PRICE T ROWE EQUITY SERIES INC, 485BPOS, 1997-04-23

PRICE T ROWE EQUITY SERIES INC
485BPOS, 1997-04-23

Previous: PRICE T ROWE INTERNATIONAL SERIES INC, 485BPOS, 1997-04-23

Next: ROUGE STEEL CO, 10-Q, 1997-04-23

PAGE 1
Registration Nos. 811-07143/033-52161

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /

Post-Effective Amendment No. 9 / X /

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

Amendment No. 10 / X /

Fiscal Year Ended December 31, 1996
_______________________________________

T. ROWE PRICE EQUITY SERIES, INC.
________________________________________
(Exact Name of Registrant as Specified in Charter)

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

Registrant's Telephone Number, including Area Code 410-345-2000
____________

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

Approximate Date of Proposed Public Offering May 1, 1997
___________

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

/ / immediately upon filing pursuant to paragraph (b)

/X/ on May 1, 1997 pursuant to paragraph (b)

PAGE 2
/ / 60 days after filing pursuant to paragraph (a)(1)

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

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

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

If appropriate, check the following box:

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

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

+Not applicable, as no securities are being registered by this
Post-Effective Amendment No. 9 to the Registration Statement.

PAGE 3
The Registration Statement of the T. Rowe Price Equity
Series, Inc. on Form N-1A (File No. 33-52161) is hereby amended
under the Securities Act of 1933 to update the Registrant's
financial statements, make other changes in the Registrant's
Prospectus and Statement of Additional Information, and to
satisfy the annual amendment requirement of Rule 8b-16 under the
Investment Company Act of 1940.

This Amendment consists of the following:

Cross Reference Sheet
Part A of Form N-1A, Revised Prospectus
Part B of Form N-1A, Statement of Additional Information
Part C of Form N-1A, Other Information
Opinion of Counsel
Accountants' Consent

PAGE 4
T. ROWE PRICE EQUITY INCOME PORTFOLIO
T. ROWE PRICE NEW AMERICA GROWTH PORTFOLIO
T. ROWE PRICE PERSONAL STRATEGY BALANCED PORTFOLIO
CROSS REFERENCE SHEET

N-1A Item No. Location
_____________ ________

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

PART B
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History +
Item 13. Investment Objectives and Investment Objective
Policies and Policies;
Investment Objective;
Investment Program;
Investment
Restrictions;
Investment Performance
Item 14. Management of the Registrant Management of Funds

PAGE 5
Item 15. Control Persons and Principal Principal Holders of
Holders of Securities Securities
Item 16. Investment Advisory and Other Investment Management
Services Services; Custodian;
Independent
Accountants; Legal
Counsel
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Dividends; Capital
Securities Stock
Item 19. Purchase, Redemption and Redemptions in Kind;
Pricing of Securities Being Pricing of Securities;
Offered Net Asset Value Per
Share; Federal
Registration of
Shares; Ratings of
Commercial Paper,
Ratings of Corporate
Debt Securities
Item 20. Tax Status Tax Status
Item 21. Underwriters Distributor for Funds
Item 22. Calculation of Yield Quotations
of Money Market Funds +
Item 23. Financial Statements Incorporated by
Reference from Annual
Report

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

PAGE 6
T. ROWE PRICE MID-CAP GROWTH PORTFOLIO
CROSS REFERENCE SHEET

N-1A Item No. Location
_____________ ________

PART A
Item 1. Cover Page Cover
Item 2. Synopsis +
Item 3. Condensed Financial Information +
Item 4. General Description of Fund, Market, and Risk
Registrant Characteristics;
Organization and
Management;
Understanding
Performance
Information;
Investment Policies
and Practices
Item 5. Management of the Fund Fund, Market, and Risk
Characteristics;
Organization and
Management
Item 6. Capital Stock and Other Organization and
Securities Management
Item 7. Purchase of Securities Being Pricing Shares and
Offered Receiving Sale
Proceeds
Item 8. Redemption or Repurchase Pricing Shares and
Receiving Sale
Proceeds
Item 9. Pending Legal Proceedings +

PAGE 7
Item 16. Investment Advisory and Other Investment Management
Services Services; Custodian;
Independent
Accountants; Legal
Counsel
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Dividends; Capital
Securities Stock
Item 19. Purchase, Redemption and Redemptions in Kind;
Pricing of Securities Being Pricing of Securities;
Offered Net Asset Value Per
Share; Federal
Registration of
Shares; Ratings of
Commercial Paper,
Ratings of Corporate
Debt Securities
Item 20. Tax Status Tax Status
Item 21. Underwriters Distributor for Funds
Item 22. Calculation of Yield Quotations
of Money Market Funds +
Item 23. Financial Statements +

PAGE 8

<PAGE>

PROSPECTUS

May 1, 1997
T. Rowe Price Equity Income Portfolio
<PAGE>

FACTS AT A GLANCE

Investment Goal
To provide substantial dividend income and also long-term capital appreciation.
As with any mutual fund, there is no guarantee the fund will achieve its goal.

Strategy
To invest primarily in dividend-paying common stocks, particularly of
established companies, with favorable prospects for both increasing dividends
and capital appreciation.

Risk/Reward
A conservative stock fund with the potential for dividend income and some
capital appreciation. Lower risk than a fund focusing on growth stocks, but
greater risk than a bond fund. Stocks paying high dividends tend to be less
volatile than those paying below-average dividends. However, the fund's share
price may decline, causing a loss.

Investor Profile
Individuals seeking a relatively conservative approach to investing in stocks,
who can accept the risk of loss inherent in common stock investing.

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 $99 billion for more
than five million individual and institutional investor accounts as of December
31, 1996.
<PAGE>

T. Rowe Price Equity Series, Inc.

Prospectus

May 1, 1997

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

T. ROWE PRICE 2
CONTENTS

ABOUT THE FUND
Financial Highlights 2
Fund, Market, and Risk Characteristics 3

ABOUT YOUR ACCOUNT
Pricing Shares and Receiving Sale Proceeds 7
Distributions and Taxes 8

MORE ABOUT THE FUND
Organization and Management 9
Understanding Performance Information 11
Investment Policies and Practices 13

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, 1997, 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.
<PAGE>

ABOUT THE FUND
1
FINANCIAL HIGHLIGHTS
----------------------------------------------------------

Table 1, which provides information about the fund's financial history, is
based on a single share outstanding throughout each fiscal year. The table is
part of the fund's financial statements which are included in its annual
report, and are incorporated by reference into the Statement of Additional
Information (available upon request). The financial statements in the annual
report were audited by Price Waterhouse LLP, the fund's independent
accountants.

<TABLE>
Table 1 Financial Highlights
<CAPTION>
<S> <S> <C> <C> <C> <C>
Income From Investment Activities

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

1994/a/ $ 10.00 $ 0.30 $ 0.41 $ 0.71

1995 10.42 0.44 3.05 3.49

1996 13.21 0.42 2.13 2.55
- ------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
Less Distributions Net Asset Value

Net Net Realized Total Net Asset
Investment Gain Distributions Value,
Income End of Period

$ (0.29) -- $ (0.29) $ 10.42

(0.44) $ (0.26) (0.70) 13.21

(0.42) (0.08) (0.50) 15.26
- --------------------------------------------------------------------------------------
</TABLE>

<TABLE>
Table 1 Financial Highlights (continued)
<CAPTION>
<S> <C>

Period
Ended

1994/a/

1995

1996
- --------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
Returns, Ratios, and Supplemental Data

Total Return Ratio of Ratio of Net
(Includes Net Assets Expenses to Investment Portfolio
Reinvested ($ thousands)Average Net Income to TurnoverRate
Distributions) Assets Average Net
Assets

7.15% $ 2,191 0.85%/b/ 3.88%/b/ 21.3%/b/

34.76 14,658 0.85 3.61 10.1

19.56 103,751 0.85 2.94 17.4
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>

Average
Commission
Rate Paid

--
--
--

$ 0.0388
- --------------------
</TABLE>

To help you decide whether this fund is appropriate for you, this section
o The fund should not represent your complete investment program, nor be used
for short-term trading purposes.
<PAGE>

T. ROWE PRICE 4
What is the fund's objective?

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

What is the fund's investment program?

Under normal circumstances, the fund will invest at least 65% of total assets
in the common stocks of established companies paying above-average dividends.
These companies are expected to have favorable prospects for dividend growth
and capital appreciation, as determined by T. Rowe Price.

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

What are the fund's major characteristics?

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

How does the fund select stocks for the portfolio?

The fund will generally consider companies with the following
characteristics:

o Established operating histories.

o Above-average current dividend yield relative to the average yield of the
S&P 500.

o Low price/earnings ratios relative to the S&P 500.

o Sound balance sheets and other financial characteristics.

o Low stock price relative to a company's underlying value as measured by
assets, earnings, cash flow, or business franchises.

What is meant by a "value" investment approach?

Value investors look for undervalued assets, seeking to invest in companies
whose stock prices are low in relation to their real worth or future
prospects. By identifying companies whose stocks are currently out of favor
or misunderstood, value investors hope to realize significant appreciation as
other investors recognize the stock's intrinsic value and the price rises
accordingly.
<PAGE>

ABOUT THE FUND 5
Finding undervalued stocks requires considerable research to identify the
particular company, analyze its underlying financial condition and prospects,
and assess the likelihood that the stock's underlying value will be
recognized by the market and reflected in its price.

o Value investors look for undervalued assets.

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

o Price/earnings ratio Dividing a stock's price by its earnings per share
generates a price/earnings or P/E ratio. A stock with a P/E that is
significantly below that of its peers, the market as a whole, or its own
historical norm may represent an attractive opportunity.

o Price/book value ratio This ratio, calculated by dividing a stock's price by
its book value per share, indicates how a stock is priced relative to the
accounting (i.e., book) value of the company's assets. A ratio below the
market, that of its competitors, or its own historic norm could indicate an
undervalued situation.

o Dividend yield A stock's dividend yield is found by dividing its annual
dividend by its share price. A yield significantly above a stock's own
historic norm or that of its peers may suggest an investment opportunity.

o A stock selling at $10 with a dividend of $0.50 has a 5% yield.

o Price/cash flow Dividing a stock's price by the company's cash flow per
share, rather than its earnings or book value, provides a more useful measure
of value in some cases. A ratio below that of the market or of its peers
suggests the market may be incorrectly valuing the company's cash flow for
reasons that may be temporary.

o Undervalued assets This analysis compares a company's stock price with its
underlying asset values, its projected value in the private (as opposed to
public) market, or its expected value if the company or parts of it were sold
or liquidated.

o Restructuring opportunities The market can react favorably to the
announcement or the successful implementation of a corporate restructuring,
financial reengineering, or asset redeployment. Such events can result in an
increase in a company's stock price. A value investor may try to anticipate
these actions and invest before the market places an appropriate value on any
actual or expected changes.
<PAGE>

T. ROWE PRICE 6
What are some of the fund's potential risks?

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

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

What are some of the fund's potential rewards?

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

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

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

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

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

Consider your investment goals, your time horizon for achieving them, and
your tolerance for risk. If you can accept the price fluctuations inherent in
stock investing in an effort to achieve income and capital appreciation, the
fund could be an appropriate part of your overall investment strategy.

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

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

<PAGE>

ABOUT YOUR ACCOUNT
2
PRICING SHARES AND RECEIVING SALE PROCEEDS
----------------------------------------------------------
Here are some procedures you should know when investing in the fund. For
instructions on how to purchase and redeem shares of the fund, read the
separate account prospectus.

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.

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

T. ROWE PRICE 8
Note: The time at which transactions and shares are priced and the time until
which orders are accepted may be changed in case of an emergency or if the
New York Stock Exchange closes at a time other than 4 p.m. ET.

How you can receive the proceeds from a sale

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

Dividends and Other Distributions

For a discussion of the tax status of your variable annuity contract, please
refer to the attached separate account prospectus.

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 quarterly. 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.
<PAGE>

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

How is the fund organized?

The T. Rowe Price Equity Series, Inc. (the "Corporation") 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
four series, each representing a separate class of shares having different
objectives and investment policies. The four series are: the Equity Income
Portfolio, the New America Growth Portfolio, and the Personal Strategy
Balanced Portfolio, which were all established in 1994; and the Mid-Cap
Growth Portfolio, established in 1996. The other three portfolios are
described in separate prospectuses. The Corporation's charter provides that
the Board of Directors may issue additional series of shares and/or

As with all mutual funds, investors purchase shares when they put money in a
fund. These shares are part of a fund's authorized capital stock, but share
o Cast one vote per share on certain fund matters, including the election of
fund directors, changes in fundamental policies, or approval of changes in
The 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

<PAGE>

T. ROWE PRICE 10
decided. In addition, shareholders representing at least 10% of all eligible
votes may call a special meeting if they wish for the purpose of voting on
the removal of any fund director or trustee. If a meeting is held and you
cannot attend, you can vote by proxy. Before the meeting, the fund will send
you proxy materials that explain the issues to be decided and include a
voting card for you to mail back.

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

Who runs the fund?

General Oversight

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

Portfolio Management
The fund has an Investment Advisory Committee composed of the following
members: Brian C. Rogers, Chairman, Thomas H. Broadus Jr., Richard P. Howard,
William J. Stromberg, and Daniel M. Theriault. 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.
Rogers has been chairman of the fund's committee since its inception in 1994.
Mr. Rogers joined T. Rowe Price in 1982 and has been managing investments
since 1983.

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

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

How are fund expenses determined?

ABOUT YOUR ACCOUNT 11
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 previously and are described in 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
Corporation'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 fund
performance. You will come across them in shareholder reports you receive
from us.

Total Return

This tells you how much an investment in the 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.
<PAGE>

T. ROWE PRICE 12
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.

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

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 types of securities the
fund may hold in its portfolio and the various kinds of investment practices
that may be used in day-to-day portfolio management. The fund's investment
program is subject to further restrictions and risks described in the
Statement of Additional Information.

ABOUT YOUR ACCOUNT 13
applicable investment restrictions and policies at the time it makes an
investment. A later change in circumstances will not require the sale of an
investment if it was proper at the time it was made.

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

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

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

Types of Portfolio Securities

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

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

T. ROWE PRICE 14
Convertible Securities and Warrants
The fund may invest in debt or preferred equity securities convertible into
or exchangeable for equity securities. Traditionally, convertible securities
have paid dividends or interest at rates higher than common stocks but lower
than nonconvertible securities. They generally participate in the
appreciation or depreciation of the underlying stock into which they are
convertible, but to a lesser degree. In recent years, convertibles have been
developed which combine higher or lower current income with options and other
features. Warrants are options to buy a stated number of shares of common
stock at a specified price anytime during the life of the warrants
(generally, two or more years).

Foreign Securities
The fund may invest in foreign securities. These include
nondollar-denominated securities traded outside of the U.S. and
dollar-denominated securities of foreign issuers traded in the U.S. (such as
ADRs). Such investments increase a portfolio's diversification and may
enhance return, but they also involve some special risks such as exposure to
potentially adverse local political and economic developments;
nationalization and exchange controls; potentially lower liquidity and higher
volatility; possible problems arising from accounting, disclosure,
settlement, and regulatory practices that differ from U.S. standards; and the
chance that fluctuations in foreign exchange rates will decrease the
investment's value (favorable changes can increase its value). These risks
are heightened for investments in developing countries, and there is no limit
on the amount of the fund's foreign investments that may be made in such
countries.

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

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

High-Yield/High-Risk Investing
The total return and yield of lower-quality (high-yield/high-risk) bonds,
commonly referred to as "junk" bonds, can be expected to fluctuate more than
the total return and yield of higher-quality, shorter-term bonds, but not as
much as common stocks. Junk bonds (those rated below BBB or in default) are
regarded as predominantly speculative with respect to the issuer's continuing
ability to meet principal and interest payments.
<PAGE>

MORE ABOUT THE FUND 15

Operating policy The fund will not purchase a noninvestment-grade debt
security (or junk bond) if immediately after such purchase the fund would
have more than 10% of its total assets invested in such securities.

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

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

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

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

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

Types of Management Practices

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

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

T. ROWE PRICE 16
Fundamental policy Borrowings may not exceed 33/1//\\/3/\\% of total fund
assets.

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

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

Futures contracts and options may not always be successful hedges; their
prices can be highly volatile. Using them could lower the fund's total
return, and the potential loss from the use of futures can exceed the fund's
initial exposure to such contracts. In many foreign countries, futures and
options markets do not exist or are not sufficiently developed to be
effectively used by the fund.

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

MORE ABOUT THE FUND 17
circumstances, a "proxy currency" may be substituted for the currency in
which the investment is denominated, a strategy known as "proxy hedging."
Although foreign currency transactions will be used primarily to protect the
fund's foreign securities from adverse currency movements relative to the
dollar, they involve the risk that anticipated currency movements will not
occur and the fund's total return could be reduced.

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

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

Portfolio Turnover

The fund will not generally trade in securities for short-term profits, but,
when circumstances warrant, securities may be purchased and sold without
regard to the length of time held. The fund's portfolio turnover rate for the
fiscal years ended December 31, 1996 and 1995 were 17.4% and 10.1%,
respectively. For the fiscal period ended December 31, 1994, the fund's
annualized portfolio turnover rate was 21.3%.
<PAGE>

T. ROWE PRICE 18
<PAGE>

MORE ABOUT THE FUND 19
<PAGE>

T. ROWE PRICE 20
<PAGE>

MORE ABOUT THE FUND 21
<PAGE>

T. ROWE PRICE 22

PAGE 9
STATEMENT OF ADDITIONAL INFORMATION

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

T. Rowe Price Equity Income 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, 1997, 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, 1997.

SAI-EIP 5/1/97

PAGE 10
TABLE OF CONTENTS

Page Page

Capital Stock . . . . 57 Investment Program . . . . 9
Code of Ethics . . . . . 47 Investment Restrictions . 32
Custodian . . . . . . . . 47 Legal Counsel . . . . . . 59
Dealer Options . . . . . 19 Lending of Portfolio
Distributor for Fund . . 46 Securities . . . . . . . 12
Dividends . . . . . . . . 55 Management of Fund . . . 41
Federal Registration Net Asset Value Per Share 55
of Shares . . . . . . . 59 Options . . . . . . . . . 13
Foreign Currency Portfolio Management
Transactions . . . . . . 28 Practices . . . . . . . 12
Futures Contracts . . . . 20 Portfolio Transactions . 47
Hybrid Instruments . . . 9 Pricing of Securities . . 54
Illiquid or Restricted Principal Holders of
Securities . . . . . . . 10 Securities . . . . . . . 44
Independent Accountants . 60 Ratings of Corporate Debt
Investment Management Securities . . . . . . . 60
Services . . . . . . . . 44 Repurchase Agreements . . 13
Investment Objective and Risk Factors of Foreign
Policies . . . . . . . . 2 Investing . . . . . . . . 4
Investment Performance . 37 Shareholder Services . . 46
Tax Status . . . . . . . 56
Warrants . . . . . . 11

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

PAGE 11
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
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.

Debt Obligations

Although the Fund will invest most of its assets in common
stocks, it is permitted to purchase debt securities. Yields on
short, intermediate, and long-term securities are dependent on a
variety of factors, including the general conditions of the money
and bond markets, the size of a particular offering, the maturity
of the obligation, and the credit quality and rating of the
issue. Debt securities with longer maturities tend to have
higher yields and are generally subject to potentially greater
capital appreciation and depreciation than obligations with
shorter maturities and lower yields. The market prices of debt
securities usually vary, depending upon available yields. An
increase in interest rates will generally reduce the value of
portfolio investments, and a decline in interest rates will
generally increase the value of portfolio investments. The
ability of the Fund to achieve its investment objective is also
dependent on the continuing ability of the issuers of the debt
securities in which the Fund invests to meet their obligations
for the payment of interest and principal when due. The Fund's
investment program permits it to purchase below investment grade
securities. Since investors generally perceive that there are
greater risks associated with investment in lower quality
securities, the yields from such securities normally exceed those
obtainable from higher quality securities. However, the
principal value of lower-rated securities generally will
fluctuate more widely than higher quality securities. Lower

PAGE 12
quality investments entail a higher risk of default--that is, the
nonpayment of interest and principal by the issuer than higher
quality investments. Such securities are also subject to special
risks, discussed below. Although the Fund seeks to reduce risk
by portfolio diversification, credit analysis (considered by T.
Rowe Price to be among the most stringent in the investment
management industry), and attention to trends in the economy,
industries and financial markets, such efforts will not eliminate
all risk. There can, of course, be no assurance that the Fund
will achieve its investment objective.

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

Special Risks of High-Yield Investing

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

PAGE 13
Risk Factors of Foreign Investing

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

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

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

PAGE 14
the Fund's securities denominated in that currency will rise.
When a given currency depreciates against the dollar (the dollar
strengthens) the value of the Funds' securities denominated in
that currency would be expected to decline.

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

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

Investment Funds. The Funds may invest in investment funds
which have been authorized by the governments of certain

PAGE 15
countries specifically to permit foreign investment in securities
of companies listed and traded on the stock exchanges in these
respective countries. The Funds' investment in these funds is
subject to the provisions of the 1940 Act discussed on pages 43
and 44. If the Funds invest in such investment funds, the Funds'
shareholders will bear not only their proportionate share of the
expenses of the Funds (including operating expenses and the fees
of the investment manager), but also will bear indirectly similar
expenses of the underlying investment funds. In addition, the
securities of these investment funds may trade at a premium over
their net asset value.

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

Taxes. The dividends and interest payable on certain of
the Funds' foreign portfolio securities may be subject to foreign
withholding taxes, thus reducing the net amount of income
available for distribution to the Funds' shareholders. A
shareholder otherwise subject to United States federal income
taxes may, subject to certain limitations, be entitled to claim a
credit or deduction for U.S. federal income tax purposes for his
or her proportionate share of such foreign taxes paid by the
Funds. (See "Tax Status".)

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

PAGE 16
speculative at this time. Political and economic reforms are too
recent to establish a definite trend away from centrally-planned
economies and state owned industries. In many of the countries
of Eastern Europe and Russia, there is no stock exchange or
formal market for securities. Such countries may also have
government exchange controls, currencies with no recognizable
market value relative to the established currencies of western
market economies, little or no experience in trading in
securities, no financial reporting standards, a lack of a banking
and securities infrastructure to handle such trading, and a legal
tradition which does not recognize rights in private property.
In addition, these countries may have national policies which
restrict investments in companies deemed sensitive to the
country's national interest. Further, the governments in such
countries may require governmental or quasi-governmental
authorities to act as custodian of a Fund's assets invested in
such countries and these authorities may not qualify as a foreign
custodian under the Investment Company Act of 1940 and exemptive
relief from such Act may be required. All of these
considerations are among the factors which could cause
significant risks and uncertainties to investment in Eastern
Europe and Russia. Each Fund will only invest in a company
located in, or a government of, Eastern Europe and Russia, if it
believes the potential return justifies the risk. To the extent
any securities issued by companies in Eastern Europe and Russia
are considered illiquid, each Fund will be required to include
such securities within its 15% restriction on investing in
illiquid securities.

Latin America

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

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

PAGE 17
if they were to reoccur, could reverse favorable trends toward
market and economic reform, privatization and removal of trade
barriers and result in significant disruption in securities
markets.

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

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

INVESTMENT PROGRAM

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

Types of Securities

Hybrid Instruments

PAGE 18
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
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

PAGE 19
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
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.

PAGE 20

Other Investments

Although the Fund's assets are invested primarily in common
stocks, the Fund may invest in convertible securities, corporate
and municipal debt securities, preferred stocks, U.S. traded,
dollar-denominated securities of foreign issuers, and nondollar-
denominated fixed income securities, which hold the prospect of
contributing to the achievement of the Fund's objectives,
particularly the current income objective. The Fund may purchase
corporate debt securities within the four highest credit
categories assigned by established public rating agencies, which
include both high and medium quality investment grade corporate
debt securities. Medium quality securities (rated BBB by Moody's
Investors Service, Inc. ("Moody's") or Baa by Standard & Poor's
Corporation ("S&P"), or unrated securities of equivalent quality)
are regarded as having an adequate capacity to pay principal and
interest, although adverse economic conditions or changing
circumstances are more likely to lead to a weakening of such
capacity than for bonds in the A category. In addition, the Fund
may, from time to time, purchase corporate debt securities that
are below investment grade (i.e., those rated below BBB by
Moody's, or below Baa by S&P, or unrated securities of equivalent
quality as determined by T. Rowe Price). The above described
quality standards will not be applied to the Fund's investments
in convertible 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

PAGE 21
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.

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

PAGE 22
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
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.

PAGE 23
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
(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

PAGE 24
underlying security or currency, the relationship of the exercise
price to such market price, the historical price volatility of
the underlying security or currency, and the length of the option
period. Once the decision to write a call option has been made,
T. Rowe Price, in determining whether a particular call option
should be written on a particular security or currency, will
consider the reasonableness of the anticipated premium and the
likelihood that a liquid secondary market will exist for those
options. The premium received by the Fund for writing covered
call options will be recorded as a liability of the Fund. This
liability will be adjusted daily to the option's current market
value, which will be the latest sale price at the time at which
the net asset value per share of the Fund is computed (close of
the New York Stock Exchange), or, in the absence of such sale,
the latest asked price. The option will be terminated upon
expiration of the option, the purchase of an identical option in
a closing transaction, or delivery of the underlying security or
currency upon the exercise of the option.

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

Call options written by the Fund will normally have
expiration dates of less than nine months from the date written.
The exercise price of the options may be below, equal to, or

PAGE 25
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
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.

PAGE 26
price lower than the current market price of the security or
currency. In such event the Fund would write a put option at an
exercise price which, reduced by the premium received on the
option, reflects the lower price it is willing to pay. Since the
Fund would also receive interest on debt securities or currencies
maintained to cover the exercise price of the option, this
technique could be used to enhance current return during periods
of market uncertainty. The risk in such a transaction would be
that the market price of the underlying security or currency
would decline below the exercise price less the premiums
received. Such a decline could be substantial and result in a
significant loss to the Fund. In addition, the Fund, because it
does not own the specific securities or currencies which it may
be required to purchase in exercise of the put, cannot benefit
from appreciation, if any, with respect to such specific
securities or currencies. The Fund will not write a covered put
option if, as a result, the aggregate market value of all
portfolio securities or currencies covering written put or call
options exceeds 25% of the market value of the Fund's net assets.
In calculating the 25% limit, the Fund will offset, against the
value of assets covering written puts and calls, the aggregate
market value of all assets underlying purchased puts and calls on
identical securities or currencies with identical maturity
dates.

Purchasing Put Options

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

PAGE 27
may be purchased in order to protect unrealized appreciation of a
security or currency where T. Rowe Price deems it desirable to
continue to hold the security or currency because of tax
considerations. The premium paid for the put option and any
transaction costs would reduce any capital gain otherwise
available for distribution when the security or currency is
eventually sold.

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

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

Purchasing Call Options

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

PAGE 28
current return. The Fund may also purchase call options in order
to acquire the underlying securities or currencies. Examples of
such uses of call options are provided below.

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

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

Dealer (Over-the-Counter) Options

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

Exchange-traded options generally have a continuous liquid
market while dealer options have none. Consequently, the Fund
will generally be able to realize the value of a dealer option it

PAGE 29
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.

Futures Contracts

Futures are a type of potentially high-risk derivative.

Transactions in Futures

The Fund may enter into futures contracts, including stock
index, interest rate and currency futures ("futures or futures
contracts").

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.

PAGE 30
Interest rate or currency futures contracts may be used as
a hedge against changes in prevailing levels of interest rates or
currency exchange rates in order to establish more definitely the
effective return on securities or currencies held or intended to
be acquired by the Fund. In this regard, the Fund could sell
interest rate or currency futures as an offset against the effect
of expected increases in interest rates or currency exchange
rates and purchase such futures as an offset against the effect
of expected declines in interest rates or currency exchange
rates.

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

Regulatory Limitations

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

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

PAGE 31
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.

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

PAGE 32
upward from less than 5% of the value of the contract being
traded.

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

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

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

For example, the Standard & Poor's 500 Stock Index is
composed of 500 selected common stocks, most of which are listed
on the New York Stock Exchange. The S&P 500 Index assigns
relative weightings to the common stocks included in the Index,
and the Index fluctuates with changes in the market values of
those common stocks. In the case of the S&P 500 Index, contracts
are to buy or sell 500 units. Thus, if the value of the S&P 500

PAGE 33
Index were $150, one contract would be worth $75,000 (500 units x
$150). The stock index futures contract specifies that no
delivery of the actual stock making up the index will take place.
Instead, settlement in cash occurs. Over the life of the
contract, the gain or loss realized by the Fund will equal the
difference between the purchase (or sale) price of the contract
and the price at which the contract is terminated. For example,
if the Fund enters into a futures contract to buy 500 units of
the S&P 500 Index at a specified future date at a contract price
of $150 and the S&P 500 Index is at $154 on that future date, the
Fund will gain $2,000 (500 units x gain of $4). If the Fund
enters into a futures contract to sell 500 units of the stock
index at a specified future date at a contract price of $150 and
the S&P 500 Index is at $152 on that future date, the Fund will
lose $1,000 (500 units x loss of $2).

Special Risks of Transactions in Futures Contracts

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

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

PAGE 34
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 cash, liquid high-grade
debt or other appropriate cover, equal in value to the current
value of the underlying instrument less the margin deposit.

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

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

PAGE 35
Hedging Risk. A decision of whether, when, and how to
hedge involves skill and judgment, and even a well-conceived
hedge may be unsuccessful to some degree because of unexpected
market behavior, market or interest rate trends. There are
several risks in connection with the use by the Fund of futures
contracts as a hedging device. One risk arises because of the
imperfect correlation between movements in the prices of the
futures contracts and movements in the prices of the underlying
instruments which are the subject of the hedge. T. Rowe Price
will, however, attempt to reduce this risk by entering into
futures contracts whose movements, in its judgment, will have a
significant correlation with movements in the prices of the
Fund's underlying instruments sought to be hedged.

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

PAGE 36
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
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

PAGE 37
the Fund and other T. Rowe Price Funds. Such aggregated orders
would be allocated among the Funds and the other T. Rowe Price
Funds in a fair and non-discriminatory manner.

Special Risks of Transactions in Options on Futures Contracts

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

Additional Futures and Options Contracts

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

PAGE 38
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.

PAGE 39
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; currency available for cover of the forward
contract(s) or other suitable cover. In determining the amount
to be delivered under a contract, the Fund may net offsetting
positions.

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

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

PAGE 40
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 41
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 42
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
purchase the securities of any issuer (other than obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities) if, as a result:

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;

PAGE 43
(3) Industry Concentration. Purchase the securities of
any issuer if, as a result, more than 25% of the
value of the Fund's total assets would be invested
in the securities of issuers having their principal
business activities in the same industry;

(4) Loans. Make loans, although the Fund may (i) lend
portfolio securities and participate in an interfund
lending program with other Price Funds provided that
no such loan may be made if, as a result, the
aggregate of such loans would exceed 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,
including limited partnership interests therein,
unless acquired as a result of ownership of
securities or other instruments (but this shall not
prevent the Fund from investing in securities or
other instruments backed by real estate or
securities of companies engaged in the real estate
business);

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

PAGE 44
(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
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:

PAGE 45
(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
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;

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

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

PAGE 46
(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) Short Sales. Effect short sales of securities;
or

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

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.

INVESTMENT PERFORMANCE

PAGE 47
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

1 Yr. Since
Ended Inception to
12/31/96 12/31/96
___________ ___________

Equity Income Portfolio 19.56% 72.63%

Average Annual Compound Rates of Return

1 Yr. Since
Ended Inception to
12/31/96 12/31/96
___________ ___________

Equity Income Portfolio 19.56% 21.93%

Other Sources of Information

PAGE 48
firm which ranks mutual funds by overall performance, investment
objectives, and assets; (B) Morningstar, Inc., another widely
used independent research firm which rates 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; (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

PAGE 49
afford to spend and still preserve your purchasing power and
suggest how you might invest to reach your goal; Tax
Considerations for Investors discusses the tax advantages of
annuities and municipal bonds and how to access whether they are
suitable for your portfolio, reviews pros and cons of placing
assets in a gift to minors account and summarizes the benefits
and types of tax-deferred retirement plans currently available;
the Personal Strategy Planner simplifies investment decision
making by helping investors define personal financial goals,
establish length of time the investor intends to invest,
determine risk "comfort zone" and select diversified investment
mix; the How to Choose a Bond Fund guide which discusses how to
choose an appropriate bond fund for your portfolio; and
Diversifying Overseas: a T. Rowe Price Guide to International
Investing helps investors determine and implement an
international investment strategy that is appropriate for
particular investment needs. From time to time, other worksheets
and guides may be made available as well. Of course, an
investment in the Fund cannot guarantee that such goals will be
met.

From time to time, the example shown below 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 12/31/96

50 years 20 years 10 years 5 years

Small-Company Stocks 14.44% 17.84% 12.98% 19.47%

Large-Company Stocks 12.59 14.55 15.28 15.20

Foreign Stocks N/A 15.29 8.74 8.48

Long-Term Corporate Bonds 5.76 9.71 9.48 8.52

Intermediate-Term U.S.
Gov't. Bonds 5.89 9.14 7.77 6.17

Treasury Bills 4.89 7.28 5.46 4.22

U.S. Inflation 4.08 5.15 3.70 2.89

PAGE 50

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

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

Performance of Retirement Portfolios*

Asset Mix Average Annualized Value
Returns 20 Years of
Ended 12/31/96 $10,000
Investment
After Period
________________ __________________ ____________

Nominal Real BestWorst
Portfolio Growth IncomeSafety ReturnReturn** YearYear

I. Low
Risk 40% 40% 20% 11.5% 6.3% 24.9% 0.1% $ 88,900

II. Moderate
Risk 60% 30% 10% 12.9% 7.7% 29.1% -1.8%$112,500

III. High
Risk 80% 20% 0% 14.1% 8.9% 33.4% -5.2%$140,300

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

* Based on actual performance for the 20 years ended 1996 of
stocks (85% Wilshire 5000 and 15% Europe, Australia, Far
East [EAFE] Index), bonds (Lehman Brothers Aggregate Bond
Index from 1976-95 and 30-day Treasury bills from January
1976 through December 1996. 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

PAGE 51
illustrative purposes only and is not representative of the
performance of any T. Rowe Price fund.
** Based on inflation rate of 5.2% for the 20-year period ended
12/31/96.

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 a fund's shares for
securities or assets other than cash will be limited to (1) bona
fide reorganizations; (2) statutory mergers; or (3) other
acquisitions of portfolio securities that: (a) meet the
investment 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.

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)

PAGE 52
President, Chief Operating Officer and Director, Homestake Mining
Company; Address: One Norwest Center, 1700 Lincoln Street, Suite
1950, Denver, Colorado 80203

HANNE M. MERRIMAN, Director--Retail business consultant;
formerly President and Chief Operating Officer (1991-92), Nan
Duskin, Inc., a women's specialty store, Director (1984-1990) and
Chairman (1989-90) Federal Reserve Bank of Richmond, and
President and Chief Executive Officer (1988-89), Honeybee, Inc.,
a division of Spiegel, Inc.; Director, Central Illinois Public
Service Company, CIPSCO Incorporated, The Rouse Company, State
Farm Mutual Automobile Insurance Company and USAir Group, Inc.;
Address: 3201 New Mexico Avenue, N.W., Suite 350, Washington,
D.C. 20016
HUBERT D. VOS, Director--President, Stonington Capital
Corporation, a private investment company; Address: 1231 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
Technologies Inc. and Stuart Medical, Inc.; Address: 755 Page
Mill Road, Suite A200, Palo Alto, California 94304
*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 Investment Services, Inc; President and Trust Officer,
T. Rowe Price Trust Company; Director, Rowe Price-Fleming
International, Inc. and Rhone-Poulenc Rorer, Inc.
BRIAN C. ROGERS, President--Managing Director, T. Rowe Price;
Chartered Financial Analyst
THOMAS H. BROADUS, JR., Vice President--Managing Director,
T. Rowe Price; Chartered Financial Analyst and Chartered
Investment Counselor
ANDREW M. BROOKS, Vice President--Vice President, T. Rowe Price
HENRY H. HOPKINS, Vice President--Managing Director, T. Rowe
Price; Vice President and Director, T. Rowe Price Investment
Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price
Trust Company; Vice President, Rowe Price-Fleming International,
Inc. and T. Rowe Price Retirement Plan Services, Inc.
RICHARD P. HOWARD, Vice President--Vice President of T. Rowe
Price; Chartered Financial Analyst
WILLIAM J. STROMBERG, Vice President--Vice President, T. Rowe
Price; Chartered Financial Analyst
DANIEL M. THERIAULT, Vice President--Vice President, T. Rowe
Price, Chartered Financial Analyst; formerly Securities Analyst,
John A. Levin & Co.
MARK J. VASELKIV, Vice President--Vice President, T. Rowe Price

PAGE 53
LENORA V. HORNUNG, Secretary--Vice President, T. Rowe Price
PATRICIA S. BUTCHER, Assistant Secretary--Assistant Vice
President, T. Rowe Price and T. Rowe Price Investment Services,
Inc.
CARMEN F. DEYESU, Treasurer--Vice President, T. Rowe Price,
T. Rowe Price Services, Inc., and T. Rowe Price Trust Company
DAVID S. MIDDLETON, Controller--Vice President, T. Rowe Price,
T. Rowe Price Services, Inc., and T. Rowe Price Trust Company
J. JEFFREY LANG, Assistant Vice President--Assistant Vice
President, T. Rowe Price
INGRID I. VORDEMBERGE, Assistant Vice President--Employee,
T. Rowe Price

The Fund's Executive Committee, comprised of Mr. Riepe has
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.

COMPENSATION TABLE

The Fund does not pay pension or retirement benefits to its
officers or directors. Also, any director of the Fund who is an
officer or employee of T. Rowe Price or Price Fleming does not
receive any remuneration from the Fund.
_________________________________________________________________
Total Compensation
from Fund and
Name of Aggregate Fund Complex
Person, Compensation Paid to
Position from Fund(a) Directors(b)
_________________________________________________________________
Leo C. Bailey, $217 $42,083
Director(c)

Donald W. Dick, Jr., 977 72,917
Director

David K. Fagin, 895 59,167
Director

Addison Lanier, 217 42,083
Director(c)

John K. Major, 228 34,167
Director

PAGE 54
Hanne M. Merriman, 895 59,167
Director

Hubert D. Vos, 895 59,167
Director

Paul M. Wythes, 982 69,667
Director

(a) Amounts in this column are based on compensation accrued for
the period January 1, 1996 through December 31, 1996.
(b) Amounts in this column are for calendar year 1996.
(c) Messrs. Bailey and Lanier retired from their positions with
the Funds in April 1996.

PRINCIPAL HOLDERS OF SECURITIES

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

As of March 31, 1997, the following shareholders owned of
record more than 5% of the funds outstanding shares:

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

INVESTMENT MANAGEMENT SERVICES

Services Provided by T. Rowe Price

PAGE 55
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 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
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 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

PAGE 56
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.

Investment Services serves as distributor to the Fund
pursuant to an Underwriting Agreement ("Underwriting Agreement"),
which provides that the Fund will pay all fees and expenses in
connection with: necessary state filings; preparing, setting in
type, printing, and mailing the Fund 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 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 the various states
in which Investment Services is qualified as a broker-dealer.
Under the Underwriting Agreement, Investment Services accepts
orders for Fund shares at net asset value. No sales charges are
paid by investors or the Fund.

PAGE 57
SHAREHOLDER SERVICES

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

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.

CODE OF ETHICS

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

PAGE 58
trading restrictions. In addition, employees are prohibited from
profiting from short-term trading (e.g., purchases and sales
involving the same security within 60 days). Any material
violation of the Code of Ethics is reported to the Board of the
Fund. The Board also reviews the administration of the Code of
Ethics on an annual basis.

PORTFOLIO TRANSACTIONS

Investment or Brokerage Discretion

How Brokers and Dealers are Selected

Equity Securities

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

PAGE 59
Fixed Income Securities

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

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

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

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

Description of Research Services Received from Brokers and
Dealers

PAGE 60
affecting portfolio securities, technical market action, pricing
and appraisal services, credit analysis, risk measurement
analysis, performance analysis and analysis of corporate
responsibility issues. These services provide both domestic and
international perspective. Research services are received
primarily in the form of written reports, computer generated
services, telephone contacts and personal meetings with security
analysts. In addition, such services may be provided in the form
of meetings arranged with corporate and industry spokespersons,
economists, academicians and government representatives. In some
cases, research services are generated by third parties but are
provided to T. Rowe Price by or through broker-dealers.

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

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

Commissions to Brokers who Furnish Research Services

PAGE 61
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
research services they provide. Actual brokerage received by any
firm may be less than the suggested allocations but can, and

PAGE 62
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 63
common stock of such company would be held by its clients in the
aggregate.

Trade Allocation Policies

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

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

Transactions with Related Brokers and Dealers

PAGE 64
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
("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, 1996, 1995, and
1994, the total brokerage commissions paid by the Fund, including
the discounts received by securities dealers in connection with
underwritings were $86,000, $10,000, and $4,700, respectively.
Of these commissions, none was paid in 1994, 13.7% was paid in
1995, and 25.3% was paid in 1996 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

PAGE 65
the Fund. The annualized portfolio turnover rate of the Fund for
the fiscal period ended December 31, 1994 was 21.3%. The
portfolio turnover rates for the fiscal years ended December 31,
1996 and 1995 were 17.4% and 10.1%, respectively.

PRICING OF SECURITIES

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

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

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

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

NET ASSET VALUE PER SHARE

PAGE 66
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 (1) 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, the fourth
quarter dividend and capital gain distribution 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 67
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

PAGE 68
investment. In addition, the Fund may be subject to corporate
income tax and an interest charge on certain dividends and
capital gains earned from these investments, regardless of
whether such income and gains are distributed to shareholders.

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

Foreign Currency Gains and Losses

Foreign currency gains and losses, including the portion of
gain or loss on the sale of debt securities attributable to
foreign exchange rate fluctuations, are 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

PAGE 69
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
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.

PAGE 70
There will normally be no meetings of shareholders for the
purpose of electing directors unless and until such time as less
than a majority of the directors holding office have been elected
by shareholders, at which time the directors then in office will
call a shareholders' meeting for the election of directors.
Except as set forth above, the directors shall continue to hold
office and may appoint successor directors. Voting rights are
not cumulative, so that the holders of more than 50% of the
shares voting in the election of directors can, if they choose to
do so, elect all the directors of the Fund, in which event the
holders of the remaining shares will be unable to elect any
person as a director. As set forth in the By-Laws of the
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 REGISTRATION OF SHARES

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

LEGAL COUNSEL

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

INDEPENDENT ACCOUNTANTS

PAGE 71
independent accountants are included in the Fund's Annual Report
for the year ended December 31, 1996. A copy of the Annual
Report accompanies this Statement of Additional Information. The
following financial statements and the report of independent
accountants appearing in the Annual Report for the year ended
December 31, 1996, are incorporated into this Statement of
Additional Information by reference:

EQUITY INCOME
PORTFOLIO
_________________

Report of Independent Accountants 13
Statement of Net Assets, December 31, 1996 5-8
Statement of Operations, year ended December 31, 1996 9
Statement of Changes in Net Assets, years ended
December 31, 1996 and December 31, 1995 10
Notes to Financial Statements, December 31, 1996 11-12
Financial Highlights 4

RATINGS OF CORPORATE DEBT SECURITIES

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

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

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

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

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

Ba - Bonds rated Ba are judged to have speculative elements:
their futures cannot be considered as well assured. Often the
protection of interest and principal payments may be very

PAGE 72
moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterize
bonds in this class.

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

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

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

Standard & Poor's Corporation (S&P)

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

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

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

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

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

PAGE 73

Fitch Investors Service, Inc.

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

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

PAGE 74

<PAGE>

PROSPECTUS

May 1, 1997
T. Rowe Price New America Growth Portfolio
<PAGE>

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 may decline, causing a loss.

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

Investment Manager

T. Rowe Price Equity Series, Inc.

Prospectus

May 1, 1997

T. ROWE PRICE 2
CONTENTS

ABOUT THE FUND

Financial Highlights 2
Fund, Market, and Risk Characteristics 3

ABOUT YOUR ACCOUNT

Pricing Shares and Receiving Sale Proceeds 6
Distributions and Taxes 7

MORE ABOUT THE FUND

Organization and Management 8
Understanding Performance Information 10
Investment Policies and Practices 11

ABOUT THE FUND
1
FINANCIAL HIGHLIGHTS
----------------------------------------------------------

<TABLE>
Table 1 Financial Highlights
<CAPTION>
<S> <S> <C> <C> <C> <C>
Income From Investment Activities

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

1994/a/ $ 10.00 $ 0.01 $ 0.09 $ 0.10
00
1995 10.10 0.03 5.12 5.15

1996 15.23 0.04 2.94 2.98
- ------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
Less Distributions Net Asset Value

Net Net Realized Total Net Asset
Investment Gain Distributions Value,
Income End of Period

-- -- -- $ 10.10
--
$ (0.02) -- $ (0.02) 15.23

(0.04) $ (0.50) (0.54) 17.67
- -------------------------------------------------------------------------------------
</TABLE>

<TABLE>
Table 1 Financial Highlights (continued)
<CAPTION>
<S> <C>

Period
Ended

1994/a/

1995

1996
- ------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Returns, Ratios, and Supplemental Data

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

1.00% $ 2,028 0.85%/b/ 0.15%/b/ 81.0%/b/ --
--
51.10 12,304 0.85 0.23 54.5 --

20.09 60,241 0.85 0.18 27.2 $ 0.0996
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

/a/ From March 31, 1994 (commencement of operations) to December 31, 1994.

/b/ Annualized.
<PAGE>

T. ROWE PRICE 4
FUND, MARKET, AND RISK CHARACTERISTICS: WHAT TO EXPECT
----------------------------------------------------------
To help you decide whether this fund is appropriate for you, this section
takes a closer look at its investment objective and approach.

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

What is the fund's objective?

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

What is the fund's investment program?

The fund will invest most of its assets in service companies, regardless of
size, that are believed by T. Rowe Price to be above-average performers in
their fields. Companies in the portfolio will range from larger blue chip
firms to small, rapidly growing companies. The fund may also invest up to 25%
of its assets in growth companies outside the service sector. Total return
will consist primarily of capital appreciation or depreciation.

Most of the assets will be invested in U.S. common stocks. However, the fund
may also purchase other types of securities, for example, foreign securities,
convertible securities and warrants, when consistent with the fund's
investment 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, media and communications, restaurants and food
distribution), business services (health care, computer services), and
financial services (insurance, investment services).

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

o The fund also includes companies whose prospects are closely tied to service
industries.

Why does the fund emphasize the service sector?

If service companies, which represent over 50% of the U.S. economy, outpace
overall economic growth, their stocks could generate above-average returns.
Share prices generally rise with earnings over time, so companies with
superior
<PAGE>

ABOUT THE FUND 5
earnings growth can provide investors with the opportunity for attractive
capital appreciation. In addition, service-oriented companies in general may
be more resistant to economic downturns because they have lower fixed costs,
are less capital intensive, and maintain smaller physical inventories than
manufacturing companies.

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

What is meant by a "growth" investment approach?

Sixty years ago, Thomas Rowe Price, Jr. 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.

o Growth investors look for companies with above-average earnings gains.

What are some of the fund's potential risks?

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

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

What are some of the fund's potential rewards?

