<PAGE>



PAGE 1
                      Registration Nos. 002-43237/811-2215

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                   FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933          /X/


         Post-Effective Amendment No. 37                          /X/

                                     AND/OR

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


         Amendment No. 31                                         /X/

                       T. ROWE PRICE SMALL-CAP VALUE FUND
                       ----------------------------------
                Exact Name of Registrant as Specified in Charter

                100 East Pratt Street, Baltimore, Maryland 21202
                ------------------------------------------------
                     Address of Principal Executive Offices

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

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


          Approximate Date of Proposed Public Offering May 1, 2002
                                                       ---------------

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

/ /      Immediately upon filing pursuant to paragraph (b)

/X/      On May 1, 2002, pursuant to paragraph (b)
/ /      60 days after filing pursuant to paragraph (a)(1)

/ /      On (date), pursuant to paragraph (a)(1)
/ /      75 days after filing pursuant to paragraph (a)(2)

/ /      On (date), pursuant to paragraph (a)(2) of Rule 485
         If appropriate, check the following box:

/ /      This post-effective amendment designates a new effective date for a
         previously filed post-effective amendment.
<PAGE>
<PAGE>

PROSPECTUS

May 1, 2002

T. ROWE PRICE

Small-Cap
Value Fund

 A stock fund seeking long-term capital growth through investments in small U.S.
 companies whose stocks appear undervalued.
(R)
 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.
<PAGE>

T. Rowe Price Small-Cap Value Fund, Inc.
Prospectus


May 1, 2002



<TABLE>
<CAPTION>
<S>      <C>  <C>                                       <C>
1             ABOUT THE FUND
              Objective, Strategy, Risks, and Expenses      1
              -----------------------------------------------
              Other Information About the Fund              5
              -----------------------------------------------

              T. ROWE PRICE ACCOUNT INFORMATION
2
              Pricing Shares and Receiving                  8
              Sale Proceeds
              -----------------------------------------------
              Useful Information on Distributions          11
              and Taxes
              -----------------------------------------------
              Transaction Procedures and                   15
              Special Requirements
              -----------------------------------------------

3             MORE ABOUT THE FUND
              Organization and Management                  18
              -----------------------------------------------
              Understanding Performance Information        19
              -----------------------------------------------
              Investment Policies and Practices            20
              -----------------------------------------------
              Financial Highlights                         25
              -----------------------------------------------

4             INVESTING WITH T. ROWE PRICE
              Account Requirements                         27
              and Transaction Information
              -----------------------------------------------
              Opening a New Account                        28
              -----------------------------------------------
              Purchasing Additional Shares                 29
              -----------------------------------------------
              Exchanging and Redeeming Shares              30
              -----------------------------------------------
              Rights Reserved by the Funds                 32
              -----------------------------------------------
              Information About Your Services              32
              -----------------------------------------------
              T. Rowe Price Brokerage                      35
              -----------------------------------------------
              Investment Information                       36
              -----------------------------------------------
              T. Rowe Price Privacy Policy                 37
              -----------------------------------------------
</TABLE>




 Founded in 1937 by the late Thomas Rowe Price, Jr., T. Rowe Price Associates,
Inc., and its affiliates managed $156.3 billion for more than eight million
individual and institutional investor accounts as of December 31, 2001.

 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.
<PAGE>

 ABOUT THE FUND
 OBJECTIVE, STRATEGY, RISKS, AND EXPENSES
 ----------------------------------------------------------

 What is the fund's objective?

   The fund seeks long-term capital growth by investing primarily in small
   companies whose common stocks are believed to be undervalued.


 What is the fund's principal investment strategy?


   Reflecting a value approach to investing, the fund will seek the stocks of
   companies whose current stock prices do not appear to adequately reflect
   their underlying value as measured by assets, earnings, cash flow, or
   business franchises. Normally, the fund will invest at least 80% of its net
   assets in companies with a market capitalization that is within or below the
   range of companies in the Russell 2000 Index. The market capitalization of
   the companies in the fund's portfolio and the Russell 2000 Index changes over
   time and the fund will not sell a stock just because the company has grown to
   a market capitalization outside the range. The fund may, on occasion,
   purchase companies with a market capitalization above the range. Our in-house
   research team seeks to identify companies that appear to be undervalued by
   various measures, and may be temporarily out of favor, but have good
   prospects for capital appreciation. In selecting investments, we generally
   look for some of the following:

  . low price/earnings, price/book value, or price/cash flow ratios relative to
   the S&P 500, the company's peers, or its own historic norm;


  . low stock price relative to a company's underlying asset values;

  . above-average dividend yield relative to a company's peers or its own
   historic norm;

  . a plan to improve the business through restructuring; and


  . a sound balance sheet and other positive financial characteristics.

   In pursuing its investment objective, the fund's management has the
   discretion to purchase some securities that do not meet its normal investment
   criteria, as described above, when it perceives an unusual opportunity for
   gain. These special situations might arise when the fund's management
   believes a security could increase in value for a variety of reasons,
   including a change in management, an extraordinary corporate event, or a
   temporary imbalance in the supply of or demand for the securities.


   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.
<PAGE>

   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?


   Investing in small companies involves greater risk than is customarily
   associated with larger companies. Stocks of small companies are subject to
   more abrupt or erratic price movements than larger-company stocks. Small
   companies often have limited product lines, markets, or financial resources,
   and their managements may lack depth and experience. Such companies seldom
   pay significant dividends that could cushion returns in a falling market.


   The value approach carries the risk that the market will not recognize a
   security's intrinsic value for a long time, or that a stock judged to be
   undervalued may actually be appropriately priced.

   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 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.

   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.
<PAGE>

 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 an aggressive, long-term approach to
   capital growth through small-company 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.

   The fund can be used in both regular and tax-deferred accounts, such as IRAs.


   . 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 how fund performance compares with that of a
   comparable market index. Fund past returns (before and after taxes) are not
   necessarily an indication of future performance.

   The fund can also experience short-term performance swings, as shown by the
   best and worst calendar quarter returns during the years depicted.

   In addition, the average annual total return table shows hypothetical
   after-tax returns to suggest how taxes paid by the shareholder may influence
   returns. Actual after-tax returns depend on each investor's situation and may
   differ from those shown. After-tax returns are not relevant if the shares are
   held in a tax-deferred account, such as a 401(k) or IRA. During periods of
   fund losses, the post-liquidation after-tax return may exceed the fund's
   other returns because the loss generates a tax benefit that is factored into
   the result.

<PAGE>


<TABLE>
<CAPTION>
                                 Calendar Year Total Returns
 "92"       "93"   "94"    "95"    "96"   "97".    "98"     "99"    "00"   "01"
 ----------------------------------------------------------------------------------
 <S>      <C>    <C>   <C>   <C>   <C>     <C>    <C>    <C>   <C>
  20.87  23.30  -1.38  29.29  24.61  27.92  -12.47   1.19  19.77   21.94
 ----------------------------------------------------------------------------------
</TABLE>


                  Quarter ended    Total return

 Best quarter        6/30/99          16.68%
 Worst quarter       9/30/98         -20.17%



<TABLE>
 Table 1  Average Annual Total Returns
<CAPTION>
                                        Periods ended December 31, 2001
                                        1 year     5 years     10 years
 ------------------------------------------------------------------------------
 <S>                                   <C>        <C>         <C>         <S>
  Small-Cap Value Fund
  Returns before taxes                  21.94%      10.60%      14.63%
  Returns after taxes on
  distributions                         21.02        8.74       12.86
  Returns after taxes on
  distributions and sale of fund
  shares                                13.79        8.11       11.85
  Russell 2000 Index                     2.49        7.52       11.51
  Lipper Small-Cap Core Fund Index       7.13       10.15       12.61
 ------------------------------------------------------------------------------
</TABLE>




 Returns are based on changes in principal value, reinvested dividends, and
 capital gain distributions, if any. Returns before taxes do not reflect effects
 of any income or capital gains taxes. All after-tax returns are calculated
 using the historical highest individual federal marginal income tax and capital
 gains rates. They do not reflect the impact of state and local taxes. Returns
 after taxes on distributions reflect the taxed return on the payment of
 dividends and capital gains. Returns after taxes on distributions and sale of
 fund shares assume the shares were sold at period end, and, therefore, are also
 adjusted for any capital gains or losses incurred by the shareholder. Market
 indexes do not include expenses, which are deducted from fund returns, or
 taxes.



 What fees or expenses will I pay?

   The fund is 100% no load. However, the fund charges a 1.00% redemption fee,
   payable to the fund, on shares held less than one year. There are no other
   fees or charges to buy or sell fund shares, reinvest dividends, or exchange
   into other T. Rowe Price funds. There are no 12b-1 fees.
<PAGE>


<TABLE>
 Table 2  Fees and Expenses of the Fund*
<CAPTION>
    Shareholder fees (fees paid directly from your investment)
  Redemption fee                        1.00%/a/
                  Annual fund operating expenses
          (expenses that are deducted from fund assets)
 -----------------------------------------------------------------------
 <S>                                    <C>                        <S>
  Management fee                                  0.67%
  Other expenses                                  0.22%
  Total annual fund operating expenses            0.89%
 -----------------------------------------------------------------------
</TABLE>




 *Redemption proceeds of less than $5,000 sent by wire are subject to a $5 fee
  paid to the fund. Accounts with less


  than a $2,000 balance (with certain exceptions) are subject to a $10 fee. See
  Transaction Procedures and Special

  Requirements--Account Maintenance and Small Account Fees.

 /a/
   On shares purchased and held for less than one year (details under Contingent
   Redemption Fee in Pricing Shares

   and Receiving Sales Proceeds).


   Example.  The following table gives you an idea of how expense ratios may
   translate into dollars and helps you to compare the cost of investing in this
   fund with that of other mutual funds. Although your actual costs may be
   higher or lower, the table shows how much you would pay if operating expenses
   remain the same, you invest $10,000, earn a 5% annual return, and hold the
   investment for the following periods and then redeem:



<TABLE>
<CAPTION>
      1 year      3 years      5 years       10 years
    ----------------------------------------------------
    <S>         <C>          <C>          <C>
       $91         $284         $493          $1,096
    ----------------------------------------------------
</TABLE>





 OTHER INFORMATION ABOUT THE FUND
 ----------------------------------------------------------

 What are some of the fund's potential rewards?


   Small companies may offer greater opportunity for capital appreciation than
   larger, more established companies.

   In addition, stock whose prices are below the company's intrinsic value may
   offer the potential for substantial capital appreciation.



 What is meant by a "value" investment approach?

   Value investors seek 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>

   Finding undervalued stocks requires considerable research to identify the
   particular company, analyze its 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.

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

  . 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.

  . Price/book value ratio 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.

  . 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.


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

  . Price/cash flow Dividing a stock's price by the company's cash flow per
   share, rather than by 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.

  . 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.

  . Restructuring opportunities The market can react favorably to the
   announcement of 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.


 What are the advantages of a value approach to small-cap investing?

   Small-capitalization stocks are less actively followed by stock analysts than
   are larger-capitalization stocks, and less information is available to
   evaluate small-cap stock prices. As a result, compared with
   larger-capitalization stocks, there may be greater variations between the
   current stock price and the estimated underlying value, which could represent
   greater opportunity for appreciation.
<PAGE>

 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.

<PAGE>

 T. ROWE PRICE ACCOUNT INFORMATION

   Here are some procedures you should know when investing in the T. Rowe Price
   family of taxable stock, bond, and money market funds.




 PRICING SHARES AND RECEIVING SALE PROCEEDS
 ----------------------------------------------------------

 How and when shares are priced


   The share price (also called "net asset value" or NAV per share) for all
   funds except the Japan Fund is calculated at the close of the New York Stock
   Exchange, normally 4 p.m. ET, each day that the exchange is open for
   business. (See the following section for information on the Japan Fund.) To
   calculate the NAV, a fund's assets are valued and totaled, liabilities are
   subtracted, and the balance, called net assets, is divided by the number of
   shares outstanding. Market values are used to price stocks and bonds.
   Amortized cost is used to price securities held by money market funds.


   The securities of funds investing in foreign markets are usually valued on
   the basis of the most recent closing market prices at 4 p.m. ET. Most foreign
   markets close before that time. For securities primarily traded in the Far
   East, for example, the most recent closing prices may be as much as 15 hours
   old at 4 p.m. Normally, developments that could affect the values of
   portfolio securities that occur between the close of the foreign market and 4
   p.m. ET will not be reflected in a fund NAV. However, if a fund determines
   that such developments are so significant that they will, in its judgment,
   clearly and materially affect the value of the fund's securities, the fund
   may adjust the previous closing prices to reflect what it believes to be the
   fair value of the securities as of 4 p.m. ET. A fund may fair value
   securities in other situations, for example, when a particular foreign market
   is closed but the fund is open.


   . The various ways you can buy, sell, and exchange shares are explained at
     the end of this prospectus and on the New Account Form. These procedures
     may differ for institutional and employer-sponsored retirement accounts.


 How your purchase, sale, or exchange price is determined

   If we receive your request in correct form by 4 p.m. ET, your transaction
   will be priced at that day's NAV. If we receive it after 4 p.m., it will be
   priced at the next business day's NAV.

   We cannot accept orders that request a particular day or price for your
   transaction or any other special conditions.
<PAGE>

   Fund shares may be purchased through various third-party intermediaries
   including banks, brokers, and investment advisers. Where authorized by a
   fund, orders will be priced at the NAV next computed after receipt by the
   intermediary. Consult your intermediary to determine when your orders will be
   priced. The intermediary may charge a fee for its services.

   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.

   Japan Fund: Pricing and Transactions

   The Japan Fund's share price is calculated at the close of the New York Stock
   Exchange, normally 4 p.m. ET, when both it and the Tokyo Stock Exchange are
   open. The fund will not price shares or process orders on any day when either
   the New York or Tokyo Stock Exchange is closed. Orders received on such days
   will be processed the next day the fund computes an NAV. As such, you may
   experience a delay in purchasing or redeeming fund shares. Exchanges: If you
   wish to exchange into the Japan Fund on a day the New York Stock Exchange is
   open but the Tokyo Stock Exchange is closed, the exchange out of the other T.
   Rowe Price fund will be processed on that day, but Japan Fund shares will not
   be purchased until the day the Japan Fund reopens. If you wish to exchange
   out of the Japan Fund on a day when the New York Stock Exchange is open but
   the Tokyo Stock Exchange is closed, the exchange will be delayed until the
   Japan Fund reopens.

   The Tokyo Stock Exchange is scheduled to be closed on the following weekdays:
   In 2002 -January 1, 2, 3, and 14; February 11; March 21; April 29; May 3 and
   6; September 16 and 23; October 14; November 4; and December 23 and 31. In
   2003-January 1, 2, 3, and 13; February 11; March 21; April 29; May 3 and 5;
   July 21; September 15 and 23; October 13; November 4 and 24; December 23 and
   31. If the Tokyo Stock Exchange closes on dates not listed, the fund will not
   be priced on those dates.



 How you can receive the proceeds from a sale


   . When filling out the New Account Form, you may wish to give yourself the
     widest range of options for receiving proceeds from a sale.


   If your request is received by 4 p.m. ET in correct form, proceeds are
   usually sent on the next business day. Proceeds can be sent to you by mail or
   to your bank account by Automated Clearing House (ACH) transfer or bank wire.
   ACH is an automated method of initiating payments from, and receiving
   payments in, your financial institution account. Proceeds sent by ACH
   transfer are usually credited the second business day after the sale.
   Proceeds sent by bank wire should be credited to your account the first
   business day after the sale.

<PAGE>

  . Exception:  Under certain circumstances and when deemed to be in a fund's
   best interest, your proceeds may not be sent for up to seven calendar days
   after we receive your redemption request.


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

   Contingent Redemption Fee

   Short-term "market timers" who engage in frequent purchases and redemptions
   can disrupt a fund's investment program and create additional transaction
   costs. For these reasons, certain T. Rowe Price funds, listed below, assess a
   fee on redemptions (including exchanges) of fund shares held for less than
   the time period shown:


<TABLE>
<CAPTION>
  Fund                             Holding period  Redemption fee
 <S>                               <S>             <S>             <C>
  Diversified Small-Cap Growth        6 months     1.00%
                                   --------------------------------
  Developing Technologies              1 year      1.00%
                                   --------------------------------
  Emerging Europe & Mediterranean      1 year      2.00%
                                   --------------------------------
  Emerging Markets Stock               1 year      2.00%
                                   --------------------------------
  Equity Index 500                    6 months     0.50%
                                   --------------------------------
  Extended Equity Market Index        6 months     0.50%
                                   --------------------------------
  High Yield                           1 year      1.00%
                                   --------------------------------
  International Discovery              1 year      2.00%
                                   --------------------------------
  International Equity Index           6 months    1.00%
                                   --------------------------------
  Latin America                        1 year      2.00%
                                   --------------------------------
  Real Estate                         6 months     1.00%
                                   --------------------------------
  Small-Cap Value                      1 year      1.00%
                                   --------------------------------
  Tax-Efficient Balanced               1 year      1.00%
                                   --------------------------------
  Tax-Efficient Growth                2 years      1.00%
                                   --------------------------------
  Tax-Efficient Multi-Cap Growth      2 years      1.00%
                                   --------------------------------
  Total Equity Market Index           6 months     0.50%
                                   --------------------------------
  U.S. Bond Index                     6 months     0.50%
 -----------------------------------------------------------------------
</TABLE>



   Redemption fees are paid to a fund to help offset transaction costs and to
   protect its long-term shareholders. The "first-in, first-out" (FIFO) method
   is used to determine the holding period. Under this method, the date of the
   redemption or exchange will be compared with the earliest purchase date of
   shares held in the account. If this holding period is less than the
   designated holding period, the fee will be charged.
<PAGE>

   In determining a holding period, the fund will use the anniversary date of a
   transaction. Thus, for a one-year period, shares purchased on January 1 will
   be subject to the fee if they are redeemed on or prior to the following
   December 31. If they are redeemed on or after January 1 of the following
   year, they will not be subject to the fee.


   The fee does not apply to any shares purchased through reinvested
   distributions (dividends and capital gains), shares held in retirement plans,
   such as 401(k), 403(b), 457, Keogh, profit sharing, SIMPLE IRA, SEP-IRA, and
   money purchase pension accounts, or to shares redeemed through designated
   systematic withdrawal plans. The fee does apply to all other types of
   accounts including IRAs. The fee may also apply to shares in retirement plans
   held in broker omnibus accounts.




 USEFUL INFORMATION ON DISTRIBUTIONS AND TAXES
 ----------------------------------------------------------

   . All net investment income and realized capital gains are distributed to
     shareholders.


 Dividends and Other Distributions


   Dividend and capital gain distributions are reinvested in additional fund
   shares in your account unless you select another option on your New Account
   Form. Reinvesting distributions results in compounding, that is, receiving
   income dividends and capital gain distributions on a rising number of shares.


   Distributions not reinvested are paid by check or transmitted to your bank
   account via ACH. If the Post Office cannot deliver your check, or if your
   check remains uncashed for six months, the fund reserves the right to
   reinvest your distribution check in your account at the NAV on the day of the
   reinvestment and to reinvest all subsequent distributions in shares of the
   fund. No interest will accrue on amounts represented by uncashed distribution
   or redemption checks.

   The following chart provides details on dividend payments.


<TABLE>
 Table 3  Dividend Payment Schedule
<CAPTION>
  Fund                                               Dividends
 <S>                               <S>                                            <C>
  Money market funds                 .Declared daily to shareholders of record
                                      as of 12 noon ET on that day. Purchases
                                      made after 12 noon ET receive the dividend
                                      on the next business day after payment has
                                      been received.

                                     .Paid on the first business day of each
                                      month.
 ---------------------------------------------------------------------------------
  Bond funds                         .Declared daily to shareholders of record
                                      as of 4 p.m. ET the previous business day.
                                      Purchases made after 4 p.m. ET receive the
                                      dividend on the next business day after
                                      payment has been received.

                                     .Paid on the first business day of each
                                      month.
 --------------------------------------------------------------------------------------
  These stock funds only:*           .Declared quarterly, if any, in March,
   .Balanced                          June, September, and December.

   . Dividend Growth                 .Must be a shareholder of record as of 4
                                      p.m. ET on the record date.
   . Equity Income

   . Equity Index 500

   . Growth & Income

   . Personal Strategy Balanced

   . Personal Strategy Income

   . Real Estate
 ---------------------------------------------------------------------------------
  All other stock funds*             .Declared annually, if any, generally in
                                      December.

                                     .Must be a shareholder of record as of 4
                                      p.m. ET on the record date.
 ---------------------------------------------------------------------------------
  Tax-Efficient Balanced*           Municipal Portion
                                     .Declared daily, paid on the last business
                                      day of March, June, September, and
                                      December.

                                    Equity Portion
                                     .Declared annually, if any, usually in
                                      December.

                                     .Must be a shareholder of record as of 4
                                      p.m. ET on the record date.
 --------------------------------------------------------------------------------------
</TABLE>



<PAGE>


 * Mutual fund dividends are eligible for the 70% deduction for dividends
   received by corporations to the extent the fund's income consists of
   dividends paid by U.S. corporations.


   Bond or money fund shares will earn dividends through the date of redemption;
   also, shares redeemed on a Friday or prior to a holiday (other than wire
   redemptions for money funds received before 12 noon ET) will continue to earn
   dividends until the next business day. Generally, if you redeem all of your
   bond or money fund shares at any time during the month, you will also receive
   all dividends earned through the date of redemption in the same check. When
   you redeem only a portion of your bond or money fund shares, all dividends
   accrued on those shares will be reinvested, or paid in cash, on the next
   dividend payment date.



 Capital gain payments

   If a fund has net capital gains for the year (after subtracting any capital
   losses), they are usually declared and paid in December to shareholders of
   record on a specified date that month. If a second distribution is necessary,
   it is paid the following year.
<PAGE>

   Capital gain payments are not expected in money market funds, which are
   managed to maintain a constant share price.


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

   Tax Information

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

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

  . You sell fund shares, including an exchange from one fund to another.
  . A fund makes a distribution to your account.

   Taxes on fund redemptions

   When you sell shares in any fund, you may realize a gain or loss. An exchange
   from one fund to another is also a sale for tax purposes.


   In January, you will be sent Form 1099-B indicating the date and amount of
   each sale you made in the fund during the prior year. This information will
   also be reported to the IRS. For most new accounts or those opened by
   exchange in 1984 or later, we will provide the gain or loss on the shares you
   sold during the year based on the "average cost" single category method. This
   information is not reported to the IRS, and you do not have to use it. You
   may calculate the cost basis using other methods acceptable to the IRS, such
   as "specific identification."

   To help you maintain accurate records, we send you a confirmation promptly
   following each transaction you make (except for systematic purchases and
   redemptions) and a year-end statement detailing all your transactions in each
   fund account during the year.

   Taxes on fund distributions

   In January, you will be sent Form 1099-DIV indicating the tax status of any
   dividend and capital gain distributions made to you. This information will
   also be reported to the IRS. Distributions are generally taxable to you in
   the year in which they are paid. You will be sent any additional information
   you need to determine your taxes on fund distributions, such as the portion
   of your dividends, if any, that may be exempt from state income taxes.

   The tax treatment of a capital gain distribution is determined by how long
   the fund held the portfolio securities, not how long you held shares in the
   fund. Short-term (one year or less) capital gain distributions are taxable at
   the same rate as ordinary income and long-term gains on securities held more
   than 12 months are taxed at a maximum rate of 20%. If you realized a loss on
   the sale or exchange of fund shares that you held six months or less, your
   short-term loss must be reclassified to a long-term loss to the extent of any
   long-term capital gain

<PAGE>


   distribution received during the period you held the shares. Gains and losses
   from the sale of foreign currencies and the foreign currency gain or loss
   resulting from the sale of a foreign debt security can increase or decrease
   an ordinary income dividend. Net foreign currency losses may cause monthly or
   quarterly dividends to be reclassified as a return of capital.


   If the fund qualifies and elects to pass through nonrefundable foreign taxes
   paid to foreign governments during the year, your portion of such taxes will
   be reported to you as taxable income. However, you may be able to claim an
   offsetting credit or deduction on your tax return for those amounts. There
   can be no assurance that a fund will be able to meet the requirements to pass
   through foreign income taxes paid.

   Tax consequences of hedging

   For funds investing in foreign securities, distributions resulting from the
   sale of certain foreign currencies, currency contracts, and debt securities
   are taxed as ordinary income. Net foreign currency losses may cause monthly
   or quarterly dividends to be reclassified as a return of capital. Entering
   into certain options, futures, swaps, and forward foreign exchange contracts
   and transactions may result in the application of the mark-to-market and
   straddle provisions of the Internal Revenue Code. These provisions could
   result in the fund being required to distribute gains on such transactions
   even though it did not close the contracts during the year or receive cash to
   pay such distributions. The fund may not be able to reduce its distributions
   for losses on such transactions to the extent of unrealized gains in
   offsetting positions.



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

   Tax effect of buying shares before a capital gain distribution
   If you buy shares shortly before or on the "record date" - the date that
   establishes you as the person to receive the upcoming distribution - you
   receive a portion of the money you just invested in the form of a taxable
   distribution. Therefore, you may wish to find out a fund's record date before
   investing. Of course, a fund's share price may, at any time, reflect
   undistributed capital gains and unrealized appreciation, which may result in
   future taxable distributions. Such distributions can occur even in a year
   when the fund has a negative return.


   . The preceding tax information summary does not apply to retirement
     accounts, such as IRAs, which are not subject to current tax.
<PAGE>

 TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
 ----------------------------------------------------------

   . Following these procedures helps assure timely and accurate transactions.


 Purchase Conditions

   Nonpayment

   If you pay with a check or ACH transfer that does not clear or if your
   payment is not received in a timely manner, your purchase may be canceled.
   You will be responsible for any losses or expenses incurred by the fund or
   transfer agent, and the fund can redeem shares you own in this or another
   identically registered T. Rowe Price account as reimbursement. The fund and
   its agents have the right to reject or cancel any purchase, exchange, or
   redemption due to nonpayment.

   U.S. dollars

   All purchases must be paid for in U.S. dollars; checks must be drawn on U.S.
   banks.


 Sale (Redemption) Conditions

   Holds on immediate redemptions: 10-day hold

   If you sell shares that you just purchased and paid for by check or ACH
   transfer, the fund will process your redemption but will generally delay
   sending you the proceeds for up to 10 calendar days to allow the check or
   transfer to clear. If, during the clearing period, we receive a check drawn
   against your newly purchased shares, it will be returned marked
   "uncollected." (The 10-day hold does not apply to purchases paid for by bank
   wire or automatic purchases through your paycheck.)

   Telephone, Tele*Access/(R)/, and online account transactions
   You may access your account or conduct transactions using the telephone or
   Tele*Access, or online. The T. Rowe Price funds and their agents use
   reasonable procedures to verify the identity of the shareholder. If these
   procedures are followed, the funds and their agents are not liable for any
   losses that may occur from acting on unauthorized instructions. A
   confirmation is sent promptly after a transaction. Please review it carefully
   and contact T. Rowe Price immediately about any transaction you believe to be
   unauthorized. Telephone conversations are recorded.


   Redemptions over $250,000

   Large redemptions can adversely affect a portfolio manager's ability to
   implement a fund's investment strategy by causing the premature sale of
   securities that would otherwise be held. If, in any 90-day period, you redeem
   (sell) more than $250,000, or your sale amounts to more than 1% of fund net
   assets, the fund has the right to pay the difference between the redemption
   amount and the lesser of the two previously mentioned figures with securities
   from the fund.

<PAGE>

 Excessive Trading


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

   Frequent trades or market timing in your account or accounts controlled by
   you can disrupt management of a fund and raise its expenses. To deter such
   activity, each fund has adopted an excessive trading policy. If you violate
   this policy, you may be barred indefinitely and without further notice from
   further purchases of the T. Rowe Price funds.

  . Trades placed directly with T. Rowe Price If you trade directly with T. Rowe
   Price, you can make one purchase and one sale or one sale and one purchase
   involving the same fund within any 120-day period. If you exceed this limit,
   or if your trading activity involves market timing, you are in violation of
   our excessive trading policy.

