PRICE T ROWE INTERNATIONAL SERIES INC, 497, 1996-05-16

PRICE T ROWE INTERNATIONAL SERIES INC
497, 1996-05-16

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PAGE 1
Combined New York Variable Annuity Prospectus, dated May 1, 1996,
should be inserted here.

T. Rowe Price Fixed Income Series, Inc.
Limited-Term Bond Portfolio

T. Rowe Price Equity Series, Inc.
Personal Strategy Balanced Portfolio
Equity Income Portfolio
New America Growth Portfolio

T. Rowe Price International Series, Inc.
International Stock Portfolio

May 1, 1996

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

THIS PROSPECTUS CONTAINS INFORMATION YOU SHOULD KNOW BEFORE INVESTING. PLEASE
KEEP IT FOR FUTURE REFERENCE. A STATEMENT OF ADDITIONAL INFORMATION ABOUT THE
FUNDS, DATED MAY 1, 1996, HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION AND IS INCORPORATED BY REFERENCE IN THIS PROSPECTUS. TO OBTAIN A
FREE COPY, CONTACT 1-800-469-6587.

Facts at a Glance

Investment Goal

Tax-deferred growth of capital over time through portfolios representing a
broad range of investment approaches from conservative to aggressive. There is
no assurance the portfolios will achieve their goals.

Strategy

Limited-Term Bond Portfolio
Invests primarily in investment-grade, corporate bonds. Risk/Reward: Moderate
income level and share price fluctuation.

Personal Strategy Balanced Portfolio
To pursue both capital appreciation and income, the fund will invest
approximately 50% to 70% of assets in stocks with the remainder invested in
bonds and money market securities. Risk/Reward: Higher risk and return than a
bond fund but lower risk and return than a stock fund. The fund's share price
may decline, causing a loss.

Equity Income Portfolio
To invest primarily in dividend-paying common stocks, particularly of
established companies, with favorable prospects for both increasing dividends
and capital appreciation.
Risk/Reward: Conservative stock fund. Lower risk than a fund focusing on
growth stocks but greater risk than a bond fund. The fund's share price may
decline, causing a loss.

New America Growth Portfolio
To invest in the stocks of large and small service companies expected by T.
Rowe Price to show superior earnings growth. The fund may also invest up to
25% of total assets in nonservice-related growth companies. Total return will
consist primarily of capital appreciation or depreciation. Risk/Reward: The
potential to provide significant growth of capital over time with
above-average volatility. The fund's share price may decline, causing a loss.

International Stock Portfolio
Invests worldwide primarily in well-established, non-U.S. companies.
Risk/Reward: The fund's share price will fluctuate with changes in market,
economic, and foreign currency exchange conditions. High potential risk and
reward.The fund's share price may decline, causing a loss.

Investor Profile

Those seeking the tax advantages and insurance benefits of the T. Rowe Price
No-Load Variable Annuity, whose risk tolerance and investment goals are suited
to one or more of the five portfolios.

Investment Manager

The Limited-Term Bond, Personal Strategy Balanced, Equity Income, and New
America Growth Portfolios are managed by T. Rowe Price Associates, Inc. ("T.
Rowe Price"). The International Stock Portfolio is managed by Rowe
Price-Fleming International, Inc. ("Price-Fleming"), a joint venture
established in 1979 between T. Rowe Price Associates, Inc. and Robert Fleming
Holdings, Limited.

Table of Contents

T. Rowe Price
Fixed Income Series, Inc.
Equity Series, Inc.
International Series, Inc.

May 1, 1996

Prospectus

About the Funds

Financial Highlights 4

Fund, Market, and
Risk Characteristics 5

Limited-Term Bond Portfolio 5

Personal Strategy
Balanced Portfolio 8

Equity Income Portfolio 10

New America Growth Portfolio 12

International Stock Portfolio 14

About Your Account

Pricing Shares and Receiving
Sale Proceeds 19

Dividends and Distributions 20

More About the Funds

Organization and Management 20

Understanding Performance
Information 24

Investment Policies and Practices25

Limited-Term Bond Portfolio 26

Personal Strategy Balanced
Portfolio 32

Equity Income Portfolio 39

New America Growth Portfolio 42

International Stock Portfolio 45

About the Funds

Financial Highlights

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

<TABLE>
<CAPTION>
___________________________________________________________________________________________________________

Investment Activities Distributions End of Period

Net Ratio
Realized of Net
and Total Ratio Invest-
Net Unreal- Return of Ex- ment
Pe- Asset Net ized Total Net Net (Incl- penses Income
riod Value, Invest- Gain From Invest- Net Asset udes to to Port-
EndedBegin- ment (Loss) Invest- ment Real- Value, Rein- Aver- Aver- folio
Dece- ning In- on ment In- ized Total End vested age age Turn-
mber of come Invest-Activi- come Gain Distri- of Divi- Net Net Net over
31 Period ments ties (Loss) (Loss)butionsPeriod dends) Assets Assets Assets Rate
____________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Limited-Term
Bond Portfolio
1994a$5.00 $0.21$(0.08) $0.13 $(0.21) -$(0.21) $4.92 2.62%$2,080,7520.70%e 6.63%e 146.0%e
1995 4.92 0.33 0.14 0.47 (0.33) - (0.33) 5.06 9.88% 3,966,030 0.70% 6.60% 73.7%

Equity Income
Portfolio
1994b$10.00$0.30 $0.41 $0.71 $(0.29) -$(0.29) $10.42 7.2%$2,191,3560.85%e 3.88%e 21.3%e
1995 10.42 0.44 3.05 3.49 (0.44)$(0.26) (0.70) 13.21 34.8%14,657,555 0.85% 3.61% 10.1%

New America
Growth Portfolio
1994b$10.00$0.01 $0.09 $0.10 - - - $10.10 1.0%$2,028,3730.85%e 0.15%e 81.0%e
1995 10.10 0.03 5.12 5.15 $(0.02) -$(0.02) 15.23 51.1%12,303,927 0.85% 0.23% 54.5%

Personal Strategy
Balanced Portfolio
1995c$10.00$0.42 $2.41 $2.83 $(0.40) -$(0.40) $12.43 28.7%$5,624,8750.90%e 3.69%e 39.3%e

International
Stock Portfolio
1994b$10.00$0.06 $0.12d $0.18 - - - $10.18 1.8%$9,094,9601.05%e 1.50%e 4.6%e
1995 10.18 0.07 1.06 1.13 $(0.05) -$(0.05) 11.26 11.2%51,660,700 1.05% 1.47% 17.4%

<FN>
a From May 31, 1994 (commencement of operations) to December 31, 1994.
b From March 31, 1994 (commencement of operations) to December 31, 1994.
c From December 30, 1994 (commencement of operations) to December 31, 1995.
d The amount presented is calculated pursuant to a methodology prescribed by the Securities and Exchange
Commission for a share outstanding throughout the period. This amount is inconsistent with the fund's
aggregate gains and losses because of the timing of sales and redemptions of fund shares in relation to
fluctuating market values for the investment portfolio.
e Annualized.

Note: Total returns do not include charges imposed by your insurance company's separate account. If these
were included, performance would have been lower.
</FN>

Table 1
</TABLE>

Fund, Market, and Risk Characteristics: What to Expect
To help you decide how to allocate your investments within the T. Rowe Price
No-Load Variable Annuity, this section takes a closer look at each portfolio
and the markets in which each invests. Your investment in any of the
portfolios should not represent your complete investment program, nor be used
to play short-term market swings. The share prices of all the portfolios may
decline, causing a loss.

Limited-Term Bond Portfolio

What is the fund's objective and investment program?
The fund's objective is to provide a high level of income consistent with
moderate fluctuation in principal value. The fund will invest at least 65% of
total assets in short- and intermediate-term, investment-grade bonds. There
are no maturity limitations on individual securities purchased, but the fund's
dollar-weighted average effective maturity will not exceed five years.
Targeting effective maturity provides additional flexibility in portfolio
management but, all else being equal, could result in higher volatility than
would be true of a fund targeting a stated maturity or maturity range.

At least 90% of the fund portfolio will be invested in securities rated in the
four highest credit categories (investment-grade securities) by a nationally
recognized rating agency, or, if unrated, of equivalent quality as determined
by T. Rowe Price. Investment-grade securities include a range of securities
from the highest rated to medium quality (BBB). Securities in the BBB category
may be more susceptible to adverse economic conditions or changing
circumstances and securities at the lower end of the BBB category have certain
speculative characteristics. In an effort to enhance yield, up to 10% of
assets can be invested in below-investment-grade securities, commonly referred
to as "junk" bonds in the taxable market, including those with the lowest
rating. The fund's income level should be higher than a money market fund's,
but its share price will vary.

How does the fund's credit quality relate to its investment objective?
To secure a higher income with moderate principal fluctuation, the fund
invests at least 90% of assets in investment-grade securities, which provides
a wider range of income opportunities with some additional credit risk. The
balance may consist of securities rated below investment grade, including
those with the lowest rating. Like all portfolio holdings, these securities
are subject to rigorous credit research conducted by T. Rowe Price analysts.
(For further discussion, please see "Investment Policies and
Practices-High-Yield/High-Risk Investing.")

_____________________________________________________________________________
THE SHARE PRICE AND YIELD OF THE FUND WILL FLUCTUATE WITH CHANGING MARKET
CONDITIONS AND INTEREST RATE LEVELS. WHEN YOU SELL YOUR SHARES, YOU MAY LOSE
MONEY.

What are the main risks of investing in the fund?
o Interest rate or market risk: the decline in the prices of fixed income
securities and funds that may accompany a rise in the overall level of
interest rates (please see Table 2).
o Credit risk: the chance that any of the fund's holdings will have its
credit rating downgraded or will default (fail to make scheduled
interest and principal payments), potentially reducing the fund's income
level and share price.
o Currency risk: the possibility that the fund's foreign holdings will be
adversely affected by fluctuations in currency markets.

How does the portfolio manager try to reduce risk?
Consistent with the fund's objective, the portfolio manager actively seeks to
reduce risk and increase total return. Risk management tools include:
o Diversification of assets to reduce the impact of a single holding or
asset class on the fund's share price.
o Thorough credit research by our own analysts.
o Adjustment of a fund's duration to try to reduce the negative impact of
rising interest rates or to take advantage of the benefits of falling
rates.

What are derivatives and can the fund invest in them?
The term derivative is used to describe financial instruments whose value is
derived from an underlying security (e.g., a stock or bond) or a market
benchmark (e.g., an interest rate index). Many types of investments
representing a wide range of potential risks and rewards fall under the
"derivatives" umbrella-from conventional instruments such as callable bonds,
futures and options, to more exotic investments such as stripped mortgage
securities and structured notes. While it was only recently that the term
derivative has become widely known among the investing public, derivatives
have in fact been employed by investment managers for many years.

The fund will invest in derivatives only if the expected risks and rewards are
consistent with its objective, policies, and overall risk profile as described
in this prospectus. The fund will only use derivatives in an effort to:
increase yield or total return; hedge against a decline in principal value;
invest in eligible asset classes with greater efficiency and lower cost than
is possible through direct investment; or to adjust portfolio duration. The
fund will not invest in any high-risk, highly leveraged derivative instrument
that is expected to cause the price volatility of the portfolio to be
meaningfully different from that of an intermediate-term investment-grade
bond.

_____________________________________________________________________________
BEFORE CHOOSING THE FUND, YOU MAY FIND IT HELPFUL TO REVIEW SOME FUNDAMENTALS
OF FIXED INCOME INVESTING.

Is the fund's yield fixed or will it vary?
It will vary. The yield is calculated every day by dividing a fund's net
income per share, expressed at annual rates, by the share price. Since both
income and share price will fluctuate, a fund's yield will also vary.

Is the fund's "yield" the same thing as the "total return"?
Not for bond funds. The total return reported for a fund is the result of
reinvested distributions (income and capital gains) and the change in share
price for a given time period. Income is always a positive contributor to
total return and can enhance a rise in share price or serve as an offset to a
drop in share price.

What is "credit quality" and how does it affect the fund's yield?
Credit quality refers to a bond issuer's expected ability to make all required
interest and principal payments in a timely manner. Because highly rated
issuers represent less risk, they can borrow at lower interest rates than less
creditworthy issuers. Therefore, a fund investing in high credit-quality
securities should have a lower yield than an otherwise comparable fund
investing in lower credit-quality securities.

What is meant by a bond fund's "maturity"?
Every bond has a stated maturity date when the issuer must repay the bond's
entire principal value to the investor. Some types of bonds may also have an
"effective maturity" that is shorter than the stated date. The effective
maturity of mortgage-backed bonds is determined by the rate at which
homeowners pay down the principal on the underlying mortgages. Many corporate
and municipal bonds are "callable," meaning their principal can be repaid
before their stated maturity dates on (or after) specified call dates. Bonds
are most likely to be called when interest rates are falling, because the
issuer wants to refinance at a lower rate. In such an environment, a bond's
"effective maturity" is usually its nearest call date.

A bond mutual fund has no maturity in the strict sense of the word, but does
have an average maturity and an average effective maturity. This number is an
average of the stated or effective maturities of the underlying bonds, with
each bond's maturity "weighted" by the percentage of fund assets it
represents. Funds that target effective maturities would use the effective
(rather than stated) maturities of the underlying instruments when computing
the average. Targeting effective maturity provides additional flexibility in
portfolio management but, all else being equal, could result in higher
volatility than a fund targeting a stated maturity or maturity range.

What is a bond fund's "duration"?
Duration is a calculation that seeks to measure the price sensitivity of a
bond or a bond fund to changes in interest rates. It measures bond price
sensitivity to interest rate changes more accurately than maturity because it
takes into account the time value of cash flows generated over the bond's
life. Future interest and principal payments are discounted to reflect their
present value and then are multiplied by the number of years they will be
received to produce a value that is expressed in years, i.e., the duration.
Effective duration takes into account call features and sinking fund payments
that may shorten a bond's life.

Since duration can also be computed for bond funds, you can estimate the
effect of interest rates on a fund's share price. Simply multiply the fund's
duration (available for T. Rowe Price bond funds in our shareholder reports)
by an expected change in interest rates. For example, the price of a bond fund
with a duration of five years would be expected to fall approximately 5% if
rates rose by one percentage point.

How is a bond's price affected by changes in interest rates?
When interest rates rise, a bond's price usually falls, and vice versa.

_____________________________________________________________________________
IN GENERAL, THE LONGER A BOND'S MATURITY, THE GREATER THE PRICE INCREASE OR
DECREASE IN RESPONSE TO A GIVEN CHANGE IN INTEREST RATES, AS SHOWN IN THE
TABLE AT RIGHT.
________________________________________________________________________
How Interest Rates Affect Bond Prices

Bond Coupon Price of a $1,000
Maturity Bond if Interest Rates:
_____________________________________________________________________________
Increase Decrease
1% 2% 1% 2%
________________________________________________________________________
1 Year 5.40% $990 $981 $1,010 $1,020
5 Years 6.10 959 919 1,044 1,090
10 Years 6.34 930 866 1,077 1,161
30 Years 6.69 883 788 1,143 1,320

Table 2 Coupons reflect yields on Treasury securities as of March 31,
1996. This is an illustration and does not represent expected
yields or share price changes of any T. Rowe Price fund.

Since the average effective maturity of bonds held by the fund is expected to
be approximately five years, the fund's share price, like the value of the
underlying bonds in its portfolio, should fluctuate less than a fund which
holds bonds with longer average effective maturities.

How can I decide if the fund is appropriate for me?
Review your own financial objectives, time horizon, and risk tolerance to
choose a fund (or funds) suitable for your particular needs. For example, the
fund is expected to be a good choice for investors seeking more income than
provided by very short-term investments, such as money market funds and CDs,
with less principal risk than longer-term investments. Keep in mind that the
share price of any bond fund will fluctuate and, unlike a CD, the fund is not
guaranteed by the U.S. government. If you are investing for principal safety
and liquidity, you should consider a money market fund.

Is there other information I need to review before making a decision?
Be sure to review "Investment Policies and Practices" in Section 3, which
discusses the following: Types of Portfolio Securities (bonds, asset-backed
securities, mortgage-backed securities, hybrid instruments,
high-yield/high-risk investing, private placements, and foreign securities);
and Types of Management Practices (cash position, borrowing money and
transferring assets, futures and options, interest rate swaps, managing
foreign currency risk, lending of portfolio securities, when-issued securities
and forward commitment contracts, portfolio turnover, bond ratings and
high-yield bonds).

Personal Strategy Balanced Portfolio

What is the fund's objective?
The fund's objective is to seek the highest total return over time consistent
with an emphasis on both capital appreciation and income.

What is the fund's investment program?
The fund pursues its objective by investing in a diversified portfolio
typically consisting of approximately 60% stocks, 30% bonds, and 10% money
market securities. Under normal conditions, allocations can vary by 10% above
or below these ranges, based on the fund manager's outlook for the economy and
the financial markets.

What are the general characteristics and risk factors of these major asset
classes?
For a more detailed discussion of the fund's investments and their risk
factors, please see "Investment Policies and Practices."

o Stocks represent ownership in a corporation. Common stock prices
fluctuate with changes in a company's current earnings and future
prospects and with overall stock market conditions. Stocks of many
well-established corporations offer the potential for appreciation and
rising dividends. While smaller companies usually reinvest earnings in
their own growth and, therefore, pay minimal or no dividends, they offer
the possibility of even greater appreciation if their businesses prosper
and grow.

Historically, stocks have provided higher returns over time than bonds
or money market securities and, therefore, offer a way to invest for
long-term growth of capital. In addition, stock investments have
provided the greatest protection against the erosion of purchasing power
caused by inflation.

Share prices of even the best managed, most profitable corporations are
subject to market risk, which means their stock prices can decline. In
addition, swings in investor psychology and/or significant trading by
large institutional investors can result in price fluctuations. For this
reason, equity investors should have a long-term investment horizon and
be willing to wait out bear markets.

o Bonds have two main sources of risk. Credit risk refers to the
possibility that a bond's price may fall due to a credit downgrade or
"default," i.e., the issuer failing to make an interest or principal
payment. Interest rate risk refers to a bond's price movement in
response to changes in interest rates. When rates rise, bond prices
fall, and vice versa. Generally, the longer a bond's maturity, the
greater its potential price fluctuation.

The fund expects to invest primarily in bonds with investment-grade
credit ratings. However, the fund may also make investments in more
volatile below-investment-grade (or "junk") bonds, including bonds with
the lowest rating. Investment-grade securities include a range of
securities from the highest rated (AAA) to medium quality (BBB).
Securities in the BBB category may be more susceptible to price declines
arising from adverse economic conditions or changing circumstances. The
securities at the lower end of the BBB category have certain speculative
characteristics. Prices of junk bonds are usually more affected by
adverse economic conditions or a deterioration in the issuer's financial
circumstances than by overall changes in interest rates. To compensate
investors for higher credit risk exposure, such bonds usually provide
higher income. Please see "High-Yield/High-Risk Investing" for further
information on these investments.

o Money market securities are debt obligations issued primarily by the
U.S. government, government agencies, and corporations. The high credit
ratings, short maturities, and high liquidity of the fund's money market
securities should minimize its credit and market risk. The fund's low
risk is usually accompanied by low potential returns relative to other
investments.
_____________________________________________________________________________
THE FUND MANAGER REGULARLY REVIEWS THE ASSET ALLOCATION AND MAY MAKE GRADUAL
CHANGES, WITHIN THE DEFINED RANGES, BASED ON THE OUTLOOK FOR THE ECONOMY,
INTEREST RATES, AND THE FINANCIAL MARKETS. THE FUNDS WILL NOT ATTEMPT TO TIME
SHORT-TERM MARKET MOVES.

How does the portfolio manager try to reduce risk?
Consistent with the fund's objective, the portfolio manager actively seeks to
reduce risk and increase total return. Risk management tools include:
o Broad diversification of assets to reduce the impact of a single holding
or asset class on the fund's share price.
o Gradual allocation changes among and within asset classes (stocks,
bonds, etc.) to take advantage of market opportunities and changing
economic conditions.
o Thorough research of stocks, bonds, and other securities by our analysts
to find the most favorable investment opportunities.

What are the advantages of diversifying across stocks, bonds, and money market
securities?
Diversification is the investment equivalent of not putting all your eggs in
one basket. While there is no guarantee, the fund's overall volatility could
be reduced by spreading investments across several types of assets. Since
prices of stocks and bonds may respond differently to changes in economic
conditions and interest rate levels, a rise in bond prices, for example, could
help offset a fall in stock prices. Money market securities have a stabilizing
influence, since their price fluctuations are very small. In addition, the
steady income provided by bonds and money market securities contributes
positively to a portfolio's total return, cushioning the impact of any price
declines or enhancing price increases.

Diversification among asset classes is intended to reduce the risk associated
with investing in a single asset category; however, there is no guarantee the
strategy will always result in lower overall volatility for the fund.

_____________________________________________________________________________
FOR A DISCUSSION OF THE EFFECTS OF CURRENCY EXCHANGE RATE FLUCTUATIONS AND
OTHER SPECIAL RISKS OF FOREIGN INVESTING, PLEASE SEE "INVESTMENT POLICIES AND
PRACTICES."

Why include foreign securities?
The fund may invest up to 35% of its total assets in foreign securities.
Foreign stocks and bonds offer advantages to the portfolio but also represent
additional risk. The potential advantages are extra diversification and
enhanced returns. Since foreign stock and bond markets may move somewhat
independently from their U.S. counterparts, such investments could reduce the
portfolio's short-term price fluctuations while offering a way to participate
in markets that may generate attractive returns. Of course, if U.S. and
foreign markets move in the same direction, the positive or negative effect on
the fund's share price could be magnified. In addition, a significant decline
in foreign securities' prices would reduce the fund's return.

How can I decide if the fund is appropriate for me?
Review your own financial objectives, investment time horizon, and risk
tolerance. Generally, the fund is intended for those seeking a
middle-of-the-road approach that emphasizes stocks for their higher capital
appreciation potential but retains a significant income component to temper
principal volatility. The fund will invest at least 25% of its total assets in
senior fixed income securities.

If you are investing for principal safety and liquidity, you should consider a
money market fund.

