PRICE T ROWE SPECTRUM FUND INC
497, 1996-08-08
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          PAGE 1

          Prospectus for the T. Rowe Price Spectrum Fund, Inc., dated May
          1, 1996, revised to July 15, 1996 should be inserted here.

          
Prospectus and IRA Plan Disclosure Statement and Custodial Agreement

T. Rowe Price Spectrum Funds

T. Rowe Price Spectrum Funds, Inc.
May 1, 1996
revised to
July 15, 1996

Two broadly diversified funds composed of other T. Rowe Price funds, one
seeking a high level of current income consistent with moderate share price
fluctuation, and the other seeking long-term capital appreciation and growth
of income.

Invest With Confidence (registered trademark)
T. Rowe Price

T. Rowe Price Spectrum Funds, Inc.
May 1, 1996
Revised to
July 15, 1996

Prospectus

This prospectus contains information you should know before investing. Please
keep it for future reference. A Statement of Additional Information about the
fund, dated May 1, 1996, has been filed with the Securities and Exchange
Commission and is incorporated by reference in this prospectus. To obtain a
free copy, call 1-800-638-5660.

Facts at a Glance

Investment Goals

Spectrum Income Fund seeks a high level of current income consistent with
moderate share price fluctuation. 

Spectrum Growth Fund seeks long-term capital appreciation and growth of
income, with current income a secondary objective. As with any mutual fund,
there is no guarantee the funds will achieve their goals.

Strategy

Each fund diversifies its assets within set limits among seven underlying
Price funds. Allocation decisions reflect T. Rowe Price's outlook for the
economy, financial markets, and the relative valuations of the underlying
funds.

Spectrum Income invests primarily in domestic bond funds and also in a foreign
bond fund, but may allocate up to 25% of assets to a stock fund. 

Spectrum Growth invests primarily in domestic stock funds and also in a
foreign stock fund.

Risk/Reward

Spectrum Income Fund: The potential for investors to achieve high current
income with modest share price appreciation through diversification of assets.

Spectrum Growth Fund: The potential for investors to achieve long-term capital
appreciation and growth of income through diversification. 

Investors in both funds should be prepared for share price volatility and the
possibility of losing money. Under normal conditions, Spectrum Growth Fund
will carry a greater degree of risk than Spectrum Income Fund. Before
investing, you should carefully consider the risks explained in more detail in
"Investment Policies and Practices."

Investor Profile

Spectrum Income Fund: Individuals seeking high current income through
diversification primarily among various bond funds.

Spectrum Growth Fund: Individuals seeking long-term capital appreciation and
growth of income through diversification among different stock funds. 

Investors in both funds should be prepared to accept the possibility of share
price declines. Appropriate for both regular and tax-deferred accounts, such
as IRAs.

Fees and Charges

100% no load. No fees or charges to buy or sell shares or to reinvest
dividends; no 12b-1 marketing fees; free telephone exchange.

Investment Manager

Founded in 1937 by the late Thomas Rowe Price, Jr., T. Rowe Price Associates,
Inc. ("T. Rowe Price") and its affiliates managed over $75 billion for over
three and a half million individual and institutional investor accounts as of
December 31, 1995.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION, PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

Contents

1   About the Funds

Transaction and Fund Expenses                2
Financial Highlights                         4
Fund, Market, and Risk Characteristics       5

2   About Your Account

Pricing Shares and Receiving Sale Proceeds   9
Distributions and Taxes                      10
Transaction Procedures and Special Requirements13

3   More About the Funds

Organization and Management                  16
Understanding Performance Information        21
Special Risks and Considerations             22
Description of Underlying Price Funds        24
Spectrum Fund Investment Policies            28
Investment Policies and Practices of 
Underlying Price Funds                       30

4   Investing With T. Rowe Price

Account Requirements and Transaction Information33
Opening a New Account                        34
Purchasing Additional Shares                 35
Exchanging and Redeeming                     35
Shareholder Services                         37

1   About the Funds

Transaction and Fund Expenses

_____________________________________________________________________________
LIKE ALL T. ROWE PRICE FUNDS, THESE FUNDS ARE 100% NO LOAD.

These tables should help you understand the kinds of expenses you will bear
indirectly as a fund shareholder. The funds will indirectly bear their pro
rata share of the expenses of the underlying Price funds.

In Table 1 below, Shareholder Transaction Expenses, shows that you pay no
sales charges. All the money you invest in a fund goes to work for you. Shown
below are all expenses and fees each fund incurred during its fiscal year.
More information about these expenses may be found below and under "Management
Fees of Underlying Price Funds" and in the Statement of Additional Information
under "Management Fee and Expenses."

                                     Income Fund  Growth Fund
Shareholder Transaction Expenses                

Sales charge "load" on purchases            None         None
Sales charge "load" on reinvested dividends None         None
Redemption fees                             None         None
Exchange fees                               None         None

Annual Fund Expenses

Management Fee                              None         None
Marketing fees (12b-1)                      None         None
Total other expenses (shareholder servicing, 
custodial, auditing, etc.)                  None         None

Total fund expenses                         None         None

Note: The fund charges a $5 fee for wire redemptions under $5,000, subject to
change without notice, and a $10 fee is charged for small accounts when
applicable (see "Small Account Fee" under "Transaction Procedures and Special
Requirements").

Table 1

The funds will operate at a zero expense level (see "Expenses" for an
explanation of the Special Servicing Agreement under "Organization and
Management"). However, the funds will indirectly bear their pro rata share of
fees and expenses incurred by the underlying Price funds and the investment
returns of the funds will be net of the expenses of the underlying Price
funds. The following chart provides the expense ratios for each of the
underlying Price funds in which both funds will invest (based on information
as of December 31, 1995). Where applicable, expense ratios are restated to
reflect current fees.

Spectrum Income     Expense     Spectrum Growth       Expense 
Fund                Ratio       Fund                  Ratio

Prime Reserve       0.66%       Prime Reserve         0.66%
Equity Income       0.83        Equity Income         0.83
Short-Term Bond     0.71        Growth & Income       0.84
International Bond  0.90        International Stock   0.89
GNMA                0.74        New Era               0.79
High Yield          0.85        New Horizons          0.90
New Income          0.76        Growth Stock          0.80

Based on the foregoing, the range of the average weighted expense ratio for
the Income Fund is expected to be 0.75% to 0.83% and for the Growth Fund 0.78%
to 0.86%. A range is provided since the average assets of the income and
growth funds invested in each of the underlying Price funds will fluctuate.

o   Hypothetical example: Using the midpoint of the above ranges, the
    following example illustrates the expenses you would incur on a $1,000
    investment, assuming you invest $1,000, the fund returns 5% annually,
    expense ratios remain as listed previously, and you close your account
    at the end of the time periods shown. Your expenses would be:

_____________________________________________________________________________
THE TABLE AT RIGHT IS JUST AN EXAMPLE; ACTUAL EXPENSES CAN BE HIGHER OR LOWER
THAN THOSE SHOWN.

Fund                 1 year     3 years    5 years    10 years

Income               $8         $25        $44        $98
Growth               $8         $26        $46        $101

Table 2

Financial Highlights

The following table provides information about each fund's financial history.
It is based on a single share outstanding throughout each fiscal year. The
table is part of each fund's financial statements which are included in each
fund's annual report and incorporated by reference into the Statement of
Additional Information. This document is available to shareholders upon
request. The financial statements in the annual report have been audited by
Price Waterhouse LLP, independent accountants, whose unqualified report covers
the periods shown.

<TABLE>
___________________________________________________________________________________________________________

Investment Activities         Distributions      End of Period

                   Net                                                       Ratio
                Realized                                                    of Net
                   and                                  Total         Ratio Invest-
      Net        Unreal-                               Return        of Ex-  ment
     Asset   Net  ized  Total   Net                Net (Incl-        penses Income
YearValue, Invest-Gain  From  Invest- Net         Asset udes    Net    to     to  Port-
Ended,Begin-ment (Loss)Invest- ment- Real-       Value, Rein- Assets  Aver-  Aver-folio
Dece-ning    In-   on   ment    In-  ized- Total   End vested   ($     age    age Turn-
mber  of    come Invest-Activi-come  Gain Distri-  of   Divi-  Thou-   Net    Net over
31  Period        ments ties  (Loss)(Loss)butionsPerioddends) sands) Assets AssetsRate
____________________________________________________________________________________________________________
<S>  <C>   <C>   <C>    <C>    <C>   <C>  <C>    <C>    <C>    <C>   <C>    <C>    <C>
Income Fund

1990a$10.00$0.44$(0.18) $0.26$(0.44)$(0.05)$(0.49)$9.77 2.7%$ 40,082 0.00%b  9.58%b36.9%b
1991  9.77 0.82   1.03   1.85 (0.83)(0.06) (0.89) 10.7319.6% 147,859 0.00%   8.03% 18.8%
1992 10.73 0.76   0.05   0.81 (0.76)(0.08) (0.84) 10.70 7.8% 376,435 0.00%   7.10% 14.2%
1993 10.70 0.69   0.60   1.29 (0.69)(0.19) (0.88) 11.1112.4% 587,931 0.00%   6.19% 14.4%
1994 11.11 0.69  (0.90) (0.21)(0.69)(0.10) (0.79) 10.11(1.9%)624,940 0.00%   6.48% 23.1%
1995 10.11 0.72   1.16   1.88 (0.72)(0.03) (0.75) 11.2419.4% 986,701 0.00%   6.43% 20.2%

Growth Fund

1990a$10.00$0.20$(1.21)$(1.01)$(0.19)$(0.28)$(0.47)$8.52(10.1)%$35,3870.00%b 4.50%b33.4%b
1991  8.52 0.21   2.33   2.54 (0.21)(0.32) (0.53) 10.5329.9% 148,661 0.00%   2.77% 14.6%
1992 10.53 0.20   0.56   0.76 (0.20)(0.55) (0.75) 10.54 7.2% 355,134 0.00%   2.15%  7.9%
1993 10.54 0.16   2.05   2.21 (0.16)(0.72) (0.88) 11.8721.0% 584,876 0.00%   1.57%  7.0%
1994 11.87 0.17  (0.01)  0.16 (0.17)(0.73) (0.90) 11.13 1.4% 879,366 0.00%   1.60% 20.7%
1995 11.13 0.21   3.12   3.33 (0.21)(0.76) (0.97) 13.4930.0%1,358,3440.00%   1.81%  7.4%
<FN>
a    For the period June 29, 1990 (commencement of operations) to December 31, 1990.
b    Annualized.
</FN>
Table 3
</TABLE>
<PAGE>
Fund, Market, and Risk Characteristics: What to Expect

_____________________________________________________________________________
NEITHER FUND SHOULD REPRESENT YOUR COMPLETE INVESTMENT PROGRAM, NOR BE USED
FOR SHORT-TERM TRADING PURPOSES.

To help you decide whether the funds are appropriate for you, this section
takes a closer look at their investment objectives and approaches.

What are the funds' objectives?

The objective of Spectrum Income Fund is to provide a high level of current
income with moderate share price fluctuation. The objective of Spectrum Growth
Fund is to provide long-term capital appreciation and growth of income, with
current income a secondary objective.

What are the funds' investment programs?

Spectrum Income Fund will allocate its assets among a diversified group of
seven underlying T. Rowe Price funds that invest primarily in fixed income
securities. Spectrum Growth Fund will allocate its assets among a diversified
group of seven underlying T. Rowe Price funds that invest primarily in stocks.

Each fund will diversify within set limits based on T. Rowe Price's outlook
for the economy, financial markets, and relative market valuation of each
underlying fund. The amounts allocated to each underlying fund will vary
within the ranges specified below. The Spectrum Funds will not purchase shares
of any underlying fund that would result in the funds' ownership of more than
30% of an underlying fund's outstanding voting shares.

_____________________________________________________________________________
FOR DETAILS ABOUT THE FUNDS' INVESTMENT PROGRAMS AND PRACTICES, PLEASE SEE THE
"INVESTMENT POLICIES AND PRACTICES" SECTION.

Spectrum          Investment   Spectrum           Investment
Income Fund       Range (% of  Growth Fund        Range (% of
                  Income Fund                     Growth Fund
                  assets)                         assets)

Short-Term Bond   0-15%        Prime Reserve      0-25%
GNMA              5-20%        Equity Income      5-20%
International Bond5-20%        Growth & Income    5-20%
Equity Income     10-25%       International Stock5-20%
High Yield        10-25%       New Era            10-25%
Prime Reserve     5-30%        New Horizons       10-25%
New Income        15-30%       Growth Stock       15-30%

What are some of the funds' potential risks?

Each fund's share price will fluctuate with changing market conditions as the
share prices of the underlying funds rise or fall. 

_____________________________________________________________________________
FOR SPECTRUM INCOME, A RISE IN INTEREST RATES IS AN IMPORTANT SOURCE OF RISK.

With Spectrum Income Fund, the risks are generally the same as with many
income funds:

o   Interest rate or market risk: the decline in bond prices that
    accompanies a rise in the overall level of interest rates.

o   Credit risk: the chance that holdings of the underlying funds will have
    their credit ratings downgraded or will default, potentially reducing
    the fund's share price and income level. This risk is even greater with
    high-yield ("junk") bonds, whose issuers are more vulnerable to business
    setbacks and to economic changes, such as a recession, that may impair
    their ability to make timely interest and principal payments.

o   Prepayment risk: with mortgage-backed securities, there is a chance
    that, when interest rates are falling, homeowners will accelerate
    principal payments on mortgages, causing a loss to investors in mortgage
    securities that were originally purchased at a price above par. 

o   Currency risk: The risk that weak foreign currencies versus the U.S.
    dollar could result in losses for U.S. investors.

Also, the fund's maximum 25% exposure to the Equity Income Fund subjects that
portion of assets to the risks associated with stocks (see below). 

_____________________________________________________________________________
FOR SPECTRUM GROWTH, A DECLINE IN STOCK PRICES IS AN IMPORTANT SOURCE OF RISK.

With Spectrum Growth Fund, the major risk is the same inherent in all stock
funds. Since economic growth has been punctuated by declines, share prices of
even the best-managed, most profitable companies are subject to market risk.
Swings in investor psychology and significant trading by large institutions
can result in price declines. For this reason, equity investors should have a
long-term investment horizon and be willing to wait out bear markets.

A significant portion of the total assets of each fund may also be exposed to
the risks of foreign investing, including currency risk, as previously
defined. The economies, markets, and political structures of some countries in
which the underlying funds can invest do not compare favorably with the U.S.
and other mature economies in terms of wealth and stability. Therefore,
investments in these countries will be riskier and more subject to erratic and
abrupt price movements.

_____________________________________________________________________________
THE FUNDS' SHARE PRICES WILL FLUCTUATE; WHEN YOU SELL YOUR SHARES, YOU MAY
LOSE MONEY.

What are some of the funds' potential rewards?

The funds offer a professionally managed allocation of assets among a broad
range of other Price funds. By investing in a variety of underlying funds,
each fund's performance could benefit from the diversified returns of many
types of securities. 

For example, Spectrum Income invests in funds holding high-quality domestic
and foreign bonds, high-yield bonds, short- and long-term securities, and
dividend-paying stocks. Spectrum Growth invests in funds holding domestic and
foreign stocks, small- and large-cap stocks, and growth and value stocks.
Moreover, the diversified nature of the funds' investments could cushion
declines in falling markets.

The theory of diversification holds that investors can reduce their overall
risk by spreading assets among a variety of investments. Each type of
investment follows a cycle of its own and responds differently to changes in
the economy and the marketplace. A decline in one investment can be balanced
by returns in other investments that are stable or rising. Therefore, a major
benefit of these funds is the potential for attractive long-term returns with
reduced volatility.

What are the characteristics of the underlying Price funds?

_____________________________________________________________________________
FOR A FULL DESCRIPTION OF THE UNDERLYING PRICE FUNDS, PLEASE SEE "DESCRIPTION
OF UNDERLYING PRICE FUNDS" IN SECTION 3.

The major characteristics of the underlying T. Rowe Price funds are as
follows:

               Relative Fixed
Fixed Income   Income Risk         Objective/Program

Prime Reserve  Lowest              Stable share price and liquidity
                                   while generating current income
Short-Term BondLow                 High income with minimal share price
                                   fluctuation
GNMA           Moderate            High income consistent with maximum
                                   credit protection and moderate share
                                   price fluctuation
New Income     Moderate            High income with moderate share
                                   price fluctuation
High Yield     High                High income and capital appreciation 
                                   through investments in high-yield
                                   ("junk") bonds
International
Bond           High                High income and capital appreciation
                                   through investments in high-quality
                                   foreign bonds

               Relative
Equity         Equity Risk         Objective/Program

Equity Income  Low                 Substantial dividend income and
                                   capital appreciation 
Growth & IncomeLow                 Capital appreciation and reasonable
                                   dividend income
Growth Stock   Moderate            Capital appreciation and increasing
                                   income through investments in
                                   growth stocks
New Era        Moderate            Capital appreciation through
                                   investments in natural resource
                                   stocks
International
Stock          Moderate            Capital appreciation through
                                   investments in stocks of established
                                   foreign companies
New Horizons   High                Aggressive capital appreciation
                                   through investments in small-company
                                   stocks

How can I decide if one or both of the funds is right for me?

Consider your investment goals, your time horizon for achieving them, and your
tolerance for risk. If you would like a one-stop approach to broad
diversification and can accept the possibility of moderate share price
declines in an effort to achieve relatively high income, Spectrum Income Fund
could be an appropriate part of your overall investment strategy. If you seek
one-stop diversification and can accept the possibility of greater share price
declines in an effort to achieve long-term capital appreciation, Spectrum
Growth Fund could be an appropriate part of your overall investment strategy.

For an IRA, retirement plan, or other long-term investment, the funds can
offer investment programs that seek to combine attractive returns with the
benefits of broad diversification. 

Is there additional information about the funds to help me decide if they are
appropriate for me?

Be sure to review "Special Risks and Considerations," "Description of
Underlying Price Funds," "Investment Policies of the Spectrum Funds," and
"Investment Policies and Practices of Underlying Price Funds" in Section 3 for
further discussion of the funds' policies.

2   About Your Account

Pricing Shares and Receiving Sale Proceeds

Here are some procedures you should know when investing in a T. Rowe Price
fund.

_____________________________________________________________________________
THE VARIOUS WAYS YOU CAN BUY, SELL, AND EXCHANGE SHARES ARE EXPLAINED AT THE
END OF THIS PROSPECTUS AND ON THE NEW ACCOUNT FORM. THESE PROCEDURES MAY
DIFFER FOR INSTITUTIONAL AND EMPLOYER-SPONSORED RETIREMENT ACCOUNTS.

How and when shares are priced

The share price (also called "net asset value" or NAV per share) for each fund
is calculated at 4 p.m. ET each day the New York Stock Exchange is open for
business. To calculate the NAV, a fund"s assets are valued and totaled,
liabilities are subtracted, and the balance, called net assets, is divided by
the number of shares outstanding.

How your purchase, sale, or exchange price is determined

If we receive your request in correct form before 4 p.m. ET, your transaction
will be priced at that day's NAV. If we receive it after 4 p.m., it will be
priced at the next business day's NAV.

We cannot accept orders that request a particular day or price for your
transaction or any other special conditions.

Note: The time at which transactions and shares are priced and the time until
which orders are accepted may be changed in case of an emergency or if the New
York Stock Exchange closes at a time other than 4 p.m. ET.

_____________________________________________________________________________
WHEN FILLING OUT THE NEW ACCOUNT FORM, YOU MAY WISH TO GIVE YOURSELF THE
WIDEST RANGE OF OPTIONS FOR RECEIVING PROCEEDS FROM A SALE.

How you can receive the proceeds from a sale

If your request is received by 4 p.m. ET in correct form, proceeds are usually
sent on the next business day. Proceeds can be sent to you by mail, or to your
bank account by ACH transfer or bank wire. Proceeds sent by ACH transfer
should be credited the second day after the sale. ACH (Automated Clearing
House) is an automated method of initiating payments from and receiving
payments in your financial institution account. ACH is a payment system
supported by over 20,000 banks, savings banks, and credit unions, which
electronically exchanges the transactions primarily through the Federal
Reserve Banks. Proceeds sent by bank wire should be credited to your account
the next business day.

_____________________________________________________________________________
IF FOR SOME REASON WE CANNOT ACCEPT YOUR REQUEST TO SELL SHARES, WE WILL
CONTACT YOU.

Exception:

o   Under certain circumstances and when deemed to be in the funds' best
    interests, your proceeds may not be sent for up to five business days
    after receiving your sale or exchange request. If you were exchanging
    into a bond or money fund, your new investment would not begin to earn
    dividends until the sixth business day.

Useful Information on Distributions and Taxes

_____________________________________________________________________________
ALL NET INVESTMENT INCOME AND REALIZED CAPITAL GAINS ARE DISTRIBUTED TO
SHAREHOLDERS.

Dividends and Other Distributions

Dividend and capital gain distributions are reinvested in additional fund
shares in your account unless you select another option on your New Account
Form. The advantage of reinvesting distributions arises from compounding; that
is, you receive income dividends and capital gain distributions on a rising
number of shares.

Distributions not reinvested are paid by check or transmitted to your bank
account via ACH. If the Post Office cannot deliver your check, or if your
check remains uncashed for six months, a fund reserves the right to reinvest
your distribution check in your account at the then current NAV and to
reinvest all subsequent distributions in shares of the fund.

Spectrum Income Fund dividends

o   The fund declares income dividends daily at 4 p.m. ET to shareholders of
    record at that time provided payment has been received on the previous
    business day.

o   The fund pays dividends on the first business day of each month.

o   Fund shares will earn dividends through the date of redemption; also,
    shares redeemed on a Friday or prior to a holiday will continue to earn
    dividends until the next business day. Generally, if you redeem all of
    your shares at any time during the month, you will also receive all
    dividends earned through the date of redemption in the same check. When
    you redeem only a portion of your shares, all dividends accrued on those
    shares will be reinvested, or paid in cash, on the next dividend payment
    date.

Spectrum Growth Fund dividends

o   The fund declares and pays dividends (if any) annually.

o   All or part of the fund's dividends will be eligible for the 70%
    deduction for dividends received by corporations.

Capital gains (both funds)

o   A capital gain or loss is the difference between the purchase and sale
    price of a security.

o   If a fund has net capital gains for the year (after subtracting any
    capital losses), they are usually declared and paid in December to
    shareholders of record on a specified date that month.

_____________________________________________________________________________
YOU WILL BE SENT TIMELY INFORMATION FOR YOUR TAX FILING NEEDS.

Tax Information

The fund furnishes average cost and capital gain (loss) information on most
share redemptions.

You need to be aware of the possible tax consequences when:

o   The fund makes a distribution to your account.

o   You sell fund shares, including an exchange from one fund to another.

Taxes on your fund redemptions. When you sell shares in any fund, you may
realize a gain or loss. An exchange from one fund to another is still a sale
for tax purposes.

In January, you will be sent Form 1099-B, indicating the date and amount of
each sale you made in the fund during the prior year. This information will
also be reported to the IRS. For accounts opened new or by exchange in 1983 or
later, we will provide you with the gain or loss of the shares you sold during
the year, based on the "average cost" method. This information is not reported
to the IRS, and you do not have to use it. You may calculate the cost basis
using other methods acceptable to the IRS, such as "specific identification."

To help you maintain accurate records, we send you a confirmation immediately
following each transaction (except for systematic purchases and redemptions)
and a year-end statement detailing all your transactions in each fund account
during the year.

_____________________________________________________________________________
CAPITAL GAIN DISTRIBUTIONS ARE TAXABLE WHETHER REINVESTED IN ADDITIONAL SHARES
OR RECEIVED IN CASH.

Taxes on fund distributions. The following summary does not apply to
retirement accounts, such as IRAs, which are tax-deferred until you withdraw
money from them.

In January, you will be sent Form 1099-DIV indicating the tax status of any
dividend and capital gain distribution made to you. This information will also
be reported to the IRS. All distributions made by a fund are taxable to you
for the year in which they were paid. The only exception is that distributions
declared during the last three months of the year and paid in January are
taxed as though they were paid by December 31. You will be sent any additional
information you need to determine your taxes on fund distributions, such as
the portion of your dividend, if any, that may be exempt from state income
taxes.

Short-term capital gains are taxable as ordinary income and long-term gains
are taxable at the applicable long-term gain rate. The gain is long- or
short-term depending on how long the fund held the securities, not how long
you held shares in the fund. If you realize a loss on the sale or exchange of
fund shares held six months or less, your short-term loss recognized is
reclassified to long-term to the extent of any long-term capital gain
distribution received.