   Two types of transactions are exempt from this policy: 1) Trades solely in
   money market funds (exchanges between a money fund and a nonmoney fund are
   not exempt); and 2) systematic purchases and redemptions (see Information
   About Your Services).

  . Trades placed through intermediaries  If you purchase fund shares through an
   intermediary including a broker, bank, investment adviser, recordkeeper, or
   other third party, you can make one purchase and one sale or one sale and one
   purchase involving the same fund within any 120-day period. If you exceed
   this limit or if you hold fund shares for less than 60 calendar days, you are
   in violation of our excessive trading policy. Systematic purchases and
   redemptions are exempt from this policy. Transactions accepted by
   intermediaries in violation of this excessive trading policy or from persons
   believed to be market timers are subject to rejection or cancellation by the
   funds.



 Keeping Your Account Open

   Due to the relatively high cost to a fund of maintaining small accounts, we
   ask you to maintain an account balance of at least $1,000 ($10,000 for Summit
   Funds). If your balance is below this amount for three months or longer, we
   have the right to close your account after giving you 60 days to increase
   your balance.


 Account Maintenance and Small Account Fees


  . Small Account Fee (all funds except Index Funds)  Because of the
   disproportionately high costs of servicing accounts with low balances, a $10
   fee, paid to T. Rowe Price Services, the funds' transfer agent, will
   automatically be deducted from nonretirement accounts with balances falling
   below a minimum amount. The valuation of accounts and the deduction are
   expected to take place during the last five business days of September. The
   fee will be deducted from accounts with balances below $2,000, except for
   UGMA/UTMA accounts, for which the

<PAGE>


   minimum is $500. The fee will be waived for any investor whose T. Rowe Price
   mutual fund accounts total $25,000 or more. Accounts employing automatic
   investing (e.g., payroll deduction, automatic purchase from a bank account,
   etc.) are also exempt from the charge. The fee does not apply to IRAs and
   other retirement plan accounts that utilize a prototype plan sponsored by T.
   Rowe Price, but a separate custodial or administrative fee may apply to such
   accounts.

  . Account Maintenance Fee (Index Funds only)  The account maintenance fee is
   charged on a quarterly basis usually during the last week of a calendar
   quarter. On the day of the assessment, accounts with balances below $10,000
   will be charged the fee. Please note that the fee will be charged to accounts
   that fall below $10,000 for any reason, including market fluctuations,
   redemptions, or exchanges. When an account with less than $10,000 is closed
   either through redemption or exchange, the fee will be charged and deducted
   from the proceeds. The fee will apply to IRA accounts. The fee does not apply
   to retirement plans directly registered with T. Rowe Price Services, or
   accounts maintained by intermediaries through NSCC/(R)/Networking.



 Signature Guarantees


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


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


  . Written requests 1) to redeem over $100,000 or 2) to wire redemption
   proceeds when prior bank account authorization is not on file.

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

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

  . Establishing certain services after the account is opened.


   You can obtain a signature guarantee from most banks, savings institutions,
   broker-dealers, and other guarantors acceptable to T. Rowe Price. We cannot
   accept guarantees from notaries public or organizations that do not provide
   reimbursement in the case of fraud.

<PAGE>

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

 How is the fund organized?

   The fund was incorporated in Maryland in 1988 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.


   . Shareholders benefit from T. Rowe Price's 65 years of investment management
     experience.



 What is meant by "shares"?

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

   Each share and fractional share entitles the shareholder to:


  . Receive a proportional interest in income and capital gain distributions.

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


 Do T. Rowe Price funds have annual shareholder meetings?

   The funds are not required to hold annual meetings and, 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 by mail or telephone, or on the
   Internet.


 Who runs the fund?

   General Oversight

   The fund is governed by a Board of Directors that meets regularly to review
   the fund's investments, performance, expenses, and other business affairs.
   The Board elects the fund's officers. The majority of Board members are
   independent of T. Rowe Price Associates, Inc. (T. Rowe Price).

<PAGE>

   . 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:
   Preston G. Athey, Chairman, Hugh M. Evans III, Gregory A. McCrickard, Joseph
   Milano, Charles G. Pepin, and David J. Wallack. 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.
   Athey has been chairman of the fund's committee since 1991. He joined T. Rowe
   Price in 1978 and has been managing investments since 1982.


   The Management Fee
   This fee has two parts - an "individual fund fee," which reflects a fund's
   particular characteristics, and a "group fee." The group fee, which is
   designed to reflect the benefits of the shared resources of the T. Rowe Price
   investment management complex, is calculated daily based on the combined net
   assets of all T. Rowe Price funds (except the Spectrum Funds, and any
   institutional, index, or private label mutual funds). The group fee schedule
   (shown below) is graduated, declining as the asset total rises, so
   shareholders benefit from the overall growth in mutual fund assets.


<TABLE>
   Group Fee Schedule
<CAPTION>
    <S>               <C>
    0.334%*           First $50 billion

    0.305%            Next $30 billion

    0.300%            Next $40 billion

    0.295%            Thereafter
    -------------------------------------
</TABLE>




   * Represents a blended group fee rate containing various break points.


   The fund's portion of the group fee is determined by the ratio of its daily
   net assets to the daily net assets of all the T. Rowe Price funds described
   previously. Based on combined T. Rowe Price fund assets of over $94 billion

   at December 31, 2001, the group fee was 0.32%. .  The individual fund fee is
   0.35%.




 UNDERSTANDING PERFORMANCE INFORMATION
 ----------------------------------------------------------
   This section should help you understand the terms used to describe fund
   performance. You will come across them in shareholder reports you receive
   from us; in
   our education and informational materials; in T. Rowe Price advertisements;
   and
   in the media.
<PAGE>

 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.



 INVESTMENT POLICIES AND PRACTICES
 ----------------------------------------------------------
   This section takes a detailed look at some of the types of fund 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 apply 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.

   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

<PAGE>


   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 other fund investments.


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


   . 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, 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 its investment program. The following pages describe various
   types of fund 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 outstanding voting securities of the issuer would be held by the fund.


   Fund investments are primarily in common stocks (normally, at least 80% of
   net

   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.
<PAGE>

   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). Warrants can be highly volatile, have no
   voting rights, and pay no dividends.

   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 and ADSs). 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  Fund investments in foreign securities are limited to 20%
   of total assets.

   Fixed-Income Securities
   From time to time, we 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, generally rising when interest rates fall and falling when
   interest rates rise.

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


   Operating policy  The fund may purchase any type of noninvestment-grade debt
   security (or junk bond) including those in default. The fund will not
   purchase this type of security if it would have more than 5% of its total
   assets invested in such securities. Fund investments in convertible
   securities are not subject to this limit.


   Hybrid Instruments
   These instruments (a type of potentially high-risk derivative) can combine
   the characteristics of securities, futures, and options. For example, the
   principal amount, redemption, or conversion terms of a security could be
   related to the market price of some commodity, currency, or securities index.
   Such securities may bear interest or pay dividends at below market or even
   relatively nominal rates. Under 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, paying
   expenses, and in the timing of new investments and can serve as a short-term
   defense during periods of unusual market volatility.
<PAGE>

   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 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 fund
   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" or
   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; to protect the
   value of portfolio securities; and as a cash management tool. Call or put
   options may be purchased or sold on securities, financial indi

   ces, 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 covering call or
   put options may not exceed 25% of fund total assets. No more than 5% of fund
   total assets will be committed to premiums when purchasing call or put
   options.


   Exchange Traded Funds (ETFs)
   These are a type of index fund bought and sold on a securities exchange. An
   ETF trades like common stock and represents a fixed portfolio of securities
   designed to track a particular market index. The fund could purchase an ETF
   to temporarily gain exposure to a portion of the U.S. or a foreign market
   while awaiting purchase of underlying securities. The risks of owning an ETF
   generally reflect
<PAGE>

   the risks of owning the underlying securities they are designed to track,
   although lack of liquidity in an ETF could result in it being more volatile
   and ETFs have management fees which increase their costs.

   Managing Foreign Currency Risk

   Investors in foreign securities may attempt to "hedge" their exposure to
   potentially unfavorable currency changes. The primary means of doing this is
   through the use of "forwards"- contracts to exchange one currency for another
   on some future date at a specified exchange rate. However, futures, swaps,
   and options on these instruments may also be used. In certain circumstances,
   a "proxy currency" may be substituted for the currency in which the
   investment is denominated, a strategy known as "proxy hedging." If the fund
   were to engage in any of these foreign currency transactions, they would be
   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, which could reduce fund total
   return. There are certain markets, including many emerging markets, where it
   is not possible to engage in effective foreign currency hedging.


   Lending of Portfolio Securities

   Fund securities may be lent to broker-dealers, other institutions, or other
   persons to earn additional income. Risks include the potential insolvency of
   the broker-dealer or other borrower that could result in delays in recovering
   securities and capital losses. Additionally, losses could result from the
   reinvestment of collateral received on loaned securities.


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

   Portfolio Turnover

   Turnover is an indication of frequency of trading. 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, result in
   additional capital gain distributions, and reduce fund total return. The
   fund's portfolio turnover rates


   are shown in the Financial Highlights table.



 FINANCIAL HIGHLIGHTS
 ----------------------------------------------------------
   Table 4, which provides information about the fund's financial history, is
   based on a single share outstanding throughout the periods shown. 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
<PAGE>

   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 and no payment of account or
   (if applicable) redemption fees). The financial statements in the annual
   report were audited by the fund's independent accountants,
   PricewaterhouseCoopers LLP.


<TABLE>
 Table 4  Financial Highlights
<CAPTION>
                                         Year ended December 31
                             1997      1998     1999     2000     2001
 ------------------------------------------------------------------------------
 <S>                        <C>      <C>       <C>      <C>      <C>      <S>

  Net asset value,
  beginning of period       $19.56   $23.40    $18.97   $17.62   $19.14
  Income From Investment Operations
  Net investment income       0.21     0.25      0.17     0.21     0.17
                            ----------------------------------------------
  Net gains or losses on
  securities (both            5.22    (3.23)       --     3.19     4.00
  realized and unrealized)
                            ----------------------------------------------
  Total from investment
  operations                  5.43    (2.98)     0.17     3.40     4.17
  Less Distributions
  Dividends (from net        (0.20)   (0.25)    (0.17)   (0.20)   (0.17)
  investment income)
                            ----------------------------------------------
  Distributions (from        (1.39)   (1.20)    (1.35)   (1.68)   (0.48)
  capital gains)
                            ----------------------------------------------
  Returns of capital            --       --        --       --       --
                            ----------------------------------------------
  Total distributions        (1.59)   (1.45)    (1.52)   (1.88)   (0.65)
                            ----------------------------------------------
  Net asset value,          $23.40   $18.97    $17.62   $19.14   $22.66
  end of period
                            ----------------------------------------------
  Total return               27.92%  (12.47)%    1.19%   19.77%   21.94%
  Ratios/Supplemental Data
  Net assets, end of        $2,088   $1,632    $1,262   $1.361   $2,012
  period (in millions)
                            ----------------------------------------------
  Ratio of expenses to        0.87%    0.87%     0.92%    0.90%    0.89%
  average net assets
                            ----------------------------------------------
  Ratio of net income to      1.01%    1.02%     0.84%    1.06%    0.88%
  average net assets
                            ----------------------------------------------
  Portfolio turnover rate     14.6%    17.3%      7.3%    14.4%    16.8%
 ------------------------------------------------------------------------------
</TABLE>



<PAGE>

 INVESTING WITH T. ROWE PRICE
 ACCOUNT REQUIREMENTS AND TRANSACTION INFORMATION
 ----------------------------------------------------------
Tax Identification
Number

We must have your correct Social Security or tax identification number on a
signed New Account Form or W-9 Form. Otherwise, federal law requires the funds
to withhold a percentage (currently 30%) of your dividends, capital gain
distributions, and redemptions, and may subject you to an IRS fine. If this
information is not received within 60 days after your account is established,
your account may be redeemed at the fund's NAV on the redemption date.

Transaction Confirmations
We send immediate confirmations for most of your fund transactions, but some,
such as systematic purchases and dividend reinvestments, are reported on your
account statement. Please review confirmations and statements as soon as you
receive them and promptly report any discrepancies to Shareholder Services.


Employer-Sponsored Retirement Plans and Institutional Accounts
T. Rowe Price
Trust Company
1-800-492-7670
Transaction procedures in the following sections may not apply to
employer-sponsored retirement plans and institutional accounts. For procedures
regarding employer-sponsored retirement plans, please call T. Rowe Price Trust
Company or consult your plan administrator. For institutional account
procedures, please call your designated account manager or service
representative.

We do not accept third-party checks, except for IRA Rollover checks that are
properly endorsed. In addition, T. Rowe Price does not accept purchases made by
credit card check.
<PAGE>

 OPENING A NEW ACCOUNT
 ----------------------------------------------------------
$2,500 minimum initial investment; $1,000 for retirement plans or gifts or
transfers to minors (UGMA/UTMA) accounts ($25,000 minimum initial investment for
Summit Funds only)

Account Registration
If you own other T. Rowe Price funds, be sure to register any new account just
like your existing accounts so you can exchange among them easily. (The name and
account type would have to be identical.)


For joint accounts or other types of accounts owned or controlled by more than
one party, either owner/party has complete authority to act on behalf of all and
give instructions concerning the account without notice to the other party. T.
Rowe Price may, in its sole discretion, require written authorization from all
owners/parties to act on the account for certain transactions (for example, to
transfer ownership).


By Mail

Please make your check payable to T. Rowe Price Funds (otherwise it will be
returned) and send your check, together with the New Account Form, to the
appropriate address below:


via U.S. Postal Service
T. Rowe Price Account Services
P.O. Box 17300
Baltimore, MD 21297-1300

via private carriers/overnight services
T. Rowe Price Account Services
Mailcode 17300
4515 Painters Mill Road
Owings Mills, MD 21117-4903

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

Receiving Bank:  PNC Bank, N.A. (Pittsburgh)
Receiving Bank ABA#:  043000096
Beneficiary:  T. Rowe Price [fund name]
Beneficiary Account:  1004397951
Originator to Beneficiary Information (OBI):
name of owner(s) and account number
<PAGE>


Complete a New Account Form and mail it to one of the appropriate T. Rowe Price
addresses listed under "By Mail."

Note: Investment will be made, but no services will be established and IRS
penalty withholding may occur until we receive a signed New Account Form.


By Exchange
Call Shareholder Services or use Tele*Access or your personal computer (see
Automated Services under Information About Your Services). The new account will
have the same registration as the account from which you are exchanging.
Services for the new account may be carried over by telephone request if they
are preauthorized on the existing account. For limitations on exchanging, see
the explanation of Excessive Trading under Transaction Procedures and Special
Requirements.

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



 PURCHASING ADDITIONAL SHARES
 ----------------------------------------------------------

$100 minimum additional purchase ($1,000 for Summit Funds). For retirement
plans, Automatic Asset Builder, and gifts or transfers to minors (UGMA/UTMA)
accounts $50, except $100 for Summit Funds.


By ACH Transfer
Use Tele*Access or your personal computer or call Shareholder Services if you
have established electronic transfers using the ACH system.

By Wire

Call Shareholder Services or use the wire instructions listed in Opening a New
Account.


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

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

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

via U.S. Postal Service
T. Rowe Price Account Services
P.O. Box 17300
Baltimore, MD 21297-1300

/(For //mail via private carriers and overnight services//, see previous /
/section.)/

By Automatic
Asset Builder
Fill out the Automatic Asset Builder section on the New Account or Shareholder
Services Form.



 EXCHANGING AND REDEEMING SHARES
 ----------------------------------------------------------
Exchange Service
You can move money from one account to an existing identically registered
account or open a new identically registered account. Remember, exchanges are
purchases and sales for tax purposes. (Exchanges into a state tax-free fund are
limited to investors living in states where the fund is registered.)

Redemptions
Redemption proceeds can be mailed to your account address, sent by ACH transfer
to your bank, or wired to your bank (provided your bank information is already
on file). For charges, see Electronic Transfers-By Wire under Information About
Your Services. Please note that large redemption requests initiated through
automated services may be routed to a service representative.

If you request to redeem a specific dollar amount, and the market value of your
account is less than the amount of your request, we will redeem all shares from
your account.

Some of the T. Rowe Price funds may impose a redemption fee of 0.5% to 2% on
shares held for less than six months, one year, or two years, as specified in
the prospectus. The fee is paid to the fund.

For redemptions by check or electronic transfer, please see Information About
Your Services.

By Phone
Call Shareholder Services
If you find our phones busy during unusually volatile markets, please consider
placing your order by your personal computer or Tele*Access (if you have
previously authorized these services), mailgram, or
<PAGE>

express mail. For exchange policies, please see Transaction Procedures and
Special Requirements - Excessive Trading.

By Mail
For each account involved, provide the account name, number, fund name, and
exchange or redemption amount. For exchanges, be sure to specify any fund you
are exchanging out of and the fund or funds you are exchanging into. T. Rowe
Price requires the signatures of all owners exactly as registered, and possibly
a signature guarantee (see Transaction Procedures and Special Requirements -
Signature Guarantees). Please use the appropriate address below:

For nonretirement and IRA accounts:
via U.S. Postal Service
T. Rowe Price Account Services
P.O. Box 17302
Baltimore, MD 21297-1302

via private carriers/overnight services
T. Rowe Price Account Services
Mailcode 17302
4515 Painters Mill Road
Owings Mills, MD 21117-4903

For employer-sponsored retirement accounts:
via U.S. Postal Service
T. Rowe Price Trust Company
P.O. Box 17479
Baltimore, MD 21297-1479

via private carriers/overnight services
T. Rowe Price Trust Company
Mailcode 17479
4515 Painters Mill Road
Owings Mills, MD 21117-4903

Requests for redemptions from employer-sponsored retirement accounts must be in
writing; please call T. Rowe Price Trust Company or your plan administrator for
instructions. IRA distributions may be requested in writing or by telephone;
please call Shareholder Services to obtain an IRA Distribution Form or an IRA
Shareholder Services Form to authorize the telephone redemption service.
<PAGE>

 RIGHTS RESERVED BY THE FUNDS
 ----------------------------------------------------------

T. Rowe Price funds and their agents reserve the following rights: (1) to waive
or lower investment minimums; (2) to accept initial purchases by telephone or
mailgram; (3) to refuse any purchase or exchange order; (4) 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) upon notice
to the shareholder within five business days of the trade or if the written
confirmation has not been received by the shareholder, whichever is sooner; (5)
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; (6) to otherwise modify
the conditions of purchase and any services at any time; (7) to waive any
redemption, small account, maintenance or other fees charged to a group of
shareholders; (8) to act on instructions reasonably believed to be genuine; and
(9) to involuntarily redeem your account in cases of threatening conduct or
suspected fraudulent or illegal activity. 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 T. Rowe Price funds from the possible adverse effects of
a substantial redemption in a large account, as a matter of general policy, no
shareholder or group of shareholders controlled by the same person or group of
persons will knowingly be permitted to purchase in excess of 5% of the
outstanding shares of a fund, except upon approval of the fund's management.



 INFORMATION ABOUT YOUR SERVICES
 ----------------------------------------------------------
Shareholder Services
1-800-225-5132
Investor Services
1-800-638-5660
Many services are available to you as a shareholder; some you receive
automatically, and others you must authorize or request on the New Account Form.
By signing up for services on the New Account Form rather than later on, you
avoid having to complete a separate form and obtain a signature guarantee. This
section discusses some of the
<PAGE>

services currently offered. Our Services Guide, which we mail to all new
shareholders, contains detailed descriptions of these and other services.

Note: Corporate and other institutional accounts require an original or
certified resolution to establish services and to redeem by mail. Certain other
fiduciary accounts (such as trusts or power of attorney arrangements) require
documentation, which may include an original or certified copy of the trust or
power of attorney to establish services and to redeem by mail. For more
information, call Investor Services.

Retirement Plans
We offer a wide range of plans for individuals, institutions, and large and
small businesses: Traditional IRAs, Roth IRAs, SIMPLE IRAs, SEP-IRAs, Keoghs
(profit sharing, money purchase pension), 401(k)s, and 403(b)(7)s. For
information on IRAs or our no-load variable annuity, call Investor Services. For
information on all other retirement plans, please call our Trust Company at
1-800-492-7670.


Investing for College Expenses
We can help you save for future college expenses on a tax-advantaged basis.

Education Savings Accounts (ESAs) (formerly known as Education IRAs)
Invest up to $2,000 a year depending on your annual income; account earnings are
tax-free when used for qualified expenses.

529 Plans
The T. Rowe Price College Savings Plan (for any U.S. resident), the Maryland
College Investment Plan (for any U.S. resident), and the University of Alaska
College Savings Plan (for Alaska residents) allow you to contribute on a
tax-deferred basis toward a student's higher education. For more information on
tax-related features and the plans' investment approaches, risks, and expenses,
call toll-free 1-866-521-1894.


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

24-hour service via a toll-free number enables you to (1) access information on
fund performance, prices, distributions, account balances, and your latest
transaction; (2) request checks, prospectuses, services forms, dupli-

<PAGE>


cate statements, and tax forms; and (3) buy, sell, and exchange shares in your
accounts (see Electronic Transfers in this section).


Web Address
www.troweprice.com
Online Account Access
You can sign up online to conduct account transactions through our Web site on
the Internet. If you subscribe to America Online/(R)/, you can access our Web
site via keyword "T. Rowe Price" and conduct transactions in your account.

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


By Telephone and
In Person

Buy, sell, or exchange shares by calling one of our service representatives or
by visiting one of our investor center locations whose addresses are listed on
the back cover.

Electronic Transfers
By ACH

With no charges to pay, you can move as little as $100 or as much as $100,000
between your bank account and fund account using the ACH system. Enter
instructions via Tele*Access or your personal computer, or call Shareholder
Services.


By Wire

Electronic transfers can be conducted via bank wire. There is a $5 fee for wire
redemptions under $5,000, and your bank may charge for incoming or outgoing wire
transfers regardless of size.


Checkwriting

(Not available for equity funds or the High Yield, Emerging Markets Bond, or
U.S. Bond Index Funds) You may write an unlimited number of free checks on any
money market fund and most bond funds, with a minimum of $500 per check. Keep in
mind, however, that a check results in a redemption; a check written on a bond
fund will create a taxable event which you and we must report to the IRS.


Automatic Investing

Automatic Asset Builder

You can instruct us to move $50 ($100 for Summit Funds) or more from your bank
account, or you can instruct your employer to send all or a portion of your
paycheck to the fund or funds you designate.
<PAGE>

Automatic Exchange
You can set up systematic investments from one fund account into another, such
as from a money fund into a stock fund.



 T. ROWE PRICE BROKERAGE
 ----------------------------------------------------------
To Open an Account
1-800-638-5660
For Existing
Brokerage Customers
1-800-225-7720

Investments available through our brokerage service include  stocks, options,
bonds, and others  at commission savings over full-service brokers.* We also
provide a wide range of services, including:


Automated Telephone and Computer Services
You can enter stock and option orders, access quotes, and review account
information around the clock by phone with Tele-Trader or via the Internet with
Account Access-Brokerage. Any trades entered through Tele-Trader save you an
additional 10% on commissions. For stock trades entered through Account
Access-Brokerage, you will pay a commission of $19.95 for up to 1,000 shares
plus $.02 for each share over 1,000. Option trades entered through Account
Access-Brokerage save you 10% over our standard commission schedule. All trades
are subject to a $35 minimum commission except stock trades placed through
Account Access-Brokerage.

Investor Information
A variety of informative reports, such as our Brokerage Insights series and S&P
Market Month newsletter, as well as access to online research tools can help you
better evaluate economic trends and investment opportunities.

Dividend Reinvestment Service

If you elect to participate in this service, the cash dividends from the
eligible securities held in your account will automatically be reinvested in
additional shares of the same securities free of charge. Most securities listed
on national securities exchanges or Nasdaq are eligible for this service.


/*Services //v//ary //b//y //f//irm./

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

 INVESTMENT INFORMATION
 ----------------------------------------------------------

To help you monitor your investments and make decisions that accurately reflect
your financial goals, T. Rowe Price offers a wide variety of information in
addition to account statements. Most of this information is also available on
our Web site at www.troweprice.com.

A note on mailing procedures: If two or more members of a household own the same
fund, we economize on fund expenses by sending only one fund report and
prospectus. If you need additional copies or do not want your mailings to be
"householded," please call Shareholder Services at 1-800-225-5132 or write to us
at P.O. Box 17630, Baltimore, Maryland 21297-1630.


Shareholder Reports

Fund managers' annual and semiannual reviews of their strategies and
performance.


The T. Rowe Price Report
A quarterly investment newsletter discussing markets and financial strategies
and including the Performance Update, a review of all T. Rowe Price fund
results.

Insights
Educational reports on investment strategies and financial markets.

Investment Guides

Asset Mix Worksheet, College Planning Kit, Diversifying Overseas: A T. Rowe
Price Guide to International Investing, Managing Your Retirement Distribution,
Personal Strategy Planner, Retirement Readiness Guide, Retirement Planning Kit,
and Tax Considerations for Investors.

<PAGE>


 T. ROWE PRICE PRIVACY POLICY
 ----------------------------------------------------------
 In the course of doing business with T. Rowe Price, you share personal and
 financial information with us. We treat this information as confidential and
 recognize the importance of protecting access to it.

 You may provide information when communicating or transacting with us in
 writing, electronically, or by phone. For instance, information may come from
 applications, requests for forms or literature, and your transactions and
 account positions with us. On occasion, such information may come from consumer
 reporting agencies and those providing services to us.

 We do not sell information about current or former customers to any third
 parties, and we do not disclose it to third parties unless necessary to process
 a transaction, service an account, or as otherwise permitted by law. We may
 share information within the T. Rowe Price family of companies in the course of
 providing or offering products and services to best meet your investing needs.
 We may also share that information with companies that perform administrative
 or marketing services for T. Rowe Price, with a research firm we have hired, or
 with a business partner, such as a bank or insurance company with whom we are
 developing or offering investment products. When we enter into such a
 relationship, our contracts restrict the companies' use of our customer
 information, prohibiting them from sharing or using it for any purposes other
 than those for which they were hired.

 We maintain physical, electronic, and procedural safeguards to protect your
 personal information. Within T. Rowe Price, access to such information is
 limited to those who need it to perform their jobs, such as servicing your
 accounts, resolving problems, or informing you of new products or services.
 Finally, our Code of Ethics, which applies to all employees, restricts the use
 of customer information and requires that it be held in strict confidence.

 This Privacy Policy applies to the following T. Rowe Price family of companies:
 T. Rowe Price Associates, Inc.; T. Rowe Price Advisory Services, Inc.; T. Rowe
 Price Investment Services, Inc.; T. Rowe Price Savings Bank; T. Rowe Price
 Trust Company; and the T. Rowe Price Funds.

<PAGE>

To help you achieve your financial goals, T. Rowe Price offers a wide range of
stock, bond, and money market investments, as well as convenient services and
informative reports.
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 free
copies of any of these documents, or for shareholder inquiries, call
1-800-638-5660.