Is there other information I need to review before making a decision?
Yes. Although the fund will invest primarily in common stocks, bonds, and
money market securities, it can also make other investments which have
additional and different risks. Be sure to review "Investment Policies and
Practices" in Section 3, which discusses the following: Types of Portfolio
Securities (bonds, common and preferred stocks, convertible securities and
warrants, foreign securities, asset-backed securities, mortgage-backed
securities, hybrid instruments, investment funds, zero coupon bonds and
pay-in-kind bonds, private placements, and high-yield/high-risk investing);
and Types of Management Practices (cash position, borrowing money and
transferring assets, futures and options, interest rate transactions, managing
foreign currency risk, lending of portfolio securities, when-issued securities
and forward commitment contracts, portfolio turnover, and credit-quality
considerations).

Equity Income Portfolio

What is the fund's objective?
The fund's objective is to provide substantial dividend income as well as
long-term capital appreciation through investments in common stocks of
established companies.

_____________________________________________________________________________
MOST OF THE FUND'S ASSETS WILL BE INVESTED IN U.S. COMMON STOCKS.

What is the fund's investment program?
Under normal circumstances, the fund will invest at least 65% of total assets
in the common stocks of established companies paying above-average dividends.
These companies are expected to have favorable prospects for dividend growth
and capital appreciation, as determined by T. Rowe Price.

The fund may also purchase other types of securities, for example, foreign
securities, convertible stocks and bonds, and warrants, when considered
consistent with the fund's investment objective and program. The portfolio
manager may also engage in a variety of investment management practices, such
as buying and selling futures and options.

What are the fund's major characteristics?
T. Rowe Price believes that income can be a significant contributor to total
return over time and expects the fund's yield to be above that of the Standard
& Poor's 500 Stock Index. The fund will tend to take a "value" approach and
invest in stocks and other securities that appear to be temporarily
undervalued by various measures, such as price/earnings ratios.

How does the fund select stocks for the portfolio?
The fund will generally consider companies with the following characteristics:
o Established operating histories.
o Above-average current dividend yield relative to the average yield of
the S&P 500.
o Low price/earnings ratios relative to the S&P 500.
o Sound balance sheets and other financial characteristics.
o Low stock price relative to a company's underlying value as measured by
assets, earnings, cash flow, or business franchises.

What is meant by a "value" investment approach?

_____________________________________________________________________________
VALUE INVESTORS LOOK FOR UNDERVALUED ASSETS.

Value investors seek to buy a stock (or other security) when its price is low
in relation to what they believe to be its real worth or future prospects. By
identifying companies whose stocks are currently out of favor, value investors
hope to realize significant appreciation as other investors recognize the
stock's intrinsic value and the price rises accordingly.

Finding undervalued stocks requires considerable research to identify the
particular stock, to analyze the company's underlying financial condition and
prospects, and to assess the likelihood that the stock's underlying value will
be recognized by the market and reflected in its price.

Some of the principal measures used to identify such stocks are:

o Price/earnings ratio. Dividing a stock's price by its earnings per share
generates a price/earnings or P/E ratio. A stock with a P/E that is
significantly below that of its peers, the market as a whole, or its own
historical norm may represent an attractive opportunity.
o Price/book value ratio. This ratio, calculated by dividing a stock's
price by its book value per share, indicates how a stock is priced
relative to the accounting (i.e., book) value of the company's assets. A
ratio below the market, that of its competitors, or its own historic
norm could indicate an undervalued situation.

_____________________________________________________________________________
A STOCK SELLING AT $10 WITH A DIVIDEND OF $0.50 HAS A 5% YIELD.

o Dividend yield. A stock's dividend yield is found by dividing its annual
dividend by its share price. A yield significantly above a stock's own
historic norm or that of its peers may suggest an investment
opportunity.
o Price/cash flow. This is found by dividing a stock's price by the amount
of cash flow per share generated by the company. A ratio below that of
the market or of its peers suggests the market may be incorrectly
valuing the company's cash flow for reasons that may be temporary.
o Undervalued assets. This analysis compares a company's stock price with
its underlying asset values, its projected value in the private (as
opposed to public) market, or its expected value if the company or parts
of it were sold or liquidated.
o Restructuring opportunities. The market can react favorably to the
announcement or the successful implementation of a corporate
restructuring, financial engineering, or asset redeployment. Such events
can result in an increase in a company's stock price. A value investor
may try to anticipate these actions and invest before the market places
an appropriate value on any actual or expected changes.

_____________________________________________________________________________
THE FUND'S SHARE PRICE WILL FLUCTUATE; WHEN YOU SELL YOUR SHARES, YOU MAY LOSE
MONEY.

What are some of the fund's potential risks?
The fund's emphasis on stocks of established, high dividend-paying companies,
as well as its possible exposure to fixed income securities, could limit its
potential for capital appreciation. Sharply rising interest rates could also
decrease the appeal of stocks purchased by the fund, further restraining total
return.

What are some of the fund's potential rewards?
Dividends are normally a more stable and predictable component of total return
than capital appreciation. While the price of a company's stock can go up or
down in response to earnings or to fluctuations in the general market,
dividends are usually more reliable. Stocks paying a high level of dividend
income tend to be less volatile than those with below-average dividends.

_____________________________________________________________________________
EQUITY INVESTORS SHOULD HAVE A LONG-TERM INVESTMENT HORIZON AND BE WILLING TO
WAIT OUT BEAR MARKETS.

What are some potential risks and rewards of investing in the stock market?
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. Economic growth has been punctuated by periodic
declines. Share prices of even the best managed, most profitable corporations
are subject to market risk, which means their stock prices can decline. In
addition, swings in investor psychology or significant trading by large
institutional investors can result in price fluctuations.

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 can accept the price fluctuations inherent in stock
investing in an effort to achieve income and capital appreciation, the fund
could be an appropriate part of your overall investment strategy.

Is there other information I need to review before making a decision?
Be sure to review "Investment Policies and Practices" in Section 3, which
discusses the following: Types of Portfolio Securities (common and preferred
stocks, convertible securities and warrants, foreign securities, fixed income
securities, high-yield/high-risk investing, hybrid instruments, and private
placements); and Types of Management Practices (cash position, borrowing money
and transferring assets, futures and options, managing foreign currency risk,
lending of portfolio securities, and portfolio turnover).

New America Growth Portfolio

What is the fund's objective?
The fund's objective is to provide long-term growth of capital by investing
primarily in the common stocks of U.S. growth companies operating in service
industries.

What is the fund's investment program?
The fund will invest most of its assets in service companies, regardless of
size, that are believed by T. Rowe Price to be above-average performers in
their fields. Companies in the portfolio will range from larger blue chip
firms to small, rapidly growing companies. The fund may also invest up to 25%
of its assets in growth companies outside the service sector. Total return
will consist primarily of capital appreciation or depreciation.

Most of the assets will be invested in U.S. common stocks. However, the fund
may also purchase other types of securities, for example, foreign securities,
convertible securities and warrants, when consistent with the fund's
investment objective and program. The fund may also engage in a variety of
investment management practices, such as buying and selling futures and
options.

_____________________________________________________________________________
THE FUND ALSO INCLUDES COMPANIES WHOSE PROSPECTS ARE CLOSELY TIED TO SERVICE
INDUSTRIES.

What types of service companies will the fund invest in?
The fund will emphasize companies that derive a majority of their revenues or
operating earnings from such activities as consumer services (retailing,
entertainment and leisure, media and communications, restaurants and food
distribution), business services (health care, computer services), and
financial services (insurance, investment services).

T. Rowe Price analysts will attempt to identify service companies that are
expected to show superior earnings growth. In addition to their growth
prospects, companies will be judged according to their fundamental strength
and the relative valuations of their stock prices.

Why does the fund emphasize the service sector?
If service companies, which represent over 50% of the U.S. economy, outpace
overall economic growth, their stocks could generate above-average returns.
Share prices generally rise with earnings over time, so companies with
superior earnings growth can provide investors with the opportunity for
attractive capital appreciation. In addition, service-oriented companies in
general may be more resistant to economic downturns because they have lower
fixed costs, are less capital intensive, and maintain smaller physical
inventories than manufacturing companies.

While service-related companies will dominate, the fund will take advantage of
its ability to invest in promising nonservice growth companies as
opportunities occur.

_____________________________________________________________________________
GROWTH INVESTORS LOOK FOR COMPANIES WITH ABOVE-AVERAGE EARNINGS GAINS.

What is meant by a "growth" investment approach?
More than 50 years ago, Thomas Rowe Price pioneered the growth stock theory of
investing. It is based on the premise that inflation represents a more serious
long-term threat to an investor's portfolio than stock market fluctuations or
recessions. Mr. Price believed that when a company's earnings grow faster than
both inflation and the economy in general, the market will eventually reward
its long-term earnings growth with a higher stock price. In addition, the
company should be able to raise its dividend in line with its growth in
earnings. However, investors should be aware that, during periods of adverse
economic and market conditions, stock prices may fall despite favorable
earnings trends.

_____________________________________________________________________________
THE FUND'S SHARE PRICE WILL FLUCTUATE; WHEN YOU SELL YOUR SHARES, YOU MAY LOSE
MONEY.

What are some of the fund's potential risks?
The fund may entail above-average risk since rapidly growing companies paying
few dividends are generally more volatile than companies with slower growth
rates and higher dividends. In addition, the portfolio may contain the stocks
of small companies, that often have limited product lines, markets, or
financial resources. These stocks may have limited marketability and may be
subject to more volatile price movements than securities of larger companies.

What are some of the fund's potential rewards?
The fund offers the opportunity for significant, long-term capital
appreciation by participating in the growth of dynamic service-related
companies. In addition, the fund has the flexibility to seek appreciation
opportunities through growth stock investments outside the service sector.

_____________________________________________________________________________
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 can accept the risk of price declines in an effort
to achieve superior capital appreciation, the fund may be an appropriate part
of your overall investment strategy.

Is there other information I need to review before making a decision?
Be sure to review "Investment Policies and Practices" in Section 3, which
discusses the following: Types of Portfolio Securities (common and preferred
stocks, convertible securities and warrants, foreign securities, hybrid
instruments, and private placements); and Types of Management Practices (cash
position, borrowing money and transferring assets, futures and options,
managing foreign currency risk, lending of portfolio securities, and portfolio
turnover).

International Stock Portfolio

Why invest in an international fund?
There are three main reasons:
o Expanded investment opportunities. More than half of the world's total
stock market capitalization and two-thirds of global GNP consists of
non-U.S. stocks and companies.
o The potential for higher long-term returns. For example, foreign stocks
represented by the Morgan Stanley EAFE Index (Europe, Australia, Far
East) outperformed U.S. stocks measured by the S&P 500 Stock Index in
all but two rolling 10-year periods from 1981 through 1995. Of course,
during this time there were shorter periods when U.S. stocks
outperformed.
o Potentially reduced overall volatility for an all-U.S. stock portfolio.
Since foreign stock markets tend to move independently of the U.S.
market and each other, spreading investments across a number of markets
can help smooth out fluctuations in the returns of your total equity
holdings.

What is the fund's objective and investment program?
The fund's objective is long-term growth of capital through investments
primarily in common stocks of established, non-U.S. companies. The fund
expects to invest substantially all of its assets outside the U.S. and to
diversify broadly among countries throughout the world-developed, newly
industrialized, and emerging.

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

How does the portfolio manager select stocks?
Rowe Price-Fleming uses a "bottom-up" approach to stock selection based on
fundamental research. A company's prospects for achieving and sustaining
above-average, long-term earnings growth is generally the manager's primary
focus. However, valuation factors, such as price/earnings, price/cash flow,
and price/book are also important considerations. In conjunction with
identifying potential stocks for investment, external factors are also
reviewed. For example, a country's or region's political, economic, and
financial status help shape the outlook for individual stocks and also affect
decisions regarding the prudent level of overall exposure to particular areas.

_____________________________________________________________________________
EXCHANGE RATE MOVEMENTS CAN BE LARGE AND CAN LAST FOR EXTENDED PERIODS.

What are the major risks associated with international investing and this
fund?
Stock prices of foreign and U.S. companies are subject to many of the same
influences, such as general economic conditions, company and industry earnings
prospects, and investor psychology. However, investing in foreign securities
also involves additional risks which can increase the potential for the losses
in the fund. These risks can be significantly magnified for investments in
emerging markets.

o Currency fluctuations. Transactions in foreign securities are conducted
in local currencies, so dollars must often be exchanged for another
currency when a stock is bought or sold or a dividend is paid. Likewise,
share price quotations and total return information reflect conversion
into dollars. Fluctuations in foreign exchange rates can significantly
increase or decrease the dollar value of a foreign investment, boosting
or offsetting its local market return. For example, if a French stock
rose 10% in price during a year, but the U.S. dollar gained 5% against
the French franc during that time, the U.S. investor's return would be
reduced to 5%. This is because the franc would "buy" fewer dollars at
the end of the year than at the beginning, or, conversely, a dollar
would buy more francs.
o Costs. It is more expensive for U.S. investors to trade in foreign
markets than in the U.S. Mutual funds offer a very efficient way for
individuals to invest abroad, but the overall expense ratios of
international funds are usually somewhat higher than those of typical
domestic stock funds.

_____________________________________________________________________________
WHILE CERTAIN COUNTRIES HAVE MADE PROGRESS IN ECONOMIC GROWTH, LIBERALIZATION,
FISCAL DISCIPLINE, AND POLITICAL AND SOCIAL STABILITY, THERE IS NO ASSURANCE
THESE TRENDS WILL CONTINUE.

o Political and economic factors. The economies, markets, and political
structures of a number of the countries in which the fund can invest do
not compare favorably with the U.S. and other mature economies in terms
of wealth and stability. Therefore, investments in these countries will
be riskier and more subject to erratic and abrupt price movements. This
is especially true for emerging markets such as those found in Latin
America, China, and certain Asian countries, Eastern Europe, and Africa.
However, even investments in countries with highly developed economies
are subject to risk. For example, the Japanese stock market historically
has experienced wide swings in value.

Some economies are less well developed (for example, those in Latin
America, Eastern Europe, Africa, and certain Asian countries), overly
reliant on particular industries, and more vulnerable to the ebb and
flow of international trade, trade barriers, and other protectionist or
retaliatory measures (for example, Japan, Southeast Asia, Latin America,
Eastern Europe, and Africa). This makes investment in such markets
significantly riskier than in other countries. Some countries,
particularly in Latin America and Africa, are grappling with severe
inflation and high levels of national debt. Investments in countries
that have recently begun moving away from central planning and
state-owned industries toward free markets, such as Eastern Europe,
China, and Africa, should be regarded as speculative.

_____________________________________________________________________________
FOR MORE DETAILS ON POTENTIAL RISKS OF FOREIGN INVESTMENTS, PLEASE SEE
"INVESTMENT POLICIES AND PRACTICES."

Certain countries have histories of instability and upheaval (for
example, Latin America and Africa) with respect to their internal
politics that could cause their governments to act in a detrimental or
hostile manner toward private enterprise or foreign investment. Actions
such as nationalizing a company or industry, expropriating assets, or
imposing punitive taxes could have a severe effect on security prices
and impair a fund's ability to repatriate capital or income. Significant
external risks, including war, currently affect some countries.
Governments in many emerging market countries participate to a
significant degree in their economies and securities markets.
o Legal, regulatory, and operational. Certain countries lack uniform
accounting, auditing, and financial reporting standards, have less
governmental supervision of financial markets than in the U.S., do not
honor legal rights enjoyed in the U.S., and have settlement practices,
such as delays, which could subject a fund to risks not customary in the
U.S. In addition, securities markets in these countries have
substantially lower trading volumes than U.S. markets, resulting in less
liquidity and more volatility than in the U.S.
o Pricing. Portfolio securities may be listed on foreign exchanges that
are open days (such as Saturdays) when the fund does not compute its
price. As a result, the fund's net asset value may change significantly
on days when shareholders cannot make transactions.

_____________________________________________________________________________
THE FUND'S SHARE PRICE WILL FLUCTUATE; WHEN YOU SELL YOUR SHARES, YOU MAY LOSE
MONEY.

What can I expect in terms of price volatility?
Like U.S. stock investments, common stocks of foreign companies offer
investors a way to build capital over time. Nevertheless, the long-term rise
of foreign stock prices as a group has been punctuated by periodic declines.
Share prices of even the best managed, most profitable corporations, whether
U.S. or foreign, are subject to market risk, which means they can fluctuate
widely.

In less well-developed stock markets, such as those in Latin America, Eastern
Europe, Africa, and certain Asian countries, volatility may be heightened by
actions of a few major investors. For example, substantial increases or
decreases in cash flows of mutual funds investing in these markets could
significantly affect local stock prices and, therefore, fund share prices.

How does the portfolio manager try to reduce risk?
The principal tools are intensive research and diversification; currency
hedging techniques are used from time to time.

o In addition to conducting on-site research in portfolio countries and
companies, Price-Fleming has close ties with investment analysts based
throughout the world.
o Diversification significantly reduces but does not eliminate risk. The
impact on the fund's share price from a drop in the price of a
particular stock is reduced substantially by investing in a portfolio
with dozens of different companies. Likewise, the impact of unfavorable
developments in a particular country is reduced because investments are
spread among many countries.

Portfolio managers keep close watch on individual investments as well as
on political and economic trends in each country and region. Holdings
are adjusted according to the manager's analysis and outlook.

o While currency translation does affect the shorter-run returns provided
by foreign stocks, its influence on longer-term results generally has
been outweighed by price trends on local stock exchanges. Therefore,
under normal conditions, the fund does not engage in extensive hedging
programs. However, when foreign exchange rates are expected to be
unfavorable for U.S. investors, fund managers can hedge the risk through
use of currency forwards and options. In a general sense, these tools
allow a manager to exchange currencies in the future at a rate specified
in the present. (For more details, please see "Foreign Currency
Transactions" under "Investment Policies and Practices.") If the
manager's forecast is wrong, the hedge may cause a loss. Also, it may be
difficult or not practical to hedge currency risk in many emerging
countries.

What are some of the opportunities represented by major overseas markets?
o Europe: Market deregulation, privatization, and lower trade barriers
have expanded the range of investment opportunities. The emergence of
capitalist economics in Eastern Europe could, over the long term, open
previously inaccessible markets and also provide a lower-cost, skilled
labor pool, which may further stimulate European economies.
o Asia: No longer solely dependent on the Japanese "engine" for growth,
the newly industrialized countries of the Pacific Rim are powered by
worldwide exports and, increasingly, by strong regional demand. In
addition, China's move toward a more capitalistic economy has positive
implications for the entire region's future.
o Japan: Although its growth rate has slowed, the longer-term outlook for
Japan's economy is positive. In addition to its productive labor force,
technological expertise, and commitment to capital investment, Japan's
shift to a more domestic-oriented economy could promote future growth
and create new investment opportunities.
o Latin America: After years of stagnation, some countries here are
experiencing rising growth rates that reflect lower trade barriers,
privatization of industry, progress on reducing inflation, and
restructuring of national debt burdens.
o Emerging markets: A number of countries in Latin America, Eastern
Europe, Asia, and Africa are emerging from periods of economic
stagnation and offer the potential for growth exceeding that of the U.S.
and other developed countries. The countries initiating market-based
economic reforms could benefit from significant amounts of capital
inflows.

How can I decide if the fund may be appropriate for me?
First, be sure that your investment objective is the same as the fund's:
capital appreciation over time. If you will need the money you plan to invest
in the near future, the fund is not suitable.

Second, your decision should take into account whether you have any other
foreign stock investments.

Third, consider your risk tolerance and the risk profile of the fund.

Is there other information I need to review before making a decision?
Be sure to review "Investment Policies and Practices" in Section 3, which
discusses the following: Types of Portfolio Securities (common and preferred
stocks, convertible securities and warrants, fixed income securities, hybrid
instruments, passive foreign investment companies, and private placements);
and Types of Management Practices (cash position, borrowing money and
transferring assets, foreign currency transactions, futures and options, tax
consequences of hedging, and portfolio turnover).

Consider your investment goals, your time horizon for achieving them, and your
tolerance for risk. Compare these to the description of the funds. You may
find the chart set forth below helpful in this process.

_____________________________________________________________________________
YOU CAN PURCHASE SHARES IN THESE FUNDS FOR VARIABLE ANNUITY CONTRACTS.

Comparison of Variable Annuity Portfolios

Portfolio Investment Portfolio
Emphasis Risk/Reward Profile
_____________________________________________________________________________
Limited- Short- and intermediate-term Moderate income level
Term Bond investment-grade bonds and share price fluctuations.
____________________________________________________________________________
Personal Approximately 60% stocks, Middle-of-the-road approach.
Strategy 30% bonds, 10% money Higher risk and return
Balanced markets. potential than a bond fund,
but lower than a stock fund.
_____________________________________________________________________________
Equity Stocks of established companiesRelatively conservative stock
Income with above average dividends fund. Greater risk and return
potential than a bond fund,
but lower than a stock fund.
_____________________________________________________________________________
New Stocks of rapidly growing U.S.Aggressive domestic stock
America companies operating in the fund. High potential risk
Growth service sector and reward.
_____________________________________________________________________________
International Stocks of established Aggressive international stock
Stock non-U.S. companies fund. High potential risk and
reward; subject to risks
unique to foreign investing.
_____________________________________________________________________________
Table 3

About Your Account

Pricing Shares and Receiving Sale Proceeds

Here are some procedures you should know when investing in a fund. For
instructions on how to purchase a T. Rowe Price No-Load Variable Annuity
Contract, read the attached separate account prospectus for the T. Rowe Price
No-Load Variable Annuity.

Shares of each fund will be offered to insurance company separate accounts
(including the T. Rowe Price Variable Annuity Account, a separate account of
First Security Benefit Life Insurance and Annuity Company of New York
("Security Benefit")) established for the purpose of funding variable annuity
contracts. They may also be offered to insurance company separate accounts
established for the purpose of funding variable life contracts. Variable
annuity and variable life Contract Holders or Participants (including
individuals purchasing the T. Rowe Price No-Load Variable Annuity) are not the
shareholders of a fund. Rather, the separate account is the shareholder. The
T. Rowe Price No-Load Variable Annuity and Variable Life Contracts are issued
by Security Benefit and described in the attached prospectus. The funds assume
no responsibility for any insurance company prospectuses, or variable annuity
or life contracts.

Shares of the funds are sold and redeemed without the imposition of any sales
commission or redemption charge. However, certain other charges may apply to
annuity or life contracts. Those charges are disclosed in the accompanying
prospectus for the T. Rowe Price No-Load Variable Annuity.

