NEW AGE MEDIA FUND INC, N-1A EL/A, 1997-07-23

NEW AGE MEDIA FUND INC
N-1A EL/A, 1997-07-23

Previous: BEDFORD PROPERTY INVESTORS INC/MD, 8-K, 1997-07-23

Next: NORTHSTAR ADVANTAGE TRUST, 485BPOS, 1997-07-23

Registration Nos. 033-27963/811-7075

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /

Pre-Effective Amendment No. 1 / X /

Post-Effective Amendment No. __ / /

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /

Amendment No. 1 / X /

T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
__________________________________________
(Exact Name of Registrant as Specified in Charter)

100 East Pratt Street, Baltimore, Maryland 21202
__________________________________________
(Address of Principal Executive Offices)(Zip Code)

410-345-2000
__________________________________________
(Registrant's Telephone Number, Including Area Code)

Henry H. Hopkins
100 East Pratt Street
Baltimore, Maryland 21202
_________________________
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering July 25, 1997
_____________

It is proposed that this filing will become effective (check appropriate box):

/ / immediately upon filing pursuant to paragraph (b)

/ / on (date) pursuant to paragraph (b)

/ / 60 days after filing pursuant to paragraph (a)(1)

/ / on (date) pursuant to paragraph (a)(1)

/ / 75 days after filing pursuant to paragraph (a)(2)

/ / on (date) pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:

/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933+
____________________________________________________________________________
Pursuant to Section 24f-2 of the Investment Company Act of 1940, the
Registrant has registered an indefinite number of securities under the
Securities Act of 1933 and intends to file a 24f-2 Notice by February 28,
1998.

+Not applicable, as no securities are being registered by this Pre-Effective
Amendment No. 1 to the Registration Statement.

The purpose of this Registration Statement is to register the Registrant under
the Investment Company Act of 1940, to register the shares of the Registrant
under the Securities Act of 1933, and to declare pursuant to Section 24(f) of
the Investment Company Act of 1940 and Rule 24f-2 thereunder that an
indefinite number of its securities is being registered by this Registration
Statement.

The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states the Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a) may
determine.

SUBJECT TO COMPLETION

Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
<PAGE>
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
CROSS REFERENCE SHEET

N-1A Item No. Location
_____________ ________

PART A

Item 1. Cover Page Cover Page
Item 2. Synopsis Transaction and Fund Expenses
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Transaction and
Registrant Fund Expenses; Fund, Market,
and Risk Characteristics;
Organization and Management;
Understanding Performance
Information; Investment
Policies and Practices
Item 5. Management of the Fund Transaction and Fund Expenses;
Fund, Market, and Risk
Characteristics; Organization
and Management
Item 6. Capital Stock and Other Distributions and
Securities Taxes; Capital Stock
Item 7. Purchase of Securities Pricing Shares and
Being Offered Receiving Sale Proceeds;
Transaction Procedures and
Special Requirements; Account
Requirements and Transaction
Information; Shareholder
Services
Item 8. Redemption or Repurchase Pricing Shares and Receiving
Sale Proceeds; Transaction
Procedures and Special
Requirements; Exchanging and
Redeeming Shares; Shareholder
Services
Item 9. Pending Legal Proceedings +

PART B

Item 10.Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History +
Item 13. Investment Objectives and Investment Objectives
Policies and Policies; Investment
Objectives and Programs;
Investment Restrictions; Risk
Factors of Foreign Investing;
Investment Performance
Item 14.Management of the Registrant Management of Funds
Item 15.Control Persons and Principal Principal Holders of
Holders of Securities Securities
Item 16.Investment Advisory and Other Investment Management
Services Services; Custodian; Legal
Counsel; Independent
Accountants
Item 17.Brokerage Allocation Portfolio Transactions; Code
of Ethics
Item 18.Capital Stock and Other Dividends and
Securities Distributions; Capital Stock
Item 19.Purchase, Redemption and Redemptions in Kind;
Pricing of Securities Being Pricing of Securities;
Offered Net Asset Value Per Share;
Federal Registration of Shares
Item 20.Tax Status Tax Satus
Item 21.Underwriters Distributor for Funds
Item 22.Calculation of Performance Data +
Item 23.Financial Statements Incorporated by Reference From
Annual Report

PART C

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement
___________________________________
+ Not applicable or negative answer

<PAGE>

PROSPECTUS
July 28, 1997
Media & TelecommunicationsFund

An aggressive stock fund seeking long-term capital appreciation through
investments in media, technology, and telecommunications companies.

T. ROWE PRICE

RAM LOGO
<PAGE>

FACTS AT A GLANCE
Media & Telecommunications Fund

Investment Goal
To provide long-term capital appreciation.

As with any mutual fund, there is no guarantee the fund will achieve its goal.

Strategy

To invest primarily in common stocks of companies operating in the media,
telecommunications, and technology industries, such as entertainment,
broadcasting, and advanced communications networks. Income is not a
consideration in choosing stocks.

Risk/Reward
Likely to have more severe price fluctuations than the overall stock market but
offering the potential for superior returns over time. The fund's share price
may decline, causing a loss.

Investor Profile
Individuals seeking an aggressive approach to capital growth who can accept the
risk of loss inherent in a fund that focuses on a volatile area of the market.
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 $103 billion for more
than five million individual and institutional investor accounts as of March
31, 1997.
<PAGE>

T. Rowe Price Media & Telecommunications Fund, Inc.

Prospectus
July 28, 1997

Contents
1 About the Fund
Transaction and Fund Expenses 2
Financial Highlights 3
Fund, Market, and Risk Characteristics 4

2 About Your Account
Pricing Shares and Receiving Sale Proceeds 8
Distributions and Taxes 9
Transaction Procedures and Special Requirements 11

3 More About the Fund
Organization and Management 14
Understanding Performance Information 16
Investment Policies and Practices 17

4 Investing With T. Rowe Price
Account Requirements and Transaction Information 22
Opening a New Account 22
Purchasing Additional Shares 24
Exchanging and Redeeming 24
Shareholder Services 26
Discount Brokerage 28
Investment Information 29

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

This prospectus contains information you should know before investing. Please
keep it for future reference. A Statement of Additional Information about the
fund, dated July 28, 1997, 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.
<PAGE>

ABOUT THE FUND
1
TRANSACTION AND FUND EXPENSES
----------------------------------------------------------
. Like all T. Rowe Price funds, this fund is 100% no load.

These tables should help you understand the kinds of expenses you will bear
directly or indirectly as a fund shareholder.

Shareholder Transaction Expenses in Table 1 shows that you pay no sales
charges. All the money you invest in the fund goes to work for you, subject
to the fees explained below. Annual Fund Expenses shows an estimate of how
much it will cost to operate the fund for a year. The expenses shown below
have been adjusted to reflect the fund's new investment management agreement
and new status as an open-end mutual fund. These are costs you pay
indirectly, because they are deducted from the fund's total assets before the
daily share price is calculated and before dividends and other distributions
are made. In other words, you will not see these expenses on your account
statement.

<TABLE>
Table 1/a/
<CAPTION>
<S> <C> <C> <C> <C>
Shareholder Transaction Percentage of Average Net
Expenses Annual Fund Expenses Assets as of 6/30/97
Sales charge "load" on purchases None Management fee 0.68%

Sales charge "load" on reinvested
distributions None Marketing fees (12b-1) None

Total other (shareholder servic
Redemption fees None ing, custodial, auditing, etc.) 0.27%

Exchange fees None Total fund expenses 0.95%
- ------------------------------------------------------------------------------------------------------------
</TABLE>

/a/Higher or lower asset levels will affect the fund's expense ratio. To limit
the fund's expenses, T. Rowe Price has agreed to waive its fees and bear any
expenses through December 31, 1998, to the extent such fees or expenses would
cause the fund's ratio of expenses to average net assets to exceed 1.25%. Fees
waived or expenses paid or assumed under this agreement are subject to
reimbursement to T. Rowe Price by the fund whenever the fund's expense ratio
is below 1.25%; however, no reimbursement will be made after December 31,
2000, or if it would result in the expense ratio exceeding 1.25%. Any amounts

Note:
A $5 fee is charged for wire redemptions under $5,000, subject to change without
notice, and a $10 fee is charged for small accounts, when applicable (see Small

The main types of expenses, which all mutual funds may charge against fund

. A management fee The percent of fund assets paid to the fund's investment
manager. The fund's fee comprises a group fee, 0.33% as of June 30, 1997, and
an individual fund fee of 0.35%.
<PAGE>

ABOUT THE FUND 3
. "Other" administrative expenses Primarily the servicing of shareholder
accounts, such as providing statements and reports, disbursing dividends, and
providing custodial services.

. Marketing or distribution fees An annual charge ("12b-1") to existing
shareholders to defray the cost of selling shares to new shareholders. T.
Rowe Price funds do not levy 12b-1 fees.

For further details on fund expenses, please see Organization and Management.

. Hypothetical example Assume 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:

<TABLE>
Table 2
<CAPTION>
<S> <C> <C> <C> <C> <C>
Hypothetical Fund Expenses
1 year 3 years 5 years 10 years

$10 $30 $53 $117
- ----------------------------------------------------------
</TABLE>

. Table 2 is just an example; actual expenses can be higher or lower than
those shown.

FINANCIAL HIGHLIGHTS
----------------------------------------------------------
Table 3, which provides information about the fund's financial history, is
based on a single share outstanding throughout each fiscal year. The table is
part of the fund's financial statements which are included in its annual
report and are incorporated by reference into the Statement of Additional
Information (available upon request). The financial statements in the annual
report were audited by Price Waterhouse LLP, the fund's independent
accountants.

<TABLE>
Table 3 Financial Highlights/a/
<CAPTION>
Income From Investment Activities

Period Net Asset Net Net Realized Total From
Ended Value, Investment & Unrealized Investment
Beginning Income (Loss) Gain (Loss) on Activities
of Period Investments

<S> <S> <C> <C> <C> <C>
1993/b/ $13.93 $0.01 $(0.37) $(0.36)
1994 13.57 (0.01 (0.11) (0.12)
1995 13.44 (0.04) 5.79 5.75
1996 17.99 (0.11) 0.36 0.25
- ------------------------------------------------------------------------------------------------------
<CAPTION>
Net
Less Distributions Asset Value

Net Total From Net Asset
Investment Net Realized Total Share Value, End
Income (Loss) Gain (Loss) Distributions Repurchases of Period

Footnotes appear on page 4. (Table 3 continues on page 4.)
<PAGE>

T. ROWE PRICE 4

<TABLE>
Table 3 Financial Highlights (continued)
<CAPTION>

Period
Ended

<S> <S>
1993/a/
1994
1995
1996
- --------------
<CAPTION>
Returns, Ratios, and Supplemental Data

Total Return Ratio of Ratio of Net
(Includes Net Assets Expenses to Investment Portfolio Average
Reinvested Average Net Income to Turnover Commission
Distributions) ($ Thousands) Assets Average Net Assets Rate Rate Paid

/a/
The figures in Table 3 reflect the performance of the fund as a closed-end
investment company trading on the New York Stock Exchange.
/b/ From 10/13/93 to 12/31/93.
/c/ Annualized.

FUND, MARKET, AND RISK CHARACTERISTICS: WHAT TO EXPECT
----------------------------------------------------------
To help you decide whether this fund is appropriate for you, this section
takes a closer look at its investment objective and approach.

. The fund should not represent your complete investment program nor be used
for short-term trading purposes.

What is the fund's objective?

The fund seeks long-term growth of capital.

What is the fund's investment program?

The fund will invest at least 80% of total assets in the common stocks of
companies engaged in any facet of media and telecommunications.

The fund will invest a minimum of 65% of its assets in the securities of U.S.
companies and may invest up to 35% of assets in foreign securities. Up to 20%
may be invested in the debt securities of media and telecommunications
companies that have potential for capital appreciation.

While common stocks will be the principal holdings, the fund can also
purchase other types of securities, such as preferred stocks, convertible
stocks and bonds, warrants, and debt securities when considered consistent
with its investment objective and program. The portfolio manager may also
employ a variety of investment management practices, such as buying and
selling futures and options.
<PAGE>

ABOUT THE FUND 5
Why invest in media and telecommunications companies?

T. Rowe Price believes that potential significant wealth-building
opportunities are being created by three major forces: the convergence of
media, telecommunications, and technology companies; favorable regulatory
changes; and beneficial financial markets that have provided much of the
needed capital. These forces extend to international markets and could affect
a broad variety of industries.

Technological changes should continue to have a profound influence on
communication, education, commerce, and the demand for entertainment products
and services. While government regulations have not always kept pace with
this technological revolution, various governments have recently begun to
eliminate barriers that previously restrained innovation and competition. T.
Rowe Price's extensive research capability may enable the fund to benefit
from active participation in the financial markets, including initial public
offerings, which have provided capital for many companies in these
industries.

What types of companies could benefit most from these developments?

The fund may benefit from companies operating in the following areas:

. Media and Content These companies create and own various forms of printed,
visual, and audio content, as well as information databases that they sell or
lease to others. Examples include newspaper, magazine, and book publishers;
software developers; movie and television studios; advertising agencies;
gaming and lodging companies; and credit card processors.

. Distribution These companies own and operate both wired and wireless
distribution networks that transport various forms of content. Examples
include domestic and international telephone companies, cellular and paging
services, radio and television broadcasters, and cable television and direct
satellite broadcast system operators.

. Technology These companies manufacture equipment and provide services used
by content creators, distribution companies, and various consumers of media
and telecommunications products and services. Examples include semiconductor
manufacturers, software developers, networking companies, and
telecommunications equipment vendors.

How does the fund select stocks for the portfolio?

Stock selection is based on fundamental, "bottom-up" analysis that seeks to
identify companies with good appreciation prospects. The fund managers will
seek to invest primarily in mid- to large-cap stocks with market
capitalizations in excess of $500 million. The managers will typically follow
a growth-oriented approach to stock selection, although some portion of fund
assets may be invested in value stocks. In the growth area, the manager will
try to identify
<PAGE>

T. ROWE PRICE 6
companies with capable management, attractive business niches, sound
financial and accounting practices, and a demonstrated ability to increase
revenues, earnings, and cash flow consistently. In the value area, the
managers will seek companies whose current stock prices appear undervalued in
terms of earnings potential, projected cash flow, or asset value per share.

. Growth investors look for companies with above-average earnings gains. Value
investors look for undervalued assets.

What are some of the fund's potential risks?

The fund will be less diversified than stock funds investing in a broader
range of industries and, therefore, could experience significant volatility
when trends are perceived as unfavorable for media and telecommunications
companies. For example, these companies are subject to risks of developing
technologies, including rapid obsolescence, lack of consumer or business
acceptance, and lack of standardization or compatibility with existing
technologies.

Governmental regulatory authorities can adversely affect the types of
companies in which the fund invests by delaying or refusing to issue
necessary licences, regulating rates, limiting returns, imposing market share
restrictions, and being unpredictable.

Many of the companies in these fields are subject to intense competition,
which can adversely affect their ability to maintain profitable margins.
Other companies are dependent on a combination of patent, copyright,
trademark, and trade secret protection, and there is no assurance a company
will be able to protect its rights in these areas. Finally, certain of the
new technologies in which the fund may invest may be perceived as posing
health risks to consumers.

To the extent that the fund invests in foreign companies, its share price
would be subject to the additional risk of fluctuations in the foreign
exchange value of the dollar. The fund's partial exposure to mid- and
smaller-cap companies makes it subject to greater price fluctuation than is
associated with large-cap companies.

The fund may also buy below investment-grade ("junk") bonds, which would
expose a portion of the portfolio to the risk that an issuer may have trouble
making interest and principal payments.

. The fund's share price will fluctuate; when you sell your shares, you may
lose money.
<PAGE>

ABOUT THE FUND 7
What are some of the fund's potential rewards?

T. Rowe Price believes that trends in the media and telecommunications
industries offer opportunities for significant long-term capital
appreciation. For investors who currently have a broad exposure to equities,
the fund provides a way to diversify into an area of the economy undergoing
substantial change as well as the potential for rapid growth in a number of
fields, such as content, distribution, and technology.

What are some potential risks and rewards of investing in the stock market
through this fund?

Common stocks, in general, offer a way to invest for long-term growth of
capital. As the U.S. economy has expanded, corporate profits have grown and
share prices have risen. Nevertheless, economic growth has been punctuated by
periods of stagnation and recession. Share prices of all companies, even the
best managed and most profitable, can fall for any number of reasons, ranging
from lower-than-expected earnings to changes in investor psychology.
Significant trading by large institutional investors also can lead to price
declines. In addition, if our assessment of company prospects proves
incorrect, companies that our managers and analysts expect to do well may
perform poorly. Since 1950, the U.S. stock market has experienced 10 negative
years as well as steep drops of shorter duration. Its worst calendar quarter
return in recent years was -22.5% in 1987's fourth quarter.

. Equity investors should have a long-term investment horizon and be willing
to wait out bear markets.

How can I decide if the fund is appropriate for me?

Consider your investment goals, your time horizon for achieving them, and
your tolerance for risk. If you seek capital growth through a more narrowly
focused fund and are willing to accept the price swings that can affect
media, telecommunications, and technology stocks, the fund could be an
appropriate part of your long-term investment strategy.

Is there other information I need to review before making a decision?

Be sure to read Investment Policies and Practices in Section 3, which
discusses the principal types of portfolio securities that the fund may
purchase as well as the types of management practices that the fund may use.
<PAGE>

ABOUT YOUR ACCOUNT
2
PRICING SHARES AND RECEIVING SALE PROCEEDS
----------------------------------------------------------
Here are some procedures you should know when investing in a T. Rowe Price
equity fund.

How and when shares are priced

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

. 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 your purchase, sale, or exchange price is determined

If we receive your request in correct form by 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.

How you can receive the proceeds from a sale

. When filling out the New Account Form, you may wish to give yourself the
widest range of options for receiving 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 Automated Clearing House (ACH) transfer or bank wire.
Proceeds sent by ACH transfer should be credited the second day after the
sale. ACH 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.

. Exception: Under certain circumstances and when deemed to be in the fund's
best interests, your proceeds may not be sent for up to five business days
after
<PAGE>

ABOUT YOUR ACCOUNT 9
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.

. If for some reason we cannot accept your request to sell shares, we will
contact you.

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, the fund reserves the right to
reinvest your distribution check in your account at the NAV on the business
day of the reinvestment and to reinvest all subsequent distributions in
shares of the fund.

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

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

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

. If the 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. If a second
distribution is necessary, it is usually declared and paid during the first
quarter of the following year.

Tax Information

. You will be sent timely information for your tax filing needs.

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

. You sell fund shares, including an exchange from one fund to another.
<PAGE>

T. ROWE PRICE 10
. The fund makes a distribution to your account.

Taxes on 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 you make (except for systematic purchases and
redemptions) and a year-end statement detailing all your transactions in each
fund account during the year.

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 the 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 a calendar 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 gain distributions are taxable as ordinary income and
long-term gain distributions 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 the fund's ordinary income dividend. Net foreign currency losses
may result in the fund's dividend being classified as a return of capital.
<PAGE>

ABOUT YOUR ACCOUNT 11
If a fund pays nonrefundable taxes to foreign governments during the year,
the taxes will reduce the fund's dividends, but will still be included in
your taxable income. However, you may be able to claim an offsetting
deduction on your tax return for your portion of foreign taxes paid by the
fund.

. Distributions are taxable whether reinvested in additional shares or
received in cash.

Tax effect of buying shares before a capital gain or dividend 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 also wish to find out the fund's record
date before investing. Of course, the fund's share price may, at any time,
reflect undistributed capital gains or income and unrealized appreciation.
When these amounts are eventually distributed, they are taxable.

TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
----------------------------------------------------------
. Following these procedures helps assure timely and accurate transactions.

Purchase Conditions

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
<PAGE>

T. ROWE PRICE 12
or ACH transfer has not cleared. (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/(R)/, and personal computer 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. The 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 the 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.

Excessive Trading

. T. Rowe Price may bar excessive traders from purchasing shares.

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).
<PAGE>

ABOUT YOUR ACCOUNT 13
Keeping Your Account Open

Due to the relatively high cost to the 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 fund's 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.)

Signature Guarantees

. A signature guarantee is designed to protect you and the T. Rowe Price funds
from fraud by verifying your signature.

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

. Written requests 1) to redeem over $100,000, or 2) to wire redemption
proceeds.

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

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

. 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.
<PAGE>

MORE ABOUT THE FUND
3
ORGANIZATION AND MANAGEMENT
----------------------------------------------------------

How is the fund organized?

The fund was incorporated in Maryland in 1993 as a diversified, closed-end
investment company. In 1997, it was converted to a "diversified, open-end
investment company," or mutual fund. Mutual funds pool money received from
shareholders and invest it to try to achieve specified objectives.

. Shareholders benefit from T. Rowe Price's 60 years of investment management
experience.

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:

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

. 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, in order to avoid
unnecessary costs to fund shareholders, 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.

Who runs the fund?

General Oversight
The fund is governed by a Board of Directors that meets regularly to review
the fund's investments, performance, expenses, and other business affairs.
The Board elects the fund's officers. The policy of the fund is that the
majority of Board members will be independent of T. Rowe Price.
<PAGE>

ABOUT YOUR ACCOUNT 15
. All decisions regarding the purchase and sale of fund investments are made
by T. Rowe Price-specifically by the fund's portfolio managers.

Portfolio Management

The fund has an Investment Advisory Committee composed of the following
members: Brian D. Stansky, Chairman, Lise J. Buyer, Robert N. Gensler, Seema
R. Hingorani, Charles A. Morris, and John F. Wakeman. The committee chairman
has day-to-day responsibility for managing the portfolio and works with the
committee in developing and executing the fund's investment program. Mr.
Stansky became chairman of the fund's committee in 1997. As a member of the
Investment Advisory Committees of the T. Rowe Price Capital Opportunity Fund,
Inc., T. Rowe Price New Horizons Fund, Inc., and T. Rowe Price Science &
Technology Fund, Inc., Mr. Stansky has been managing investments since 1996.
He joined T. Rowe Price in 1989 as an investment analyst.

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

Shareholder Services
T. Rowe Price Services, Inc., another wholly owned subsidiary, acts as the
fund's 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?

The management agreement spells out the expenses to be paid by the fund. In
addition to the management fee, the fund pays for the following: shareholder
service expenses; custodial, accounting, legal, and audit fees; costs of
preparing and printing prospectuses and reports sent to shareholders;
registration fees and expenses; proxy and annual meeting expenses (if any);
and director/trustee fees and expenses.

. For the fiscal period ending December 31, 1997, the fund is expected to pay
the following: $340,000 to T. Rowe Price Services, Inc., for transfer and
dividend disbursing functions and shareholder services and $70,000 to T. Rowe
Price for accounting services.

The Management Fee
This fee has two parts- an "individual fund fee" (discussed under Transaction
and Fund Expenses), which reflects a fund's particular investment management
costs, and a "group fee." The group fee, which is designed to reflect the
benefits of the shared resources of the T. Rowe Price investment management
complex, is calculated daily based on the combined net assets of all T. Rowe
Price funds
<PAGE>

T. ROWE PRICE 16
(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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
0.480% First $1 billion 0.360% Next $2 billion 0.310% Next $16 billion
--------------------------
0.450% Next $1 billion 0.350% Next $2 billion 0.305% Next $30 billion
----------------------------------------------------
0.420% Next $1 billion 0.340% Next $5 billion 0.300% Thereafter
----------------------------------------------------
0.390% Next $1 billion 0.330% Next $10 billion
------------------------------------------------------------------------------
0.370% Next $1 billion 0.320% Next $10 billion
</TABLE>

The 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 T. Rowe Price funds described
previously. Based on combined T. Rowe Price funds' assets of approximately
$63 billion at March 31, 1997, the group fee was 0.33%.

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

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.

. Total return is the most widely used performance measure. Detailed
performance information is included in the fund's annual and semiannual
shareholder reports and in the quarterly Performance Update, which are all
available without charge.
<PAGE>

MORE ABOUT THE FUND 17
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 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.

INVESTMENT POLICIES AND PRACTICES
----------------------------------------------------------
This section takes a detailed look at some of the types of securities the
fund may hold in its portfolio and the various kinds of investment practices
that may be used in day-to-day portfolio management. The fund's investment
program is subject to further restrictions and risks described in the
Statement of Additional Information.

Shareholder approval is required to substantively change the fund's objective
and certain investment restrictions noted in the following section as
"fundamental policies." The managers also follow certain "operating
policies," which can be changed without shareholder approval. However,
significant changes are discussed with shareholders in fund reports. The fund
adheres to applicable investment restrictions and policies at the time it
makes an investment. A later change in circumstances will not require the
sale of an investment if it was proper at the time it was made.

The fund's holdings of certain kinds of investments cannot exceed maximum
percentages of total assets, which are set forth herein. For instance, this
fund is not permitted to invest more than 10% of total assets in hybrid
instruments. While these restrictions provide a useful level of detail about
the fund's investment program, investors should not view them as an accurate
gauge of the potential risk of such investments. For example, in a given
period, a 5% investment in hybrid instruments could have significantly more
of an impact on the fund's share price than its weighting in the portfolio.
The net effect of a particular investment depends on its volatility and the
size of its overall return in relation to the performance of all the fund's
other investments.

Changes in the fund's holdings, the fund's performance, and the contribution
of various investments are discussed in the shareholder reports sent to you.
<PAGE>

T. ROWE PRICE 18
. Fund managers have considerable leeway in choosing investment strategies and
selecting securities they believe will help the fund achieve its objective.

Types of Portfolio Securities

In seeking to meet its investment objective, the fund may invest in any type
of security or instrument (including certain potentially high-risk
derivatives described in this section) whose investment characteristics are
consistent with the fund's investment program. The following pages describe
the principal types of portfolio securities and investment management
practices of the fund.

Fundamental policy The fund will not purchase a security if, as a result,
with respect to 75% of its total assets, more than 5% of its total assets
would be invested in securities of a single issuer, or if more than 10% of
the voting securities of the issuer would be held by the fund.

Common and Preferred Stocks
Stocks represent shares of ownership in a company. Generally, preferred stock
has a specified dividend and ranks after bonds and before common stocks in
its claim on income for dividend payments and on assets should the company be
liquidated. After other claims are satisfied, common stockholders participate
in company profits on a pro-rata basis; profits may be paid out in dividends
or reinvested in the company to help it grow. Increases and decreases in
earnings are usually reflected in a company's stock price, so common stocks
generally have the greatest appreciation and depreciation potential of all
corporate securities. While most preferred stocks pay a dividend, the fund
may purchase preferred stock where the issuer has omitted, or is in danger of
omitting, payment of its dividend. Such investments would be made primarily
for their capital appreciation potential.

Convertible Securities and Warrants
The fund may invest in debt or preferred equity securities convertible into
or exchangeable for equity securities. Traditionally, convertible securities
have paid dividends or interest at rates higher than common stocks but lower
than nonconvertible securities. They generally participate in the
appreciation or depreciation of the underlying stock into which they are
convertible, but to a lesser degree. In recent years, convertibles have been
developed which combine higher or lower current income with options and other
features. Warrants are options to buy a stated number of shares of common
stock at a specified price anytime during the life of the warrants
(generally, two or more years).

Foreign Securities
The fund may invest in foreign securities. These include
nondollar-denominated securities traded outside of the U.S. and
dollar-denominated securities of foreign issuers traded in the U.S. (such as
ADRs). Such investments increase a portfolio's diversification and may
enhance return, but they also involve some special
<PAGE>

MORE ABOUT THE FUND 19
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).
These risks are heightened for investments in developing countries, and there
is no limit on the amount of the fund's foreign investments that may be made
in such countries.

Operating policy The fund may invest up to 35% of its total assets (excluding
reserves) in foreign securities.

Fixed Income Securities
The fund may invest in debt securities of any type without regard to quality
or rating. Such securities would be purchased in companies which meet the
investment criteria for the fund. The price of a bond fluctuates with changes
in interest rates, rising when interest rates fall and falling when interest
rates rise.

High-Yield/High-Risk Investing 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,
shorter-term bonds, but not as much as those of common stocks. Junk bonds
(those rated below BBB or in default) are regarded as predominantly
speculative with respect to the issuer's continuing ability to meet principal
and interest payments.

Operating policy The fund may invest up to 20% of its total assets in
corporate debt securities, including convertible bonds.

Operating policy The fund will not purchase a noninvestment-grade debt
security (or junk bond) if immediately after such purchase the fund would
have more than 5% of its total assets invested in such securities. The fund's
investments in convertible securities are not subject to this limit.

Hybrid Instruments
These instruments (a type of potentially high-risk derivative) can combine
the characteristics of securities, futures, and options. For example, the
principal amount, redemption, or conversion terms of a security could be
related to the market price of some commodity, currency, or securities index.
Such securities may bear interest or pay dividends at below market or even
relatively nominal rates. Under certain conditions, the redemption value of
such an investment could be zero.

. Hybrids can have volatile prices and limited liquidity, and their use by the
fund may not be successful.

Operating policy The fund may invest up to 10% of its total assets in hybrid
instruments.
<PAGE>

T. ROWE PRICE 20
Private Placements
These securities are sold directly to a small number of investors, usually
institutions. Unlike public offerings, such securities are not registered
with the SEC. Although certain of these securities may be readily sold, for
example, under Rule 144A, others may be illiquid, and their sale may involve
substantial delays and additional costs.

Operating policy The fund will not invest more than 15% of its net assets in
illiquid securities.

Types of Management Practices

Cash Position
The fund will 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, the fund may invest without limitation in such
securities. This 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 market volatility.

Borrowing Money and Transferring Assets
The fund can borrow money from banks as a temporary measure for emergency
purposes, to facilitate redemption requests, or for other purposes consistent
with the fund's investment objective and program. Such borrowings may be
collateralized with fund assets, subject to restrictions.

Fundamental policy Borrowings may not exceed 33 1/3% of total fund
assets.

Operating policies The fund may not transfer as collateral any portfolio
securities except as necessary in connection with permissible borrowings or
investments, and then such transfers may not exceed 33 1/3% of the
fund's total assets. The fund may not purchase additional securities when
borrowings exceed 5% of total assets.

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 fund may buy
and sell futures and options contracts for any number of reasons, including:
to manage its exposure to changes in securities prices and foreign
currencies; as an efficient means of adjusting its overall exposure to
certain markets; in an effort to enhance income; and to protect the value of
portfolio securities. The fund may purchase, sell, or write call and put
options on securities, financial indices, and foreign currencies.
<PAGE>

MORE ABOUT THE FUND 21
Futures contracts and options may not always be successful hedges; their
prices can be highly volatile. Using them could lower the fund's total
return, and the potential loss from the use of futures can exceed the fund's
initial exposure to such contracts.

Operating policies Futures: Initial margin deposits and premiums on options
used for non-hedging purposes will not equal more than 5% of the fund's net
asset value. Options on securities: The total market value of securities
against which the fund has written call or put options may not exceed 25% of
its total assets. The fund will not commit more than 5% of its total assets
to premiums when purchasing call or put options.

Managing Foreign Currency Risk
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."
Although foreign currency transactions will be used 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.

Lending of Portfolio Securities
Like other mutual funds, the fund 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 fund could experience delays in recovering its securities and
possibly capital losses.

Fundamental policy The value of loaned securities may not exceed
33 1/3% of total fund assets.

Portfolio Turnover
The fund will not generally trade in securities for short-term profits, but,
when circumstances warrant, securities may be purchased and sold without
regard to the length of time held. A high turnover rate may increase
transaction costs and result in additional taxable gains. The fund's
portfolio turnover rates for the fiscal years ending December 31, 1996, 1995,
and 1994, were 102.9%, 118.9%, and 133.9%, respectively.
<PAGE>

INVESTING WITH T. ROWE PRICE
4
ACCOUNT REQUIREMENTS AND TRANSACTION INFORMATION
----------------------------------------------------------
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.

Always verify your transactions by carefully reviewing the confirmation we send
you. Please report any discrepancies to Shareholder Services promptly.

Employer-Sponsored Retirement Plans and Institutional Accounts
T. Rowe Price
Trust Company
1-800-492-7670 1-410-625-6585
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 plans or gifts or
transfers to minors (UGMA/UTMA) accounts

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
on the next page. We do not accept third party checks to open new accounts,
except for IRA Rollover checks that are properly endorsed.
<PAGE>

INVESTING WITH T. ROWE PRICE 23
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

By Wire
Call Investor Services for an account number and give the following wire
information to your bank:

PNC Bank, N.A. (Pittsburgh) ABA# 043000096 T. Rowe Price [fund name] Account#
1004397951 account name and account number

Complete a New Account Form and mail it to one of the appropriate addresses
listed above.

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 your personal computer (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. For limitations on exchanging, see explanation of Excessive
Trading under Transaction Procedures and Special Requirements.

In Person
Drop off your New Account Form at any location listed on the cover and obtain a
receipt.
<PAGE>

T. ROWE PRICE 24
PURCHASING ADDITIONAL SHARES
----------------------------------------------------------
$100 minimum purchase; $50 minimum for retirement plans, Automatic Asset
Builder, and gifts or transfers to minors (UGMA/UTMA) accounts

By ACH Transfer
Use Tele*Access, your personal computer, 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.

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

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

3. Remember to provide your account number and the fund name on the memo line of
your check.

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 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 your personal computer, 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.
<PAGE>

INVESTING WITH T. ROWE PRICE 25
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.

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 fund or funds you are exchanging into. Please mail
to the appropriate address below. 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 IRA accounts
T. Rowe Price Account Services P.O. Box 89000 Baltimore, MD 21289-0220

For employer-sponsored retirement accounts
T. Rowe Price Trust Company P.O. Box 89000 Baltimore, MD 21289-0300

/(For mailgrams, express, registered, or certified mail, see addresses / /under
Opening a New Account.)/

Redemptions from employer-sponsored retirement accounts must be in writing;
please call T. Rowe Price Trust Company or your plan administrator for
instructions. IRA distributions may be requested in writing or by telephone;
please call Shareholder Services to obtain an IRA Distribution 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 refuse any purchase
order; 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,
<PAGE>

T. ROWE PRICE 26
whichever is sooner; to freeze any account and suspend account services 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
Investor Services 1-800-638-5660 1-410-547-2308
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 institutional accounts require an original or
certified resolution to establish services and to redeem by mail. For more
information, call Investor Services.

Retirement Plans
We offer a wide range of plans for individuals, institutions, and large and
small businesses: IRAs, SIMPLE 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, including our no-load
variable annuity, 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
<PAGE>

INVESTING WITH T. ROWE PRICE 27
0.5% to 2% on shares held for less than six months or one year, as specified in
the prospectus. The fee is paid to the fund.

Automated Services
Tele*Access 1-800-638-2587 24 hours, 7 days

Tele*Access
24-hour service via toll-free number enables you to (1) access information on
fund yields, prices, distributions, account balances, and your latest
transaction; (2) request checks, prospectuses, services forms, duplicate
statements, and tax forms; and (3) initiate purchase, redemption, and exchange
transactions in your accounts (see Electronic Transfers below).

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

Plan Account Line 1-800-401-3279
Plan Account Line
This 24-hour service is similar to Tele*Access, but is designed specifically to
meet the needs of retirement plan investors.

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 or your personal computer,
or call Shareholder Services.

By Wire
Electronic transfers can 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.
<PAGE>

T. ROWE PRICE 28
Automatic Investing
($50 minimum) You can invest automatically in several different ways, including:

Automatic Asset Builder
You instruct us to move $50 or more 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.

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
----------------------------------------------------------
This additional service gives you the opportunity to easily consolidate all of
your investments with one company. Through our discount brokerage, you can buy
and sell individual securities - stocks, bonds, options, and others - at
commission savings over full-service brokers. We also provide a wide range of
services, including:

To open an account 1-800-638-5660 For existing discount brokerage investors
1-800-225-7720
Automated telephone and on-line services
You can enter trades, access quotes, and review account information 24 hours a
day, seven days a week. Any trades executed through these programs save you an
additional 10% on commissions.

Note: Discount applies to our current commission schedule, subject to our $35
minimum commission.

Investor information
A variety of informative reports, such as our Brokerage Insights series, S&P
Market Month Newsletter, and select stock reports can help you better evaluate
economic trends and investment opportunities.

Dividend Reinvestment Service
Virtually all stocks held in customer accounts are eligible for this
service-free of charge.

/Discount Brokerage is a division of //T. Rowe Price// Investment / /Services,
Inc., Member NASD/SIPC./
<PAGE>

INVESTING WITH T. ROWE PRICE 29
INVESTMENT INFORMATION
----------------------------------------------------------
To help shareholders monitor their current investments and make decisions that
accurately reflect their financial goals, T. Rowe Price offers a wide variety of
information in addition to account statements.

Shareholder Reports
Fund managers' reviews of their strategies and results. If several members of a
household own the same fund, only one fund report is mailed to that address. To
receive additional copies, please call Shareholder Services or write to us at
100 East Pratt Street, Baltimore, Maryland 21202.

The T. Rowe Price Report
A quarterly investment newsletter discussing markets and financial strategies.

Performance Update
Quarterly review of all T. Rowe Price fund results.

Insights
Educational reports on investment strategies and financial markets.

Investment Guides
Asset Mix Worksheet, College Planning Kit, Diversifying Overseas: A T. Rowe
Price Guide to International Investing, How to Choose a Bond Fund, Personal
Strategy Planner, Retirees Financial Guide, Retirement Planning Kit, and Tax
Considerations for Investors.
<PAGE>

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.

To Open a Mutual Fund 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, Prices, Account Information, or to Conduct Transactions
Tele*Access/(R)/
1-800-638-2587 24 hours, 7 days

To Open a Discount Brokerage Account
1-800-638-5660

Plan Account Line
1-800-401-3279
For retirement plan
investors

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
www.troweprice.com

Invest With Confidence
T. Rowe Price
Ram Logo
F21-040 7/28/97

STATEMENT OF ADDITIONAL INFORMATION

T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE VALUE FUND, INC.
and
INSTITUTIONAL EQUITY FUNDS, INC.
MID-CAP EQUITY GROWTH FUND

(collectively the "Funds" and individually the "Fund")

This Statement of Additional Information is not a prospectus but should
be read in conjunction with the appropriate Fund prospectus dated May 1, 1997;
or June 30 1997, for the T. Rowe Price Diversified Small-Cap Growth Fund,
Inc.; or July 28, 1997, for the T. Rowe Price Media & Telecommunications Fund,
Inc., 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, 1997,
revised to June 30, 1997, for the Diversified Small-Cap Growth Fund, Inc., and
to July 28, 1997, for the T. Rowe Price Media & Telecommunications Fund, Inc.

C20-043 7/28/97

TABLE OF CONTENTS

Page Page

Asset-Backed Securities. . . . . . . . Legal Counsel . . . . . .
Capital Stock. . . . . . . . . . . . . Lending of Portfolio
Custodian. . . . . . . . . . . . . . . Securities . . . . . . .
Code of Ethics . . . . . . . . . . . . Management of Funds . . . . .
Distributor for Fund . . . . . . . . . Mortgage-Related
Dividends and. . . . . Securities . . . . . . .
Distributions . . . . . . . . . . . . Net Asset Value Per Share . . . . .
Federal Registration . . . . . . . . . Options . . . . . . . . .
of Shares . . . . . . . . . . . . . . Organization of the Fund. . . . . .
Foreign Currency . . . . . Portfolio Management
Transactions. . . . . . . . . . . . . Practices. . . . . . . .
Foreign Futures and. . . . . Portfolio Transactions. . . . . . .
Options . . . . . . . . . . . . . . . Pricing of Securities . . . . . . .
Foreign Securities . . . . . . . . . . Principal Holders of. . . . . . . .
Futures Contracts. . . . . . . . . . . Securities . . . . . . .
Hybrid Instruments . . . . . . . . . . Ratings of Corporate Debt
Independent Accountants. . . . . . . . Securities . . . . . . .
Illiquid or Restricted . . . . . Repurchase Agreements . . . . . . .
Securities. . . . . . . . . . . . . . Risk Factors. . . . . . .
Investment Management. . . . . Tax Status. . . . . . . .
Services. . . . . . . . . . . . . . . Taxation of Foreign
Investment Objectives and. . . . . Shareholders . . . . . .
Policies. . . . . . . . . . . . . . . Warrants. . . . . . . . .
Investment Performance . . . . . . . . When-Issued Securities and
Investment Program . . . . . . . . . . and Forward Commitment
Investment Restrictions. . . . . . . . Contracts. . . . . . . .

INVESTMENT OBJECTIVES AND POLICIES

The following information supplements the discussion of each Fund's
investment objectives and policies discussed in each Fund's 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. Each Fund's operating policies are subject to change by each Board
of Directors/Trustees without shareholder approval. However, shareholders will
be notified of a material change in an operating policy. Each Fund's
fundamental policies 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.

Throughout this Statement of Additional Information, "the Fund" is
intended to refer to each Fund listed on the cover page,
unless otherwise indicated.

RISK FACTORS

General

Because of its investment policy, the Fund may or may not be suitable or
appropriate for all investors. The Fund is not a money market fund and is not
an appropriate investment for those whose primary objective is principal
stability. The Fund will normally have substantially all (for the Balanced
Fund 50-70% and for the Capital Appreciation Fund at least 50%) of its assets
in equity securities (e.g., common stocks). This portion of the Fund's assets
will be subject to all of the risks of investing in the stock market. There is
risk in all investment. The value of the portfolio securities of the Fund will
fluctuate based upon market conditions. Although the Fund seeks to reduce risk
by investing in a diversified portfolio, such diversification does not
eliminate all risk. There can, of course, be no assurance that the Fund will
achieve its investment objective. Reference is also made to the sections
entitled "Types of Securities" and "Portfolio Management Practices" for
discussions of the risks associated with the investments and practices
described therein as they apply to the Fund.

Foreign Securities (All Funds other than Equity Index Fund)

The Fund may invest in U.S. dollar-denominated and non-U.S. dollar-
denominated securities of foreign issuers.

Risk Factors of Foreign Investing

There are special risks in foreign investing. Many of the risks are more
pronounced for investments in developing or emerging countries, such as many
of the countries of Southeast Asia, Latin America, Eastern Europe and the
Middle East. Although there is no universally accepted definition, a
developing country is generally considered to be a country which is in the
initial stages of its industrialization cycle with a per capita gross national
product of less than $8,000.

Political and Economic Factors. Individual foreign economies of certain
countries may differ favorably or unfavorably from the United States' economy
in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position. The internal politics of certain foreign countries are not as stable
as in the United States. For example, in 1991, the existing government in
Thailand was overthrown in a military coup. In 1992, there were two military
coup attempts in Venezuela and in 1992 the President of Brazil was impeached.
In addition, significant external political risks currently affect some
foreign countries. Both Taiwan and China still claim sovereignty of one
another and there is a demilitarized border between North and South Korea.

Governments in certain foreign countries continue to participate to a
significant degree, through ownership interest or regulation, in their
respective economies. Action by these governments could have a significant
effect on market prices of securities and payment of dividends. The economies
of many foreign countries are heavily dependent upon international trade and
are accordingly affected by protective trade barriers and economic conditions
of their trading partners. The enactment by these trading partners of
protectionist trade legislation could have a significant adverse effect upon
the securities markets of such countries.

Currency Fluctuations. The Fund may invest in securities denominated in
various currencies. Accordingly, a change in the value of any such currency
against the U.S. dollar will result in a corresponding change in the U.S.
dollar value of the Fund's assets denominated in that currency. Such changes
will also affect the Fund's income. Generally, when a given currency
appreciates against the dollar (the dollar weakens) the value of the Fund's
securities denominated in that currency will rise. When a given currency
depreciates against the dollar (the dollar strengthens) the value of the
Fund's securities denominated in that currency would be expected to decline.

Investment and Repatriation of Restrictions. Foreign investment in the
securities markets of certain foreign countries is restricted or controlled in
varying degrees. These restrictions may limit at times and preclude investment
in certain of such countries and may increase the cost and expenses of the
Funds. Investments by foreign investors are subject to a variety of
restrictions in many developing countries. These restrictions may take the
form of prior governmental approval, limits on the amount or type of
securities held by foreigners, and limits on the types of companies in which
foreigners may invest. Additional or different restrictions may be imposed at
any time by these or other countries in which the Funds invest. In addition,
the repatriation of both investment income and capital from several foreign
countries is restricted and controlled under certain regulations, including in
some cases the need for certain government consents. For example, capital
invested in Chile normally cannot be repatriated for one year.

Market Characteristics. It is contemplated that most foreign securities,
will be purchased in over-the-counter markets or on stock exchanges located in
the countries in which the respective principal offices of the issuers of the
various securities are located, if that is the best available market.
Investments in certain markets may be made through ADRs traded in the United
States. Foreign stock markets are generally not as developed or efficient as,
and may be more volatile than, those in the United States. While growing in
volume, they usually have substantially less volume than U.S. markets and the
Funds' portfolio securities may be less liquid and subject to more rapid and
erratic price movements than securities of comparable U.S. companies. Equity
securities may trade at price/earnings multiples higher than comparable United
States securities and such levels may not be sustainable. Fixed commissions on
foreign stock exchanges are generally higher than negotiated commissions on
United States exchanges, although the Funds will endeavor to achieve the most
favorable net results on their portfolio transactions. There is generally less
government supervision and regulation of foreign stock exchanges, brokers, and
listed companies than in the United States. Moreover, settlement practices for
transactions in foreign markets may differ from those in United States
markets. Such differences may include delays beyond periods customary in the
United States and practices, such as delivery of securities prior to receipt
of payment, which increase the likelihood of a "failed settlement." Failed
settlements can result in losses to a Fund.

