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PROSPECTUS
May 1, 2000
T. ROWE PRICE
New AmericaGrowth Portfolio
A stock fund seeking long-term capital appreciation through investments in
companies believed by T. Rowe Price to be in the fast-growing sectors that
define the "new America."
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
(LOGO)
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T. Rowe Price Equity Series, Inc. T. Rowe Price New America Growth Portfolio
Prospectus
May 1, 2000
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<S> <C> <C> <C>
ABOUT THE FUND
1
Objective, Strategy, Risks, and Expenses 1
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Other Information About the Fund 3
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Some Basics of
Fixed
Investing
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ABOUT YOUR ACCOUNT
2
Pricing Shares and Receiving 5
Sale Proceeds
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Rights Reserved by the Fund 6
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Dividends and Distributions 6
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MORE ABOUT THE FUND
3
Organization and Management 8
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Understanding Performance Information 10
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Investment Policies and Practices 10
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Financial Highlights 14
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Founded in 1937 by the late Thomas Rowe Price, Jr., T. Rowe Price Associates,
Inc., and its affiliates managed over $179.9 billion for more than eight
million individual and institutional investor accounts as of December 31, 1999.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any
depository institution. Shares are not insured by the FDIC, Federal Reserve, or
any other government agency, and are subject to investment risks, including
possible loss of the principal amount invested.
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ABOUT THE FUND
1
OBJECTIVE, STRATEGY, RISKS, AND EXPENSES
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To help you decide whether this fund is appropriate for you, this section
reviews its major characteristics.
The fund should be used as an investment option for variable annuity and
variable life insurance contracts.
What is the fund's objective?
To achieve long-term growth of capital by investing primarily in the common
stocks of companies operating in sectors T. Rowe Price believes will be the
fastest growing in the United States.
What is the fund's principal investment strategy?
We invest primarily (at least 65% of total assets) in common stocks of U.S.
companies that operate in those sectors of the economy identified at any
given time by T. Rowe Price as the fastest growing or having the greatest
growth potential. In recent years, the U.S. economy has evolved rapidly,
primarily because of the application of new technologies and scientific
advances. Fast-growing companies can be found across an array of industries
in today's "new America." The choice of industry sectors would reflect such
factors as the overall revenue growth of the component companies and the
sector's contribution to Gross Domestic Product from year to year. In
recent years, for example, such sectors have included technology and
telecommunications, but others may supplement or replace these at any time.
Holdings range from large-cap to small companies. In selecting stocks, we
look for many characteristics, including but not limited to:
. earnings growth rates that generally exceed that of the average company in
the S&P 500 Stock Index;
. favorable company fundamentals, such as a strong balance sheet, sound
business strategy, and promising competitive positioning;
. effective management; and
. stock valuations, such as price/earnings or price/cash flow ratios, that
seem reasonable relative to the company's prospects.
While most assets will be invested in U.S. common stocks, other securities
may also be purchased, including foreign stocks, futures, and options, in
keeping with fund objectives.
The fund may sell securities for a variety of reasons, such as to secure
gains, limit losses, or redeploy assets into more promising opportunities.
. For details about the fund's investment program, please see the Investment
Policies and Practices section.
What are the main risks of investing in the fund?
As with all equity funds, this fund's share price can fall because of
weakness in the broad market, a particular industry, or specific holdings.
The market as a whole can decline for many reasons, including adverse
political or economic developments here or abroad, changes in
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T. ROWE PRICE
investor psychology, or heavy institutional selling. The prospects for an
industry or company may deteriorate because of a variety of factors,
including disappointing earnings or changes in the competitive environment.
In addition, our assessment of companies held in the fund may prove
incorrect, resulting in losses or poor performance even in a rising market.
Finally, the fund's investment approach could fall out of favor with the
investing public, resulting in lagging performance versus other types of
stock funds.
The fund may entail above-average risk since growth companies pay few
dividends and are typically more volatile than slower-growing companies
with high dividends. Generally, stocks of companies in rapidly evolving -
and often highly competitive - industries are subject to significant price
swings. Since investors buy these stocks because of their expected superior
earnings growth, earnings disappointments, even small ones, can result in
sharp price declines. Changes in investor psychology from positive to
negative can also cause growth stocks to lose value because of the high
valuations they typically carry. The level of risk will be increased if the
fund has significant exposure to small-company stocks, which tend to be
more volatile than large-company stocks because of their limited product
lines, markets, or financial resources. In addition, picking long-term
winners in the early stages of developing new industries is very difficult.
Promising new fields tend to attract a great deal of competition and
capital investment, and the increasingly fast pace of technological change
can render an established company's products and services obsolete
virtually overnight.