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

_____________________________________________________________________________
ADDITIONAL INFORMATION REGARDING PRICING FOR THE INTERNATIONAL STOCK PORTFOLIO
ONLY IS DISCUSSED AT RIGHT.

The calculation of the International Stock Portfolio's net asset value
normally will not take place contemporaneously with the determination of the
value of the fund's portfolio securities. Events affecting the values of
portfolio securities that occur between the time their prices are determined
and the time the fund's net asset value is calculated will not be reflected in
the fund's net asset value unless Price-Fleming, under the supervision of the
fund's Board of Directors, determines that the particular event should be
taken into account in computing the fund's net asset value.

How your purchase, sale, or exchange price is determined
Purchases. Security Benefit purchases shares of a fund for the T. Rowe Price
Variable Annuity or Variable Life Account, using premiums allocated by the
Contract Holders or Participants. Shares are purchased at the NAV next
determined after Security Benefit receives the premium payment in acceptable
form. Initial and subsequent payments allocated to a fund are subject to the
limits stated in the attached separate account prospectus.

Redemptions. Security Benefit redeems shares of a fund to make benefit or
surrender payments under the terms of its Contracts. Redemptions are processed
on any day on which the New York Stock Exchange is open and are priced at a
fund's NAV next determined after the insurance company receives a surrender
request in acceptable form.

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 Security Benefit receives the proceeds from a sale
Payment for redeemed shares will be made promptly, but in no event later than
seven days. However, the right of redemption may be suspended or the date of
payment postponed in accordance with the Investment Company Act of 1940. The
amount received upon redemption of the shares of the fund may be more or less
than the amount paid for the shares, depending on the fluctuations in the
market value of the assets owned by a fund.

Dividends and Other Distributions
For a discussion of the tax status of your variable annuity or life contract,
please refer to the attached separate account prospectus.

Dividends and other distributions. The policy of each fund is to distribute
all of its net investment income and net capital gains each year to its
shareholders, which are the separate accounts established by the various
insurance companies in connection with their issuance of variable annuity and
life contracts. Dividends from net investment income for the Limited-Term Bond
Portfolio are declared daily and paid monthly. Dividends for the Personal
Strategy Balanced and Equity Income Portfolios are declared and paid
quarterly. Dividends (if any) for the other funds are declared and paid
annually. All fund distributions made to a separate account will be reinvested
automatically in additional fund shares, unless a shareholder (separate
account) elects to receive distributions in cash. Under current law, dividends
and distributions made by a fund to separate accounts, generally, are not
taxable to the separate accounts, the insurance company or the Contract
Holder, provided that the separate account meets the diversification
requirements of Section 817(h) of the Internal Revenue Code of 1986, as
amended, and other tax-related requirements are satisfied. The funds intend to
diversify their investments in the manner required under Code Section 817(h).

Foreign Transactions. If a fund pays nonrefundable taxes to foreign
governments during the year, the taxes will reduce a fund's dividends.

More About the Funds

Organization and Management

How are the funds organized?
T. Rowe Price Fixed Income Series, Inc. ("Income Corporation"), T. Rowe Price
Equity Series, Inc. ("Equity Corporation") and T. Rowe Price International
Series, Inc. ("International Corporation") are each Maryland corporations
organized in 1994 and registered with the Securities and Exchange Commission
under the Investment Company Act of 1940 as a diversified, open-end investment
companies, commonly known as "mutual funds." Mutual funds pool money received
from shareholders and invest it to try to achieve specific objectives. Each
Corporation is a series fund and has the authority to issue other series in
addition to those currently in existence.

Currently, the Fixed Income Corporation has one series, the Limited-Term Bond
Portfolio; the Equity Corporation has three series, the Personal Strategy
Balanced, Equity Income, and New America Growth Portfolios; and the
International Corporation has one series, the International Stock Portfolio,
all established in 1994, and each representing a separate class of shares
having different objectives and investment policies.

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

Each share and fractional share entitles the shareholder to:

o Receive a proportional interest in a fund's income and capital gain
distributions.
o Cast one vote per share on certain fund matters, including the election
of fund directors, changes in fundamental policies, or approval of
changes in the fund's management contract.

The shares of the fund have equal voting rights. The various insurance
companies own the outstanding shares of the fund in their separate accounts.
These separate accounts are registered under the 1940 Act or are excluded from
registration thereunder. Under current law, the insurance companies must vote
the shares held in registered separate accounts in accordance with voting
instructions received from variable Contract Holders or Participants having
the right to give such instructions.

Do T. Rowe Price funds have annual shareholder meetings?
The funds are not required to hold annual meetings and do not intend to do so
except when certain matters, such as a change in a fund's fundamental
policies, are to be decided. In addition, shareholders representing at least
10% of all eligible votes of a fund may call a special meeting if they wish
for the purpose of voting on the removal of any fund director.

Who runs the funds?
General Oversight. The funds are governed by a Board of Directors that meets
regularly to review the funds' investments, performance, expenses, and other
business affairs. The Board elects the funds' officers. The policy of the
funds is that a majority of Board members will be independent of their
investment manager.

Limited-Term Bond Portfolio
Equity Income Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio

Investment Manager. T. Rowe Price is responsible for selection and management
of the funds' portfolio investments. T. Rowe Price serves as investment
manager to a variety of individual and institutional investors, including
limited and real estate partnerships and other mutual funds.

T. Rowe Price was incorporated in Maryland in 1947 as successor to the
investment counseling business founded by the late Thomas Rowe Price, Jr. in
1937. As of December 31, 1995, T. Rowe Price and its affiliates managed over
$75 billion of assets for over three and a half million individual and
institutional investor accounts.

International Stock Portfolio
Investment Manager. Price-Fleming is responsible for selection and management
of the fund's portfolio investments. Price-Fleming's U.S. office is located at
100 East Pratt Street, Baltimore, Maryland 21202. Price-Fleming has offices in
Baltimore, London, Tokyo, and Hong Kong.

Price-Fleming was incorporated in Maryland in 1979 as a joint venture between
T. Rowe Price and Robert Fleming Holdings Limited (Flemings).

_____________________________________________________________________________
FLEMINGS IS A DIVERSIFIED INVESTMENT ORGANIZATION WHICH PARTICIPATES IN A
GLOBAL NETWORK OF REGIONAL INVESTMENT OFFICES IN NEW YORK, LONDON, ZURICH,
GENEVA, TOKYO, HONG KONG, MANILA, KUALA LUMPUR, SEOUL, TAIPEI, BOMBAY,
JAKARTA, SINGAPORE, BANGKOK, AND JOHANNESBURG.

T. Rowe Price, Flemings, and Jardine Fleming are owners of Price-Fleming. The
common stock of Price-Fleming is 50% owned by a wholly owned subsidiary of T.
Rowe Price, 25% by a subsidiary of Flemings, and 25% by Jardine Fleming Group
Limited (Jardine Fleming). (Half of Jardine Fleming is owned by Flemings and
half by Jardine Matheson Holdings Limited.) T. Rowe Price has the right to
elect a majority of the Board of Directors of Price-Fleming, and Flemings has
the right to elect the remaining directors, one of whom will be nominated by
Jardine Fleming.

Research and Administration. Certain administrative support is provided by T.
Rowe Price, which receives from Price-Fleming a fee of .15% of the market
value of all assets in equity accounts, .15% of the market value of all assets
in active fixed income accounts, and .035% of the market value of all assets
in passive fixed income accounts under Price-Fleming's management. Additional
investment research and administrative support for equity investments is
provided to Price-Fleming by Fleming Investment Management Limited (FIM) and
Jardine Fleming Investment Holdings Limited (JFIH), for which each receives
from Price-Fleming a fee of .075% of the market value of all assets in equity
accounts under Price-Fleming's management. JFIH and FIM each receive a fee of
.075% of the market value of all assets in active fixed income accounts and
.0175% of such market value in passive fixed income accounts under
Price-Fleming's management. FIM and JFIH are wholly owned subsidiaries of
Flemings and Jardine Fleming, respectively.

Portfolio Management.
The Limited-Term Bond Portfolio has an Investment Advisory Committee composed
of the following members: Edward A. Wiese, Chairman, Robert P. Campbell,
Christy M. DiPietro, Thomas E. Tewksbury, and Mark J. Vaselkiv. The committee
chairman has day-to-day responsibility for managing the fund and works with
the committee in developing and executing the fund's investment program. Mr.
Wiese has been chairman of the fund's committee since 1995. Mr. Wiese joined
T. Rowe Price in 1984 and has been managing investments since 1985.

The Equity Income Portfolio has an Investment Advisory Committee composed of
the following members: Brian C. Rogers, Chairman, Thomas H. Broadus Jr.,
Richard P. Howard, William J. Stromberg, and Daniel Theriault. The committee
chairman has day-to-day responsibility for managing the fund and works with
the committee in developing and executing the fund's investment program. Mr.
Rogers has been chairman of the committee since its inception in 1994. He
joined T. Rowe Price in 1982 and has been managing investments since 1983.

The New America Growth Portfolio has an Investment Advisory Committee composed
of the following members: John H. Laporte, Chairman, Brian W. H. Berghuis, 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. Laporte has been chairman of the
fund's committee since 1988. Mr. Laporte joined T. Rowe Price in 1976 and has
been managing investments since 1984.

The Personal Strategy Balanced Portfolio's investments are guided by two
committees. An Asset Allocation Committee meets regularly to determine the
asset allocation of the fund among stocks, bonds, and money market securities.
Committee members include Peter Van Dyke, Chairman, Stephen W. Boesel, Edmund
M. Notzon, William T. Reynolds, James S. Riepe, Charles P. Smith, and M. David
Testa.

Day-to-day responsibility for managing the fund's investments lies with an
Investment Advisory Committee which includes Chairman Van Dyke, Messrs.
Boesel, Gillespie, Notzon, Donald J. Peters, Reynolds, Testa, Judith B. Ward,
and Richard T. Whitney.

The Asset Allocation Committee has been acting in this role for T. Rowe Price
since 1990, and its members bring a wide range of investment experience to
this task. Members of the Investment Advisory Committee responsible for making
day-to-day portfolio decisions for the fund are each experienced investment
managers. Mr. Van Dyke has been managing investments since joining T. Rowe
Price in 1985.

The International Stock Portfolio has an Investment Advisory Group composed of
the following members: Martin G. Wade, Christopher D. Alderson, Peter B.
Askew, Richard J. Bruce, Mark J. T. Edwards, John R. Ford, Robert C. Howe,
James B. M. Seddon, Benedict R. F. Thomas, and David J. L. Warren. This group
has day-to-day responsibility for managing the portfolio and developing and
executing the fund's investment program.

Martin Wade joined Price-Fleming in 1979 and has 26 years of experience with
the Fleming Group in research, client service, and investment management.
(Fleming Group includes Robert Fleming and/or Jardine Fleming.) Christopher
Alderson joined Price-Fleming in 1988, and has nine years of experience with
the Fleming Group in research and portfolio management. Peter Askew joined
Price-Fleming in 1988 and has 20 years of experience managing multi-currency
fixed income portfolios. Richard Bruce joined Price-Fleming in 1991 and has
seven years of experience in investment management with the Fleming Group in
Tokyo. Mark Edwards joined Price-Fleming in 1986 and has 14 years of
experience in financial analysis. John Ford joined Price-Fleming in 1982 and
has 15 years of experience with the Fleming Group in research and portfolio
management. Robert Howe joined Price-Fleming in 1986 and has 14 years of
experience in economic research, company research, and portfolio management.
James Seddon joined Price-Fleming in 1987 and has nine years of portfolio
management experience. Benedict Thomas joined Price-Fleming in 1988 and has
six years of portfolio management experience. David Warren joined
Price-Fleming in 1984 and has 15 years of experience in equity research, fixed
income research, and portfolio management.

Portfolio Transactions. Decisions with respect to the purchase and sale of a
fund's portfolio securities on behalf of the fund are made by T. Rowe Price or
Price-Fleming, as the case may be. Each fund's Board of Directors has
authorized T. Rowe Price or Price-Fleming to utilize affiliates of Flemings
and Jardine Fleming in the capacity of broker in connection with the execution
of the fund's portfolio transactions. Price-Fleming would utilize these
affiliates only if it believes that doing so would result in an economic
advantage (in the form of lower execution costs or otherwise) being obtained
by the International Stock Portfolio.

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

Shareholder Services. T. Rowe Price Services, Inc., another wholly owned
subsidiary, acts as the fund's transfer and dividend disbursing agent and
provides shareholder and administrative services. T. Rowe Price calculates the
daily share price and maintains the portfolio and general accounting records
of the fund. The address for T. Rowe Price Services, Inc. is 100 East Pratt
St., Baltimore, MD 21202.

How are fund expenses determined?
Under the management agreement, all expenses of each fund will be paid by T.
Rowe Price (or in the case of International Stock Portfolio, Price-Fleming),
except interest, taxes, brokerage commissions, directors' fees and expenses
(including counsel fees and expenses) and extraordinary expenses. The Board of
Directors of each fund reserves the right to impose additional fees against
shareholder accounts to defray expenses which would otherwise be paid by T.
Rowe Price or Price-Fleming, under the management agreement. The Board does
not anticipate levying such charges; such a fee, if charged, may be retained
by the fund or paid to T. Rowe Price or Price-Fleming, as the case may be.
The Management Fee. Each fund pays T. Rowe Price, or for the International
Stock Portfolio, Price-Fleming, a single, all-inclusive fee based on the
fund's average daily net assets to cover investment management and operating
expenses. The all-inclusive management fee for each fund is noted below.

Limited-Term Bond Portfolio 0.70%
Personal Strategy Balanced Portfolio 0.90%
Equity Income Portfolio 0.85%
New America Growth Portfolio 0.85%
International Stock Portfolio 1.05%

From time to time, T. Rowe Price or, for the International Stock Portfolio,
Price-Fleming, may pay participating insurance companies for services provided
by such insurance companies for the fund or on behalf of contract holders.

Variable Annuity and Variable Life Charges. Variable annuity and variable life
fees and charges are in addition to those described previously and are
described in variable annuity and life prospectuses.

The funds may serve as an investment medium for both variable annuity
contracts and variable life insurance policies. Shares of the funds may be
offered to separate accounts established by any number of insurance companies.
The funds currently do not foresee any disadvantages to variable annuity
contract owners due to the fact that the funds may serve as an investment
medium for both variable life insurance policies and annuity contracts;
however, due to differences in tax treatment or other considerations, it is
theoretically possible that the interests of owners of annuity contracts and
insurance policies for which the funds serve as an investment medium might at
some time be in conflict. However, each fund's Board of Directors is required
to monitor events to identify any material conflicts between variable annuity
contract owners and variable life policy owners, and will determine what
action, if any, should be taken in the event of such a conflict. If such a
conflict were to occur, an insurance company participating in a fund might be
required to redeem the investment of one or more of its separate accounts from
the fund. This might force the fund to sell securities at disadvantageous
prices.

Understanding Performance Information

This section should help you understand the terms used to describe each fund's
performance. You will come across them in shareholder reports you receive from
us.

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

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

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

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

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

Yield
The Limited-Term Bond Portfolio may advertise a yield figure derived by
dividing the fund's net investment income per share (as defined by applicable
SEC regulations) during a 30-day base period by the per share price on the
last day of the base period.

Total returns and yields quoted for the funds include the effect of deducting
each fund's expenses, but may not include charges and expenses attributable to
any particular insurance product. Since you can only purchase shares of the
funds through an insurance product, you should carefully review the prospectus
of the insurance product you have chosen for information on relevant charges
and expenses. Excluding these charges from quotations of a fund's performance
has the effect of increasing the performance quoted.

Investment Policies and Practices

This section takes a detailed look at some of the types of securities each
fund may hold in its portfolio and the various kinds of investment practices
that may be used in day-to-day portfolio management. Each 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 a 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. Each 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.

A fund's holdings of certain kinds of investments cannot exceed maximum
percentages of total assets, which are set forth herein. For instance, these
funds are not permitted to invest more than 10% of total assets in hybrid
instruments. While these restrictions provide a useful level of detail about a
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 than a 5%
impact on a fund's share price. 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 funds' other investments.

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

Limited-Term Bond Portfolio

_____________________________________________________________________________
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) 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 more than 10% of the
voting securities of the issuer would be held by the fund.

Bonds. A bond is an interest-bearing security-an IOU-issued by companies or
governmental units. The issuer has a contractual obligation to pay interest at
a stated rate on specific dates and to repay principal (the bond's face value)
on a specified date. An issuer may have the right to redeem or "call" a bond
before maturity, and the investor may have to reinvest the proceeds at lower
market rates.

A bond's annual interest income, set by its coupon rate, is usually fixed for
the life of the bond. Its yield (income as a percent of current price) will
fluctuate to reflect changes in interest rate levels. A bond's price usually
rises when interest rates fall, and vice versa, so its yield stays current.

Bonds may be unsecured (backed by the issuer's general creditworthiness only)
or secured (also backed by specified collateral).

Certain bonds have interest rates that are adjusted periodically, which tend
to minimize fluctuations in their principal value. The maturity of those
securities may be shortened under certain specified conditions.

Bonds may be designated as senior or subordinated obligations. Senior
obligations generally have the first claim on a corporation's earnings and
assets and, in the event of liquidation, are paid before subordinated debt.

Asset-Backed Securities. An underlying pool of assets, such as credit card or
automobile trade receivables or corporate loans or bonds, backs these bonds
and provides the interest and principal payments to investors. Credit quality
depends primarily on the quality of the underlying assets and the level of
credit support, if any, provided by the issuer. The underlying assets (i.e.,
loans) are subject to prepayments which can shorten the securities' weighted
average life and may lower their return. The value of these securities also
may change because of actual or perceived changes in the creditworthiness of
the originator, servicing agent, or of the financial institution providing the
credit support. There is no limit on the portion of the fund's fixed income
investments in these securities.

Mortgage-Backed Securities. The fund may invest in a variety of
mortgage-backed securities. Mortgage lenders pool individual home mortgages
with similar characteristics to back a certificate or bond, which is sold to
investors such as the fund. Interest and principal payments generated by the
underlying mortgages are passed through to the investors. The "big three"
issuers are the Government National Mortgage Association (GNMA), the Federal
National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage
Corporation (Freddie Mac). GNMA certificates are backed by the full faith and
credit of the U.S. government, while others, such as Fannie Mae and Freddie
Mac certificates, are only supported by the ability to borrow from the U.S.
Treasury or supported only by the credit of the agency. Private mortgage
bankers and other institutions also issue mortgage-backed securities.

Mortgage-backed securities are subject to scheduled and unscheduled principal
payments as homeowners pay down or prepay their mortgages. As these payments
are received, they must be reinvested when interest rates may be higher or
lower than on the original mortgage security. Therefore, these securities are
not an effective means of locking in long-term interest rates. In addition,
when interest rates fall, the pace of mortgage prepayments picks up. These
refinanced mortgages are paid off at face value (par), causing a loss for any
investor who may have purchased the security at a price above par. In such an
environment, this risk limits the potential price appreciation of these
securities and can negatively affect the fund's net asset value. When rates
rise, the prices of mortgage-backed securities can be expected to decline,
although historically these securities have experienced smaller price declines
than comparable quality bonds. There is no limit on the portion of the fund's
fixed income investments in these securities.

Additional mortgage-backed securities in which the fund may invest include:

o Collateralized Mortgage Obligations (CMOs). CMOs are debt securities
that are fully collateralized by a portfolio of mortgages or
mortgage-backed securities. All interest and principal payments from the
underlying mortgages are passed through to the CMOs in such a way as to
create more definite maturities than is the case with the underlying
mortgages. CMOs may pay fixed or variable rates of interest, and certain
CMOs have priority over others with respect to the receipt of
prepayments.
o Stripped Mortgage Securities. Stripped mortgage securities (a type of
potentially high-risk derivative) are created by separating the interest
and principal payments generated by a pool of mortgage-backed securities
or a CMO to create additional classes of securities. Generally, one
class receives only interest payments (IOs) and one principal payments
(POs). Unlike other mortgage-backed securities and POs, the value of IOs
tends to move in the same direction as interest rates. The fund could
use IOs as a hedge against falling prepayment rates (interest rates are
rising) and/or a bear market environment. POs can be used as a hedge
against rising prepayment rates (interest rates are falling) and/or a
bull market environment. IOs and POs are acutely sensitive to interest
rate changes and to the rate of principal prepayments. A rapid or
unexpected increase in prepayments can severely depress the price of
IOs, while a rapid or unexpected decrease in prepayments could have the
same effect on POs. These securities are very volatile in price and may
have lower liquidity than most other mortgage-backed securities. Certain
non-stripped CMOs may also exhibit these qualities, especially those
that pay variable rates of interest that adjust inversely with and more
rapidly than short-term interest rates. There is no guarantee the fund's
investment in CMOs, IOs, or POs will be successful, and the fund's total
return could be adversely affected as a result.

Operating policy: The fund may invest up to 10% of its total assets in
stripped mortgage-backed securities.

_____________________________________________________________________________
HYBRIDS CAN HAVE VOLATILE PRICES AND LIMITED LIQUIDITY AND THEIR USE BY THE
FUND MAY NOT BE SUCCESSFUL.

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 or interest rate of a hybrid could
be tied (positively or negatively) to the price of some commodity, currency,
or securities index or another interest rate (each a "benchmark"). Hybrids can
be used as an efficient means of pursuing a variety of investment goals,
including currency hedging, duration management, and increased total return.
Hybrids may not bear interest or pay dividends. The value of a hybrid or its
interest rate may be a multiple of a benchmark and, as a result, may be
leveraged and move (up or down) more steeply and rapidly than the benchmark.
These benchmarks may be sensitive to economic and political events, such as
commodity shortages and currency devaluations, which cannot be readily
foreseen by the purchaser of a hybrid. Under certain conditions, the
redemption value of a hybrid could be zero. Thus, an investment in a hybrid
may entail significant market risks that are not associated with a similar
investment in a traditional, U.S. dollar-denominated bond that has a fixed
principal amount and pays a fixed rate or floating rate of interest. The
purchase of hybrids also exposes the fund to the credit risk of the issuer of
the hybrid. These risks may cause significant fluctuations in the net asset
value of the fund.

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

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 10% of its total assets invested in such securities.

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.