Investment Funds. The Fund may invest in investment funds which have
been authorized by the governments of certain countries specifically to permit
foreign investment in securities of companies listed and traded on the stock
exchanges in these respective countries. If the Fund invests in such
investment funds, the Fund's shareholders will bear not only their
proportionate share of the expenses of the Fund (including operating expenses
and the fees of the investment manager), but also will bear indirectly similar
expenses of the underlying investment funds. In addition, the securities of
these investment funds may trade at a premium over their net asset value.

Information and Supervision. There is generally less publicly available
information about foreign companies comparable to reports and ratings that are
published about companies in the United States. Foreign companies are also
generally not subject to uniform accounting, auditing and financial reporting
standards, practices, and requirements comparable to those applicable to
United States companies. It also may be more difficult to keep currently
informed of corporate actions which affect the prices of portfolio securities.

Taxes. The dividends and interest payable on certain of the Fund's
foreign portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount of income available for distribution to the Fund's
shareholders.

Other. With respect to certain foreign countries, especially developing
and emerging ones, there is the possibility of adverse changes in investment
or exchange control regulations, expropriation or confiscatory taxation,
limitations on the removal of funds or other assets of the Funds, political or
social instability, or diplomatic developments which could affect investments
by U.S. persons in those countries.

Eastern Europe and Russia. Changes occurring in Eastern Europe and
Russia today could have long-term potential consequences. As restrictions
fall, this could result in rising standards of living, lower manufacturing
costs, growing consumer spending, and substantial economic growth. However,
investment in the countries of Eastern Europe and Russia is highly speculative
at this time. Political and economic reforms are too recent to establish a
definite trend away from centrally-planned economies and state-owned
industries. In many of the countries of Eastern Europe and Russia, there is no
stock exchange or formal market for securities. Such countries may also have
government exchange controls, currencies with no recognizable market value
relative to the established currencies of western market economies, little or
no experience in trading in securities, no financial reporting standards, a
lack of a banking and securities infrastructure to handle such trading, and a
legal tradition which does not recognize rights in private property. In
addition, these countries may have national policies which restrict
investments in companies deemed sensitive to the country's national interest.
Further, the governments in such countries may require governmental or quasi-
governmental authorities to act as custodian of the Fund's assets invested in
such countries, and these authorities may not qualify as a foreign custodian
under the Investment Company Act of 1940 and exemptive relief from such Act
may be required. All of these considerations are among the factors which could
cause significant risks and uncertainties to investment in Eastern Europe and
Russia. Each Fund will only invest in a company located in, or a government
of, Eastern Europe and Russia, if it believes the potential return justifies
the risk. To the extent any securities issued by companies in Eastern Europe
and Russia are considered illiquid, each Fund will be required to include such
securities within its 15% restriction on investing in illiquid securities.

Latin America

Inflation. Most Latin American countries have experienced, at one time
or another, severe and persistent levels of inflation, including, in some
cases, hyperinflation. This has, in turn, led to high interest rates, extreme
measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth. Although inflation in many countries
has lessened, there is no guarantee it will remain at lower levels.

Political Instability. The political history of certain Latin American
countries has been characterized by political uncertainty, intervention by the
military in civilian and economic spheres, and political corruption. Such
developments, if they were to reoccur, could reverse favorable trends toward
market and economic reform, privatization, and removal of trade barriers, and
result in significant disruption in securities markets.

Foreign Currency. Certain Latin American countries may have managed
currencies which are maintained at artificial levels to the U.S. dollar rather
than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors. For example, in late 1994
the value of the Mexican peso lost more than one-third of its value relative
to the dollar. Certain Latin American countries also may restrict the free
conversion of their currency into foreign currencies, including the U.S.
dollar. There is no significant foreign exchange market for certain currencies
and it would, as a result, be difficult for the Fund to engage in foreign
currency transactions designed to protect the value of the Fund's interests in
securities denominated in such currencies.

Sovereign Debt. A number of Latin American countries are among the
largest debtors of developing countries. There have been moratoria on, and
reschedulings of, repayment with respect to these debts. Such events can
restrict the flexibility of these debtor nations in the international markets
and result in the imposition of onerous conditions on their economies.

INVESTMENT PROGRAM

Types of Securities

Set forth below is additional information about certain of the
investments described in the Fund's prospectus.

Illiquid or Restricted Securities

Restricted securities may be sold only in privately negotiated
transactions or in a public offering with respect to which a registration
statement is in effect under the Securities Act of 1933 (the "1933 Act").
Where registration is required, the Fund may be obligated to pay all or part
of the registration expenses, and a considerable period may elapse between the
time of the decision to sell and the time the Fund may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell. Restricted securities
will be priced at fair value as determined in accordance with procedures
prescribed by the Fund's Board of Directors/Trustees. If through the
appreciation of illiquid securities or the depreciation of liquid securities,
the Fund should be in a position where more than 15% of the value of its net
assets is invested in illiquid assets, including restricted securities, the
Fund will take appropriate steps to protect liquidity.

Notwithstanding the above, the Fund may purchase securities which, while
privately placed, are eligible for purchase and sale under Rule 144A under the
1933 Act. This rule permits certain qualified institutional buyers, such as
the Fund, to trade in privately placed securities even though such securities
are not registered under the 1933 Act. T. Rowe Price under the supervision of
the Fund's Board of Directors/Trustees, will consider whether securities
purchased under Rule 144A are illiquid and thus subject to the Fund's
restriction of investing no more than 15% of its net assets in illiquid
securities. A determination of whether a Rule 144A security is liquid or not
is a question of fact. In making this determination, T. Rowe Price will
consider the trading markets for the specific security taking into account the
unregistered nature of a Rule 144A security. In addition, T. Rowe Price could
consider the (1) frequency of trades and quotes, (2) number of dealers and
potential purchases, (3) dealer undertakings to make a market, and (4) the
nature of the security and of marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers, and the mechanics of
transfer). The liquidity of Rule 144A securities would be monitored, and if as
a result of changed conditions it is determined that a Rule 144A security is
no longer liquid, the Fund's holdings of illiquid securities would be reviewed
to determine what, if any, steps are required to assure that the Fund does not
invest more than 15% of its net assets in illiquid securities. Investing in
Rule 144A securities could have the effect of increasing the amount of the
Fund's assets invested in illiquid securities if qualified institutional
buyers are unwilling to purchase such securities.

Hybrid Instruments

Hybrid Instruments (a type of potentially high-risk derivative) have
been developed and combine the elements of futures contracts or options with
those of debt, preferred equity ,or a depository instrument (hereinafter
"Hybrid Instruments"). Generally, a Hybrid Instrument will be a debt security,
preferred stock, depository share, trust certificate, certificate of deposit,
or other evidence of indebtedness on which a portion of or all interest
payments, and/or the principal or stated amount payable at maturity,
redemption, or retirement, is determined by reference to prices, changes in
prices, or differences between prices, of securities, currencies, intangibles,
goods, articles, or commodities (collectively "Underlying Assets") or by
another objective index, economic factor, or other measure, such as interest
rates, currency exchange rates, commodity indices, and securities indices
(collectively "Benchmarks"). Thus, Hybrid Instruments may take a variety of
forms, including, but not limited to, debt instruments with interest or
principal payments or redemption terms determined by reference to the value of
a currency or commodity or securities index at a future point in time,
preferred stock with dividend rates determined by reference to the value of a
currency, or convertible securities with the conversion terms related to a
particular commodity.

Hybrid Instruments can be an efficient means of creating exposure to a
particular market, or segment of a market, with the objective of enhancing
total return. For example, a Fund may wish to take advantage of expected
declines in interest rates in several European countries, but avoid the
transactions costs associated with buying and currency-hedging the foreign
bond positions. One solution would be to purchase a U.S. dollar-denominated
Hybrid Instrument whose redemption price is linked to the average three-year
interest rate in a designated group of countries. The redemption price formula
would provide for payoffs of greater than par if the average interest rate was
lower than a specified level, and payoffs of less than par if rates were above
the specified level. Furthermore, the Fund could limit the downside risk of
the security by establishing a minimum redemption price so that the principal
paid at maturity could not be below a predetermined minimum level if interest
rates were to rise significantly. The purpose of this arrangement, known as a
structured security with an embedded put option, would be to give the Fund the
desired European bond exposure while avoiding currency risk, limiting downside
market risk, and lowering transactions costs. Of course, there is no guarantee
that the strategy will be successful, and the Fund could lose money if, for
example, interest rates do not move as anticipated or credit problems develop
with the issuer of the Hybrid.

The risks of investing in Hybrid Instruments reflect a combination of
the risks of investing in securities, options, futures and currencies. Thus,
an investment in a Hybrid Instrument may entail significant risks that are not
associated with a similar investment in a traditional debt instrument that has
a fixed principal amount, is denominated in U.S. dollars, or bears interest
either at a fixed rate or a floating rate determined by reference to a common,
nationally published Benchmark. The risks of a particular Hybrid Instrument
will, of course, depend upon the terms of the instrument, but may include,
without limitation, the possibility of significant changes in the Benchmarks
or the prices of Underlying Assets to which the instrument is linked. Such
risks generally depend upon factors which are unrelated to the operations or
credit quality of the issuer of the Hybrid Instrument and which may not be
readily foreseen by the purchaser, such as economic and political events, the
supply and demand for the Underlying Assets, and interest rate movements. In
recent years, various Benchmarks and prices for Underlying Assets have been
highly volatile, and such volatility may be expected in the future. Reference
is also made to the discussion of futures, options, and forward contracts
herein for a discussion of the risks associated with such investments.

Hybrid Instruments are potentially more volatile and carry greater
market risks than traditional debt instruments. Depending on the structure of
the particular Hybrid Instrument, changes in a Benchmark may be magnified by
the terms of the Hybrid Instrument and have an even more dramatic and
substantial effect upon the value of the Hybrid Instrument. Also, the prices
of the Hybrid Instrument and the Benchmark or Underlying Asset may not move in
the same direction or at the same time.

Hybrid Instruments may bear interest or pay preferred dividends at below
market (or even relatively nominal) rates. Alternatively, Hybrid Instruments
may bear interest at above market rates but bear an increased risk of
principal loss (or gain). The latter scenario may result if "leverage" is used
to structure the Hybrid Instrument. Leverage risk occurs when the Hybrid
Instrument is structured so that a given change in a Benchmark or Underlying
Asset is multiplied to produce a greater value change in the Hybrid
Instrument, thereby magnifying the risk of loss as well as the potential for
gain.

Hybrid Instruments may also carry liquidity risk since the instruments
are often "customized" to meet the portfolio needs of a particular investor,
and therefore, the number of investors that are willing and able to buy such
instruments in the secondary market may be smaller than that for more
traditional debt securities. In addition, because the purchase and sale of
Hybrid Instruments could take place in an over-the-counter market without the
guarantee of a central clearing organization or in a transaction between the
Fund and the issuer of the Hybrid Instrument, the creditworthiness of the
counter party or issuer of the Hybrid Instrument would be an additional risk
factor which the Fund would have to consider and monitor. Hybrid Instruments
also may not be subject to regulation of the Commodities Futures Trading
Commission ("CFTC"), which generally regulates the trading of commodity
futures by U.S. persons, the SEC, which regulates the offer and sale of
securities by and to U.S. persons, or any other governmental regulatory
authority.

The various risks discussed above, particularly the market risk of such
instruments, may in turn cause significant fluctuations in the net asset value
of the Fund. Accordingly, the Fund will limit its investments in Hybrid
Instruments to 10% of total assets. However, because of their volatility, it
is possible that the Fund's investment in Hybrid Instruments will account for
more than 10% of the Fund's return (positive or negative).

Warrants

The Fund may acquire warrants. Warrants are pure speculation in that
they have no voting rights, pay no dividends ,and have no rights with respect
to the assets of the corporation issuing them. Warrants basically are options
to purchase equity securities at a specific price valid for a specific period
of time. They do not represent ownership of the securities, but only the right
to buy them. Warrants differ from call options in that warrants are issued by
the issuer of the security which may be purchased on their exercise, whereas
call options may be written or issued by anyone. The prices of warrants do not
necessarily move parallel to the prices of the underlying securities.

Debt Securities

Balanced, Blue Chip Growth, Capital Appreciation, Capital Opportunity,
Dividend Growth, Equity Income, Financial Services, Growth & Income, Media &
Telecommunications, Mid-Cap Value, New Era, Small-Cap Stock, Small-Cap Value,
and Value Funds

Debt Obligations

Although a majority of the Fund's assets are invested in common stocks,
the Fund may invest in convertible securities, corporate debt securities, and
preferred stocks which hold the prospect of contributing to the achievement of
the Fund's objectives. Yields on short, intermediate, and long-term securities
are dependent on a variety of factors, including the general conditions of the
money and bond markets, the size of a particular offering, the maturity of the
obligation, and the credit quality and rating of the issuer. Debt securities
with longer maturities tend to have higher yields and are generally subject to
potentially greater capital appreciation and depreciation than obligations
with shorter maturities and lower yields. The market prices of debt securities
usually vary, depending upon available yields. An increase in interest rates
will generally reduce the value of portfolio investments, and a decline in
interest rates will generally increase the value of portfolio investments. The
ability of the Fund to achieve its investment objective is also dependent on
the continuing ability of the issuers of the debt securities in which the Fund
invests to meet their obligations for the payment of interest and principal
when due. The Fund's investment program permits it to purchase below
investment-grade securities. Since investors generally perceive that there are
greater risks associated with investment in lower-quality securities, the
yields from such securities normally exceed those obtainable from higher-quality
securities. However, the principal value of lower-rated securities
generally will fluctuate more widely than higher-quality securities. Lower-
quality investments entail a higher risk of default-that is, the nonpayment of
interest and principal by the issuer than higher-quality investments. Such
securities are also subject to special risks, discussed below. Although the
Fund seeks to reduce risk by portfolio diversification, credit analysis, and
attention to trends in the economy, industries and financial markets, such
efforts will not eliminate all risk. There can, of course, be no assurance
that the Fund will achieve its investment objective.

After purchase by the Fund, a debt security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require a sale of such security by the Fund. However, T.
Rowe Price will consider such event in its determination of whether the Fund
should continue to hold the security. To the extent that the ratings given by
Moody's or S&P may change as a result of changes in such organizations or
their rating systems, the Fund will attempt to use comparable ratings as
standards for investments in accordance with the investment policies contained
in the prospectus.

Special Risks of High-Yield Investing

The Fund may invest in low-quality bonds commonly referred to as "junk
bonds." Junk bonds are regarded as predominantly speculative with respect to
the issuer's continuing ability to meet principal and interest payments.
Because investment in low and lower-medium-quality bonds involves greater
investment risk, to the extent the Fund invests in such bonds, achievement of
its investment objective will be more dependent on T. Rowe Price's credit
analysis than would be the case if the Fund was investing in higher-quality
bonds. High-yield bonds may be more susceptible to real or perceived adverse
economic conditions than investment-grade bonds. A projection of an economic
downturn, or higher interest rates, for example, could cause a decline in
high-yield bond prices because the advent of such events could lessen the
ability of highly leveraged issuers to make principal and interest payments on
their debt securities. In addition, the secondary trading market for high-yield
bonds may be less liquid than the market for higher-grade bonds, which
can adversely affect the ability of a Fund to dispose of its portfolio
securities. Bonds for which there is only a "thin" market can be more
difficult to value inasmuch as objective pricing data may be less available
and judgment may play a greater role in the valuation process.

Fixed income securities in which the Fund may invest include, but are
not limited to, those described below.

U.S. Government Obligations. Bills, notes, bonds, and other debt
securities issued by the U.S. Treasury. These are direct obligations of the
U.S. government and differ mainly in the length of their maturities.

U.S. Government Agency Securities. Issued or guaranteed by U.S.
government-sponsored enterprises and federal agencies. These include
securities issued by the Federal National Mortgage Association, Government
National Mortgage Association, Federal Home Loan Bank, Federal Land Banks,
Farmers Home Administration, Banks for Cooperatives, Federal Intermediate
Credit Banks, Federal Financing Bank, Farm Credit Banks, the Small Business
Association, and the Tennessee Valley Authority. Some of these securities are
supported by the full faith and credit of the U.S. Treasury; the remainder are
supported only by the credit of the instrumentality, which may or may not
include the right of the issuer to borrow from the Treasury.

Bank Obligations. Certificates of deposit, bankers' acceptances, and
other short-term debt obligations. Certificates of deposit are short-term
obligations of commercial banks. A bankers' acceptance is a time draft drawn
on a commercial bank by a borrower, usually in connection with international
commercial transactions. Certificates of deposit may have fixed or variable
rates. The Fund may invest in U.S. banks, foreign branches of U.S. banks, U.S.
branches of foreign banks, and foreign branches of foreign banks.

Short-Term Corporate Debt Securities. Outstanding nonconvertible
corporate debt securities (e.g., bonds and debentures) which have one year or
less remaining to maturity. Corporate notes may have fixed, variable, or
floating rates.

Commercial Paper. Short-term promissory notes issued by corporations
primarily to finance short-term credit needs. Certain notes may have floating
or variable rates.

Foreign Government Securities. Issued or guaranteed by a foreign
government, province, instrumentality, political subdivision, or similar unit
thereof.

Savings and Loan Obligations. Negotiable certificates of deposit and
other short-term debt obligations of savings and loan associations.

Supranational Agencies. Securities of certain supranational entities,
such as the International Development Bank.

When-Issued Securities and Forward Commitment Contracts

The Fund may purchase securities on a "when-issued" or delayed delivery
basis ("When-Issueds") and may purchase securities on a forward commitment
basis ("Forwards"). Any or all of the Fund's investments in debt securities
may be in the form of When-Issueds and Forwards. The price of such securities,
which may be expressed in yield terms, is fixed at the time the commitment to
purchase is made, but delivery and payment take place at a later date.
Normally, the settlement date occurs within 90 days of the purchase for When-
Issueds, but may be substantially longer for Forwards. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The purchase of these securities will
result in a loss if their value declines prior to the settlement date. This
could occur, for example, if interest rates increase prior to settlement. The
longer the period between purchase and settlement, the greater the risks are.
At the time the Fund makes the commitment to purchase these securities, it
will record the transaction and reflect the value of the security in
determining its net asset value. The Fund will cover these securities by
maintaining cash and/or liquid, high-grade debt securities with its custodian
bank equal in value to commitments for them during the time between the
purchase and the settlement. Therefore, the longer this period, the longer the
period during which alternative investment options are not available to the
Fund (to the extent of the securities used for cover). Such securities either
will mature or, if necessary, be sold on or before the settlement date.

To the extent the Fund remains fully or almost fully invested (in
securities with a remaining maturity or more than one year) at the same time
it purchases these securities, there will be greater fluctuations in the
Fund's net asset value than if the Fund did not purchase them.

Balanced Fund

Mortgage-Related Securities

Mortgage-related securities in which the Fund may invest include, but
are not limited to, those described below.

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-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 a 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.

U.S. Government Agency Mortgage-Backed Securities. These are obligations
issued or guaranteed by the United States Government or one of its agencies or
instrumentalities, such as the Government National Mortgage Association
("Ginnie Mae" or "GNMA"), the Federal National Mortgage Association ("Fannie
Mae" or "FNMA") the Federal Home Loan Mortgage Corporation ("Freddie Mac" or
"FHLMC"), and the Federal Agricultural Mortgage Corporation ("Farmer Mac" or
"FAMC"). FNMA, FHLMC, and FAMC obligations are not backed by the full faith
and credit of the U.S. government as GNMA certificates are, but they are
supported by the instrumentality's right to borrow from the United States
Treasury. U.S. Government Agency Mortgage-Backed Certificates provide for the
pass-through to investors of their pro-rata share of monthly payments
(including any prepayments) made by the individual borrowers on the pooled
mortgage loans, net of any fees paid to the guarantor of such securities and
the servicer of the underlying mortgage loans. Each of GNMA, FNMA, FHLMC, and
FAMC guarantees timely distributions of interest to certificate holders. GNMA
and FNMA guarantee timely distributions of scheduled principal. FHLMC has in
the past guaranteed only the ultimate collection of principal of the
underlying mortgage loan; however, FHLMC now issues Mortgage-Backed Securities
(FHLMC Gold PCS) which also guarantee timely payment of monthly principal
reductions.

Ginnie Mae Certificates. Ginnie Mae is a wholly-owned corporate
instrumentality of the United States within the Department of Housing and
Urban Development. The National Housing Act of 1934, as amended (the "Housing
Act"), authorizes Ginnie Mae to guarantee the timely payment of the principal
of and interest on certificates that are based on and backed by a pool of
mortgage loans insured by the Federal Housing Administration under the Housing
Act, or Title V of the Housing Act of 1949 ("FHA Loans"), or guaranteed by the
Department of Veterans Affairs under the Servicemen's Readjustment Act of
1944, as amended ("VA Loans"), or by pools of other eligible mortgage loans.
The Housing Act provides that the full faith and credit of the United States
government is pledged to the payment of all amounts that may be required to be
paid under any guaranty. In order to meet its obligations under such guaranty,
Ginnie Mae is authorized to borrow from the United States Treasury with no
limitations as to amount.

Fannie Mae Certificates. Fannie Mae is a federally chartered and
privately owned corporation organized and existing under the Federal National
Mortgage Association Charter Act of 1938. FNMA Certificates represent a pro-rata
interest in a group of mortgage loans purchased by Fannie Mae. FNMA
guarantees the timely payment of principal and interest on the securities it
issues. The obligations of FNMA are not backed by the full faith and credit of
the U.S. government.

Freddie Mac Certificates. Freddie Mac is a corporate instrumentality of
the United States created pursuant to the Emergency Home Finance Act of 1970,
as amended (the "FHLMC Act"). Freddie Mac Certificates represent a pro-rata
interest in a group of mortgage loans (a "Freddie Mac Certificate group")
purchased by Freddie Mac. Freddie Mac guarantees timely payment of interest
and principal on certain securities it issues and timely payment of interest
and eventual payment of principal on other securities it issues. The
obligations of Freddie Mac are obligations solely of Freddie Mac and are not
backed by the full faith and credit of the U.S. government.

Farmer Mac Certificates. The Federal Agricultural Mortgage Corporation
("Farmer Mac") is a federally chartered instrumentality of the United States
established by Title VIII of the Farm Credit Act of 1971, as amended ("Charter
Act"). Farmer Mac was chartered primarily to attract new capital for financing
of agricultural real estate by making a secondary market in certain qualified
agricultural real estate loans. Farmer Mac provides guarantees of timely
payment of principal and interest on securities representing interests in, or
obligations backed by, pools of mortgages secured by first liens on
agricultural real estate ("Farmer Mac Certificates"). Similar to Fannie Mae
and Freddie Mac, Farmer Mac's Certificates are not supported by the full faith
and credit of the U.S. Government; rather, Farmer Mac may borrow up from the
U.S. Treasury to meet its guaranty obligations.

As discussed above, prepayments on the underlying mortgages and their
effect upon the rate of return of a Mortgage-Backed Security, is the principal
investment risk for a purchaser of such securities, like the Fund. Over time,
any pool of mortgages will experience prepayments due to a variety of factors,
including (1) sales of the underlying homes (including foreclosures), (2)
refinancings of the underlying mortgages, and (3) increased amortization by
the mortgagee. These factors, in turn, depend upon general economic factors,
such as level of interest rates and economic growth. Thus, investors normally
expect prepayment rates to increase during periods of strong economic growth
or declining interest rates, and to decrease in recessions and rising interest
rate environments. Accordingly, the life of the Mortgage-Backed Security is
likely to be substantially shorter than the stated maturity of the mortgages
in the underlying pool. Because of such variation in prepayment rates, it is
not possible to predict the life of a particular Mortgage-Backed Security, but
FHA statistics indicate that 25- to 30-year single family dwelling mortgages
have an average life of approximately 12 years. The majority of Ginnie Mae
Certificates are backed by mortgages of this type, and, accordingly, the
generally accepted practice treats Ginnie Mae Certificates as 30-year
securities which prepay full in the 12th year. FNMA and Freddie Mac
Certificates may have differing prepayment characteristics.

Fixed Rate Mortgage-Backed Securities bear a stated "coupon rate," which
represents the effective mortgage rate at the time of issuance, less certain
fees to GNMA, FNMA and FHLMC for providing the guarantee, and the issuer for
assembling the pool and for passing through monthly payments of interest and
principal.

Payments to holders of Mortgage-Backed Securities consist of the monthly
distributions of interest and principal less the applicable fees. The actual
yield to be earned by a holder of Mortgage-Backed Securities is calculated by
dividing interest payments by the purchase price paid for the Mortgage-Backed
Securities (which may be at a premium or a discount from the face value of the
certificate).

Monthly distributions of interest, as contrasted to semi-annual
distributions which are common for other fixed interest investments, have the
effect of compounding and thereby raising the effective annual yield earned on
Mortgage-Backed Securities. Because of the variation in the life of the pools
of mortgages which back various Mortgage-Backed Securities, and because it is
impossible to anticipate the rate of interest at which future principal
payments may be reinvested, the actual yield earned from a portfolio of
Mortgage-Backed Securities will differ significantly from the yield estimated
by using an assumption of a certain life for each Mortgage-Backed Security
included in such a portfolio as described above.

U.S. Government Agency Multiclass Pass-Through Securities. Unlike CMOs,
U.S. Government Agency Multiclass Pass-Through Securities, which include FNMA
Guaranteed REMIC Pass-Through Certificates and FHLMC Multi-Class Mortgage
Participation Certificates, are ownership interests in a pool of Mortgage
Assets. Unless the context indicates otherwise, all references herein to CMOs
include multiclass pass-through securities.

Multi-Class Residential Mortgage Securities. Such securities represent
interests in pools of mortgage loans to residential home buyers made by
commercial banks, savings and loan associations or other financial
institutions. Unlike GNMA, FNMA and FHLMC securities, the payment of principal
and interest on Multi-Class Residential Mortgage Securities is not guaranteed
by the U.S. government or any of its agencies. Accordingly, yields on
Multi-Class Residential Mortgage Securities have been historically higher than
the yields on U.S. government mortgage securities. However, the risk of loss
due to default on such instruments is higher since they are not guaranteed by
the U.S. Government or its agencies. Additionally, pools of such securities
may be divided into senior or subordinated segments. Although subordinated
mortgage securities may have a higher yield than senior mortgage securities,
the risk of loss of principal is greater because losses on the underlying
mortgage loans must be borne by persons holding subordinated securities before
those holding senior mortgage securities.

Privately-Issued Mortgage-Backed Certificates. These are pass-through
certificates issued by non-governmental issuers. Pools of conventional
residential mortgage loans created by such issuers generally offer a higher
rate of interest than government and government-related pools because there
are no direct or indirect government guarantees of payment. Timely payment of
interest and principal of these pools is, however, generally
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance. The insurance and guarantees are
issued by government entities, private insurance or the mortgage poolers. Such
insurance and guarantees and the creditworthiness of the issuers thereof will
be considered in determining whether a mortgage-related security meets the
Fund's quality standards. The Fund may buy mortgage-related securities without
insurance or guarantees if through an examination of the loan experience and
practices of the poolers, the investment manager determines that the
securities meet the Fund's quality standards.

Collateralized Mortgage Obligations (CMOs)

CMOs are bonds that are collateralized by whole loan mortgages or
mortgage pass-through securities. The bonds issued in a CMO deal are divided
into groups, and each group of bonds is referred to as a "tranche." Under the
traditional CMO structure, the cash flows generated by the mortgages or
mortgage pass-through securities in the collateral pool are used to first pay
interest and then pay principal to the CMO bondholders. The bonds issued under
a CMO structure are retired sequentially as opposed to the pro rata return of
principal found in traditional pass-through obligations. Subject to the
various provisions of individual CMO issues, the cash flow generated by the
underlying collateral (to the extent it exceeds the amount required to pay the
stated interest) is used to retire the bonds. Under the CMO structure, the
repayment of principal among the different tranches is prioritized in
accordance with the terms of the particular CMO issuance. The "fastest-pay"
tranche of bonds, as specified in the prospectus for the issuance, would
initially receive all principal payments. When that tranche of bonds is
retired, the next tranche, or tranches, in the sequence, as specified in the
prospectus, receive all of the principal payments until they are retired. The
sequential retirement of bond groups continues until the last tranche, or
group of bonds, is retired. Accordingly, the CMO structure allows the issuer
to use cash flows of long maturity, monthly-pay collateral to formulate
securities with short, intermediate and long final maturities and expected
average lives.

In recent years, new types of CMO structures have evolved. These include
floating rate CMOs, planned amortization classes, accrual bonds and CMO
residuals. These newer structures affect the amount and timing of principal
and interest received by each tranche from the underlying collateral. Under
certain of these new structures, given classes of CMOs have priority over
others with respect to the receipt of prepayments on the mortgages. Therefore,
depending on the type of CMOs in which the Fund invests, the investment may be
subject to a greater or lesser risk of prepayment than other types of
mortgage-related securities.

The primary risk of any mortgage security is the uncertainty of the
timing of cash flows. For CMOs, the primary risk results from the rate of
prepayments on the underlying mortgages serving as collateral. An increase or
decrease in prepayment rates (resulting from a decrease or increase in
mortgage interest rates) will affect the yield, average life and price of
CMOs. The prices of certain CMOs, depending on their structure and the rate
of prepayments, can be volatile. Some CMOs may also not be as liquid as other
securities.

Stripped Agency Mortgage-Backed Securities

Stripped Agency Mortgage-Backed securities represent interests in a pool
of mortgages, the cash flow of which has been separated into its interest and
principal components. "IOs" (interest only securities) receive the interest
portion of the cash flow while "POs" (principal only securities) receive the
principal portion. Stripped Agency Mortgage-Backed Securities may be issued by
U.S. Government Agencies or by private issuers similar to those described
above with respect to CMOs and privately-issued mortgage-backed certificates.
As interest rates rise and fall, the value of IOs tends to move in the same
direction as interest rates. The value of the other mortgage-backed securities
described herein, like other debt instruments, will tend to move in the
opposite direction compared to interest rates. Under the Internal Revenue Code
of 1986, as amended (the "Code"), POs may generate taxable income from the
current accrual of original issue discount, without a corresponding
distribution of cash to the Fund.

The cash flows and yields on IO and PO classes are extremely sensitive
to the rate of principal payments (including prepayments) on the related
underlying mortgage assets. For example, a rapid or slow rate of principal
payments may have a material adverse effect on the prices of IOs or POs,
respectively. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, an investor may fail to fully recoup its
initial investment in an IO class of a stripped mortgage-backed security, even
if the IO class is rated AAA or Aaa or is derived from a full faith and credit
obligation. Conversely, if the underlying mortgage assets experience slower
than anticipated prepayments of principal, the price on a PO class will be
affected more severely than would be the case with a traditional
mortgage-backed security.

The staff of the Securities and Exchange Commission has advised the Fund
that it believes the Fund should treat IOs and POs, other than
government-issued IOs or POs backed by fixed rate mortgages, as illiquid
securities and, accordingly, limit its investments in such securities,
together with all other illiquid securities, to 15% of the Fund's net assets.
Under the staff's position, the determination of whether a particular
government-issued IO and PO backed by fixed rate mortgages may be made on a
case by case basis under guidelines and standards established by the Fund's
Board of Directors/Trustees. The Fund's Board of Directors/Trustees has
delegated to T. Rowe Price the authority to determine the liquidity of these
investments based on the following guidelines: the type of issuer; type of
collateral, including age and prepayment characteristics; rate of interest on
coupon relative to current market rates and the effect of the rate on the
potential for prepayments; complexity of the issue's structure, including the
number of tranches; size of the issue and the number of dealers who make a
market in the IO or PO. The Fund will treat non-government-issued IOs and POs
not backed by fixed or adjustable rate mortgages as illiquid unless and until
the Securities and Exchange Commission modifies its position.

Asset-Backed Securities

The credit quality of most asset-backed securities depends primarily on
the credit quality of the assets underlying such securities, how well the
entity issuing the security is insulated from the credit risk of the
originator or any other affiliated entities and the amount and quality of any
credit support provided to the securities. The rate of principal payment on
asset-backed securities generally depends on the rate of principal payments
received on the underlying assets which in turn may be affected by a variety
of economic and other factors. As a result, the yield on any asset-backed
security is difficult to predict with precision and actual yield to maturity
may be more or less than the anticipated yield to maturity. Asset-backed
securities may be classified as pass-through certificates or collateralized
obligations.

Pass-through certificates are asset-backed securities which represent an
undivided fractional ownership interest in an underlying pool of assets. Pass-
through certificates usually provide for payments of principal and interest
received to be passed through to their holders, usually after deduction for
certain costs and expenses incurred in administering the pool.

Because pass-through certificates represent an ownership interest in the
underlying assets, the holders thereof bear directly the risk of any defaults
by the obligors on the underlying assets not covered by any credit support.
See "Types of Credit Support".

Asset-backed securities issued in the form of debt instruments, also
known as collateralized obligations, are generally issued as the debt of a
special purpose entity organized solely for the purpose of owning such assets
and issuing such debt. Such assets are most often trade, credit card or
automobile receivables. The assets collateralizing
such asset-backed securities are pledged to a trustee or custodian for the
benefit of the holders thereof. Such issuers generally hold no assets other
than those underlying the asset-backed securities and any credit support
provided. As a result, although payments on such asset-backed securities are
obligations of the issuers, in the event of defaults on the underlying assets
not covered by any credit support (see "Types of Credit Support"), the issuing
entities are unlikely to have sufficient assets to satisfy their obligations
on the related asset-backed securities.

PORTFOLIO MANAGEMENT PRACTICES

Lending of Portfolio Securities

Securities loans are made to broker-dealers or institutional investors
or other persons, pursuant to agreements requiring that the loans be
continuously secured by collateral at least equal at all times to the value of
the securities lent marked to market on a daily basis. The collateral received
will consist of cash, U.S. government securities, letters of credit or such
other collateral as may be permitted under its investment program. While the
securities are being lent, the Fund will continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities, as well as
interest on the investment of the collateral or a fee from the borrower. The
Fund has a right to call each loan and obtain the securities on five business
days' notice or, in connection with securities trading on foreign markets,
within such longer period of time which coincides with the normal settlement
period for purchases and sales of such securities in such foreign markets. The
Fund will not have the right to vote on securities while they are being lent,
but it will call a loan in anticipation of any important vote. The risks in
lending portfolio securities, as with other extensions of secured credit,
consist of possible delay in receiving additional collateral or in the
recovery of the securities or possible loss of rights in the collateral should
the borrower fail financially. Loans will only be made to firms deemed by T.
Rowe Price to be of good standing and will not be made unless, in the judgment
of T. Rowe Price, the consideration to be earned from such loans would justify
the risk.

Other Lending/Borrowing

Subject to approval by the Securities and Exchange Commission and certain
state regulatory agencies, the Fund may make loans to, or borrow funds from,
other mutual funds sponsored or advised by T. Rowe Price or Rowe Price-Fleming
International, Inc. ("Price-Fleming"), (collectively, "Price Funds"). The Fund
has no current intention of engaging in these practices at this time.

Repurchase Agreements

The Fund may enter into a repurchase agreement through which an investor
(such as the Fund) purchases a security (known as the "underlying security")
from a well-established securities dealer or a bank that 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. 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. Repurchase agreements which do
not provide for payment within seven days will be treated as illiquid
securities. The Fund will only enter into repurchase agreements where (i) the
underlying securities are of the type (excluding maturity limitations) which
the Fund's investment guidelines would allow it to purchase directly, (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 a bankruptcy or other default of a seller of
a repurchase agreement, the Fund 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
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.

Reverse Repurchase Agreements

Although the Fund has no current intention, in the foreseeable future,
of engaging in reverse repurchase agreements, the Fund reserves the right to
do so. Reverse repurchase agreements are ordinary repurchase agreements in
which a Fund is the seller of, rather than the investor in, securities, and
agrees to repurchase them at an agreed upon time and price. Use of a reverse
repurchase agreement may be preferable to a regular sale and later repurchase
of the securities because it avoids certain market risks and transaction
costs. A reverse repurchase agreement may be viewed as a type of borrowing by
the Fund, subject to Investment Restriction (1). (See "Investment
Restrictions," page __.)

All Funds, Except Equity Index Fund

Options

Options are a type of potentially high-risk derivative.

Writing Covered Call Options

The Fund may write (sell) American or European style "covered" call
options and purchase options to close out options previously written by the
Fund. In writing covered call options, the Fund expects to generate additional
premium income which should serve to enhance the Fund's total return and
reduce the effect of any price decline of the security or currency involved in
the option. Covered call options will generally be written on securities or
currencies which, in T. Rowe Price's opinion, are not expected to have any
major price increases or moves in the near future but which, over the long
term, are deemed to be attractive investments for the Fund.

A call option gives the holder (buyer) the "right to purchase" a
security or currency at a specified price (the exercise price) at expiration
of the option (European style) or at any time until a certain date (the
expiration date) (American style). So long as the obligation of the writer of
a call option continues, he may be assigned an exercise notice by the broker-
dealer through whom such option was sold, requiring him to deliver the
underlying security or currency against payment of the exercise price. This
obligation terminates upon the expiration of the call option, or such earlier
time at which the writer effects a closing purchase transaction by
repurchasing an option identical to that previously sold. To secure his
obligation to deliver the underlying security or currency in the case of a
call option, a writer is required to deposit in escrow the underlying security
or currency or other assets in accordance with the rules of a clearing
corporation.

The Fund will write only covered call options. This means that the Fund
will own the security or currency subject to the option or an option to
purchase the same underlying security or currency, having an exercise price
equal to or less than the exercise price of the "covered" option, or will
establish and maintain with its custodian for the term of the option, an
account consisting of cash, U.S. government securities or other liquid high-
grade debt obligations having a value equal to the fluctuating market value of
the optioned securities or currencies.

Portfolio securities or currencies on which call options may be written
will be purchased solely on the basis of investment considerations consistent
with the Fund's investment objective. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk
(in contrast to the writing of naked or uncovered options, which the Fund will
not do), but capable of enhancing the Fund's total return. When writing a
covered call option, a Fund, in return for the premium, gives up the
opportunity for profit from a price increase in the underlying security or
currency above the exercise price, but conversely retains the risk of loss
should the price of the security or currency decline. Unlike one who owns
securities or currencies not subject to an option, the Fund has no control
over when it may be required to sell the underlying securities or currencies,
since it may be assigned an exercise notice at any time prior to the
expiration of its obligation as a writer. If a call option which the Fund has
written expires, the Fund will realize a gain in the amount of the premium;
however, such gain may be offset by a decline in the market value of the
underlying security or currency during the option period. If the call option
is exercised, the Fund will realize a gain or loss from the sale of the
underlying security or currency. The Fund does not consider a security or
currency covered by a call to be "pledged" as that term is used in the Fund's
policy which limits the pledging or mortgaging of its assets.

The premium received is the market value of an option. The premium the
Fund will receive from writing a call option will reflect, among other things,
the current market price of the underlying security or currency, the
relationship of the exercise price to such market price, the historical price
volatility of the underlying security or currency, and the length of the
option period. Once the decision to write a call option has been made, T. Rowe
Price, in determining whether a particular call option should be written on a
particular security or currency, will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will
exist for those options. The premium received by the Fund for writing covered
call options will be recorded as a liability of the Fund. This liability will
be adjusted daily to the option's current market value, which will be the
latest sale price at the time at which the net asset value per share of the
Fund is computed (close of the New York Stock Exchange), or, in the absence of
such sale, the latest asked price. The option will be terminated upon
expiration of the option, the purchase of an identical option in a closing
transaction, or delivery of the underlying security or currency upon the
exercise of the option.

Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or, to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price or expiration date or both. If the Fund desires to
sell a particular security or currency from its portfolio on which it has
written a call option, or purchased a put option, it will seek to effect a
closing transaction prior to, or concurrently with, the sale of the security
or currency. There is, of course, no assurance that the Fund will be able to
effect such closing transactions at favorable prices. If the Fund cannot enter
into such a transaction, it may be required to
hold a security or currency that it might otherwise have sold. When the Fund
writes a covered call option, it runs the risk of not being able to
participate in the appreciation of the underlying securities or currencies
above the exercise price, as well as the risk of being required to hold on to
securities or currencies that are depreciating in value. This could result in
higher transaction costs. The Fund will pay transaction costs in connection
with the writing of options to close out previously written options. Such
transaction costs are normally higher than those applicable to purchases and
sales of portfolio securities.

Call options written by the Fund will normally have expiration dates of
less than nine months from the date written. The exercise price of the options
may be below, equal to, or above the current market values of the underlying
securities or currencies at the time the options are written. From time to
time, the Fund may purchase an underlying security or currency for delivery in
accordance with an exercise notice of a call option assigned to it, rather
than delivering such security or currency from its portfolio. In such cases,
additional costs may be incurred.

The Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. Because increases in the market price
of a call option will generally reflect increases in the market price of the
underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by the Fund.

The Fund will not write a covered call option if, as a result, the
aggregate market value of all portfolio securities or currencies covering call
or put options exceeds 25% of the market value of the Fund's net assets. In
calculating the 25% limit, the Fund will offset, against the value of assets
covering written calls and puts, the value of purchased calls and puts on
identical securities or currencies with identical maturity dates.

Writing Covered Put Options

The Fund may write American or European style covered put options and
purchase options to close out options previously written by the Fund. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) has the obligation to buy, the underlying security or currency at the
exercise price during the option period (American style) or at the expiration
of the option (European style). So long as the obligation of the writer
continues, he may be assigned an exercise notice by the broker-dealer through
whom such option was sold, requiring him to make payment of the exercise price
against delivery of the underlying security or currency. The operation of put
options in other respects, including their related risks and rewards, is
substantially identical to that of call options.

The Fund would write put options only on a covered basis, which means
that the Fund would maintain in a segregated account cash, U.S. government
securities or other liquid high-grade debt obligations in an amount not less
than the exercise price or the Fund will own an option to sell the underlying
security or currency subject to the option having an exercise price equal to
or greater than the exercise price of the "covered" option at all times while
the put option is outstanding. (The rules of a clearing corporation currently
require that such assets be deposited in escrow to secure payment of the
exercise price.)

The Fund would generally write covered put options in circumstances
where T. Rowe Price wishes to purchase the underlying security or currency for
the Fund's portfolio at a price lower than the current market price of the
security or currency. In such event the Fund would write a put option at an
exercise price which, reduced by the premium received on the option, reflects
the lower price it is willing to pay. Since the Fund would also receive
interest on debt securities or currencies maintained to cover the exercise
price of the option, this technique could be used to enhance current return
during periods of market uncertainty. The risk in such a transaction would be
that the market price of the underlying security or currency would decline
below the exercise price less the premiums received. Such a decline could be
substantial and result in a significant loss to the Fund. In addition, the
Fund, because it does not own the specific securities or currencies which it
may be required to purchase in exercise of the put, cannot benefit from
appreciation, if any, with respect to such specific securities or currencies.

The Fund will not write a covered put option if, as a result, the
aggregate market value of all portfolio securities or currencies covering put
or call options exceeds 25% of the market value of the Fund's net assets. In
calculating the 25% limit, the Fund will offset, against the value of assets
covering written puts and calls, the value of purchased puts and calls on
identical securities or currencies with identical maturity dates.

Purchasing Put Options

The Fund may purchase American or European style put options. As the
holder of a put option, the Fund has the right to sell the underlying security
or currency at the exercise price at any time during the option period
(American style) or at the expiration of the option (European style). The Fund
may enter into closing sale transactions with respect to such options,
exercise them or permit them to expire. The Fund may purchase put options for
defensive purposes in order to protect against an anticipated decline in the
value of its securities or currencies. An example of such use of put options
is provided below.

The Fund may purchase a put option on an underlying security or currency
(a "protective put") owned by the Fund as a defensive technique in order to
protect against an anticipated decline in the value of the security or
currency. Such hedge protection is provided only during the life of the put
option when the Fund, as the holder of the put option, is able to sell the
underlying security or currency at the put exercise price regardless of any
decline in the underlying security's market price or currency's exchange
value. For example, a put option may be purchased in order to protect
unrealized appreciation of a security or currency where T. Rowe Price deems it
desirable to continue to hold the security or currency because of tax
considerations. The premium paid for the put option and any transaction costs
would reduce any capital gain otherwise available for distribution when the
security or currency is eventually sold.

The Fund may also purchase put options at a time when the Fund does not
own the underlying security or currency. By purchasing put options on a
security or currency it does not own, the Fund seeks to benefit from a decline
in the market price of the underlying security or currency. If the put option
is not sold when it has remaining value, and if the market price of the
underlying security or currency remains equal to or greater than the exercise
price during the life of the put option, the Fund will lose its entire
investment in the put option. In order for the purchase of a put option to be
profitable, the market price of the underlying security or currency must
decline sufficiently below the exercise price to cover the premium and
transaction costs, unless the put option is sold in a closing sale
transaction.

The Fund will not commit more than 5% of its assets to premiums when
purchasing put and call options. The premium paid by the Fund when purchasing
a put option will be recorded as an asset of the Fund. This asset will be
adjusted daily to the option's current market value, which will be the latest
sale price at the time at which the net asset value per share of the Fund is
computed (close of New York Stock Exchange), or, in the absence of such sale,
the latest bid price. This asset will be terminated upon expiration of the
option, the selling (writing) of an identical option in a closing transaction,
or the delivery of the underlying security or currency upon the exercise of
the option.

Purchasing Call Options

The Fund may purchase American or European style call options. As the
holder of a call option, the Fund has the right to purchase the underlying
security or currency at the exercise price at any time during the option
period (American style) or at the expiration of the option (European style).
The Fund may enter into closing sale transactions with respect to such
options, exercise them or permit them to expire. The Fund may purchase call
options for the purpose of increasing its current return or avoiding tax
consequences which could reduce its current return. The Fund may also purchase
call options in order to acquire the underlying securities or currencies.
Examples of such uses of call options are provided below.