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

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

<PAGE>

T. ROWE PRICE 6
periods of stagnation and recession. Share prices of all companies, even the
best managed and most profitable, can fall for any number of reasons, ranging
from lower-than-expected earnings to changes in investor psychology.
Significant trading by large institutional investors also can lead to price
declines. In addition, if our assessment of company prospects proves
incorrect, companies that our managers and analysts expect to do well may
perform poorly. Since 1950, the U.S. stock market has experienced 10 negative
years as well as steep drops of shorter duration. Its worst calendar quarter
return in recent years was -22.5% in 1987's fourth quarter.

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

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

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

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

<PAGE>

How and when shares are priced

How your purchase, sale, or exchange price is determined

How you can receive the proceeds from a sale

Dividends and Other Distributions

For a discussion of the tax status of your variable annuity contract, please
refer to the attached separate account prospectus.

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.
<PAGE>

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

How is the fund organized?

The T. Rowe Price Equity Series, Inc. (the "Corporation") 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
four series, each representing a separate class of shares having different
objectives and investment policies. The four series are: the New America
Growth Portfolio, the Equity Income Portfolio, and the Personal Strategy
Balanced Portfolio, which were all established in 1994; and the Mid-Cap
Growth Portfolio, established in 1996. The other three 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.

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

What is meant by "shares"?

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

Each share and fractional share entitles the shareholder to:

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

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

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

T. ROWE PRICE 10
Do T. Rowe Price funds have annual shareholder meetings?

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

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

Who runs the fund?

General Oversight

Portfolio Management

The fund has an Investment Advisory Committee composed of the following
members: John H. Laporte, Chairman, Marc L. Baylin, 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 its inception in 1994. 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 these and all other T. Rowe Price funds.

ABOUT YOUR ACCOUNT 11
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 Corporation 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.

T. ROWE PRICE 12
Total Return

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

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

Cumulative Total Return

Average Annual Total Return

ABOUT YOUR ACCOUNT 13
INVESTMENT POLICIES AND PRACTICES
----------------------------------------------------------
This section takes a detailed look at some of the types of securities the
fund may hold in its portfolio and the various kinds of investment practices
that may be used in day-to-day portfolio management. The fund's investment
program is subject to further restrictions and risks described in the
Statement of Additional Information.

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

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.

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

Types of Portfolio Securities

T. ROWE PRICE 14

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

Foreign Securities

The fund may invest in foreign securities. These include
nondollar-denominated securities traded outside of the U.S. and
dollar-denominated securities of foreign issuers traded in the U.S. (such as
ADRs). Such investments increase a portfolio's diversification and may
enhance return, but they also involve some special risks such as exposure to
potentially adverse local political and economic developments;
nationalization and exchange controls; potentially lower liquidity and higher
volatility; possible problems arising from accounting, disclosure,
settlement, and regulatory practices that differ from U.S. standards; and the
chance that fluctuations in foreign exchange rates will decrease the
investment's value (favorable changes can increase its value). These risks
are heightened for investments in developing countries, and there is no limit
on the amount of the fund's foreign investments that may be made in such
countries.

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

MORE ABOUT THE FUND 15
Hybrid Instruments
These instruments (a type of potentially high-risk derivative) can combine
the characteristics of securities, futures, and options. For example, the
principal amount, redemption, or conversion terms of a security could be
related to the market price of some commodity, currency, or securities index.
Such securities may bear interest or pay dividends at below market (or even
relatively nominal) rates. Under certain conditions, the redemption value of
such an investment could be zero.

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

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

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

Types of Management Practices

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

T. ROWE PRICE 16
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.

Managing Foreign Currency Risk
Investors in foreign securities may "hedge" their exposure to potentially
unfavorable currency changes by purchasing a contract to exchange one
currency for another on some future date at a specified exchange rate. In
certain circumstances, a "proxy currency" may be substituted for the currency
in which the investment is denominated, a strategy known as "proxy hedging."
Although foreign currency transactions will be used primarily to protect the
fund's foreign
<PAGE>

MORE ABOUT THE FUND 17
securities from adverse currency movements relative to the dollar, they
involve the risk that anticipated currency movements will not occur and the
fund's total return could be reduced.

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

Portfolio Turnover

The fund will not generally trade in securities for short-term profits, but,
when circumstances warrant, securities may be purchased and sold without
regard to the length of time held. The fund's portfolio turnover rate for the
fiscal years ended December 31, 1996 and 1995 were 27.2% and 54.5%,
respectively. For the fiscal period ended December 31, 1994, the fund's
annualized portfolio turnover rate was 81.0%.

PAGE 75
STATEMENT OF ADDITIONAL INFORMATION

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

T. Rowe Price New America Growth Portfolio

(the "Fund")

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.

The date of this Statement of Additional Information is May
1, 1997.

SAI-NAP 5/1/97

PAGE 76
TABLE OF CONTENTS

Page Page

Call and Put Options . 8 Investment Objective and
Capital Stock . . . . . . 55 Policies . . . . . . . . . 2
Code of Ethics . . . . . 44 Investment Performance . 33
Custodian . . . . . . . . 43 Investment Program . . . . 4
Dealer Options . . . . . 14 Investment Restrictions . 28
Distributor for Fund . . 42 Legal Counsel . . . . . . 57
Dividends . . . . . . . . 53 Lending of Portfolio
Federal Registration Securities . . . . . . . . 6
of Shares . . . . . . . 57 Management of Fund . . . 37
Foreign Currency Net Asset Value Per Share 52
Transactions . . . . . . 24 Portfolio Management
Foreign Securities . . . 3 Practices . . . . . . . . 6
Futures Contracts . . . . 15 Portfolio Transactions . 44
Hybrid Instruments . . . 4 Pricing of Securities . . 51
Illiquid or Restricted Principal Holders of
Securities . . . . . . . 5 Securities . . . . . . . 40
Independent Accountants . 57 Repurchase Agreements . . . 7
Investment Management Risk Factors . . . . . . . 2
Services . . . . . . . . 41 Shareholder Services . . 43
Tax Status . . . . . . . 53
Warrant . . . . . . . . 6

INVESTMENT OBJECTIVE AND POLICIES

PAGE 77
RISK FACTORS

General

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

PAGE 78
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:

Types 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.

PAGE 79
("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

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

PAGE 80
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

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

PAGE 81
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.

Other Lending/Borrowing

Repurchase Agreements

PAGE 82
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

PAGE 83
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. The Fund will not
write a covered call option if, as a result, the aggregate market
value of all portfolio securities or currencies covering written
call or put options exceeds 25% of the market value of the Fund's
net assets. In calculating the 25% limit, the Fund will offset,
against the value of assets covering written calls and puts, the
aggregate market value of all assets underlying purchased calls
and puts on identical securities or currencies with identical
maturity dates.

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

PAGE 84
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.

PAGE 85
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.

Writing Covered Put Options

PAGE 86
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

PAGE 87
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.

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

PAGE 88
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.

Dealer (Over-the-Counter) Options

PAGE 89
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.

Futures Contracts

Futures are a type of potentially high-risk derivative.

Transactions in Futures

The Fund may enter into futures contracts, including stock
index, interest rate and currency futures ("futures or futures
contracts").

PAGE 90
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.

Regulatory Limitations

PAGE 91
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%.

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.

Trading in Futures Contracts

PAGE 92
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.

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

PAGE 93
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

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

PAGE 94
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 cash, liquid high-grade
debt or other appropriate cover, equal in value to the current
value of the underlying instrument less the margin deposit.

PAGE 95
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.

In addition to the possibility that there might be an
imperfect correlation, or no correlation at all, between price

PAGE 96
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.

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

PAGE 97
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

Additional Futures and Options Contracts

Although the Fund has no current intention of engaging in
futures or options transactions other than those described above,

PAGE 98
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

PAGE 99
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.

PAGE 100
of the currency it has agreed to purchase exceeds the price of
the currency it has agreed to sell.

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

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.

PAGE 101
gain or loss regardless of the holding period of the instrument.
The Fund will be required to distribute net gains on such
transactions to shareholders even though it may not have closed
the transaction and received cash to pay such distributions.

Options, futures and forward foreign exchange contracts,
including options and futures on currencies, which offset a
foreign dollar denominated bond or currency position may be
considered straddles for tax purposes, in which case a loss on
any position in a straddle will be subject to deferral to the
extent of unrealized gain in an offsetting position. The holding
period of the securities or currencies comprising the straddle
will be deemed not to begin until the straddle is terminated.
For securities offsetting a purchased put, this adjustment of the
holding period may increase the gain from sales of securities
held less than three months. The holding period of the security
offsetting an "in-the-money qualified covered call" option on an
equity security will not include the period of time the option is
outstanding.

PAGE 102
are recognized for tax purposes, will not be considered gains on
securities or currencies held less than three months for purposes
of the 30% test.

INVESTMENT RESTRICTIONS

Fundamental Policies

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;

PAGE 103
(3) Industry Concentration. Purchase the securities of
any issuer if, as a result, more than 25% of the
value of the Fund's total assets would be invested in
the securities of issuers having their principal
business activities in the same industry;

(4) Loans. Make loans, although the Fund may (i) lend
portfolio securities and participate in an interfund
lending program with other Price Funds provided that
no such loan may be made if, as a result, the
aggregate of such loans would exceed 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;

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

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

PAGE 104
(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
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.

Operating Policies

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

PAGE 105
(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
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;

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

PAGE 106
(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) Short Sales. Effect short sales of securities;
or

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

INVESTMENT PERFORMANCE

Total Return Performance

The Fund's calculation of total return performance includes
the reinvestment of all capital gain distributions and income

PAGE 107
dividends for the period or periods indicated, without regard to
tax consequences to a shareholder in the Fund. Total return is
calculated as the percentage change between the beginning value
of a static account in the Fund and the ending value of that
account measured by the then current net asset value, including
all shares acquired through reinvestment of income and capital
gains dividends. The results shown are historical and should not
be considered indicative of the future performance of the Fund.
Each average annual compound rate of return is derived from the
cumulative performance of the Fund over the time period
specified. The annual compound rate of return for the Fund over
any other period of time will vary from the average.

Cumulative Performance Percentage Change

1 Yr. Since
Ended Inception to
12/31/96 12/31/96
___________ ___________

New America Growth Portfolio 20.09% 83.25%

Average Annual Compound Rates of Return

1 Yr. Since
Ended Inception to
12/31/96 12/31/96
___________ ___________

New America Growth Portfolio 20.09% 24.60%

Other Sources of Information

PAGE 108
information; (iii) indices of stocks comparable to those in which
the Fund invests; (iv) the performance of U.S. Government and
corporate bonds, notes and bills. (The purpose of these
comparisons would be to illustrate historical trends in different
market sectors so as to allow potential investors to compare
different investment strategies.); (2) the Consumer Price Index
(measure for inflation) may be used to assess the real rate of
return from an investment in the Fund; (3) other 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

PAGE 109
afford to spend and still preserve your purchasing power and
suggest how you might invest to reach your goal; Tax
Considerations for Investors discusses the tax advantages of
annuities and municipal bonds and how to access whether they are
suitable for your portfolio, reviews pros and cons of placing
assets in a gift to minors account and summarizes the benefits
and types of tax-deferred retirement plans currently available;
the Personal Strategy Planner simplifies investment decision
making by helping investors define personal financial goals,
establish length of time the investor intends to invest,
determine risk "comfort zone" and select diversified investment
mix; the How to Choose a Bond Fund guide which discusses how to
choose an appropriate bond fund for your portfolio; and
Diversifying Overseas: a T. Rowe Price Guide to International
Investing helps investors determine and implement an
international investment strategy that is appropriate for
particular investment needs. From time to time, other worksheets
and guides may be made available as well. Of course, an
investment in the Fund cannot guarantee that such goals will be
met.

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 12/31/96

50 years 20 years 10 years 5 years

Small-Company Stocks 14.44% 17.84% 12.98% 19.47%

Large-Company Stocks 12.59 14.55 15.28 15.20

Foreign Stocks N/A 15.29 8.74 8.48

Long-Term Corporate Bonds 5.76 9.71 9.48 8.52

Intermediate-Term U.S.
Gov't. Bonds 5.89 9.14 7.77 6.17

Treasury Bills 4.89 7.28 5.46 4.22

U.S. Inflation 4.08 5.15 3.70 2.89

PAGE 110

Performance of Retirement Portfolios*

Asset Mix Average Annualized Value
Returns 20 Years of
Ended 12/31/96 $10,000
Investment
After Period
________________ __________________ ____________

Nominal Real BestWorst
Portfolio Growth IncomeSafety ReturnReturn** YearYear

I. Low
Risk 40% 40% 20% 11.5% 6.3% 24.9% 0.1% $ 88,900

II. Moderate
Risk 60% 30% 10% 12.9% 7.7% 29.1% -1.8%$112,500

III. High
Risk 80% 20% 0% 14.1% 8.9% 33.4% -5.2%$140,300

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

* Based on actual performance for the 20 years ended 1996 of
stocks (85% Wilshire 5000 and 15% Europe, Australia, Far
East [EAFE] Index), bonds (Lehman Brothers Aggregate Bond
Index from 1976-95 and 30-day Treasury bills from January
1976 through December 1996. 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

PAGE 111
for illustrative purposes only and is not representative of
the performance of any T. Rowe Price fund.
** Based on inflation rate of 5.2% for the 20-year period
ended 12/31/96.

Redemptions in Kind

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
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

PAGE 112
President, Chief Operating Officer and Director, Homestake Mining
Company; Address: One Norwest Center, 1700 Lincoln Street, Suite
1950, Denver, Colorado 80203

HANNE M. MERRIMAN, Director--Retail business consultant;
formerly President and Chief Operating Officer (1991-92), Nan
Duskin, Inc., a women's specialty store, Director (1984-1990) and
Chairman (1989-90) Federal Reserve Bank of Richmond, and
President and Chief Executive Officer (1988-89), Honeybee, Inc.,
a division of Spiegel, Inc.; Director, Central Illinois Public
Service Company, CIPSCO Incorporated, The Rouse Company, State
Farm Mutual Automobile Insurance Company and USAir Group, Inc.;
Address: 3201 New Mexico Avenue, N.W., Suite 350, Washington,
D.C. 20016
HUBERT D. VOS, Director--President, Stonington Capital
Corporation, a private investment company; Address: 1231 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
Technologies Inc. and Stuart Medical, Inc.; Address: 755 Page
Mill Road, Suite A200, Palo Alto, California 94304
*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 Investment Services, Inc; President and Trust Officer,
T. Rowe Price Trust Company; Director, Rowe Price-Fleming
International, Inc. and Rhone-Poulenc Rorer, Inc.
*JOHN H. LAPORTE, JR., President and Director--Managing Director,
T. Rowe Price; Chartered Financial Analyst
BRIAN W.H. BERGHUIS, Executive Vice President--Vice President,
T. Rowe Price; Chartered Financial Analyst
MARC L. BAYLIN, Vice President--Assistant Vice President, T. Rowe
Price; formerly financial analyst, Rausher Pierce Refsnes
KARA M. CHESEBY, Vice President--Vice President, T. Rowe Price,
formerly (1996- ) Vice President, Legg Mason Wood Walker
GREGORY V. DONOVAN, Vice President--Vice President, T. Rowe Price
ROBERT N. GENSLER, Vice President--Vice President, T. Rowe Price
HENRY H. HOPKINS, Vice President--Managing Director, T. Rowe
Price; Vice President and Director, T. Rowe Price Investment
Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price
Trust Company; Vice President, Rowe Price-Fleming International,
Inc. and T. Rowe Price Retirement Plan Services, Inc.
THOMAS J. HUBER, Vice President--Employee, T. Rowe Price
CHARLES G. PEPIN, Vice President--Employee, T. Rowe Price
STEVEN B. ROORDA, Vice President--Vice President, T. Rowe Price

PAGE 113
BRIAN D. STANSKY, Vice President--Vice President, T. Rowe Price;
Chartered Financial Analyst
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
J. JEFFREY LANG, Assistant Vice President--Assistant Vice
President, T. Rowe Price
INGRID I. VORDEMBERGE, Assistant Vice President--Employee,
T. Rowe Price

The Fund's Executive Committee, comprised of Messrs.
Laporte and Riepe 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.

COMPENSATION TABLE

The Fund does not pay pension or retirement benefits to its
officers or directors. Also, any director of the Fund who is an
officer or employee of T. Rowe Price or Price-Fleming does not
receive any remuneration from the Fund.
_________________________________________________________________
Total Compensation
from Fund and
Name of Aggregate Fund Complex
Person, Compensation Paid to
Position from Fund(a) Directors(b)
_________________________________________________________________
Leo C. Bailey, $214 $42,083
Director(c)

Donald W. Dick, Jr., 969 72,917
Director

David K. Fagin, 873 59,167
Director

Addison Lanier, 214 42,083
Director(c)

PAGE 114
John K. Major, 224 34,167
Director

Hanne M. Merriman, 873 59,167
Director

Hubert D. Vos, 873 59,167
Director

Paul M. Wythes, 974 69,667
Director

PRINCIPAL HOLDERS OF SECURITIES

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

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

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

INVESTMENT MANAGEMENT SERVICES

Services Provided by T. Rowe Price

PAGE 115
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 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.

Management Fee

The Fund pays T. Rowe Price an annual all-inclusive fee
(the "Fee") of 0.85%. The Fee is paid monthly to 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.

PAGE 116
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

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

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 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.

PAGE 117
SHAREHOLDER SERVICES

CUSTODIAN

CODE OF ETHICS

PAGE 118
trading restrictions. In addition, employees are prohibited from
profiting from short-term trading (e.g., purchases and sales
involving the same security within 60 days). Any material
violation of the Code of Ethics is reported to the Board of the
Fund. The Board also reviews the administration of the Code of
Ethics on an annual basis.

PORTFOLIO TRANSACTIONS

Investment or Brokerage Discretion

How Brokers and Dealers are Selected

Equity Securities

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

PAGE 119
Fixed Income Securities

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

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

Description of Research Services Received from Brokers and
Dealers

PAGE 120
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.

Commissions to Brokers who Furnish Research Services

PAGE 121
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

PAGE 122
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

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

PAGE 123
common stock of such company would be held by its clients in the
aggregate.

Trade Allocation Policies

Transactions with Related Brokers and Dealers

PAGE 124
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.

Other

For the fiscal periods ended December 31, 1996, 1995, and
1994, the total brokerage commissions paid by the Fund, including
the discounts received by securities dealers in connection with
underwritings was $142,000, $45,000, and $15,700, respectively.
Of these commissions, approximately 30.7%, 19.9%, and 22.2%,
respectively, was paid to firms which provided research,
statistical or other services to T. Rowe Price in connection with
the management of the Fund, or in some cases, to the Fund. The
portfolio turnover rates of the Fund for the periods ended

PAGE 125
December 31, 1996, 1995, and 1994 were 27.2%, 54.5%, and 81.0%
(annualized), respectively.

PRICING OF SECURITIES

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

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

NET ASSET VALUE PER SHARE

The purchase and redemption price of the Fund's shares is
equal to the Fund's net asset value per share or share price.
The Fund determines its net asset value per share by subtracting
the Fund's liabilities (including accrued expenses and dividends
payable) from its total assets (the market value of the
securities the Fund holds plus cash and other assets, including
income accrued but not yet received) and dividing the result by
the total number of shares outstanding. The net asset value per
share of the Fund is 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

PAGE 126
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

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.

PAGE 127
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.

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
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.

PAGE 128
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
four series, T. Rowe Price Equity Income Portfolio, T. Rowe Price
Personal Strategy Portfolio, and T. Rowe Price New America Growth
Portfolio all established in 1994, and the T. Rowe Price Mid-Cap
Growth Portfolio established in 1996. Each series represents a
separate class of the Corporation's shares and has different
objectives and investment policies. The T. Rowe Price Equity
Income Portfolio, T. Rowe Price Personal Strategy Balanced
Portfolio, and the T. Rowe Price Mid-Cap Growth Portfolio are
each 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 129
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.

PAGE 130
Except as set forth above, the directors shall continue to hold
office and may appoint successor directors. Voting rights are
not cumulative, so that the holders of more than 50% of the
shares voting in the election of directors can, if they choose to
do so, elect all the directors of the Fund, in which event the
holders of the remaining shares will be unable to elect any
person as a director. As set forth in the By-Laws of the
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 REGISTRATION OF SHARES

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, Gateway International II, 1306
Concourse Drive, Suite 100, Linthicum, Maryland 21090-1020, are
independent accountants to the Fund. The financial statements of
the Fund for the year ended December 31, 1996, and the report of
independent accountants are included in the Fund's Annual Report
for the year ended December 31, 1996. A copy of the Annual
Report accompanies this Statement of Additional Information. The
following financial statements and the report of independent
accountants appearing in the Annual Report for the year ended

PAGE 131
December 31, 1996, are incorporated into this Statement of
Additional Information by reference:

NEW AMERICA GROWTH
PORTFOLIO
_________________

Report of Independent Accountants 10
Statement of Net Assets, December 31, 1996 5-6
Statement of Operations, year ended December 31, 1996 7
Statement of Changes in Net Assets, years ended
December 31, 1996 and December 31, 1995 8
Notes to Financial Statements, December 31, 1996 9
Financial Highlights 4

PAGE 132

<PAGE>

PROSPECTUS

May 1, 1997
T. Rowe Price Personal Strategy Balanced Portfolio
<PAGE>

FACTS AT A GLANCE

Investment Goal
The highest total return over time consistent with an emphasis on both capital
appreciation and income.

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

Strategy
Invests in a diversified portfolio of stocks, bonds, and money market
securities. The investment mix will be shifted gradually within specified
ranges according to the manager's outlook for the economy and the financial
markets.

To pursue both capital appreciation and income, the fund will invest
approximately 50% to 70% of assets in stocks with the remainder invested in
bonds and money market securities.

Risk/Reward
Higher risk and return than a bond fund but lower risk and return than a stock
fund. The fund's share price may decline causing a loss.

Investor Profile
Individuals who seek to match their investment goals, time horizon, and risk
tolerance with an investment that diversifies across several asset categories.

Investment Manager

T. Rowe Price Equity Series, Inc.

Prospectus

May 1, 1997

T. ROWE PRICE 2
CONTENTS

ABOUT THE FUND

Financial Highlights 2
Fund, Market, and Risk Characteristics 2

ABOUT YOUR ACCOUNT

Pricing Shares and Receiving Sale Proceeds 6
Distributions and Taxes 7

MORE ABOUT THE FUND

Organization and Management 8
Understanding Performance Information 11
Investment Policies and Practices 12

ABOUT THE FUND
1
FINANCIAL HIGHLIGHTS
----------------------------------------------------------

<TABLE>
Table 1 Financial Highlights
<CAPTION>
<S> <S> <C> <C> <C> <C>
Income From Investment Activities

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

1995/a/ $ 10.00 $ 0.42 $ 2.41 $ 2.83

1996 12.43 0.41 1.32 1.73
- ------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
Less Distributions Net Asset Value

Net Net Realized Total Ne t Asset
Investment Gain Distributions Value,
Income End of Period

$ (0.40) -- $ (0.40) $ 12.43

(0.41) $ (0.31) (0.72) 13.44
- -------------------------------------------------------------------------------------
</TABLE>

<TABLE>
Table 1 Financial Highlights (continued)
<CAPTION>
<S> <C>

Period
Ended

1995/a/

1996
- --------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Returns, Ratios, and Supplemental Data

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

28.66% $ 5,625 0.90% 3.69% 39.3% --

14.21 33,263 0.90 3.33 51.7 $ 0.0433
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

/a/ From December 30, 1994 (commencement of operations) to December 31, 1995.

FUND, MARKET, AND RISK CHARACTERISTICS: WHAT TO EXPECT
----------------------------------------------------------
This section takes a closer look at the fund's investment program as well as
some fundamentals of stock, bond, and money market investing.

What is the fund's objective?

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

o The fund should not be relied upon for short-term financial needs, nor be
used to play short-term swings in the stock or bond markets.
<PAGE>

T. ROWE PRICE 4
What is the fund's investment program?

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

What are the general characteristics and risk factors of these major asset
classes?

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

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

Share prices of all companies, even the best managed and most profitable, can
fall for any number of reasons, ranging from lower-than-expected earnings to
changes in investor psychology. Significant trading by large institutional
invetors also can lead to price declines. In addition, if our assessment of
company prospects proves incorrect, companies that our managers and analysts
expect to do well may perform poorly. Since 1950, the U.S. stock market has
experienced 10 negative years as well as steep drops of shorter duration. Its
worst calendar quarter return in recent years was -22.5% in 1987's fourth
quarter. For these reasons, equity investors should have a long-term
investment horizon and be willing to wait out bear markets.

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

The fund expects to invest primarily in bonds with investment-grade credit
ratings. However, the fund may also make investments in more volatile
below-investment-grade (or "junk") bonds, including bonds with the lowest
rating. Investment-grade securities include a range of securities from the
highest rated (AAA) to medium quality (BBB). Securities in the BBB category
may be more susceptible to price declines arising from adverse economic
conditions or
<PAGE>

ABOUT THE FUND 5
changing circumstances. The securities at the lower end of the BBB category
have certain speculative characteristics. Prices of junk bonds are usually
more affected by adverse economic conditions or a deterioration in the
issuer's financial circumstances than by overall changes in interest rates.
To compensate investors for higher credit risk exposure, such bonds usually
provide higher income. Please see High-Yield/High-Risk Investing for further
information on these investments.

o Money market securities are debt obligations issued primarily by the U.S.
government, government agencies, and corporations. The high credit ratings,
short maturities, and high liquidity of the fund's money market securities
should minimize its credit and market risk. The fund's low risk is usually
accompanied by low potential returns relative to other investments.

o For a more detailed discussion of the fund's investments and its risk
factors, please see Investment Policies and Practices.

How does the portfolio manager try to reduce risk?

Consistent with the fund's objective, the portfolio manager actively seeks to
reduce risk and increase total return. Risk management tools include:

o Broad diversification of assets to reduce the impact of a single holding or
asset class on the fund's share price.

o Gradual allocation changes among and within asset classes (stocks, bonds,
etc.) to take advantage of market opportunities and changing economic
conditions.

o Thorough research of stocks, bonds, and other securities by our analysts to
find the most favorable investment opportunities.

o The fund manager regularly reviews the asset allocation and may make gradual
changes, within the defined ranges, based on the outlook for the economy,
interest rates, and the financial markets. The fund will not attempt to time
short-term market moves.

What are the advantages of diversifying across stocks, bonds, and money market
securities?

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

T. ROWE PRICE 6
Diversification among asset classes is intended to reduce the risk associated
with investing in a single asset category; however, there is no guarantee the
strategy will always result in lower overall volatility for the fund.

Why include foreign securities?

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

o For a discussion of the effects of currency exchange rate fluctuations and
other special risks of foreign investing, please see Investment Policies and
Practices.

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

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

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

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

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

Yes. Although the fund will invest primarily in common stocks, bonds, and
money market securities, it can also make other investments which have
additional and different risks. Be sure to read Investment Policies and
Practices in Section 3, which discusses the principal types of portfolio
securities that the fund may purchase as well as the types of management
practices that the fund may use.
<PAGE>

How and when shares are priced

How your purchase, sale, or exchange price is determined

How you can receive the proceeds from a sale

Dividends and Other Distributions

For a discussion of the tax status of your variable annuity contract, please
refer to the attached separate account prospectus.

Foreign Transactions

If the fund pays nonrefundable taxes to foreign governments during the year,
the taxes will reduce the fund's dividends.
<PAGE>

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

How is the fund organized?

The T. Rowe Price Equity Series, Inc. (the "Corporation") 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
four series, each representing a separate class of shares having different
objectives and investment policies. The four series are: the Personal
Strategy Balanced Portfolio, the New America Growth Portfolio, and the Equity
Income Portfolio, which were all established in 1994; and the Mid-Cap Growth
Portfolio, established in 1996. The other three 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.

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

What is meant by "shares"?

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

Each share and fractional share entitles the shareholder to:

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

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

T. ROWE PRICE 10
Do T. Rowe Price funds have annual shareholder meetings?

Who runs the fund?

General Oversight

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

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

Day-to-day responsibility for managing the fund's investments lies with an
Investment Advisory Committee which includes Messrs. Boesel, Notzon, Peters,
Puglia, Reynolds, Testa, Van Dyke, Ward, and Whitney.

The Asset Allocation Committee has been acting in this role for T. Rowe Price
since 1990, and its members bring a wide range of investment experience to
this task. Members of the Investment Advisory Committee responsible for
making day-to-day portfolio decisions for the fund are each experienced
investment managers. Mr. Van Dyke has been managing investments since joining
T. Rowe Price in 1985. Mr. Boesel has been managing investments since joining
T. Rowe Price in 1973. Mr. Testa has been managing investments since joining
T. Rowe Price in 1972. Mr. Notzon joined T. Rowe Price in 1989 and has been
managing investments since 1991.

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

ABOUT YOUR ACCOUNT 11
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 0.90% 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.

T. ROWE PRICE 12
UNDERSTANDING PERFORMANCE INFORMATION
----------------------------------------------------------
This section should help you understand the terms used to describe fund
performance. You will come across them in shareholder reports you receive
from us.

Total Return

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

Cumulative Total Return

Average Annual Total Return

Total returns and yields 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.
<PAGE>

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.

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

Types of Portfolio Securities

T. ROWE PRICE 14
Bonds
A bond is an interest-bearing security- an IOU-issued by companies or
governmental units. The issuer has a contractual obligation to pay interest
at a stated rate on specific dates and to repay principal (the bond's face
value) on a specified date. An issuer may have the right to redeem or "call"
a bond before maturity, and the investor may have to reinvest the proceeds at
lower market rates.

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

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

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

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

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

MORE ABOUT THE FUND 15
depreciation of the underlying stock into which they are convertible, but to
a lesser degree. In recent years, convertibles have been developed which
combine higher or lower current income with options and other features.
Warrants are options to buy a stated number of shares of common stock at a
specified price anytime during the life of the warrants (generally, two or
more years).

Foreign Securities

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

Asset-Backed Securities

An underlying pool of assets, such as credit card or automobile trade
receivables or corporate loans or bonds, backs these bonds and provides the
interest and principal payments to investors. On occasion, the pool of assets
may also include a swap obligation, which is used to change the cash flows on
the underlying assets. As an example, a swap may be used to allow floating
rate assets to back a fixed rate obligation. Credit quality depends primarily
on the quality of the underlying assets, the level of credit support, if any,
provided by the issuer, and the credit quality of the swap counterparty, if
any. The underlying assets (i.e., loans) are subject to prepayments which can
shorten the securities' weighted average life and may lower their return. The
value of these securities also may change because of actual or perceived
changes in the creditworthiness of the originator, the servicing agent, the
financial institution providing the credit support, or of the swap
counterparty. There is no limit on the fund's investment in these securities.

Mortgage-Backed Securities
The fund may invest in a variety of mortgage-backed securities. Mortgage
lenders pool individual home mortgages with similar characteristics to back a
certificate or bond, which is sold to investors such as the fund. Interest
and principal payments generated by the underlying mortgages are passed
through
<PAGE>

T. ROWE PRICE 16
to the investors. The "big three" issuers are the Government National
Mortgage Association (GNMA), the Federal National Mortgage Association
(Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac).
GNMA certificates are backed by the full faith and credit of the U.S.
government, while others, such as Fannie Mae and Freddie Mac certificates,
are only supported by the ability to borrow from the U.S. Treasury or
supported only by the credit of the agency. Private mortgage bankers and
other institutions also issue mortgage-backed securities.

Mortgage-backed securities are subject to scheduled and unscheduled principal
payments as homeowners pay down or prepay their mortgages. As these payments
are received, they must be reinvested when interest rates may be higher or
lower than on the original mortgage security. Therefore, these securities are
not an effective means of locking in long-term interest rates. In addition,
when interest rates fall, the pace of mortgage prepayments picks up. These
refinanced mortgages are paid off at face value (par), causing a loss for any
investor who may have purchased the security at a price above par. In such an
environment, this risk limits the potential price appreciation of these
securities and can negatively affect the fund's net asset value. When rates
rise, the prices of mortgage-backed securities can be expected to decline,
although historically these securities have experienced smaller price
declines than comparable quality bonds. In addition, when rates rise, and
prepayments slow, the effective duration of mortgage-backed securities
extends resulting in increased volatility.

o Collateralized Mortgage Obligations (CMOs) CMOs are debt securities that are
fully collateralized by a portfolio of mortgages or mortgage-backed
securities. All interest and principal payments from the underlying mortgages
are passed through to the CMOs in such a way as to create, in most cases,
more definite maturities than is the case with the underlying mortgages. CMOs
may pay fixed or variable rates of interest, and certain CMOs have priority
over others with respect to the receipt of prepayments.

o Stripped Mortgage Securities Stripped mortgage securities (a type of
potentially high-risk derivative) are created by separating the interest and
principal payments generated by a pool of mortgage-backed securities or a CMO
to create additional classes of securities. Generally, one class receives
only interest payments (IOs) and one principal payments (POs). Unlike other
mortgage-backed securities and POs, the value of IOs tends to move in the
same direction as interest rates. The fund could use IOs as a hedge against
falling prepayment rates (interest rates are rising) and/or a bear market
environment. POs can be used as a hedge against rising prepayment rates
(interest rates are falling) and/or a bull market environment. IOs and POs
are acutely sensitive to interest rate changes and to the rate of principal
prepayments.
<PAGE>

MORE ABOUT THE FUND 17
A rapid or unexpected increase in prepayments can severely depress the price
of IOs, while a rapid or unexpected decrease in prepayments could have the
same effect on POs. These securities are very volatile in price and may have
lower liquidity than most other mortgage-backed securities. Certain
non-stripped CMOs may also exhibit these qualities, especially those that pay
variable rates of interest that adjust inversely with and more rapidly than
short-term interest rates. In addition, if interest rates rise rapidly and
prepayment rates slow more than expected, certain CMOs, in addition to losing
value, can exhibit characteristics of longer securities and become more
volatile. There is no guarantee the fund's investment in CMOs, IOs, or POs
will be successful, and the fund's total return could be adversely affected
as a result.

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

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

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

Hybrid Instruments
These instruments (a type of potentially high-risk derivative) can combine
the characteristics of securities, futures, and options. For example, the
principal amount or interest rate of a hybrid could be tied (positively or
negatively) to the price of some commodity, currency, or securities index or
another interest rate (each a "benchmark"). Hybrids can be used as an
efficient means of pursuing a variety of investment goals, including currency
hedging, duration management,
<PAGE>

T. ROWE PRICE 18
and increased total return. Hybrids may not bear interest or pay dividends.
The value of a hybrid or its interest rate may be a multiple of a benchmark
and, as a result, may be leveraged and move (up or down) more steeply and
rapidly than the benchmark. These benchmarks may be sensitive to economic and
political events, such as commodity shortages and currency devaluations,
which cannot be readily foreseen by the purchaser of a hybrid. Under certain
conditions, the redemption value of a hybrid could be zero. Thus, an
investment in a hybrid may entail significant market risks that are not
associated with a similar investment in a traditional, U.S.
dollar-denominated bond that has a fixed principal amount and pays a fixed
rate or floating rate of interest. The purchase of hybrids also exposes the
fund to the credit risk of the issuer of the hybrid. These risks may cause
significant fluctuations in the net asset value of the fund.

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

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

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

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

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

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

MORE ABOUT THE FUND 19
Types of Management Practices

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

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

T. ROWE PRICE 20
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.

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

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

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

MORE ABOUT THE FUND 21
When-Issued Securities and Forward Commitment Contracts
The fund may purchase securities on a when-issued or delayed delivery basis
or may purchase or sell securities on a forward commitment basis. There is no
limit on the fund's investment in these securities. The price of these
securities is fixed at the time of the commitment to buy, but delivery and
payment can take place a month or more later. During the interim period, the
market value of the securities can fluctuate, and no interest accrues to the
purchaser. At the time of delivery, the value of the securities may be more
or less than the purchase or sale price. To the extent the fund remains fully
or almost fully invested (in securities with a remaining maturity of more
than one year) at the same time it purchases these securities, there will be
greater fluctuations in the fund's net asset value than if the fund did not
purchase them.

Portfolio Turnover

The fund will not generally trade in securities (either common stocks or
bonds) for short-term profits, but when circumstances warrant, securities may
be purchased and sold without regard to the length of time held. A high
turnover cost may increase transaction costs and result in additional taxable
gains. The fund's portfolio turnover rates for the fiscal periods ended
December 31, 1996 and 1995 were 51.7% and 39.3%, respectively.

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

Table 2 shows the rating scale used by the major rating agencies. T. Rowe
Price considers publicly available ratings, but emphasizes its own credit
analysis when selecting investments.
<PAGE>

T. ROWE PRICE 22
<TABLE>
Table 2
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratings of Corporate Debt Securities
Moody's Standard Fitch Definition
Investor & Poor's Investors
Services Services Services, Inc.
Long Term Aaa AAA AAA Highest quality

Aa AA AA High quality

A A A Upper medium grade

Baa BBB BBB Medium grade

Ba BB BB Speculative

B B B Highly speculative
C
Caa CCC, CC CCC, CC Vulnerable to default
C
Ca C C Default is imminent

C D DDD, DD, D Probably in default
Moody's S&P Fitch
Commercial P-1 Superior quality A-1+ Extremely strong F-1+ Exceptionally strong quality
Paper
C
A-1 Strong quality F-1 Very strong quality
C
P-2 Strong quality A-2 Satisfactory quality F-2 Good credit quality
C
P-3 Acceptable quality A-3 Adequate quality F-3 Fair credit quality
C
B Speculative quality F-3 Weak credit quality
C
C Doubtful quality
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

MORE ABOUT THE FUND 23
<PAGE>

T. ROWE PRICE 24
<PAGE>

MORE ABOUT THE FUND 25

PAGE 133
STATEMENT OF ADDITIONAL INFORMATION

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

T. Rowe Price Personal Strategy Balanced 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, 1997, which
may be obtained by contacting your insurance company.

The date of this
Statement of Additional Information is May 1, 1997.

SAI-PSP 5/1/97

PAGE 134
TABLE OF CONTENTS

Page Page

Asset-Backed Securities15 Lending of Portfolio
Capital Stock . . . . . . 60 Securities . . . . . . 22
Code of Ethics . . . . . 47 Management of Fund . . . 42
Custodian . . . . . . . . 46 Mortgage-Related Securities 9
Description of the Fund . 46 Net Asset Value Per Share 52
Distributor for Fund . . 53 Options . . . . . . . . 24
Dividends and Organization of the Fund 22
Distributions . . . . . 61 Portfolio Management
Federal Registration Practices . . . . . . . 22
of Shares . . . . . . . 35 Portfolio Transactions . 47
Foreign Currency Pricing of Securities . 52
Transactions . . . . . . 35 Principal Holders of
Foreign Futures and Securities . . . . . . 44
Options . . . . . . . . 29 Ratings of Commercial
Futures Contracts . . . . 19 Paper . . . . . . . . . 62
Hybrid Instruments . . . 62 Ratings of Corporate
Independent Accountants . 21 Debt Securities . . . . 63
Illiquid or Restricted Repurchase Agreements . 23
Securities . . . . . . . 45 Risk Factors of Foreign
Investment Management Investing . . . . . . . . 4
Services . . . . . . . . 2 Shareholder Services . . 21
Investment Objectives and Tax Status . . . . . . . 53
Policies . . . . . . . . 54 Taxation of Foreign
Investment Performance . 8 Shareholders . . . . . 32
Investment Program . . . 38 Warrants . . . . . . . . 18
Investment Restrictions . 34 When-Issued Securities and
Legal Counsel . . . . . . 61 Forward Commitment
Contracts . . . . . . . 20
Yield Information . 22

INVESTMENT OBJECTIVES AND POLICIES

The following information supplements the discussion of the
Fund's investment objective and policies discussed in the Fund's
prospectus. The Fund will not make a material change in its
investment objective without obtaining shareholder approval.
Unless otherwise specified, the investment program and
restrictions of the Fund are not fundamental policies. The
Fund's operating policies are subject to change by the Board of
Directors without shareholder approval. However, shareholders
will be notified of a material change in an operating policy.
The Fund's fundamental policies may not be changed without the

PAGE 135
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 value of the
portfolio securities of the Fund will fluctuate based upon market
conditions. Although the Fund seeks to reduce risk by investing
in a diversified portfolio, such diversification does not
eliminate all risk. There can, of course, be no assurance that
the Fund will achieve its investment objective.

Debt Obligations

Yields on short, intermediate, and long-term securities are
dependent on a variety of factors, including the general
conditions of the money and bond markets, the size of a
particular offering, the maturity of the obligation, and the
credit quality and rating of the issue. Debt securities with
longer maturities tend to have higher yields and are generally
subject to potentially greater capital appreciation and
depreciation than obligations with shorter maturities and lower
yields. The market prices of debt securities usually vary,
depending upon available yields. An increase in interest rates
will generally reduce the value of portfolio debt securities, and
a decline in interest rates will generally increase the value of
portfolio debt securities. The ability of the Fund to achieve
its investment objective is also dependent on the continuing
ability of the issuers of the debt securities in which the Fund
invests to meet their obligations for the payment of interest and
principal when due. Although the Fund seeks to reduce risk by
portfolio diversification, credit analysis, and attention to
trends in the economy, industries and financial markets, such
efforts will not eliminate all risk. There can, of course, be no
assurance that the Fund will achieve its investment objective.

After purchase by the Fund, a debt security may cease to be
rated or its rating may be reduced below the minimum required for
purchase by the Fund. For the Prime Reserve and U.S. Treasury

PAGE 136
Money Funds, the procedures set forth in Rule 2a-7, under the
Investment Company Act of 1940, may require the prompt sale of
any such security. For the other Funds, neither event will
require a sale of such security by the Fund. However, T. Rowe
Price will consider such event in its determination of whether
the Fund should continue to hold the security. To the extent
that the ratings given by Moody's or S&P may change as a result
of changes in such organizations or their rating systems, the
Fund will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained
in the prospectus. When purchasing unrated securities, T. Rowe
Price, under the supervision of the Fund's Board of Directors,
determines whether the unrated security is of a qualify
comparable to that which the Fund is allowed to purchase.

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.

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

The market value of adjustable rate mortgage securities
("ARMs"), like other U.S. government securities, will generally
vary inversely with changes in market interest rates, declining
when interest rates rise and rising when interest rates decline.
Because of their periodic adjustment feature, ARMs should be more
sensitive to short-term interest rates than long-term rates.
They should also display less volatility than long-term mortgage

PAGE 137
securities. Thus, while having less risk of a decline during
periods of rapidly rising rates, ARMs may also have less
potential for capital appreciation than other investments of
comparable maturities. Interest rate caps on mortgages
underlying ARM securities may prevent income on the ARM from
increasing to prevailing interest rate levels and cause the
securities to decline in value. In addition, to the extent ARMs
are purchased at a premium, mortgage foreclosures and unscheduled
principal prepayments may result in some loss of the holders'
principal investment to the extent of the premium paid. On the
other hand, if ARMs are purchased at a discount, both a scheduled
payment of principal and an unscheduled prepayment of principal
will increase current and total returns and will accelerate the
recognition of income which when distributed to shareholders will
be taxable as ordinary income.

Risk Factors of Foreign Investing

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

Governments in certain foreign countries continue to
participate to a significant degree, through ownership interest

PAGE 138
or regulation, in their respective economies. Action by these
governments could have a significant effect on market prices of
securities and payment of dividends. The economies of many
foreign countries are heavily dependent upon international trade
and are accordingly affected by protective trade barriers and
economic conditions of their trading partners. The enactment by
these trading partners of protectionist trade legislation could
have a significant adverse effect upon the securities markets of
such countries.

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

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

PAGE 139
trade at price/earnings multiples higher than comparable United
States securities and such levels may not be sustainable. Fixed
commissions on foreign stock exchanges are generally higher than
negotiated commissions on United States exchanges, although the
Funds will endeavor to achieve the most favorable net results on
their portfolio transactions. There is generally less government
supervision and regulation of foreign stock exchanges, brokers
and listed companies than in the United States. Moreover,
settlement practices for transactions in foreign markets may
differ from those in United States markets. Such differences may
include delays beyond periods customary in the United States and
practices, such as delivery of securities prior to receipt of
payment, which increase the likelihood of a "failed settlement."
Failed settlements can result in losses to a Fund.

Investment Funds. The Funds may invest in investment funds
which have been authorized by the governments of certain
countries specifically to permit foreign investment in securities
of companies listed and traded on the stock exchanges in these
respective countries. The Funds' investment in these funds is
subject to the provisions of the 1940 Act. If the Funds invest
in such investment funds, the Funds' shareholders will bear not
only their proportionate share of the expenses of the Funds
(including operating expenses and the fees of the investment
manager), but also will bear indirectly similar expenses of the
underlying investment funds. In addition, the securities of
these investment funds may trade at a premium over their net
asset value.

Other. With respect to certain foreign countries,
especially developing and emerging ones, there is the possibility

PAGE 140
of adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitations on the
removal of funds or other assets of the Funds, political or
social instability, or diplomatic developments which could affect
investments by U.S. persons in those countries.

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

Latin America

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

PAGE 141
Inflation. Most Latin American countries have experienced,
at one time or another, severe and persistent levels of
inflation, including, in some cases, hyperinflation. This has,
in turn, led to high interest rates, extreme measures by
governments to keep inflation in check and a generally
debilitating effect on economic growth. Although inflation in
many countries has lessened, there is no guarantee it will remain
at lower levels.

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

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

Special Risks of Investing in Junk Bonds

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

PAGE 142
Youth and Growth of the Lower Rated Debt Securities Market.
The market for lower rated debt securities is relatively new and
its growth has paralleled a long economic expansion. Past
experience may not, therefore, provide an accurate indication of
future performance of this market, particularly during periods of
economic recession. An economic downturn or increase in interest
rates is likely to have a greater negative effect on this market,
the value of lower rated debt securities in the Fund's portfolio,
the Fund's net asset value and the ability of the bonds' issuers
to repay principal and interest, meet projected business goals
and obtain additional financing than on higher rated securities.
These circumstances also may result in a higher incidence of
defaults than with respect to higher rated securities. An
investment in this Fund is more speculative than investment in
shares of a fund which invests only in higher rated debt
securities.

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

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

PAGE 143
market. To the extent the Fund owns or may acquire illiquid or
restricted lower rated securities, these securities may involve
special registration responsibilities, liabilities and costs, and
liquidity and valuation difficulties. Changes in values of debt
securities which the Fund owns will affect its net asset value
per share. If market quotations are not readily available for
the Fund's lower rated or nonrated securities, these securities
will be valued by a method that the Fund's Board of Directors
believes accurately reflects fair value. Judgment plays a
greater role in valuing lower rated debt securities than with
respect to securities for which more external sources of
quotations and last sale information are available.

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

INVESTMENT PROGRAM

Types of Securities

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

Debt Securities

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

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

U.S. Government Agency Securities. Issued or guaranteed by
U.S. Government sponsored enterprises and federal agencies.

PAGE 144
These include securities issued by the Federal National Mortgage
Association, Government National Mortgage Association, Federal
Home Loan Bank, Federal Land Banks, Farmers Home Administration,
Banks for Cooperatives, Federal Intermediate Credit Banks,
Federal Financing Bank, Farm Credit Banks, the Small Business
Association, and the Tennessee Valley Authority. Some of these
securities are supported by the full faith and credit of the U.S.
Treasury; and the remainder are supported only by the credit of
the instrumentality, which may or may not include the right of
the issuer to borrow from the Treasury.