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

Operating policy: The fund may invest without limitation in U.S.
dollar-denominated debt securities of foreign issuers, foreign branches of
U.S. banks, and U.S. branches of foreign banks and may invest up to 10% of its
total assets (excluding reserves) in non-U.S. dollar-denominated fixed income
securities principally traded in financial markets outside the U.S.

Types of Management Practices

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

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 331/3% 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 331/3% of the fund's total
assets. The fund may not purchase additional securities when borrowings exceed
5% of total assets.

In accordance with California law, the fund may not borrow more than 10% of
its net asset value when borrowing for any general purposes; and the fund may
not borrow more than 25% of net asset value when borrowing as a temporary
measure to facilitate redemptions. Net asset value of a portfolio is the
market value of all investments or assets owned less outstanding liabilities
of the portfolio at the time that any new or additional borrowing is
undertaken.

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

Futures and Options. Futures (a type of potentially high-risk derivative) are
often used to manage or hedge risk, because they enable the investor to buy or
sell an asset in the future at an agreed upon price. Options (another type of
potentially high-risk derivative) give the investor the right, but not the
obligation, to buy or sell an asset at a predetermined price in the future.
The fund may buy and sell futures and options contracts for any number of
reasons, including: to manage its exposure to changes in interest rates, stock
and bond prices, and foreign currencies; as an efficient means of adjusting
its overall exposure to certain markets; in an effort to enhance income; to
protect the value of portfolio securities; and to adjust the portfolio's
duration. The fund may purchase, sell, or write call and put options on
securities, financial indices, and foreign currencies.

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

Interest Rate Swaps. The fund may enter into various interest rate
transactions (a type of potentially high-risk derivative investment) such as
interest rate swaps and the purchase or sale of interest rate caps, collars,
and floors, to preserve a return or spread on a particular investment or
portion of its portfolio, to create synthetic securities, or to structure
transactions designed for other purposes.

Operating policy: The fund will not invest more than 10% of its total assets
in interest rate swaps.

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." The fund may also use these contracts to
create a synthetic bond-issued by a U.S. company, for example, but with the
dollar component transformed into a foreign currency. Although 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.

Operating policy: The fund will not commit more than 10% of its total assets
to forward currency contracts.

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 331/3% of
the fund's total assets.

When-Issued Securities and Forward Commitment Contracts. The fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. There is no limit on the fund's
fixed income investments in these securities. The price of these securities is
fixed at the time of the commitment to buy, but delivery and payment can take
place a month or more later. During the interim period, the market value of
the securities can fluctuate, and no interest accrues to the purchaser. At the
time of delivery, the value of the securities may be more or less than the
purchase or sale price. To the extent the fund remains fully or almost fully
invested (in securities with a remaining maturity of 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.

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. The fund's
portfolio turnover rate for the fiscal year ended December 31, 1995, was
73.7%. For the fiscal period ended December 31, 1994, the fund's annualized
portfolio turnover rate was 146.0%.

Bond Ratings and High-Yield Bonds. Larger bond issues are evaluated by rating
agencies such as Moody's and Standard & Poor's on the basis of the issuer's
ability to meet all required interest and principal payments. T. Rowe Price
research analysts also evaluate all portfolio holdings, including those rated
by an outside agency. Other things being equal, lower-rated bonds have higher
yields due to greater risk. High-yield bonds, also called "junk" bonds, are
those rated below BBB (see Table 3).

Ratings of Corporate Debt Securities
_____________________________________________________________________________
Moody's Standard & Fitch
Investors Poor's Investors Definition
Service, Inc. Corporation Service, Inc.
_____________________________________________________________________________
Long-Term Aaa AAA AAA Highest
quality
Aa AA AA High
quality
A A A Upper
medium
grade
Baa BBB BBB Medium
grade
Ba BB BB Speculative
B B B Highly
speculative
Caa CCC, CC CCC, CC Vulnerable
to default
Ca C C Default is
imminent
C D DDD, DD, D Probably in
default
_____________________________________________________________________________
Commercial P-1 Superior A-1+ Extremely F-1+ Exceptionally
Paper quality strong quality strong quality
A-1 Strong F-1 Very strong
quality quality
P-2 Strong A-2 Satisfactory F-2 Good
quality quality credit quality
P-3 Acceptable A-3 Adequate F-3 Fair
quality quality credit quality
B Speculative F-S Weak
quality credit quality
C Doubtful
quality

Table 3

Personal Strategy Balanced Portfolio

Types of Portfolio Securities

Bonds may be unsecured (backed by the issuer's general creditworthiness only)
or secured (also backed by specified collateral).

Operating policy: At least 25% of the fund's total assets must be senior fixed
income securities.

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 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 which may be made in such countries.

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

Additional mortgage-backed securities in which the fund may invest include:

Operating policy: The fund may invest up to 10% of its total assets in
stripped mortgage securities.

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
bonds. Junk bonds (those related below BBB or in default) are regarded as
predominantly speculative with respect to the issuer's continuing ability to
meet principal and interest payments. Successful investment in lower-medium-
and low-quality bonds involves greater investment risk and is highly dependent
on T. Rowe Price's credit analysis. A real or perceived economic downturn or
higher interest rates could cause a decline in high-yield bond prices by
lessening the ability of issuers to make principal and interest payments.
These bonds are often thinly traded and can be more difficult to sell and
value accurately than high-quality bonds. Because objective pricing data may
be less available, judgment may play a greater role in the valuation process.
In addition, the entire junk bond market can experience sudden and sharp price
swings due to a variety of factors, including changes in economic forecasts,
stock market activity, large or sustained sales by major investors, a
high-profile default, or just a change in the market's psychology. This type
of volatility is usually associated more with stocks than bonds, but junk bond
investors should be prepared for it.

Operating policy: The fund may invest up to 20% of its total assets in
below-investment-grade or junk bonds.

_____________________________________________________________________________
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.

Investment Funds. The fund may invest in other investment funds or companies,
primarily where such investments would be the only practical means of
investing in certain foreign countries. Such investments would result in the
fund paying additional or duplicative fees and expenses. The risks of such
investments would reflect the risks of investing in the types of securities in
which the investment fund or companies invest.

Operating policy: The fund may invest up to 10% of its assets in other
investment funds and companies.

Zero Coupon Bonds and Pay-in-Kind Bonds. A zero coupon bond does not make cash
interest payments during the life of the bond. Instead, it is sold at a deep
discount to face value, and the interest consists of the gradual appreciation
in price as the bond approaches maturity. "Zeros" can be an attractive
financing method for issuers with near-term cash-flow problems. Pay-in-kind
(PIK) bonds pay interest in cash or additional securities, at the issuer's
option, for a specified period. Like zeros, they may help a corporation
economize on cash. PIK prices reflect the market value of the underlying debt
plus any accrued interest. Zeros and PIKS can be higher- or lower-quality
debt, and both are more volatile than coupon bonds.

The fund is required to distribute to shareholders income imputed to any zero
or PIK investments. Such distributions could reduce the fund's reserve
position.

Operating policy: The fund may invest up to 10% of its total assets in zero
coupon and pay-in-kind bonds.

Operating policy: The fund will not invest more than 15% of its net assets in
illiquid securities. As part of this limit, the fund will not invest more than
10% in certain restricted securities.

Types of Management Practices

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

Fundamental policy: Borrowings may not exceed 331/3% 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 331/3% of the fund's total
assets. The fund may not purchase additional securities when borrowings exceed
5% of total assets.

Interest Rate Transactions. The fund may enter into various interest rate
transactions (a type of potentially high-risk derivative investment) such as
interest rate swaps and the purchase or sale of interest rate caps, collars,
and floors, to preserve a return or spread on a particular investment or
portion of its portfolio, to create synthetic securities, or to structure
transactions designed for other purposes.

Operating policies: The fund will not invest more than 10% of its total assets
in interest rate transactions.

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.

Fundamental policy: The value of loaned securities may not exceed 331/3% of
the fund's total assets.

When-Issued Securities and Forward Commitment Contracts. The fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. There is no limit on the fund's
fixed income investments in these securities. The price of these securities is
fixed at the time of the commitment to buy, but delivery and payment can take
place a month or more later. During the interim period, the market value of
the securities can fluctuate, and no interest accrues to the purchaser. At the
time of delivery, the value of the securities may be more or less than the
purchase or sale price. To the extent the fund remains fully or almost fully
invested (in securities with a remaining maturity of 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.

Portfolio Turnover. The fund will not generally trade in securities (either
common stocks or bonds) 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 annualized portfolio turnover rate for
the fiscal period ended December 31, 1995, was 39.3%.

Credit-Quality Considerations. The credit quality of most bond issues is
evaluated by rating agencies such as Moody's and Standard & Poor's. Credit
quality refers to the issuer's ability to meet all required interest and
principal payments. The highest ratings are assigned to issuers perceived to
be the best credit risks. T. Rowe Price research analysts also evaluate all
portfolio holdings of the fund, including those rated by outside agencies. The
lower the rating on a bond, the higher the yield, other things being equal.

Table 4 shows the rating scale used by the major rating agencies. T. Rowe
Price considers publicly available ratings, but emphasizes its own credit
analysis when selecting investments.

Table 4

Equity Income Portfolio

Types of Portfolio Securities

Operating policy: The fund may invest up to 25% of its total assets (excluding
reserves) in foreign securities.

Fixed Income Securities. The fund may invest in debt securities of any type
including municipal securities without regard to quality or rating. Such
securities would be purchased in companies, or municipalities, or entities
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 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.

_____________________________________________________________________________
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.

Operating policy: The fund will not invest more than 15% of its net assets in
illiquid securities. As part of this limit, the fund will not invest more than
10% in certain restricted securities.

Types of Management Practices

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

Fundamental policy: Borrowings may not exceed 331/3% of total fund 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.

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.

Fundamental policy: The value of loaned securities may not exceed 331/3% of
the fund's total 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. The fund's
portfolio turnover rate for the fiscal year ended December 31, 1995, was
10.1%. For the fiscal period ended December 31, 1994, the fund's annualized
portfolio turnover rate was 21.3%.

New America Growth Portfolio

Types of Portfolio Securities

Operating policy: The fund may invest up to 15% of its total assets (excluding
reserves)
in foreign securities.

_____________________________________________________________________________
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.

Operating policy: The fund will not invest more than 15% of its net assets in
illiquid securities. As part of this limit, the fund will not invest more than
10% in certain restricted securities.

Types of Management Practices

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

Fundamental policy: Borrowings may not exceed 331/3% of total fund 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.

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.

Fundamental policy: The value of loaned securities may not exceed 331/3% of
the fund's total 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. The fund's
portfolio turnover rate for the fiscal year ended December 31, 1995, was
54.5%. For the fiscal period ended December 31, 1994, the fund's annualized
portfolio turnover rate was 81.0%.

International Stock Portfolio

Types of Portfolio Securities

Fixed Income Securities. The fund may invest in any type of investment-grade
security. 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.

_____________________________________________________________________________
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.

Passive Foreign Investment Companies. The fund may purchase the securities of
certain foreign investment funds or trusts called passive foreign investment
companies. Such trusts have been the only or primary way to invest in certain
countries. In addition to bearing their proportionate share of the trust's
expenses (management fees and operating expenses), shareholders will also
indirectly bear similar expenses of such trusts. Capital gains on the sale of
such holdings are considered ordinary income regardless of how long the fund
held its investment. 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 are distributed
to shareholders.

To avoid such tax and interest, each Price-Fleming fund intends to treat these
securities as sold on the last day of its 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.

Operating policy: The fund will not invest more than 15% of its net assets in
illiquid securities. As part of this limit, the fund will not invest more than
10% in certain restricted securities.

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

Types of Management Practices

Fundamental policy: Borrowings may not exceed 331/3% of total fund assets.

Foreign Currency Transactions. The fund will normally conduct its foreign
currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or through entering
into forward contracts to purchase or sell foreign currencies. The fund will
generally not enter into a forward contract with a term greater than one year.

The fund will generally enter into forward foreign currency exchange contracts
only under two circumstances. 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. Second, when
Price-Fleming believes that the currency of a particular foreign country may
suffer or enjoy a substantial movement against another currency, it may enter
into a forward contract to sell or buy the former foreign currency (or another
currency which acts as a proxy for that currency), approximating the value of
some or all of the fund's portfolio securities denominated in such foreign
currency. Under certain circumstances, the fund may commit a substantial
portion or the entire value of its portfolio to the consummation of these
contracts. Price-Fleming will consider the effect such a commitment of its
portfolio to forward contracts would have on the investment program of the
fund and the flexibility of the fund to purchase additional securities.
Although forward contracts will be used primarily to protect the fund from
adverse currency movements, they also involve the risk that anticipated
currency movements will not be accurately predicted and the fund's total
return could be adversely affected as a result.

There are certain markets where it is not possible to engage in effective
foreign currency hedging. This may be true, for example, for the currencies of
various Latin American countries and other emerging markets where the foreign
exchange markets are not sufficiently developed to permit hedging activity to
take place.

Futures and Options. Futures (a type of potentially high-risk derivative) are
often used to manage 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 a number
of reasons, including: to manage its exposure to changes in securities prices
and foreign currencies; as an efficient means of adjusting 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.

Tax Consequences of Hedging. Under applicable tax law, the fund may be
required to limit its gains from hedging in foreign currency forwards,
futures, and options. Although the fund is expected to comply with such
limits, the extent to which these limits apply is subject to tax regulations
as yet unissued. Hedging may also result in the application of the
mark-to-market and straddle provisions of the Internal Revenue Code. These
provisions could result in an increase (or decrease) in the amount of taxable
dividends paid by the fund and could affect whether dividends paid by the fund
are classified as capital gains or ordinary income.

Fundamental policy: The value of loaned securities may not exceed 331/3% of
the fund's total 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. The fund's
portfolio turnover rate for the fiscal year ended December 31, 1995, was
17.4%. For the fiscal period ended December 31, 1994, the fund's annualized
portfolio turnover rate was 4.6%.

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 an Account
T. Rowe Price
Investor Services
1-800-496-5304

For Existing Accounts
T. Rowe Price Variable
Annuity Service Center
1-800-469-6587

For Yields and Prices
Tele*Access(registered trademark)
1-800-638-2587
1-410-625-7676
24 hours, 7 days

Investor Centers
101 East Lombard St.
Baltimore, MD 21202

T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117

Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006

ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071

4200 West Cypress St.
10th Floor
Tampa, FL 33607

Invest With Confidence (registered trademark)
T. Rowe Price

________________________________________________________________________
DESCRIPTION OF SIGNIFICANT DIFFERENCES BETWEEN EDGAR FILING
AND PRINTED COPY

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

PAGE 2
Combined New York Variable Annuity Statement of Additional
Information, dated May 1, 1996, should be inserted here.

Statement of Additional Information
for the "Funds"

The T. Rowe Price No-Load Variable Annuity

May 1, 1996

STATEMENT OF ADDITIONAL INFORMATION

T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio

T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio

T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio

(the "Funds")

Shares of the Funds may be offered to insurance company separate accounts
(including the T. Rowe Price Variable Annuity Account, a separate account of
Security Benefit Life Insurance Company ("Security Benefit")) established for
the purpose of funding variable annuity contracts. They may also be offered to
insurance company separate accounts established for the purpose of funding
variable life contracts. Variable annuity and variable life Contract Holders
or Participants (including individuals purchasing the T. Rowe Price No-Load
Variable Annuity) are not the shareholders of the Funds. Rather, the separate
account is the shareholder. The T. Rowe Price No-Load Variable Annuity
contract is issued by Security Benefit and described in the attached
prospectus. The Funds assume no responsibility for any insurance company
prospectuses or variable annuity or life contracts.

In the future, it is possible that the Funds may offer their shares to
separate accounts funding variable annuities, variable life insurance or other
insurance products of other insurance companies.

This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Funds' prospectuses dated May 1, 1996, which may
be obtained by contacting T. Rowe Price Variable Annuity Service Center, P.O.
Box 750440, Topeka, Kansas, 66675-0440, 1-800-469-6587.

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

Contents

16 Asset-Backed Securities
75 Capital Stock
63 Code of Ethics
62 Custodian
62 Distributor for Fund
74 Dividends and Distributions
76 Federal and State Registration of Shares
38 Foreign Currency Transactions
37 Foreign Futures and Options
32 Futures Contracts
20 Hybrid Instruments
76 Independent Accountants
23 Illiquid or Restricted Securities
59 Investment Management Services
3 Investment Objectives and Policies
45 Investment Performance
9 Investment Program
41 Investment Restrictions
76 Legal Counsel
24 Lending of Portfolio Securities
51 Management of Fund
10 Mortgage-Related Securities
73 Net Asset Value Per Share
25 Options
24 Portfolio Management Practices
63 Portfolio Transactions
73 Pricing of Securities
59 Principal Holders of Securities
78 Ratings of Commercial Paper
79 Ratings of Corporate Debt Securities
24 Repurchase Agreements
4 Risk Factors
74 Tax Status
23 Warrants
21 When-Issued Securities and Forward
Commitment Contracts
44 Yield Information

Throughout this Statement of Additional Information, "the Fund" is intended to
refer to each Fund listed on the cover page, unless otherwise indicated.
References to "the Manager" are intended to refer to T. Rowe Price when
mentioned in connection with the Limited-Term Bond, Personal Strategy
Balanced, Equity Income, and New America Growth Portfolios. References to
"the Manager" refer to Rowe-Price Fleming International, Inc.
("Price-Fleming") when mentioning the International Stock Portfolio. These
references are intended throughout this Statement of Additional Information
unless otherwise indicated.

Investment Objectives and Policies

The following information supplements the discussion of each Fund's investment
objective and policies discussed in the prospectus. Each Fund will not make a
material change in its investment objective without obtaining shareholder
approval. Unless otherwise specified, the investment program and restrictions
of the Funds are not fundamental policies. Each Fund's operating policies are
subject to change by the Board of Directors 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.

International Stock Portfolio

It is the present intention of Price-Fleming to invest in companies based in
(or governments of or within) the Far East (for example, Japan, Hong Kong,
Singapore, and Malaysia), Western Europe (for example, United Kingdom,
Germany, Hungary, Poland, Netherlands, France, Spain, and Switzerland), South
Africa, Australia, Canada, and such other areas and countries as Price-Fleming
may determine from time to time.

In determining the appropriate distribution of investments among various
countries and geographic regions, Price-Fleming ordinarily considers the
following factors: prospects for relative economic growth between foreign
countries; expected levels of inflation; government policies influencing
business conditions; the outlook for currency relationships; and the range of
individual investment opportunities available to international investors.

In analyzing companies for investment, Price-Fleming ordinarily looks for one
or more of the following characteristics: an above-average earnings growth
per share; high return on invested capital; healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; efficient service; pricing flexibility; strength of management; and
general operating characteristics which will enable the companies to compete
successfully in their market place. While current dividend income is not a
prerequisite in the selection of portfolio companies, the companies in which
the Fund invests normally will have a record of paying dividends, and will
generally be expected to increase the amounts of such dividends in future
years as earnings increase.

It is expected that the International Stock Portfolio's investments will
ordinarily be traded on exchanges located at least in the respective countries
in which the various issuers of such securities are principally based.

Risk Factors

General

Each Fund's share price will fluctuate with market, economic and where
applicable, foreign exchange conditions, and your investment may be worth more
or less when redeemed than when purchased. No Fund should be relied upon as a
complete investment program, nor used to play short-term swings in the stock,
bond, or foreign exchange markets. Because of each Fund's investment policy,
the Fund may or may not be suitable or appropriate for all investors. None of
the Funds are money market funds and none are an appropriate investment for
those whose primary objective is principal stability. There is risk in all
investments. The value of the portfolio securities of the Funds will
fluctuate based upon market conditions. Although the Funds seek to reduce
risk by investing in a diversified portfolio, such diversification does not
eliminate all risk. There can, of course, be no assurance that any 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 Funds.

Debt Obligations (All Funds except New America Growth and International Stock)

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 issue. 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 debt securities, and a decline in
interest rates will generally increase the value of portfolio debt securities.
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. Although the Fund seeks to reduce risk by portfolio
diversification, credit analysis (considered by the Manager to be among the
strongest in the investment management industry), 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 any Fund will achieve
its investment objective.

After purchase by the Fund, a 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, the Manager will
consider such events 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. When purchasing unrated securities, the Manager, under the
supervision of each Fund's Board of Directors, determines whether the unrated
security is of a quality comparable to that which the Fund is allowed to
purchase.

Limited-Term Bond and Personal Strategy Balanced Portfolios

Mortgage securities differ from conventional bonds in that principal is paid
back over the life of the security rather than at maturity. As a result, the
holder of a mortgage security (i.e., the Fund) receives monthly scheduled
payments of principal and interest, and may receive unscheduled principal
payments representing prepayments on the underlying mortgages. The incidence
of unscheduled principal prepayments is also likely to increase in mortgage
pools owned by the Fund when prevailing mortgage loan rates fall below the
mortgage rates of the securities underlying the individual pool. The effect
of such prepayments in a falling rate environment is to (1) cause the Fund to
reinvest principal payments at the then lower prevailing interest rate, and
(2) reduce the potential for capital appreciation beyond the face amount of
the security. Conversely, the Fund may realize a gain on prepayments of
mortgage pools trading at a discount. Such prepayments will provide an early
return of principal which may then be reinvested at the then higher prevailing
interest rate.

The market value of adjustable rate mortgage securities ("ARMs"), like other
U.S. government securities, will generally vary inversely with changes in
market interest rates, declining when interest rates rise and rising when
interest rates decline. Because of their periodic adjustment feature, ARMs
should be more sensitive to short-term interest rates than long-term rates.
They should also display less volatility than long-term mortgage securities.
Thus, while having less risk of a decline during periods of rapidly rising
rates, ARMs may also have less potential for capital appreciation than other
investments of comparable maturities. Interest rate caps on mortgages
underlying ARM securities may prevent income on the ARM from increasing to
prevailing interest rate levels and cause the securities to decline in value.
In addition, to the extent ARMs are purchased at a premium, mortgage
foreclosures and unscheduled principal prepayments may result in some loss of
the holders' principal investment to the extent of the premium paid. On the
other hand, if ARMs are purchased at a discount, both a scheduled payment of
principal and an unscheduled prepayment of principal will increase current and
total returns and will accelerate the recognition of income which when
distributed to shareholders will be taxable as ordinary income.