Call options may be purchased by the Fund for the purpose of acquiring
the underlying securities or currencies for its portfolio. Utilized in this
fashion, the purchase of call options enables the Fund to acquire the
securities or currencies at the exercise price of the call option plus the
premium paid. At times the net cost of acquiring securities or currencies in
this manner may be less than the cost of acquiring the securities or
currencies directly. This technique may also be useful to the Fund in
purchasing a large block of securities or currencies that would be more
difficult to acquire by direct market purchases. So long as it holds such a
call option rather than the underlying security or currency itself, the Fund
is partially protected from any unexpected decline in the market price of the
underlying security or currency and in such event could allow the call option
to expire, incurring a loss only to the extent of the premium paid for the
option.

The Fund will not commit more than 5% of its assets to premiums when
purchasing call and put options. The Fund may also purchase call options on
underlying securities or currencies it owns in order to protect unrealized
gains on call options previously written by it. A call option would be
purchased for this purpose where tax considerations make it inadvisable to
realize such gains through a closing purchase transaction. Call options may
also be purchased at times to avoid realizing losses.

Dealer (Over-the-Counter) Options

The Fund may engage in transactions involving dealer options. Certain
risks are specific to dealer options. While the Fund would look to a clearing
corporation to exercise exchange-traded options, if the Fund were to purchase
a dealer option, it would rely on the dealer from whom it purchased the option
to perform if the option were exercised. Failure by the dealer to do so would
result in the loss of the premium paid by the Fund as well as loss of the
expected benefit of the transaction.

Exchange-traded options generally have a continuous liquid market while
dealer options have none. Consequently, the Fund will generally be able to
realize the value of a dealer option it has purchased only by exercising it or
reselling it to the dealer who issued it. Similarly, when the Fund writes a
dealer option, it generally will be able to close out the option prior to its
expiration only by entering into a closing purchase transaction with the
dealer to which the Fund originally wrote the option. While the Fund will seek
to enter into dealer options only with dealers who will agree to and which are
expected to be capable of entering into closing transactions with the Fund,
there can be no assurance that the Fund will be able to liquidate a dealer
option at a favorable price at any time prior to expiration. Until the Fund,
as a covered dealer call option writer, is able to effect a closing purchase
transaction, it will not be able to liquidate securities (or other assets) or
currencies used as cover until the option expires or is exercised. In the
event of insolvency of the contra party, the Fund may be unable to liquidate a
dealer option. With respect to options written by the Fund, the inability to
enter into a closing transaction may result in material losses to the Fund.
For example, since the Fund must maintain a secured position with respect to
any call option on a security it writes, the Fund may not sell the assets
which it has segregated to secure the position while it is obligated under the
option. This requirement may impair a Fund's ability to sell portfolio
securities or currencies at a time when such sale might be advantageous.

The Staff of the SEC has taken the position that purchased dealer
options and the assets used to secure the written dealer options are illiquid
securities. The Fund may treat the cover used for written OTC options as
liquid if the dealer agrees that the Fund may repurchase the OTC option it has
written for a maximum price to be calculated by a predetermined formula. In
such cases, the OTC option would be considered illiquid only to the extent the
maximum repurchase price under the formula exceeds the intrinsic value of the
option. Accordingly, the Fund will treat dealer options as subject to the
Fund's limitation on illiquid securities. If the SEC changes its position on
the
liquidity of dealer options, the Fund will change its treatment of such
instrument accordingly.

Equity Index Fund

The only option activity the Fund currently may engage in is the
purchase of S&P 500 call options. Such activity is subject to the same risks
described above under "Purchasing Call Options". The Fund reserves the right
to engage in other options activity, however.

All Funds

Futures Contracts

Futures contracts are a type of potentially high-risk derivative.

Transactions in Futures

The Fund may enter into futures contracts including stock index,
interest rate, and currency futures ("futures or futures contracts"). The New
Era Fund may also enter into futures on commodities related to the types of
companies in which it invests, such as oil and gold futures. The Equity Index
Fund may only enter into stock index futures, such as the S&P 500 stock index,
to provide an efficient means of maintaining liquidity while being invested in
the market, to facilitate trading, or to reduce transaction costs. It will not
use futures for hedging purposes. Otherwise the nature of such futures and the
regulatory limitations and risks to which they are subject are the same as
those described below.

Stock index futures contracts may be used to provide a hedge for a
portion of the Fund's portfolio, as a cash management tool, or as an efficient
way for T. Rowe Price to implement either an increase or decrease in portfolio
market exposure in response to changing market conditions. The Fund may
purchase or sell futures contracts with respect to any stock index.
Nevertheless, to hedge the Fund's portfolio successfully, the Fund must sell
futures contacts with respect to indices or subindices whose movements will
have a significant correlation with movements in the prices of the Fund's
portfolio securities.

Interest rate or currency futures contracts may be used as a hedge
against changes in prevailing levels of interest rates or currency exchange
rates in order to establish more definitely the effective return on securities
or currencies held or intended to be acquired by the Fund. In this regard, the
Fund could sell interest rate or currency futures as an offset against the
effect of expected increases in interest rates or currency exchange rates and
purchase such futures as an offset against the effect of expected declines in
interest rates or currency exchange rates.

The Fund will enter into futures contracts which are traded on national
or foreign futures exchanges, and are standardized as to maturity date and
underlying financial instrument. Futures exchanges and trading in the United
States are regulated under the Commodity Exchange Act by the CFTC. Futures are
traded in London, at the London International Financial Futures Exchange, in
Paris, at the MATIF, and in Tokyo, at the Tokyo Stock Exchange. Although
techniques other than the sale and purchase of futures contracts could be used
for the above-referenced purposes, futures contracts offer an effective and
relatively low cost means of implementing the Fund's objectives in these
areas.

Regulatory Limitations

The Fund will engage in futures contracts and options thereon only for
bona fide hedging, yield enhancement, and risk management purposes, in each
case in accordance with rules and regulations of the CFTC.

The Fund may not purchase or sell futures contracts or related options
if, with respect to positions which do not qualify as bona fide hedging under
applicable CFTC rules, the sum of the amounts of initial margin deposits and
premiums paid on those positions would exceed 5% of the net asset value of the
Fund after taking into account unrealized profits and unrealized losses on any
such contracts it has entered into; provided, however, that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount
may be excluded in calculating the 5% limitation. For purposes of this policy,
options on futures contracts and foreign currency options traded on a
commodities exchange will be considered "related options". This policy may be
modified by the Board of Directors/Trustees without a shareholder vote and
does not limit the percentage of the Fund's assets at risk to 5%.

In instances involving the purchase of futures contracts or the writing
of call or put options thereon by the Fund, an amount of cash, U.S. government
securities or other liquid, high-grade debt obligations, equal to the market
value of the futures contracts and options thereon (less any related margin
deposits), will be identified in an account with the Fund's custodian to cover
the position, or alternative cover (such as owning an offsetting position)
will be employed. Assets used as cover or held in an identified account cannot
be sold while the position in the corresponding option or future is open,
unless they are replaced with similar assets. As a result, the commitment of a
large portion of a Fund's assets to cover or identified accounts could impede
portfolio management or the fund's ability to meet redemption requests or
other current obligations.

If the CFTC or other regulatory authorities adopt different (including
less stringent) or additional restrictions, the Fund would comply with such
new restrictions.

Trading in Futures Contracts

A futures contract provides for the future sale by one party and
purchase by another party of a specified amount of a specific financial
instrument (e.g., units of a stock index) for a specified price, date, time
and place designated at the time the contract is made. Brokerage fees are
incurred when a futures contract is bought or sold and margin deposits must be
maintained. Entering into a contract to buy is commonly referred to as buying
or purchasing a contract or holding a long position. Entering into a contract
to sell is commonly referred to as selling a contract or holding a short
position.

Unlike when the Fund purchases or sells a security, no price would be
paid or received by the Fund upon the purchase or sale of a futures contract.
Upon entering into a futures contract, and to maintain the Fund's open
positions in futures contracts, the Fund would be required to deposit with its
custodian in a segregated account in the name of the futures broker an amount
of cash, U.S. government securities, suitable money market instruments, or
liquid, high-grade debt securities, known as "initial margin." The margin
required for a particular futures contract is set by the exchange on which the
contract is traded, and may be significantly modified from time to time by the
exchange during the term of the contract. Futures contracts are customarily
purchased and sold on margins that may range upward from less than 5% of the
value of the contract being traded.

If the price of an open futures contract changes (by increase in the
case of a sale or by decrease in the case of a purchase) so that the loss on
the futures contract reaches a point at which the margin on deposit does not
satisfy margin requirements, the broker will require an increase in the
margin. However, if the value of a position increases because of favorable
price changes in the futures contract so that the margin deposit exceeds the
required margin, the broker will pay the excess to the Fund.

These subsequent payments, called "variation margin," to and from the
futures broker, are made on a daily basis as the price of the underlying
assets fluctuate making the long and short positions in the futures contract
more or less valuable, a process known as "marking to the market." The Fund
expects to earn interest income on its margin deposits.

Although certain futures contracts, by their terms, require actual
future delivery of and payment for the underlying instruments, in practice
most futures contracts are usually closed out before the delivery date.
Closing out an open futures contract purchase or sale is effected by entering
into an offsetting futures contract sale or purchase, respectively, for the
same aggregate amount of the identical securities and the same delivery date.
If the offsetting purchase price is less than the original sale price, the
Fund realizes a gain; if it is more, the Fund realizes a loss. Conversely, if
the offsetting sale price is more than the original purchase price, the Fund
realizes a gain; if it is less, the Fund realizes a loss. The transaction
costs must also be included in these calculations. There can be no assurance,
however, that the Fund will be able to enter into an offsetting transaction
with respect to a particular futures contract at a particular time. If the
Fund is not able to enter into an offsetting transaction, the Fund will
continue to be required to maintain the margin deposits on the futures
contract.

For example, the Standard & Poor's 500 Stock Index is composed of 500
selected common stocks, most of which are listed on the New York Stock
Exchange. The S&P 500 Index assigns relative weightings to the common stocks
included in the Index, and the Index fluctuates with changes in the market
values of those common stocks. In the case of the S&P 500 Index, contracts are
to buy or sell 500 units. Thus, if the value of the S&P 500 Index were $150,
one contract would be worth $75,000 (500 units x $150). The stock index
futures contract specifies that no delivery of the actual stock making up the
index will take place. Instead, settlement in cash occurs. Over the life of
the contract, the gain or loss realized by the Fund will equal the difference
between the purchase (or sale) price of the contract and the price at which
the contract is terminated. For example, if the Fund enters into a futures
contract to buy 500 units of the S&P 500 Index at a specified future date at a
contract price of $150 and the S&P 500 Index is at $154 on that future date,
the Fund will gain $2,000 (500 units x gain of $4). If the Fund enters into a
futures contract to sell 500 units of the stock index at a specified future
date at a contract price of $150 and the S&P 500 Index is at $152 on that
future date, the Fund will lose $1,000 (500 units x loss of $2).

Special Risks of Transactions in Futures Contracts

Volatility and Leverage. The prices of futures contracts are volatile
and are influenced, among other things, by actual and anticipated changes in
the market and interest rates, which in turn are affected by fiscal and
monetary policies and national and international political and economic
events.

Most United States futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. The daily
limit establishes the maximum amount that the price of a futures contract may
vary either up or down from the previous day's settlement price at the end of
a trading session. Once the daily limit has been reached in a particular type
of futures contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses, because the limit may
prevent the liquidation of unfavorable positions. Futures contract prices have
occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of futures
positions and subjecting some futures traders to substantial losses.

Margin deposits required on futures trading are low. As a result, a
relatively small price movement in a futures contract may result in immediate
and substantial loss, as well as gain, to the investor. For example, if at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit, if the contract
were closed out. Thus, a purchase or sale of a futures contract may result in
losses in excess of the amount invested in the futures contract. However, the
Fund would presumably have sustained comparable losses if, instead of the
futures contract, it had invested in the underlying financial instrument and
sold it after the decline. Furthermore, in the case of a futures contract
purchase, in order to be certain that the Fund has sufficient assets to
satisfy its obligations under a futures contract, the Fund earmarks to the
futures contract money market instruments equal in value to the current value
of the underlying instrument less the margin deposit.

Liquidity. The Fund may elect to close some or all of its futures
positions at any time prior to their expiration. The Fund would do so to
reduce exposure represented by long futures positions or short futures
positions. The Fund may close its positions by taking opposite positions which
would operate to terminate the Fund's position in the futures contracts. Final
determinations of variation margin would then be made, additional cash would
be required to be paid by or released to the Fund, and the Fund would realize
a loss or a gain.

Futures contracts may be closed out only on the exchange or board of
trade where the contracts were initially traded. Although the Fund intends to
purchase or sell futures contracts only on exchanges or boards of trade where
there appears to be an active market, there is no assurance that a liquid
market on an exchange or board of trade will exist for any particular contract
at any particular time. In such event, it might not be possible to close a
futures contract, and in the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of variation margin.
However, in the event futures contracts have been used to hedge the underlying
instruments, the Fund would continue to hold the underlying instruments
subject to the hedge until the futures contracts could be terminated. In such
circumstances, an increase in the price of underlying instruments, if any,
might partially or completely offset losses on the futures contract. However,
as described below, there is no guarantee that the price of the underlying
instruments will, in fact, correlate with the price movements in the futures
contract and thus provide an offset to losses on a futures contract.

Hedging Risk. A decision of whether, when, and how to hedge involves
skill and judgment, and even a well-conceived hedge may be unsuccessful to
some degree because of unexpected market behavior, market or interest rate
trends. There are several risks in connection with the use by the Fund of
futures contracts as a hedging device. One risk arises because of the
imperfect correlation between movements in the prices of the futures contracts
and movements in the prices of the underlying instruments which are the
subject of the hedge. T. Rowe Price will, however, attempt to reduce this risk
by entering into futures contracts whose movements, in its judgment, will have
a significant correlation with movements in the prices of the Fund's
underlying instruments sought to be hedged.

Successful use of futures contracts by the Fund for hedging purposes is
also subject to T. Rowe Price's ability to correctly predict movements in the
direction of the market. It is possible that, when the Fund has sold futures
to hedge its portfolio against a decline in the market, the index, indices, or
instruments underlying futures might advance and the value of the underlying
instruments held in the Fund's portfolio might decline. If this were to occur,
the Fund would lose money on the futures and also would experience a decline
in value in its underlying instruments. However, while this might occur to a
certain degree, T. Rowe Price believes that over time the value of the Fund's
portfolio will tend to move in the same direction as the market indices used
to hedge the portfolio. It is also possible that if the Fund were to hedge
against the possibility of a decline in the market (adversely affecting the
underlying instruments held in its portfolio) and prices instead increased,
the Fund would lose part or all of the benefit of increased value of those
underlying instruments that it has hedged, because it would have offsetting
losses in its futures positions. In addition, in such situations, if the Fund
had insufficient cash, it might have to sell underlying instruments to meet
daily variation margin requirements. Such sales of underlying instruments
might be, but would not necessarily be, at increased prices (which would
reflect the rising market). The Fund might have to sell underlying instruments
at a time when it would be disadvantageous to do so.

In addition to the possibility that there might be an imperfect
correlation, or no correlation at all, between price movements in the futures
contracts and the portion of the portfolio being hedged, the price movements
of futures contracts might not correlate perfectly with price movements in the
underlying instruments due to certain market distortions. First, all
participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors might close futures contracts through offsetting
transactions, which could distort the normal relationship between the
underlying instruments and futures markets. Second, the margin requirements in
the futures market are less onerous than margin requirements in the securities
markets, and as a result the futures market might attract more speculators
than the securities markets do. Increased participation by speculators in the
futures market might also cause temporary price distortions. Due to the
possibility of price distortion in the futures market and also because of the
imperfect correlation between price movements in the underlying instruments
and movements in the prices of futures contracts, even a correct forecast of
general market trends by T. Rowe Price might not result in a successful
hedging transaction over a very short time period.

Options on Futures Contracts

The Fund may purchase and sell options on the same types of futures in
which it may invest.

Options (another type of potentially high-risk derivative) on futures
are similar to options on underlying instruments except that options on
futures give the purchaser the right, in return for the premium paid, to
assume a position in a futures contract (a long position if the option is a
call and a short position if the option is a put), rather than to purchase or
sell the futures contract, at a specified exercise price at any time during
the period of the option. Upon exercise of the option, the delivery of the
futures position by the writer of the option to the holder of the option will
be accompanied by the delivery of the accumulated balance in the writer's
futures margin account which represents the amount by which the market price
of the futures contract, at exercise, exceeds (in the case of a call) or is
less than (in the case of a put) the exercise price of the option on the
futures contract. Purchasers of options who fail to exercise their options
prior to the exercise date suffer a loss of the premium paid.

As an alternative to writing or purchasing call and put options on stock
index futures, the Fund may write or purchase call and put options on stock
indices. Such options would be used in a manner similar to the use of options
on futures contracts. From time to time, a single order to purchase or sell
futures contracts (or options thereon) may be made on behalf of the Fund and
other T. Rowe Price Funds. Such aggregated orders would be allocated among the
Funds and the other T. Rowe Price Funds in a fair and non-discriminatory
manner.

Special Risks of Transactions in Options on Futures Contracts

The risks described under "Special Risks of Transactions on Futures
Contracts" are substantially the same as the risks of using options on
futures. In addition, where the Fund seeks to close out an option position by
writing or buying an offsetting option covering the same index, underlying
instrument or contract and having the same exercise price and expiration date,
its ability to establish and close out positions on such options will be
subject to the maintenance of a liquid secondary market. Reasons for the
absence of a liquid secondary market on an exchange include the following: (i)
there may be insufficient trading interest in certain options; (ii)
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; (iii) trading halts, suspensions or other restrictions
may be imposed with respect to particular classes or series of options, or
underlying instruments; (iv) unusual or unforeseen circumstances may interrupt
normal operations on an exchange; (v) the facilities of an exchange or a
clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on the exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no
assurance that higher than anticipated trading activity or other unforeseen
events might not, at times, render certain of the facilities of any of the
clearing corporations inadequate, and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution
of customers' orders.

Additional Futures and Options Contracts

Although the Fund has no current intention of engaging in futures or
options transactions other than those described above, it reserves the right
to do so. Such futures and options trading might involve risks which differ
from those involved in the futures and options described above.

Foreign Futures and Options

Participation in foreign futures and foreign options transactions
involves the execution and clearing of trades on or subject to the rules of a
foreign board of trade. Neither the National Futures Association nor any
domestic exchange regulates activities of any foreign boards of trade,
including the execution, delivery and clearing of transactions, or has the
power to compel enforcement of the rules of a foreign board of trade or any
applicable foreign law. This is true even if the exchange is formally linked
to a domestic market so that a position taken on the market may be liquidated
by a transaction on another market. Moreover, such laws or regulations will
vary depending on the foreign country in which the foreign futures or foreign
options transaction occurs. For these reasons, when the Fund trades foreign
futures or foreign options contracts, it may not be afforded certain of the
protective measures provided by the Commodity Exchange Act, the CFTC's
regulations and the rules of the National Futures Association and any domestic
exchange, including the right to use reparations proceedings before the CFTC
and arbitration proceedings provided by the National Futures Association or
any domestic futures exchange. In particular, funds received from the Fund for
foreign futures or foreign options transactions may not be provided the same
protections as funds received in respect of transactions on United States
futures exchanges. In addition, the price of any foreign futures or foreign
options contract and, therefore, the potential profit and loss thereon may be
affected by any variance in the foreign exchange rate between the time the
Fund's order is placed and the time it is liquidated, offset or exercised.

All Funds, Except Equity Index Fund

Foreign Currency Transactions

A forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are principally traded
in the interbank market conducted directly between currency traders (usually
large, commercial banks) and their customers. A forward contract generally has
no deposit requirement, and no commissions are charged at any stage for
trades.

The Fund may enter into forward contracts for a variety of purposes in
connection with the management of the foreign securities portion of its
portfolio. The Fund's use of such contracts would include, but not be limited
to, the following:

First, when the Fund enters into a contract for the purchase or sale of
a security denominated in a foreign currency, it may desire to "lock in" the
U.S. dollar price of the security. By entering into a forward contract for the
purchase or sale, for a fixed amount of dollars, of the amount of foreign
currency involved in the underlying security transactions, the Fund will be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date the security is purchased or sold
and the date on which payment is made or received.

Second, when T. Rowe Price believes that one currency may experience a
substantial movement against another currency, including the U.S. dollar, it
may enter into a forward contract to sell or buy the amount of the former
foreign currency, approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. Alternatively,
where appropriate, the Fund may hedge all or part of its foreign currency
exposure through the use of a basket of currencies or a proxy currency where
such currency or currencies act as an effective proxy for other currencies. In
such a case, the Fund may enter into a forward contract where the amount of
the foreign currency to be sold exceeds the value of the securities
denominated in such currency. The use of this basket hedging technique may be
more efficient and economical than entering into separate forward contracts
for each currency held in the Fund. The precise matching of the forward
contract amounts and the value of the securities involved will not generally
be possible since the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of those
securities between the date the forward contract is entered into and the date
it matures. The projection of short-term currency market movement is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Under normal circumstances, consideration of the prospect
for currency parities will be incorporated into the longer term investment
decisions made with regard to overall diversification strategies. However, T.
Rowe Price believes that it is important to have the flexibility to enter into
such forward contracts when it determines that the best interests of the Fund
will be served.

The Fund may enter into forward contacts for any other purpose
consistent with the Fund's investment objective and program. However, the Fund
will not enter into a forward contract, or maintain exposure to any such
contract(s), if the amount of foreign currency required to be delivered
thereunder would exceed the Fund's holdings of liquid, high-grade debt
securities, and currency available for cover of the forward contract(s) or
other suitable cover. In determining the amount to be delivered under a
contract, the Fund may net offsetting positions.

At the maturity of a forward contract, the Fund may sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and either extend the maturity of the forward contract (by "rolling"
that contract forward) or may initiate a new forward contract.

If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If the Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward prices decline
during the period between the Fund's entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting contract
for the purchase of the foreign currency, the Fund will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase. Should forward prices increase, the
Fund will suffer a loss to the extent of the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.

The Fund's dealing in forward foreign currency exchange contracts will
generally be limited to the transactions described above. However, the Fund
reserves the right to enter into forward foreign currency contracts for
different purposes and under different circumstances. Of course, the Fund is
not required to enter into forward contracts with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate
by T. Rowe Price. It also should be realized that this method of hedging
against a decline in the value of a currency does not eliminate fluctuations
in the underlying prices of the securities. It simply establishes a rate of
exchange at a future date. Additionally, although such contracts tend to
minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time, they tend to limit any potential gain which might
result from an increase in the value of that currency.

Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. It will do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the difference (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire to resell that currency to the dealer.

Federal Tax Treatment of Options, Futures Contracts, and Forward Foreign
Exchange Contracts

The Fund may enter into certain option, futures, and forward foreign
exchange contracts, including options and futures on currencies, which will be
treated as Section 1256 contracts or straddles.

Transactions which are considered Section 1256 contracts will be
considered to have been closed at the end of the Fund's fiscal year and any
gains or losses will be recognized for tax purposes at that time. Such gains
or losses from the normal closing or settlement of such transactions will be
characterized as 60% long-term capital gain or loss and 40% short-term capital
gain or loss regardless of the holding period of the instrument. The Fund will
be required to distribute net gains on such transactions to shareholders even
though it may not have closed the transaction and received cash to pay such
distributions.

Options, futures and forward foreign exchange contracts, including
options and futures on currencies, which offset a foreign dollar denominated
bond or currency position may be considered straddles for tax purposes, in
which case a loss on any position in a straddle will be subject to deferral to
the extent of unrealized gain in an offsetting position. The holding period of
the securities or currencies comprising the straddle will be deemed not to
begin until the straddle is terminated.

For securities offsetting a purchased put, this adjustment of the
holding period may increase the gain from sales of securities held less than
three months. The holding period of the security offsetting an "in-the-money
qualified covered call" option on an equity security will not include the
period of time the option is outstanding.

Losses on written covered calls and purchased puts on securities,
excluding certain "qualified covered call" options on equity securities, may
be long-term capital losses, if the security covering the option was held for
more than twelve months prior to the writing of the option.

In order for the Fund to continue to qualify for federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities or currencies. Pending tax regulations could limit the extent that
net gain realized from option, futures or foreign forward exchange contracts
on currencies is qualifying income for purposes of the 90% requirement. In
addition, gains realized on the sale or other disposition of securities,
including option, futures or foreign forward exchange contracts on securities
or securities indexes and, in some cases, currencies, held for less than three
months, must be limited to less than 30% of the Fund's annual gross income. In
order to avoid realizing excessive gains on securities or currencies held less
than three months, the Fund may be required to defer the closing out of
option, futures or foreign forward exchange contracts) beyond the time when it
would otherwise be advantageous to do so. It is anticipated that unrealized
gains on Section 1256 option, futures and foreign forward exchange contracts,
which have been open for less than three months as of the end of the Fund's
fiscal year and which are recognized for tax purposes, will not be considered
gains on securities or currencies held less than three months for purposes of
the 30% test.

INVESTMENT RESTRICTIONS

Fundamental policies may not be changed without the approval of the
lesser of (1) 67% of the Fund's 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 Fund's outstanding shares. Other
restrictions in the form of operating policies are subject to change by the
Fund's Board of Directors/Trustees 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, the Fund.

Fundamental Policies

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

(1) Borrowing. Borrow money except that the Fund may (i) borrow
for non-leveraging, temporary, or emergency purposes; and
(ii) engage in reverse repurchase agreements and make other
investments or engage in other transactions, which may
involve a borrowing, in a manner consistent with the Fund's
investment objective and program, provided that the
combination of (i) and (ii) shall not exceed 33 1/3% of the
value of the Fund's total assets (including the amount
borrowed) less liabilities (other than borrowings) or such
other percentage permitted by law. Any borrowings which come
to exceed this amount will be reduced in accordance with
applicable law. The Fund may borrow from banks, other Price
Funds or other persons to the extent permitted by applicable
law;

(2) Commodities. Purchase or sell physical commodities; except
that it may enter into futures contracts and options
thereon;

(3) (a) Industry Concentration (All Funds, except Health
Sciences and Financial Services Funds). Purchase the
securities of any issuer if, as a result, more than
25% of the value of the Fund's total assets would be
invested in the securities of issuers having their
principal business activities in the same industry;

(b) Industry Concentration (Health Sciences and Financial
Services Funds). Purchase the securities of any issuer
if, as a result, more than 25% of the value of the
Fund's total assets would be invested in the
securities of issuers having their principal business
activities in the same industry; provided, however,
that (i) the Health Sciences Fund will invest more
than 25% of its total assets in the health sciences
industry as defined in the Fund's prospectus; and (ii)
the Financial Services Fund will invest more than 25%
of its total assets in the financial services industry
as defined in the Fund's prospectus.

(4) Loans. Make loans, although the Fund may (i) lend portfolio
securities and participate in an interfund lending program
with other Price Funds provided that no such loan may be
made if, as a result, the aggregate of such loans would
exceed 33 1/3% of the value of the Fund's total assets; (ii)
purchase money market securities and enter into repurchase
agreements; and (iii) acquire publicly-distributed or
privately-placed debt securities and purchase debt;

(5) Percent Limit on Assets Invested in Any One Issuer. Purchase
a security if, as a result, with respect to 75% of the value
of its total assets, more than 5% of the value of the Fund's
total assets would be invested in the securities of a single
issuer, except securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities;

(6) Percent Limit on Share Ownership of Any One Issuer (All
Funds, except Capital Opportunity). Purchase a security if,
as a result, with respect to 75% of the value of the Fund's
total assets, more than 10% of the outstanding voting
securities of any issuer would be held by the Fund (other
than obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities);

(7) Real Estate. Purchase or sell real estate, unless acquired
as a result of ownership of securities or other instruments
(but this shall not prevent the Fund from investing in
securities or other instruments backed by real estate or in
securities of companies engaged in the real estate
business);

(8) Senior Securities. Issue senior securities except in
compliance with the Investment Company Act of 1940; or

(9) Underwriting. Underwrite securities issued by other persons,
except to the extent that the Fund may be deemed to be an
underwriter within the meaning of the Securities Act of 1933
in connection with the purchase and sale of its portfolio
securities in the ordinary course of pursuing its investment
program.

NOTES

The following notes should be read in connection with the above-
described fundamental policies. The notes are not fundamental
policies.

With respect to investment restrictions (1) and (4), the Fund will
not borrow from or lend to any other Price Fund unless each Fund
applies for and receives an exemptive order from the SEC or the SEC
issues rules permitting such transactions. The Fund has no current
intention of engaging in any such activity and there is no
assurance the SEC would grant any order requested by the Fund or
promulgate any rules allowing the transactions.

With respect to investment restriction (2), the Fund does not
consider currency contracts or hybrid investments to be
commodities.

For purposes of investment restriction (3), U.S., state or local
governments, or related agencies or instrumentalities, are not
considered an industry. Industries are determined by reference to
the classifications of industries set forth in the Fund's
semiannual and annual reports.

For purposes of investment restriction (4), the Fund will consider
the acquisition of a debt security to include the execution of a
note or other evidence of an extension of credit with a term of
more than nine months.

Operating Policies

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

(1) Borrowing. The Fund will not purchase additional
securities when money borrowed exceeds 5% of its total
assets;

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

(3) Futures Contracts. Purchase a futures contract or an
option thereon if, with respect to positions in futures
or options on futures which do not represent bona fide
hedging, the aggregate initial margin and premiums on
such options would exceed 5% of the Fund's net asset
value;

(4) Illiquid Securities. Purchase illiquid securities if, as
a result, more than 15% of its net assets would be
invested in such securities;

(5) Investment Companies. Purchase securities of open-end or
closed-end investment companies except in compliance with
the Investment Company Act of 1940;

(6) Margin. Purchase securities on margin, except (i) for use
of short-term credit necessary for clearance of purchases
of portfolio securities and (ii) it may make margin
deposits in connection with futures contracts or other
permissible investments;

(7) Mortgaging. Mortgage, pledge, hypothecate or, in any
manner, transfer any security owned by the Fund as
security for indebtedness except as may be necessary in
connection with permissible borrowings or investments and
then such mortgaging, pledging or hypothecating may not
exceed 33 1/3% of the Fund's total assets at the time of
borrowing or investment;

(8) Oil and Gas Programs. Purchase participations or other
direct interests in, or enter into leases with respect
to, oil, gas, or other mineral exploration or development
programs if, as a result thereof, more than 5% of the
value of the total assets of the Fund would be invested
in such programs;

(9) Options, Etc. Invest in puts, calls, straddles, spreads,
or any combination thereof, except to the extent
permitted by the prospectus and Statement of Additional
Information;

(10) Short Sales. Effect short sales of securities;

(11) Warrants. Invest in warrants if, as a result thereof,
more than 10% of the value of the net assets of the Fund
would be invested in warrants;

Blue Chip Growth, Capital Opportunity, Diversified Small-Cap Growth,
Financial Services, Health Sciences, Media & Telecommunications, Mid-Cap
Value, and Value Funds

Notwithstanding anything in the above fundamental and operating
restrictions to the contrary, the Fund may invest all of its assets in a
single investment company or a series thereof in connection with a "master-
feeder" arrangement. Such an investment would be made where the Fund (a
"Feeder"), and one or more other Funds with the same investment objective and
program as the Fund, sought to accomplish its investment objective and program
by investing all of its assets in the shares of another investment company
(the "Master"). The Master would, in turn, have the same investment objective
and program as the Fund. The Fund would invest in this manner in an effort to
achieve the economies of scale associated with having a Master fund make
investments in portfolio companies on behalf of a number of Feeder funds. In
the event that the Fund exercises its right to convert to a Master Fund/Feeder
Fund structure, it will do so in compliance with the Guidelines for
Registration of a Master Fund/Feeder Fund as established by the North American
Securities Administrators Association, Inc. ("NASAA").

MANAGEMENT OF FUNDS

The officers and directors of the Fund are listed below. Unless
otherwise noted, the address of each is 100 East 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, the Fund's directors who
are considered "interested persons" of T. Rowe Price as defined under
Section 2(a)(19) of the Investment Company Act of 1940 are noted with an
asterisk (*). These directors are referred to as inside directors by virtue of
their officership, directorship, and/or employment with T. Rowe Price.

All Funds

Independent Directors/Trustees

DONALD W. DICK, JR., Principal, EuroCapital Advisors, LLC, an acquisition and
management advisory firm; formerly (5/89-6/95) Principal, Overseas Partners,
Inc., a financial investment firm; formerly (6/65-3/89) Director and Vice
President-Consumer Products Division, McCormick & Company, Inc., international
food processors; Director, Waverly, Inc., Baltimore, Maryland; Address: P.O.
Box 491, Chilmark, MA 02535-0491

DAVID K. FAGIN, Chairman, Chief Executive Officer and Director, Golden Star
Resources, Ltd.; formerly (1986-7/91) President, Chief Operating Officer and
Director, Homestake Mining Company; Address: 1660 Lincoln Street, Suite 3000,
Denver, Colorado 80264

HANNE M. MERRIMAN, Retail business consultant; formerly President and Chief
Operating Officer (1991-92), Nan Duskin, Inc., a women's specialty store,
Director (1984-1990) and Chairman (1989-90) Federal Reserve Bank of Richmond,
and President and Chief Executive Officer (1988-89), Honeybee, Inc., a
division of Spiegel, Inc.; Director, Central Illinois Public Service Company,
CIPSCO Incorporated, The Rouse Company, State Farm Mutual Automobile Insurance
Company and USAir Group, Inc.; Address: 3201 New Mexico Avenue, N.W., Suite
350, Washington, D.C. 20016

HUBERT D. VOS, President, Stonington Capital Corporation, a private investment
company; Address: 1114 State Street, Suite 247, P.O. Box 90409, Santa Barbara,
California 93190-0409

PAUL M. WYTHES, Founding General Partner, Sutter Hill Ventures, a venture
capital limited partnership, providing equity capital to young high technology
companies throughout the United States; Director, Teltone Corporation,
Interventional Technologies Inc. and Stuart Medical, Inc.; Address: 755 Page
Mill Road, Suite A200, Palo Alto, California 94304-1005

Officers

HENRY H. HOPKINS, Vice President--Director and 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,
Rowe Price-Fleming International, Inc. and T. Rowe Price Retirement Plan
Services, Inc.
LENORA V. HORNUNG, Secretary--Vice President, T. Rowe Price
PATRICIA S. BUTCHER, Assistant Secretary--Assistant Vice President, T. Rowe
Price and T. Rowe Price Investment Services, Inc.
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
J. JEFFREY LANG, Assistant Vice President--Assistant Vice President, T. Rowe
Price
INGRID I. VORDEMBERGE, Assistant Vice President--Employee, T. Rowe Price

Balanced Fund
*JAMES S. RIEPE, Chairman of the Board--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Vice President and Director--Chairman of the Board,
Price-Fleming; Vice Chairman of the Board, Chief Investment Officer, and
Managing Director, T. Rowe Price; Vice President and Director, T. Rowe Price
Trust Company; Chartered Financial Analyst; Chartered Investment Counselor
RICHARD T. WHITNEY, President--Vice President of T. Rowe Price and T. Rowe
Price Trust Company; Chartered Financial Analyst
STEPHEN W. BOESEL, Vice President--Managing Director, T. Rowe Price
ANDREW M. BROOKS, Vice President--Vice President, T. Rowe Price
JAMES A. C. KENNEDY III, Vice President and Director--Managing Director of T.
Rowe Price; Chartered Financial Analyst
EDMUND M. NOTZON, Vice President--Managing Director, T. Rowe Price; Vice
President, T. Rowe Price Trust Company
DONALD J. PETERS, Vice President--Vice President, T. Rowe Price; formerly
portfolio manager, Geewax Terker and Company
PETER VAN DYKE, Vice President--Managing Director, T. Rowe Price; Vice
President of Rowe Price-Fleming International, Inc. and T. Rowe Price Trust
Company
MARK J. VASELKIV, Vice President--Vice President, T. Rowe Price

Blue Chip Growth Fund
LARRY J. PUGLIA, President--Vice President, T. Rowe Price; Chartered Financial
Analyst
*THOMAS H. BROADUS, JR., Executive Vice President--Managing Director, T. Rowe
Price; Chartered Financial Analyst and Chartered Investment Counselor
*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Director--Chairman of the Board, Price-Fleming; Vice Chairman
of the Board, Chief Investment Officer, and Managing Director, T. Rowe Price;
Vice President and Director, T. Rowe Price Trust Company; Chartered Financial
Analyst; Chartered Investment Counselor
JAMES A. C. KENNEDY III, Director--Managing Director of T. Rowe Price;
Chartered Financial Analyst
BRIAN W. H. BERGHUIS, Vice President--Managing Director, T. Rowe Price;
Chartered Financial Analyst
STEPHANIE C. CLANCY, Vice President--Assistant Vice President, T. Rowe Price
JILL L. HAUSER, Vice President--Vice President, T. Rowe Price
THOMAS J. HUBER, Vice President--Assistant Vice President, T. Rowe Price
ROBERT W. SMITH, Vice President--Vice President, T. Rowe Price; formerly
(1987-1992) Investment Analyst, Massachusetts Financial Services, Inc.;
Boston, Massachusetts
WILLIAM J. STROMBERG, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst

Capital Appreciation Fund

*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*GEORGE A. ROCHE, Trustee--President, Chief Executive Officer, Chairman of the
Board, and Managing Director, T. Rowe Price; Vice President and Director, Rowe
Price-Fleming International, Inc.
*M. DAVID TESTA, Chairman of the Board--Chairman of the Board, Price-Fleming;
Vice Chairman of the Board, Chief Investment Officer, and Managing Director,
T. Rowe Price; Vice President and Director, T. Rowe Price Trust Company;
Chartered Financial Analyst; Chartered Investment Counselor
RICHARD P. HOWARD, President--Vice President of T. Rowe Price; Chartered
Financial Analyst
ARTHUR B. CECIL III, Vice President--Vice President of T. Rowe Price;
Chartered Financial Analyst
CHARLES A. MORRIS, Vice President--Vice President of T. Rowe Price; Chartered
Financial Analyst
CHARLES M. OBER, Vice President--Vice President, T. Rowe Price, Chartered
Financial Analyst

Capital Opportunity Fund
*JOHN H. LAPORTE, JR., President and Director--Managing Director, T. Rowe
Price; Chartered Financial Analyst
*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Director--Chairman of the Board, Price-Fleming; Vice Chairman
of the Board, Chief Investment Officer, and Managing Director, T. Rowe Price;
Vice President and Director, T. Rowe Price Trust Company; Chartered Financial
Analyst; Chartered Investment Counselor
JOHN F. WAKEMAN, Executive Vice President--Vice President, T. Rowe Price
MARC L. BAYLIN, Vice President--Assistant Vice President, T. Rowe Price;
formerly financial analyst, Rausher Pierce Refsnes
BRIAN W. H. BERGHUIS, Vice President--Managing Director, T. Rowe Price;
Chartered Financial Analyst
STEPHANIE C. CLANCY, Vice President--Assistant Vice President, T. Rowe Price
LARRY J. PUGLIA, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
BRIAN D. STANSKY, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst

Diversified Small-Cap Growth Fund
*JOHN H. LAPORTE, JR., Vice President and Director--Managing Director, T. Rowe
Price; Chartered Financial Analyst
*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board, T.
Rowe Price; Chairman of the Board, T. Rowe Price Services, Inc., T. Rowe Price
Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Director--Chairman of the Board, Price-Fleming; Vice Chairman
of the Board, Chief Investment Officer, and Managing Director, T. Rowe Price;
Vice President and Director, T. Rowe Price Trust Company; Chartered Financial
Analyst; Chartered Investment Counselor
RICHARD T. WHITNEY, President--Vice President, T. Rowe Price; Chartered
Financial Analyst
MARC L. BAYLIN, Vice President--Assistant Vice President, T. Rowe Price;
formerly financial analyst, Rausher Pierce Refsnes
KRISTEN F. CULP, Vice President--Assistant Vice President, T. Rowe Price
DONALD J. PETERS, Vice President--Vice President, T. Rowe Price; formerly
portfolio manager, Geewax Terker and Company

Dividend Growth Fund
*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Director--Chairman of the Board, Price-Fleming; Vice Chairman
of the Board, Chief Investment Officer, T. Rowe Price; Vice President and
Director, T. Rowe Price Trust Company; Chartered Financial Analyst; Chartered
Investment Counselor
JAMES A. C. KENNEDY III, Director--Managing Director of T. Rowe Price;
Chartered Financial Analyst
WILLIAM J. STROMBERG, President--Vice President, T. Rowe Price
BRIAN C. ROGERS, Executive Vice President--Director and Managing Director, T.
Rowe Price; Chartered Financial Analyst
ARTHUR B. CECIL III, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
STEPHANIE C. CLANCY, Vice President--Assistant Vice President, T. Rowe Price
MICHAEL W. HOLTON, Vice President--Employee, T. Rowe Price, formerly Research
Analyst at Bowles, Hollowell, Conner and Company
DONALD J. PETERS, Vice President--Vice President, T. Rowe Price; formerly
portfolio manager, Geewax Terker and Company
LARRY J. PUGLIA, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
DANIEL M. THERIAULT, Vice President--Vice President, T. Rowe Price, Chartered
Financial Analyst; formerly Securities Analyst, John A. Levin & Co.
DAVID J. WALLACK, Vice President--Vice President, T. Rowe Price

Equity Income Fund
*JAMES S. RIEPE, Vice President and Trustee--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Trustee--Chairman of the Board, Price-Fleming; Vice Chairman
of the Board, Chief Investment Officer, T. Rowe Price; Vice President and
Director, T. Rowe Price Trust Company; Chartered Financial Analyst; Chartered
Investment Counselor
BRIAN C. ROGERS, President--Director and Managing Director, T. Rowe Price;
Chartered Financial Analyst
JAMES A. C. KENNEDY III, Trustee--Managing Director of T. Rowe Price;
Chartered Financial Analyst
*THOMAS H. BROADUS, JR., Vice President--Managing Director, T. Rowe Price;
Chartered Financial Analyst and Chartered Investment Counselor
ANDREW M. BROOKS, Vice President--Vice President, T. Rowe Price
RICHARD P. HOWARD, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
WILLIAM J. STROMBERG, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
DANIEL M. THERIAULT, Vice President--Vice President, T. Rowe Price, Chartered
Financial Analyst; formerly Securities Analyst, John A. Levin & Co.
MARK J. VASELKIV, Vice President--Vice President, T. Rowe Price

Equity Index Fund
*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Director--Chairman of the Board, Price-Fleming; Vice Chairman
of the Board, Chief Investment Officer, and Managing Director, T. Rowe Price;
Vice President and Director, T. Rowe Price Trust Company; Chartered Financial
Analyst; Chartered Investment Counselor
JAMES A. C. KENNEDY III, Director--Managing Director of T. Rowe Price;
Chartered Financial Analyst
RICHARD T. WHITNEY, President--Vice President, T. Rowe Price; Chartered
Financial Analyst
KRISTEN F. CULP, Executive Vice President--Assistant Vice President, T. Rowe
Price
DONALD J. PETERS, Vice President--Vice President, T. Rowe Price; formerly
portfolio manager, Geewax Terker and Company
WENDY R. DIFFENBAUGH, Assistant Vice President--Assistant Vice President, T.
Rowe Price

Financial Services Fund
*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Chairman of the Board--Chairman of the Board, Price-Fleming;
Vice Chairman of the Board, Chief Investment Officer, and Managing Director,
T. Rowe Price; Vice President and Director, T. Rowe Price Trust Company;
Chartered Financial Analyst; Chartered Investment Counselor
JAMES A. C. KENNEDY III, Director--Managing Director of T. Rowe Price;
Chartered Financial Analyst
DANIEL M. THERIAULT, President--Vice President, T. Rowe Price, Chartered
Financial Analyst; formerly Securities Analyst, John A. Levin & Co.
ROBERT N. GENSLER, Vice President--Vice President, T. Rowe Price
ROBERT J. MARCOTTE, Vice President--Vice President, T. Rowe Price
LARRY J. PUGLIA, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
ANNA DOPKIN, Assistant Vice President--Employee, T. Rowe Price
SUSAN J. KLEIN, Assistant Vice President--Employee, T. Rowe Price

Growth & Income Fund
*JAMES S. RIEPE, Chairman of the Board--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Director--Chairman of the Board, Price-Fleming; Vice Chairman
of the Board, Chief Investment Officer, and Managing Director, T. Rowe Price;
Vice President and Director, T. Rowe Price Trust Company; Chartered Financial
Analyst; Chartered Investment Counselor
*STEPHEN W. BOESEL, President and Director--Vice President, T. Rowe Price
JAMES A. C. KENNEDY III, Director--Managing Director of T. Rowe Price;
Chartered Financial Analyst
ANDREW M. BROOKS, Vice President--Vice President, T. Rowe Price
ARTHUR B. CECIL III, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
DAVID M. LEE, Vice President--Assistant Vice President, T. Rowe Price,
formerly Marketing Representative at IBM
GREGORY A. MCCRICKARD, Vice President--Vice President, T. Rowe Price;
Chartered Financial Analyst
LARRY J. PUGLIA, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
MARK J. VASELKIV, Vice President--Vice President, T. Rowe Price
RICHARD T. WHITNEY, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
DAVID J. WALLACK, Vice President--Vice President, T. Rowe Price