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

Corporate Debt Securities. Outstanding nonconvertible
corporate debt securities (e.g., bonds and debentures).
Corporate notes may have fixed, variable, or floating rates.

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

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

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

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

Mortgage-Related Securities

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

Mortgage-Backed Securities. Mortgage-backed securities are
securities representing an interest in a pool of mortgages. The

PAGE 145
mortgages may be of a variety of types, including adjustable
rate, conventional 30-year fixed rate, graduated payment, and 15-
year. Principal and interest payments made on the mortgages in
the underlying mortgage pool are passed through to the Fund. This
is in contrast to traditional bonds where principal is normally
paid back at maturity in a lump sum. Unscheduled prepayments of
principal shorten the securities' weighted average life and may
lower their total return. (When a mortgage in the underlying
mortgage pool is prepaid, an unscheduled principal prepayment is
passed through to the Fund. This principal is returned to the
Fund at par. As a result, if a mortgage security were trading at
a premium, its total return would be lowered by prepayments, and
if a mortgage security were trading at a discount, its total
return would be increased by prepayments.) The value of these
securities also may change because of changes in the market's
perception of the creditworthiness of the federal agency that
issued them. In addition, the mortgage securities market in
general may be adversely affected by changes in governmental
regulation or tax policies.

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

Ginnie Mae Certificates. Ginnie Mae is a wholly-owned
corporate instrumentality of the United States within the
Department of Housing and Urban Development. The National

PAGE 146
Housing Act of 1934, as amended (the "Housing Act"), authorizes
Ginnie Mae to guarantee the timely payment of the principal of
and interest on certificates that are based on and backed by a
pool of mortgage loans insured by the Federal Housing
Administration under the Housing Act, or Title V of the Housing
Act of 1949 ("FHA Loans"), or guaranteed by the Department of
Veterans Affairs under the Servicemen's Readjustment Act of 1944,
as amended ("VA Loans"), or by pools of other eligible mortgage
loans. The Housing Act provides that the full faith and credit
of the United States government is pledged to the payment of all
amounts that may be required to be paid under any guaranty. In
order to meet its obligations under such guaranty, Ginnie Mae is
authorized to borrow from the United States Treasury with no
limitations as to amount.

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

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

Farmer Mac Certificates. The Federal Agricultural Mortgage
Corporation ("Farmer Mac") is a federally chartered
instrumentality of the United States established by Title VIII of
the Farm Credit Act of 1971, as amended ("Charter Act"). Farmer
Mac was chartered primarily to attract new capital for financing
of agricultural real estate by making a secondary market in
certain qualified agricultural real estate loans. Farmer Mac
provides guarantees of timely payment of principal and interest
on securities representing interests in, or obligations backed
by, pools of mortgages secured by first liens on agricultural
real estate ("Farmer Mac Certificates"). Similar to Fannie Mae

PAGE 147
and Freddie Mac, Farmer Mac's Certificates are not supported by
the full faith and credit of the U.S. Government; rather, Farmer
Mac may borrow up from the U.S. Treasury to meet its guaranty
obligations.

When mortgages in the pool underlying a Mortgage-Backed
Security are prepaid by mortgagors or by result of foreclosure,
such principal payments are passed through to the certificate
holders. Accordingly, the life of the Mortgage-Backed Security
is likely to be substantially shorter than the stated maturity of
the mortgages in the underlying pool. Because of such variation
in prepayment rates, it is not possible to predict the life of a
particular Mortgage-Backed Security, but FHA statistics indicate
that 25- to 30-year single family dwelling mortgages have an
average life of approximately 12 years. The majority of Ginnie
Mae Certificates are backed by mortgages of this type, and,
accordingly, the generally accepted practice treats Ginnie Mae
Certificates as 30-year securities which prepay full in the 12th
year. FNMA and Freddie Mac Certificates may have differing
prepayment characteristics.

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

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

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

PAGE 148

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

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

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

PAGE 149
Collateralized Mortgage Obligations (CMOs). CMOs are bonds
that are collateralized by whole loan mortgages or mortgage pass-
through securities. The bonds issued in a CMO deal are divided
into groups, and each group of bonds is referred to as a
"tranche." Under the traditional CMO structure, the cash flows
generated by the mortgages or mortgage pass-through securities in
the collateral pool are used to first pay interest and then pay
principal to the CMO bondholders. The bonds issued under a CMO
structure are retired sequentially as opposed to the pro rata
return of principal found in traditional pass-through
obligations. Subject to the various provisions of individual CMO
issues, the cash flow generated by the underlying collateral (to
the extent it exceeds the amount required to pay the stated
interest) is used to retire the bonds. Under the CMO structure,
the repayment of principal among the different tranches is
prioritized in accordance with the terms of the particular CMO
issuance. The "fastest-pay" tranche of bonds, as specified in
the prospectus for the issuance, would initially receive all
principal payments. When that tranche of bonds is retired, the
next tranche, or tranches, in the sequence, as specified in the
prospectus, receive all of the principal payments until they are
retired. The sequential retirement of bond groups continues
until the last tranche, or group of bonds, is retired.
Accordingly, the CMO structure allows the issuer to use cash
flows of long maturity, monthly-pay collateral to formulate
securities with short, intermediate and long final maturities and
expected average lives.

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

The primary risk of any mortgage security is the uncertainty
of the timing of cash flows. For CMOs, the primary risk results
from the rate of prepayments on the underlying mortgages serving
as collateral. An increase or decrease in prepayment rates
(resulting from a decrease or increase in mortgage interest
rates) will affect the yield, average life and price of CMOs.
The prices of certain CMOs, depending on their structure and the

PAGE 150
rate of prepayments, can be volatile. Some CMOs may also not be
as liquid as other securities.

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

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

The staff of the Securities and Exchange Commission has
advised the Fund that it believes the Fund should treat IOs and
POs, other than government-issued IOs or POs backed by fixed rate
mortgages, as illiquid securities and, accordingly, limit its
investments in such securities, together with all other illiquid
securities, to 15% of the Fund's net assets. Under the Staff's
position, the determination of whether a particular
government-issued IO and PO backed by fixed rate mortgages may be
made on a case by case basis under guidelines and standards
established by the Fund's Board of Directors/Trustees. The

PAGE 151
Fund's Board of Directors/Trustees has delegated to T. Rowe Price
the authority to determine the liquidity of these investments
based on the following guidelines: the type of issuer; type of
collateral, including age and prepayment characteristics; rate of
interest on coupon relative to current market rates and the
effect of the rate on the potential for prepayments; complexity
of the issue's structure, including the number of tranches; size
of the issue and the number of dealers who make a market in the
IO or PO. The Fund will treat non-government-issued IOs and POs
not backed by fixed or adjustable rate mortgages as illiquid
unless and until the Securities and Exchange Commission modifies
its position.

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

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

Characteristics of Adjustable Rate Mortgage Securities -
Interest Rate Indices. The interest rates paid on adjustable
rate securities are readjusted periodically to an increment over
some predetermined interest rate index. Such readjustments occur
at intervals ranging from one to 60 months. There are three main
categories of indexes: (1) those based on U.S. Treasury
securities (2) those derived from a calculated measure such as a
cost of funds index ("COFI") or a moving average of mortgage
rates and (3) those based on actively traded or prominently
posted short-term, interest rates. Commonly utilized indexes
include the one-year, three-year and five-year constant maturity

PAGE 152
Treasury rates, the three-month Treasury bill rate, the 180-day
Treasury bill rate, rates on longer-term Treasury securities, the
11th District Federal Home Loan Bank Cost of Funds, the National
Median Cost of Funds, the one-month, three-month, six-month or
one-year London Interbank Offered Rate (LIBOR), the prime rate of
a specific bank, or commercial paper rates. Some indexes, such
as the one-year constant maturity Treasury rate, closely mirror
changes in market interest rate levels. Others, such as the 11th
District Home Loan Bank Cost of Funds index, tend to lag behind
changes in market rate levels. The market value of the Fund's
assets and of the net asset value of the Fund's shares will be
affected by the length of the adjustment period, the degree of
volatility in the applicable indexes and the maximum increase or
decrease of the interest rate adjustment on any one adjustment
date, in any one year and over the life of the securities. These
maximum increases and decreases are typically referred to as
"caps" and "floors", respectively.

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

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

PAGE 153
Caps and Floors. ARMs will frequently have caps and floors
which limit the maximum amount by which the interest rate to the
residential borrower may move up or down, respectively, each
adjustment period and over the life of the loan. Interest rate
caps on ARM securities may cause them to decrease in value in an
increasing interest rate environment. Such caps may also prevent
their income from increasing to levels commensurate with
prevailing interest rates. Conversely, interest rate floors on
ARM securities may cause their income to remain higher than
prevailing interest rate levels and result in an increase in the
value of such securities. However, this increase may be tempered
by the acceleration of prepayments.

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

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

Asset-Backed Securities

The credit quality of most asset-backed securities depends
primarily on the credit quality of the assets underlying such
securities, how well the entity issuing the security is insulated
from the credit risk of the originator or any other affiliated
entities and the amount and quality of any credit support
provided to the securities. The rate of principal payment on
asset-backed securities generally depends on the rate of
principal payments received on the underlying assets which in

PAGE 154
turn may be affected by a variety of economic and other factors.
As a result, the yield on any asset-backed security is difficult
to predict with precision and actual yield to maturity may be
more or less than the anticipated yield to maturity. Asset-
backed securities may be classified as pass-through certificates
or collateralized obligations.

Pass-through certificates are asset-backed securities which
represent an undivided fractional ownership interest in an
underlying pool of assets. Pass-through certificates usually
provide for payments of principal and interest received to be
passed through to their holders, usually after deduction for
certain costs and expenses incurred in administering the pool.
Because pass-through certificates represent an ownership interest
in the underlying assets, the holders thereof bear directly the
risk of any defaults by the obligors on the underlying assets not
covered by any credit support. See "Types of Credit Support".

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

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

This is accomplished typically through creation of one or more
classes whose right to payments on the asset-backed security is
made subordinate to the right to such payments of the remaining
class or classes. See "Types of Credit Support". Second,
multiple classes may permit the issuance of securities with
payment terms, interest rates or other characteristics differing

PAGE 155
both from those of each other and from those of the underlying
assets. Examples include so-called "strips" (asset-backed
securities entitling the holder to disproportionate interests
with respect to the allocation of interest and principal of the
assets backing the security), and securities with class or
classes having characteristics which mimic the characteristics of
non-asset-backed securities, such as floating interest rates
(i.e., interest rates which adjust as a specified benchmark
changes) or scheduled amortization of principal.

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

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

PAGE 156
provided on each issue is based generally on historical
information respecting the level of credit risk associated with
such payments. Delinquency or loss in excess of that anticipated
could adversely affect the return on an investment in an asset-
backed security.

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

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

PAGE 157
Credit Card Receivable Securities. The Fund may invest in
Asset Backed Securities backed by receivables from revolving
credit card agreements ("Credit Card Receivable Securities").
Credit balances on revolving credit card agreements ("Accounts")
are generally paid down more rapidly than are Automobile
Contracts. Most of the Credit Card Receivable Securities issued
publicly to date have been Pass-Through Certificates. In order
to lengthen the maturity of Credit Card Receivable Securities,
most such securities provide for a fixed period during which only
interest payments on the underlying Accounts are passed through
to the security holder and principal payments received on such
Accounts are used to fund the transfer to the pool of assets
supporting the related Credit Card Receivable Securities of
additional credit card charges made on an Account. The initial
fixed period usually may be shortened upon the occurrence of
specified events which signal a potential deterioration in the
quality of the assets backing the security, such as the
imposition of a cap on interest rates. The ability of the issuer
to extend the life of an issue of Credit Card Receivable
Securities thus depends upon the continued generation of
additional principal amounts in the underlying accounts during
the initial period and the non-occurrence of specified events.
An acceleration in cardholders' payment rates or any other event
which shortens the period during which additional credit card
charges on an Account may be transferred to the pool of assets
supporting the related Credit Card Receivable Security could
shorten the weighted average life and yield of the Credit Card
Receivable Security.

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

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

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

PAGE 158
Zero Coupon and Pay-in-Kind Bonds

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

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

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

Warrants

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

PAGE 159
Hybrid Instruments

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

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

PAGE 160
guarantee that the strategy will be successful and the Fund could
lose money if, for example, interest rates do not move as
anticipated or credit problems develop with the issuer of the
Hybrid.

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

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

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

PAGE 161
Hybrid Instruments may also carry liquidity risk since the
instruments are often "customized" to meet the portfolio needs of
a particular investor, and therefore, the number of investors
that are willing and able to buy such instruments in the
secondary market may be smaller than that for more traditional
debt securities. In addition, because the purchase and sale of
Hybrid Instruments could take place in an over-the-counter market
without the guarantee of a central clearing organization or in a
transaction between the Fund and the issuer of the Hybrid
Instrument, the creditworthiness of the counter party or issuer
of the Hybrid Instrument would be an additional risk factor which
the Fund would have to consider and monitor. Hybrid Instruments
also may not be subject to regulation of the Commodities Futures
Trading Commission ("CFTC"), which generally regulates the
trading of commodity futures by U.S. persons, the SEC, which
regulates the offer and sale of securities by and to U.S.
persons, or any other governmental regulatory authority.

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

When-Issued Securities and Forward Commitment Contracts

The Fund may purchase securities on a "when-issued" or
delayed delivery basis ("When-Issueds") and may purchase
securities on a forward commitment basis ("Forwards"). Any or
all of the Fund's investments in debt securities may be in the
form of When-Issueds and Forwards. The price of such securities,
which may be expressed in yield terms, is fixed at the time the
commitment to purchase is made, but delivery and payment take
place at a later date. Normally, the settlement date occurs
within 90 days of the purchase for When-Issueds, but may be
substantially longer for Forwards. During the period between
purchase and settlement, no payment is made by the Fund to the
issuer and no interest accrues to the Fund. The purchase of
these securities will result in a loss if their value declines
prior to the settlement date. This could occur, for example, if
interest rates increase prior to settlement. The longer the
period between purchase and settlement, the greater the risks
are. At the time the Fund makes the commitment to purchase these
securities, it will record the transaction and reflect the value

PAGE 162
of the security in determining its net asset value. The Fund
will cover these securities by maintaining cash and/or liquid,
high-grade debt securities with its custodian bank equal in value
to commitments for them during the time between the purchase and
the settlement. Therefore, the longer this period, the longer
the period during which alternative investment options are not
available to the Fund (to the extent of the securities used for
cover). Such securities either will mature or, if necessary, be
sold on or before the settlement date.

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

Additional Adjustable Rate Securities

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

Variable Rate Securities. Variable rate instruments are
those whose terms provide for the adjustment of their interest
rates on set dates and which, upon such adjustment, can
reasonably be expected to have a market value that approximates
its par value. A variable rate instrument, the principal amount
of which is scheduled to be paid in 397 days or less, is deemed
to have a maturity equal to the period remaining until the next
readjustment of the interest rate. A variable rate instrument
which is subject to a demand feature entitles the purchaser to
receive the principal amount of the underlying security or
securities, either (i) upon notice of no more than 30 days or
(ii) at specified intervals not exceeding 397 days and upon no
more than 30 days' notice, is deemed to have a maturity equal to
the longer of the period remaining until the next readjustment of
the interest rate or the period remaining until the principal
amount can be recovered through demand.

Floating Rate Securities. Floating rate instruments are
those whose terms provide for the adjustment of their interest

PAGE 163
rates whenever a specified interest rate changes and which, at
any time, can reasonably be expected to have a market value that
approximates its par value. The maturity of a floating rate
instrument is deemed to be the period remaining until the date
(noted on the face of the instrument) on which the principal
amount must be paid, or in the case of an instrument called for
redemption, the date on which the redemption payment must be
made. Floating rate instruments with demand features are deemed
to have a maturity equal to the period remaining until the
principal amount can be recovered through demand.

Put Option Bonds. Long-term obligations with maturities
longer than one year may provide purchasers an optional or
mandatory tender of the security at par value at predetermined
intervals, often ranging from one month to several years (e.g., a
30-year bond with a five-year tender period). These instruments
are deemed to have a maturity equal to the period remaining to
the put date.

Illiquid or Restricted Securities

PAGE 164
consider whether securities purchased under Rule 144A are
illiquid and thus subject to the Fund's restriction of investing
no more than 15% of its net assets in illiquid securities. A
determination of whether a Rule 144A security is liquid or not is
a question of fact. In making this determination, T. Rowe Price
will consider the trading markets for the specific security
taking into account the unregistered nature of a Rule 144A
security. In addition, T. Rowe Price could consider the (1)
frequency of trades and quotes, (2) number of dealers and
potential purchases, (3) dealer undertakings to make a market,
and (4) the nature of the security and of marketplace trades
(e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer). The liquidity
of Rule 144A securities would be monitored, and if as a result of
changed conditions it is determined that a Rule 144A security is
no longer liquid, the Fund's holdings of illiquid securities
would be reviewed to determine what, if any, steps are required
to assure that the Fund does not invest more than 15% of its net
assets in illiquid securities. Investing in Rule 144A securities
could have the effect of increasing the amount of the Fund's
assets invested in illiquid securities if qualified institutional
buyers are unwilling to purchase such securities.

PORTFOLIO MANAGEMENT PRACTICES

Lending of Portfolio Securities

Securities loans are made to broker-dealers or institutional
investors or other persons, pursuant to agreements requiring that
the loans be continuously secured by collateral at least equal at
all times to the value of the securities lent marked to market on
a daily basis. The collateral received will consist of cash,
U.S. government securities, letters of credit or such other
collateral as may be permitted under its investment program.
While the securities are being lent, the Fund will continue to
receive the equivalent of the interest or dividends paid by the
issuer on the securities, as well as interest on the investment
of the collateral or a fee from the borrower. The Fund has a
right to call each loan and obtain the securities on five
business days' notice or, in connection with securities trading
on foreign markets, within such longer period of time which
coincides with the normal settlement period for purchases and
sales of such securities in such foreign markets. The Fund will
not have the right to vote 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

PAGE 165
extensions of secured credit, consist of possible delay in
receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral should
the borrower fail financially. Loans will only be made to firms
deemed by T. Rowe Price to be of good standing and will not be
made unless, in the judgment of T. Rowe Price, the consideration
to be earned from such loans would justify the risk.

Other Lending/Borrowing

Subject to approval by the Securities and Exchange
Commission and certain state regulatory agencies, the Fund may
make loans to, or borrow funds from, other mutual funds sponsored
or advised by T. Rowe Price or Rowe Price-Fleming International,
Inc. (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.
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.

PAGE 166
Reverse Repurchase Agreements

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

Options

Options are a type of potentially high risk derivative.

Writing Covered Call Options

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

PAGE 167
the underlying security or currency or other assets in accordance
with the rules of a clearing corporation.

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

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

PAGE 168
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.

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

PAGE 169
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 not write a covered call option if, as a
result, the aggregate market value of all portfolio securities or
currencies covering written call or put options exceeds 25% of
the market value of the Fund's net assets. In calculating the
25% limit, the Fund will offset, against the value of assets
covering written calls and puts, the aggregate market value of
all assets underlying purchased calls and puts on identical
securities or currencies with identical maturity dates.

Writing Covered Put Options

PAGE 170
clearing corporation currently require that such assets be
deposited in escrow to secure payment of the exercise price.)

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

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

Purchasing Put Options

PAGE 171
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.

Purchasing Call Options

PAGE 172
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.

Dealer (Over-the-Counter) Options

PAGE 173
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.

Futures Contracts

Futures are a type of potentially high-risk derivative.

Transactions in Futures

The Fund may enter into futures contracts, including stock
index, interest rate and currency futures ("futures or futures
contracts").

PAGE 174
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.

Regulatory Limitations

PAGE 175
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%.

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

Trading in Futures Contracts

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

PAGE 176
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.

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.

As an example of an offsetting transaction in which the
underlying instrument is not delivered, the contractual

PAGE 177
obligations arising from the sale of one contract of September
Treasury Bills on an exchange may be fulfilled at any time before
delivery of the contract is required (i.e., on a specified date
in September, the "delivery month") by the purchase of one
contract of September Treasury Bills on the same exchange. In
such instance, the difference between the price at which the
futures contract was sold and the price paid for the offsetting
purchase, after allowance for transaction costs, represents the
profit or loss to the Fund.

A futures contract on the Standard & Poor's 500 Stock Index,
composed of 500 selected common stocks, most of which are listed
on the New York Stock Exchange, provides an example of how
futures contracts operate. The S&P 500 Index assigns relative
weightings to the common stocks included in the Index, and the
Index fluctuates with changes in the market values of those
common stocks. In the case of futures contracts on the S&P 500
Index, the contracts are to buy or sell 500 units. Thus, if the
value of the S&P 500 Index were $150, one contract would be worth
$75,000 (500 units x $150). The contract specifies that no
delivery of the actual stocks making up the index will take
place. Instead, settlement in cash occurs. Over the life of the
contract, the gain or loss realized by the Fund will equal the
difference between the purchase (or sale) price of the contract
and the price at which the contract is terminated. For example,
if the Fund enters into the example contract above and the S&P
500 Index is at $154 on the termination date, the Fund will gain
$2,000 (500 units x gain of $4). If, however, the S&P 500 Index
is at $148 on that future date, the Fund will lose $1,000 (500
units x loss of $2).

Special Risks of Transactions in Futures Contracts

PAGE 178
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 cash, liquid high-grade
debt or other appropriate cover, equal in value to the current
value of the underlying instrument less the margin deposit.

PAGE 179
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.

PAGE 180
the Fund would lose part or all of the benefit of increased value
of those underlying instruments that it has hedged, because it
would have offsetting losses in its futures positions. In
addition, in such situations, if the Fund had insufficient cash,
it might have to sell underlying instruments to meet daily
variation margin requirements. Such sales of underlying
instruments might be, but would not necessarily be, at increased
prices (which would reflect the rising market). The Fund might
have to sell underlying instruments at a time when it would be
disadvantageous to do so.

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

Options on Futures Contracts

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

PAGE 181
option, the delivery of the futures position by the writer of the
option to the holder of the option will be accompanied by the
delivery of the accumulated balance in the writer's futures
margin account which represents the amount by which the market
price of the futures contract, at exercise, exceeds (in the case
of a call) or is less than (in the case of a put) the exercise
price of the option on the futures contract. Purchasers of
options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.

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

Special Risks of Transactions in Options on Futures Contracts

PAGE 182
exchange would continue to be exercisable in accordance with
their terms. There is no assurance that higher than anticipated
trading activity or other unforeseen events might not, at times,
render certain of the facilities of any of the clearing
corporations inadequate, and thereby result in the institution by
an exchange of special procedures which may interfere with the
timely execution of customers' orders.

Additional Futures and Options Contracts

Foreign Futures and Options

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

PAGE 183
Foreign Currency Transactions

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

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.

PAGE 184
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. Third, the Fund may use forward
contracts when the Fund wishes to hedge out of the dollar into a
foreign currency in order to create a synthetic bond or money
market instrument--the security would be issued in U.S. dollars
but the dollar component would be transformed into a foreign
currency through a forward contract.

The Fund may enter into forward contacts for any other
purpose consistent with 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, currency available for cover of the forward
contract(s) or other suitable cover. In determining the amount
to be delivered under a contract, the Fund may net offsetting
positions.

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

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

PAGE 185
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.

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.

PAGE 186
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.

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

PAGE 187
are recognized for tax purposes, will not be considered gains on
securities or currencies held less than three months for purposes
of the 30% test.

INVESTMENT RESTRICTIONS

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

Fundamental Policies

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

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

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

PAGE 188
(3) Industry Concentration. Purchase the securities
of any issuer if, as a result, more than 25% of
the value of the Fund's total assets would be
invested in the securities of issuers having their
principal business activities in the same
industry;

(4) Loans. Make loans, although the Fund may (i) lend
portfolio securities and participate in an
interfund lending program with other Price Funds
provided that no such loan may be made if, as a
result, the aggregate of such loans would exceed
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,
including limited partnership interests thereon,
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);

PAGE 189
(8) Senior Securities. Issue senior securities except
in compliance with the Investment Company Act of
1940; or

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

NOTES

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

With respect to investment restrictions (1) and
(4) the Fund will not borrow from or lend to any
other T. Rowe Price Fund unless each Fund applies
for and receives an exemptive order from the SEC
or the SEC issues rules permitting such
transactions. The 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 instruments to be commodities.

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.

PAGE 190
For purposes of investment restriction (5), the
Fund will consider a repurchase agreement fully
collateralized with U.S. government securities to
be U.S. government securities.

Operating Policies

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

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

(b) 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) Equity Securities. Purchase any common stocks or
other equity securities, except as set forth in
its prospectus and operating policy on investment
companies;

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

(5) Illiquid Securities. Purchase illiquid securities
and securities of unseasoned issuers if, as a
result, more than 15% of a Fund's net assets would
be invested in such securities;

PAGE 191
(6) Investment Companies. Purchase securities of
open-end or closed-end investment companies except
in compliance with the Investment Company Act of
1940;

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

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

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

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

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

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

PAGE 192
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.

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 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.

PAGE 193
PAUL M. WYTHES, Director--Founding General Partner, Sutter Hill
Ventures, a venture capital limited partnership, providing equity
capital to young high technology companies throughout the United
States; Director, Teltone Corporation, Interventional
Technologies Inc. and Stuart Medical, Inc.; Address: 755 Page
Mill Road, Suite A200, Palo Alto, California 94304
*M. DAVID TESTA, Chairman of the Board--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
*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 Investment Services, Inc; President and Trust Officer,
T. Rowe Price Trust Company; Director, Rowe Price-Fleming
International, Inc. and Rhone-Poulenc Rorer, Inc.
*JOHN H. LAPORTE, JR., Vice President and Director--Managing
Director, T. Rowe Price; Chartered Financial Analyst
PETER VAN DYKE, President--Managing Director, T. Rowe Price; Vice
President of Rowe Price-Fleming International, Inc. and T. Rowe
Price Trust Company
STEPHEN W. BOESEL, Executive Vice President--Managing Director,
T. Rowe Price
EDMUND M. NOTZON, Executive Vice President--Vice President,
T. Rowe Price and T. Rowe Price Trust Company
LARRY J. PUGLIA, Executive Vice President--Vice President,
T. Rowe Price; Chartered Financial Analyst
HENRY H. HOPKINS, Vice President--Managing Director, T. Rowe
Price; Vice President and Director, T. Rowe Price Investment
Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price
Trust Company; Vice President, Rowe Price-Fleming International,
Inc. and T. Rowe Price Retirement Plan Services, Inc.
HEATHER R. LANDON, Vice President--Vice President, T. Rowe Price
and T. Rowe Price Trust Company
DONALD J. PETERS, Vice President--Vice President, T. Rowe Price;
formerly portfolio manager, Geewax Terker and Company
WILLIAM T. REYNOLDS, Vice President--Managing Director, T. Rowe
Price; Chartered Financial Analyst
BRIAN C. ROGERS, Vice President--Managing Director, T. Rowe
Price; Chartered Financial Analyst
MARK J. VASELKIV, Vice President--Vice President, T. Rowe Price
J. WARD
RICHARD T. WHITNEY, Vice President--Vice President, T. Rowe
Price; Chartered Financial Analyst
LENORA V. HORNUNG, Secretary--Vice President, T. Rowe Price

PAGE 194
PATRICIA S. BUTCHER, Assistant Secretary--Assistant Vice
President, T. Rowe Price and T. Rowe Price Investment Services,
Inc.
CARMEN F. DEYESU, Treasurer--Vice President, T. Rowe Price,
T. Rowe Price Services, Inc., and T. Rowe Price Trust Company
DAVID S. MIDDLETON, Controller--Vice President, T. Rowe Price,
T. Rowe Price Services, Inc., and T. Rowe Price Trust Company
J. JEFFREY LANG, Assistant Vice President--Assistant Vice
President, T. Rowe Price
C. MUNOZ, Assistant Vice President--Employee, T. Rowe Price,
Chartered Financial Analyst
INGRID I. VORDEMBERGE, Assistant Vice President--Employee,
T. Rowe Price

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.

COMPENSATION TABLE

The Fund does not pay pension or retirement benefits to
its officers or directors. Also, any director of the Fund who is
an officer or employee of T. Rowe Price or Price-Fleming does not
receive any remuneration from the Fund.
_________________________________________________________________
Total Compensation
from Fund and
Name of Aggregate Fund Complex
Person, Compensation Paid to
Position from Fund(a) Directors(b)
_________________________________________________________________
Leo C. Bailey, $212 $42,083
Director(c)

Donald W. Dick Jr., 958 72,917
Director

David K. Fagin, 844 59,167
Director

Addison Lanier, 212 42,083
Director(c)

PAGE 195
John K. Major, 215 34,167
Director

Hanne M. Merriman, 844 59,167
Director

Hubert D. Vos, 844 59,167
Director

Paul M. Wythes, 959 69,667
Director

PRINCIPAL HOLDERS OF SECURITIES

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

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

INVESTMENT MANAGEMENT SERVICES

Services

Under the Management Agreement, T. Rowe Price provides the
Fund with discretionary investment services. Specifically, T.
Rowe Price is responsible for supervising and directing the
investments of the Fund in accordance with the Fund's investment
objectives, program, and restrictions as provided in its
prospectus and this Statement of Additional Information. T. Rowe
Price is also responsible for effecting all security transactions
on behalf of the Fund, including the negotiation of commissions

PAGE 196
and the allocation of principal business and portfolio brokerage.
In addition to these services, T. Rowe Price provides the Fund
with certain corporate administrative services, including:
maintaining the Fund's corporate existence and corporate records;
registering and qualifying Fund shares under federal laws;
monitoring the financial, accounting, and administrative
functions of the Fund; maintaining liaison with the agents
employed by the Fund such as the Fund's custodian and transfer
agent; assisting the Fund in the coordination of such agents'
activities; and permitting T. Rowe Price's employees to serve as
officers, directors, and committee members of the Fund without
cost to the Fund.

The Management Agreement also provides that T. Rowe Price,
its directors, officers, employees, and certain other persons
performing specific functions for the Fund will only be liable to
the Fund for losses resulting from willful misfeasance, bad
faith, gross negligence, or reckless disregard of duty.

Management Fee

The Fund pays T. Rowe Price an annual all-inclusive fee (the
"Fee") of 0.90%. The Fee is paid monthly to 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.

PAGE 197
charges; such a fee, if charged, may be retained by the Fund or
paid to T. Rowe Price.

DISTRIBUTOR FOR FUND

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

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

SHAREHOLDER SERVICES

PAGE 198
The Fund from time to time may enter into agreements with
outside parties through which shareholders hold Fund shares. The
shares would be held by such parties in omnibus accounts. The
agreements would provide for payments by the Fund to the outside
party for such shareholder services provided to shareholders in
the omnibus accounts.

CUSTODIAN

State Street Bank and Trust Company (the "Bank") is the
custodian for the Fund's domestic securities and cash, but it
does not participate in the Fund's investment decisions.
Portfolio securities purchased in the U.S. are maintained in the
custody of 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 as are approved by the Fund's Board of
Directors/Trustees in accordance with regulations under the
Investment Company Act of 1940. State Street Bank's main office
is at 225 Franklin Street, Boston, Massachusetts 02110. The
address for The Chase Manhattan Bank, N.A., London is Woolgate
House, Coleman Street, London, EC2P 2HD, England.

CODE OF ETHICS

PAGE 199
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. The Fund's purchases
and sales of fixed-income portfolio securities are normally done
on a principal basis and do not involve the payment of a
commission although they may involve the designation of selling
concessions. That part of the discussion below relating solely
to brokerage commissions would not normally apply to the Fund
(except to the extent it purchases equity securities. However,
it is included because T. Rowe Price does manage a significant
number of common stock portfolios which do engage in agency
transactions and pay commissions and because some research and
services resulting from the payment of such commissions may
benefit the Fund.

How Brokers and Dealers are Selected

Equity Securities

PAGE 200
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

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

PAGE 201
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.

PAGE 202
research and non-research use of the product or service and
allocates brokerage only with respect to the research component.

Commissions to Brokers who Furnish Research Services

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

Internal Allocation Procedures

PAGE 203
various investment committees, and the Trading Department each
seek to evaluate the brokerage and research services they receive
from brokers or dealers and make judgments as to the level of
business which would recognize such services. In addition,
brokers or dealers sometimes suggest a level of business they
would like to receive in return for the various brokerage and
research services they provide. Actual brokerage received by any
firm may be less than the suggested allocations but can, and
often does, exceed the suggestions, because the total business is
allocated on the basis of all the considerations described above.
In no case is a broker or dealer excluded from receiving business
from T. Rowe Price because it has not been identified as
providing research services.

Miscellaneous

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

PAGE 204
cases, where the aggregate order is executed in a series of
transactions at various prices on a given day, each participating
client's proportionate share of such order reflects the average
price paid or received with respect to the total order. T. Rowe
Price has established a general investment policy that it will
ordinarily not make additional purchases of a common stock of a
company for its clients (including the T. Rowe Price Funds) if,
as a result of such purchases, 10% or more of the outstanding
common stock of such company would be held by its clients in the
aggregate.

Trade Allocation Policies

PAGE 205
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 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
("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

PAGE 206
For the fiscal period ended December 31, 1996 and 1995, the
total brokerage commissions paid by the Fund, including the
discounts received by securities dealers in connection with
underwritings was $52,000 and $7,200, respectively. Of these
commissions, approximately 30.8% and 6.2% was paid to firms which
provided research, statistical or other services to T. Rowe Price
in connection with the management of the Fund, or in some cases
to the Fund. The portfolio turnover rates of the Fund for the
fiscal years ended December 31, 1996 and 1995 were 51.7% and
39.3%, respectively.

PRICING OF SECURITIES

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 amortized cost which, when combined with accrued
interest, approximates fair value.

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

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

PAGE 207
NET ASSET VALUE PER SHARE

The purchase and redemption price of the Fund's shares is
equal to the Fund's net asset value per share or share price.
The Fund determines its net asset value per share by subtracting
the Fund's liabilities (including accrued expenses and dividends
payable) from its total assets (the market value of the
securities the Fund holds plus cash and other assets, including
income accrued but not yet received) and dividing the result by
the total number of shares outstanding. The net asset value per
share of the Fund is normally calculated as of the close of
trading on the New York Stock Exchange ("NYSE") every day the
NYSE is open for trading. The NYSE is closed on the following
days: New Year's Day, Washington's Birthday, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.

Determination of net asset value (and the offering, sale
redemption and repurchase of shares) for the Fund may be
suspended at times (a) during which the NYSE is closed, other
than customary weekend and holiday closings, (b) during which
trading on the NYSE is restricted, (c) during which an emergency
exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net
assets, or (d) during which a governmental body having
jurisdiction over the Fund may by order permit such a suspension
for the protection of the Fund's shareholders; provided that
applicable rules and regulations of the Securities and Exchange
Commission (or any succeeding governmental authority) shall
govern as to whether the conditions prescribed in (b), (c), or
(d) exist.

DIVIDENDS AND DISTRIBUTIONS

Unless you elect otherwise, the Fund's annual capital gain
distribution, if any, will be reinvested on the reinvestment date
using the NAV per share of that date. The reinvestment date
normally precedes the payment date by about 10 days although the
exact timing is subject to change.

PAGE 208
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).

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.

PAGE 209
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 fund's expenses (management fees and operating expenses)
shareholders will also indirectly bear similar expenses of such
funds. Capital gains on the sale of such holdings will be deemed
to be ordinary income regardless of how long the Fund holds its
investment. In addition, the Fund may be subject to corporate
income tax and an interest charge on certain dividends and
capital gains earned from these investments, regardless of
whether such income and gains are distributed to shareholders.

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

Foreign Currency Gains and Losses

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

INVESTMENT PERFORMANCE

Total Return Performance

PAGE 210
calculated as the percentage change between the beginning value
of a static account in the Fund and the ending value of that
account measured by the then current net asset value, including
all shares acquired through reinvestment of income and capital
gains dividends. The results shown are historical and should not
be considered indicative of the future performance of the Fund.
Each average annual compound rate of return is derived from the
cumulative performance of the Fund over the time period
specified. The annual compound rate of return for the Fund over
any other period of time will vary from the average.

Cumulative Performance Percentage Change

1 Yr. Since
Ended Inception to
12/31/96 12/31/96
___________ ___________

Personal Strategy Balanced
Portfolio 14.21% 46.94%

Average Annual Compound Rates of Return

1 Yr. Since
Ended Inception to
12/31/96 12/31/96
___________ ___________

Personal Strategy Balanced
Portfolio 14.21% 21.22%

Outside Sources of Information

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

Advertising News Service, Inc., "Bank Rate Monitor+ - The
Weekly Financial Rate Reporter" is a weekly publication which
lists the yields on various money market instruments offered

PAGE 211
to the public by 100 leading banks and thrift institutions in
the U.S., including loan rates offered by these banks. Bank
certificates of deposit differ from mutual funds in several
ways: the interest rate established by the sponsoring bank is
fixed for the term of a CD; there are penalties for early
withdrawal from CDs; and the principal on a CD is insured.

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

First Boston High Yield Index. It shows statistics on the
Composite Index and analytical data on new issues in the
marketplace and low-grade issuers.

Lipper Analytical Services, Inc., "Lipper-Fixed Income Fund
Performance Analysis" is a monthly publication which tracks
net assets, total return, principal return and yield on
approximately 950 fixed income mutual funds offered in the
United States.

Merrill Lynch, Pierce, Fenner & Smith, Inc., "Taxable Bond
Indices" is a monthly publication which lists principal,
coupon and total return on over 100 different taxable bond
indices tracked by Merrill Lynch, together with the par
weighted characteristics of each Index. The index used as a
benchmark for the High Yield Fund is the High Yield Index.
The two indices used as benchmarks for the Short-Term Bond
Fund are the 91-Day Treasury Bill Index and the 1-2.99 Year
Treasury Note Index.

Morningstar, Inc., is a widely used independent research firm
which rates mutual funds by overall performance, investment
objectives and assets.

Salomon Brothers Inc., "Analytical Record of Yields and Yield
Spreads" is a publication which tracks historical yields and
yield spreads on short-term market rates, public obligations
of the U.S. Treasury and agencies of the U.S. government,
public corporate debt obligations, municipal debt obligations
and preferred stocks.

PAGE 212
Salomon Brothers Inc., "Bond Market Round-up" is a weekly
publication which tracks the yields and yield spreads on a
large, but select, group of money market instruments, public
corporate debt obligations, and public obligations of the
U.S. Treasury and agencies of the U.S. Government.

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

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

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

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

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

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

Other Features and Benefits

PAGE 213
The Fund is a member of the T. Rowe Price Family of Funds and
may help investors achieve various long-term investment goals,
such as investing money for retirement, saving for a down payment
on a home, or paying college costs. To explain how the Fund
could be used to assist investors in planning for these goals and
to illustrate basic principles of investing, various worksheets
and guides prepared by T. Rowe Price Associates, Inc. and/or T.
Rowe Price Investment Services, Inc. may be made available.
These currently include: the Asset Mix Worksheet which is
designed to show shareholders how to reduce their investment risk
by developing a diversified investment plan: the College Planning
Guide which discusses various aspects of financial planning to
meet college expenses and assists parents in projecting the costs
of a college education for their children; the Retirement
Planning Kit (also available in a PC version) which includes a
detailed workbook to determine how much money you may need for
retirement and suggests how you might invest to reach your goal;
and the Retirees Financial Guide which includes a detailed
workbook to determine how much money you can afford to spend and
still preserve your purchasing power and suggest how you might
invest to reach your goal; Tax Considerations for Investors
discusses the tax advantages of annuities and municipal bonds and
how to access whether they are suitable for your portfolio,
reviews pros and cons of placing assets in a gift to minors
account and summarizes the benefits and types of tax-deferred
retirement plans currently available; the Personal Strategy
Planner simplifies investment decision making by helping
investors define personal financial goals, establish length of
time the investor intends to invest, determine risk "comfort
zone" and select diversified investment mix; the How to Choose a
Bond Fund guide which discusses how to choose an appropriate bond
fund for your portfolio; and Diversifying Overseas: a T. Rowe
Price Guide to International Investing helps investors determine
and implement an international investment strategy that is
appropriate for particular investment needs. From time to time,
other worksheets and guides may be made available as well. Of
course, an investment in the Fund cannot guarantee that such
goals will be met.

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

PAGE 214
Historical Returns for Different Investments

Annualized returns for periods ended 12/31/96

50 years 20 years 10 years 5 years

Small-Company Stocks 14.44% 17.84% 12.98% 19.47%

Large-Company Stocks 12.59 14.55 15.28 15.20

Foreign Stocks N/A 15.29 8.74 8.48

Long-Term Corporate Bonds 5.76 9.71 9.48 8.52

Intermediate-Term U.S.
Gov't. Bonds 5.89 9.14 7.77 6.17

Treasury Bills 4.89 7.28 5.46 4.22

U.S. Inflation 4.08 5.15 3.70 2.89

PAGE 215
Performance of Retirement Portfolios*

Asset Mix Average Annualized Value
Returns 20 Years of
Ended 12/31/96 $10,000
Investment
After Period
________________ __________________ ____________

Nominal Real BestWorst
Portfolio Growth IncomeSafety ReturnReturn** YearYear

I. Low
Risk 40% 40% 20% 11.5% 6.3% 24.9% 0.1% $ 88,900

II. Moderate
Risk 60% 30% 10% 12.9% 7.7% 29.1% -1.8%$112,500

III. High
Risk 80% 20% 0% 14.1% 8.9% 33.4% -5.2%$140,300

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

Insights

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

PAGE 216
investing, investing in small companies, tax-free investing,
fixed income investing, investing in mortgage-backed securities,
as well as other topics and strategies.

Other Publications

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

Redemptions in Kind

Issuance of Fund Shares for Securities

Transactions involving issuance of Fund shares for
securities or assets other than cash will be limited to (1) bona
fide reorganizations; (2) statutory mergers; or (3) other
acquisitions of portfolio securities that: (a) meet the
investment objective and policies of the Fund; (b) are acquired
for investment and not for resale except in accordance with
applicable law; (c) have a value that is readily ascertainable
via listing on or trading in a recognized United States or
international exchange or market; and (d) are not illiquid.

CAPITAL STOCK

PAGE 217
T. Rowe Price Equity Income Portfolio and T. Rowe Price New
America Growth Portfolio established in 1994, and T. Rowe Price
Mid-Cap Growth Portfolio established in 1996. Each series
represents a separate class of the Corporation's shares and has
different objectives and investment policies. The T. Rowe Price
Equity Income Portfolio, T. Rowe Price New America Growth
Portfolio, and T. Rowe Price Mid-Cap Growth Portfolio are each
described in 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 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.

PAGE 218
Participants. Fund shares for which Contract Holders or
Participants are entitled to give voting instructions, but as to
which no voting instructions are received, and shares owned by
the insurance companies or affiliated companies in the separate
accounts, will be voted in proportion to the shares for which
voting instructions have been received.

There will normally be no meetings of shareholders for the
purpose of electing directors unless and until such time as less
than a majority of the directors holding office have been elected
by shareholders, at which time the directors then in office will
call a shareholders' meeting for the election of directors.
Except as set forth above, the directors shall continue to hold
office and may appoint successor directors. Voting rights are
not cumulative, so that the holders of more than 50% of the
shares voting in the election of directors can, if they choose to
do so, elect all the directors of the Fund, in which event the
holders of the remaining shares will be unable to elect any
person as a director. As set forth in the By-Laws of the
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 REGISTRATION OF SHARES

LEGAL COUNSEL

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

PAGE 219
INDEPENDENT ACCOUNTANTS

PERSONAL STRATEGY
BALANCED PORTFOLIO
_________________

Report of Independent Accountants 19
Statement of Net Assets, December 31, 1996 5-14
Statement of Operations, year ended December 31, 1996 15
Statement of Changes in Net Assets, year ended
December 31, 1996 and from December 30, 1994
(commencement of operations) to December 31, 1995 16
Notes to Financial Statements, December 31, 1996 17-18
Financial Highlights 4

RATINGS OF COMMERCIAL PAPER

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

PAGE 220
Standard & Poor's Corporation: Commercial paper rated A (highest
quality) by S&P has the following characteristics: liquidity
ratios are adequate to meet cash requirements; long-term senior
debt is rated "A" or better, although in some cases "BBB" credits
may be allowed. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances.
Typically, the issuer's industry is well established and the
issuer has a strong position within the industry. The
reliability and quality of management are unquestioned. The
relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated A1, A2, or A3.

Fitch Investors Service, Inc.: Fitch 1 - Highest grade.
Commercial paper assigned this rating is regarded as having the
strongest degree of assurance for timely payment. Fitch 2 - Very
good grade. Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest
issues.

RATINGS OF CORPORATE DEBT SECURITIES

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

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

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

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

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

Ba - Bonds rated Ba are judged to have speculative elements:
their futures cannot be considered as well assured. Often the

PAGE 221
protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterize
bonds in this class.

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

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

C - Bonds rated C represent the lowest-rated, and have extremely
poor prospects of attaining investment standing.

Standard & Poor's Corporation (S&P)

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

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

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

PAGE 222
degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse
conditions.

D - Bonds rated D are in default.

Fitch Investors Service, Inc.

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

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

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

BB, B, CCC, CC, and C are regarded on balance as predominantly
speculative with respect to the issuer's capacity to repay

PAGE 223
interest and repay principal in accordance with the terms of the
obligation for bond issues not in default. BB indicates the
lowest degree of speculation and C the highest degree of
speculation. The rating takes into consideration special
features of the issue, its relationship to other obligations of
the issuer, and the current and prospective financial condition
and operating performance of the issuer.

PAGE 224

<PAGE>

PROSPECTUS

May 1, 1997
T. Rowe Price Mid-Cap Growth Portfolio
<PAGE>

FACTS AT A GLANCE

Investment Goal
To provide long-term capital appreciation by investing primarily in common
stocks of medium-sized (mid-cap) growth companies. As with any mutual fund,
there is no guarantee the fund will achieve its goal.

Strategy

The fund will focus on companies with superior earnings growth potential that
are no longer considered new or emerging, but are not large.

Risk/Reward

The potential to provide above-average growth of capital over time. Mid-cap
growth company stocks are generally more volatile than stocks of large,
established companies, but they offer the possibility of more rapid growth.
Additionally, mid-cap stocks tend to be less volatile than small-company
stocks. The fund's share price may decline, causing a loss.

Investor Profile

Individuals seeking greater potential for capital appreciation than is provided
by large companies, who are willing to incur the higher risk of loss associated
with somewhat aggressive investments in mid-cap stocks.

Investment Manager

T. Rowe Price Equity Series, Inc.

Prospectus

May 1, 1997

T. ROWE PRICE 2
CONTENTS

ABOUT THE FUND

Fund, Market, and Risk Characteristics 2

ABOUT YOUR ACCOUNT

Pricing Shares and Receiving Sale Proceeds 5
Distributions and Taxes 6

MORE ABOUT THE FUND

Organization and Management 7
Understanding Performance Information 9
Investment Policies and Practices 11

ABOUT THE FUND
1
FUND, MARKET, AND RISK CHARACTERISTICS: WHAT TO EXPECT
----------------------------------------------------------
To help you decide whether this fund is appropriate for you, this section
takes a closer look at its investment objective and approach.

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

What is the fund's objective?

The fund's investment objective is to provide long-term capital appreciation
by investing in mid-cap stocks offering the potential for above-average
earnings growth.