Foreign stock holdings are subject to the risk that some holdings may lose
value because of declining foreign currencies or adverse political or
economic events overseas. Investments in futures and options, if any, are
subject to additional volatility and potential losses.
As with any mutual fund, there can be no guarantee the fund will achieve
its objective.
. The fund's share price may decline, so when you sell your shares, you may
lose money.
How can I tell if the fund is appropriate for me?
Consider your investment goals, your time horizon for achieving them, and
your tolerance for risk. If you seek long-term appreciation and can accept
the potentially higher volatility of growth stocks, the fund could be an
appropriate part of your overall investment strategy. This fund should not
represent your complete investment program or be used for short-term
trading purposes.
. Equity investors should have a long-term investment horizon and be
willing to wait out bear markets.
How has the fund performed in the past?
The bar chart showing calendar year returns and the average annual total
return table indicate risk by illustrating how much returns can differ from
one year to the next and over time. Fund past performance is no guarantee
of future returns.
The fund can also experience short-term performance swings, as shown by the
best and worst calendar quarter returns during the years depicted in the
chart.
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MORE ABOUT THE FUND
LOGO
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Calendar Year Total Returns
"95" "96" "97" "98" "99"
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51.08 20.09 21.12 18.51 12.75
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Quarter ended Total return
Best quarter 12/31/98 27.85%
Worst quarter 9/30/98 -20.84%
<TABLE>
Table 1 Average Annual Total Returns
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Periods ended
December 31, 1999
Since inception
1 year 5 years (3/31/94)
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<S> <C> <C> <C>
New America Growth Portfolio 12.75% 24.04% 20.80%
S&P 500 Stock Index 21.04 28.56 25.52
Lipper VA Underlying Growth Funds 31.48 26.45 22.84
Average
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These figures include changes in principal value, reinvested dividends, and
capital gain distributions, if any. Figures do not reflect fees at the
insurance product or contract level and if those fees were included returns
would be lower.
OTHER INFORMATION ABOUT THE FUND
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What are some of the fund's potential rewards?
The fund offers the potential for significant, long-term growth of capital
by participating in the growth of companies positioned to benefit from the
dynamic technological, social, medical, economic and business developments
that are defining the "new America." The fund has the flexibility to seek
investments in companies of any size in any sector believed by T. Rowe
Price to offer the greatest growth potential.
What is meant by a "growth" investment approach?
Thomas Rowe Price, Jr. pioneered the growth stock theory of investing over
60 years ago. It is based on the premise that inflation represents a more
serious long-term threat to an investor's
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T. ROWE PRICE
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.
. Growth investors look for companies with above-average earnings gains.
Is there other information I can review before making a decision?
Investment Policies and Practices in Section 3 discusses various types of
portfolio securities the fund may purchase as well as types of management
practices the fund may use.
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ABOUT YOUR ACCOUNT
2
PRICING SHARES AND RECEIVING SALE PROCEEDS
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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 are designed to 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 variable 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.
Your ability to exchange from this fund to any other one that serves as an
investment option under your insured contract is governed by the terms of
that contract and the separate account prospectus.
How and when shares are priced
The share price (also called "net asset value" or NAV per share) for a fund
is calculated at the close of the New York Stock Exchange, normally 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. Current market values are used to price fund shares.
How your purchase, sale, or exchange price is determined
Purchases
The insurance companies purchase shares of the fund for their separate
accounts, using premiums allocated by the contract holders or participants.
Shares are purchased at the NAV next determined after the insurance company
receives the premium payment in acceptable form. Initial and subsequent
payments allocated to the fund are subject to the limits stated in the
separate account prospectus issued by the insurance company.
Redemptions
The insurance companies redeem shares of the fund to make benefit or
surrender payments under the terms of its Contracts. Redemptions are
processed on any day on which the New York Stock Exchange is open and are
priced at the fund's NAV next determined after the insurance company
receives a surrender request in acceptable form.
Note: The time at which transactions 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
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T. ROWE PRICE
accordance with the Investment Company Act of 1940. The amount received
upon redemption of the shares of the fund may be more or less than the
amount paid for the shares, depending on the fluctuations in the market
value of the assets owned by the fund.
Excessive Trading
Frequent trades in your account or accounts controlled by you can disrupt
management of the fund and raise its expenses. To deter such activity, the
fund has adopted an excessive trading policy. If you violate our excessive
trading policy, you may be barred indefinitely and without further notice
from further purchases of T. Rowe Price funds. Our excessive trading policy
applies to contract holders and participants notwithstanding any provisions
in your insurance contract:
You can make one purchase and one sale involving the same fund within any
120-day period. If you exceed this limit or you hold fund shares for less
than 60 calendar days, you are in violation of our excessive trading
policy. Systematic purchases or redemptions are exempt from this policy.