Growth Stock Fund
*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Director--Chairman of the Board, Price-Fleming; Vice Chairman
of the Board, Chief Investment Officer, and Managing Director, T. Rowe Price;
Vice President and Director, T. Rowe Price Trust Company; Chartered Financial
Analyst; Chartered Investment Counselor
JAMES A. C. KENNEDY III, Vice President and Director--Managing Director, T.
Rowe Price; Chartered Financial Analyst
ROBERT W. SMITH, President--Vice President, T. Rowe Price; formerly
(1987-1992) Investment Analyst, Massachusetts Financial Services, Inc.; Boston,
Massachusetts
BRIAN W. H. BERGHUIS, Vice President--Managing Director, T. Rowe Price;
Chartered Financial Analyst
JOSEPH KLEIN III, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
CHARLES A. MORRIS, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
JAMES D. PREY III, Vice President--Vice President, T. Rowe Price
LARRY J. PUGLIA, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
DANIEL M. THERIAULT, Vice President--Vice President, T. Rowe Price, Chartered
Financial Analyst; formerly Securities Analyst, John A. Levin & Co.
CAROL G. BARTHA, Assistant Vice President--Employee, T. Rowe Price

Health Sciences Fund
*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Director--Chairman of the Board, Price-Fleming; Vice Chairman
of the Board, Chief Investment Officer, and Managing Director, T. Rowe Price;
Vice President and Director, T. Rowe Price Trust Company; Chartered Financial
Analyst; Chartered Investment Counselor
*JOHN H. LAPORTE, JR., President and Director--Managing Director, T. Rowe
Price; Chartered Financial Analyst
JOSEPH KLEIN III, Executive Vice President--Vice President, T. Rowe Price;
Chartered Financial Analyst
MARC L. BAYLIN, Vice President--Assistant Vice President, T. Rowe Price;
formerly financial analyst, Rausher Pierce Refsnes
CHARLES A. MORRIS, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
CHARLES PEPIN, Vice President--Assistant Vice President, T. Rowe Price;
formerly (1990-1992) Corporate Finance Analyst, Piper Jaffray Inc.
JAMES D. PREY III, Vice President--Vice President, T. Rowe Price
DARRELL M. RILEY, Vice President--Employee, T. Rowe Price
MICHAEL F. SOLA, Vice President--Employee, T. Rowe Price, formerly Systems
Analyst/Programmer at SRA Corporation
ANDREW BHAK, Assistant Vice President--Employee, T. Rowe Price; formerly
(1990-1995) Senior Healthcare Analyst, United States General Accounting Office

Media & Telecommunications Fund

*JAMES S. RIEPE, Chairman of the Board and Director--Vice Chairman of the
Board and Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe
Price Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*JAMES A. C. KENNEDY III, President--Managing Director, T. Rowe Price;
Chartered Financial Analyst
*CHARLES A. MORRIS, Executive Vice President--Vice President, T. Rowe Price;
Chartered Financial Analyst
*BRIAN D. STANSKY, Executive Vice President--Vice President, T. Rowe Price
LISE J. BUYER, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
ROBERT N. GENSLER, Vice President--Vice President, T. Rowe Price
SEEMA R. HINGORANI, Vice President--Employee, T. Rowe Price
D. JAMES PREY III, Vice President--Vice President, T. Rowe Price
*M. DAVID TESTA, Vice President and Director--Chairman of the Board,
Price-Fleming; Vice Chairman of the Board, Chief Investment Officer, and
Managing Director, T. Rowe Price; Vice President and Director, T. Rowe Price
Trust Company; Chartered Financial Analyst; Chartered Investment Counselor
JOHN F. WAKEMAN, Vice President--Vice President, T. Rowe Price

Mid-Cap Equity Growth Fund
*JAMES S. RIEPE, Chairman of the Board--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*JAMES A. C. KENNEDY III, Director--Managing Director, T. Rowe Price;
Chartered Financial Analyst
*JOHN H. LAPORTE JR., Director--Managing Director, T. Rowe Price; Chartered
Financial Analyst
*M. DAVID TESTA, President and Director--Chairman of the Board, Price-Fleming;
Vice Chairman of the Board, Chief Investment Officer, and Managing Director,
T. Rowe Price; Vice President and Director, T. Rowe Price Trust Company;
Chartered Financial Analyst; Chartered Investment Counselor
BRIAN W. H. BERGHUIS, Executive Vice President--Vice President, T. Rowe Price;
Chartered Financial Analyst
MARC L. BAYLIN, Vice President--Assistant Vice President, T. Rowe Price;
formerly financial analyst, Rausher Pierce Refsnes
ROBERT N. GENSLER, Vice President--Vice President, T. Rowe Price
THOMAS J. HUBER, Vice President--Assistant Vice President, T. Rowe Price
JOSEPH KLEIN III, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
ROBERT J. MARCOTTE, Vice President--Vice President, T. Rowe Price
CHARLES A. MORRIS, Vice President--Vice President of T. Rowe Price; Chartered
Financial Analyst
STEVEN B. ROORDA, Vice President--Vice President, T. Rowe Price
JOHN F. WAKEMAN, Vice President--Vice President, T. Rowe Price

Mid-Cap Growth Fund
*JAMES S. RIEPE, Chairman of the Board--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*JAMES A. C. KENNEDY III, Director--Managing Director, T. Rowe Price;
Chartered Financial Analyst
*JOHN H. LAPORTE, JR., Director--Managing Director, T. Rowe Price; Chartered
Financial Analyst
BRIAN W. H. BERGHUIS, President--Managing Director, T. Rowe Price;
Chartered Financial Analyst
MARC L. BAYLIN, Vice President--Assistant Vice President, T. Rowe Price;
formerly financial analyst, Rausher Pierce Refsnes
THOMAS J. HUBER, Vice President--Assistant Vice President, T. Rowe Price
ROBERT N. GENSLER, Vice President--Vice President, T. Rowe Price
JOSEPH KLEIN III, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
ROBERT J. MARCOTTE, Vice President--Vice President, T. Rowe Price
CHARLES A. MORRIS, Vice President--Vice President, T. Rowe Price;
Chartered Financial Analyst
STEVEN B. ROORDA, Vice President--Vice President, T. Rowe Price
JOHN F. WAKEMAN, Vice President--Vice President, T. Rowe Price

Mid-Cap Value Fund
**M. DAVID TESTA, Director--Chairman of the Board, Price-Fleming; Vice
Chairman of the Board, Chief Investment Officer, and Managing Director, T.
Rowe Price; Vice President and Director, T. Rowe Price Trust Company;
Chartered Financial Analyst; Chartered Investment Counselor
GREGORY A. McCRICKARD, President--Vice President, T. Rowe Price; Chartered
Financial Analyst
*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
JAMES A. C. KENNEDY III, Vice President and Director--Managing Director, T.
Rowe Price; Chartered Financial Analyst
PRESTON G. ATHEY, Vice President--Managing Director, T. Rowe Price;
Chartered Financial Analyst
HUGH M. EVANS III, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
MARCY L. FISHER, Vice President--Vice President, T. Rowe Price
BRIAN C. ROGERS, Vice President--Director and Managing Director, T. Rowe
Price; Chartered Financial Analyst
DAVID J. WALLACK, Vice President--Vice President, T. Rowe Price

New America Growth Fund
*JOHN H. LAPORTE, JR., President and Trustee--Managing Director of T. Rowe
Price; Chartered Financial Analyst
*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Trustee--Chairman of the Board, Price-Fleming; Vice Chairman
of the Board, Chief Investment Officer, and Managing Director, T. Rowe Price;
Vice President and Director, T. Rowe Price Trust Company; Chartered Financial
Analyst; Chartered Investment Counselor
BRIAN W. H. BERGHUIS, Executive Vice President--Managing Director, T. Rowe
Price; Chartered Financial Analyst
MARC L. BAYLIN, Vice President--Assistant Vice President, T. Rowe Price;
formerly financial analyst, Rausher Pierce Refsnes
GREGORY V. DONOVAN, Vice President--Vice President, T. Rowe Price
ROBERT N. GENSLER, Vice President--Vice President, T. Rowe Price
THOMAS J. HUBER, Vice President----Assistant Vice President, T. Rowe Price
KARA M. CHESEBY, Vice President--Vice President, T. Rowe Price, formerly Vice
President, Legg Mason Wood Walker
CHARLES PEPIN, Vice President--Employee, T. Rowe Price
STEVEN B. ROORDA, Vice President--Vice President, T. Rowe Price
BRIAN D. STANSKY, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
JOHN F. WAKEMAN, Vice President--Vice President, T. Rowe Price

New Era Fund
*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Director--Chairman of the Board, Price-Fleming; Vice Chairman
of the Board, Chief Investment Officer, and Managing Director, T. Rowe Price;
Vice President and Director, T. Rowe Price Trust Company; Chartered Financial
Analyst; Chartered Investment Counselor
JAMES A. C. KENNEDY III, Vice President and Director--Managing Director, T.
Rowe Price; Chartered Financial Analyst
CHARLES M. OBER, President--Vice President, T. Rowe Price; Chartered Financial
Analyst
DAVID J. WALLACK, Executive Vice President--Vice President, T. Rowe Price
HUGH M. EVANS III, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
RICHARD P. HOWARD, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
DAVID M. LEE, Vice President--Assistant Vice President, T. Rowe Price
ROBERT J. MARCOTTE, Vice President--Vice President, T. Rowe Price
*GEORGE A. ROCHE, Vice President--Chief Executive Officer, President, Chairman
of the Board, and Managing Director, T. Rowe Price; Vice President and
Director, Rowe Price-Fleming International, Inc.

New Horizons Fund
*JOHN H. LAPORTE, President and Director--Managing Director of T. Rowe Price;
Chartered Financial Analyst
*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Director--Chairman of the Board, Price-Fleming; Vice Chairman
of the Board, Chief Investment Officer, and Managing Director, T. Rowe Price;
Vice President and Director, T. Rowe Price Trust Company; Chartered Financial
Analyst; Chartered Investment Counselor
PRESTON G. ATHEY, Vice President--Managing Director, T. Rowe Price;
Chartered Financial Analyst
MARC L. BAYLIN, Vice President--Assistant Vice President, T. Rowe Price;
formerly financial analyst, Rausher Pierce Refsnes
BRIAN W. H. BERGHUIS, Vice President--Managing Director, T. Rowe Price;
Chartered Financial Analyst
LISE J. BUYER, Vice President--Vice President, T. Rowe Price; formerly (4/91-
4/92) PC Analyst, Cowen & Co.; Chartered Financial Analyst
GREGORY V. DONOVAN, Vice President--Vice President, T. Rowe Price
MARCY L. FISHER, Vice President--Vice President, T. Rowe Price
ROBERT N. GENSLER, Vice President--Vice President, T. Rowe Price
JILL L. HAUSER, Vice President--Vice President, T. Rowe Price
THOMAS J. HUBER, Vice President--Assistant Vice President, T. Rowe Price
JOSEPH KLEIN III, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
CHARLES A. MORRIS, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
CHARLES G. PEPIN, Vice President--Assistant Vice President, T. Rowe Price
DARRELL M. RILEY, Vice President--Employee, T .Rowe Price
STEVEN B. ROORDA, Vice President--Vice President, T. Rowe Price
BRIAN D. STANSKY, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
JOHN F. WAKEMAN, Vice President--Vice President, T. Rowe Price
FRANCIES W. HAWKS, Assistant Vice President--Assistant Vice President of T.
Rowe Price

Small-Cap Stock Fund
*JOHN H. LAPORTE, JR., Chairman of the Board--Managing Director of T. Rowe
Price; Chartered Financial Analyst
*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Director--Chairman of the Board, Price-Fleming; Vice Chairman
of the Board, Chief Investment Officer, and Managing Director, T. Rowe Price;
Vice President and Director, T. Rowe Price Trust Company; Chartered Financial
Analyst; Chartered Investment Counselor
GREGORY A. McCRICKARD, President--Vice President, T. Rowe Price; Chartered
Financial Analyst
LISE J. BUYER, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
HUGH M. EVANS III, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
MARCY L. FISHER, Vice President--Assistant Vice President, T. Rowe Price
JAMES A. C. KENNEDY III, Vice President--Managing Director of T. Rowe Price;
Chartered Financial Analyst
BRIAN D. STANSKY, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
RICHARD T. WHITNEY, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst

Science & Technology Fund
*JOHN H. LAPORTE, JR., Chairman of the Board--Managing Director, T. Rowe
Price; Chartered Financial Analyst
*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Director--Chairman of the Board, Price-Fleming; Vice Chairman
of the Board, Chief Investment Officer, and Managing Director, T. Rowe Price;
Vice President and Director, T. Rowe Price Trust Company; Chartered Financial
Analyst; Chartered Investment Counselor
CHARLES A. MORRIS, President--Vice President, T. Rowe Price; Chartered
Financial Analyst
MARC L. BAYLIN, Vice President--Assistant Vice President, T. Rowe Price;
formerly financial analyst, Rausher Pierce Refsnes
LISE J. BUYER, Vice President--Vice President, T. Rowe Price; formerly (4/91-
4/92) PC Analyst, Cowen & Co.; Chartered Financial Analyst
GREGORY V. DONOVAN, Vice President--Vice President, T. Rowe Price MARCY L.
FISHER, Vice President--Vice President, T. Rowe Price
ROBERT N. GENSLER, Vice President--Vice President, T. Rowe Price
JILL L. HAUSER, Vice President--Vice President, T. Rowe Price
JOSEPH KLEIN III, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
JAMES D. PREY III, Vice President--Vice President, T. Rowe Price
MICHAEL F. SOLA, Vice President--Employee, T. Rowe Price, formerly Systems
Analyst/Programmer at SRA Corporation
BRIAN D. STANSKY, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst

Small-Cap Value Fund
*JOHN H. LAPORTE, JR., Chairman of the Board--Managing Director of T. Rowe
Price; Chartered Financial Analyst
*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Director--Chairman of the Board, Price-Fleming; Vice Chairman
of the Board, Chief Investment Officer, and Managing Director, T. Rowe Price;
Vice President and Director, T. Rowe Price Trust Company; Chartered Financial
Analyst; Chartered Investment Counselor
PRESTON G. ATHEY, President--Managing Director, T. Rowe Price; Chartered
Financial Analyst
HUGH M. EVANS III, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
ROBERT J. MARCOTTE, Vice President--Employee, T. Rowe Price
GREGORY A. MCCRICKARD, Vice President--Vice President, T. Rowe Price;
Chartered Financial Analyst
LAUREN A. ROMEO, Vice President--Employee, T. Rowe Price, Chartered Financial
Analyst
DANIEL M. THERIAULT, Vice President--Vice President, T. Rowe Price, Chartered
Financial Analyst; formerly Securities Analyst, John A. Levin & Co.
FRANCIES W. HAWKS, Assistant Vice President--Assistant Vice President of T.
Rowe Price

Value Fund
*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and 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.
*M. DAVID TESTA, Director--Chairman of the Board, Price-Fleming; Vice Chairman
of the Board, Chief Investment Officer, and Managing Director, T. Rowe Price;
Vice President and Director, T. Rowe Price Trust Company; Chartered Financial
Analyst; Chartered Investment Counselor
BRIAN C. ROGERS, President--Director and Managing Director, T. Rowe Price;
Chartered Financial Analyst
STEPHEN W. BOESEL, Vice President--Vice President, T. Rowe Price
STEPHANIE C. CLANCY, Vice President--Assistant Vice President, T. Rowe Price
RICHARD P. HOWARD, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
KARA M. CHESEBY, Vice President--Vice President, T. Rowe Price, formerly Vice
President, Legg Mason Wood Walker

ROBERT W. SMITH, Vice President--Vice President, T. Rowe Price; formerly
(1987-1992) Investment Analyst, Massachusetts Financial Services, Inc.,
Boston, Massachusetts
DANIEL M. THERIAULT, Vice President--Vice President, T. Rowe Price, Chartered
Financial Analyst; formerly Securities Analyst, John A. Levin & Co.
DAVID J. WALLACK, Vice President--Vice President, T. Rowe Price

COMPENSATION TABLE

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

Total Compensation
Aggregate From Fund and
Name of Compensation Fund Complex
Person, From Paid to
Position Fund(a) Directors (b)
________________________________________________________________
Balanced Fund

Leo C. Bailey, , Director (c) $ 512 $42,083
Donald W. Dick, Jr., Director 1,563 72,917
David K. Fagin, Director 2,331 59,167
Addison Lanier, Director (c) 512 42,083
John K. Major, Director(c) 883 34,167
Hanne M. Merriman, Director 2,331 59,167
Hubert D. Vos, Director 2,331 59,167
Paul M. Wythes, Director 1,772 69,667
_________________________________________________________________
Blue Chip Growth Fund

Leo C. Bailey, Director(c) $ 281 $42,083
Donald W. Dick, Jr., Director 1,140 72,917
David K. Fagin, Director 1,280 59,167
Addison Lanier, Director(c) 281 42,083
John K. Major, Director(c) 370 34,167
Hanne M. Merriman, Director 1,280 59,167
Hubert D. Vos, Director 1,280 59,167
Paul M. Wythes, Director 1,188 69,667
_________________________________________________________________
Capital Appreciation Fund

Leo C. Bailey, Director (c) $ 599 $42,083
Donald W. Dick, Jr., Director 1,693 72,917
David K. Fagin, Director 2,646 59,167
Addision Lanier, Director (c) 599 42,083
John K. Major, Director (c) 1,078 34,167
Hanne M. Merriman, Director 2,646 59,167
Hubert D. Vos, Director 2,646 59,167
Paul M. Wythes, Director 1,971 69,667
_________________________________________________________________
Capital Opportunity Fund

Leo C. Bailey, Director (c) $ 241 $42,083
Donald W. Dick, Jr., Director 1,026 72,917
David K. Fagin, Director 1,024 59,167
Addision Lanier, Director (c) 241 42,083
John K. Major, Director (c) 280 34,167
Hanne M. Merriman, Director 1,024 59,167
Hubert D. Vos, Director 1,024 59,167
Paul M. Wythes, Director 1,046 69,667
_________________________________________________________________
Dividend Growth Fund

Leo C. Bailey, Director(c) $ 248 $42,083
Donald W. Dick, Jr., Director 1,041 72,917
David K. Fagin, Director 1,043 59,167
Addision Lanier, Director (c) 248 42,083
John K. Major, Director(c) 297 34,167
Hanne M. Merriman, Director 1,043 59,167
Hubert D. Vos, Director 1,043 59,167
Paul M. Wythes, Director 1,068 69,667
_________________________________________________________________
Equity Income Fund

Leo C. Bailey, Trustee (c) $1,876 $42,083
Donald W. Dick, Jr., Trustee 4,805 72,917
David K. Fagin, Trustee 7,418 59,167
Addision Lanier, Trustee (c) 1,876 42,083
John K. Major, Trustee (c) 1,876 34,167
Hanne M. Merriman, Trustee 7,418 59,167
Hubert D. Vos, Trustee 7,418 59,167
Paul M. Wythes, Trustee 4,805 69,667
_________________________________________________________________
Equity Index Fund

Leo C. Bailey, Director (c) $ 430 $42,083
Donald W. Dick, Jr., Director 1,437 72,917
David K. Fagin, Director 2,029 59,167
Addision Lanier, Director (c) 430 42,083
John K. Major, Director (c) 701 34,167
Hanne M. Merriman, Director 2,029 59,167
Hubert D. Vos, Director 2,029 59,167
Paul M. Wythes, Director 1,587 69,667
_________________________________________________________________
Financial Services Fund

Donald W. Dick, Jr., Director $249 $72,917
David K. Fagin, Director 249 59,167
Hanne M. Merriman, Director 249 59,167
Hubert D. Vos, Director 249 59,167
Paul M. Wythes, Director 249 69,667
_________________________________________________________________
Growth & Income Fund

Leo C. Bailey, Director (c) $1,020 $42,083
Donald W. Dick, Jr., Director 2,581 72,917
David K. Fagin, Director 4,686 59,167
Addision Lanier, Director (c) 1,020 42,083
John K. Major, Director (c) 1,876 34,167
Hanne M. Merriman, Director 4,686 59,167
Hubert D. Vos, Director 4,686 59,167
Paul M. Wythes, Director 3,052 69,667
_________________________________________________________________
Growth Stock Fund

Leo C. Bailey, Director (c) $1,476 $42,083
Donald W. Dick, Jr., Director 3,417 72,917

David K. Fagin, Director 5,441 59,167
Addision Lanier, Director (c) 1,476 42,083
John K. Major, Director (c) 1,876 34,167
Hanne M. Merriman, Director 5,441 59,167
Hubert D. Vos, Director 5,441 59,167
Paul M. Wythes, Director 3,681 69,667
_________________________________________________________________
Media & Telecommunications Fund (d)

Donald W. Dick, Jr., Director $824 72,917
David K. Fagin, Director 1,151 59,167
Hanne M. Merriman, Director 1,151 59,167
Hubert D. Vos, Director 1,151 59,167
Paul M. Wythes, Director 824 69,667

_________________________________________________________________
Mid-Cap Equity Growth Fund

Donald W. Dick, Jr., Director $416 72,917
David K. Fagin, Director 417 59,167
Hanne M. Merriman, Director 417 59,167
Hubert D. Vos, Director 417 59,167
Paul M. Wythes, Director 416 69,667
_________________________________________________________________
Mid-Cap Growth Fund

Leo C. Bailey, Director (c) $ 354 $42,083
Donald W. Dick, Jr., Director 1,366 72,917
David K. Fagin, Director 1,858 59,167
Addision Lanier, Director (c) 354 42,083
John K. Major, Director (c) 529 34,167
Hanne M. Merriman, Director 1,858 59,167
Hubert D. Vos, Director 1,858 59,167
Paul M. Wythes, Director 1,454 69,667
_________________________________________________________________
Mid-Cap Value Fund

Donald W. Dick, Jr., Director $421 72,917
David K. Fagin, Director 427 59,167
Hanne M. Merriman, Director 427 59,167
Hubert D. Vos, Director 427 59,167
Paul M. Wythes, Director 422 69,667
________________________________________________________________
New America Growth Fund

Leo C. Bailey, Trustee (c) $ 685 $42,083
Donald W. Dick, Jr., Trustee 1,929 72,917
David K. Fagin, Trustee 3,250 59,167
Addision Lanier, Trustee (c) 685 42,083
John K. Major, Trustee (c) 1,268 34,167
Hanne M. Merriman, Trustee 3,250 59,167
Hubert D. Vos, Trustee 3,250 59,167
Paul M. Wythes, Trustee 2,256 69,667
_________________________________________________________________
New Era Fund

Leo C. Bailey, Director (c) $ 721 $42,083
Donald W. Dick, Jr., Director 1,974 72,917

David K. Fagin, Director 3,314 59,167
Addision Lanier, Director (c) 721 42,083
John K. Major, Director (c) 1,317 34,167
Hanne M. Merriman, Director 3,314 59,167
Hubert D. Vos, Director 3,314 59,167
Paul M. Wythes, Director 2,297 69,667
_________________________________________________________________
New Horizons Fund

Leo C. Bailey, Director (c) $1,560 $42,083
Donald W. Dick, Jr., Director 3,787 72,917
David K. Fagin, Director 6,146 59,167
Addision Lanier, Director (c) 1,560 42,083
John K. Major, Director (c) 1,876 34,167
Hanne M. Merriman, Director 6,146 59,167
Hubert D. Vos, Director 6,146 59,167
Paul M. Wythes, Director 4,035 69,667
_________________________________________________________________
Small-Cap Stock Fund

Leo C. Bailey, Director (c) $ 333 $42,083
Donald W. Dick, Jr., Director 1,204 72,917
David K. Fagin, Director 1,457 59,167
Addision Lanier, Director (c) 333 42,083
John K. Major, Director (c) 486 34,167
Hanne M. Merriman, Director 1,457 59,167
Hubert D. Vos, Director 1,457 59,167
Paul M. Wythes, Director 1,293 69,667
_________________________________________________________________
Science & Technology Fund

Leo C. Bailey, Director (c) $1,309 $42,083
Donald W. Dick, Jr., Director 3,191 72,917
David K. Fagin, Director 5,381 59,167
Addision Lanier, Director (c) 1,309 42,083
John K. Major, Director (c) 1,876 34,167
Hanne M. Merriman, Director 5,381 59,167
Hubert D. Vos, Director 5,381 59,167
Paul M. Wythes, Director 3,545 69,667
_________________________________________________________________
Small-Cap Value Fund

Leo C. Bailey, Director (c) $ 658 $42,083
Donald W. Dick, Jr., Director 1,871 72,917
David K. Fagin, Director 3,108 59,167
Addision Lanier, Director (c) 658 42,083
John K. Major, Director (c) 1,205 34,167
Hanne M. Merriman, Director 3,108 59,167
Hubert D. Vos, Director 3,108 59,167
Paul M. Wythes, Director 2,178 69,667
_________________________________________________________________
Value Fund

Leo C. Bailey, Director (c) $ 235 $42,083
Donald W. Dick, Jr., Director 1,011 72,917
David K. Fagin, Director 987 59,167
Addision Lanier, Director (c) 235 42,083
John K. Major, Director (c) 267 34,167
Hanne M. Merriman, Director 987 59,167
Hubert D. Vos, Director 987 59,167
Paul M. Wythes, Director 1,027 69,667

(a) Amounts in this column are based on accrued compensation for calendar
year 1996.
(b) Amounts in this column are based on compensation received from January
1, 1996 to December 31, 1996. The T. Rowe Price complex included 76
funds as of December 31, 1996.
(c) Messrs. Bailey, Lanier, and Major retired from their positions with the
Funds in April 1996.

(d) Estimated future annual compensation from the Fund based on a full
calendar year.

All Funds

The Fund's Executive Committee, consisting of the Fund's interested
directors/trustees, has been authorized by its respective Board of
Directors/Trustees to exercise all powers of the Board to manage the Funds in
the intervals between meetings of the Board, except the powers prohibited by
statute from being delegated.

PRINCIPAL HOLDERS OF SECURITIES

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

As of June 30, 1997, the following shareholders beneficially owned more
than 5% of the outstanding shares of:

Growth Stock, New Era, New Horizons and Growth & Income Funds: Pirateline &
Co., FBO Spectrum Growth Fund Acct., Attn.: Mark White, State Street Bank &
Trust Co., 1776 Heritage Drive - 4W, North Quincy, Massachusetts 02171-2197;

Blue Chip Growth, Capital Appreciation, Dividend Growth, Mid-Cap Growth, New
Era, Small-Cap Value and Science & Technology Funds: Charles Schwab & Co.
Inc., Reinvest. Account, Attn.: Mutual Fund Dept., 101 Montgomery Street, San
Francisco, California 94104-4122;

Growth & Income Fund: Manulife Financial USA, 200 Bloor St East NT3, Toronto,
Ontario Canada M4WIE5, Attn.: Rosie Chuck, Pension Accounting;

Small-Cap Stock Fund: Sigler & Co. of Smithsonian Inst., Wellington Trust Co.,
RD7 9866-77, Attn.: Jasmine Felix, 4 New York Plaza, 4th Floor, New York, New
York 10004-2413;

Mid-Cap Equity Growth Fund: Mercantile Bank of St. Louis, Attn.: Trust
Securities Unit 17-1, P.O. Box 387, St. Louis, Missouri 63166-0387; Atlantic
Trust Company NA, Attn.: Nominee Account, 100 Federal Street, 37th Floor,
Boston, Massachusetts 02110-1802; Conref & Company, c/o Mercantile Bank of St.
Louis, Attn.: Trust Securities Unit 17-1, P.O. Box 387, St. Louis, Missouri
63166-0387; Wentworth-Douglass Hospital, Attn.: Rayna Feldman, 789 Central
Avenue, Dover, New Hampshire 03820-2589.

INVESTMENT MANAGEMENT SERVICES

Services

Under the Management Agreement, T. Rowe Price provides the Fund with
discretionary investment services. Specifically, T. Rowe Price is responsible
for supervising and directing the investments of the Fund in accordance with
the Fund's investment objectives, program, and restrictions as provided in its
prospectus and this Statement of Additional Information. T. Rowe Price is also
responsible for effecting all security transactions
on behalf of the Fund, including the negotiation of commissions and the
allocation of principal business and portfolio brokerage. In addition to these
services, T. Rowe Price provides the Fund with certain corporate
administrative services, including: maintaining the Fund's corporate existence
and corporate records; registering and qualifying Fund shares under federal
laws; monitoring the financial, accounting, and administrative functions of
the Fund; maintaining liaison with the agents employed by the Fund such as the
Fund's custodian and transfer agent; assisting the Fund in the coordination of
such agents' activities; and permitting T. Rowe Price's employees to serve as
officers, directors, and committee members of the Fund without cost to the
Fund.

The 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.

All Funds, Except Equity Index and Mid-Cap Equity Growth Funds

Management Fee

The Fund pays T. Rowe Price 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 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 0.340% Next $5 billion
0.450% Next $1 billion 0.330% Next $10 billion
0.420% Next $1 billion 0.320% Next $10 billion
0.390% Next $1 billion 0.310% Next $16 billion
0.370% Next $1 billion 0.305% Next $30 billion
0.360% Next $2 billion 0.300% Thereafter
0.350% Next $2 billion

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 T. Rowe Price Equity Index Fund and T. Rowe Price Spectrum Fund,
Inc. 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 ("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 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.
The individual fund fees for each Fund are listed in the chart below:

Balanced Fund 0.15%
Blue Chip Growth Fund 0.30%
Capital Appreciation Fund 0.30%*
Capital Opportunity Fund 0.45%
Diversified Small-Cap Growth Fund 0.35%
Dividend Growth Fund 0.20%
Equity Income Fund 0.25%
Equity Index Fund 0.20%
Financial Services Fund 0.35%
Growth & Income Fund 0.25%
Growth Stock Fund 0.25%
Health Sciences Fund 0.35%
Media & Telecommunications Fund 0.35%
Mid-Cap Growth Fund 0.35%
Mid-Cap Value Fund 0.35%
New America Growth Fund 0.35%
New Era Fund 0.25%
New Horizons Fund 0.35%
Small-Cap Stock Fund 0.45%
Science & Technology Fund 0.35%
Small-Cap Value Fund 0.35%
Value Fund 0.35%

*Subject to Performance Adjustment (please see page __).

The following chart sets forth the total management fees, if any, paid
to T. Rowe Price by each Fund, during last three years:

Fund 1996 1995 1994

Balanced $3,765,000 $2,778,000 $1,969,227
Blue Chip Growth 1,924,000 534,000 76,000
Capital Appreciation 4,218,000 4,940,000 4,161,612
Capital Opportunity 890,000 134,000 **
Dividend Growth 754,000 357,000 107,000
Equity Income 37,762,000 24,358,000 17,847,000
Equity Index 925,000 498,000 156,349
Financial Services ** * *
Growth & Income 12,048,000 8,195,000 5,984,000
Growth Stock 17,848,000 14,222,000 11,981,872
Health Sciences 750,000 * *
Media &
Telecommunications*** 3,056,000 2,665,000 2,109,000
Mid-Cap Equity Growth ** * *
Mid-Cap Growth 4,390,000 1,234,000 545,000
Mid-Cap Value 22,000 * *
New America Growth 8,648,000 5,554,000 4,395,000
New Era 7,559,000 6,218,000 5,272,000
New Horizons 25,875,000 15,035,000 11,402,554
Small-Cap Stock 2,619,000 1,897,000 1,534,235
Science & Technology 19,792,000 11,393,000 4,467,208
Small-Cap Value 8,187,000 4,262,000 3,047,508
Value 748,000 19,000 **

* Prior to commencement of operations.
** Due to each Fund's expense limitation in effect at that time, no
management fees were paid by the Funds to T. Rowe Price.

*** Fees listed were paid under this Fund's previous management agreement,
prior to becoming an open-end mutual fund.

The Management Agreement between the Fund and T. Rowe Price provides that
the Fund will bear all expenses of its operations not specifically assumed by
T. Rowe Price.

Balanced, Blue Chip Growth, Capital Opportunity, Diversified Small-Cap
Growth, Dividend Growth, Equity Index, Financial Services, Health Sciences,
Media & Telecommunications, Mid-Cap Equity Growth, Mid-Cap Growth, Mid-Cap
Value, and Value Funds

The following chart sets forth expense ratio limitations and the periods
for which they are effective. For each, T. Rowe Price has agreed to bear any
Fund expenses which would cause the Fund's ratio of expenses to average net
assets to exceed the indicated percentage limitations. The expenses borne by
T. Rowe Price are subject to reimbursement by the Fund through the indicated
reimbursement date, provided no reimbursement will be made if it would result
in the Fund's expense ratio exceeding its applicable limitation.

Expense
Limitation Ratio Reimbursement
Fund Period Limitation Date
_______ _________ ________ __________

Blue Chip
Growth(a) January 1, 1995- 1.25% December 31, 1998
December 31, 1996
Capital
Opportunity November 30, 1994- 1.35% December 31, 1998
December 31, 1996
Diversifed
Small-Cap
Growth June 30, 1997-
December 31, 1998 1.25% December 31, 2000
Dividend
Growth(b) January 1, 1995- 1.10% December 31, 1998
December 31, 1996
Equity Index(c) January 1, 1996- 0.40% December 31, 1999
December 31, 1997
Financial
Services September 30, 1996- 1.25% December 31, 2000
December 31, 1998
Health Sciences December 29, 1995- 1.35% December 31, 1999
December 31, 1997
Mid-Cap Equity
Growth July 31, 1996- 0.85% December 31, 1999
December 31, 1997
Mid-Cap Growth January 1, 1994- 1.25% December 31, 1997
December 31, 1995
Mid-Cap Value June 28, 1996- 1.25% December 31, 1999
December 31, 1997
Value September 30,1994- 1.10% December 31, 1998
December 31, 1996

(a) The Blue Chip Growth Fund previously operated under a 1.25% limitation
that expired December 31, 1994. The reimbursement period for this
limitation extends through December 31, 1996.
(b) The Dividend Growth Fund previously operated under a 1.00% limitation
that expired December 31, 1994. The reimbursement period for this
limitation extends through December 31, 1996.
(c) The Equity Index Fund previously operated under a 0.45% limitation that
expired December 31, 1995. The reimbursement period for this limitation
extends through December 31, 1997.

Each of the above-referenced Fund's Management Agreement also provides that
one or more additional expense limitation periods (of the same or different
time periods) may be implemented after the expiration of the current expense
limitation, and that with respect to any such additional limitation period,
the Fund may reimburse T. Rowe Price, provided the reimbursement does not
result in the Fund's aggregate expenses exceeding the additional expense
limitation.

Pursuant to the Health Sciences Fund's current expense limitation,
$101,000 of management fees were not accrued by the Fund for the year ended
December 31, 1996.

Pursuant to the Blue Chip Growth Fund's current and previous expense
limitation, $214,000 of unaccrued fees and expenses were repaid during the
year ended December 31, 1996.

Pursuant to the Dividend Growth Fund's previous expense limitation,
$174,000 of unaccrued 1993-94 fees and expenses were repaid by the Fund for
the year ended December 31, 1996. Additionally, $5,000 of unaccrued management
fees related to the current expense limitation are subject to reimbursement
through December 31, 1998.

Pursuant to the Equity Index Fund's current expense limitation, $370,000
of management fees were not accrued by the fund for the year ended December
31, 1996. Additionally, $445,000 of unaccrued management fees related to a
previous expense limitation are subject to reimbursement through December 31,
1997.

Pursuant to Capital Opportunity Fund's expense limitation that expired
on December 31, 1996, $1,000 of management fees were not accrued by the fund
for the year ended December 31, 1996. Additionally, $156,000 of unaccrued
1994-95 fees and expenses are subject to reimbursement through December 31,
1998.

Pursuant to the Value Fund's current expense limitation, $35,000 of
management fees were not accrued by the fund for the year ended December 31,
1996. Additionally, $202,000 of unaccrued 1994-95 fees and expenses are
subject to reimbursement through December 31, 1998.

Pursuant to the Mid-Cap Growth Fund's previous expense limitation,
$58,000 of unaccrued management fees were repaid during the year ended
December 31, 1996.

Pursuant to the Mid-Cap Equity Growth Fund's current expense limitation,
$14,000 of management fees and $34,000 of expenses were not accrued by the
fund for the year ended December 31, 1996 and are subject to reimbursement
through December 31, 1999.

Pursuant to the Mid-Cap Value Fund's current expense limitation, $78,000
of management fees were not accrued by the fund for the year ended December
31, 1996 and are subject to reimbursement through December 31, 1999.

Pursuant to the Financial Services Fund's current expense limitation,
$24,000 of management fees were not accrued by the fund for the year ended
December 31, 1996 and $2,000 of other expenses were borne by the manager.

Capital Appreciation Fund

Management Fee

The Fund pays T. Rowe Price a fee ("Fee") which consists of three
components: a Group Management Fee ("Group Fee"), an Individual Fund Fee
("Fund Fee") and a performance fee adjustment ("Performance Fee Adjustment")
based on the performance of the Fund relative to the Standard & Poor's 500
Stock Index (the "Index"). The Fee is paid monthly to T. Rowe Price on the
first business day of the next succeeding calendar month and is calculated as
described below. The performance adjustment for the year ended December 31,
1996, decreased management fees by $1,530,000.

The Monthly Group Fee and Monthly Fund Fee are combined (the "Combined
Fee") and are subject to a downward Performance Fee Adjustment until October
31, 1998, depending on the total return investment performance of the Fund
relative to the total return performance of the Standard & Poor's 500 Stock
Composite Index (the "Index") during the previous thirty-six (36) months.
Effective November 1, 1998, there will be no Performance Fee Adjustment. The
Performance Fee adjustment is computed as of the end of each month and if any
adjustment results, is subtracted from the Combined Fee. No Performance Fee
Adjustment is made to the Combined Fee unless the investment performance
("Investment Performance") of the Fund (stated as a percent) is exceeded by
the investment record ("Investment Record") of the Index (stated as a percent)
by at least one full point. (The difference between the Investment Performance
and Investment Record will be referred to as the Investment Performance
Differential.) The Performance Fee Adjustment for any month is calculated by
multiplying the rate of the Performance Fee Adjustment ("Performance Fee
Adjustment") (as determined below) achieved for the 36-month period, times the
average daily net assets of the Fund for such 36-month period and dividing the
product by 12. The Performance Fee Adjustment Rate is calculated by
multiplying the Investment Performance Differential (rounded downward to the
nearest full point) times a factor of .02%. Regardless of the Investment
Performance Differential, the Performance Fee Adjustment Rate shall not exceed
(.30)%. the same period.

Example

For example, if the Investment Performance Differential was (11.6), it
would be rounded to (11). The Investment Performance Differential of
(11) would be multiplied by .02% to arrive at the Performance Fee
Adjustment Rate of (.22)%.

The (.22)% Performance Fee Adjustment Rate would be multiplied by the
fraction of 1/12 and that product would be multiplied by the Fund's
average daily net assets for the 36-month period to arrive at the
Performance Fee Adjustment.

The computation of the Investment Performance of the Fund and the
Investment Record of the Index will be made in accordance with Rule 205-1
under the Investment Advisers Act of 1940 or any other applicable rule as,
from time to time, may be adopted or amended. These terms are currently
defined as follows:

The Investment Performance of the Fund is the sum of: (i) the change in
the Fund's net asset value per share during the period; (ii) the value of the
Fund's cash distributions per share having an exdividend date occurring within
the period; and (iii) the per share amount of any capital gains taxes paid or
accrued during such period by the Fund for undistributed, realized long-term
capital gains.

The Investment Record of the Index is the sum of: (i) the change in the
level of the Index during the period; and (ii) the value, computed
consistently with the Index, of cash distributions having an exdividend date
occurring within the period made by companies whose securities comprise the
Index.

Management Fee

Equity Index Fund

The Fund pays T. Rowe Price an annual investment management fee in
monthly installments of 0.20% of the average daily net asset value of the
Fund.

Mid-Cap Equity Growth Fund

The Fund pays T. Rowe Price an annual investment management fee in
monthly installments of 0.60% of the average daily net asset value of the
Fund.

Equity Income, Growth & Income, Growth Stock, New Era, and New Horizons Funds

T. Rowe Price Spectrum Fund, Inc.

The Funds listed above are a party to a Special Servicing Agreement
("Agreement") between and among T. Rowe Price Spectrum Fund, Inc. ("Spectrum
Fund"), T. Rowe Price, T. Rowe Price Services, Inc. and various other T. Rowe
Price funds which, along with the Fund, are funds in which Spectrum Fund
invests (collectively all such funds "Underlying Price Funds").

The Agreement provides that, if the Board of Directors/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.

All Funds

DISTRIBUTOR FOR FUND

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 the Fund's distributor. 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 the
Fund's shares is continuous.

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

Investment Services serves as distributor to the Fund pursuant to an
Underwriting Agreement ("Underwriting Agreement"), which provides that the
Fund will pay all fees and expenses in connection with: necessary state
filings; preparing, setting in type, printing, and mailing its prospectuses
and reports to shareholders; and issuing its shares, including expenses of
confirming purchase orders.

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 Fund shares;
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 Fund shares, except for those fees and
expenses specifically assumed by the Fund. Investment Services' expenses are
paid by T. Rowe Price.

Investment Services acts as the agent of the Fund in connection with the
sale of its shares in the various states in which Investment Services is
qualified as a broker-dealer. Under the Underwriting Agreement, Investment
Services accepts orders for Fund shares at net asset value. No sales charges
are paid by investors or the Fund.

All Funds
CUSTODIAN

State Street Bank and Trust Company is the custodian for the Fund's
securities and cash, but it does not participate in the Fund's investment
decisions. 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 Fund (other than Equity Index Fund) has entered into a Custodian
Agreement with The Chase Manhattan Bank, N.A., London, pursuant to which
portfolio securities which are purchased outside the United States are
maintained in the custody of various foreign branches of The Chase Manhattan
Bank and such other custodians, including foreign banks and foreign securities
depositories as are approved by the Fund's Board of Directors/Trustees in
accordance with regulations under the Investment Company Act of 1940. State
Street Bank's main office is at 225 Franklin Street, Boston, Massachusetts
02110. The address for The Chase Manhattan Bank, N.A., London is Woolgate
House, Coleman Street, London, EC2P 2HD, England.

SHAREHOLDER SERVICES

The Fund from time to time may enter into agreements with outside
parties through which shareholders hold Fund shares. The shares would be held
by such parties in omnibus accounts. The agreements would provide for payments
by the Fund to the outside party for shareholder services provided to
shareholders in the omnibus accounts.

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 10 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.

PORTFOLIO TRANSACTIONS

Investment or Brokerage Discretion

Decisions with respect to the purchase and sale of portfolio securities
on behalf of the Fund are made by T. Rowe Price. T. Rowe Price is also
responsible for implementing these decisions, including the negotiation of
commissions and the allocation of portfolio brokerage and principal business.

How Brokers and Dealers Are Selected

Equity Securities

In purchasing and selling the Fund's portfolio securities, it is T. Rowe
Price's policy to obtain quality execution at the most favorable prices
through responsible brokers and dealers and, in the case of agency
transactions, at competitive commission rates. However, under certain
conditions, the Fund may pay higher brokerage commissions in return for
brokerage and research services. As a general practice, over-the-counter
orders are executed with market-makers. In selecting among market-makers, T.
Rowe Price generally seeks to select those it believes to be actively and
effectively trading the security being purchased or sold. In selecting broker-
- -dealers to execute the Fund's portfolio transactions, consideration is given
to such factors as the price of the security, the rate of the commission, the
size and difficulty of the order, the reliability, integrity, financial
condition, general execution and operational capabilities of competing brokers
and dealers, and brokerage and research services provided by them. It is not
the policy of T. Rowe Price to seek the lowest available commission rate where
it is believed that a broker or dealer charging a higher commission rate would
offer greater reliability or provide better price or execution.

Fixed Income Securities

Fixed income securities are generally purchased from the issuer or a
primary market-maker acting as principal for the securities on a net basis,
with no brokerage commission being paid by the client although the price
usually includes an undisclosed compensation. Transactions placed through
dealers serving as primary market-makers reflect the spread between the bid
and asked prices. Securities may also be purchased from underwriters at prices
which include underwriting fees.

With respect to equity and fixed income securities, T. Rowe Price may
effect principal transactions on behalf of the Fund with a broker or dealer
who furnishes brokerage and/or research services, designate any such broker or
dealer to receive selling concessions, discounts or other allowances, or
otherwise deal with any such broker or dealer in connection with the
acquisition
of securities in underwritings. T. Rowe Price may receive research services in
connection with brokerage transactions, including designations in fixed price
offerings.

How Evaluations Are Made of the Overall Reasonableness of Brokerage
Commissions Paid

On a continuing basis, T. Rowe Price seeks to determine what levels of
commission rates are reasonable in the marketplace for transactions executed
on behalf of the Fund. In evaluating the reasonableness of commission rates,
T. Rowe Price considers: (a) historical commission rates, both before and
since rates have been fully negotiable; (b) rates which other institutional
investors are paying, based on available public information; (c) rates quoted
by brokers and dealers; (d) the size of a particular transaction, in terms of
the number of shares, dollar amount, and number of clients involved; (e) the
complexity of a particular transaction in terms of both execution and
settlement; (f) the level and type of business done with a particular firm
over a period of time; and (g) the extent to which the broker or dealer has
capital at risk in the transaction.

Description of Research Services Received From Brokers and Dealers

T. Rowe Price receives a wide range of research services from brokers
and dealers. These services include information on the economy, industries,
groups of securities, individual companies, statistical information,
accounting and tax law interpretations, political developments, legal
developments affecting portfolio securities, technical market action, pricing
and appraisal services, credit analysis, risk measurement analysis,
performance analysis, and analysis of corporate responsibility issues. These
services provide both domestic and international perspective. Research
services are received primarily in the form of written reports, computer
generated services, telephone contacts and personal meetings with security
analysts. In addition, such services may be provided in the form of meetings
arranged with corporate and industry spokespersons, economists, academicians
and government representatives. In some cases, research services are generated
by third parties but are provided to T. Rowe Price by or through broker-dealers.