Gains and losses from the sale of foreign currencies and the foreign currency
gain or loss resulting from the sale of a foreign debt security can increase
or decrease a fund's ordinary income dividend. Net foreign currency losses may
result in a fund's dividend being classified as a return of capital.

If a fund pays nonrefundable taxes to foreign governments during the year, the
taxes will reduce a fund's dividends, but will still be included in your
taxable income. However, you may be able to claim an offsetting credit or
deduction on your tax return for your portion of foreign taxes paid by a fund.

Tax effect of buying shares before a capital gain distribution. If you buy
shares shortly before or on the "record date" -- the date that establishes you
as the person to receive the upcoming distribution -- you will receive, in the
form of a taxable distribution, a portion of the money you just invested.
Therefore, you may wish to find out a fund's record date(s) before investing.
Of course, a fund's share price may, at any time, reflect undistributed
capital gains or unrealized appreciation. When these amounts are eventually
distributed, they are taxable.

Tax-Qualified Retirement Plans. Tax-qualified retirement plans generally will
not be subject to federal tax liability on either distributions from the funds
or redemption of shares of the funds. Rather, participants in such plans will
be taxed when they begin taking distributions from the plans.

Transaction Procedures and Special Requirements

Purchase Conditions

_____________________________________________________________________________
FOLLOWING THESE PROCEDURES HELPS ASSURE TIMELY AND ACCURATE TRANSACTIONS.

Nonpayment. If your payment is not received or you pay with a check or ACH
transfer that does not clear, your purchase will be canceled. You will be
responsible for any losses or expenses incurred by the fund or transfer agent,
and the fund can redeem shares you own in this or another identically
registered T. Rowe Price fund as reimbursement. The fund and its agents have
the right to reject or cancel any purchase, exchange, or redemption due to
nonpayment.

U.S. dollars. All purchases must be paid for in U.S. dollars; checks must be
drawn on U.S. banks.

Sale (Redemption) Conditions

10-day hold. If you sell shares that you just purchased and paid for by check
or ACH transfer, the fund will process your redemption but will generally
delay sending you the proceeds for up to 10 calendar days to allow the check
or transfer to clear. If your redemption request was sent by mail or mailgram,
proceeds will be mailed no later than the seventh calendar day following
receipt unless the check or ACH transfer has not cleared. If, during the
clearing period, we receive a check drawn against your bond or money market
account, it will be returned marked "uncollected." (The 10-day hold does not
apply to the following: purchases paid for by bank wire; cashier's, certified,
or treasurer's checks; or automatic purchases through your paycheck.)

Telephone, Tele*Access (registered trademark), and PC*Access (registered
trademark) transactions. These exchange and redemption services are
established automatically when you sign the New Account Form unless you check
the box which states that you do not want these services. Each fund uses
reasonable procedures (including shareholder identity verification) to confirm
that instructions given by telephone are genuine and is not liable for acting
on these instructions. If these procedures are not followed, it is the opinion
of certain regulatory agencies that a fund may be liable for any losses that
may result from acting on the instructions given. A confirmation is sent
promptly after the telephone transaction. All conversations are recorded.

Redemptions over $250,000. Large sales can adversely affect a portfolio
manager's ability to implement a fund's investment strategy by causing the
premature sale of securities that would otherwise be held. If, in any 90-day
period, you redeem (sell) more than $250,000, or your sale amounts to more
than 1% of the fund's net assets, the fund has the right to delay sending your
proceeds for up to five business days after receiving your request, or to pay
the difference between the redemption amount and the lesser of the two
previously mentioned figures with securities from the fund.

_____________________________________________________________________________
T. ROWE PRICE MAY BAR EXCESSIVE TRADERS FROM PURCHASING SHARES.

Excessive Trading

Frequent trades involving either substantial fund assets, or a substantial
portion of your account or accounts controlled by you, can disrupt management
of the fund and raise its expenses. We define "excessive trading" as exceeding
one purchase and sale involving the same fund within any 120-day period.

For example, you are in fund A. You can move substantial assets from fund A to
fund B, and, within the next 120 days, sell your shares in fund B to return to
fund A or move to fund C.

If you exceed the number of trades described above, you may be barred
indefinitely from further purchases of T. Rowe Price funds.

Three types of transactions are exempt from excessive trading guidelines: 1)
trades solely between money market funds; 2) redemptions that are not part of
exchanges; and 3) systematic purchases or redemptions (see "Shareholder
Services").

Keeping Your Account Open

Due to the relatively high cost to a fund of maintaining small accounts, we
ask you to maintain an account balance of at least $1,000. If your balance is
below $1,000 for three months or longer, we have the right to close your
account after giving you 60 days in which to increase your balance.

Small Account Fee

Because of the disproportionately high costs of servicing accounts with low
balances, a $10 fee, paid to T. Rowe Price Services, the funds' transfer
agent, will automatically be deducted from nonretirement accounts with
balances falling below a minimum level. The valuation of accounts and the
deduction are expected to take place during the last five business days of
September. The fee will be deducted from accounts with balances below $2,000,
except for UGMA/UTMA accounts, for which the limit is $500. The fee will be
waived for any investor whose aggregate T. Rowe Price mutual fund investments
total $25,000 or more.  Accounts employing automatic investing (e.g., payroll
deduction, automatic purchase from a bank account, etc.) are also exempt from
the charge. The fee will not apply to IRAs and other retirement plan accounts.
(A separate custodial fee may apply to IRAs and other retirement plan
accounts.)

_____________________________________________________________________________
A SIGNATURE GUARANTEE IS DESIGNED TO PROTECT YOU AND THE T. ROWE PRICE FUNDS
FROM FRAUD BY VERIFYING YOUR SIGNATURE.

Signature Guarantees

You may need to have your signature guaranteed in certain situations, such as:

o   Written requests 1) to redeem over $50,000, or 2) to wire redemption
    proceeds.

o   Remitting redemption proceeds to any person, address, or bank account
    not on record.

o   Transferring redemption proceeds to a T. Rowe Price fund account with a
    different registration (name or ownership) from yours.

o   Establishing certain services after the account is opened.

You can obtain a signature guarantee from most banks, savings institutions,
broker-dealers, and other guarantors acceptable to T. Rowe Price. We cannot
accept guarantees from notaries public or organizations that do not provide
reimbursement in the case of fraud.

3   More About the Funds

Organization and Management

_____________________________________________________________________________
SHAREHOLDERS BENEFIT FROM T. ROWE PRICE'S 59 YEARS OF INVESTMENT MANAGEMENT
EXPERIENCE.

How are the funds organized?

The T. Rowe Price Spectrum Fund, Inc. (Spectrum Fund) is a Maryland
corporation organized in 1987 and is registered with the Commission under the
1940 Act as a nondiversified, open-end investment company, commonly known as a
"mutual fund." Mutual funds pool money received from shareholders and invest
it to try to achieve specified objectives.

Currently, Spectrum Fund consists of two series, the Spectrum Income Fund and
the Spectrum Growth Fund, each of which represents a separate class of shares
and has different objectives and investment policies. The Spectrum Fund's
Charter provides that the Board of Directors may issue additional series of
shares and/or additional classes of shares for each series.

What is meant by "shares"?

As with all mutual funds, investors purchase shares when they put money in a
fund. These shares are part of a fund's authorized capital stock, but share
certificates are not issued.

Each share and fractional share entitles the shareholder to:

o   Receive a proportional interest in the fund's income and capital gain
    distributions.

o   Cast one vote per share on certain fund matters, including the election
    of fund directors, changes in fundamental policies, or approval of
    changes in the fund's management contract.

Do T. Rowe Price funds have annual shareholder meetings?

The funds are not required to hold annual meetings and do not intend to do so
except when certain matters, such as a change in a fund's fundamental
policies, are to be decided. In addition, shareholders representing at least
10% of all eligible votes may call a special meeting if they wish for the
purpose of voting on the removal of any fund director or trustee. If a meeting
is held and you cannot attend, you can vote by proxy. Before the meeting, the
fund will send you proxy materials that explain the issues to be decided and
include a voting card for you to mail back.

_____________________________________________________________________________
ALL DECISIONS REGARDING THE PURCHASE AND SALE OF FUND INVESTMENTS ARE MADE BY
T. ROWE PRICE -- SPECIFICALLY BY THE FUNDS' PORTFOLIO MANAGERS.

Who runs the funds?

General Oversight. The funds are governed by a Board of Directors that meets
regularly to review the funds' investments, performance, expenses, and other
business affairs. The Board elects the funds' officers. The policy of the
funds is that a majority of Board members will be independent of T. Rowe Price
and that none of the independent directors will be directors of any underlying
Price fund. In exercising their responsibilities, the Board, among other
things, will refer to the Special Servicing Agreement and policies and
guidelines included in the Exemptive Order ("Order") issued by the Securities
and Exchange Commission in connection with the operation of the funds. The
interested directors and the officers of Spectrum Fund and T. Rowe Price also
serve in similar positions with most of the underlying Price funds. Thus, if
the interests of a fund and the underlying Price funds were ever to become
divergent, it is possible that a conflict of interest could arise and affect
how the interested directors and officers fulfill their fiduciary duties to
that fund and the underlying Price funds. The directors of Spectrum Fund
believe they have structured each fund to avoid these concerns. However,
conceivably, a situation could occur where proper action for the Growth Fund
or Income Fund, could be adverse to the interests of an underlying Price fund,
or the reverse could occur. If such a possibility arises, the directors and
officers of the affected funds and T. Rowe Price will carefully analyze the
situation and take all steps they believe reasonable to minimize and, where
possible, eliminate the potential conflict. Moreover, limitations on aggregate
investments in the underlying Price funds and other restrictions have been
adopted by Spectrum Fund to minimize this possibility, and close and
continuous monitoring will be exercised to avoid, insofar as possible, these
concerns.

Spectrum Fund Portfolio Management. The funds have an Investment Advisory
Committee composed of the following members: Peter Van Dyke, Chairman, Stephen
W. Boesel, Edmund M. Notzon, James S. Riepe, Charles P. Smith, and M. David
Testa. The committee chairman has day-to-day responsibility for managing the
funds and works with the committee in developing and executing the funds'
investment programs.  Mr. Van Dyke has been chairman of the committee since
1990.  He has been managing investments since joining T. Rowe Price in 1985.

Management of the Underlying Price Funds. T. Rowe Price serves as investment
manager to all of the underlying Price funds with the exception of the T. Rowe
Price International Stock Fund and the T. Rowe Price International Bond Fund,
and is responsible for selection and management of the underlying Price funds'
portfolio investments. T. Rowe Price serves as investment manager to a variety
of individual and institutional investors, including limited and real estate
partnerships and other mutual funds.

Price-Fleming is responsible for selection and management of the portfolio
investments of the T. Rowe Price International Stock Fund and the T. Rowe
Price International Bond Fund and, subject to the authority of such funds'
Board of Directors, for their business affairs. As of December 31, 1995,
Price-Fleming managed approximately $22 billion of assets, substantially all
of which were invested in foreign securities.  Price-Fleming's U.S. office is
located at 100 East Pratt Street, Baltimore, Maryland 21202.

Price-Fleming was incorporated in Maryland in 1979 as a joint venture between
T. Rowe Price and Robert Fleming Holdings Limited (Flemings). Flemings is a
diversified investment organization which participates in a global network of
regional investment offices in New York, London, Zurich, Geneva, Tokyo, Hong
Kong, Manila, Kuala Lumpur, Seoul, Taipei, Bombay, Jakarta, Singapore,
Bangkok, and Johannesburg.

Flemings was incorporated in 1974 in the United Kingdom as successor to the
business founded by Robert Fleming in 1873.

T. Rowe Price, Flemings, and Jardine Fleming are owners of Price-Fleming. The
common stock of Price-Fleming is 50% owned by a wholly owned subsidiary of T.
Rowe Price, 25% by Flemings, and 25% by Jardine Fleming Group Limited (Jardine
Fleming). (Half of Jardine Fleming is owned by Flemings and half by Jardine
Matheson Holdings Limited.)  

T. Rowe Price has the right to elect a majority of the board of directors of
Price-Fleming, and Flemings has the right to elect the remaining directors,
one of whom will be nominated by Jardine Fleming.

Marketing. T. Rowe Price Investment Services, Inc., a wholly owned subsidiary
of T. Rowe Price, distributes (sells) shares of these and all other T. Rowe
Price funds.

Shareholder Services. T. Rowe Price Services, Inc., another wholly owned
subsidiary, acts as the funds' transfer and dividend disbursing agent and
provides shareholder and administrative services. Services for certain types
of retirement plans are provided by T. Rowe Price Retirement Plan Services,
Inc., also a wholly owned subsidiary. The address for each is 100 East Pratt
St., Baltimore, MD 21202.

How are fund expenses determined?

Each fund will operate at a zero expense ratio. However, each fund will incur
its pro rata share of the fees and expenses of the underlying Price funds in
which they invest. The payment of each fund's operational expenses is subject
to the Special Servicing Agreement described below as well as certain
undertakings made by T. Rowe Price, under its Investment Management Agreement
with each fund. Fund expenses include: shareholder servicing fees and
expenses; custodian and accounting fees and expenses; legal and auditing fees;
expenses of preparing and printing prospectuses and shareholder reports;
registration fees and expenses; proxy and annual meeting expenses, if any; and
directors' fees and expenses.

_____________________________________________________________________________
HERE IS SOME INFORMATION REGARDING THE SPECIAL SERVICING AGREEMENT.

The Special Servicing Agreement (Agreement) is between and among Spectrum
Fund, the underlying Price funds, T. Rowe Price, and TRP Services. Under the
Agreement, TRP Services will act as Shareholder Servicing Agent for Spectrum
Fund and arrange for all other services necessary for the operation of
Spectrum Fund.

The Agreement provides that, if the Board of Directors or Trustees of any
underlying Price fund determines that such underlying fund's share of the
aggregate expenses of Spectrum Fund is less than the estimated savings to the
underlying Price fund from the operation of Spectrum Fund, the underlying
Price fund will bear those expenses in proportion to the average daily value
of its shares owned by Spectrum Fund, provided further that no underlying
Price fund will bear such expenses in excess of the estimated savings to it.
Such savings are expected to result primarily from the elimination of numerous
separate shareholder accounts which are or would have been invested directly
in the underlying Price funds and the resulting reduction in shareholder
servicing costs. Although such cost savings are not certain, the estimated
savings to the underlying Price funds generated by the operation of Spectrum
Fund are expected to be sufficient to offset most, if not all, of the expenses
incurred by Spectrum Fund.

Under the Investment Management Agreement with the funds, and the Special
Servicing Agreement, T. Rowe Price has agreed to bear any expenses of Spectrum
Fund which exceed the estimated savings to each of the underlying Price funds.
Thus, Spectrum Fund will operate at a zero expense ratio. Of course,
shareholders of Spectrum Fund will still indirectly bear their fair and
proportionate share of the cost of operating the underlying Price funds owned
by Spectrum Fund.

The Management Fee. T. Rowe Price will act as the investment manager for the
Income Fund and the Growth Fund, but will not be paid a management fee for
performing such services.  However, T. Rowe Price and Price-Fleming receive
management fees from managing the underlying Price funds in which the funds
invest.  

The determination of how each fund's assets will be invested in the underlying
Price funds will be made by T. Rowe Price pursuant to the investment
objectives and policies of each fund set forth in this prospectus and
procedures and guidelines established by the Board of Directors for the
Spectrum Fund. The Directors for Spectrum Fund will periodically monitor the
allocations made and the basis upon which such allocations were made or
maintained. Each fund, as a shareholder in any underlying Price fund, will
indirectly bear its proportionate share of any investment management fees and
other expenses paid by the underlying Price funds.

Each underlying Price fund pays T. Rowe Price (or Price-Fleming) an investment
management fee consisting of two parts: an "individual fund fee" (discussed
below) and a "group fee."  The group fee, which reflects the benefits each
underlying fund derives from sharing the resources of the T. Rowe Price
investment management complex, is calculated daily based on the combined net
assets of all T. Rowe Price funds (except Equity Index and the Spectrum Funds
and any institutional or private label mutual funds). The group fee schedule
(shown below) is graduated, declining as the asset total rises, so
shareholders benefit from the overall growth in mutual fund assets.

0.480% First $1 billion0.370% Next $1 billion0.330% Next $10 billion
0.450% Next $1 billion0.360% Next $2 billion0.320% Next $10 billion
0.420% Next $1 billion0.350% Next $2 billion0.310% Next $16 billion
0.390% Next $1 billion0.340% Next $5 billion0.305% Thereafter

The underlying Price fund's portion of the group fee is determined by the
ratio of its daily net assets to the daily net assets of all the Price funds
described above. Based on the combined Price funds' assets of approximately
$48.6 billion at December 31, 1995, the group fee was 0.34%.

The individual fund fees and total management fees of the underlying Price
funds are as follows:

                      Individual           
                      Fee as a             Total
                      % of Fund            Management
Fund                  Net Assets           Fee Paid

International Bond    0.35%                0.69%
International Stock   0.35                 0.69
New Horizons          0.35                 0.69
High Yield            0.30                 0.64
Equity Income         0.25                 0.59
Growth Stock          0.25                 0.59
New Era               0.25                 0.59
GNMA                  0.15                 0.49
Growth & Income       0.25                 0.59
New Income            0.15                 0.49
Short-Term Bond       0.10                 0.44
Prime Reserve         0.05                 0.39

The total combined management fee for each of the underlying Price funds was
an annual rate as shown above.

Understanding Performance Information

This section should help you understand the terms used to describe fund
performance. You will come across them in shareholder reports you receive from
us, in our newsletter, The Price Report, in Insights articles, in T. Rowe
Price advertisements, and in the media.

_____________________________________________________________________________
TOTAL RETURN IS THE MOST WIDELY USED PERFORMANCE MEASURE. DETAILED PERFORMANCE
INFORMATION IS INCLUDED IN THE FUNDS' ANNUAL AND SEMIANNUAL SHAREHOLDER
REPORTS AND IN THE QUARTERLY PERFORMANCE UPDATE, WHICH ARE ALL AVAILABLE
WITHOUT CHARGE.

Total Return

This tells you how much an investment in a fund has changed in value over a
given time period. It reflects any net increase or decrease in the share price
and assumes that all dividends and capital gains (if any) paid during the
period were reinvested in additional shares. Including reinvested
distributions means that total return numbers include the effect of
compounding, i.e., you receive income and capital gain distributions on a
rising number of shares.

Advertisements for a fund may include cumulative or compound average annual
total return figures, which may be compared with various indices, other
performance measures, or other mutual funds.

Cumulative Total Return

This is the actual rate of return on an investment for a specified period. A
cumulative return does not indicate how much the value of the investment may
have fluctuated between the beginning and the end of the period specified.

Average Annual Total Return

This is always hypothetical. Working backward from the actual cumulative
return, it tells you what constant year-by-year return would have produced the
actual, cumulative return. By smoothing out all the variations in annual
performance, it gives you an idea of the investment's annual contribution to
your portfolio provided you held it for the entire period in question.

_____________________________________________________________________________
YOU WILL SEE FREQUENT REFERENCES TO A FUND'S YIELD IN OUR REPORTS, IN
ADVERTISEMENTS, IN MEDIA STORIES, AND SO ON.

Yield (Income Fund)

The current or "dividend" yield on a fund or any investment tells you the
relationship between the investment's current level of annual income and its
price on a particular day. The dividend yield reflects the actual income paid
to shareholders for a given period, annualized, and divided by the average
price during the given period. For example, a fund providing $5 of annual
income per share and a price of $50 has a current yield of 10%. Yields can be
calculated for any time period. 

The advertised or "SEC" yield is found by determining the net income per share
(as defined by the SEC) earned by the fund during a 30-day base period and
dividing this amount by the per share price on the last day of the base
period. The SEC yield may differ from the dividend yield.

Special Risks and Considerations

Prospective investors should consider the following factors:  

o   The investments of each fund are concentrated in the underlying Price
    funds, so each fund's investment performance is directly related to the
    investment performance of these underlying Price funds.  

o   As a matter of fundamental policy, the funds must allocate their
    investments among the underlying Price funds within certain ranges.  As
    a result, they do not have the same flexibility to invest as a mutual
    fund without such constraints.

o   As an operating policy, each fund will not redeem more than 1% of any
    underlying Price fund's assets during any period of less than 15 days,
    except when necessary to meet the fund's shareholder redemption
    requests. As a result, the funds may not be able to reallocate assets
    among the underlying Price funds as efficiently and rapidly as would be
    the case in the absence of this constraint.

o   In addition to their principal investments, certain underlying Price
    funds may: invest a portion of their assets in foreign securities; enter
    into forward currency transactions; lend their portfolio securities;
    enter into stock index, interest rate, and currency futures contracts,
    and options on such contracts; engage in options transactions; make
    short sales; purchase zero coupon bonds and payment-in-kind bonds; and
    engage in various other investment practices.   

o   The officers, interested directors, and T. Rowe Price, the investment
    manager of Spectrum Funds, presently serve as officers, interested
    directors, and investment manager of most of the underlying Price funds.
    Therefore, conflicts may arise as these persons fulfill their fiduciary
    responsibilities to Spectrum Funds and the underlying Price funds. 

o   Spectrum Income Fund must invest at least 10% and can invest as much as
    25% of its assets in the T. Rowe Price High Yield Fund. As a result, the
    Income Fund will be subject to some of the risks resulting from
    high-yield investing.

o   Each of the funds may invest in underlying Price funds which invest in
    medium-grade bonds. If these bonds are downgraded, the funds will
    consider whether to increase or decrease their investment in the
    affected underlying Price fund.

o   Spectrum Income Fund may invest in underlying Price funds which
    concentrate their assets in certain industries.  Under certain unusual
    circumstances, this could result in the Income Fund being indirectly
    concentrated in these industries. If this were to occur, the Income Fund
    would consider whether to maintain or change its investments in such
    underlying Price funds.

o   Spectrum Income Fund must invest at least 5% and can invest as much as
    20% of its assets in the International Bond Fund, which invests
    primarily in foreign fixed income securities; the Spectrum Growth Fund
    must invest at least 5% and can invest as much as 20% of its assets in
    the International Stock Fund, which invests primarily in foreign equity
    securities. These investments will subject the funds to risks associated
    with investing in foreign securities.

_____________________________________________________________________________
FURTHER INFORMATION ON THESE INVESTMENT POLICIES AND PRACTICES CAN BE FOUND
UNDER "INVESTMENT POLICIES OF THE UNDERLYING PRICE FUNDS" AND IN THE STATEMENT
OF ADDITIONAL INFORMATION AS WELL AS THE PROSPECTUSES OF EACH OF THE
UNDERLYING PRICE FUNDS.

Description of Underlying Price Funds

The following is a brief description of the principal investment programs of
the underlying Price funds. Additional investment practices are described
under "Special Risks and Considerations," the Statement of Additional
Information, and the prospectuses for each of the underlying Price funds.

Underlying Price Funds of Both the Spectrum Income and Growth Funds

o   T. Rowe Price Prime Reserve Fund is a money market fund which is managed
    to maintain a stable share price of $1.00.  This policy has been
    maintained since its inception; however, the $1.00 price is neither
    insured by the U.S. government, nor is its yield fixed. The fund invests
    at least 95% of its total assets in prime money market instruments, that
    is, securities receiving the highest credit rating. The dollar-weighted
    average maturity of the fund will not exceed 90 days. Since the fund is
    managed to maintain a constant share price, its total return should be
    composed entirely of income.

o   T. Rowe Price Equity Income Fund's objective is to provide substantial
    dividend income as well as long-term capital appreciation through
    investments in common stocks of established companies. Under normal
    circumstances, the fund will invest at least 65% of total assets in the
    common stocks of established companies paying above-average dividends.
    These companies are expected to have favorable prospects for dividend
    growth and capital appreciation, according to T. Rowe Price.

Spectrum Income Fund. Each of the underlying Price funds in the Income Fund
seeks the highest level of income consistent with its individual investment
program. 

o   T. Rowe Price Short-Term Bond Fund's objective is to provide a high
    level of income consistent with minimum fluctuation in principal value
    and liquidity. The fund will invest in a diversified portfolio of short-
    and intermediate-term corporate, government, and mortgage debt
    securities. Under normal circumstances, at least 65% of total assets
    will be invested in short-term bonds. The fund's dollar-weighted average
    effective maturity will not exceed three years. Securities purchased by
    the fund will be rated within the four highest credit categories.

o   T. Rowe Price GNMA Fund's objective is to provide a high level of
    current income consistent with maximum credit protection and moderate
    price fluctuation by investing exclusively in securities backed by the
    full faith and credit of the U.S. government and instruments involving
    these securities. The fund invests primarily in mortgage-backed
    securities issued and guaranteed by the Government National Mortgage
    Association (GNMA). The GNMA guarantee does not apply in any way to the
    price of GNMA securities or the fund, both of which will fluctuate with
    market conditions.

