PRICE T ROWE EQUITY SERIES INC, 497, 1995-05-19

PRICE T ROWE EQUITY SERIES INC
497, 1995-05-19

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PAGE 1

Prospectus for the T. Rowe Price New America Growth Portfolio,
dated May 1, 1995, should be inserted here.

Prospectus

T. Rowe Price
New America Growth Portfolio

Facts at a Glance

Investment Goal
To provide long-term capital growth by investing primarily in common stocks
of U.S. growth companies operating in service industries. As with any
mutual fund, there is no guarantee the fund will achieve its goal.

Strategy

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 will fluctuate with
changing market conditions.

Investor Profile
Individuals seeking long-term capital appreciation, who can accept the risk
of periodic declines in share prices.

Investment Manager
Founded in 1937 by the late Thomas Rowe Price, Jr. T. Rowe Price
Associates, Inc. ("T. Rowe Price") and its affiliates managed over $57
billion for over three million individual and institutional investor
accounts as of December 31, 1994.

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.
T. Rowe Price
Equity Series, Inc.
May 1, 1995

Prospectus

Contents

1 About the Fund
Financial Highlights 2
Fund, Market, and Risk Characteristics 2

2 About Your Account
Pricing Shares; Receiving Sale Proceeds 4
Dividends and Distributions 5

3 More About the Fund
Organization and Management 6
Understanding Fund Performance 7
Investment Policies and Practices 8

This prospectus contains information that a prospective Contract Holder or
Participant should know about the fund before investing. Please keep it for
future reference. A Statement of Additional Information about the fund,
dated May 1, 1995, has been filed with the Securities and Exchange
Commission and is incorporated by reference in this prospectus. To obtain a
free copy, contact your insurance company.

1 About the Fund

Financial Highlights
The following table provides information about the fund's financial
history. It is based on a single share outstanding for the period March 31,
1994 (commencement of operations) to December 31, 1994. The table is part
of the fund's financial statements which are included in the fund's annual
report and incorporated by reference into the Statement of Additional
Information. This document is available to shareholders upon request. The
financial statements in the annual report have been audited by Price
Waterhouse LLP, independent accountants, whose unqualified report covers
the period shown.

<TABLE>
<CAPTION>
Investment Activities Distributions End of Period
Net
Real-
ized
and Total Ratio
Net Unreal- Return of Net
Asset ized Total Net (in- Ratio Invest-
Value, Net Gain from Asset cludes of Ex- ment Port-
Period Begin- Invest- (Loss) Invest- Net Net Total Value Rein- penses Income- folio
Ended, ning ment on ment Invest- Real- Dis- End vested to Aver- to Aver- Turn-
Dec. of Income Invest- Activi- ment ized tribu- of Divi- Net age Net age Net over
31 Period (Loss) ments ties Income Gain tions Period dends) Assets Assets Assets Rate

<FN>

<F1> Annualized.

</FN>
</TABLE>
Table 1

Fund, Market, and Risk Characteristics: What to Expect

To help you decide whether the fund is appropriate for you, this section
takes a closer look at its investment objective and approach.

The fund should not be relied upon as a complete investment program nor be
used for short-term trading purposes.

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 overall 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, without regard to size. 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 nonservice-related growth
companies. 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 considered
consistent with the fund's investment objectives and program. The fund may
also engage in a variety of investment management practices, such as buying
and selling futures and options.

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, restaurants, and food distribution);
business services (health care, computer services); and financial services
(insurance, investment services). The fund also includes companies whose
prospects are closely tied to service industries.

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 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,
continue to 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 have provided investors with the
opportunity for attractive capital appreciation. In addition, certain
service-oriented companies 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.

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, which often have limited product lines,
markets or financial resources. They 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.

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.

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., a stock 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 investment 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 limits its use of derivatives to
situations in which they may: increase yield or total return; hedge against
a decline in principal value; or invest in eligible asset classes with
greater efficiency and lower cost than is possible through direct
investment.

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

Consider your investment goals, your time horizon for achieving them, and
your tolerance for risk. If you can accept the risk of periodic price
declines in an effort to achieve superior capital appreciation, the fund
may be an appropriate part of your overall investment strategy.

Is there additional information about the fund to help me decide if it is
appropriate for me?
Be sure to review "Investment Policies and Practices" in Section 3, which
discusses the following topics: Types of Portfolio Securities (common and
preferred stocks, convertible securities and warrants, foreign securities,
hybrid instruments, and private placements); 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).

2 About Your Account

Pricing Shares and Receiving Sale Proceeds
Here are some procedures you should know when investing in the fund. For
instructions on how to purchase and redeem shares of the fund, read the
separate account prospectus.

Shares of the fund will be offered to insurance company separate accounts
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 are not the shareholders of the fund.
Rather, the separate account is the shareholder. The variable annuity (and
variable life contracts) are described in separate prospectuses issued by
the insurance companies. The fund assumes no responsibility for such
prospectuses or variable annuity or life contracts.

Shares of the fund are sold and redeemed without the imposition of any
sales commission or redemption charge. However, certain deferred sales
charges and other charges may apply to annuity or life contracts. Those
charges are disclosed in the separate account prospectus.

How and when shares are priced
The share price (also called "net asset value" or NAV per share) for the
fund is calculated at 4 p.m. ET each day the New York Stock Exchange is
open for business. To calculate the NAV, the fund's assets are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares outstanding.
How your purchase, sale, or exchange price is determined
Purchases. The insurance companies purchase shares of the fund for separate
accounts, using premiums allocated by the Contract Holders or Participants.
Shares are purchased at the NAV next determined after the insurance company
receives the premium payment in acceptable form. Initial and subsequent
payments allocated to the fund are subject to the limits stated in the
separate account prospectus issued by the insurance company.

Redemptions. The insurance companies redeem shares of the 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 the fund's NAV next determined after the insurance company
receives a surrender request in acceptable form.

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

How you can receive the proceeds from a sale
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 the fund.

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

Dividends and other distributions. The policy of the 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 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 the 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
fund intends to diversify its investments in the manner required under Code
Section 817(h).