Fund information and Statements of Additional Information are also available
from the Public Reference Room of the Securities and Exchange Commission. Infor-
mation 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 publicinfo@sec.gov, or by writing the Public Reference
Room, Washington D.C. 20549-0102.
 For mutual fund or T. Rowe Price Brokerage information
 Investor Services
 1-800-638-5660

For existing accounts
 Shareholder Services
 1-800-225-5132

For the hearing impaired
 1-800-367-0763

For performance, prices,
account information, or
to conduct transactions
 Tele*Access/(R)/
 24 hours, 7 days
 1-800-638-2587

Internet address
 www.troweprice.com

Plan Account Line
 For retirement plan
 investors: The
 appropriate 800
 number appears on your retirement account statement.
Investor Centers
 For directions, call
 1-800-225-5132 or
 visit our Web site

Baltimore Area
Downtown
 105 East Lombard Street

Owings Mills
 Three Financial Center
 4515 Painters Mill Road

Boston Area
 386 Washington Street
 Wellesley

Chicago Area
 1900 Spring Road
 Suite 104
 Oak Brook

Colorado Springs
 2260 Briargate Parkway

Los Angeles Area
 Warner Center
 21800 Oxnard Street
 Suite 270
 Woodland Hills

New Jersey/New York Area
 51 JFK Parkway, 1st Floor
 Short Hills, New Jersey

San Francisco Area
 1990 N. California Blvd.
 Suite 100
 Walnut Creek

Tampa
 4200 West Cypress Street
 10th Floor

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

Tysons Corner
 1600 Tysons Boulevard
 Suite 150
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202

F46-040 5/1/02

1940 Act File No. 811-2215

<PAGE>

PROSPECTUS

May 1, 2002

T. ROWE PRICE

Small-Cap
Value Fund--
Advisor Class

 A stock fund seeking long-term capital growth through investments in small U.S.
 companies whose stocks appear undervalued. This class of
 shares is sold only through financial
 intermediaries.
(R)
 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.
<PAGE>

T. Rowe Price Small-Cap Value Fund, Inc.
  T. Rowe Price Small-Cap Value Fund--Advisor Class
Prospectus

May 1, 2002


<TABLE>
<CAPTION>
<S>      <C>  <C>                                       <C>
              ABOUT THE FUND
1
              Objective, Strategy, Risks, and Expenses    1

              -----------------------------------------------
              Other Information About the Fund            5

              -----------------------------------------------


              T. ROWE PRICE ACCOUNT
2             INFORMATION
              Pricing Shares and Receiving                8
              Sale Proceeds
              -----------------------------------------------
              Useful Information on
              Distributions                               9
              and Taxes
              -----------------------------------------------
              Transaction Procedures and                 11
              Special Requirements
              -----------------------------------------------


              MORE ABOUT THE FUND
3
              Organization and Management                13

              -----------------------------------------------
              Understanding Performance Information      15

              -----------------------------------------------
              Investment Policies and Practices          16

              -----------------------------------------------
              Financial Highlights                       21

              -----------------------------------------------


              INVESTING WITH T. ROWE PRICE
4
              Account Requirements                       23
              and Transaction Information
              -----------------------------------------------
              Purchasing Additional Shares               24

              -----------------------------------------------
              Rights Reserved by the Fund                24
              s
              -----------------------------------------------
              T. Rowe Price Privacy Policy               26

              -----------------------------------------------
</TABLE>



 Founded in 1937 by the late Thomas Rowe Price, Jr., T. Rowe Price Associates,
Inc., and its affiliates managed $156.3 billion for more than eight million
individual and institutional investor accounts as of December 31, 2001.
 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.
<PAGE>

 ABOUT THE FUND
 OBJECTIVE, STRATEGY, RISKS, AND EXPENSES
 ----------------------------------------------------------

   A word about the fund's name and structure. Small-Cap Value Fund - Advisor
   Class is a share class of T. Rowe Price Small-Cap Value Fund. The Advisor
   Class is not a separate mutual fund. It is sold only through brokers,
   dealers, banks, insurance companies, and other financial intermediaries that
   provide various distribution and administrative services.



 What is the fund's objective?

   The fund seeks long-term capital growth by investing primarily in small
   companies whose common stocks are believed to be undervalued.


 What is the fund's principal investment strategy?


   Reflecting a value approach to investing, the fund will seek the stocks of
   companies whose current stock prices do not appear to adequately reflect
   their underlying value as measured by assets, earnings, cash flow, or
   business franchises. Normally, the fund will invest at least 80% of its net
   assets in companies with a market capitalization that is within or below the
   range of companies in the Russell 2000 Index. The market capitalization of
   the companies in the fund's portfolio and the Russell 2000 Index changes over
   time and the fund will not sell a stock just because the company has grown to
   a market capitalization outside the range. The fund may, on occasion,
   purchase companies with a market capitalization above the range. Our in-house
   research team seeks to identify companies that appear to be undervalued by
   various measures, and may be temporarily out of favor, but have good
   prospects for capital appreciation. In selecting investments, we generally
   look for some of the following:

  . low price/earnings, price/book value, or price/cash flow ratios relative to
   the S&P 500, the company's peers, or its own historic norm;


  . low stock price relative to a company's underlying asset values;

  . above-average dividend yield relative to a company's peers or its own
   historic norm;

  . a plan to improve the business through restructuring; and


  . a sound balance sheet and other positive financial characteristics.

   In pursuing its investment objective, the fund's management has the
   discretion to purchase some securities that do not meet its normal investment
   criteria, as described above, when it perceives an unusual opportunity for
   gain. These special situations might arise when the fund's management
   believes a security could increase in value for a variety of reasons,
   including a change in management, an

<PAGE>


   extraordinary corporate event, or a temporary imbalance in the supply of or
   demand for the securities.


   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?


   Investing in small companies involves greater risk than is customarily
   associated with larger companies. Stocks of small companies are subject to
   more abrupt or erratic price movements than larger-company stocks. Small
   companies often have limited product lines, markets, or financial resources,
   and their managements may lack depth and experience. Such companies seldom
   pay significant dividends that could cushion returns in a falling market.


   The value approach carries the risk that the market will not recognize a
   security's intrinsic value for a long time, or that a stock judged to be
   undervalued may actually be appropriately priced.

   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 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.

   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.
<PAGE>

 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 are investing through an intermediary and
   seek an aggressive, long-term approach to capital growth through
   small-company 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.

   The fund can be used in both regular and tax-deferred accounts, such as IRAs.


   . 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 how fund performance compares with that of a
   comparable market index. Fund past returns (before and after taxes) are not
   necessarily an indication of future performance.

   The fund can also experience short-term performance swings, as shown by the
   best and worst calendar quarter returns during the year depicted.

   In addition, the average annual total return table shows hypothetical
   after-tax returns to suggest how taxes paid by the shareholder may influence
   returns. Actual after-tax returns depend on each investor's situation and may
   differ from those shown. After-tax returns are not relevant if the shares are
   held in a tax-deferred account, such as a 401(k) or IRA. During periods of
   fund losses, the post-liquidation after-tax return may exceed the fund's
   other returns because the loss generates a tax benefit that is factored into
   the result.

<PAGE>


<TABLE>
<CAPTION>
            Calendar Year Total Returns
                        "01"
 -------------------------------------------------
 <S><C>

 21.84
 -------------------------------------------------
</TABLE>


                    Quarter ended   Total return
 Best quarter         6/30/01   16.40%
 Worst quarter        9/30/01   -10.76%



<TABLE>
 Table 1  Average Annual Total Returns
<CAPTION>
                                                 Periods ended
                                               December 31, 2001
                                                       Since inception
                                          1 year          (3/31/00)
 ------------------------------------------------------------------------------
 <S>                                   <C>            <C>                 <S>
  Small-Cap Value Fund-Advisor Class
  Returns before taxes                    21.84%            21.66%
  Returns after taxes on
  distributions                           20.92             19.68
  Returns after taxes on
  distributions and sale of fund
  shares                                  13.72             17.03
  Russell 2000 Index                       2.49             -4.16
  Lipper Small-Cap Core Fund Index         7.13              2.18
 ------------------------------------------------------------------------------
</TABLE>




 Returns are based on changes in principal value, reinvested dividends, and
 capital gain distributions, if any. Returns before taxes do not reflect effects
 of any income or capital gains taxes. All after-tax returns are calculated
 using the historical highest individual federal marginal income tax and capital
 gains rates. They do not reflect the impact of state and local taxes. Returns
 after taxes on distributions reflect the taxed return on the payment of
 dividends and capital gains. Returns after taxes on distributions and sale of
 fund shares assume the shares were sold at period end, and, therefore, are also
 adjusted for any capital gains or losses incurred by the shareholder. Market
 indexes do not include expenses, which are deducted from fund returns, or
 taxes.

<PAGE>

 What fees or expenses will I pay?


<TABLE>
 Table 2  Fees and Expenses of the Advisor Class*
<CAPTION>
                                                         Annual fund operating expenses
                                                  (expenses that are deducted from fund assets)
 -----------------------------------------------------------------------------------------------
 <S>                                             <C>
  Management fee                                                     0.67%
  Distribution and service (12b-1) fees                              0.25%
  Other expenses                                                     0.13%
  Total annual fund operating expenses                               1.05%/a/
 -----------------------------------------------------------------------------------------------
</TABLE>




 *Redemption proceeds of less than $5,000 sent by wire are subject to a $5 fee
   paid to the fund.

 /a/Effective January 1, 2002, T. Rowe Price contractually obligated itself to
   bear any expenses (other than management fees and certain other portfolio
   level expenses) through December 31, 2003, that would cause the class's ratio
   of expenses to average net assets to exceed 1.15%. Expenses paid or assumed
   under this agreement are subject to reimbursement to T. Rowe Price by the
   fund whenever the class's expense ratio is below 1.15%; however, no
   reimbursement will be made after December 31, 2005, or if it would result in
   the expense ratio exceeding 1.15%. Any amounts reimbursed will have the
   effect of increasing fees otherwise paid by the class.


   Example.  The following table gives you an idea of how expense ratios may
   translate into dollars and helps you to compare the cost of investing in this
   class with that of other mutual funds. Although your actual costs may be
   higher or lower, the table shows how much you would pay if operating expenses
   remain the same, the expense limitation currently in place is not renewed,
   you invest $10,000, earn a 5% annual return, and hold the investment for the
   following periods and then redeem:



<TABLE>
<CAPTION>
      1 year      3 years      5 years       10 years
    ----------------------------------------------------
    <S>         <C>          <C>          <C>
       $107        $334         $579          $1,283
    ----------------------------------------------------
</TABLE>





 OTHER INFORMATION ABOUT THE FUND
 ----------------------------------------------------------

 What are some of the fund's potential rewards?


   Small companies may offer greater opportunity for capital appreciation than
   larger, more established companies.

   In addition, stock whose prices are below the company's intrinsic value may
   offer the potential for substantial capital appreciation.



 What is meant by a "value" investment approach?

   Value investors seek 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>

   Finding undervalued stocks requires considerable research to identify the
   particular company, analyze its 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.

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

  . 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.

  . Price/book value ratio 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.

  . 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.


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

  . Price/cash flow Dividing a stock's price by the company's cash flow per
   share, rather than by 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.

  . 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.

  . Restructuring opportunities The market can react favorably to the
   announcement of 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.


 What are the advantages of a value approach to small-cap investing?

   Small-capitalization stocks are less actively followed by stock analysts than
   are larger-capitalization stocks, and less information is available to
   evaluate small-cap stock prices. As a result, compared with
   larger-capitalization stocks, there may be greater variations between the
   current stock price and the estimated underlying value, which could represent
   greater opportunity for appreciation.
<PAGE>

 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.
<PAGE>

 T. ROWE PRICE ACCOUNT INFORMATION
 PRICING SHARES AND RECEIVING SALE PROCEEDS
 ----------------------------------------------------------
   Here are some procedures you should know when investing in shares of the T.
   Rowe Price Advisor Class.


 How and when shares are priced


   The share price (also called "net asset value" or NAV per share) for each
   class of shares 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 each class's proportionate share of the
   balance, called net assets, is divided by the number of shares outstanding of
   that class. Market values are used to price stocks and bonds.

   The securities of funds investing in foreign markets are usually valued on
   the basis of the most recent closing market prices at 4 p.m. ET. Most foreign
   markets close before that time. For securities primarily traded in the Far
   East, for example, the most recent closing prices may be as much as 15 hours
   old at 4 p.m. Normally, developments that could affect the values of
   portfolio securities that occur between the close of the foreign market and 4
   p.m. ET will not be reflected in a fund NAV. However, if a fund determines
   that such developments are so significant that they will, in its judgment,
   clearly and materially affect the value of the fund's securities, the fund
   may adjust the previous closing prices to reflect what it believes to be the
   fair value of the securities as of 4 p.m. ET. A fund may fair value
   securities in other situations, for example, when a particular foreign market
   is closed but the fund is open.



 How your purchase, sale, or exchange price is determined


   Advisor Class shares are intended for purchase and may be held only through
   various third-party intermediaries including brokers, dealers, banks,
   insurance companies, retirement plan recordkeepers and others. Consult your
   intermediary to find out about how to purchase, sell, or exchange your
   shares, cut-off times, and other applicable procedures for these
   transactions. The intermediary may charge a fee for its services.

   The fund may have an agreement with your intermediary that permits the
   intermediary to accept orders on behalf of the fund until 4 p.m. ET. In such
   cases, if your order is received by the intermediary in good form by 4 p.m.
   ET and transmitted to the fund and paid for in accordance with the agreement,
   it will be priced at the next NAV computed after the intermediary received
   your order.

<PAGE>

   Note: The time at which transactions and shares are priced and the time until
   which orders are accepted by the fund or an intermediary 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 proceeds are received
   Normally, the fund transmits proceeds to intermediaries for redemption orders
   received in good form on either the next or third business day after receipt,
   depending on the arrangement with the intermediary. Under certain
   circumstances and when deemed to be in the fund's best interests, proceeds
   may not be sent for up to seven calendar days after receipt of the redemption
   order. You must contact your intermediary about procedures for receiving your
   redemption proceeds.



 USEFUL INFORMATION ON DISTRIBUTIONS AND TAXES
 ----------------------------------------------------------

   . All net investment income and realized capital gains are distributed to
     shareholders.


 Dividends and Other Distributions


   Dividend and capital gain distributions are reinvested in additional fund
   shares in your account unless you select another option on your New Account
   Form. Reinvesting distributions results in compounding, that is, receiving
   income dividends and capital gain distributions on a rising number of shares.


   No interest will accrue on amounts represented by uncashed distribution or
   redemption checks.

   Income dividends

  . The funds declare and pay dividends (if any) quarterly for the Equity Income
   Fund-Advisor Class; declare daily and pay monthly for the High Yield
   Fund-Advisor Class and International Bond Fund-Advisor Class; and declare and
   pay annually for all other Advisor Classes.
  . A portion of fund dividends (other than High Yield Fund-Advisor Class and
   International Stock Fund-Advisor Class) may be eligible for the 70% deduction
   for dividends received by corporations to the extent the funds' income
   consists of dividends paid by U.S. corporations.
  . The dividends of High Yield Fund-Advisor Class and International Stock
   Fund-Advisor Class will not be eligible for the 70% deduction for dividends
   received by corporations, if, as expected, none of the funds' income consists
   of dividends paid by U.S. corporations.

<PAGE>

   Capital gains payments
  . A capital gain or loss is the difference between the purchase and sale price
   of a security.
  . If a fund has net capital gains for the year (after subtracting any capital
   losses), they are usually declared and paid in December to shareholders of
   record on a specified date that month. If a second distribution is necessary,
   it is paid the following year.


 Tax Information

   You should contact your intermediary for the tax information that will be
   sent to you and reported to the IRS.

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

  . You sell fund shares, including an exchange from one fund to another.
  . The fund makes a distribution to your account.

   Taxes on fund redemptions
   When you sell shares in any fund, you may realize a gain or loss. An exchange
   from one fund to another is still a sale for tax purposes.

   Taxes on fund distributions

   The tax treatment of a capital gain distribution is determined by how long
   the fund held the portfolio securities, not how long you held shares in the
   fund. Short-term (one year or less) capital gain distributions are taxable at
   the same rate as ordinary income and long-term gains on securities held more
   than 12 months are taxed at a maximum rate of 20%. If you realized a loss on
   the sale or exchange of fund shares that you held six months or less, your
   short-term loss must be reclassified to a long-term loss to the extent of any
   long-term capital gain distribution received during the period you held the
   shares. Gains and losses from the sale of foreign currencies and the foreign
   currency gain or loss resulting from the sale of a foreign debt security can
   increase or decrease an ordinary income dividend. Net foreign currency losses
   may cause monthly or quarterly dividends to be reclassified as a return of
   capital.


   If the fund qualifies and elects to pass through nonrefundable foreign taxes
   paid to foreign governments during the year, your portion of such taxes will
   be reported to you as taxable income. However, you may be able to claim an
   offsetting credit or deduction on your tax return for those amounts. There
   can be no assurance that a fund will be able to meet the requirements to pass
   through foreign income taxes paid.

   Tax consequences of hedging

   For funds investing in foreign securities, distributions resulting from the
   sale of certain foreign currencies, currency contracts, and debt securities
   are taxed as ordinary income. Net foreign currency losses may cause monthly
   or quarterly

<PAGE>


   dividends to be reclassified as a return of capital. Entering into certain
   options, futures, swaps, and forward foreign exchange contracts and
   transactions may result in the application of the mark-to-market and straddle
   provisions of the Internal Revenue Code. These provisions could result in a
   fund being required to distribute gains on such transactions even though it
   did not close the contracts during the year or receive cash to pay such
   distributions. A fund may not be able to reduce its distributions for losses
   on such transactions to the extent of unrealized gains in offsetting
   positions.



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

   Tax effect of buying shares before a capital gain or dividend distribution
   If you buy shares shortly before or on the "record date" -  the date that
   establishes you as the person to receive the upcoming distribution - you will
   receive a portion of the money you just invested in the form of a taxable
   distribution. Therefore, you may wish to find out a fund's record date before
   investing. Of course, a fund's share price may, at any time, reflect
   undistributed capital gains or income and unrealized appreciation, which may
   result in future taxable distributions. Such distributions can occur even in
   a year when the fund has a negative return.


   . The preceding tax information summary does not apply to retirement
     accounts, such as IRAs, which are not subject to current tax.



 TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
 ----------------------------------------------------------
 Purchase Conditions for Intermediaries

   Nonpayment

   If the fund receives a check or ACH transfer that does not clear or the
   payment is not received in a timely manner, your purchase may be canceled.
   Any losses or expenses incurred by the fund or transfer agent will be the
   responsibility of the intermediary. The fund and its agents have the right to
   reject or cancel any purchase, exchange, or redemption due to nonpayment.

   U.S. dollars

   All purchases must be paid for in U.S. dollars; checks must be drawn on U.S.
   banks.


 Sale (Redemption) Conditions

   Holds on immediate redemptions: 10-day hold
   If an intermediary sells shares that it just purchased and paid for by check
   or ACH transfer, the fund will process the redemption but will generally
   delay send-
<PAGE>

   ing the proceeds for up to 10 calendar days to allow the check or transfer to
   clear. (The 10-day hold does not apply to purchases paid for by bank wire.)

   Redemptions over $250,000

   Large redemptions can adversely affect a portfolio manager's ability to
   implement a fund's investment strategy by causing the premature sale of
   securities that would otherwise be held. If, in any 90-day period, you redeem
   (sell) more than $250,000, or your sale amounts to more than 1% of fund net
   assets, the fund has the right to pay the difference between the redemption
   amount and the lesser of the two previously mentioned figures with securities
   from the fund.



 Excessive Trading


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


   Frequent trades or market timing in your account or accounts controlled by
   you can disrupt management of the fund and raise its expenses. To deter such
   activity, each fund has adopted an excessive trading policy. If you violate
   this policy, you may be barred indefinitely and without further notice from
   further purchases of the T. Rowe Price funds.

   You can make one purchase and one sale or one sale and one purchase involving
   the same fund within any 120-day period. If you exceed this limit or if you
   hold fund shares for less than 60 calendar days, you are in violation of our
   excessive trading policy. Systematic purchases and redemptions are exempt
   from this policy. Transactions accepted by intermediaries in violation of
   this excessive trading policy or from persons believed to be market timers
   are subject to rejection or cancellation by the funds.



 Signature Guarantees


   An intermediary may need to obtain a signature guarantee in certain
   situations and should consult its T. Rowe Price Financial Institution
   Services representative.

   You can obtain a signature guarantee from most banks, savings institutions,
   broker-dealers, and other guarantors acceptable to T. Rowe Price. We cannot
   accept guarantees from notaries public or organizations that do not provide
   reimbursement in the case of fraud.

<PAGE>

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

 How is the fund organized?

   The fund was incorporated in Maryland in 1988 and is a "diversified, open-end
   investment company," or mutual fund. Mutual funds pool money received from
   shareholders of each class into a single portfolio and try to achieve
   specified objectives. In 2000, the fund issued a separate class of shares
   known as the Advisor Class.


   . Shareholders benefit from T. Rowe Price's 65 years of investment management
     experience.



 What is meant by "shares"?

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

   Each share and fractional share entitles the shareholder to:

  . Receive a proportional interest in income and capital gain distributions of
   the class.


   The income dividends for Small-Cap Value Fund-Advisor Class shares will
   generally differ from those of the regular Small-Cap Value Fund shares to the
   extent that the expense ratio of Small-Cap Value Fund-Advisor Class shares
   differs.


  . 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. Small-Cap Value Fund-Advisor Class
   shareholders have

   exclusive voting rights on matters affecting only the Small-Cap Value Fund-

   Advisor Class shares.


 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
<PAGE>

   meeting, the fund will send you proxy materials that explain the issues to be
   decided and include instructions on voting by mail or telephone, or on the
   Internet.


 Who runs the fund?

   General Oversight

   The fund is governed by a Board of Directors that meets regularly to review
   the fund's investments, performance, expenses, and other business affairs.
   The Board elects the fund's officers. The 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:
   Preston G. Athey, Chairman, Hugh M. Evans III, Gregory A. McCrickard, Joseph
   Milano, Charles G. Pepin, and David J. Wallack. 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.
   Athey has been chairman of the fund's committee since 1991. He joined T. Rowe
   Price in 1978 and has been managing investments since 1982.


   The Management Fee
   This fee has two parts - an "individual fund fee," which reflects a fund's
   particular characteristics, and a "group fee." The group fee, which is
   designed to reflect the benefits of the shared resources of the T. Rowe Price
   investment management complex, is calculated daily based on the combined net
   assets of all T. Rowe Price funds (except the Spectrum Funds, and any
   institutional, index, or private label mutual funds). The group fee schedule
   (shown below) is graduated, declining as the asset total rises, so
   shareholders benefit from the overall growth in mutual fund assets.


<TABLE>
   Group Fee Schedule
<CAPTION>
    <S>               <C>
    0.334%*           First $50 billion

    0.305%            Next $30 billion

    0.300%            Next $40 billion

    0.295%            Thereafter
    -------------------------------------
</TABLE>




   * Represents a blended group fee rate containing various break points.

<PAGE>


   The fund's portion of the group fee is determined by the ratio of its daily
   net assets to the daily net assets of all the T. Rowe Price funds described
   previously. Based on combined T. Rowe Price fund assets of over $94 billion

   at December 31, 2001, the group fee was 0.32%. .  The individual fund fee is
   0.35%.



 Distribution, Shareholder Servicing, and Recordkeeping Fees


   Small-Cap Value Fund-Advisor Class has adopted a 12b-1 plan under which it
   pays a fee at the rate of up to 0.25% of its daily net assets per year to
   various intermediaries for distribution and servicing of its shares. These
   payments may be more or less than the costs incurred by the intermediaries.
   Because the fees are paid from the Advisor Class net assets on an ongoing
   basis, they will increase the cost of your investment and, over time, could
   result in your paying more than with other types of sales charges. The
   Advisor Class may also separately compensate intermediaries at a rate of up
   to 0.10% of daily net assets per year for various recordkeeping and transfer
   agent services they perform.




 UNDERSTANDING PERFORMANCE INFORMATION
 ----------------------------------------------------------
   This section should help you understand the terms used to describe fund
   performance.


 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.
<PAGE>

 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.



 INVESTMENT POLICIES AND PRACTICES
 ----------------------------------------------------------
   This section takes a detailed look at some of the types of fund 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 apply 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.

   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 other fund investments.


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


   . Fund managers have considerable leeway in choosing investment strategies
     and selecting securities they believe will help achieve fund objectives.
<PAGE>

 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 its investment program. The following pages describe various
   types of fund 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 outstanding voting securities of the issuer would be held by the fund.


   Fund investments are primarily in common stocks (normally, at least 80% of
   net

   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). Warrants can be highly volatile, have no
   voting rights, and pay no dividends.

   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 and ADSs). Such
<PAGE>

   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  Fund investments in foreign securities are limited to 20%
   of total assets.

   Fixed-Income Securities
   From time to time, we 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, generally rising when interest rates fall and falling when
   interest rates rise.

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


   Operating policy  The fund may purchase any type of noninvestment-grade debt
   security (or junk bond) including those in default. The fund will not
   purchase this type of security if it would have more than 5% of its total
   assets invested in such securities. Fund investments in convertible
   securities are not subject to this limit.


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

   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, paying
   expenses, and in 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 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 fund
   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" or
   sells the option), to buy or sell an asset at a

<PAGE>


   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; to protect the value of portfolio securities; and as a cash
   management tool. Call or put options may be purchased or sold on securities,
   financial indi

   ces, 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 covering call or
   put options may not exceed 25% of fund total assets. No more than 5% of fund
   total assets will be committed to premiums when purchasing call or put
   options.


   Exchange Traded Funds (ETFs)
   These are a type of index fund bought and sold on a securities exchange. An
   ETF trades like common stock and represents a fixed portfolio of securities
   designed to track a particular market index. The fund could purchase an ETF
   to temporarily gain exposure to a portion of the U.S. or a foreign market
   while awaiting purchase of underlying securities. The risks of owning an ETF
   generally reflect the risks of owning the underlying securities they are
   designed to track, although lack of liquidity in an ETF could result in it
   being more volatile and ETFs have management fees which increase their costs.

   Managing Foreign Currency Risk

   Investors in foreign securities may attempt to "hedge" their exposure to
   potentially unfavorable currency changes. The primary means of doing this is
   through the use of "forwards"- contracts to exchange one currency for another
   on some future date at a specified exchange rate. However, futures, swaps,
   and options on these instruments may also be used. In certain circumstances,
   a "proxy currency" may be substituted for the currency in which the
   investment is denominated, a strategy known as "proxy hedging." If the fund
   were to engage in any of these foreign currency transactions, they would be
   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, which could reduce fund total
   return. There are certain markets, including many emerging markets, where it
   is not possible to engage in effective foreign currency hedging.

<PAGE>

   Lending of Portfolio Securities

   Fund securities may be lent to broker-dealers, other institutions, or other
   persons to earn additional income. Risks include the potential insolvency of
   the broker-dealer or other borrower that could result in delays in recovering
   securities and capital losses. Additionally, losses could result from the
   reinvestment of collateral received on loaned securities.


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

   Portfolio Turnover

   Turnover is an indication of frequency of trading. 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, result in
   additional capital gain distributions, and reduce fund total return. The
   fund's portfolio turnover rates


   are shown in the Financial Highlights table.



 FINANCIAL HIGHLIGHTS
 ----------------------------------------------------------
   Table 3, which provides information about the class's financial history, is
   based on a single share outstanding throughout the periods shown. The table
   is part of the class'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 class (assuming reinvestment of all dividends and
   distributions and no payment of account or (if applicable) redemption fees).
   The financial statements in the annual report were audited by the fund's
   independent accountants, PricewaterhouseCoopers LLP.
<PAGE>


<TABLE>
 Table 3  Financial Highlights
<CAPTION>
                                3/31/00/*/
                                  through      Year ended December 31
                                 12/31/00
                              -----------------         2001
 -----------------------------                 -----------------------------
 <S>                          <C>              <C>                     <S>

  Net asset value,
  beginning of period            $18.23               $ 19.14
  Income From Investment Operations
  Net investment income            0.10                  0.10
                              -----------------------------------------
  Net gains or losses on
  securities (both realized        2.69                  4.05
  and unrealized)
                              -----------------------------------------
  Total from investment
  operations                       2.79                  4.15
  Less Distributions
  Dividends (from net             (0.20)                (0.17)
  investment income)
                              -----------------------------------------
  Distributions (from             (1.68)                (0.48)
  capital gains)
                              -----------------------------------------
  Returns of capital                 --                    --
                              -----------------------------------------
  Total distributions             (1.88)                (0.65)
                              -----------------------------------------
  Net asset value,               $19.14               $ 22.64
  end of period
                              -----------------------------------------
  Total return                    15.77%                21.84%
  Ratios/Supplemental Data
  Net assets, end of period      $1,408               $25,296
  (in thousands)
                              -----------------------------------------
  Ratio of expenses to             0.80%/a/              1.05%
  average net assets
                              -----------------------------------------
  Ratio of net income to           1.50%/a/              0.86%
  average net assets
                              -----------------------------------------
  Portfolio turnover rate          14.4%/a/              16.8%
 ---------------------------------------------------------------------------
</TABLE>




 * Inception date.