What is the fund's investment program?

The fund will invest at least 65% of its assets in a diversified portfolio of
mid-cap companies whose earnings are expected by T. Rowe Price to grow at a
faster rate than the average company.

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 objective and program. The fund may also engage in a
variety of investment management practices, such as buying and selling
futures and options. (Please see Investment Policies and Practices for

A mid-cap company is defined as one whose market capitalization (number of
shares outstanding multiplied by share price) falls between $300 million and
$5 billion. Mid-cap growth companies are no longer considered new or
emerging, but are not large. By focusing their activities, mid-cap companies
may be more responsive and better able to adapt to the changing needs of
their markets than large companies. Mid-cap companies tend to offer higher
growth prospects than larger companies. They tend to have greater resources,
and therefore represent less risk, than smaller companies. They are usually
mature enough to have established organizational structures and the depth of
management needed to expand their operations. In addition, these companies
generally have sufficient financial resources and access to capital to
finance their growth.
<PAGE>

T. ROWE PRICE 4

Does the fund only invest in mid-cap stocks?

Most of the stocks purchased by the fund will be in the mid-cap size range
outlined above. However, the fund will not automatically sell a stock just
because the company's market cap has grown beyond the $5 billion upper limit,
and such positions may be increased on occasion through additional purchases.

What is meant by a "growth" investment approach?

Sixty years ago, Thomas Rowe Price, Jr. 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.

o Growth investors look for companies with above-average earnings gains.

How does the fund select mid-cap stocks for the portfolio?

T. Rowe Price analysts seek to identify mid-cap companies with attractive
growth prospects. The fund attempts to invest primarily in companies that
offer proven products or services; have a historical record of above-average
earnings growth; demonstrate the potential to sustain earnings growth;
operate in industries experiencing increasing demand; or are believed to be
undervalued in the marketplace.

What are some of the fund's potential risks?

The stocks of mid-cap companies entail greater risk and are usually more
volatile than the shares of large, established companies. Also, growth stocks
can be volatile for several reasons. Since they usually reinvest a high
portion of earnings in their own businesses, they may lack the comfortable
dividend yield associated with value stocks that can cushion total return in
a declining market. Also, since investors buy these stocks because of their
expected superior earnings growth, earnings disappointments often result in
sharp price declines.

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

MORE ABOUT THE FUND 5
What are some of the fund's potential rewards?

Mid-cap companies may offer greater potential for capital appreciation than
large companies because of their higher growth rates. Since mid-cap stocks
are usually less actively followed by securities analysts, they could be
undervalued by the market, providing opportunities for investors.

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

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

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

Consider your investment goals, your time horizon for achieving them, and
your tolerance level for risk. If you can accept the greater risk of
investing in mid-cap companies in an effort to achieve superior capital
appreciation, the fund can be an appropriate part of your overall investment
strategy.

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

<PAGE>

How and when shares are priced

How your purchase, sale, or exchange price is determined

MORE ABOUT THE FUND 7
Note: The time at which transactions and shares are priced and the time until
which orders are accepted may be changed in case of an emergency or if the
New York Stock Exchange closes at a time other than 4 p.m. ET.

How you can receive the proceeds from a sale

Dividends and Other Distributions

For a discussion of the tax status of your variable annuity contract, please
refer to the attached separate account prospectus.

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.
<PAGE>

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

How is the fund organized?

The T. Rowe Price Equity Series, Inc. (the "Corporation") 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 specified objectives. Currently, the corporation consists
of four series, each representing a separate class of shares having different
objectives and investment policies. The four series are: the Equity Income
Portfolio, the New America Growth Portfolio, and the Personal Strategy
Balanced Portfolio, which were all established in 1994; and the Mid-Cap
Growth Portfolio, established in 1996. The other three 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.

ABOUT YOUR ACCOUNT 9
Do T. Rowe Price funds have annual shareholder meetings?

Who runs the fund?

General Oversight

The Corporation 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 Corporation's officers. The policy of the
Corporation is that a majority of Board members will be independent of T.
Rowe Price.

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

Portfolio Management
The fund has an Investment Advisory Committee composed of the following
members: Brian W. H. Berghuis, Chairman, Marc L. Baylin, James A. C. Kennedy
III, 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. Berghuis has been
chairman of the fund's committee since its inception in 1996. Mr. Berghuis
has been managing investments since joining T. Rowe Price in 1985.

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

T. ROWE PRICE 10
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 Corporation 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.

ABOUT YOUR ACCOUNT 11
Total Return

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

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

Cumulative Total Return

Average Annual Total Return

T. ROWE PRICE 12
Shareholder approval is required to substantively change the fund's objective
and certain investment restrictions noted in the following section as
"fundamental policies." The managers also follow certain "operating
policies," which can be changed without shareholder approval. However,
significant changes are discussed with shareholders in fund reports. The fund
adheres to applicable investment restrictions and policies at the time it
makes an investment. A later change in circumstances will not require the
sale of an investment if it was proper at the time it was made.

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.

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

Types of Portfolio Securities

MORE ABOUT THE FUND 13
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.

Foreign Securities

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

T. ROWE PRICE 14
may bear interest or pay dividends at below market (or even relatively
nominal) rates. Under certain conditions, the redemption value of such an
investment could be zero.

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

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

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

Types of Management Practices

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

MORE ABOUT THE FUND 15
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.

T. ROWE PRICE 16
Lending of Portfolio Securities
Like other mutual funds, the fund may lend securities to broker-dealers,
other institutions, or other persons to earn additional income. The principal
risk is the potential insolvency of the broker-dealer or other borrower. In
this event, the fund could experience delays in recovering its securities and
possibly capital losses.

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

Portfolio Turnover
The fund will not generally trade in securities for short-term profits, but,
when circumstances warrant, securities may be purchased and sold without
regard to the length of time held. A high turnover rate may increase
transaction costs and result in additional taxable gains. The fund's
portfolio turnover rate for its initial period of operations is not expected
to exceed 100%.
<PAGE>

MORE ABOUT THE FUND 17
<PAGE>

T. ROWE PRICE 18
<PAGE>

MORE ABOUT THE FUND 19

PAGE 225
STATEMENT OF ADDITIONAL INFORMATION

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

T. Rowe Price Mid-Cap Growth Portfolio

(the "Fund")

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.

The date of this Statement of Additional Information is May
1, 1997.

SAI-MCP 5/1/97

PAGE 226
TABLE OF CONTENTS

Page Page

Capital Stock . . . . 56 Investment Program . . . . 8
Code of Ethics . . . . . 42 Investment Restrictions . 32
Custodian . . . . . . . . 41 Legal Counsel . . . . . . 58
Dealer Options . . . . . 18 Lending of Portfolio
Distributor for Fund . . 40 Securities . . . . . . . 10
Dividends . . . . . . . . 50 Management of Fund . . . 36
Federal Reistration Net Asset Value Per Share 49
of Shares . . . . . . . 58 Options . . . . . . . . . 12
Foreign Currency Portfolio Management
Transactions . . . . . . 28 Practices . . . . . . . 10
Futures Contracts . . . . 19 Portfolio Transactions . 42
Hybrid Instruments . . . 8 Pricing of Securities . . 48
Illiquid or Restricted Principal Holders of
Securities . . . . . . . 9 Securities . . . . . . . 39
Independent Accountants . 58 Repurchase Agreements . . 11
Investment Management Risk Factors of Foreign
Services . . . . . . . . 39 Investing . . . . . . . . 3
Investment Objective and Shareholder Services . . 41
Policies . . . . . . . . 2 Tax Status . . . . . . . 50
Investment Performance . 52 Warrants . . . . . . 10

INVESTMENT OBJECTIVE AND POLICIES

PAGE 227
RISK FACTORS

General

Special Risks of High-Yield Investing

PAGE 228
Risk Factors of Foreign Investing

PAGE 229
the Fund's securities denominated in that currency will rise.
When a given currency depreciates against the dollar (the dollar
strengthens) the value of the Funds' securities denominated in
that currency would be expected to decline.

Investment Funds. The Fund may invest in investment funds
which have been authorized by the governments of certain

PAGE 230
countries specifically to permit foreign investment in securities
of companies listed and traded on the stock exchanges in these
respective countries. The Fund's investment in these funds is
subject to the provisions of the 1940 Act discussed on page 27.
If the Fund invests in such investment funds, the Fund's
shareholders will bear not only its proportionate share of the
expenses of the Fund (including operating expenses and the fees
of the investment manager), but also will bear indirectly similar
expenses of the underlying investment funds. In addition, the
securities of these investment funds may trade at a premium over
their net asset value.

PAGE 231
speculative at this time. Political and economic reforms are too
recent to establish a definite trend away from centrally-planned
economies and state owned industries. In many of the countries
of Eastern Europe and Russia, there is no stock exchange or
formal market for securities. Such countries may also have
government exchange controls, currencies with no recognizable
market value relative to the established currencies of western
market economies, little or no experience in trading in
securities, no financial reporting standards, a lack of a banking
and securities infrastructure to handle such trading, and a legal
tradition which does not recognize rights in private property.
In addition, these countries may have national policies which
restrict investments in companies deemed sensitive to the
country's national interest. Further, the governments in such
countries may require governmental or quasi-governmental
authorities to act as custodian of a Fund's assets invested in
such countries and these authorities may not qualify as a foreign
custodian under the Investment Company Act of 1940 and exemptive
relief from such Act may be required. All of these
considerations are among the factors which could cause
significant risks and uncertainties to investment in Eastern
Europe and Russia. Each Fund will only invest in a company
located in, or a government of, Eastern Europe and Russia, if it
believes the potential return justifies the risk. To the extent
any securities issued by companies in Eastern Europe and Russia
are considered illiquid, each Fund will be required to include
such securities within its 15% restriction on investing in
illiquid securities.

Latin America

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

PAGE 232
if they were to reoccur, could reverse favorable trends toward
market and economic reform, privatization and removal of trade
barriers and result in significant disruption in securities
markets.

INVESTMENT PROGRAM

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

Types of Securities

Hybrid Instruments

PAGE 233
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.

Illiquid or Restricted Securities

PAGE 234
restricted securities, the Fund will take appropriate steps to
protect liquidity.

Warrants

PAGE 235
PORTFOLIO MANAGEMENT PRACTICES

Lending of Portfolio Securities

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

Other Lending/Borrowing

Repurchase Agreements

PAGE 236
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.

Reverse Repurchase Agreements

Options

Options are a type of potentially high-risk derivative.

PAGE 237
Writing Covered Call Options

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

PAGE 238
value of purchased calls and puts on identical securities or
currencies with identical maturity dates.

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,

PAGE 239
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.

PAGE 240
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 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

PAGE 241
be required to purchase in exercise of the put, cannot benefit
from appreciation, if any, with respect to such specific
securities or currencies. The Fund will not write a covered put
option if, as a result, the aggregate market value of all
portfolio securities or currencies covering written put or call
options exceeds 25% of the market value of the Fund's net assets.
In calculating the 25% limit, the Fund will offset, against the
value of assets covering written puts and calls, the aggregate
market value of all assets underlying purchased puts and calls on
identical securities or currencies with identical maturity
dates.

Purchasing Put Options

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.

PAGE 242
sold when it has remaining value, and if the market price of the
underlying security or currency remains equal to or greater than
the exercise price during the life of the put option, the Fund
will lose its entire investment in the put option. In order for
the purchase of a put option to be profitable, the market price
of the underlying security or currency must decline sufficiently
below the exercise price to cover the premium and transaction
costs, unless the put option is sold in a closing sale
transaction.

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

Purchasing Call Options

PAGE 243
Fund in purchasing a large block of securities or currencies that
would be more difficult to acquire by direct market purchases.
So long as it holds such a call option rather than the underlying
security or currency itself, the Fund is partially protected from
any unexpected decline in the market price of the underlying
security or currency and in such event could allow the call
option to expire, incurring a loss only to the extent of the
premium paid for the option.

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

Dealer (Over-the-Counter) Options

PAGE 244
the option expires or is exercised. In the event of insolvency
of the contra party, the Fund may be unable to liquidate a dealer
option. With respect to options written by the Fund, the
inability to enter into a closing transaction may result in
material losses to the Fund. For example, since the Fund must
maintain a secured position with respect to any call option on a
security it writes, the Fund may not sell the assets which it has
segregated to secure the position while it is obligated under the
option. This requirement may impair a Fund's ability to sell
portfolio securities or currencies at a time when such sale might
be advantageous.

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

Futures are a type of potentially high-risk derivative.

Transactions in Futures

The Fund may enter into futures contracts, including stock
index, interest rate and currency futures ("futures or futures
contracts").

PAGE 245
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.

Regulatory Limitations

PAGE 246
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.

Trading in Futures Contracts

PAGE 247
upward from less than 5% of the value of the contract being
traded.

PAGE 248
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

PAGE 249
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 cash, liquid high-grade
debt or other appropriate cover, equal in value to the current
value of the underlying instrument less the margin deposit.

PAGE 250
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.

PAGE 251
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.

PAGE 252
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

Additional Futures and Options Contracts

PAGE 253
Foreign Futures and Options

Foreign Currency Transactions

The Fund may enter into forward contracts for a variety of
purposes in connection with the management of the foreign

PAGE 254
securities portion of its portfolio. The Fund's use of such
contracts would include, but not be limited to, the following:

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

PAGE 255
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, currency available for cover of the forward
contract(s) or other suitable cover. In determining the amount
to be delivered under a contract, the Fund may net offsetting
positions.

PAGE 256
potential gain which might result from an increase in the value
of that currency.

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.

PAGE 257
equity security will not include the period of time the option is
outstanding.

INVESTMENT RESTRICTIONS

PAGE 258
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:

(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;

PAGE 259
(4) Loans. Make loans, although the Fund may (i) lend
portfolio securities and participate in an interfund
lending program with other Price Funds provided that
no such loan may be made if, as a result, the
aggregate of such loans would exceed 33 1/3% of the
value of the Fund's total assets; (ii) purchase
money market securities and enter into repurchase
agreements; and (iii) acquire publicly-distributed
or privately-placed debt securities and purchase
debt;

(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.

PAGE 260

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

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;

PAGE 261
(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;

(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 10% of its total assets in
restricted securities;

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

(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;

PAGE 262
(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) Short Sales. Effect short sales of securities;
or

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

Notwithstanding anything in the above fundamental and
operating restrictions to the contrary, the Fund may invest all
of its assets in a single investment company or a series thereof
in connection with a "master-feeder" arrangement. Such an
investment would be made where the Fund (a "Feeder"), and one or
more other Funds with the same investment objective and program
as the Fund, sought to accomplish its investment objective and
program by investing all of its assets in the shares of another
investment company (the "Master"). The Master would, in turn,
have the same investment objective and program as the Fund. The
Fund would invest in this manner in an effort to achieve the
economies of scale associated with having a Master fund make
investments in portfolio companies on behalf of a number of
Feeder funds.

MANAGEMENT OF FUND

PAGE 263
DONALD W. DICK, JR., Director--Principal, Overseas Partners,
Inc., a financial investment firm; formerly (6/65-3/89) Director
and Vice President-Consumer Products Division, McCormick &
Company, Inc., international food processors; Director, Waverly,
Inc., Baltimore, Maryland; Address: 111 Pavonia Avenue, Suite
334, Jersey City, New Jersey 07310
DAVID K. FAGIN, Director--Chairman, Chief Executive Officer and
Director, Golden Star Resources, Ltd.; formerly (1986-7/91)
President, Chief Operating Officer and Director, Homestake Mining
Company; Address: One Norwest Center, 1700 Lincoln Street, Suite
1950, Denver, Colorado 80203

HANNE M. MERRIMAN, Director--Retail business consultant;
formerly President and Chief Operating Officer (1991-92), Nan
Duskin, Inc., a women's specialty store, Director (1984-1990) and
Chairman (1989-90) Federal Reserve Bank of Richmond, and
President and Chief Executive Officer (1988-89), Honeybee, Inc.,
a division of Spiegel, Inc.; Director, Central Illinois Public
Service Company, CIPSCO Incorporated, The Rouse Company, State
Farm Mutual Automobile Insurance Company and USAir Group, Inc.;
Address: 3201 New Mexico Avenue, N.W., Suite 350, Washington,
D.C. 20016
HUBERT D. VOS, Director--President, Stonington Capital
Corporation, a private investment company; Address: 1231 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
Technologies Inc. and Stuart Medical, Inc.; Address: 755 Page
Mill Road, Suite A200, Palo Alto, California 94304
*JAMES S. RIEPE, Chairman of the Board--Managing Director,
T. Rowe Price; Chairman of the Board, T. Rowe Price Services,
Inc., T. Rowe Price Retirement Plan Services, Inc., and T. Rowe
Price Investment Services, Inc; President and Trust Officer,
T. Rowe Price Trust Company; Director, Rowe Price-Fleming
International, Inc. and Rhone-Poulenc Rorer, Inc.
BRIAN W.H. BERGHUIS, President--Vice President, T. Rowe Price;
Chartered Financial Analyst
MARC L. BAYLIN, Vice President--Assistant Vice President, T. Rowe
Price; formerly financial analyst, Rausher Pierce Refsnes
ROBERT N. GENSLER, Vice President--Vice President, T. Rowe Price
HENRY H. HOPKINS, Vice President--Managing Director, T. Rowe
Price; Vice President and Director, T. Rowe Price Investment
Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price
Trust Company; Vice President, Rowe Price-Fleming International,
Inc. and T. Rowe Price Retirement Plan Services, Inc.
THOMAS J. HUBER, Vice President--Employee, T. Rowe Price

PAGE 264
JOSEPH KLEIN III, Vice President--Vice President, T. Rowe
Price;Chartered Financial Analyst
ROBERT J. MARCOTTE, Vice President--Vice President, T. Rowe Price
CHARLES A. MORRIS, Vice President--Vice President of T. Rowe
Price; Chartered Financial Analyst
STEVEN B. ROORDA, Vice President--Vice President, T. Rowe Price
JOHN F. WAKEMAN, Vice President--Vice President, T. Rowe Price
LENORA V. HORNUNG, Secretary--Vice President, T. Rowe Price
PATRICIA S. BUTCHER, Assistant Secretary--Assistant Vice
President, T. Rowe Price and T. Rowe Price Investment Services,
Inc.
CARMEN F. DEYESU, Treasurer--Vice President, T. Rowe Price,
T. Rowe Price Services, Inc., and T. Rowe Price Trust Company
DAVID S. MIDDLETON, Controller--Vice President, T. Rowe Price,
T. Rowe Price Services, Inc., and T. Rowe Price Trust Company
J. JEFFREY LANG, Assistant Vice President--Assistant Vice
President, T. Rowe Price
INGRID I. VORDEMBERGE, Assistant Vice President--Employee,
T. Rowe Price

COMPENSATION TABLE

David K. Fagin, -- 59,167
Director

PAGE 265
Hanne M. Merriman, -- 59,167
Director

Hubert D. Vos, -- 59,167
Director

Paul M. Wythes, -- 69,667
Director

(a) There were no estimated future payments for the fiscal year
1996.
(b) Amounts in this column are for calendar year 1996.

PRINCIPAL HOLDERS OF SECURITIES

As of the date of the prospectus, the officers and directors
of the Fund, as a group, did not own any 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 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 266
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

DISTRIBUTOR FOR FUND

PAGE 267
Investment Services is located at the same address as the
Fund and T. Rowe Price -- 100 East Pratt Street, Baltimore,
Maryland 21202.

SHAREHOLDER SERVICES

CUSTODIAN

PAGE 268
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.

CODE OF ETHICS

PORTFOLIO TRANSACTIONS

Investment or Brokerage Discretion

PAGE 269
How Brokers and Dealers are Selected

Equity Securities

Fixed Income Securities

PAGE 270
How Evaluations are Made of the Overall Reasonableness of
Brokerage Commissions Paid

Description of Research Services Received from Brokers and
Dealers

PAGE 271
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.

Commissions to Brokers who Furnish Research Services

PAGE 272
Internal Allocation Procedures

Miscellaneous

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

PAGE 273
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.

Trade Allocation Policies

PAGE 274
specialized investment policies and objectives; and (iv)
reallocations in light of a participating portfolio's
characteristics (e.g., industry or issuer concentration,
duration, and credit exposure).

Transactions with Related Brokers and Dealers

PAGE 275
The Board of Directors 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
("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.

PRICING OF SECURITIES

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

PAGE 276
under the supervision of the officers of the Fund, as authorized
by the Board of Directors.

NET ASSET VALUE PER SHARE

DIVIDENDS

Unless the insurance company separate account elects
otherwise, the fourth quarter dividend and capital gain
distribution 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.

PAGE 277
TAX STATUS

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.

PAGE 278
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 fund's expenses (management fees and operating expenses)
shareholders will also indirectly bear similar expenses of such
funds. Capital gains on the sale of such holdings will be deemed
to be ordinary income regardless of how long the Fund holds its
investment. In addition, the Fund may be subject to corporate
income tax and an interest charge on certain dividends and
capital gains earned from these investments, regardless of
whether such income and gains are distributed to shareholders.

Foreign Currency Gains and Losses

INVESTMENT PERFORMANCE

Total Return Performance

The Fund's calculation of total return performance will
include 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

PAGE 279
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 to be 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.

Outside Sources of Information

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

PAGE 280
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 Associates, Inc.
and/or T. Rowe Price Investment Services, Inc. may be made
available. These currently include: the Asset Mix Worksheet
which is designed to show shareholders how to reduce their
investment risk by developing a diversified investment plan: the
College Planning Guide which discusses various aspects of
financial planning to meet college expenses and assists parents
in projecting the costs of a college education for their
children; the Retirement Planning Kit (also available in a PC
version) which includes a detailed workbook to determine how much
money you may need for retirement and suggests how you might
invest to reach your goal; and the Retirees Financial Guide which
includes a detailed workbook to determine how much money you can
afford to spend and still preserve your purchasing power and
suggest how you might invest to reach your goal; Tax
Considerations for Investors discusses the tax advantages of
annuities and municipal bonds and how to access whether they are
suitable for your portfolio, reviews pros and cons of placing
assets in a gift to minors account and summarizes the benefits
and types of tax-deferred retirement plans currently available;
the Personal Strategy Planner simplifies investment decision
making by helping investors define personal financial goals,
establish length of time the investor intends to invest,
determine risk "comfort zone" and select diversified investment
mix; the How to Choose a Bond Fund guide which discusses how to
choose an appropriate bond fund for your portfolio. From time to
time, other worksheets and guides may be made available as well;
and Diversifying Overseas: a T. Rowe Price Guide to International
Investing helps investors determine and implement an
international investment strategy that is appropriate for
particular investment needs. Of course, an investment in the
Fund cannot guarantee that such goals will be met.

From time to time, the example shown below may be used to
assist investors in understanding the different returns and risk

PAGE 281
characteristics of various investments, including presentation of
historical returns of these investments. An example of this is
shown below.

Historical Returns for Different Investments

Annualized returns for periods ended 12/31/96

50 years 20 years 10 years 5 years

Small-Company Stocks 14.44% 17.84% 12.98% 19.47%

Large-Company Stocks 12.59 14.55 15.28 15.20

Foreign Stocks N/A 15.29 8.74 8.48

Long-Term Corporate Bonds 5.76 9.71 9.48 8.52

Intermediate-Term U.S.
Gov't. Bonds 5.89 9.14 7.77 6.17

Treasury Bills 4.89 7.28 5.46 4.22

U.S. Inflation 4.08 5.15 3.70 2.89

PAGE 282
Performance of Retirement Portfolios*

Asset Mix Average Annualized Value
Returns 20 Years of
Ended 12/31/96 $10,000
Investment
After Period
________________ __________________ ____________

Nominal Real BestWorst
Portfolio Growth IncomeSafety ReturnReturn** YearYear

I. Low
Risk 40% 40% 20% 11.5% 6.3% 24.9% 0.1% $ 88,900

II. Moderate
Risk 60% 30% 10% 12.9% 7.7% 29.1% -1.8%$112,500

III. High
Risk 80% 20% 0% 14.1% 8.9% 33.4% -5.2%$140,300

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

Redemptions in Kind

PAGE 283
Issuance of Fund Shares for Securities

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
four series, T. Rowe Price Equity Income Portfolio, T. Rowe Price
Personal Strategy Balanced Portfolio and T. Rowe Price New
America Growth Portfolio all established in 1994, and the T. Rowe
Price Mid-Cap Growth Portfolio established in 1996. Each series
represents a separate class of the Corporation's shares and has
different objectives and investment policies. The T. Rowe Price
Equity Income Portfolio, T. Rowe Price Personal Strategy Balanced
Portfolio, and the T. Rowe Price New America Growth Portfolio are
each 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
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.

PAGE 284
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.

PAGE 285
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 REGISTRATION OF SHARES

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, Gateway International II, 1306
Concourse Drive, Suite 100, Linthicum, Maryland 21090-1020, are
independent accountants to the Fund.

PAGE 286
PART C
OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements.

Equity Income, New America Growth, and Personal Strategy
Balanced Portfolios

Condensed Financial Information (Financial Highlights table)
for the Funds is included in Part A of the Registration
Statement.

Statement of Net Assets, Statement of Operations, and
Statement of Changes in Net Assets are included in the
Annual Report to Shareholders, the pertinent portions of
which are incorporated by reference in Part B of the
Registration Statement.

Mid-Cap Growth Portfolio

Inapplicable

(b) Exhibits.

(1)(a) Articles of Incorporation of Registrant, dated
January 31, 1994 (electronically filed with initial
Registration Statement dated February 4, 1994)

(1)(b) Articles Supplementary, for T. Rowe Price Personal
Strategy Balanced Portfolio dated July 13, 1994
(electronically filed with Amendment No. 2 dated
July 15, 1994)

(1)(c) Certificate of Correction, dated July 14, 1994
(electronically filed with Amendment No. 2 dated
July 15, 1994)

(1)(d) Articles Supplementary, for T. Rowe Price Mid-Cap
Growth Portfolio dated August 1, 1996
(electronically filed with Amendment No. 8 dated
October 21, 1996)

(2) By-Laws of Registrant (electronically filed with
initial Registration Statement dated February 4,
1994)

PAGE 287

(3) Inapplicable

(4) See Article SIXTH, Capital Stock, Paragraphs (b)-(g)
of the Articles of Incorporation, Article II,
Shareholders, Sections 2.01-2.11 and Article VIII,
Capital Stock, Sections 8.01-8.07 of the Bylaws
filed as Exhibits to this Registration Statement.

(5)(a) Investment Management Agreement between Registrant,
on behalf of T. Rowe Price Equity Income Portfolio,
and T. Rowe Price Associates, Inc., dated March 1,
1994 (electronically filed with Amendment No. 1
dated March 30, 1994)

(5)(b) Investment Management Agreement between Registrant,
on behalf of T. Rowe Price New America Growth
Portfolio, and T. Rowe Price Associates, Inc., dated
March 1, 1994 (electronically filed with Amendment
No. 1 dated March 30, 1994)

(5)(c) Investment Management Agreement between Registrant,
on behalf of T. Rowe Price Personal Strategy
Balanced Portfolio, and T. Rowe Price Associates,
Inc. dated July 27, 1994 (electronically filed with
Amendment No. 4 dated October 26, 1994)

(5)(d) Investment Management Agreement between Registrant,
on behalf of T. Rowe Price Mid-Cap Growth Portfolio,
and T. Rowe Price Associates, Inc., dated July 31,
1996 (electronically filed with Amendment No. 9
dated November 13, 1996)

(6) Underwriting Agreement between Registrant, on behalf
of T. Rowe Price Equity Income Portfolio and T. Rowe
Price New America Growth Portfolio, and T. Rowe
Price Investment Services, Inc., dated March 1, 1994
(electronically filed with Amendment No. 1 dated
March 30, 1994)

(7) Inapplicable

PAGE 288
(8)(a) Custodian Agreement between T. Rowe Price Funds and
State Street Bank and Trust Company, dated September
28, 1987, as amended to June 24, 1988, October 19,
1988, February 22, 1989, July 19, 1989, September
15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990,
July 18, 1990, October 15, 1990, February 13, 1991,
March 6, 1991, September 12, 1991, November 6, 1991,
April 23, 1992, September 2, 1992, November 3, 1992,
December 16, 1992, December 21, 1992, January 28,
1993, April 22, 1993, September 16, 1993, November
3, 1993, March 1, 1994, April 21, 1994, July 27,
1994, September 21, 1994, November 1, 1994, November
2, 1994, January 25, 1995, September 20, 1995,
November 1, 1995, December 11, 1995, April 24, 1996,
August 2, 1996, and November 12, 1996

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

(9)(a) Transfer Agency and Service Agreement between T.
Rowe Price Services, Inc. and T. Rowe Price Funds,
dated January 1, 1997

(9)(b) Agreement between T. Rowe Price Associates, Inc. and
T. Rowe Price Funds for Fund Accounting Services,
dated January 1, 1997

(9)(c) Inapplicable

(10) Opinion of Counsel, dated April 22, 1997

(11) Consent of Independent Accountants

(12) Inapplicable

(13) Inapplicable

(14) Inapplicable

(15) Inapplicable

(16) Inapplicable

PAGE 289
(17) Financial Data Schedules for T. Rowe Price Equity
Income Portfolio, T. Rowe Price New America Growth
Portfolio and T. Rowe Price Personal Strategy
Balanced Portfolio as of December 31, 1996 and
T. Rowe Price Mid-Cap Growth Portfolio dated
November 13, 1996.

(18) Inapplicable

(19) Other Exhibits:

Power of Attorney for T. Rowe Price Equity Series,
Inc.

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

None.

Item 26. Number of Holders of Securities

As of March 31, 1997, there were 15 shareholders in the
T. Rowe Price Equity Income Portfolio.

As of March 31, 1997, there were 10 shareholders in the
T. Rowe Price New America Growth Portfolio.

As of March 31, 1997, there were 6 shareholders in the
T. Rowe Price Personal Strategy Balanced Portfolio.

As of March 31, 1997, there were 3 shareholders in the
T. Rowe Price Mid-Cap Growth Portfolio.

Item 27. Indemnification

The Registrant maintains comprehensive Errors and Omissions
and Officers and Directors insurance policies written by the
Evanston Insurance Company, The Chubb Group and ICI Mutual.
These policies provide coverage for the named insureds, which
include T. Rowe Price Associates, Inc. ("Manager"), Rowe
Price-Fleming International, Inc. ("Price-Fleming"), T. Rowe
Price Investment Services, Inc., T. Rowe Price Services, Inc., T.
Rowe Price Trust Company, T. Rowe Price Stable Asset Management,
Inc., RPF International Bond Fund, and forty-five other
investment companies, namely, T. Rowe Price Growth Stock Fund,
Inc., T. Rowe Price New Horizons Fund, Inc., T. Rowe Price New
Era Fund, Inc., T. Rowe Price New Income Fund, Inc., T. Rowe

PAGE 290
Price Prime Reserve Fund, Inc., T. Rowe Price Tax-Free Income
Fund, Inc., T. Rowe Price Tax-Exempt Money Fund, Inc., T. Rowe
Price International Funds, Inc., T. Rowe Price Growth & Income
Fund, Inc., T. Rowe Price Tax-Free Short-Intermediate Fund, Inc.,
T. Rowe Price Short-Term Bond Fund, Inc., T. Rowe Price High
Yield Fund, Inc., T. Rowe Price Tax-Free High Yield Fund, Inc.,
T. Rowe Price New America Growth Fund, T. Rowe Price Equity
Income Fund, T. Rowe Price GNMA Fund, T. Rowe Price Capital
Appreciation Fund, T. Rowe Price State Tax-Free Income Trust, T.
Rowe Price California Tax-Free Income Trust, T. Rowe Price
Science & Technology Fund, Inc., T. Rowe Price Small-Cap Value
Fund, Inc., Institutional International Funds, Inc., T. Rowe
Price U.S. Treasury Funds, Inc., T. Rowe Price Index Trust, Inc.,
T. Rowe Price Spectrum Fund, Inc., T. Rowe Price Balanced Fund,
Inc., T. Rowe Price Short-Term U.S. Government Fund, Inc., T.
Rowe Price Mid-Cap Growth Fund, Inc., T. Rowe Price OTC Fund,
Inc., T. Rowe Price Tax-Free Insured Intermediate Bond Fund,
Inc., T. Rowe Price Dividend Growth Fund, Inc., T. Rowe Price
Blue Chip Growth Fund, Inc., T. Rowe Price Summit Funds, Inc., T.
Rowe Price Summit Municipal Funds, Inc., T. Rowe Price Equity
Series, Inc., T. Rowe Price International Series, Inc., T. Rowe
Price Fixed-Income Series, Inc., T. Rowe Price Personal Strategy
Funds, Inc., T. Rowe Price Value Fund, Inc., T. Rowe Price
Capital Opportunity Fund, Inc., T. Rowe Price Corporate Income
Fund, Inc., T. Rowe Price Health Sciences Fund, Inc., T. Rowe
Price Mid-Cap Value Fund, Inc., Institutional Equity Funds, Inc.,
and T. Rowe Price Financial Services Fund, Inc. The Registrant
and the forty-five investment companies listed above, with the
exception of Institutional International Funds, Inc., will be
collectively referred to as the Price Funds and Institutional
Equity Funds, Inc. The investment manager for the Price Funds,
excluding T. Rowe Price International Funds, Inc. and T. Rowe
Price International Series, Inc., is the Manager. Price-Fleming
is the manager to T. Rowe Price International Funds, Inc., T.
Rowe Price International Series, Inc., and Institutional
International Funds, Inc. and is 50% owned by TRP Finance, Inc.,
a wholly-owned subsidiary of the Manager, 25% owned by Copthall
Overseas Limited, a wholly-owned subsidiary of Robert Fleming
Holdings Limited, and 25% owned by Jardine Fleming International
Holdings Limited. In addition to the corporate insureds, the
policies also cover the officers, directors, and employees of
each of the named insureds. The premium is allocated among the
named corporate insureds in accordance with the provisions of
Rule 17d-1(d)(7) under the Investment Company Act of 1940.

PAGE 291
General. The Charter of the Corporation provides that
to the fullest extent permitted by Maryland or federal law,
no director of officer of the Corporation shall be
personally liable to the Corporation or the holders of
Shares for money damages and each director and officer shall
be indemnified by the Corporation; provided, however, that
nothing herein shall be deemed to protect any director or
officer of the Corporation against any liability to the
Corporation of the holders of Shares to which such director
or officer would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or
her office.

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

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

PAGE 292
Notwithstanding the foregoing, nothing herein shall
protect or purport to protect any Indemnitee against any
liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of
his office ("Disabling Conduct").

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

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

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

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

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

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

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

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

PAGE 293
(c) there is a determination, based on a review of
readily available facts, that there is reason to
believe that the Indemnitee will ultimately be
found entitled to indemnification, which
determination shall be made by:

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

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

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

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

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

PAGE 294
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.

Item 28. Business and Other Connections of Investment Manager.

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

T. Rowe Price Investment Services, Inc. ("Investment
Services"), a wholly owned subsidiary of the Manager, was
incorporated in Maryland in 1980 for the purpose of acting as the
principal underwriter and distributor for the Price Funds.
Investment Services is registered as a broker-dealer under the
Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. In 1984, Investment
Services expanded its activities to include a discount brokerage
service.

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

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

PAGE 295
T. Rowe Price Services, Inc. ("Price Services"), a wholly
owned subsidiary of the Manager, was incorporated in Maryland in
1982 and is registered as a transfer agent under the Securities
Exchange Act of 1934. Price Services provides transfer agent,
dividend disbursing, and certain other services, including
shareholder services, to the Price Funds.

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

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

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

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

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

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

PAGE 296
RPFI International Partners, L.P., is a Delaware limited
partnership organized in 1985 for the purpose of investing in a
diversified group of small and medium-sized non-U.S. companies.
Price-Fleming is the general partner of this partnership, and
certain institutional investors, including advisory clients of
Price-Fleming, are its limited partners.

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

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

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

PAGE 297
T. Rowe Price Recovery Fund II Associates, Inc., is a
Maryland limited liability Company organized in 1996. Wholly
owned by the Manager, it serves as the General Partner of T. Rowe
Price Recovery Fund II, L.P., a Delaware limited partnership
which also invests in financially distressed companies.

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

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

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

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

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

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

T. Rowe Price Strategic Partners Fund II, L.P. is a Delaware
limited partnership organized in 1992 for the purpose of
investing in small public and private companies seeking capital

PAGE 298
for expansion or undergoing a restructuring of ownership. The
general partner of the Fund is T. Rowe Price Strategic Partners,
L.P., ("Strategic Partners"), a Delaware limited partnership
whose general partner is T. Rowe Price Strategic Partners
Associates, Inc., a Maryland corporation which is a wholly owned
subsidiary of the Manager.

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

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

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

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

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

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

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

PAGE 299
Albemarle Corporation. Mrs. Whittemore's address is One James
Center, Richmond, Virginia 23219.

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

George J. Collins is a Director of the Manager.

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

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

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

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

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

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

Edward C. Bernard, Stephen W. Boesel, Thomas H. Broadus, Jr.,
Mary J. Miller, Charles A. Morris, Charles E. Vieth, and Richard
T. Whitney are Managing Directors of the Manager.

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

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

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

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

PAGE 300
Alvin M. Younger, Jr., who is Chief Financial Officer,
Managing Director, Secretary, and Treasurer of the Manager, is
Secretary and Treasurer of Price-Fleming.

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

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

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

Elsie S. Crawford and Ava M. Rainey, both employees of the
Manager, are Assistant Vice Presidents of Price-Fleming.

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

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

Item 29. Principal Underwriters.

(a) The principal underwriter for the Registrant is
Investment Services. Investment Services acts as the
principal underwriter for the other seventy-five Price
Funds. Investment Services, a wholly owned subsidiary
of the Manager, is registered as a broker-dealer under
the Securities Exchange Act of 1934 and is a member of
the National Association of Securities Dealers, Inc.
Investment Services has been formed for the limited
purpose of distributing the shares of the Price Funds
and will not engage in the general securities business.
Since the Price Funds are sold on a no-load basis,
Investment Services will not receive any commission or
other compensation for acting as principal underwriter.

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

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

James S. Riepe Chairman of the Board Vice President
and Director
Edward C. Bernard President None
Henry H. Hopkins Vice President and DirectorVice
President
Charles E. Vieth Vice President and DirectorNone
Patricia M. Archer Vice President None
Joseph C. Bonasorte Vice President None
Darrell N. Braman Vice President None
Ronae M. Brock Vice President None

PAGE 301
Meredith C. Callanan Vice President None
Christine M. Carolan Vice President None
Laura H. Chasney Vice President None
Victoria C. Collins Vice President None
Alana S. Curtice Vice President None
Christopher W. Dyer Vice President None
Christine S. Fahlund Vice President None
Forrest R. Foss Vice President None
Andrea G. Griffin Vice President None
David J. Healy Vice President None
Joseph P. Healy Vice President None
Walter J. Helmlinger Vice President None
Eric G. Knauss Vice President None
Douglas G. Kremer Vice President None
Sharon R. Krieger Vice President None
Keith W. Lewis Vice President None
James Link Vice President None
Sarah McCafferty Vice President None
Maurice A. Minerbi Vice President None
Nancy M. Morris Vice President None
George A. Murnaghan Vice President None
Steven E. Norwitz Vice President None
Kathleen M. O'Brien Vice President None
Scott R. Powell Vice President None
Pamela D. Preston Vice President None
Corbin D. Riemer Vice President None
Lucy B. Robins Vice President None

John R. Rockwell Vice President None
Christopher S. Ross Vice President None
Kenneth J. Rutherford Vice President None
Daniel S. Schreiner Vice President None
Monica R. Tucker Vice President None
William F. Wendler II Vice President None
Jane F. White Vice President None
Thomas R. Woolley Vice President None
Alvin M. Younger, Jr. Secretary and Treasurer None
Mark S. Finn Controller & Vice PresidentNone
Richard J. Barna Assistant Vice President None
Catherine L. Berkenkemper Assistant Vice
President None
Patricia S. Butcher Assistant Vice President Assistant
Secretary
Renee M. Christoff Assistant Vice President None
Cheryl L. Emory Assistant Vice President None
John A. Galateria Assistant Vice President None
Douglas E. Harrison Assistant Vice President None
Janelyn A. Healey Assistant Vice President None
Kathleen Hussey Assistant Vice President None
Jeanette M. LeBlanc Assistant Vice President None
C. Lillian Matthews Assistant Vice President None
Janice D. McCrory Assistant Vice President None
Sandra J. McHenry Assistant Vice President None
Mark J. Mitchell Assistant Vice President None
Barbara A. O'Connor Assistant Vice President None
JeanneMarie B. Patella Assistant Vice President None
Kristin E. Seeberger Assistant Vice President None
Arthur J. Silber Assistant Vice President None

PAGE 302
Jerome Tuccille Assistant Vice President None
Linda C. Wright Assistant Vice President None
Nolan L. North Assistant Treasurer None
Barbara A. Van Horn Assistant Secretary None

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

Item 30. Location of Accounts and Records.

All accounts, books, and other documents required to be
maintained by T. Rowe Price Equity Series, Inc. under
Section 31(a) of the Investment Company Act of 1940 and the
rules thereunder will be maintained by T. Rowe Price Equity

Series, Inc., at its offices at 100 East Pratt Street,
Baltimore, Maryland 21202. Transfer agent, dividend
disbursing, and shareholder service activities are performed
by T. Rowe Price Services, Inc., at 100 East Pratt Street,
Baltimore, Maryland 21202. Custodian activities for T. Rowe
Price Equity Series, Inc. are performed at State Street Bank
and Trust Company's Service Center (State Street South),
1776 Heritage Drive, Quincy, Massachusetts 02171.

Item 31. Management Services.

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

Item 32. Undertakings.

(a) Inapplicable

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

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

(d) Each series of the Registrant agrees to furnish, upon
request and without charge, a copy of its latest Annual
Report to each person to whom as prospectus is
delivered.

PAGE 303
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
the Registrant certifies that it meets all of the requirements
for effectiveness of this registration statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore,
State of Maryland, this 23rd day of April, 1997.

T. ROWE PRICE EQUITY SERIES, INC.
/s/M. David Testa
By: M. David Testa
President and Director

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

SIGNATURE TITLE DATE
_________ _______ _____

/s/M. David Testa President and Director
M. David Testa (Principal Executive Officer) April 23, 1997

/s/Carmen F. Deyesu Treasurer (Principal
Carmen F. Deyesu Financial Officer) April 23, 1997

* Director April 23, 1997
Donald W. Dick, Jr.

* Director April 23, 1997
David K. Fagin

/s/John H. Laporte Executive Vice President April 23, 1997
John H. Laporte and Director

* Director April 23, 1997
Hanne M. Merriman

/s/James S. Riepe Vice President and April 23, 1997
James S. Riepe Director

* Director April 23, 1997
Hubert D. Vos

* Director April 23, 1997

Paul M. Wythes

*/s/Henry H. Hopkins, Attorney-In-Fact April 23, 1997
Henry H. Hopkins, Attorney-In-Fact

The Custodian Agreement dated September 28, 1987, as
amended, between State Street Bank and Trust Company and T. Rowe
Price Funds should be inserted here.

CUSTODIAN CONTRACT
Between
STATE STREET BANK AND TRUST COMPANY
and
EACH OF THE PARTIES INDICATED
ON APPENDIX A
DATED: SEPTEMBER 28, 1987

FRF 07/87

PAGE 2
TABLE OF CONTENTS

1. Employment of Custodian and Property to be Held By It1
2. Duties of the Custodian with Respect to Property of the Fund
Held by the Custodian in the United States. . . 2
2.1 Holding Securities . . . . . . . . . . . . . 2
2.2 Delivery of Securities . . . . . . . . . . . 2
1) Sale . . . . . . . . . . . . . . . . . . 2
2) Repurchase Agreement . . . . . . . . . . 2
3) Securities System . . . . . . . . . . . . 3
4) Tender Offer . . . . . . . . . . . . . . 3
5) Redemption by Issuer . . . . . . . . . . 3
6) Transfer to Issuer, Nominee, Exchange . . 3
7) Sale to Broker . . . . . . . . . . . . . 3
8) Exchange or Conversion . . . . . . . . . 4
9) Warrants, Rights . . . . . . . . . . . . 4
10) Loans of Securities . . . . . . . . . . . 4
11) Borrowings . . . . . . . . . . . . . . . 4
12) Options . . . . . . . . . . . . . . . . . 5
13) Futures . . . . . . . . . . . . . . . . . 5
14) In-Kind Distributions . . . . . . . . . . 5
15) Miscellaneous . . . . . . . . . . . . . . 5
16) Type of Payment . . . . . . . . . . . . . 6
2.3 Registration of Securities . . . . . . . . . 6
2.4 Bank Accounts . . . . . . . . . . . . . . . . 7
2.5 Sale of Shares and Availability of Federal Funds7
2.6 Collection of Income, Dividends . . . . . . . 7
2.7 Payment of Fund Monies . . . . . . . . . . . 8
1) Purchases . . . . . . . . . . . . . . . . 8
2) Exchanges . . . . . . . . . . . . . . . . 9
3) Redemptions . . . . . . . . . . . . . . . 9
4) Expense and Liability . . . . . . . . . . 9
5) Dividends . . . . . . . . . . . . . . . . 9
6) Short Sale Dividend . . . . . . . . . . . 10
7) Loan . . . . . . . . . . . . . . . . . . 10
8) Miscellaneous . . . . . . . . . . . . . . 10
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased . . . . . . . . . . . 10
2.9 Appointment of Agents . . . . . . . . . . . . 10
2.10 Deposit of Securities in Securities System . 10
1) Account of Custodian . . . . . . . . . . 11
2) Records . . . . . . . . . . . . . . . . . 11
3) Payment of Fund Monies, Delivery of
Securities . . . . . . . . . . . . . . 11
4) Reports . . . . . . . . . . . . . . . . . 12
5) Annual Certificate . . . . . . . . . . . 12
6) Indemnification . . . . . . . . . . . . . 12
2.11 Fund Assets Held in the Custodian's Direct Paper
System . . . . . . . . . . . . . . . . . . 13
2.12 Segregated Account . . . . . . . . . . . . . 14

PAGE 3

2.13 Ownership Certificates for Tax Purposes . . . 15
2.14 Proxies . . . . . . . . . . . . . . . . . . . 15
2.15 Communications Relating to Fund Portfolio
Securities . . . . . . . . . . . . . . . . 15
2.16 Reports to Fund by Independent Public
Accountants . . . . . . . . . . . . . . . . 16
3. Duties of the Custodian with Respect to Property
of the Fund Held Outside of the United States . 16
3.1 Appointment of Foreign Sub-Custodians . . . . 16
3.2 Assets to be Held . . . . . . . . . . . . . . 17
3.3 Foreign Securities Depositories . . . . . . . 17
3.4 Segregation of Securities . . . . . . . . . . 17
3.5 Access of Independent Accountants of the Fund 17
3.6 Reports by Custodian . . . . . . . . . . . . 18
3.7 Transactions in Foreign Assets of the Fund . 18
3.8 Responsibility of Custodian, Sub-Custodian and
Fund . . . . . . . . . . . . . . . . . . . 18
3.9 Monitoring Responsibilities . . . . . . . . . 19
3.10 Branches of U.S. Banks . . . . . . . . . . . 19
4. Payments for Repurchases or Redemptions and Sales of
Shares of the Fund . . . . . . . . . . . . . . . 19
5. Proper Instructions . . . . . . . . . . . . . . . 20
6. Actions Permitted Without Express Authority . . . 21
7. Evidence of Authority, Reliance on Documents . . . 21
8. Duties of Custodian with Respect to the Books of
Account and Calculations of Net Asset Value and
Net Income . . . . . . . . . . . . . . . . . . . 22
9. Records, Inventory . . . . . . . . . . . . . . . . 22
10. Opinion of Fund's Independent Accountant . . . . . 23
11. Compensation of Custodian . . . . . . . . . . . . 23
12. Responsibility of Custodian . . . . . . . . . . . 23
13. Effective Period, Termination and Amendment . . . 25
14. Successor Custodian . . . . . . . . . . . . . . . 26
15. Interpretive and Additional Provisions . . . . . . 28
16. Notice . . . . . . . . . . . . . . . . . . . . . . 28
17. Bond . . . . . . . . . . . . . . . . . . . . . . . 28
18. Confidentiality . . . . . . . . . . . . . . . . . 29
19. Exemption from Liens . . . . . . . . . . . . . . . 29
20. Massachusetts Law to Apply . . . . . . . . . . . . 29
21. Prior Contracts . . . . . . . . . . . . . . . . . 29
22. The Parties . . . . . . . . . . . . . . . . . . . 30
23. Governing Documents . . . . . . . . . . . . . . . 30
24. Subcustodian Agreement . . . . . . . . . . . . . . 30
25. Directors and Trustees . . . . . . . . . . . . . . 30
26. Massachusetts Business Trust . . . . . . . . . . . 30
27. Successors of Parties . . . . . . . . . . . . . . 31

PAGE 4
CUSTODIAN CONTRACT

This Contract by and between State Street Bank and Trust
Company, a Massachusetts trust company, having its principal
place of business at 225 Franklin Street, Boston, Massachusetts,
02110 (hereinafter called the "Custodian"), and each fund which
is listed on Appendix A (as such Appendix may be amended from
time to time) and which evidences its agreement to be bound
hereby by executing a copy of this Contract (each such fund
individually hereinafter called the "Fund," whose definition may
be found in Section 22),

WITNESSETH: That in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto agree as
follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of
its assets, including securities it desires to be held in places
within the United States ("domestic securities") and securities
it desires to be held outside the United States ("foreign
securities") pursuant to the Governing Documents of the Fund.
The Fund agrees to deliver to the Custodian all securities and
cash now or hereafter owned or acquired by it, and all payments
of income, payments of principal or capital distributions
received by it with respect to all securities owned by the Fund
from time to time, and the cash consideration received by it for
such new or treasury shares of capital stock ("Shares") of the
Fund as may be issued or sold from time to time. The Custodian
shall not be responsible for any property of the Fund held or
received by the Fund and not delivered to the Custodian.
With respect to domestic securities, upon receipt of "Proper
Instructions" (within the meaning of Article 5), the Custodian
shall from time to time employ one or more sub-custodians located
in the United States, but only in accordance with an applicable
vote by the Board of Directors/Trustees of the Fund, and provided
that the Custodian shall have no more or less responsibility or
liability to the Fund on account of any actions or omissions of
any sub-custodian so employed than any such sub-custodian has to
the Custodian, and further provided that the Custodian shall not
release the sub-custodian from any responsibility or liability
unless mutually agreed upon by the parties in writing. With
respect to foreign securities and other assets of the Fund held
outside the United States, the Custodian shall employ Chase
Manhattan Bank, N.A., as a sub-custodian for the Fund in
accordance with the provisions of Article 3.