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

3 More About the Fund

The Fund's Organization and Management

Shareholders benefit from T. Rowe Price's 58 years of investment management
experience.

How is the fund organized?
The T. Rowe Price Equity Series, Inc. was incorporated in Maryland in 1994,
and is a diversified, open-end investment company or mutual fund. Mutual
funds pool money received from shareholders and invest it to try to achieve
specific objectives.

Currently, the Corporation consists of three series, each representing a
separate class of shares having different objectives and investment
policies. The three series are the: Equity Income Portfolio, New America
Growth Portfolio, and Personal Strategy Balanced Portfolio, all established
in 1994. The other two Portfolios are described in separate prospectuses.
The Corporation's charter provides that the Board of Directors may issue
additional series of shares and/or additional classes of shares for each
series.

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

Each share and fractional share entitles the shareholder to:

- - receive a proportional interest in a fund's income and capital gain
distributions;

- - cast one vote per share on certain fund matters, including the
election of fund directors, changes in fundamental policies, or approval of
changes in a 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.

Does the fund have an annual shareholder meeting?

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

All decisions regarding the purchase and sale of fund investments are made
by T. Rowe Price-specifically by the fund's portfolio managers. The fund's
Board of Directors has authorized T. Rowe Price to use certain brokers
indirectly related to T. Rowe Price in the capacity of broker when buying
and selling the fund's securities.

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

Portfolio Management. The fund 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.

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

Shareholder Services. T. Rowe Price Services, Inc., another wholly-owned
subsidiary, acts as the fund's transfer and dividend disbursing agent and
provides shareholder and administrative services. 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 is 100 East
Pratt St., Baltimore, MD 21202.

How are fund expenses determined?
Under the management agreement, all expenses of the fund will be paid by T.
Rowe Price, except interest, taxes, brokerage commissions, directors' fees
and expenses (including counsel fees and expenses) and extraordinary
expenses. The Board of Directors of the fund reserves the right to impose
additional fees against shareholder accounts to defray expenses which would
otherwise be paid by T. Rowe Price 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.

The Management Fee. The fund pays T. Rowe Price an annual all-inclusive fee
of 0.85% based on its average daily net assets. The fund calculates and
accrues the fee daily. This fee pays for investment management services and
other operating costs.

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

The fund may serve as an investment medium for both variable annuity
contracts and variable life insurance policies. Shares of the fund may be
offered to separate accounts established by any number of insurance
companies. The fund currently does not foresee any disadvantages to
variable annuity contract owners due to the fact that the fund 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 fund serves as an
investment medium might at some time be in conflict. However, the 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 the 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 the
fund's performance. You will come across them in shareholder reports you
receive from us two times a year.

Total return is the most widely used performance measure. Detailed
performance information is included in the fund's shareholder reports.

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 the 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.

Total returns quoted for the fund include the effect of deducting the
fund's expenses, but may not include charges and expenses attributable to
any particular insurance product. Since you can only purchase shares of the
fund 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
the 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 securities the fund may
hold in its portfolio and the various kinds of investment practices that
may be used in day-to-day portfolio management. The fund's investment
program is subject to further restrictions and risks described in the
Statement of Additional Information. The fund adheres to applicable
investment restrictions at the time it makes an investment. A later charge
in circumstances will not require the sale of an investment if it was
proper at the time it was made.

Shareholder approval is required to substantively change the fund's
objective and certain investment restrictions noted in the following
section as "fundamental policies." The managers also follow certain
"operating policies" which can be changed without shareholder approval.
However, significant changes are discussed with shareholders in fund
reports.

The fund's holdings of certain kinds of investments cannot exceed maximum
percentages of total assets, which are set forth in the prospectus. For
instance, this fund is not permitted to invest more than 10% of total
assets in hybrid instruments. While these restrictions provide a useful
level of detail about the fund's investment program, investors should not
view them as an accurate gauge of the potential risk of such investments.
For example, in a given period, a 5% investment in hybrid instruments could
have significantly more than a 5% impact on the 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 fund's other
investments.

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

Types of Portfolio Securities
Fund managers have considerable leeway in choosing investment strategies
and selecting securities they believe will help the fund achieve its
objective.

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

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. These and some of the other investment
techniques the fund may use are described in the following pages.

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.

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 non-convertible
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 any time 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 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 greater for
investments in emerging markets.

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.

Hybrid Instruments. These instruments (a potentially high-risk type of
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. There is no assurance
that the fund's investment in hybrids will be successful.

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

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 and no more than 5% of its total assets 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.

Cash Position. The fund will hold a certain portion of its assets in U.S.
and foreign dollar-denominated money market securities, including
repurchase agreements, in the two highest rating categories, maturing in
one year or less. For temporary, defensive purposes, the fund may invest
without limitation in such securities. This reserve position provides
flexibility in meeting redemptions, expenses, and the timing of new
investments, and serves as a short-term defense during periods of unusual
market volatility.

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

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

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

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 securities prices and foreign currencies; as an efficient means
of adjusting its overall exposure to certain markets; 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.

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 a
fund's net asset value. Options on securities: The total market value of
securities against which a fund has written call or put options may not
exceed 25% of its total assets. The fund will not commit more than 5% of
its total assets to premiums when purchasing call or put options.

Managing Foreign Currency Risk. 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 of
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 the fund 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. 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.

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 their securities and possibly capital losses.

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

Portfolio Turnover. The fund will not generally trade in securities for
short-term profits, but, when circunstances warrant, securities may be
purchased and sold without regard to the length of time held. The fund's
annualized portfolio turnover rate for the fiscal period ending December
31, 1994 was 81.0%.

PAGE 2
STATEMENT OF ADDITIONAL INFORMATION

T. Rowe Price Equity Series, Inc. (the "Corporation")

T. Rowe Price New America Growth Portfolio

(the "Fund")

Shares of the Fund may be offered to insurance company
separate accounts 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 are not the shareholders of the Fund.
Rather, the separate account is the shareholder. The variable
annuity and variable life contracts are described in separate
prospectuses issued by the insurance companies. The Fund assumes
no responsibility for such prospectuses, or variable annuity or
life contracts.