 /a//     /       Annualized.
<PAGE>

 INVESTING WITH T. ROWE PRICE
 ACCOUNT REQUIREMENTS AND TRANSACTION INFORMATION
 ----------------------------------------------------------
Tax Identification
Number

The intermediary must provide us with its certified Social Security or tax
identification number (TIN). Otherwise, federal law requires the funds to
withhold a percentage (currently 30%) of dividends, capital gain distributions,
and redemptions, and may subject the intermediary or account holder to an IRS
fine. If this information is not received within 60 days after the account is
established, the account may be redeemed at the fund's NAV on the redemption
date.


The information in
this section is for use
by intermediaries only. Shareholders of the
Advisor Class should contact their intermediary for information regarding the
intermediary's policies on purchasing, exchanging, and redeeming fund shares as
well as initial and subsequent investment minimums.
All initial and subsequent investments by intermediaries must be made by bank
wire.

Opening a New Account

$2,500 minimum initial investment; $1,000 for retirement plans or gifts or
transfers to minors (UGMA/UTMA) accounts

Intermediaries should call Financial Institution Services for an account number
and assignment to a dedicated service representative and give the following wire
information to their bank:


Receiving Bank:  PNC Bank, N.A. (Pittsburgh)
Receiving Bank ABA#:  043000096
Beneficiary:  T. Rowe Price [fund name]
Beneficiary Account:  1004397951
Originator to Beneficiary Information (OBI):
name of owner(s) and account number


Complete a New Account Form and mail it to one of the appropriate addresses
listed below. Intermediaries must also enter into a separate agreement with the
fund or its agent.

via U.S. Postal Service

T. Rowe Price Financial Institution Services
P.O. Box 17603
Baltimore, MD 21297-1603
<PAGE>

via private carriers/overnight services
T. Rowe Price Financial Institution Services
Four Financial Center
4515 Painters Mill Road
Owings Mills, MD 21117-4842



 PURCHASING ADDITIONAL SHARES
 ----------------------------------------------------------

$100 minimum purchase; $50 minimum for retirement plans, Automatic Asset
Builder, and gifts or transfers to minors (UGMA/UTMA) accounts


By Wire

Intermediaries should call Financial Institution Services or use the wire
instructions listed in Opening a New Account.


Exchange Service
You can move money from one account to an existing identically registered
account or open a new identically registered account. Intermediaries should call
their Financial Institution Services representative.

Redemptions

Unless otherwise indicated, redemption proceeds will be wired to the
intermediary's designated bank. Intermediaries should contact their Financial
Institution Services representative.




 RIGHTS RESERVED BY THE FUNDS
 ----------------------------------------------------------

T. Rowe Price funds and their agents reserve the following rights: (1) to refuse
any purchase or exchange order; (2) 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) upon notice to the
intermediary within five business days of the trade or if the written
confirmation has not been received by the shareholder, whichever is sooner; (3)
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; (4) to otherwise modify
the conditions of purchase and any services at any time; and (5) to act on

<PAGE>


instructions reasonably 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 T. Rowe Price funds from the possible adverse effects of
a substantial redemption in a large account, as a matter of general policy, no
shareholder or group of shareholders controlled by the same person or group of
persons will knowingly be permitted to purchase in excess of 5% of the
outstanding shares of a fund, except upon approval of the fund's management.

<PAGE>


 T. ROWE PRICE PRIVACY POLICY
 ----------------------------------------------------------
 In the course of doing business with T. Rowe Price, you share personal and
 financial information with us. We treat this information as confidential and
 recognize the importance of protecting access to it.

 You may provide information when communicating or transacting with us in
 writing, electronically, or by phone. For instance, information may come from
 applications, requests for forms or literature, and your transactions and
 account positions with us. On occasion, such information may come from consumer
 reporting agencies and those providing services to us.

 We do not sell information about current or former customers to any third
 parties, and we do not disclose it to third parties unless necessary to process
 a transaction, service an account, or as otherwise permitted by law. We may
 share information within the T. Rowe Price family of companies in the course of
 providing or offering products and services to best meet your investing needs.
 We may also share that information with companies that perform administrative
 or marketing services for T. Rowe Price, with a research firm we have hired, or
 with a business partner, such as a bank or insurance company with whom we are
 developing or offering investment products. When we enter into such a
 relationship, our contracts restrict the companies' use of our customer
 information, prohibiting them from sharing or using it for any purposes other
 than those for which they were hired.

 We maintain physical, electronic, and procedural safeguards to protect your
 personal information. Within T. Rowe Price, access to such information is
 limited to those who need it to perform their jobs, such as servicing your
 accounts, resolving problems, or informing you of new products or services.
 Finally, our Code of Ethics, which applies to all employees, restricts the use
 of customer information and requires that it be held in strict confidence.

 This Privacy Policy applies to the following T. Rowe Price family of companies:
 T. Rowe Price Associates, Inc.; T. Rowe Price Advisory Services, Inc.; T. Rowe
 Price Investment Services, Inc.; T. Rowe Price Savings Bank; T. Rowe Price
 Trust Company; and the T. Rowe Price Funds.

<PAGE>

T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202
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 free
copies of any of these documents, call your intermediary.

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 publicinfo@sec.gov, or by writing the
Public Reference Room, Washington D.C. 20549-0102.
1940 Act File No. 811-2215

E246-040 5/1/02


 <PAGE>

  STATEMENT OF ADDITIONAL INFORMATION

   The date of this Statement of Additional Information is May 1, 2002.

         T. ROWE PRICE BALANCED FUND, INC.
         T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
              T. Rowe Price Blue Chip Growth Fund-Advisor Class
         T. ROWE PRICE CAPITAL APPRECIATION FUND
         T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
         T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC.
         T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
         T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
         T. ROWE PRICE EQUITY INCOME FUND
              T. Rowe Price Equity Income Fund-Advisor Class
         T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
         T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC.
         T. ROWE PRICE GROWTH & INCOME FUND, INC.
         T. ROWE PRICE GROWTH STOCK FUND, INC.
              T. Rowe Price Growth Stock Fund-Advisor Class
         T. ROWE PRICE HEALTH SCIENCES FUND, INC.
         T. ROWE PRICE INDEX TRUST, INC.
              T. Rowe Price Equity Index 500 Fund
              T. Rowe Price Extended Equity Market Index Fund
              T. Rowe Price Total Equity Market Index Fund
         T. ROWE PRICE INSTITUTIONAL EQUITY FUNDS, INC.
              T. Rowe Price Institutional Large-Cap Growth Fund
              T. Rowe Price Institutional Large-Cap Value Fund
              T. Rowe Price Institutional Mid-Cap Equity Growth Fund
              T. Rowe Price Institutional Small-Cap Stock Fund
         T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
         T. ROWE PRICE MID-CAP GROWTH FUND, INC.
              T. Rowe Price Mid-Cap Growth Fund-Advisor Class
         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 REAL ESTATE FUND, INC.
         T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
              T. Rowe Price Science & Technology Fund-Advisor Class
         T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
              T. Rowe Price Small-Cap Stock Fund-Advisor Class
         T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
              T. Rowe Price Small-Cap Value Fund-Advisor Class
                                       and
         T. ROWE PRICE VALUE FUND, INC.

              T. Rowe Price Value Fund-Advisor Class
 -------------------------------------------------------------------------------

   Mailing Address:
   T. Rowe Price Investment Services, Inc.
   100 East Pratt Street
   Baltimore, Maryland 21202
   1-800-638-5660



                                                              C20-043 5/1/02

<PAGE>


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

   For convenience, the term "director" is used to refer to both directors of
   funds that are corporations and to trustees of funds that are Massachusetts
   business trusts.

   This Statement of Additional Information is not a prospectus but should be
   read in conjunction with the appropriate fund prospectus dated May 1, 2002,
   which may be obtained from T. Rowe Price Investment Services, Inc.
   ("Investment Services").

   Each fund's financial statements for the fiscal period ended December 31,
   2001, and the report of independent accountants are included in each fund's
   Annual Report and incorporated by reference into this Statement of Additional
   Information.

   If you would like a prospectus or an annual or semiannual shareholder report
   for a fund of which you are not a shareholder, please call 1-800-638-5660 and
   they will be sent to you at no charge. Please read them carefully.


<TABLE>
<CAPTION>
                              TABLE OF CONTENTS
                              -----------------
                              Page                                       Page
                              ----                                       ----
<S>                           <C>
Capital Stock                   82       Legal Counsel                       84
------------------------------------     --------------------------------------
Code of Ethics                  69       Management of the Funds             30
------------------------------------     --------------------------------------
Custodian                       68       Net Asset Value per Share           77
------------------------------------     --------------------------------------
Distributor for the Funds       67       Organization of the Funds           83
------------------------------------     --------------------------------------
Dividends and Distributions     77       Portfolio Management Practices      15
------------------------------------     --------------------------------------
Federal Registration of         84       Portfolio Transactions              69
Shares
------------------------------------     --------------------------------------
Independent Accountants         84       Pricing of Securities               76
------------------------------------     --------------------------------------
Investment Management           58       Principal Holders of                57
Services                                 Securities
------------------------------------     --------------------------------------
Investment Objectives and        2       Ratings of Corporate Debt           90
Policies                                 Securities
------------------------------------     --------------------------------------
Investment Performance          78       Risk Factors                         3
------------------------------------     --------------------------------------
Investment Program               6       Services by Outside Parties         66
------------------------------------     --------------------------------------
Investment Restrictions         28       Tax Status                          77
------------------------------------     --------------------------------------
</TABLE>






 INVESTMENT OBJECTIVES AND POLICIES
 -------------------------------------------------------------------------------
   The following information supplements the discussion of each fund's
   investment objectives and policies discussed in each fund's prospectus.


   Shareholder approval is required to substantively change fund objectives.
   Unless otherwise specified, the investment programs and restrictions of the
   funds are not fundamental policies. Each fund's operating policies are
   subject to change by each Board of Directors without shareholder approval.
   However, shareholders will be notified of a material change in an operating
   policy. Each fund's fundamental policies may not be changed without the
   approval of at least a majority of the outstanding shares of the fund or, if
   it is less, 67% of the shares represented at a meeting of shareholders at
   which the holders of 50% or more of the shares are represented. References to
   the following are as indicated:

                  Investment Company Act of 1940 ("1940 Act")
                  Securities and Exchange Commission ("SEC")


                                       2

<PAGE>

                  T. Rowe Price Associates, Inc. ("T. Rowe Price")
                  Moody's Investors Service, Inc. ("Moody's")
                  Standard & Poor's Corporation ("S&P")
                  Internal Revenue Code of 1986 ("Code")
                  T. Rowe Price International, Inc. ("T. Rowe Price
   International")



 RISK FACTORS
 -------------------------------------------------------------------------------
   Reference is also made to the sections entitled "Investment Program" and
   "Portfolio Management Practices" for discussions of the risks associated with
   the investments and practices described therein as they apply to the fund.

   Because of its investment policy, the fund may or may not be suitable or
   appropriate for any particular investor. The fund is not a money market fund
   and is not an appropriate investment for those whose primary objective is

   principal stability. The fund will normally have substantially all  (for the

   Balanced Fund 50-70% and for the Capital Appreciation Fund at least 50%)  of
   its assets in equity securities (e.g., common stocks). This portion of the
   fund's assets will be subject to all of the risks of investing in the stock
   market. There is risk in every investment. The value of the portfolio
   securities of the fund will fluctuate based upon market conditions. Although
   the fund seeks to reduce risk by investing in a diversified portfolio, such
   diversification does not eliminate all risk. There can, of course, be no
   assurance that the fund will achieve its investment objective.

   Foreign securities (All funds other than Equity Index 500, Extended Equity
   Market, and Total Equity Market
   Index Funds)
   The fund may invest in U.S. dollar-denominated and non-U.S.
   dollar-denominated securities of foreign issuers.

  . Risk Factors of Foreign Investing There are special risks in foreign
   investing. Certain of these risks are inherent in any mutual fund while
   others relate more to the countries in which the fund will invest. Many of
   the risks are more pronounced for investments in developing or emerging
   market countries, such as many of the countries of Asia, Latin America,
   Eastern Europe, Russia, Africa, 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 some
   countries 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 some 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 1994-1995, the Mexican peso plunged in
   value, setting off a severe crisis in the Mexican economy. Asia is still
   coming to terms with its own crisis and recessionary conditions sparked by
   widespread currency weakness in late 1997. In 1998, there was substantial
   turmoil in markets throughout the world. In 1999, the democratically elected
   government of Pakistan was overthrown by a military coup. The Russian
   government also defaulted on all its domestic debt. 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 and hostile relations between North and South Korea. In 2001,
   Argentina defaulted on its foreign-owned debt and had the peso devalued,
   resulting in the resignation of its president and deadly riots in December in
   response to government-mandated austerity measures.

   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


                                       3

<PAGE>

   economic conditions of their trading partners. The enactment by these trading
   partners of protectionist trade legislation could have a significant adverse
   effect upon the securities markets of such countries.

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

  . Investment and Repatriation Restrictions Foreign investment in the
   securities markets of certain foreign countries is restricted or controlled
   to varying degrees. These restrictions limit and at times preclude investment
   in certain of such countries and increase the cost and expenses of the fund.
   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 fund invests. 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. In 1998, the
   government of Malaysia imposed currency controls which effectively made it
   impossible for foreign investors to convert Malaysian ringgits to foreign
   currencies.

  . Market Characteristics It is contemplated that most foreign securities will
   be purchased in over-the-counter markets or on securities exchanges located
   in the countries in which the respective principal offices of the issuers of
   the various securities are located, if that is the best available market.
   Investments in certain markets may be made through American Depository
   Receipts ("ADRs") and Global Depository Receipts ("GDRs") traded in the
   United States or on foreign exchanges. Foreign securities markets are
   generally not as developed or efficient as, and more volatile than, those in
   the United States. While growing in volume, they usually have substantially
   less volume than U.S. markets and the fund's portfolio securities may be less
   liquid and subject to more rapid and erratic price movements than securities
   of comparable U.S. companies. Securities may trade at price/earnings
   multiples higher than comparable United States securities and such levels may
   not be sustainable. Commissions on foreign securities trades are generally
   higher than commissions on United States exchanges, and while there are an
   increasing number of overseas securities markets that have adopted a system
   of negotiated rates, a number are still subject to an established schedule of
   minimum commission rates. There is generally less government supervision and
   regulation of foreign securities 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 include delays beyond periods customary in the United States and
   practices, such as delivery of securities prior to receipt of payment, which
   increase the likelihood of a "failed settlement." Failed settlements can
   result in losses to the fund.

  . Investment Funds The fund may invest in investment funds which have been
   authorized by the governments of certain countries specifically to permit
   foreign investment in securities of companies listed and traded on the stock
   exchanges in these respective countries. The fund's investment in these funds
   is subject to the provisions of the 1940 Act. If the fund invests in such
   investment funds, the fund's shareholders will bear not only their
   proportionate share of the expenses of the fund (including operating expenses
   and the fees of the investment manager), but also will indirectly bear
   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 is often more difficult to
   keep currently informed of corporate actions which affect the prices of
   portfolio securities.


                                       4

<PAGE>

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

  . Other With respect to certain foreign countries, especially developing and
   emerging ones, there is the possibility of adverse changes in investment or
   exchange control regulations, expropriation or confiscatory taxation,
   limitations on the removal of funds or other assets of the fund, 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 most countries of Eastern Europe and Russia is highly
   speculative at this time. Political and economic reforms are too recent to
   establish a definite trend away from centrally planned economies and
   state-owned industries. In many of the countries of Eastern Europe and
   Russia, there is no stock exchange or formal market for securities. Such
   countries may also have government exchange controls, currencies with no
   recognizable market value relative to the established currencies of western
   market economies, little or no experience in trading in securities, no
   financial reporting standards, a lack of a banking and securities
   infrastructure to handle such trading, and a legal tradition which does not
   recognize rights in private property. In addition, these countries may have
   national policies which restrict investments in companies deemed sensitive to
   the country's national interest. Further, the governments in such countries
   may require governmental or quasi-governmental authorities to act as
   custodian of the fund's assets invested in such countries, and these
   authorities may not qualify as a foreign custodian under the 1940 Act and
   exemptive relief from such Act may be required. All of these considerations
   are among the factors which result in significant risks and uncertainties
   when investing in Eastern Europe and Russia.

  . Latin America

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

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

   Foreign Currency Certain Latin American countries may experience sudden and
   large adjustments in their currency which, in turn, can have a disruptive and
   negative effect on foreign investors. For example, in late 1994 the Mexican
   peso lost more than one-third of its value relative to the dollar. In 1999,
   the Brazilian real lost 30% of its value against the U.S. dollar. Certain
   Latin American countries may impose restrictions on the free conversion of
   their currency into foreign currencies, including the U.S. dollar. There is
   no significant foreign exchange market for many 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.

  . Japan

   Japan has experienced earthquakes and tidal waves of varying degrees of
   severity, and the risks of such phenomena, and damage resulting therefrom,
   continue to exist. Japan also has one of the world's highest


                                       5

<PAGE>

   population densities. A significant percentage of the total population of
   Japan is concentrated in the metropolitan areas of Tokyo, Osaka, and Nagoya.

   Economy The Japanese economy languished for much of the last decade. Lack of
   effective governmental action in the areas of tax reform to reduce high tax
   rates, banking regulation to address enormous amounts of bad debt, and
   economic reforms to attempt to stimulate spending are among the factors cited
   as possible causes of Japan's economic problems. The yen has had a history of
   unpredictable and volatile movements against the dollar; a weakening yen
   hurts U.S. investors holding yen-denominated securities. Finally, the
   Japanese stock market has experienced wild swings in value and has often been
   considered significantly overvalued.

   Energy Japan has historically depended on oil for most of its energy
   requirements. Almost all of its oil is imported, the majority from the Middle
   East. In the past, oil prices have had a major impact on the domestic
   economy, but more recently Japan has worked to reduce its dependence on oil
   by encouraging energy conservation and use of alternative fuels. In addition,
   a restructuring of industry, with emphasis shifting from basic industries to
   processing and assembly type industries, has contributed to the reduction of
   oil consumption. However, there is no guarantee this favorable trend will
   continue.


   Foreign Trade Overseas trade is important to Japan's economy. Japan has few
   natural resources and must export to pay for its imports of these basic
   requirements. Because of the concentration of Japanese exports in highly
   visible products such as automobiles, machine tools, and semiconductors and
   the large trade surpluses ensuing therefrom, Japan has had difficult
   relations with its trading partners, particularly the U.S. It is possible
   that trade sanctions or other protectionist measures could impact Japan
   adversely in both the short term and long term.



 INVESTMENT PROGRAM
 -------------------------------------------------------------------------------

                               Types of Securities

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


                               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
   transaction 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


                                       6

<PAGE>


   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 transaction costs. Of course, there is no guarantee that
   the strategy will be successful, and the fund could lose money if, for
   example, interest rates do not move as anticipated or credit problems develop
   with the issuer of the hybrid instruments.

   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 of and demand for the underlying assets, and interest rate
   movements. In recent years, various benchmarks and prices for underlying
   assets have been highly volatile, and such volatility may be expected in the
   future. Reference is also made to the discussion of futures, options, and
   forward contracts herein for a discussion of the risks associated with such
   investments.

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

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

   Hybrid instruments may also carry liquidity risk since the instruments are
   often "customized" to meet the portfolio needs of a particular investor, and
   therefore, the number of investors that are willing and able to buy such
   instruments in the secondary market may be smaller than that for more
   traditional debt securities. In addition, because the purchase and sale of
   hybrid instruments could take place in an over-the-counter market without the
   guarantee of a central clearing organization or in a transaction between the
   fund and the issuer of the hybrid instrument, the creditworthiness of the
   counterparty 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 by the Commodities Futures Trading
   Commission ("CFTC"), which generally regulates the trading of commodity
   futures by U.S. persons, the SEC, which regulates the offer and sale of
   securities by and to U.S. persons, or any other governmental regulatory
   authority.

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


                        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


                                       7

<PAGE>


   considerable period may elapse between the time of the decision to sell and
   the time the fund may be permitted to sell a security under an effective
   registration statement. If, during such a period, adverse market conditions
   were to develop, the fund might obtain a less favorable price than prevailed
   when it decided to sell. Restricted securities will be priced at fair value
   as determined in accordance with procedures prescribed by the fund's Board of
   Directors. If, through the appreciation of illiquid securities or the
   depreciation of liquid securities, the fund should be in a position where
   more than 15% of the value of its net assets is invested in illiquid assets,
   including restricted securities, the fund will take appropriate steps to
   protect liquidity.

   Notwithstanding the above, 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 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 following: (1) frequency of trades and quotes;
   (2) number of dealers and potential purchasers; (3) dealer undertakings to
   make a market; and (4) the nature of the security and of marketplace trades
   (e.g., the time needed to dispose of the security, the method of soliciting
   offers, and the mechanics of transfer). The liquidity of Rule 144A securities
   would be monitored and, if as a result of changed conditions it is determined
   that a Rule 144A security is no longer liquid, the fund's holdings of
   illiquid securities would be reviewed to determine what, if any, steps are
   required to assure that the fund does not invest more than 15% of its net
   assets in illiquid securities. Investing in Rule 144A securities could have
   the effect of increasing the amount of the fund's assets invested in illiquid
   securities if qualified institutional buyers are unwilling to purchase such
   securities.


                                    Warrants

   The fund may acquire warrants. Warrants can be highly volatile and 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 securities at a specific price valid for a specific period of time.
   They do not represent ownership of the securities, but only the right to buy
   them. Warrants differ from call options in that warrants are issued by the
   issuer of the security which may be purchased on their exercise, whereas call
   options may be written or issued by anyone. The prices of warrants do not
   necessarily move parallel to the prices of the underlying securities.


                                 Debt Securities

   Balanced, Blue Chip Growth, Capital Appreciation, Capital Opportunity,
   Dividend Growth, Equity Income, Financial Services, Global Technology, Growth
   & Income, Health Sciences, Institutional Large-Cap Value, Institutional
   Small-Cap Stock, Media & Telecommunications, Mid-Cap Value, New Era, Real
   Estate, Small-Cap Stock, Small-Cap Value, and Value Funds

   Debt Obligations Although a majority of the fund's assets are invested in
   common stocks, the fund may invest in convertible securities, corporate and
   government debt securities, and preferred stocks which hold the prospect of
   contributing to the achievement of the fund's objectives. Yields on short-,
   intermediate-, and long-term securities are dependent on a variety of
   factors, including the general conditions of the money and bond markets, the
   size of a particular offering, the maturity of the obligation, and the credit
   quality and rating of the issuer. Debt securities with longer maturities tend
   to have higher yields and are generally subject to potentially greater
   capital appreciation and depreciation than obligations with shorter
   maturities and lower yields. The market prices of debt securities usually
   vary, depending upon available yields. An increase in interest rates will
   generally reduce the value of portfolio investments, and a decline in
   interest rates will generally increase the value of portfolio investments.
   The ability of the fund to achieve its investment objective is also dependent
   on the continuing ability of the issuers of the debt securities in which the
   fund invests to meet their obligations for the payment of interest and
   principal when due. The fund's investment program permits it to purchase
   below investment-grade securities. Since investors generally perceive that
   there are greater risks associated


                                       8

<PAGE>

   with investment in lower-quality securities, the yields from such securities
   normally exceed those obtainable from higher-quality securities. However, the
   principal value of lower-rated securities generally will fluctuate more
   widely than higher-quality securities. Lower-quality investments entail a
   higher risk of default-the nonpayment of interest or principal by the
   issuer-than higher-quality investments. Such securities are also subject to
   special risks, discussed below. Although the fund seeks to reduce risk by
   portfolio diversification, credit analysis, and attention to trends in the
   economy, industries, and financial markets, such efforts will not eliminate
   all risk. There can, of course, be no assurance that the fund will achieve
   its investment objective.

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

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

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

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

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

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


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

  . Commercial Paper and Commercial Notes  Short-term promissory notes issued by
   corporations primarily to finance short-term credit needs. Certain notes may
   have floating or variable rates and may contain options, exercisable by
   either the buyer or the seller, that extend or shorten the maturity of the
   note.


                                       9

<PAGE>

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

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

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


             When-Issued Securities and Forward Commitment Contracts

   The 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 values decline 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. At the time the fund makes the commitment to purchase
   these securities, it will record the transaction and reflect the value of the
   security in determining its net asset value. The fund will cover these
   securities by maintaining cash, liquid, high-grade debt securities, or other
   suitable cover as permitted by the SEC 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.


                           Mortgage-Related Securities

   Balanced Fund

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

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

  . U.S. Government Agency Mortgage-Backed Securities These are obligations
   issued or guaranteed by the United States government or one of its agencies
   or instrumentalities, such as GNMA, FNMA, the Federal Home Loan Mortgage
   Corporation ("Freddie Mac" or "FHLMC"), and the Federal Agricultural Mortgage
   Corporation ("Farmer Mac" or "FAMC"). FNMA, FHLMC, and FAMC obligations are
   not backed by the full faith and credit of the U.S. government as GNMA
   certificates are, but they are supported by the instrumentality's right to
   borrow from the United States Treasury. U.S. Government Agency
   Mortgage-Backed Certificates provide for the pass-through to investors of
   their pro-rata share of monthly payments (including any prepayments) made by
   the individual borrowers on the pooled mortgage loans, net of any fees paid
   to the guarantor of such securities and the servicer of the underlying
   mortgage loans. Each of GNMA, FNMA,


                                       10

<PAGE>

   FHLMC, and FAMC guarantees timely distributions of interest to certificate
   holders. GNMA and FNMA guarantee timely distributions of scheduled principal.
   FHLMC has in the past guaranteed only the ultimate collection of principal of
   the underlying mortgage loan; however, FHLMC now issues mortgage-backed
   securities (FHLMC Gold PCS) which also guarantee timely payment of monthly
   principal reductions.

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

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

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

  . Farmer Mac Certificates 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. Similar to
   Fannie Mae and Freddie Mac, Farmer Mac Certificates are not supported by the
   full faith and credit of the U.S. government; rather, Farmer Mac may borrow
   from the U.S. Treasury to meet its guaranty obligations.

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


                                       11

<PAGE>

   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 semiannual 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.


  . 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 such 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 tranches 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 and from the structure of
   the deal (priority of the individual tranches). An increase or decrease in
   prepayment rates (resulting from a decrease or increase in mortgage interest
   rates) will affect the yield, average life, and price of CMOs. The prices of
   certain CMOs, depending on their structure and the rate of prepayments, can
   be volatile. Some CMOs may also not be as liquid as other securities.


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

  . 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


                                       12

<PAGE>

   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 nongovernmental issuers. Pools of conventional
   residential or commercial 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.

  . Stripped Mortgage-Backed Securities These instruments are a type of
   potentially high-risk derivative. They represent interests in a pool of
   mortgages, the cash flow of which has been separated into its interest and
   principal components. Interest only securities ("IOs") receive the interest
   portion of the cash flow while principal only securities ("POs") receive the
   principal portion. IOs and POs are usually structured as tranches of a CMO.
   Stripped Mortgage-Backed Securities may be issued by U.S. government agencies
   or by private issuers similar to those described above with respect to CMOs
   and privately issued mortgage-backed certificates. As interest rates rise and
   fall, the value of IOs tends to move in the same direction as interest rates.
   The value of the other mortgage-backed securities described herein, like
   other debt instruments, will tend to move in the opposite direction compared
   to interest rates. Under the 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. In the case of IOs, prepayments affect the amount, but not
   the timing, of cash flows provided to the investor. In contrast, prepayments
   on the mortgage pool affect the timing, but not the amount, of cash flows
   received by investors in POs. For example, a rapid or slow rate of principal
   payments may have a material adverse effect on the prices of IOs or POs,
   respectively. If the underlying mortgage assets experience greater than
   anticipated prepayments of principal, an investor may fail to fully recoup
   his/her 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 SEC 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 or PO backed by
   fixed-rate mortgages is liquid may be made on a case by case basis under
   guidelines and standards established by the fund's Board of
   Directors/Trustees. The fund's Board of Directors/Trustees has delegated to
   T. Rowe Price the authority to determine the liquidity of these investments
   based on the following guidelines: the type of issuer; type of collateral,
   including age and prepayment characteristics; rate of interest on coupon
   relative to current market rates and the effect of the rate on the potential
   for prepayments; complexity of the issue's structure, including the number of
   tranches; and size of the issue and the number of dealers who make a market
   in the IO or PO.