2. Duties of the Custodian with Respect to Property of the Fund
Held By the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of the Fund all

PAGE 5
non-cash property, to be held by it in the United States,
including all domestic securities owned by the Fund, other
than (a) securities which are maintained pursuant to Section
2.10 in a clearing agency which acts as a securities
depository or in a book-entry system authorized by the U.S.
Department of the Treasury, collectively referred to herein
as "Securities System," and (b) commercial paper of an
issuer for which the Custodian acts as issuing and paying
agent ("Direct Paper") which is deposited and/or maintained
in the Direct Paper System of the Custodian pursuant to
Section 2.11.
2.2 Delivery of Securities. The Custodian shall release
and deliver domestic securities owned by the Fund held by
the Custodian or in a Securities System account of the
Custodian or in the Custodian's Direct Paper book entry
system account ("Direct Paper System Account") only upon
receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by mutual agreement of
the parties, and only in the following cases:
1) Sale. Upon sale of such securities for the
account of the Fund and receipt of payment
therefor;
2) Repurchase Agreement. Upon the receipt of payment
in connection with any repurchase agreement
related to such securities entered into by the
Fund;
3) Securities System. In the case of a sale effected
through a Securities System, in accordance with
the provisions of Section 2.10 hereof;
4) Tender Offer. To the depository agent or other
receiving agent in connection with tender or other
similar offers for portfolio securities of the
Fund;
5) Redemption by Issuer. To the issuer thereof or
its agent when such securities are called,
redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) Transfer to Issuer, Nominee. Exchange. To the
issuer thereof, or its agent, for transfer into
the name of the Fund or into the name of any
nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or
nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other
evidence representing the same aggregate face
amount or number of units and bearing the same
interest rate, maturity date and call provisions,

PAGE 6
if any; provided that, in any such case, the new
securities are to be delivered to the Custodian;
7) Sale to Broker or Dealer. Upon the sale of such
securities for the account of the Fund, to the
broker or its clearing agent or dealer, against a
receipt, for examination in accordance with
"street delivery" custom; provided that in any
such case, the Custodian shall have no
responsibility or liability for any loss arising
from the delivery of such securities prior to
receiving payment for such securities except as
may arise from the Custodian's failure to act in
accordance with its duties as set forth in
Section 12.
8) Exchange or Conversion. For exchange or
conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization,
split-up of shares, change of par value or
readjustment of the securities of the issuer of
such securities, or pursuant to provisions for
conversion contained in such securities, or
pursuant to any deposit agreement provided that,
in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
9) Warrants, Rights. In the case of warrants, rights
or similar securities, the surrender thereof in
the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or
temporary securities for definitive securities;
provided that, in any such case, the new
securities and cash, if any, are to be delivered
to the Custodian;
10) Loans of Securities. For delivery in connection
with any loans of securities made by the Fund, but
only against receipt of adequate collateral as
agreed upon from time to time by the Custodian and
the Fund, which may be in the form of cash,
obligations issued by the United States
government, its agencies or instrumentalities, or
such other property as mutually agreed by the
parties, except that in connection with any loans
for which collateral is to be credited to the
Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury,
the Custodian will not be held liable or
responsible for the delivery of securities owned
by the Fund prior to the receipt of such
collateral, unless the Custodian fails to act in
accordance with its duties set forth in
Article 12;

PAGE 7

11) Borrowings. For delivery as security in
connection with any borrowings by the Fund
requiring a pledge of assets by the Fund, but only
against receipt of amounts borrowed, except where
additional collateral is required to secure a
borrowing already made, subject to Proper
Instructions, further securities may be released
for that purpose;
12) Options. For delivery in accordance with the
provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange
Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing
Corporation, any registered national securities
exchange, any similar organization or
organizations, or the Investment Company Act of
1940, regarding escrow or other arrangements in
connection with transactions by the Fund;
13) Futures. For delivery in accordance with the
provisions of any agreement among the Fund, the
Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act,
relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any
Contract Market, any similar organization or
organizations, or the Investment Company Act of
1940, regarding account deposits in connection
with transactions by the Fund;
14) In-Kind Distributions. Upon receipt of
instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in
connection with distributions in kind, as may be
described from time to time in the Fund's
currently effective prospectus and statement of
additional information ("prospectus"), in
satisfaction of requests by holders of Shares for
repurchase or redemption;
15) Miscellaneous. For any other proper corporate
purpose, but only upon receipt of, in addition to
Proper Instructions, a certified copy of a
resolution of the Board of Directors/Trustees or
of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities to
be delivered, setting forth the purpose for which
such delivery is to be made, declaring such

PAGE 8
purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of
such securities shall be made; and
16) Type of Payment. In any or all of the above
cases, payments to the Fund shall be made in cash,
by a certified check upon or a treasurer's or
cashier's check of a bank, by effective bank wire
transfer through the Federal Reserve Wire System
or, if appropriate, outside of the Federal Reserve
Wire System and subsequent credit to the Fund's
Custodian account, or, in case of delivery through
a stock clearing company, by book-entry credit by
the stock clearing company in accordance with the
then current street custom, or such other form of
payment as may be mutually agreed by the parties,
in all such cases collected funds to be promptly
credited to the Fund.
2.3 Registration of Securities. Domestic securities held
by the Custodian (other than bearer securities) shall be
registered in the name of the Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian which
nominee shall be assigned exclusively to the Fund, unless
the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered
investment companies having the same investment adviser as
the Fund, or in the name or nominee name of any agent
appointed pursuant to Section 2.9 or in the name or nominee
name of any sub-custodian appointed pursuant to Article 1.
All securities accepted by the Custodian on behalf of the
Fund under the terms of this Contract shall be in "street
name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the United States in
the name of the Fund, subject only to draft or order by the
Custodian acting pursuant to the terms of this Contract, and
shall hold in such account or accounts, subject to the
provisions hereof all cash received by it from or for the
account of the Fund, other than cash maintained by the Fund
in a bank account established and used in accordance with
Rule 17f-3 under the Investment Company Act of 1940. Funds
held by the Custodian for the Fund may be deposited for the
Fund's credit in the Banking Department of the Custodian or
in such other banks or trust companies as the Custodian may
in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the
funds to be deposited with each such bank or trust company
shall be approved by vote of a majority of the Board of
Directors/Trustees of the Fund. Such funds shall be

PAGE 9
deposited by the Custodian in its capacity as Custodian and
shall be withdrawable by the Custodian only in that
capacity.
2.5 Sale of Shares and Availability of Federal Funds. Upon
mutual agreement between the Fund and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions,
make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for
Shares of the Fund which are deposited into the Fund's
account.
2.6 Collection of Income, Dividends. The Custodian shall
collect on a timely basis all income and other payments with
respect to United States registered securities held
hereunder to which the Fund shall be entitled either by law
or pursuant to custom in the securities business, and shall
collect on a timely basis all income and other payments with
respect to United States bearer securities if, on the date
of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such income
or other payments, as collected, to the Fund's custodian
account. Without limiting the generality of the foregoing,
the Custodian shall detach and present for payment all
coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on
securities held hereunder. The Custodian will also receive
and collect all stock dividends, rights and other items of
like nature as and when they become due or payable. Income
due the Fund on United States securities loaned pursuant to
the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty
or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be
necessary to assist the Fund in arranging for the timely
delivery to the Custodian of the income to which the Fund is
properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper
Instructions,
which may be continuing instructions when deemed appropriate
by mutual agreement of the parties, the Custodian shall pay
out monies of the Fund in the following cases only:
1) Purchases. Upon the purchase of domestic
securities, options, futures contracts or options
on futures contracts for the account of the Fund
but only (a) against the delivery of such
securities, or evidence of title to such options,
futures contracts or options on futures contracts,
to the Custodian (or any bank, banking firm or
trust company doing business in the United States
or abroad which is qualified under the Investment

PAGE 10
Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian
as its agent for this purpose in accordance with
Section 2.9 hereof) registered in the name of the
Fund or in the name of a nominee of the Fund or of
the Custodian referred to in Section 2.3 hereof or
in other proper form for transfer; (b) in the case
of a purchase effected through a Securities
System, in accordance with the conditions set
forth in Section 2.10 hereof or (c) in the case of
a purchase involving the Direct Paper System, in
accordance with the conditions set forth in
Section 2.11; or (d) in the case of repurchase
agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer
which is a member of NASD, (i) against delivery of
the securities either in certificate form or
through an entry crediting the Custodian's account
at the Federal Reserve Bank with such securities
or (ii) against delivery of the receipt evidencing
purchase by the Fund of securities owned by the
Custodian along with written evidence of the
agreement by the Custodian to repurchase such
securities from the Fund. All coupon bonds
accepted by the Custodian shall have the coupons
attached or shall be accompanied by a check
payable on coupon payable date for the interest
due on such date.
2) Exchanges. In connection with conversion,
exchange or surrender of securities owned by the
Fund as set forth in Section 2.2 hereof;
3) Redemptions. For the redemption or repurchase of
Shares issued by the Fund as set forth in Article
4 hereof;
4) Expense and Liability. For the payment of any
expense or liability incurred by the Fund,
including but not limited to the following
payments for the account of the Fund: interest,
taxes, management, accounting, transfer agent and
legal fees, and operating expenses of the Fund
whether or not such expenses are to be in whole or
part capitalized or treated as deferred expenses;
5) Dividends. For the payment of any dividends or
other distributions to shareholders declared
pursuant to the Governing Documents of the Fund;
6) Short Sale Dividend. For payment of the amount of
dividends received in respect of securities sold
short;
7) Loan. For repayment of a loan upon redelivery of
pledged securities and upon surrender of the

PAGE 11
note(s), if any, evidencing the loan;
8) Miscellaneous. For any other proper purpose, but
only upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of
the Board of Directors/Trustees or of the
Executive Committee of the Fund signed by an
officer of the Fund and certified by its Secretary
or an Assistant Secretary, specifying the amount
of such payment, setting forth the purpose for
which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be
made.
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased. In any and every case where payment
for purchase of domestic securities for the account of the
Fund is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the
Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been
received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time
or times in its discretion appoint (and may at any time
remove) any other bank or trust company, which is itself
qualified under the Investment Company Act of 1940, as
amended, to act as a custodian, as its agent to carry out
such of the provisions of this Article 2 as the Custodian
may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian of
its responsibilities or liabilities hereunder.
2.10 Deposit of Securities in Securities Systems. The
Custodian may deposit and/or maintain domestic securities
owned by the Fund in a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal
agencies, collectively referred to herein as "Securities
System" in accordance with applicable Federal Reserve Board
and Securities and Exchange Commission rules and
regulations, if any, and subject to the following
provisions:
1) Account of Custodian. The Custodian may keep
domestic securities of the Fund in a Securities
System provided that such securities are
represented in an account ("Account") of the
Custodian in the Securities System which shall not
include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise

PAGE 12
for customers;
2) Records. The records of the Custodian, with
respect to domestic securities of the Fund which
are maintained in a Securities System, shall
identify by book-entry those securities belonging
to the Fund;
3) Payment of Fund Monies, Delivery of Securities.
Subject to Section 2.7, the Custodian shall pay
for domestic securities purchased for the account
of the Fund upon (i) receipt of advice from the
Securities System that such securities have been
transferred to the Account, and (ii) the making of
an entry on the records of the Custodian to
reflect such payment and transfer for the account
of the Fund. Subject to Section 2.2, the
Custodian shall transfer domestic securities sold
for the account of the Fund upon (i) receipt of
advice from the Securities System that payment for
such securities has been transferred to the
Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer
and payment for the account of the Fund. Copies
of all advices from the Securities System of
transfers of domestic securities for the account
of the Fund shall identify the Fund, be maintained
for the Fund by the Custodian and be provided to
the Fund at its request. The Custodian shall
furnish the Fund confirmation of each transfer to
or from the account of the Fund in the form of a
written advice or notice and shall furnish to the
Fund copies of daily transaction sheets reflecting
each day's transactions in the Securities System
for the account of the Fund;
4) Reports. The Custodian shall provide the Fund
with any report obtained by the Custodian on the
Securities System's accounting system, internal
accounting control and procedures for safeguarding
domestic securities deposited in the Securities
System, and further agrees to provide the Fund
with copies of any documentation it has relating
to its arrangements with the Securities Systems as
set forth in this Agreement or as otherwise
required by the Securities and Exchange
Commission;
5) Annual Certificate. The Custodian shall have
received the initial or annual certificate, as the
case may be, required by Article 13 hereof;
6) Indemnification. Anything to the contrary in this
Contract notwithstanding, the Custodian shall be
liable to the Fund for any loss or expense,

PAGE 13
including reasonable attorneys fees, or damage to
the Fund resulting from use of the Securities
System by reason of any failure by the Custodian
or any of its agents or of any of its or their
employees or agents or from failure of the
Custodian or any such agent to enforce effectively
such rights as it may have against the Securities
System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the
Custodian with respect to any claim against the
Securities System or any other person which the
Custodian may have as a consequence of any such
loss, expense or damage if and to the extent that
the Fund has not been made whole for any such
loss, expense or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper
System. The Custodian may deposit and/or maintain
securities owned by the Fund in the Direct Paper System of
the Custodian subject to the following provisions:
1) No transaction relating to securities in the
Direct Paper System will be effected in the
absence of Proper Instructions;
2) The Custodian may keep securities of the Fund in
the Direct Paper System only if such securities
are represented in an account ("Account") of the
Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to
securities of the Fund which are maintained in the
Direct Paper System shall identify by book-entry
those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased
for the account of the Fund upon the making of an
entry on the records of the Custodian to reflect
such payment and transfer of securities to the
account of the Fund. The Custodian shall transfer
securities sold for the account of the Fund upon
the making of an entry on the records of the
Custodian to reflect such transfer and receipt of
payment for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation
of each transfer to or from the account of the
Fund, in the form of a written advice or notice,
of Direct Paper on the next business day following
such transfer and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's
transaction in the Securities System for the
account of the Fund;

PAGE 14

6) The Custodian shall provide the Fund with any
report on its system of internal accounting
control as the Fund may reasonably request from
time to time;
2.12 Segregated Account. The Custodian shall, upon receipt
of Proper Instructions, which may be of a continuing nature
where deemed appropriate by mutual agreement of the parties,
establish and maintain a segregated account or accounts for
and on behalf of the Fund, into which account or accounts
may be transferred cash and/or securities, including
securities maintained in an account by the Custodian
pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund, the Custodian
and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization
or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund, (ii) for purposes
of segregating cash or government securities in connection
with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or
sold by the Fund, (iii) for the purposes of compliance by
the Fund with the procedures required by Investment Company
Act Release No. 10666, or any subsequent release, rule or
policy, of the Securities and Exchange Commission relating
to the maintenance of segregated accounts by registered
investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt
of, in addition to Proper Instructions, a certified copy of
a resolution of the Board of Directors/Trustees or of the
Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary,
setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate
purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to domestic securities of the Fund held by it and in
connection with transfers of such securities.
2.14 Proxies. If the securities are registered other than
in the name of the Fund or a nominee of the Fund, the
Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the

PAGE 15
registered holder of such securities, all proxies, without
indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Fund such proxies,
all proxy soliciting materials and all notices relating to
such securities.
2.15 Communications Relating to Fund Portfolio Securities.
The Custodian shall transmit promptly to the Fund all
written information (including, without limitation, pendency
of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the
maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers of the domestic
securities being held for the Fund by the Custodian, an
agent appointed under Section 2.9, or sub-custodian
appointed under Section 1. With respect to tender or
exchange offers, the Custodian shall transmit promptly to
the Fund all written information received by the Custodian,
an agent appointed under Section 2.9, or sub-custodian
appointed under Section 1 from issuers of the domestic
securities whose tender or exchange is sought and from the
party (or his agents) making the tender or exchange offer.
If the Fund desires to take action with respect to any
tender offer, exchange offer or any other similar
transaction, the Fund shall notify the Custodian of such
desired action at least 72 hours (excluding holidays and
weekends) prior to the time such action must be taken under
the terms of the tender, exchange offer, or other similar
transaction, and it will be the responsibility of the
Custodian to timely transmit to the appropriate person(s)
the Fund's notice. Where the Fund does not notify the
Custodian of its desired action within the aforesaid 72 hour
period, the Custodian shall use its best efforts to timely
transmit the Fund's notice to the appropriate person.
2.16 Reports to Fund by Independent Public Accountants. The
Custodian shall provide the Fund, at such times as the Fund
may reasonably require, with reports by independent public
accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including
domestic securities deposited and/or maintained in a
Securities System, relating to the services provided by the
Custodian under this Contract; such reports shall be of
sufficient scope and in sufficient detail, as may reasonably
be required by the Fund to provide reasonable assurance that
any material inadequacies existing or arising since the
prior examination would be disclosed by such examination.
The reports must describe any material inadequacies
disclosed and, if there are no such inadequacies, the
reports shall so state.

PAGE 16

3. Duties of the Custodian with Respect to Property of the Fund
Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Custodian
is authorized and instructed to employ Chase Manhattan Bank,
N.A, ("Chase") as sub-custodian for the Fund's securities,
cash and other assets maintained outside of the United
States ("foreign assets") all as described in the
Subcustodian Agreement between the Custodian and Chase.
Upon receipt of "Proper Instructions", together with a
certified resolution of the Fund's Board of
Directors/Trustees, the Custodian and the Fund may agree to
designate additional proper institutions and foreign
securities depositories to act as sub-custodians of the
Fund's foreign assets. Upon receipt of Proper Instructions
from the Fund, the Custodian shall cease the employment of
any one or more of such sub-custodians for maintaining
custody of the Fund's foreign assets.
3.2 Assets to be Held. The Custodian shall limit the
foreign assets maintained in the custody of foreign sub-
custodians to foreign assets specified under the terms of
the Subcustodian Agreement between the Custodian and Chase.
3.3 Foreign Securities Depositories. Except as may
otherwise be agreed upon in writing by the Custodian and the
Fund, foreign assets of the Fund shall be maintained in
foreign securities depositories only through arrangements
implemented by the banking institutions serving as sub-
custodians pursuant to the terms hereof.
3.4 Segregation of Securities. The Custodian shall
identify on its books as belonging to the Fund, the foreign
assets of the Fund held by Chase and by each foreign sub-
custodian.
3.5 Access of Independent Accountants of the Fund. Upon
request of the Fund, the Custodian will use its best efforts
(subject to applicable law) to arrange for the independent
accountants, officers or other representatives of the Fund
or the Custodian to be afforded access to the books and
records of Chase and any banking or other institution
employed as a sub-custodian for the Fund by Chase or the
Custodian insofar as such books and records relate to the
performance of Chase or such banking or other institution
under any agreement with the Custodian or Chase. Upon
request of the Fund, the Custodian shall furnish to the Fund
such reports (or portions thereof) of Chase's external
auditors as are available to the Custodian and which relate
directly to Chase's system of internal accounting controls
applicable to Chase's duties as a subcustodian or which
relate to the internal accounting controls of any
subcustodian employed by Chase with respect to foreign
assets of the Fund.

PAGE 17

3.6 Reports by Custodian. The Custodian will supply to the
Fund from time to time, as mutually agreed upon, statements
in respect of the foreign assets of the Fund held pursuant
to the terms of the Subcustodian Agreement between the
Custodian and Chase, including but not limited, to an
identification of entities having possession of the Fund's
foreign assets and advices or notifications of any transfers
of foreign assets to or from each custodial account
maintained by any sub-custodian on behalf of the Fund
indicating, as to foreign assets acquired for the Fund, the
identity of the entity having physical possession of such
foreign assets.
3.7 Transactions in Foreign Assets of the Fund. All
transactions with respect to the Fund's foreign assets shall
be in accordance with, and subject to, the provisions of the
Subcustodian Agreement between Chase and the Custodian.
3.8 Responsibility of Custodian, Sub-Custodian, and Fund.
Notwithstanding anything to the contrary in this Custodian
Contract, the Custodian shall not be liable to the Fund for
any loss, damage, cost, expense, liability or claim arising
out of or in connection with the maintenance of custody of
the Fund's foreign assets by Chase or by any other banking
institution or securities depository employed pursuant to
the terms of any Subcustodian Agreement between Chase and
the Custodian, except that the Custodian shall be liable for
any such loss, damage, cost, expense, liability or claim to
the extent provided in the Subcustodian Agreement between
Chase and the Custodian or attributable to the failure of
the Custodian to exercise the standard of care set forth in
Article 12 hereof in the performance of its duties under
this Contract or such Subcustodian Agreement. At the
election of the Fund, the Fund shall be entitled to be
subrogated to the rights of the Custodian under the
Subcustodian Agreement with respect to any claims arising
thereunder against Chase or any other banking institution or
securities depository employed by Chase if and to the extent
that the Fund has not been made whole therefor. As between
the Fund and the Custodian, the Fund shall be solely
responsible to assure that the maintenance of foreign
securities and cash pursuant to the terms of the
Subcustodian Agreement complies with all applicable rules,
regulations, interpretations and orders of the Securities
and Exchange Commission, and the Custodian assumes no
responsibility and makes no representations as to such
compliance.
3.9 Monitoring Responsibilities. With respect to the
Fund's foreign assets, the Custodian shall furnish annually
to the Fund, during the month of June, information
concerning the sub-custodians employed by the Custodian.

PAGE 18
Such information shall be similar in kind and scope to that
furnished to the Fund in connection with the initial
approval of this Contract. In addition, the Custodian will
promptly inform the Fund in the event that the Custodian
learns of a material adverse change in the financial
condition of a sub-custodian.
3.10 Branches of U.S. Banks. Except as otherwise set forth
in this Contract, the provisions of this Article 3 shall not
apply where the custody of the Fund's assets is maintained
in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment
Company Act of 1940 which meets the qualification set forth
in Section 26(a) of said Act. The appointment of any such
branch as a sub-custodian shall be governed by Section 1 of
this Contract.
4. Payments for Repurchases or Redemptions and Sales of Shares
of the Fund
From such funds as may be available for the purpose but
subject to the limitations of the Governing Documents of the Fund
and any applicable votes of the Board of Directors/Trustees of
the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer
Agent a request for redemption or repurchase of their Shares. In
connection with the redemption or repurchase of Shares of the
Fund, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholder. In connection with
the redemption or repurchase of Shares of the Fund, the Custodian
shall honor checks drawn on the Custodian by a holder of Shares,
which checks have been furnished by the Fund to the holder of
Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to
time between the Fund and the Custodian.

The Custodian shall receive from the distributor for the
Fund's Shares or from the Transfer Agent of the Fund and deposit
as received into the Fund's account such payments as are received
for Shares of the Fund issued or sold from time to time by the
Fund. The Custodian will provide timely notification to the Fund
and the Transfer Agent of any receipt by it of payments for
Shares of the Fund.
5. Proper Instructions
Proper Instructions as used herein means a writing signed or
initialled by one or more person or persons as the Board of
Directors/Trustees shall have from time to time authorized. Each
such writing shall set forth the specific transaction or type of
transaction involved, including a specific statement of the
purpose for which such action is requested, or shall be a blanket
instruction authorizing specific transactions of a repeated or

PAGE 19
routine nature. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all
oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the
authorization by the Board of Directors/Trustees of the Fund
accompanied by a detailed description of procedures approved by
the Board of Directors/Trustees, Proper Instructions may include
communications effected directly between electro-mechanical or
electronic devices provided that the Board of Directors/Trustees
and the Custodian are satisfied that such procedures afford
adequate safeguards for the Fund's assets.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express
authority from the Fund:
1) make payments to itself or others for minor
expenses of handling securities or other similar
items relating to its duties under this Contract,
provided that all such payments shall be accounted
for to the Fund;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the Fund,
checks, drafts and other negotiable instruments on
the same day as received; and
4) in general, attend to all non-discretionary
details in connection with the sale, exchange,
substitution, purchase, transfer and other
dealings with the securities and property of the
Fund except as otherwise directed by the Board of
Directors/Trustees of the Fund.
7. Evidence of Authority, Reliance on Documents
The Custodian shall be protected in acting upon any
instructions, notice, request, consent, certificate or other
instrument or paper reasonably and in good faith believed by it
to be genuine and to have been properly executed by or on behalf
of the Fund in accordance with Article 5 hereof. The Custodian
may receive and accept a certified copy of a vote of the Board of
Directors/Trustees of the Fund as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or
(b) of any determination or of any action by the Board of
Directors/Trustees pursuant to the Governing Documents of the
Fund as described in such vote, and such vote may be considered
as in full force and effect until receipt by the Custodian of
written notice to the contrary. So long as and to the extent
that it is in the exercise of the standard of care set forth in
Article 12 hereof, the Custodian shall not be responsible for the
title, validity or genuineness of any property or evidence of
title thereto received by it or delivered by it pursuant to this

PAGE 20
Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party
or parties.
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary
information to the person or persons appointed by the Board of
Directors/Trustees of the Fund to keep the books of account of
the Fund and/or compute the net asset value per share of the
outstanding shares of the Fund or, if directed in writing to do
so by the Fund, shall itself keep such books of account and/or
compute such net asset value per share. If so directed, the
Custodian shall also calculate daily the net income of the Fund
as described in the Fund's currently effective prospectus and
shall advise the Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an
officer of the Fund to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various
components. The calculations of the net asset value per share
and the daily income of the Fund shall be made at the time or
times and in the manner described from time to time in the Fund's
currently effective prospectus.
9. Records, Inventory
The Custodian shall create and maintain all records relating
to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the
Investment Company Act of 1940, with particular attention to
Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the
Fund. All such records shall be the property of the Fund and
shall at all times during the regular business hours of the
Custodian be open for inspection and audit by duly authorized
officers, employees or agents of the Fund and employees and
agents of the Securities and Exchange Commission, and, in the
event of termination of this Agreement, will be delivered in
accordance with Section 14 hereof. The Custodian shall, at the
Fund's request, supply the Fund with a tabulation of securities
owned by the Fund and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall
be agreed upon between the Fund and the Custodian, include
certificate numbers in such tabulations. The Custodian shall
conduct a periodic inventory of all securities and other property
subject to this Agreement and provide to the Fund a periodic
reconciliation of the vaulted position of the Fund to the
appraised position of the Fund. The Custodian will promptly
report to the Fund the results of the reconciliation, indicating
any shortages or discrepancies uncovered thereby, and take
appropriate action to remedy any such shortages or discrepancies.

PAGE 21

10. Opinion of Fund's Independent Accountant
The Custodian shall cooperate with the Fund's independent
public accountants in connection with the annual and other audits
of the books and records of the Fund and take all reasonable
action, as the Fund may from time to time request, to provide
from year to year the necessary information to such accountants
for the expression of their opinion without any qualification as
to the scope of their examination, including but not limited to,
any opinion in connection with the preparation of the Fund's Form
N-lA, and Form N-SAR or other annual reports to the Securities
and Exchange Commission and with respect to any other
requirements of such Commission.
11. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation
for its services and expenses as Custodian, as agreed upon from
time to time between the Fund and the Custodian.
12. Responsibility of Custodian
Notwithstanding anything to the contrary in this Agreement,
the Custodian shall be held to the exercise of reasonable care in
carrying out the provisions of this Contract, but shall be kept
indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence.
In order for the indemnification provision contained in this
Section to apply, it is understood that if in any case the Fund
may be asked to indemnify or save the Custodian harmless, the
Fund shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further
understood that the Custodian will use all reasonable care to
identify and notify the Fund promptly concerning any situation
which presents or appears likely to present the probability of
such a claim for indemnification against the Fund. The Fund,
shall have the option to defend the Custodian against any claim
which may be the subject of this indemnification, and in the
event that the Fund so elects, it will so notify the Custodian,
and thereupon the Fund shall take over complete defense of the
claim and the Custodian shall in such situation initiate no
further legal or other expenses for which it shall seek
indemnification under this Section. The Custodian shall in no
case confess any claim or make any compromise in any case in
which the Fund will be asked to indemnify the Custodian except
with the Fund's prior written consent. Nothing herein shall be
construed to limit any right or cause of action on the part of
the Custodian under this Contract which is independent of any
right or cause of action on the part of the Fund. The Custodian
shall be entitled to rely on and may act upon advice of counsel
(who may be counsel for the Fund or such other counsel as may be
agreed to by the parties) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to
such advice. Notwithstanding the foregoing, the responsibility

PAGE 22
of the Custodian with respect to redemptions effected by check
shall be in accordance with a separate Agreement entered into
between the Custodian and the Fund.
If the Fund requires the Custodian to take any action with
respect to securities, which action involves the payment of money
or which action may, in the opinion of the Custodian, result in
the Custodian or its nominee assigned to the Fund being liable
for the payment of money or incurring liability of some other
form, the Fund, as a prerequisite to requiring the Custodian to
take such action, shall provide indemnity to the Custodian in an
amount and form satisfactory to it.
If the Fund requires the Custodian to advance cash or
securities for any purpose or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to
act or willful misconduct, any property at any time held for the
account of the Fund shall be security therefor and should the
Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of the Fund's
assets to the extent necessary to obtain reimbursement, provided
that the Custodian gives the Fund reasonable notice to repay such
cash or securities advanced, however, such notice shall not
preclude the Custodian's right to assert any lien under this
provision.
13. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution,
shall continue in full force and effect until terminated as
hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either
party by an instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take effect not
sooner than sixty (60) days after the date of such delivery or
mailing in the case of a termination by the Fund, and not sooner
than 180 days after the date of such delivery or mailing in the
case of a termination by the Custodian; provided, however that
the Custodian shall not act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or
an Assistant Secretary that the Board of Directors/Trustees of
the Fund has approved the initial use of a particular Securities
System and the receipt of an annual certificate of the Secretary
or an Assistant Secretary that the Board of Directors/Trustees
has reviewed the use by the Fund of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company
Act of 1940, as amended and that the Custodian shall not act
under Section 2.11 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the
Board of Directors/Trustees has approved the initial use of the
Direct Paper System and the receipt of an annual certificate of

PAGE 23
the Secretary or an Assistant Secretary that the Board of
Directors/Trustees has reviewed the use by the Fund of the Direct
Paper System; provided further, however, that the Fund shall not
amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the
Governing Documents of the Fund, and further provided, that the
Fund may at any time by action of its Board of Directors/Trustees
(i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event
at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements, provided that the Custodian
shall not incur any costs, expenses or disbursements specifically
in connection with such termination unless it has received prior
approval from the Fund, which approval shall not be unreasonably
withheld.
14. Successor Custodian
If a successor custodian shall be appointed by the Board of
Directors/Trustees of the Fund, the Custodian shall, upon
termination, deliver to such successor custodian at the office of
the Custodian, duly endorsed and in the form for transfer, all
securities, funds and other properties then held by it hereunder
and shall transfer to an account of the successor custodian all
of the Fund's securities held in a Securities System. The
Custodian shall also use its best efforts to assure that the
successor custodian will continue any subcustodian agreement
entered into by the Custodian and any subcustodian on behalf of
the Fund.

If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified copy
of a vote of the Board of Directors/Trustees of the Fund, deliver
at the office of the Custodian and transfer such securities,
funds and other properties in accordance with such vote.

In the event that no written order designating a successor
custodian or certified copy of a vote of the Board of
Directors/Trustees shall have been delivered to the Custodian on
or before the date when such termination shall become effective,
then the Custodian shall have the right to deliver to a bank
or trust company, which is a "bank" as defined in the Investment
Company Act of 1940, doing business in Boston, Massachusetts, of
its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not

PAGE 24
less than $25,000,000, all securities, funds and other properties
held by the Custodian and all instruments held by the Custodian
relative thereto and all other property held by it under this
Contract and to transfer to an account of such successor
custodian all of the Fund's securities held in any Securities
System. Thereafter, such bank or trust company shall be the
successor of the Custodian under this Contract.

In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to procure the
certified copy of the vote referred to or of the Board of
Directors/Trustees to appoint a successor custodian, the
Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such
securities, funds and other properties and the provisions of this
Contract relating to the duties and obligations of the Custodian
shall remain in full force and effect. If while this Contract is
in force the Fund shall be liquidated pursuant to law, the
Custodian shall distribute, either in cash or (if the Fund so
orders) in the portfolio securities and other assets of the Fund,
pro rata among the holders of shares of the Fund as certified by
the Transfer Agent, the property of the Fund which remains after
paying or satisfying all expenses and liabilities of the Fund.
Section 12 hereof shall survive any termination of this Contract.
15. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Fund may from time to time agree on such
provisions interpretive of or in addition to the provisions of
this Contract as may in their joint opinion be consistent with
the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Governing Documents of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Contract.

16. Notice
Any notice shall be sufficiently given when sent by
registered or certified mail, or by such other means as the
parties shall agree, to the other party at the address of such
party set forth above or at such other address as such party may
from time to time specify in writing to the other party.
17. Bond
The Custodian shall, at all times, maintain a bond in such
form and amount as is acceptable to the Fund which shall be
issued by a reputable fidelity insurance company authorized to do
business in the place where such bond is issued against larceny

PAGE 25
and embezzlement, covering each officer and employee of the
Custodian who may, singly or jointly with others, have access to
securities or funds of the Fund, either directly or through
authority to receive and carry out any certificate instruction,
order request, note or other instrument required or permitted by
this Agreement. The Custodian agrees that it shall not cancel,
terminate or modify such bond insofar as it adversely affects the
Fund except after written notice given to the Fund not less than
10 days prior to the effective date of such cancellation,
termination or modification. The Custodian shall furnish to the
Fund a copy of each such bond and each amendment thereto.
18. Confidentiality
The Custodian agrees to treat all records and other
information relative to the Fund and its prior, present or future
shareholders as confidential, and the Custodian, on behalf of
itself and its employees, agrees to keep confidential all such
information except, after prior notification to and approval in
writing by the Fund, which approval shall not be unreasonably
withheld and may not be withheld where the Custodian may be
exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Fund.
19. Exemption from Liens
The securities and other assets held by the Custodian for
the Fund shall be subject to no lien or charge of any kind in
favor of the Custodian or any person claiming through the
Custodian, but nothing herein shall be deemed to deprive the
Custodian of its right to invoke any and all remedies available
at law or equity to collect amounts due it under this Agreement.
Neither the Custodian nor any sub-custodian appointed pursuant to
Section 1 hereof shall have any power or authority to assign,
hypothecate, pledge or otherwise dispose of any securities held
by it for the Fund, except upon the direction of the Fund, duly
given as herein provided, and only for the account of the Fund.
20. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth
of Massachusetts.
21. Prior Contracts
Without derogating any of the rights established by such
contracts, this Contract supersedes and terminates, as of the
date hereof, all prior contracts between the Fund and the
Custodian relating to the custody of the Fund's assets.
22. The Parties
All references herein to "the Fund" are to each of the funds
listed on Appendix A individually, as if this Contract were
between such individual fund and the Custodian. In the case of a
series fund or trust, all references to "the Fund" are to the
individual series or portfolio of such fund or trust, or to such
fund or trust on behalf of the individual series or portfolio, as

PAGE 26
appropriate. Any reference in this Contract to "the parties"
shall mean the Custodian and such other individual Fund as to
which the matter pertains.
23. Governing Documents.
The term "Governing Documents" means the Articles of
Incorporation, Agreement of Trust, By-Laws and Registration
Statement filed under the Securities Act of 1933, as amended from
time to time.
24. Subcustodian Agreement.
Reference to the "Subcustodian Agreement" between the
Custodian and Chase shall mean any such agreement which shall be
in effect from time to time between Chase and the Custodian with
respect to foreign assets of the Fund.
25. Directors and Trustees.
It is understood and is expressly stipulated that neither
the holders of shares in the Fund nor any Directors or Trustees
of the Fund shall be personally liable hereunder.
26. Massachusetts Business Trust
With respect to any Fund which is a party to this Contract
and which is organized as a Massachusetts business trust, the
term Fund means and refers to the trustees from time to time
serving under the applicable trust agreement (Declaration of
Trust) of such Trust as the same may be amended from time to
time. It is expressly agreed that the obligations of any such
Trust hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the
Trust, personally, but bind only the trust property of the Trust,
as provided in the Declaration of Trust of the Trust. The
execution and delivery of this Contract has been authorized by
the trustees and signed by an authorized officer of the Trust,
acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officer shall be deemed
to have been made by any of them but shall bind only the trust
property of the Trust as provided in its Declaration of Trust.
27. Successors of Parties.
This Contract shall be binding on and shall inure to the
benefit of the Fund and the Custodian and their respective
successors.

IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the dates indicated below.

DATED: September 28, 1987
__________________

PAGE 27

STATE STREET BANK AND TRUST
COMPANY
ATTEST:

/s/Kathleen M. Kubit By/s/Charles Cassidy
_____________________ _________________________________
Assistant Secretary Vice President

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Stock Fund

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio

PAGE 28
(SIGNATURES CONTINUED)

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
New York Tax-Free Money Fund

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
New York Tax-Free Bond Fund

T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Money Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

DATED: September 28, 1987
___________________

ATTEST:

/s/Nancy J. Wortman By/s/Carmen F. Deyesu
____________________________ __________________________________

PAGE 29
Appendix A

The following Funds are parties to this Agreement and have
so indicated their intention to be bound by such Agreement by
executing the Agreement on the dates indicated thereon.

T. Rowe Price California Tax-Free Income Trust on behalf of
the
California Tax-Free Bond Fund and
California Tax-Free Money Fund
T. Rowe Price Capital Appreciation Fund

T. Rowe Price Equity Income Fund
T. Rowe Price GNMA Fund

T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.

T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Institutional Trust on behalf of the
Tax-Exempt Reserve Portfolio

T. Rowe Price International Trust on behalf of the
T. Rowe Price International Bond Fund and
T. Rowe Price International Stock Fund

T. Rowe Price New America Growth Fund
T. Rowe Price New Era Fund, Inc.

T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price New Income Fund, Inc.

T. Rowe Price Prime Reserve Fund, Inc.
T. Rowe Price Science & Technology Fund, Inc.

T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price State Tax-Free Income Trust on behalf of the
Maryland Tax-Free Bond Fund,
New York Tax-Free Bond Fund and
New York Tax-Free Money Fund

T. Rowe Price Tax-Exempt Money Fund, Inc.
T. Rowe Price Tax-Free High Yield Fund, Inc.

T. Rowe Price Tax-Free Income Fund, Inc.
T. Rowe Price Tax-Free Short-Intermediate Fund, Inc.

T. Rowe Price U.S. Treasury Money Fund, Inc.

PAGE 30
AMENDMENT NO. 1 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

THIS AGREEMENT, made as of this 24th day of June, 1988, by
and between: T. Rowe Price Growth Stock Fund, Inc., T. Rowe Price
New Horizons Fund, Inc., T. Rowe Price New Era Fund, Inc., T.
Rowe Price New Income Fund, Inc., T. Rowe Price Prime Reserve
Fund, Inc., T. Rowe Price International Trust, T. Rowe Price U.S.
Treasury Money Fund, Inc., T. Rowe Price Growth & Income Fund,
Inc., T. Rowe Price Tax-Exempt Money Fund, Inc., T. Rowe Price
Tax-Free Income Fund, Inc., T. Rowe Price Tax-Free Short-
Intermediate Fund, Inc., T. Rowe Price Short-Term Bond Fund,
Inc., T. Rowe Price High Yield Fund, Inc., T. Rowe Price Tax-Free
High Yield Fund, Inc., T. Rowe Price New America Growth Fund, T.
Rowe Price Equity Income Fund, T. Rowe Price GNMA Fund, T. Rowe
Price Capital Appreciation Fund, T. Rowe Price Institutional
Trust, T. Rowe Price State Tax-Free Income Trust, T. Rowe Price
California Tax-Free Income Trust, T. Rowe Price Science &
Technology Fund, Inc., (hereinafter together called the "Funds"
and individually "Fund") and State Street Bank and Trust Company,
a Massachusetts trust,

W I T N E S S E T H:

It is mutually agreed that the Custodian Contract made by
the parties on the 28th day of September, 1987, is hereby amended
by adding thereto the T. Rowe Price Small-Cap Value Fund, Inc.

T. ROWE PRICE GROWTH STOCK FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE NEW HORIZONS FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE NEW ERA FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

PAGE 31
(SIGNATURES CONTINUED)

T. ROWE PRICE NEW INCOME FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE PRIME RESERVE FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE INTERNATIONAL TRUST
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
/s/Henry H.Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE GROWTH & INCOME FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE SHORT-TERM BOND FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE TAX-FREE INCOME FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

PAGE 32
(SIGNATURES CONTINUED)

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE HIGH YIELD FUND, INC.
/s/ Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE NEW AMERICA GROWTH FUND
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE EQUITY INCOME FUND
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE GNMA FUND
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE CAPITAL APPRECIATION FUND
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE INSTITUTIONAL TRUST
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

PAGE 33
(SIGNATURES CONTINUED)

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

STATE STREET BANK AND TRUST COMPANY
/s/William Blackwell
______________________________________________
By:

PAGE 34
AMENDMENT NO. 2 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, between State Street Bank and Trust Company and
each of the Parties listed on Appendix A thereto is hereby
further amended, as of October 19, 1988, by adding thereto the T.
Rowe Price International Discovery Fund, Inc., a separate series
of T. Rowe Price International Trust.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund

T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

PAGE 35

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

STATE STREET BANK AND TRUST COMPANY

/s/Guy R. Sturgeon
______________________________________________
By:

PAGE 36
AMENDMENT NO. 3 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988 and October 19, 1988, between State Street Bank and
Trust Company and each of the Parties listed on Appendix A
thereto is hereby further amended, as of February 22, 1989, by
adding thereto the T. Rowe Price International Equity Fund, Inc.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund

T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

PAGE 37

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.

/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

STATE STREET BANK AND TRUST COMPANY

/s/K. Donelson
______________________________________________
By:

PAGE 38
AMENDMENT NO. 4 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988 and February 22, 1989, between
State Street Bank and Trust Company and each of the Parties
listed on Appendix A thereto is hereby further amended, as of
July 19, 1989, by adding thereto the Institutional International
Funds, Inc., on behalf of the Foreign Equity Fund.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund

T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

PAGE 39
T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President

STATE STREET BANK AND TRUST COMPANY

/s/
______________________________________________
By:

PAGE 40
AMENDMENT NO. 5 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, and July 19,
1989 between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of September 15, 1989, by adding thereto the T. Rowe Price
U.S. Treasury Funds, Inc., on behalf of the U.S. Treasury
Intermediate Fund and the U.S. Treasury Long-Term Fund.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund

T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

PAGE 41

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund

/s/Henry H. Hopkins
____________________________________
By: Henry H. Hopkins
Vice President

STATE STREET BANK AND TRUST COMPANY

/s/
____________________________________
By:

PAGE 42
AMENDMENT NO. 6 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19, 1989
and September 15, 1989, between State Street Bank and Trust
Company and each of the Parties listed on Appendix A thereto is
hereby further amended, as of December 15, 1989, by restating
Section 2.15 as follows:

2.15 Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Fund all written
information (including, without limitation, pendency of calls and
maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put
options written by the Fund and the maturity of futures contracts
purchased or sold by the Fund) received by the Custodian from
issuers of the domestic securities being held for the Fund by the
Custodian, an agent appointed under Section 2.9, or sub-custodian
appointed under Section 1. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund all
written information received by the Custodian, an agent appointed
under Section 2.9, or sub-custodian appointed under Section 1
from issuers of the domestic securities whose tender or exchange
is sought and from the party (or his agents) making the tender or
exchange offer. If the Fund desires to take action with respect
to any tender offer, exchange offer or any other similar
transaction, the Fund shall notify the Custodian of such desired
action at least 48 hours (excluding holidays and weekends) prior
to the time such action must be taken under the terms of the
tender, exchange offer, or other similar transaction, and it will
be the responsibility of the Custodian to timely transmit to the
appropriate person(s) the Fund's notice. Where the Fund does not
notify the custodian of its desired action within the aforesaid
48 hour period, the Custodian shall use its best efforts to
timely transmit the Fund's notice to the appropriate person. It
is expressly noted that the parties may negotiate and agree to
alternative procedures with respect to such 48 hour notice period
on a selective and individual basis.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

PAGE 43

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund

T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.