RIGHTS RESERVED BY THE FUND
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The fund and its agents reserve the following rights: (1) to waive or lower
investment minimums; (2) to refuse any purchase or exchange order; (3) to
cancel or rescind any purchase or exchange order (including, but not
limited to, orders deemed to result in excessive trading, market timing,
fraud, or 5% ownership by individual contract holders or participants) upon
notice to the contract holder or participant within five business days of
the trade or if the written confirmation has not been received by the
contract holder or participant, whichever is sooner; (4) to freeze any
account and suspend account services when notice has been received of a
dispute between the registered or beneficial account owners or there is
reason to believe a fraudulent transaction may occur; (5) to otherwise
modify the conditions of purchase and any services at any time; or (6) to
act on instructions believed to be genuine. These actions will be taken
when, in the sole discretion of management, they are deemed to be in the
best interest of the fund.
In an effort to protect the fund from the possible adverse effects of a
substantial redemption in a large account, as a matter of general policy,
no contract holder or participant or group of contract holders or
participants controlled by the same person or group of persons will
knowingly be permitted to purchase in excess of 5% of the outstanding
shares of the fund, except upon approval of the fund's management.
DIVIDENDS AND OTHER DISTRIBUTIONS
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For a discussion of the tax status of your variable annuity contract,
please refer to the 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 variable life
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MORE ABOUT THE FUND
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 fund dividends.
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MORE ABOUT THE FUND
3
ORGANIZATION AND MANAGEMENT
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How is the fund organized?
The T. Rowe Price Equity Series, Inc. (the "corporation") was incorporated
in Maryland in 1994. 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.
While the fund is managed in a manner similar to that of the T. Rowe Price
New America Growth Fund, investors should be aware that the fund is not the
same fund and will not have the same performance. Investments made by the
fund at any given time may not be the same as those made by the T. Rowe
Price New America Growth Fund. Different performance will result due to
factors such as differences in the cash flows into and out of the fund,
different fees and expenses, and differences in portfolio size and
positions.
. Shareholders benefit from T. Rowe Price's 63 years of investment
management experience.
What is meant by "shares"?
Contract holders and participants indirectly (through the insurance company
separate account) purchase shares when they put money in a fund offered as
an investment option in their insurance contracts. 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 (the insurance
company separate account) to 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 Investment
Company Act of 1940 or are excluded from registration thereunder. Under
current law, the insurance companies must vote the shares held in
registered separate accounts in accordance with voting instructions
received from variable contract holders or participants having the right to
give such instructions.
Do T. Rowe Price funds have annual shareholder meetings?
The funds are not required to hold annual meetings and, to avoid
unnecessary costs to fund shareholders, do not do so except when certain
matters, such as a change in fundamental policies, must 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
instructions on voting.
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MORE ABOUT THE FUND
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 are independent of T. Rowe
Price Associates, Inc. (T. Rowe Price).
. 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 with the following members:
Marc L. Baylin, Chairman, Brian W.H. Berghuis, Robert Gensler, Eric M.
Gerster, John H. Laporte, Robert W. Smith, and R. Candler Young. 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. Baylin was elected chairman of the fund's committee
in 2000 and has been a member of the committee since 1997. He was a
research analyst with T. Rowe Price from 1993 through 2000 and began
managing investments in 1997.
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.
From time to time, T. Rowe Price may pay eligible insurance companies for
services. They provide to the fund for contract holders. These payments
range from 0.15% to 0.25% of the average annual total assets invested by
separate accounts of the insurance company in the fund.
Variable Annuity and Variable Life Charges
Variable annuity and variable life fees and charges imposed on contract
holders and Participants by the insurance companies are in addition to
those described previously and are described in the variable annuity and
variable life contract prospectuses.
Variable Annuity and Variable Life Conflicts
The fund may serve as an investment medium for both variable annuity
contracts and variable life insurance policies. Shares of the fund may be
offered to separate accounts established by any number of insurance
companies. The fund currently does not foresee any disadvantages to
variable annuity contract owners due to the fact that the fund may serve as
an investment medium for both variable life insurance policies and annuity
contracts; however, due to differences in tax treatment or other
considerations, it is theoretically possible that the interests of owners
of annuity contracts and insurance policies for which the fund serves as an
investment medium might at some time be in conflict. However, the fund's
Board of Directors is required to monitor events to identify any material
conflicts between variable annuity contract owners and variable life policy
owners, and will determine what action, if any, should be taken in the
event of such a conflict. If such a conflict were to occur, an insurance
company participating in the fund might be required to redeem the
investment of one or more of its separate accounts from the fund. This
might force the fund to sell securities at disadvantageous prices.