                             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


                                       13

<PAGE>

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

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


   Because pass-through certificates represent an ownership interest in the
   underlying assets, the holders thereof directly bear the risk of any defaults
   by the obligors on the underlying assets not covered by any 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, the issuing entities are unlikely to have sufficient
   assets to satisfy their obligations on the related asset-backed securities.



                            Real Estate and REIT Risk

   Primarily Real Estate Fund (but also any other fund investing in REITs)
   Investors in the fund may experience many of the same risks involved with
   investing in real estate directly. These risks include: declines in real
   estate values, risks related to local or general economic conditions,
   particularly lack of demand, overbuilding and increased competition,
   increases in property taxes and operating expenses, changes in zoning laws,
   heavy cash flow dependency, possible lack of availability of mortgage funds,
   obsolescence, losses due to natural disasters, condemnation of properties,
   regulatory limitations on rents and fluctuations in rental income, variations
   in market rental rates, and possible environmental liabilities. Real Estate
   Investment Trusts ("REITs") may own real estate properties (Equity REITs) and
   be subject to these risks directly, or may make or purchase mortgages
   (Mortgage REITs) and be subject to these risks indirectly through underlying
   construction, development, and long-term mortgage loans that may default or
   have payment problems.

   Equity REITs can be affected by rising interest rates that may cause
   investors to demand a high annual yield from future distributions which, in
   turn, could decrease the market prices for the REITs. In addition, rising
   interest rates also increase the costs of obtaining financing for real estate
   projects. Since many real estate projects are dependent upon receiving
   financing, this could cause the value of the Equity REITs in which the fund
   invests to decline.

   Mortgage REITs may hold mortgages that the mortgagors elect to prepay during
   periods of declining interest rates, which may diminish the yield on such
   REITs. In addition, borrowers may not be able to repay mortgages when due,
   which could have a negative effect on the fund.

   Some REITs have relatively small market capitalizations which could increase
   their volatility. REITs tend to be dependent upon specialized management
   skills and have limited diversification so they are subject to risks inherent
   in operating and financing a limited number of properties. In addition, when
   the fund invests in REITs, a shareholder will bear his proportionate share of
   fund expenses and indirectly bear similar expenses of the REITs. REITs depend
   generally on their ability to generate cash flow to make distributions to
   shareholders. In addition, both Equity and Mortgage REITs are subject to the
   risks of failing to qualify for tax-free status of income under the Code or
   failing to maintain exemption from the 1940 Act.


                                       14

<PAGE>

 PORTFOLIO MANAGEMENT PRACTICES
 -------------------------------------------------------------------------------

                         Lending of Portfolio Securities


   Securities loans are made to broker-dealers, 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.
   The collateral, in turn, is invested in short-term securities. 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
   a portion of the interest on the investment of the collateral. Normally, the
   fund employs an agent to implement its securities lending program and the
   agent receives a fee from the fund for its services. The fund has a right to
   call each loan and obtain the securities, within such period of time which
   coincides with the normal settlement period for purchases and sales of such
   securities in the respective markets. The fund will not have the right to
   vote on securities while they are being lent, but it will call a loan in
   anticipation of any important vote. The risks in lending portfolio
   securities, as with other extensions of secured credit, consist of a possible
   default by the borrower, 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. Additionally, the fund bears the risk that the
   reinvestment of collateral will result in a principal loss. Finally, there is
   also the risk that the price of the securities will increase while they are
   on loan and the collateral will not adequately cover their value.


                         Interfund Borrowing and Lending


   The fund is a party to an exemptive order received from the SEC on December
   8, 1998, amended on November 23, 1999, that permits it to borrow money from
   and/or lend money to other funds in the T. Rowe Price complex ("Price
   Funds"). All loans are set at an interest rate between the rates charged on
   overnight repurchase agreements and short-term bank loans. All loans are
   subject to numerous conditions designed to ensure fair and equitable
   treatment of all participating funds. The program is subject to the oversight
   and periodic review of the Boards of Directors of the Price Funds.


                              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 (1) the underlying
   securities are of the type (excluding maturity limitations) which the fund's
   investment guidelines would allow it to purchase directly, (2) 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 (3)
   payment for the underlying security is made only upon physical delivery or
   evidence of book-entry transfer to the account of the custodian or a bank
   acting as agent. In the event of a bankruptcy or other default of a seller of
   a repurchase agreement, the fund could experience both delays in liquidating
   the underlying security and losses, including: (a) possible decline in the
   value of the underlying security during the period while the fund seeks to
   enforce its rights thereto; (b) possible subnormal levels of income and lack
   of access to income during this period; and (c) expenses of enforcing its
   rights.


                          Reverse Repurchase Agreements

   Although the fund has no current intention 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


                                       15

<PAGE>

   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.")


                              Money Market Reserves


   It is expected that the fund will invest its cash reserves primarily in one
   or more money market funds established for the exclusive use of the T. Rowe

   Price family of mutual funds and other clients of T. Rowe . Price. Currently,
   two such money market funds are in operation: T. Rowe Price Reserve
   Investment Fund ("RIF") and T. Rowe Price Government Reserve Investment Fund

   ("GRF"), each a series of the T. Rowe Price Reserve Investment Funds, Inc.
   . Additional series may be created in the future. These funds were created
   and operate under an Exemptive Order issued by the SEC (Investment Company
   Act Release No. IC-22770, July 29, 1997).

   Both funds must comply with the requirements of Rule 2a-7 under the 1940 Act
   governing money market funds. The RIF invests at least 95% of its total
   assets in prime money market instruments receiving the highest credit rating.
   The GRF invests primarily in a portfolio of U.S. government-backed
   securities, primarily U.S. Treasuries, and repurchase agreements thereon.


   The RIF and GRF provide a very efficient means of managing the cash reserves
   of the fund. While neither RIF nor GRF pays an advisory fee to the Investment
   Manager, they will incur other expenses. However, the RIF and GRF are
   expected by T. Rowe Price to operate at very low expense ratios. The fund
   will only invest in RIF or GRF to the extent it is consistent with its
   objective and program.

   Neither fund is insured or guaranteed by the FDIC or any other government
   agency. Although the funds seek to maintain a stable net asset value of $1.00
   per share, it is possible to lose money by investing in them.

   All funds except Equity Index 500, Extended Equity Market Index, and Total
   Equity Market Index Funds


                                     Options

   Options are a type of potentially high-risk derivative.


                          Writing Covered Call Options

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

   A call option gives the holder (buyer) the right to purchase, and the writer
   (seller) has the obligation to sell, 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 generally will write only covered call options. This means that the
   fund will either 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. From time to time, the fund will


                                       16

<PAGE>


   write a call option that is not covered as indicated above but where the fund
   will establish and maintain with its custodian for the term of the option, an
   account consisting of cash, U.S. government securities, other liquid
   high-grade debt obligations, or other suitable cover as permitted by the SEC
   having a value equal to the fluctuating market value of the optioned
   securities or currencies. While such an option would be "covered" with
   sufficient collateral to satisfy SEC prohibitions on issuing senior
   securities, this type of strategy would expose the fund to the risks of
   writing uncovered options.

   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
   generally 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. If the fund
   writes an uncovered option as described above, it will bear the risk of
   having to purchase the security subject to the option at a price higher than
   the exercise price of the option. As the price of a security could appreciate
   substantially, the fund's loss could be significant.


   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 on its primary exchange 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 mean of closing bid and ask
   prices. 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.


                                       17

<PAGE>

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

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

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


                           Writing Covered Put Options

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

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

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


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




                                       18

<PAGE>


   The premium received by the fund for writing covered put 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 on its
   primary exchange 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 mean of the closing bid and ask prices.


                             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 next.

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

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


   The fund will not commit more than 5% of its assets to premiums when
   purchasing put and call options. The premium paid by the fund when purchasing
   a put option will be recorded as an asset of the fund in the portfolio of
   investments. This asset will be adjusted daily to the option's current market
   value, which will be the latest sale price on its primary exchange 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 mean of
   closing bid and ask prices. This asset will be terminated upon expiration of
   the option, the selling (writing) of an identical option in a closing
   transaction, or the delivery of the underlying security or currency upon the
   exercise of the option.


                             Purchasing Call Options

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

   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


                                       19

<PAGE>

   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 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.

   The fund will not commit more than 5% of its assets to premiums when
   purchasing call and put options. The premium paid by the fund when purchasing
   a call option will be recorded as an asset of the fund in the portfolio of
   investments. This asset will be adjusted daily to the option's current market
   value, which will be the latest sale price on its primary exchange 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 mean of
   closing bid and ask prices.


                        Dealer (Over-the-Counter) Options

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

   Exchange-traded options generally have a continuous liquid market while
   dealer options have none. Consequently, the fund will generally be able to
   realize the value of a dealer option it has purchased only by exercising it
   or reselling it to the dealer who issued it. Similarly, when the fund writes
   a dealer option, it generally will be able to close out the option prior to
   its expiration only by entering into a closing purchase transaction with the
   dealer to which the fund originally wrote the option. While the fund will
   seek to enter into dealer options only with dealers who will agree to and
   which are expected to be capable of entering into closing transactions with
   the fund, there can be no assurance that the fund will be able to liquidate a
   dealer option at a favorable price at any time prior to expiration. Until the
   fund, as a covered dealer call option writer, is able to effect a closing
   purchase transaction, it will not be able to liquidate securities (or other
   assets) or currencies used as cover until the option expires or is exercised.
   In the event of insolvency of the counter 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 Over-the-Counter ("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.

   Equity Index 500, Extended Equity Market Index, and Total Equity Market Index
   Funds


                                     Options

   Options are a type of potentially high-risk derivative.


                                       20

<PAGE>

   The only option activity the funds currently may engage in is the purchase of
   S&P 500 call options for the Equity Index 500 Fund, or the purchases of call
   options on any indices that may be consistent with the investment programs
   for the Extended Equity Market Index and Total Equity Market Index Funds.
   Such activity is subject to the same risks described above under "Purchasing
   Call Options." However, the funds reserve the right to engage in other
   options activity.

   All funds


                                Futures Contracts

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

   Transactions in Futures

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

   The New Era Fund may also enter into futures contracts on commodities related
   to the types of companies in which it invests, such as oil and gold futures.
   The Equity Index 500, Extended Equity Market Index, and Total Equity Market
   Index Funds may only enter into stock index futures which are appropriate for
   their investment programs to provide an efficient means of maintaining
   liquidity while being invested in the market, to facilitate trading, or to
   reduce transaction costs. They will not use futures for hedging purposes.
   Otherwise the nature of such futures and the regulatory limitations and risks
   to which they are subject are the same as those described below.

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

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


   The fund will enter into futures contracts which are traded on national or
   foreign futures exchanges and are standardized as to maturity date and
   underlying financial instrument. Futures exchanges and trading in the United
   States are regulated under the Commodity Exchange Act by the CFTC. 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

   If the fund purchases or sells futures contracts or related options which do
   not qualify as bona fide hedging under applicable CFTC rules, the aggregate
   initial margin deposits and premium required to establish those positions
   cannot exceed 5% of the liquidation 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 without a shareholder vote and does not limit the
   percentage of the fund's assets at risk to 5%.

   In instances involving the purchase of futures contracts or the writing of
   call or put options thereon by the fund, an amount of cash, liquid assets, or
   other suitable cover as permitted by the SEC, equal to the market


                                       21

<PAGE>

   value of the futures contracts and options thereon (less any related margin
   deposits), will be identified by the fund 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 or liquid assets 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.


   Financial futures are valued daily at closing settlement prices. 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 a payment by the fund ("variation
   margin") to restore the margin account to the amount of the initial margin.



   Subsequent payments ("mark-to-market payments") 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. If the value of the open futures position increases in the
   case of a sale or decreases in the case of a purchase, the fund will pay the
   amount of the daily change in value to the broker. However, if the value of
   the open futures position decreases in the case of a sale or increases in the
   case of a purchase, the broker will pay the amount of the daily change in
   value to the fund.

   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 S&P 500 Stock Index is made up 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


                                       22

<PAGE>

   the case of futures contracts on the S&P 500 Index, the contracts are to buy
   or sell 250 units. Thus, if the value of the S&P 500 Index were $150, one
   contract would be worth $37,500 (250 units x $150). The stock index futures
   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 a futures
   contract to buy 250 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 $1,000 (250 units x gain of $4). If the fund enters
   into a futures contract to sell 250 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 $500 (250 units x loss of $2).


               Special Risks of Transactions in Futures Contracts

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

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

   Margin deposits required on futures trading are low. As a result, a
   relatively small price movement in a futures contract may result in immediate
   and substantial loss, as well as gain, to the investor. For example, if at
   the time of purchase, 10% of the value of the futures contract is deposited
   as margin, a subsequent 10% decrease in the value of the futures contract
   would result in a total loss of the margin deposit, before any deduction for
   the transaction costs, if the account were then closed out. A 15% decrease
   would result in a loss equal to 150% of the original margin deposit, if the
   contract were closed out. Thus, a purchase or sale of a futures contract may
   result in losses in excess of the amount invested in the futures contract.

  . 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 mark-to-market payments 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 mark-to-market and variation
   margin payments. 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 next, 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 or economic events.


                                       23

<PAGE>

   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 had 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 mark-to-market and 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. 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 imperfect correlation between price movements in the
   underlying instruments and movements in the prices of futures contracts, even
   a correct forecast of general market trends by T. Rowe Price might not result
   in a successful hedging transaction over a very short time period.


                          Options on Futures Contracts

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


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

   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
   financial indices. Such options would be used in a manner similar to the use


                                       24

<PAGE>

   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
   nondiscriminatory manner.


          Special Risks of Transactions in Options on Futures Contracts


   The risks described under "Special Risks of Transactions in Futures
   Contracts" are substantially the same as the risks of using options on
   futures. If the fund were to write an option on a futures contract, it would
   be required to deposit and maintain initial and variation margin in the same
   manner as a regular futures contract. 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: (1) there may be insufficient trading
   interest in certain options; (2) restrictions may be imposed by an exchange
   on opening transactions or closing transactions or both; (3) trading halts,
   suspensions, or other restrictions may be imposed with respect to particular
   classes or series of options, or underlying instruments; (4) unusual or
   unforeseen circumstances may interrupt normal operations on an exchange; (5)
   the facilities of an exchange or a clearing corporation may not at all times
   be adequate to handle current trading volume; or (6) one or more exchanges
   could, for economic or other reasons, decide or be compelled at some future
   date to discontinue the trading of options (or a particular class or series
   of options), in which event the secondary market on that exchange (or in the
   class or series of options) would cease to exist, although outstanding
   options on the exchange that had been issued by a clearing corporation as a
   result of trades on that exchange would continue to be exercisable in
   accordance with their terms. There is no assurance that higher than
   anticipated trading activity or other unforeseen events might not, at times,
   render certain of the facilities of any of the clearing corporations
   inadequate, and thereby result in the institution by an exchange of special
   procedures which may interfere with the timely execution of customers'
   orders.


                    Additional Futures and Options Contracts

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


                           Foreign Futures and Options

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


                                       25

<PAGE>

   All funds except Equity Index 500, Extended Equity Market Index, and Total
   Equity Market Index Funds


                          Foreign Currency Transactions


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



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

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

   and the date on which payment is made or received.


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


                                       26

<PAGE>

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

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

   Although the fund values its assets daily in terms of U.S. dollars, it does
   not intend to convert its holdings of foreign currencies into U.S. dollars on
   a daily basis. It will do so from time to time, and there are costs
   associated with 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 options, futures, forward foreign exchange
   contracts, and swaps, including options and futures on currencies, which will
   be treated as Section 1256 contracts or straddles.

   Transactions 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 (taxable at a maximum rate of 20%) or loss and 40%
   short-term capital gain or loss regardless of the holding period of the
   instrument (ordinary income or loss for foreign exchange contracts). 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, forward foreign exchange contracts, and swaps, 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. The holding period of the
   security offsetting an "in-the-money qualified covered call" option on an
   equity security will not include the period of time the option is
   outstanding.

   Losses on written covered calls and purchased puts on securities, excluding
   certain "qualified covered call" options on equity securities, may be
   long-term capital losses, if the security covering the option was held for
   more than 12 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. Tax regulations could be issued limiting the extent
   that net gain realized from options, futures, or foreign forward exchange
   contracts on currencies is qualifying income for purposes of the 90%
   requirement.

   Entering into certain options, futures contracts, swaps, or foreign forward
   contracts may result in the "constructive sale" of offsetting stocks or debt
   securities of the fund.


                                       27

<PAGE>

   The Internal Revenue Service has issued a notice proposing alternative
   methods for the inclusion or deduction of certain payments made under swap
   contracts. Although not anticipated, it is possible that final rules could
   result in changes to the amounts recorded by the fund, potentially impacting
   the tax results of the fund.



 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 a fund's outstanding shares. Other
   restrictions in the form of operating policies are subject to change by the
   fund's Board of Directors without shareholder approval. Any investment
   restriction which involves a maximum percentage of securities or assets shall
   not be considered to be violated unless an excess over the percentage occurs
   immediately after, and is caused by, an acquisition of securities or assets
   of, or borrowings by, the fund. Calculation of the fund's total assets for
   compliance with any of the following fundamental or operating policies or any
   other investment restrictions set forth in the fund's prospectus or Statement
   of Additional Information will not include cash collateral held in connection
   with securities lending activities.


                              Fundamental Policies

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

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


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

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

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

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


   (5)



                                       28

<PAGE>


   All funds except Institutional Large-Cap Growth Fund

   (6) 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, its agencies, or instrumentalities;

   (7) Percent Limit on Share Ownership of Any One Issuer Purchase a security
       if, as a result, with respect to 75% of the value of its 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);

   All funds

   (8) 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);

   (9) Senior Securities Issue senior securities except in compliance with the
       1940 Act; or

   (10) 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 1933 Act 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 restriction (2), the fund does not consider
       currency contracts or hybrid investments to be commodities.


       . For purposes of investment restriction (3): U.S., state, or local
        governments, or related agencies or instrumentalities, are not
        considered an industry.

       . Industries are determined by reference to the classifications of
        industries set forth in the fund's semiannual and annual reports.

       . It is the position of the staff of the SEC that foreign governments are
        industries for purposes of this restriction.

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


                                  Operating Policies

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

   (1) Borrowing Purchase additional securities when money borrowed exceeds 5%
       of its total assets;

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

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


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


                                       29

<PAGE>

   (5) Investment Companies  Purchase securities of open-end or closed-end
       investment companies except (i) in compliance with the 1940 Act; or (ii)
       securities of the T. Rowe Price Reserve Investment or Government Reserve
       Investment Funds;

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

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

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

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

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


   For Blue Chip Growth, Capital Opportunity, Developing Technologies,
   Diversified Small-Cap Growth, Financial Services, Global Technology, Health
   Sciences, Media & Telecommunications, Mid-Cap Value, Real Estate, and Value
   Funds:

   Notwithstanding anything in the above fundamental and operating restrictions
   to the contrary, the fund may invest all of its assets in a single investment
   company or a series thereof in connection with a "master-feeder" arrangement.
   Such an investment would be made where the fund (a "Feeder"), and one or more
   other funds with the same investment objective and program as the fund,
   sought to accomplish its investment objective and program by investing all of
   its assets in the shares of another investment company (the "Master"). The
   Master would, in turn, have the same investment objective and program as the
   fund. The fund would invest in this manner in an effort to achieve the
   economies of scale associated with having a Master fund make investments in
   portfolio companies on behalf of a number of Feeder funds.



 MANAGEMENT OF THE FUNDS
 -------------------------------------------------------------------------------

   The officers and directors of the fund are listed below. Unless otherwise
   noted, the address of each is 100 East Pratt Street, Baltimore, Maryland
   21202. Except as indicated, each has been an employee of T. Rowe Price for
   more than five years.

   The fund is governed by a Board of Directors that meets regularly to review
   fund investments, performance, expenses, and other business affairs. The
   Board elects the fund's officers. The majority of Board members are
   independent of T. Rowe Price and T. Rowe Price International. The directors
   who are also employees or officers of T. Rowe Price are referred to as inside
   or interested directors. Each Board currently has three committees, described
   in the following paragraphs.

   The Committee of Independent Directors, which consists of all of the
   independent directors of the funds, is responsible for selecting candidates
   for election as independent directors to fill vacancies on each fund's Board.
   F. Pierce Linaweaver is chairman of the committee. The committee will
   consider written recommendations from shareholders for possible nominees.
   Shareholders should submit their recommendations to the secretary of the
   funds. The committee held no formal meetings during the last fiscal year.


                                       30

<PAGE>


   The Joint Audit Committee is comprised of David K. Fagin, F. Pierce
   Linaweaver, John G. Schreiber, and Paul M. Wythes, all independent directors.
   The Audit Committee holds two regular meetings during each fiscal year, at
   which time it meets with the independent accountants of the T. Rowe Price
   funds to review: (1) the services provided; (2) the findings of the most
   recent audit; (3) management's response to the findings of the most recent
   audit; (4) the scope of the audit to be performed; (5) the accountants' fees;
   and (6) any accounting or other questions relating to particular areas of the
   T. Rowe Price funds' operations or the operations of parties dealing with the
   T. Rowe Price funds, as circumstances indicate. The Audit Committee for the
   funds met three times in 2001. All members of the committee participated in
   the meetings.

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

   All funds


                           Independent Directors*


<TABLE>
<CAPTION>
                                                                                     Number of
                                      Term of Office(a)                              Portfolios
                                      and Length of Time                              in Fund
                        Position(s)         Served        Principal Occupation(s)     Complex      Other Directorships of
  Name, Address, and     Held with                         During Past 5 Years(b)   Overseen by       Public Companies
    Date of Birth           Fund                                                      Director
---------------------------------------------------------------------------------------------------------------------------
<S>                     <C>
 Calvin W. Burnett,     Director      Director since      President, Coppin              97       Provident Bank of
 Ph.D.                                later of            State College                           Maryland
 100 East Pratt Street                2001
 Baltimore, MD 21202                   or
 3/16/32                              inception of
                                      fund(c)
---------------------------------------------------------------------------------------------------------------------------
 Anthony W. Deering     Director      Director since      Director, Chairman             97       The Rouse Company
 100 East Pratt Street                later of            of the Board,
 Baltimore, MD 21202                  2001                President, and Chief
 1/28/45                               or                 Executive Officer,
                                      inception of        The Rouse
                                      fund(c)             Company, real estate
                                                          developers
---------------------------------------------------------------------------------------------------------------------------
 Donald W. Dick, Jr.    Director      Director since      Principal,                     97       None
 100 East Pratt Street                later of            EuroCapital
 Baltimore, MD 21202                  1982                Advisors, LLC, an
 1/27/43                               or                 acquisition and
                                      inception of        management
                                      fund(c)             advisory firm
---------------------------------------------------------------------------------------------------------------------------
 David K. Fagin         Director      Director since      Director, Dayton               97       Dayton Mining
 100 East Pratt Street                later of            Mining Corporation                      Corporation, Golden
 Baltimore, MD 21202                  1988                (6/98 to present),                      Star Resources Ltd.,
 4/9/38                                or                 Golden Star                             and Canyon
                                      inception of        Resources Ltd., and                     Resources, Corp.
                                      fund(c)             Canyon Resources,
                                                          Corp. (5/00 to
                                                          present); Chairman
                                                          and President, Nye
                                                          Corporation
---------------------------------------------------------------------------------------------------------------------------
 F. Pierce Linaweaver   Director      Director since      President, F. Pierce           97       None
 100 East Pratt Street                later of            Linaweaver &
 Baltimore, MD 21202                  2001                Associates, Inc.,
 8/22/34                               or                 consulting
                                      inception of        environmental &
                                      fund(c)             civil engineers
---------------------------------------------------------------------------------------------------------------------------
 Hanne M. Merriman      Director      Director since      Retail Business                97       Ann Taylor Stores
 100 East Pratt Street                later of            Consultant                              Corporation,
 Baltimore, MD 21202                  1994                                                        Ameren Corp.,
 11/16/41                              or                                                         Finlay Enterprises,
                                      inception of                                                Inc., The Rouse
                                      fund(c)                                                     Company, and US
                                                                                                  Airways Group, Inc.
---------------------------------------------------------------------------------------------------------------------------
 John G. Schreiber      Director      Director since      Owner/President,               97       AMLI Residential
 100 East Pratt Street                later of            Centaur Capital                         Properties Trust,
 Baltimore, MD 21202                  2001                Partners, Inc., a real                  Host Marriott
 10/21/46                              or                 estate investment                       Corporation, and
                                      inception of        company; Senior                         The Rouse Company,
                                      fund(c)             Advisor and Partner,                    real estate developers
                                                          Blackstone Real
                                                          Estate Advisors, L.P.
---------------------------------------------------------------------------------------------------------------------------
 Hubert D. Vos          Director      Director since      Owner/President,               97       None
 100 East Pratt Street                later of            Stonington Capital
 Baltimore, MD 21202                  1986                Corporation, a
 8/2/33                                or                 private investment
                                      inception of        company
                                      fund(c)
---------------------------------------------------------------------------------------------------------------------------
 Paul M. Wythes         Director      Director since      Founding Partner of            97        Teltone Corporation
 100 East Pratt Street                later of            Sutter Hill Ventures,
 Baltimore, MD 21202                  1982                a venture capital
 6/23/33                               or                 limited partnership,
                                      inception of        providing equity
                                      fund(c)             capital to young
                                                          high technology
                                                          companies
                                                          throughout the
                                                          United States
---------------------------------------------------------------------------------------------------------------------------
</TABLE>






                                       31

<PAGE>



                                       32

<PAGE>


 * All information about the directors was current as of December 31, 2001.

 (a) Each director serves until election of a successor.

 (b) Unless otherwise indicated, the Independent Directors have been
   engaged in their respective principal occupations for at least five
   years.

 (c) See fund inception dates in the chart below.



<TABLE>
<CAPTION>
                 Fund Inception Dates
Fund                                      Inception Date
----                                      --------------
<S>                                      <C>
Balanced                                     12/31/39
Blue Chip Growth                             06/30/93
Blue Chip Growth Fund-Advisor Class          03/31/00
Capital Appreciation                         06/30/86
Capital Opportunity                          11/30/94
Developing Technologies                      08/31/00
Diversified Small-Cap Growth                 06/30/97
Dividend Growth                              12/30/92
Equity Income                                10/31/85
Equity Income Fund-Advisor Class             03/31/00
Equity Index 500                             03/30/90
Extended Equity Market Index                 01/30/98
Financial Services                           09/30/96
Global Technology                            09/29/00
Growth & Income                              12/21/82
Growth Stock                                 04/11/50
Growth Stock Fund-Advisor Class              12/31/01
Health Sciences                              12/29/95
Institutional Large-Cap Growth               10/31/01
Institutional Large-Cap Value                03/31/00
Institutional Mid-Cap Equity Growth          07/31/96
Institutional Small-Cap Stock                03/31/00
Media & Telecommunications                   10/13/93
Mid-Cap Growth                               06/30/92
Mid-Cap Growth Fund-Advisor Class            03/31/00
Mid-Cap Value                                06/28/96
New America Growth                           09/30/85
New Era                                      01/20/69
New Horizons                                 06/03/60
Real Estate                                  10/31/97
Science & Technology                         09/30/87
Science & Technology Fund-Advisor Class      03/31/00
Small-Cap Stock                              06/01/56
Small-Cap Stock Fund-Advisor Class           03/31/00
Small-Cap Value                              06/30/88
Small-Cap Value Fund-Advisor Class           03/31/00
Total Equity Market Index                    01/30/98
Value                                        09/30/94
Value Fund-Advisor Class                     03/31/00
---------------------------------------------------------
</TABLE>






                                       33

<PAGE>


                              Inside Directors*


<TABLE>
<CAPTION>
<S>                  <C>
                                   Term of                                Number of    O
                                   Office(                                Portfolios   ther
                                   a                                      in Fund      Director
                     Position(s)   )            Principal Occupation(s)   Complex      ships of
Name, Address, and   Held with     and Length   During Past 5 Years       Overseen     Public
Date of Birth        Fund          of Time      (b)                       by Director  Companies
                                   Served
--------------------------------------------------------------------------------------------------
</TABLE>





<TABLE>
<CAPTION>
<S>                     <C>
 James A. C. Kennedy     Director   Director since    Managing Director and     32     None
 100 East Pratt Street              later of 1992     Director, T. Rowe
 Baltimore, MD 21202                or inception of   Price Associates,
 8/15/53                            fund(c)           Inc. and T. Rowe
                                                      Price Group, Inc.