Risk Factors of Foreign Investing (All Funds)

There are special risks in foreign investing. Certain of these risks are
inherent in any mutual fund investing in foreign securities while others
relate more to the countries in which each Fund will invest. 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 Funds will 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 Funds' assets denominated in that currency. Such changes
will also affect the Funds' 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
Funds' 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. Foreign stock and bond 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 the Fund.

Investment Funds. Each 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. The Fund's investment in these funds
is subject to the provisions of the 1940 Act. If the Funds invest 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 Funds' foreign
portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount of income available for distribution to the Funds'
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 securiies.

Latin America

To the extent the Fund invests in Latin America, such investments will be
subject to the factors discussed below.

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.

Special Risks of Investing in Junk Bonds (Limited-Term Bond, Personal Strategy
Balanced and Equity Income Funds)

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

Youth and Growth of the Lower Rated Debt Securities Market. The market for
lower rated debt securities is relatively new and its growth has paralleled a
long economic expansion. Past experience may not, therefore, provide an
accurate indication of future performance of this market, particularly during
periods of economic recession. An economic downturn or increase in interest
rates is likely to have a greater negative effect on this market, the value of
lower rated debt securities in the Fund's portfolio, the Fund's net asset
value and the ability of the bonds' issuers to repay principal and interest,
meet projected business goals and obtain additional financing than on higher
rated securities. These circumstances also may result in a higher incidence
of defaults than with respect to higher rated securities. An investment in
this Fund is more speculative than investment in shares of a fund which
invests only in higher rated debt securities.

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

Liquidity and Valuation. Because the market for lower rated securities may be
thinner and less active than for higher rated securities, there may be market
price volatility for these securities and limited liquidity in the resale
market. Nonrated securities are usually not as attractive to as many buyers
as rated securities are, a factor which may make nonrated securities less
marketable. These factors may have the effect of limiting the availability of
the securities for purchase by the Fund and may also limit the ability of the
Fund to sell such securities at their fair value either to meet redemption
requests or in response to changes in the economy or the financial markets.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of lower rated
debt securities, especially in a thinly traded market. To the extent the Fund
owns or may acquire illiquid or restricted lower rated securities, these
securities may involve special registration responsibilities, liabilities and
costs, and liquidity and valuation difficulties. Changes in values of debt
securities which the Fund owns will affect its net asset value per share. If
market quotations are not readily available for the Fund's lower rated or
nonrated securities, these securities will be valued by a method that the
Fund's Board of Directors believes accurately reflects fair value. Judgment
plays a greater role in valuing lower rated debt securities than with respect
to securities for which more external sources of quotations and last sale
information are available.

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

Investment Program
Types of Securities

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

Debt Securities (Limited-Term Bond and Personal Strategy Balanced Funds)

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

o 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.
o 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; and 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.
o 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.
o Corporate Debt Securities. Outstanding nonconvertible corporate debt
securities (e.g., bonds and debentures). Corporate notes may have
fixed, variable, or floating rates.
o Commercial Paper. Short-term promissory notes issued by corporations
primarily to finance short-term credit needs. Certain notes may have
floating or variable rates.
o Foreign Government Securities. Issued or guaranteed by a foreign
government, province, instrumentality, political subdivision or similar
unit thereof.
o Savings and Loan Obligations. Negotiable certificates of deposit and
other short-term debt obligations of savings and loan associations.
o Supranational Agencies. Securities of certain supranational entities,
such as the International Development Bank.

Mortgage-Related Securities (Limited-Term Bond and Personal Strategy Balanced
Funds)

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

o 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.
o 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") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac" or "FHLMC"). FNMA and FHLMC obligations are
not backed by the full faith and credit of the U.S. Government as GNMA
certificates are, but FNMA and FHLMC securities 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 and FHLMC 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.
o 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.
o 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.
o 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.

When mortgages in the pool underlying a Mortgage-Backed Security are
prepaid by mortgagors or by result of foreclosure, such principal
payments are passed through to the certificate holders. 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.

o U.S. Government Agency Multi-Class Pass-Through Securities. Unlike CMOs,
U.S. Government Agency Multi-Class 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 multi-class pass-through
securities.
o 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.
o 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.
o 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.

o 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 below 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 recoup fully 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.

o Adjustable Rate Mortgages. Adjustable rate mortgage (ARM) securities are
collateralized by adjustable rate, rather than fixed rate, mortgages.

ARMs, like fixed rate mortgages, have a specified maturity date, and the
principal amount of the mortgage is repaid over the life of the
mortgage. Unlike fixed rate mortgages, the interest rate on ARMs is
adjusted at regular intervals based on a specified, published interest
rate "index" such as a Treasury rate index. The new rate is determined
by adding a specific interest amount, the "margin," to the interest rate
of the index. Investment in ARM securities allows the Fund to
participate in changing interest rate levels through regular adjustments
in the coupons of the underlying mortgages, resulting in more variable
current income and lower price volatility than longer term fixed rate
mortgage securities. The ARM securities in which the Fund expects to
invest will generally adjust their interest rates at regular intervals
of one year or less. ARM securities are a less effective means of
locking in long-term rates than fixed rate mortgages since the income
from adjustable rate mortgages will increase during periods of rising
interest rates and decline during periods of falling rates.

o Characteristics of Adjustable Rate Mortgage Securities - Interest Rate
Indices. The interest rates paid on adjustable rate securities are
readjusted periodically to an increment over some predetermined interest
rate index. Such readjustments occur at intervals ranging from one to
60 months. There are three main categories of indexes: (1) those based
on U.S. Treasury securities (2) those derived from a calculated measure
such as a cost of funds index ("COFI") or a moving average of mortgage
rates and (3) those based on actively traded or prominently posted
short-term, interest rates. Commonly utilized indexes include the
one-year, three-year and five-year constant maturity Treasury rates, the
three-month Treasury bill rate, the 180-day Treasury bill rate, rates on
longer-term Treasury securities, the 11th District Federal Home Loan
Bank Cost of Funds, the National Median Cost of Funds, the one-month,
three-month, six-month or one-year London Interbank Offered Rate
(LIBOR), the prime rate of a specific bank, or commercial paper rates.
Some indexes, such as the one-year constant maturity Treasury rate,
closely mirror changes in market interest rate levels. Others, such as
the 11th District Home Loan Bank Cost of Funds index, tend to lag behind
changes in market rate levels. The market value of the Fund's assets
and of the net asset value of the Fund's shares will be affected by the
length of the adjustment period, the degree of volatility in the
applicable indexes and the maximum increase or decrease of the interest
rate adjustment on any one adjustment date, in any one year and over the
life of the securities. These maximum increases and decreases are
typically referred to as "caps" and "floors", respectively.

A number of factors affect the performance of the Cost of Funds Index
and may cause the Cost of Funds Index to move in a manner different from
indices based upon specific interest rates, such as the One Year
Treasury Index. Additionally, there can be no assurance that the Cost
of Funds Index will necessarily move in the same direction or at the
same rate as prevailing interest rates. Furthermore, any movement in
the Cost of Funds Index as compared to other indices based upon specific
interest rates may be affected by changes instituted by the FHLB of San
Francisco in the method used to calculate the Cost of Funds Index. To
the extent that the Cost of Funds Index may reflect interest changes on
a more delayed basis than other indices, in a period of rising interest
rates, any increase may produce a higher yield later than would be
produced by such other indices, and in a period of declining interest
rates, the Cost of Funds Index may remain higher than other market
interest rates which may result in a higher level of principal
prepayments on mortgage loans which adjust in accordance with the Cost
of Funds Index than mortgage loans which adjust in accordance with other
indices.

LIBOR, the London interbank offered rate, is the interest rate that the
most creditworthy international banks dealing in U.S. dollar-denominated
deposits and loans charge each other for large dollar-denominated loans.
LIBOR is also usually the base rate for large dollar-denominated loans
in the international market. LIBOR is generally quoted for loans having
rate adjustments at one, three, six or 12 month intervals.

o Caps and Floors. ARMs will frequently have caps and floors which limit
the maximum amount by which the interest rate to the residential
borrower may move up or down, respectively, each adjustment period and
over the life of the loan. Interest rate caps on ARM securities may
cause them to decrease in value in an increasing interest rate
environment. Such caps may also prevent their income from increasing to
levels commensurate with prevailing interest rates. Conversely,
interest rate floors on ARM securities may cause their income to remain
higher than prevailing interest rate levels and result in an increase in
the value of such securities. However, this increase may be tempered by
the acceleration of prepayments.

Mortgage securities generally have a maximum maturity of up to 30 years.
However, due to the adjustable rate feature of ARM securities, their
prices are considered to have volatility characteristics which
approximate the average period of time until the next adjustment of the
interest rate. As a result, the principal volatility of ARM securities
may be more comparable to short- and intermediate-term securities than
to longer term fixed rate mortgage securities. Prepayments however,
will increase their principal volatility. See also the discussion of
Mortgage-Backed Securities on page 11.

o Other Mortgage Related Securities. The Fund expects that governmental,
government-related or private entities may create mortgage loan pools
offering pass-through investments in addition to those described above.
The mortgages underlying these securities may be alternative mortgage
instruments, that is, mortgage instruments whose principal or interest
payments may vary or whose terms to maturity may differ from customary
long-term fixed rate mortgages. As new types of mortgage-related
securities are developed and offered to investors, the investment
manager will, consistent with the Fund's objective, policies and quality
standards, consider making investments in such new types of securities.

Asset-Backed Securities (Limited-Term Bond and Personal Strategy Balanced
Funds)

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.

Methods of Allocating Cash Flows. While many asset-backed securities are
issued with only one class of security, many asset-backed securities are
issued in more than one class, each with different payment terms. Multiple
class asset-backed securities are issued for two main reasons. First,
multiple classes may be used as a method of providing credit support.

This is accomplished typically through creation of one or more classes whose
right to payments on the asset-backed security is made subordinate to the
right to such payments of the remaining class or classes. See "Types of
Credit Support". Second, multiple classes may permit the issuance of
securities with payment terms, interest rates or other characteristics
differing both from those of each other and from those of the underlying
assets. Examples include so-called "strips" (asset-backed securities
entitling the holder to disproportionate interests with respect to the
allocation of interest and principal of the assets backing the security), and
securities with class or classes having characteristics which mimic the
characteristics of non-asset-backed securities, such as floating interest
rates (i.e., interest rates which adjust as a specified benchmark changes) or
scheduled amortization of principal.

Asset-backed securities in which the payment streams on the underlying assets
are allocated in a manner different than those described above may be issued
in the future. The Fund may invest in such asset-backed securities if such
investment is otherwise consistent with its investment objectives and policies
and with the investment restrictions of the Fund.

Types of Credit Support. Asset-backed securities are often backed by a pool of
assets representing the obligations of a number of different parties. To
lessen the effect of failures by obligors on underlying assets to make
payments, such securities may contain elements of credit support. Such credit
support falls into two classes: liquidity protection and protection against
ultimate default by an obligor on the underlying assets. Liquidity protection
refers to the provision of advances, generally by the entity administering the
pool of assets, to ensure that scheduled payments on the underlying pool are
made in a timely fashion. Protection against ultimate default ensures
ultimate payment of the obligations on at least a portion of the assets in the
pool. Such protection may be provided through guarantees, insurance policies
or letters of credit obtained from third parties, through various means of
structuring the transaction or through a combination of such approaches.
Examples of asset-backed securities with credit support arising out of the
structure of the transaction include "senior-subordinated securities"
(multiple class asset-backed securities with certain classes subordinate to
other classes as to the payment of principal thereon, with the result that
defaults on the underlying assets are borne first by the holders of the
subordinated class) and asset-backed securities that have "reserve funds"
(where cash or investments, sometimes funded from a portion of the initial
payments on the underlying assets, are held in reserve against future losses)
or that have been "over collateralized" (where the scheduled payments on, or
the principal amount of, the underlying assets substantially exceeds that
required to make payment of the asset-backed securities and pay any servicing
or other fees). The degree of credit support provided on each issue is based
generally on historical information respecting the level of credit risk
associated with such payments. Delinquency or loss in excess of that
anticipated ould adversely affect the return on an investment in an
asset-backed security.

Automobile Receivable Securities. Each Fund may invest in Asset Backed
Securities which are backed by receivables from motor vehicle installment
sales contracts or installment loans secured by motor vehicles ("Automobile
Receivable Securities"). Since installment sales contracts for motor vehicles
or installment loans related thereto ("Automobile Contracts") typically have
shorter durations and lower incidences of prepayment, Automobile Receivable
Securities generally will exhibit a shorter average life and are less
susceptible to prepayment risk.

Most entities that issue Automobile Receivable Securities create an
enforceable interest in their respective Automobile Contracts only by filing a
financing statement and by having the servicer of the Automobile Contracts,
which is usually the originator of the Automobile Contracts, take custody
thereof. In such circumstances, if the servicer of the Automobile Contracts
were to sell the same Automobile Contracts to another party, in violation of
its obligation not to do so, there is a risk that such party could acquire an
interest in the Automobile Contracts superior to that of the holders of
Automobile Receivable Securities. Also although most Automobile Contracts
grant a security interest in the motor vehicle being financed, in most states
the security interest in a motor vehicle must be noted on the certificate of
title to create an enforceable security interest against competing claims of
other parties. Due to the large number of vehicles involved, however, the
certificate of title to each vehicle financed, pursuant to the Automobile
Contracts underlying the Automobile Receivable Security, usually is not
amended to reflect the assignment of the seller's security interest for the
benefit of the holders of the Automobile Receivable Securities. Therefore,
there is the possibility that recoveries on repossessed collateral may not, in
some cases, be available to support payments on the securities. In addition,
various state and federal securities laws give the motor vehicle owner the
right to assert against the holder of the owner's Automobile Contract certain
defenses such owner would have against the seller of the motor vehicle. The
assertion of such defenses could reduce payments on the Automobile Receivable
Securities.

Credit Card Receivable Securities. The Fund may invest in Asset Backed
Securities backed by receivables from revolving credit card agreements
("Credit Card Receivable Securities"). Credit balances on revolving credit
card agreements ("Accounts") are generally paid down more rapidly than are
Automobile Contracts. Most of the Credit Card Receivable Securities issued
publicly to date have been Pass-Through Certificates. In order to lengthen
the maturity of Credit Card Receivable Securities, most such securities
provide for a fixed period during which only interest payments on the
underlying Accounts are passed through to the security holder and principal
payments received on such Accounts are used to fund the transfer to the pool
of assets supporting the related Credit Card Receivable Securities of
additional credit card charges made on an Account. The initial fixed period
usually may be shortened upon the occurrence of specified events which signal
a potential deterioration in the quality of the assets backing the security,
such as the imposition of a cap on interest rates. The ability of the issuer
to extend the life of an issue of Credit Card Receivable Securities thus
depends upon the continued generation of additional principal amounts in the
underlying accounts during the initial period and the non-occurrence of
specified events. An acceleration in cardholders' payment rates or any other
event which shortens the period during which additional credit card charges on
an Account may be transferred to the pool of assets supporting the related
Credit Card Receivable Security could shorten the weighted average life and
yield of the Credit Card Receivable Security.

Credit cardholders are entitled to the protection of a number of state and
federal consumer credit laws, many of which give such holder the right to set
off certain amounts against balances owed on the credit card, thereby reducing
amounts paid on Accounts. In addition, unlike most other Asset Backed
Securities, Accounts are unsecured obligations of the cardholder.

Other Assets. T. Rowe Price anticipates that Asset Backed Securities backed by
assets other than those described above will be issued in the future. The
Fund may invest in such securities in the future if such investment is
otherwise consistent with its investment objective and policies.

There are, of course, other types of securities that are, or may become
available, which are similar to the foregoing and the Fund reserves the right
to invest in these securities.

Zero Coupon and Pay-in-Kind Bonds (Personal Strategy Balanced Fund)

A zero coupon security has no cash coupon payments. Instead, the issuer sells
the security at a substantial discount from its maturity value. The interest
received by the investor from holding this security to maturity is the
difference between the maturity value and the purchase price. The advantage
to the investor is that reinvestment risk of the income received during the
life of the bond is eliminated. However, zero-coupon bonds like other bonds
retain interest rate and credit risk and usually display more price volatility
than those securities that pay a cash coupon.

Pay-in-Kind (PIK) Instruments are securities that pay interest in either cash
or additional securities, at the issuer's option, for a specified period.
PIK's, like zero coupon bonds, are designed to give an issuer flexibility in
managing cash flow. PIK bonds can be either senior or subordinated debt and
trade flat (i.e., without accrued interest). The price of PIK bonds is
expected to reflect the market value of the underlying debt plus an amount
representing accrued interest since the last payment. PIK's are usually less
volatile than zero coupon bonds, but more volatile than cash pay securities.

For federal income tax purposes, these types of bonds will require the
recognition of gross income each year even though no cash may be paid to the
Fund until the maturity or call date of the bond. The Fund will nonetheless
be required to distribute substantially all of this gross income each year to
comply with the Internal Revenue Code, and such distributions could reduce the
amount of cash available for investment by the Fund.

Hybrid Instruments (All Funds)

Hybrid Instruments 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, the 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, each Fund will limit its investments in Hybrid
Instruments to 10% of net 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).

When-Issued Securities and Forward Commitment Contracts (Limited-Term Bond and
Personal Strategy Balanced Funds)

Each 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 of 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.

Additional Adjustable Rate Securities (Limited-Term Bond and Personal Strategy
Balanced Funds)

Certain securities may be issued with adjustable interest rates that are reset
periodically by pre-determined formulas or indexes in order to minimize
movements in the principal value of the investment. Such securities may have
long-term maturities, but may be treated as a short-term investment under
certain conditions. Generally, as interest rates decrease or increase, the
potential for capital appreciation or depreciation on these securities is less
than for fixed-rate obligations. These securities may take the following
forms:

o Variable Rate Securities. Variable rate instruments are those whose
terms provide for the adjustment of their interest rates on set dates
and which, upon such adjustment, can reasonably be expected to have a
market value that approximates its par value. A variable rate
instrument, the principal amount of which is scheduled to be paid in 397
days or less, is deemed to have a maturity equal to the period remaining
until the next readjustment of the interest rate. A variable rate
instrument which is subject to a demand feature entitles the purchaser
to receive the principal amount of the underlying security or
securities, either (i) upon notice of no more than 30 days or (ii) at
specified intervals not exceeding 397 days and upon no more than 30
days' notice, is deemed to have a maturity equal to the longer of the
period remaining until the next readjustment of the interest rate or the
period remaining until the principal amount can be recovered through
demand.
o Floating Rate Securities. Floating rate instruments are those whose
terms provide for the adjustment of their interest rates whenever a
specified interest rate changes and which, at any time, can reasonably
be expected to have a market value that approximates its par value. The
maturity of a floating rate instrument is deemed to be the period
remaining until the date (noted on the face of the instrument) on which
the principal amount must be paid, or in the case of an instrument
called for redemption, the date on which the redemption payment must be
made. Floating rate instruments with demand features are deemed to have
a maturity equal to the period remaining until the principal amount can
be recovered through demand.
o Put Option Bonds. Long-term obligations with maturities longer than one
year may provide purchasers an optional or mandatory tender of the
security at par value at predetermined intervals, often ranging from one
month to several years (e.g., a 30-year bond with a five-year tender
period). These instruments are deemed to have a maturity equal to the
period remaining to the put date.

Illiquid or Restricted Securities (All Funds)

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. 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, each 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. The Manager 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, the Manager will
consider the trading markets for the specific security taking into account the
unregistered nature of a Rule 144A security. In addition, the Manager 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.

Warrants (All Funds)

Each 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.
There are, of course, other types of securities that are, or may become
available, which are similar to the foregoing and each Fund may invest in
these securities.

Portfolio Management Practices (All Funds)

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 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 the
Manager to be of good standing and will not be made unless, in the judgment of
the Manager, 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 Price-Fleming
(collectively, "Price Funds"). None of the Funds have current intentions of
engaging in these practices at this time.

Repurchase Agreements

Each 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 the Manager's
approved list.

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 (Limited-Term Bond and Personal Strategy
Balanced Funds)

Although neither Fund has current intentions, in the foreseeable future, of
engaging in reverse repurchase agreements, each Fund reserves the right to do
so. Reverse repurchase agreements are ordinary repurchase agreements in which
the 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 44.)

Options

Options are a type of potentially high-risk derivative.

o Writing Covered Call Options. Each 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 the Manager'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.

Each 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 each 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, the 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, the Manager, 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 that 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
each 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 any 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. Each 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.

In order to comply with the requirements of several states, 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.
Should these state laws change or should the Fund obtain a waiver of its
application, the Fund reserves the right to increase this percentage.
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.

o Writing Covered Put Options. Each 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 the Manager 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.

In order to comply with the requirements of several states, 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.
Should these state laws change or should the Fund obtain a waiver of its
application, the Fund reserves the right to increase this percentage.
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.

o Purchasing Put Options. Each 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.

Each 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 the Manager 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.

To the extent required by the laws of certain states, the Fund may not
be permitted to commit more than 5% of its assets to premiums when
purchasing put and call options. Should these state laws change or
should the Fund obtain a waiver of its application, the Fund may commit
more than 5% of its assets to premiums when purchasing call and put
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.

o Purchasing Call Options. Each 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.

To the extent required by the laws of certain states, the Fund may not
be permitted to commit more than 5% of its assets to premiums when
purchasing call and put options. Should these state laws change or
should the Fund obtain a waiver of its application, that Fund may 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.

o Dealer (Over-the-Counter) Options. Each 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 that 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 that 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 the 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.

Interest Rate Transactions (Limited-Term Bond Portfolio)

This Fund may enter into various interest rate transactions such as interest
rate swaps and the purchase or sale of interest rate caps and floors, to
preserve a return or spread on a particular investment or portion of its
portfolio, to create synthetic securities, or to structure transactions
designed for other non-speculative purposes.