Research services received from brokers and dealers are supplemental to
T. Rowe Price's own research effort and, when utilized, are subject to
internal analysis before being incorporated by T. Rowe Price into its
investment process. As a practical matter, it would not be possible for T.
Rowe Price's Equity Research Division to generate all of the information
presently provided by brokers and dealers. T. Rowe Price pays cash for certain
research services received from external sources. T. Rowe Price also allocates
brokerage for research services which are available for cash. While receipt of
research services from brokerage firms has not reduced T. Rowe Price's normal
research activities, the expenses of T. Rowe Price could be materially
increased if it attempted to generate such additional information through its
own staff. To the extent that research services of value are provided by
brokers or dealers, T. Rowe Price may be relieved of expenses which it might
otherwise bear.

T. Rowe Price has a policy of not allocating brokerage business in
return for products or services other than brokerage or research services. In
accordance with the provisions of Section 28(e) of the Securities Exchange Act
of 1934, T. Rowe Price may from time to time receive services and products
which serve both research and non-research functions. In such event, T. Rowe
Price makes a good faith determination of the anticipated research and non-
research use of the product or service and allocates brokerage only with
respect to the research component.

Commissions to Brokers Who Furnish Research Services

Certain brokers and dealers who provide quality brokerage and execution
services also furnish research services to T. Rowe Price. With regard to the
payment of brokerage commissions, T. Rowe Price has adopted a brokerage
allocation policy embodying the concepts of Section 28(e) of the Securities
Exchange Act of 1934, which permits an investment adviser to cause an account
to pay commission rates in excess of those another broker or dealer would have
charged for effecting the same transaction, if the adviser determines in good
faith that the commission paid is reasonable in relation to the value of the
brokerage and research services provided. The determination may be viewed in
terms of either the particular transaction involved or the overall
responsibilities of the adviser with respect to the accounts over which it
exercises investment discretion. Accordingly, while T. Rowe Price cannot
readily determine the extent to which commission rates or net prices charged
by broker-dealers reflect the value of their research services, T. Rowe Price
would expect to assess the reasonableness of commissions in light of the total
brokerage and research services provided by each particular broker. T. Rowe
Price may receive research, as defined in Section 28(e), in connection with
selling concessions and designations in fixed price offerings in which the
Funds participate.

Internal Allocation Procedures

T. Rowe Price has a policy of not precommitting a specific amount of
business to any broker or dealer over any specific time period. Historically,
the majority of brokerage placement has been determined by the needs of a
specific transaction such as market-making, availability of a buyer or seller
of a particular security, or specialized execution skills. However, T. Rowe
Price does have an internal brokerage allocation procedure for that portion of
its discretionary client brokerage business where special needs do not exist,
or where the business may be allocated among several brokers or dealers which
are able to meet the needs of the transaction.

Each year, T. Rowe Price assesses the contribution of the brokerage and
research services provided by brokers or dealers, and attempts to allocate a
portion of its brokerage business in response to these assessments. Research
analysts, counselors, various investment committees, and the Trading
Department each seek to evaluate the brokerage and research services they
receive from brokers or dealers and make judgments as to the level of business
which would recognize such services. In addition, brokers or dealers sometimes
suggest a level of business they would like to receive in return for the
various brokerage and research services they provide. Actual brokerage
received by any firm may be less than the suggested allocations but can, and
often does, exceed the suggestions, because the total business is allocated on
the basis of all the considerations described above. In no case is a broker or
dealer excluded from receiving business from T. Rowe Price because it has not
been identified as providing research services.

Miscellaneous

T. Rowe Price's brokerage allocation policy is consistently applied to
all its fully discretionary accounts, which represent a substantial majority
of all assets under management. Research services furnished by brokers or
dealers through which T. Rowe Price effects securities transactions may be
used in servicing all accounts (including non-Fund accounts) managed by T.
Rowe Price. Conversely, research services received from brokers or dealers
which execute transactions for the Fund are not necessarily used by T. Rowe
Price exclusively in connection with the management of the Fund.

From time to time, orders for clients may be placed through a
computerized transaction network.

The Fund does not allocate business to any broker-dealer on the basis of
its sales of the Fund's shares. However, this does not mean that broker-
dealers who purchase Fund shares for their clients will not receive business
from the Fund.

Some of T. Rowe Price's other clients have investment objectives and
programs similar to those of the Fund. T. Rowe Price may occasionally make
recommendations to other clients which result in their purchasing or selling
securities simultaneously with the Fund. As a result, the demand for
securities being purchased or the supply of securities being sold may
increase, and this could have an adverse effect on the price of those
securities. It is T. Rowe Price's policy not to favor one client over another
in making recommendations or in placing orders. T. Rowe Price frequently
follows the practice of grouping orders of various clients for execution which
generally results in lower commission rates being attained. In certain cases,
where the aggregate order is executed in a series of transactions at various
prices on a given day, each participating client's proportionate share of such
order reflects the average price paid or received with respect to the total
order. T. Rowe Price has established a general investment policy that it will
ordinarily not make additional purchases of a common stock of a company for
its clients (including the T. Rowe Price Funds) if, as a result of such
purchases, 10% or more of the outstanding common stock of such company would
be held by its clients in the aggregate.

Trade Allocation Policies

T. Rowe Price has developed written trade allocation guidelines for its
Equity, Municipal, and Taxable Fixed Income Trading Desks. Generally, when the
amount of securities available in a public offering or the secondary market is
insufficient to satisfy the volume or price requirements for the participating
client portfolios, the guidelines require a pro rata allocation based upon the
amounts initially requested by each portfolio manager. In allocating trades
made on combined basis, the Trading Desks seek to achieve the same net unit
price of the securities for each participating client. Because a pro-rata
allocation may not always adequately accommodate all facts and circumstances,
the guidelines provide for exceptions to allocate trades on an adjusted, pro
rata basis. Examples of where adjustments may be made include: (i)
reallocations to recognize the efforts of a portfolio manager in negotiating a
transaction or a private placement; (ii) reallocations to eliminate deminimis
positions; (iii) priority for accounts with specialized investment policies
and objectives; and (iv) reallocations in light of a participating portfolio's
characteristics (e.g., industry or issuer concentration, duration, and credit
exposure).

To the extent possible, T. Rowe Price intends to recapture solicitation
fees paid in connection with tender offers through T. Rowe Price Investment
Services, Inc., the Fund's distributor. At the present time, T. Rowe Price
does not recapture commissions or underwriting discounts or selling group
concessions in connection with taxable securities acquired in underwritten
offerings. T. Rowe Price does, however, attempt to negotiate elimination of
all or a portion of the selling-group concession or underwriting discount when
purchasing tax-exempt municipal securities on behalf of its clients in
underwritten offerings.

Transactions With Related Brokers and Dealers

As provided in the Investment Management Agreement between the Fund and
T. Rowe Price, T. Rowe Price is responsible not only for making decisions with
respect to the purchase and sale of the Fund's portfolio securities, but also
for implementing these decisions, including the negotiation of commissions and
the allocation of portfolio brokerage and principal business. It is expected
that T. Rowe Price may place orders for the Fund's portfolio transactions with
broker-dealers through the same trading desk T. Rowe Price uses for portfolio
transactions in domestic securities. The trading desk accesses brokers and
dealers in various markets in which the Fund's foreign securities are located.
These brokers and dealers may include certain affiliates of Robert Fleming
Holdings Limited ("Robert Fleming Holdings") and Jardine Fleming Group Limited
("JFG"), persons indirectly related to T. Rowe Price. Robert Fleming Holdings,
through Copthall Overseas Limited, a wholly owned subsidiary, owns 25% of the
common stock of Rowe Price-Fleming International, Inc. ("RPFI"), an investment
adviser registered under the Investment Advisers Act of 1940. Fifty percent of
the common stock of RPFI is owned by TRP Finance, Inc., a wholly owned
subsidiary of T. Rowe Price, and the remaining 25% is owned by Jardine Fleming
Holdings Limited, a subsidiary of JFG. JFG is 50% owned by Robert Fleming
Holdings and 50% owned by Jardine Matheson Holdings Limited. Orders for the
Fund's portfolio transactions placed with affiliates of Robert Fleming
Holdings and JFG will result in commissions being received by such affiliates.

The Board of Directors/Trustees of the Fund has authorized T. Rowe Price
to utilize certain affiliates of Robert Fleming and JFG in the capacity of
broker in connection with the execution of the Fund's portfolio transactions.
Other affiliates of Robert Fleming Holding and JFG also may be used. Although
it does not believe that the Fund's use of these brokers would be subject to
Section 17(e) of the Investment Company Act of 1940, the Board of
Directors/Trustees of the Fund has agreed that the procedures set forth in
Rule 17e-1 under that Act will be followed when using such brokers.

Other

For the years 1996, 1995, and 1994, the total brokerage commissions paid
by each Fund, including the discounts received by securities dealers in
connection with underwritings, and the percentage of these commissions paid to
firms which provided research, statistical, or other services to T. Rowe Price
in connection with the management of each Fund, or, in some cases, to each
Fund, was as shown below.

<TABLE>
<CAPTION>
1996 1995 1994

Fund Commissions % Commissions % Commissions %
<S> <C> <C> <C> <C> <C> <C>
Balanced 292,325 13.0% $392,293.25 14.8% $258,006 18.1%
Blue Chip
Growth 748,661 34.6% 420,930.75 10.3% 219,539 11.9%
Capital
Apprec-
iation 886,009 46.6% 1,922,697.14 32.4% 828,822 67.4%
Capital
Oppor-
tunity 764,518 38.7% 528,726.58 24.6% 7,857 7.2%
Dividend
Growth 478,131 28.6% 373,297.65 9.6% 294,479 15.9%
Equity
Income 6,912,071 59.2% 4,193,326.16 43.2% 4,511,187 48.4%
Growth &
Income 1,874,214 42.7% 1,431,193.83 44.7% 2,550,364 23.7%
Growth
Stock 5,630,241 48.7% 4,769,565.10 42.6% 4,002,616 51.6%

Equity
Index 37,146 0.0% 98,198.06 0.1% 21,198 3.27%
Financial
Services 60,862 10.5% * * * *
Health
Sciences 1,488,623 20.4% * * * *
Media &
Telecom-
munica-
tions 1,659,735 15.0% 1,069,972.92 22.6% 1,008,389.5345.1%

Mid-Cap
Equity
Growth 24,079 12.0% * * * *
Mid-Cap
Growth 3,149,050 27.9% 924,702.44 16.5% 349,991 30.8%
Mid-Cap
Value 92,359 17.0% * * * *
New America
Growth 1,344,080 31.6% 3,605,674.73 16.1% 1,646,550 23.7%
New Era 2,500,868 45.2% 1,259,196.48 42.7% 1,863,739 35.8%
New
Horizons 15,900,960 6.5% 8,729,848.09 9.1% 5,246,463 10.0%
Small-Cap
Stock 1,044,665 5.5% 873,954.17 7.5% 584,525 4.6%
Science &
Tech-
nology 5,713,825 39.1% 4,766,170.90 18.5% 1,272,479 45.4%
Small-Cap
Value 1,289,012 31.8% 1,321,168.10 14.4% 512,452 26.28%
Value 780,033 57.4% 270,118.81 32.3% 30,478 14.9%
<FN>
* Prior to commencement of operations.
</FN>
</TABLE>

On December 31, 1996, the Equity Index Fund held common stock of the
following regular brokers or dealers of the Fund: Bankers Trust New York,
Citicorp, Merrill Lynch, J.P. Morgan, Chemical Bank, and Household
International respectively, with a value of $1,002,000, $6,837,000,
$1,896,000, $2,569,000, and 1,262,000 respectively. In 1996, Bankers Trust New
York, Citicorp, Merrill Lynch, J.P. Morgan, Chemical Bank,
and Household International were among the Fund's regular brokers or dealers
as defined in Rule 10b-1 under the Investment Company Act of 1940.

On December 31, 1996, the Growth & Income Fund held common stocks of the
following regular broker dealers of the Fund: Bear Stearns and Household
International, respectively, with a value of $16,336,000, and $30,504,000
respectively. The Fund also held medium-term notes of Morgan Stanley with a
value of $10,003,000. In 1996, Bear Stearns, Household International, and
Morgan Stanley were among the Fund's regular brokers or dealers as defined in
Rule 10b-1 under the Investment Company Act of 1940.

On December 31, 1996, the Small-Cap Value Fund held commercial paper of
Morgan Stanley Group with a value of $7,002,000. In 1996, the Morgan Stanley
Group was among the Fund's regular brokers or dealers as defined in Rule 10b-1
under the Investment Company Act of 1940.

On December 31, 1996, the Dividend Growth Fund held medium-term notes of
Morgan Stanley Group with a value of $1,000,000. In 1996, the Morgan Stanley
Group was among the Fund's regular brokers or dealers as defined in Rule 10b-1
under the Investment Company Act of 1940.

On December 31, 1996, the Capital Appreciation Fund held commercial
paper of Morgan Stanley Group with a value of $10,003,000. In 1996, the Morgan
Stanley Group was among the Fund's regular brokers or dealers as defined in
Rule 10b-1 under the Investment Company Act of 1940.

On December 31, 1996, the Small-Cap Stock Fund held commercial paper of
Morgan Stanley Group with a value of $2,001,000. In 1996, the Morgan Stanley
Group was among the Fund's regular brokers or dealers as defined in Rule 10b-1
under the Investment Company Act of 1940.

On December 31, 1996, the Equity Income Fund held common stock of the
following regular broker dealers of the Fund: Bankers Trust, Chemical Bank,
and J.P. Morgan, respectively, with a value of $41,331,000, $0, and
$82,981,000, respectively. The Fund also held medium-term notes of GMAC and
the Morgan Stanley Group, with a value of $7,002,000$19,979,000 and
$31,455,000, respectively. In 1996, Bankers Trust, Chemical Bank, J.P. Morgan,
GMAC, and Morgan Stanley Group were among the Fund's regular brokers or
dealers as defined in Rule 10b-1 under the Investment Company Act of 1940.

On December 31, 1996, the Balanced Fund held common stock of J.P. Morgan
with a value of $1,953,000. The Fund also held a bond of Lehman Brothers
Holding with a value of $1,615,000. The Fund also held commercial paper of
Morgan Stanley Group with a value of $5,006,000. In 1996, J.P. Morgan, Lehman
Brothers Holding, and the Morgan Stanley Group were among the Fund's regular
brokers or dealers as defined in Rule 10b-1 under the Investment Company Act
of 1940.

The portfolio turnover rate for each Fund for the years ended 1996,
1995, and 1994, was as follows:

Fund 1996 1995 1994

Balanced 22.3% 12.6% 33.3%
Blue Chip Growth 26.3% 38.1% 75.0%
Capital Appreciation 44.2% 47.0% 43.6%
Capital Opportunity 107.3% 136.9% 134.5%
Dividend Growth 43.1% 56.1% 71.4%
Equity Income 25.0% 21.4% 36.3%
Equity Index 1.3% 1.3% 1.3%
Financial Services 5.6%* ** **
Growth & Income 13.5% 26.2% 25.6%
Growth Stock 49.0% 42.5% 54.0%
Health Sciences 133.1% ** **
Media &
Telecommunications 102.9% 118.9% 133.9%

Mid-Cap Equity Growth 31.3%* ** **
Mid-Cap Growth 38.1% 57.5% 48.7%
Mid-Cap Value 3.9%* ** **
New America Growth 36.7% 56.2% 31.0%
New Era 28.6% 22.7% 24.7%
New Horizons 41.4% 55.9% 44.3%
Small-Cap Stock 31.1% 57.8% 41.9%
Science & Technology 125.6% 130.3% 113.3%
Small-Cap Value 15.2% 18.1% 21.4%
Value 68.0% 89.7% 30.8%

* Annualized.
** Prior to commencement of operations.

All Funds

PRICING OF SECURITIES

Equity securities listed or regularly traded on a securities exchange
are valued at the last quoted sales price at the time the valuations are made.
A security which is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary market for such
security. Listed securities not traded on a particular day and securities
regularly traded in the over-the-counter market are valued at the mean of the
latest bid and asked prices. Other equity securities are valued at a price
within the limits of the latest bid and asked prices deemed by the Board of
Directors/Trustees, or by persons delegated by the Board, best to reflect fair
value.

Debt securities are generally traded in the over-the-counter market and
are valued at a price deemed best to reflect fair value as quoted by dealers
who make markets in these securities or by an independent pricing service.
Short-term debt securities are valued at their amortized cost in local
currency which, when combined with accrued interest, approximates fair value.

For purposes of determining the Fund's net asset value per share, the
U.S. dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.

Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
Fund, as authorized by the Board of Directors/Trustees.

All Funds

NET ASSET VALUE PER SHARE

The purchase and redemption price of the Fund's shares is equal to the
Fund's net asset value per share or share price. The Fund determines its net
asset value per share by subtracting the Fund's liabilities (including accrued
expenses and dividends payable) from its total assets (the market value of the
securities the 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 the Fund is normally 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, Dr. Martin Luther King, Jr. Holiday, President's Day, 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 the 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 the 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 AND DISTRIBUTIONS

Unless you elect otherwise, the Fund's annual dividend and capital gain
distribution, if any, and final quarterly dividend (Balanced, Dividend Growth,
Equity Income, Equity Index, Growth & Income, Mid-Cap Value, and Value Funds)
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

The 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 the dividends paid by the Fund may be eligible for the
dividends-received deduction for corporate shareholders. For tax purposes, it
does not make any difference whether dividends and capital gain distributions
are paid in cash or in additional shares. The 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 to avoid federal income tax.

At the time of your purchase, the Fund's net asset value may reflect
undistributed 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. For federal income
tax purposes, the 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 December 31, 1996, the books of each Fund indicated that each Fund's
aggregate net assets included undistributed net income, net realized capital
gains or losses, and unrealized appreciation or depreciation, which are listed
below.

Net Realized
Undistributed Capital Gain Unrealized
Fund Net Income (Losses) Appreciation

Balanced $ 479,605 $ 988,176 $ 165,264,889
Blue Chip Growth -0- 1,809,910 85,179,920
Capital Appreciation 363,581 19,106,692 149,382,190
Capital Opportunity -0- 1,017,759 14,827,525
Dividend Growth -0- 3,203,747 34,752,830
Equity Income 1,983,703 151,781,728 1,627,204,000
Equity Index -0- 4,023,968 204,489,336
Financial Services -0- -0- 1,184,982
Growth & Income 1,197,947 4,825,908 745,309,119
Growth Stock 161,050 30,164,090 1,324,077,291
Health Sciences -0- 408,636 5,004,666

Media & Telecommunications -0- (3,423,801) 22,903,888
Mid-Cap Equity -0- 57,907 532,169
Mid-Cap Growth -0- 6,341,881 148,411,029
Mid-Cap Value 19,634 (14,294) 5,043,874
New America Growth -0- 29,107,180 430,949,361
New Era -0- 15,417,132 464,688,120
New Horizons -0- (17,232,407) 1,266,666,244
Small-Cap Stock 23,101 9,648,365 94,813,776
Science & Technology -0- 14,105,432 555,199,263
Small-Cap Value 40,475 19,156,306 342,576,379
Value -0- 2,817,864 17,037,654

If, in any taxable year, the 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).

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.

All Funds, Except Equity Index Fund

To the extent the Fund invests in foreign securities, the following
would apply:

Passive Foreign Investment Companies

The Fund may purchase the securities of certain foreign investment funds
or trusts called passive foreign investment companies. Capital gains on the
sale of such holdings will be deemed to be ordinary income regardless of how
long the Fund holds its investment. In addition to bearing their proportionate
share of the Fund's expenses (management fees and operating expenses)
shareholders will also indirectly bear similar expenses of such funds. In
addition, the Fund may be subject to corporate income tax and an interest
charge on certain dividends and capital gains earned from these investments,
regardless of whether such income and gains were distributed to shareholders.

In accordance with tax regulations, the Fund intends to treat these
securities as sold on the last day of the Fund's fiscal year and recognize any
gains for tax purposes at that time; losses will not be recognized. Such gains
will be considered ordinary income which the Fund will be required to
distribute even though it has not sold the security and received cash to pay
such distributions.

Foreign Currency Gains and Losses

Foreign currency gains and losses, including the portion of gain or loss
on the sale of debt securities attributable to foreign exchange rate
fluctuations, are taxable as ordinary income. If the net effect of these
transactions is a gain, the ordinary income dividend paid by the Fund will be
increased. If the result is a loss, the income dividend paid by the Fund will
be decreased, or to the extent such dividend has already been paid, it may be
classified as a return of capital. Adjustments to reflect these gains and
losses will be made at the end of the Fund's taxable year.

All Funds

INVESTMENT PERFORMANCE

Total Return Performance

The 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 for the Fund over
any other period of time will vary from the average.

<TABLE>
<CAPTION>
Cumulative Performance Percentage Change

1 Yr. 5 Yrs. 10 Yrs. Since
Ended Ended Ended Inception-
12/31/96 12/31/96 12/31/96 12/31/96
<S> <C> <C> <C> <C>
S & P 500 22.96 103.05 314.28
Dow Jones
Industrial Average 28.88 132.65 366.13
CPI 3.65 15.37 43.98

Balanced Fund 14.57 71.09 184.22 28,585.93
(12/31/39)

Blue Chip Growth Fund 27.75 N/A N/A 103.02
(6/30/93)

Capital Appreciation Fund 16.82 87.99 251.25 281.11
(6/30/86)

Capital Opportunity Fund 16.76 N/A N/A 78.41
(11/30/94)

Dividend Growth Fund 25.36 N/A N/A 101.47
(12/31/92)

Equity Income Fund 20.40 119.97 286.01 438.33
(10/31/85)

Equity Index Fund 22.65 99.32 N/A 158.34
(3/30/90)

Growth & Income Fund 25.64 113.97 257.36 544.47
(12/21/82)

Growth Stock Fund 21.70 96.96 247.90 16,900.01
(4/11/50)
Media &
Telecommunications** 1.78 N/A N/A 31.71
(10/13/93)

Mid-Cap Growth Fund 24.84 N/A N/A 177.44
(6/30/92)

New America Growth Fund 20.01 106.90 336.86 492.08
(9/30/85)

New Era Fund 24.25 85.78 214.24 1,699.77
(1/20/69)

New Horizons Fund 17.03 146.18 352.34 6,628.27
(6/3/60)

Small-Cap Stock Fund 21.05 118.70 219.48 23,328.87
(6/1/56)

Science & Technology Fund 14.23 203.52 N/A 516.07
(9/30/87)

Small-Cap Value Fund 24.61 136.78 N/A 220.15
(6/30/88)

Value Fund 28.51 N/A N/A 85.29
(9/30/94)

Health Sciences Fund 26.75 N/A N/A 26.75
(12/29/95)

Financial Services Fund N/A N/A N/A 13.40
(9/30/96)

Mid-Cap Value Fund N/A N/A N/A 16.30
(6/28/96)

Mid-Cap Equity
Growth Fund N/A N/A N/A 16.10
(7/31/96)
<FN>
* Since 12/31/82
** Figures based on performance as a closed-end investment company traded on
the New York Stock Exchange.
</FN>
</TABLE>

<TABLE>
<CAPTION>
Average Annual Compound Rates of Return

1 Yr. 5 Yrs. 10 Yrs. Since
Ended Ended Ended Inception-
12/31/96 12/31/96 12/31/96 12/31/96
<S> <C> <C> <C> <C>
S&P 500 22.96% 15.22% 15.27%
Dow Jones
Industrial Avg. 28.88 18.40 16.64
CPI 3.65 2.90 3.71

Balanced Fund 14.57 11.34 11.01 10.44
(12/31/39)

Blue Chip Growth Fund 27.75 N/A N/A 22.41
(6/30/93)
Capital Appreciation
Fund 16.82 13.46 13.39 13.59
(6/30/86)

Capital Opportunity
Fund 16.76 N/A N/A 32.01
(11/30/94)

Dividend Growth Fund 25.36 N/A N/A 19.14
(12/30/92)

Equity Income Fund 20.40 17.08 14.46 16.27
(10/31/85)

Equity Index Fund 22.65 14.79 N/A 15.08
(3/30/90)

Growth & Income Fund 25.64 16.43 13.58 14.21
(12/21/82)

Growth Stock Fund 21.70 14.52 13.28 11.62
(4/11/50)

Media & Tele-
communications Fund** 1.78 N/A N/A 8.94

Mid-Cap Growth Fund 24.84 N/A N/A 25.44
(6/30/92)

New America Growth Fund 20.01 15.65 15.89 17.12
(9/30/85)

New Era Fund 24.25 13.19 12.13 10.90
(1/20/69)

New Horizons Fund 17.03 19.74 16.29 12.19
(6/3/60)

Small-Cap Stock Fund 21.05 16.94 12.32 14.39
(6/1/56)
Science & Technology
Fund 14.23 24.86 N/A 21.72
(9/30/87)

Small-Cap Value Fund 24.61 18.81 N/A 14.67
(6/30/88)

Value Fund 28.51 N/A N/A 31.52
(9/30/94)

Health Sciences Fund 26.75 N/A N/A 26.75
(12/29/95)

Financial Services Fund N/A N/A N/A N/A
(9/30/96)

Mid-Cap Value Fund N/A N/A N/A N/A
(6/28/96)

Mid-Cap Equity
Growth Fund N/A N/A N/A N/A
(7/31/96)
<FN>
* Since 12/31/82
** Figures based on performance as a closed-end investment company traded on
the New York Stock Exchange.
</FN>
</TABLE>

Outside Sources of Information

From time to time, in reports and promotional literature: (1) the Fund's
total return performance, ranking, or any other measure of the Fund's
performance may be compared to any one or combination of the following: (i) a
broad based index; (ii) other groups of mutual funds, including T. Rowe Price
Funds, tracked by independent research firms ranking entities, or financial
publications; (iii) indices of stocks comparable to those in which the Fund
invests; (2) the Consumer Price Index (or any other measure for inflation,
government statistics, such as GNP may be used to illustrate investment
attributes of the Fund or the general economic, business, investment, or
financial environment in which the Fund operates; (3) various financial,
economic and market statistics developed by brokers, dealers and other persons
may be used to illustrate aspects of the Fund's performance; (4) the effect of
tax-deferred compounding on the Fund's investment returns, or on returns in
general in both qualified and non-qualified retirement plans or any other tax
advantage product, may be illustrated by graphs, charts, etc.; and (5) the
sectors or industries in which the Fund invests may be compared to relevant
indices or surveys in order to evaluate the Fund's historical performance or
current or potential value with respect to the particular industry or sector.

Other Publications

From time to time, in newsletters and other publications issued by T.
Rowe Price Investment Services, Inc., T. Rowe Price mutual fund portfolio
managers may discuss economic, financial and political developments in the
U.S. and abroad and how these conditions have affected or may affect
securities prices or the Fund; individual securities within the Fund's
portfolio; and their philosophy regarding the selection of individual stocks,
including why specific stocks have been added, removed or excluded from the
Fund's portfolio.

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, which include, but are
not limited to, 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.

No-Load Versus Load and 12b-1 Funds

Unlike the T. Rowe Price funds, many mutual funds charge sales fees to
investors or use fund assets to finance distribution activities. These fees
are in addition to the normal advisory fees and expenses charged by all mutual
funds. There are several types of fees charged which vary in magnitude and
which may often be used in combination. A sales charge (or "load") can be
charged at the time the fund is purchased (front-end load) or at the time of
redemption (back-end load). Front-end loads are charged on the total amount
invested. Back-end loads or "redemption fees" are charged either on the amount
originally invested or on the amount redeemed. 12b-1 plans allow for the
payment of marketing and sales expenses from fund assets. These expenses are
usually computed daily as a fixed percentage of assets.

The Fund is a no-load fund which imposes no sales charges or 12b-1 fees.
No-load funds are generally sold directly to the public without the use of
commissioned sales representatives. This means that 100% of your purchase is
invested for you.

Redemptions in Kind

In the unlikely event a shareholder were to receive an in kind
redemption of portfolio securities of the Fund, brokerage fees could be
incurred by the shareholder in a subsequent sale of such securities.

Issuance of Fund Shares for Securities

Transactions involving issuance of Fund 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 objective 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 exchange or market; and (d) are not
illiquid.

Balanced Fund

On August 31, 1992, the T. Rowe Price Balanced Fund acquired
substantially all of the assets of the Axe-Houghton Fund B, a series of Axe-
Houghton Funds, Inc. As a result of this acquisition, the Securities &
Exchange Commission requires that the historical performance information of
the Balanced Fund be based on the performance of Fund B. Therefore, all
performance information of the Balanced Fund prior to September 1, 1992,
reflects the performance of Fund B and investment managers other than T. Rowe
Price. Performance information after August 31, 1992, reflects the combined
assets of the Balanced Fund and Fund B.

Media & Telecommunications Fund

On July 28, 1997, the Fund converted its status from a closed-end fund to an
open-end mutual fund. Prior to the conversion the Fund was known as New Age
Media Fund, Inc.

Small-Cap Stock Fund

Effective May 1, 1997, the Fund's name was changed from the T. Rowe
Price OTC Fund to the T .Rowe Price Small-Cap Stock Fund.

All Funds, Except Capital Appreciation, Equity Income and New America Growth
Funds

CAPITAL STOCK

The Fund's 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, conversions 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 Fund has authorized to issue
without shareholder approval.

Except to the extent that the Fund's Board of Directors might provide by
resolution that holders of shares of a particular class are entitled to vote
as a class on specified matters presented for a vote of the holders of all
shares entitled to vote on such matters, there would be no right of class vote
unless and to the extent that such a right might be construed to exist under
Maryland law. The Charter contains no provision entitling the holders of the
present class of capital stock to a vote as a class on any matter.
Accordingly, the preferences, rights, and other characteristics attaching to
any class of shares, including the present class of capital stock, might be
altered or eliminated, or the class might be combined with another class or
classes, by action approved by the vote of the holders of a majority of all
the shares of all classes entitled to be voted on the proposal, without any
additional right to vote as a class by the holders of the capital stock or of
another affected class or classes.

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 Fund, 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 Fund, a special meeting of
shareholders of the Fund shall be called by the Secretary of the Fund on the
written request of shareholders entitled to cast at least 10% of all the votes
of the Fund entitled to be cast at such meeting. Shareholders requesting such
a meeting must pay to the Fund the reasonably estimated costs of preparing and
mailing the notice of the meeting. The Fund, however, will otherwise assist
the shareholders seeking to hold the special meeting in communicating to the
other shareholders of the Fund to the extent required by Section 16(c) of the
Investment Company Act of 1940.

Capital Appreciation, Equity Income and New America Growth Funds

ORGANIZATION OF THE FUNDS

For tax and business reasons, the Funds were organized as Massachusetts
Business Trusts (1985 for the Equity Income and New America Growth Funds and
1986 for the Capital Appreciation Fund), and are registered with the
Securities and Exchange Commission under the Investment Company Act of 1940 as
diversified, open-end investment companies, commonly known as "mutual funds."

The Declaration of Trust permits the Board of Trustees to issue an
unlimited number of full and fractional shares of a single class. The
Declaration of Trust also provides that the Board of Trustees may issue
additional series or classes of shares. Each share represents an equal
proportionate beneficial interest in the Fund. In the event of the liquidation
of the Fund, each share is entitled to a pro-rata share of the net assets of
the Fund.

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 trustees (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 trustees unless and until
such time as less than a majority of the trustees holding office have been
elected by shareholders, at which time the trustees then in office will call a
shareholders' meeting for the election of trustees. Pursuant to Section 16(c)
of the Investment Company Act of 1940, holders of record of not less than two-
thirds of the outstanding shares of the Fund may remove a trustee by a vote
cast in person or by proxy at a meeting called for that purpose. Except as set
forth above, the trustees shall continue to hold office and may appoint
successor trustees. Voting rights are not cumulative, so that the holders of
more than 50% of the shares voting in the election of trustees can, if they
choose to do so, elect all the trustees of the Trust, in which event the
holders of the remaining shares will be unable to elect any person as a
trustee. No amendments may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Trust.

Shares have no preemptive or conversion rights; the right of redemption
and the privilege of exchange are described in the prospectus. Shares are
fully paid and nonassessable, except as set forth below. The Trust may be
terminated (i) upon the sale of its assets to another diversified, open-end
management investment company, if approved by the vote of the holders of two-
thirds of the outstanding shares of the Trust, or (ii) upon liquidation and
distribution of the assets of the Trust, if approved by the vote of the
holders of a majority of the outstanding shares of the Trust. If not so
terminated, the Trust will continue indefinitely.

Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or executed by the
Fund or a Trustee. The Declaration of Trust provides for indemnification from
Fund property for all losses and expenses of any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its
obligations, a possibility which T. Rowe Price believes is remote. Upon
payment of any liability incurred by the Fund, the shareholders of the Fund
paying such liability will be entitled to reimbursement from the general
assets of the Fund. The Trustees intend to conduct the operations of the Fund
in such a way so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of such Fund.

FEDERAL REGISTRATION OF SHARES

All Funds

The Fund's shares are registered for sale under the Securities Act of
1933. Registration of the Fund's shares is not required under any state law,
but the Fund is required to make certain filings with and pay fees to the
states in order to sell its shares in the states.

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

Blue Chip Growth, Diversified Small-Cap Growth Fund, Dividend Growth,
Equity Income, Growth & Income, Media & Telecommunications, Mid-Cap Equity
Growth, Mid-Cap Growth, Mid-Cap Value, New America Growth, and New Era Funds

Price Waterhouse LLP, 1306 Concourse Drive, Suite 100, Linthicum,
Maryland 21090-1020, are independent accountants to the Funds.

Balanced, Capital Appreciation, Capital Opportunity, Equity Index Fund,
Financial Services, Growth Stock, Health Sciences, New Horizons, Small-Cap
Stock, Science & Technology, Small-Cap Value, and Value Funds

Coopers & Lybrand L.L.P., 217 East Redwood Street, Baltimore, Maryland
21202, are independent accountants to the Fund.

A Statement of Assets and Liabilities for the Diversified Small-Cap
Growth Fund is attached to the end of this Statement of Additional Information.

The financial statements of the Funds (except for Diversified Small-Cap
Growth Fund) for the year ended December 31, 1996, and the report of
independent accountants are included in the Fund's Annual Report for the year
ended December 31, 1996. 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, 1996, are incorporated into this Statement of
Additional Information by reference:

ANNUAL REPORT REFERENCES:

CAPITAL EQUITY EQUITY GROWTH &
APPRECIATION INCOME INDEX INCOME
____________ ________ ______ ________

Report of Independent
Accountants 25 25 32 23
Statement of Net Assets,
December 31, 1996 12-19 9-18 12-26 9-17
Statement of Operations,
year ended
December 31, 1996 20 19 27 18
Statement of Changes in
Net Assets, years ended
December 31, 1996 and
December 31, 1995 21 20 28 19
Notes to Financial
Statements,
December 31, 1996 22-24 21-24 29-31 20-22
Financial Highlights 11 8 11 8

NEW SMALL-
GROWTH AMERICA NEW CAP
STOCK GROWTH ERA STOCK
________ ________ _____ ____

Report of Independent
Accountants 25 20 21 25
Statement of Net Assets,
December 31, 1996 11-19 11-14 11-15 10-19
Statement of Operations,
year ended
December 31, 1996 20 15 16 20
Statement of Changes in
Net Assets, years ended
December 31, 1996 and
December 31, 1995 21 16 17 21
Notes to Financial
Statements,
December 31, 1996 22-24 17-19 18-20 22-24
Financial Highlights 10 10 10 9

MEDIA &
TELECOMMUN- MID-CAP
BALANCED MUNICATIONS GROWTH
_________ ________ ________

Report of Independent
Accountants 41 15 21
Statement of Net Assets,
December 31, 1996 11-34 8-10 11-15
Statement of Operations,
year ended
December 31, 1996 35 11 16
Statement of Changes in
Net Assets, years ended
December 31, 1996 and
December 31, 1995 36 12 17
Notes to Financial
Statements,
December 31, 1996 37-40 13-14 18-20
Financial Highlights 10 7 10

NEW SMALL-CAP
HORIZONS VALUE
__________ __________

Report of Independent
Accountants 29 27
Portfolio of Investments,
December 31, 1996 11-22 10-20
Statement of Assets and
Liabilities,
December 31, 1996 23 21
Statement of Operations,
year ended
December 31, 1996 24 22
Statement of Changes
in Net Assets, years ended
December 31, 1996 and
December 31, 1995 25 23
Notes to Financial
Statements,
December 31, 1996 26-28 24-26
Financial Highlights 10 9

BLUE CHIP
GROWTH
___________

Report of Independent Accountants 25
Statement of Net Assets, December 31, 1996 12-19
Statement of Operations, year ended December 31, 1996 20
Statement of Changes in Net Assets, years
ended December 31, 1996 and December 31, 1995 21
Notes to Financial Statements, December 31, 1996 22-24
Financial Highlights 11

DIVIDEND
GROWTH
____________

Report of Independent Accountants 24
Statement of Net Assets, December 31, 1996 10-17
Statement of Operations, year ended December 31, 1996 18
Statement of Changes in Net Assets, years
ended December 31, 1996 and December 31, 1995 19
Notes to Financial Statements, December 31, 1996 20-23
Financial Highlights 9

VALUE
_______

Report of Independent Accountants 21
Statement of Net Assets, December 31, 1996 9-15
Statement of Operations, year ended December 31, 1996 16
Statement of Changes in Net Assets, year ended
December 31, 1996 and December 31, 1995 17
Notes to Financial Statements, December 31, 1995 18-20
Financial Highlights 8

CAPITAL
OPPORTUNITY
_____________

Report of Independent Accountants 20
Statement of Net Assets, December 31, 1996 10-14
Statement of Operations, year ended December 31, 1996 15
Statement of Changes in Net Assets, year ended
December 31, 1996 and December 31, 1995 16
Notes to Financial Statements, December 31, 1996 17-19
Financial Highlights 9

SCIENCE &
TECHNOLOGY
_____________

Report of Independent Accountants 21
Statement of Net Assets, December 31, 1996 12-15
Statement of Operations, year ended December 31, 1996 16
Statement of Changes in Net Assets, year ended
December 31, 1996 and December 31, 1995 17
Notes to Financial Statements, December 31, 1996 18-20
Financial Highlights 11

FINANCIAL
SERVICES
_____________

Report of Independent Accountants 19
Statement of Net Assets, December 31, 1996 12-13
Statement of Operations, September 30, 1996
(Commencement of Operations) to December 31, 1996 14
Statement of Changes in Net Assets, September 30, 1996
(Commencement of Operations) to December 31, 1996 15
Notes to Financial Statements, December 31, 1996 16-18
Financial Highlights 9

HEALTH
SCIENCES
_____________

Report of Independent Accountants 25
Statement of Net Assets, December 31, 1996 13-19
Statement of Operations, December 31, 1995
(Commencement of Operations) to December 31, 1996 20
Statement of Changes in Net Assets, December 31, 1995
(Commencement of Operations) to December 31, 1996 21
Notes to Financial Statements, December 31, 1996 22-24
Financial Highlights 12

MID-CAP
VALUE
_____________

Report of Independent Accountants 22
Statement of Net Assets, December 31, 1996 10-16
Statement of Operations, June 28, 1996
(Commencement of Operations) to December 31, 1996 17
Statement of Changes in Net Assets, June 28, 1996
(Commencement of Operations) to December 31, 1996 18
Notes to Financial Statements, December 31, 1996 19-21
Financial Highlights 9

MID-CAP
EQUITY GROWTH
_____________

Report of Independent Accountants 12
Statement of Net Assets, December 31, 1996 5-7
Statement of Operations, July 31, 1996
(Commencement of Operations) to December 31, 1996 8
Statement of Changes in Net Assets, July 31, 1996
(Commencement of Operations) to December 31, 1996 9
Notes to Financial Statements, December 31, 1996 10-11
Financial Highlights 4

T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 23, 1997

Assets
Receivable for Fund shares sold $100,000
Deferred organizational expenses 48,745

Total assets 148,745

Liabilities
Amount due Manager 46,395
Accrued expenses 2,350

Total liabilities 48,745

Net Assets - offering and redemption
price of $10.00 per share; 1,000,000,000
shares of $0.0001 par value capital
stock authorized, 10,000 shares
outstanding $100,000

NOTE TO STATEMENT OF ASSETS AND LIABILITIES

T. Rowe Price Diversified Small-Cap Growth Fund, Inc. (the "Corporation")
was organized on April 22, 1997, as a Maryland corporation and is registered
under the Investment Company Act of 1940 as a diversified, open-end management
investment company. The Corporation has had no operations other than those
matters related to organization and registration as an investment company, the
registration of shares for sale under the Securities Act of 1933, and the sale
of 10,000 shares of the T. Rowe Price Diversified Small-Cap Growth Fund at
$10.00 per share on June 23, 1997 to T. Rowe Price Associates, Inc. via share
exchange from a T. Rowe Price money-market mutual fund. The exchange was
settled in the ordinary course of business on June 24, 1997 with the transfer
of $100,000 cash. The Corporation has entered into an investment management
agreement with T. Rowe Price Associates, Inc. (the Manager) which is described
in the Statement of Additional Information under the heading "Investment
Management Services."

Organizational expenses for the Corporation in the amount of $48,745 have
been accrued at June 23, 1997, and will be amortized on a straight-line basis
over a period not to exceed sixty months. The Manager has agreed to advance
certain organizational expenses incurred by the Corporation and will be
reimbursed for such expenses approximately six months after the commencement
of the Corporation's operations.

The Manager has also agreed that in the event any of its initial shares are
redeemed during the 60-month amortization period of the deferred
organizational expenses, proceeds from a redemption of the shares representing
the initial capital will be reduced by a pro rata portion of any unamortized
organizational expenses.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.

In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of the T. Rowe Price
Diversified Small-Cap Growth Fund, Inc., hereafter referred to as the "Fund",
at June 24, 1997, in accordance with generally accepted accounting principles.
This financial statement is the responsibility of the Fund's management; our
responsibility is to express an opinion on this financial statement based on
our audit. We conducted our audit of this financial statement in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion expressed above.

/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP
Baltimore, Maryland
June 24, 1997

RATINGS OF CORPORATE DEBT SECURITIES

Moody's Investors Services, Inc. (Moody's)

Aaa-Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge."

Aa-Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds.

A-Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations.

Baa-Bonds rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba-Bonds rated Ba are judged to have speculative elements: their futures
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterize bonds in this class.

B-Bonds rated B generally lack the characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa-Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

Ca-Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked short-comings.

C-Lowest-rated; extremely poor prospects of ever attaining investment
standing.

Standard & Poor's Corporation (S&P)

AAA-This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.

AA-Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong.

A-Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.

BBB-Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds
in this category than for bonds in the A category.

BB, C, CCC, CC-Bonds rated BB, B, CCC, and CC are regarded on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal. BB indicates the lowest degree of speculation
and CC the highest degree of speculation. While such bonds will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.

D-In default.

Fitch Investors Service, Inc.

AAA-High grade, broadly marketable, suitable for investment by trustees and
fiduciary institutions, and liable to but slight market fluctuation other than
through changes in the money rate. The prime feature of a "AAA" bond is the
showing of earnings several times or many times interest requirements for such
stability of applicable interest that safety is beyond reasonable question
whenever changes occur in conditions. Other features may enter, such as a wide
margin of protection through collateral, security or direct lien on specific
property. Sinking funds or voluntary reduction of debt by call or purchase or
often factors, while guarantee or assumption by parties other than the
original debtor may influence their rating.

AA-Of safety virtually beyond question and readily salable. Their merits
are not greatly unlike those of "AAA" class but a bond so rated may be junior
though of strong lien, or the margin of safety is less strikingly broad. The
issue may be the obligation of a small company, strongly secured, but
influenced as to rating by the lesser financial power of the enterprise and
more local type of market.

PART C
OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements. The Condensed Financial Information (Financial
Highlights table) is included in Part A of the Registration
Statement. The Statement of Net Assets, Statement of Assets and
Liabilities, Statement of Operations, and Statement of Changes in Net
Assets are included in the Annual Report to Shareholders, the
pertinent portions of which are incorporated in Part B of the Fund's
Registration Statement.

(b) Exhibits.

(1)(a) Articles of Incorporation (electronically filed with the initial
Registration Statement on August 18, 1993)

(1)(b) Amended Articles of Incorporation (electronically filed with
Pre-Effective Amendment No.1 on September 23, 1993)

(1)(c) Amended and Restated Articles of Incorporation

(2)(a) By-Laws of Registrant (electronically filed with Pre-Effective
Amendment No. 2 on October 13, 1993)

(2)(b) Amended and Restated By-Laws

(3) Inapplicable

(4) See Article SIXTH, Capital Stock, subparagraphs (b)-(g) of the
Articles of Incorporation and Article II, Shareholders, in its
entirety, and Article VIII, Capital Stock, in its entirety, of the
By-Laws electronically filed as exhibits to this Registration
Statement.

(5) Investment Management Agreement between Registrant and T. Rowe Price
Associates, Inc.

(6) Underwriting Agreement between Registrant and T. Rowe Price
Investment Services, Inc.