    Mortgage-Backed Securities. Mortgage lenders pool individual home
    mortgages with similar characteristics to back a certificate or bond,
    which is then sold to investors. Interest and principal payments
    generated by the underlying mortgages are passed through to the
    investor. There is a risk of homeowner prepayment; that is, when
    interest rates are falling, homeowners may accelerate principal payments
    on the mortgages that underlie the GNMA securities. Prepayments cause a
    loss to investors, such as this fund, on mortgages that were originally
    purchased at a premium (price above par).

o   T. Rowe Price International Bond Fund's objective is to provide high
    current income and capital appreciation by investing in high-quality,
    nondollar-denominated government and corporate bonds outside the U.S.
    The fund also seeks to moderate price fluctuation by actively managing
    its maturity structure and currency exposure. The fund will invest at
    least 65% of its assets in high-quality bonds, but may invest up to 20%
    of assets in below-investment-grade, high-risk bonds, including bonds in
    default or those with the lowest rating.

    Although the fund expects to maintain an intermediate to long weighted
    average maturity, it has no maturity restrictions on the overall
    portfolio or on individual securities. Normally, the fund does not hedge
    its foreign currency exposure back to the dollar, nor involve more than
    50% of total assets in cross hedging transactions. Therefore, changes in
    foreign interest rates and currency exchange rates are likely to have a
    significant impact on total return and the market value of portfolio
    securities. 

o   T. Rowe Price High Yield Fund has high current income and, secondarily,
    capital appreciation as its objective. Under normal conditions, the fund
    expects to invest at least 80% of its total assets in a widely
    diversified portfolio of high-yield bonds (so-called "junk" bonds) and
    income-producing convertible securities and preferred stocks. The fund"s
    longer average maturity (expected to be in the 8- to 12-year range)
    makes its price more sensitive to broad changes in interest rate
    movements than shorter-term bond funds. The portfolio manager buys
    defaulted bonds only if significant potential for capital appreciation
    is expected.

    Special Risks of High-Yield Investing. This fund is expected to have
    greater price swings than are associated with most bond funds
    emphasizing high-quality investments. The total return and yield of
    lower-quality (high-yield/high-risk) bonds, commonly referred to as
    "junk" bonds, can be expected to fluctuate more than the total return
    and yield of higher-quality bonds. Junk bonds are regarded as
    predominantly speculative with respect to the issuer's continuing
    ability to meet principal and interest payments. Successful investment
    in low- and lower-medium-quality bonds involves greater investment risk
    and is highly dependent on T. Rowe Price's credit analysis. A real or
    perceived economic downturn or higher rates could cause a decline in
    high-yield bond prices because such events could lessen the ability of
    issuers to make principal and interest payments. In addition, the entire
    junk bond market can experience sudden and sharp price swings due to a
    variety of factors.

_____________________________________________________________________________
FOR MORE INFORMATION ABOUT AN UNDERLYING PRICE FUND, CALL: 1-800-638-5660 OR
1-410-547-2308.

    The High Yield Fund imposes a redemption fee of 1% on all redemptions
    (including exchanges) of shares held in the fund for less than one year.
    The redemption fee is paid to the High Yield Fund. Spectrum Fund is
    subject to this fee if it redeems shares held in the High Yield Fund for
    less than one year.

o   T. Rowe Price New Income Fund's objective is to provide the highest
    level of income over time consistent with the preservation of capital
    through investment primarily in marketable debt securities. At least 80%
    of total assets will be invested in income-producing, investment-grade
    instruments, including (but not limited to) U.S. government and agency
    obligations, mortgage-backed securities, corporate debt securities,
    asset-backed securities, bank obligations, CMOs, commercial paper,
    foreign securities, and others. There are no maturity restrictions on
    securities purchased by the fund, but the fund's dollar-weighted average
    maturity is generally expected to be between 4 and 15 years. 

Summary of Programs

                                       Share
                                       price       Expected
                  Credit               fluctuation average
Fund              quality   Yield      (NAV)       maturity

Prime Reserve     2 highest Lowest     Maintain    No more
                  possible             $1.00 (not  than 90 days
                                       guaranteed) 
Short-Term Bond   4 highest Moderate   Moderate    Not greater
                                                   than 3 years
GNMA              Highest   Moderate   Moderate    Varies,    
                                                   possible   
                                                   3-10 years
New Income        4 highest High       High        No restriction
International     Primarily High       High        Intermediate to
Bond              4 highest                        high
                  to 20% below
                  4 highest) 
High Yield        BB or     Highest    Highest     Normally
                  lower                            8-12 years

Table 4

Spectrum Growth Fund. Each of the underlying Price funds in the Spectrum
Growth Fund seeks long-term growth of capital as its primary objective.  

o   T. Rowe Price Growth & Income Fund's objective is to provide long-term
    capital growth, a reasonable level of current income, and increasing
    future income through investments primarily in dividend-paying stocks.
    The fund can focus on companies whose earnings are expected by T. Rowe
    Price to grow at an above-average rate and can support a growing
    dividend payment as well as stocks that do not pay dividends currently
    but offer prospects of appreciation  and future income.

o   T. Rowe Price International Stock Fund's objective is to seek long-term
    growth of capital through investments primarily in common stocks of
    established, non-U.S. companies. The fund expects to invest
    substantially all of its assets outside the U.S. and to diversify
    broadly among countries throughout the world in developed, newly
    industrialized, and emerging economies.
  
o   T. Rowe Price New Era Fund's objective is to provide long-term capital
    appreciation by investing primarily in common stocks of companies that
    own or develop natural resources and other basic commodities, and in the
    stocks of selected nonresource growth companies. The fund's primary
    focus will be on the common stocks of companies whose earnings and
    tangible assets are expected to grow faster than inflation. The fund
    will also invest in selected nonresource growth companies with strong
    potential for earnings growth.

o   T. Rowe Price New Horizons Fund's objective is to provide long-term
    growth of capital by investing primarily in common stocks of small,
    rapidly growing companies. The fund will invest primarily in a
    diversified group of small, emerging growth companies. It will seek to
    invest early in the corporate life cycle, before a company becomes
    widely recognized by the investment community. The fund may also invest
    in companies that offer the possibility of accelerating earnings growth
    because of rejuvenated management, new products, or structural changes
    in the economy.

o   T. Rowe Price Growth Stock Fund's objective is to provide long-term
    growth of capital and, secondarily, increasing dividend income by
    investing primarily in common stocks of well-established growth
    companies. The fund will invest primarily (at least 65% of total assets)
    in the common stocks of a diversified group of growth companies. Though
    it is not required, the companies in which the fund invests normally pay
    dividends, which are generally expected to rise in future years as
    earnings increase.

Investment Policies of the Spectrum Funds

Each fund's investment policies and practices are subject to further
restrictions and risks which are described in the Statement of Additional
Information. The funds will not make a material change in their investment
objectives or their fundamental policies without obtaining shareholder
approval. The funds' investment programs, unless otherwise specified, are not
fundamental policies and may be changed without shareholder approval.
Shareholders will be notified of any material change in such investment
programs.

_____________________________________________________________________________
CASH RESERVES PROVIDE FLEXIBILITY AND SERVE AS A SHORT-TERM DEFENSE DURING
PERIODS OF UNUSUAL MARKET VOLATILITY.

Cash Position. While the Income Fund will remain primarily invested in bonds
and the Growth Fund in stocks, each fund can hold a certain portion of its
assets in U.S. and foreign dollar-denominated money market securities,
including repurchase agreements in the two highest rating categories, maturing
in one year or less. For temporary, defensive purposes, a fund may invest
without limitation in such securities. Each fund may invest its cash reserves
in the Prime Reserve Fund. A reserve position provides flexibility in meeting
redemptions, expenses, and the timing of new investments, and serves as a
short-term defense during periods of unusual volatility.

Diversification. Spectrum Fund is a "nondiversified" investment company for
purposes of the 1940 Act because it invests in the securities of a limited
number of mutual funds. However, the underlying Price funds themselves are
diversified investment companies (with the exception of the T. Rowe Price
International Bond Fund). Spectrum Fund intends to qualify as a diversified
investment company for the purposes of Subchapter M of the Internal Revenue
Code.

Fundamental Investment Policies. As a matter of fundamental policy, each fund
will not: (i) invest more than 25% of its respective total assets in any one
industry, except for investment companies which are members of the T. Rowe
Price family of funds; (ii) borrow money except temporarily to facilitate
redemption requests in amounts not exceeding 30% of each fund's total assets
valued at market; (iii) in any manner transfer as collateral for indebtedness
any securities owned by each fund except in connection with permissible
borrowings, which in no event will exceed 30% of each fund's total assets
valued at market; (iv) change the selection of the underlying Price funds in
which it can invest; or (v) change the percentage ranges of each fund which
may be allocated to the underlying Price funds.

Other Investment Restrictions. As a matter of operating policy, each fund will
not, among other things: (i) purchase additional securities when money
borrowed exceeds 5% of the fund's total assets; (ii) invest more than 10% of
its net assets in illiquid securities, provided that each fund will not invest
more than 5% of its net assets in restricted securities (other than securities
eligible for resale under Rule 144A of the Securities Act of 1933); and (iii)
redeem securities from any underlying Price fund at a rate in excess of 1% of
the underlying Price fund's assets in any period of less than 15 days, except
where necessary to meet shareholder redemption requests.

The funds may not purchase shares of any underlying Price fund if, as a result
of such purchase, they would own more than 30% of the outstanding voting
securities of the underlying Price fund. This is an operating policy and may
be changed by the Board of Directors. The ability to invest this amount in the
underlying Price funds could subject the funds to greater risk due to the
resulting concentration. However, each of the underlying Price funds invests
in a broad portfolio, which would tend to mitigate this risk to some degree.

If a fund reaches a percentage investment limit with any underlying Price
fund, the Directors will have to determine whether to increase the limit, stop
sales of shares of that fund,  or take other suitable steps.

Portfolio Turnover. Each fund's portfolio turnover is expected to be low. The
funds will purchase or sell securities to: (i) accommodate purchases and sales
of each fund's shares; (ii) change the percentages of each fund's assets
invested in each of the underlying Price funds in response to market
conditions; and (iii) maintain or modify the allocation of each fund's assets
among the underlying Price funds within the percentage limits described
earlier. The following chart sets forth each fund's portfolio turnover rates
for the years ended December 31, 1995, December 31, 1994, and December 31,
1993.

                  1995      1994       1993
Income Fund       20.2%     23.1%      14.4%
Growth Fund       7.4       20.7       7.0         

Investment Policies and Practices of Underlying Price Funds

_____________________________________________________________________________
FUND MANAGERS HAVE CONSIDERABLE LEEWAY IN CHOOSING INVESTMENT STRATEGIES AND
SELECTING SECURITIES THEY BELIEVE WILL HELP THE FUNDS ACHIEVE THEIR
OBJECTIVES.

In pursuing their investment objectives and programs, each of the underlying
Price funds is permitted to engage in a wide range of investment policies.
Certain of these policies are described in the following paragraphs and
further information about the underlying Price funds is contained in the
Statement of Additional Information as well as the prospectuses of such funds. 
Because each fund invests in the underlying Price funds, shareholders of each
fund will be affected by these investment policies in direct proportion to the
amount of assets each fund allocates to the underlying funds pursuing such
policies.

Lending of Portfolio Securities. Like other mutual funds, the underlying Price
funds may lend securities to broker-dealers, other institutions, or other
persons to earn additional income. The principal risk is the potential
insolvency of the broker-dealer or other borrower. In this event, the
underlying Price funds could experience delays in recovering its securities
and possibly capital losses.

Foreign Securities. The funds will each invest in certain underlying Price
funds that invest all or a portion of their assets in foreign securities.
These investments in foreign securities, include nondollar-denominated
securities traded outside of the U.S. and dollar-denominated securities of
foreign issuers. Such investments increase a portfolio's diversification and
may enhance return, but they also involve some special risks such as exposure
to potentially adverse local political and economic developments;
nationalization and exchange controls; potentially lower liquidity and higher
volatility; possible problems arising from accounting, disclosure, settlement,
and regulatory practices that differ from U.S. standards; and the chance that
fluctuations in foreign exchange rates will decrease the investment's value
(favorable changes can increase its value). To the extent the underlying Price
funds invest in developing countries, these risks are increased.

Managing Foreign Currency Risk. Foreign securities in which the underlying
Price funds invest are subject to currency risk, that is, the risk that the
U.S. dollar value of these securities may be affected favorably or unfavorably
by changes in foreign currency exchange rates and exchange control
regulations. Investors in foreign securities may "hedge" their exposure to
potentially unfavorable currency changes by purchasing a contract to exchange
one currency for another on some future date at a specified exchange rate. In
certain circumstances, a "proxy currency" may be substituted for the currency
in which the investment is denominated, a strategy known as "proxy hedging."
An underlying fund may also use these contracts to create a synthetic
bond -- issued by a U.S. company, for example, but with the dollar component
transformed into a foreign currency. Although the underlying funds will engage
in foreign currency transactions primarily to protect the fund's foreign
securities from adverse currency movements relative to the dollar, they
involve the risk that anticipated currency movements will not occur and the
fund's total return could be reduced.

_____________________________________________________________________________
FUTURES ARE USED TO MANAGE RISK; OPTIONS GIVE THE INVESTOR THE OPTION TO BUY
OR SELL AN ASSET AT A PREDETERMINED PRICE IN THE FUTURE.

Futures and Options. Futures (a type of potentially high-risk derivative) are
often used to manage or hedge risk, because they enable the investor to buy or
sell an asset in the future at an agreed upon price. Options (another type of
potentially high-risk derivative) give the investor the right, but not the
obligation, to buy or sell an asset at a predetermined price in the future.
The funds may buy and sell futures and options contracts for a number of
reasons, including: to manage their exposure to changes in interest rates,
securities prices, and foreign currencies; to efficiently adjust their overall
exposure to certain markets; to attempt to enhance income; to protect the
value of portfolio securities; and to adjust the portfolios' duration.

The funds may purchase, sell, or write call and put options on securities,
financial indices, and foreign currencies.

Futures contracts and options may not always be successful hedges; their
prices can be highly volatile; using them could lower the funds' total return;
and the potential loss from the use of futures can exceed the fund's initial
investment in such contracts.

4   Investing With T. Rowe Price

Account Requirements and Transaction Information 

_____________________________________________________________________________
ALWAYS VERIFY YOUR TRANSACTIONS BY CAREFULLY REVIEWING THE CONFIRMATION WE
SEND YOU. PLEASE REPORT ANY DISCREPANCIES TO SHAREHOLDER SERVICES PROMPTLY.

Tax Identification Number

We must have your correct Social Security or corporate tax identification
number on a signed New Account Form or W-9 Form. Otherwise, federal law
requires the funds to withhold a percentage (currently 31%) of your dividends,
capital gain distributions, and redemptions, and may subject you to an IRS
fine. If this information is not received within 60 days after your account is
established, your account may be redeemed, priced at the NAV on the date of
redemption.

Unless you request otherwise, one shareholder report will be mailed to
multiple account owners with the same tax identification number and same ZIP
code and to shareholders who have requested that their account be combined
with someone else's for financial reporting.

_____________________________________________________________________________
T. ROWE PRICE TRUST COMPANY
1-800-492-7670
1-410-625-6585

Employer-Sponsored Retirement Plans and Institutional Accounts

Transaction procedures in the following sections may not apply to
employer-sponsored retirement plans and institutional accounts. For procedures
regarding employer-sponsored retirement plans, please call T. Rowe Price Trust
Company or consult your plan administrator. For institutional account
procedures, please call your designated account manager or service
representative.

Opening a New Account: $2,500 minimum initial investment; $1,000 for
retirement or gifts or transfers to minors (UGMA/UTMA) accounts

_____________________________________________________________________________
REGULAR MAIL
T. ROWE PRICE ACCOUNT SERVICES
P.O. BOX 17300
BALTIMORE, MD 21298-9353

MAILGRAM, EXPRESS, REGISTERED, OR CERTIFIED MAIL
T. ROWE PRICE ACCOUNT SERVICES
10090 RED RUN BLVD.
OWINGS MILLS, MD  21117

Account Registration

If you own other T. Rowe Price funds, be sure to register any new account just
like your existing accounts so you can exchange among them easily. (The name
and account type would have to be identical.) 

By Mail

Please make your check payable to T. Rowe Price Funds (otherwise it will be
returned) and send your check together with the New Account Form to the
address at left. We do not accept third party checks, except for IRA Rollover
checks, to open new accounts.

By Wire

o   Call Investor Services for an account number and give the following wire
    address to your bank: 

Morgan Guaranty Trust Co. of New York 
ABA# 021000238 
T. Rowe Price [fund name] 
AC-00153938 
account name(s) and account number.

o   Complete a New Account Form and mail it to one of the appropriate
    addresses listed on the previous page. 

Note: No services will be established and IRS penalty withholding may occur
until a signed New Account Form is received. Also, retirement plans cannot be
opened by wire.

By Exchange

Call Shareholder Services or use Tele*Access or PC*Access (see "Automated
Services" under "Shareholder Services"). The new account will have the same
registration as the account from which you are exchanging. Services for the
new account may be carried over by telephone request if preauthorized on the
existing account. (See explanation of "Excessive Trading" under "Transaction
Procedures.")

In Person

Drop off your New Account Form at any of the locations listed on the cover and
obtain a receipt.

Purchasing Additional Shares: $100 minimum purchase; $50 minimum for
retirement plans and Automatic Asset Builder

By ACH Transfer

Use Tele*Access or PC*Access, or call Investor Services, if you have
established electronic transfers using the ACH network.

By Wire

Call Shareholder Services or use the wire address in "Opening a New Account."

_____________________________________________________________________________
REGULAR MAIL
T. ROWE PRICE FUNDS
ACCOUNT SERVICES
P.O. BOX 89000
BALTIMORE, MD 21289-1500 (FOR MAILGRAMS, EXPRESS, REGISTERED, OR CERTIFIED
MAIL, SEE PREVIOUS SECTION.)

By Mail

o   Make your check payable to T. Rowe Price Funds (otherwise it may be
    returned).

o   Mail the check to us at the address shown at left with either a fund
    reinvestment slip or a note indicating the fund you want to buy and your
    fund account number.

o   Remember to provide your account number and the fund name on your check.

By Automatic Asset Builder

Fill out the Automatic Asset Builder section on the New Account or Shareholder
Services Form.

Exchanging and Redeeming Shares

By Phone

Call Shareholder Services. If you find our phones busy during unusually
volatile markets, please consider placing your order by PC*Access, Tele*Access
(if you have previously authorized telephone services), mailgram, or express
mail. For exchange policies, please see "Transaction Procedures and Special
Requirements -- Excessive Trading."

Redemption proceeds can be mailed to your account address, sent by ACH
transfer, or wired to your bank (provided your bank information is already on
file). For charges, see "Electronic Transfers -- By Wire" under "Shareholder
Services."

_____________________________________________________________________________
FOR MAILGRAMS, EXPRESS, REGISTERED, OR CERTIFIED MAIL, SEE ADDRESSES UNDER
"OPENING A NEW ACCOUNT."

By Mail

For each account involved, provide the account name, number, fund name, and
exchange or redemption amount. For exchanges, be sure to indicate any fund you
are exchanging out of and the funds you are exchanging into. Please mail to
the appropriate address below or as indicated at left.

T. Rowe Price requires the signatures of all owners exactly as registered, and
possibly a signature guarantee (see "Transaction Procedures and Special
Requirements -- Signature Guarantees").

Regular Mail

For nonretirement and       For employer-sponsored
IRA accounts:               retirement accounts:

T. Rowe Price Account ServicesT. Rowe Price Trust Company 
P.O. Box 89000              P.O. Box 89000
Baltimore, MD 21289-0220    Baltimore, MD 21289-0300

Redemptions from employee-sponsored retirement accounts, must be in writing;
please call Shareholder Services to obtain an IRA Distribution Request Form or
an IRA Shareholder Services Form to authorize the telephone redemption
service.

Rights Reserved by the Fund

The fund and its agents reserve the right to waive or lower investment
minimums; to accept initial purchases by telephone or mailgram; to cancel or
rescind any purchase or exchange (for example, if an account has been
restricted due to excessive trading or fraud) upon notice to the shareholder
within five business days of the trade or if the written confirmation has not
been received by the shareholder, whichever is sooner; to freeze any account
and temporarily suspend services on the account when notice has been received
of a dispute between the registered or beneficial account owners or there is
reason to believe a fraudulent transaction may occur; to otherwise modify the
conditions of purchase and any services at any time; or to act on instructions
believed to be genuine.

Shareholder Services

_____________________________________________________________________________
SHAREHOLDER SERVICES
1-800-225-5132
1-410-625-6500

Many services are available to you as a T. Rowe Price shareholder; some you
receive automatically and others you must authorize on the New Account Form.
By signing up for services on the New Account Form rather than later on, you
avoid having to complete a separate form and obtain a signature guarantee.
This section reviews some of the principal services currently offered. Our
Services Guide contains detailed descriptions of these and other services. 

If you are a new T. Rowe Price investor, you will receive a Services Guide
with our Welcome Kit. 

Note: Corporate and other entity accounts require an original or certified
resolution to establish services and to redeem by mail. For more information,
call Investor Services.

Retirement Plans

_____________________________________________________________________________
INVESTOR SERVICES
1-800-638-5660
1-410-547-2308

We offer a wide range of plans for individuals and institutions, including
large and small businesses: IRAs, SEP-IRAs, Keoghs (profit sharing, money
purchase pension), 401(k), and 403(b)(7). For information on IRAs, call
Investor Services. For information on all other retirement plans, please call
our Trust Company at 1-800-492-7670.

Exchange Service

You can move money from one account to an existing identically registered
account, or open a new identically registered account. Remember, exchanges are
purchases and sales for tax purposes. (Exchanges into a state tax-free fund
are limited to investors living in states where the funds are registered.)
Some of the T. Rowe Price funds may impose a redemption fee of .50% to 2%,
payable to such funds, on shares held for less than one year, or in some
funds, six months.

Automated Services

_____________________________________________________________________________
TELE*ACCESS
1-800-638-2587
1-410-625-7676

Tele*Access. 24-hour service via toll-free number provides information on fund
yields and prices, dividends, account balances, and your latest transaction,
as well as the ability to request prospectuses, account and tax forms,
duplicate statements, checks, and to initiate purchase, redemption, and
exchange orders in your accounts (see "Electronic Transfers" on the next
page).

PC*Access. 24-hour service via dial-up modem provides the same information as
Tele*Access, but on a personal computer. Please call Investor Services for an
information guide. 

Telephone and Walk-In Services

Buy, sell, or exchange shares by calling one of our service representatives or
by visiting one of our investor center locations whose addresses are listed on
the cover.

Electronic Transfers

By ACH. With no charges to pay, you can initiate a purchase or redemption for
as little as $100 or as much as $100,000 between your bank account and fund
account using the ACH network. Enter instructions via Tele*Access, PC*Access,
or call Shareholder Services.

By Wire. Electronic transfers can also be conducted via bank wire. There is
currently a $5 fee for wire redemptions under $5,000, and your bank may charge
for incoming or outgoing wire transfers regardless of size.

Checkwriting (Not available for equity funds, or the High Yield or Emerging
Markets Bond Funds)

You may write an unlimited number of free checks on any money market fund, and
most bond funds, with a minimum of $500 per check. Keep in mind, however, that
a check results in a redemption; a check written on a bond fund will create a
taxable event which you and we must report to the IRS.

Automatic Investing ($50 minimum)

You can invest automatically in several different ways, including: 

o   Automatic Asset Builder. You instruct us to move $50 or more once a
    month or less often from your bank account, or you can instruct your
    employer to send all or a portion of your paycheck to the fund or funds
    you designate.

    Note: If you are moving money from your bank account, and if the date
    you select for your transaction falls on a Sunday or a Monday which is a
    holiday, your order will be priced on the second business day following
    this date.

o   Automatic Exchange. You can set up systematic investments from one fund
    account into another, such as from a money fund into a stock fund.