In the future, it is possible that the Fund may offer its
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 Fund's
prospectus dated May 1, 1995, which may be obtained from T. Rowe
Price Investment Services, Inc., 100 East Pratt Street,
Baltimore, Maryland 21202.

The date of this Statement of Additional Information is May
1, 1995.

PAGE 3
TABLE OF CONTENTS

Page Page

Capital Stock . . . . . . . Investment Performance . .
Code of Ethics . . . . . . Investment Program . . . .
Custodian . . . . . . . . . Investment Restrictions . .
Distributor for Fund . . . Legal Counsel . . . . . . .
Dividends . . . . . . . . . Lending of Portfolio
Federal and State Securities . . . . . . . .
Registration of Shares . . Management of Fund . . . .
Foreign Currency Net Asset Value Per Share .
Transactions . . . . . . . Portfolio Transactions . .
Foreign Futures and Pricing of Securities . . .
Options . . . . . . . . . Principal Holders of
Foreign Securities . . . . Securities . . . . . . . .
Futures Contracts . . . . . Repurchase Agreements . . .
Independent Accountants . . Risk Factors . . . . . . .
Investment Management . . . Tax Status . . . . . . . .
Services . . . . . . . . . The Service Economy . . . .
Investment Objective and
Policies . . . . . . . . .

INVESTMENT OBJECTIVE AND POLICIES

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

RISK FACTORS

General

Because of its investment policy, the Fund may or may not
be suitable or appropriate for all investors. The Fund is not a
money market fund and is not an appropriate investment for those
whose primary objective is principal stability. The Fund will
normally have most of its assets in equity securities (e.g.,
common stocks). This portion of the Fund's assets will be

PAGE 4
subject to all of the risks of investing in the stock market.
There is risk in all investment. The value of the portfolio
securities of the Fund will fluctuate based upon market
conditions. Although the Fund seeks to reduce risk by investing
in a diversified portfolio, such diversification does not
eliminate all risk. There can, of course, be no assurance that
the Fund will achieve these results. Reference is also made to
the sections entitled "Types of Securities" and "Portfolio
Management Practices" for discussions of the risks associated
with the investments and practices described therein as they
apply to the Fund.

Foreign Securities

Because the Fund may invest in foreign securities,
investment in the Fund involves risks that are different in some
respects from an investment in a fund which invests only in
securities of U.S. domestic issuers. Foreign investments may be
affected favorably or unfavorably by changes in currency rates
and exchange control regulations. There may be less publicly
available information about a foreign company than about a U.S.
company, and foreign companies may not be subject to accounting,
auditing, and financial reporting standards and requirements
comparable to those applicable to U.S. companies. There may be
less governmental supervision of securities markets, brokers and
issuers of securities. Securities of some foreign companies are
less liquid or more volatile than securities of U.S. companies,
and foreign brokerage commissions and custodian fees are
generally higher than in the United States. Settlement practices
may include delays and may differ from those customary in United
States markets. Investments in foreign securities may also be
subject to other risks different from those affecting U.S.
investments, including local political or economic developments,
expropriation or nationalization of assets, restrictions on
foreign investment and repatriation of capital, imposition of
withholding taxes on dividend or interest payments, currency
blockage (which would prevent cash from being brought back to the
United States), and difficulty in enforcing legal rights outside
the U.S.

INVESTMENT PROGRAM

In addition to the investments described in the Fund's
prospectus, the Fund may invest in the following:

PAGE 5
Type of Securities

Hybrid Instruments

Hybrid Instruments (a type of potentially high-risk
derivative) have recently been developed and combine the elements
of futures contracts or options with those of debt, preferred
equity or a depository instrument (hereinafter "Hybrid
Instruments"). Often these Hybrid Instruments are indexed to the
price of a commodity, particular currency, or a domestic or
foreign debt or equity securities index. 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.

The risks of investing in Hybrid Instruments reflect a
combination of the risks from investing in securities, options,
futures and currencies, including volatility and lack of
liquidity. Reference is made to the discussion of futures,
options, and forward contracts herein for a discussion of these
risks. Further, the prices of the Hybrid Instrument and the
related commodity or currency 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). In addition, because the purchase and sale of Hybrid
Instruments could take place in an over-the-counter market or in
a private transaction between the Fund and the seller of the
Hybrid Instrument, the creditworthiness of the contra party to
the transaction would be a risk factor which the Fund would have
to consider. 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.

Illiquid or Restricted Securities

Restricted securities may be sold only in privately
negotiated transactions or in a public offering with respect to
which a registration statement is in effect under the Securities
Act of 1933 (the "1933 Act"). Where registration is required,
the Fund may be obligated to pay all or part of the registration

PAGE 6
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 are invested in illiquid assets, including
restricted securities, the Fund will take appropriate steps to
protect liquidity.

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

The Fund may invest in 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

PAGE 7
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
the Fund may invest in these securities.

PORTFOLIO MANAGEMENT PRACTICES

Lending of Portfolio Securities

For the purpose of realizing additional income, the Fund
may make secured loans of portfolio securities amounting to not
more than 33 1/3% of its total assets. This policy is a
fundamental policy. 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 T. Rowe Price to be of good
standing and will not be made unless, in the judgment of T. Rowe
Price, the consideration to be earned from such loans would
justify the risk.

PAGE 8
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"). The Fund has no current intention of engaging in
these practices at this time.