(7) Inapplicable

(8)(a) Custodian Agreement between T. Rowe Price Funds and State Street Bank
and Trust Company, dated September 28, 1987, as amended to June 24,
1988, October 19, 1988, February 22, 1989, July 19, 1989, September
15, 1989, December 15, 1989, December 20, 1989, January 25, 1990,
February 21, 1990, June 12, 1990, July 18, 1990, October 15, 1990,
February 13, 1991, March 6, 1991, September 12, 1991, November 6,
1991, April 23, 1992, September 2, 1992, November 3, 1992, December
16, 1992, December 21, 1992, and January 28, 1993, April 22, 1993,
September 16, 1993, November 3, 1993, March 1, 1994, April 21, 1994,
July 27, 1994, September 21, 1994, November 1, 1994, November 2,
1994, January 25, 1995, September 20, 1995, November 1, 1995,
December 11, 1995, April 24, 1996, August 2, 1996, November 12, 1996,
February 4, 1997, and April 24, 1997 (to be filed by amendment)

(8)(b) Global Custody Agreement between The Chase Manhattan Bank, N.A. and
T. Rowe Price Funds, dated January 3, 1994, as amended April 18,
1994, August 15, 1994, November 28, 1994, May 31, 1995, November 1,
1995, and July 31, 1996 (to be filed by amendment)

(9)(a) Transfer Agency and Service Agreement between T. Rowe Price Services,
Inc. and T. Rowe Price Funds, dated January 1, 1997, as amended
February 4, 1997, and April 24, 1997 (to be filed by amendment)

(9)(b) Agreement between T. Rowe Price Associates, Inc. and T. Rowe Price
Funds for Fund Accounting Services, dated January 1, 1997, as amended
February 4, 1997, and April 24, 1997 (to be filed by amendment)

(9)(c) Agreement between T. Rowe Price Retirement Plan Services, Inc. and
the Taxable Funds, dated January 1, 1997 (to be filed by amendment)

(10) Inapplicable

(11) Consent of Independent Accountants

(12) Inapplicable

(13) Inapplicable

(14) Inapplicable

(15) Inapplicable

(16) The Registrant hereby incorporates by reference the methodology used
in calculating the performance information included in Post-Effective
Amendment No. 45 and Amendment No. 9 of the T. Rowe Price New Era
Fund, Inc. (SEC. File Nos. 2-29866 and 811-1710) dated March 2, 1988.

(17) Financial Data Schedule for T. Rowe Price Media & Telecommunications
Fund, Inc., as of June 30, 1997.

(18) Inapplicable

(19) Power of Attorney for Media & Telecommunications Fund, Inc.

Item 25. Persons Controlled by or Under Common Control With Registrant.

None.

Item 26. Number of Holders of Securities

As of June 30, 1997, there were 743 shareholders in the New Age Media
Fund, Inc.

Item 27. Indemnification.

The Registrant maintains comprehensive Errors and Omissions and Officers
and Directors insurance policies written by the Evanston Insurance Company,
The Chubb Group, and ICI Mutual. These policies provide coverage for the named
insureds, which include T. Rowe Price Associates, Inc. ("Manager"), Rowe
Price-Fleming International, Inc. ("Price-Fleming"), T. Rowe Price Investment
Services, Inc., T. Rowe Price Services, Inc., T. Rowe Price Trust Company, T.
Rowe Price Stable Asset Management, Inc., RPF International Bond Fund, and
forty-seven investment companies, including, T. Rowe Price Growth Stock Fund,
Inc., T. Rowe Price New Horizons Fund, Inc., T. Rowe Price New Era Fund, Inc.,
T. Rowe Price New Income Fund, Inc., T. Rowe Price Prime Reserve Fund, Inc.,
T. Rowe Price Tax-Free Income Fund, Inc., T. Rowe Price Tax-Exempt Money Fund,
Inc., T. Rowe Price International Funds, Inc., T. Rowe Price Growth & Income
Fund, Inc., T. Rowe Price Tax-Free Short-Intermediate Fund, Inc., T. Rowe
Price Short-Term Bond Fund, Inc., T. Rowe Price High Yield Fund, Inc., T. Rowe
Price Tax-Free High Yield Fund, Inc., T. Rowe Price New America Growth Fund,
T. Rowe Price Equity Income Fund, T. Rowe Price GNMA Fund, T. Rowe Price
Capital Appreciation Fund, T. Rowe Price California Tax-Free Income Trust, T.
Rowe Price State Tax-Free Income Trust, T. Rowe Price Science & Technology
Fund, Inc., T. Rowe Price Small-Cap Value Fund, Inc., Institutional
International Funds, Inc., T. Rowe Price U.S. Treasury Funds, Inc., T. Rowe
Price Index Trust, Inc., T. Rowe Price Spectrum Fund, Inc., T. Rowe Price
Balanced Fund, Inc., T. Rowe Price Short-Term U.S. Government Fund, Inc., T.
Rowe Price Mid-Cap Growth Fund, Inc., T. Rowe Price Small-Cap Stock Fund,
Inc., T. Rowe Price Tax-Free Insured Intermediate Bond Fund, Inc., T. Rowe
Price Dividend Growth Fund, Inc., T. Rowe Price Blue Chip Growth Fund, Inc.,
T. Rowe Price Summit Funds, Inc., T. Rowe Price Summit Municipal Funds, Inc.,
T. Rowe Price Equity Series, Inc., T. Rowe Price International Series, Inc.,
T. Rowe Price Fixed Income Series, Inc., T. Rowe Price Personal Strategy
Funds, Inc., T. Rowe Price Value Fund, Inc., T. Rowe Price Capital Opportunity
Fund, Inc., T. Rowe Price Corporate Income Fund, Inc., T. Rowe Price Health
Sciences Fund, Inc., T. Rowe Price Mid-Cap Value Fund, Inc., Institutional
Equity Funds, Inc., T. Rowe Price Financial Services Fund, Inc., T. Rowe Price
Tax-Efficient Balanced Fund, Inc., and T. Rowe Price Diversified Small-Cap
Growth Fund, Inc. The Registrant and the forty-seven investment companies
listed above, with the exception of Institutional International Funds, Inc.,
will be collectively referred to as the Price Funds. The investment manager
for the Price Funds, excluding T. Rowe Price International Funds, Inc. and T.
Rowe Price International Series, Inc., is the Manager. Price-Fleming is the
manager to T. Rowe Price International Funds, Inc., T. Rowe Price
International Series, Inc. and Institutional International Funds, Inc. and is
50% owned by TRP Finance, Inc., a wholly owned subsidiary of the Manager, 25%
owned by Copthall Overseas Limited, a wholly owned subsidiary of Robert
Fleming Holdings Limited, and 25% owned by Jardine Fleming International
Holdings Limited. In addition to the corporate insureds, the policies also
cover the officers, directors, and employees of each of the named insureds.
The premium is allocated among the named corporate insureds in accordance with
the provisions of Rule 17d-1(d)(7) under the Investment Company Act of
1940.

Article X, Section 10.01 of the Registrant's By-Laws provides as
follows:

Section 10.01. Indemnification and Payment of Expenses in Advance.
The Corporation shall indemnify any individual ("Indemnitee") who is a
present or former director, officer, employee, or agent of the
Corporation, or who is or has been serving at the request of the
Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise,
who, by reason of his position was, is, or is threatened to be made, a
party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative
(hereinafter collectively referred to as a "Proceeding") against any
judgments, penalties, fines, settlements, and reasonable expenses
(including attorneys' fees) incurred by such Indemnitee in connection
with any Proceeding, to the fullest extent that such indemnification may
be lawful under applicable Maryland law, as from time to time amended.
The Corporation shall pay any reasonable expenses so incurred by such
Indemnitee in defending a Proceeding in advance of the final disposition
thereof to the fullest extent that such advance payment may be lawful
under applicable Maryland Law, as from time to time amended. Subject to
any applicable limitations and requirements set forth in the
Corporation's Articles of Incorporation and in these By-Laws, any
payment of indemnification or advance of expenses shall be made in
accordance with the procedures set forth in applicable Maryland law, as
from time to time amended.

Notwithstanding the foregoing, nothing herein shall protect or
purport to protect any Indemnitee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the
conduct of his office ("Disabling Conduct").

Anything in this Article X to the contrary notwithstanding, no
indemnification shall be made by the Corporation to any Indemnitee
unless:

(a) there is a final decision on the merits by a court or other body
before whom the Proceeding was brought that the Indemnitee was not
liable by reason of Disabling Conduct; or

(b) in the absence of such a decision, there is a reasonable
determination, based upon a review of the facts, that the
Indemnitee was not liable by reason of Disabling Conduct, which
determination shall be made by:

(i) the vote of a majority of a quorum of directors who are
neither "interested persons" of the Corporation, as defined
in Section 2(a)(19) of the Investment Company Act of 1940,
nor parties to the Proceeding; or

(ii) an independent legal counsel in a written opinion.

Anything in this Article X to the contrary notwithstanding, any
advance of expenses by the Corporation to any Indemnitee shall be made
only upon the undertaking by such Indemnitee to repay the advance unless
it is ultimately determined that such Indemnitee is entitled to
indemnification as above provided, and only if one of the following
conditions is met:

(a) the Indemnitee provides a security for his undertaking; or

(b) the Corporation shall be insured against losses arising by reason
of any lawful advances; or

(c) there is a determination, based on a review of readily available
facts, that there is reason to believe that the Indemnitee will
ultimately be found entitled to indemnification, which
determination shall be made by:

(i) a majority of a quorum of directors who are neither
"interested persons" of the Corporation as defined in
Section 2(a)(19) of the Investment Company Act of 1940, nor
parties to the Proceeding; or

(ii) an independent legal counsel in a written opinion.

Section 10.02 of the Registrant's By-Laws provides as follows:

Section 10.02. Insurance of Officers, Directors, Employees, and
Agents. To the fullest extent permitted by applicable Maryland law and
by Section 17(h) of the Investment Company Act of 1940, as from time to
time amended, the Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or
agent of the Corporation, or who is or was serving at the request of the
Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise,
against any liability asserted against him and incurred by him in or
arising out of his position, whether or not the Corporation would have
the power to indemnify him against such liability.

Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the
Registrant in the successful defense of any action, suit, or proceeding)
is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.

Item 28. Business and Other Connections of Investment Manager.

Rowe Price-Fleming International, Inc. ("Price-Fleming"), a Maryland
corporation, is a corporate joint venture 50% owned by TRP Finance, Inc., a
wholly owned subsidiary of the Manager. Price-Fleming was incorporated in
Maryland in 1979 to provide investment counsel service with respect to foreign
securities for institutional investors in the United States. In addition to
managing private counsel client accounts, Price-Fleming also sponsors
registered investment companies which invest in foreign securities, serves as
general partner of RPFI International Partners, Limited Partnership, and
provides investment advice to the T. Rowe Price Trust Company, trustee of the
International Common Trust Fund.

T. Rowe Price Investment Services, Inc. ("Investment Services"), a
wholly owned subsidiary of the Manager, was incorporated in Maryland in 1980
for the purpose of acting as the principal underwriter and distributor for the
Price Funds. 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. In 1984, Investment Services expanded its activities
to include a discount brokerage service.

TRP Distribution, Inc., a wholly owned subsidiary of Investment
Services, was incorporated in Maryland in 1991. It was organized for and
engages in the sale of certain investment related products prepared by
Investment Services.

T. Rowe Price Associates Foundation, Inc. (the "Foundation"), was
incorporated in 1981 (and is not a subsidiary of the Manager). The
Foundation's overall objective emphasizes various community needs by giving to
a broad range of educational, civic, cultural, and health-related
institutions. The Foundation has a very generous matching gift program whereby
employee gifts designated to qualifying institutions are matched according to
established guidelines.

T. Rowe Price Services, Inc. ("Price Services"), a wholly owned
subsidiary of the Manager, was incorporated in Maryland in 1982 and is
registered as a transfer agent under the Securities Exchange Act of 1934.
Price Services provides transfer agent, dividend disbursing, and certain other
services, including shareholder services, to the Price Funds.

T. Rowe Price Retirement Plan Services, Inc. ("RPS"), a wholly owned
subsidiary of the Manager, was incorporated in Maryland in 1991 and is
registered as a transfer agent under the Securities Exchange Act of 1934. RPS
provides administrative, recordkeeping, and subaccounting services to
administrators of employee benefit plans.

T. Rowe Price Trust Company ("Trust Company"), a wholly owned subsidiary
of the Manager, is a Maryland-chartered limited-purpose trust company,
organized in 1983 for the purpose of providing fiduciary services. The Trust
Company serves as trustee/custodian for employee benefit plans, individual
retirement accounts, and common trust funds and as trustee/investment agent
for one trust.

T. Rowe Price Investment Technologies, Inc. was incorporated in Maryland
in 1996. A wholly owned subsidiary of the Manager, it owns the technology
rights, hardware, and software of the Manager and affiliated companies and
provides technology services to them.

T. Rowe Price Threshold Fund Associates, Inc., a wholly owned subsidiary
of the Manager, was incorporated in Maryland in 1994 and serves as the general
partner of T. Rowe Price Threshold Fund III, L.P., a Delaware limited
partnership established in 1994.

T. Rowe Price Threshold Fund II, L.P., a Delaware limited partnership,
was organized in 1986 by the Manager and invests in private financings of
small companies with high growth potential; the Manager is the General Partner
of the partnership.

T. Rowe Price Threshold Fund III, L.P., a Delaware limited partnership,
was organized in 1994 by the Manager and invests in private financings of
small companies with high growth potential; T. Rowe Price Threshold Fund
Associates, Inc. is the General Partner of this partnership.

RPFI International Partners, L.P., is a Delaware limited partnership
organized in 1985 for the purpose of investing in a diversified group of small
and medium-sized non-U.S. companies. Price-Fleming is the general partner of
this partnership, and certain institutional investors, including advisory
clients of Price-Fleming, are its limited partners.

T. Rowe Price Real Estate Group, Inc. ("Real Estate Group"), is a
Maryland corporation and a wholly owned subsidiary of the Manager established
in 1986 to provide real estate services. Subsidiaries of Real Estate Group
are: T. Rowe Price Realty Income Fund I Management, Inc., a Maryland
corporation (General Partner of T. Rowe Price Realty Income Fund I, A No-Load
Limited Partnership), T. Rowe Price Realty Income Fund II Management, Inc., a
Maryland corporation (General Partner of T. Rowe Price Realty Income Fund II,
America's Sales-Commission-Free Real Estate Limited Partnership), T. Rowe
Price Realty Income Fund III Management, Inc., a Maryland corporation (General
Partner of T. Rowe Price Realty Income Fund III, America's
Sales-Commission-Free Real Estate Limited Partnership, and T. Rowe Price
Realty Income Fund IV Management, Inc., a Maryland corporation (General
Partner of T. Rowe Price Realty Income Fund IV, America's
Sales-Commission-Free Real Estate Limited Partnership). Real Estate Group
serves as investment manager to T. Rowe Price Renaissance Fund, Ltd., A
Sales-Commission-Free Real Estate Investment, established in 1989 as a
Maryland corporation which qualifies as a REIT.

T. Rowe Price Stable Asset Management, Inc. ("Stable Asset Management"),
was incorporated in Maryland in 1988 as a wholly owned subsidiary of the
Manager. Stable Asset Management, is registered as an investment adviser under
the Investment Advisers Act of 1940, and specializes in the management of
investment portfolios which seek stable and consistent investment returns
through the use of guaranteed investment contracts, bank investment contracts,
structured investment contracts, and short-term fixed income securities.

T. Rowe Price Recovery Fund Associates, Inc., a Maryland corporation, is
a wholly owned subsidiary of the Manager organized in 1988 for the purpose of
serving as the General Partner of T. Rowe Price Recovery Fund, L.P., T. Rowe
Price Recovery Fund II, L.P., Delaware limited partnerships which invest in
financially distressed companies.

T. Rowe Price Recovery Fund II Associates, Inc., is a Maryland limited
liability Company organized in 1996. Wholly owned by the Manager, it serves as
the General Partner of T. Rowe Price Recovery Fund II, L.P., a Delaware
limited partnership which also invests in financially distressed companies.

T. Rowe Price (Canada), Inc. ("TRP Canada") is a Maryland corporation
organized in 1988 as a wholly owned subsidiary of the Manager. This entity is
registered as an investment adviser under the Investment Advisers Act of 1940
and as a non-Canadian Adviser under the Securities Act (Ontario).

T. Rowe Price Insurance Agency, Inc., is a wholly owned subsidiary of T.
Rowe Price Associates, Inc. organized in Maryland in 1994 and licensed to do
business in several states to act primarily as an insurance agency in
connection with the sale of the Price Funds' variable annuity products.

Since 1983, the Manager has organized several distinct Maryland limited
partnerships, which are informally called the Pratt Street Ventures
partnerships, for the purpose of acquiring interests in growth-oriented
businesses.

TRP Suburban, Inc., is a Maryland corporation organized in 1990 as a
wholly owned subsidiary of the Manager. It entered into agreements with
McDonogh School and CMANE-McDonogh-Rowe Limited Partnership to construct an
office building in Owings Mills, Maryland, which currently houses the
Manager's transfer agent, plan administrative services, retirement plan
services, and operations support functions.

TRP Suburban Second, Inc., a wholly owned Maryland subsidiary of T. Rowe
Price Associates, Inc., was incorporated in 1995 to primarily engage in the
development and ownership of real property located in Owings Mills, Maryland.

TRP Finance, Inc., a wholly owned subsidiary of the Manager, is a
Delaware corporation organized in 1990 to manage certain passive corporate
investments and other intangible assets.

T. Rowe Price Strategic Partners Fund II, L.P. is a Delaware limited
partnership organized in 1992 for the purpose of investing in small public and
private companies seeking capital for expansion or undergoing a restructuring
of ownership. The general partner of the Fund is T. Rowe Price Strategic
Partners, L.P., ("Strategic Partners"), a Delaware limited partnership whose
general partner is T. Rowe Price Strategic Partners Associates, Inc., a
Maryland corporation which is a wholly owned subsidiary of the Manager.

Listed below are the directors of the Manager who have other substantial
businesses, professions, vocations, or employment aside from that of Director
of the Manager:

GEORGE J. COLLINS is a Director of the Manager and of Price-Fleming. Mr.
Collins retired from his positions as Chairman of the Board, Chief Executive
Officer, and President of the Manager effective as of May 31, 1997. He
continues to serve on the Board of Directors .

JAMES E. HALBKAT, JR., Director of the Manager. Mr. Halbkat is President of
U.S. Monitor Corporation, a provider of public response systems. Mr. Halbkat's
address is: P.O. Box 23109, Hilton Head Island, South Carolina 29925.

RICHARD L. MENSCHEL, Director of the Manager. Mr. Menschel is a limited
partner of The Goldman Sachs Group, L.P. Mr. Menschel's address is 85 Broad
Street, 2nd Floor, New York, New York 10004.

JOHN W. ROSENBLUM, Director of the Manager. Mr. Rosenblum is the Dean of the
Jepson School of Leadership Studies at the University of Richmond and a
director of: Chesapeake Corporation, a manufacturer of paper products; Cadmus
Communications Corp., a provider of printing and communication services;
Comdial Corporation, a manufacturer of telephone systems for businesses; Cone
Mills Corporation, a textiles producer; and Providence Journal Company, a
publisher of newspapers and owner of broadcast television stations. Mr.
Rosenblum's address is: University of Richmond, Virginia 23173.

ROBERT L. STRICKLAND, Director of the Manager. Mr. Strickland is Chairman of
Lowe's Companies, Inc., a retailer of specialty home supplies and a Director
of Hannaford Bros., Co., a food retailer. Mr. Strickland's address is 604 Two
Piedmont Plaza Building, Winston-Salem, North Carolina 27104.

PHILIP C. WALSH, Director of the Manager. Mr. Walsh is a Consultant to Cyprus
Amax Minerals Company, Englewood, Colorado. Mr. Walsh's address is: Pleasant
Valley, Peapack, New Jersey 07977.

ANNE MARIE WHITTEMORE, Director of the Manager. Mrs. Whittemore is a partner
of the law firm of McGuire, Woods, Battle & Boothe and is a director of Owens
& Minor, Inc.; USF&G Corporation; the James River Corporation of Virginia; and
Albemarle Corporation. Mrs. Whittemore's address is One James Center,
Richmond, Virginia 23219.

With the exception of Messrs. Collins, Halbkat, Menschel, Rosenblum,
Strickland, and Walsh, and Mrs. Whittemore, all of the following directors of
the Manager are employees of the Manager.

James S. Riepe, who is a Vice-Chairman of the Board, Director, and Managing
Director of the Manager, is also a Director of Price-Fleming.

George A. Roche, who is Chairman of the Board, President, a Director, and
Managing Director of the Manager, is a Director and Vice President of
Price-Fleming.

M. David Testa, who is a Vice-Chairman of the Board, Director, Cheif
Investment Officer and Managing Director of the Manager, is Chairman of the
Board of Price-Fleming.

Henry H. Hopkins, who is a Director and Managing Director of the Manager, is a
Vice President of Price-Fleming.

Charles P. Smith and Peter Van Dyke, who are Managing Directors of the
Manager, are Vice Presidents of Price-Fleming.

James A. C. Kennedy III, John H. Laporte, Jr., William T. Reynolds, and Brian
C. Rogers are Directors and Managing Directors of the Manager.

Preston G. Athey, Brian W.H. Berghuis, Edward C. Bernard, Stephen W. Boesel,
Thomas H. Broadus, Jr., Michael A. Goff, Andrew C. Goresh, Mary J. Miller,
Charles A. Morris, Edmund M. Notzon, III, R. Todd Ruppert, Charles E. Vieth,
and Richard T. Whitney are Managing Directors of the Manager.

George A. Murnaghan, who is a Managing Director of the Manager, is also an
Executive Vice President of Price-Fleming.

Robert P. Campbell, Michael J. Conelius, Roger L. Fiery III, R. Aran Gordon,
Veena A. Kutler, Heather R. Landon, Nancy M. Morris, Robert W. Smith, William
F. Wendler II, and Edward A. Wiese, who are Vice Presidents of the Manager,
are Vice Presidents of Price-Fleming.

Todd J. Henry, and Kathleen G. Polk, who are employees of the Manager, are
Vice Presidents of Price-Fleming.

Kimberly A. Haker, an Assistant Vice President of the Manager, is Assistant
Vice President and Controller of Price-Fleming.

Alvin M. Younger, Jr., who is Chief Financial Officer, Managing Director,
Secretary, and Treasurer of the Manager, is Secretary and Treasurer of
Price-Fleming.

Nolan L. North, who is a Vice President and Assistant Treasurer of the
Manager, is Assistant Treasurer of Price-Fleming.

Leah P. Holmes, who is an Assistant Vice President of the Manager, is a Vice
President of Price-Fleming.

Ava M. Rainey, who is an Assistant Vice President of the Manager, is Assistant
Vice President of Price-Fleming.

Barbara A. Van Horn, who is Assistant Secretary of the Manager, is Assistant
Secretary of Price-Fleming.

Elsie S. Crawford. employee of the Manager, is Assistant Vice President of
Price-Fleming.

Certain directors and officers of the Manager are also officers and/or
directors of one or more of the Price Funds and/or one or more of the
affiliated entities listed herein.

See also "Management of Fund," in Registrant's Statement of Additional
Information.

Item 29. Principal Underwriters.

(a) The principal underwriter for the Registrant is Investment
Services. Investment Services acts as the principal underwriter
for seventy-eight Price Funds. Investment Services, a wholly
owned subsidiary of the Manager, 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. Investment
Services has been formed for the limited purpose of distributing
the shares of the Price Funds and will not engage in the general
securities business. Since the Price Funds are sold on a no-load
basis, Investment Services will not receive any commission or
other compensation for acting as principal underwriter.

(b) The address of each of the directors and officers of Investment
Services listed below is 100 East Pratt Street, Baltimore,
Maryland 21202.

Principal
Name and Positions and Offices Offices With
Business Address With Underwriter Registrant
__________________ ______________________ _____________

James S. Riepe Chairman of the Board Vice President
and Director
Edward C. Bernard President None
Henry H. Hopkins Vice President and Vice President
Director
Charles E. Vieth Vice President and
Director None
Patricia M. Archer Vice President None
Joseph C. Bonasorte Vice President None
Darrell N. Braman Vice President None
Ronae M. Brock Vice President None
Meredith C. Callanan Vice President None
Christine M. Carolan Vice President None
Laura H. Chasney Vice President None
Renee M. Christoff Vice President None
Victoria C. Collins Vice President None
Alana S. Curtice Vice President None
Christopher W. Dyer Vice President None
Christine S. Fahlund Vice President None
Forrest R. Foss Vice President None
Andrea G. Griffin Vice President None
Douglas E. Harrison Vice President None
David J. Healy Vice President None
Joseph P. Healy Vice President None
Walter J. Helmlinger Vice President None
Eric G. Knauss Vice President None
Douglas G. Kremer Vice President None
Sharon R. Krieger Vice President None
Keith W. Lewis Vice President None
James Link Vice President None
Sarah McCafferty Vice President None
Maurice A. Minerbi Vice President None
Nancy M. Morris Vice President None
George A. Murnaghan Vice President None
Steven E. Norwitz Vice President None
Kathleen M. O'Brien Vice President None
Scott R. Powell Vice President None
Pamela D. Preston Vice President None
Corbin D. Riemer Vice President None
Lucy B. Robins Vice President None
John R. Rockwell Vice President None
Christopher S. Ross Vice President None
Kenneth J. Rutherford Vice President None
Daniel S. Schreiner Vice President None
Kristin E. Seeberger Vice President None
Monica R. Tucker Vice President None
William F. Wendler II Vice President None
Jane F. White Vice President None
Thomas R. Woolley Vice President None
Alvin M. Younger, Jr. Secretary and Treasurer None
Mark S. Finn Controller and
Vice President None
Richard J. Barna Assistant Vice President None
Catherine L.
Berkenkemper Assistant Vice President None
Robin C.B. Binkley Assistant Vice President None
Patricia S. Butcher Assistant Vice President Assistant
Secretary
Cheryl L. Emory Assistant Vice President None
John A. Galateria Assistant Vice President None
Edward F. Giltenan Assistant Vice President None
Janelyn A. Healey Assistant Vice President None
Kathleen Hussey Assistant Vice President None
Valerie King Assistant Vice President None
Steven A. Larson Assistant Vice President None
Jeanette M. LeBlanc Assistant Vice President None
C. Lillian Matthews Assistant Vice President None
Janice D. McCrory Assistant Vice President None
Sandra J. McHenry Assistant Vice President None
Mark J. Mitchell Assistant Vice President None
Danielle N. Nicholson Assistant Vice President None
Barbara A. O'Connor Assistant Vice President None
JeanneMarie B.
Patella Assistant Vice President None
Carin C. Quinn Assistant Vice President None
David A. Roscum Assistant Vice President None
Arthur J. Silber Assistant Vice President None
Jerome Tuccille Assistant Vice President None
Linda C. Wright Assistant Vice President None
Nolan L. North Assistant Treasurer None
Barbara A. Van Horn Assistant Secretary None

(c) Not applicable. Investment Services will not receive any
compensation with respect to its activities as underwriter for the
Price Funds since the Price Funds are sold on a no-load basis.

Item 30. Location of Accounts and Records.

All accounts, books, and other documents required to be maintained by T.
Rowe Price Media & Telecommunications Fund, Inc., under Section 31(a) of the
Investment Company Act of 1940 and the rules thereunder will be maintained by
T. Rowe Price Media & Telecommunications Fund, Inc. at its offices at 100 East
Pratt Street, Baltimore, Maryland 21202. Transfer, dividend disbursing, and
shareholder service activities are performed by T. Rowe Price Services, Inc.,
at 100 East Pratt Street, Baltimore, Maryland 21202. Custodian activities for
T. Rowe Price Media & Telecommunications Fund, Inc. are performed at State
Street Bank and Trust Company's Service Center (State Street South), 1776
Heritage Drive, Quincy, Massachusetts 02171.

Item 31. Management Services.

Registrant is not a party to any management-related service contract,
other than as set forth in the Prospectus.

Item 32. Undertakings.

(a) The undersigned Registrant hereby undertakes to file an amendment
to the Registration Statement with certified financial statements
showing the initial capital received before accepting
subscriptions from any persons in excess of 25 if it raises its
initial capital pursuant to Section 14(a)(3) of the 1940 Act.

(b) The Fund will file, within four to six months from the effective
date of its registration statement, a post-effective amendment
using financial statements which need not be certified.

(c) If requested to do so by the holders of at least 10% of all votes
entitled to be cast, the Registrant will call a meeting of
shareholders for the purpose of voting on the question of removal
of a director or directors and will assist in communications with
other shareholders to the extent required by Section 16(c).

(d) The Fund agrees to furnish, upon request and without charge, a
copy of its latest Annual Report to each person to whom a
prospectus is delivered.

<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland, this 22nd day of July, 1997.

T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.

/s/James S. Riepe
By: James S. Riepe, Chairman of the Board

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:

SIGNATURE TITLE DATE
_________ ______ _____

/s/James S. Riepe Chairman of the Board July 22, 1997
James S. Riepe

/s/Carmen F. Deyesu Treasurer July 22, 1997
Carmen F. Deyesu (Principal Financial Officer)

/s/James A. C. Kennedy President July 22, 1997
James A. C. Kennedy

*
Donald W. Dick, Jr. Director July 22, 1997

*
David K. Fagin Director July 22, 1997

*
Hanne M. Merriman Director July 22, 1997

*
M. David Testa Director July 22, 1997

*
Hubert D. Vos Director July 22, 1997

*
Paul M. Wythes Director July 22, 1997

/s/Henry H. Hopkins Attorney-In-Fact July 22, 1997
Henry H. Hopkins, Attorney-In-Fact

<PAGE>

ARTICLES OF AMENDMENT AND RESTATEMENT

New Age Media Fund, Inc.

New Age Media Fund, Inc., a Maryland corporation having its principal office
in Baltimore hereby certifies to the State Department of Assessments and
Taxation of Maryland that:

FIRST: The charter of the Corporation is hereby amended and restated in
its entirety as follows:

FIRST: THE UNDERSIGNED, Henry H. Hopkins, whose address is 100 East Pratt
Street, Baltimore, Maryland 21202, being at least eighteen years of age,
acting as incorporator, does hereby form a corporation under the General Laws
of the State of Maryland.

SECOND: (a) The name of the corporation (which is hereinafter called the
"Corporation") is:

T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.

(b) The Corporation acknowledges that it is adopting its corporate
name through permission of T. Rowe Price Associates, Inc., a
Maryland corporation (hereinafter referred to as "Price
Associates"), and acknowledges that Price Associates has the sole
and exclusive right to use or license the use of the name "T. Rowe
Price" in commerce. The Corporation agrees that if at any time and
for any cause, the investment adviser or distributor of the
Corporation ceases to be Price Associates or an affiliate of Price
Associates, the Corporation shall at the written request of Price
Associates take all requisite action to amend its charter to
eliminate the name "T. Rowe Price" from the Corporation's
corporate name and from the designations of its shares of capital
stock. The Corporation further acknowledges that Price Associates
reserves the right to grant the non-exclusive right to use the
name "T. Rowe Price" to any other corporation, including other
investment companies, whether now in existence or hereafter
created.

THIRD: (a) The purposes for which the Corporation is formed and the business
and objects to be carried on and promoted by it are:

(1) To engage generally in the business of investing,
reinvesting, owning, holding, or trading in securities, as
defined in the Investment Company Act of 1940, as from time
to time amended (hereinafter referred to as the "Investment
Company Act"), as an investment company classified under the
Investment Company Act as a management company.

(2) To engage in any one or more businesses or transactions, or
to acquire all or any portion of any entity engaged in any
one or more businesses or transactions, which the Board of
Directors may from time to time authorize or approve,
whether or not related to the business described elsewhere
in this Article or to any other business at the time or
theretofore engaged in by the Corporation.

(b) The foregoing enumerated purposes and objects shall be in no way
limited or restricted by reference to, or inference from, the
terms of any other clause of this or any other Article of the
charter of the Corporation, and each shall be regarded as
independent; and they are intended to be and shall be construed as
powers as well as purposes and objects of the Corporation and
shall be in addition to and not in limitation of the general
powers of corporations under the General Laws of the State of
Maryland.

FOURTH: The present address of the principal office of the Corporation in
this State is:

100 East Pratt Street
Baltimore, Maryland 21202

FIFTH: The name and address of the resident agent of the Corporation in this
State are:

Henry H. Hopkins
100 East Pratt Street
Baltimore, Maryland 21202

Said resident agent is a citizen of the State of Maryland, and actually
resides therein.

SIXTH: (a) The total number of shares of stock of all classes and series
which the Corporation initially has authority to issue is One
Billion (1,000,000,000) shares of capital stock (par value $0.0001
per share), amounting in aggregate par value to One Hundred
Thousand Dollars ($100,000). All of such shares are initially
classified as "Common Stock" of the "T. Rowe Price Media &
Telecommunications" series. The Board of Directors may classify
and reclassify any unissued shares of capital stock (whether or
not such shares have been previously classified or reclassified)
by setting or changing in any one or more respects the
preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or
terms or conditions of redemption of such shares of stock.

(b) The following is a description of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption
of the shares of Common Stock classified as the "T. Rowe Price
Media & Telecommunications" series and any additional series of
Common Stock of the Corporation (unless provided otherwise by the
Board of Directors with respect to any such additional series at
the time it is established and designated):

(1) Assets Belonging to Series. All consideration received by
the Corporation from the issue or sale of shares of a
particular series, together with all assets in which such
consideration is invested or reinvested, all income,
earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any
investment or reinvestment of such proceeds in whatever form
the same may be, shall irrevocably belong to that series for
all purposes, subject only to the rights of creditors, and
shall be so recorded upon the books of account of the
Corporation. Such consideration, assets, income, earnings,
profits and proceeds, together with any General Items
allocated to that series as provided in the following
sentence, are herein referred to collectively as "assets
belonging to" that series. In the event that there are any
assets, income, earnings, profits or proceeds which are not
readily identifiable as belonging to any particular series
(collectively, "General Items"), such General Items shall be
allocated by or under the supervision of the Board of
Directors to and among any one or more of the series
established and designated from time to time in such manner
and on such basis as the Board of Directors, in its sole
discretion, deems fair and equitable; and any General Items
so allocated to a particular series shall belong to that
series. Each such allocation by the Board of Directors shall
be conclusive and binding for all purposes.

(2) Liabilities of Series. The assets belonging to each
particular series shall be charged with the liabilities of
the Corporation in respect of that series and all expenses,
costs, charges, and reserves attributable to that series,
and any general liabilities, expenses, costs, charges or
reserves of the Corporation which are not readily
identifiable as pertaining to any particular series, shall
be allocated and charged by or under the supervision of the
Board of Directors to and among any one or more of the
series established and designated from time to time in such
manner and on such basis as the Board of Directors, in its
sole discretion, deems fair and equitable. The liabilities,
expenses, costs, charges, and reserves allocated and so
charged to a series are herein referred to collectively as
"liabilities of" that series. Each allocation of
liabilities, expenses, costs, charges, and reserves by or
under the supervision of the Board of Directors shall be
conclusive and binding for all purposes.

(3) Dividends and Distributions. Dividends and capital gains
distributions on shares of a particular series may be paid
with such frequency, in such form and in such amount as the
Board of Directors may determine by resolution adopted from
time to time, or pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the
Board of Directors may determine, after providing for actual
and accrued liabilities of that series. All dividends on
shares of a particular series shall be paid only out of the
income belonging to that series and all capital gains
distributions on shares of a particular series shall be paid
only out of the capital gains belonging to that series. All
dividends and distributions on shares of a particular series
shall be distributed pro rata to the holders of that series
in proportion to the number of shares of that series held by
such holders at the date and time of record established for
the payment of such dividends or distributions, except that
in connection with any dividend or distribution program or
procedure, the Board of Directors may determine that no
dividend or distribution shall be payable on shares as to
which the shareholder's purchase order and/or payment have
not been received by the time or times established by the
Board of Directors under such program or procedure.

Dividends and distributions may be paid in cash, property or
additional shares of the same or another series, or a
combination thereof, as determined by the Board of Directors
or pursuant to any program that the Board of Directors may
have in effect at the time for the election by shareholders
of the form in which dividends or distributions are to be
paid. Any such dividend or distribution paid in shares shall
be paid at the current net asset value thereof.

(4) Voting. On each matter submitted to a vote of the
shareholders, each holder of shares shall be entitled to one
vote for each share standing in his name on the books of the
Corporation, irrespective of the series thereof, and all
shares of all series shall vote as a single class ("Single
Class Voting"); provided, however, that (i) as to any matter
with respect to which a separate vote of any series is
required by the Investment Company Act or by the Maryland
General Corporation Law, such requirement as to a separate
vote by that series shall apply in lieu of Single Class
Voting; (ii) in the event that the separate vote requirement
referred to in (i) above applies with respect to one or more
series, then, subject to (iii) below, the shares of all
other series shall vote as a single class; and (iii) as to
any matter which does not affect the interest of a
particular series, including liquidation of another series
as described in subsection (7) below, only the holders of
shares of the one or more affected series shall be entitled
to vote.

(5) Redemption by Shareholders. Each holder of shares of a
particular series shall have the right at such times as may
be permitted by the Corporation to require the Corporation
to redeem all or any part of his shares of that series, at a
redemption price per share equal to the net asset value per
share of that series next determined after the shares are
properly tendered for redemption, less such redemption fee
or sales charge, if any, as may be established by the Board
of Directors in its sole discretion and contained in the
current Prospectus or Statement of Additional Information
for the Corporation. Payment of the redemption price shall
be in cash; provided, however, that if the Board of
Directors determines, which determination shall be
conclusive, that conditions exist which make payment wholly
in cash unwise or undesirable, the Corporation may, to the
extent and in the manner permitted by the Investment Company
Act, make payment wholly or partly in securities or other
assets belonging to the series of which the shares being
redeemed are a part, at the value of such securities or
assets used in such determination of net asset value.

Notwithstanding the foregoing, the Corporation may postpone
payment of the redemption price and may suspend the right of
the holders of shares of any series to require the
Corporation to redeem shares of that series during any
period or at any time when and to the extent permissible
under the Investment Company Act.

(6) Redemption by Corporation. The Board of Directors may cause
the Corporation to redeem at net asset value the shares of
any series from a holder (i) if the Board of Directors of
the Corporation determines in its sole discretion that
failure to so redeem such shares may have materially adverse
consequences to the holders of shares of the Corporation or
any series, or (ii) upon such other conditions with respect
to the maintenance of shareholder accounts of a minimum
amount as may from time to time be established by the Board
of Directors in its sole discretion and contained in the
current Prospectus or Statement of Additional Information
for the Corporation.

(7) Liquidation. In the event of the liquidation of a particular
series, the shareholders of the series that is being
liquidated shall be entitled to receive, as a class, when
and as declared by the Board of Directors, the excess of the
assets belonging to that series over the liabilities of that
series. The holders of shares of any particular series shall
not be entitled thereby to any distribution upon liquidation
of any other series. The assets so distributable to the
shareholders of any particular series shall be distributed
among such shareholders in proportion to the number of
shares of that series held by them and recorded on the books
of the Corporation. The liquidation of any particular series
in which there are shares then outstanding may be authorized
by vote of a majority of the Board of Directors then in
office, subject to the approval of a majority of the
outstanding voting securities of that series, as defined in
the Investment Company Act, and without the vote of the
holders of shares of any other series. The liquidation of a
particular series may be accomplished, in whole or in part,
by the transfer of assets of such series to another series
or by the exchange of shares of such series for the shares
of another series.

(8) Net Asset Value Per Share. The net asset value per share of
any series shall be the quotient obtained by dividing the
value of the net assets of that series (being the value of
the assets belonging to that series less the liabilities of
that series) by the total number of shares of that series
outstanding, all as determined by or under the direction of
the Board of Directors in accordance with generally accepted
accounting principles and the Investment Company Act.
Subject to the applicable provisions of the Investment
Company Act, the Board of Directors, in its sole discretion,
may prescribe and shall set forth in the By-Laws of the
Corporation or in a duly adopted resolution of the Board of
Directors such bases and times for determining the value of
the assets belonging to, and the net asset value per share
of outstanding shares of, each series, or the net income
attributable to such shares, as the Board of Directors deems
necessary or desirable. The Board of Directors shall have
full discretion, to the extent not inconsistent with the
Maryland General Corporation Law and the Investment Company
Act, to determine which items shall be treated as income and
which items as capital and whether any item of expense shall
be charged to income or capital. Each such determination and
allocation shall be conclusive and binding for all purposes.

The Board of Directors may determine to maintain the net
asset value per share of any series at a designated constant
dollar amount and in connection therewith may adopt
procedures not inconsistent with the Investment Company Act
for the continuing declaration of income attributable to
that series as dividends and for the handling of any losses
attributable to that series. Such procedures may provide
that in the event of any loss, each shareholder shall be
deemed to have contributed to the capital of the Corporation
attributable to that series his pro rata portion of the
total number of shares required to be canceled in order to
permit the net asset value per share of that series to be
maintained, after reflecting such loss, at the designated
constant dollar amount. Each shareholder of the Corporation
shall be deemed to have agreed, by his investment in any
series with respect to which the Board of Directors shall
have adopted any such procedure, to make the contribution
referred to in the preceding sentence in the event of any
such loss.

(9) Equality. All shares of each particular series shall
represent an equal proportionate interest in the assets
belonging to that series (subject to the liabilities of that
series), and each share of any particular series shall be
equal to each other share of that series. The Board of
Directors may from time to time divide or combine the shares
of any particular series into a greater or lesser number of
shares of that series without thereby changing the
proportionate interest in the assets belonging to that
series or in any way affecting the rights of holders of
shares of any other series.

(10) Conversion or Exchange Rights. Subject to compliance with
the requirements of the Investment Company Act, the Board of
Directors shall have the authority to provide that holders
of shares of any class or series shall have the right to
convert or exchange said shares into shares of one or more
other classes or series of shares in accordance with such
requirements and procedures as may be established by the
Board of Directors and as set forth in the Corporation's
current Prospectus or Statement of Additional
Information.

(c) The shares of Common Stock of the Corporation, or of any series of
Common Stock of the Corporation to the extent such Common Stock is
divided into series, may be further subdivided into classes (which
may, for convenience of reference be referred to a term other than
"class"). Unless otherwise provided in the Articles Supplementary
establishing such classes, all such shares, or all shares of a
series of Common Stock in a series, shall have identical voting,
dividend, and liquidation rights. Shares of the classes shall also
be subject to such front-end sales loads, contingent deferred
sales charges, expenses (including, without limitation,
distribution expenses under a Rule 12b-1 plan and administrative
expenses under an administration or service agreement, plan or
other arrangement, however designated), conversion rights, and
class voting rights as shall be consistent with Maryland law, the
Investment Company Act of 1940, and the rules and regulations of
the National Association of Securities Dealers and shall be
contained in Articles Supplementary establishing such classes.

(d) For the purposes hereof and of any articles supplementary to the
charter providing for the classification or reclassification of
any shares of capital stock or of any other charter document of
the Corporation (unless otherwise provided in any such articles or
document), any class or series of stock of the Corporation shall
be deemed to rank:

(1) prior to another class or series either as to dividends or
upon liquidation, if the holders of such class or series
shall be entitled to the receipt of dividends or of amounts
distributable on liquidation, dissolution or winding up, as
the case may be, in preference or priority to holders of
such other class or series;

(2) on a parity with another class or series either as to
dividends or upon liquidation, whether or not the dividend
rates, dividend payment dates or redemption or liquidation
price per share thereof be different from those of such
others, if the holders of such class or series of stock
shall be entitled to receipt of dividends or amounts
distributable upon liquidation, dissolution or winding up,
as the case may be, in proportion to their respective
dividend rates or redemption or liquidation prices, without
preference or priority over the holders of such other class
or series; and

(3) junior to another class or series either as to dividends or
upon liquidation, if the rights of the holders of such class
or series shall be subject or subordinate to the rights of
the holders of such other class or series in respect of the
receipt of dividends or the amounts distributable upon
liquidation, dissolution or winding up, as the case may be.

(e) Unless otherwise prohibited by law, so long as the Corporation is
registered as an open-end management investment company under the
Investment Company Act, the Board of Directors shall have the
power and authority, without the approval of the holders of any
outstanding shares, to increase or decrease the number of shares
of capital stock or the number of shares of capital stock of any
class or series that the Corporation has authority to issue.

(f) The Corporation may issue and sell fractions of shares of capital
stock having pro rata all the rights of full shares, including,
without limitation, the right to vote and to receive dividends,
and wherever the words "share" or "shares" are used in the charter
or By-Laws of the Corporation, they shall be deemed to include
fractions of shares, where the context does not clearly indicate
that only full shares are intended.

(g) The Corporation shall not be obligated to issue certificates
representing shares of any class or series of capital stock. At
the time of issue or transfer of shares without certificates, the
Corporation shall provide the shareholder with such information as
may be required under the Maryland General Corporation Law.

SEVENTH: The number of directors of the Corporation shall be seven (7), which
number may be increased or decreased pursuant to the By-Laws of the
Corporation, but shall never be less than the minimum number permitted by the
General Laws of the State of Maryland now or hereafter in force. The names of
the directors of the Corporation currently in office are: Donald W. Dick, Jr.,
David K. Fagin, Hanne M. Merriman, James S. Riepe, M. David Testa, Hubert D.
Vos, and Paul M. Wythes.

EIGHTH: (a) The following provisions are hereby adopted for the purpose
of defining, limiting, and regulating the powers of the
Corporation and of the directors and shareholders:

(1) The Board of Directors is hereby empowered to authorize the
issuance from time to time of shares of its stock of any
class or series, whether now or hereafter authorized, or
securities convertible into shares of its stock of any class
or series, whether now or hereafter authorized, for such
consideration as may be deemed advisable by the Board of
Directors and without any action by the shareholders.

(2) No holder of any stock or any other securities of the
Corporation, whether now or hereafter authorized, shall have
any preemptive right to subscribe for or purchase any stock
or any other securities of the Corporation other than such,
if any, as the Board of Directors, in its sole discretion,
may determine and at such price or prices and upon such
other terms as the Board of Directors, in its sole
discretion, may fix; and any stock or other securities which
the Board of Directors may determine to offer for
subscription may, as the Board of Directors in its sole
discretion shall determine, be offered to the holders of any
class, series or type of stock or other securities at the
time outstanding to the exclusion of the holders of any or
all other classes, series or types of stock or other
securities at the time outstanding.