Discount Brokerage

_____________________________________________________________________________
DISCOUNT BROKERAGE IS A DIVISION OF T. ROWE PRICE INVESTMENT SERVICES, INC.

You can trade stocks, bonds, options, precious metals, and other securities at
a savings over regular commission rates. Call Investor Services for
information.

Note: If you buy or sell T. Rowe Price funds through anyone other than T. Rowe
Price, such as broker-dealers or banks, you may be charged transaction or
service fees by those institutions. No such fees are charged by T. Rowe Price
Investment Services or the fund for transactions conducted directly with the
fund.

T. Rowe Price Funds
Individual Retirement Account

Disclosure Statement

This Disclosure Statement is provided to each person who establishes an
Individual Retirement Account ("IRA"). Please read it and the Custodial
Agreement carefully as well as the prospectuses for any of the T. Rowe Price
Funds you select for your IRA investment. 

Revocation

You must receive this Disclosure Statement and Custodial Agreement seven days
prior to opening your IRA. Your Application cannot be accepted, nor can your
account be opened, until you have had these documents for seven days. You may
not revoke your Application for a T. Rowe Price IRA after it has been received
and accepted by the Custodian.

Definition of Individual Retirement Account

An IRA is a trust created in the United States for the exclusive benefit of an
individual (or his beneficiaries). Generally, you defer federal income taxes
on the earnings in your account and you may be able to defer income taxes on
the amount you invest. State income tax treatment of an IRA varies. 

Eligibility

All individuals who receive compensation may contribute to an IRA before the
year in which they reach age 70 1/2. If you or your spouse is an active
participant in an employer-sponsored retirement plan, you will be eligible to
make tax-deductible contributions only under limited conditions. If you are
not eligible to make deductible contributions, you may be able to make
nondeductible contributions. 

Contributions

Your contributions must be in cash or a cash equivalent (for example, a
check). Except for rollovers, the maximum amount that you may contribute to
all IRAs for a calendar year is $2,000, but you can contribute less if you
choose. However, if your compensation for a year is less than $2,000, your
contribution is limited to the total amount of that compensation. If your
spouse's earned income is less than $250 during the year, your spouse may
elect to be treated as having no compensation and you may make a contribution
to a separate spousal IRA on your spouse's behalf. You need not make equal
contributions to the two IRAs; however, you may not contribute more than
$2,000 to either IRA for any year and the total contribution for both IRAs
cannot exceed $2,250. 

There are two different types of contributions: deductible contributions and
nondeductible contributions. Depending on your personal situation, your
contribution may be entirely deductible, entirely nondeductible or a portion
of both. The Internal Revenue Code ("Code") requires you to determine and
report to the IRS which portion of your contribution is deductible and/or
nondeductible. This information is needed to determine the taxable portion of
any distributions you receive. You are not required to inform the IRA
Custodian what portion of your contribution is deductible, and the Custodian
is not obligated to check whether you are correct. Penalties apply if you
overstate the amount of your deductible and/or nondeductible contributions. 

If your deductible IRA contribution is limited because you are an active
participant in a qualified employer-sponsored plan and your modified adjusted
gross income exceeds a certain level, you may make a nondeductible
contribution which, when added to your maximum deductible contribution, can be
no more than your total annual limit on contributions (in most cases, $2,000).
No contributions (except rollover contributions) may be made to your IRA
account for the year in which you reach age 70 1/2 or any following year. 

Rollover

IRA to IRA. You may roll over a distribution from one IRA to another IRA. The
amount may be all or part of the IRA. You must complete the transaction within
60 days after you receive the distribution. You may make only one rollover
from an IRA in any 12-month period. There is no limit on the number of
rollovers you may make to an IRA in any period. There is also no limit on the
amount you may roll over from one IRA to another IRA. 

Qualified Plan to IRA. You may roll over all or part of an eligible rollover
distribution from a qualified employer plan to an IRA. Before you receive the
plan distribution, the plan should be able to tell you if all or part of your
plan distribution will qualify as an eligible rollover distribution. The
rollover may be accomplished by a "direct rollover;" that is, the plan sends
the distribution directly to the IRA. "Indirect" rollovers must be completed
within 60 days after you receive the distribution.

Transfer

You may authorize an IRA custodian to transfer cash (or securities) directly
from one IRA to another. As long as you do not directly receive a
distribution, you may transfer the funds between IRAs as often as you wish. If
you are transferring IRA assets to T. Rowe Price, call to request the proper
forms. 

Limitation Regarding When Contributions Can Be Made

Regular contributions to an IRA, whether deductible or nondeductible, must be
made no later than the date required for filing your tax return for that year
without any extension (usually April 15). 

All contributions must be made in cash. You may not make contributions of
property such as stock or real estate. In limited circumstances, you may be
able to transfer current property held in an IRA or employer-sponsored
retirement plan. Call us for specific details regarding the T. Rowe Price
Discount Brokerage IRA.

IRA Prohibitions

The following transactions are prohibited in your IRA:

1.  No part of your IRA assets may be invested in life insurance or
    commingled with other property except in a common trust or investment
    fund. In addition, no part of your IRA assets may be invested in
    collectibles within the meaning of section 408(m) of the Code, except
    for certain U.S. minted gold and silver coins. 

2.  Transactions between you (or your beneficiary) and the assets held in
    your IRA are not allowed. The specific prohibited transactions are
    described in the Code (for example, borrowing from the account). 

3.  You may not pledge or use any portion of your IRA as security for a
    loan. 

If any one of these transactions occurs, part or all of your account will lose
its tax-deferred status and will be treated as having been distributed to you.

Distributions

Timing of Distributions. You can withdraw funds from your IRA at any time;
however, all taxable amounts withdrawn may be subject to an additional 10%
penalty. The most common types of distributions which can be made without
incurring the penalty include distributions:

a.  after age 59 1/2,
b.  upon death, 
c.  upon permanent disability,
d.  that are part of a series of substantially equal periodic payments taken
    at least annually over your life expectancy, or 
e.  timely rolled over to another IRA.

Minimum Required Distribution ("MRD"). You must begin to receive distributions
from your IRA by April 1 of the year following the year in which you reach age
70 1/2. The distributions must be paid out at least annually based upon your
life expectancy or the combined life expectancy of you and your designated
primary beneficiary.

In calculating your MRD, your life expectancy may be recalculated annually. If
your life expectancy is not recalculated, the original life expectancy factor
will be reduced by one each year. The recalculation method is available for
you and your spousal beneficiary. You must make an IRREVOCABLE election
whether to recalculate. This election must be made before the first required
distribution date. If you fail to make an election, life expectancy will not
be recalculated. 

When you receive an MRD, please be aware that you may not roll over the MRD to
another IRA.

For purposes of calculating your MRD, you can aggregate your IRA accounts from
different custodians and take the MRD amount from any IRA. Therefore, T. Rowe
Price cannot monitor the required distributions from your T. Rowe Price IRAs.
Please check with your tax advisor to verify that you are receiving the proper
amount from all of your IRAs. 

All distribution requests must be made in writing. Please contact T. Rowe
Price to receive the proper distribution form. 

Payment Options. Your account may be distributed to you in one or both of the
following methods: 

a.  A lump-sum payment of all or a part of the IRA. 
b.  Substantially equal installments taken at least annually for a period
    not exceeding your life expectancy or the combined life expectancy of
    you and your designated primary beneficiary. 

Taxation. Distributions from your IRA will be treated as part taxable and part
nontaxable if you have made nondeductible contributions to any IRA. You must
use IRS forms to determine how much of any distribution is nontaxable. Unlike
certain distributions from qualified plans, lump sum distributions from IRAs
are not eligible for capital gains or special averaging treatment. Unless you
elect in writing not to have federal income taxes withheld, the IRS requires
T. Rowe Price to withhold from the entire distribution an amount determined by
current IRS tables and regulations. 

Payment to Beneficiary. If you die after distributions begin, the remaining
money will be distributed to your designated primary beneficiary in accordance
with the regulations under section 401(a)(9) of the Code. If you die before
distributions begin, your entire interest will be distributed in accordance
with the provisions outlined in Section 3.3 of the IRA Agreement. Your
designated beneficiary will be the last written designation that you filed
with T. Rowe Price during your lifetime. 

Penalty Taxes

Excess Contributions. If you contribute more to an IRA than allowed in a year,
you must pay a 6% excise tax. Contributions (except rollover contributions)
which are subject to the excise tax are those contributions which are greater
than the lesser of (1) $2,000, or (2) your compensation for the year. The 6%
excise tax will apply for each year the excess contributions remain in the
IRA. 

You can avoid the excise tax by withdrawing the excess contribution and any
earnings on it, if any, before the due date for filing your federal tax return
including extensions, for the year of the excess contribution. The withdrawn
earnings must be included in income for the tax year in which the excess
contribution was made. If you do not withdraw the excess contribution by the
due date of your tax return, you may be able to treat the excess contribution
as a contribution for the year after the excess contribution was made and
eliminate the penalty for that following year.

Failure to Report Nondeductible Contributions Properly. If, on your tax
return, you overstate the amount of a nondeductible contribution, you will be
subject to a $100 penalty for each overstatement unless you can prove that the
overstatement was due to a reasonable cause. Failure to report nondeductible
contributions will result in a $50 penalty.

Premature Distributions. If you receive distributions from your IRA before you
reach age 59 1/2, you may be subject to a 10% penalty tax in addition to the
ordinary income taxes you must pay on the distribution. See Timing of
DistributionsTIMING section above. Excess Accumulations. After you reach age
70 1/2, a 50% penalty tax will be imposed on any amount which must be
distributed to you under the minimum required distribution rules, but which
you fail to withdraw. 

Excess Distributions. If the total annual amount you receive in a year from
all retirement plans, including IRAs, is in excess of the lesser of $150,000
or $112,500 (as indexed), a 15% excise tax is applied to the excess amount.
This tax does not apply to nontaxable distributions or amounts rolled over. 

Please refer to IRS Publication 590, Individual Retirement Arrangements
(IRAs), for additional information concerning these complicated rules. You may
obtain this publication from your local IRS office or call 1-800-TAX-FORM. In
addition, you should contact your tax advisor to determine how these penalties
may affect you. 

Fees

Fees. An annual fiduciary fee of $10 will be charged for each IRA mutual fund
account. However, this fee will be waived if the individual IRA mutual fund
account balance is $5,000 or greater at the time of fee billing. If you close
any mutual fund account in your T. Rowe Price IRA during the year other than
by exchange to another T. Rowe Price mutual fund account, the $10 fiduciary
fee will be deducted automatically from the proceeds of the redemption. 

Some of these fees may be deductible on your federal income tax return if you
itemize your deductions and if you pay the fee directly during the same
calendar year for which you are claiming the deduction.

Information on fees and commissions associated with a Discount Brokerage
account is in the material provided with your Self-Directed IRA kit. 

Miscellaneous

Tax Forms. T. Rowe Price will send you Form 5498 each year that you contribute
to your IRA. This form shows the total contributions for the prior tax year
and the total rollover contributions for the prior calendar year. You also
will receive a statement of the market value of your IRA account(s) on the
preceding December 31.      

If you make nondeductible contributions, you must report the amount to the IRS
on Form 8606. 

If you incur a penalty tax due to excess accumulations, premature
distributions, excess contributions and/or excess distributions, you must file
Form 5329 for that year. 

Investment Performance. The growth of your mutual fund account can be neither
projected nor guaranteed. 

IRS Approval. The updated T. Rowe Price Trust Company IRA Custodial Agreement
was approved by the Internal Revenue Service on August 2, l993. The IRS
approval concerns the form of the IRA Agreement with respect to its tax
qualification and does not involve the merits of investing in the particular
investment. 

We recommend that you consult with your personal tax advisor concerning any
questions you have about your IRA. You also may obtain information from any
district office of the Internal Revenue Service. 

T. Rowe Price Funds
Individual Retirement Account

Custodial Agreement

Introduction

This Agreement is an amendment and restatement of the T. Rowe Price Funds
Prototype Individual Retirement Account Agreement which was approved by the
Internal Revenue Service (the "IRS") on March 27, 1986. This Agreement was
approved by the IRS on August 2, 1993. 

By signing the Application, the individual hereinafter referred to as Investor
(the "Investor") establishes an Individual Retirement Custodial Account (the
"Account") under section 408(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), sponsored by T. Rowe Price Trust Company (the
"Sponsor"), and T. Rowe Price Trust Company (the "Custodian"), by accepting
the Application, accepts the custodianship of the Account. The Investor and
the Custodian agree that the Account is subject to the terms and conditions of
this Agreement and the Application signed by the Investor, which shall be
effective as of the date the Application is accepted by the Custodian. 

Article I -- Contributions

1.1 Regular Contributions. Except in the case of a rollover contribution
described in section 402, 403 or 408 of the Code or an employer contribution
to a Simplified Employee Pension Plan described in section 408(k) of the Code,
for any tax year the Investor may contribute no more than the lesser of the
Investor's compensation or $2,000. Contributions for a given tax year may be
made during that year or no later than the time prescribed by law for filing
the tax return for that year (not including extensions).

For this purpose, "compensation" means wages, salaries, professional fees or
other amounts derived from or received for personal service actually rendered
(including, but not limited to, commissions-paid salespeople, compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses) and includes earned income, as defined in section
401(c)(2) of the Code (reduced by the deduction the self-employed individual
takes for contributions made to a qualified retirement plan pursuant to
section 401(a) of the Code). For purposes of this definition, section
401(c)(2) of the Code shall be applied as if the term trade or business for
purposes of section 1402 of the Code included service described in subsection
(c)(6). Compensation does not include amounts derived from or received as
earnings or profits from property (including, but not limited to, interest and
dividends) or amounts not includable in gross income. Compensation also does
not include any amount received as a pension or annuity or as deferred
compensation. The term "compensation" shall include any amount includable in
the individual's gross income under section 71 of the Code with respect to a
divorce or separation instrument described in section 71(b)(2)(A) of the Code.

1.2 Rollover Contribution. The Custodian may accept rollover contributions
as an investment in the Account. To effect a rollover, the Investor shall
execute any and all forms as the Custodian may reasonably request. 

1.3 Transfer of Assets. The Custodian may accept, in the form or manner
acceptable to it, a transfer of assets held on behalf of the Investor from a
trustee or custodian of another individual retirement account. At the written
request of the Investor, the Custodian may, in the form or manner acceptable
to it, transfer assets in the Account directly to the trustee or custodian of
another individual retirement account established on behalf of the Investor
or, as provided in section 408(d)(6) of the Code, to an individual retirement
account established on behalf of the Investor's spouse or former spouse
incident to divorce. 

1.4 Return of Excess Contributions. At the written request of the Investor,
the Custodian shall return to the Investor any excess contribution as defined
in section 408(d)(4) or 408(d)(5) of the Code (and any income on such excess
contribution, if the Investor's request asks for such income and states that
the return is intended to comply with section 408(d)(4) of the Code). 

1.5 Form of Contributions. Rollover contributions or transfers may be made
in cash or other property acceptable to the Custodian and which are
permissible investments under section 408 of the Code. All other contributions
must be made in cash. 

1.6 Responsibility of Custodian. The Custodian shall have no obligation to
verify the allowability, amount, deductibility or tax effect of any
contribution, transfer or return of excess contributions made by or on behalf
of the Investor. 

Article II -- Investments

2.1 Investment Instructions. The Custodian shall invest and reinvest all
contributions and transfers to the Account in accordance with the Investor's
written directions in the Application and in accordance with any subsequent
directions given in the form and manner acceptable to the Custodian by the
Investor (or, following the Investor's death, the beneficiary). If any
investment instructions are unclear in the opinion of the Custodian, or if any
contribution exceeds $2,000 and is not identified as a rollover contribution,
the Custodian may hold or return all or a portion of the contribution or
transfer uninvested without liability for loss of income or depreciation and
without liability for interest, pending receipt of proper instructions or
clarification. 

2.2 Permissible Investments. Assets in the Account may be invested or
reinvested in shares of one or more of the regulated investment companies for
which T. Rowe Price Associates, Inc., or any of its affiliates, serves as
investment adviser ("Price Fund") and any other investment permitted under
section 408(a) of the Code which the Custodian permits as an investment under
this Agreement ("Other Investment Vehicle"). The Investor must provide
specific instructions to the Custodian of specific purchases, sales, exchanges
and other transactions in the Account. All such transactions must comply with
this Agreement and the current prospectus, or other offering materials, of the
investment(s) involved. By giving instructions to the Custodian to invest in a
Price Fund, the Investor will be deemed to have acknowledged receipt of the
current prospectus for such Price Fund. The Custodian shall execute such
instructions promptly; provided, however, that neither the Custodian nor any
affiliated company shall be obligated to invest any portion of the Investor's
initial contribution to his or her Account until seven calendar days shall
have elapsed from the date of acceptance of the Investor's Application by the
Custodian. 

2.3 Reinvestment of Earnings. All dividends and other distributions received
by the Custodian on shares of any Price Fund held in the Account shall be
reinvested in additional shares of such Price Fund unless the Investor elects
in writing, in the form and manner acceptable to the Custodian, to receive
such dividends and other distributions in cash. Dividends, interest or any
other distributions received with respect to Other Investment Vehicles held in
the Account shall be reinvested in accordance with the Investor's written
instructions in the Application or in subsequent written instructions
furnished to the Custodian in the form and manner acceptable to the Custodian.

2.4 Registration of Assets. All assets held in the Account shall be
registered in the name of the Custodian for the benefit of the Investor. The
Custodian shall deliver, or cause to be delivered, to the Investor all
notices, prospectuses, financial statements, proxies and proxy solicitation
materials relating to the Price Fund shares or Other Investment Vehicles held
in the Account. The Custodian shall not vote any such shares or Other
Investment Vehicles except in accordance with written instructions received
from the Investor; provided, however, that the Custodian may, without written
direction from the Investor, vote shares "present" solely for purposes of
establishing a quorum. 

2.5 Impermissible Investments. The Account cannot invest in life insurance
contracts or collectibles within the meaning of section 408(m) of the Code.
The Account cannot be commingled with other property except in a common trust
fund or in a common investment fund. 

2.6 Responsibility of Custodian. The Custodian shall be entitled to rely
completely on investment instructions furnished to it by the Investor and
shall have no duty or obligation to question such investment instructions. The
Investor acknowledges that the Custodian does not undertake to render any
investment advice and that the Custodian is not responsible for any loss which
results from the Investor's exercise of (or failure to exercise) investment
control. 

Article III -- Distribution Rules

3.1 General Requirements. Subject to the following requirements of this
Article, the Investor may elect in a form or manner acceptable to the
Custodian to have all or any part of the Account distributed in one or any
combination of the following ways: 

a.  single sum payment, or
b.  monthly, quarterly or annual installment payments.

3.2 Lifetime Minimum Required Distributions. The entire value of the Account
of the Investor will be distributed or commence to be distributed, no later
than the first day of April following the calendar year in which the Investor
attains age 70 1/2 (required beginning date), over a period certain not
extending beyond the life expectancy of the Investor, or the joint and last
survivor expectancy of the Investor and his or her designated beneficiary. 

The amount to be distributed each year, beginning with the first calendar year
for which distributions are required and then for each succeeding calendar
year, shall not be less than the quotient obtained by dividing the Investor's
Account balance as of December 31 of the preceding year by the lesser of (a)
the applicable life expectancy, or (b) if the Investor's spouse is not the
designated beneficiary, the applicable divisor determined from the table set
forth in Q&A-4 or Q&A-5, as applicable, of section 1.401(a)(9)-2 of the
Proposed Income Tax Regulations or any successor regulation. 

Distributions after the death of the Investor shall be distributed using the
applicable life expectancy as the relevant divisor without regard to proposed
regulations section 1.401(a)(9)-2. 

Life expectancy is computed by use of the expected return multiples in Tables
V and VI of section 1.72-9 of the Income Tax Regulations. Unless otherwise
elected by the Investor by the time distributions are required to begin, life
expectancies shall not be recalculated. Such election shall be irrevocable by
the Investor and shall apply to all subsequent years. The life expectancy of a
non-spouse beneficiary may not be recalculated even if the Investor elects to
recalculate life expectancies annually. Instead, if the Investor elects
recalculation, life expectancy will be calculated using the attained age of
such beneficiary during the calendar year in which the Investor attains age 70
1/2, and payments for subsequent years shall be calculated based on such life
expectancy reduced by one for each calendar year which has elapsed since the
calendar year life expectancy was first calculated. 

3.3 Minimum Required Distributions Upon Death. 

a.  If the Investor dies after distribution of his or her interest has
    begun, the remaining portion of such interest will continue to be
    distributed at least as rapidly as under the method of distribution
    being used prior to the Investor's death. 

b.  If the Investor dies before distribution of his or her interest begins,
    distribution of the Investor's entire Account shall be completed by
    December 31 of the calendar year containing the fifth anniversary of the
    Investor's death except to the extent that an election is made to
    receive distributions in accordance with (i), (ii) or (iii) below:

(i) If the Investor's interest is payable to a designated beneficiary, then
    the entire interest of the Investor may be distributed over a period
    certain not greater than the life expectancy of the designated
    beneficiary commencing on or before December 31 of the calendar year
    immediately following the calendar year in which the Investor died. 

(ii)If the designated beneficiary is the Investor's surviving spouse, the
    date distributions are required to begin in accordance with (i) above
    shall not be earlier than the later of (1) December 31 of the calendar
    year immediately following the calendar year in which the Investor died,
    or (2) December 31 of the calendar year in which the Investor would have
    attained age 70 1/2. 

(iii)If the designated beneficiary is the Investor's surviving spouse, the
     spouse may elect to treat the Account as his or her own individual
     retirement arrangement (IRA) by giving written notice of such election
     to the Custodian at least 30 days before distributions are required to
     begin under (ii) above. 

c.   Life expectancy is computed by use of the expected return multiples in
     Tables V and VI of section 1.72-9 of the Income Tax Regulations. For
     purposes of distributions beginning after the Investor's death, unless
     otherwise elected by the surviving spouse by the time distributions are
     required to begin, life expectancies shall not be recalculated annually.
     An election to recalculate life expectancies annually shall be
     irrevocable by the surviving spouse and shall apply to all subsequent
     years. In the case of any other designated beneficiary, life
     expectancies shall be calculated using the attained age of such
     beneficiary during the calendar year in which distributions are required
     to begin pursuant to this section, and payments for any subsequent
     calendar year shall be calculated based on such life expectancy reduced
     by one for each calendar year which has elapsed since the calendar year
     life expectancy was first calculated. 

d.   Distributions under this section are considered to have begun if the
     distributions are made on account of the Investor reaching his or her
     required beginning date. If the Investor receives distributions prior to
     the required beginning date and the Investor dies, distributions will
     not be considered to have begun. 

3.4  Aggregation of IRAs for Purposes of Minimum Required Distributions. An
Investor (or beneficiary, if applicable) may satisfy the minimum distribution
requirements described above and under sections 408(a)(6) and 408(b)(3) of the
Code by receiving a distribution from one IRA that is equal to the amount
required to satisfy the minimum distribution requirements for two or more
IRAs. For this purpose, the Investor may use the "alternative method"described
in Notice 88-38, 1988-1 C.B. 524, to satisfy the minimum distribution
requirements described above. Accordingly, if the Investor fails to elect one
of the described methods of distribution before the required beginning date,
the Custodian will assume the Investor has received the minimum required
distribution from another source. 

3.5  Responsibility of Custodian. The Custodian will not assume any
responsibility to make any distribution from the Account except at the written
direction of the Investor (or beneficiary, if applicable). Furthermore, the
Custodian shall have no responsibility for the tax consequences of any
distribution, or the failure to elect any distribution, from the Account; such
responsibility is solely that of the Investor (or beneficiary, if applicable).


3.6  Beneficiary Designation. The Investor may designate and change his
beneficiary or beneficiaries by filing a written designation with the
Custodian prior to the Investor' death in the form or manner acceptable to the
Custodian. If no such designation is in effect at the time of the Investor's
death, the beneficiary shall be the Investor's surviving spouse, or, if there
is no surviving spouse, then the estate of the Investor. 

Article IV -- Reporting, Disclosure and Charges

4.1  Investor Information. The Investor agrees to provide in the manner
requested by the Custodian any information that may be necessary for the
Custodian to prepare reports required by the IRS.

4.2  Custodian Reports. The Custodian agrees to submit reports to the IRS and
to the Investor which contain information prescribed by the IRS. Within 60
days after the close of each calendar year, or after the Custodian's
resignation or removal pursuant to Section 7.1, the Custodian shall send to
the Investor a written report reflecting the transactions made during such
period and the market value of the Account at the close of the period. If,
within 60 days after receiving such report, the Investor does not object in
writing to any specific item in such report, the accounting in such report
shall be deemed final and the Custodian shall, to the extent permitted by
applicable law, be forever released and discharged from all liability and
accountability with respect to items set forth in such report. 