Interest rate swaps involve the exchange by the Fund with third parties of its
respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments. The purchase of an interest
rate cap entitles the purchaser, to the extent that a specified index exceeds
a predetermined interest rate, to receive payments of interest on a
contractually-based principal amount from the party selling the interest rate
cap. The purchase of an interest rate floor entitles the purchaser, to the
extent that a specified index falls below a predetermined interest rate, to
receive payments of interest on a contractually-based principal amount from
the party selling the interest rate floor. In circumstances in which the
Manager anticipates that interest rates will decline, the Fund might, for
example, enter into an interest rate swap as the floating rate payor. In the
case where the Fund purchases such an interest rate swap, if the floating rate
payments fell below the level of the fixed rate payment set in the swap
agreement, the Fund's counterparties would pay the Fund's amounts equal to
interest computed at the difference between the fixed and floating rates over
the national principal amount. Such payments would offset or partially offset
the decrease in the payments the Fund would receive in respect of floating
rate assets being hedged. In the case of purchasing an interest rate floor,
if interest rates declined below the floor rate, the Fund would receive
payments from the counterparties which would wholly or partially offset the
decrease in the payments they would receive in respect of the financial
instruments being hedged.

The Fund will usually enter into interest rate swaps on a net basis, i.e., the
two payment streams are netted out, with the Fund receiving or paying, as the
case may be, only the net amount of the two payments. The net amount of the
excess, if any, of the Fund's obligations over its entitlements with respect
to each interest rate swap will be accrued on a daily basis and an amount of
cash or high-quality liquid securities having an aggregate net asset value at
least equal to the accrued excess will be maintained in an account by the
Fund's custodian. If the Fund enters into an interest rate swap on other than
a net basis, the Fund would maintain an account in the full amount accrued on
a daily basis of the Fund's obligations with respect to the swap. To the
extent the Fund sells (i.e., writes) caps and floors, it will maintain in an
account cash or high-quality liquid debt securities having an aggregate net
asset value at least equal to the full amount, accrued on a daily basis, of
the Fund's obligations with respect to any caps or floors. The Fund will not
enter into any interest rate swap, cap or floor transaction unless the
unsecured senior debt or the claims paying ability of the counterparty thereto
is rated at least A by S&P. T. Rowe Price will monitor the creditworthiness
of counterparties on an ongoing basis. If there is a default by the other
parties to such a transaction, the Fund will have contractual remedies
pursuant to the agreements related to the transaction.

The swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. The Manager has determined that,
as a result, the swap market has become relatively liquid. The Fund may enter
into interest rate swaps only with respect to positions held in its portfolio.
Interest rate swaps do not involve the delivery of securities or other
underlying assets or principal. Accordingly, the risk of loss with respect to
interest rate swaps is limited to the net amount of interest payments that the
Fund is contractually obligated to make. If the other parties to interest
rate swaps default, the Fund's risk of loss consists of the net amount of
interest payments that the Fund is contractually entitled to receive. Since
interest rate swaps are individually negotiated, the Fund expects to achieve
an acceptable degree of correlation between its right to receive interest on
loan interests and its right and obligation to receive and pay interest
pursuant to interest rate swaps.

The aggregate purchase price of caps and floors held by the Fund may not
exceed 10% of the Fund's total assets. The Fund may sell (i.e., write) caps
and floors without limitation, subject to the account coverage requirement
described above.

Futures Contracts (All Funds)

Transactions in Futures. Each Fund may enter into futures contracts (a type of
potentially high-risk derivative), including stock index, interest rate and
currency futures ("futures or futures contracts").

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
the Manager 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 and applicable state law.

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 accordance with the rules of the State of California, the Fund may have to
apply the above 5% test without excluding the value of initial margin and
premiums paid for bona fide hedging positions.

The Fund's use of futures contracts will not result in leverage. Therefore,
to the extent necessary, 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 the 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 debt security) 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 that 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 any 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.

As an example of an offsetting transaction in which the underlying instrument
is not delivered, the contractual obligations arising from the sale of one
contract of September Treasury Bills on an exchange may be fulfilled at any
time before delivery of the contract is required (i.e., on a specified date in
September, the "delivery month") by the purchase of one contract of September
Treasury Bills on the same exchange. In such instance, the difference between
the price at which the futures contract was sold and the price paid for the
offsetting purchase, after allowance for transaction costs, represents the
profit or loss to the Fund.

A futures contract on the Standard & Poor's 500 Stock Index, composed of 500
selected common stocks, most of which are listed on the New York Stock
Exchange, provides an example of how futures contracts operate. 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 futures contracts on the S&P 500 Index, the 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 contract
specifies that no delivery of the actual stocks 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 the example contract
above and the S&P 500 Index is at $154 on the termination date, the Fund will
gain $2,000 (500 units x gain of $4). If, however, the S&P 500 Index is at
$148 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.

Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. 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 that 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. The
Manager 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 the Manager'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, the Manager 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 the
Manager might not result in a successful hedging transaction over a very short
time period.

Options on Futures Contracts

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

Options 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 interest
rate futures, the Fund may write or purchase call and put options on financial
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 Funds have no current intention of engaging in futures or options
transactions other than those described above, they reserve 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 Commission 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.

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.

Each 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 the Manager 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, the Manager 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. Third, the Fund may use forward contracts when
the Fund wishes to hedge out of the dollar into a foreign currency in order to
create a synthetic bond or money market instrument-the security would be
issued in U.S. dollrs but the dollar component would be transformed into a
foreign currency through a forward contract.

The Fund may enter into forward contacts for any other purpose consistent with
that 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). 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 the Manager. 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

Each 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 loss, 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 each 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 each Fund's outstanding shares. Other
restrictions in the form of operating policies are subject to change by the
Fund's Board of Directors without shareholder approval. Any investment
restriction which involves a maximum percentage of securities or assets shall
not be considered to be violated unless an excess over the percentage occurs
immediately after, and is caused by, an acquisition of securities or assets
of, or borrowings by, the Fund.

Fundamental Policies

As a matter of fundamental policy, each 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 331/3% 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 the Fund
may enter into futures contracts and options thereon;
(3) Industry Concentration. 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;
(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 331/3% 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. 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, including limited partnership
interests therein, 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 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 T. Rowe Price Fund unless each Fund applies for and
receives an exemptive order from the SEC or the SEC issues rules permitting
such transactions. The Funds have 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 instruments 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 Semi-Annual 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.

For purposes of investment restriction (5), the Fund will consider a
repurchase agreement fully collateralized with U.S. government securities to
be U.S. government securities.

Operating Policies

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

(1) Borrowing.
(a) The Fund will not purchase additional securities when money borrowed
exceeds 5% of its total assets.
(b) No Fund may borrow more than: (1) 10% of net asset value of the Fund
when borrowing for any general purpose, and (2) 25% of net asset value
when borrowing as a temporary measure to facilitate redemptions. Net
asset value of a portfolio is the market value of all investments or
assets owned less outstanding liabilities of the portfolio at the time
that any new or additional borrowing is undertaken.

Net asset value of a portfolio is the market value of all investments or
assets owned less outstanding liabilities of the portfolio at the time
that any new or additional borrowing is undertaken.

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

(3) Equity Securities.
(a) Limited-Term Bond Portfolio: Purchase any common stocks or other equity
securities;
(b) Personal Strategy Balanced Portfolio: Purchase any common stocks or
other equity securities, except as set forth in its prospectus and
operating policy on investment companies;
(4) 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 positions would exceed 5% of the Fund's net asset value.
(5) Illiquid Securities. Purchase illiquid securities and securities of
unseasoned issuers if, as a result, more than 15% of the Fund's net
assets would be invested in such securities, provided that the Fund will
not invest more than 10% of its total assets in restricted securities;
(6) Investment Companies. Purchase securities of open-end or closed-end
investment companies except in compliance with the Investment Company
Act of 1940 and applicable state law. Duplicate fees may result from
such purchases;
(7) 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;
(8) 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 331/3% of the Fund's total assets at the time of borrowing or
investment;
(9) Oil and Gas Programs. Purchase participations or other direct interests
or enter into leases with respect to, oil, gas, or other mineral
exploration or development programs;
(10) 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;
(11) Ownership of Portfolio Securities by Officers and Directors. Purchase or
retain the securities of any issuer if those officers and directors of
the Fund, and of its investment manager, who each own
beneficially more than 0.5% of the outstanding securities of such
issuer, together own beneficially more than 5% of such securities.
(12) Short Sales. Effect short sales of securities;
(13) Unseasoned Issuers. Purchase a security (other than obligations issued
or guaranteed by the U.S., any foreign, state or local government, their
agencies or instrumentalities) if, as a result, more than 5% of the
value of the Fund's total assets would be invested in the securities
issuers which at the time of purchase had been in operation for less
than three years (for this purpose, the period of operation of any
issuer shall include the period of operation of any predecessor or
unconditional guarantor of such issuer). This restriction does not
apply to securities of pooled investment vehicles or mortgage or
asset-backed securities; or
(14) Warrants. Invest in warrants if, as a result thereof, more than 2% of
the value of the net assets of the Fund would be invested in warrants
which are not listed on the New York Stock Exchange, the American Stock
Exchange, or a recognized foreign exchange, or more than 5% of the value
of the net assets of the Fund would be invested in warrants whether or
not so listed. For purposes of these percentage limitations, the
warrants will be valued at the lower of cost or market and warrants
acquired by the Fund in units or attached to securities may be deemed to
be without value.

All Funds

Notwithstanding anything in the above fundamental and operating restrictions
to the contrary, each 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 that 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 that
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.

International Stock Portfolio

In addition to the restrictions described above, some foreign countries limit,
or prohibit, all direct foreign investment in the securities of their
companies. However, the governments of some countries have authorized the
organization of investment funds to permit indirect foreign investment in such
securities. For tax purposes these funds may be known as Passive Foreign
Investment Companies. The Fund is subject to certain percentage limitations
under the 1940 Act and certain states relating to the purchase of securities
of investment companies, and may be subject to the limitation that no more
than 10% of the value of the Fund's total assets may be invested in such
securities.

Yield Information

Limited-Term Bond Portfolio

An income factor is calculated for each security in the portfolio based upon
the security's market value at the beginning of the period and yield as
determined in conformity with regulation of the Securities and Exchange
Commission. The income factors are then totalled for all securities in the
portfolio. Next, expenses of the Fund for the period net of expected
reimbursement are deducted from the income to arrive at net income, which is
then converted to a per-share amount by dividing net income by the average
number of shares outstanding during the period. The net income per share is
divided by the net asset value on the last day of the period to produce a
monthly yield which is then annualized. Quoted yield factors are for
comparison purposes only, and are not intended to indicate future performance
or forecast the dividend per share of the Fund.

The yield of the Fund calculated under the above-described method for the
month ended December 31, 1995, was 5.36%.

Investment Performance

Each Fund's calculation of total return performance includes the reinvestment
of all capital gain distributions and income dividends for the period or
periods indicated, without regard to tax consequences to a shareholder in the
Fund. Total return is calculated as the percentage change between the
beginning value of a static account in the Fund and the ending value of that
account measured by the then current net asset value, including all shares
acquired through reinvestment of income and capital gains dividends. The
results shown are historical and should not be considered indicative of the
future performance of the Fund. Each average annual compound rate of return
is derived from the cumulative performance of the Fund over the time period
specified. The annual compound rate of return for the Fund over any other
period of time will vary from the average.

Cumulative Performance Percentage Change

1 Yr. Since
Ended Inception to
12/31/95 12/31/95
_____________________________________________________________________________
Limited-Term Bond Portfolio 9.88% 12.76%
(5/13/94)
_____________________________________________________________________________
Merrill Lynch 1-5 Year Corporate
and Government Bond Index 12.96 14.73
_____________________________________________________________________________
Lipper Short Investment Grade
Debt Funds Average 10.84 11.75*
_____________________________________________________________________________
Equity Income Portfolio 34.76 44.39
(3/31/94)
_____________________________________________________________________________
Lipper Equity Income Fund Average 30.17 32.01
_____________________________________________________________________________
S&P 500 37.58 44.89
_____________________________________________________________________________
New America Growth Portfolio 51.08 52.60
(3/31/94)
_____________________________________________________________________________
Lipper Growth Fund Index 32.09 34.03
_____________________________________________________________________________
S&P 500 37.58 44.89
_____________________________________________________________________________
International Stock Portfolio 11.18 13.18
(3/31/94)
_____________________________________________________________________________
S&P 500 37.58 44.89
_____________________________________________________________________________
Dow Jones Industrial Average 36.89 47.42
_____________________________________________________________________________
Lipper International Funds Average 9.41 9.99
_____________________________________________________________________________
EAFE Index 11.55 16.40
_____________________________________________________________________________
CPI 2.54 4.28
_____________________________________________________________________________
Personal Strategy Balanced Portfolio 28.66 28.66
(12/30/94)
_____________________________________________________________________________
Lipper Balanced Funds Average 25.16 25.16
_____________________________________________________________________________
Lipper Flexible Portfolio Funds Average25.08 25.08
_____________________________________________________________________________
Combined Index - 60% S&P 500,
40% LB Aggregate Index 29.66 29.66
_____________________________________________________________________________
* From May 31, 1994.

Average Annual Compound Rates of Return
1 Yr. Since
Ended Inception to
12/31/95 12/31/95
_____________________________________________________________________________
Limited-Term Bond Portfolio 9.88% 7.61%
(5/13/94)
_____________________________________________________________________________
Merrill Lynch 1-5 Year Corporate
and Government Bond Index 12.96 8.64
_____________________________________________________________________________
Lipper Short Investment Grade
Debt Funds Average 10.84 7.25*
_____________________________________________________________________________
Equity Income Portfolio 34.76 23.30
(3/31/94)
_____________________________________________________________________________
Lipper Equity Income Fund Average 30.17 17.13
_____________________________________________________________________________
S&P 500 37.58 23.54
_____________________________________________________________________________
New America Growth Portfolio 51.08 27.24
(3/31/94)
_____________________________________________________________________________
Lipper Growth Fund Index 18.22 34.03
_____________________________________________________________________________
S&P 500 23.55 44.89
_____________________________________________________________________________
International Stock Portfolio 11.18 7.31
(3/31/94)
_____________________________________________________________________________
S&P 500 37.58 23.54
_____________________________________________________________________________
Dow Jones Industrial Average 36.89 24.77
_____________________________________________________________________________
Lipper International Funds Average 9.41 5.55
_____________________________________________________________________________
EAFE Index 11.55 9.04
_____________________________________________________________________________
CPI 2.54 2.42
_____________________________________________________________________________
Personal Strategy Balanced Portfolio 28.66 28.66
(12/30/94)
______________________________________________________________________________
_____________________________________________________________________________
Lipper Balanced Funds Average 25.16 25.16

Lipper Flexible Portfolio Funds Average25.08 25.08
_____________________________________________________________________________
Combined Index - 60% S&P 500,
40% LB Aggregate Index 29.66 29.66
_____________________________________________________________________________
* From May 31, 1994.

Outside Sources of Information

From time to time, in reports and promotional literature: (1) the Fund's total
return performance or P/E ratio may be compared to any one or combination of
the following: (i) the Standard & Poor's 500 Stock Index and Dow Jones
Industrial Average so that you may compare the Fund's results with those of a
group of unmanaged securities widely regarded by investors as representative
of the U.S. stock market in general; (ii) other groups of mutual funds,
including T. Rowe Price Funds, tracked by: (A) Lipper Analytical Services, a
widely used independent research firm which ranks mutual funds by overall
performance, investment objectives, and assets; (B) Morningstar, Inc., another
widely used independent research firm which ranks mutual funds; or (C) other
financial or business publications, such as Business Week, Money Magazine,
Forbes and Barron's, which provide similar information; (iii) The Financial
Times (a London based international financial newspaper)-Actuaries World
Indices, including Europe and sub indices comprising this Index (a wide range
of comprehensive measures of stock price performance for the major stock
markets as well as for regional areas, broad economic sectors and industry
groups); (iv) Morgan Stanley Capital International Indices, including the EAFE
Index, Pacific Basin Index, Japan Index, U.K. Index, and Pacific Ex Japan
Index which is a widely-recognized series of indices in international market
performance; (v) Hoarve Govette Small Cap Index and Datastream, as sources for
United Kingdom Small Cap Stocks; (vi) the International Finance Corporation
(an affiliate of the World Bank established to encourage economic development
in less developed countries), World Bank, OECD (Organization for Economic
Co-Operation and Development) and IMF (International Monetary Fund) as a
source of economic statistics; (vii) the Nikkei Average, a generally accepted
benchmark for performance of the Japanese stock market; (viii) indices of
stocks comparable to those in which the Fund invests including the Topix Idex,
which reflects the performance of the first section of the Tokyo Stock
Exchange and the Japan Small-Tokyo Stock Exchange Section 2; (ix) the Wilshire
Small Growth Index, as a source for U.S. small company average annual returns;
(x) IFCI Composite 100, IFCI Latin America 100, IFCI Asia 100, and the IFCI
Europe/Mideast 100 may each be used as a source to represent total return on
an investment of $100 in each index at various points in time; and (xi) the
performance of U.S. government and corporate bonds, notes and bills. (The
purpose of these comparisons would be to illustrate historical trends in
different market sectors so as to allow potential investors to compare
different investment strategies.); (2) the Consumer Price Index (measure for
inflation) may be used to assess the real rate of return from an investment in
the Fund; (3) other U.S. or foreign government statistics such as GNP, and net
import and export figures derived from governmental publications, e.g. The
Survey of Current Business, may be used to illustrate investment attributes of
the Fund or the general economic, business, investment, or financial
environment in which the Fund operates; (4) the effect of tax-deferred
compounding on the Fund's investment returns, or on returns in general, may be
illustrated by graphs, charts, etc. where such graphs or charts would compare,
at various points in time, the return from an investment in the Fund (or
returns in general) on a tax-deferred basis (assuming reinvestment of capital
gains and dividends and assuming one or more tax rates) with the return on a
taxable basis; and (5) the sectors or industries in which the Fund invests may
be compared to relevant indices or surveys (e.g. S&P Industry Surveys) in
order to evaluate the Fund's historical performance or current or potential
value with respect to the particular industry or sector.

Other Features and Benefits

Each Fund is a member of the T. Rowe Price Family of Funds and may help
investors achieve various long-term investment goals, such as investing money
for retirement, saving for a down payment on a home, or paying college costs.
To explain how the Fund could be used to assist investors in planning for
these goals and to illustrate basic principles of investing, various
worksheets and guides prepared by T. Rowe Price Associates, Inc. and/or T.
Rowe Price Investment Services, Inc. may be made available. These currently
include: the Asset Mix Worksheet which is designed to show shareholders how to
reduce their investment risk by developing a diversified investment plan: the
College Planning Guide which discusses various aspects of financial planning
to meet college expenses and assists parents in projecting the costs of a
college education for their children; the Retirement Planning Kit (also
available in a PC version) which includes a detailed workbook to determine how
much money you may need for retirement and suggests how you might invest to
reach your goal; and the Retirees Financial Guide which includes a detailed
workbook to determine how much money you can afford to spend and still
preserve your purchasing power and suggest how you might invest to reach your
goal; Tax Considerations for Investors discusses the tax advantages of
annuities and municipal bonds and how to access whether they are suitable for
your portfolio, versus pros and cons of placing assets in a gift to minors
account and summarizes the benefits and types of tax-deferred retirement plans
currently available; the Personal Strategy Planner simplifies investment
decision making by helping investors define personal financial goals,
establish length of time the investor intends to invest, determine risk
"comfort zone" and select diversified investment mix; and the How to Choose a
Bond Fund guide, which discusses how to choose an appropriate bond fund for
your portfolio. From time to time, other worksheets and guides may be made
available as wel. Of course, an investment in the Fund cannot guarantee that
such goals will be met.

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

Historical Returns for Different Investments
_____________________________________________________________________________
Annualized returns for
periods ended 12/31/95 50 years 20 years10 years 5 years
_____________________________________________________________________________
Small-Company Stocks 13.8% 19.6% 11.9% 24.5%
_____________________________________________________________________________
Large-Company Stocks 11.9 14.6 14.8 16.6
_____________________________________________________________________________
Foreign Stocks N/A 15.1 13.9 9.7
_____________________________________________________________________________
Long-Term Corporate Bonds 5.7 10.5 11.2 12.1
_____________________________________________________________________________
Intermediate-Term U.S. Gov't. Bonds5.9 9.7 9.1 8.8
_____________________________________________________________________________
Treasury Bills 4.8 7.3 5.5 4.3
_____________________________________________________________________________
U.S. Inflation 4.4 5.2 3.5 2.8
_____________________________________________________________________________
Sources: Ibbotson Associates, Morgan Stanley. Foreign stocks reflect
performance of The Morgan Stanley Capital International EAFE Index, which
includes some 1,000 companies representing the stock markets of Europe,
Australia, New Zealand, and the Far East. This chart is for illustrative
purposes only and should not be considered as performance for, or the
annualized return of, any T. Rowe Price Fund. Past performance does not
guarantee future results.

Also included will be various portfolios demonstrating how these historical
indices would have performed in various combinations over a specified time
period in terms of return. An example of this is shown below.

Performance of Retirement Portfolios*

Average Annualized
Returns 20 Years
Asset Mix Ended 12/31/95 Value of
Nomin-Real $10,000
In- Saf- al Re- Re- Best WorstInvestment
Portfolio Growth come ety turnturn**Year YearAfter Period
_____________________________________________________________________________
I. Low Risk 40% 40% 20% 11.8% 6.5% 24.9% 0.1% $92,675
_____________________________________________________________________________
II. Moderate Risk60% 30% 10% 13.1% 7.9% 29.1% -1.8% $116,826
_____________________________________________________________________________
III.High Risk 80% 20% 0% 14.3% 9.1% 33.4% -5.2% $145,611
_____________________________________________________________________________
Source: T. Rowe Price Associates; data supplied by Lehman Brothers, Wilshire
Associates, and Ibbotson Associates.

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

**Based on inflation rate of 5.2% for the 20-year period ended 12/31/95.

Outside Sources of Information

From time to time, in reports and promotional literature, one or more of the
T. Rowe Price funds, including these Funds, may compare its performance to
Overnight Government Repurchase Agreements, Treasury bills, notes, and bonds,
certificates of deposit, and six-month money market certificates. Performance
may also be compared to (1) indices of broad groups of managed or unmanaged
securities considered to be representative of or similar to Fund portfolio
holdings; (2) other mutual funds; or (3) other measures of performance set
forth in publications such as:

Advertising News Service, Inc., "Bank Rate Monitor+ - The Weekly Financial
Rate Reporter" is a weekly publication which lists the yields on various money
market instruments offered to the public by 100 leading banks and thrift
institutions in the U.S., including loan rates offered by these banks. Bank
certificates of deposit differ from mutual funds in several ways: the interest
rate established by the sponsoring bank is fixed for the term of a CD; there
are penalties for early withdrawal from CDs; and the principal on a CD is
insured.