                                                      Vice President,
                                                      Balanced
                                                      Fund, Institutional
                                                      Equity
                                                      Funds, Mid-Cap Value
                                                      Fund,
                                                      New Era Fund, and
                                                      Small-Cap
                                                      Stock Fund
-----------------------------------------------------------------------------------------------
</TABLE>





                                       34

<PAGE>


<TABLE>
<CAPTION>
<S>                     <C>
 John H. Laporte        Director   Director since    Managing Director, T. Rowe          15     None
 100 East Pratt Street             later of          Price Associates, Inc.;
 Baltimore, MD 21202               1985              Managing Director and
 7/26/45                                             Director, T. Rowe Price Group,
                                   or inception
                                   of fund(          Inc.
                                   c                 President, New Horizons
                                   )                 Fund; Vice President,
                                                     Diversified Small-Cap Growth
                                                     Fund, Health Sciences Fund,
                                                     and New America Growth
                                                     Fund
---------------------------------------------------------------------------------------------------------
</TABLE>




<TABLE>
<CAPTION>
<S>                     <C>
 James S. Riepe         Director   Director since    Vice Chairman of the Board,          97     None
 100 East Pratt Street             later of          Director and Managing
 Baltimore, MD 21202               1982              Director, T. Rowe Price
 6/25/43                                             Associates, Inc.
                                   or inception      and T. Rowe
                                   of fund(          Price Group, Inc.; Chairman
                                   c                 of the Board and Director,
                                   )                 T. Rowe Price Investment
                                                     Services, Inc., T. Rowe Price
                                                     Retirement Plan Services, Inc.,
                                                     and T. Rowe Price Services,
                                                     Inc.; Chairman of the Board,
                                                     Director, President, and Trust
                                                     Officer, T. Rowe Price Trust
                                                     Company; Director, T. Rowe
                                                     Price International, Inc.,
                                                     T. Rowe Price Global Asset
                                                     Management Limited, and
                                                     T. Rowe Price Global

                                                     Investment Services Limited
                                                     Chairman of the Board,
                                                     Institutional Equity Funds;
                                                     Vice President, all funds
----------------------------------------------------------------------------------------------------------
</TABLE>





                                       35

<PAGE>


<TABLE>
<CAPTION>
<S>                     <C>
 M. David Testa         Director   Director since    Vice Chairman of the Board,          97     None
 100 East Pratt Street             later of          Chief Investment Officer,
 Baltimore, MD 21202               1991              Director, and Managing
 4/22/44                                             Director, T. Rowe Price Group,
                                   or inception      Inc.; Chief Investment Officer,
                                   of fund(          Director, and Managing
                                   c                 Director, T. Rowe Price
                                   )                 Associates, Inc.
                                                     ; Chairman,
                                                     T. Rowe Price Global Asset
                                                     Management Limited; Vice
                                                     President and Director,
                                                     T. Rowe Price Trust Company;
                                                     Director, T. Rowe Price Global
                                                     Investment Services Limited
                                                     and T. Rowe Price

                                                     International, Inc.
                                                     President, Institutional Equity
                                                     Funds; Vice President,
                                                     Balanced Fund and Capital
                                                     Appreciation Fund
----------------------------------------------------------------------------------------------------------
</TABLE>




 * All information about the directors was current as of December 31, 2001.

 (a) Each director serves until election of a successor.

 (b) Unless otherwise indicated, the Independent Directors have been
   engaged in their respective principal occupations for at least five
   years.

 (c) See fund inception dates in the chart above.


                                  Officers/(a)/



<TABLE>
<CAPTION>
Name, Date of Birth, Address, and
Principal Occupations                       Position(s) Held With Fund
-------------------------------------------------------------------------------
<S>                                        <C>
Marcy L. Arnold, 8/5/59                     Vice President, Institutional
Vice President, T. Rowe Price Associates,   Equity Funds, Mid-Cap Value Fund,
Inc. and T. Rowe Price Group, Inc.          New Era Fund, and Small-Cap Stock
                                            Fund
-------------------------------------------------------------------------------
Preston G. Athey, 7/17/49                   President, Small-Cap Value Fund;
Managing Director, T. Rowe Price            Vice President, Institutional
Associates, Inc. and T. Rowe Price Group,   Equity Funds, Mid-Cap Value Fund,
Inc.; Vice President, T. Rowe Price Trust   and Small-Cap Stock Fund
Company
-------------------------------------------------------------------------------
Eugene F. Bair, 12/11/69                    Vice President, Index Trust

-------------------------------------------------------------------------------
Carol G. Bartha, 1/4/42                     Assistant Vice President, Growth
                                            Stock Fund
-------------------------------------------------------------------------------
Marc L. Baylin, 11/17/67                    President, New America Growth Fund;
Vice President, T. Rowe Price Associates,   Vice President, Institutional
Inc. and T. Rowe Price Group, Inc.          Equity Funds, Mid-Cap Growth Fund,
                                            and New Horizons Fund
-------------------------------------------------------------------------------
Brian W.H. Berghuis, 10/12/58               President, Mid-Cap Growth Fund;
Managing Director, T. Rowe Price            Executive Vice President,
Associates, Inc. and T. Rowe Price Group,   Institutional Equity Funds; Vice
Inc.                                        President, Blue Chip Growth Fund,
                                            Growth Stock Fund, New America
                                            Growth Fund, and New Horizons Fund
-------------------------------------------------------------------------------
Stephen W. Boesel, 12/28/44                 President, Capital Appreciation
Managing Director, T. Rowe Price            Fund; Vice President, Balanced
Associates, Inc. and T. Rowe Price Group,   Fund, Equity Income Fund, Financial
Inc.; Vice President, T. Rowe Price Trust   Services Fund, Growth & Income
Company                                     Fund, Institutional Equity Funds,
                                            Real Estate Fund, and Value Fund
-------------------------------------------------------------------------------
Andrew M. Brooks, 2/16/56                   Vice President, Equity Income Fund
Vice President, T. Rowe Price Associates,   and Value Fund
Inc. and T. Rowe Price Group, Inc.
-------------------------------------------------------------------------------
Brace C. Brooks, 1/10/67                    Vice President, Mid-Cap Value Fund

-------------------------------------------------------------------------------
Joseph A. Carrier, 12/30/60                 Treasurer, all funds
Vice President, T. Rowe Price Associates,
Inc., T. Rowe Price Group, Inc., and T.
Rowe Price Investment Services, Inc.
-------------------------------------------------------------------------------
Arthur B. Cecil III, 9/15/42                Vice President, Capital
Vice President, T. Rowe Price Associates,   Appreciation Fund, Dividend Growth
Inc. and T. Rowe Price Group, Inc.          Fund, Equity Income Fund, and
                                            Growth & Income Fund
-------------------------------------------------------------------------------
Kara Cheseby, 10/9/63                       Vice President, Institutional
Vice President, T. Rowe Price Associates,   Equity Funds, Mid-Cap Value Fund,
Inc. and T. Rowe Price Group, Inc.          and Value Fund
-------------------------------------------------------------------------------
Stephanie C. Clancy, 12/19/64               Vice President, Capital
Vice President, T. Rowe Price Associates,   Appreciation Fund, Dividend Growth
Inc. and T. Rowe Price Group, Inc.          Fund, Global Technology Fund, and
                                            Institutional Equity Funds
-------------------------------------------------------------------------------
                                            Vice President, Developing
Giri Devulapally, 11/18/67                  Technologies Fund, Dividend Growth
Vice President, T. Rowe Price Associates,   Fund, Equity Income Fund, Global
Inc. and T. Rowe Price Group, Inc.          Technology Fund, Growth & Income
                                            Fund, Media & Telecommunications
                                            Fund, New America Growth Fund, and
                                            Science & Technology Fund
-------------------------------------------------------------------------------
Wendy R. Diffenbaugh, 10/2/53               Vice President, Balanced Fund and
Assistant Vice President, T. Rowe Price     Index Trust
Associates, Inc.
-------------------------------------------------------------------------------
Anna M. Dopkin, 9/5/67                      President, Financial Services Fund;
Vice President, T. Rowe Price Associates,   Vice President, Growth Stock Fund,
Inc. and T. Rowe Price Group, Inc.          Institutional Equity Funds, Mid-Cap
                                            Growth Fund, New Horizons Fund, and
                                            Real Estate Fund
-------------------------------------------------------------------------------
Donald J. Easley, 11/28/71                  Vice President, Blue Chip Growth
                                            Fund, Dividend Growth Fund, and
                                            Science & Technology Fund
-------------------------------------------------------------------------------
Hugh M. Evans III, 5/17/66                  Vice President, Institutional
Vice President, T. Rowe Price Associates,   Equity Funds, New Era Fund,
Inc. and T. Rowe Price Group, Inc.          Small-Cap Stock Fund, and Small-Cap
                                            Value Fund
-------------------------------------------------------------------------------
John R. Ford, 11/25/57                      Vice President, Growth Stock Fund
Managing Director, T. Rowe Price
Associates, Inc. and T. Rowe Price Group,
Inc.; Chief Investment Officer, Director,
and Vice President, T. Rowe Price
International, Inc.
-------------------------------------------------------------------------------
Abigail J. Fulton, 12/19/69                 Vice President, Financial Services
Vice President, T. Rowe Price Group, Inc.   Fund
-------------------------------------------------------------------------------
                                            President, Global Technology Fund
Robert N. Gensler, 10/18/57                 and Media & Telecommunications
Vice President, T. Rowe Price Associates,   Fund; Vice President, Blue Chip
Inc. and T. Rowe Price Group, Inc.          Growth Fund, Developing
                                            Technologies Fund, Growth Stock
                                            Fund, Institutional Equity Funds,
                                            Mid-Cap Growth Fund, New Horizons
                                            Fund, and Science & Technology Fund
-------------------------------------------------------------------------------
                                            Vice President, Blue Chip Growth
Eric M. Gerster, 3/23/71                    Fund, Developing Technologies Fund,
Vice President, T. Rowe Price Associates,   Global Technology Fund, Growth
Inc. and T. Rowe Price Group, Inc.          Stock Fund, Media &
                                            Telecommunications Fund, Mid-Cap
                                            Growth Fund, New America Growth
                                            Fund, New Horizons Fund, and
                                            Science & Technology Fund
-------------------------------------------------------------------------------
David R. Giroux, 6/8/75                     Vice President, Mid-Cap Value Fund
Assistant Vice President, T. Rowe Price     and Value Fund
Associates, Inc.
-------------------------------------------------------------------------------
Jill L. Hauser, 6/23/58                     Vice President, Blue Chip Growth
Vice President, T. Rowe Price Associates,   Fund, Developing Technologies Fund,
Inc. and T. Rowe Price Group, Inc.          Global Technology Fund, Growth
                                            Stock Fund, New Horizons Fund, and
                                            Science & Technology Fund
-------------------------------------------------------------------------------
Francies W. Hawks, 2/2/44                   Assistant Vice President, New
Assistant Vice President, T. Rowe Price     Horizons Fund and Small-Cap Value
Associates, Inc.                            Fund
-------------------------------------------------------------------------------
Ann M. Holcomb, 1/16/72                     Vice President, Index Trust
Assistant Vice President, T. Rowe Price
Associates, Inc.
-------------------------------------------------------------------------------
Michael W. Holton, 9/25/68                  Vice President, Capital Opportunity
Vice President, T. Rowe Price Associates,   Fund, Dividend Growth Fund,
Inc. and T. Rowe Price Group, Inc.          Financial Services Fund, Growth &
                                            Income Fund, Institutional Equity
                                            Funds, and Value Fund
-------------------------------------------------------------------------------
Henry H. Hopkins, 12/23/42                  Vice President, all funds
Managing Director, T. Rowe Price
Associates, Inc.; Director and Managing
Director, T. Rowe Price Group, Inc.; Vice
President, T. Rowe Price International,
Inc. and T. Rowe Price Retirement Plan
Services, Inc.; Vice President and
Director, T. Rowe Price Investment
Services, Inc., T. Rowe Price Services,
Inc., and T. Rowe Price Trust Company
-------------------------------------------------------------------------------
Thomas J. Huber, 9/23/66                    President, Dividend Growth Fund;
Vice President, T. Rowe Price Associates,   Vice President, Institutional
Inc. and T. Rowe Price Group, Inc.          Equity Funds
-------------------------------------------------------------------------------
Stephen C. Jansen, 12/12/68                 Vice President, Blue Chip Growth
Vice President, T. Rowe Price Associates,   Fund, Dividend Growth Fund, Global
Inc. and T. Rowe Price Group, Inc.          Technology Fund, Growth & Income
                                            Fund, Growth Stock Fund, and Media
                                            & Telecommunications Fund
-------------------------------------------------------------------------------
                                            President, Health Sciences Fund;
Kris H. Jenner, 2/5/62                      Vice President, Blue Chip Growth
Vice President, T. Rowe Price Associates,   Fund, Growth Stock Fund,
Inc. and T. Rowe Price Group, Inc.          Institutional Equity Funds, Mid-Cap
                                            Growth Fund, New Horizons Fund, and
                                            Small-Cap Stock Fund
-------------------------------------------------------------------------------
Lewis Johnson, 9/20/69                      Vice President, New Era Fund

-------------------------------------------------------------------------------
Terral M. Jordan, 8/13/45                   Vice President, Developing
Vice President, T. Rowe Price Associates,   Technologies Fund and Science &
Inc. and T. Rowe Price Group, Inc.          Technology Fund
-------------------------------------------------------------------------------
Susan J. Klein, 4/18/50                     Vice President, Financial Services
Assistant Vice President, T. Rowe Price     Fund and Small-Cap Value Fund
Associates, Inc.
-------------------------------------------------------------------------------
J. Jeffrey Lang, 1/10/62                    Vice President, all funds
Vice President, T. Rowe Price Associates,
Inc. and T. Rowe Price Trust Company
-------------------------------------------------------------------------------
David M. Lee, 11/13/62                      President, Real Estate Fund; Vice
Vice President, T. Rowe Price Associates,   President, Dividend Growth Fund and
Inc. and T. Rowe Price Group, Inc.          New Era Fund
-------------------------------------------------------------------------------
Christopher R. Leonard, 1/11/73             Vice President, Blue Chip Growth
                                            Fund and Health Sciences Fund
-------------------------------------------------------------------------------
Nathaniel S. Levy, 7/13/62                  Vice President, Balanced Fund
Vice President, T. Rowe Price Associates,
Inc. and T. Rowe Price Group, Inc.
-------------------------------------------------------------------------------
John D. Linehan, 1/21/65                    Vice President, Equity Income Fund,
Vice President, T. Rowe Price Associates,   Institutional Equity Funds, New Era
Inc., T. Rowe Price Group, Inc., and T.     Fund, and Value Fund
Rowe Price International, Inc.
-------------------------------------------------------------------------------
Patricia B. Lippert, 1/12/53                Secretary, all funds
Assistant Vice President, T. Rowe Price
Associates, Inc. and T. Rowe Price
Investment Services, Inc.
-------------------------------------------------------------------------------
Robert J. Marcotte, 3/6/62                  Vice President, Institutional
Vice President, T. Rowe Price Associates,   Equity Funds, Mid-Cap Growth Fund,
Inc. and T. Rowe Price Group, Inc.          and New America Growth Fund
-------------------------------------------------------------------------------
Gregory A. McCrickard, 10/19/58             President, Mid-Cap Value Fund and
Managing Director, T. Rowe Price            Small-Cap Stock Fund; Executive
Associates, Inc. and T. Rowe Price Group,   Vice President, Institutional
Inc.; Vice President, T. Rowe Price Trust   Equity Funds; Vice President,
Company                                     Small-Cap Value Fund
-------------------------------------------------------------------------------
David S. Middleton, 1/18/56                 Controller, all funds
Vice President, T. Rowe Price Associates,
Inc., T. Rowe Price Group, Inc., and T.
Rowe Price Trust Company
-------------------------------------------------------------------------------
                                            Vice President, Institutional
Joseph M. Milano, 9/14/72                   Equity Funds, Mid-Cap Growth Fund,
Vice President, T. Rowe Price Associates,   Mid-Cap Value Fund, New America
Inc. and T. Rowe Price Group, Inc.          Growth Fund, New Horizons Fund,
                                            Small-Cap Stock Fund, and Small-Cap
                                            Value Fund
-------------------------------------------------------------------------------
Raymond A. Mills, 12/3/60                   Vice President, Balanced Fund and
Vice President, T. Rowe Price Associates,   Index Trust
Inc. and T. Rowe Price Group, Inc.
-------------------------------------------------------------------------------
Mary C. Munoz, 12/2/62                      Vice President, Index Trust
Assistant Vice President, T. Rowe Price
Associates, Inc.
-------------------------------------------------------------------------------
Edmund M. Notzon III, 10/1/45               Vice President, Balanced Fund
Managing Director, T. Rowe Price
Associates, Inc. and T. Rowe Price Group,
Inc.; Vice President, T. Rowe Price
Investment Services, Inc. and T. Rowe
Price Trust Company
-------------------------------------------------------------------------------
Charles M. Ober, 4/20/50                    President, New Era Fund; Vice
Vice President, T. Rowe Price Associates,   President, Capital Appreciation
Inc. and T. Rowe Price Group, Inc.          Fund and Real Estate Fund
-------------------------------------------------------------------------------
Curt J. Organt, 1/5/68                      Vice President, Small-Cap Stock
                                            Fund
-------------------------------------------------------------------------------
Charles G. Pepin, 4/23/66                   Vice President, Health Sciences
 Vice President, T. Rowe Price              Fund, Institutional Equity Funds,
Associates, Inc. and T. Rowe Price Group,   Mid-Cap Value Fund, New Horizons
Inc.                                        Fund, Small-Cap Stock Fund, and
                                            Small-Cap Value Fund
-------------------------------------------------------------------------------
Donald J. Peters, 7/3/59                    Vice President, Diversified
Vice President, T. Rowe Price Associates,   Small-Cap Growth Fund and Dividend
Inc. and T. Rowe Price Group, Inc.          Growth Fund
-------------------------------------------------------------------------------
D. James Prey III, 11/26/59                 Vice President, Global Technology
Vice President, T. Rowe Price Associates,   Fund, Media & Telecommunications
Inc. and T. Rowe Price Group, Inc.          Fund, and Science & Technology Fund
-------------------------------------------------------------------------------
Larry J. Puglia, 8/25/60                    President, Blue Chip Growth Fund;
Managing Director, T. Rowe Price            Vice President, Dividend Growth
Associates, Inc. and T. Rowe Price Group,   Fund, Financial Services Fund, and
Inc.                                        Growth Stock Fund
-------------------------------------------------------------------------------
Karen M. Regan, 4/16/67                     Vice President, Growth & Income
                                            Fund and Real Estate Fund
-------------------------------------------------------------------------------
Brian C. Rogers, 6/27/55                    President, Equity Income Fund and
Managing Director, T. Rowe Price;           Value Fund; Executive Vice
Director and Managing Director, T. Rowe     President, Institutional Equity
Price Group, Inc.; Vice President, T.       Funds; Vice President, Capital
Rowe Price Trust Company                    Appreciation Fund and Real Estate
                                            Fund
-------------------------------------------------------------------------------
Philip W. Ruedi, 7/2/71                     Vice President, New Horizons Fund
Vice President, T. Rowe Price Associates,
Inc. and T. Rowe Price Group, Inc.
-------------------------------------------------------------------------------
Robert W. Sharps, 6/10/71                   President, Growth & Income Fund,
Vice President, T. Rowe Price Associates,   Growth & Income Fund; Vice
Inc. and T. Rowe Price Group, Inc.          President, Blue Chip Growth Fund,
                                            Financial Services Fund, and
                                            Institutional Equity Funds
-------------------------------------------------------------------------------
Robert W. Smith, 4/11/61                    President, Growth Stock Fund;
Managing Director, T. Rowe Price and T.     Executive Vice President,
Rowe Price Group, Inc.; Vice President,     Institutional Equity Funds; Vice
T. Rowe Price International, Inc.           President, Blue Chip Growth Fund,
                                            Growth & Income Fund, Media &
                                            Telecommunications Fund, and New
                                            America Growth Fund
-------------------------------------------------------------------------------
Michael F. Sola, 7/21/69                    President, Developing Technologies
Vice President, T. Rowe Price and T. Rowe   Fund and Science & Technology Fund;
Price Group, Inc.                           Vice President, Institutional
                                            Equity Funds, Mid-Cap Growth Fund,
                                            New Horizons Fund, and Small-Cap
                                            Stock Fund
-------------------------------------------------------------------------------
William J. Stromberg, 3/10/60               President, Capital Opportunity
Managing Director, T. Rowe Price and T.     Fund; Vice President, Blue Chip
Rowe Price Group, Inc.                      Growth Fund, Dividend Growth Fund,
                                            Equity Income Fund, Financial
                                            Services Fund, and Real Estate Fund
-------------------------------------------------------------------------------
Dean Tenerelli, 12/7/64                     Vice President, Media &
Vice President, T. Rowe Price Group, Inc.   Telecommunications Fund
and T. Rowe Price International, Inc.
-------------------------------------------------------------------------------
Justin Thomson, 1/14/68                     Vice President, Developing
Vice President, T. Rowe Price Group, Inc.   Technologies Fund
-------------------------------------------------------------------------------
Mark J. Vaselkiv, 7/22/58                   Vice President, Balanced Fund
Managing Director, T. Rowe Price
Associates, Inc. and T. Rowe Price Group,
Inc.
-------------------------------------------------------------------------------
J. David Wagner, 2/25/74                    Vice President, Financial Services
                                            Fund, Mid-Cap Value Fund, and New
                                            Horizons Fund
-------------------------------------------------------------------------------
John F. Wakeman, 11/25/62                   Executive Vice President, Mid-Cap
Vice President, T. Rowe Price and T. Rowe   Growth Fund; Vice President,
Price Group, Inc.                           Institutional Equity Funds and New
                                            Horizons Fund
-------------------------------------------------------------------------------
                                            Executive Vice President, Mid-Cap
                                            Value Fund and New Era Fund; Vice
David J. Wallack, 7/2/60                    President, Capital Appreciation
Vice President, T. Rowe Price Associates,   Fund, Dividend Growth Fund,
Inc. and T. Rowe Price Group, Inc.          Institutional Equity Funds,
                                            Small-Cap Value Fund, and Value
                                            Fund
-------------------------------------------------------------------------------
Dale E. West, 1/21/69                       Vice President, Media &
Vice President, T. Rowe Price Group, Inc.   Telecommunications Fund
and T. Rowe Price International, Inc.
-------------------------------------------------------------------------------
Richard T. Whitney, 5/7/58                  President, Balanced Fund,
Managing Director, T. Rowe Price and T.     Diversified Small-Cap Growth Fund,
Rowe Price Group, Inc.; Vice President,     and Index Trust; Vice President,
T. Rowe Price Trust Company and             Capital Opportunity Fund,
T. Rowe Price International, Inc.           Institutional Equity Funds, and
                                            Small-Cap Stock Fund
-------------------------------------------------------------------------------
Paul W. Wojcik, 11/28/70                    Executive Vice President,
Vice President, T. Rowe Price Associates,   Diversified Small-Cap Growth Fund
Inc. and T. Rowe Price Group, Inc.
-------------------------------------------------------------------------------
R. Candler Young, 9/28/71                   Vice President, Growth & Income
Assistant Vice President, T. Rowe Price     Fund, Mid-Cap Growth Fund, and New
Associates, Inc.                            America Growth Fund
-------------------------------------------------------------------------------
</TABLE>






                                       36

<PAGE>



                                       37

<PAGE>



                                       38

<PAGE>



                                       39

<PAGE>



                                       40

<PAGE>



                                       41

<PAGE>





(a)
  Unless otherwise indicated, the officers have been employees of T. Rowe Price
  or T. Rowe Price International for at least five years.


                           Director 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 T. Rowe Price International does not receive any remuneration
   from the fund.