Repurchase Agreements

The Fund may enter into a repurchase agreement through
which an investor (such as the Fund) purchases a security (known
as the "underlying security") from a well-established securities
dealer or a bank that is a member of the Federal Reserve System.
Any such dealer or bank will be on T. Rowe Price's approved list
and have a credit rating with respect to its short-term debt of
at least A1 by Standard & Poor's Ratings Group, P1 by Moody's
Investors Service, or the equivalent rating by T. Rowe Price. At
that time, the bank or securities dealer agrees to repurchase the
underlying security at the same price, plus specified interest.
Repurchase agreements are generally for a short period of time,
often less than a week. Repurchase agreements which do not
provide for payment within seven days will be treated as illiquid
securities. The Fund will only enter into repurchase agreements
where (i) the underlying securities are of the type (excluding
maturity limitations) which the Fund's investment guidelines
would allow it to purchase directly, (ii) the market value of the
underlying security, including interest accrued, will be at all
times equal to or exceed the value of the repurchase agreement,
and (iii) payment for the underlying security is made only upon
physical delivery or evidence of book-entry transfer to the
account of the custodian or a bank acting as agent. In the event
of a bankruptcy or other default of a seller of a repurchase
agreement, the Fund could experience both delays in liquidating
the underlying security and losses, including: (a) possible
decline in the value of the underlying security during the period
while the Fund seeks to enforce its rights thereto; (b) possible
subnormal levels of income and lack of access to income during
this period; and (c) expenses of enforcing its rights.

Options

Options are a type of potentially high-risk derivative.

Writing Covered Call Options

The Fund may write (sell) "covered" call options and
purchase options to close out options previously written by a
Fund. In writing covered call options, the Fund expects to

PAGE 9
generate additional premium income which should serve to enhance
the Fund's total return and reduce the effect of any price
decline of the security or currency involved in the option.
Covered call options will generally be written on securities or
currencies which, in T. Rowe Price's opinion, are not expected to
have any major price increases or moves in the near future but
which, over the long term, are deemed to be attractive
investments for the Fund.

A call option gives the holder (buyer) the "right to
purchase" a security or currency at a specified price (the
exercise price) at expiration of the option (European style) or
at any time until a certain date (the expiration date) (American
style). So long as the obligation of the writer of a call option
continues, he may be assigned an exercise notice by the broker-
dealer through whom such option was sold, requiring him to
deliver the underlying security or currency against payment of
the exercise price. This obligation terminates upon the
expiration of the call option, or such earlier time at which the
writer effects a closing purchase transaction by repurchasing an
option identical to that previously sold. To secure his
obligation to deliver the underlying security or currency in the
case of a call option, a writer is required to deposit in escrow
the underlying security or currency or other assets in accordance
with the rules of a clearing corporation. The Fund will write
only covered call options. This means that the Fund will own the
security or currency subject to the option or an option to
purchase the same underlying security or currency, having an
exercise price equal to or less than the exercise price of the
"covered" option, or will establish and maintain with its
custodian for the term of the option, an account consisting of
cash, U.S. government securities or other liquid high-grade debt
obligations having a value equal to the fluctuating market value
of the optioned securities or currencies. 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.

Portfolio securities or currencies on which call options
may be written will be purchased solely on the basis of
investment considerations consistent with the Fund's investment
objective. The writing of covered call options is a conservative
investment technique believed to involve relatively little risk

PAGE 10
(in contrast to the writing of naked or uncovered options, which
the Fund will not do), but capable of enhancing the Fund's total
return. When writing a covered call option, a Fund, in return
for the premium, gives up the opportunity for profit from a price
increase in the underlying security or currency above the
exercise price, but conversely retains the risk of loss should
the price of the security or currency decline. Unlike one who
owns securities or currencies not subject to an option, the Fund
has no control over when it may be required to sell the
underlying securities or currencies, since it may be assigned an
exercise notice at any time prior to the expiration of its
obligation as a writer. If a call option which the Fund has
written expires, the Fund will realize a gain in the amount of
the premium; however, such gain may be offset by a decline in the
market value of the underlying security or currency during the
option period. If the call option is exercised, the Fund will
realize a gain or loss from the sale of the underlying security
or currency. The Fund does not consider a security or currency
covered by a call to be "pledged" as that term is used in the
Fund's policy which limits the pledging or mortgaging of its
assets.

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

Closing transactions will be effected in order to realize a
profit on an outstanding call option, to prevent an underlying
security or currency from being called, or, to permit the sale of
the underlying security or currency. Furthermore, effecting a
closing transaction will permit the Fund to write another call
option on the underlying security or currency with either a

PAGE 11
different exercise price or expiration date or both. If the Fund
desires to sell a particular security or currency from its
portfolio on which it has written a call option, or purchased a
put option, it will seek to effect a closing transaction prior
to, or concurrently with, the sale of the security or currency.
There is, of course, no assurance that the Fund will be able to
effect such closing transactions at favorable prices. If the
Fund cannot enter into such a transaction, it may be required to
hold a security or currency that it might otherwise have sold.
When the Fund writes a covered call option, it runs the risk of
not being able to participate in the appreciation of the
underlying securities or currencies above the exercise price, as
well as the risk of being required to hold on to securities or
currencies that are depreciating in value. This could result in
higher transaction costs. The Fund will pay transaction costs in
connection with the writing of options to close out previously
written options. Such transaction costs are normally higher than
those applicable to purchases and sales of portfolio securities.

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

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

Writing Covered Put Options

The Fund may write American or European style covered put
options and purchase options to close out options previously
written by the Fund. A put option gives the purchaser of the
option the right to sell, and the writer (seller) has the
obligation to buy, the underlying security or currency at the
exercise price during the option period (American style) or at
the expiration of the option (European style). So long as the
obligation of the writer continues, he may be assigned an

PAGE 12
exercise notice by the broker-dealer through whom such option was
sold, requiring him to make payment of the exercise price against
delivery of the underlying security or currency. The operation
of put options in other respects, including their related risks
and rewards, is substantially identical to that of call options.

The Fund would write put options only on a covered basis,
which means that the Fund would maintain in a segregated account
cash, U.S. government securities or other liquid high-grade debt
obligations in an amount not less than the exercise price or the
Fund will own an option to sell the underlying security or
currency subject to the option having an exercise price equal to
or greater than the exercise price of the "covered" option at all
times while the put option is outstanding. (The rules of a
clearing corporation currently require that such assets be
deposited in escrow to secure payment of the exercise price.)
The Fund would generally write covered put options in
circumstances where T. Rowe Price wishes to purchase the
underlying security or currency for the Fund's portfolio at a
price lower than the current market price of the security or
currency. In such event the Fund would write a put option at an
exercise price which, reduced by the premium received on the
option, reflects the lower price it is willing to pay. Since the
Fund would also receive interest on debt securities or currencies
maintained to cover the exercise price of the option, this
technique could be used to enhance current return during periods
of market uncertainty. The risk in such a transaction would be
that the market price of the underlying security or currency
would decline below the exercise price less the premiums
received. Such a decline could be substantial and result in a
significant loss to the Fund. In addition, the Fund, because it
does not own the specific securities or currencies which it may
be required to purchase in exercise of the put, cannot benefit
from appreciation, if any, with respect to such specific
securities or currencies. 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.