(3) The Board of Directors of the Corporation shall, consistent
with applicable law, have power in its sole discretion to
determine from time to time in accordance with sound
accounting practice or other reasonable valuation methods
what constitutes annual or other net profits, earnings,
surplus, or net assets in excess of capital; to determine
that retained earnings or surplus shall remain in the hands
of the Corporation; to set apart out of any funds of the
Corporation such reserve or reserves in such amount or
amounts and for such proper purpose or purposes as it shall
determine and to abolish any such reserve or any part
thereof; to distribute and pay distributions or dividends in
stock, cash, or other securities or property, out of surplus
or any other funds or amounts legally available therefor, at
such times and to the shareholders of record on such dates
as it may, from time to time, determine; and to determine
whether and to what extent and at what times and places and
under what conditions and regulations the books, accounts,
and documents of the Corporation, or any of them, shall be
open to the inspection of shareholders, except as otherwise
provided by statute or by the By-Laws, and, except as so
provided, no shareholder shall have any right to inspect any
book, account, or document of the Corporation unless
authorized so to do by resolution of the Board of Directors.

(4) Notwithstanding any provision of law requiring the
authorization of any action by a greater proportion than a
majority of the total number of shares of all classes and
series of capital stock or of the total number of shares of
any class or series of capital stock entitled to vote as a
separate class, such action shall be valid and effective if
authorized by the affirmative vote of the holders of a
majority of the total number of shares of all classes and
series outstanding and entitled to vote thereon, or of the
class or series entitled to vote thereon as a separate
class, as the case may be, except as otherwise provided in
the charter of the Corporation.

(5) The Corporation shall indemnify (i) its past and present
directors and officers, whether serving the Corporation or
at its request any other entity, to the full extent required
or permitted by the General Laws of the State of Maryland
now or hereafter in force, including the advance of expenses
under the procedures and to the full further extent
permitted by law, and (ii) other employees and agents to
such extent as shall be authorized by the Board of Directors
or the By-Laws and as permitted by law. Nothing contained
herein shall be construed to protect any director or officer
of the Corporation against any liability to the Corporation
or its security holders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in
the conduct of his office. The foregoing rights of
indemnification shall not be exclusive of any other rights
to which those seeking indemnification may be entitled. The
Board of Directors may take such action as is necessary to
carry out these indemnification provisions and is expressly
empowered to adopt, approve and amend from time to time such
by-laws, resolutions or contracts implementing such
provisions or such further indemnification arrangements as
may be permitted by law. No amendment of the charter of the
Corporation or repeal of any of its provisions shall limit
or eliminate the right of indemnification provided hereunder
with respect to acts or omissions occurring prior to such
amendment or repeal.

(6) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, and the
Investment Company Act, no director or officer of the
Corporation shall be personally liable to the Corporation or
its shareholders for money damages; provided, however, that
nothing herein shall be construed to protect any director or
officer of the Corporation against any liability to the
Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. No amendment of the
charter of the Corporation or repeal of any of its
provisions shall limit or eliminate the limitation of
liability provided to directors and officers hereunder with
respect to any act or omission occurring prior to such
amendment or repeal.

(7) The Corporation reserves the right from time to time to make
any amendments of its charter which may now or hereafter be
authorized by law, including any amendments changing the
terms or contract rights, as expressly set forth in its
charter, of any of its outstanding stock by classification,
reclassification or otherwise.

(b) The enumeration and definition of particular powers of the Board
of Directors included in the foregoing shall in no way be limited
or restricted by reference to or inference from the terms of any
other clause of this or any other Article of the charter of the
Corporation, or construed as or deemed by inference or otherwise
in any manner to exclude or limit any powers conferred upon the
Board of Directors under the General Laws of the State of Maryland
now or hereafter in force.

NINTH: The duration of the Corporation shall be perpetual.

SECOND: The provisions set forth in the Articles of Amendment and
Restatement (the "Articles") are all the provisions of the Charter currently
in effect.

THIRD: The entire Board of Directors of the Corporation declared these
Articles to be advisable and adopted them at a meeting of the Board of
Directors held on February 12, 1997. The Board of Directors then recommended
that these Articles be submitted to the stockholders for approval.

FOURTH: At a meeting of the stockholders held on July 23, 1997, the
Corporation's Common Stock, the only class of capital stock of the Corporation
entitled to vote, adopted and approved these Articles.

FIFTH: Prior to the filing of these Articles, the Corporation had
authority to issue One Billion (1,000,000,000) shares of capital stock (par
value $0.0001 per share), amounting in aggregate par value to One Hundred
Thousand Dollars ($100,000).

Subsequent to the filing of these Articles, the Corporation shall have
authority to issue One Billion (1,000,000,000) shares of capital stock (par
value $0.0001 per share), amounting in aggregate par value to One Hundred
Thousand Dollars ($100,000).

SIXTH: The foregoing amendment shall be effective as of 5:00 p.m. on
July 25, 1997.

IN WITNESS WHEREOF, New Age Media Fund, Inc., has caused these Articles of
Amendment and Restatement to be signed in its name and on its behalf by its
President and attested to by its Assistant Secretary this 24th day of July,
1997, and its President acknowledges under penalties of perjury that these
Articles of Amendment and Restatement are the corporate act of the Corporation
and that to the best of his knowledge, information, and belief, these matters
and facts set forth herein with respect to the authorization and approval
thereof, are true in all material respects.

Attest: NEW AGE MEDIA FUND, INC.

/s/Patricia S. Butcher /s/James A. C. Kennedy III

Patricia S. Butcher, James A. C. Kennedy III,
Assistant Secretary President
<PAGE>

T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
(A Maryland Corporation)

AMENDED AND RESTATED BY-LAWS

ARTICLE I

NAME OF CORPORATION, LOCATION OF OFFICES, AND SEAL

Section 1.01. Name: The name of the Corporation is T. ROWE PRICE MEDIA &
TELECOMMUNICATIONS FUND, INC.

Section 1.02. Principal Office: The principal office of the Corporation
in the State of Maryland shall be located in the City of Baltimore. The
Corporation may, in addition, establish and maintain such other offices and
places of business, within or outside the State of Maryland, as the Board of
Directors may from time to time determine.
[MGCL, Sections 2-103(4), 2-108(a)(1)]

Section 1.03. Seal: The corporate seal of the Corporation shall be
circular in form, and shall bear the name of the Corporation, the year of its
incorporation, and the words "Corporate Seal, Maryland." The form of the seal
shall be subject to alteration by the Board of Directors and the seal may be
used by causing it or a facsimile to be impressed or affixed or printed or
otherwise reproduced. In lieu of affixing the corporate seal to any document
it shall be sufficient to meet the requirements of any law, rule, or
regulation relating to a corporate seal to affix the word "(Seal)" adjacent to
the signature of the authorized officer of the Corporation. Any officer or
Director of the Corporation shall have authority to affix the corporate seal
of the Corporation to any document requiring the same.
[MGCL, Sections 1-304(b), 2-103(3)]
ARTICLE II

SHAREHOLDERS

Section 2.01. Annual Meetings: The Corporation shall not be required to
hold an annual meeting of its shareholders in any year unless the Investment
Company Act of 1940 requires an election of directors by shareholders. In the
event that the Corporation shall be so required to hold an annual meeting,
such meeting shall be held at a date and time set by the Board of Directors,
which date shall be no later than 120 days after the occurrence of the event
requiring the meeting. Any shareholders' meeting held in accordance with the
preceding sentence shall for all purposes constitute the annual meeting of
shareholders for the fiscal year of the corporation in which the meeting is
held. At any such meeting, the shareholders shall elect directors to hold the
offices of any directors who have held office for more than one year or who
have been elected by the Board of Directors to fill vacancies which result
from any cause. Except as the Articles of Incorporation or statute provides
otherwise, Directors may transact any business within the powers of the
Corporation as may properly come before the meeting. Any business of the
Corporation may be transacted at the annual meeting without being specially
designated in the notice, except such business as is specifically required by
statute to be stated in the notice. [MGCL, Section 2-501]

Section 2.02. Special Meetings: Special meetings of the shareholders may
be called at any time by the Chairman of the Board, the President, any Vice
President, or by the Board of Directors. Special meetings of the shareholders
shall be called by the Secretary on the written request of shareholders
entitled to cast at least ten (10) percent of all the votes entitled to be
cast at such meeting, provided that (a) such request shall state the purpose
or purposes of the meeting and the matters proposed to be acted on, and (b)
the shareholders requesting the meeting shall have paid to the Corporation the
reasonably estimated cost of preparing and mailing the notice thereof, which
the Secretary shall determine and specify to such shareholders. Unless
requested by shareholders entitled to cast a majority of all the votes
entitled to be cast at the meeting, a special meeting need not be called to
consider any matter which is substantially the same as a matter voted upon at
any special meeting of the shareholders held during the preceding twelve (12)
months. [MGCL, Section 2-502]

Section 2.03. Place of Meetings: All shareholders' meetings shall be held
at such place within the United States as may be fixed from time to time by
the Board of Directors. [MGCL, Section 2-503]

Section 2.04. Notice of Meetings: Not less than ten (10) days, nor more
than ninety (90) days before each shareholders' meeting, the Secretary or an
Assistant Secretary of the Corporation shall give to each shareholder entitled
to vote at the meeting, and each other shareholder entitled to notice of the
meeting, written notice stating (1) the time and place of the meeting, and (2)
the purpose or purposes of the meeting if the meeting is a special meeting or
if notice of the purpose is required by statute to be given. Such notice
shall be personally delivered to the shareholder, or left at his residence or
usual place of business, or mailed to him at his address as it appears on the
records of the Corporation. Notice shall be deemed to be given when deposited
in the United States mail addressed to the shareholders as aforesaid. No
notice of a shareholders' meeting need be given to any shareholder who shall
sign a written waiver of such notice, whether before or after the meeting,
which is filed with the records of shareholders' meetings, or to any
shareholder who is present at the meeting in person or by proxy. Notice of
adjournment of a shareholders' meeting to another time or place need not be
given if such time and place are announced at the meeting, unless the
adjournment is for more than one hundred twenty (120) days after the original
record date. Irregularities in the notice of any meeting to, or the
nonreceipt of any such notice by, any of the stockholders shall not invalidate
any action otherwise properly taken by or at any such meeting. [MGCL,
Sections 2-504, 2-511(d)]

Section 2.05. Voting - In General: Except as otherwise specifically
provided in the Articles of Incorporation or these By-Laws, or as required by
provisions of the Investment Company Act with respect to the vote of a series,
if any, of the Corporation, at every shareholders' meeting, each shareholder
shall be entitled to one vote for each share of stock of the Corporation
validly issued and outstanding and held by such shareholder, except that no
shares held by the Corporation shall be entitled to a vote. Fractional shares
shall be entitled to fractional votes. Except as otherwise specifically
provided in the Articles of Incorporation, or these By-Laws, or as required by
provisions of the Investment Company Act, a majority of all the votes cast at
a meeting at which a quorum is present is sufficient to approve any matter
which properly comes before the meeting. The vote upon any question shall be
by ballot whenever requested by any person entitled to vote, but, unless such
a request is made, voting may be conducted in any way approved by the meeting.
[MGCL, Sections 2-214(a)(i), 2-506(a)(2), 2-507(a), 2-509(b)]

At any meeting at which there is an election of Directors, the Chairman of
the meeting may, and upon the request of the holders of ten (10) percent of
the stock entitled to vote at such election shall, appoint two inspectors of
election who shall first subscribe an oath or affirmation to execute
faithfully the duties of inspectors at such election with strict impartiality
and according to the best of their ability, and shall, after the election,
make a certificate of the result of the vote taken. No candidate for the
office of Director shall be appointed as an inspector.

Section 2.06. Shareholders Entitled to Vote: If, pursuant to Section 8.05
hereof, a record date has been fixed for the determination of shareholders
entitled to notice of or to vote at any shareholders' meeting, each
shareholder of the Corporation shall be entitled to vote in person or by
proxy, each share or fraction of a share of stock outstanding in his name on
the books of the Corporation on such record date. If no record date has been
fixed for the determination of shareholders, the record date for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day on which notice of
the meeting is mailed or the 30th day before the meeting, whichever is the
closer date to the meeting, or, if notice is waived by all shareholders, at
the close of business on the tenth (10th) day next preceding the date of the
meeting. [MGCL, Sections 2-507, 2-511]

Section 2.07. Voting - Proxies: The right to vote by proxy shall exist
only if the instrument authorizing such proxy to act shall have been executed
in writing by the shareholder himself, or by his attorney thereunto duly
authorized in writing. No proxy shall be valid more than eleven (11) months
after its date unless it provides for a longer period. All proxies shall be
delivered to the Secretary of the Corporation or to the person acting as
Secretary of the meeting before being voted, who shall decide all questions
concerning qualification of voters, the validity of proxies, and the
acceptance or rejection of votes. If inspectors of election have been
appointed by the chairman of the meeting, such inspectors shall decide all
such questions. A proxy with respect to stock held in the name of two or more
persons shall be valid if executed by one of them unless at or prior to
exercise of such proxy the Corporation receives a specific written notice to
the contrary from any one of them. A proxy purporting to be executed by or on
behalf of a shareholder shall be deemed valid unless challenged at or prior to
its exercise. [MGCL, Section 2-507(b)]

Section 2.08. Quorum: The presence at any shareholders' meeting, in
person or by proxy, of shareholders entitled to cast a majority of the votes
entitled to be cast at the meeting shall constitute a quorum. [MGCL, Section
2-506(a)]

Section 2.09. Absence of Quorum: In the absence of a quorum, the holders
of a majority of shares entitled to vote at the meeting and present thereat in
person or by proxy, or, if no shareholder entitled to vote is present in
person or by proxy, any officer present who is entitled to preside at or act
as Secretary of such meeting, may adjourn the meeting sine die or from time to
time. Any business that might have been transacted at the meeting originally
called may be transacted at any such adjourned meeting at which a quorum is
present.

Section 2.10. Stock Ledger and List of Shareholders: It shall be the duty
of the Secretary or Assistant Secretary of the Corporation to cause an
original or duplicate stock ledger to be maintained at the office of the
Corporation's transfer agent, containing the names and addresses of all
shareholders and the number of shares of each class held by each shareholder.
Such stock ledger may be in written form, or any other form capable of being
converted into written form within a reasonable time for visual inspection.
Any one or more persons, who together are and for at least six (6) months have
been shareholders of record of at least five percent (5%) of the outstanding
capital stock of the Corporation, may submit (unless the Corporation at the
time of the request maintains a duplicate stock ledger at its principal
office) a written request to any officer of the Corporation or its resident
agent in Maryland for a list of the shareholders of the Corporation. Within
twenty (20) days after such a request, there shall be prepared and filed at
the Corporation's principal office a list, verified under oath by an officer
of the Corporation or by its stock transfer agent or registrar, which sets
forth the name and address of each shareholder and the number of shares of
each class which the shareholder holds. [MGCL, Sections 2-209, 2-513]

Section 2.11. Informal Action By Shareholders: Any action required or
permitted to be taken at a meeting of shareholders may be taken without a
meeting if the following are filed with the records of shareholders' meetings:

(a) A unanimous written consent which sets forth the action
and is signed by each shareholder entitled to vote on the
matter; and

(b) A written waiver of any right to dissent signed by each
shareholder entitled to notice of the meeting, but not
entitled to vote at it.

[MGCL, Section 2-505]

ARTICLE III

BOARD OF DIRECTORS

Section 3.01. Number and Term of Office: The Board of Directors shall
consist of one (1) Director, which number may be increased by a resolution of
a majority of the entire Board of Directors, provided that the number of
Directors shall not be more than fifteen (15) nor less than the lesser of (i)
three (3) or (ii) the number of shareholders of the Corporation. Each
Director (whenever elected) shall hold office until the next annual meeting of
shareholders and until his successor is elected and qualifies or until his
earlier death, resignation, or removal. [MGCL, Sections 2-402, 2-404, 2-405]

Section 3.02. Qualification of Directors: No member of the Board of
Directors need be a shareholder of the Corporation, but at least one member of
the Board of Directors shall be a person who is not an interested person (as
such term is defined in the Investment Company Act) of the investment adviser
of the Corporation, nor an officer or employee of the Corporation. [MGCL,
Section 2-403; Investment Company Act, Section 10(d)]

Section 3.03. Election of Directors: Until the first annual meeting of
shareholders, or until successors are duly elected and qualified, the Board of
Directors shall consist of the persons named as such in the Articles of
Incorporation. Thereafter, except as otherwise provided in Sections 3.04 and
3.05 hereof, at each annual meeting, the shareholders shall elect Directors to
hold office until the next annual meeting and/or until their successors are
elected and qualify. In the event that Directors are not elected at an annual
shareholders' meeting, then Directors may be elected at a special
shareholders' meeting. Directors shall be elected by vote of the holders of a
plurality of the shares present in person or by proxy and entitled to vote.
[MGCL, Section 2-404]

Section 3.04. Removal of Directors: At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any Director or Directors from office, either with or without
cause, and may elect a successor or successors to fill any resulting vacancies
for the unexpired terms of removed Directors. [MGCL, Sections 2-406, 2-407]

Section 3.05. Vacancies and Newly Created Directorships: If any vacancies
occur in the Board of Directors by reason of resignation, removal or
otherwise, or if the authorized number of Directors is increased, the
Directors then in office shall continue to act, and such vacancies (if not
previously filled by the shareholders) may be filled by a majority of the
Directors then in office, whether or not sufficient to constitute a quorum,
provided that, immediately after filling such vacancy, at least two-thirds of
the Directors then holding office shall have been elected to such office by
the shareholders of the Corporation. In the event that at any time, other
than the time preceding the first meeting of shareholders, less than a
majority of the Directors of the Corporation holding office at that time were
so elected by the shareholders, a meeting of the shareholders shall be held
promptly and in any event within sixty (60) days for the purpose of electing
Directors to fill any existing vacancies in the Board of Directors unless the
Securities and Exchange Commission shall by order extend such period. Except
as provided in Section 3.04 hereof, a Director elected by the Board of
Directors to fill a vacancy shall be elected to hold office until the next
annual meeting of shareholders or until his successor is elected and
qualifies. [MGCL, Section 2-407; Investment Company Act, Section 16(a)]

Section 3.06. General Powers:

(a) The property, business, and affairs of the Corporation
shall be managed under the direction of the Board of
Directors which may exercise all the powers of the
Corporation except such as are by law, by the Articles of
Incorporation, or by these By-Laws conferred upon or
reserved to the shareholders of the Corporation. [MGCL,
Section 2-401]

(b) All acts done by any meeting of the Directors or by any
person acting as a Director, so long as his successor
shall not have been duly elected or appointed, shall,
notwithstanding that it be afterwards discovered that
there was some defect in the election of the Directors or
such person acting as a Director or that they or any of
them were disqualified, be as valid as if the Directors
or such person, as the case may be, had been duly elected
and were or was qualified to be Directors or a Director
of the Corporation.

Section 3.07. Power to Issue and Sell Stock: The Board of Directors may
from time to time authorize by resolution the issuance and sale of any of the
Corporation's authorized shares to such persons as the Board of Directors
shall deem advisable and such resolution shall set the minimum price or value
of consideration for the stock or a formula for its determination, and shall
include a fair description of any consideration other than money and a
statement of the actual value of such consideration as determined by the Board
of Directors or a statement that the Board of Directors has determined that
the actual value is or will be not less than a certain sum.
[MGCL, Section 2-203]

Section 3.08. Power to Declare Dividends:

(a) The Board of Directors, from time to time as it may deem
advisable, may declare and the Corporation pay dividends,
in cash, property, or shares of the Corporation available
for dividends out of any source available for dividends,
to the shareholders according to their respective rights
and interests. [MGCL, Section 2-309]

(b) The Board of Directors shall cause to be accompanied by a
written statement any dividend payment wholly or partly
from any source other than the Corporation's accumulated
undistributed net income (determined in accordance with
good accounting practice and the rules and regulations of
the Securities and Exchange Commission then in effect)
not including profits or losses realized upon the sale of
securities or other properties. Such statement shall
adequately disclose the source or sources of such payment
and the basis of calculation and shall be otherwise in
such form as the Securities and Exchange Commission may
prescribe. [Investment Company Act, Section 19; SEC Rule
19a-1; MGCL, Section 2-309(c)]

(c) Notwithstanding the above provisions of this Section
3.08, the Board of Directors may at any time declare and
distribute pro rata among the shareholders a stock
dividend out of the Corporation's authorized but unissued
shares of stock, including any shares previously
purchased by the Corporation, provided that such dividend
shall not be distributed in shares of any class with
respect to any shares of a different class. The shares
so distributed shall be issued at the par value thereof,
and there shall be transferred to stated capital, at the
time such dividend is paid, an amount of surplus equal to
the aggregate par value of the shares issued as a
dividend and there may be transferred from earned surplus
to capital surplus such additional amount as the Board of
Directors may determine. [MGCL, Section 2-309]

Section 3.09. Annual and Regular Meetings: The annual meeting of the
Board of Directors for choosing officers and transacting other proper business
shall be held after the annual shareholders' meeting at such time and place as
may be specified in the notice of such meeting of the Board of Directors or,
in the absence of such annual shareholders' meeting, at such time and place as
the Board of Directors may provide. The Board of Directors from time to time
may provide by resolution for the holding of regular meetings and fix their
time and place (within or outside the State of Maryland).
[MGCL, Section 2-409(a)]

Section 3.10. Special Meetings: Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board, the
President (or, in the absence or disability of the President, by any Vice
President), the Treasurer, or two or more Directors, at the time and place
(within or outside the State of Maryland) specified in the respective notices
or waivers of notice of such meetings.

Section 3.11. Notice: Notice of annual, regular, and special meetings
shall be in writing, stating the time and place, and shall be mailed to each
Director at his residence or regular place of business or caused to be
delivered to him personally or to be transmitted to him by telegraph, cable,
or wireless at least two (2) days before the day on which the meeting is to be
held. Except as otherwise required by the By-Laws or the Investment Company
Act, such notice need not include a statement of the business to be transacted
at, or the purpose of, the meeting. [MGCL, Section 2-409(b)]

Section 3.12. Waiver of Notice: No notice of any meeting need be given to
any Director who is present at the meeting or to any Director who signs a
waiver of the notice of the meeting (which waiver shall be filed with the
records of the meeting), whether before or after the meeting. [MGCL, Section
2-409(c)]

Section 3.13. Quorum and Voting: At all meetings of the Board of
Directors the presence of one-third of the total number of Directors
authorized, but not less than two (2) Directors if there are at least two
directors, shall constitute a quorum. In the absence of a quorum, a majority
of the Directors present may adjourn the meeting, from time to time, until a
quorum shall be present. The action of a majority of the Directors present at
a meeting at which a quorum is present shall be the action of the Board of
Directors unless the concurrence of a greater proportion is required for such
action by law, by the Articles of Incorporation or by these By-Laws. [MGCL,
Section 2-408]

Section 3.14. Conference Telephone: Members of the Board of Directors or
of any committee designated by the Board, may participate in a meeting of the
Board or of such committee by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time, and participation by such means shall constitute
presence in person at such meeting. [MGCL, Section 2-409(d)]

Section 3.15. Compensation: Each Director may receive such remuneration
for his services as shall be fixed from time to time by resolution of the
Board of Directors.

Section 3.16. Action Without a Meeting: Except as otherwise provided
under the Investment Company Act, any action required or permitted to be taken
at any meeting of the Board of Directors or any committee thereof may be taken
without a meeting if a unanimous written consent which sets forth the action
is signed by all members of the Board or of such committee and such written
consent is filed with the minutes of proceedings of the Board or committee.
[MGCL, Section 2-408(c)]

Section 3.17. Director Emeritus: Upon the retirement of a Director of the
Corporation, the Board of Directors may designate such retired Director as a
Director Emeritus. The position of Director Emeritus shall be honorary only
and shall not confer upon such Director Emeritus any responsibility, or voting
authority, whatsoever with respect to the Corporation. A Director Emeritus
may, but shall not be required to, attend the meetings of the Board of
Directors and receive materials normally provided Directors relating to the
Corporation. The Board of Directors may establish such compensation as it may
deem appropriate under the circumstances to be paid by the Corporation to a
Director Emeritus.

ARTICLE IV

EXECUTIVE COMMITTEE AND OTHER COMMITTEES

Section 4.01. How Constituted: By resolution adopted by the Board of
Directors, the Board may appoint from among its members one or more
committees, including an Executive Committee, each consisting of at least two
(2) Directors. Each member of a committee shall hold office during the
pleasure of the Board. [MGCL, Section 2-411]

Section 4.02. Powers of the Executive Committee: Unless otherwise
provided by resolution of the Board of Directors, the Executive Committee, in
the intervals between meetings of the Board of Directors, shall have and may
exercise all of the powers of the Board of Directors to manage the business
and affairs of the Corporation except the power to:

(a) Declare dividends or distributions on stock;

(b) Issue stock other than as provided in Section 2-411(b) of
Corporations and Associations Article of the Annotated
Code of Maryland;

(d) Amend the By-Laws; or

(e) Approve any merger or share exchange which does not
require shareholder approval.

[MGCL, Section 2-411(a)]

Section 4.03. Other Committees of the Board of Directors: To the extent
provided by resolution of the Board, other committees shall have and may
exercise any of the powers that may lawfully be granted to the Executive
Committee. [MGCL, Section 2-411(a)]

Section 4.04. Proceedings, Quorum, and Manner of Acting: In the absence
of appropriate resolution of the Board of Directors, each committee may adopt
such rules and regulations governing its proceedings, quorum and manner of
acting as it shall deem proper and desirable, provided that the quorum shall
not be less than two (2) Directors. In the absence of any member of any such
committee, the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint a member of the Board of Directors to act in
the place of such absent member. [MGCL, Section 2-411(c)]

Section 4.05. Other Committees: The Board of Directors may appoint other
committees, each consisting of one or more persons who need not be Directors.
Each such committee shall have such powers and perform such duties as may be
assigned to it from time to time by the Board of Directors, but shall not
exercise any power which may lawfully be exercised only by the Board of
Directors or a committee thereof.

ARTICLE V

OFFICERS

Section 5.01. General: The officers of the Corporation shall be a
President, one or more Vice Presidents (one or more of whom may be designated
Executive Vice President), a Secretary, and a Treasurer, and may include one
or more Assistant Vice Presidents, one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 5.11 hereof. The Board of Directors
may elect, but shall not be required to elect, a Chairman of the Board.
[MGCL, Section 2-412]

Section 5.02. Election, Term of Office and Qualifications: The officers
of the Corporation (except those appointed pursuant to Section 5.11 hereof)
shall be elected by the Board of Directors at its first meeting and thereafter
at each annual meeting of the Board. If any officer or officers are not
elected at any such meeting, such officer or officers may be elected at any
subsequent regular or special meeting of the Board. Except as provided in
Sections 5.03, 5.04, and 5.05 hereof, each officer elected by the Board of
Directors shall hold office until the next annual meeting of the Board of
Directors and until his successor shall have been chosen and qualified. Any
person may hold two or more offices of the Corporation, except that neither
the Chairman of the Board, nor the President, may hold the office of Vice
President, but no person shall execute, acknowledge, or verify any instrument
in more than one capacity if such instrument is required by law, the Articles
of Incorporation, or these By-Laws to be executed, acknowledged, or verified
by two or more officers. The Chairman of the Board shall be selected from
among the Directors of the Corporation and may hold such office only so long
as he continues to be a Director. No other officer need be a Director.
[MGCL, Sections 2-412, 2-413 and 2-415]

Section 5.03. Resignation: Any officer may resign his office at any time
by delivering a written resignation to the Board of Directors, the President,
the Secretary, or any Assistant Secretary. Unless otherwise specified
therein, such resignation shall take effect upon delivery.

Section 5.04. Removal: Any officer may be removed from office by the
Board of Directors whenever in the judgment of the Board of Directors the best
interests of the Corporation will be served thereby. [MGCL, Section 2-413(c)]

Section 5.05 Vacancies and Newly Created Offices: If any vacancy shall
occur in any office by reason of death, resignation, removal, disqualification
or other cause, or if any new office shall be created, such vacancies or newly
created offices may be filled by the Board of Directors at any meeting or, in
the case of any office created pursuant to Section 5.11 hereof, by any officer
upon whom such power shall have been conferred by the Board of Directors.
[MGCL, Section 2-413(d)]

Section 5.06. Chairman of the Board: Unless otherwise provided by
resolution of the Board of Directors, the Chairman of the Board, if there be
such an officer, shall be the chief executive and operating officer of the
Corporation, shall preside at all shareholders' meetings, and at all meetings
of the Board of Directors. He shall be ex officio a member of all standing
committees of the Board of Directors. Subject to the supervision of the Board
of Directors, he shall have general charge of the business, affairs, property,
and operation of the Corporation and its officers, employees, and agents. He
may sign (unless the President or a Vice President shall have signed)
certificates representing stock of the Corporation authorized for issuance by
the Board of Directors and shall have such other powers and perform such other
duties as may be assigned to him from time to time by the Board of Directors.

Section 5.07. President: Unless otherwise provided by resolution of the
Board of Directors, the President shall, at the request of or in the absence
or disability of the Chairman of the Board, or if no Chairman of the Board has
been chosen, he shall preside at all shareholders' meetings and at all
meetings of the Board of Directors and shall in general exercise the powers
and perform the duties of the Chairman of the Board. He may sign (unless the
Chairman or a Vice President shall have signed) certificates representing
stock of the Corporation authorized for issuance by the Board of Directors.
Except as the Board of Directors may otherwise order, he may sign in the name
and on behalf of the Corporation all deeds, bonds, contracts, or agreements.
He shall exercise such other powers and perform such other duties as from time
to time may be assigned to him by the Board of Directors.

Section 5.08. Vice President: The Board of Directors shall, from time to
time, designate and elect one or more Vice Presidents (one or more of whom may
be designated Executive Vice President) who shall have such powers and perform
such duties as from time to time may be assigned to them by the Board of
Directors or the President. At the request or in the absence or disability of
the President, the Vice President (or, if there are two or more Vice
Presidents, the Vice President in order of seniority of tenure in such office
or in such other order as the Board of Directors may determine) may perform
all the duties of the President and, when so acting, shall have all the powers
of and be subject to all the restrictions upon the President. Any Vice
President may sign (unless the Chairman, the President, or another Vice
President shall have signed) certificates representing stock of the
Corporation authorized for issuance by the Board of Directors.

Section 5.09. Treasurer and Assistant Treasurers: The Treasurer shall be
the principal financial and accounting officer of the Corporation and shall
have general charge of the finances and books of account of the Corporation.
Except as otherwise provided by the Board of Directors, he shall have general
supervision of the funds and property of the Corporation and of the
performance by the custodian of its duties with respect thereto. He may
countersign (unless an Assistant Treasurer or Secretary or Assistant Secretary
shall have countersigned) certificates representing stock of the Corporation
authorized for issuance by the Board of Directors. He shall render to the
Board of Directors, whenever directed by the Board, an account of the
financial condition of the Corporation and of all his transactions as
Treasurer; and as soon as possible after the close of each fiscal year he
shall make and submit to the Board of Directors a like report for such fiscal
year. He shall cause to be prepared annually a full and correct statement of
the affairs of the Corporation, including a balance sheet and a financial
statement of operations for the preceding fiscal year, which shall be
submitted at the annual meeting of shareholders and filed within twenty (20)
days thereafter at the principal office of the Corporation. He shall perform
all the acts incidental to the office of the Treasurer, subject to the control
of the Board of Directors. Any Assistant Treasurer may perform such duties of
the Treasurer as the Treasurer or the Board of Directors may assign, and, in
the absence of the Treasurer, he may perform all the duties of the Treasurer.

Section 5.10. Secretary and Assistant Secretaries: The Secretary shall
attend to the giving and serving of all notices of the Corporation and shall
record all proceedings of the meetings of the shareholders and Directors in
one or more books to be kept for that purpose. He shall keep in safe custody
the seal of the Corporation and shall have charge of the records of the
Corporation, including the stock books and such other books and papers as the
Board of Directors may direct and such books, reports, certificates and other
documents required by law to be kept, all of which shall at all reasonable
times be open to inspection by any Director. He shall countersign (unless the
Treasurer, an Assistant Treasurer or an Assistant Secretary shall have
countersigned) certificates representing stock of the Corporation authorized
for issuance by the Board of Directors. He shall perform such other duties as
appertain to his office or as may be required by the Board of Directors. Any
Assistant Secretary may perform such duties of the Secretary as the Secretary
or the Board of Directors may assign, and, in the absence of the Secretary, he
may perform all the duties of the Secretary.

Section 5.11. Subordinate Officers: The Board of Directors from time to
time may appoint such other officers or agents as it may deem advisable, each
of whom shall have such title, hold office for such period, have such
authority and perform such duties as the Board of Directors may determine.
The Board of Directors from time to time may delegate to one or more officers
or agents the power to appoint any such subordinate officers or agents and to
prescribe their respective rights, terms of office, authorities, and duties.
Any officer or agent appointed in accordance with the provisions of this
Section 5.11 may be removed, either with or without cause, by any officer upon
whom such power of removal shall have been conferred by the Board of
Directors. [MGCL, Section 2-412(b)]

Section 5.12. Remuneration: The salaries or other compensation of the
officers of the Corporation shall be fixed from time to time by resolution of
the Board of Directors, except that the Board of Directors may by resolution
delegate to any person or group of persons the power to fix the salaries or
other compensation of any subordinate officers or agents appointed in
accordance with the provisions of Section 5.11 hereof.

Section 5.13. Surety Bond: The Board of Directors may require any officer
or agent of the Corporation to execute a bond (including, without limitation,
any bond required by the Investment Company Act and the rules and regulations
of the Securities and Exchange Commission promulgated thereunder) to the
Corporation in such sum and with such surety or sureties as the Board of
Directors may determine, conditioned upon the faithful performance of his or
her duties to the Corporation, including responsibility for negligence and for
the accounting for any of the Corporation's property, funds or securities that
may come into his or her hands.

ARTICLE VI

CUSTODY OF SECURITIES AND CASH

Section 6.01. Employment of a Custodian: The Corporation shall place and
at all times maintain in the custody of a Custodian (including
any sub-custodian for the Custodian)all funds, securities, and similar
investments owned by the Corporation. The Custodian shall be a bank having
an aggregate
capital, surplus, and undivided profits of not less than $10,000,000. Subject
to such rules, regulations, and orders as the Securities and Exchange
Commission may adopt as necessary or appropriate for the protection of
investors, the Corporation's Custodian may deposit all or a part of the
securities owned by the Corporation in a sub-custodian or sub-custodians
situated within or without the United States. The Custodian shall be
appointed and its remuneration fixed by the Board of Directors. [Investment
Company Act, Section 17(f)]

Section 6.02. Central Certificate Service: Subject to such rules,
regulations, and orders as the Securities and Exchange Commission may adopt as
necessary or appropriate for the protection of investors, the Corporation's
Custodian may deposit all or any part of the securities owned by the
Corporation in a system for the central handling of securities established by
a national securities exchange or national securities association registered
with the Commission under the Securities Exchange Act of 1934, or such other
person as may be permitted by the Commission, pursuant to which system all
securities of any particular class or series of any issuer deposited within
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities. [Investment
Company Act, Section 17(f)]

Section 6.03. Cash Assets: The cash proceeds from the sale of securities
and similar investments and other cash assets of the Corporation shall be kept
in the custody of a bank or banks appointed pursuant to Section 6.01 hereof,
or in accordance with such rules and regulations or orders as the Securities
and Exchange Commission may from time to time prescribe for the protection of
investors, except that the Corporation may maintain a checking account or
accounts in a bank or banks, each having an aggregate capital, surplus, and
undivided profits of not less than $10,000,000, provided that the balance of
such account or the aggregate balances of such accounts shall at no time
exceed the amount of the fidelity bond, maintained pursuant to the
requirements of the Investment Company Act and rules and regulations
thereunder, covering the officers or employees authorized to draw on such
account or accounts. [Investment Company Act, Section 17(f)]

Section 6.04. Free Cash Accounts: The Corporation may, upon resolution of
its Board of Directors, maintain a petty cash account free of the foregoing
requirements of this Article VI in an amount not to exceed $500, provided that
such account is operated under the imprest system and is maintained subject to
adequate controls approved by the Board of Directors over disbursements and
reimbursements including, but not limited to, fidelity bond coverage for
persons having access to such funds. [Investment Company Act, Rule 17f-3]

Section 6.05. Action Upon Termination of Custodian Agreement: Upon
resignation of a custodian of the Corporation or inability of a custodian to
continue to serve, the Board of Directors shall promptly appoint a successor
custodian, but in the event that no successor custodian can be found who has
the required qualifications and is willing to serve, the Board of Directors
shall call as promptly as possible a special meeting of the shareholders to
determine whether the Corporation shall function without a custodian or shall
be liquidated. If so directed by vote of the holders of a majority of the
outstanding shares of stock of the Corporation, the custodian shall deliver
and pay over all property of the Corporation held by it as specified in such
vote.

Section 6.06. Other Arrangements: The Corporation may make such other
arrangements for the custody of its assets (including deposit arrangements) as
may be required by any applicable law, rule or regulation.

ARTICLE VII

EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES

Section 7.01. Execution of Instruments: All deeds, documents, transfers,
contracts, agreements, requisitions or orders, promissory notes, assignments,
endorsements, checks and drafts for the payment of money by the Corporation,
and other instruments requiring execution by the Corporation shall be signed
by the Chairman, the President, a Vice President, or the Treasurer, or as the
Board of Directors may otherwise, from time to time, authorize. Any such
authorization may be general or confined to specific instances.

Section 7.02. Voting of Securities: Unless otherwise ordered by the Board
of Directors, the Chairman, the President, or any Vice President shall have
full power and authority on behalf of the Corporation to attend and to act and
to vote, or in the name of the Corporation to execute proxies to vote, at any
meeting of shareholders of any company in which the Corporation may hold
stock. At any such meeting such officer shall possess and may exercise (in
person or by proxy) any and all rights, powers, and privileges incident to the
ownership of such stock. The Board of Directors may by resolution from time
to time confer like powers upon any other person or persons. [MGCL, Section
2-509]

ARTICLE VIII

CAPITAL STOCK

Section 8.01. Ownership of Shares:

(a) Certificates certifying the ownership of shares will not
be issued for shares purchased or otherwise acquired.
The ownership of shares, full or fractional, shall be
recorded on the books of the Corporation or its agent.
The record books of the Corporation as kept by the
Corporation or its agent, as the case may be, shall be
conclusive as to the number of shares held from time to
time by each such shareholder.

Section 8.02. Transfer of Capital Stock:

(a) Shares of stock of the Corporation shall be transferable
only upon the books of the Corporation kept for such
purpose.

(b) The Corporation shall be entitled to treat the holder of
record of any share of stock as the absolute owner
thereof for all purposes, and accordingly shall not be
bound to recognize any legal, equitable, or other claim
or interest in such share on the part of any other
person, whether or not it shall have express or other
notice thereof, except as otherwise expressly provided by
the statutes of the State of Maryland.

Section 8.03. Transfer Agents and Registrars: The Board of Directors may,
from time to time, appoint or remove transfer agents and registrars of
transfers of shares of stock of the Corporation, and it may appoint the same
person as both transfer agent and registrar.

Section 8.04. Transfer Regulations: The shares of stock of the
Corporation may be freely transferred, and the Board of Directors may, from
time to time, adopt lawful rules and regulations with reference to the method
of transfer of the shares of stock of the Corporation.

Section 8.05. Fixing of Record Date: The Board of Directors may fix in
advance a date as a record date for the determination of the shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or to receive payment of any dividend or other distribution
or allotment of any rights, or to exercise any rights in respect of any
change, conversion, or exchange of stock, or for any other proper purpose,
provided that such record date shall be a date not more than sixty (60) days
nor, in the case of a meeting of shareholders, less than ten (10) days prior
to the date on which the particular action, requiring such determination of
shareholders, is to be taken. In such case, only such shareholders as shall
be shareholders of record on the record date so fixed shall be entitled to
such notice of, and to vote at, such meeting or adjournment, or to give such
consent, or to receive payment of such dividend or other distribution, or to
receive such allotment of rights, or to exercise such rights, or to take other
action, as the case may be, notwithstanding any transfer of any shares on the
books of the Corporation after any such record date. A meeting of
shareholders convened on the date for which it was called may be adjourned
from time to time without notice to a date not more than one hundred twenty
(120) days after the original record date. [MGCL, Section 2-511]

ARTICLE IX

FISCAL YEAR, ACCOUNTANT

Section 9.01. Fiscal Year: The fiscal year of the Corporation shall be
the twelve (12) calendar months beginning on the 1st day of January in each
year and ending on the last day of the following December, or such other
period of twelve (12) calendar months as the Board of Directors may by
resolution prescribe.

Section 9.02. Accountant:

(a) The Corporation shall employ an independent public
accountant or firm of independent public accountants for
each series of the Corporation to examine the accounts of
the Corporation with respect to such series and to sign
and certify financial statements filed by the Corporation
with respect to such series. The certificates and
reports of the accountant(s) shall be addressed both to
the Board of Directors and to the shareholders. The
Corporation may employ a different accountant with
respect to each series.

(b) A majority of the members of the Board of Directors who
are not interested persons (as such term is defined in
the Investment Company Act) of the Corporation shall
select the accountant for each series, by vote cast in
person, at any meeting held within such period of time as
may be allowed under the Investment Company Act. Such
selection shall be submitted for ratification or
rejection at the next succeeding annual shareholders'
meeting for such series. If such meeting shall reject
such selection, the accountant for such series shall be
selected by majority vote of the Corporation's
outstanding voting securities of such series, either at
the meeting at which the rejection occurred or at a
subsequent meeting of shareholders for such series called
for the purpose.

(c) Any vacancy occurring between annual meetings, due to the
death or resignation of the accountant of a series, may
be filled by the vote of a majority of those members of
the Board of Directors who are not interested persons (as
so defined) of the Corporation, cast in person at a
meeting called for the purpose of voting on such action.

(d) The employment of the accountant of a series shall be
conditioned upon the right of such series of the
Corporation by vote of a majority of the outstanding
voting securities of such series at any meeting called
for the purpose to terminate such employment forthwith
without any penalty. [Investment Company Act, Section
32(a)]

ARTICLE X

INDEMNIFICATION AND INSURANCE

Section 10.01. Indemnification and Payment of Expenses in Advance: The
Corporation shall indemnify any individual ("Indemnitee") who is a present or
former director, officer, employee, or agent of the Corporation, or who is or
has been serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, who, by reason of his position was, is, or is threatened to
be made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative
(hereinafter collectively referred to as a "Proceeding") against any
judgments, penalties, fines, settlements, and reasonable expenses (including
attorneys' fees) incurred by such Indemnitee in connection with any
Proceeding, to the fullest extent that such indemnification may be lawful
under Maryland law. The Corporation shall pay any reasonable expenses so
incurred by such Indemnitee in defending a Proceeding in advance of the final
disposition thereof to the fullest extent that such advance payment may be
lawful under Maryland law. Subject to any applicable limitations and
requirements set forth in the Corporation's Articles of Incorporation and in
these By-Laws, any payment of indemnification or advance of expenses shall be
made in accordance with the procedures set forth in Maryland law.

Notwithstanding the foregoing, nothing herein shall protect or purport to
protect any Indemnitee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office
("Disabling Conduct").

Anything in this Article X to the contrary notwithstanding, no
indemnification shall be made by the Corporation to any Indemnitee unless:

(a) there is a final decision on the merits by a court or
other body before whom the Proceeding was brought that
the Indemnitee was not liable by reason of Disabling
Conduct; or

(i) the vote of a majority of a quorum of directors who are
neither "interested persons" of the Corporation as
defined in Section 2(a)(19) of the Investment Company
Act, nor parties to the Proceeding; or

(ii) an independent legal counsel in a written opinion.

Anything in this Article X to the contrary notwithstanding, any advance of
expenses by the Corporation to any Indemnitee shall be made only upon the
undertaking by such Indemnitee to repay the advance unless it is ultimately
determined that such Indemnitee is entitled to indemnification as above
provided, and only if one of the following conditions is met:

(a) the Indemnitee provides a security for his undertaking;
or

(b) the Corporation shall be insured against losses arising
by reason of any lawful advances; or

(c) there is a determination, based on a review of readily
available facts, that there is reason to believe that the
Indemnitee will ultimately be found entitled to
indemnification, which determination shall be made by:

(i) a majority of a quorum of directors who are neither
"interested persons" of the Corporation as defined in
Section 2(a)(19) of the Investment Company Act, nor
parties to the Proceeding; or

(ii) an independent legal counsel in a written opinion.

Section 10.02. Insurance of Officers, Directors, Employees and Agents: To
the fullest extent permitted by applicable Maryland law and by Section 17(h)
of the Investment Company Act, as from time to time amended, the Corporation
may purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee, or agent of the Corporation, or who is or was
serving at the request of the Corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise, against any liability asserted against him and incurred by him in
or arising out of his position, whether or not the Corporation would have the
power to indemnify him against such liability. [MGCL, Section 2-418(k)]

Section 10.03. Amendment: No amendment, alteration or repeal of this
Article or the adoption, alteration or amendment of any other provision of the
Articles of Incorporation or By-Laws inconsistent with this Article shall
adversely affect any right or protection of any person under this Article with
respect to any act or failure to act which occurred prior to such amendment,
alteration, repeal or adoption.