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T. ROWE PRICE
UNDERSTANDING PERFORMANCE INFORMATION
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This section should help you understand the terms used to describe fund
performance. You will come across them in shareholder reports you receive
from your insurance company.
Total Return
This tells you how much an investment 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. Therefore, total return
numbers include the effect of compounding.
Advertisements may include cumulative or average annual total return
figures, which may be compared with various indices, other performance
measures, or other mutual funds.
Cumulative Total Return
This is the actual return of an investment for a specified period. A
cumulative return does not indicate how much the value of the investment
may have fluctuated during the period. For example, an investment could
have a 10-year positive cumulative return despite experiencing some
negative years during that time.
Average Annual Total Return
This is always hypothetical and should not be confused with actual
year-by-year results. It smooths out all the variations in annual
performance to tell you what constant year-by-year return would have
produced the investment's actual cumulative return. This gives you an idea
of an investment's annual contribution to your portfolio, provided you held
it for the entire period.
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
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This section takes a detailed look at some of the types of fund portfolio
securities and the various kinds of investment practices that may be used
in day-to-day portfolio management. Fund investments are subject to further
restrictions and risks described in the Statement of Additional
Information.
Shareholder approval is required to substantively change fund objectives
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. Fund
investment restrictions and policies are adhered to at the time of
investment. A later change in circumstances will not require the sale of an
investment if it was proper at the time it was made.
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MORE ABOUT THE FUND
Fund holdings of certain kinds of investments cannot exceed maximum
percentages of total assets, which are set forth in this prospectus. For
instance, fund investments in hybrid instruments are limited to 10% of
total assets. While these restrictions provide a useful level of detail
about fund investments, 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 a 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 other fund
investments.
Changes in fund holdings, fund performance, and the contribution of various
investments are discussed in the shareholder reports sent to you by your
insurance company.
. Fund managers have considerable leeway in choosing investment strategies
and selecting securities they believe will help achieve fund objectives.
Types of Portfolio Securities
In seeking to meet its investment objective, we 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 various
types of fund portfolio securities and investment management practices.
Fundamental policy The fund will not purchase a security if, as a result,
with respect to 75% of its total assets, more than 5% of its total assets
would be invested in securities of a single issuer, or if more than 10% of
the voting securities of the issuer would be held by the fund.
Fund investments are primarily in common stocks (normally, at least 65% of
total assets) and, to a lesser degree, other types of securities as
described below.
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, preferred stock may be purchased where the issuer
has omitted, or is in danger of omitting, payment of its dividend. Such
investments would be made primarily for their capital appreciation
potential.
Convertible Securities and Warrants
Investments may be made 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).
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T. ROWE PRICE
Foreign Securities
Investments may be made 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 fund 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.
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 some conditions, the redemption
value of such an investment could be zero.
. Hybrids can have volatile prices and limited liquidity, and their use may
not be successful.
Operating policy Fund investments in hybrid instruments are limited to 10%
of total assets.
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 Fund investments in illiquid securities are limited to
15% of net assets.
Types of Investment Management Practices
Reserve Position
A certain portion of fund assets will be held in money market reserves.
Fund reserve positions are expected to consist primarily of shares of one
or more T. Rowe Price internal money market funds. Short-term, high-quality
U.S. and foreign dollar-denominated money market securities, including
repurchase agreements, may also be held. For temporary, defensive purposes,
there is no limit on fund investments in money market reserves. The effect
of taking such a position is that the fund may not achieve its investment
objective. The reserve position provides flexibility in meeting
redemptions, expenses, and the timing of new investments and can serve as a
short-term defense during periods of unusual market volatility.
Borrowing Money and Transferring Assets
Fund borrowings may be made from banks and other T. Rowe Price funds for
temporary emergency purposes to facilitate redemption requests, or for
other purposes consistent with
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MORE ABOUT THE FUND
fund policies as set forth in this prospectus. Such borrowings may be
collateralized with fund assets, subject to restrictions.
Fundamental policy Borrowings may not exceed 33/1//\\/3/\\% of total fund
assets.
Operating policy Fund transfers of portfolio securities as collateral will
not be made 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. Fund purchases of additional securities will not
be made when borrowings exceed 5% of total assets.