Purchasing Put Options

The Fund may purchase American or European style put
options. As the holder of a put option, the Fund has the right

PAGE 13
to sell the underlying security or currency at the exercise price
at any time during the option period (American style) or at the
expiration of the option (European style). The Fund may enter
into closing sale transactions with respect to such options,
exercise them or permit them to expire. The Fund may purchase
put options for defensive purposes in order to protect against an
anticipated decline in the value of its securities or currencies.
An example of such use of put options is provided below.

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

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

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

PAGE 14
price at the time at which the net asset value per share of the
Fund is computed (close of New York Stock Exchange), or, in the
absence of such sale, the latest bid price. This asset will be
terminated upon expiration of the option, the selling (writing)
of an identical option in a closing transaction, or the delivery
of the underlying security or currency upon the exercise of the
option.

Purchasing Call Options

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

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

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, the 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

PAGE 15
realize such gains through a closing purchase transaction. Call
options may also be purchased at times to avoid realizing losses.

Dealer (Over-the-Counter) Options

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

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

The Staff of the SEC has taken the position that purchased
dealer options and the assets used to secure the written dealer
options are illiquid securities. The Fund may treat the cover
used for written OTC options as liquid if the dealer agrees that
the Fund may repurchase the OTC option it has written for a
maximum price to be calculated by a predetermined formula. In
such cases, the OTC option would be considered illiquid only to

PAGE 16
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
unmarketable securities. If the SEC changes its position on the
liquidity of dealer options, the Fund will change its treatment
of such instrument accordingly.

Futures Contracts

Transactions in Futures

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

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

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

PAGE 17
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 a Fund's assets to cover or identified accounts could
impede portfolio management or the fund's ability to meet
redemption requests or other current obligations.

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

PAGE 18
Trading in Futures Contracts

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

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

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

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

Although certain futures contracts, by their terms, require
actual future delivery of and payment for the underlying
instruments, in practice most futures contracts are usually

PAGE 19
closed out before the delivery date. Closing out an open futures
contract purchase or sale is effected by entering into an
offsetting futures contract sale or purchase, respectively, for
the same aggregate amount of the identical securities and the
same delivery date. If the offsetting purchase price is less
than the original sale price, the Fund realizes a gain; if it is
more, the Fund realizes a loss. Conversely, if the offsetting
sale price is more than the original purchase price, the Fund
realizes a gain; if it is less, the Fund realizes a loss. The
transaction costs must also be included in these calculations.
There can be no assurance, however, that the Fund will be able to
enter into an offsetting transaction with respect to a particular
futures contract at a particular time. If the Fund is not able
to enter into an offsetting transaction, the Fund will continue
to be required to maintain the margin deposits on the futures
contract.

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

Special Risks of Transactions in Futures Contracts

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

Most United States futures exchanges limit the amount of
fluctuation permitted in futures contract prices during a single

PAGE 20
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
the Fund would realize a loss or a gain.

Futures contracts may be closed out only on the exchange or
board of trade where the contracts were initially traded.
Although the Fund intends to purchase or sell futures contracts

PAGE 21
only on exchanges or boards of trade where there appears to be an
active market, there is no assurance that a liquid market on an
exchange or board of trade will exist for any particular contract
at any particular time. In such event, it might not be possible
to close a futures contract, and in the event of adverse price
movements, the Fund would continue to be required to make daily
cash payments of variation margin. However, in the event futures
contracts have been used to hedge the underlying instruments, the
Fund would continue to hold the underlying instruments subject to
the hedge until the futures contracts could be terminated. In
such circumstances, an increase in the price of underlying
instruments, if any, might partially or completely offset losses
on the futures contract. However, as described below, there is
no guarantee that the price of the underlying instruments will,
in fact, correlate with the price movements in the futures
contract and thus provide an offset to losses on a futures
contract.

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

Successful use of futures contracts by the Fund for hedging
purposes is also subject to T. Rowe Price's ability to correctly
predict movements in the direction of the market. It is possible
that, when the Fund has sold futures to hedge its portfolio
against a decline in the market, the index, indices, or
instruments underlying futures might advance and the value of the
underlying instruments held in the Fund's portfolio might
decline. If this were to occur, the Fund would lose money on the
futures and also would experience a decline in value in its
underlying instruments. However, while this might occur to a
certain degree, T. Rowe Price believes that over time the value
of the Fund's portfolio will tend to move in the same direction
as the market indices used to hedge the portfolio. It is also
possible that if the Fund were to hedge against the possibility
of a decline in the market (adversely affecting the underlying
instruments held in its portfolio) and prices instead increased,
the Fund would lose part or all of the benefit of increased value
of those underlying instruments that it has hedged, because it

PAGE 22
would have offsetting losses in its futures positions. In
addition, in such situations, if the Fund had insufficient cash,
it might have to sell underlying instruments to meet daily
variation margin requirements. Such sales of underlying
instruments might be, but would not necessarily be, at increased
prices (which would reflect the rising market). The Fund might
have to sell underlying instruments at a time when it would be
disadvantageous to do so.

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

Options on Futures Contracts

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

Options 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

PAGE 23
of a call) or is less than (in the case of a put) the exercise
price of the option on the futures contract. Purchasers of
options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.

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

Special Risks of Transactions in Options on Futures Contracts

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

PAGE 24
Additional Futures and Options Contracts

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

Foreign Currency Transactions

A forward foreign currency contract ("forward 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 its
customers. A forward contract generally has no deposit
requirement, and no commissions are charged at any stage for
trades.