ARTICLE XI

AMENDMENTS

Section 11.01. General: Except as provided in Section 11.02 hereof, all
By-Laws of the Corporation, whether adopted by the Board of Directors or the
shareholders, shall be subject to amendment, alteration, or repeal, and new
By-Laws may be made, by the affirmative vote of a majority of either:

(a) the holders of record of the outstanding shares of stock
of the Corporation entitled to vote, at any annual or
special meeting the notice or waiver of notice of which
shall have specified or summarized the proposed
amendment, alteration, repeal, or new By-Law; or

(b) the Directors present at any regular or special meeting
at which a quorum is present if the notice or waiver of
notice thereof or material sent to the Directors in
connection therewith on or prior to the last date for the
giving of such notice under these By-Laws shall have
specified or summarized the proposed amendment,
alteration, repeal, or new By-Law.

Section 11.02. By Shareholders Only:

(a) No amendment of any section of these By-Laws shall be
made except by the shareholders of the Corporation if the
shareholders shall have provided in the By-Laws that such
section may not be amended, altered, or repealed except
by the shareholders.

(b) From and after the issue of any shares of the Capital
Stock of the Corporation, no amendment of this Article XI
shall be made except by the shareholders of the
Corporation.

ARTICLE XII

MISCELLANEOUS

Section 12.01. Use of the Term "Annual Meeting:" The use of the term
"annual meeting" in these By-Laws shall not be construed as implying a
requirement that a shareholder meeting be held annually.

<PAGE>

INVESTMENT MANAGEMENT AGREEMENT

Between

T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.

and

T. ROWE PRICE ASSOCIATES, INC.

INVESTMENT MANAGEMENT AGREEMENT, made as of July 26, 1997, by and
between T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC., a Maryland
corporation (hereinafter called the "Fund"), and T. ROWE PRICE ASSOCIATES,
INC., a corporation organized and existing under the laws of the State of
Maryland (hereinafter called the "Manager").

W I T N E S S E T H:

WHEREAS, the Fund is engaged in business as an open-end management
investment company and is registered as such under the Federal Investment
Company Act of 1940, as amended (the "Act"); and

WHEREAS, the Manager is engaged principally in the business of rendering
investment supervisory services and is registered as an investment adviser
under the federal Investment Advisers Act of 1940, as amended; and

WHEREAS, the Fund desires the Manager to render investment supervisory
services to the Fund in the manner and on the terms and conditions hereinafter
set forth;

NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the parties hereto agree as follows:

1. Duties and Responsibilities of Manager.

A. Investment Management Services. The Manager shall act as
investment manager and shall supervise and direct the investments of the Fund
in accordance with the Fund's investment objectives, program, and restrictions
as provided in its prospectus, as amended from time to time, and such other
limitations as the Fund may impose by notice in writing to the Manager. The
Manager shall obtain and evaluate such information relating to the economy,
industries, businesses, securities markets, and securities as it may deem
necessary or useful in the discharge of its obligations hereunder and shall
formulate and implement a continuing program for the management of the assets
and resources of the Fund in a manner consistent with its investment
objectives. In furtherance of this duty, the Manager, as agent and
attorney-in-fact with respect to the Fund, is authorized, in its discretion
and without prior consultation with the Fund, to:

(i) buy, sell, exchange, convert, lend, and otherwise trade in
any stocks, bonds, and other securities or assets; and

(ii) place orders and negotiate the commissions (if any) for the
execution of transactions in securities with or through such
brokers, dealers, underwriters or issuers as the Manager
may select.

B. Financial, Accounting, and Administrative Services. The Manager
shall maintain the corporate existence and corporate records of the Fund;
maintain the registrations and qualifications of Fund shares under federal and
state law; monitor the financial, accounting, and administrative functions of
the Fund; maintain liaison with the various agents employed by the Fund
(including the Fund's transfer agent, custodian, independent accountants and
legal counsel) and assist in the coordination of their activities on behalf of
the Fund.

C. Reports to Fund. The Manager shall furnish to or place at the
disposal of the Fund such information, reports, evaluations, analyses and
opinions as the Fund may, at any time or from time to time, reasonably request
or as the Manager may deem helpful to the Fund.

D. Reports and Other Communications to Fund Shareholders. The
Manager shall assist the Fund in developing all general shareholder
communications, including regular shareholder reports.

E. Fund Personnel. The Manager agrees to permit individuals who
are officers or employees of the Manager to serve (if duly elected or
appointed) as officers, directors, members of any committee of directors,
members of any advisory board, or members of any other committee of the Fund,
without remuneration from or other cost to the Fund.

F. Personnel, Office Space, and Facilities of Manager. The Manager
at its own expense shall furnish or provide and pay the cost of such office
space, office equipment, office personnel, and office services as the Manager
requires in the performance of its investment advisory and other obligations
under this Agreement.

2. Allocation of Expenses.

A. Expenses Paid by Manager.

(1) Salaries and Fees of Officers. The Manager shall pay all
salaries, expenses, and fees of the officers and directors
of the Fund who are affiliated with the Manager.

(2) Assumption of Fund Expenses by Manager. The payment or
assumption by the Manager of any expense of the Fund that
the Manager is not required by this Agreement to pay or
assume shall not obligate the Manager to pay or assume the
same or any similar expense of the Fund on any subsequent
occasion.

B. Expenses Paid by Fund. The Fund shall bear all expenses of its
organization, operations, and business not specifically assumed or
agreed to be paid by the Manager as provided in this Agreement. In
particular, but without limiting the generality of the foregoing,
the Fund shall pay:

(1) Custody and Accounting Services. All expenses of the
transfer, receipt, safekeeping, servicing and accounting
for the Fund's cash, securities, and other property,
including all charges of depositories, custodians, and
other agents, if any;

(2) Shareholder Servicing. All expenses of maintaining and
servicing shareholder accounts, including all charges of
the Fund's transfer, shareholder recordkeeping, dividend
disbursing, redemption, and other agents, if any;

(3) Shareholder Communications. All expenses of preparing,
setting in type, printing, and distributing reports and
other communications to shareholders;

(4) Shareholder Meetings. All expenses incidental to holding
meetings of Fund shareholders, including the printing of
notices and proxy material, and proxy solicitation
therefor;

(5) Prospectuses. All expenses of preparing, setting in type,
and printing of annual or more frequent revisions of the
Fund's prospectus and of mailing them to shareholders;

(6) Pricing. All expenses of computing the Fund's net asset
value per share, including the cost of any equipment or
services used for obtaining price quotations;

(7) Communication Equipment. All charges for equipment or
services used for communication between the Manager or the
Fund and the custodian, transfer agent or any other agent
selected by the Fund;

(8) Legal and Accounting Fees and Expenses. All charges for
services and expenses of the Fund's legal counsel and
independent auditors;

(9) Directors' Fees and Expenses. All compensation of
directors, other than those affiliated with the Manager,
and all expenses incurred in connection with their service;

(10) Federal Registration Fees. All fees and expenses of
registering and maintaining the registration of the Fund
under the Act and the registration of the Fund's shares
under the Securities Act of 1933, as amended (the "'33
Act"), including all fees and expenses incurred in
connection with the preparation, setting in type, printing,
and filing of any registration statement and prospectus
under the '33 Act or the Act, and any amendments or
supplements that may be made from time to time;

(11) State Filing Fees. All fees and expenses imposed on the
Fund, as appropriate, with respect to the sale of the
Fund's shares under securities laws of various states or
jurisdictions, and under all other laws applicable to the
Fund or its business activities (including registering the
Fund as a broker-dealer, or any officer of the Fund or any
person as agent or salesman of the Fund in any state);

(12) Issue and Redemption of Fund Shares. All expenses incurred
in connection with the issue, redemption, and transfer of
Fund shares, including the expense of confirming all share
transactions, and of preparing and transmitting the Fund's
stock certificates;

(13) Bonding and Insurance. All expenses of bond, liability,
and other insurance coverage required by law or deemed
advisable by the Fund's board of directors;

(14) Brokerage Commissions. All brokers' commissions and other
charges incident to the purchase, sale, or lending of the
Fund's portfolio securities;

(15) Taxes. All taxes or governmental fees payable by or with
respect of the Fund to federal, state, or other
governmental agencies, domestic or foreign, including stamp
or other transfer taxes;

(16) Trade Association Fees. All fees, dues, and other expenses
incurred in connection with the Fund's membership in any
trade association or other investment organization; and

(17) Nonrecurring and Extraordinary Expenses. Such nonrecurring
expenses as may arise, including the costs of actions,
suits, or proceedings to which the Fund is a party and the
expenses the Fund may incur as a result of its legal
obligation to provide indemnification to its officers,
directors, and agents.

3. Management Fee. The Fund shall pay the Manager a fee ("Fee") which
will consist of two components: a Group Management Fee ("Group Fee") and an
Individual Fund Fee ("Fund Fee"). The Fee shall be paid monthly to the Manager
on the first business day of the next succeeding calendar month and shall be
calculated as follows:

A. Group Fee. The monthly Group Fee ("Monthly Group Fee") shall be
the sum of the daily Group Fee accruals ("Daily Group Fee Accruals") for
each month. The Daily Group Fee Accrual for any particular day will be
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 shall be 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% Next $30 billion
0.300% Thereafter

The Price Funds shall include all the mutual funds distributed by
T. Rowe Price Investment Services, Inc. (other than institutional or "private
label" funds, Equity Index, and the Spectrum Funds). For the purposes of
calculating the Daily Price Funds' Group Fee Accrual for any particular day,
the net assets of each Price Fund shall be 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.

B. Fund Fee. The monthly Fund Fee ("Monthly Fund Fee") shall be
the sum of the daily Fund Fee accruals ("Daily Fund Fee Accruals") for
each month. The Daily Fund Fee Accrual for any particular day will be
computed by multiplying the fraction of one (1) over the number of
calendar days in the year by the Fund Fee Rate of 0.35% 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.

C. Expense Limitation. As part of the consideration for the Fund
entering into this Agreement, the Manager hereby agrees to limit the
aggregate expenses of every character incurred by the Fund, including
but not limited to Fees of the Manager computed as hereinabove set
forth, but excluding interest, taxes, brokerage, and other expenditures
which are capitalized in accordance with generally accepted accounting
principles and extraordinary expenses, ("Manager Limitation"). Under the
Manager Limitation, the Manager agrees that through December 31, 1998,
such expenses shall not exceed 1.25% of the average daily net assets of
the Fund ("1.25% Expense Limitation"). To determine the Manager's
liability for the Fund's expenses over the 1.25% Expense Limitation, the
amount of allowable year-to-date expenses shall be computed daily by
prorating the 1.25% Expense Limitation based on the number of days
elapsed within the fiscal year of the Fund, or limitation period, if
shorter ("Prorated Limitation"). The Prorated Limitation shall be
compared to the expenses of the Fund recorded through the prior day in
order to produce the allowable expenses to be recorded for the current
day ("Allowable Expenses"). If the Fund's Management Fee and other
expenses for the current day exceed the Allowable Expenses, the
Management Fee for the current day shall be reduced by such excess
("Unaccrued Fees"). In the event the excess exceeds the amount due as
the Management Fee, the Manager shall be responsible to the Fund for the
additional excess ("Other Expenses Exceeding Limit"). If at any time up
through and including December 31, 1998, the Fund's Management Fee and
other expenses for the current day are less than the Allowable Expenses,
the differential shall be due to the Manager as payment of cumulative
Unaccrued Fees (if any) or as payment for cumulative Other Expenses
Exceeding Limit (if any). If cumulative Unaccrued Fees or cumulative
Other Expenses Exceeding Limit remain at December 31, 1998, these
amounts shall be paid to the Manager in the future provided that: (1) no
such payment shall be made to the Manager after December 31, 2000; and
(2) such payment shall only be made to the extent that it does not
result in the Fund's aggregate expenses exceeding an expense limit of
1.25% of average daily net assets. The Manager may voluntarily agree to
an additional expense limitation (any such additional expense limitation
hereinafter referred to as an "Additional Expense Limitation"), at the
same or a different level and for the same or a different period of time
beyond December 31, 1998 (any such additional period being hereinafter
referred to an as "Additional Period") provided, however, that: (1) the
calculations and methods of payment shall be as described above; (2) no
payment for cumulative Unaccrued Fees or cumulative Other Expenses
Exceeding Limit shall be made to the Manager more than two years after
the end of an Additional Period; and (3) payment for cumulative
Unaccrued Fees or cumulative Other Expenses Exceeding Limit after the
expiration of the Additional Period shall only be made to the extent it
does not result in the Fund's aggregate expenses exceeding the
Additional Expense Limitation to which the unpaid amounts relate.

D. Proration of Fee. If this Agreement becomes effective or
terminates before the end of any month, the Fee for the period from the
effective date to the end of such month or from the beginning of such
month to the date of termination, as the case may be, shall be prorated
according to the proportion which such period bears to the full month in
which such effectiveness or termination occurs.

4. Brokerage. Subject to the approval of the board of directors of the
Fund, the Manager, in carrying out its duties under Paragraph 1.A., may cause
the Fund to pay a broker-dealer which furnishes brokerage or research services
[as such services are defined under Section 28(e) of the Securities Exchange
Act of 1934, as amended (the "'34 Act")], a higher commission than that which
might be charged by another broker-dealer which does not furnish brokerage or
research services or which furnishes brokerage or research services deemed to
be of lesser value, if such commission is deemed reasonable in relation to the
brokerage and research services provided by the broker-dealer, viewed in terms
of either that particular transaction or the overall responsibilities of the
Manager with respect to the accounts as to which it exercises investment
discretion (as such term is defined under Section 3(a)(35) of the '34 Act).

5. Manager's Use of the Services of Others. The Manager may (at its
cost except as contemplated by Paragraph 4 of this Agreement) employ, retain
or otherwise avail itself of the services or facilities of other persons or
organizations for the purpose of providing the Manager or the Fund with such
statistical and other factual information, such advice regarding economic
factors and trends, such advice as to occasional transactions in specific
securities or such other information, advice or assistance as the Manager may
deem necessary, appropriate or convenient for the discharge of its obligations
hereunder or otherwise helpful to the Fund, or in the discharge of Manager's
overall responsibilities with respect to the other accounts which it serves as
investment manager.

6. Ownership of Records. All records required to be maintained and
preserved by the Fund pursuant to the provisions of rules or regulations of
the Securities and Exchange Commission under Section 31(a) of the Act and
maintained and preserved by the Manager on behalf of the Fund are the property
of the Fund and will be surrendered by the Manager promptly on request by the
Fund.

7. Reports to Manager. The Fund shall furnish or otherwise make
available to the Manager such prospectuses, financial statements, proxy
statements, reports, and other information relating to the business and
affairs of the Fund as the Manager may, at any time or from time to time,
reasonably require in order to discharge its obligations under this Agreement.

8. Services to Other Clients. Nothing herein contained shall limit the
freedom of the Manager or any affiliated person of the Manager to render
investment supervisory and corporate administrative services to other
investment companies, to act as investment manager or investment counselor to
other persons, firms or corporations, or to engage in other business
activities; but so long as this Agreement or any extension, renewal or
amendment hereof shall remain in effect or until the Manager shall otherwise
consent, the Manager shall be the only investment manager to the Fund.

9. Limitation of Liability of Manager. Neither the Manager nor any of
its officers, directors, or employees, nor any person performing executive,
administrative, trading, or other functions for the Fund (at the direction or
request of the Manager) or the Manager in connection with the Manager's
discharge of its obligations undertaken or reasonably assumed with respect to
this Agreement, shall be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except for loss resulting from willful misfeasance, bad
faith, or gross negligence in the performance of its or his duties on behalf
of the Fund or from reckless disregard by the Manager or any such person of
the duties of the Manager under this Agreement.

10. Use of Manager's Name. The Fund may use the name "T. Rowe Price
Media & Telecommunications Fund, Inc." or any other name derived from the name
"T. Rowe Price" only for so long as this Agreement or any extension, renewal,
or amendment hereof remains in effect, including any similar agreement with
any organization which shall have succeeded to the business of the Manager as
investment manager. At such time as this Agreement or any extension, renewal,
or amendment hereof, or such other similar agreement shall no longer be in
effect, the Fund will (by corporate action, if necessary) cease to use any
name derived from the name "T. Rowe Price," any name similar thereto or any
other name indicating that it is advised by or otherwise connected with the
Manager, or with any organization which shall have succeeded to the Manager's
business as investment manager.

11. Term of Agreement. The term of this Agreement shall begin on
the date first above written, and unless sooner terminated as hereinafter
provided, this Agreement shall remain in effect through April 30, 1998.
Thereafter, this Agreement shall continue in effect from year to year, subject
to the termination provisions and all other terms and conditions hereof, so
long as: (a) such continuation shall be specifically approved at least
annually by the board of directors of the Fund or by vote of a majority of the
outstanding voting securities of the Fund and, concurrently with such approval
by the board of directors or prior to such approval by the holders of the
outstanding voting securities of the Fund, as the case may be, by the vote,
cast in person at a meeting called for the purpose of voting on such approval,
of a majority of the directors of the Fund who are not parties to this
Agreement or interested persons of any such party; and (b) the Manager shall
not have notified the Fund, in writing, at least 60 days prior to April 30,
1998, or prior to April 30th of any year thereafter, that it does not desire
such continuation. The Manager shall furnish to the Fund, promptly upon its
request, such information as may reasonably be necessary to evaluate the terms
of this Agreement or any extension, renewal or amendment hereof.

12. Amendment and Assignment of Agreement. This Agreement may not
be amended or assigned without the affirmative vote of a majority of the
outstanding voting securities of the Fund, and this Agreement shall
automatically and immediately terminate in the event of its assignment.

13. Termination of Agreement. This Agreement may be terminated by
either party hereto, without the payment of any penalty, upon 60 days' prior
notice in writing to the other party; provided, that in the case of
termination by the Fund such action shall have been authorized by resolution
of a majority of the directors of the Fund who are not parties to this
Agreement or interested persons of any such party, or by vote of a majority of
the outstanding voting securities of the Fund.

14. Miscellaneous.

A. Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of
the provisions hereof or otherwise affect their construction or effect.

B. Interpretation. Nothing herein contained shall be deemed to
require the Fund to take any action contrary to its Articles of
Incorporation or By-Laws, or any applicable statutory or regulatory
requirement to which it is subject or by which it is bound, or to
relieve or deprive the board of directors of the Fund of its
responsibility for and control of the conduct of the affairs of the
Fund.

C. Definitions. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the Act shall be resolved by reference to
such term or provision of the Act and to interpretations thereof, if
any, by the United States courts or, in the absence of any controlling
decision of any such court, by rules, regulations or orders of the
Securities and Exchange Commission validly issued pursuant to the Act.
Specifically, the terms "vote of a majority of the outstanding voting
securities," "interested person," "assignment," and "affiliated person,"
as used in Paragraphs 2, 8, 10, 11, and 12 hereof, shall have the
meanings assigned to them by Section 2(a) of the Act. In addition, where
the effect of a requirement of the Act reflected in any provision of
this Agreement is relaxed by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or of general
application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.

Attest: T. ROWE PRICE MEDIA & TELECOMMUNICATIONS
FUND, INC.

/s/Patricia S. Butcher /s/James A. C. Kennedy III
________________________ By: _______________________
Patricia S. Butcher James A. C. Kennedy III
Assistant Secretary President

Attest: T. ROWE PRICE ASSOCIATES, INC.

/s/Barbara A. Van Horn /s/Henry H. Hopkins
________________________ By: ________________________
Barbara A. Van Horn Henry H. Hopkins
Assistant Secretary Managing Director

UNDERWRITING AGREEMENT

BETWEEN

T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.

AND

T. ROWE PRICE INVESTMENT SERVICES, INC.

THIS UNDERWRITING AGREEMENT, made as of the 26th day of July, 1997, by
and between T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC., a
corporation
organized and existing under the laws of the State of Maryland (hereinafter
called the "Corporation"), and T. ROWE PRICE INVESTMENT SERVICES, INC., a
corporation organized and existing under the laws of the State of Maryland
(hereinafter called the "Distributor").

W I T N E S S E T H:

WHEREAS, the Corporation proposes to engage in business as an open-end
management investment company and to register as such under the federal
Investment Company Act of 1940, as amended ("ICA-40"); and

WHEREAS, the Distributor is engaged principally in the business of
distributing shares of the investment companies sponsored and managed by
either Price Associates ("Price Associates") or Rowe Price-Fleming
International, Inc. ("Price-Fleming") and is registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended, ("SEA-34") and is a
member of the National Association of Securities Dealers, Inc. ("NASD"); and

WHEREAS, the Corporation desires the Distributor to act as the
distributor in the public offering of the Shares of the Funds; and

NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the parties hereto agree as follows:

1. Delivery of Corporate Documents. The Corporation has furnished
Distributor with copies, properly certified or authenticated, of each of the
following:

(a) Amended and Restated Articles of Incorporation, effective as
of July 25, 1997.

(b) Amended and Restated By-Laws of the Corporation as in effect
on the date hereof.

(c) Resolutions of the Board of Directors of the Corporation
selecting Distributor as principal underwriter for the Fund
and approving this form of agreement.

The Corporation shall furnish the Distributor from time to time with
copies, properly certified or authenticated, of all the amendments of, or
supplements to, the foregoing, if any.

The Corporation shall furnish Distributor promptly with properly
certified or authenticated copies of any registration statements filed by it
on behalf of the Fund with the Securities and Exchange Commission under the
Securities Act of 1933, as amended ("SA-33") or ICA-40, together with any
financial statements and exhibits included therein, and all amendments or
supplements thereto hereafter filed.

2. Sale of Shares. Subject to the provisions of Paragraphs 3, 4, and
6 hereof, and to such minimum purchase requirements as may from time to time
be currently indicated in the Corporation's prospectus, on behalf of the Fund,
the Distributor is authorized to sell, as agent for the Corporation, on behalf
of the Fund, Shares authorized for issuance and registered under SA-33.
Distributor may also sell Shares under offers of exchange between and among
the investment companies for which Price Associates and/or Price-Fleming act
as investment advisers ("Price Funds"). Distributor may also purchase as
principal such Shares for resale to the public. Such sale will be made by
Distributor on behalf of the Fund by accepting unconditional orders to
purchase the Shares placed with Distributor by investors and such purchases
will be made by Distributor only after acceptance by Distributor of such
orders. The sales price to the public of such Shares shall be the public
offering price as defined in Paragraph 5 hereof.

3. Sale of Shares by the Corporation. The rights granted to the
Distributor shall be nonexclusive in that the Corporation, on behalf of the
Fund, reserves the right to sell Shares of the Fund to investors pursuant to
applications received and accepted by the Corporation or its transfer agent.
Further, the Corporation reserves the right to issue Shares in connection with
the merger or consolidation of any other investment company, trust, or
personal holding company with the Corporation or the Corporation's acquisition
by the purchase or otherwise, of all or substantially all of the assets of an
investment company, trust, or personal holding company. Any right granted to
Distributor to accept orders for Shares, or to make sales on behalf of the
Fund or to purchase Shares for resale, will not apply to Shares issued in
connection with the merger or consolidation of any other investment company
with the Corporation or its acquisition by purchase or otherwise, of all or
substantially all of the assets of any investment company, trust, or personal
holding company, or substantially all of the outstanding shares or interests
of any such entity, and such right shall not apply to Shares that may be
offered by the Corporation to shareholders by virtue of their being
shareholders of the Fund.

4. Shares Covered by This Agreement. This Agreement relates to the
issuance and sale of Shares that are duly authorized, registered, and
available for sale by the Corporation, on behalf of the Fund, including
redeemed or repurchased Shares if and to the extent that they may be legally
sold and if, but only if, the Corporation authorizes the Distributor to sell
them.

5. Public Offering Price. All Shares sold by the Distributor
pursuant to this Agreement shall be sold at the public offering price. The
public offering price for all accepted subscriptions will be the net asset
value per share, as determined in the manner provided in the Corporation's
Amended and Restated Articles of Incorporation, with respect to the Fund, as
now in effect, or as they may be amended (and as reflected in the then current
prospectus of the Corporation, with respect to the Fund), next determined
after the order is accepted by the Distributor. The Distributor will process
orders submitted by brokers for the sale of Shares at the public offering
price exclusive of any commission charged by such broker to his customer.

6. Suspension of Sales. If and whenever the determination of net
asset value is suspended and until such suspension is terminated, no further
orders for Shares shall be accepted by the Distributor except such
unconditional orders placed with the Distributor before it had knowledge of
the suspension. In addition, the Corporation reserves the right to suspend
sales and Distributor's authority to accept orders for Shares on behalf of the
Fund if, in the judgment of the Board of Directors of the Corporation, it is
in the best interests of the Corporation or Fund to do so, such suspension to
continue for such period as may be determined by the Board of Directors; and
in that event, no orders to purchase Shares shall be processed or accepted by
the Distributor on behalf of the Fund while such suspension remains in effect
except for Shares necessary to cover unconditional orders accepted by
Distributor before it had knowledge of the suspension, unless otherwise
directed by the Board of Directors.

7. Solicitation of Orders. In consideration of the rights granted to
the Distributor under this Agreement, Distributor will use its best efforts
(but only in states in which Distributor may lawfully do so) to obtain from
investors unconditional orders for Shares authorized for issuance by the
Corporation, on behalf of the Fund, and registered under SA-33, provided that
Distributor may in its discretion reject any order to purchase Shares. This
does not obligate the Distributor to register or maintain its registration as
a broker or dealer under the state securities laws of any jurisdiction if, in
the discretion of the Distributor, such registration is not practical or
feasible. The Fund shall make available to the Distributor at the expense of
the Distributor such number of copies of the Fund's currently effective
prospectus as the Distributor may reasonably request. The Fund shall furnish
to the Distributor copies of all information, financial statements, and other
papers which the Distributor may reasonably request for use in connection with
the distribution of Shares.

8. Authorized Representations. The Corporation is not authorized by
the Distributor to give, on behalf of the Distributor, any information or to
make any representations other than the information and representations
contained in a registration statement or prospectus filed with the SEC under
SA-33 and/or ICA-40, covering Shares, as such registration statement and
prospectus may be amended or supplemented from time to time.

Distributor is not authorized by the Corporation to give on behalf of
the Fund any information or to make any representations in connection with the
sale of Shares other than the information and representations contained in a
registration statement or prospectus filed with the Securities and Exchange
Commission ("SEC") under SA-33 and/or ICA-40, covering Shares, as such
registration statement and prospectus may be amended or supplemented from time
to time, or contained in shareholder reports or other material that may be
prepared by or on behalf of the Fund for the Distributor's use. This shall not
be construed to prevent the Distributor from preparing and distributing
tombstone ads and sales literature or other material as it may deem
appropriate. No person other than Distributor is authorized to act as
principal underwriter (as such term is defined in ICA-40, as amended) for the
Corporation.

9. Registration and Sale of Additional Shares. The Corporation, on
behalf of the Fund will, from time to time, use its best efforts to register
under SA-33, such Shares of the Fund as Distributor may reasonably be expected
to sell on behalf of the Fund. In connection therewith, the Corporation, on
behalf of the Fund, hereby agrees to register an indefinite number of Shares
pursuant to Rule 24f-2 under ICA-40, and to register such Shares as shall be
deemed advisable pursuant to Rule 24e-2 under ICA-40, as amended. The
Corporation, on behalf of the Fund will, in cooperation with the Distributor,
take such action as may be necessary from time to time to qualify such Shares
(so registered or otherwise qualified for sale under SA-33), in any state
mutually agreeable to the Distributor and the Fund, and to maintain such
qualification.

10. Expenses. The Distributor shall pay (or will enter into
arrangements providing that persons other than Distributor shall pay) all fees
and expenses:

a. in connection with the preparation, setting in type and
filing of any registration statement and prospectus under
SA-33 and/or ICA-40, and any amendments or supplements that
may be made from time to time;

b. in connection with the sale in the various states in which
the Corporation shall determine it advisable to sell such
Shares. (Including registering the Corporation as a broker
or dealer or any officer of the Corporation or other person
as agent or salesman of the Corporation in any state.);

c. of preparing, setting in type, printing and mailing any
report or other communication to shareholders of the Fund in
their capacity as such;

d. of preparing, setting in type, printing and mailing
prospectuses annually to existing shareholders;

e. in connection with the issue and transfer of Shares
resulting from the acceptance by Distributor of orders to
purchase Shares placed with the Distributor by investors,
including the expenses of confirming such purchase orders;

f. of any issue taxes or (in the case of Shares redeemed) any
initial transfer taxes.

The Distributor shall pay (or will enter into arrangements providing
that persons other than Distributor shall pay) all fees and expenses:

a. of printing and distributing any prospectuses or reports
prepared for its use in connection with the distribution of
Shares to the public;

b. of preparing, setting in type, printing and mailing any
other literature used by the Distributor in connection with
the distribution of the Shares to the public;

c. of advertising in connection with the distribution of such
Shares to the public;

d. incurred in connection with its registration as a broker or
dealer or the registration or qualification of its officers,
directors or representatives under federal and state laws;
and

e. incurred in connection with the sale and offering for sale
of Shares which have not been herein specifically allocated
to the Fund.

11. Conformity With Law. Distributor agrees that in selling Shares it
shall duly conform in all respects with the laws of the United States and any
state in which such Shares may be offered for sale by Distributor pursuant to
this Agreement and to the rules and regulations of the NASD.

12. Independent Contractor. Distributor shall be an independent
contractor and neither Distributor, nor any of its officers, directors,
employees, or representatives is or shall be an employee of the Corporation in
the performance of Distributor's duties hereunder. Distributor shall be
responsible for its own conduct and the employment, control, and conduct of
its agents and employees and for injury to such agents or employees or to
others through its agents or employees. Distributor assumes full
responsibility for its agents and employees under applicable statutes and
agrees to pay all employee taxes thereunder.

13. Indemnification. Distributor agrees to indemnify and hold
harmless the Corporation or Fund, as appropriate, and each of the
Corporation's directors, officers, employees, representatives, and each
person, if any, who controls the Corporation or Fund within the meaning of
Section 15 of SA-33 against any and all losses, liabilities, damages, claims
or expenses (including the reasonable costs of investigating or defending any
alleged loss, liability, damage, claim, or expense and reasonable legal
counsel fees incurred in connection therewith) to which the Corporation or
Fund or such of the Corporation's directors, officers, employees,
representatives, or controlling person may become subject under SA-33, under
any other statute, at common law, or otherwise, arising out of the acquisition
of any Shares by any person which (i) may be based upon any wrongful act by
Distributor or any of Distributor's directors, officers, employees, or
representatives, or (ii) may be based upon any untrue statement or alleged
untrue statement of a material fact contained in a registration statement,
prospectus, shareholder report, or other information covering Shares filed or
made public by the Corporation, on behalf of the Fund, or any amendment
thereof or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was made in
reliance upon information furnished to the Corporation by Distributor. In no
case (i) is Distributor's indemnity in favor of the Corporation or Fund, as
appropriate, or any person indemnified to be deemed to protect the Corporation
or Fund, as appropriate, or such indemnified person against any liability to
which the Corporation or Fund, as appropriate, or such person would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of his duties or by reason of his reckless disregard of his
obligations and duties under this Agreement or (ii) is Distributor to be
liable under its indemnity agreement contained in this Paragraph with respect
to any claim made against the Corporation or Fund, as appropriate, or any
person indemnified unless the Corporation or Fund, as appropriate, or such
person, as the case may be, shall have notified Distributor in writing of the
claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Corporation or Fund, as appropriate, or upon such person (or
after the Corporation or Fund or such person shall have received notice of
such service on any designated agent). However, failure to notify Distributor
of any such claim shall not relieve Distributor from any liability which
Distributor may have to the Corporation or Fund or any person against whom
such action is brought otherwise than on account of Distributor's indemnity
agreement contained in this Paragraph.

Distributor shall be entitled to participate, at its own expense, in the
defense, or, if Distributor so elects, to assume the defense of any suit
brought to enforce any such claim, but, if Distributor elects to assume the
defense, such defense shall be conducted by legal counsel chosen by
Distributor and satisfactory to the Corporation, on behalf of the Fund, to its
directors, officers, employees, or representatives, or to any controlling
person or persons, defendant or defendants, in the suit. In the event that
Distributor elects to assume the defense of any such suit and retain such
legal counsel, the Corporation, its directors, officers, employees,
representatives, or controlling person or persons, defendant or defendants in
the suit, shall bear the fees and expenses of any additional legal counsel
retained by them. If Distributor does not elect to assume the defense of any
such suit, Distributor will reimburse the Corporation, on behalf of the Fund,
such directors, officers, employees, representatives, or controlling person or
persons, defendant or defendants in such suit for the reasonable fees and
expenses of any legal counsel retained by them. Distributor agrees to promptly
notify the Corporation of the commencement of any litigation or proceedings
against it or any of its directors, officers, employees, or representatives in
connection with the issue or sale of any Shares.

The Corporation, on behalf of the Fund, agrees to indemnify and hold
harmless Distributor and each of its directors, officers, employees,
representatives, and each person, if any, who controls Distributor within the
meaning of Section 15 of SA-33 against any and all losses, liabilities,
damages, claims, or expenses (including the reasonable costs of investigating
or defending any alleged loss, liability, damage, claim, or expense and
reasonable legal counsel fees incurred in connection therewith) to which
Distributor or such of its directors, officers, employees, representatives, or
controlling person may become subject under SA-33, under any other statute, at
common law, or otherwise, arising out of the acquisition of any Shares by any
person which (i) may be based upon any wrongful act by the Corporation or any
of the Corporation's directors, officers, employees, or representatives, or
(ii) may be based upon any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, shareholder
report, or other information covering Shares filed or made public by the
Corporation, on behalf of the Fund, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading if such statement or omission was made in reliance upon information
furnished to Distributor by the Corporation. In no case (i) is the
Corporation's indemnity in favor of the Distributor, or any person indemnified
to be deemed to protect the Distributor or such indemnified person against any
liability to which the Distributor or such person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of his duties or by reason of his reckless disregard of his
obligations and duties under this Agreement, or (ii) is the Corporation, on
behalf of the Fund, to be liable under its indemnity agreement contained in
this Paragraph with respect to any claim made against Distributor, or person
indemnified unless Distributor, or such person, as the case may be, shall have
notified the Corporation in writing of the claim within a reasonable time
after the summons or other first written notification giving information of
the nature of the claim shall have been served upon Distributor or upon such
person (or after Distributor or such person shall have received notice of such
service on any designated agent). However, failure to notify the Corporation
of any such claim shall not relieve the Corporation from any liability which
the Corporation may have to Distributor or any person against whom such action
is brought otherwise than on account of the Corporation's indemnity agreement
contained in this Paragraph.

The Corporation, on behalf of the Fund, shall be entitled to
participate, at its own expense, in the defense, or, if the Corporation, on
behalf of the Fund, so elects, to assume the defense of any suit brought to
enforce any such claim, but, if the Corporation, on behalf of the Fund, elects
to assume the defense, such defense shall be conducted by legal counsel chosen
by the Corporation, on behalf of the Fund, and satisfactory to Distributor, to
its directors, officers, employees or representatives, or to any controlling
person or persons, defendant or defendants, in the suit. In the event that the
Corporation, on behalf of the Fund, elects to assume the defense of any such
suit and retain such legal counsel, Distributor, its directors, officers,
employees, representatives, or controlling person or persons, defendant or
defendants in the suit, shall bear the fees and expenses of any additional
legal counsel retained by them. If the Corporation, on behalf of the Fund,
does not elect to assume the defense of any such suit, the Corporation, on
behalf of the Fund, will reimburse Distributor, such directors, officers,
employees, representatives, or controlling person or persons, defendant or
defendants in such suit for the reasonable fees and expenses of any legal
counsel retained by them. The Corporation, on behalf of the Fund, agrees to
promptly notify Distributor of the commencement of any litigation or
proceedings against it or any of its directors, officers, employees, or
representatives in connection with the issue or sale of any Shares.

14. Limitation on Liability of Corporation. The term "T. Rowe Price
Media & Telecommunication Fund, Inc.," means and refers to the directors from
time to time serving under the Amended and Restated Articles of Incorporation
of the Corporation effective as of July 25, 1997, as the same may subsequently
thereto have been, or subsequently hereto be, amended. It is expressly agreed
that the obligations of the Corporation hereunder shall not be binding upon
any of the directors, shareholders, nominees, officers, agents, or employees
of the Corporation, personally, but bind only the trust property of the
Corporation, as provided in the Amended and Restated Articles of Incorporation
of the Corporation. The execution and delivery of this Agreement have been
authorized by the directors of the Corporation and signed by an authorized
officer of the Corporation, acting as such, and neither such authorization by
such directors nor such execution and delivery by such officer shall be deemed
to have been made by any of them but shall bind only the trust property of the
Corporation as provided in its Amended and Restated Articles of Incorporation.

15. Duration and Termination of This Agreement. This Agreement shall
become effective upon its execution ("effective date") and, unless terminated
as provided, shall remain in effect through April 30, 1998, and from year to
year thereafter, but only so long as such continuance is specifically approved
at least annually by the vote of a majority of the directors of the
Corporation who are not interested persons of Distributor or of the
Corporation, cast in person at a meeting called for the purpose of voting on
such approval, and by vote of the directors of the Corporation or of a
majority of the outstanding voting securities of the Corporation. This
Agreement may, on 60 days' written notice, be terminated at any time, without
the payment of any penalty, by the vote of a majority of the directors of the
Corporation who are not interested persons of Distributor or the Corporation,
by a vote of a majority of the outstanding voting securities of the
Corporation, or by Distributor. This Agreement will automatically terminate in
the event of its assignment. In interpreting the provisions of this Paragraph
15, the definitions contained in Section 2(a) of ICA-40 (particularly the
definitions of "interested person," "assignment," and "majority of the
outstanding securities") shall be applied.

16. Amendment of This Agreement. No provisions of this Agreement may
be changed, waived, discharged, or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge, or termination is sought. If the Corporation should
at any time deem it necessary or advisable in the best interests of the
Corporation that any amendment of this Agreement be made in order to comply
with the recommendations or requirements of the SEC or other governmental
authority or to obtain any advantage under state or federal tax laws and
notifies Distributor of the form of such amendment, and the reasons therefor,
and if Distributor should decline to assent to such amendment, the Corporation
may terminate this Agreement forthwith. If Distributor should at any time
request that a change be made in the Corporation's Amended and Restated
Articles of Incorporation or By-Laws or in its methods of doing business, in
order to comply with any requirements of federal law or regulations of the
SEC, or of a national securities association of which Distributor is or may be
a member relating to the sale of Shares, and the Corporation, on behalf of the
Fund, should not make such necessary change within a reasonable time,
Distributor may terminate this Agreement forthwith.

17. Additional Funds. In the event that the Corporation establishes
one or more series of Shares in addition to the Fund with respect to which it
desires to have Distributor render services as distributor under the terms
hereof, it shall so notify Distributor in writing, and if Distributor agrees
in writing to provide such services, such series of Shares shall become a Fund
hereunder.

18. Miscellaneous. It is understood and expressly stipulated that
neither the shareholders of the Fund, nor the directors of the Corporation
shall be personally liable hereunder. The captions in this Agreement are
included for convenience of reference only, and in no way define or delimit
any of the provisions hereof or otherwise affect their construction or effect.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

19. Notice. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party to the party
giving notice: if to the Corporation, 100 East Pratt Street, Baltimore,
Maryland 21202, and if to the Distributor, at 100 East Pratt Street,
Baltimore, Maryland 21202.

ATTEST: T. ROWE PRICE MEDIA & TELECOMMUNICATIONS
FUND, INC.

/s/Patricia S. Butcher /s/James A.C. Kennedy III
____________________________ By: _______________________________
Patricia S. Butcher James A. C. Kennedy III
Assistant Secretary President

ATTEST: T. ROWE PRICE INVESTMENT SERVICES, INC.

/s/Barbara A. Van Horn /s/Henry H. Hopkins
____________________________ By: _______________________________
Barbara A. Van Horn Henry H. Hopkins
Assistant Secretary Vice President

PAGE 1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Registration
Statement on Form N-1A (the "Registration Statement") of T. Rowe Price Media &
Telecommunications Fund, Inc. of our report dated January 20, 1997 relating to
the financial statements and financial highlights appearing in the December
31, 1996 Annual Report to Shareholders of New Age Media Fund, Inc., which is
also incorporated by reference into the Registration Statement. We also
consent to the references to us under the heading "Financial Highlights" in
the Prospectus and under the heading "Independent Accountants" in the
Statement of Additional Information.

/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP

Baltimore, Maryland
July 22, 1997
PAGE 2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Registration Statement on
Form N-1A (the "Registration Statement") of T. Rowe Price Media &
Telecommunications Fund, Inc. of our reports dated January 20, 1997 relating
to the financial statements and financial highlights appearing in the December
31, 1996 Annual Reports to Shareholders of T. Rowe Price Blue Chip Growth
Fund, Inc., T. Rowe Price Dividend Growth Fund, Inc., T. Rowe Price Equity
Income Fund, T. Rowe Price Growth & Income Fund, Inc., T. Rowe Price Mid-Cap
Growth Fund, Inc., T. Rowe Price Mid-Cap Value Fund, Inc., T. Rowe Price New
America Growth Fund, T. Rowe Price New Era Fund, Inc., and Mid-Cap Equity
Growth Fund (constituting Institutional Equity Funds, Inc.), which are also
incorporated by reference into the Registration Statement. We also consent to
the reference to us under the heading "Independent Accountants" in the
Statement of Additional Information.

/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP

Baltimore, Maryland
July 22, 1997
PAGE 3

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional Information
constituting part of this Registration Statement on Form N-1A (the
"Registration Statement") of T. Rowe Price Media & Telecommunications Fund,
Inc. of our report dated June 24, 1997, relating to the statement of assets
and liabilities of T. Rowe Price Diversified Small-Cap Growth Fund, Inc.,
which appears in such Statement of Additional Information. We also consent to
the reference to us under the heading "Independent Accountants" in such
Statement of Additional Information.

/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP

Baltimore, Maryland
July 22, 1997

<ARTICLE> 6
<CIK> 0000910671
<NAME> NEW AGE MEDIA FUND, INC.
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 198341
<INVESTMENTS-AT-VALUE> 237580
<RECEIVABLES> 906
<ASSETS-OTHER> 61
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 238547
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 512
<TOTAL-LIABILITIES> 512
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 201485
<SHARES-COMMON-STOCK> 14501
<SHARES-COMMON-PRIOR> 14627
<ACCUMULATED-NII-CURRENT> (84)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5891)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 42525
<NET-ASSETS> 238035
<DIVIDEND-INCOME> 367
<INTEREST-INCOME> 921
<OTHER-INCOME> 0
<EXPENSES-NET> 1372
<NET-INVESTMENT-INCOME> (84)
<REALIZED-GAINS-CURRENT> (2467)
<APPREC-INCREASE-CURRENT> 19621
<NET-CHANGE-FROM-OPS> 17070
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 126
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 15479
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (3424)
<GROSS-ADVISORY-FEES> 1199
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1372
<AVERAGE-NET-ASSETS> 219841
<PER-SHARE-NAV-BEGIN> 15.22
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> 1.19
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.42
<EXPENSE-RATIO> 1.26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.

POWER OF ATTORNEY

RESOLVED, that the Corporation and each of its directors do hereby
constitute and authorize, James S. Riepe, Joel H. Goldberg, and Henry H.
Hopkins, and each of them individually, their true and lawful attorneys and
agents to take
any and all action and execute any and all instruments which said attorneys and
agents may deem necessary or advisable to enable the Corporation to comply with
the Securities Act of 1933, as amended, and the Investment Company Act of 1940,
as amended, and any rules, regulations, orders or other requirements of the
United States Securities and Exchange Commission thereunder, in connection with
the registration under the Securities Act of 1933, as amended, of shares of the
Corporation, to be offered by the Corporation, and the registration of the
Corporation under the Investment Company Act of 1940, as amended, including
specifically, but without limitation of the foregoing, power and authority to
sign the name of the Corporation on its behalf, and to sign the names of each of
such directors and officers on his behalf as such director or officer to any
amendment or supplement (including Post-Effective Amendments) to the R
egistration Statement on Form N-1A of the Corporation filed with the
Securities and Exchange
Commission under the Securities Act of 1933, as amended, and the Registration
Statement on Form N-1A of the Corporation under the Investment Company Act of
1940, as amended, and to any instruments or documents filed or to be filed as a
part of or in connection with such Registration Statement.

IN WITNESS WHEREOF, the Corporation has caused these presents to be signed
by its Chairman of the Board and the same attested by its Secretary, each
thereunto duly authorized by its Board of Directors, and each of the undersigned
has hereunto set his hand and seal as of the day set opposite his name.

T. ROWE PRICE MEDIA &
TELECOMMUNICATIONS FUND, INC.

/s/ James S. Riepe
By: ________________________________________
James S. Riepe, Chairman of the Board

July 23, 1997

Attest:

/s/Lenora V. Hornung
________________________________
Lenora V. Hornung, Secretary

/s/James S. Riepe
_________________________ Chairman of the Board July 23, 1997
James S. Riepe (Principal Executive Officer)

/s/Carmen F. Deyeus
________________________ Treasurer July 23, 1997
Carmen F. Deyesu (Principal Financial Officer)

/s/Donald W. Dick, Jr.
__________________________ Director July 23, 1997
Donald W. Dick, Jr.

/s/David K. Fagin
________________________________ Director July 23, 1997
David K. Fagin

/s/Hanne M. Merriman
________________________________ Director July 23, 1997
Hanne M. Merriman

/s/M. David Testa
________________________________ Director July 23, 1997
M. David Testa

/s/Hubert D. Vos
________________________________ Director July 23, 1997
Hubert D. Vos

/s/Paul M. Wythes
________________________________ Director July 23, 1997
Paul M. Wythes