Futures and Options
Futures (a type of potentially high-risk derivative) are often used to
manage or hedge risk because they enable the investor to buy or sell an
asset in the future at an agreed-upon price. Options (another type of
potentially high-risk derivative) give the investor the right (where the
investor purchases the option), or the obligation (where the investor
writes (sells) the option), to buy or sell an asset at a predetermined
price in the future. Futures and options contracts may be bought or sold
for any number of reasons, including: to manage fund exposure to changes in
securities prices and foreign currencies; as an efficient means of
adjusting fund overall exposure to certain markets; in an effort to enhance
income; as a cash management tool; and to protect the value of portfolio
securities. Call and put options may be purchased or sold 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 fund total return;
and the potential loss from the use of futures can exceed a fund's initial
investment in such contracts.
Operating policies Futures: Initial margin deposits and premiums on
options used for nonhedging purposes will not exceed 5% of fund net asset
value. Options on securities: The total market value of securities against
which call or put options are written may not exceed 25% of its total
assets. No more than 5% of fund total assets will be committed to premiums
when purchasing call or put options.
Managing Foreign Currency Risk
Investors in foreign securities may "hedge" their exposure to potentially
unfavorable currency changes by purchasing a contract to exchange one
currency for another on some future date at a specified exchange rate. In
certain circumstances, a "proxy currency" may be substituted for the
currency in which the investment is denominated, a strategy known as "proxy
hedging." Foreign currency transactions, if used, would be designed
primarily to protect a fund's foreign securities from adverse currency
movements relative to the dollar. Such transactions involve the risk that
anticipated currency movements will not occur, and fund total return could
be reduced.
Lending of Portfolio Securities
Fund securities may be lent 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.
<PAGE>
T. ROWE PRICE
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 higher capital gain distributions
by the fund. The fund's portfolio turnover rates for the fiscal years
ending December 31 are listed in the tables in the Financial Highlights
section.
FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------------
Table 2, 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 total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the fund (assuming reinvestment of all dividends and
distributions). The financial statements in the annual report were audited
by the fund's independent accountants, PricewaterhouseCoopers LLP.
<TABLE>
Table 2 Financial Highlights
<CAPTION>
Year ended December 31
1995 1996 1997 1998 1999
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.10 $ 15.23 $ 17.67 $ 21.35 $ 24.74
Income From Investment Operations
Net investment income 0.03 0.04 -- (0.08) (0.07)
------------------------------------------------------
Net gains or losses
on securities (both
realized and 5.12 2.94 3.73 3.97 3.10
unrealized)
------------------------------------------------------
Total from investment
operations 5.15 2.98 3.73 3.89 3.03
Less Distributions
Dividends (from net (0.02) (0.04) -- -- --
investment income)
------------------------------------------------------
Distributions (from -- (0.50) (0.05) (0.50) (1.59)
capital gains)
------------------------------------------------------
Returns of capital -- -- -- -- --
------------------------------------------------------
Total distributions (0.02) (0.54) (0.05) (0.50) (1.59)
------------------------------------------------------
Net asset value, $ 15.23 $ 17.67 $ 21.35 $ 24.74 $ 26.18
end of period
------------------------------------------------------
Total return 51.10% 20.09% 21.12% 18.51% 12.75%
Ratios/Supplemental Data
Net assets, end of $12,304 $60,241 $96,991 $118,989 $125,974
period (in thousands)
------------------------------------------------------
Ratio of expenses to 0.85% 0.85% 0.85% 0.85% 0.85% '
average net assets
------------------------------------------------------
Ratio of net income 0.23% 0.18% 0.02% (0.34)% (0.30)%
to average net assets
------------------------------------------------------
Portfolio turnover 54.5% 27.2% 37.3% 46.0% 42.1%
rate
-----------------------------------------------------------------------------------
</TABLE>
<PAGE>
A fund Statement of Additional Information has been filed with the Securities
and Exchange Commission and is incorporated by reference into this prospectus.
Further information about fund investments, including a review of market
conditions and the manager's recent strategies and their impact on performance,
is available in the annual and semiannual shareholder reports. To obtain a free
copy of a fund report or Statement of Additional Information, or for inquiries,
contact your insurance company.
Fund information and Statements of Additional Information are also available
from the Public Reference Room of the Securities and Exchange Commission.
Information on the operation of the Public Reference Room may be obtained by
calling the SEC at 1-202-942-8090. Fund reports and other fund information are
available on the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. Copies of this information may be obtained, after paying a
duplicating fee, by electronic request at [email protected], or by writing the
Public Reference Room, Washington D.C. 20549-0102.
1940 Act File No.: 811-07143
(LOGO)
5/1/00