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

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

Second, when T. Rowe Price believes that one currency may
experience a substantial movement against another currency,
including the U.S. dollar, it may enter into a forward contract
to sell or buy the amount of the former foreign currency,
approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency. Alternatively,
where appropriate, the Fund may hedge all or part of its foreign
currency exposure through the use of a basket of currencies or a
proxy currency where such currency or currencies act as an
effective proxy for other currencies. In such a case, the Fund
may enter into a forward contract where the amount of the foreign
currency to be sold exceeds the value of the securities

PAGE 25
denominated in such currency. The use of this basket hedging
technique may be more efficient and economical than entering into
separate forward contracts for each currency held in the Fund.
The precise matching of the forward contract amounts and the
value of the securities involved will not generally be possible
since the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered
into and the date it matures. The projection of short-term
currency market movement is extremely difficult, and the
successful execution of a short-term hedging strategy is highly
uncertain. Under normal circumstances, consideration of the
prospect for currency parities will be incorporated into the
longer term investment decisions made with regard to overall
diversification strategies. However, T. Rowe Price believes that
it is important to have the flexibility to enter into such
forward contracts when it determines that the best interests of
the Fund will be served.

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

PAGE 26

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

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

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

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

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

PAGE 27
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.

PAGE 28
INVESTMENT RESTRICTIONS

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

Fundamental Policies

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

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

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

(3) 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

PAGE 29
aggregate of such loans would exceed 33 1/3% of the
value of the Fund's total assets; (ii) purchase money
market securities and enter into repurchase
agreements; and (iii) acquire publicly-distributed or
privately-placed debt securities and purchase debt;

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

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

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

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

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

NOTES

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

With respect to investment restrictions (1) and (4),
the Fund will not borrow from or lend to any other
Price Fund (defined as any other mutual fund managed

PAGE 30
or for which T. Rowe Price acts as adviser) unless
each Fund applies for and receives an exemptive order
from the SEC or the SEC issues rules permitting such
transactions. The Fund has no current intention of
engaging in any such activity and there is no
assurance the SEC would grant any order requested by
the Fund or promulgate any rules allowing the
transactions.

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

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

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) The Fund will limit borrowing for any variable
annuity separate account to (1) 10% of net asset
value 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.

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

(3) Futures Contracts. Purchase a futures contract or an
option thereon if, with respect to positions in

PAGE 31
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;

(4) Illiquid Securities. Purchase illiquid securities
and securities of unseasoned issuers if, as a result,
more than 15% of its net assets would be invested in
such securities, provided that the Fund will not
invest more than 5% of its total assets in restricted
securities and not more than 5% in securities of
unseasoned issuers. Securities eligible for resale
under Rule 144A of the Securities Act of 1933 are not
included in the 5% limitation but are subject to the
15% limitation;

(5) 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 could
result from any such purchases;

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

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

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

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

(10) 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 owns

PAGE 32
beneficially more than .5% of the outstanding
securities of such issuer, together own beneficially
more than 5% of such securities;

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

(12) 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 of 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

(13) 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 Funds in units or attached to securities may
be deemed to be without value.

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 the Fund, sought to accomplish its investment objective and
program by investing all of its assets in the shares of another
investment company (the "Master"). The Master would, in turn,
have the same investment objective and program as the Fund. The
Fund would invest in this manner in an effort to achieve the
economies of scale associated with having a Master fund make
investments in portfolio companies on behalf of a number of
Feeder funds.

PAGE 33
INVESTMENT PERFORMANCE

Total Return Performance

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

Cumulative Performance Percentage Change

Since
1 Yr. Inception
Ended 3/31/94 to
12/31/94 12/31/94
___________ ____________

New America Growth Portfolio N/A 1.00

Lipper Growth Fund Index -1.77 1.66

S&P 500 1.32 5.34

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

PAGE 34
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 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

The Fund is a member of the T. Rowe Price Family of
Funds and may help investors achieve various long-term investment
goals, such as investing money for retirement, saving for a down
payment on a home, or paying college costs. To explain how the
Fund could be used to assist investors in planning for these
goals and to illustrate basic principles of investing, various
worksheets and guides prepared by T. Rowe Price 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; and the Retirees
Financial Guide which includes a detailed workbook to determine
how much money you can afford to spend and still preserve your
purchasing power and suggests how you might invest to reach your
goal. 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
suggests how you might invest to reach your goal. From time to

PAGE 35
time, other worksheets and guides may be made available as well.
Of course, an investment in the Fund cannot guarantee that such
goals will be met. 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.

From time to time, the example shown on the following page
may be used to assist investors in understanding the different
returns and risk characteristics of various investments,
including presentation of historical returns of these
investments. An example of this is shown on the next page.

Historical Returns for Different Investments

Annualized returns for periods ended 12/31/94

50 years 20 years 10 years 5 years

Small-Company Stocks 14.4% 20.3% 11.1% 11.8%

Large-Company Stocks 11.9 14.6 14.4 8.7

Foreign Stocks N/A 16.3 17.9 1.8

Long-Term Corporate Bonds 5.3 10.0 11.6 8.4

Intermediate-Term U.S.
Gov't. Bonds 5.6 9.3 9.4 7.5

Treasury Bills 4.7 7.3 5.8 4.7

U.S. Inflation 4.5 5.5 3.6 3.5

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

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

PAGE 36
Performance of Retirement Portfolios*

Asset Mix Average Annualized Value
Returns 20 Years of
Ended 12/31/94 $10,000
Investment
After Period
________________ __________________ ____________

Nominal Real Best Worst
Portfolio Growth Income Safety Return Return** Year Year

I. Low
Risk 40% 40% 20% 12.4% 6.9% 24.9% 0.1%$ 92,515

II. Moderate
Risk 60% 30% 10% 13.5% 8.1% 29.1% -1.8%$118,217

III. High
Risk 80% 20% 0% 14.5% 9.1% 33.4% -5.2%$149,200

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

* Based on actual performance for the 20 years ended 1994 of
stocks (85% Wilshire 5000 and 15% Europe, Australia, Far
East [EAFE] Index), bonds (Lehman Brothers Aggregate Bond
Index from 1976-94 and Lehman Brothers Government/Corporate
Bond Index from 1975), and 30-day Treasury bills from
January 1975 through December 1994. 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 5.5% for the 20-year period ended
12/31/94.