4.3  Custodian Fees and Expenses. The Custodian shall be entitled to such
fees for maintaining and administering the Account as it may establish from
time to time and which may be changed by it at any time upon 30 days' written
notice to the Investor. All such fees, and all other expenses incurred in
maintaining the Account (including, but not limited to, taxes, brokerage
commissions and transfer taxes) shall be charged to the Account unless, with
the consent of the Custodian, all or part of such fees and expenses are paid
by the Investor. 

Article V -- Additional Provisions Regarding the Custodian

5.1  Duties of Custodian. The parties do not intend to confer any fiduciary
duties on the Custodian, and none shall be implied. The Custodian may rely
conclusively upon and shall be protected in acting upon any written order from
the Investor or the Investor's beneficiary or any other notice, request,
consent or certificate believed by it to be genuine. The Custodian may perform
any of its administrative duties through other persons designated by the
Custodian from time to time, except that assets must be registered as stated
in Section 2.4. No such delegation or future change therein shall be
considered as an amendment of this Agreement. 

5.2  Indemnification. To the extent permitted by applicable law, the Investor
shall fully indemnify the Custodian and hold it harmless from any and all
liability whatsoever which may arise in connection with this Agreement and
matters which it contemplates except those which arise due to the Custodian's
gross negligence or willful misconduct. The Custodian shall not be obligated
or expected to commence or defend any legal action or proceeding in connection
with this Agreement unless agreed upon by the Custodian and the Investor and
unless the Custodian is fully indemnified for so doing to the Custodian's
satisfaction. 

Article VI -- Amendment

6.1  General. The Sponsor reserves the right to amend the Agreement at any
time in any manner which would not cause the Agreement to be disqualified
under section 408 of the Code. Any amendment by the Sponsor shall be effective
upon communication, in writing, to the Investor, and the Investor shall be
deemed to have consented thereto unless, within 30 days after such
communication to the Investor is mailed, the Investor gives the Custodian a
proper written order for a lump-sum distribution or a transfer of the entire
Account. 

6.2  Exceptions. This Article shall not be construed to restrict the
Custodian's freedom to agree with the Price Funds upon the terms by which
Price Funds may be offered or chosen for investment in the Account. Also, this
Article VI shall not be construed to restrict any change in fees made as
provided in Section 4.3. No such agreement or change shall be deemed to be an
amendment of this Agreement. 

Article VII -- Resignation or Removal of Custodian

7.1  General. The Custodian may resign and appoint a successor custodian at
any time upon at least thirty days' prior written notice to the Investor. The
Investor may remove the Custodian and designate a successor custodian at any
time upon thirty days' prior written notice to the Custodian. Upon such
resignation or removal, and upon receipt by the Custodian of written
acceptance of its appointment by the successor custodian, which must be a bank
or other person qualified to serve as a custodian under section 408 of the
Code, the Custodian shall transfer to such successor custodian the assets of
the Account and all pertinent records (or copies thereof), provided that (if
so requested by the Custodian) such successor custodian agrees not to dispose
of any such records without the Custodian's consent. The Custodian is
authorized, however, to reserve such a portion of such assets as it may deem
advisable for payment for all its fees, compensation, costs and expenses, or
for payment of any other liabilities constituting a charge on or against the
assets of the Account or on or against the Custodian, with any balance of such
reserve remaining after the payment of all such items to be paid over to the
successor custodian. If, within thirty days after the Custodian's resignation
or removal, or such longer time as the Custodian may agree to, the Investor or
Custodian has not appointed a successor custodian which has accepted such
appointment, the Custodian shall terminate the Account pursuant to Article
VIII. 

7.2  Responsibility of Custodian. After the Custodian has transferred the
Account assets (including any reserve balance as contemplated above) to the
successor custodian, the Custodian shall be relieved of all further liability
with respect to this Agreement, the Account and the assets thereof. 

Article VIII -- Termination of Account

8.1  General. The Investor may terminate the Account at any time upon prior
written notice to the Custodian. The Custodian shall terminate the Account if,
within the time specified in Section 7.1 after the Custodian's resignation or
removal, neither the Investor nor the Custodian have appointed a successor
custodian which has accepted such appointment. Termination of the Account
shall be effected by distributing all assets thereof in a lump sum to the
Investor, subject to the Custodian's right to reserve funds as provided in
Section 7.1. 

8.2  Responsibility of Custodian. Upon termination of the Account, this
Agreement shall terminate and have no further force and effect, and the
Custodian shall be relieved from all further liability with respect to this
Agreement, the Account and all assets thereof so distributed.

Article IX -- Miscellaneous

9.1  Governing Law. This Agreement shall be construed and enforced according
to the laws of the State of Maryland; however, it is intended that this
Agreement create an Account for a qualified individual retirement account
under the Code, and this Agreement shall be construed so as to accomplish that
purpose. 

9.2  Gender; Plural. Whenever used in this Agreement, personal pronouns are
deemed to mean masculine and feminine. The singular form, whenever used
herein, shall mean or include the plural form where applicable, and vice
versa. 

9.3  Notices. Any notice, accounting or other communication which the
Custodian may give the Investor shall be deemed given when mailed to the
Investor at the address on record with the Custodian. All notices the Investor
is required to give to the Custodian shall be deemed given when received by
the Custodian at its principal office. 

9.4  Enforceability. If any provision of this Agreement shall be for any
reason invalid or unenforceable, the remaining provisions shall, nevertheless,
continue in effect and shall not be invalidated thereby unless they are
rendered unconscionable, inadequate or incapable of being interpreted as a
result of the deletion of the invalid or unenforceable portions of the
Agreement. 

9.5  Exclusive Benefit; Nonforfeitability. The Account has been created for
the exclusive benefit of the Investor and his or her beneficiaries. The
interest of the Investor in the Account shall at all times be nonforfeitable,
but shall be subject to the fees, expenses and charges described in Sections
4.3, 7.1 and 8.1. 

9.6  Prohibition Against Assignment. Other than as provided in Sections 4.3,
7.1 and 8.1, no interest, right or claim in or to any portion of the Account
or any payment therefrom shall be assignable, transferable or subject to sale,
mortgage, pledge, hypothecation, commutation, anticipation, garnishment,
attachment, execution or levy of any kind. The Custodian shall not recognize
any attempt to do any of the above, except to the extent required by law. 

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  
1-410-625-7676
24 hours, 7 days  

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

Internet Address
http://www.troweprice.com

To help you achieve your financial goals, T. Rowe Price offers a wide range of
stock, bond, and money market investments, as well as convenient services and
timely, informative reports. 

Invest With Confidence

PROSSPC 7/15/96

________________________________________________________________________
   DESCRIPTION OF SIGNIFICANT DIFFERENCES BETWEEN EDGAR FILING
                        AND PRINTED COPY

Information appearing in all capital letters before a paragraph in the Edgar
filing will appear, in the printed copy, as call-outs in the left margin.










































































          PAGE 2
                         STATEMENT OF ADDITIONAL INFORMATION

                 T. ROWE PRICE SPECTRUM FUND, INC. ("Spectrum Fund")

                         Spectrum Income Fund ("Income Fund")

                         Spectrum Growth Fund ("Growth Fund")
                                    (the "Funds")

                    This  Statement  of  Additional  Information  is not  a
          prospectus  but should  be read  in conjunction  with  the Funds'
          prospectus dated  May 1, 1996, which may be obtained from T. Rowe
          Price  Investment   Services,  Inc.,   100  East   Pratt  Street,
          Baltimore, Maryland 21202.

                    If you would like a prospectus for a Fund of  which you
          are not a shareholder, please call  1-800-638-5660.  A prospectus
          with  more complete  information, including  management fees  and
          expenses will be sent to you.  Please read it carefully.

                    The date of this Statement of Additional Information is
          May 1, 1996.




























          PAGE 3
                                  TABLE OF CONTENTS

                                    Page                              Page

          Capital Stock . . . . . . . 29   Investment Restrictions  . . 11
          Code of Ethics  . . . . . . 20   Legal Counsel  . . . . . . . 30
          Custodian . . . . . . . . . 20   Management of the Funds  . . 13
          Distributor for the Funds . 19   Net Asset Value Per Share  . 21
          Dividends . . . . . . . . . 21   Pricing of Securities  . . . 21
          Federal and State 
           Registration of Shares . . 30   Principal Holders of 
          Independent Accountants . . 30    Securities  . . . . . . . . 16
          Investment Management 
           Services . . . . . . . . . 16   Repurchase Agreements  . . .  3
          Investment Objective             Special Considerations   . . 10
           and Policies . . . . . . .  2   Tax Status   . . . . . . . . 21
          Investment Performance  . . 23   Yield Information  . . . . . 22
          Investment Policies . . . .  3




                          INVESTMENT OBJECTIVES AND POLICIES

                    The following information supplements the discussion of
          the  Funds' investment objectives  and policies discussed  in the
          Funds' prospectus.  The Funds' will not make a material change in
          their   investment  objectives   without  obtaining   shareholder
          approval.   Unless otherwise  specified, the  investment programs
          and restrictions of the Funds  are not fundamental policies.  The
          operating policies  of a Fund  are subject to change  by Spectrum
          Fund's Board of Directors without shareholder approval.  However,
          shareholders  will  be  notified  of  a  material  change  in  an
          operating policy.  The  fundamental policies of a Fund may not be
          changed  without the  approval  of  at least  a  majority of  the
          outstanding shares  of the  Fund or, if  it is  less, 67%  of the
          shares  represented  at a  meeting of  shareholders at  which the
          holders of 50% or more of the shares are represented.

                                    Spectrum Fund

                    The following information supplements the discussion of
          each Fund's investment  objectives and policies discussed  in the
          prospectus.

                    The  proliferation  of  mutual   funds  has  left  many
          investors in search of a means of diversifying  among a number of
          mutual   funds  while   obtaining   professional  management   in
          determining which  funds to select,  how much of their  assets to
          commit  to  each fund,  and  when  to make  the  selections.   In
          response to  this need, the Spectrum  Fund has been created  as a
          means of providing a simple  and effective means of structuring a













          comprehensive mutual fund  investment program.  By  selecting the
          Spectrum Growth Fund or 

          PAGE 4
          Spectrum Income  Fund, or  a combination  of both, investors  may
          choose the investment  objective appropriate for  their long-term
          investment  goals.  The  Spectrum Funds  will attempt  to achieve
          these goals  by diversification in  a selected group of  other T.
          Rowe  Price Funds.   Although  the Spectrum  Funds are  not asset
          allocation or market  timing funds, each, over  time, will adjust
          the amount of its  assets invested in  the various other T.  Rowe
          Price Funds as economic, market and financial conditions warrant.

          InterFund Borrowing and Lending

                    Subject to  approval  by the  Securities  and  Exchange
          Commission,  and certain state regulatory agencies, each Fund may
          borrow funds from, and certain  of the Underlying Price Funds may
          make loans  to and borrow funds  from, other Price Funds.   These
          Funds have no current intention of engaging in these practices at
          this time.

                                Repurchase Agreements

                    Each Fund may enter into repurchase agreements  through
          which  investors (such  as the Funds)  purchases a  security (the
          "underlying security") from a well-established securities  dealer
          or a bank which is a  member of the Federal Reserve System.   Any
          such dealer or bank will be on  T. Rowe Price's approved list and
          have a  credit rating with respect  to its short-term debt  of at
          least  A1  by  Standard  &  Poor's  Corporation,  P1  by  Moody's
          Investors  Service, Inc.,  or the  equivalent rating  by  T. Rowe
          Price Associates, Inc. ("T. Rowe Price").  At that time, the bank
          or securities dealer agrees to repurchase the underlying security
          at  the  same   price,  plus  specified  interest.     Repurchase
          agreements are generally  for a short period of  time, often less
          than a week.  Neither Fund will enter into a repurchase agreement
          which does not  provide for payment  within seven days  if, as  a
          result, more than 10% of the  value of its net assets would  then
          be invested in  such repurchase agreements.  The  Funds will only
          enter  into a  repurchase  agreement  where  (i)  the  underlying
          securities are of the type (excluding maturity limitations) which
          each  Fund's investment  guidelines would  allow  it to  purchase
          directly  (however,  the  underlying  securities  for  the  Prime
          Reserve  Fund  will  either  be  U.S.  government  securities  or
          securities which, at the time the repurchase agreement is entered
          into, are rated  in the highest rating category  by public rating
          agencies),  (ii) the  market value  of  the underlying  security,
          including  interest accrued,  will be  at all  times equal  to or
          exceed  the value of the  repurchase agreement, and (iii) payment
          for the underlying  security is made only  upon physical delivery
          or  evidence  of  book-entry  transfer  to  the  account  of  the
          custodian or a bank acting as agent.   In the event of bankruptcy
          or other default of a seller of a repurchase agreement, the Funds












          could  experience  both  delays  in  liquidating  the  underlying
          security and losses, including: (a) possible decline in the value
          of the underlying security during the period while the Fund seeks
          to 

          PAGE 5
          enforce  its rights  thereto; (b)  possible  subnormal levels  of
          income and lack  of access to income during this  period; and (c)
          expenses of enforcing its rights.


                                 INVESTMENT POLICIES

                    The  following  is  a  description  of  the  investment
          objective and program for each of the Underlying Price Funds.  

                                 Spectrum Income Fund

                    T. Rowe Price  Short-Term Bond Fund, Inc.  seeks a high
          level  of income consistent with minimum fluctuation in principal
          value  and liquidity.   The  Fund  will invest  in a  diversified
          portfolio of short-  and intermediate-term corporate, government,
          and mortgage securities.  The fund may also invest in other types
          of securities such as  bank obligations, collateralized mortgage-
          obligations (CMOs), foreign securities, hybrids, and futures  and
          options.  Under normal circumstances,  at least 65% of the Fund's
          total  assets will  be invested  in  short-term bonds.   In  this
          regard, the dollar-weighted  average effective maturity will  not
          exceed three years,  and the Fund will not  purchase any security
          whose effective maturity,  average life or tender  date, measured
          from the date of settlement, exceeds seven  years.  The Fund will
          purchase  securities   rated  within  the   four  highest  credit
          categories by at least one  established public rating agency (or,
          if unrated, a T. Rowe Price equivalent).  Short and intermediate-
          term   securities   typically  yield   more  than   money  market
          securities, but  less than longer  term securities.   Also, share
          price fluctuations should  be lower than a  mutual fund investing
          in longer term securities.

                    T. Rowe Price GNMA Fund  seeks to provide high level of
          current  income  consistent with  maximum  credit protection  and
          moderate price fluctuation by investing exclusively in securities
          backed by  the full faith  and credit of the  U.S. government and
          instruments  involving  these  securities.    The   fund  invests
          primarily in mortgage-backed securities  issued and guaranteed by
          the Government National Mortgage Association (GNMA), an agency of
          the Department of Housing and  Urban Development (HUD).  The GNMA
          guarantee  does  not  apply  in any  way  to  the  price  of GNMA
          securities or the fund, both  of which will fluctuate with market
          conditions.   The fund can  also purchase bills, notes  and bonds
          issued by  the U.S.  Treasury as well  as related  futures, other
          agency securities backed by the full faith and credit of the U.S.
          Government; and  securities involving  GNMAs, such  as CMO's  and













          stripped certificates  (securities that receive only the interest
          or principal portion of the underlying mortgage payments).  

                    Mortgage-Backed Securities.  Mortgage-backed securities
          are  securities representing an interest  in a pool of mortgages.
          The mortgages may be of  a variety of types, including adjustable
          rate, conventional 30-year fixed rate, graduated payment, and 15-

          PAGE 6
          year.  Principal  and interest payments made on  the mortgages in
          the  underlying  mortgage pool  are passed  through to  the fund.
          This  is in  contrast  to traditional  bonds  where principal  is
          normally  paid back  at  maturity  in a  lump  sum.   Unscheduled
          prepayments of principal shorten the securities' weighted average
          life and may lower their total  return.  (When a mortgage in  the
          underlying mortgage  pool  is prepaid,  an unscheduled  principal
          prepayment  is passed  through to  the fund.   This  principal is
          returned to the fund at par.   As result, if a mortgage  security
          were trading at  a premium, its total return would  be lowered by
          prepayments,  and  if  a  mortgage  security were  trading  at  a
          discount,  its total return  would be increased  by prepayments.)
          The value of these securities  also may change because of changes
          in the market's perception of the creditworthiness of the federal
          agency that  issued them.   In addition, the  mortgage securities
          market  in  general  may  be  adversely  affected by  changes  in
          governmental regulation  or tax policies. As a  result the actual
          or  "effective"    maturity  of  a  mortgage-backed  security  is
          virtually always shorter than its stated maturity.

                    T.  Rowe Price  International Bond  Fund  seeks a  high
          level  of current income and capital appreciation by investing in
          a  diversified portfolio  of high-quality  nondollar-denominated,
          government and  corporate bonds outside  the U.S.  The  Fund also
          seeks  to moderate  price fluctuation  by  actively managing  its
          maturity structure and currency exposure. 

                    The Fund will invest primarily (at least 65% of assets)
          in debt securities  that are considered high quality  at the time
          of  purchase.  The  Fund may also  invest up to  20% of its total
          assets  in  below  investment grade,  high-risk  ("junk")  bonds,
          including  bonds  in default  or  those which  have  received the
          lowest rating.

                    Rowe   Price-Fleming   International,   Inc.   ("Price-
          Fleming"),  the   Fund's  investment   manager,  will   base  its
          investment  decisions   on  fundamental   market  attractiveness,
          currency trends, local  market factors and  credit quality.   The
          Fund will generally invest in countries where the  combination of
          fixed  income market returns and currency exchange rate movements
          is attractive, or,  if the currency  trend is unfavorable,  where
          the currency risk can be minimized through hedging.

                    Although the  fund expects to  maintain an intermediate
          to  long   weighted  average   maturity,  it   has  no   maturity












          restrictions   on  the   overall  portfolio   or   on  individual
          securities.  Normally,  the  fund  does  not  hedge  its  foreign
          currency exposure back  to the dollar, nor involve  more than 50%
          of total assets in cross hedging transactions. Therefore, changes
          in foreign interest  rates and currency exchange rates are likely
          to have a significant impact on total return and the market value
          of   portfolio   securities.   Such   changes   provide   greater
          opportunities  for capital  gains and  greater  risks of  capital
          loss. Price-Fleming attempts to reduce these risks 
          PAGE 7
          through  diversification  among  foreign  securities  and  active
          management of maturities and currency exposures.

                    The Fund will  normally not hedge its  foreign currency
          exposure back to the dollar  and will normally have no more  than
          50% of the  value of its  total assets involved in  cross hedging
          transactions.  Therefore,  its total return, and,  in particular,
          the principal  value  of  its  foreign-currency-denominated  debt
          securities, is likely to be  significantly affected by changes in
          foreign interest rate levels and foreign currency exchange rates.
          These  changes provide greater  opportunity for capital  gains as
          well as greater  risks of capital loss.   Exchange rate movements
          can  be large  and endure for  extended periods of  time.  Price-
          Fleming   will  attempt  to  reduce  the  risks  associated  with
          investments  in  international  fixed income  securities  through
          portfolio  diversification and  active management  of the  Fund's
          maturity structure and currency exposure.

                    Because  Price-Fleming  currently expects  to  invest a
          large  percentage of assets  in foreign government  securities in
          order to maintain  liquidity and to reduce credit  risk, the Fund
          has  registered as a  "non-diversified" investment company.   The
          Fund  may,  for  temporary defensive  purposes,  invest,  without
          limitation, in U.S. dollar-denominated debt securities.

                    T. Rowe  Price High Yield  Fund, Inc. has  high current
          income  and, secondarily, capital  appreciation as its objective.
          Under normal conditions  the fund expects to invest  at least 80%
          of its  total assets in  a widely diversified portfolio  of high-
          yield  bonds  (so-called  "junk"  bonds),  and  income  producing
          convertible  securities and preferred stocks.   The fund may also
          invest  in a  variety  of  other  securities,  including  foreign
          securities,  pay-in-kind bonds,  private placements,  bank loans,
          hybrid  instruments,  futures  and options.    The  fund's longer
          average maturity  (expected to be in  the 8- to  12- year range),
          makes its price more sensitive  to broad changes in interest rate
          movements  than shorter-term bond  funds.  The  portfolio manager
          buys  defaulted bonds only  if significant potential  for capital
          appreciation is  expected.  In  addition, the Fund may  invest in
          medium quality, investment grade  securities, and, for  temporary
          defensive purposes, higher quality securities.  The Fund may also
          invest up to 20% of its net assets in non-U.S. dollar-denominated
          fixed income securities.













          Special Risks of Investing in Junk Bonds

                    The  following  special considerations  are  additional
          risk  factors associated  with the  Fund's  investments in  lower
          rated debt securities.

                    Youth and  Growth of  the Lower  Rated Debt  Securities
          Market.  The market for lower rated debt securities is relatively
          new and  its growth  has paralleled  a  long economic  expansion.
          Past 

          PAGE 8
          experience  may not, therefore, provide an accurate indication of
          future performance of this market, particularly during periods of
          economic recession.  An economic downturn or increase in interest
          rates is likely to have a greater negative effect on this market,
          the value of lower rated debt securities in the Fund's portfolio,
          the Fund's net  asset value and the ability of the bonds' issuers
          to  repay principal and  interest, meet projected  business goals
          and  obtain additional financing than on higher rated securities.
          These  circumstances also  may  result in  a higher  incidence of
          defaults  than  with respect  to  higher  rated  securities.   An
          investment in this  Fund is more  speculative than investment  in
          shares  of  a  fund  which  invests only  in  higher  rated  debt
          securities.

                    Sensitivity to  Interest  Rate  and  Economic  Changes.
          Prices of  lower rated debt  securities may be more  sensitive to
          adverse economic  changes or  corporate developments than  higher
          rated investments.  Debt securities with longer maturities, which
          may have  higher yields, may  increase or decrease in  value more
          than  debt securities with shorter  maturities.  Market prices of
          lower rated debt securities structured  as zero coupon or pay-in-
          kind securities are affected to a greater extent by interest rate
          changes  and may  be  more  volatile  than securities  which  pay
          interest periodically and in cash.  Where it deems it appropriate
          and  in the  best interests  of Fund  shareholders, the  Fund may
          incur additional expenses to seek  recovery on a debt security on
          which the  issuer  has  defaulted  and to  pursue  litigation  to
          protect  the interests  of  security  holders  of  its  portfolio
          companies.

                    Liquidity  and Valuation.  Because the market for lower
          rated securities may  be thinner and less active  than for higher
          rated securities,  there may be market price volatility for these
          securities and limited liquidity in  the resale market.  Nonrated
          securities are  usually not  as attractive to  as many  buyers as
          rated securities are, a factor which may make nonrated securities
          less marketable.   These factors may have the  effect of limiting
          the availability of  the securities for purchase by  the Fund and
          may also limit the ability of the Fund to sell such securities at
          their  fair  value  either  to  meet  redemption requests  or  in
          response to  changes in  the  economy or  the financial  markets.
          Adverse  publicity and investor perceptions, whether or not based












          on fundamental analysis, may decrease the values and liquidity of
          lower  rated debt  securities,  especially  in  a  thinly  traded
          market.  To the extent the  Fund owns or may acquire illiquid  or
          restricted lower  rated securities, these  securities may involve
          special registration responsibilities, liabilities and costs, and
          liquidity and valuation difficulties.   Changes in values of debt
          securities which  the Fund owns  will affect its net  asset value
          per share.   If market  quotations are not readily  available for
          the Fund's lower  rated or nonrated securities,  these securities
          will be  valued by a  method that the  Fund's Board  of Directors
          believes  accurately reflects  fair  value.    Judgment  plays  a
          greater role  in valuing lower  rated debt  securities than  with
          respect to securities for which more 

          PAGE 9
          external  sources of  quotations and  last  sale information  are
          available.

                    Congressional Action.   New and proposed laws  may have
          an impact on the market for lower rated debt securities.  T. Rowe
          Price is unable  at this time to predict what effect, if any, any
          such  legislation may  have on  the market  for lower  rated debt
          securities.