                                       42

<PAGE>





<TABLE>
<CAPTION>
Name of Person,                   Aggregate Compensation From                   Total Compensation From Fund and
Position                          Fund(a)                                       Fund Complex Paid to Directors(b)
--------------------------------  --------------------------------------------  ---------------------------------
-------------------------------------------------------------------------------------------------------------------
<C>                               <S>
Balanced Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                262                           $110,000
Anthony W. Deering/c/                                                      262                            110,000
Donald W. Dick, Jr.                                                 1,803                              110,000
David K. Fagin                                                      2,553                              112,000
F. Pierce Linaweaver/c/                                                    311                            113,000
Hannes M. Merriman                                                       2,521                            110,000
John G. Schreiber/c/                                                       311                            113,000
Hubert D. Vos                                                       2,594                              111,000
Paul M. Wythes                                                      1,742                              113,000
-------------------------------------------------------------------------------------------------------------------
Blue Chip Growth Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                715                           $110,000
Anthony W. Deering/c/                                                      715                            110,000
Donald W. Dick, Jr.                                                 3,973                              110,000
David K. Fagin                                                      7,057                              112,000
F. Pierce Linaweaver/c/                                                    911                            113,000
Hannes M. Merriman                                                       6,925                            110,000
John G. Schreiber/c/                                                       911                            113,000
Hubert D. Vos                                                       7,186                              111,000
Paul M. Wythes                                                      4,324                              113,000
-------------------------------------------------------------------------------------------------------------------
Capital Appreciation Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                223                           $110,000
Anthony W. Deering/c/                                                      223                            110,000
Donald W. Dick, Jr.                                                 1,499                              110,000
David K. Fagin                                                      1,974                              112,000
F. Pierce Linaweaver/c/                                                    263                            113,000
Hannes M. Merriman                                                       1,947                            110,000
John G. Schreiber/c/                                                       263                            113,000
Hubert D. Vos                                                       1,986                              111,000
Paul M. Wythes                                                      1,558                              113,000
-------------------------------------------------------------------------------------------------------------------
Capital Opportunity Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                100                           $110,000
Anthony W. Deering/c/                                                      100                            110,000
Donald W. Dick, Jr.                                                   863                              110,000
David K. Fagin                                                        998                              112,000
F. Pierce Linaweaver/c/                                                    102                            113,000
Hannes M. Merriman                                                         997                            110,000
John G. Schreiber/c/                                                       102                            113,000
Hubert D. Vos                                                       1,000                              111,000
Paul M. Wythes                                                        867                              113,000
-------------------------------------------------------------------------------------------------------------------
Developing Technologies Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                 95                           $110,000
Anthony W. Deering/c/                                                       95                            110,000
Donald W. Dick, Jr.                                                   932                              110,000
David K. Fagin                                                        940                              112,000
F. Pierce Linaweaver/c/                                                     96                            113,000
Hannes M. Merriman                                                         940                            110,000
John G. Schreiber/c/                                                        96                            113,000
Hubert D. Vos                                                         940                              111,000
Paul M. Wythes                                                        933                              113,000
-------------------------------------------------------------------------------------------------------------------
Diversified Small-Cap Growth Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                 99                           $110,000
Anthony W. Deering/c/                                                       99                            110,000
Donald W. Dick, Jr.                                                   958                              110,000
David K. Fagin                                                        987                              112,000
F. Pierce Linaweaver/c/                                                    101                            113,000
Hannes M. Merriman                                                         986                            110,000
John G. Schreiber/c/                                                       101                            113,000
Hubert D. Vos                                                         987                              111,000
Paul M. Wythes                                                        961                              113,000
-------------------------------------------------------------------------------------------------------------------
Dividend Growth Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                158                           $110,000
Anthony W. Deering/c/                                                      158                            110,000
Donald W. Dick, Jr.                                                 1,263                              110,000
David K. Fagin                                                      1,553                              112,000
F. Pierce Linaweaver/c/                                                    178                            113,000
Hannes M. Merriman                                                       1,541                            110,000
John G. Schreiber/c/                                                       178                            113,000
Hubert D. Vos                                                       1,566                              111,000
Paul M. Wythes                                                      1,299                              113,000
-------------------------------------------------------------------------------------------------------------------
Equity Income Fund
Calvin W. Burnett, Ph.D./c/                                                833                           $110,000
Anthony W. Deering/c/                                                      833                            110,000
Donald W. Dick, Jr.                                                 5,351                              110,000
David K. Fagin                                                      8,666                              112,000
F. Pierce Linaweaver/c/                                                    931                            113,000
Hannes M. Merriman                                                       8,601                            110,000
John G. Schreiber/c/                                                       931                            113,000
Hubert D. Vos                                                       8,921                              111,000
Paul M. Wythes                                                      5,682                              113,000
-------------------------------------------------------------------------------------------------------------------
Equity Index 500 Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                416                           $110,000
Anthony W. Deering/c/                                                      416                            110,000
Donald W. Dick, Jr.                                                 2,656                              110,000
David K. Fagin                                                      4,128                              112,000
F. Pierce Linaweaver/c/                                                    485                            113,000
Hannes M. Merriman                                                       4,082                            110,000
John G. Schreiber/c/                                                       485                            113,000
Hubert D. Vos                                                       4,215                              111,000
Paul M. Wythes                                                      2,813                              113,000
-------------------------------------------------------------------------------------------------------------------
Extended Equity Market Index Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                 99                           $110,000
Anthony W. Deering/c/                                                       99                            110,000
Donald W. Dick, Jr.                                                   959                              110,000
David K. Fagin                                                        991                              112,000
F. Pierce Linaweaver/c/                                                    101                            113,000
Hannes M. Merriman                                                         989                            110,000
John G. Schreiber/c/                                                       101                            113,000
Hubert D. Vos                                                         992                              111,000
Paul M. Wythes                                                        963                              113,000
-------------------------------------------------------------------------------------------------------------------
Financial Services Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                121                           $110,000
Anthony W. Deering/c/                                                      121                            110,000
Donald W. Dick, Jr.                                                 1,074                              110,000
David K. Fagin                                                      1,202                              112,000
F. Pierce Linaweaver/c/                                                    127                            113,000
Hannes M. Merriman                                                       1,198                            110,000
John G. Schreiber/c/                                                       127                            113,000
Hubert D. Vos                                                       1,210                              111,000
Paul M. Wythes                                                      1,087                              113,000
-------------------------------------------------------------------------------------------------------------------
Global Technology Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                100                           $110,000
Anthony W. Deering/c/                                                      100                            110,000
Donald W. Dick, Jr.                                                 1,530                              110,000
David K. Fagin                                                      1,043                              112,000
F. Pierce Linaweaver/c/                                                    148                            113,000
Hannes M. Merriman                                                       1,011                            110,000
John G. Schreiber/c/                                                       148                            113,000
Hubert D. Vos                                                       1,030                              111,000
Paul M. Wythes                                                      1,581                              113,000
-------------------------------------------------------------------------------------------------------------------
Growth & Income Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                317                           $110,000
Anthony W. Deering/c/                                                      317                            110,000
Donald W. Dick, Jr.                                                 2,179                              110,000
David K. Fagin                                                      3,259                              112,000
F. Pierce Linaweaver/c/                                                    367                            113,000
Hannes M. Merriman                                                       3,225                            110,000
John G. Schreiber/c/                                                       367                            113,000
Hubert D. Vos                                                       3,329                              111,000
Paul M. Wythes                                                      2,299                              113,000
-------------------------------------------------------------------------------------------------------------------
Growth Stock Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                528                           $110,000
Anthony W. Deering/c/                                                      528                            110,000
Donald W. Dick, Jr.                                                 3,245                              110,000
David K. Fagin                                                      5,230                              112,000
F. Pierce Linaweaver/c/                                                    643                            113,000
Hannes M. Merriman                                                       5,153                            110,000
John G. Schreiber/c/                                                       643                            113,000
Hubert D. Vos                                                       5,336                              111,000
Paul M. Wythes                                                      3,476                              113,000
-------------------------------------------------------------------------------------------------------------------
Health Sciences Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                180                           $110,000
Anthony W. Deering/c/                                                      180                            110,000
Donald W. Dick, Jr.                                                 1,333                              110,000
David K. Fagin                                                      1,671                              112,000
F. Pierce Linaweaver/c/                                                    199                            113,000
Hannes M. Merriman                                                       1,659                            110,000
John G. Schreiber/c/                                                       199                            113,000
Hubert D. Vos                                                       1,689                              111,000
Paul M. Wythes                                                      1,371                              113,000
-------------------------------------------------------------------------------------------------------------------
Institutional Large-Cap Growth Fund(d)
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                 93                           $110,000
Anthony W. Deering/c/                                                       93                            110,000
Donald W. Dick, Jr.                                                    93                              110,000
David K. Fagin                                                         96                              112,000
F. Pierce Linaweaver/c/                                                     98                            113,000
Hannes M. Merriman                                                          92                            110,000
John G. Schreiber/c/                                                        98                            113,000
Hubert D. Vos                                                          95                              111,000
Paul M. Wythes                                                         98                              113,000
-------------------------------------------------------------------------------------------------------------------
Institutional Large-Cap Value Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                 93                           $110,000
Anthony W. Deering/c/                                                       93                            110,000
Donald W. Dick, Jr.                                                   923                              110,000
David K. Fagin                                                        925                              112,000
F. Pierce Linaweaver/c/                                                     93                            113,000
Hannes M. Merriman                                                         925                            110,000
John G. Schreiber/c/                                                        93                            113,000
Hubert D. Vos                                                         925                              111,000
Paul M. Wythes                                                        924                              113,000
-------------------------------------------------------------------------------------------------------------------
Institutional Mid-Cap Equity Growth Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                120                           $110,000
Anthony W. Deering/c/                                                      120                            110,000
Donald W. Dick, Jr.                                                 1,059                              110,000
David K. Fagin                                                      1,174                              112,000
F. Pierce Linaweaver/c/                                                    126                            113,000
Hannes M. Merriman                                                       1,170                            110,000
John G. Schreiber/c/                                                       126                            113,000
Hubert D. Vos                                                       1,180                              111,000
Paul M. Wythes                                                      1,072                              113,000
-------------------------------------------------------------------------------------------------------------------
Institutional Small-Cap Stock Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                117                           $110,000
Anthony W. Deering/c/                                                      117                            110,000
Donald W. Dick, Jr.                                                 1,038                              110,000
David K. Fagin                                                      1,132                              112,000
F. Pierce Linaweaver/c/                                                    122                            113,000
Hannes M. Merriman                                                       1,129                            110,000
John G. Schreiber/c/                                                       122                            113,000
Hubert D. Vos                                                       1,137                              111,000
Paul M. Wythes                                                      1,047                              113,000
-------------------------------------------------------------------------------------------------------------------
Media & Telecommunications Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                154                           $110,000
Anthony W. Deering/c/                                                      154                            110,000
Donald W. Dick, Jr.                                                 1,271                              110,000
David K. Fagin                                                      1,571                              112,000
F. Pierce Linaweaver/c/                                                    170                            113,000
Hannes M. Merriman                                                       1,560                            110,000
John G. Schreiber/c/                                                       170                            113,000
Hubert D. Vos                                                       1,588                              111,000
Paul M. Wythes                                                      1,304                              113,000
-------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                698                           $110,000
Anthony W. Deering/c/                                                      698                            110,000
Donald W. Dick, Jr.                                                 3,808                              110,000
David K. Fagin                                                      6,670                              112,000
F. Pierce Linaweaver/c/                                                    824                            113,000
Hannes M. Merriman                                                       6,586                            110,000
John G. Schreiber/c/                                                       824                            113,000
Hubert D. Vos                                                       6,790                              111,000
Paul M. Wythes                                                      4,067                              113,000
-------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                135                           $110,000
Anthony W. Deering/c/                                                      135                            110,000
Donald W. Dick, Jr.                                                 1,096                              110,000
David K. Fagin                                                      1,277                              112,000
F. Pierce Linaweaver/c/                                                    206                            113,000
Hannes M. Merriman                                                       1,228                            110,000
John G. Schreiber/c/                                                       206                            113,000
Hubert D. Vos                                                       1,259                              111,000
Paul M. Wythes                                                      1,173                              113,000
-------------------------------------------------------------------------------------------------------------------
New America Growth Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                201                           $110,000
Anthony W. Deering/c/                                                      201                            110,000
Donald W. Dick, Jr.                                                 1,544                              110,000
David K. Fagin                                                      2,082                              112,000
F. Pierce Linaweaver/c/                                                    230                            113,000
Hannes M. Merriman                                                       2,063                            110,000
John G. Schreiber/c/                                                       230                            113,000
Hubert D. Vos                                                       2,113                              111,000
Paul M. Wythes                                                      1,606                              113,000
-------------------------------------------------------------------------------------------------------------------
New Era Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                194                           $110,000
Anthony W. Deering/c/                                                      194                            110,000
Donald W. Dick, Jr.                                                 1,465                              110,000
David K. Fagin                                                      1,924                              112,000
F. Pierce Linaweaver/c/                                                    215                            113,000
Hannes M. Merriman                                                       1,910                            110,000
John G. Schreiber/c/                                                       215                            113,000
Hubert D. Vos                                                       1,948                              111,000
Paul M. Wythes                                                      1,511                              113,000
-------------------------------------------------------------------------------------------------------------------
New Horizons Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                585                           $110,000
Anthony W. Deering/c/                                                      585                            110,000
Donald W. Dick, Jr.                                                 3,530                              110,000
David K. Fagin                                                      5,742                              112,000
F. Pierce Linaweaver/c/                                                    696                            113,000
Hannes M. Merriman                                                       5,668                            110,000
John G. Schreiber/c/                                                       696                            113,000
Hubert D. Vos                                                       5,868                              111,000
Paul M. Wythes                                                      3,771                              113,000
-------------------------------------------------------------------------------------------------------------------
Real Estate Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                 99                           $110,000
Anthony W. Deering/c/                                                       99                            110,000
Donald W. Dick, Jr.                                                   949                              110,000
David K. Fagin                                                        972                              112,000
F. Pierce Linaweaver/c/                                                    101                            113,000
Hannes M. Merriman                                                         970                            110,000
John G. Schreiber/c/                                                       101                            113,000
Hubert D. Vos                                                         972                              111,000
Paul M. Wythes                                                        953                              113,000
-------------------------------------------------------------------------------------------------------------------
Science & Technology Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                623                           $110,000
Anthony W. Deering/c/                                                      623                            110,000
Donald W. Dick, Jr.                                                 4,163                              110,000
David K. Fagin                                                      7,457                              112,000
F. Pierce Linaweaver/c/                                                    793                            113,000
Hannes M. Merriman                                                       7,343                            110,000
John G. Schreiber/c/                                                       793                            113,000
Hubert D. Vos                                                       7,650                              111,000
Paul M. Wythes                                                      4,532                              113,000
-------------------------------------------------------------------------------------------------------------------
Small-Cap Stock Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                368                           $110,000
Anthony W. Deering/c/                                                      368                            110,000
Donald W. Dick, Jr.                                                 2,177                              110,000
David K. Fagin                                                      3,203                              112,000
F. Pierce Linaweaver/c/                                                    427                            113,000
Hannes M. Merriman                                                       3,164                            110,000
John G. Schreiber/c/                                                       427                            113,000
Hubert D. Vos                                                       3,243                              111,000
Paul M. Wythes                                                      2,283                              113,000
-------------------------------------------------------------------------------------------------------------------
Small-Cap Value Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                274                           $110,000
Anthony W. Deering/c/                                                      274                            110,000
Donald W. Dick, Jr.                                                 1,726                              110,000
David K. Fagin                                                      2,397                              112,000
F. Pierce Linaweaver/c/                                                    339                            113,000
Hannes M. Merriman                                                       2,353                            110,000
John G. Schreiber/c/                                                       339                            113,000
Hubert D. Vos                                                       2,411                              111,000
Paul M. Wythes                                                      1,820                              113,000
-------------------------------------------------------------------------------------------------------------------
Total Equity Market Index Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                111                           $110,000
Anthony W. Deering/c/                                                      111                            110,000
Donald W. Dick, Jr.                                                 1,015                              110,000
David K. Fagin                                                      1,094                              112,000
F. Pierce Linaweaver/c/                                                    116                            113,000
Hannes M. Merriman                                                       1,090                            110,000
John G. Schreiber/c/                                                       116                            113,000
Hubert D. Vos                                                       1,097                              111,000
Paul M. Wythes                                                      1,025                              113,000
-------------------------------------------------------------------------------------------------------------------
Value Fund
                                                                             $
Calvin W. Burnett, Ph.D./c/                                                213                           $110,000
Anthony W. Deering/c/                                                      213                            110,000
Donald W. Dick, Jr.                                                 1,502                              110,000
David K. Fagin                                                      1,991                              112,000
F. Pierce Linaweaver/c/                                                    251                            113,000
Hannes M. Merriman                                                       1,965                            110,000
John G. Schreiber/c/                                                       251                            113,000
Hubert D. Vos                                                       2,004                              111,000
Paul M. Wythes                                                      1,560                              113,000
-------------------------------------------------------------------------------------------------------------------
</TABLE>






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                                       44

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                                       46

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                                       47

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                                       48

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                                       49

<PAGE>


 (a) Amounts in this column are based on accrued compensation for fiscal year
   2001.

 (b) Amounts in this column are based on compensation received for fiscal
   year 2001. The T. Rowe Price complex included 97 funds as of December 31,
   2001.

 (c) Newly elected to fund Board as of October 24, 2001.
 (d) Expenses estimated for the period October 31, 2001 through December 31,
   2001.


                 Directors' Holdings in the T. Rowe Price Funds

   The following table sets forth the T. Rowe Price fund holdings of the
   independent and inside directors, as of December 31, 2001.



<TABLE>
<CAPTION>
                              Burnett  Deering     Dick     Fagin    Linaweaver  Merriman  Schreiber    Vos       Wythes
-----------------------------------------------------------                                                     ----------
<S>                           <C>
    Aggregate Holdings,
    -------------------         $1-     over      over      over       over       over       over      over      over
         All Funds            $10,000  $100,000  $100,000  $100,000   $100,000   $100,000  $100,000   $100,000  $100,000
         ---------
--------------------------------------------------------------------------------------------------------------------------
 Balanced Fund                 None      None      None      None $50,001-$100,000 None      None       None       None

--------------------------------------------------------------------------------------------------------------------------
 Blue Chip Growth Fund         None      None   $1-$10,0$10,001-$50,000   None         over      None       None       None
                                                                                     $100,000
------------------------------------------------------------------------------------------------------------------------------
 Blue Chip Growth              None      None      None        None            None         None      None       None       None
 Fund-Advisor Class
-----------------------------------------------------------------------------------------------------------------------------------
 Blue Chip Growth Portfolio    None      None      None        None            None         None      None       None       None
-----------------------------------------------------------------------------------------------------------------------------------
 California Tax-Free Bond      None      None      None        None            None         None      None       None       None
 Fund
-----------------------------------------------------------------------------------------------------------------------------------
 California Tax-Free Money     None      None      None        None            None         None      None       None       None
 Fund
-----------------------------------------------------------------------------------------------------------------------------------
 Capital Appreciation Fund     None      None      over        None            None      $10,001-$50,000   None       None     None
                                                 $100,000
------------------------------------------------------------------------------------------------------------------------------------
 Capital Opportunity Fund      None      None      None        None            None           None         None       None     None
------------------------------------------------------------------------------------------------------------------------------------
 Corporate Income Fund         None      None      None        None            None           None         None       None     None
------------------------------------------------------------------------------------------------------------------------------------
 Developing Technologies       None      None      None        None            None           None         None       None     None
 Fund
------------------------------------------------------------------------------------------------------------------------------------
 Diversified Small-Cap         None      None      None        None            None           None         None       None     None
 Growth Fund
------------------------------------------------------------------------------------------------------------------------------------
 Dividend Growth Fund          None      None      None   $10,001-$50,000      None      $10,001-$50,000   None       None     None

------------------------------------------------------------------------------------------------------------------------------------
 Emerging Europe &             None      None      None        None            None           None         None       None     None
 Mediterranean Fund
------------------------------------------------------------------------------------------------------------------------------------
 Emerging Markets Bond Fund    None      None      None        None            None           None         None       None     None
------------------------------------------------------------------------------------------------------------------------------------
 Emerging Markets Stock Fund   None      None      None        None            None           None         None       None     None
------------------------------------------------------------------------------------------------------------------------------------
 Equity Income Fund            None      None$50,001-$100,$50,001-$100,000     None      $50,001-$100,000  None  $10,001-$50,00None

------------------------------------------------------------------------------------------------------------------------------------
 Equity Income Fund-Advisor    None      None         None            None            None            None         None       None
 Class
------------------------------------------------------------------------------------------------------------------------------------
 Equity Income Portfolio       None      None         None            None            None            None         None       None
------------------------------------------------------------------------------------------------------------------------------------
 Equity Index 500 Fund         None      None         None            None            None       over $100,000     None       None

------------------------------------------------------------------------------------------------------------------------------------
 Equity Index 500 Portfolio    None      None         None            None            None            None         None       None
------------------------------------------------------------------------------------------------------------------------------------
 European Stock Fund           None      over    $10,001-$50,000 $10,001-$50,000      None            None         None       None
                                       $100,000
------------------------------------------------------------------------------------------------------------------------------------
 Extended Equity Market        None      None         None            None            None            None         None       None
 Index Fund
------------------------------------------------------------------------------------------------------------------------------------
 Financial Services Fund       None      None    $10,001-$50,000      None            None            None         None       None

------------------------------------------------------------------------------------------------------------------------------------
 Florida Intermediate          None      None         None            None            None            None         None       None
 Tax-Free Fund
------------------------------------------------------------------------------------------------------------------------------------
 Georgia Tax-Free Bond Fund    None      None         None            None            None            None         None       None
------------------------------------------------------------------------------------------------------------------------------------
 Global Stock Fund             None      None         None            None            None            None         None       None
------------------------------------------------------------------------------------------------------------------------------------
 Global Technology Fund        None      None         None            None            None            None         None       None
------------------------------------------------------------------------------------------------------------------------------------
 GNMA Fund                     None      None         None            None            None            None         over       None
                                                                                                                 $100,000
------------------------------------------------------------------------------------------------------------------------------------
 Government Reserve            None      None         None            None            None            None         None       None
 Investment Fund
------------------------------------------------------------------------------------------------------------------------------------
 Growth & Income Fund          None      None      $1-$10,000         None            None            None         over       No$10,
                                                                                                                 $100,000
------------------------------------------------------------------------------------------------------------------------------------
 Growth Stock Fund             None      None    $10,001-$50,000      None       $10,001-$50,000      None         None       None

------------------------------------------------------------------------------------------------------------------------------------
 Growth Stock Fund-Advisor     None      None         None            None            None            None         None       None
 Class
------------------------------------------------------------------------------------------------------------------------------------
 Health Sciences Fund          None      None    $10,001-$50,000      None            None            None         None $50,001-$100

------------------------------------------------------------------------------------------------------------------------------------
 Health Sciences Portfolio     None      None         None            None            None            None         None       None
------------------------------------------------------------------------------------------------------------------------------------
 High Yield Fund             $1-$10,000  None    $10,001-$50,000      None            None            None         over       None
                                                                                                                 $100,000
------------------------------------------------------------------------------------------------------------------------------------
 High Yield Fund-Advisor        None      None         None            None            None            None         None      None
 Class
------------------------------------------------------------------------------------------------------------------------------------
 Institutional Foreign          None      None         None            None            None            None         None      None
 Equity Fund
------------------------------------------------------------------------------------------------------------------------------------
 Institutional Large-Cap        None      None         None            None            None            None         None      None
 Growth Fund
------------------------------------------------------------------------------------------------------------------------------------
 Institutional Large-Cap        None      None         None            None            None            None         None      None
 Value Fund
------------------------------------------------------------------------------------------------------------------------------------
 Institutional Mid-Cap          None      None         None            None            None            None         None      None
 Equity Growth Fund
------------------------------------------------------------------------------------------------------------------------------------
 Institutional Small-Cap        None      None         None            None            None            None         None      None
 Stock Fund
------------------------------------------------------------------------------------------------------------------------------------
 International Bond Fund        None      None   $50,001-$100,000      None            None            None         None      None

------------------------------------------------------------------------------------------------------------------------------------
 International Bond             None      None         None            None            None            None         None      None
 Fund-Advisor Class
------------------------------------------------------------------------------------------------------------------------------------
 International Discovery        None$50,001-$100,0$10,001-$50,000      None       over $100,000        None         None      None
 Fund
------------------------------------------------------------------------------------------------------------------------------------
 International Equity Index     None         None            None            None            None            None         None    No
 Fund
------------------------------------------------------------------------------------------------------------------------------------
 International Growth &         None         None            None            None            None            None         None    No
 Income Fund
------------------------------------------------------------------------------------------------------------------------------------
 International Stock Fund    $1-$10,000 over $100,000        None       over $100,000        None            None         None    No

------------------------------------------------------------------------------------------------------------------------------------
 International Stock            None         None            None            None            None            None         None    No
 Fund-Advisor Class
------------------------------------------------------------------------------------------------------------------------------------
 International Stock            None         None            None            None            None            None         None    No
 Portfolio
------------------------------------------------------------------------------------------------------------------------------------
 Japan Fund                     None         None            None            None            None            None         None    No
------------------------------------------------------------------------------------------------------------------------------------
 Latin America Fund             None         None            None            None            None            None         None    No
------------------------------------------------------------------------------------------------------------------------------------
 Limited-Term Bond Portfolio    None         None            None            None            None            None         None    No
------------------------------------------------------------------------------------------------------------------------------------
 Maryland Short-Term            None         None            None            None            None            None         None    No
 Tax-Free Bond Fund
------------------------------------------------------------------------------------------------------------------------------------
 Maryland Tax-Free Bond Fund    None         None            None            None            None            None         None    No
------------------------------------------------------------------------------------------------------------------------------------
 Maryland Tax-Free Money        None         None            None            None            None            None         None    No
 Fund
------------------------------------------------------------------------------------------------------------------------------------
 Media & Telecommunications     None    $10,001-$50,000      None            None            None            None         None    No
 Fund
------------------------------------------------------------------------------------------------------------------------------------
 Mid-Cap Growth Fund            None         None         $1-$10,000    $10,001-$50,000      None            None         No$10,001-

------------------------------------------------------------------------------------------------------------------------------------
 Mid-Cap Growth Fund-Advisor    None         None            None            None            None            None         None    No
 Class
------------------------------------------------------------------------------------------------------------------------------------
 Mid-Cap Growth Portfolio       None         None            None            None            None            None         None    No
------------------------------------------------------------------------------------------------------------------------------------
 Mid-Cap Value Fund             None         None            None            None            None            None         None    No
------------------------------------------------------------------------------------------------------------------------------------
 New America Growth Fund        None         None            None            None       over $100,000   $10,001-$50,000   None    No
------------------------------------------------------------------------------------------------------------------------------------
 New America Growth             None         None            None            None            None            None         None    No
 Portfolio
------------------------------------------------------------------------------------------------------------------------------------
 New Asia Fund                  None         None            None       $10,001-$50,000      None            None         None    No

------------------------------------------------------------------------------------------------------------------------------------
 New Era Fund                   None         None            None            None            None            None         No$10,001-

------------------------------------------------------------------------------------------------------------------------------------
 New Horizons Fund           $1-$10,000      None       $10,001-$50,000   $1-$10,000    over $100,000   $10,001-$50,000   No$10,001-

------------------------------------------------------------------------------------------------------------------------------------
 New Income Fund                None         None      $50,001-$100,000      None            None            None         over    No
                                                                                                                        $100,000
------------------------------------------------------------------------------------------------------------------------------------
 New Jersey Tax-Free Bond       None         None            None            None            None            None         None    No
 Fund
------------------------------------------------------------------------------------------------------------------------------------
 New York Tax-Free Bond Fund    None         None            None            None            None            None         None    No
------------------------------------------------------------------------------------------------------------------------------------
 New York Tax-Free Money        None         None            None            None            None            None         None    No
 Fund
------------------------------------------------------------------------------------------------------------------------------------
 Personal Strategy Balanced     None         None            None            None            None            None         None    No
 Fund
------------------------------------------------------------------------------------------------------------------------------------
 Personal Strategy Balanced     None         None            None            None            None            None         None    No
 Portfolio
------------------------------------------------------------------------------------------------------------------------------------
 Personal Strategy Growth       None         None            None            None            None            None         None    No
 Fund
------------------------------------------------------------------------------------------------------------------------------------
 Personal Strategy Income       None         None            None            None            None            None         None    No
 Fund
------------------------------------------------------------------------------------------------------------------------------------
 Prime Reserve Fund          $1-$10,000      None       over $100,000        None         $1-$10,000   $50,001-$100,0$10,001-$50,0No

------------------------------------------------------------------------------------------------------------------------------------
 Prime Reserve Fund-PLUS        None         None            None            None            None            None           None
 Class
------------------------------------------------------------------------------------------------------------------------------------
 Prime Reserve Portfolio        None         None            None            None            None            None           None
------------------------------------------------------------------------------------------------------------------------------------
 Real Estate Fund               None         None            None            None            None            None           None
------------------------------------------------------------------------------------------------------------------------------------
 Reserve Investment Fund        None         None            None            None            None            None           None
------------------------------------------------------------------------------------------------------------------------------------
 Science & Technology Fund      None    over $100,000        None            None            None       $10,001-$50,000     No$10,00
------------------------------------------------------------------------------------------------------------------------------------
 Science & Technology           None         None            None            None            None            None           None
 Fund-Advisor Class
------------------------------------------------------------------------------------------------------------------------------------
 Short-Term Bond Fund           None         None            None      $50,001-$100,000      None            None           over
                                                                                                                          $100,000
------------------------------------------------------------------------------------------------------------------------------------
 Small-Cap Stock Fund           None         None         $1-$10,000    $10,001-$50,000      None            None           No$10,00

------------------------------------------------------------------------------------------------------------------------------------
 Small-Cap Stock                None         None            None            None            None            None           None
 Fund-Advisor Class
------------------------------------------------------------------------------------------------------------------------------------
 Small-Cap Value Fund           None         None            None            None            None            None           No$10,00

------------------------------------------------------------------------------------------------------------------------------------
 Small-Cap Value                None         None            None            None            None            None           None
 Fund-Advisor Class
------------------------------------------------------------------------------------------------------------------------------------
 Spectrum Growth Fund           None         None            None            None            None       over $100,000       None

------------------------------------------------------------------------------------------------------------------------------------
 Spectrum Income Fund           None         None            None            None            None            None           None
------------------------------------------------------------------------------------------------------------------------------------
 Spectrum International Fund    None         None            None            None            None       $10,001-$50,000     None
------------------------------------------------------------------------------------------------------------------------------------
 Summit Cash Reserves Fund      None         None            None       over $100,000        None            None           over
                                                                                                                          $100,000
------------------------------------------------------------------------------------------------------------------------------------
 Summit GNMA Fund               None         None            None            None            None            None           None
------------------------------------------------------------------------------------------------------------------------------------
 Summit Municipal Income        None         None            None            None            None            None           over
 Fund                                                                                                                     $100,000
------------------------------------------------------------------------------------------------------------------------------------
 Summit Municipal               None         None            None            None            None            None           over
 Intermediate Fund                                                                                                        $100,000
------------------------------------------------------------------------------------------------------------------------------------
 Summit Municipal Money         None         None            None            None            None      $50,001-$100,000     None
 Market Fund
------------------------------------------------------------------------------------------------------------------------------------
 Tax-Efficient Balanced Fund    None         None            None      $50,001-$100,000      None            None           None
------------------------------------------------------------------------------------------------------------------------------------
 Tax-Efficient Growth Fund      None         None            None       $10,001-$50,000      None            None           None
------------------------------------------------------------------------------------------------------------------------------------
 Tax-Efficient Multi-Cap        None         None            None            None            None            None           None
 Growth Fund
------------------------------------------------------------------------------------------------------------------------------------
 Tax-Exempt Money Fund          None         None            None            None            None            None           over
                                                                                                                          $100,000
------------------------------------------------------------------------------------------------------------------------------------
 Tax-Exempt Money Fund-PLUS     None         None            None            None            None            None           None
 Class
------------------------------------------------------------------------------------------------------------------------------------
 Tax-Free High Yield Fund       None         None            None            None            None            None           over
                                                                                                                          $100,000
------------------------------------------------------------------------------------------------------------------------------------
 Tax-Free Income Fund           None         None            None            None            None            None           over
                                                                                                                          $100,000
------------------------------------------------------------------------------------------------------------------------------------
 Tax-Free Intermediate Bond     None         None            None            None            None            None           None
 Fund
------------------------------------------------------------------------------------------------------------------------------------
 Tax-Free Short-Intermediate    None         None            None            None            None            None           None
 Fund
------------------------------------------------------------------------------------------------------------------------------------
 Total Equity Market Index      None         None            None            None            None            None           None
 Fund
------------------------------------------------------------------------------------------------------------------------------------
 U.S. Bond Index Fund           None         None            None            None            None            None           None
------------------------------------------------------------------------------------------------------------------------------------
 U.S. Treasury Intermediate     None         None       over $100,000        None            None            None           over
 Fund                                                                                                                     $100,000
------------------------------------------------------------------------------------------------------------------------------------
 U.S. Treasury Long-Term        None         None            None            None            None            None           over
 Fund                                                                                                                     $100,000
------------------------------------------------------------------------------------------------------------------------------------
 U.S. Treasury Money Fund       None         None            None            None            None            None           over
                                                                                                                          $100,000
------------------------------------------------------------------------------------------------------------------------------------
 Value Fund                     None         None       $10,001-$50,000      None            None      $50,001-$100,000     over
                                                                                                                          $100,000
------------------------------------------------------------------------------------------------------------------------------------
 Value Fund-Advisor Class       None         None            None            None            None            None           None
------------------------------------------------------------------------------------------------------------------------------------
 Virginia Tax-Free Bond Fund    None         None            None            None            None            None           None
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>