Redemptions in Kind

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

Issuance of Fund Shares for Securities

Transactions involving issuance of the Fund's shares for
securities or assets other than cash will be limited to (1) bona

PAGE 37
fide reorganizations; (2) statutory mergers; or (3) other
acquisitions of portfolio securities that: (a) meet the
investment objective and policies of the Fund; (b) are acquired
for investment and not for resale except in accordance with
applicable law; (c) have a value that is readily ascertainable
via listing on or trading in a recognized United States or
international exchange or market; and (d) are not illiquid.

MANAGEMENT OF FUND

The officers and directors of the Fund are listed below.
Unless otherwise noted, the address of each is 100 East Pratt
Street, Baltimore, Maryland 21202. Except as indicated, each has
been an employee of T. Rowe Price for more than five years. In
the list below, the Fund's directors who are considered
"interested persons" of T. Rowe Price or the Fund as defined
under Section 2(a)(19) of the Investment Company Act of 1940 are
noted with an asterisk (*). These directors are referred to as
inside directors by virtue of their officership, directorship
and/or employment with T. Rowe Price.

LEO C. BAILEY, Director--Retired; Address: 3396 South Placita
Fabula, Green Valley, Arizona 85614
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
ADDISON LANIER, Director--Financial management; Manager, Thomas
Emery's Sons, LLC, Alternative Asset Holdings, LLC, President,
Emery Group, Inc.; Director, Scinet Development and Holdings,
Inc.; Address: 441 Vine Street, Suite 2300, Cincinnati, Ohio
45202-2913
JOHN K. MAJOR, Director--Chairman of the Board and President,
KCMA Incorporated, Tulsa, Oklahoma; Address: 126 E. 26 Place,
Tulsa, Oklahoma 74114-2422
HUBERT D. VOS, Director--President, Stonington Capital
Corporation, a private investment company; Address: 1114 State
Street, Suite 247, 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

PAGE 38
Technologies Inc. and Stuart Medical, Inc.; Address: 755 Page
Mill Road, Suite A200, Palo Alto, California 94304
*JOHN H. LAPORTE, JR., Executive Vice President and Director--
Managing Director, T. Rowe Price; Chartered Financial Analyst
*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. and T. Rowe
Price Trust Company; President and Director, T. Rowe Price
Investment Services, Inc.; Director, Rhone-Poulenc Rorer, Inc.
*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 W. H. BERGHUIS, Executive Vice President--Vice President,
T. Rowe Price
BRIAN C. ROGERS, Executive Vice 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
GREGORY V. DONOVAN, Vice President--Vice President of T. Rowe
Price
HENRY H. HOPKINS, Vice President--Vice President, Price-Fleming
and T. Rowe Price Retirement Plan Services, Inc.; 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
RICHARD P. HOWARD, Vice President--Vice President, T. Rowe Price;
Chartered Financial Analyst
JAMES A. C. KENNEDY, III, Vice President--Managing Director of T.
Rowe Price
ROBERT W. SMITH, Vice President--Vice President, T. Rowe Price;
formerly (1987-1992) Investment Analyst, Massachusetts Financial
Services, Inc., Boston, Massachusetts
WILLIAM J. STROMBERG, Vice President--Vice President, T. Rowe
Price
MARK J. VASELKIV, Vice President--Vice President, T. Rowe Price
JOHN F. WAKEMAN, Vice President--Vice President, T. Rowe Price
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,
Price-Fleming and T. Rowe Price

PAGE 39
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

COMPENSATION TABLE

_________________________________________________________________
Pension or Total Compensation
Retirement from Fund and
Name of Aggregate Benefits Fund Group
Person, Compensation Accrued as Paid to
Position from Fund(a) Part of Fund(b) Directors(c)
_________________________________________________________________
Leo C. Bailey, $631 N/A $64,583
Director

Donald W. Dick, Jr., 631 N/A 64,833
Director

David K. Fagin, 631 N/A 53,833
Director

Addison Lanier, 631 N/A 64,583
Director

John K. Major, 631 N/A 54,583
Director

Hanne M. Merriman, 631 N/A 42,083
Director

Hubert D. Vos, 631 N/A 54,583
Director

Paul M. Wythes, 631 N/A 54,333
Director

John H. Laporte, -- N/A --
Director(d)

James S. Riepe, -- N/A --
Director(d)

M. David Testa, -- N/A --
Director(d)

a Amounts in this Column are for the period January 1, 1994
through December 31, 1994.

PAGE 40
b Not applicable. The Fund does not pay pension or retirement
benefits to officers or directors/trustees of the Fund.
c Amounts in this column are for calendar year 1994, included
67 funds at December 31, 1994. (Includes estimated future
payments for all funds.)
d Any director/trustee of the Fund who is an officer or
employee of T. Rowe Price receives no remuneration from the
Fund.

The Fund's Executive Committee, comprised of Messrs.
Laporte, Riepe, and Testa have been authorized by its 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.

PRINCIPAL HOLDERS OF SECURITIES

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

INVESTMENT MANAGEMENT SERVICES

Services Provided by T. Rowe Price

Under the Management Agreement with the Fund, T. Rowe Price
provides the Fund with discretionary investment services.
Specifically, T. Rowe Price is responsible for supervising and
directing the investments of the Fund in accordance with its
investment objective, program, and restrictions as provided in
the 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 allocation of
principal business and portfolio brokerage and the negotiation of
commissions. In addition to these services, T. Rowe Price
provides the Fund with certain corporate administrative services,
including: maintaining the Fund's corporate existence, corporate
records, and registering and qualifying the Fund's 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 the Fund.

The Fund's Management Agreement also provides that T. Rowe
Price, its directors, officers, employees, and certain other

PAGE 41
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.