                    Taxation.   Special  tax considerations  are associated
          with investing in lower rated debt securities structured as  zero
          coupon  or pay-in-kind  securities.   The Fund accrues  income on
          these securities prior to the receipt of cash payments.  The Fund
          must   distribute  substantially  all   of  its  income   to  its
          shareholders  to qualify for pass-through treatment under the tax
          laws and  may,  therefore,  have  to  dispose  of  its  portfolio
          securities to satisfy distribution requirements.

                    T. Rowe Price New Income  Fund, Inc. seeks the  highest
          level  of income  over time consistent  with the  preservation of
          capital   through  investment   primarily   in  marketable   debt
          securities.   The Fund invests  in long, intermediate  and short-
          term debt securities.  The Fund has no maturity restrictions, but
          the  average portfolio  maturity  is  generally  expected  to  be
          between four and 15 years although it may vary significantly.  At
          least 80% of the Fund's total  assets will be invested in income-
          producing,  investment-grade  instruments,   including  (but  not
          limited  to) U.S.  Government and  agency  obligations, mortgage-
          backed  securities,   corporate  debt   securities,  asset-backed
          securities, bank  obligations, CMO's,  commercial paper,  foreign
          securities, and others.  The  Fund will purchase securities rated
          investment grade by at least one of the established public rating
          agencies  (e.g.,  AAA,  AA,  A,  or  BBB  by  Standard  &  Poor's
          Corporation  (S&P) or  Aaa, Aa,  A, or  Baa by  Moody's investors
          Services,  Inc.  (Moody's))  or, if  unrated,  are  of equivalent
          investment  quality  as  determined  by  the   Fund's  investment
          manager,  T. Rowe  Price.   Debt  securities within  the top  two
          credit categories comprise what are generally known as high-grade
          bonds.    Medium-grade  bonds   (e.g.,  BBB  by  S&P)  are   more












          susceptible   to   adverse   economic  conditions   or   changing
          circumstances than higher grade bonds.  The Fund may invest up to
          5% of  net assets  in securities  rated at  the time  of purchase
          within T. Rowe Price top four credit categories without regard to
          the public agency  ratings.  Without regard to  quality, the Fund
          may invest up  to 25% of its total assets (not including cash) in
          preferred   and  common   stocks   and  convertible   securities,
          convertible  into or  which carry warrants  for common  stocks or
          other equity securities.  The Fund  may also invest up to 20%  of
          its  net  assets  in  non-U.S.  dollar-denominated  fixed  income
          securities.























































          PAGE 10
                                 Spectrum Growth Fund

                    T.  Rowe Price Growth  & Income Fund,  Inc. seeks long-
          term capital growth,  a reasonable level  of current income,  and
          increasing  future   income  through  investments   primarily  in
          dividend-paying  stocks  with   prospects  for  appreciation  and
          increasing dividends.   The Fund's assets are  invested primarily
          in common stocks  of companies whose earnings are  expected by T.
          Rowe Price to grow at a rate  in excess of that of common  stocks
          in general and are  adequate to support  a growing dividend.   To
          further its objectives, the Fund may also purchase  common stocks
          which  do not provide  current income, but  which offer prospects
          for  capital  appreciation  and future  income.    Relative value
          (based on a company's asset  value or projected earnings growth),
          dividend  yield, and potential  for dividend and  earnings growth
          are the predominant considerations in evaluating prospective Fund
          holdings.

                    In seeking  to achieve  its  investment objective,  the
          Fund may invest in companies which are believed to be undervalued
          or out  of favor  in the eyes  of the  investment community.   An
          undervalued company  is generally  one where  (1) the  stock/bond
          price  is  low  in  relation  to  the  general  market,  industry
          standards or a company's historical record based on an evaluation
          of various  financial measures such as earnings,  cash flow, book
          value and dividends; or (2)  potential value exists because of a)
          a company's assets, such  as real estate, which are  carried on a
          company's books at  lower than market  value, or b)  intangibles,
          such as franchise value, a  dominant market share in the industry
          or a well-known brand name.

                    Although  the Fund will invest primarily in U.S. common
          stocks, it  may  also purchase  other  types of  securities,  for
          example, foreign securities  (25% of  total assets),  convertible
          securities  and  warrants,  when considered  consistent  with the
          Fund's  investment objectives  and program.   The  Fund may  also
          engage in a variety  of investment management practices,  such as
          buying  and selling futures and options.   The Fund's investments
          in convertible  securities, preferred stocks and  debt securities
          are  limited to  30%  of the  Fund's total  assets.   The  Fund's
          investments in non-investment  grade debt securities are  limited
          to 10% of total assets.

                    T. Rowe Price International  Stock Fund seeks long-term
          growth  of capital through investments primarily in common stocks
          of established, non-U.S. companies.

                    The Fund intends to diversify investments broadly among
          countries and to normally have at least three different countries
          represented in the  portfolio.  The Fund may  invest in countries
          of the Far East and Europe  as well as Africa, Australia, Canada,
          and  other areas  (including  newly industrialized  and  emerging
          countries). 













          PAGE 11
                    The Fund  expects to  invest substantially  all of  its
          assets in common stocks.  However, the Fund may also invest  in a
          variety of  other equity  related securities,  such as  preferred
          stocks, warrants and convertible securities, as well as corporate
          and governmental debt securities, when considered consistent with
          the Fund's investment  objective and program.  The  Fund may also
          engage in a variety  of investment management practices, such  as
          buying and selling  futures and options.   The Fund's investments
          in securities other  than common stocks  is, under normal  market
          conditions,  limited  to  no  more  than  35%  of  total  assets.
          However,  for temporary defensive  purposes, the Fund  may invest
          all or a significant portion of its assets in U.S. government and
          corporate debt obligations.  The  Fund will not purchase any debt
          security which at the time  of purchase is rated below investment
          grade.  This would not prevent the Fund from retaining a security
          downgraded to below investment grade after purchase.

                    T.  Rowe Price  New  Era  Fund,  Inc.  seeks  long-term
          capital appreciation by  investing primarily in common  stocks of
          companies that own  or develop natural resources and  other basic
          commodities, as well as through investment in stocks of selected,
          non-resource growth companies.  Current income is not a factor in
          the selection  of stocks for  investment by  the Fund.   The Fund
          invests in a diversified group of companies whose earnings and/or
          value of  tangible assets  are expected to  grow faster  than the
          rate of inflation over the long term.  T. Rowe Price believes the
          most attractive  opportunities which satisfy the Fund's objective
          are in  companies which own  or develop natural resources  and in
          companies where management  has the flexibility to  adjust prices
          or the ability to control operating costs.  The percentage of the
          Fund's assets invested in natural resource and related businesses
          versus the percentage invested in non-resource companies may vary
          greatly depending upon  economic and monetary conditions  and the
          outlook   for  inflation.    The  earnings  of  natural  resource
          companies may be  expected to follow irregular  patterns, because
          these  companies are  particularly influenced  by  the forces  of
          nature  and international  politics.    Companies  which  own  or
          develop   real  estate  might   also  be  subject   to  irregular
          fluctuations of earnings, because these companies are affected by
          changes in the  availability of money, interest  rates, and other
          factors.

                    Although  the Fund will invest primarily in U.S. common
          stocks,  it may  also  purchase other  types  of securities,  for
          example, foreign  securities (35%  of total  assets), convertible
          securities  and  warrants, when  considered  consistent with  the
          Fund's investment  objective  and program.    The Fund  may  also
          engage  in a variety of  investment management practices, such as
          buying and selling  futures and options.   The Fund's investments
          in  non-investment grade debt  securities are  limited to  10% of
          total assets.














          PAGE 12
                    T. Rowe Price  Growth Stock Fund, Inc.  seeks long-term
          growth  of   capital  and  increasing   dividend  income  through
          investment primarily in common  stocks of well-established growth
          companies.  The  fund will invest primarily in  the common stocks
          of a diversified  group of growth companies.  A growth company is
          defined as one which:   (1) has demonstrated historical growth of
          earnings faster than  the growth of inflation and  the economy in
          general; and (2)  has indications of being able  to continue this
          growth pattern in  the future.  While current  dividend income is
          not  a prerequisite  in the  selection of  a growth  company, the
          companies in which the Fund will invest normally have a record of
          paying  dividends  and  are generally  expected  to  increase the
          amounts of such dividends in future years as earnings increase.

                    Although  the Fund will invest primarily in U.S. common
          stocks,  it may  also  purchase other  types  of securities,  for
          example, foreign  securities (30%  of total  assets), convertible
          securities  and  warrants, when  considered  consistent with  the
          Fund's  investment objectives  and  program.   The Fund  may also
          engage in a  variety of investment management practices,  such as
          buying and selling futures and options.

                    T. Rowe Price  New Horizons Fund, Inc.  seeks long-term
          growth of capital  through investment primarily in  common stocks
          of  small,  rapidly  growing companies.    The  fund  will invest
          primarily  in a  diversified  group  of  small,  emerging  growth
          companies.  It  seeks to invest early in the corporate life cycle
          and  before a company becomes widely-recognized by the investment
          community.  The Fund may also invest in companies which offer the
          possibility   of   accelerating   earnings   growth  because   of
          rejuvenated management,  new products,  or structural  changes in
          the economy.  Current income is not a factor in the  selection of
          stocks.

                    Investors  should  realize  that  the  very  nature  of
          investing  in small  companies  involves  greater  risk  than  is
          customarily associated with more established companies.  The Fund
          is designed  for long-term  investors who are  willing to  accept
          greater investment  risks  in  search  of  substantial  long-term
          rewards.    Small  companies often  have  limited  product lines,
          markets, or financial resources, and they may be dependent upon a
          small group  of inexperienced managers.  The  securities of small
          companies may  have limited marketability  and may be  subject to
          more abrupt or erratic market movements than securities of larger
          companies  or  the market  averages in  general.   However, small
          companies   may   offer   greater   opportunities   for   capital
          appreciation  than  larger,  more  established   companies.    In
          addition,  small companies are often overlooked by the investment
          community.   Therefore, these  securities may be  undervalued and
          provide the potential for significant capital appreciation.














                    Although  the Fund will invest primarily in U.S. common
          stocks,  it  may also  purchase  other types  of  securities, for
          example, foreign securities (10% of total assets), convertible 

          PAGE 13
          securities  and  warrants, when  considered  consistent with  the
          Fund's investment  objective  and program.    The Fund  may  also
          engage in  a variety of investment management  practices, such as
          buying and selling futures and options.

                               Income and Growth Funds

                    T. Rowe  Price  Prime Reserve  Fund,  Inc. is  a  money
          market fund which  maintain a stable share price of  $1.00.  This
          policy  has been  maintained since  its  inception; however,  the
          $1.00 price is not guaranteed  or insured by the U.S. government,
          nor is its yield fixed.   The Fund generally purchases securities
          which mature in 13 months or less, although the Fund may purchase
          U.S. government  securities with a  maturity of up to  25 months.
          The dollar-weighted average maturity of the  Fund will not exceed
          90 days.

                    The objectives of the Fund are preservation of capital,
          liquidity,  and, consistent  with these  objectives, the  highest
          possible current  income through investments  primarily in  high-
          quality money market securities.  To achieve its objectives,  the
          Fund invests in a  diversified portfolio of domestic and  foreign
          U.S. dollar-denominated money market securities  rated within the
          two  highest  credit  categories assigned  by  established rating
          agencies or,  if not rated,  of equivalent investment  quality as
          determined by the Fund's investment manager, T. Rowe Price.

                    The Fund will  invest at least 95% of  its total assets
          in  prime money market instruments--that is, securities which are
          rated within the highest credit category assigned by at least two
          established rating agencies (or one rating agency if the security
          is  rated  by  only  one,  or,  if  not rated,  T.  Rowe  Price's
          equivalent).    A security  is considered  rated if  the security
          itself, the  issuer, or  a comparable security  of the  issuer is
          rated.    T. Rowe  Price  subjects  all  securities eligible  for
          investment to its  own credit analysis  and considers all  Fund's
          securities  may have adjustable  rates of interest  with periodic
          demand features.

                    T.  Rowe  Price  Equity Income  Fund  seeks  to provide
          substantial  dividend   income  as  well   as  long-term  capital
          appreciation  by  investing primarily  in  dividend-paying common
          stocks of established companies.  In pursuing its  objective, the
          Fund emphasizes companies with favorable prospects for increasing
          dividend  income, and  secondarily, capital  appreciation.   Over
          time, the income component (dividends and interest earned) of the
          Fund's investments is expected to be a significant contributor to
          the Fund's total return.  The Fund's  income yield is expected to













          be significantly  above that of  the Standard & Poor's  500 Stock
          Index. 

                    To achieve its  objective, the Fund will,  under normal
          circumstances,  invest  at least  65%  of its  assets  in income-
          producing common stocks, whose prospectus for dividend growth and


          PAGE 14
          capital appreciation are  considered favorable by T.  Rowe Price.
          To enhance capital appreciation  potential, the Fund also  uses a
          value-oriented  approach, which  means it  invests  in stocks  it
          believes  are currently undervalued.  The Fund's investments will
          generally be made in companies  which share some of the following
          characteristics:

                       established operating histories;
                       above-average  current dividend  yields  relative  to
                       the  S&P 500;
                       low price/earnings ratios relative to the S&P 500;
                       sound balance sheets and other financial 
                       characteristics; and
                       low  stock  price  relative to  company's  underlying
                       value as measured by  assets, earnings, cash flow  or
                       business franchises.

                    The  Fund may  also invest  its assets in  fixed income
          securities (corporate, government, and municipal bonds of various
          maturities).  The  Fund would invest in municipal  bonds when the
          expected total return from such bonds appears to exceed the total
          returns  obtainable from corporate or government bonds of similar
          credit quality.   Interest earned on municipal bonds purchased by
          the Fund will  be taxable income to Fund  shareholders.  Although
          the Fund will invest primarily in U.S. common stocks, it may also
          purchase  other  types   of  securities,  for  example,   foreign
          securities  (25%  of  total assets),  convertible  securities and
          warrants,  when considered consistent  with the Fund's investment
          objective and program.  The Fund may  also engage in a variety of
          investment  management  practices,  such  as  buying  and selling
          futures and options.


                                SPECIAL CONSIDERATIONS

                    Prospective  investors  should  consider  that  certain
          Underlying  Price Funds  (the "Price  Funds") may  engage in  the
          following:

                    (1)  Foreign Currency Transactions.  Enter into foreign
                         currency  transactions.     Since  investments  in
                         foreign companies will  usually involve currencies
                         of foreign  countries, and the  International Bond
                         and International Stock Funds, as well as  certain
                         other  Price  Funds,  will   hold  funds  in  bank












                         deposits   in   foreign  custodians   during   the
                         completion of  investment programs,  the value  of
                         the assets of the Price Funds as measured  in U.S.
                         dollars may  be affected favorably  or unfavorably
                         by changes in foreign  currency exchange rates and
                         exchange  control  regulations,  and  these  Price
                         Funds   may  incur   costs   in  connection   with
                         conversions between various currencies.  The Price
                         Funds will generally

          PAGE 15
                         conduct    their    foreign    currency   exchange
                         transactions either on  a spot (i.e.,  cash) basis
                         at  the  prevailing rate  in the  foreign currency
                         exchange market, or through entering into  forward
                         contracts to purchase  or sell foreign currencies.
                         The  Price Funds will  generally not enter  into a
                         forward contract with  a term of greater  than one
                         year.  Although foreign currency transactions will
                         be  used primarily to protect the Price Funds from
                         adverse currency movements, they also involve  the
                         risk that anticipated  currency movements will not
                         be accurately predicted.

                    (2)  Lending  Portfolio  Securities.    Lend  portfolio
                         securities for the purpose of realizing additional
                         income.   The Price  Funds may lend  securities to
                         broker-dealers  or institutional  investors.   Any
                         such  loan   will  be   continuously  secured   by
                         collateral  at least  equal to  the  value of  the
                         security  loaned.   Such lending  could result  in
                         delays in  receiving additional  collateral or  in
                         the recovery of the securities or possible loss of
                         rights  in the collateral should the borrower fail
                         financially.

                    (3)  Futures   Contracts   and    Options   (types   of
                         potentially  high-risk derivatives).   Enter  into
                         interest  rate, stock  index  or currency  futures
                         contracts.   Certain  Price Funds  may enter  into
                         such  contracts   (or  options   thereon),  or   a
                         combination  of  such contracts,  (1)  as  a hedge
                         against changes  in prevailing levels  of interest
                         rates, price movements or  currency exchange rates
                         in  the  Price  Funds'   portfolios  in  order  to
                         establish more definitely  the effective return on
                         securities or  currencies held  or intended  to be
                         acquired  by such Price Funds; (2) as an efficient
                         means of adjusting  the Price  Funds' exposure  to
                         the markets; or  (3) to adjust the duration of the
                         Price Funds' portfolios.  Initial margin  deposits
                         and  premiums  on  options  used  for  non-hedging
                         purposes will not equal more than 5% of each Price
                         Fund's net asset  value.  Certain Price  Funds may












                         also purchase  and sell  call and  put options  on
                         securities,  currencies  and financial  and  stock
                         indices.    The  aggregate market  value  of  each
                         Fund's currencies or portfolio securities covering
                         call  or  put options  will  not exceed  25%  of a
                         Fund's  net assets.  Futures contracts and options
                         can  be  highly  volatile  and   could  result  in
                         reduction of  a Price  Fund's total  return and  a
                         Price  Fund's attempt to  use such investments for
                         hedging purposes may not be successful.
          PAGE 16

              FOR MORE INFORMATION ABOUT AN UNDERLYING PRICE FUND, CALL
                           1-800-638-5660 (1-410-547-2308).


                               INVESTMENT RESTRICTIONS

                    Fundamental  policies of the  Funds may not  be changed
          without  the  approval of  the lesser  of (1)  67% of  the Funds'
          shares present  at a  meeting of shareholders  if the  holders of
          more than 50% of the outstanding shares are present in person  or
          by proxy or (2) more  than 50% of the Funds'  outstanding shares.
          Other  restrictions, in  the  form  of  operating  policies,  are
          subject to change by Spectrum  Fund's Board of Directors  without
          shareholder approval.  Any  investment restriction which involves
          a  maximum percentage  of  securities  or  assets  shall  not  be
          considered to  be violated unless  an excess over  the percentage
          occurs immediately after,  and is  caused by,  an acquisition  of
          securities or assets of, or borrowings by, a Fund.

                                 Fundamental Policies

                    As a matter of fundamental policy, each Fund may not:

                    (1)  Borrowing.   Borrow  money, except  each  Fund may
                         borrow  from banks  or  other  Price  Funds  as  a
                         temporary measure  for extraordinary  or emergency
                         purposes, and  then only in  amounts not exceeding
                         30%  of its total  assets valued at  market.  Each
                         Fund will not  borrow in order to  increase income
                         (leveraging),  but only  to facilitate  redemption
                         requests  which might  otherwise require  untimely
                         disposition of portfolio  securities (see page  13
                         of the  prospectus).   Interest paid  on any  such
                         borrowings will reduce net investment income;

                    (2)  Commodities.   Purchase  or  sell  commodities  or
                         commodity or futures contracts;

                    (3)  Loans.    Make  loans,  although  the   Funds  may
                         purchase  money market  securities and  enter into
                         repurchase agreements;  













                    (4)  Margin.  Purchase securities on margin, except for
                         use of short-term  credit necessary for  clearance
                         of purchases of portfolio securities;

                    (5)  Mortgaging.  Mortgage, pledge,  hypothecate or, in
                         any manner,  transfer any  security  owned by  the
                         Funds as security  for indebtedness except as  may
                         be  necessary   in  connection   with  permissible
                         borrowings, in which event such mortgaging,

          PAGE 17
                         pledging, or  hypothecating may not exceed  30% of
                         each Fund's total assets, valued at market;

                    (6)  Real  Estate.    Purchase  or  sell  real  estate,
                         including limited  partnership interests  therein,
                         unless  acquired  as  a  result  of  ownership  of
                         securities  or  other instruments  (although  each
                         Fund may purchase  money market securities secured
                         by  real estate or interests therein, or issued by
                         companies  or investment  trusts  which invest  in
                         real estate or interests therein);

                    (7)  Senior Securities.  Issue senior securities;  

                    (8)  Short Sales.  Effect short sales of securities; or


                    (9)  Underwriting.    Underwrite securities  issued  by
                         other persons, except to the extent the  Funds may
                         be deemed to be underwriters within the meaning of
                         the  Securities Act of 1933 in connection with the
                         purchase and sale of their portfolio securities in
                         the ordinary  course of pursuing  their investment
                         programs.

                                  Operating Policies

                    As a matter of operating policy, each Fund may not:

                    (1)  Control  of  Portfolio   Companies.    Invest   in
                         companies for the purpose of exercising management
                         or control;

                    (2)  Illiquid Securities.  Purchase illiquid securities
                         if, as a  result, more than 15% of  its net assets
                         would be invested in such securities provided that
                         each Fund  will not invest  more than  10% of  its
                         total assets in restricted securities; 

                    (3)  Oil and Gas Programs.  Purchase  participations or
                         other direct  interests or enter into  leases with
                         respect to, oil, gas, other mineral exploration or
                         development programs; 












                    (4)  Options.  Invest in options; 

                    (5)  Ownership of Portfolio Securities by Officers  and
                         Directors.   Purchase or retain  the securities of
                         any  issuer if,  to the  knowledge  of the  Funds'
                         management,  those   officers  and   directors  of
                         Spectrum Fund, and of its  investment manager, who
                         each owns beneficially more than .5% of the

          PAGE 18
                         outstanding  securities of  such issuer,  together
                         own beneficially more than 5% of such securities;

                    (6)  Unseasoned Issuers.   Purchase  the securities  of
                         any  issuer  (other  than  obligations  issued  or
                         guaranteed  by the U.S.  government or any foreign
                         government, their agencies or instrumentalities or
                         shares of  Price mutual  funds) if,  as a  result,
                         more than  5% of  the value  of each  Fund's total
                         assets  would  be invested  in  the securities  of
                         issuers which at the time of purchase had  been in
                         operation  for less  than  three years,  including
                         predecessors and unconditional guarantors; or

                    (7)  Warrants.  Invest in warrants.

                    Pursuant to an Exemptive Order issued by the Securities
          and Exchange Commission  (Investment Company Act Release  No. IC-
          21425, October 18,  1995):  (i) there  is no limit on  the amount
          the Funds may  own of the total outstanding  voting securities of
          registered  investment companies which are members of the T. Rowe
          Price family  of funds,  (ii) each Fund,  in accordance  with its
          prospectus, may invest more than 5% of its assets in any one such
          investment company, and (iii) each  Fund may invest more than 10%
          of its assets,  collectively, in registered investment  companies
          which are members of the T. Rowe Price family of funds.

                    Because of  their investment  objectives and  policies,
          the  Funds will each concentrate more than 25% of their assets in
          the  mutual  fund  industry.    In  accordance  with  the  Funds'
          investment  programs set  forth in  the prospectus,  each  of the
          Funds may invest  more than 25% of  its assets in certain  of the
          Underlying  Price Funds.   However, each of  the Underlying Price
          Funds in which each Fund will invest (other than New Income Fund,
          Short-Term  Bond Fund,  High Yield  Fund  and International  Bond
          Fund)  will not concentrate more than 25%  of its total assets in
          any one industry.   The New Income Fund and  Short-Term Bond Fund
          will, under certain conditions, invest  up to 50% of their assets
          in any  one  of  the  following  industries:  gas,  utility,  gas
          transmission  utility,  electric utility,  telephone  utility and
          petroleum.      















                    The  Short-Term Bond Fund,  International Bond Fund and
          High  Yield Fund  will each normally  concentrate 25%  or more of
          their assets in the securities of the banking industry when their
          position in  issues maturing in  one year  or less equals  35% or
          more of their total assets.

          Redemptions in Kind

                    In the unlikely event a shareholder were to  receive an
          in  kind  redemption of  portfolio  securities  of  either  Fund,

          brokerage 

          PAGE 19
          fees could be incurred by  the shareholder in subsequent sale  of
          such securities.

          Issuance of Fund Shares for Securities

                    Transactions  involving issuance of a fund's shares for
          securities or assets other than cash will be limited  to (1) bona
          fide  reorganizations;   (2)  statutory  mergers;  or  (3)  other
          acquisitions   of  portfolio  securities   that:  (a)   meet  the
          investment objectives and policies of the Fund;  (b) are acquired
          for  investment and  not  for resale  except  in accordance  with
          applicable law; (c)  have a value  that is readily  ascertainable

          via  listing on  or  trading  in a  recognized  United States  or
          international market; and (d) are not illiquid.