PAGE 44

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U. S. TREASURY FUNDS, INC.
U. S. Treasury Intermediate Fund
U. S. Treasury Long-Term Fund

/s/Carmen F. Deyesu
_________________________________________
By: Carmen F. Deyesu,
Treasurer

STATE STREET BANK AND TRUST COMPANY

/s/ E. D. Hawkes, Jr.
_________________________________________
By: E. D. Hawkes, Jr.
Vice President

PAGE 45
Amendment No. 7 filed on Form SE January 25, 1990 with
International Trust (CIK 313212) Post Effective Amendment No. 17.

PAGE 46
AMENDMENT NO. 8 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, and December 20,
1989, between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of January 25, 1990, by adding thereto the T. Rowe Price
European Stock Fund, a separate series of T. Rowe Price
International Trust.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund

T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

PAGE 47

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund

/s/Henry H. Hopkins
_________________________________________
By: Henry H. Hopkins
Vice President

STATE STREET BANK AND TRUST COMPANY

/s/
_________________________________________
By:

PAGE 48
AMENDMENT NO. 9 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
and January 25, 1990 between State Street Bank and Trust Company
and each of the Parties listed on Appendix A thereto is hereby
further amended, as of February 21, 1990, by adding thereto the
T. Rowe Price Index Trust, Inc., on behalf of the T. Rowe Price
Equity Index Fund.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund

T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

PAGE 49
T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins
Vice President

STATE STREET BANK AND TRUST COMPANY

/s/
______________________________________
By:

PAGE 50
AMENDMENT NO. 10 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, between State Street Bank
and Trust Company and each of the Parties listed on Appendix A
thereto is hereby further amended, as of June 12, 1990, by adding
thereto the T. Rowe Price Spectrum Fund, Inc., on behalf of the
Spectrum Growth Fund and the Spectrum Income Fund.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund

T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

PAGE 51
T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/
______________________________________
By:

PAGE 52
AMENDMENT NO. 11 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, and June 12, 1990 between
State Street Bank and Trust Company and each of the Parties
listed on Appendix A thereto is hereby further amended, as of
July 18, 1990, by adding thereto the T. Rowe Price New Asia Fund,
a separate series of the T. Rowe Price International Funds, Inc.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

PAGE 53
T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/ Guy R. Sturgeon
______________________________________
By: Guy R. Sturgeon

PAGE 54
AMENDMENT NO. 12 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, and July 18,
1990 between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of October 15, 1990, by adding thereto the T. Rowe Price
Global Government Bond Fund, a separate series of the T. Rowe
Price International Funds, Inc.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

PAGE 55
T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY
/s/ Guy R. Sturgeon
______________________________________
By:

PAGE 56
AMENDMENT NO. 13 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, and October 15, 1990, between State Street Bank and Trust
Company and each of the Parties listed on Appendix A thereto is
hereby further amended, as of February 13, 1991, by adding
thereto the Virginia Tax-Free Bond Fund and New Jersey Tax-Free
Bond Fund, two separate series of the T. Rowe Price State Tax-
Free Income Trust

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

PAGE 57
T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/ Guy Sturgeon
______________________________________
By: Vice President

PAGE 58
AMENDMENT NO. 14 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

PAGE 59
T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
______________________________________
By:

PAGE 60
AMENDMENT NO. 15 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

PAGE 61
T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S.
GOVERNMENT FUND, INC.

/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President

PAGE 62
STATE STREET BANK AND TRUST COMPANY

/s/
______________________________________
By:

PAGE 63
AMENDMENT NO. 16 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

PAGE 64
T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S.
GOVERNMENT FUND, INC.

PAGE 65
/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/
______________________________________
By:

PAGE 66
AMENDMENT NO. 17 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

PAGE 67
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

PAGE 68
/s/Henry H. Hopkins
_________________________________
By:Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/
____________________________________
By:

PAGE 69
AMENDMENT NO. 18 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

PAGE 70
T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

PAGE 71
/s/Henry H. Hopkins
__________________________________
By:Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/
__________________________________
By:

PAGE 72
AMENDMENT NO. 19 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

PAGE 73

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

PAGE 74
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

/s/Henry H. Hopkins
_________________________________________
By:Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/
_________________________________________
By:

PAGE 75
AMENDMENT NO. 20 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

PAGE 76

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

PAGE 77

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

/s/Henry H. Hopkins
_________________________________________
By:Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/
_________________________________________
By:

PAGE 78
AMENDMENT NO. 21 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

PAGE 79

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

PAGE 80
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

/s/Henry H. Hopkins
_________________________________________
By:Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/
_________________________________________
By:

PAGE 81
AMENDMENT NO. 22 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

PAGE 82

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.

PAGE 83
T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

/s/Henry H. Hopkins
_________________________________________
By:Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/
_________________________________________
By:

PAGE 84
AMENDMENT NO. 23 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

PAGE 85

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

PAGE 86
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.

/s/Henry H. Hopkins
_________________________________________
By:Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/
__________________________________________
By:

PAGE 87
AMENDMENT NO. 24 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

Notwithstanding anything to the contrary herein, it is
understood that the T. Rowe Price Summit Funds, Inc. and T. Rowe
Price Summit Municipal Funds, Inc. (collectively referred to as
the "Funds") shall not be responsible for paying any of the fees
or expenses set forth herein but that, in accordance with the
Investment Management Agreement, dated September 16, 1993,
between the Funds and T. Rowe Price Associates, Inc. ("T. Rowe
Price"), the Funds will require T. Rowe Price to pay all such
fees and expenses.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

PAGE 88
T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

PAGE 89
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.

T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund

/s/Henry H. Hopkins
________________________________________
By:Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/
________________________________________
By:

PAGE 90
AMENDMENT NO. 25 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

PAGE 91
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

PAGE 92
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.

T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund

/s/Henry H. Hopkins
________________________________________
By:Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/
________________________________________
By:

PAGE 93
AMENDMENT NO. 26 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, and
November 3, 1993, between State Street Bank and Trust Company and
each of the Parties listed on Appendix A thereto is hereby
further amended, as of March 1, 1994, by adding thereto the T.
Rowe Price Equity Income Portfolio and T. Rowe Price New America
Growth Portfolio, two separate series of the T. Rowe Price Equity
Series, Inc. and T. Rowe Price International Stock Portfolio, a
separate series of the T. Rowe Price International Series, Inc.

Notwithstanding anything to the contrary herein, it is
understood that the T. Rowe Price Equity Series, Inc. and T. Rowe
Price International Series, Inc. (collectively referred to as the
"Funds") shall not be responsible for paying any of the fees or
expenses set forth herein but that, in accordance with the
Investment Management Agreements, dated March 1, 1994, between
the Funds and T. Rowe Price Associates, Inc. and Rowe Price-
Fleming International, Inc. (collectively referred to as "T. Rowe
Price"), the Funds will require T. Rowe Price to pay all such
fees and expenses.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

PAGE 94
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

PAGE 95
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.

T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund

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

PAGE 96
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio

/s/Henry H. Hopkins
________________________________________
By:Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/
________________________________________
By:

PAGE 97
AMENDMENT NO. 27 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, and March 1, 1994, between State Street Bank and Trust
Company and each of the Parties listed on Appendix A thereto is
hereby further amended, as of April 21, 1994, by adding thereto
the T. Rowe Price Limited-Term Bond Portfolio, a separate series
of the T. Rowe Price Fixed Income Series, Inc.

Notwithstanding anything to the contrary herein, it is
understood that the T. Rowe Price Fixed Income Series, Inc.
(referred to as the "Fund") shall not be responsible for paying
any of the fees or expenses set forth herein but that, in
accordance with the Investment Management Agreement, dated April
21, 1994, between the Fund and T. Rowe Price Associates, Inc.
(referred to as "T. Rowe Price"), the Fund will require T. Rowe
Price to pay all such fees and expenses.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

PAGE 98

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

PAGE 99
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.

T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund

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

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

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

PAGE 100
/s/Henry H. Hopkins
________________________________________
By:Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/
________________________________________
By:

PAGE 101
AMENDMENT NO. 28 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, and April 21, 1994, between State Street
Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of July 27,
1994, by adding thereto the T. Rowe Price Personal Strategy
Balanced Fund, T. Rowe Price Personal Strategy Growth Fund, and
T. Rowe Price Personal Strategy Income Fund, three separate
series of the T. Rowe Price Personal Strategy Funds, Inc.

Notwithstanding anything to the contrary herein, it is
understood that the T. Rowe Price Personal Strategy Funds, Inc.
(collectively referred to as the "Funds") shall not be
responsible for paying any of the fees or expenses set forth
herein but that, in accordance with the Investment Management
Agreements, dated July 27, 1994, between the Funds and T. Rowe
Price Associates, Inc. (referred to as "T. Rowe Price"), the
Funds will require T. Rowe Price to pay all such fees and
expenses.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

PAGE 102
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

PAGE 103
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.

T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund

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

PAGE 104
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio

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

T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund

T. Rowe Price Personal Strategy Income Fund

/s/Henry H. Hopkins
________________________________________
By:Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY
/s/
________________________________________
By:

PAGE 105
AMENDMENT NO. 29 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, and April 21, 1994, between State Street
Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of July 27,
1994, by adding thereto the T. Rowe Price Personal Strategy
Balanced Strategy Balanced Portfolio, a separate series of the T.
Rowe Price Equity Series, Inc.

Notwithstanding anything to the contrary herein, it is
understood that the T. Rowe Price Personal Strategy Balanced
Portfolio, a separate series of the T. Rowe Price Equity Series,
Inc. (referred to as the "Fund) shall not be responsible for
paying any of the fees or expenses set forth herein but that, in
accordance with the Investment Management Agreement, dated July
27, 1994, between the Fund and T. Rowe Price Associates, Inc.
(referred to as "T. Rowe Price"), the Fund will require T. Rowe
Price to pay all such fees and expenses.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

PAGE 106
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

PAGE 107
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.

T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund

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

T. Rowe Price Personal Strategy Balanced
Portfolio

PAGE 108
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio

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

T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund

/s/Henry H. Hopkins
________________________________________
By:Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY
/s/
________________________________________
By:

PAGE 109

AMENDMENT NO. 30 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

PAGE 110
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.

Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

PAGE 111
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.

T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund

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

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

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

T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund

PAGE 112
T. ROWE PRICE VALUE FUND, INC.

/s/Henry H. Hopkins
________________________________________
By:Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/Carol C. Ayotte
________________________________________
By:Carol C. Ayotte, Vice President

PAGE 113
AMENDMENT NO. 31 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, and September
21, 1994 between State Street Bank and Trust Company and each of
the Parties listed on Appendix A thereto is hereby further
amended, as of November 1, 1994, by adding thereto the T. Rowe
Price Virginia Short-Term Tax-Free Bond Fund, a separate series
of the T. Rowe Price State Tax-Free Income Trust.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

PAGE 114
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

PAGE 115

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.

T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund

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

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

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

T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund

PAGE 116
T. ROWE PRICE VALUE FUND, INC.

/s/Henry H. Hopkins
________________________________________
By: Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/Carol C. Ayotte
________________________________________
By:Carol C. Ayotte, Vice President

PAGE 117
AMENDMENT NO. 32 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, and November 1, 1994 between State Street Bank and Trust
Company and each of the Parties listed on Appendix A thereto is
hereby further amended, as of November 2, 1994, by adding thereto
the T. Rowe Price Capital Opportunity Fund, Inc. and the T. Rowe
Price Emerging Markets Bond Fund, a separate series of the T.
Rowe Price International Funds, Inc.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

PAGE 118
T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

PAGE 119
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.

T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund

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

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

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

T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund

T. ROWE PRICE VALUE FUND, INC.

PAGE 120
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.

/s/Henry H. Hopkins
________________________________________
By: Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/Carol C. Ayotte
________________________________________
By:Carol C. Ayotte, Vice President

PAGE 121
AMENDMENT NO. 33 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, and November 2, 1994 between State Street
Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of January 25,
1995, by adding thereto the T. Rowe Price Emerging Markets Stock
Fund, a separate series of the T. Rowe Price International Funds,
Inc.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

PAGE 122
T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

PAGE 123
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.

T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund

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

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

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

T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund

T. ROWE PRICE VALUE FUND, INC.

PAGE 124
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.

/s/Henry H. Hopkins
_____________________________________________
By: Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/Carol C. Ayotte
_____________________________________________
By: Carol C. Ayotte, Vice President

PAGE 125
AMENDMENT NO. 34 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, November 2, 1994, and January 25, 1995,
between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of September 20, 1995, by adding thereto the T. Rowe Price
Corporate Income Fund, Inc.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

PAGE 126
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.

Spectrum Growth Fund
Spectrum Income Fund

PAGE 127
T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC., now known as T. ROWE PRICE SHORT-
TERM U.S. GOVERNMENT FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.

T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund

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

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

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

T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund

T. ROWE PRICE VALUE FUND, INC.

T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.

PAGE 128
T. ROWE PRICE CORPORATE INCOME FUND, INC.

/s/Henry H. Hopkins
_____________________________________________
By: Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/Carol C. Ayotte
_____________________________________________
By: Carol C. Ayotte, Vice President

PAGE 129
AMENDMENT NO. 35 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, November 2, 1994, January 25, 1995,
September 20, 1995, and October 11, 1995, between State Street
Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of November 1,
1995, by adding thereto the T. Rowe Price Global Stock Fund, a
separate series of the T. Rowe Price International Funds, Inc.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

PAGE 130
T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

PAGE 131
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC., now known as T. ROWE PRICE SHORT-
TERM U.S. GOVERNMENT FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.

T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund

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

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

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

T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund

T. ROWE PRICE VALUE FUND, INC.

PAGE 132
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.

T. ROWE PRICE CORPORATE INCOME FUND, INC.

/s/Henry H. Hopkins
_____________________________________________
By: Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/Carol C. Ayotte
_____________________________________________
By: Carol C. Ayotte, Vice President

PAGE 133
AMENDMENT NO. 36 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, November 2, 1994, January 25, 1995,
September 20, 1995, October 11, 1995, and November 1, 1995,
between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of December 11, 1995, by adding thereto the T. Rowe Price
Health Sciences Fund, Inc.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

PAGE 134
T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

PAGE 135
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC., now known as T. ROWE PRICE SHORT-
TERM U.S. GOVERNMENT FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.

T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund

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

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

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

T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund

PAGE 136
T. ROWE PRICE VALUE FUND, INC.

T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.

T. ROWE PRICE CORPORATE INCOME FUND, INC.

T. ROWE PRICE HEALTH SCIENCES FUND, INC.

/s/Henry H. Hopkins
_____________________________________________
By: Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/Carol C. Ayotte
_____________________________________________
By: Carol C. Ayotte, Vice President

PAGE 137
AMENDMENT NO. 37 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, November 2, 1994, January 25, 1995,
September 20, 1995, October 11, 1995, November 1, 1995, and
December 11, 1995, between State Street Bank and Trust Company
and each of the Parties listed on Appendix A thereto is hereby
further amended, as of April 24, 1996, by adding thereto the T.
Rowe Price Mid-Cap Value Fund, Inc. and Mid-Cap Equity Growth
Fund, a separate series of the Institutional Domestic Equity
Funds, Inc.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

PAGE 138
T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

PAGE 139
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC., now known as T. ROWE PRICE SHORT-
TERM U.S. GOVERNMENT FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.

T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund

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

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

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

PAGE 140
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund

T. ROWE PRICE VALUE FUND, INC.

T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.

T. ROWE PRICE CORPORATE INCOME FUND, INC.

T. ROWE PRICE HEALTH SCIENCES FUND, INC.

T. ROWE PRICE MID-CAP VALUE FUND, INC.

INSTITUTIONAL DOMESTIC EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund

/s/Henry H. Hopkins
_____________________________________________
By: Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/Carol C. Ayotte
_____________________________________________
By: Carol C. Ayotte, Vice President

PAGE 141
AMENDMENT NO. 38 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, November 2, 1994, January 25, 1995,
September 20, 1995, October 11, 1995, November 1, 1995, December
11, 1995, and April 24, 1996, between State Street Bank and Trust
Company and each of the Parties listed on Appendix A thereto is
hereby further amended, as of August 2, 1996, by adding thereto
the T. Rowe Price Financial Services Fund, Inc., Mid-Cap Growth
Portfolio, a separate series of the T. Rowe Price Equity Series,
Inc. and Prime Reserve Portfolio, a separate series of the T.
Rowe Price Fixed Income Series, Inc.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

PAGE 142

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

PAGE 143

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC., now known as T. ROWE PRICE SHORT-
TERM U.S. GOVERNMENT FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.

T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund

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

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

PAGE 144
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio

T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund

T. ROWE PRICE VALUE FUND, INC.

T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.

T. ROWE PRICE CORPORATE INCOME FUND, INC.

T. ROWE PRICE HEALTH SCIENCES FUND, INC.

T. ROWE PRICE MID-CAP VALUE FUND, INC.

INSTITUTIONAL DOMESTIC EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund

T. ROWE PRICE FINANCIAL SERVICES FUND, INC.

/s/Henry H. Hopkins
_____________________________________________
By: Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/Carol C. Ayotte
_____________________________________________
By: Carol C. Ayotte, Vice President

PAGE 145

AMENDMENT NO. 39 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS

W I T N E S S E T H:

The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, November 2, 1994, January 25, 1995,
September 20, 1995, October 11, 1995, November 1, 1995, December
11, 1995, April 24, 1996, and August 2, 1996, between State
Street Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of November 12,
1996, by adding thereto the T. Rowe Price Spectrum International
Fund, a separate series of the T. Rowe Price Spectrum Fund, Inc.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE PRIME RESERVE FUND, INC.

PAGE 146

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE EQUITY INCOME FUND

T. ROWE PRICE GNMA FUND

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
T. Rowe Price Maryland Tax-Free Bond Fund
T. Rowe Price Maryland Short-Term Tax-Free
Bond Fund
T. Rowe Price New York Tax-Free Bond Fund
T. Rowe Price New York Tax-Free Money Fund
T. Rowe Price Virginia Tax-Free Bond Fund
T. Rowe Price Virginia Short-Term Tax-Free
Bond Fund
T. Rowe Price New Jersey Tax-Free Bond Fund
T. Rowe Price Georgia Tax-Free Bond Fund
T. Rowe Price Florida Insured Intermediate
Tax-Free Fund

T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
T. Rowe Price California Tax-Free Bond Fund
T. Rowe Price California Tax-Free Money Fund

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

PAGE 147
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
T. Rowe Price U.S. Treasury Intermediate Fund
T. Rowe Price U.S. Treasury Long-Term Fund
T. Rowe Price U.S. Treasury Money Fund

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

T. ROWE PRICE SPECTRUM FUND, INC.
T. Rowe Price Spectrum Growth Fund
T. Rowe Price Spectrum Income Fund
T. Rowe Price Spectrum International Fund

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC., now known as T. ROWE PRICE SHORT-
TERM U.S. GOVERNMENT FUND, INC.

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.

T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund

PAGE 148
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio

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

T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund

T. ROWE PRICE VALUE FUND, INC.

T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.

T. ROWE PRICE CORPORATE INCOME FUND, INC.

T. ROWE PRICE HEALTH SCIENCES FUND, INC.

T. ROWE PRICE MID-CAP VALUE FUND, INC.

INSTITUTIONAL DOMESTIC EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund

T. ROWE PRICE FINANCIAL SERVICES FUND, INC.

/s/Henry H. Hopkins
_____________________________________________
By: Henry H. Hopkins, Vice President

STATE STREET BANK AND TRUST COMPANY

/s/Carol C. Ayotte
_____________________________________________
By: Carol C. Ayotte, Vice President

The Global Custody Agreement dated January 3, 1994, as
amended, between The Chase Manhattan Bank, N.A. and T. Rowe Price
Funds should be inserted here.

PAGE 1
GLOBAL CUSTODY AGREEMENT

This AGREEMENT is effective January 3, 1994, and is between
THE CHASE MANHATTAN BANK, N.A. (the "Bank") and EACH OF THE

ENTITIES LISTED ON SCHEDULE A HERETO, Individually and Separately
(each individually, the "Customer").

1. Customer Accounts.

The Bank agrees to establish and maintain the following
accounts ("Accounts"):

(a) A custody account in the name of the Customer
("Custody Account") for any and all stocks, shares, bonds,
debentures, notes, mortgages or other obligations for the payment
of money, bullion, coin and any certificates, receipts, warrants
or other instruments representing rights to receive, purchase or
subscribe for the same or evidencing or representing any other
rights or interests therein and other similar property whether
certificated or uncertificated as may be received by the Bank or
its Subcustodian (as defined in Section 3) for the account of the
Customer ("Securities"); and

(b) A deposit account in the name of the Customer ("Deposit
Account") for any and all cash in any currency received by the
Bank or its Subcustodian for the account of the Customer, which
cash shall not be subject to withdrawal by draft or check.

The Customer warrants its authority to: 1) deposit the cash
and Securities ("Assets") received in the Accounts and 2) give
Instructions (as defined in Section 11) concerning the Accounts.
The Bank may deliver securities of the same class in place of
those deposited in the Custody Account.

Upon written agreement between the Bank and the Customer,
additional Accounts may be established and separately accounted
for as additional Accounts under the terms of this Agreement.

2. Maintenance of Securities and Cash at Bank and Subcustodian
Locations.

Unless Instructions specifically require another location
acceptable to the Bank:

(a) Securities will be held in the country or other
jurisdiction in which the principal trading market for such
Securities is located, where such Securities are to be presented
for payment or where such Securities are acquired; and

PAGE 2
(b) Cash will be credited to an account in a country or
other jurisdiction in which such cash may be legally deposited or
is the legal currency for the payment of public or private debts.

Cash may be held pursuant to Instructions in either interest
or non-interest bearing accounts as may be available for the
particular currency. To the extent Instructions are issued and
the Bank can comply with such Instructions, the Bank is
authorized to maintain cash balances on deposit for the Customer
with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in
non-interest bearing accounts as the Customer may direct, if
acceptable to the Bank.

If the Customer wishes to have any of its Assets held in the
custody of an institution other than the established
Subcustodians as defined in Section 3 (or their securities
depositories), such arrangement must be authorized by a written
agreement, signed by the Bank and the Customer.

3. Subcustodians and Securities Depositories.

The Bank may act under this Agreement through the
subcustodians listed in Schedule B of this Agreement with which
the Bank has entered into subcustodial agreements
("Subcustodians"). The Customer authorizes the Bank to hold
Assets in the Accounts in accounts which the Bank has established
with one or more of its branches or Subcustodians. The Bank and
Subcustodians are authorized to hold any of the Securities in
their account with any securities depository in which they
participate.

The Bank reserves the right to add new, replace or remove
Subcustodians. The Customer will be given reasonable notice by
the Bank of any amendment to Schedule B. Upon request by the
Customer, the Bank will identify the name, address and principal
place of business of any Subcustodian of the Customer's Assets
and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such
Subcustodian.

4. Use of Subcustodian.

(a) The Bank will identify such Assets on its books as
belonging to the Customer.

(b) A Subcustodian will hold such Assets together with
assets belonging to other customers of the Bank in accounts
identified on such Subcustodian's books as special custody
accounts for the exclusive benefit of customers of the Bank.

PAGE 3
Any Securities held in a securities depository for the account of
a Subcustodian will be subject only to the instructions of such
Subcustodian.

(d) Any agreement the Bank enters into with a Subcustodian
for holding its customer's assets shall provide that such assets
will not be subject to any right, charge, security interest, lien
or claim of any kind in favor of such Subcustodian or its
creditors except for a claim for payment for safe custody or
administration, and that the beneficial ownership of such assets
will be freely transferable without the payment of money or value
other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or
arrangement made by the Customer with any particular
Subcustodian.

5. Deposit Account Transactions.

(a) The Bank or its Subcustodians will make payments from
the Deposit Account upon receipt of Instructions which include
all information required by the Bank.

(b) In the event that any payment to be made under this
Section 5 exceeds the funds available in the Deposit Account, the
Bank, in its discretion, may advance the Customer such excess
amount which shall be deemed a loan payable on demand, bearing
interest at the rate customarily charged by the Bank on similar
loans.

(c) If the Bank credits the Deposit Account on a payable
date, or at any time prior to actual collection and
reconciliation to the Deposit Account, with interest, dividends,
redemptions or any other amount due, the Customer will promptly
return any such amount upon oral or written notification: (i)
that such amount has not been received in the ordinary course of
business or (ii) that such amount was incorrectly credited. If
the Customer does not promptly return any amount upon such
notification, the Bank shall be entitled, upon oral or written
notification to the Customer, to reverse such credit by debiting
the Deposit Account for the amount previously credited. The Bank
or its Subcustodian shall have no duty or obligation to institute
legal proceedings, file a claim or a proof of claim in any
insolvency proceeding or take any other action with respect to
the collection of such amount, but may act for the Customer upon
Instructions after consultation with the Customer.

6. Custody Account Transactions.

(a) Securities will be transferred, exchanged or delivered
by the Bank or its Subcustodian upon receipt by the Bank of
Instructions which include all information required by the Bank.
Settlement and payment for Securities received for, and delivery
of Securities out of, the Custody Account may be made in

PAGE 4
accordance with the customary or established securities trading
or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs,
including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery.
Delivery of Securities out of the Custody Account may also be
made in any manner specifically required by Instructions
acceptable to the Bank.

(b) The Bank, in its discretion, may credit or debit the
Accounts on a contractual settlement date with cash or Securities
with respect to any sale, exchange or purchase of Securities.
Otherwise, such transactions will be credited or debited to the
Accounts on the date cash or Securities are actually received by
the Bank and reconciled to the Account.

(i) The Bank may reverse credits or debits made to the
Accounts in its discretion if the related transaction
fails to settle within a reasonable period, determined
by the Bank in its discretion, after the contractual
settlement date for the related transaction.

(ii) If any Securities delivered pursuant to this
Section 6 are returned by the recipient thereof, the
Bank may reverse the credits and debits of the
particular transaction at any time.

7. Actions of the Bank.

The Bank shall follow Instructions received regarding assets
held in the Accounts. However, until it receives Instructions to
the contrary, the Bank will:

(a) Present for payment any Securities which are called,
redeemed or retired or otherwise become payable and all coupons
and other income items which call for payment upon presentation,
to the extent that the Bank or Subcustodian is actually aware of
such opportunities.

(b) Execute in the name of the Customer such ownership and
other certificates as may be required to obtain payments in
respect of Securities.

(d) Appoint brokers and agents for any transaction
involving the Securities, including, without limitation,
affiliates of the Bank or any Subcustodian.

(e) Issue statements to the Customer, at times mutually
agreed upon, identifying the Assets in the Accounts.

PAGE 5
The Bank will send the Customer an advice or notification of
any transfers of Assets to or from the Accounts. Such
statements, advices or notifications shall indicate the identity
of the entity having custody of the Assets. Unless the Customer
sends the Bank a written exception or objection to any Bank
statement within ninety (90) days of receipt, the Customer shall
be deemed to have approved such statement. The Bank shall, to
the extent permitted by law, be released, relieved and discharged
with respect to all matters set forth in such statement or
reasonably implied therefrom as though it had been settled by the
decree of a court of competent jurisdiction in an action where
the Customer and all persons having or claiming an interest in
the Customer or the Customer's Accounts were parties if: (a) the
Customer has failed to provide a written exception or objection
to any Bank statement within ninety (90) days of receipt and
where the Customer's failure to so provide a written exception or
objection within such ninety (90) day period has limited the
Bank's (i) access to the records, materials and other information
required to investigate the Customer's exception or objection,
and (ii) ability to recover from third parties any amounts for
which the Bank may become liable in connection with such
exception or objection, or (b) where the Customer has otherwise
explicitly approved any such statement.

All collections of funds or other property paid or
distributed in respect of Securities in the Custody Account shall
be made at the risk of the Customer. The Bank shall have no
liability for any loss occasioned by delay in the actual receipt
of notice by the Bank or by its Subcustodians of any payment,
redemption or other transaction regarding Securities in the
Custody Account in respect of which the Bank has agreed to take
any action under this Agreement.

8. Corporate Actions; Proxies.

Whenever the Bank receives information concerning the
Securities which requires discretionary action by the beneficial
owner of the Securities (other than a proxy), such as
subscription rights, bonus issues, stock repurchase plans and
rights offerings, or legal notices or other material intended to
be transmitted to securities holders ("Corporate Actions"), the
Bank will give the Customer notice of such Corporate Actions to
the extent that the Bank's central corporate actions department
has actual knowledge of a Corporate Action in time to notify its
customers.

When a rights entitlement or a fractional interest resulting
from a rights issue, stock dividend, stock split or similar
Corporate Action is received which bears an expiration date, the
Bank will endeavor to obtain Instructions from the Customer or
its Authorized Person, but if Instructions are not received in
time for the Bank to take timely action, or actual notice of such
Corporate Action was received too late to seek Instructions, the

PAGE 6
Bank is authorized to sell such rights entitlement or fractional
interest and to credit the Deposit Account with the proceeds or
take any other action it deems, in good faith, to be appropriate
in which case it shall be held harmless for any such action.

The Bank will deliver proxies to the Customer or its
designated agent pursuant to special arrangements which may have
been agreed to in writing. Such proxies shall be executed in the
appropriate nominee name relating to Securities in the Custody
Account registered in the name of such nominee but without
indicating the manner in which such proxies are to be voted; and
where bearer Securities are involved, proxies will be delivered
in accordance with Instructions.

9. Nominees.

Securities which are ordinarily held in registered form may
be registered in a nominee name of the Bank, Subcustodian or
securities depository, as the case may be. The Bank may without
notice to the Customer cause any such Securities to cease to be
registered in the name of any such nominee and to be registered
in the name of the Customer. In the event that any Securities
registered in a nominee name are called for partial redemption by
the issuer, the Bank may allot the called portion to the
respective beneficial holders of such class of security pro rata
or in any other manner that is fair, equitable and practicable.
The Customer agrees to hold the Bank, Subcustodians, and their
respective nominees harmless from any liability arising directly
or indirectly from their status as a mere record holder of
Securities in the Custody Account.

10. Authorized Persons.

As used in this Agreement, the term "Authorized Person"
means employees or agents including investment managers as have
been designated by written notice from the Customer or its
designated agent to act on behalf of the Customer under this
Agreement. Such persons shall continue to be Authorized Persons
until such time as the Bank receives Instructions from the
Customer or its designated agent that any such employee or agent
is no longer an Authorized Person.

11. Instructions.

The term "Instructions" means instructions of any Authorized
Person received by the Bank, via telephone, telex, TWX, facsimile
transmission, bank wire or other teleprocess or electronic
instruction or trade information system acceptable to the Bank
which the Bank believes in good faith to have been given by
Authorized Persons or which are transmitted with proper testing
or authentication pursuant to terms and conditions which the Bank
may specify. Unless otherwise expressly provided, all

PAGE 7
Instructions shall continue in full force and effect until
canceled or superseded.

Any Instructions delivered to the Bank by telephone shall
promptly thereafter be confirmed in writing by an Authorized
Person (which confirmation may bear the facsimile signature of
such Person), but the Customer will hold the Bank harmless for
the failure of an Authorized Person to send such confirmation in
writing, the failure of such confirmation to conform to the
telephone instructions received or the Bank's failure to produce
such confirmation at any subsequent time. The Bank may
electronically record any Instructions given by telephone, and
any other telephone discussions with respect to the Custody
Account. The Customer shall be responsible for safeguarding any
testkeys, identification codes or other security devices which
the Bank shall make available to the Customer or its Authorized
Persons.

12. Standard of Care; Liabilities.

(a) The Bank shall be responsible for the performance of
only such duties as are set forth in this Agreement or expressly
contained in Instructions which are consistent with the
provisions of this Agreement. Notwithstanding anything to the
contrary in this Agreement:

(i) The Bank will use reasonable care with respect to
its obligations under this Agreement and the
safekeeping of Assets. The Bank shall be liable to the
Customer for any loss which shall occur as the result
of the failure of a Subcustodian to exercise reasonable
care with respect to the safekeeping of such Assets to
the same extent that the Bank would be liable to the
Customer if the Bank were holding such Assets in New
York. In the event of any loss to the Customer by
reason of the failure of the Bank or its Subcustodian
to utilize reasonable care, the Bank shall be liable to
the Customer only to the extent of the Customer's
direct damages, and shall in no event be liable for any
special or consequential damages.

(ii) The Bank will not be responsible for any act,
omission, default or for the solvency of any broker or
agent which it or a Subcustodian appoints unless such
appointment was made negligently or in bad faith or for
any loss due to the negligent act of such broker or
agent except to the extent that such broker or agent
(other than a Subcustodian) performs in a negligent
manner which is the cause of the loss to the Customer
and the Bank failed to exercise reasonable care in
monitoring such broker's or agent's performance where
Customer has requested and Bank has agreed to accept
such monitoring responsibility.

PAGE 8
(iii) The Bank shall be indemnified by, and
without liability to the Customer for any action taken
or omitted by the Bank whether pursuant to Instructions
or otherwise within the scope of this Agreement if such
act or omission was in good faith, without negligence.
In performing its obligations under this Agreement, the
Bank may rely on the genuineness of any document which
it believes in good faith to have been validly
executed.

(iv) The Customer agrees to pay for and hold the Bank
harmless from any liability or loss resulting from the
imposition or assessment of any taxes or other
governmental charges, and any related expenses with
respect to income from or Assets in the Accounts,
except to the extent that the Bank has failed to
exercise reasonable care in performing any obligations
which the Bank may have agreed to assume (in addition
to those stated in this Agreement) with respect to
taxes and such failure by the Bank is the direct cause
of such imposition or assessment of such taxes, charges
or expenses.

(v) The Bank shall be entitled to rely, and may act,
upon the advice of counsel (who may be counsel for the
Customer) on all legal matters and shall be without
liability for any action reasonably taken or omitted
pursuant to such advice; provided, that the Bank gives
(to the extent practicable) prior notice to Customer of
Bank's intention to so seek advice of counsel and an
opportunity for consultation with Customer on the
proposed contact with counsel.

(vi) The Bank represents and warrants that it currently
maintain a banker's blanket bond which provides
standard fidelity and non-negligent loss coverage with
respect to the Securities and Cash which may be held by
Subcustodians pursuant to this Agreement. The Bank
agrees that if at any time it for any reason
discontinues such coverage, it shall immediately give
sixty (60) days' prior written notice to the Customer.
The Bank need not maintain any insurance for the
benefit of the Customer.

(vii) Without limiting the foregoing, the Bank
shall not be liable for any loss which results from:
(1) the general risk of investing, or (2) investing or
holding Assets in a particular country including, but
not limited to, losses resulting from nationalization,
expropriation or other governmental actions; regulation
of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market

PAGE 9
conditions which prevent the orderly execution of securities
transactions or affect the value of Assets.

(viii) Neither party shall be liable to the other
for any loss due to forces beyond their control
including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection,
revolution, nuclear fusion, fission or radiation, or
acts of God.

(b) Consistent with and without limiting the first
paragraph of this Section 12, it is specifically acknowledged
that the Bank shall have no duty or responsibility to:

(i) question Instructions or make any suggestions to
the Customer or an Authorized Person regarding such
Instructions;

(ii) supervise or make recommendations with respect to
investments or the retention of Securities;

(iii) advise the Customer or an Authorized Person
regarding any default in the payment of principal or
income of any security other than as provided in
Section 5(c) of this Agreement;

(iv) evaluate or report to the Customer or an
Authorized Person regarding the financial condition of
any broker, agent (other than a Subcustodian) or other
party to which Securities are delivered or payments are
made pursuant to this Agreement;

(v) review or reconcile trade confirmations received
from brokers. The Customer or its Authorized Persons
(as defined in Section 10) issuing Instructions shall
bear any responsibility to review such confirmations
against Instructions issued to and statements issued by
the Bank.

(c) The Customer authorizes the Bank to act under this
Agreement notwithstanding that the Bank or any of its divisions
or affiliates may have a material interest in a transaction, or
circumstances are such that the Bank may have a potential
conflict of duty or interest including the fact that the Bank or
any of its affiliates may provide brokerage services to other
customers, act as financial advisor to the issuer of Securities,
act as a lender to the issuer of Securities, act in the same
transaction as agent for more than one customer, have a material
interest in the issue of Securities, or earn profits from any of
the activities listed herein.

13. Fees and Expenses.

PAGE 10
The Customer agrees to pay the Bank for its services under
this Agreement such amount as may be agreed upon in writing,
together with the Bank's reasonable out-of-pocket or incidental
expenses, including, but not limited to, reasonable legal fees.
The Bank shall have a lien on and is authorized to charge any
Accounts of the Customer for any amount owing to the Bank under
any provision of this Agreement upon notice to the Customer.

14. Miscellaneous.

(a) Foreign Exchange Transactions. Pursuant to
Instructions, which may be standing Instructions, to facilitate
the administration of the Customer's trading and investment
activity, the Bank is authorized to enter into spot or forward
foreign exchange contracts with the Customer or an Authorized
Person for the Customer and may also provide foreign exchange
through its subsidiaries or Subcustodians. The Bank may
establish rules or limitations concerning any foreign exchange
facility made available. In all cases where the Bank, its
subsidiaries, affiliates or Subcustodians enter into a foreign
exchange contract related to Accounts, the terms and conditions
of the then current foreign exchange contract of the Bank, its
subsidiary, affiliate or Subcustodian and, to the extent not
inconsistent, this Agreement shall apply to such transaction.

(b) Certification of Residency, etc. The Customer
certifies that it is a resident of the United States and agrees
to notify the Bank of any changes in residency. The Bank may
rely upon this certification or the certification of such other
facts as may be required to administer the Bank's obligations
under this Agreement. The Customer will indemnify the Bank
against all losses, liability, claims or demands arising directly
or indirectly from any such certifications.

(c) Access to Records. The Bank shall allow the Customer's
independent public accountants, officers and advisers reasonable
access to the records of the Bank relating to the Assets as is
required in connection with their examination of books and
records pertaining to the Customer's affairs. Subject to
restrictions under applicable law, the Bank shall also obtain an
undertaking to permit the Customer's independent public
accountants reasonable access to the records of any Subcustodian
which has physical possession of any Assets as may be required in
connection with the examination of the Customer's books and
records.

(d) Governing Law; Successors and Assigns. This Agreement
shall be governed by the laws of the State of New York and shall
not be assignable by either party, but shall bind the successors
in interest of the Customer and the Bank.

PAGE 11
(e) Entire Agreement; Applicable Riders. Customer
represents that the Assets deposited in the Accounts are (Check
one):

X * Employee Benefit Plan or other assets subject to the
Employee Retirement Income Security Act of 1974, as amended
("ERISA");

X ** Mutual Fund assets subject to certain Securities
and Exchange Commission ("SEC") rules and regulations;

X *** Neither of the above.

With respect to each Customer, this Agreement consists
exclusively of this document together with Schedules A, B,
Exhibits I - _______ and the following Rider(s) to the
extent indicated on Schedule A hereto opposite the name of
the Customer under the column headed "Applicable Riders to
Agreement":

X ERISA

X MUTUAL FUND

SPECIAL TERMS AND CONDITIONS

There are no other provisions of this Agreement and this
Agreement supersedes any other agreements, whether written or
oral, between the parties. Any amendment to this Agreement must
be in writing, executed by both parties.

(f) Severability. In the event that one or more provisions
of this Agreement are held invalid, illegal or enforceable in any
respect on the basis of any particular circumstances or in any
jurisdiction, the validity, legality and enforceability of such
provision or provisions under other circumstances or in other
jurisdictions and of the remaining provisions will not in any way
be affected or impaired.
____________________

* With respect to each Customer listed on Schedule A
hereto under the heading "ERISA Trusts".

** With respect to each Customer listed on Schedule A
hereto under the heading "Investment
Companies/Portfolios Registered under the Investment
Company Act of 1940".

*** With respect to certain of the Customers listed on
Schedule A hereto under the heading "Separate Accounts"
as indicated on Schedule A.

PAGE 12
(g) Waiver. Except as otherwise provided in this
Agreement, no failure or delay on the part of either party in
exercising any power or right under this Agreement operates as a
waiver, nor does any single or partial exercise of any power or
right preclude any other or further exercise, or the exercise of
any other power or right. No waiver by a party of any provision
of this Agreement, or waiver of any breach or default, is
effective unless in writing and signed by the party against whom
the waiver is to be enforced.

(h) Notices. All notices under this Agreement shall be
effective when actually received. Any notices or other
communications which may be required under this Agreement are to
be sent to the parties at the following addresses or such other
addresses as may subsequently be given to the other party in
writing:

Bank: The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Investor Services
Telephone: (718) 242-3455
Facsimile: (718) 242-1374

Copy to: The Chase Manhattan Bank, N.A.
Woolgate House
Coleman Street
London EC2P 2HD England
Attention: Global Investor Services
Telephone: 44-71-962-5000
Facsimile: 44-71-962-5377
Telex: 8954681CMBG

Customer: Name of Customer from Schedule A
c/o T. Rowe Price
100 East Pratt Street
Baltimore, MD 21202
Attention: Treasurer
Telephone: (410) 625-6658
Facsimile: (410) 547-0180

(i) Termination. This Agreement may be terminated by the
Customer or the Bank by giving ninety (90) days written notice to
the other, provided that such notice to the Bank shall specify
the names of the persons to whom the Bank shall deliver the
Assets in the Accounts. If notice of termination is given by the
Bank, the Customer shall, within ninety (90) days following
receipt of the notice, deliver to the Bank Instructions
specifying the names of the persons to whom the Bank shall
deliver the Assets. In either case the Bank will deliver the
Assets to the persons so specified, after deducting any amounts
which the Bank determines in good faith to be owed to it under

PAGE 13
Section 13. If within ninety (90) days following receipt of a
notice of termination by the Bank, the Bank does not receive
Instructions from the Customer specifying the names of the
persons to whom the Bank shall deliver the Assets, the Bank, at
its election, may deliver the Assets to a bank or trust company
doing business in the State of New York to be held and disposed
of pursuant to the provisions of this Agreement, or to Authorized
Persons, or may continue to hold the Assets until Instructions
are provided to the Bank.

(j) Entire Agreement. This Agreement, including the
Schedules and Riders hereto, embodies the entire agreement and
understanding of the parties in respect of the subject matter
contained in this Agreement. This Agreement supersedes all other
custody or other agreements between the parties with respect to
such subject matter, which prior agreements are hereby terminated
effective as of the date hereof and shall have no further force
or effect.

EACH OF THE CUSTOMERS, INDIVIDUALLY
AND SEPARATELY LISTED ON SECTION I OF
SCHEDULE A HERETO

/s/Carmen F. Deyesu
By:________________________________
Carmen F. Deyesu
Treasurer & Vice President

EACH OF THE CUSTOMERS, INDIVIDUALLY
AND SEPARATELY LISTED ON SECTION II OF
SCHEDULE A HERETO

/s/Alvin M. Younger
By:____________________________________
Alvin M. Younger
Treasurer

EACH OF THE CUSTOMERS, INDIVIDUALLY
AND SEPARATELY LISTED ON SECTION III OF
SCHEDULE A HERETO

/s/Alvin M. Younger
By:___________________________________
Alvin M. Younger
Treasurer

PAGE 14
THE CHASE MANHATTAN BANK, N.A.

/s/Alan Naughton
By:_________________________________
Alan Naughton
Vice President

STATE OF )
: ss.
COUNTY OF )

On this day of , 19 , before me
personally came , to me known, who
being by me duly sworn, did depose and say that he/she resides in
at ;
that he/she is of
, the entity
described in and which executed the foregoing instrument; that
he/she knows the seal of said entity, that the seal affixed to
said instrument is such seal, that it was so affixed by order of
said entity, and that he/she signed his/her name thereto by like
order.

__________________________________

Sworn to before me this
day of , 19 .

________________________________
Notary

PAGE 15
STATE OF )
: ss.
COUNTY OF )

On this day of
,19 , before me personally came , to
me known, who being by me duly sworn, did depose and say that
he/she resides in
at ; that
he/she is a Vice President of THE CHASE MANHATTAN BANK, (National
Association), the corporation described in and which executed the
foregoing instrument; that he/she knows the seal of said
corporation, that the seal affixed to said instrument is such
corporate seal, that it was so affixed by order of the Board of
Directors of said corporation, and that he/she signed his/her
name thereto by like order.

___________________________________

Sworn to before me this
day of , 19 .

___________________________________
Notary

PAGE 16
Schedule A

Page 1 of 2

LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO

GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.

DATED JANUARY 3, 1994

APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT

I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is
REGISTERED UNDER THE INVESTMENT applicable to all
COMPANY ACT OF 1940 Customers listed under
Section I of this
Schedule A.

Equity Funds

T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small Cap Value Fund, Inc.
CUNA Mutual Funds, Inc. on behalf of:
CUNA Mutual Cornerstone Fund

PAGE 17
Schedule A
Page 2 of 2

APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT

Income Funds

II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is
applicable to all
T. Rowe Price Trust Company, as Customers under Section
Trustee for the Johnson Matthey II of this Schedule A.
Salaried Employee Savings Plan

Common Trust Funds

T. Rowe Price Trust Company, as Trustee
for the International Common Trust Fund
on behalf of the Underlying Trusts:

Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust

New York City International Common Trust Fund

III. OTHER No Riders are applicable
to the Customer listed
RPFI International Partners, L.P. under Section III of
this Schedule A.

PAGE 18
ERISA Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
Each of the Entities Listed on Schedule A Hereto
effective January 3, 1994

Customer represents that the Assets being placed in the
Bank's custody are subject to ERISA. It is understood that in
connection therewith the Bank is a service provider and not a
fiduciary of the plan and trust to which the assets are related.
The Bank shall not be considered a party to the underlying plan
and trust and the Customer hereby assumes all responsibility to
assure that Instructions issued under this Agreement are in
compliance with such plan and trust and ERISA.

This Agreement will be interpreted as being in compliance
with the Department of Labor Regulations Section 2550.404b-1
concerning the maintenance of indicia of ownership of plan assets
outside of the jurisdiction of the district courts of the United
States.

The following modifications are made to the Agreement:

Section 3. Subcustodians and Securities Depositories.

Add the following language to the end of Section 3:

As used in this Agreement, the term Subcustodian and the
term securities depositories include a branch of the Bank,
a branch of a qualified U.S. bank, an eligible foreign
custodian, or an eligible foreign securities depository,
where such terms shall mean:

(a) "qualified U.S. bank" shall mean a U.S. bank as
described in paragraph (a)(2)(ii)(A)(1) of the
Department of Labor Regulations Section 2550.404b-1;

(b) "eligible foreign custodian" shall mean a banking
institution incorporated or organized under the laws
of a country other than the United States which is
supervised or regulated by that country's government
or an agency thereof or other regulatory authority in
the foreign jurisdiction having authority over banks;
and

(c) "eligible foreign securities depository" shall mean a
securities depository or clearing agency,
incorporated or organized under the laws of a country
other than the United States, which is supervised or
regulated by that country's government or an agency
thereof or other regulatory authority in the foreign
jurisdiction having authority over such depositories
or clearing agencies and which is described in
paragraph (c)(2) of the Department of Labor
Regulations Section 2550.404b-1.

Section 4. Use of Subcustodian.

PAGE 19
Subsection (d) of this section is modified by deleting the
last sentence.

Section 5. Deposit Account Payments.

Subsection (b) is amended to read as follows:

(b) In the event that any payment made under this Section
5 exceeds the funds available in the Deposit Account, such
discretionary advance shall be deemed a service provided
by the Bank under this Agreement for which it is entitled
to recover its costs as may be determined by the Bank in
good faith.

Section 10. Authorized Persons.