Donoghue Organization, Inc., "Donoghue's Money Fund Report" is a weekly
publication which tracks net assets, yield, maturity and portfolio holdings on
approximately 380 money market mutual funds offered in the U.S. These funds
are broken down into various categories such as U.S. Treasury, Domestic Prime
and Euros, Domestic Prime and Euros and Yankees, and Aggressive.

First Boston High Yield Index, It shows statistics on the Composite Index and
analytical data on new issues in the marketplace and low-grade issuers.
Lipper Analytical Services, Inc., "Lipper-Fixed Income Fund Performance
Analysis" is a monthly publication which tracks net assets, total return,
principal return and yield on approximately 950 fixed income mutual funds
offered in the U.S.

Merrill Lynch, Pierce, Fenner & Smith, Inc., "Taxable Bond Indices" is a
monthly publication which lists principal, coupon and total return on over 100
different taxable bond indices tracked by Merrill Lynch, together with the par
weighted characteristics of each Index.

Morningstar, Inc., is a widely used independent research firm which rates
mutual funds by overall performance, investment objectives and assets.
Salomon Brothers Inc., "Analytical Record of Yields and Yield Spreads" is a
publication which tracks historical yields and yield spreads on short-term
market rates, public obligations of the U.S. Treasury and agencies of the U.S.
government, public corporate debt obligations, municipal debt obligations and
preferred stocks.

Salomon Brothers Inc., "Bond Market Round-up" is a weekly publication which
tracks the yields and yield spreads on a large, but select, group of money
market instruments, public corporate debt obligations, and public obligations
of the U.S. Treasury and agencies of the U.S. Government.

Salomon Brothers Inc., "High Yield Composite Index" is an index which provides
performance and statistics for the high yield market place.

Salomon Brothers Inc., "Market Performance" is a monthly publication which
tracks principal return, total return and yield on the Salomon Brothers Broad
investment - Grade Bond Index and the components of the Index.

Shearson Lehman Brothers, Inc., "The Bond Market Report" is a monthly
publication which tracks principal, coupon and total return on the Shearson
Lehman Govt./Corp. Index and Shearson Lehman Aggregate Bond Index, as well as
all the components of these Indices.

Telerate Systems, Inc., is a market data distribution network which tracks a
broad range of financial markets including, the daily rates on money market
instruments, public corporate debt obligations and public obligations of the
U.S. Treasury and agencies of the U.S. Government.

Wall Street Journal, is a national daily financial news publication which
lists the yields and current market values on money market instruments,
public corporate debt obligations, public obligations of the U.S. Treasury
and agencies of the U.S. government as well as common stocks, preferred
stocks, convertible preferred stocks, options and commodities; in addition to
indices prepared by the research departments of such financial organizations
as Shearson Lehman/American Express Inc., and Merrill Lynch, Pierce, Fenner
and Smith, Inc., including information provided by the Federal Reserve Board.

Performance rankings and ratings reported periodically in national financial
publications such as MONEY, FORBES, BUSINESS WEEK, BARRON'S, etc. will also be
used.

Insights

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

Other Publications

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

Redemptions in Kind

In the unlikely event a shareholder of any Fund were to receive an in kind
redemption of portfolio securities of the Fund, brokerage fees could be
incurred by the shareholder in 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 U.S.
or international exchange or market; and (d) are not illiquid.

Management of Fund

The officers and directors of each 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 the Manager for more
than five years. In the list below, each Fund's directors who are considered
"interested persons" of the Manager 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 the Manager.

Officers (All Funds)

HENRY H. HOPKINS, Vice President - Managing Director, T. Rowe Price; Vice
President and Director, T. Rowe Price Investment Services, Inc., T. Rowe Price
Services, Inc., and T. Rowe Price Trust Company; Vice President, 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

ROGER L. FIERY III, Assistant Vice President - Vice President, T. Rowe Price
and Rowe Price-Fleming International, Inc.

EDWARD T. SCHNEIDER, Assistant Vice President - Assistant Vice President, T.
Rowe Price, and Vice President, T. Rowe Price Services, Inc.

INGRID I. VORDEMBERGE, Assistant Vice President - Employee, T. Rowe Price

Independent Directors

Equity Income, New America Growth and Personal Strategy Balanced Portfolios

DONALD W. DICK JR., Director - 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: 111 Pavonia Avenue,
Suite 334, Jersey City, New Jersey 07310

DAVID K. FAGIN, Director - Chairman, Chief Executive Officer and Director,
Golden Star Resources, Ltd.; formerly (1986-7/91) President, Chief Operating
Officer and Director, Homestake Mining Company; Address: One Norwest Center,
1700 Lincoln Street, Suite 1950, Denver, Colorado 80203

HANNE M. MERRIMAN, Director - 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, Ann Taylor Stores, Central Illinois
Public Service Company, CIPSCO Incorporated, The Rouse Company, State Farm
Mutual Automobile Insurance Company and USAir Group, Inc.

HUBERT D. VOS, Director - President, Stonington Capital Corporation, a private
investment company; Address: 1231 State Street, Suite 210, Santa Barbara,
California 93190-0409

PAUL M. WYTHES, Director - 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

Limited-Term Bond Portfolio

ROBERT P. BLACK, Director - Retired; formerly President, Federal Reserve Bank
of Richmond; Address: 10 Dahlgren Road, Richmond, Virginia 23233

CALVIN W. BURNETT, PH.D., Director - President, Coppin State College;
Director, Maryland Chamber of Commerce and Provident Bank of Maryland; Former
President, Baltimore Area Council Boy Scouts of America; Vice President, Board
of Directors, The Walters Art Gallery; Address: 2000 North Warwick Avenue,
Baltimore, Maryland 21216

ANTHONY W. DEERING, Director - Director, President and Chief Executive
Officer, The Rouse Company, real estate developers, Columbia, Maryland;
Advisory Director, Kleinwort, Benson (North America) Corporation, a registered
broker-dealer; Address: 10275 Little Patuxent Parkway, Columbia, Maryland
21044

F. PIERCE LINAWEAVER, Director - President, F. Pierce Linaweaver & Associates,
Inc.; formerly (1987-1991) Executive Vice President, EA Engineering, Science,
and Technology, Inc., and (1987-1990) President, EA Engineering, Inc.,
Baltimore, Maryland; Address: The Legg Mason Tower, 111 South Calvert Street,
Suite 2700, Baltimore, Maryland 21202

JOHN G. SCHREIBER, Director - President, Schreiber Investments, Inc., a real
estate investment company; Director AMLI Residential Properties Trust;
Partner, Blackstone Real Estate Partners, L.P.; Director and formerly
(12/70-12/90) Executive Vice President, JMB Realty Corporation, a national
real estate investment manager and developer; Director, Urban Shopping
Centers, Inc.; Address: 1115 East Illinois Road, Lake Forest, Illinois 60045

International Stock Portfolio

DONALD W. DICK JR., Director - 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: 111 Pavonia Avenue,
Suite 334, Jersey City, New Jersey 07310

PAUL M. WYTHES, Director - 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

Officers

Limited-Term Bond Portfolio

*GEORGE J. COLLINS, Chairman and Director - President, Managing Director and
Chief Executive Officer, T. Rowe Price; Director, Rowe Price-Fleming
International, Inc., T. Rowe Price Trust Company and T. Rowe Price Retirement
Plan Services, Inc., Chartered Investment Counselor

*JAMES S. RIEPE, Vice President and Director - Managing Director, T. Rowe
Price; Chairman of the Board, T. Rowe Price Services, Inc., T. Rowe Price
Retirement Plan Services, Inc., T. Rowe Price Trust Company, and T. Rowe Price
Investment Services, Inc.; Director, Rhone-Poulenc Rorer, Inc.

WILLIAM T. REYNOLDS, President - Managing Director, T. Rowe Price

EDWARD A. WIESE, Executive President - Vice President, T. Rowe Price, Rowe
Price-Fleming International, Inc. and T. Rowe Price Trust Company

ROBERT P. CAMPBELL, Vice President - Vice President, T. Rowe Price and Rowe
Price-Fleming International, Inc.; formerly (4/80-5/90) Vice President and
Director, Private Finance, New York Life Insurance Company, New York, New York

CHRISTY M. DIPIETRO, Vice President - Vice President, T. Rowe Price and T.
Rowe Price Trust Company

JAMES M. MCDONALD, Vice President - Vice President, T. Rowe Price

ROBERT M. RUBINO, Vice President - Vice President, T. Rowe Price

THOMAS E. TEWKSBURY, Vice President - Vice President, T. Rowe Price

CHERYL A. REDWOOD, Assistant Vice President - Employee, T. Rowe Price

Equity Income Portfolio

*JOHN H. LAPORTE, Executive Vice President and Director - Managing Director,
T. Rowe Price; Chartered Financial Analyst

*M. DAVID TESTA, President and Director - Chairman of the Board,
Price-Fleming; Managing Director, T. Rowe Price; Vice President and Director,
T. Rowe Price Trust Company; Chartered Financial Analyst; Chartered Investment
Counselor

BRIAN C. ROGERS, President - Managing Director, T. Rowe Price

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

DANIEL J. 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

New America Growth Portfolio

*JOHN H. LAPORTE, President and Director - Managing Director, T. Rowe Price;
Chartered Financial Analyst

*M. DAVID TESTA, Director - Chairman of the Board, Price-Fleming; 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

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

JOHN WAKEMAN, Vice President - Vice President, T. Rowe Price

STEVEN B. ROORDA, Vice President - Vice President, T. Rowe Price

ROBERT N. GENSLER, Vice President - Vice President, T. Rowe Price

CHARLES PEPIN, Vice President - Employee, T. Rowe Price; formerly (1990-1992)
Corporate Finance Analyst, Piper Jaffray Inc.

BRIAN D. STANSKY, Vice President - Vice President, T. Rowe Price

Personal Strategy Balanced Portfolio

*JOHN H. LAPORTE, Vice President and Director - Managing Director, T. Rowe
Price; Chartered Financial Analyst

PETER VAN DYKE, President - Managing Director, T. Rowe Price; Vice President
of Rowe Price-Fleming International, Inc. and T. Rowe Price Trust Company

STEPHEN W. BOESEL, Executive Vice President - Managing Director, T. Rowe Price

JOHN D. GILLESPIE, Executive Vice President - Vice President, T. Rowe Price

EDMUND M. NOTZON, Executive Vice President - Vice President, T. Rowe Price and
T. Rowe Price Trust Company

WILLIAM T. REYNOLDS, Vice President - Managing Director, T. Rowe Price

BRIAN C. ROGERS, Vice President - Managing Director, T. Rowe Price

DONALD J. PETERS, Vice President - Vice President, T. Rowe Price; formerly
portfolio manager, Geewax Terker and Company

RICHARD T. WHITNEY, Vice President - Vice President of T. Rowe Price and T.
Rowe Price Trust Company

JUDITH B. WARD, Assistant Vice President - Assistant Vice President, T. Rowe
Price

International Stock Portfolio

*M. DAVID TESTA, Chairman of the Board - Chairman of the Board, Rowe
Price-Fleming International, Inc.; Managing Director, T. Rowe Price; Vice
President and Director, T. Rowe Price Trust Company; Chartered Financial
Analyst; Chartered Investment Counselor

*MARTIN G. WADE, President and Director - President, Rowe Price-Fleming
International, Inc.; Director, Robert Fleming Holdings Limited; Address: 25
Copthall Avenue, London, EC2R 7DR, England

CHRISTOPHER D. ALDERSON, Vice President - Vice President, Rowe Price-Fleming
International, Inc.

PETER B. ASKEW, Vice President - Executive Vice President, Rowe Price-Fleming
International, Inc.

RICHARD J. BRUCE, Vice President - Vice President of Rowe Price-Fleming
International, Inc.; formerly (1985-1990) Investment Manager, Jardine Fleming
Investment Advisers, Tokyo

ROBERT P. CAMPBELL, Vice President - Vice President, T. Rowe Price and Rowe
Price-Fleming International Inc.; formerly (4/80-5/90) Vice President and
Director, Private Finance, New York Life Insurance Company, New York, New York

MARK J. T. EDWARDS, Vice President - Vice President, Rowe Price-Fleming
International, Inc.

JOHN R. FORD, Vice President - Executive Vice President, Rowe Price-Fleming
International, Inc.

ROBERT C. HOWE, Vice President - Vice President, Rowe Price-Fleming
International, Inc. and T. Rowe Price

STEPHEN ILOTT, Vice President - Employee, Rowe Price-Fleming International,
Inc.; formerly (1988-1991) portfolio management, Fixed Income Portfolios
Group, Robert Fleming Holdings Limited, London

GEORGE A. MURNAGHAN, Vice President - Vice President, Rowe Price-Fleming
International, Inc., T. Rowe Price, T. Rowe Price Trust Company and T. Rowe
Price Investment Services, Inc.

JAMES S. RIEPE, Vice President - Managing Director, T. Rowe Price; Chairman of
the Board, T. Rowe Price Services, Inc., T. Rowe Price Retirement Plan
Services, Inc., T. Rowe Price Trust Company, and T. Rowe Price Investment
Services, Inc.; Director, Rhone-Poulenc Rorer, Inc.

CHRISTOPHER ROTHERY, Vice President - Vice President, Rowe Price-Fleming
International, Inc.; formerly (1987-1989) employee of Robert Fleming Holdings
Limited, London

JAMES B. M. SEDDON, Vice President - Vice President, Rowe Price-Fleming
International, Inc.

BENEDICT R. F. THOMAS, Vice President - Vice President, Rowe Price-Fleming
International, Inc.

DAVID J. L. WARREN, Vice President - Executive Vice President, Rowe
Price-Fleming International, Inc.

WILLIAM F. WENDLER II, Vice President - Vice President, Rowe Price-Fleming
International, Inc., T. Rowe Price and T. Rowe Price Investment Services, Inc.

EDWARD A. WIESE, Vice President - Vice President, T. Rowe Price, Rowe
Price-Fleming International, Inc. and T. Rowe Price Trust Company

ANN B. CRANMER, Assistant Vice President - Vice President, Rowe Price-Fleming
International, Inc.

LEAH P. HOLMES, Assistant Vice President - Vice President, Rowe Price-Fleming
International, Inc. and Assistant Vice President, T. Rowe Price

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

Compensation Table

The Funds do not pay pension or retirement benefits to its officers or
directors. Also, any director of a Fund who is an officer or employee of T.
Rowe Price or Price-Fleming receives no remuneration from a Fund.

Total Compensation
from Fund and
Aggregate Fund Complex
Compensation Paid to
Name of Person, Position from Fund(a) Directors(b)
_____________________________________________________________________________
Equity Income Portfolio
_____________________________________________________________________________
Donald W. Dick Jr., Director $634 $70,083
David K. Fagin, Director 634 57,833
Hanne M. Merriman, Director 634 57,833
Hubert D. Vos, Director 634 57,833
Paul M. Wythes, Director 634 57,833
_____________________________________________________________________________
New America Growth Portfolio
_____________________________________________________________________________
Donald W. Dick Jr., Director $633 $70,083
David K. Fagin, Director 633 57,833
Hanne M. Merriman, Director 633 57,833
Hubert D. Vos, Director 633 57,833
Paul M. Wythes, Director 633 57,833
_____________________________________________________________________________
Personal Strategy Balanced Portfolio
_____________________________________________________________________________
Donald W. Dick Jr., Director $629 $70,083
David K. Fagin, Director 629 57,833
Hanne M. Merriman, Director 629 57,833
Hubert D. Vos, Director 629 57,833
Paul M. Wythes, Director 629 57,833
_____________________________________________________________________________
Limited-Term Bond Portfolio
_____________________________________________________________________________
Robert P. Black, Director $800 $56,000
Calvin W. Burnett, Ph.D, Director 800 56,000
Anthony W. Deering, Director 800 68,250
F. Pierce Linaweaver, Director 800 56,000
John G. Schreiber, Director 800 56,000
_____________________________________________________________________________
International Stock Portfolio
_____________________________________________________________________________
Anthony W. Deering, Director $1,316 $68,250
Donald W. Dick Jr., Director 1,316 70,083
Paul M. Wythes, Director 1,316 57,833
_____________________________________________________________________________
(a) Amounts in this column are for the period January 1, 1995, through
December 31, 1995.
(b) Amounts in this column are for calendar year 1995. The Fund complex
consisted of 72 Funds as of December 31, 1995.

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

Principal Holders of Securities

As of March 31, 1996, the following shareholders beneficially owned more than
5% of the outstanding shares of the fund:

Equity Income Portfolio:

Security Benefit Life Insurance Company, FBO T. Rowe Price No-Load Variable
Annuity, Attn: Mark Young, 700 SW Harrison St., Topeka, KS 66636-0002; United
Of Omaha - Series V, Attn: John Martin, Corporate General Ledger, Mutual Of
Omaha Plaza, Omaha, NE 68175; Providian Life & Health Insurance Company,
Attn: Kim Cox, 8th Floor, P.O. Box 32830, Louisville, KY 40232-2830; American
United Life Separate Account II, Attn: Bill Flory, P.O. Box 195, Indianapolis,
IN 46206-9102; American United Life, American Individual Unit Trust, Attn:
Bill Flory, P.O. Box 195, Indianapolis, IN 46206-9102.

International Stock Portfolio:

Century Life of America, Century Variable Annuity Account, c/o Vicki Foelske,
2000 Heritage Way, Waverly, IA 50677-9208; The Prudential Insurance Company
of America, Attn: Robert Leung, 71 Hanover Road, Mail Stop 84, Florham Park,
NJ 07932-1502; SMA Life, 440 Lincoln Street S134, Worcester, MA 01653-002;
UNUM Variable Annuity, 2211 Congress Street, M279, Portland, ME 04122-0002;
Providian Life & Health Insurance Company, Attn: Kim Cox, 8th Floor, P.O. Box
32830, Louisville, KY 40232-2830; United Of Omaha - Series V, Attn: John
Martin, Corporate General Ledger, Mutual Of Omaha Plaza, Omaha, NE 68175.

New America Growth Portfolio:

Security Benefit Life Insurance Company, FBO T. Rowe Price No-Load Variable
Annuity, Attn: Mark Young, 700 SW Harrison St., Topeka, KS 66636-0002;
Providian Life & Health Insurance Company, Attn: Kim Cox, 8th Floor, P.O. Box
32830, Louisville, KY 40232-2830; United Of Omaha - Series V, Attn: John
Martin, Corporate General Ledger, Mutual Of Omaha Plaza, Omaha, NE 68175.

Limited-Term Bond Portfolio:

Security Benefit Life Insurance Company, FBO T. Rowe Price No-Load Variable
Annuity, Attn:. Mark Young, 700 SW Harrison St., Topeka, KS 66636-0002;
United Of Omaha - Series V, Attn: John Martin, Corporate General Ledger,
Mutual Of Omaha Plaza, Omaha, NE 68175.

Personal Strategy Balanced Portfolio:

Investment Management Services

Services (All Funds except International Stock Portfolio)

Under the Management Agreement, T. Rowe Price provides each Fund, except the
International Stock Portfolio, with discretionary investment services.
Specifically, T. Rowe Price is responsible for supervising and directing the
investments of each 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 each Fund's
corporate existence and corporate records; registering and qualifying Fund
shares under federal and state 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 that 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.

International Stock Portfolio

Under the Management Agreement for the International Stock Portfolio,
Price-Fleming provides the Fund with discretionary investment services.
Specifically, Price-Fleming is responsible for supervising and directing the
investments of the Fund in accordance with the Fund's investment objective,
program, and restrictions as provided in its prospectus and this Statement of
Additional Information. Price-Fleming 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, Price-Fleming provides the Fund with certain
corporate administrative services, including: maintaining the Fund's corporate
existence, corporate records, and registering and qualifying Fund shares under
federal and state 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 Price-Fleming's employees to serve as officers, directors, and
committee members of the Fund without cost to the Fund.

The Management Agreement also provides that Price-Fleming, 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.
Under the Management Agreement, Price-Fleming is permitted to utilize the
services or facilities of others to provide it or the Fund with statistical
and other factual information, advice regarding economic factors and trends,
advice as to occasional transactions in specific securities, and such other
information, advice or assistance as Price-Fleming may deem necessary,
appropriate, or convenient for the discharge of its obligations under the
Management Agreement or otherwise helpful to the Fund.

Certain administrative support is provided by T. Rowe Price which receives
from Price-Fleming a fee of 0.15% of the market value of all assets in equity
accounts, 0.15% of the market value of all assets in active fixed income
accounts and 0.035% of the market value of all assets in passive fixed income
accounts under Price-Fleming's management.

Price-Fleming has entered into separate letters of agreement with Fleming
Investment Management Limited ("FIM") and Jardine Fleming Investment Holdings
Limited ("JFIH"), wherein FIM and JFIH have agreed to render investment
research and administrative support to Price-Fleming. FIM is a wholly-owned
subsidiary of Robert Fleming Asset Management Limited which is a wholly-owned
subsidiary of Robert Fleming Holdings Limited ("Robert Fleming Holdings").
JFIH is an indirect wholly-owned subsidiary of Jardine Fleming Group Limited.
Under the letters of agreement, these companies will provide Price-Fleming
with research material containing statistical and other factual information,
advice regarding economic factors and trends, advice on the allocation of
investments among countries and as between debt and equity classes of
securities, and research and occasional advice with respect to specific
companies. For these services, FIM and JFIH each receives a fee 0.075% of the
market value of all assets in equity accounts under Price-Fleming's
management. FIM and JFIH each receive a fee of 0.075% of the market value of
all assets in active fixed income accounts and 0.0175% of such market value in
passive fixed income accounts under Price-Fleming's management.

Robert Fleming personnel have extensive research resources throughout the
world. A strong emphasis is placed on direct contact with companies in the
research universe. Robert Fleming personnel, who frequently speak the local
language, have access to the full range of research products available in the
market place and are encouraged to produce independent work dedicated solely
to portfolio investment management, which adds value to that generally
available.

Management Fee

Each Fund, pays the Manager an annual all-inclusive fee (the "Fee"). The Fee
is paid monthly to the Manager, on the first business day of the next
succeeding calendar month and is the sum of the daily Fee accruals for each
month. The daily 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 appropriate 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 from the previous business day on which
the Fund was open for business.