                               MANAGEMENT OF THE FUNDS

                    The management of each  Fund's business and affairs  is
          the responsibility of  the Board of Directors  for Spectrum Fund.
          In  exercising  their responsibilities,  the  Board,  among other
          things, will refer  to the Special Servicing Agreement  (see page
          18) and policies and guidelines included in an Application for an
          Exemptive Order (and accompanying Notice and  Order issued by the
          Commission).   A majority  of Spectrum  Fund's directors  will be
          non-interested persons as defined in Section 2(a)(19) of the 1940

          Act.    However, the  interested  directors and  the  officers of
          Spectrum Fund and  T. Rowe Price also serve  in similar positions
          with most of the Underlying Price Funds.  Thus,  if the interests
          of  a Fund  and the  Underlying Price  Funds were ever  to become
          divergent, it is possible that a conflict of interest could arise
          and  affect  how  this  latter  group  of  persons fulfill  their
          fiduciary duties to  that Fund  and the  Underlying Price  Funds.
          The directors of Spectrum Fund  believe they have structured each
          Fund to  avoid these concerns.  However, conceivably, a situation
          could occur where proper action  for Spectrum Fund or the  Growth
          Fund or Income Fund separately, could be adverse to the interests













          of an Underlying Price Fund, or the reverse could occur.  If such
          a possibility arises, the directors  and officers of the affected
          funds and T.  Rowe Price will carefully analyze the situation and
          take  all steps  they believe reasonable  to minimize  and, where
          possible,   eliminate   the   potential   conflict.     Moreover,
          limitations  on  aggregate investments  in  the  Underlying Price
          Funds  and other restrictions have  been adopted by Spectrum Fund
          to minimize this possibility, and close and continuous monitoring
          will be exercised to avoid, insofar as possible, these concerns.


                    The officers and directors of Spectrum Fund are  listed
          below.  Unless otherwise noted, the address of each is 100 East 

          PAGE 20
          Pratt Street, Baltimore,  Maryland 21202.   Except as  indicated,
          each has been  an employee of  T. Rowe Price  for more than  five
          years.   In  the list  below, Spectrum  Fund's directors  who are
          considered  "interested persons" of T. Rowe  Price or the Fund as
          defined under Section 2(a)(19)  of the Investment Company  Act of
          1940 are noted with an asterisk (*).  Mr. Riepe is referred to as
          an inside director by  virtue of his directorship and  employment
          by T. Rowe Price.

          *JAMES  S. RIEPE,  Chairman of  the Board--Managing  Director, T.
          Rowe  Price; Chairman of the Board, T. Rowe Price Services, Inc.,

          and T. Rowe Price Retirement Plan Services, Inc.; Chairman of the
          Board  and  Director, T.  Rowe  Price  Investment Services,  Inc;
          President  and  Trust  Officer,  T.  Rowe  Price  Trust  Company;
          Director,  Rowe  Price-Fleming  International,  Inc.  and  Rhone-
          Poulenc Rorer, Inc.
          JEFFREY  H. DONAHUE,  Director--Senior  Vice President  and Chief
          Financial Officer  of  The  Rouse Company,  a  full-service  real
          estate  and  development  company, Columbia,  Maryland;  Address:
          10275 Little Patuxent Parkway, Columbia, Maryland 21044
          A.  MACDONOUGH  PLANT,  Director--Partner, law  firm  of Stewart,
          Plant &  Blumenthal; (formerly until  4/91) Partner, law  firm of
          Semmes, Bowen & Semmes, Baltimore, Maryland; Address:  Suite 910,
          7 Seven St. Paul Street, Baltimore, Maryland 21202
          PETER VAN DYKE, President--Managing Director, T. Rowe Price; Vice

          President, Price-Fleming and T. Rowe Price Trust Company
          STEPHEN W. BOESEL, Vice President--Vice President, T. Rowe Price
          GEORGE  J. COLLINS,  Vice  President--President, Chief  Executive
          Officer, and  Managing Director, T. Rowe  Price; Director, Price-
          Fleming, T. Rowe Price Trust Company and T. Rowe Price Retirement
          Plan Services, Inc.; Chartered Investment Counselor
          HENRY  H. HOPKINS,  Vice  President--Managing  Director, T.  Rowe
          Price; Vice  President and  Director,  T. Rowe  Price  Investment
          Services,  Inc., T. Rowe Price Services,  Inc., and T. Rowe Price
          Trust Company;  Vice President,  Price-Fleming and T.  Rowe Price
          Retirement Plan Services, Inc.













          EDMUND M.  NOTZON, Vice President--Vice President,  T. Rowe Price
          and T.  Rowe Price Trust  Company; formerly, (1972-1989)  charter
          member  of  the  U.S.  Senior  Executive  Service  and  Director,
          Analysis  and  Evaluation  Division   in  the  Office  of   Water
          Regulations  and Standards  of the U.S.  Environmental Protection
          Agency
          WILLIAM T. REYNOLDS, Managing Director, T. Rowe Price
          CHARLES P.  SMITH,  Vice President--Managing  Director,  T.  Rowe
          Price; Vice President, Price-Fleming
          M. DAVID TESTA, Vice President--Managing Director, T. Rowe Price;

          Chairman  of   the  Board,   Price-Fleming;  Director   and  Vice
          President, T.  Rowe  Price  Trust  Company;  Chartered  Financial
          Analyst
          LENORA V. HORNUNG, Secretary--Vice President, T. Rowe Price
          PATRICIA   S.   BUTCHER,   Assistant  Secretary--Assistant   Vice
          President, T.Rowe Price andT. Rowe Price InvestmentServices, Inc.

          PAGE 21
          CARMEN F. DEYESU,  Treasurer--Vice President, T.  Rowe Price,  T.
          Rowe Price Services, Inc., and T. Rowe Price Trust Company
          DAVID S.  MIDDLETON, Controller--Vice  President, T. Rowe  Price,
          T. Rowe Price Services, Inc., and T. Rowe Price Trust Company 
          ROGER L. FIERY, III, Assistant Vice President--Vice President, T.
          Rowe Price and Price-Fleming
          EDWARD  T.  SCHNEIDER, Assistant  Vice  President--Assistant Vice

          President, T. Rowe Price; Vice President, T. Rowe Price Services,
          Inc.
          INGRID  I.  VORDEMBERGE, Assistant  Vice  President--Employee, T.
          Rowe Price
          JUDITH   B.  WARD,   Assistant  Vice   President--Assistant  Vice
          President, T. Rowe Price


                                  COMPENSATION TABLE

                    The Funds  do not pay pension or retirement benefits to
          its  officers or directors.  Also, any  director of a Fund who is
          an officer  or employee  of T. Rowe  Price does  not receive  any
          remuneration from the Funds.

          _________________________________________________________________
                                                 Total Compensation
                                                   from Fund and
           Name of                  Aggregate       Fund Complex
           Person,                Compensation        Paid to
          Position                from Fund(a)      Directors(b)
          _________________________________________________________________
          Spectrum Income

          Jeffrey H. Donahue,        $7,210          $30,011
          Director













          A. MacDonough Plant,        7,210           29,750
          Director

          Spectrum Growth

          Jeffrey H. Donahue,         8,840           30,011
          Director

          A. MacDonough Plant,        8,840           29,750
          Director


          (a)  Amounts in this  column are for  the fiscal year  January 1,
               1995 to December 31, 1995.
          (b)  Amounts in this column included three funds  at December 31,
               1995.

          PAGE 22
               The Fund's Executive Committee,  comprised of Mr. Riepe  and
          Mr.  Plant, have  been authorized  by the  Board of  Directors to
          exercise  all powers of the Board  to manage Spectrum Fund in the
          intervals  between  meetings  of  the Board,  except  the  powers
          prohibited by statute from being delegated.  

               Spectrum Fund's  officers will receive  no remuneration from
          the Fund,  but  are  paid by  T.  Rowe Price.    Spectrum  Fund's

          officers and  interested directors presently serve as officers or
          interested directors of most of the Underlying Price Funds.   The
          Underlying  Price  Funds  pay  their  disinterested  directors  a
          director's fee  plus a  proportionate share  of travel  and other
          expenses incurred in attending Board meetings.


                           PRINCIPAL HOLDERS OF SECURITIES

               As of the date of the prospectus, the officers and directors
          of Spectrum  Fund,  as  a  group,  owned  less  than  1%  of  the
          outstanding shares of the Fund.

               As of  March 31, 1996, no stockholder benefically owned more

          than  5% of the outstanding shares of either Spectrum Income Fund
          or Spectrum Growth Fund.


                            INVESTMENT MANAGEMENT SERVICES

               The  business  of Spectrum  Fund  will be  conducted  by its
          officers,  directors, and  investment manager in  accordance with
          policies and guidelines set up by Spectrum Fund's directors which
          were included in the Exemptive Order issued by the Securities and














          Exchange Commission (Investment Company Act Release No. IC-21425,
          October 18, 1995).

               Each  Fund  will  operate  at  a  zero  expense ratio.    To
          accomplish this, the payment  of each Fund's operational expenses
          is subject to the Special  Servicing Agreement described below as
          well  as certain  undertakings made by  T. Rowe  Price, under its
          Investment  Management  Agreement  with  T.  Rowe  Price.    Fund
          expenses  include:  shareholder   servicing  fees  and  expenses;
          custodian and  accounting fees and  expenses; legal and  auditing

          fees;  expenses  of  preparing   and  printing  prospectuses  and
          shareholder  reports; registration  fees and expenses;  proxy and
          annual  meeting  expenses,  if   any;  and  directors'  fees  and
          expenses.  

               Special Servicing Agreement.  Spectrum Fund has entered into
          a Special Servicing Agreement ("Agreement") between and among the
          Underlying Price Funds, T. Rowe Price and T. Rowe PriceServices, 

          PAGE 23
          Inc.  ("Price Services").   Under  the Agreement,  Price Services
          will  act as  Shareholder Servicing Agent  for Spectrum  Fund and
          arrange  for all other  services necessary  for the  operation of
          Spectrum Fund.  


               The   Agreement   provides    that,   if   the    Board   of
          Directors/Trustees of any  Underlying Price Fund determines  that
          such Underlying Price Fund's  share of the aggregate  expenses of
          Spectrum  Fund  is  less  than  the  estimated  savings  to  such
          Underlying Price  Fund from the  operation of Spectrum  Fund, the
          Underlying Price  Fund will bear those expenses  in proportion to
          the  average daily  value  of  its  shares owned  by  each  Fund,
          provided further  that no  Underlying Price  Fund will  bear such
          expenses in  excess of the estimated savings to it.  Such savings
          are expected to result primarily from the elimination of numerous
          separate  shareholder  accounts  which  are  or  would have  been
          invested directly in the Underlying Price Funds and the resulting
          reduction  in shareholder  servicing costs.   Although  such cost
          savings are  not certain, the estimated savings to the Underlying

          Price  Funds  generated by  the  operation of  Spectrum  Fund are
          expected to  be sufficient  to offset  most, if  not all, of  the
          expenses incurred by Spectrum Fund.  

               The  Special Servicing  Agreement  also  gives authority  to
          Spectrum Fund  to utilize  the  Price name  so  long as  (1)  the
          Special Servicing Agreement  is in effect, and (2)  the assets of
          the Growth Fund and the Income Fund are invested pursuant to each
          Fund's  objectives  and  policies   in  shares  of  the   various
          Underlying Price Funds (except for such cash or cash items as the
          directors may determine  to maintain  from time to  time to  meet













          current  expenses  and  redemptions).    The   Special  Servicing
          Agreement provides that the  Funds will utilize assets  deposited
          with  the custodian  of each  Fund from the  sale of  each Fund's
          shares  to promptly purchase  shares of  the specified Underlying
          Price  Funds, and will  undertake redemption or  exchange of such
          shares of  the Underlying Price  Funds in the manner  provided by
          the objectives and policies of each Fund.

               Under the  Investment Management  Agreement with  the Funds,
          and  the Special Servicing Agreement, T. Rowe Price has agreed to

          bear any  expenses of  Spectrum Fund  which exceed  the estimated
          savings  to  each of  the  Underlying Price  Funds.    Of course,
          shareholders of  Spectrum Fund  will still indirectly  bear their
          fair  and  proportionate  share  of  the  cost of  operating  the
          Underlying  Price  Funds  in  which  the  Spectrum  Fund  invests
          because, Spectrum Fund,  as a shareholder of the Underlying Price
          Funds, will bear its proportionate share of any fees and expenses
          paid  by  the  Underlying Price  Funds.    Spectrum  Fund,  as  a
          shareholder of the selected Underlying Price Funds, will  benefit
          only from cost-sharing reductions  in proportion to its  interest
          in such Underlying Price Funds.
          PAGE 24
          Services 

               Under the Management Agreement with each Fund, T. Rowe Price

          provides  each  Fund  with  discretionary   investment  services.
          Specifically, T. Rowe  Price is responsible  for supervising  and
          directing the investments  of each Fund  in accordance with  each
          Fund's  investment  objectives,  program,  and   restrictions  as
          provided  in their  prospectus and  this Statement  of Additional
          Information.  T. Rowe Price is also responsible for effecting all
          security transactions  on  behalf  of each  Fund,  including  the
          negotiation  of  commissions  and  the  allocation  of  principal
          business  and   portfolio  brokerage.    However,  it  should  be
          understood  that  the  Funds  will  invest  their  assets  almost
          exclusively in the shares of  the Underlying Price Funds and such
          investments will be made without the payment of any commission or
          other  sales charges.   In  addition to  these services,  T. Rowe
          Price provides  each Fund  with certain  corporate administrative

          services,  including:    maintaining  Spectrum  Fund's  corporate
          existence, corporate records, and registering and qualifying each
          Fund's  shares  under federal  and  state  laws;  monitoring  the
          financial, accounting, and administrative functions of each Fund;
          maintaining liaison with the agents employed by each Fund such as
          the  custodian and  transfer  agent; assisting  each Fund  in the
          coordination of such agents'  activities; and permitting T.  Rowe
          Price's employees to serve as officers, directors, and  committee
          members of each Fund without cost to the Fund.















               T. Rowe Price has agreed not to be paid a management fee for
          performing  its services.    However, T.  Rowe  Price and  Price-
          Fleming will receive management fees from managing the Underlying
          Price Funds in which Spectrum Fund invests.

               Each Fund's  Management Agreement also provides that T. Rowe
          Price,  its  directors,  officers, employees,  and  certain other
          persons performing specific  functions for the Fund will  only be
          liable to the Fund for losses resulting from willful misfeasance,
          bad faith, gross negligence, or reckless disregard of duty.


               Each Fund's Management Agreement provides that the Fund will
          bear all  expenses of its operations not  specifically assumed by
          T.  Rowe Price.  However,  T. Rowe Price  will reimburse the Fund
          for  certain  expenses  which  in  any  year  exceed  the  limits
          prescribed by any state in  which the Fund's shares are qualified
          for  sale.    Presently,   the  most  restrictive  expense  ratio
          limitation imposed by any state is 2.5% of the first  $30 million
          of  the  Fund's average  daily net  assets,  2% of  the  next $70
          million of such assets, and 1.5% of net  assets in excess of $100
          million.   For  the purpose  of determining  whether the  Fund is
          entitled  to  reimbursement,  the   expenses  of  the  Fund   are
          calculated on a monthly basis.  If the 

          PAGE 25

          Fund is  entitled to reimbursement,  that month's management  fee
          will be  reduced or postponed with any  adjustment made after the
          end of the year.

          Management Fees of Underlying Price Funds

               Each Underlying  Price  Fund pays  T. Rowe  Price or  Price-
          Fleming a fee ("Fee") which consists of two  components:  a Group
          Management Fee ("Group  Fee") and an  Individual Fund Fee  ("Fund
          Fee").  The Fee is paid monthly to T. Rowe Price or Price-Fleming
          on the first  business day of the next  succeeding calendar month
          and is calculated as described below.

               The  monthly Group Fee  ("Monthly Group Fee")  is the sum of

          the  daily Group  Fee accruals ("Daily  Group Fee  Accruals") for
          each  month.  The Daily Group Fee  Accrual for any particular day
          is computed by multiplying the Price Funds' group fee  accrual as
          determined below ("Daily  Price Funds' Group Fee Accrual") by the
          ratio of  the Fund's net  assets for that  day to the  sum of the
          aggregate net assets of the Price  Funds for that day.  The Daily
          Price  Funds'  Group  Fee  Accrual  for  any  particular  day  is
          calculated by multiplying the fraction of one (1) over the number
          of calendar days in the year by the annualized Daily Price Funds'
          Group Fee Accrual for that  day as determined in accordance  with
          the following schedule:













                                     Price Funds'
                                Annual Group Base Fee
                            Rate for Each Level of Assets
                          _________________________________

                                  0.480%   First $1 billion
                                  0.450%   Next $1 billion
                                  0.420%   Next $1 billion
                                  0.390%   Next $1 billion
                                  0.370%   Next $1 billion

                                  0.360%   Next $2 billion
                                  0.350%   Next $2 billion
                                  0.340%   Next $5 billion
                                  0.330%   Next $10 billion
                                  0.320%   Next $10 billion
                                  0.310%   Next $16 billion
                                  0.305%   Thereafter

















































          PAGE 26
                    The  Individual Fund Fees and total  management fees of
          the Underlying Price Funds are as follows:

                                            Individual Fee    Total
                                            as a % of Fund Management
                           Name of Fund       Net Assets    Fee Paid

                       International Bond Fund    0.35%        0.69%
                       International Stock Fund   0.35         0.69

                       New Horizons Fund          0.35         0.69
                       High Yield Fund            0.30         0.64
                       Equity Income Fund         0.25         0.59
                       Growth Stock Fund          0.25         0.59
                       New Era Fund               0.25         0.59
                       GNMA Fund                  0.15         0.49
                       Growth & Income Fund       0.25         0.59
                       New Income Fund            0.15         0.49
                       Short-Term Bond Fund       0.10         0.44
                       Prime Reserve Fund         0.05         0.39

                    Based  on combined Price Funds' assets of approximately
          $48.6 billion at December 31, 1995, the Group Fee was 0.34%.  The
          total combined  management fee for  each of the  Underlying Price
          Funds would have been an annual rate as shown above.


                    For  the purpose  of  calculating  the Group  Fee,  the
          Price  Funds include all the mutual  funds distributed by T. Rowe
          Price Investment  Services,  Inc. (excluding  the Spectrum  Fund,
          Equity Index  Fund, and any institutional or private label mutual
          funds).   For the purpose  of calculating the Daily  Price Funds'
          Group Fee Accrual  for any particular day, the net assets of each
          Price  Fund   are  determined  in  accordance   with  the  Fund's
          prospectus as of the close  of business on the previous  business
          day on which the Fund was open for business.

                    The monthly  Fund Fee  for each  Underlying Price  Fund
          ("Monthly Fund Fee") is  the sum of  the daily Fund Fee  accruals
          ("Daily Fund Fee  Accruals") for each month.  The  Daily Fund Fee

          accrual  for any  particular day is  computed by  multiplying the
          fraction of  one (1) over the number of calendar days in the year
          by  the individual  Fund Fee Rate  for each  Fund and multiplying
          this  product by  the net  assets of  the Fund  for that  day, as
          determined in  accordance with  the Fund's prospectus  as of  the
          close of  business on the previous business day on which the Fund
          was open for business.


                              DISTRIBUTOR FOR THE FUNDS














          PAGE 27
                    T. Rowe  Price Investment  Services, Inc.  ("Investment
          Services"), a  Maryland corporation formed  in 1980 as  a wholly-
          owned subsidiary  of T.  Rowe  Price, serves  as Spectrum  Fund's
          distributor, on behalf of the Income and Growth Fund.  Investment
          Services is  registered as a  broker-dealer under the  Securities
          Exchange Act of 1934 and is a member of the  National Association
          of  Securities Dealers,  Inc.   The  offering of  Spectrum Fund's
          shares is continuous.


                    Investment Services is located  at the same  address as
          Spectrum  Fund and  T.  Rowe  Price  --  100 East  Pratt  Street,
          Baltimore, Maryland 21202.

                    Investment Services  serves as distributor to  Spectrum
          Fund,  on behalf of  the Income and  Growth Fund, pursuant  to an
          Underwriting Agreement ("Underwriting Agreement"), which provides
          for each Fund  to pay its  fees and expenses  in connection  with
          registering  and qualifying  its shares  under the  various state
          "blue  sky"  laws;  preparing,  setting  in  type, printing,  and
          mailing its prospectuses and reports to shareholders; and issuing
          its shares,  including  expenses of  confirming purchase  orders.
          However, all such  fees and expenses are  subject to the  Special
          Servicing Agreement.


                    The  Underwriting Agreement  provides  that  Investment
          Services  will pay  all  fees and  expenses  in connection  with:
          printing  and distributing  prospectuses and  reports for  use in
          offering and selling shares for  each Fund; preparing, setting in
          type, printing, and mailing all sales literature and advertising;
          Investment  Services'  federal  and  state  registrations  as   a
          broker-dealer;  and offering  and selling  shares for  each Fund,
          except for  those fees and  expenses specifically assumed  by the
          Funds.  Investment Services' expenses are paid by T. Rowe Price.

                    Investment  Services  acts  as  the agent  of  Spectrum
          Fund, on behalf of the Income and Growth Fund, in connection with
          the sale of the shares for  each Fund in all states in which  the
          shares  are  qualified  and  in  which  Investment  Services   is

          qualified as a broker-dealer.  Under  the Underwriting Agreement,
          Investment Services accepts orders for each Fund's  shares at net
          asset value.  No sales charges are paid by investors or the Fund.


                                      CUSTODIAN

                    State  Street  Bank  and  Trust  Company  (the "Bank"),
          under an agreement  with Spectrum Fund, on  behalf of the  Income
          and  Growth  Fund,  serves  as  the  custodian  for  each  Fund's














          securities and  cash, but it  does not participate in  the Funds'
          investment decisions.  

          PAGE 28
          Portfolio securities purchased in the U.S. are  maintained in the
          custody of the  Bank and may be entered into  the Federal Reserve
          Book  Entry  system, or  the  security depository  system  of the
          Depository Trust Corporation.   The Bank maintains shares  of the
          Underlying Funds in the book entry system  of such funds transfer
          agent.  T.  Rowe Price Services, Inc.   State Street  Bank's main

          office is at  225 Franklin Street,  Boston, Massachusetts  02110.
          Payments of  the fees and expenses of the Income and Growth Funds
          under  the  Custodian  Agreement   are  subject  to  the  Special
          Servicing Agreement.


                                    CODE OF ETHICS

                    The Fund's  investment adviser  (T. Rowe  Price) has  a
          written Code  of Ethics  which requires  all employees  to obtain
          prior   clearance   before   engaging  in   personal   securities
          transactions. Transactions must be executed within three business
          days of their  clearance.  In addition, all employees must report
          their personal securities transactions  within ten days of  their
          execution.     Employees   will  not   be  permitted   to  effect

          transactions in a security: If there are pending client orders in
          the security; the security has been purchased or sold by a client
          within seven calendar days; the security  is being considered for
          purchase for  a client; a change has  occurred in T. Rowe Price's
          rating  of the security within  seven calendar days  prior to the
          date of the  proposed transaction; or the security  is subject to
          internal  trading  restrictions.    In  addition,  employees  are
          prohibited   from  profiting   from  short-term   trading  (e.g.,
          purchases and sales  involving the same security within 60 days).
          Any material violation of  the Code of Ethics is reported  to the
          Board  of the Fund.  The Board also reviews the administration of
          the Code of Ethics on an annual basis.

                                PRICING OF SECURITIES


                    The securities  of the Underlying  Price Funds held  by
          each Fund  are valued at  the net asset value  of each Underlying
          Price  Fund.   For  the  Growth  Fund,  short-term  money  market
          investments  are valued at cost which, when combined with accrued
          interest receivable,  approximates market value.   For the Income
          Fund, securities with  less than one year to  maturity are stated
          at fair value which  is determined by using a  matrix system that
          establishes  a value  for  each security  based  on money  market
          yields.














                              NET ASSET VALUE PER SHARE



          PAGE 29
                    The  purchase  and  redemption  price  of  each  Fund's
          shares is equal to its net asset value per share  or share price.
          Each Fund determines its net asset value per share by subtracting
          its  liabilities   (including  accrued  expenses   and  dividends
          payable)  from  its  total  assets  (the   market  value  of  the

          securities each Fund holds plus  cash and other assets, including
          income accrued  but not yet received) and  dividing the result by
          the total number of shares outstanding.   The net asset value per
          share of each Fund  is calculated as of  the close of trading  on
          the New York  Stock Exchange ("NYSE") every day the  NYSE is open
          for  trading.   The NYSE  is  closed on  the following  days: New
          Year's  Day, Washington's  Birthday,  Good Friday,  Memorial Day,
          Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.