Add the following paragraph at the end of Section 10:

Customer represents that: a) Instructions will only be issued
by or for a fiduciary pursuant to Department of Labor
Regulation Section 404b-1 (a)(2)(i) and b) if Instructions
are to be issued by an investment manager, such entity will
meet the requirements of Section 3(38) of ERISA and will have
been designated by the Customer to manage assets held in the
Customer Accounts ("Investment Manager"). An Investment
Manager may designate certain of its employees to act as
Authorized Persons under this Agreement.

Section 14(a). Foreign Exchange Transactions.

Add the following paragraph at the end of Subsection 14(a):

Instructions to execute foreign exchange transactions with
the Bank, its subsidiaries, affiliates or Subcustodians will
include (1) the time period in which the transaction must be
completed; (2) the location i.e., Chase New York, Chase
London, etc. or the Subcustodian with whom the contract is to
be executed and (3) such additional information and
guidelines as may be deemed necessary; and, if the
Instruction is a standing Instruction, a provision allowing
such Instruction to be overridden by specific contrary
Instructions.

PAGE 20
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
Each of the Entities Listed on Schedule A Hereto
effective January 3, 1994

Customer represents that the Assets being placed in the
Bank's custody are subject to the Investment Company Act of 1940
(the Act), as the same may be amended from time to time.

Except to the extent that the Bank has specifically agreed to
comply with a condition of a rule, regulation, interpretation
promulgated by or under the authority of the SEC or the Exemptive
Order applicable to accounts of this nature issued to the Bank
(Investment Company Act of 1940, Release No. 12053, November 20,
1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall be solely responsible to assure that
the maintenance of Assets under this Agreement complies with such
rules, regulations, interpretations or exemptive order
promulgated by or under the authority of the Securities Exchange
Commission.

The following modifications are made to the Agreement:

Section 3. Subcustodians and Securities Depositories.

Add the following language to the end of Section 3:

The terms Subcustodian and securities depositories as used in
this Agreement shall mean a branch of a qualified U.S. bank,
an eligible foreign custodian or an eligible foreign
securities depository, which are further defined as follows:

(a) "qualified U.S. Bank" shall mean a qualified U.S. bank
as defined in Rule 17f-5 under the Investment Company Act of
1940;

(b) "eligible foreign custodian" shall mean (i) a banking
institution or trust company incorporated or organized under
the laws of a country other than the United States that is
regulated as such by that country's government or an agency
thereof and that has shareholders' equity in excess of $200
million in U.S. currency (or a foreign currency equivalent
thereof), (ii) a majority owned direct or indirect subsidiary
of a qualified U.S. bank or bank holding company that is
incorporated or organized under the laws of a country other
than the United States and that has shareholders' equity in
excess of $100 million in U.S. currency (or a foreign
currency equivalent thereof)(iii) a banking institution or
trust company incorporated or organized under the laws of a
country other than the United States or a majority owned
direct or indirect subsidiary of a qualified U.S. bank or
bank holding company that is incorporated or organized under
the laws of a country other than the United States which has
such other qualifications as shall be specified in
Instructions and approved by the Bank; or (iv) any other

PAGE 21
entity that shall have been so qualified by exemptive order,
rule or other appropriate action of the SEC; and

(c) "eligible foreign securities depository" shall mean a
securities depository or clearing agency, incorporated or
organized under the laws of a country other than the United
States, which operates (i) the central system for handling
securities or equivalent book-entries in that country, or
(ii) a transnational system for the central handling of
securities or equivalent book-entries.

The Customer represents that its Board of Directors has
approved each of the Subcustodians listed in Schedule B to this
Agreement and the terms of the subcustody agreements between the
Bank and each Subcustodian, which are attached as Exhibits I
through of Schedule B, and further represents that its
Board has determined that the use of each Subcustodian and the
terms of each subcustody agreement are consistent with the best
interests of the Fund(s) and its (their) shareholders. The Bank
will supply the Customer with any amendment to Schedule B for
approval. As requested by the Bank, the Customer will supply the
Bank with certified copies of its Board of Directors
resolution(s) with respect to the foregoing prior to placing
Assets with any Subcustodian so approved.

Section 11. Instructions.

Add the following language to the end of Section 11:

Deposit Account Payments and Custody Account Transactions
made pursuant to Section 5 and 6 of this Agreement may be
made only for the purposes listed below. Instructions must
specify the purpose for which any transaction is to be made
and Customer shall be solely responsible to assure that
Instructions are in accord with any limitations or
restrictions applicable to the Customer by law or as may be
set forth in its prospectus.

(a) In connection with the purchase or sale of Securities at
prices as confirmed by Instructions;

(b) When Securities are called, redeemed or retired, or
otherwise become payable;

(c) In exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan or
merger, consolidation, reorganization, recapitalization or
readjustment;

(d) Upon conversion of Securities pursuant to their terms
into other securities;

(e) Upon exercise of subscription, purchase or other similar
rights represented by Securities;

(f) For the payment of interest, taxes, management or
supervisory fees, distributions or operating expenses;

PAGE 22
(g) In connection with any borrowings by the Customer
requiring a pledge of Securities, but only against receipt of
amounts borrowed;

(h) In connection with any loans, but only against receipt
of adequate collateral as specified in Instructions which
shall reflect any restrictions applicable to the Customer;

(i) For the purpose of redeeming shares of the capital stock
of the Customer and the delivery to, or the crediting to the
account of, the Bank, its Subcustodian or the Customer's
transfer agent, such shares to be purchased or redeemed;

(j) For the purpose of redeeming in kind shares of the
Customer against delivery to the Bank, its Subcustodian or
the Customer's transfer agent of such shares to be so
redeemed;

(k) For delivery in accordance with the provisions of any
agreement among the Customer, the Bank and a broker-dealer
registered under the Securities Exchange Act of 1934 (the
"Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance
with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Customer;

(l) For release of Securities to designated brokers under
covered call options, provided, however, that such Securities
shall be released only upon payment to the Bank of monies for
the premium due and a receipt for the Securities which are to
be held in escrow. Upon exercise of the option, or at
expiration, the Bank will receive from brokers the Securities
previously deposited. The Bank will act strictly in
accordance with Instructions in the delivery of Securities to
be held in escrow and will have no responsibility or
liability for any such Securities which are not returned
promptly when due other than to make proper request for such
return;

(m) For spot or forward foreign exchange transactions to
facilitate security trading, receipt of income from
Securities or related transactions;

(n) For other proper purposes as may be specified in
Instructions issued by an officer of the Customer which shall
include a statement of the purpose for which the delivery or
payment is to be made, the amount of the payment or specific
Securities to be delivered, the name of the person or persons
to whom delivery or payment is to be made, and a
certification that the purpose is a proper purpose under the
instruments governing the Customer; and

(o) Upon the termination of this Agreement as set forth in
Section 14(i).

PAGE 23
Section 12. Standard of Care; Liabilities.

Add the following subsection (c) to Section 12:

(c) The Bank hereby warrants to the Customer that in its
opinion, after due inquiry, the established procedures to be
followed by each of its branches, each branch of a qualified
U.S. bank, each eligible foreign custodian and each eligible
foreign securities depository holding the Customer's
Securities pursuant to this Agreement afford protection for
such Securities at least equal to that afforded by the Bank's
established procedures with respect to similar securities
held by the Bank and its securities depositories in New York.

Section 14. Access to Records.

Add the following language to the end of Section 14(c):

Upon reasonable request from the Customer, the Bank shall
furnish the Customer such reports (or portions thereof) of
the Bank's system of internal accounting controls applicable
to the Bank's duties under this Agreement. The Bank shall
endeavor to obtain and furnish the Customer with such similar
reports as it may reasonably request with respect to each
Subcustodian and securities depository holding the Customer's
assets.

GLOBAL CUSTODY AGREEMENT

WITH

DATE

SPECIAL TERMS AND CONDITIONS RIDER

PAGE 24
January, 1994 Schedule B

SUB-CUSTODIANS EMPLOYED BY

THE CHASE MANHATTAN BANK, N.A. LONDON, GLOBAL CUSTODY

COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK

ARGENTINA The Chase Manhattan Bank, The Chase
N.A. Manhattan Bank,
Main Branch N.A. Buenos Aires
25 De Mayo 130/140
Buenos Aires
ARGENTINA

AUSTRALIA The Chase Manhattan Bank, The Chase
Australia Limited Manhattan Bank
36th Floor Australia Limited
World Trade Centre Sydney
Jamison Street
Sydney
New South Wales 2000
AUSTRALIA

AUSTRIA Creditanstalt - Bankvereln Credit Lyonnais
Schottengasse 6 Vienna
A - 1011, Vienna
AUSTRIA

BANGLADESH Standard Chartered Bank Standard Chartered
18-20 Motijheel C.A. Bank Dhaka
Box 536,
Dhaka-1000
BANGLADESH

BELGIUM Generale Bank Credit Lyonnais
3 Montagne Du Parc Bank Brussels
1000 Bruxelles
BELGIUM

BOTSWANA Standard Chartered Bank Standard Chartered
Botswana Ltd. Bank Botswana Ltd.
4th Floor Commerce House Gaborone
The Mall
Gaborone
BOTSWANA

BRAZIL Banco Chase Manhattan, S.A. Banco Chase
Chase Manhattan Center Manhattan S.A.
Rua Verbo Divino, 1400 Sao Paulo
Sao Paulo, SP 04719-002
BRAZIL

PAGE 25
CANADA The Royal Bank of Canada Toronto Dominion
Royal Bank Plaza Bank
Toronto Toronto
Ontario M5J 2J5
CANADA

Canada Trust Toronto Dominion
Canada Trust Tower Bank
BCE Place Toronto
161 Bay at Front
Toronto
Ontario M5J 2T2
CANADA

CHILE The Chase Manhattan Bank, The Chase
N.A. Manhattan Bank,
Agustinas 1235 N.A.
Casilla 9192 Santiago
Santiago
CHILE

COLOMBIA Cititrust Colombia S.A. Cititrust Colombia
Sociedad Fiduciaria S.A. Sociedad
Av. Jimenez No 8-89 Fiduciaria
Santafe de Bogota, DC Santafe de Bogota
COLOMBIA

CZECH Ceskoslovenska Obchodni Ceskoslovenska
REPUBLC Banka, A.S. Obchodni Banka,
Na Prikoope 14 A.S.
115 20 Praha 1 Praha
CZECH REPUBLIC

DENMARK Den Danske Bank Den Danske Bak
2 Holmens Kanala DK 1091 Copenhagen
Copenhagen
DENMARK

EUROBONDS Cedel S.A. ECU:Lloyds Bank
67 Boulevard Grande Duchesse PLC
Charlotte International
LUXEMBOURG Banking Dividion
A/c The Chase Manhattan London
Bank, N.A. For all other
London currencies: see
A/c No. 17817 relevant country

EURO CDS First Chicago Clearing ECU:Lloyds Bank
Centre PLC
27 Leadenhall Street Banking Division
London EC3A 1AA London
UNITED KINGDOM For all other
currencies: see
relevant country

PAGE 26
FINLAND Kansallis-Osake-Pankki Kanasallis-Osake-
Aleksanterinkatu 42 Pankki
00100 Helsinki 10
FINLAND

FRANCE Banque Paribas Societe Generale
Ref 256 Paris
BP 141
3, Rue D'Antin
75078 Paris
Cedex 02
FRANCE

GERMANY Chase Bank A.G. Chase Bank A.G.
Alexanderstrasse 59 Frankfurt
Postfach 90 01 09
60441 Frankfurt/Main
GERMANY

GREECE National Bank of Greece S.A. National Bank of
38 Stadiou Street Greece S.A. Athens
Athens A/c Chase
GREECE Manhattan Bank,
N.A., London
A/c No.
040/7/921578-68

HONG KONG The Chase Manhattan Bank, The Chase
N.A. Manhattan Bank,
40/F One Exchange Square N.A.
8, Connaught Place Hong Kong
Central, Hong Kong
HONG KONG

HUNGARY Citibank Budapest Rt. Citibank Budapest
Vaci Utca 19-21 Rt.
1052 Budapest V Budapest
HUNGARY

INDIA The Hongkong and Shanghai The Hongkong and
Banking Corporation Limited Shanghai
52/60 Mahatma Gandhi Road Banking
Bombay 400 001 Corporation
INDIA Limited
Bombay

INDONESIA The Hongkong and Shanghai The Chase
Banking Corporation Limited Manhattan Bank,
World Trade Center N.A.
J1. Jend Sudirman Kav. 29-31 Jakarta
Jakarta 10023
INDONESIA

PAGE 27
IRELAND Bank of Ireland Allied Irish Bank
International Financial Dublin
Services Centre
1 Hargourmaster Place
Dublin 1
IRELAND

ISRAEL Bank Leumi Le-Israel B.M. Bank Leumi Le-
19 Herzi Street Israel B.M.
65136 Tel Aviv Tel Aviv
ISRAEL

ITALY The Chase Manhattan Bank, The Chase
N.A. Manhattan Bank,
Piazza Meda 1 N.A.
20121 Milan Milan
ITALY

JAPAN The Chase Manhattan Bank, The Chase
N.A. Manhattan Bank,
1-3 Marunouchi 1-Chome N.A.
Chiyoda-Ku Tokyo
Tokyo 100
JAPAN

JORDAN Arab Bank Limited Arab Bank Limited
P.O. Box 950544-5 Amman
Amman
Shmeisani
JORDAN

LUXEMBOURG Banque Generale du Banque Generale du
Luxembourg S.A. Luxembourg S.A.
27 Avenue Monterey Luxembourg
LUXEMBOURG

MALAYSIA The Chase Manhattan Bank, The Chase
N.A. Manhattan Bank,
Pernas International N.A.
Jalan Sultan Ismail Kuala Lumpur
50250, Kuala Lumpur
MALAYSIA

MEXICO The Chase Manhattan Bank, No correspondent
(Equities) N.A. Bank
Hamburgo 213, Piso 7
06660 Mexico D.F.
MEXICO

(Government Banco Nacional de Mexico, Banque Commerciale
Bonds) Avenida Juarez No. 104 - 11 du Maroc
Piso Casablanca
06040 Mexico D.F.
MEXICO

PAGE 28

NETHERLANDS ABN AMRO N.V. Credit Lyonnais
Securities Centre Bank Nederland
P.O. Box 3200 N.V.
4800 De Breda Rotterdam
NETHERLANDS

NEW ZEALAND National Nominees Limited National Bank of
Level 2 BNZ Tower New Zealand
125 Queen Street Wellington
Auckland
NEW ZEALAND

NORWAY Den Norske Bank Den Norske Bank
Kirkegaten 21 Oslo
Oslo 1
NORWAY

PAKISTAN Citibank N.A. Citibank N.A.
State Life Building No.1 Karachi
I.I. Chundrigar Road
Karachi
PAKISTAN

PERU Citibank, N.A. Citibank N.A.
Camino Real 457 Lima
CC Torre Real - 5th Floor
San Isidro, Lima 27
PERU

PHILIPPINES The Hongkong and Shanghai The Hongkong and
Banking Corporation Limited Shaghai Banking
Hong Kong Bank Centre 3/F Corporation
San Miguel Avenue Limited
Ortigas Commercial Centre Manila
Pasig Metro Manila
PHILIPPINES

POLAND Bank Polska Kasa Opieki S.A. Bank Potska Kasa
6/12 Nowy Swiat Str Opieki S.A.
00-920 Warsaw Warsaw
POLAND

PORTUGAL Banco Espirito Santo & Banco Pinto &
Comercial de Lisboa Sotto Mayor
Servico de Gestaode Titulos Avenida Fontes
R. Mouzinho da Silvelra, 36 Pereira de Melo
r/c 1000 Lisbon
1200 Lisbon
PORTUGAL

PAGE 29
SHANGHAI The Hongkong and Shanghai The Chase
(CHINA) Banking Corporation Limited Manhattan Bank,
Shanghai Branch N.A.
Corporate Banking Centre Hong Kong
Unit 504, 5/F Shanghai
Centre
1376 Hanjing Xi Lu
Shanghai
THE PEOPLE'S REPUBLIC OF
CHINA

SCHENZHEN The Hongkong and Shanghai The Chase
(CHINA) Banking Corporation Limited Manhattan Bank,
1st Floor N.A.
Central Plaza Hotel Hong Kong
No. 1 Chun Feng Lu
Shenzhen
THE PEOPLE'S REPUBLIC OF
CHINA

SINGAPORE The Chase Manhattan Bank, The Chase
N.A. Manhattan Bank,
Shell Tower N.A.
50 Raffles Place Singapore
Singapore 0104
SINGAPORE

SOUTH KOREA The Hongkong & Shanghai The Hongkong &
Banking Corporation Limited Shanghai Banking
6/F Kyobo Building Corporation
#1 Chongro, 1-ka Chongro-Ku, Limited
Seoul Seoul
SOUGH KOREA

SPAIN The Chase Manhattan Bank, Banco Zaragozano,
N.A. S.A.
Calle Peonias 2 Madrid
7th Floor
La Piovera
28042 Madrid
SPAIN

URUGUAY The First National Bank of The First National
Boston Bank of Boston
Zabala 1463 Montevideo
Montevideo
URUGUAY

U.S.A The Chase Manhattan Bank, The Chase
N.A. Manhattan Bank,
1 Chase Manhattan Plaza N.A.
New York New York
NY 10081
U.S.A.

PAGE 30
VENEZUELA Citibank N.A. Citibank N.A.
Carmelitas a Altagracia Caracas
Edificio Citibank
Caracas 1010
VENEZUELA

PAGE 31
AMENDMENT AGREEMENT

AMENDMENT AGREEMENT, dated as of April 18, 1994 (the
"Amendment Agreement") to the Global Custody Agreement, effective
January 3, 1994 (the "Custody Agreement") by and between each of
the Entities listed in Attachment A hereto, separately and
individually (each such entity referred to hereinafter as the
"Customer") and THE CHASE MANHATTAN BANK, N.A. (the "Bank").
Terms defined in the Custody Agreement are used herein as therein
defined.

WITNESSETH:

WHEREAS, the Customer wishes to appoint the Bank as its
global custodian and the bank wishes to accept such appointment
pursuant to the terms of the Custody Agreement;

NOW, THEREFORE, the parties hereto agree as follows:

1. Amendment. Section I of Schedule A of the Custody
Agreement ("Schedule A") shall be amended to add each
Customer listed in Attachment A hereto. The revised
Schedule A incorporating these changes in the form
attached hereto as Attachment B shall supersede the
existing Schedule A in its entirety.

2. Agreement. The Customer agrees to be bound in all
respects by all the terms and conditions of the Custody
Agreement and shall be fully liable thereunder as a
"Customer" as defined in the Custody Agreement.

3. Confirmation of Agreement. Except as amended hereby, the
Custody Agreement is in full force and effect and as so
amended is hereby ratified, approved and confirmed by the
Customer and the Bank in all respects.

4. Governing Law. This Amendment Agreement shall be
construed in accordance with and governed by the law of
the State of New York without regard to its conflict of
law principles.

PAGE 32
IN WITNESS WHEREOF, the parties have executed this Amendment
Agreement as of the day and year first above written.

THE CHASE MANHATTAN BANK, N.A.

/s/Alan P. Naughton
By:________________________________
Alan P. Naughton
Vice President

EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEPARATELY AND
INDIVIDUALLY

/s/Carmen F. Deyesu
By: ______________________________
Carmen F. Deyesu
Treasurer

PAGE 33
Attachment A

LIST OF CUSTOMERS

T. Rowe Price International Series, Inc. on behalf of the
T. Rowe Price International Stock Portfolio

T. Rowe Price Equity Series, Inc. on behalf of the
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio

T. Rowe Price New America Growth Fund, Inc.

T. Rowe Price Income Series, Inc. on behalf of
T. Rowe Price Limited-Term Bond Portfolio

PAGE 34
Attachment B

Schedule A

Page 1 of 2

LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1993

APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT

I. INVESTMENT The Mutual Fund Rider is
COMPANIES/PORTFOLIOS applicable to all Customers
REGISTERED UNDER THE listed under Section I
INVESTMENT COMPANY ACT OF 1940 of this Schedule A.

PAGE 35
Equity Funds

T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
CUNA Mutual Funds, Inc. on behalf of:
CUNA Mutual Cornerstone Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price New America Growth Fund, Inc.

Income Funds

II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is
applicable to all Customers
T. Rowe Price Trust Company, under Section II of this
as Trustee for the Johnson Schedule A.
Matthey Salaried Employee
Savings Plan

PAGE 36
Common Trust Funds

T. Rowe Price Trust company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:

Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust

New York City International Common Trust Fund

III. OTHER No Riders are applicable to
the Customer listed under
RPFI International Section III of this
Partners, L.P. Schedule A.

PAGE 37
AMENDMENT AGREEMENT

AMENDMENT AGREEMENT, dated as of August 15, 1994 (the
"Amendment Agreement") to the Global Custody Agreement, effective
January 3, 1994, as amended (the "Custody Agreement") by and
between each of the Entities listed in Attachment A hereto,
separately and individually (each such entity referred to
hereinafter as the "Customer") and THE CHASE MANHATTAN BANK, N.A.
(the "Bank"). Terms defined in the Custody Agreement are used
herein as therein defined.

WITNESSETH:

WHEREAS, the Customer wishes to appoint the Bank as its
global custodian and the Bank wishes to accept such appointment
pursuant to the terms of the Custody Agreement;

NOW, THEREFORE, the parties hereto agree as follows:

1. Amendment. Section I of Schedule A of the Custody
Agreement ("Schedule A") shall be amended to add each Customer
listed in Attachment A hereto. The revised Schedule A
incorporating these changes in the form attached hereto as
Attachment B shall supersede the existing Schedule A in its
entirety.

2. Agreement. The Customer agrees to be bound in all
respects by all the terms and conditions of the Custody Agreement
and shall be fully liable thereunder as a "Customer" as defined
in the Custody Agreement.

3. Confirmation of Agreement. Except as amended hereby,
the Custody Agreement is in full force and effect and as so
amended is hereby ratified, approved and confirmed by the
Customer and the Bank in all respects.

4. Governing Law. This Amendment Agreement shall be
construed in accordance with and governed by the law of the State
of New York without regard to its conflict of law principles.

PAGE 38
IN WITNESS WHEREOF, the parties have executed this Amendment
Agreement as of the day and year first above written.

THE CHASE MANHATTAN BANK, N.A.

/s/Alan P. Naughton
By:_________________________________
Alan P. Naughton
Vice President

EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEPARATELY AND
INDIVIDUALLY

/s/Carmen F. Deyesu
By:_________________________________
Carmen F. Deyesu
Treasurer

PAGE 39
Attachment A

LIST OF CUSTOMERS

T. Rowe Price Equity Series, Inc. on behalf of the
T. Rowe Price Personal Strategy Balanced Portfolio

T. Rowe Price Personal Strategy Funds, Inc. on behalf of
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund

PAGE 40
Attachment B

Schedule A

Page 1 of 2

LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1993

APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT

I. INVESTMENT The Mutual Fund Rider is
COMPANIES/PORTFOLIOS applicable to all Customers
REGISTERED UNDER THE listed under Section I
INVESTMENT COMPANY ACT OF 1940 of this Schedule A.

Equity Funds

T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
CUNA Mutual Funds, Inc. on behalf of:
CUNA Mutual Cornerstone Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price New America Growth Fund, Inc.

PAGE 41
Income Funds

T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Government Income Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund

Common Trust Funds

T. Rowe Price Trust company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:

Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust

New York City International Common Trust Fund

III. OTHER No Riders are applicable to
the Customer listed under
RPFI International Section III of this
Partners, L.P. Schedule A.

PAGE 42
AMENDMENT AGREEMENT

AMENDMENT AGREEMENT, dated as of November 28, 1994 (the
"Amendment Agreement") to the Global Custody Agreement, effective
January 3, 1994, as amended (the "Custody Agreement") by and
between each of the Entities listed in Attachment A hereto,
separately and individually (each such entity referred to
hereinafter as the "Customer") and THE CHASE MANHATTAN BANK, N.A.
(the "Bank"). Terms defined in the Custody Agreement are used
herein as therein defined.

WITNESSETH:

WHEREAS, the Customer wishes to appoint the Bank as its
global custodian and the Bank wishes to accept such appointment
pursuant to the terms of the Custody Agreement;

NOW, THEREFORE, the parties hereto agree as follows:

1. Amendment. Section I of Schedule A of the Custody
Agreement ("Schedule A") shall be amended to add each Customer
listed in Attachment A hereto. The revised Schedule A
incorporating these changes in the form attached hereto as
Attachment B shall supersede the existing Schedule A in its
entirety.

2. Agreement. The Customer agrees to be bound in all
respects by all the terms and conditions of the Custody Agreement
and shall be fully liable thereunder as a "Customer" as defined
in the Custody Agreement.

3. Confirmation of Agreement. Except as amended hereby,
the Custody Agreement is in full force and effect and as so
amended is hereby ratified, approved and confirmed by the
Customer and the Bank in all respects.

4. Governing Law. This Amendment Agreement shall be
construed in accordance with and governed by the law of the State
of New York without regard to its conflict of law principles.

PAGE 43
IN WITNESS WHEREOF, the parties have executed this Amendment
Agreement as of the day and year first above written.

THE CHASE MANHATTAN BANK, N.A.

/s/Alan P. Naughton
By:_________________________________
Alan P. Naughton
Vice President

EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEPARATELY AND
INDIVIDUALLY

/s/Carmen F. Deyesu
By:_________________________________
Carmen F. Deyesu
Treasurer

PAGE 44
Attachment A

LIST OF CUSTOMERS

T. Rowe Price Value Fund, Inc.

T. Rowe Price Capital Opportunity Fund, Inc.

T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund

PAGE 45
Attachment B

Schedule A

Page 1 of 2

LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1993

APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT

I. INVESTMENT The Mutual Fund Rider is
COMPANIES/PORTFOLIOS applicable to all Customers
REGISTERED UNDER THE listed under Section I
INVESTMENT COMPANY ACT OF 1940 of this Schedule A.

Equity Funds

T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
CUNA Mutual Funds, Inc. on behalf of:
CUNA Mutual Cornerstone Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price New America Growth Fund, Inc.
T. Rowe Price Value Fund, Inc.

PAGE 46
Income Funds

T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Government Income Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund

Common Trust Funds

T. Rowe Price Trust company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:

Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust

New York City International Common Trust Fund

III. OTHER No Riders are applicable to
the Customer listed under
RPFI International Section III of this
Partners, L.P. Schedule A.

PAGE 47
AMENDMENT AGREEMENT

AMENDMENT AGREEMENT, dated as of May 31, 1995 (the
"Amendment Agreement") to the Global Custody Agreement, effective
January 3, 1994, as amended (the "Custody Agreement") by and
between each of the Entities listed in Attachment A hereto,
separately and individually (each such entity referred to
hereinafter as the "Customer") and THE CHASE MANHATTAN BANK, N.A.
(the "Bank"). Terms defined in the Custody Agreement are used
herein as therein defined.

WITNESSETH:

WHEREAS, the Customer wishes to appoint the Bank as its
global custodian and the Bank wishes to accept such appointment
pursuant to the terms of the Custody Agreement;

NOW, THEREFORE, the parties hereto agree as follows:

1. Amendment. Section I of Schedule A of the Custody
Agreement ("Schedule A") shall be amended to add and delete
certain Customers as specified in Attachment A hereto. The
revised Schedule A incorporating these changes in the form
attached hereto as Attachment B shall supersede the existing
Schedule A in its entirety.

2. Agreement. The Customer agrees to be bound in all
respects by all the terms and conditions of the Custody Agreement
and shall be fully liable thereunder as a "Customer" as defined
in the Custody Agreement.

3. Confirmation of Agreement. Except as amended hereby,
the Custody Agreement is in full force and effect and as so
amended is hereby ratified, approved and confirmed by the
Customer and the Bank in all respects.

4. Governing Law. This Amendment Agreement shall be
construed in accordance with and governed by the law of the State
of New York without regard to its conflict of law principles.

PAGE 48
IN WITNESS WHEREOF, the parties have executed this Amendment
Agreement as of the day and year first above written.

THE CHASE MANHATTAN BANK, N.A.

/s/Alan P. Naughton
By:_________________________________
Alan P. Naughton
Vice President

EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEPARATELY AND
INDIVIDUALLY

/s/Carmen F. Deyesu
By:_________________________________
Carmen F. Deyesu
Treasurer

PAGE 49
Attachment A

LIST OF CUSTOMERS

Add the following Fund:

T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Stock Fund

Delete the following Fund:

CUNA Mutual Funds, Inc. on behalf of:
CUNA Mutual Cornerstone Fund

PAGE 50
Attachment B

Schedule A

Page 1 of 2

LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1993

APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT

I. INVESTMENT The Mutual Fund Rider is
COMPANIES/PORTFOLIOS applicable to all Customers
REGISTERED UNDER THE listed under Section I
INVESTMENT COMPANY ACT OF 1940 of this Schedule A.

Equity Funds

T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price New America Growth Fund, Inc.
T. Rowe Price Value Fund, Inc.

PAGE 51
Income Funds

T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Government Income Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund

Common Trust Funds

T. Rowe Price Trust company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:

Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust

New York City International Common Trust Fund

III. OTHER No Riders are applicable to
the Customer listed under
RPFI International Section III of this
Partners, L.P. Schedule A.

PAGE 52
AMENDMENT AGREEMENT

AMENDMENT AGREEMENT, dated as of November 1, 1995 (the
"Amendment Agreement") to the Global Custody Agreement, effective
January 3, 1994, as amended (the "Custody Agreement") by and
between each of the Entities listed in Attachment A hereto,
separately and individually (each such entity referred to
hereinafter as the "Customer") and THE CHASE MANHATTAN BANK, N.A.
(the "Bank"). Terms defined in the Custody Agreement are used
herein as therein defined.

WITNESSETH:

WHEREAS, the Customer wishes to appoint the Bank as its
global custodian and the Bank wishes to accept such appointment
pursuant to the terms of the Custody Agreement;

NOW, THEREFORE, the parties hereto agree as follows:

2. Agreement. The Customer agrees to be bound in all
respects by all the terms and conditions of the Custody Agreement
and shall be fully liable thereunder as a "Customer" as defined
in the Custody Agreement.

3. Confirmation of Agreement. Except as amended hereby,
the Custody Agreement is in full force and effect and as so
amended is hereby ratified, approved and confirmed by the
Customer and the Bank in all respects.

4. Governing Law. This Amendment Agreement shall be
construed in accordance with and governed by the law of the State
of New York without regard to its conflict of law principles.

PAGE 53
IN WITNESS WHEREOF, the parties have executed this Amendment
Agreement as of the day and year first above written.

THE CHASE MANHATTAN BANK, N.A.

/s/Alan R. Naughton
By:_________________________________
Alan R. Naughton
Vice President

EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEPARATELY AND
INDIVIDUALLY

/s/Carmen F. Deyesu
By:_________________________________
Carmen F. Deyesu
Treasurer

PAGE 54
Attachment A

LIST OF CUSTOMERS

Add the following Funds:

T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Stock Fund
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price Health & Life Sciences Fund, Inc.

PAGE 55
Attachment B

Schedule A

Page 1 of 2

LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1993

APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT

I. INVESTMENT The Mutual Fund Rider is
COMPANIES/PORTFOLIOS applicable to all Customers
REGISTERED UNDER THE listed under Section I
INVESTMENT COMPANY ACT OF 1940 of this Schedule A.

Equity Funds

T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price New America Growth Fund, Inc.
T. Rowe Price Value Fund, Inc.
T. Rowe Price Health & Life Sciences Fund, Inc.

PAGE 56
Income Funds

T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Government Income Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Corporate Income Fund, Inc.

Common Trust Funds

T. Rowe Price Trust company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:

Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust

New York City International Common Trust Fund

III. OTHER No Riders are applicable to
the Customer listed under
RPFI International Section III of this
Partners, L.P. Schedule A.

PAGE 57
AMENDMENT AGREEMENT

AMENDMENT AGREEMENT, dated as of July 31, 1996 (the
"Amendment Agreement") to the Global Custody Agreement, effective
January 3, 1994, as amended (the "Custody Agreement") by and
between each of the Entities listed in Attachment A hereto,
separately and individually (each such entity referred to
hereinafter as the "Customer") and THE CHASE MANHATTAN BANK (the
"Bank"). Terms defined in the Custody Agreement are used herein
as therein defined.

WITNESSETH:

WHEREAS, the Customer wishes to appoint the Bank as its
global custodian and the Bank wishes to accept such appointment
pursuant to the terms of the Custody Agreement;

NOW, THEREFORE, the parties hereto agree as follows:

2. Agreement. The Customer agrees to be bound in all
respects by all the terms and conditions of the Custody Agreement
and shall be fully liable thereunder as a "Customer" as defined
in the Custody Agreement.

3. Confirmation of Agreement. Except as amended hereby,
the Custody Agreement is in full force and effect and as so
amended is hereby ratified, approved and confirmed by the
Customer and the Bank in all respects.

4. Governing Law. This Amendment Agreement shall be
construed in accordance with and governed by the law of the State
of New York without regard to its conflict of law principles.

PAGE 58
IN WITNESS WHEREOF, the parties have executed this Amendment
Agreement as of the day and year first above written.

THE CHASE MANHATTAN BANK

/s/David Mitchell
By:_________________________________
David Mitchell
Vice President

EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEPARATELY AND
INDIVIDUALLY

/s/Carmen F. Deyesu
By:_________________________________
Carmen F. Deyesu
Treasurer

PAGE 59
Attachment A

LIST OF CUSTOMERS

Add the following Funds:

T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price Financial Services Fund, Inc.
Institutional Equity Funds, Inc. on behalf of:
Mid-Cap Equity Growth Fund
T. Rowe Price Mid-Cap Value Fund, Inc.
T. Rowe Price Trust Company, as Trustee for the
International Common Trust Fund on behalf of:
Emerging Markets Equity Trust

PAGE 60
Attachment B
Schedule A
Page 1 of 2

LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1994

APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT

I. INVESTMENT The Mutual Fund Rider is
COMPANIES/PORTFOLIOS applicable to all Customers
REGISTERED UNDER THE listed under Section I
INVESTMENT COMPANY ACT OF 1940 of this Schedule A.

Equity Funds

T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Financial Services Fund, Inc.
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price Health Sciences Fund, Inc.
Institutional Equity Funds, Inc. on behalf of:
Mid-Cap Equity Growth Fund
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price Mid-Cap Value Fund, Inc.
T. Rowe Price New America Growth Fund
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund

PAGE 61
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Value Fund, Inc.

Income Funds

T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund

Common Trust Funds

T. Rowe Price Trust Company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:

Emerging Markets Equity Trust
European Discovery Trust
Foreign Discovery Trust
Foreign Discovery Trust-Augment
Japan Discovery Trust
Latin America Discovery Trust
Pacific Discovery Trust

New York City International Common Trust Fund

III. OTHER No Riders are applicable to
the Customer listed under
RPFI International Section III of this
Partners, L.P. Schedule A.

The Transfer Agency and Service Agreement between T. Rowe
Price Services, Inc. and T. Rowe Price Funds, dated January 1,
1997, should be inserted here.

PAGE 1
TRANSFER AGENCY AND SERVICE AGREEMENT

between

T. ROWE PRICE SERVICES, INC.

and

EACH OF THE PARTIES INDICATED ON APPENDIX A

PAGE 2
TABLE OF CONTENTS

Page

Article A Terms of Appointment . . . . . . . . . . . . 2
Article B Duties of Price Services . . . . . . . . . . 3

1. Receipt of Orders/Payments . . . . . . . 3
2. Redemptions . . . . . . . . . . . . . . 4
3. Transfers . . . . . . . . . . . . . . . 6
4. Confirmations . . . . . . . . . . . . . 6
5. Returned Checks and ACH Debits . . . . . 6
6. Redemption of Shares under Ten Day Hold 7
7. Dividends, Distributions and Other
Corporate Actions . . . . . . . . . . . 9
8. Unclaimed Payments and Certificates . . 9
9. Books and Records . . . . . . . . . . . 10
10. Authorized Issued and Outstanding Shares 11
11. Tax Information . . . . . . . . . . . . 12
12. Information to be Furnished to the Fund 12
13. Correspondence . . . . . . . . . . . . . 12
14. Lost or Stolen Securities . . . . . . . 13
15. Telephone Services . . . . . . . . . . . 13
16. Collection of Shareholder Fees . . . . . 13
17. Form N-SAR . . . . . . . . . . . . . . . 13
18. Cooperation With Accountants . . . . . . 14
19. Blue Sky . . . . . . . . . . . . . . . . 14
20. Other Services . . . . . . . . . . . . . 14
21. Fees and Out-of-Pocket Expenses . . . . 14
Article C Representations and Warranties of the Price
Services . . . . . . . . . . . . . . . . . . 16

Article D Representations and Warranties of the Fund . 17

Article E Standard of Care/Indemnification . . . . . . 17

Article F Dual Interests . . . . . . . . . . . . . . . 19

Article G Documentation . . . . . . . . . . . . . . . . 19

Article H References to Price Services . . . . . . . . 21

Article I Compliance with Governmental Rules and
Regulations . . . . . . . . . . . . . . . . . 21

Article J Ownership of Software and Related Material . 21

PAGE 3

Article K Quality Service Standards . . . . . . . . . . 22

Article L As of Transactions . . . . . . . . . . . . . 22

Article M Term and Termination of Agreement . . . . . . 25

Article N Notice . . . . . . . . . . . . . . . . . . . 25

Article O Assignment . . . . . . . . . . . . . . . . . 25

Article P Amendment/Interpretive Provisions . . . . . . 25

Article Q Further Assurances . . . . . . . . . . . . . 26

Article R Maryland Law to Apply . . . . . . . . . . . . 26

Article S Merger of Agreement . . . . . . . . . . . . . 26

Article T Counterparts . . . . . . . . . . . . . . . . 26

Article U The Parties . . . . . . . . . . . . . . . . . 26

Article V Directors, Trustees, Shareholders and
Massachusetts Business Trust . . . . . . . . 27

Article W Captions . . . . . . . . . . . . . . . . . . 27

PAGE 4

TRANSFER AGENCY AND SERVICE AGREEMENT

AGREEMENT made as of the first day of January, 1997, by and

between T. ROWE PRICE SERVICES, INC., a Maryland corporation

having its principal office and place of business at 100 East

Pratt Street, Baltimore, Maryland 21202 ("Price Services"), and

EACH FUND WHICH IS LISTED ON APPENDIX A (as such Appendix may be

amended from time to time) and which evidences its agreement to

be bound hereby by executing a copy of this Agreement (each such

Fund individually hereinafter referred to as "the Fund", whose

definition may be found in Article U);

WHEREAS, the Fund desires to appoint Price Services as its

transfer agent, dividend disbursing agent and agent in connection

with certain other activities, and Price Services desires to

accept such appointment;

WHEREAS, Price Services represents that it is registered

with the Securities and Exchange Commission as a Transfer Agent

under Section 17A of the Securities Exchange Act of 1934 ("'34

Act") and will notify each Fund promptly if such registration is

revoked or if any proceeding is commenced before the Securities

and Exchange Commission which may lead to such revocation;

WHEREAS, Price Services has the capability of providing

shareholder services on behalf of the Funds for the accounts of

PAGE 5

shareholders in the Funds, including banks and brokers on behalf

of underlying clients;

WHEREAS, certain of the Funds are named investment options

under various tax-sheltered retirement plans including, but not

limited to, individual retirement accounts, Sep-IRA s, SIMPLE

plans, deferred compensation plans, 403(b) plans, and profit

sharing, thrift, and money purchase pension plans for self-

employed individuals and professional partnerships and

corporations, (collectively referred to as "Retirement Plans");

WHEREAS, Price Services also has the capability of providing

special services, on behalf of the Funds, for the accounts of

shareholders participating in these Retirement Plans ("Retirement

Accounts").

WHEREAS, Price Services may subcontract or jointly contract

with other parties, on behalf of the Funds to perform certain of

the functions and services described herein including services to

Retirement Plans and Retirement Accounts;

WHEREAS, Price Services may also enter into, on behalf of

the Funds, certain banking relationships to perform various

banking services including, but not limited to, check deposits,

check disbursements, automated clearing house transactions

("ACH") and wire transfers.

PAGE 6

NOW, THEREFORE, in consideration of the mutual covenants

herein contained, the parties hereto agree as follows:

A. Terms of Appointment

Subject to the terms and conditions set forth in this

Agreement, the Fund hereby employs and appoints Price Services to

act, and Price Services agrees to act, as the Fund's transfer

agent, dividend disbursing agent and agent in connection with:

(1) the Fund's authorized and issued shares of its common stock

or shares of beneficial interest (all such stock and shares to be

referred to as "Shares"); (2) any dividend reinvestment or other

services provided to the shareholders of the Fund

("Shareholders"), including, without limitation, any periodic

investment plan or periodic withdrawal program; and (3) certain

Retirement Plan and Retirement Accounts as agreed upon by the

parties.

The parties to the Agreement hereby acknowledge that from

time to time, Price Services and T. Rowe Price Trust Company may

enter into contracts ("Other Contracts") with employee benefit

plans and/or their sponsors for the provision of certain plan

participant services to Retirement Plans and Retirement Accounts.

Compensation paid to Price Services pursuant to this Agreement

is with respect to the services described herein and not with

respect to services provided under Other Contracts.

PAGE 7

B. Duties of Price Services

Price Services agrees that it will perform the following

services:

1. Receipt of Orders/Payments

Receive for acceptance, orders/payments for the

purchase of Shares and promptly deliver payment and

appropriate documentation thereof to the authorized

custodian of the Fund (the "Custodian"). Upon receipt of

any check or other instrument drawn or endorsed to it as

agent for, or identified as being for the account of, the

Fund, Price Services will process the order as follows:

o Examine the check to determine if the check conforms to

the Funds' acceptance procedures (including certain

third-party check procedures). If the check conforms,

Price Services will endorse the check and include the

date of receipt, will process the same for payment, and

deposit the net amount to the parties agreed upon

designated bank account prior to such deposit in the

Custodial account, and will notify the Fund and the

Custodian, respectively, of such deposits (such

notification to be given on a daily basis of the total

amount deposited to said accounts during the prior

business day);

PAGE 8

o Subject to guidelines mutually agreed upon by the Funds

and Price Services, excess balances, if any, resulting

from deposit in these designated bank accounts will be

invested and the income therefrom will be used to

offset fees which would otherwise be charged to the

Funds under this Agreement;

o Ensure that any documentation received from Shareholder

is in "good order" and all appropriate documentation is

received to establish an account.

o Open a new account, if necessary, and credit the

account of the investor with the number of Shares to be

purchased according to the price of the Fund's Shares

in effect for purchases made on that date, subject to

any instructions which the Fund may have given to Price

Services with respect to acceptance of orders for

Shares;

o Maintain a record of all unpaid purchases and report

such information to the Fund daily;

o Process periodic payment orders, as authorized by

investors, in accordance with the payment procedures

mutually agreed upon by both parties;

PAGE 9

o Receive monies from Retirement Plans and determine the

proper allocation of such monies to the Retirement

Accounts based upon instructions received from

Retirement

Plan participants or Retirement Plan administrators

("Administrators");

o Process orders received from recordkeepers and banks

and brokers for omnibus accounts in accordance with

internal policies and procedures established in

executed agency agreements and other agreements

negotiated with banks and brokers; and

o Process telephone orders for purchases of Fund shares

from the Shareholder's bank account (via wire or ACH)

to the Fund in accordance with procedures mutually

agreed upon by both parties.

Upon receipt of funds through the Federal Reserve Wire

System that are designated for purchases in Funds which declare

dividends at 12:00 p.m. (or such time as set forth in the Fund's

current prospectus), Price Services shall promptly notify the

Fund and the Custodian of such deposit.

2. Redemptions

Receive for acceptance redemption requests, including

telephone redemptions and requests received from

Administrators for distributions to participants or their

PAGE 10

designated beneficiaries or for payment of fees due the

Administrator or such other person, including Price

Services, and deliver the appropriate documentation thereof

to the Custodian. Price Services shall receive and stamp

with the date of receipt, all requests for redemptions of

Shares (including all certificates delivered to it for

redemption) and shall process said redemption requests as

follows, subject to the provisions of Section 6 hereof:

o Examine the redemption request and, for written

redemptions, the supporting documentation, to determine

that the request is in good order and all requirements

have been met;

o Notify the Fund on the next business day of the total

number of Shares presented and covered by all such

requests;

o For those Funds that impose redemption fees, calculate

the fee owed on the redemption in accordance with the

guidelines established between the Fund and Price

Services;

o As set forth in the prospectus of the Fund, and in any

event, on or prior to the seventh (7th) calendar day

succeeding any such request for redemption, Price

Services shall, from funds available in the accounts

PAGE 11

maintained by Price Services as agent for the Funds,

pay the applicable redemption price in accordance with

the current prospectus of the Fund, to the investor,

participant, beneficiary, Administrator or such other

person, as the case may be;

o Instruct custodian to wire redemption proceeds to a

designated bank account of Price Services. Subject to

guidelines mutually agreed upon by the Funds and Price

Services, excess balances, if any, resulting from

deposit in these bank accounts will be invested and the

income therefrom will be used to offset fees which

would otherwise be charged to the Funds under this

Agreement;

o If any request for redemption does not comply with the

Fund's requirements, Price Services shall promptly

notify the investor of such fact, together with the

reason therefore, and shall effect such redemption at

the price in effect at the time of receipt of all

appropriate documents;

o Make such withholdings as may be required under

applicable Federal tax laws;

PAGE 12

o In the event redemption proceeds for the payment of

fees are to be wired through the Federal Reserve Wire

System or by bank wire, Price Services shall cause such

proceeds to be wired in Federal funds to the bank

account designated by Shareholder; and

o Process periodic redemption orders as authorized by the

investor in accordance with the periodic withdrawal

procedures for Systematic Withdrawal Plan ("SWP") and

systematic ACH redemptions mutually agreed upon by both

parties.

Procedures and requirements for effecting and accepting

redemption orders from investors by telephone, Tele*Access,

computer, or written instructions shall be established by

mutual agreement between Price Services and the Fund

consistent with the Fund's current prospectus.

3. Transfers

Effect transfers of Shares by the registered owners

thereof upon receipt of appropriate instructions and

documentation and examine such instructions for conformance

with appropriate procedures and requirements. In this

regard, Price Services, upon receipt of a proper request for

transfer, including any transfer involving the surrender of

certificates of Shares, is authorized to transfer, on the

records of the

PAGE 13

Fund, Shares of the Fund, including cancellation of

surrendered certificates, if any, to credit a like amount of

Shares to the transferee.

4. Confirmations

Mail all confirmations and other enclosures requested

by the Fund to the shareholder, and in the case of

Retirement Accounts, to the Administrators, as may be

required by the Funds or by applicable Federal or state law.

5. Returned Checks and ACH Debits

In order to minimize the risk of loss to the Fund by

reason of any check being returned unpaid, Price Services

will promptly identify and follow-up on any check or ACH

debit returned unpaid. For items returned, Price Services

may telephone the investor and/or redeposit the check or

debit for collection or cancel the purchase, as deemed

appropriate. Price Services and the Funds will establish

procedures for the collection of money owed the Fund from

investors who have caused losses due to these returned

items.