Management Fee

The Fund pays T. Rowe Price an annual all-inclusive fee
(the "Fee") of 0.85%. The Fee is paid monthly to the T. Rowe
Price 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 the Fund and T. Rowe Price
provides that T. Rowe Price will pay all expenses of the 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 the Fund reserves the right to
impose additional fees against shareholder accounts to defray
expenses which would otherwise be paid by T. Rowe Price 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.

DISTRIBUTOR FOR FUND

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

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

PAGE 42
Investment Services serves as distributor to the Fund
pursuant to an Underwriting Agreement ("Underwriting Agreement"),
which provides that the Fund will pay all fees and expenses in
connection with: 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.

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

Investment Services acts as the agent of the Fund in
connection with the sale of the Fund 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 the
Fund.

CUSTODIAN

State Street Bank and Trust Company (the "Bank") is the
custodian for the Fund's U.S. securities and cash, but it does
not participate in the Fund's investment decisions. Portfolio
securities purchased in the U.S. are maintained in the custody of
the Bank and may be entered into the Federal Reserve Book Entry
System, or the security depository system of the Depository Trust
Corporation. The Fund has entered into a Custodian Agreement
with The Chase Manhattan Bank, N.A., London, pursuant to which
portfolio securities which are purchased outside the United
States are maintained in the custody of various foreign branches
of The Chase Manhattan Bank and such other custodians, including
foreign banks and foreign securities depositories, 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.

PAGE 43
CODE OF ETHICS

The Fund's investment adviser (T. Rowe Price) has a written
Code of Ethics which requires all employees to obtain prior
clearance before engaging in any personal securities
transactions. 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.

PORTFOLIO TRANSACTIONS

Investment or Brokerage Discretion

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

How Brokers and Dealers are Selected

Equity Securities

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

PAGE 44
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.

PAGE 45
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.

PAGE 46
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 offering 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

PAGE 47
research services they provide. Actual brokerage received by any
firm may be less than the suggested allocations but can, and
often does, exceed the suggestions, because the total business is
allocated on the basis of all the considerations described above.
In no case is a broker or dealer excluded from receiving business
from T. Rowe Price because it has not been identified as
providing research services.

Miscellaneous

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

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

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

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

PAGE 48
common stock of such company would be held by its clients in the
aggregate.

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

Transactions with Related Brokers and Dealers

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

The Board of Directors/Trustees of the Fund has authorized
T. Rowe Price to utilize certain affiliates of Robert Fleming and
JFG in the capacity of broker in connection with the execution of
the Fund's portfolio transactions. These affiliates include, but
are not limited to, Jardine Fleming Securities Limited ("JFS"), a
wholly-owned subsidiary of JFG, Robert Fleming & Co. Limited

PAGE 49
("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.

Other

For the fiscal periods ended December 31, 1994, the total
brokerage commissions paid by the Fund, including the discounts
received by securities dealers in connection with underwritings
was $15,700. Of these commissions, approximately 22.2% 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 rate of
the Fund for the period ended December 31, 1994 was 81.0%.

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
a 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 which, when combined with
accrued interest, approximates fair value.

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

PAGE 50
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 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

Unless the separate account elects otherwise, dividends and
capital gain distributions will be reinvested on the reinvestment
date using the NAV per share of that date. The reinvestment date
normally precedes the payment date by about 10 days although the
exact timing is subject to change.

TAX STATUS

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

PAGE 51
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 by
December 31 of each year equal to at least 98% of ordinary income
(as of December 31) and capital gains (as of October 31) in order
to avoid a federal excise tax and distribute within 12 months
100% of ordinary income and capital gains as of December 31 to
avoid 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 the Fund invests in foreign securities, the
following would apply:

Passive Foreign Investment Companies

The Fund may purchase the securities of certain foreign
investment funds or trusts called passive foreign investment
companies. In addition to bearing their proportionate share of
the funds expenses (management fees and operating expenses)
shareholders will also indirectly bear similar expenses of such

PAGE 52
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 were distributed to shareholders.

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

Foreign Currency Gains and Losses

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

CAPITAL STOCK

The Charter of the T. Rowe Price Equity Series, Inc. (the
"Corporation") authorizes its 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. Currently, the Corporation consists of two
series, T. Rowe Price Equity Income Portfolio and T. Rowe Price
New America Growth Portfolio. Each series represents a separate
class of the Corporation's shares and has different objectives
and investment policies. The T. Rowe Price New America Growth
Portfolio is described in a separate Statement of Additional
Information. 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

PAGE 53
conditions of redemption, subject to applicable law, and might
thus be superior or inferior to the capital stock or to other
classes or series in various characteristics. The 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 the Funds have authorized to issue without
shareholder approval.

Except to the extent that the Corporation'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 the 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

PAGE 54
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
Corporation, a special meeting of shareholders of the Corporation
shall be called by the Secretary of the Corporation on the
written request of shareholders entitled to cast at least 10% of
all the votes of the Corporation entitled to be cast at such
meeting. Shareholders requesting such a meeting must pay to the
Corporation the reasonably estimated costs of preparing and
mailing the notice of the meeting. The Corporation, however,
will otherwise assist the shareholders seeking to hold the
special meeting in communicating to the other shareholders of the
Corporation to the extent required by Section 16(c) of the
Investment Company Act of 1940.

FEDERAL AND STATE REGISTRATION OF SHARES

The 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, 7 St. Paul Street, Suite 1700,
Baltimore, Maryland 21202, are independent accountants to the
Fund. The financial statements of the Fund for the year ended
December 31, 1994, and the report of independent accountants are
included in the Fund's Annual Report for the year ended December
31, 1994. 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, 1994, are incorporated
into this Statement of Additional Information by reference:

PAGE 55
NEW AMERICA GROWTH
PORTFOLIO
_________________

Report of Independent Accountants 7
Statement of Net Assets, December 31, 1994 3-4
Statement of Operations, From March 31, 1994
(Commencement of Operations) to
December 31, 1994 4
Statement of Changes in Net Assets,
From March 31, 1994 (Commencement of
Operations) to December 31, 1994 5
Notes to Financial Statements, December 31, 1994 5-6
Financial Highlights, From March 31, 1994
(Commencement of Operations) to December 31, 1994 6