                    Determination  of  net asset  value (and  the offering,
          sale,  redemption and  repurchase of  shares) for  a Fund  may be
          suspended  at times  (a) during which  the NYSE  is closed, other
          than  customary weekend  and holiday  closings, (b)  during which
          trading on the NYSE is  restricted (c) during which an  emergency
          exists  as a  result of  which disposal by  a Fund  of securities

          owned by it is not reasonably practicable or it is not reasonably
          practicable for the Fund fairly to determine the value of its net
          assets,   or  (d)  during   which  a   governmental  body  having
          jurisdiction over the Fund may by order  permit such a suspension
          for  the  protection of  the Fund's  shareholders;  provided that
          applicable rules  and regulations of the  Securities and Exchange
          Commission  (or  any  succeeding  governmental  authority)  shall
          govern as to whether the conditions prescribed in (b), (c) or (d)
          exist.


                                      DIVIDENDS

                    Unless    you    elect    otherwise,    capital    gain

          distributions,  if any,  will be  reinvested on  the reinvestment
          date using the NAV per share of that date.  The reinvestment date
          normally precedes the payment date by about 10 days  although the
          exact timing is subject to change.


                                      TAX STATUS

                    Each   Fund   intends  to   qualify  as   a  "regulated
          investment company"  under Subchapter  M of the  Internal Revenue
          Code of 1986, as amended ("Code").













                    A  portion  of  dividends  paid by  each  Fund  may  be
          eligible  for  the  dividends-received  deduction  for  corporate
          shareholders.   Capital gain distributions paid  from these Funds
          are never eligible for the dividends-received deduction.  For tax
          purposes, it does 

          PAGE 30
          not  make  any  difference  whether  dividends  and capital  gain
          distributions  are paid in  cash or  in additional shares.   Each
          Fund must declare  dividends by December 31 of each year equal to

          at least 98% of ordinary  income (as of December 31) and  capital
          gains (as of October 31), in order to avoid a federal excise  tax
          and  distribute  within 12  months  100% of  ordinary  income and
          capital gains  as of  December 31  in  order to  avoid a  federal
          income tax.

                    At the time  of your  purchase, each  Fund's net  asset
          value  may  reflect  undistributed  income  (Growth  Fund  only),
          capital gains  or net unrealized appreciation  of securities held
          by  the Fund.  A subsequent  distribution to you of such amounts,
          although  constituting  a return  of  your  investment, would  be
          taxable either  as dividends or capital gain  distributions.  For
          federal income  tax  purposes, each  Fund is  permitted to  carry
          forward its net realized capital losses, if  any, for eight years
          and realize  net capital gains  up to the  amount of such  losses

          without being required to pay taxes on, or distribute such gains.
          On March 31, 1996,  the books of  the Income Fund indicated  that
          the  Fund's aggregate  net assets  included net  realized capital
          gains   of   $(511,965.07)   and   unrealized   appreciation   of
          $28,982,828.36.  On March  31, 1996, the books of the Growth Fund
          indicated  that   the  Fund's  aggregate   net  assets   included
          undistributed   net  investment  income   of  $3,271,600.94,  net
          realized   capital  gains   of   $2,790,377.50,  and   unrealized
          appreciation of $282,980,070.82.

                    If,  in  any  taxable  year,  either  Fund  should  not
          qualify  as  a  regulated  investment  company  under  the  Code:
          (i) the  Fund would  be taxed  at normal  corporate rates  on the
          entire amount  of its taxable  income, if any,  without deduction

          for   dividends  or  other  distributions  to  shareholders,  and
          (ii) the Fund's  distributions  to the  extent  made out  of  the
          Fund's current  or  accumulated  earnings and  profits  would  be
          taxable to  shareholders  as ordinary  dividends  (regardless  of
          whether  they would otherwise  have been  considered capital gain
          dividends), and would qualify for the 70% deduction for dividends
          received by corporations.

          Taxation of Foreign Shareholders















                    The Code provides  that dividends from net income  will
          be subject to U.S. tax.  For shareholders  who are not engaged in
          a  business in the U.S., this tax would be imposed at the rate of
          30% upon the gross  amount of the dividends  in the absence of  a
          Tax  Treaty providing for a  reduced rate or  exemption from U.S.
          taxation.   Distributions of net long-term capital gains realized
          by the Fund are not subject to tax unless the foreign shareholder
          is a nonresident  alien individual who was physically  present in
          the U.S. during the tax year for more than 182 days.


          PAGE 31

                                  YIELD INFORMATION

          Income Fund

                    From  time to  time, the  Income  Fund may  advertise a
          yield figure calculated in the following manner:

                    An income  factor is  calculated for  each security  in
          the  portfolio based  upon  the security's  market  value at  the
          beginning  of the  period and yield  as determined  in conformity
          with regulations of the Securities and Exchange  Commission.  The
          income  factors  are then  totalled  for  all securities  in  the
          portfolio.   Next, expenses of  the Fund for  the period, net  of

          expected reimbursements, are deducted  from the income to  arrive
          at net income,  which is then converted to  a per-share amount by
          dividing net income by  the average number of  shares outstanding
          during the  period.  The net  income per share is  divided by the
          net asset  value on  the last  day  of the  period to  produce  a
          monthly yield which is then annualized.  Quoted yield factors are
          for  comparison purposes only,  and are not  intended to indicate
          future  performance or  forecast the  dividend per  share of  the
          Fund.

                    The  yield  of  the Fund  calculated  under  the above-
          described method for the month ended December 31, 1995 was 7.41%.



                                INVESTMENT PERFORMANCE

          Total Return Performance

                    Each  Fund's  calculation  of total  return performance
          includes the  reinvestment of all capital  gain distributions and
          income  dividends for  the period  or periods  indicated, without
          regard to tax consequences  to a shareholder in the  Fund.  Total
          return  is  calculated  as  the  percentage  change  between  the
          beginning value of a  static account in  the Fund and the  ending
          value  of that  account measured  by the  then current  net asset













          value, including  all  shares acquired  through  reinvestment  of
          income  and  capital gains  dividends.    The results  shown  are
          historical and  should not be considered indicative of the future
          performance  of the Fund.   Each average  annual compound rate of
          return  is derived from  the cumulative  performance of  the Fund
          over  the time  period specified.   The  annual compound  rate of
          return  of the Fund over any other  period of time will vary from
          the average.


























































          PAGE 32
          Spectrum Income Fund

                       Cumulative Performance Percentage Change

                                       1 Year    3 Years Since Inception
                                        Ended     Ended   (6/29/90) to
                                      12/31/94+ 12/31/94   12/31/94++
                                       _________ ________ _______________


          Spectrum Income Fund           -1.94%    18.82%     45.93%
          90-day Treasury Bill            4.33     11.27      21.75
          Lehman Brothers Govt./Corp.
            Bond Index                   -3.51     15.26      41.51
          Lipper Flexible Income         -3.69     17.98      43.49
          CPI                             2.67      8.56      15.24

                       Average Annual Compound Rates of Return

                                       1 Year     3 Years  Since Inception
                                        Ended      Ended    (6/29/90) to
                                      12/31/94+  12/31/94    12/31/94++
                                      _________  ________  _______________


          Spectrum Income Fund          -1.94%      5.92%      8.75%
          90-day Treasury Bill           4.33       3.62       4.46
          Lehman Brothers Govt./Corp.
            Bond Index                  -3.51       4.85       8.01
          Lipper Flexible Income        -3.69       5.67       8.34
          CPI                            2.95       2.87       3.26

          +    If  you invested $1,000 at the beginning  of 1994, the total
               return on 12/31/94 would be $980.60 ($1,000 x -1.94%).
          ++   Assumes purchase  of one  share of  the Income  Fund at  the
               inception price of $10.00 on 6/29/90.  































          PAGE 33
          Spectrum Growth Fund

                       Cumulative Performance Percentage Change

                                       1 Year    3 Years Since Inception
                                        Ended     Ended   (6/29/90) to
                                     12/31/94+  12/31/94   12/31/94++
                                       _________ ________ _______________


          Spectrum Growth Fund           1.40%    31.55%      53.61%
          S & P 500                      1.35     20.06       47.23
          Lipper Growth and Income
            Fund Index                  -0.72     26.59       50.06
          Wilshire 5000                 -0.06     21.18       49.93
          CPI                            2.67      8.56       15.24

                       Average Annual Compound Rates of Return

                                       1 Year    3 Years Since Inception
                                        Ended     Ended   (6/29/90) to
                                     12/31/94+  12/31/94   12/31/94++
                                       _________ ________ _______________


          Spectrum Growth Fund           1.40%     9.57%      10.00%
          S & P 500                      1.35      6.29        8.97
          Lipper Growth and Income
            Fund Index                  -0.72      8.18        9.44
          Wilshire 5000                 -0.06      6.61        9.41
          CPI                            2.67      2.77        3.20

          +   If you invested  $1,000 at the  beginning of 1994, the  total
              return on 12/31/94 would be $1,014 ($1,000 x 1.40%).
          ++  Assumes  purchase  of one  share  of the  Growth Fund  at the
              inception price of $10.00 on  6/29/90.  Over this time, stock
              prices in general have risen.


          Outside Sources of Information

                    From  time   to  time,  in   reports  and   promotional
          literature:  (1) the Fund's total return performance or P/E ratio
          may be compared to any one or combination  of the following:  (i)
          the  Standard & Poor's  500 Stock Index  and Dow Jones Industrial
          Average so that you may compare  the Fund's results with those of
          a group of  unmanaged securities widely regarded by  investors as
          representative of the stock market in general; (ii)  other groups
          of mutual  funds, including T. Rowe Price  Funds tracked by:  (A)
          Lipper Analytical  Services, a widely  used independent  research
          firm which rates mutual  funds by overall performance, investment
          objective, and  assets; (B) Morningstar, Inc. another widely used
          independent research firm which ranks mutual funds;  or (C) other














          financial or business publications,  such as Business Week, Money
          Magazine, 

          PAGE 34
          Forbes and  Barron's, which  provide  similar information;  (iii)
          indices of stocks comparable to  those in which the Fund invests;
          (2) the Consumer Price Index (measure for inflation) may  be used
          to assess the real rate of return from an investment in the Fund;
          (3) other government statistics such  as GNP, and net import  and
          export figures  derived from governmental  publications, e.g. The

          Survey of Current Business, may  be used to illustrate investment
          attributes  of  the  Fund  or  the  general  economic,  business,
          investment, or financial environment  in which the Fund operates;
          (4) various financial, economic  and market statistics  developed
          by brokers, dealers and  other persons may be used  to illustrate
          aspects of the Fund's performance; (5) the effect of tax-deferred
          compounding  on the Fund's  investment returns, or  on returns in
          general, may  be illustrated by  graphs, charts, etc.  where such
          graphs  or charts would  compare, at various  points in time, the
          return from an investment in the Fund (or returns  in general) on
          a tax-deferred basis (assuming  reinvestment of capital gains and
          dividends and assuming one or more tax rates)  with the return on
          a taxable basis; and (6)  the sectors or industries in  which the
          Fund invests may be compared to relevant indices or surveys (e.g.
          S&P Industry Surveys)  in order to evaluate the Fund's historical

          performance or  current or  potential value with  respect to  the
          particular industry or sector.  The Income Fund may  also compare
          its performance or yield to a variety of fixed income investments
          (e.g.,  repos,  CDs,  Treasury   bills)  and  other  measures  of
          performance  set forth  in financial  publications maintained  by
          persons such as the Donoghue Organization, Merrill Lynch,  Pierce
          Fenner & Smith, Inc., Salomon Brothers, Inc. etc.   In connection
          with (5) above, information derived  from the following chart may
          be used:

                              IRA Versus Taxable Return

          Assuming 9% annual rate of return, $2,000 annual contribution and
          28% tax bracket.


                     Year              Taxable          Tax Deferred

                      10              $ 28,700            $ 33,100
                      15                51,400              64,000
                      20                82,500             111,500
                      25               125,100             184,600
                      30               183,300             297,200

          IRAs














                      An IRA is  a long-term investment whose  objective is
          to accumulate personal savings for retirement.  Due to  the long-
          term  nature  of  the  investment,  even  slight  differences  in
          performance  will result  in  significantly  different assets  at
          retirement.  

          PAGE 35
          Mutual funds, with their diversity of choice, can be used for IRA
          investments.   Generally,  individuals may  need to  adjust their
          underlying  IRA  investments as  their  time  to  retirement  and

          tolerance for risk changes.


          Other Features and Benefits

                      The Fund is  a member of the T.  Rowe Price Family of
          Funds and may help investors achieve various long-term investment
          goals, such as  investing money for retirement, saving for a down
          payment  on a home, or paying college  costs.  To explain how the
          Fund  could be  used to  assist investors  in planning  for these
          goals and  to illustrate  basic principles of  investing, various
          worksheets and guides prepared by T. Rowe Price Associates,  Inc.
          and/or  T.  Rowe  Price  Investment Services,  Inc.  may  be made
          available.   These  currently include:  the  Asset Mix  Worksheet
          which is  designed  to  show shareholders  how  to  reduce  their

          investment risk  by developing a diversified investment plan; the
          College  Planning  Guide  which  discusses   various  aspects  of
          financial planning to meet  college expenses and assists  parents
          in  projecting  the  costs  of  a  college  education  for  their
          children;  the Retirement  Planning Kit  (also available in  a PC
          version) includes a detailed workbook to determine how much money
          you may need  for retirement and suggests how you might invest to
          achieve your  objectives; and the Retirees  Financial Guide which
          includes a detailed workbook to determine how  much money you can
          afford  to spend  and still  preserve  your purchasing  power and
          suggests  how   you  might  invest   to  reach  your   goal;  Tax
          Considerations  for Investors  discusses  the  tax advantages  of
          annuities and municipal  bonds and how to assess whether they are
          suitable  for your  portfolio, reviews  pros and cons  of placing

          assets in a gift  to minors account, and summarizes  the benefits
          and  types;  Personal  Strategy  Planner   simplifies  investment
          decision making  by helping  investors define personal  financial
          goals,  establish length of time  the investor intends to invest,
          determine risk  "comfort zone" and select  diversified investment
          mix; and the How to Choose  a Bond Fund guide which discusses how
          to choose an appropriate bond fund for your portfolio.  From time
          to  time, other  worksheets and guides  may be  made available as
          well.  Of course, an investment in the Fund cannot guarantee that
          such goals will be met.














                      To assist  investors in  understanding the  different
          returns  and risk  characteristics  of  various investments,  the
          aforementioned  guides will  include  presentation of  historical
          returns of  various  investments  using published  indices.    An
          example of this is shown below.

                     Historical Returns for Different Investments

          PAGE 36
          Annualized returns for periods ended 12/31/95


                                    50 years   20 years  10 years 5 years

          Small-Company Stocks        13.8%      19.6%     11.9%    24.5%

          Large-Company Stocks        11.9       14.6      14.8     16.6

          Foreign Stocks               N/A       15.1      13.9      9.7

          Long-Term Corporate Bonds    5.7       10.5      11.2     12.1

          Intermediate-Term U.S. 
            Gov't. Bonds               5.9        9.7       9.1      8.8

          Treasury Bills               4.8        7.3       5.5      4.3


          U.S. Inflation               4.4        5.2       3.5      2.8


          Sources:   Ibbotson Associates, Morgan  Stanley.  Foreign  stocks
          reflect performance  of The Morgan  Stanley Capital International
          EAFE Index, which includes some 1,000  companies representing the
          stock  markets of  Europe, Australia,  New Zealand,  and the  Far
          East.   This chart  is for illustrative  purposes only and should
          not  be considered as  performance for, or  the annualized return
          of,  any T. Rowe Price Fund.  Past performance does not guarantee
          future results.

             Also  included will  be  various portfolios  demonstrating how

          these  historical  indices   would  have  performed   in  various
          combinations over a specified time period in terms of return.  An
          example of this is shown below.





















          PAGE 37
                        Performance of Retirement Portfolios*


                      Asset Mix      Average Annualized           Value
                                      Returns 20 Years              of
                                       Ended 12/31/95            $10,000
                                                                Investment
                                                               After Period
                ____________      ______________________      ____________


                                       Nominal   Real   Best Worst
          PortfolioGrowth Income Safety Return Return** Year  Year

          I.   Low
               Risk  40%   40%    20%   11.8%    6.5%   24.9% 0.1%$ 92,675

          II.  Moderate
               Risk  60%   30%    10%   13.1%    7.9%   29.1%-1.8%$116,826

          III. High
               Risk  80%   20%     0%    14.3    9.1%   33.4%-5.2%$145,611

          Source:  T.  Rowe  Price  Associates;  data  supplied  by  Lehman
          Brothers, Wilshire Associates, and Ibbotson Associates.


          *   Based on  actual performance for the  20 years ended  1995 of
              stocks (85% Wilshire 5000 and 15% Europe, Australia, Far East
              [EAFE]  Index), bonds (Lehman  Brothers Aggregate  Bond Index
              from  1976-94 and  Lehman Brothers  Government/Corporate Bond
              Index from 1975), and 30-day Treasury bills from January 1976
              through December 1995.   Past performance does not  guarantee
              future results.   Figures include changes  in principal value
              and reinvested  dividends and  assume the  same asset mix  is
              maintained  each  year.   This  exhibit  is for  illustrative
              purposes only and is not representative of the performance of
              any T. Rowe Price fund.
          **  Based on  inflation rate of 5.2% for the 20-year period ended
              12/31/95.


          Insights

              From  time to time, Insights, a T.  Rowe Price publication of
          reports on  specific  investment topics  and  strategies, may  be
          included in the Fund's fulfillment kit.  Such reports may include
          information concerning:   calculating taxable gains and losses on
          mutual  fund transactions,  coping with stock  market volatility,
          benefiting    from   dollar    cost    averaging,   understanding
          international  markets, investing  in  high-yield  "junk"  bonds,
          growth stock 













          PAGE 38
          investing,   conservative  stock   investing,  value   investing,
          investing in  small companies, tax-free  investing, fixed  income
          investing, investing  in mortgage-backed  securities, as  well as
          other topics and strategies.

          Other Publications

              From  time to  time, in  newsletters  and other  publications
          issued by T. Rowe Price Investment  Services, Inc., reference may

          be made to economic, financial  and political developments in the
          U.S.  and abroad  and their  effect on  securities prices.   Such
          discussions may take the form of commentary on these developments
          by T. Rowe Price mutual  fund portfolio managers and their  views
          and analysis on how such developments could affect investments in
          mutual funds.


                                    CAPITAL STOCK

                    The  Articles   of  Incorporation   of  Spectrum   Fund
          currently  establish two  series (i.e., the  Income Fund  and the
          Growth Fund), each  of which represents a  separate class of  the
          Corporation's shares and has different objectives and  investment
          policies.  The  Articles of Incorporation  also provide that  the

          Board of Directors  may issue additional series of  shares.  Each
          share of  each Fund represents  an equal  proportionate share  in
          that Fund,  with  each  other  share, and  is  entitled  to  such
          dividends and distributions  of income belonging to  that Fund as
          are  declared by the Directors.  In  the event of the liquidation
          of a Fund,  each share is entitled to a pro rata share of the net
          assets of that Fund.

                    The  Funds' Charter  authorizes the Board  of Directors
          to  classify and  reclassify any  and all  shares which  are then
          unissued,  including unissued  shares of  capital stock  into any
          number of  classes or series, each class  or series consisting of
          such number of shares and  having such designations, such powers,
          preferences,    rights,    qualifications,    limitations,    and

          restrictions,  as shall be determined by the Board subject to the
          Investment Company Act  and other applicable law.   The shares of
          any such additional classes or series might therefore differ from
          the shares of the present class  and series of capital stock  and
          from  each other as  to preferences, conversion  or other rights,
          voting  powers,   restrictions,  limitations  as   to  dividends,
          qualifications or terms or  conditions of redemption, subject  to
          applicable  law, and  might thus be  superior or  inferior to the
          capital  stock  or  to   other  classes  or  series  in   various
          characteristics.  The Board of Directors may increase or decrease
          the aggregate number  of shares of stock or the  number of shares













          of stock of any class or series that the Funds have authorized to
          issue without shareholder approval.


          PAGE 39
                    Each share of each series has equal voting  rights with
          every other share  of every other  series, and all shares  of all
          series vote as a single group except where a separate vote of any
          class  or series  is required  by the  Investment Company  Act of
          1940, the laws of the State  of Maryland, the Funds' Articles  of

          Incorporation, the By-Laws of the Corporation, or as the Board of
          Directors may determine in its sole discretion.  Where a separate
          vote is required with  respect to one or more classes  or series,
          then the shares of all  other classes or series vote as  a single
          class or series,  provided that, as to any matter  which does not
          affect the  interest of  a particular class  or series,  only the
          holders of shares  of the one or more affected  classes or series
          is  entitled  to  vote.    The  preferences,  rights,  and  other
          characteristics attaching to any series of shares, including  the
          present series of capital stock,  might be altered or eliminated,
          or the  series might be  combined with another series,  by action
          approved by  the vote  of the holders  of a  majority of all  the
          shares  of  all  series entitled  to  be voted  on  the proposal,
          without any additional right  to vote as a series by  the holders
          of the capital stock or of another affected series.


                    Shareholders are  entitled to  one vote  for each  full
          share held (and fractional votes for  fractional shares held) and
          will  vote in  the election of  or removal  of directors  (to the
          extent hereinafter  provided) and on  other matters submitted  to
          the vote of shareholders.  There will normally be  no meetings of
          shareholders  for the  purpose of  electing directors  unless and
          until such time as less than a majority  of the directors holding
          office  have  been elected  by  shareholders, at  which  time the
          directors  then in office  will call a  shareholders' meeting for
          the  election of  directors.    Except as  set  forth above,  the
          directors shall continue to hold office and may appoint successor
          directors.      Voting rights  are  not cumulative,  so  that the
          holders of more than 50% of  the shares voting in the election of

          directors can,  if they choose to do  so, elect all the directors
          of the Funds, in  which event the holders of the remaining shares
          will be unable to  elect any person as a director.   As set forth
          in  the  By-Laws   of  the  Corporation,  a  special  meeting  of
          shareholders  of the Corporation shall be called by the Secretary
          of  the  Corporation  on  the  written  request  of  shareholders
          entitled  to  cast  at  least  10%  of   all  the  votes  of  the
          Corporation, entitled to  be cast at such  meeting.  Shareholders
          requesting  such a  meeting  must  pay  to  the  Corporation  the
          reasonably estimated costs of preparing and mailing the notice of
          the meeting.  The Corporation, however, will otherwise assist the













          shareholders seeking to hold the special meeting in communicating
          to  the  other shareholders  of  the  Corporation to  the  extent
          required by Section 16(c) of the 1940 Act.



          PAGE 40
                       FEDERAL AND STATE REGISTRATION OF SHARES

                    The Funds'  shares are  registered for  sale under  the

          Securities  Act  of  1933  and  the Funds  or  their  shares  are
          registered   under  the   laws  of   all  states   which  require
          registration, as  well as  the  District of  Columbia and  Puerto
          Rico.


                                    LEGAL COUNSEL

                    Shereff,  Friedman,  Hoffman   &  Goodman,  LLP,  whose
          address  is 919 Third Avenue, New  York, New York 10022, is legal
          counsel to the Funds.


                               INDEPENDENT ACCOUNTANTS


                    Price Waterhouse LLP,  7 St. Paul  Street, Suite  1700,
          Baltimore,  Maryland  21202, are  independent accountants  to the
          Funds.  The financial statements of  each Fund for the year ended
          December 31, 1995, and the  report of independent accountants are
          included  in the Funds' Annual Report for the year ended December
          31, 1995 on pages 8-14.  A copy of the  Annual Report accompanies
          this  Statement   of  Additional  Information.     The  following
          financial  statements and  the report of  independent accountants
          appearing  in the Annual  Report for the  year ended December 31,
          1995,  are  incorporated  into   this  Statement  of   Additional
          Information by reference:

                                                            Annual
                                                          Report Page
                                                         _____________

               Report of Independent Accountants              14
               Statement of Net Assets, December 31, 1995      8
               Statement of Operations, year ended
                  December 31, 1995                            9
               Statement of Changes in Net Assets, years ended 
                  December 31, 1995 and December 31, 1994     10
               Notes to Financial Statements, 
                  December 31, 1995                           11
               Financial Highlights                          12-13














          


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