The Management Agreement between each Fund and the Manager, provides that the
Manager will pay all expenses of each Fund's operations, except interest,
taxes, brokerage commissions and other charges incident to the purchase, sale
or lending of the Fund's portfolio securities, directors' fee and expenses
(including counsel fees and expenses) and such nonrecurring or extraordinary
expenses that 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 obligation to provide indemnification to its officers, directors and
agents. However, the Board of Directors of each Fund reserves the right to
impose additional fees against shareholder accounts to defray expenses which
would otherwise be paid by the Manager under the Management Agreement. The
Board does not anticipate levying such charges; such a fee, if charged, may be
retained by the Fund or paid to the Manager the fee for each Fund is listed in
the chart on the next page:

Name of Fund Fee
_____________________________________________________________________________
Limited-Term Bond Portfolio 0.70%
_____________________________________________________________________________
Equity Income Portfolio 0.85%
_____________________________________________________________________________
New America Growth Portfolio 0.85%
_____________________________________________________________________________
Personal Strategy Balanced Portfolio 0.90%
_____________________________________________________________________________
International Stock Portfolio 1.05%

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 each 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 each Fund's
shares is continuous.

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

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

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

Custodian

State Street Bank and Trust Company is the custodian for each Fund's domestic
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 State Street Bank and may be entered into the Federal Reserve Book
Entry System, or the security depository system of the Depository Trust
Corporation. The Funds have also entered into a Custodian Agreement with The
Chase Manhattan Bank, N.A., London, pursuant to which portfolio securities
which are purchased outside the U.S. 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 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.

Code of Ethics

Limited-Term Bond, Equity Income, New America Growth and Personal Strategy
Balanced Funds

Each Fund's investment adviser (T. Rowe Price) has a written Code of Ethics
which requires all employees to obtain prior clearance before engaging in any
personal securities transactions within three business days of their
execution. In addition, all employees must report their personal securities
transactions within ten days of their execution. Employees will not be
permitted to effect transactions in a security: If there are pending client
orders in the security; the security has been purchased or sold by a client
within seven calendar days; the security is being considered for purchase for
a client; a change has occurred in T. Rowe Price's rating of the security
within five days; or the security is subject to internal trading restrictions.
In addition, employees are prohibited from engaging in 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.

International Stock Portfolio

The Fund's investment adviser (Price-Fleming) has a written Code of Ethics
which requires all employees to obtain prior clearance before engaging in
personal securities transactions. Transactions must be executed within three
business days of their clearance. In addition, all employees must report
their personal securities transactions within ten days of their execution.
Employees will generally 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; the security is subject to
internal trading restrictions. In addition, employees are prohibited from
engaging in 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
(All Funds, except International Stock Portfolio)

Decisions with respect to the purchase and sale of portfolio securities on
behalf of each 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.
Each Fund's purchases and sales of fixed income portfolio securities are
normally done on a principal basis and do not involve the payment of a
commission although they may involve the designation of selling concessions.
That part of the discussion below relating solely to brokerage commissions
would not normally apply to the Fund's purchase of fixed income securities.

How Brokers and Dealers are Selected

Equity Securities. In purchasing and selling each 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 each 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 Funds. 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., each 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 each 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 of each 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. These
affiliates include, but are not limited to, Jardine Fleming Securities Limited
("JFS"), a wholly-owned subsidiary of JFG, Robert Fleming & Co. Limited
("RF&Co."), Jardine Fleming Australia Securities Limited, and Robert Fleming,
Inc. (a New York brokerage firm). 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.

Portfolio Transactions
(International Stock Portfolio)

Investment or Brokerage Discretion

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

How Brokers and Dealers are Selected

Equity Securities. In purchasing and selling the Fund's portfolio securities,
it is Price-Fleming's policy to obtain quality execution at the most favorable
prices through responsible broker-dealers and, in the case of agency
transactions, at competitive commission rates where such rates are
negotiable. However, under certain conditions, the Fund may pay higher
brokerage commissions in return for brokerage and research services. 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, their expertise in particular markets and
the brokerage and research services they provide to Price-Fleming or the Fund.
It is not the policy of Price-Fleming 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.

Transactions on stock exchanges involve the payment of brokerage commissions.
In transactions on stock exchanges in the United States, these commissions are
negotiated. Traditionally, commission rates have generally not been
negotiated on stock markets outside the United States. In recent years,
however, an increasing number of overseas stock markets have adopted a system
of negotiated rates, although a number of markets continue to be subject to an
established schedule of minimum commission rates. It is expected that equity
securities will ordinarily be purchased in the primary markets, whether
over-the-counter or listed, and that listed securities may be purchased in the
over-the-counter market if such market is deemed the primary market. In the
case of securities traded on the over-the-counter markets, there is generally
no stated commission, but the price usually includes an undisclosed commission
or markup. In underwritten offerings, the price includes a disclosed, fixed
commission or discount.

Fixed Income Securities. For fixed income securities, it is expected that
purchases and sales will ordinarily be transacted with the issuer, the
issuer's underwriter, or with a primary market maker acting as principal on a
net basis, with no brokerage commission being paid by the Fund. However, the
price of the securities generally includes compensation which is not disclosed
separately. Transactions placed though dealers who are serving as primary
market makers reflect the spread between the bid and asked prices.

With respect to equity and fixed income securities, Price-Fleming 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. The prices the Fund pays to
underwriters of newly-issued securities usually include a concession paid by
the issuer to the underwriter. Price-Fleming may receive research services in
connection with brokerage transactions, including designations in fixed price
offerings.

Price-Fleming may cause the Fund to pay a broker-dealer who furnishes
brokerage and/or research services a commission for executing a transaction
that is in excess of the commission another broker-dealer would have received
for executing the transaction if it is determined that such commission is
reasonable in relation to the value of the brokerage and/or research services
which have been provided. In some cases, research services are generated by
third parties but are provided to Price-Fleming by or through broker-dealers.

Descriptions of Research Services Received from Brokers and Dealers
Price-Fleming receives a wide range of research services from brokers and
dealers covering investment opportunities throughout the world, including
information on the economies, industries, groups of securities, individual
companies, statistics, political developments, technical market action,
pricing and appraisal services, and performance analyses of all the countries
in which the Fund's portfolio is likely to be invested. Price-Fleming cannot
readily determine the extent to which commissions charged by brokers reflect
the value of their research services, but brokers occasionally suggest a level
of business they would like to receive in return for the brokerage and
research services they provide. To the extent that research services of value
are provided by brokers, Price-Fleming may be relieved of expenses which it
might otherwise bear. In some cases, research services are generated by third
parties but are provided to Price-Fleming by or through brokers.

Commissions to Brokers who Furnish Research Services

Certain broker-dealers which provide quality execution services also furnish
research services to Price-Fleming. Price-Fleming 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 its clients
to pay a broker which furnishes brokerage or research services a higher
commission than that which might be charged by another broker 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, viewed in terms of either that particular transaction or the overall
responsibilities of the adviser with respect to the accounts as to which it
exercises investment discretion. Accordingly, Price-Fleming may assess the
reasonableness of commissions in light of the total brokerage and research
services provided by each particular broker.

Miscellaneous

Research services furnished by brokers through which Price-Fleming effects
securities transactions may be used in servicing all accounts managed by
Price-Fleming. Conversely, research services received from brokers which
execute transactions for a particular Fund will not necessarily be used by
Price-Fleming exclusively in connection with the management of that Fund.

Some of Price-Fleming's other clients have investment objectives and programs
similar to those of the Fund. Price-Fleming 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 Price-Fleming's policy not to favor one client over another
in making recommendations or in placing orders. Price-Fleming 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. Price-Fleming 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.

Transactions with Related Brokers and Dealers

As provided in the Investment Management Agreement between the Fund and
Price-Fleming, Price-Fleming 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 Price-Fleming will often place orders for the Fund's portfolio
transactions with broker-dealers through the trading desks of certain
affiliates of Robert Fleming Holdings Limited ("Robert Fleming"), an affiliate
of Price-Fleming. Robert Fleming, through Copthall Overseas Limited, a
wholly-owned subsidiary, owns 25% of the common stock of Price-Fleming. Fifty
percent of the common stock of Price-Fleming 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 Jardine Fleming Group
Limited ("JFG"). JFG is 50% owned by Robert Fleming and 50% owned by Jardine
Matheson Holdings Limited. The affiliates through whose trading desks such
orders may be placed include Fleming Investment Management Limited ("FIM"),
and Robert Fleming & Co. Limited ("RF&Co."). FIM and RF&Co. are wholly-owned
subsidiaries of Robert Fleming. These trading desks will operate under strict
instructions from the Fund's portfolio manager with respect to the terms of
such transactions. Neither Robert Fleming, JFG, nor their affiliates will
receive any commission, fee, or other remuneration for the use of their
trading desks, although orders for the Fund's portfolio transactions may be
placed with affiliates of Robert Fleming and JFG who may receive a commission.

The Board of Directors of the Fund has authorized Price-Fleming to utilize
certain affiliates of Robert Fleming and JFG in the capacity of broker in
connection with the execution of each Fund's portfolio transactions, provided
that Price-Fleming believes that doing so will result in an economic advantage
(in the form of lower execution costs or otherwise) being obtained for each
Fund. These affiliates include Jardine Fleming Securities Limited ("JFS"), a
wholly-owned subsidiary of JFG, RF&Co., Jardine Fleming Australia Securities
Limited, and Robert Fleming, Inc. (a New York brokerage firm).

The above-referenced authorization was made in accordance with Section 17(e)
of the Investment Company Act of 1940 (the "1940 Act") and Rule 17e-1
thereunder which require the Funds' independent directors to approve the
procedures under which brokerage allocation to affiliates is to be made and to
monitor such allocations on a continuing basis. Except with respect to tender
offers, it is not expected that any portion of the commissions, fees,
brokerage, or similar payments received by the affiliates of Robert Fleming in
such transactions will be recaptured by the Funds. The directors have
reviewed and from time to time may continue to review whether other recapture
opportunities are legally permissible and available and, if they appear to be,
determine whether it would be advisable for the Fund to seek to take advantage
of them.

During the years 1995 and 1994, the International Stock Portfolio paid Jardine
Fleming (Securities) Limited ("JFS"), Robert Fleming & Co. Limited ("RF&Co."),
and Ord Minnett the following: $3,071, $1,231, and $1,038, respectively; and
$479, $38, and $756, respectively, in total brokerage commissions (including
discounts received in connection with underwritings) in connection with the
Fund's portfolio transactions. The brokerage commissions paid to JFS, RF&Co.,
and Ord Minnett represented 14.84%, 4.89%, and 5.81%, respectively; and 2.34%,
0.19%, and 3.70%, respectively, of the Fund's aggregate brokerage commissions
paid during 1995 and 1994. The aggregate dollar amount of transactions
effected through JFS, RF&Co., and Ord Minnett involving the payment of
commissions (including discounts received in connection with underwritings)
represented 2.32%, 0.36%, and 0.41%, respectively; and 2.06%, 0.45, and 3.84%,
respectively, of the aggregate dollar amount of all transactions involving the
payment of commissions during 1995 and 1994. In accordance with the written
procedures adopted pursuant to Rule 17e-1, the independent directors of each
Fund reviewed the 1994 transactions with affiliated brokers and determined
that such transactions resulted in an economic advantage to the Funds either
in the form of lower execution costs or otherwise.

Other

For the fiscal periods ended December 31, 1995 and 1994, the Limited-Term Bond
Portfolio engaged in portfolio transactions involving broker-dealers totaling
$52,308,000 and $17,730,000, respectively. The entire amounts represented
principal transactions as to which the Fund had no knowledge of the profits or
losses realized by the respective broker-dealers for the fiscal periods ended
December 31, 1995 and 1994. The percentage of total portfolio transactions,
placed with firms which provided research, statistical or other services to T.
Rowe Price in connection with the management of the Fund, or in some cases, to
the Fund for the fiscal year ended December 31, 1995 and 1994, were
approximately 77% and 79%, respectively.

For the fiscal periods ended December 31, 1995 and 1994, the total brokerage
commissions paid by the Equity Income Portfolio, including the discounts
received by securities dealers in connection with underwritings were $10,000
and $4,700, respectively. Of these commissions, none was paid in 1994 and
13.70% was paid in 1995 to firms which provided research, statistical, or
other services to T. Rowe Price in connection with the management of the Fund,
or in some cases, to the Fund.

For the fiscal periods ended December 31, 1995 and 1994, the total brokerage
commissions paid by the New America Growth Portfolio, including the discounts
received by securities dealers in connection with underwritings were $45,000
and $15,700, respectively. Of these commissions, approximately 19.9% and
22.2%, respectively, were paid to firms which provided research, statistical,
or other services to T. Rowe Price in connection with the management of the
Fund, or in some cases, to the Fund.

For the years 1995 and 1994, the total brokerage commissions paid by the
International Stock Portfolio, including the discounts received by securities
dealers in connection with underwritings were $107,756 and $20,400,
respectively. Of these commissions, approximately 94% for both years were paid
to firms which provided research, statistical, or other services to T. Rowe
Price in connection with the management of the Fund, or in some cases, to the
Fund.

For the fiscal period ended December 31, 1995, the total brokerage commissions
paid by the Personal Strategy Balanced Portfolio, including the discounts
received by securities dealers in connection with underwritings were $7,200.
Of these commissions, approximately 6.2% was paid to firms which provided
research, statistical or other services to T. Rowe Price in connection with
the management of the Fund, or in some cases, to the Fund.

The portfolio turnover rates of the Fund were as follows:

1995 1994
_____________________________________________________________________________
Limited-Term Bond 73.7% 146.0%*
_____________________________________________________________________________
Equity Income 10.1% 21.3%*
_____________________________________________________________________________
New America Growth 54.5% 81.0%*
_____________________________________________________________________________
International Stock 17.4% 4.6%*
_____________________________________________________________________________
Personal Strategy Balanced 39.3% **
_____________________________________________________________________________
* Annualized.
** Prior to commencement of operations.

Pricing of Securities

Equity securities listed or regularly traded on a securities exchange are
valued at the last quoted sales price on the day the valuations are made. A
security which is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for such
security. Listed securities that are not traded on a particular day and
securities 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, or by persons delegated by the Board, best to reflect fair
value.

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

For the purposes of determining the Fund's net asset value per share, all
assets and liabilities initially expressed in foreign currencies are converted
into U.S. dollars at the mean of the bid and offer prices of such currencies
against U.S. dollars quoted by any 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 officers of
the Funds, as authorized by the Board of Directors.

Trading in the portfolio securities of the International Stock Portfolio may
take place in various foreign markets on certain days (such as Saturday) when
the Fund is not open for business and does not calculate its net asset value.
In addition, trading in the Fund's portfolio securities may not occur on days
when the Fund is open. The calculation of the Fund's net asset value normally
will not take place contemporaneously with the determination of the value of
the Fund's portfolio securities. Events affecting the values of portfolio
securities that occur between the time their prices are determined and the
time the Fund's net asset value is calculated will not be reflected in the
Fund's net asset value unless Price-Fleming, under the supervision of the
Fund's Board of Directors, determines that the particular event should be
taken into account in computing the Fund's net asset value.

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, Washington's Birthday, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day.

Determination of net asset value (and the offering, sale redemption and
repurchase of shares) for 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 capital gain distribution, if
any, will be reinvested on the reinvestment date using the NAV per share of
that date. The reinvestment date normally precedes the payment date by about
10 days although the exact timing is subject to change.

Tax Status

Each Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended ("Code") and
also intends to diversify its assets in accordance with regulations under Code
Section 817(h).

In 1987, the Treasury Department indicated that it may issue regulations
addressing the circumstances in which a policyholder's control of the
investments of the insurance company separate account would result in the
policyholder being treated as the owner of such assets. Although there is no
present indication that such regulations will be issued, their adoption could
alter the tax treatment of the policyholder, separate account or insurance
company.

For tax purposes, the Fund must declare dividends 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 100% of ordinary income and
capital gains as of December 31 to avoid a federal income tax. In certain
circumstances, the Fund may not be required to comply with the excise tax
distribution requirements. It does not make any difference whether dividends
and capital gain distributions are paid in cash or in additional shares.

At the time a shareholder acquires Fund shares, the Fund's net asset value may
reflect undistributed income, capital gains or net unrealized appreciation of
securities held by the Fund which may be subsequently distributed as either
dividends or capital gain distributions.

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 treated as ordinary dividends by shareholders
(regardless of whether they would otherwise have been considered capital gain
dividends), and (iii) the separate accounts investing in the Fund may fail to
satisfy the requirements of Code Section 817(h) which in turn could adversely
affect the tax status of life insurance and annuity contracts with premiums
invested in the affected separate accounts.

To the extent any 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. In addition to bearing
their proportionate share of a fund's expenses (management fees and operating
expenses) shareholders will also indirectly bear similar expenses of such
funds. 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, 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 are 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 dividend paid by the Fund will be increased; if
the result is a loss, the income dividend paid by the Fund will be decreased.
Adjustments to reflect these gains and losses will be made at the end of the
Fund's taxable year.

Capital Stock

Each 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. Each Corporation's 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 each 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.

The various insurance companies own the outstanding shares of each Fund in
their separate accounts. These separate accounts are registered as investment
companies under the 1940 Act or are excluded from registration. Each
insurance company, as the Shareholder, is entitled to one vote for each full
share held (and fractional votes for fractional shares held). Under the
current laws the insurance companies must vote the shares held in registered
separate accounts in accordance with voting instructions received from
variable Contract Holders or Participants. Fund shares for which Contract
Holders or Participants are entitled to give voting instructions, but as to
which no voting instructions are received, and shares owned by the insurance
companies or affiliated companies in the separate accounts, will be voted in
proportion to the shares for which voting instructions have been received.

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 that Fund to the extent required by
Section 16(c) of the Investment Company Act of 1940.

Federal and State Registration of Shares

Each Fund's shares are registered for sale under the Securities Act of 1933,
and the Fund or its shares are registered under the laws of all states which
require registration, as well as the District of Columbia and Puerto Rico.

Legal Counsel

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

Independent Accountants

Price Waterhouse LLP, whose address is 7 St. Paul Street, Suite 1700,
Baltimore, MD 21202 are the independent accountants to each Fund.

The financial statements of the Fund for the year ended December 31, 1995, and
the report of independent accountants are included in the Fund's Annual
Report. A copy of the Annual Report accompanies this Statement of Additional
Information. The following financial statements and the report of independent
accountants appearing in the Annual Report for the year ended December 31,
1995, are incorporated into this Statement of Additional Information by
reference:

International Stock Portfolio Page
____

Report of Independent Accountants 15
Statement of Net Assets, December 31, 1995 4-9
Statement of Operations, December 31, 1995 10
Statement of Changes in Net Assets,Year Ended December 31,
1995, and From March 31, 1994 (Commencement of Operations)
to December 31, 1994 11
Notes to Financial Statements, December 31, 1995 13
Financial Highlights 14

Equity Income Portfolio Page
____
Report of Independent Accountants 12
Statement of Net Assets, December 31, 1995 4-6
Statement of Operations, December 31, 1995 7
Statement of Changes in Net Assets, Year Ended December 31,
1995, and From March 31, 1994 (Commencement of Operations)
to December 31, 1994 8
Notes to Financial Statements, December 31, 1995 9-10
Financial Highlights 11

New America Growth Portfolio Page
____
Report of Independent Accountants 8
Statement of Net Assets, December 31, 1995 4-5
Statement of Operations, Year Ended December 31, 1995 5
Statement of Changes in Net Assets, Year Ended December 31,
1995, and From March 31, 1994 (Commencement of Operations)
to December 31, 1994 6
Notes to Financial Statements 6-7
Financial Highlights 7

Limited-Term Bond Portfolio Page
____
Report of Independent Accountants 8
Statement of Net Assets, December 31, 1995 3-5
Statement of Operations, Year Ended December 31, 1995 5
Statement of Changes in Net Assets,Year Ended December 31,
1995, and From May 13, 1994 (Commencement of Operations)
to December 31, 1994 6
Notes to Financial Statements, December 31, 1995 6-7
Financial Highlights 7

Personal Strategy Balanced Portfolio Page
____
Report of Independent Accountants 12
Statement of Net Assets, December 31, 1995 4-7
Statement of Operations, Year Ended December 31, 1995 8
Statement of Changes in Net Assets, From December 30, 1994
(Commencement of Operations) to December 31, 1995 9
Notes to Financial Statements, December 31, 1995 10
Financial Highlights 11

Ratings of Commercial Paper

Moody's Investors Service, Inc.: The rating of Prime-1 is the highest
commercial paper rating assigned by Moody's. Among the factors considered by
Moody's in assigning ratings are the following: valuation of the management
of the issuer; economic evaluation of the issuer's industry or industries and
an appraisal of speculative-type risks which may be inherent in certain areas;
evaluation of the issuer's products in relation to competition and customer
acceptance; liquidity; amount and quality of long-term debt; trend of earnings
over a period of 10 years; financial strength of the parent company and the
relationships which exist with the issuer; and recognition by the management
of obligations which may be present or may arise as a result of public
interest questions and preparations to meet such obligations. These factors
are all considered in determining whether the commercial paper is rated P1,
P2, or P3.

Standard & Poor's Corporation: Commercial paper rated A (highest quality) by
S&P has the following characteristics: liquidity ratios are adequate to meet
cash requirements; long-term senior debt is rated "A" or better, although in
some cases "BBB" credits may be allowed. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are
unquestioned. The relative strength or weakness of the above factors
determines whether the issuer's commercial paper is rated A1, A2, or A3.

Fitch Investors Service, Inc.: Fitch 1 - Highest grade. Commercial paper
assigned this rating is regarded as having the strongest degree of assurance
for timely payment.

Fitch 2 - Very good grade. Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

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 - Bonds rated C represent the lowest-rated, and have extremely poor
prospects of 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 - Bonds rated D are 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.

A - Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.

BBB - Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse impact
on these bonds, and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.

BB, B, CCC, CC, and C are regarded on balance as predominantly speculative
with respect to the issuer's capacity to repay interest and repay principal in
accordance with the terms of the obligation for bond issues not in default.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. The rating takes into consideration special features of the
issue, its relationship to other obligations of the issuer, and the current
and prospective financial condition and operating performance of the issuer.

T. Rowe Price
Variable Annuity Service Center
P.O. Box 750440
Topeka, Kansas 66675-0440

SAI VACA-FDS 5/1/96