6. Redemption of Shares under Ten Day Hold

o Uncollected Funds

Shares purchased by personal, corporate, or

governmental check, or by ACH will be considered

uncollected until the

PAGE 14

tenth calendar date following the trade date of the

trade ("Uncollected Funds");

o Good Funds

Shares purchased by treasurer's, cashier, certified, or

official check, or by wire transfer will be considered

collected immediately ("Good Funds"). Absent

information to the contrary (i.e., notification from

the payee institution), Uncollected Funds will be

considered Good Funds on the tenth calendar day

following trade date.

o Redemption of Uncollected Funds

o Shareholders making telephone requests for

redemption of shares purchased with Uncollected

Funds will be given two options:

1. The Shareholder will be permitted to exchange

to a money market fund to preserve principal until

the payment is deemed Good Funds;

2. The redemption can be processed utilizing the

same procedures for written redemptions described

below.

o If a written redemption request is made for shares

where any portion of the payment for said shares

is in Uncollected Funds, and the request is in

good order, Price Services will promptly obtain

the

PAGE 15

information relative to the payment necessary to

determine when the payment becomes Good Funds.

The redemption will be processed in accordance

with normal procedures, and the proceeds will be

held until confirmation that the payment is Good

Funds. On the seventh (7th) calendar day after

trade date, and each day thereafter until either

confirmation is received or the tenth (10th)

calendar day, Price Services will call the paying

institution to request confirmation that the check

or ACH in question has been paid. On the tenth

calendar day after trade date, the redemption

proceeds will be released, regardless of whether

confirmation has been received.

o Checkwriting Redemptions.

o Daily, all checkwriting redemptions $10,000 and

over reported as Uncollected Funds or insufficient

funds will be reviewed. An attempt will be made

to contact the shareholder to make good the funds

(through wire, exchange, transfer). Generally by

12:00 p.m. the same day, if the matter has not

been resolved, the redemption request will be

rejectedand the check returned to the Shareholder.

PAGE 16

o All checkwriting redemptions under $10,000

reported as Uncollected or insufficient funds will

be rejected and the check returned to the

Shareholder. The Funds and Services may agree to

contact shareholders presenting checks under

$10,000 reported as insufficient to obtain

alternative instructions for payment.

o Confirmations of Available Funds

The Fund expects that situations may develop whereby it

would be beneficial to determine if a person who has

placed an order for Shares has sufficient funds in his

or her checking account to cover the payment for the

Shares purchased. When this situation occurs, Price

Services may call the bank in question and request that

it confirm that sufficient funds to cover the purchase

are currently credited to the account in question.

Price Services will maintain written documentation or a

recording of each telephone call which is made under

the procedures outlined above. None of the above

procedures shall preclude Price Services from inquiring

as to the status of any check received by it in payment

for the Fund's Shares as Price Services may deem

appropriate or necessary to protect both the Fund and

Price Services. If

PAGE 17

a conflict arises between Section 2 and this Section 6,

Section 6 will govern.

7. Dividends, Distributions and Other Corporate Actions

o The Fund will promptly inform Price Services of the

declaration of any dividend, distribution, stock split

or any other distributions of a similar kind on account

of its Capital Stock.

o Price Services shall act as Dividend Disbursing Agent

for the Fund, and as such, shall prepare and make

income and capital gain payments to investors. As

Dividend Disbursing Agent, Price Services will on or

before the payment date of any such dividend or

distribution, notify the Custodian of the estimated

amount required to pay any portion of said dividend or

distribution which is payable in cash, and the Fund

agrees that on or about the payment date of such

distribution, it shall instruct the Custodian to make

available to Price Services sufficient funds for the

cash amount to be paid out. If an investor is entitled

to receive additional Shares by virtue of any such

distribution or dividend, appropriate credits will be

made to his or her account.

PAGE 18

8. Unclaimed Payments and Certificates

In accordance with procedures agreed upon by both

parties, report abandoned property to appropriate state and

governmental authorities of the Fund. Price Services shall,

90 days prior to the annual reporting of abandoned property

to each of the states, make reasonable attempts to locate

Shareholders for which (a) checks or share certificates have

been returned; (b) for which accounts have aged outstanding

checks; or (c) accounts with unissued shares that have been

coded with stop mail and meet the dormancy period guidelines

specified in the individual states. Price Services shall

make reasonable attempts to contact shareholders for those

accounts which have significant aged outstanding checks and

those checks meet a specified dollar threshold.

9. Books and Records

Maintain records showing for each Shareholder's

account, Retirement Plan or Retirement Account, as the case

may be, the following:

o Names, address and tax identification number;

o Number of Shares held;

PAGE 19

o Certain historical information regarding the

account of each Shareholder, including dividends

and distributions distributed in cash or invested

in Shares;

o Pertinent information regarding the establishment

and maintenance of Retirement Plans and Retirement

Accounts necessary to properly administer each

account;

o Information with respect to the source of

dividends and distributions allocated among income

(taxable and nontaxable income), realized short-

term gains and realized long-term gains;

o Any stop or restraining order placed against a

Shareholder's account;

o Information with respect to withholdings on

domestic and foreign accounts;

o Any instructions from a Shareholder including, all

forms furnished by the Fund and executed by a

Shareholder with respect to (i) dividend or

distribution elections, and (ii) elections with

respect to payment options in connection with the

redemption of Shares;

PAGE 20

o Any correspondence relating to the current

maintenance of a Shareholder's account;

o Certificate numbers and denominations for any

Shareholder holding certificates;

o Any information required in order for Price

Services to perform the calculations contemplated

under this Agreement.

Price Services shall maintain files and furnish

statistical and other information as required under this

Agreement and as may be agreed upon from time to time by

both parties or required by applicable law. However, Price

Services reserves the right to delete, change or add any

information to the files maintained; provided such

deletions, changes or additions do not contravene the terms

of this Agreement or applicable law and do not materially

reduce the level of services described in this Agreement.

Price Services shall also use its best efforts to obtain

additional statistical and other information as each Fund

may reasonably request for additional fees as may be agreed

to by both parties.

Any such records maintained pursuant to Rule 31a-1

under the Investment Company Act of 1940 ("the Act") will be

preserved for the periods and maintained in a manner

PAGE 21

prescribed in Rule 31a-2 thereunder. Disposition of such

records after such prescribed periods shall be as mutually

agreed upon by the Fund and Price Services. The retention

of such records, which may be inspected by the Fund at

reasonable times, shall be at the expense of the Fund. All

records maintained by Price Services in connection with the

performance of its duties under this Agreement will remain

the property of the Fund and, in the event of termination of

this Agreement, will be delivered to the Fund as of the date

of termination or at such other time as may be mutually

agreed upon.

All books, records, information and data pertaining to

the business of the other party which are exchanged or

received pursuant to the negotiation or the carrying out of

this Agreement shall remain confidential, and shall not be

voluntarily disclosed to any other person, except after

prior notification to and approval by the other party

hereto, which approval shall not be unreasonably withheld

and may not be withheld where Price Services or the Fund may

be exposed to civil or criminal contempt proceedings for

failure to comply; when requested to divulge such

information by duly constituted governmental authorities; or

after so requested by the other party hereto.

PAGE 22

10. Authorized Issued and Outstanding Shares

Record the issuance of Shares of the Fund and maintain,

pursuant to Rule 17Ad-10(e) of the '34 Act, a record of the

total number of Shares of the Fund which are authorized,

issued and outstanding, based upon data provided to it by

the Fund. Price Services shall also provide the Fund on a

regular basis the total number of Shares which are

authorized and issued and outstanding. Price Services shall

have no obligation, when recording the issuance of Shares,

to monitor the issuance of such Shares or to take cognizance

of any laws relating to the issuance or sale of such Shares.

11. Tax Information

Prepare and file with the Internal Revenue Service and

with other appropriate state agencies and, if required, mail

to investors, those returns for reporting dividends and

distributions paid as required to be so filed and mailed,

and shall withhold such sums required to be withheld under

applicable Federal income tax laws, rules, and regulations.

Additionally, Price Services will file and, as applicable,

mail to investors, any appropriate information returns

required to be filed in connection with Retirement Plan

processing, such as 1099R, 5498, as well as any other

appropriate forms that the Fund or Price Services may deem

PAGE 23

necessary. The Fund and Price Services shall agree to

procedures to be followed with respect to Price Services'

responsibilities in connection with compliance with back-up

withholding and other tax laws.

12. Information to be Furnished to the Fund

Furnish to the Fund such information as may be agreed

upon between the Fund and Price Services including any

information that the Fund and Price Services agree is

necessary to the daily operations of the business.

13. Correspondence

Promptly and fully answer correspondence from

shareholders and Administrators relating to Shareholder

Accounts, Retirement Accounts, transfer agent procedures,

and such other correspondence as may from time to time be

mutually agreed upon with the Funds. Unless otherwise

instructed, copies of all correspondence will be retained by

Price Services in accordance with applicable law and

procedures.

14. Lost or Stolen Securities

Pursuant to Rule 17f-1 of the '34 Act, report to the

Securities Information Center and/or the FBI or other

appropriate person on Form X-17-F-1A all lost, stolen,

missing or counterfeit securities. Provide any other

services

PAGE 24

relating to lost, stolen or missing securities as may be

mutually agreed upon by both parties.

15. Telephone Services

Maintain a Telephone Servicing Staff of representatives

("Representatives") sufficient to timely respond to all

telephonic inquiries reasonably foreseeable. The

Representatives will also effect telephone purchases,

redemptions, exchanges, and other transactions mutually

agreed upon by both parties, for those Shareholders who have

authorized telephone services. The Representatives shall

require each Shareholder effecting a telephone transaction

to properly identify himself/herself before the transaction

is effected, in accordance with procedures agreed upon

between by both parties. Procedures for processing

telephone transactions will be mutually agreed upon by both

parties. Price Services will also be responsible for

providing Tele*Access, PC*Access and such other Services as

may be offered by the Funds from time to time. Price

Services will maintain a special Shareholder Servicing staff

to service certain Shareholders with substantial

relationships with the Funds.

PAGE 25

16. Collection of Shareholder Fees

Calculate and notify shareholders of any fees owed the

Fund, its affiliates or its agents. Such fees include the

small account fee IRA custodial fee and wire fee.

17. Form N-SAR

Maintain such records, if any, as shall enable the Fund

to fulfill the requirements of Form N-SAR.

18. Cooperation With Accountants

Cooperate with each Fund's independent public

accountants and take all reasonable action in the

performance of its obligations under the Agreement to assure

that the necessary information is made available to such

accountants for the expression of their opinion without any

qualification as to the scope of their examination,

including, but not limited to, their opinion included in

each such Fund's annual report on Form N-SAR and annual

amendment to Form N-1A.

19. Blue Sky

Provide to the Fund or its agent, on a daily, weekly,

monthly and quarterly basis, and for each state in which the

Fund's Shares are sold, sales reports and other materials

for blue sky compliance purposes as shall be agreed upon by

the parties.

PAGE 26

20. Other Services

Provide such other services as may be mutually agreed

upon between Price Services and the Fund.

21. Fees and Out-of-Pocket Expenses

Each Fund shall pay to Price Services and/or its agents

for its Transfer Agent Services hereunder, fees computed as

set forth in Schedule A attached. Except as provided below,

Price Services will be responsible for all expenses relating

to the providing of Services. Each Fund, however, will

reimburse Price Services for the following out-of-pocket

expenses and charges incurred in providing Services:

o Postage. The cost of postage and freight for

mailing materials to Shareholders and Retirement

Plan participants, or their agents, including

overnight delivery, UPS and other express mail

services and special courier services required to

transport mail between Price Services locations

and mail processing vendors.

o Proxies. The cost to mail proxy cards and other

material supplied to it by the Fund and costs

related to the receipt, examination and tabulation

of returned proxies and the certification of the

vote to the Fund.

PAGE 27

o Communications

o Print. The printed forms used internally and

externally for documentation and processing

Shareholder and Retirement Plan participant,

or their agent's inquiries and requests;

paper and envelope supplies for letters,

notices, and other written communications

sent to Shareholders and Retirement Plan

participants, or their agents.

o Print & Mail House. The cost of internal

and third party printing and mail house

services, including printing of statements

and reports.

o Voice and Data. The cost of equipment

(including associated maintenance), supplies

and services used for communicating to and

from the Shareholders of the Fund and

Retirement Plan participants, or their

agents, the Fund's transfer agent, other Fund

offices, and other agents of either the Fund

or Price Services. These charges shall

include:

o telephone toll charges (both incoming

and outgoing, local, long distance and

mailgrams); and

PAGE 28

o data and telephone lines and associated

equipment such as modems, multiplexers,

and facsimile equipment.

o Record Retention. The cost of maintenance

and supplies used to maintain, microfilm,

copy, record, index, display, retrieve, and

store, in microfiche or microfilm form,

documents and records.

o Disaster Recovery. The cost of services,

equipment, facilities and other charges

necessary to provide disaster recovery for

any and all services listed in this

Agreement.

Out-of-pocket costs will be billed at cost to the Funds.

Allocation of monthly costs among the Funds will generally be

made based upon the number of Shareholder and Retirement Accounts

serviced by Price Services each month. Some invoices for these

costs will contain costs for both the Funds and other funds

serviced by Price Services. These costs will be allocated based

on a reasonable allocation methodology. Where possible, such as

in the case of inbound and outbound WATS charges, allocation will

be made on the actual distribution or usage.

C. Representations and Warranties of Price Services

Price Services represents and warrants to the Fund that:

PAGE 29

1. It is a corporation duly organized and existing and in

good standing under the laws of Maryland;

2. It is duly qualified to carry on its business in

Maryland, California and Florida;

3. It is empowered under applicable laws and by its

charter and by-laws to enter into and perform this

Agreement;

4. All requisite corporate proceedings have been taken to

authorize it to enter into and perform this Agreement;

5. It is registered with the Securities and Exchange

Commission as a Transfer Agent pursuant to Section 17A of

the '34 Act; and

6. It has and will continue to have access to the

necessary facilities, equipment and personnel to perform its

duties and obligations under this Agreement.

D. Representations and Warranties of the Fund

The Fund represents and warrants to Price Services that:

1. It is a corporation or business trust duly organized

and existing and in good standing under the laws of Maryland

or Massachusetts, as the case may be;

2. It is empowered under applicable laws and by its

Articles of Incorporation or Declaration of Trust, as the

case may be, and By-Laws to enter into and perform this

Agreement;

PAGE 30

3. All proceedings required by said Articles of

Incorporation or Declaration of Trust, as the case may be,

and By-Laws have been taken to authorize it to enter into

and perform this Agreement;

4. It is an investment company registered under the Act;

and

5. A registration statement under the Securities Act of

1933 ("the '33 Act") is currently effective and will remain

effective, and appropriate state securities law filings have

been made and will continue to be made, with respect to all

Shares of the Fund being offered for sale.

E. Standard of Care/Indemnification

Notwithstanding anything to the contrary in this Agreement:

1. Price Services shall not be liable to any Fund for any

act or failure to act by it or its agents or subcontractors

on behalf of the Fund in carrying or attempting to carry out

the terms and provisions of this Agreement provided Price

Services has acted in good faith and without negligence or

willful misconduct and selected and monitored the

performance of its agents and subcontractors with reasonable

care.

2. The Fund shall indemnify and hold Price Services

harmless from and against all losses, costs, damages,

claims, actions and expenses, including reasonable expenses

for legal counsel, incurred by Price Services resulting

from: (i) any action or

PAGE 31

omission by Price Services or its agents or subcontractors

in the performance of their duties hereunder; (ii) Price

Services acting upon instructions believed by it to have

been executed by a duly authorized officer of the Fund; or

(iii) Price Services acting upon information provided by the

Fund in form and under policies agreed to by Price Services

and the Fund. Price Services shall not be entitled to such

indemnification in respect of actions or omissions

constituting negligence or willful misconduct of Price

Services or where Price Services has not exercised

reasonable care in selecting or monitoring the performance

of its agents or subcontractors.

3. Except as provided in Article L of this Agreement,

Price Services shall indemnify and hold harmless the Fund

from all losses, costs, damages, claims, actions and

expenses, including reasonable expenses for legal counsel,

incurred by the Fund resulting from the negligence or

willful misconduct of Price Services or which result from

Price Services' failure to exercise reasonable care in

selecting or monitoring the performance of its agents or

subcontractors. The Fund shall not be entitled to such

indemnification in respect of actions or omissions

constituting negligence or willful misconduct of such Fund

or its agents or subcontractors; unless such negligence or

misconduct is attributable to Price Services.

PAGE 32

4. In determining Price Services' liability, an isolated

error or omission will normally not be deemed to constitute

negligence when it is determined that:

o Price Services had in place "appropriate procedures;"

o the employee(s) responsible for the error or omission

had been reasonably trained and were being

appropriately monitored; and

o the error or omission did not result from wanton or

reckless conduct on the part of the employee(s).

It is understood that Price Services is not obligated to

have in place separate procedures to prevent each and every

conceivable type of error or omission. The term

"appropriate procedures" shall mean procedures reasonably

designed to prevent and detect errors and omissions. In

determining the reasonableness of such procedures, weight

will be given to such factors as are appropriate, including

the prior occurrence of any similar errors or omissions when

such procedures were in place and transfer agent industry

standards in place at the time of the occurrence.

5. In the event either party is unable to perform its

obligations under the terms of this Agreement because of

acts of God, strikes or other causes reasonably beyond its

control, such party shall not be liable to the other party

for any

PAGE 33

loss, cost, damage, claim, action or expense resulting from

such failure to perform or otherwise from such causes.

6. In order that the indemnification provisions contained

in this Article E shall apply, upon the assertion of a claim

for which either party may be required to indemnify the

other, the party seeking indemnification shall promptly

notify the other party of such assertion, and shall keep the

other party advised with respect to all developments

concerning such claim. The party who may be required to

indemnify shall have the option to participate with the

party seeking indemnification in the defense of such claim,

or to defend against said claim in its own name or in the

name of the other party. The party seeking indemnification

shall in no case confess any claim or make any compromise in

any case in which the other party may be required to

indemnify it except with the other party's prior written

consent.

7. Neither party to this Agreement shall be liable to the

other party for consequential damages under any provision of

this Agreement.

F. Dual Interests

It is understood that some person or persons may be

directors, officers, or shareholders of both the Funds and Price

Services (including Price Services's affiliates), and that the

existence of

PAGE 34

any such dual interest shall not affect the validity of this

Agreement or of any transactions hereunder except as otherwise

provided by a specific provision of applicable law.

G. Documentation

o As requested by Price Services, the Fund shall promptly

furnish to Price Services the following:

o A certified copy of the resolution of the

Directors/Trustees of the Fund authorizing the

appointment of Price Services and the execution

and delivery of this Agreement;

o A copy of the Articles of Incorporation or

Declaration of Trust, as the case may be, and By-

Laws of the Fund and all amendments thereto;

o As applicable, specimens of all forms of

outstanding and new stock/share certificates in

the forms approved by the Board of

Directors/Trustees of the Fund with a certificate

of the Secretary of the Fund as to such approval;

o All account application forms and other documents

relating to Shareholders' accounts;

PAGE 35

o An opinion of counsel for the Fund with respect to

the validity of the stock, the number of Shares

authorized, the status of redeemed Shares, and the

number of Shares with respect to which a

Registration Statement has been filed and is in

effect; and

o A copy of the Fund's current prospectus.

The delivery of any such document for the purpose of any

other agreement to which the Fund and Price Services are or were

parties shall be deemed to be delivery for the purposes of this

Agreement.

o As requested by Price Services, the Fund will also

furnish from time to time the following documents:

o Each resolution of the Board of Directors/Trustees of

the Fund authorizing the original issue of its Shares;

o Each Registration Statement filed with the Securities

and Exchange Commission and amendments and orders

thereto in effect with respect to the sale of Shares

with respect to the Fund;

o A certified copy of each amendment to the Articles of

Incorporation or Declaration of Trust, and the By-Laws

of the Fund;

PAGE 36

o Certified copies of each vote of the Board of

Directors/Trustees authorizing officers to give

instructions to the Transfer Agent;

o Such other documents or opinions which Price Services,

in its discretion, may reasonably deem necessary or

appropriate in the proper performance of its duties;

and

o Copies of new prospectuses issued.

Price Services hereby agrees to establish and maintain

facilities and procedures reasonably acceptable to the Fund for

safekeeping of stock certificates, check forms and facsimile

signature imprinting devices, if any; and for the preparation or

use, and for keeping account of, such certificates, forms and

devices.

H. References to Price Services

Each Fund agrees not to circulate any printed matter which

contains any reference to Price Services without the prior

approval of Price Services, excepting solely such printed matter

that merely identifies Price Services as agent of the Fund. The

Fund will submit printed matter requiring approval to Price

Services in draft form, allowing sufficient time for review by

Price Services and its legal counsel prior to any deadline for

printing.

PAGE 37

I. Compliance With Governmental Rules and Regulations

Except as otherwise provided in the Agreement and except for

the accuracy of information furnished to the Fund by Price

Services, each Fund assumes full responsibility for the

preparation, contents and distribution of its prospectuses and

compliance with all applicable requirements of the Act, the '34

Act, the '33 Act, and any other laws, rules and regulations of

governmental authorities having jurisdiction over the Fund.

Price Services shall be responsible for complying with all laws,

rules and regulations of governmental authorities having

jurisdiction over transfer agents and their activities.

J. Ownership of Software and Related Material

All computer programs, magnetic tapes, written procedures

and similar items purchased and/or developed and used by Price

Services in performance of the Agreement shall be the property of

Price Services and will not become the property of the Fund.

K. Quality Service Standards

Price Services and the Fund may from time to time agree to

certain quality service standards, as well as incentives and

penalties with respect to Price Services' hereunder.

L. As Of Transactions

For purposes of this Article L, the term "Transaction" shall

mean any single or "related transaction" (as defined below)

PAGE 38

involving the purchase or redemption of Shares (including

exchanges) that is processed at a time other than the time of the

computation of the Fund's net asset value per Share next computed

after receipt of any such transaction order by Price Services.

If more than one Transaction ("Related Transaction") in the Fund

is caused by or occurs as a result of the same act or omission,

such transactions shall be aggregated with other transactions in

the Fund and be considered as one Transaction.

o Reporting

Price Services shall:

1. Utilize a system to identify all Transactions, and

shall compute the net effect of such Transactions upon

the Fund on a daily, monthly and rolling 365 day basis.

The monthly and rolling 365 day periods are hereafter

referred to as "Cumulative".

2. Supply to the Fund, from time to time as mutually

agreed upon, a report summarizing the Transactions and

the daily and Cumulative net effects of such

Transactions both in terms of aggregate dilution and

loss ("Dilution") or gain and negative dilution

("Gain") experienced by the Fund, and the impact such

Gain or Dilution has had upon the Fund's net asset

value per Share.

PAGE 39

3. With respect to any Transaction which causes

Dilution to the Fund of $25,000 or more, immediately

provide the Fund: (i) a report identifying the

Transaction and the Dilution resulting therefrom, (ii)

the reason such Transaction was processed as described

above, and (iii) the action that Price Services has or

intends to take to prevent the reoccurrence of such as

of processing ("Report").

o Liability

1. It will be the normal practice of the Funds not to

hold Price Services liable with respect to any

Transaction which causes Dilution to any single Fund of

less than $25,000. Price Services will, however,

closely monitor for each Fund the daily and Cumulative

Gain/Dilution which is caused by Transactions of less

than $25,000. When the Cumulative Dilution to any Fund

exceeds 3/10 of 1% per share, Price Services, in

consultation with counsel to the Fund, will make

appropriate inquiry to determine whether it should take

any remedial action. Price Services will report to the

Board of Directors/Trustees of the Fund ("Board") any

action it has taken.

PAGE 40

2. Where a transaction causes dilution to a Fund

greater than $25,000 and less than $100,000

("Significant Transaction"), Price Services will review

with Counsel to the Fund the circumstances surrounding

the underlying transaction to determine whether the

transaction was caused by or occurred as a result of a

negligent act or omission by Price Services. If it is

determined that the dilution is the result of a

negligent action or omission by Price Services, Price

Services and outside counsel for the Fund will

negotiate settlement. All such Significant

Transactions will be reported to the Audit Committee at

its annual meeting (unless the settlement fully

compensates the Fund for any dilution). Any "as of"

transaction, however, causing dilution in excess of the

lesser of $100,000 or a penny per share will be

promptly reported to the Board and resolved at the next

scheduled Board Meeting. Settlement for "as of"

transactions causing dilution of $100,000 or more will

not be entered into until approved by the Board. The

factors the Board would be expected to consider in

making any determination regarding the settlement of a

Significant Transaction would include but not be

limited to:

PAGE 41

o Procedures and controls adopted by Price Services

to prevent "As Of" processing;

o Whether such procedures and controls were being

followed at the time of the Significant

Transaction;

o The absolute and relative volume of all

transactions processed by Price Services on the

day of the Significant Transaction;

o The number of Transactions processed by Price

Services during prior relevant periods, and the

net Dilution/Gain as a result of all such

transactions to the Fund and to all other Price

Funds;

o The prior response of Price Services to

recommendations made by the Funds regarding

improvement to the Transfer Agent's "As Of"

Processing Procedures.

3. In determining Price Services' liability with respect

to a Significant Transaction, an isolated error or

omission will normally not be deemed to constitute

negligence when it is determined that:

o Price Services had in place "appropriate

procedures".

PAGE 42

o the employee(s) responsible for the error or

omission had been reasonably trained and were

being appropriately monitored; and

o the error or omission did not result from wanton

or reckless conduct on the part of the

employee(s).

It is understood that Price Services is not obligated

to have in place separate procedures to prevent each

and every conceivable type of error or omission. The

term "appropriate procedures" shall mean procedures

reasonably designed to prevent and detect errors and

omissions. In determining the reasonableness of such

procedures, weight will be given to such factors as are

appropriate, including the prior occurrence of any

similar errors or omissions when such procedures were

in place and transfer agent industry standards in place

at the time of the occurrence.

M. Term and Termination of Agreement

o This Agreement shall run for a period of one (1) year from

the date first written above and will be renewed from year

to year thereafter unless terminated by either party as

provided hereunder.

PAGE 43

o This Agreement may be terminated by the Fund upon one

hundred twenty (120) days' written notice to Price Services;

and by Price Services, upon three hundred sixty-five (365)

days' writing notice to the Fund.

o Upon termination hereof, the Fund shall pay to Price

Services such compensation as may be due as of the date of

such termination, and shall likewise reimburse for out-of-

pocket expenses related to its services hereunder.

N. Notice

Any notice as required by this Agreement shall be

sufficiently given (i) when sent to an authorized person of the

other party at the address of such party set forth above or at

such other address as such party may from time to time specify in

writing to the other party; or (ii) as otherwise agreed upon by

appropriate officers of the parties hereto.

O. Assignment

Neither this Agreement nor any rights or obligations

hereunder may be assigned either voluntarily or involuntarily, by

operation of law or otherwise, by either party without the prior

written consent of the other party, provided this shall not

preclude Price Services from employing such agents and

subcontractors as it deems appropriate to carry out its

obligations set forth hereunder.

PAGE 44

P. Amendment/Interpretive Provisions

The parties by mutual written agreement may amend this

Agreement at any time. In addition, in connection with the

operation of this Agreement, Price Services and the Fund may

agree from time to time on such provisions interpretive of or in

addition to the provisions of this Agreement as may in their

joint opinion be consistent with the general tenor of this

Agreement. Any such interpretive or additional provisions are to

be signed by all parties and annexed hereto, but no such

provision shall contravene any applicable Federal or state law or

regulation and no such interpretive or additional provision shall

be deemed to be an amendment of this Agreement.

Q. Further Assurances

Each party agrees to perform such further acts and execute

such further documents as are necessary to effectuate the

purposes hereof.

R. Maryland Law to Apply

This Agreement shall be construed and the provisions thereof

interpreted under and in accordance with the laws of Maryland.

S. Merger of Agreement

This Agreement, including the attached Appendices and

Schedules supersedes any prior agreement with respect to the

subject hereof, whether oral or written.

PAGE 45

T. Counterparts

This Agreement may be executed by the parties hereto on any

number of counterparts, and all of said counterparts taken

together shall be deemed to constitute one and the same

instruments.

U. The Parties

All references herein to "the Fund" are to each of the Funds

listed on Appendix A individually, as if this Agreement were

between such individual Fund and Price Services. In the case of

a series Fund or trust, all references to "the Fund" are to the

individual series or portfolio of such Fund or trust, or to such

Fund or trust on behalf of the individual series or portfolio, as

appropriate. The "Fund" also includes any T. Rowe Price Funds

which may be established after the execution of this Agreement.

Any reference in this Agreement to "the parties" shall mean Price

Services and such other individual Fund as to which the matter

pertains.

V. Directors, Trustees and Shareholders and Massachusetts

Business Trust

It is understood and is expressly stipulated that neither

the holders of Shares in the Fund nor any Directors or Trustees

of the Fund shall be personally liable hereunder.

PAGE 46

With respect to any Fund which is a party to this Agreement

and which is organized as a Massachusetts business trust, the

term "Fund" means and refers to the trustees from time to time

serving under the applicable trust agreement (Declaration of

Trust) of such Trust as the same may be amended from time to

time. It is expressly agreed that the obligations of any such

Trust hereunder shall not be binding upon any of the trustees,

shareholders, nominees, officers, agents or employees of the

Trust, personally, but bind only the trust property of the Trust,

as provided in the Declaration of Trust of the Trust. The

execution and delivery of this Agreement has been authorized by

the trustees and signed by an authorized officer of the Trust,

acting as such, and neither such authorization by such Trustees

nor such execution and delivery by such officer shall be deemed

to have been made by any of them, but shall bind only the trust

property of the Trust as provided in its Declaration of Trust.

W. Captions

The captions in the Agreement are included for convenience

of reference only and in no way define or limit any of the

provisions hereof or otherwise affect their construction or

effect.

PAGE 47

IN WITNESS WHEREOF, the parties hereto have caused this

Agreement to be executed in their names and on their behalf under

their seals by and through their duly authorized officers.

T. ROWE PRICE SERVICES, INC. T. ROWE PRICE FUNDS

/s/James S. Riepe /s/Carmen F. Deyesu
BY: ________________________ BY: ________________________

DATED: _____________________ DATED: _____________________

PAGE 48
APPENDIX A

T. ROWE PRICE BALANCED FUND, INC.

T. ROWE PRICE BLUE CHIP GROWTH FUND

T. ROWE PRICE CALIFORNIA TAX-FREE
INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund

T. ROWE PRICE CAPITAL APPRECIATION FUND

T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.

T. ROWE PRICE CORPORATE INCOME FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.

T. ROWE PRICE EQUITY INCOME FUND

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

T. ROWE PRICE FINANCIAL SERVICES FUND, INC.

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

T. ROWE PRICE GNMA FUND

T. ROWE PRICE GROWTH & INCOME FUND, INC.

T. ROWE PRICE GROWTH STOCK FUND, INC.

T. ROWE PRICE HEALTH SCIENCES FUND, INC.

T. ROWE PRICE HIGH YIELD FUND, INC.

T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund

PAGE 49
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund

INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund

T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund

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

T. ROWE PRICE MID-CAP GROWTH FUND, INC.

T. ROWE PRICE MID-CAP VALUE FUND, INC.

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW HORIZONS FUNDS, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund

T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. ROWE PRICE SHORT-TERM BOND FUND, INC.

PAGE 50
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.

T. ROWE PRICE SMALL-CAP VALUE FUND, INC.

T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund

T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.

T. ROWE PRICE TAX-FREE INCOME FUND, INC.

T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.

T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND FUND, INC.

T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

T. ROWE PRICE SUMMIT FUNDS, INC. on behalf of the:
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. on behalf of the:
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund

T. ROWE PRICE VALUE FUND, INC.

The Agreement between T. Rowe Price Associates, Inc. and
T. Rowe Price Funds for Fund Accounting Services, dated January
1, 1997, should be inserted here.

PAGE 1
AGREEMENT
between
T. ROWE PRICE ASSOCIATES, INC.
and
THE T. ROWE PRICE FUNDS
for
FUND ACCOUNTING SERVICES

PAGE 2
TABLE OF CONTENTS
Page

Article A Terms of Appointment/Duties of Price
Associates . . . . . . . . . . . . . . . . . . . 1

Article B Fees and Out-of-Pocket Expenses . . . . . . . . 2

Article C Representations and Warranties of Price
Associates . . . . . . . . . . . . . . . . . . . 3

Article D Representations and Warranties of the Fund . . . 3

Article E Ownership of Software and Related Material . . . 3

Article F Quality Service Standards . . . . . . . . . . . 4

Article G Standard of Care/Indemnification . . . . . . . . 4

Article H Dual Interests . . . . . . . . . . . . . . . . . 6

Article I Documentation . . . . . . . . . . . . . . . . . 6

Article J Recordkeeping/Confidentiality . . . . . . . . . 6

Article K Compliance with Governmental Rules and
Regulations . . . . . . . . . . . . . . . . . . 7

Article L Terms and Termination of Agreement . . . . . . . 7

Article M Notice . . . . . . . . . . . . . . . . . . . . . 7

Article N Assignment . . . . . . . . . . . . . . . . . . . 7

Article O Amendment/Interpretive Provisions . . . . . . . 8

Article P Further Assurances . . . . . . . . . . . . . . . 8

Article Q Maryland Law to Apply . . . . . . . . . . . . . 8

Article R Merger of Agreement . . . . . . . . . . . . . . 8

Article S Counterparts . . . . . . . . . . . . . . . . . . 8

Article T The Parties . . . . . . . . . . . . . . . . . . 8

PAGE 3
Article U Directors, Trustee and Shareholders and
Massachusetts Business Trust . . . . . . . . . . 9

Article V Captions . . . . . . . . . . . . . . . . . . . . 9

PAGE 4

AGREEMENT made as of the first day of January, 1997, by and

between T. ROWE PRICE ASSOCIATES, INC., a Maryland corporation

having its principal office and place of business at 100 East

Pratt Street, Baltimore, Maryland 21202 ("Price Associates"), and

each Fund which is listed on Appendix A (as such Appendix may be

amended from time to time) and which evidences its agreement to

be bound hereby by executing a copy of this Agreement (each such

Fund individually hereinafter referred to as "the Fund", whose

definition may be found in Article T);

WHEREAS, Price Associates has the capability of providing

the Funds with certain accounting services ("Accounting

Services");

WHEREAS, the Fund desires to appoint Price Associates to

provide these Accounting Services and Price Associates desires to

accept such appointment;

WHEREAS, the Board of Directors of the Fund has authorized

the Fund to utilize various pricing services for the purpose of

providing to Price Associates securities prices for the

calculation of the Fund's net asset value.

NOW, THEREFORE, in consideration of the mutual covenants

herein contained, the parties hereto agree as follows:

PAGE 5

A. Terms of Appointment/Duties of Price Associates

Subject to the terms and conditions set forth in this

Agreement, the Fund hereby employs and appoints Price Associates

to provide, and Price Associates agrees to provide, the following

Accounting Services:

a. Maintain for each Fund a daily trial balance, a general

ledger, subsidiary records and capital stock accounts;
b. Maintain for each Fund an investment ledger, including

amortized bond and foreign dollar denominated costs

where applicable;

c. Maintain for each Fund all records relating to the

Fund's income and expenses;

d. Provide for the daily valuation of each Fund's

portfolio securities and the computation of each Fund's
daily net asset value per share. Such daily valuations

shall be made in accordance with the valuation policies

established by each of the Fund's Board of Directors

including, but not limited to, the utilization of such

pricing valuation sources and/or pricing services as

determined by the Boards. Price Associates shall have

no liability for any losses or damages incurred by the
Fund as a result of erroneous portfolio security

evaluations provided by such designated sources and/or

pricing services; provided that, Price Associates

reasonably

PAGE 6

believes the prices are accurate, has adhered to its

normal verification control procedures, and has

otherwise met the standard of care as set forth in

Article G of this Agreement;

e. Provide daily cash flow and transaction status
information to each Fund's adviser;

f. Authorize the payment of Fund expenses, either through

instruction of custodial bank or utilization of

custodian's automated transfer system;

g. Prepare for each Fund such financial information that

is reasonably necessary for shareholder reports,

reports to the Board of Directors and to the officers
of the Fund, and reports to the Securities and Exchange

Commission, the Internal Revenue Service and other

Federal and state regulatory agencies;

h. Provide each Fund with such advice that may be

reasonably necessary to properly account for all

financial transactions and to maintain the Fund's
accounting procedures and records so as to insure

compliance with generally accepted accounting and tax

practices and rules;

i. Maintain for each Fund all records that may be

reasonably required in connection with the audit
performed by each Fund's independent accountant, the

Securities and Exchange Commission, the Internal

Revenue Service or such other Federal or state

regulatory agencies; and

j. Cooperate with each Fund's independent public

accountants and take all reasonable action in the

performance of its

PAGE 7

obligations under the Agreement to assure that the

necessary information is made available to such

accountants for the expression of their opinion without

any qualification as to the scope of their examination

including, but not limited to, their opinion included
in each such Fund's annual report on Form N-SAR and

annual amendment to Form N-1A.

B. Fees and Out-of-Pocket Expenses

Each Fund shall pay to Price Associates for its Accounting

Services hereunder, fees as set forth in the Schedule attached

hereto. In addition, each Fund will reimburse Price Associates
for out-of-pocket expenses such as postage, printed forms, voice

and data transmissions, record retention, disaster recovery,

third party vendors, equipment leases and other similar items as

may be agreed upon between Price Associates and the Fund. Some

invoices will contain costs for both the Funds and other funds

services by Price Associates. In these cases, a reasonable

allocation methodology will be used to allocate these costs to

the Funds.
C. Representations and Warrantees of Price Associates

Price Associates represents and warrants to the Fund that:

1. It is a corporation duly organized and existing in good

standing under the laws of Maryland.

2. It is duly qualified to carry on its business in

Maryland.

3. It is empowered under applicable laws and by its
charter and By-Laws to enter into and perform this Agreement.

4. All requisite corporate proceedings have been taken to

authorize it to enter into and perform this Agreement.

PAGE 8

5. It has, and will continue to have, access to the

necessary facilities, equipment and personnel to perform its
duties and obligations under this Agreement.

D. Representations and Warrantees of the Fund

The Fund represents and warrants to Price Associates that:

1. It is a corporation or business trust, as the case may

be, duly organized and existing and in good standing under the

laws of Maryland or Massachusetts, as the case may be.
2. It is empowered under applicable laws and by its

Articles of Incorporation or Declaration of Trust, as the case

may be, and By-Laws have been taken to authorize it to enter into

and perform this Agreement.

3. All proceedings required by said Articles of

Incorporation or Declaration of Trust, as the case may be, and

By-Laws have been taken to authorize it to enter into and perform

this Agreement.
E. Ownership of Software and Related Material

All computer programs, magnetic tapes, written procedures,

and similar items purchased and/or developed and used by Price

Associates in performance of the Agreement shall be the property

of Price Associates and will not become the property of the

Funds.

F. Quality Service Standards

Price Associates and the Fund may, from time to time, agree

to certain quality service standards, with respect to Price

Associates' services hereunder.

G. Standard of Care/Indemnification

Notwithstanding anything to the contrary in this Agreement:

PAGE 9

1. Where a Pricing Error results in loss or dilution to a

Fund of less than $10,000, the determination of liability for the

error will be made by Price Associates. Where a Pricing Error

results in loss or dilution to a Fund of $10,000 or more but less

than $100,000, liability for the error will be resolved through

negotiations between Fund Counsel and Price Associates. Where a
Pricing Error results in loss or dilution to a Fund of the lesser

of 1/2 of 1% of NAV or $100,000 or more, the error will be

promptly reported to the Board of Directors of the Fund (unless

the Fund is fully compensated for the loss or dilution), provided

that final settlement with respect to such errors will not be

made until approved by the Board of Directors of the Fund. A
summary of all Pricing Errors and their effect on the Funds will

be reported to the Funds Audit Committee on an annual basis. In

determining the liability of Price Associates for a Pricing
Error, an error or omission will not be deemed to constitute

negligence when it is determined that:

o Price Associates had in place "appropriate procedures

and an adequate system of internal controls;"

o the employee responsible for the error or omission had

been reasonably trained and was being appropriately

monitored; and
o the error or omission did not result from wanton or

reckless conduct on the part of the employee.

It is understood that Price Associates is not obligated to

have in place separate procedures to prevent each and every

conceivable type of error or omission. The term "appropriate

procedures and adequate system of internal controls" shall

PAGE 10

mean procedures and controls reasonably designed to prevent

and detect errors and omissions. In determining the

reasonableness of such procedures and controls, weight will

be given to such factors as are appropriate, including the

prior occurrence of any similar errors or omissions, when
such procedures and controls were in place and fund

accounting industry standards in place at the time of the

error.

2. The Fund shall indemnify and hold Price Associates

harmless from and against all losses, costs, damages, claims,

actions, and expenses, including reasonable expenses for legal

counsel, incurred by Price Associates resulting from: (i) any

action or omission by Price Associates or its agents or

subcontractors in the performance of their duties hereunder; (ii)
Price Associates acting upon instructions believed by it to have

been executed by a duly authorized officer of the Fund; or (iii)

Price Associates acting upon information provided by the Fund in

form and under policies agreed to by Price Associates and the

Fund. Price Associates shall not be entitled to such

indemnification in respect of actions or omissions constituting

negligence or willful misconduct of Price Associates or where
Price Associates has not exercised reasonable care in selecting

or monitoring the performance of its agents or subcontractors.

3. Price Associates shall indemnify and hold harmless the

Fund from all losses, costs, damages, claims, actions and

expenses, including reasonable expenses for legal counsel,

incurred by the Fund resulting from the negligence or willful

misconduct of Price Associates or which result from Price
Associates' failure to

PAGE 11

exercise reasonable care in selecting or monitoring the

performance

of its agents or subcontractors. The Fund shall not be entitled
to such indemnification with respect to actions or omissions

constituting negligence or willful misconduct of such Fund or its

agents or subcontractors; unless such negligence or misconduct is

attributable to Price Associates.

4. In the event either party is unable to perform its

obligations under the terms of this Agreement because of acts of

God, strikes or other causes reasonably beyond its control, such

party shall not be liable to the other party for any loss, cost,

damage, claim, action or expense resulting from such failure to
perform or otherwise from such causes.

5. In order that the indemnification provisions contained

in this Article G shall apply, upon the assertion of a claim for

which either party may be required to indemnify the other, the

party seeking indemnification shall promptly notify the other

party of such assertion, and shall keep the other party advised

with respect to all developments concerning such claim. The
party who may be required to indemnify shall have the option to

participate with the party seeking indemnification in the defense

of such claim, or to defend against said claim in its own name or

in the name of the other party. The party seeking

indemnification shall in no case confess any claim or make any

compromise in any case in which the other party may be required

to indemnify it except with the other party's prior written
consent.

6. Neither party to this Agreement shall be liable to the

other party for consequential damages under any provision of this

Agreement.

PAGE 12

H. Dual Interests
It is understood that some person or persons may be

directors, officers, or shareholders of both the Fund and Price

Associates (including Price Associates' affiliates), and that the

existence of any such dual interest shall not affect the validity

of this Agreement or of any transactions hereunder except as

otherwise provided by a specific provision of applicable law.

I. Documentation

As requested by Price Associates, the Fund shall promptly

furnish to Price Associates such documents as it may reasonably
request and as are necessary for Price Associates to carry out

its responsibilities hereunder.

J. Recordkeeping/Confidentiality

1. Price Associates shall keep records relating to the

services to be performed hereunder, in the form and manner as it

may deem advisable, provided that Price Associates shall keep all

records in such form and in such manner as required by applicable
law, including the Investment Company Act of 1940 ("the Act") and

the Securities Exchange Act of 1934 ("the '34 Act").

2. Price Associates and the Fund agree that all books,

records, information and data pertaining to the business of the

other party which are exchanged or received pursuant to the

negotiation or the carrying out of this Agreement shall remain

confidential, and shall not be voluntarily disclosed to any other
person, except: (a) after prior notification to and approval in

writing by the other party hereto, which approval shall not be

unreasonably withheld and may not be withheld where Price

Associates or Fund may be exposed to civil or criminal contempt

PAGE 13
proceedings for failure to comply; (b) when requested to divulge

such information by duly constituted governmental authorities; or

K. Compliance With Governmental Rules and Regulations

Except as otherwise provided in the Agreement and except for

the accuracy of information furnished to the Funds by Price

Associates, each Fund assumes full responsibility for the

preparation, contents and distribution of its prospectuses, and

for complying with all applicable requirements of the Act, the
'34 Act, the Securities Act of 1933 (the "33 Act"), and any laws,

rules and regulations of governmental authorities having

jurisdiction over the Funds.

L. Term and Termination of Agreement

1. This Agreement shall run for a period of one (1) year

from the date first written above and will be renewed from year

to year thereafter unless terminated by either party as provided
hereunder.

2. This Agreement may be terminated by the Fund upon sixty

(60) days' written notice to Price Associates; and by Price

Associates, upon three hundred sixty-five (365) days' writing

notice to the Fund.

3. Upon termination hereof, the Fund shall pay to Price

Associates such compensation as may be due as of the date of such
termination, and shall likewise reimburse for out-of-pocket

expenses related to its services hereunder.

M. Notice

Any notice as required by this Agreement shall be

sufficiently given (i) when sent to an authorized person of the

other party at

PAGE 14

the address of such party set forth above or at such other

address as such party may from time to time specify in writing to

the other party; or (ii) as otherwise agreed upon by appropriate

officers of the parties hereto.

N. Assignment

Neither this Agreement nor any rights or obligations

hereunder may be assigned either voluntarily or involuntarily, by

operation of law or otherwise, by either party without the prior

written consent of the other party, provided this shall not

preclude Price Associates from employing such agents and

subcontractors as it deems appropriate to carry out its

obligations set forth hereunder.

O. Amendment/Interpretive Provisions

The parties by mutual written agreement may amend this

Agreement at any time. In addition, in connection with the

operation of this Agreement, Price Associates and the Fund may

agree from time to time on such provisions interpretive of or in

addition to the provisions of this Agreement as may in their

joint opinion be consistent with the general tenor of this

Agreement. Any such interpretive or additional provisions are to

be signed by all parties and annexed hereto, but no such

provision shall contravene any applicable Federal or state law or

regulation and no such interpretive or additional provision shall

be deemed to be an amendment of this Agreement.

PAGE 15

P. Further Assurances

Each party agrees to perform such further acts and execute

such further documents as are necessary to effectuate the

purposes hereof.

Q. Maryland Law to Apply

This Agreement shall be construed and the provisions thereof

interpreted under and in accordance with the laws of Maryland.

R. Merger of Agreement

This Agreement, including the attached Appendix and Schedule

supersedes any prior agreement with respect to the subject

hereof, whether oral or written.

S. Counterparts

This Agreement may be executed by the parties hereto on any

number of counterparts, and all of said counterparts taken

together shall be deemed to constitute one and the same

instruments.

T. The Parties

All references herein to "the Fund" are to each of the Funds

listed on Appendix A individually, as if this Agreement were

between such individual Fund and Price Associates. In the case

of a series Fund or trust, all references to "the Fund" are to

the individual series or portfolio of such Fund or trust, or to

such Fund or trust on behalf of the individual series or

portfolio, as appropriate. The "Fund" also includes any T. Rowe

Price Funds which may be established after the execution of this

Agreement. Any reference in this Agreement to "the parties"

shall mean Price

PAGE 16

Associates and such other individual Fund as to which the matter

pertains.

U. Directors, Trustees and Shareholders and Massachusetts

Business Trust

It is understood and is expressly stipulated that neither

the holders of shares in the Fund nor any Directors or Trustees