                                       50

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                                       52

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                                       53

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                                       54

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<TABLE>
<CAPTION>
                            Kennedy           Laporte           Riepe            Testa
--------------------------------------------------------------------------------------------
<S>                     <C>
 Aggregate Holdings,
 -------------------
      All Funds          over $100,000     over $100,000    over $100,000   over $100,000
      ---------
--------------------------------------------------------------------------------------------
 Balanced Fund                None              None        over $100,000        None
--------------------------------------------------------------------------------------------
 Blue Chip Growth Fund        None              None            None             None
--------------------------------------------------------------------------------------------
 Blue Chip Growth             None              None            None             None
 Fund-Advisor Class
--------------------------------------------------------------------------------------------
 Blue Chip Growth             None              None            None             None
 Portfolio
--------------------------------------------------------------------------------------------
 California Tax-Free          None              None            None             None
 Bond Fund
--------------------------------------------------------------------------------------------
 California Tax-Free          None              None            None             None
 Money Fund
--------------------------------------------------------------------------------------------
 Capital Appreciation    over $100,000     over $100,000    over $100,000        None
 Fund
--------------------------------------------------------------------------------------------
 Capital Opportunity    $10,001-$50,000   $50,001-$100,000      None             None
 Fund
--------------------------------------------------------------------------------------------
 Corporate Income Fund        None              None            None             None
--------------------------------------------------------------------------------------------
 Developing                   None         over $100,000        None             None
 Technologies Fund
--------------------------------------------------------------------------------------------
 Diversified Small-Cap        None              None            None             None
 Growth Fund
--------------------------------------------------------------------------------------------
 Dividend Growth Fund    over $100,000          None            None             None
--------------------------------------------------------------------------------------------
 Emerging Europe &            None              None            None             None
 Mediterranean Fund
--------------------------------------------------------------------------------------------
 Emerging Markets Bond        None              None            None             None
 Fund
--------------------------------------------------------------------------------------------
 Emerging Markets             None              None            None         over $100,000
 Stock Fund
--------------------------------------------------------------------------------------------
 Equity Income Fund     $10,001-$50,000         None        over $100,000        None
--------------------------------------------------------------------------------------------
 Equity Income                None              None            None             None
 Fund-Advisor Class
--------------------------------------------------------------------------------------------
 Equity Income                None              None            None             None
 Portfolio
--------------------------------------------------------------------------------------------
 Equity Index 500 Fund        None              None            None             None
--------------------------------------------------------------------------------------------
 Equity Index 500             None              None            None             None
 Portfolio
--------------------------------------------------------------------------------------------
 European Stock Fund          None        $10,001-$50,000       None             None
--------------------------------------------------------------------------------------------
 Extended Equity              None              None            None             None
 Market Index Fund
--------------------------------------------------------------------------------------------
 Financial Services      over $100,000          None            None             None
 Fund
--------------------------------------------------------------------------------------------
 Florida Intermediate         None              None            None             None
 Tax-Free Fund
--------------------------------------------------------------------------------------------
 Georgia Tax-Free Bond        None              None            None             None
 Fund
--------------------------------------------------------------------------------------------
 Global Stock Fund            None              None            None             None
--------------------------------------------------------------------------------------------
 Global Technology            None              None            None             None
 Fund
--------------------------------------------------------------------------------------------
 GNMA Fund                    None              None            None             None
--------------------------------------------------------------------------------------------
 Government Reserve           None              None            None             None
 Investment Fund
--------------------------------------------------------------------------------------------
 Growth & Income Fund         None              None        over $100,000        None
--------------------------------------------------------------------------------------------
 Growth Stock Fund            None              None            None             None
--------------------------------------------------------------------------------------------
 Growth Stock                 None              None            None             None
 Fund-Advisor Class
--------------------------------------------------------------------------------------------
 Health Sciences Fund    over $100,000          None            None         over $100,000
--------------------------------------------------------------------------------------------
 Health Sciences              None              None            None             None
 Portfolio
--------------------------------------------------------------------------------------------
 High Yield Fund              None              None        over $100,000        None
--------------------------------------------------------------------------------------------
 High Yield                   None              None            None             None
 Fund-Advisor Class
--------------------------------------------------------------------------------------------
 Institutional Foreign        None              None            None             None
 Equity Fund
--------------------------------------------------------------------------------------------
 Institutional                None              None            None             None
 Large-Cap Growth Fund
--------------------------------------------------------------------------------------------
 Institutional                None              None            None             None
 Large-Cap Value Fund
--------------------------------------------------------------------------------------------
 Institutional Mid-Cap        None              None            None             None
 Equity Growth Fund
--------------------------------------------------------------------------------------------
 Institutional                None              None            None             None
 Small-Cap Stock Fund
--------------------------------------------------------------------------------------------
 International Bond           None              None            None             None
 Fund
--------------------------------------------------------------------------------------------
 International Bond           None              None            None             None
 Fund-Advisor Class
--------------------------------------------------------------------------------------------
 International          $50,001-$100,000   over $100,000     $1-$10,000      over $100,000
 Discovery Fund
--------------------------------------------------------------------------------------------
 International Equity         None              None            None             None
 Index Fund
--------------------------------------------------------------------------------------------
 International Growth         None              None            None             None
 & Income Fund
--------------------------------------------------------------------------------------------
 International Stock     over $100,000     over $100,000    over $100,000    over $100,000
 Fund
--------------------------------------------------------------------------------------------
 International Stock          None              None            None             None
 Fund-Advisor Class
--------------------------------------------------------------------------------------------
 International Stock          None              None            None             None
 Portfolio
--------------------------------------------------------------------------------------------
 Japan Fund                   None              None        over $100,000        None
--------------------------------------------------------------------------------------------
 Latin America Fund      over $100,000          None            None             None
--------------------------------------------------------------------------------------------
 Limited-Term Bond            None              None            None             None
 Portfolio
--------------------------------------------------------------------------------------------
 Maryland Short-Term          None              None            None             None
 Tax-Free Bond Fund
--------------------------------------------------------------------------------------------
 Maryland Tax-Free            None         over $100,000        None             None
 Bond Fund
--------------------------------------------------------------------------------------------
 Maryland Tax-Free            None              None            None             None
 Money Fund
--------------------------------------------------------------------------------------------
 Media &
 Telecommunications      over $100,000          None            None             None
 Fund
--------------------------------------------------------------------------------------------
 Mid-Cap Growth Fund     over $100,000     over $100,000        None         over $100,000
--------------------------------------------------------------------------------------------
 Mid-Cap Growth               None              None            None             None
 Fund-Advisor Class
--------------------------------------------------------------------------------------------
 Mid-Cap Growth               None              None            None             None
 Portfolio
--------------------------------------------------------------------------------------------
 Mid-Cap Value Fund      over $100,000          None            None             None
--------------------------------------------------------------------------------------------
 New America Growth           None         over $100,000        None             None
 Fund
--------------------------------------------------------------------------------------------
 New America Growth           None              None            None             None
 Portfolio
--------------------------------------------------------------------------------------------
 New Asia Fund           over $100,000     over $100,000     $1-$10,000          None
--------------------------------------------------------------------------------------------
 New Era Fund            over $100,000          None            None             None
--------------------------------------------------------------------------------------------
 New Horizons Fund            None         over $100,000        None         over $100,000
--------------------------------------------------------------------------------------------
 New Income Fund              None        $10,001-$50,000       None             None
--------------------------------------------------------------------------------------------
 New Jersey Tax-Free          None              None            None             None
 Bond Fund
--------------------------------------------------------------------------------------------
 New York Tax-Free            None              None            None             None
 Bond Fund
--------------------------------------------------------------------------------------------
 New York Tax-Free            None              None            None             None
 Money Fund
--------------------------------------------------------------------------------------------
 Personal Strategy            None              None            None             None
 Balanced Fund
--------------------------------------------------------------------------------------------
 Personal Strategy            None              None            None             None
 Balanced Portfolio
--------------------------------------------------------------------------------------------
 Personal Strategy            None              None            None             None
 Growth Fund
--------------------------------------------------------------------------------------------
 Personal Strategy            None              None            None             None
 Income Fund
--------------------------------------------------------------------------------------------
 Prime Reserve Fund      over $100,000    $10,001-$50,000   over $100,000   $10,001-$50,000
--------------------------------------------------------------------------------------------
 Prime Reserve                None              None            None             None
 Fund-PLUS Class
--------------------------------------------------------------------------------------------
 Prime Reserve                None              None            None             None
 Portfolio
--------------------------------------------------------------------------------------------
 Real Estate Fund             None              None            None             None
--------------------------------------------------------------------------------------------
 Reserve Investment           None              None            None             None
 Fund
--------------------------------------------------------------------------------------------
 Science & Technology         None         over $100,000    over $100,000        None
 Fund
--------------------------------------------------------------------------------------------
 Science & Technology         None              None            None             None
 Fund-Advisor Class
--------------------------------------------------------------------------------------------
 Short-Term Bond Fund         None              None        over $100,000        None
--------------------------------------------------------------------------------------------
 Small-Cap Stock Fund    over $100,000          None            None             None
--------------------------------------------------------------------------------------------
 Small-Cap Stock              None              None            None             None
 Fund-Advisor Class
--------------------------------------------------------------------------------------------
 Small-Cap Value Fund         None              None        over $100,000    over $100,000
--------------------------------------------------------------------------------------------
 Small-Cap Value              None              None            None             None
 Fund-Advisor Class
--------------------------------------------------------------------------------------------
 Spectrum Growth Fund         None              None            None             None
--------------------------------------------------------------------------------------------
 Spectrum Income Fund         None              None            None             None
--------------------------------------------------------------------------------------------
 Spectrum                     None              None            None             None
 International Fund
--------------------------------------------------------------------------------------------
 Summit Cash Reserves    over $100,000     over $100,000    over $100,000    over $100,000
 Fund
--------------------------------------------------------------------------------------------
 Summit GNMA Fund             None              None            None             None
--------------------------------------------------------------------------------------------
 Summit Municipal             None              None            None             None
 Income Fund
--------------------------------------------------------------------------------------------
 Summit Municipal             None              None            None         over $100,000
 Intermediate Fund
--------------------------------------------------------------------------------------------
 Summit Municipal        over $100,000          None        over $100,000        None
 Money Market Fund
--------------------------------------------------------------------------------------------
 Tax-Efficient                None              None            None             None
 Balanced Fund
--------------------------------------------------------------------------------------------
 Tax-Efficient Growth         None              None            None             None
 Fund
--------------------------------------------------------------------------------------------
 Tax-Efficient                None              None            None             None
 Multi-Cap Growth Fund
--------------------------------------------------------------------------------------------
 Tax-Exempt Money Fund   over $100,000          None            None             None
--------------------------------------------------------------------------------------------
 Tax-Exempt Money             None              None            None             None
 Fund-PLUS Class
--------------------------------------------------------------------------------------------
 Tax-Free High Yield          None              None            None             None
 Fund
--------------------------------------------------------------------------------------------
 Tax-Free Income Fund         None              None            None        $10,001-$50,000
--------------------------------------------------------------------------------------------
 Tax-Free Intermediate        None              None            None             None
 Bond Fund
--------------------------------------------------------------------------------------------
 Tax-Free
 Short-Intermediate           None              None        over $100,000        None
 Fund
--------------------------------------------------------------------------------------------
 Total Equity Market          None              None        over $100,000        None
 Index Fund
--------------------------------------------------------------------------------------------
 U.S. Bond Index Fund         None              None            None             None
--------------------------------------------------------------------------------------------
 U.S. Treasury                None              None            None             None
 Intermediate Fund
--------------------------------------------------------------------------------------------
 U.S. Treasury                None              None            None             None
 Long-Term Fund
--------------------------------------------------------------------------------------------
 U.S. Treasury Money          None              None            None             None
 Fund
--------------------------------------------------------------------------------------------
 Value Fund              over $100,000     over $100,000    over $100,000    over $100,000
--------------------------------------------------------------------------------------------
 Value Fund-Advisor           None              None            None             None
 Class
--------------------------------------------------------------------------------------------
 Virginia Tax-Free            None              None            None             None
 Bond Fund
--------------------------------------------------------------------------------------------
</TABLE>






                                       55

<PAGE>



                                       56

<PAGE>



                                       57

<PAGE>

 PRINCIPAL HOLDERS OF SECURITIES
 -------------------------------------------------------------------------------

   As of March 28, 2002, the officers and directors of the fund, as a group,
   owned less than 1% of the outstanding shares of the fund.

   As of March 28, 2002, the following shareholders of record owned more than 5%
   of the outstanding shares of any share class of the fund:

   Balanced (54.16%), Capital Appreciation (20.27%), Equity Income (25.08%),
   Extended Equity Market Index (17.50%), Growth & Income (26.22%), Growth Stock
   (23.60%), New America Growth (32.62%), New Era (5.54%), New Horizons
   (30.76%), Science & Technology (20.86%), and Small-Cap Value Funds (20.59%):
   T. Rowe Price Trust Company, Inc./a/, Attn.: TRPS Institutional Control
   Department, P.O. Box 17215, Baltimore, Maryland 21297-1215;

   /a/ T. Rowe Price Trust Company is a wholly owned subsidiary of T. Rowe Price
       Associates, Inc., which is a wholly owned subsidiary of T. Rowe Price
       Group, Inc., each a Maryland corporation. T. Rowe Price Trust Company is
       not the beneficial owner of these shares. Such shares are held of record
       by T. Rowe Price Trust Company and are voted by various retirement plans
       and retirement participants.

   Blue Chip Growth Fund (40.59%): T. Rowe Price Retirement Plan Services/b/ TR
   Blue Chip Growth Fund, Attn.: Asset Reconciliations, P.O. Box 17215,
   Baltimore, Maryland 21297-1215;

   /b/ T. Rowe Price Retirement Plan Services is a wholly owned subsidiary of T.
       Rowe Price Associates, Inc., which is a wholly owned subsidiary of T.
       Rowe Price Group, Inc., each a Maryland corporation. T. Rowe Price
       Retirement Plan Services is not the beneficial owner of these shares.
       Such shares are held of record by T. Rowe Price Retirement Plan Services
       and are voted by various retirement plans and retirement participants.

   Capital Appreciation (6.98%), Financial Services (6.81%), Mid-Cap Growth
   (8.22%), New Era (6.86%), and Small-Cap Value Funds (5.52%): Charles Schwab &
   Co. Inc., Reinvest Account, Attn.: Mutual Fund Department, 101 Montgomery
   Street, San Francisco, California 94104-4122;

   Capital Opportunity (5.75%) and Value Funds (22.41%): T. Rowe Price Trust
   Company, Inc., Attn.: Installation Team for TRPS Institutional Control
   Department, P.O. Box 17125, Baltimore, Maryland 21297-1125;

   Developing Technologies Fund (10.55%): Trustees of T. Rowe Price, 401k Plus
   Plan, Attn.: Financial Reporting Department, P.O. Box 89000, Baltimore,
   Maryland 21289-0001;

   Dividend Growth Fund (17.47%): T. Rowe Price Trust Company, Inc., Dividend
   Growth Fund (DGF), Attn.: Asset Reconciliation, P.O. Box 17215, Baltimore,
   Maryland 21297-1215;

   Equity Index 500 Fund (40.63%): T. Rowe Price Trust Company, Inc., Attn.: RPS
   Control Department, 10090 Red Run Boulevard, Owings Mills, Maryland
   21117-4842;

   Growth & Income (13.37%), New Era (5.10%), New Horizons (10.25%), and Mid-Cap
   Value Funds (24.33%): Pirateline & Company, T. Rowe Price Associates, Attn.:
   Fund Accounting Department, 100 East Pratt Street, Baltimore, Maryland
   21202-1009;

   Institutional Large-Cap Growth Fund (100.00%): T. Rowe Price Associates/c/,
   Attn.: Financial Reporting Department, 100 East Pratt Street, Baltimore,
   Maryland 21202-1009;

   /c/ T. Rowe Price Associates is a wholly owned subsidiary of T. Rowe Price
       Group, Inc., each a Maryland corporation. Securities owned by T. Rowe
       Price Associates are the result of its contribution to the fund at the
       fund's inception in order to provide the fund with sufficient capital to
       invest in accordance with its investment program. At the level of
       ownership indicated, T. Rowe Price Associates would be able to determine
       the outcome of most issues that were submitted to shareholders for vote.

   Institutional Large-Cap Value Fund (100.00%): T. Rowe Price Finance Inc./d/,
   802 West Street, Suite 301, Wilmington, Delaware 19801-1526;


                                       58

<PAGE>


   /d/ T. Rowe Price Finance is a wholly owned subsidiary of T. Rowe Price
       Associates, Inc., which is a wholly owned subsidiary of T. Rowe Price
       Group, Inc., each a Maryland corporation. Securities owned by T. Rowe
       Price Finance are the result of its contribution to the fund at the
       fund's inception in order to provide the fund with sufficient capital to
       invest in accordance with its investment program. At the level of
       ownership indicated, T. Rowe Price Finance would be able to determine the
       outcome of most issues that were submitted to shareholders for vote.

   Institutional Mid-Cap Equity Growth Fund: Atlantic Trust Company NA (8.74%),
   Attn.: Kathy Trull, 100 Federal Street, 37th Floor, Boston, Massachusetts
   02110-1802; Atlantic Trust Company NA (11.49%), Attn.: Kathy Trull, 100
   Federal Street, 37th Floor, Boston, Massachusetts 02110-1802; Stichting
   Pensioenfonds (8.05%), Van de Koninklijke Nedlloyd, P.O. Box 1982, 3000 B Z
   Rotterdam, The Netherlands; CIBC World Markets Agt. for CIBC (5.17%), Mellon
   Trust Co. TR Nexfor Master Investment Trust Funds, 161 Bay Street, P.O. Box
   500, Toronto, Ontario Canada M5J2S8; Band & Company (5.19%), c/o Firstar
   Bank, P.O. Box 1787, Milwaukee, Wisconsin 53201-1787;

   Institutional Small-Cap Stock Fund: Burlington Resources Inc. (5.19%), 5051
   Westheimer Road, Suite 1400, Houston, Texas 77056-5686; Brookline
   Contributory Retirement Systems (5.88%), 333 Washington Street, Brookline,
   Massachusetts 02445-6853; Northern Trust Co. TR Illinois Tool Works Pension
   Trust U/A DTD 1/ 8/90 (14.52%), Attn.: Robert T. Callahan, 3600 West Lake
   Avenue, Glenview, Illinois 60025-1215; Deutsche Trust Bank Limited FBO Tokkin
   Fund No. 5064 (12.94%), Sanno Park Tower 2-11-1, Nagatacho Chiyoda KU, Tokyo,
   Japan 100-6172; Sigler & Co. Cust, Smithsonian Institution (20.60%), Chase
   Manhattan Bank, Mark R. Pensec, AVP, 4 New York Plaza 2nd Floor, New York,
   New York 10004-2413;

   Media & Telecommunications Fund (6.57%): T. Rowe Price Trust Company, Inc.,
   Media & Telecommunications Fund, DST #121, P.O. Box 17215, Baltimore,
   Maryland 21297-1215;

   Mid-Cap Growth Fund (18.02%): T. Rowe Price Trust Company, Inc., Attn.: Asset
   Reconciliations, P.O. Box 17215, Baltimore, Maryland 21297-1215;

   Mid-Cap Value Fund: National Financial Services for the Exclusive Benefit of
   Our Customers (6.58%), 200 Liberty, One Financial Center 5th Floor, New York,
   New York 10281-1003;

   New America Growth Fund (8.80%): Wilmington Trust Co. TR, FBO Continental
   Airlines Inc., DCP Plan A/C #49277-0, c/o Mutual Funds, P.O. Box 8971,
   Wilmington, Delaware 19899-8971;

   Real Estate Fund (11.05%): T. Rowe Price Retirement Plan Services, Inc.,
   Kimley-Horn Retirement Savings PL, Plan #105315, NB-Custom Blended Fund #122
   REF, P.O. Box 17215, Baltimore, Maryland 21297-1215;

   Small-Cap Stock Fund: T. Rowe Price Trust Company, Inc. (18.16%), T. Rowe
   Price OTC Fund, Attn.: RPS Control Department, P.O. Box 17215, Baltimore,
   Maryland 21297-1215; Norwest Bank Company NA TR FBO State of Minnesota
   Deferred Compensation Plan, Minnesota State Deferred Compensation Plan Trust
   (7.57%), c/o Great West Life Recordkeeper, 8515 East Orchard Road, Attn.:
   2T2, Englewood, Colorado 80111-5037.



 INVESTMENT MANAGEMENT SERVICES
 -------------------------------------------------------------------------------
   Services

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

   principal business and portfolio brokerage. . In addition to these services,
   T. Rowe Price provides the fund with certain corporate administrative
   services, including: maintaining the fund's corporate existence and corporate
   records; registering and qualifying fund shares under federal laws;
   monitoring the financial, accounting, and administrative functions of the
   fund; maintaining liaison with the agents employed by the fund such as the



                                       59

<PAGE>


   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.

   Approval of Management Agreements

   The Management Agreements of the funds are reviewed each year by the funds'
   Boards of Directors to determine whether the agreements should be renewed for
   a one-year period or not. Renewal of the agreements requires the majority
   vote of the Board of Directors, including a majority of the independent
   directors. Each fund board consists of a majority of independent directors.

   In approving the continuation of the investment management agreements for
   each fund for the current year, the Board reviewed reports prepared by T.
   Rowe Price, materials provided by fund counsel and counsel to the independent
   directors, as well as other information. The Board considered the nature and
   quality of the investment management services provided to the fund by T. Rowe
   Price under the investment management agreements and the personnel who
   provide these services, including the historical performance of the fund
   compared to its benchmark index and its peer group of similar investment
   companies. In addition, the Board considered other services provided to the
   fund by T. Rowe Price and its affiliates, such as administrative services,
   shareholder services, fund accounting, assistance in meeting legal and
   regulatory requirements, and other services necessary for the fund's
   operation.

   The Board considered the fees paid to T. Rowe Price for investment management
   services, as well as compensation paid to T. Rowe Price or its affiliates for
   other non-advisory services provided to the fund. In connection with its
   review of the fees paid to T. Rowe Price and its affiliates, the Board
   reviewed information provided by Lipper Inc. comparing the fund's advisory
   fee rate and overall expense ratio with those of comparable funds. Where
   applicable, the Board considered that the fund's advisory fee structure
   reflects breakpoints, which permit fee reductions resulting from economies of
   scale. Additionally and where applicable, the Board considered the
   contractual fee waivers and expense reimbursements agreed to by T. Rowe
   Price.

   The Board also considered the costs incurred and the benefits received by T.
   Rowe Price and its affiliates, including the profitability of T. Rowe Price
   from providing advisory services to the fund. In reviewing data concerning
   the profitability of T. Rowe Price, the Board examined, among other
   components, the cost allocation methodology utilized in the presentation. In
   addition, the Board considered other potential benefits to T. Rowe Price,
   such as the research services T. Rowe Price receives from brokers in return
   for allocating fund brokerage in a "soft dollar" arrangement.

   Based on the information reviewed and the discussions, the Board concluded
   that it was satisfied with the nature and quality of the services provided by
   T. Rowe Price to the fund and that the management fee rate was reasonable in
   relation to such services. The independent directors of the fund were
   assisted by independent legal counsel in their deliberations.

   All funds except Equity Index 500, Extended Equity Market Index, Total Equity
   Market Index, Institutional Large-Cap Growth, Institutional Large-Cap Value,
   Institutional Mid-Cap Equity Growth, and Institutional Small-Cap Stock Funds


   Management Fee

   The fund pays a fee ("Fee") which consists of two components: a Group
   Management Fee ("Group Fee") and an Individual Fund Fee ("Fund Fee"). The Fee
   is paid monthly to T. Rowe Price on the first business day of the next
   succeeding calendar month and is calculated as described next.

   The monthly Group Fee ("Monthly Group Fee") is the sum of the daily Group Fee
   accruals ("Daily Group Fee Accruals") for each month. The Daily Group Fee
   Accrual for any particular day is computed by multiplying the Price Funds'
   group fee accrual as determined below ("Daily Price Funds' Group Fee


                                       60

<PAGE>

   Accrual") by the ratio of the Price Fund's net assets for that day to the sum
   of the aggregate net assets of the Price Funds for that day. The Daily Price
   Funds' Group Fee Accrual for any particular day is calculated by multiplying
   the fraction of one (1) over the number of calendar days in the year by the
   annualized Daily Price Funds' Group Fee Accrual for that day as determined in
   accordance with the following schedule:
<TABLE>
<CAPTION>
<S>                                    <C>
                                       0.480%  First $1 billion  0.360%  Next $2 billion   0.310%  Next $16 billion
                                       ------------------------------------------------------------------------------
                                       0.450%  Next $1 billion   0.350%  Next $2 billion   0.305%  Next $30 billion
                                       ------------------------------------------------------------------------------
                                       0.420%  Next $1 billion   0.340%  Next $5 billion   0.300%  Next $40 billion
                                       ------------------------------------------------------------------------------
                                       0.390%  Next $1 billion   0.330%  Next $10 billion  0.295%  Thereafter
                                       ------------------------------------------------------------------------------
                                       0.370%  Next $1 billion   0.320%  Next $10 billion

</TABLE>



   For the purpose of calculating the Group Fee, the Price Funds include all the
   mutual funds distributed by Investment Services (excluding the T. Rowe Price
   Spectrum Funds, and any institutional, index, or private label mutual funds).
   For the purpose of calculating the Daily Price Funds' Group Fee Accrual for
   any particular day, the net assets of each Price Fund are determined in
   accordance with the fund's prospectus as of the close of business on the
   previous business day on which the fund was open for business.

   The monthly Fund Fee ("Monthly Fund Fee") is the sum of the daily Fund Fee
   accruals ("Daily Fund Fee Accruals") for each month. The Daily Fund Fee
   Accrual for any particular day is computed by multiplying the fraction of one
   (1) over the number of calendar days in the year by the individual Fund Fee
   Rate and multiplying this product by the net assets of the fund for that day,
   as determined in accordance with the fund's prospectus as of the close of
   business on the previous business day on which the fund was open for

   business. The individual fund fees  are listed in the following chart:




<TABLE>
<CAPTION>
<S>                                <C>
Balanced Fund                         0.15%
Blue Chip Growth Fund                 0.30%
Capital Appreciation Fund             0.30%
Capital Opportunity Fund              0.35%
Developing Technologies Fund          0.60%
Diversified Small-Cap Growth Fund     0.35%
Dividend Growth Fund                  0.20%
Equity Income Fund                    0.25%
Financial Services Fund               0.35%
Global Technology Fund                0.45%
Growth & Income Fund                  0.25%
Growth Stock Fund                     0.25%
Health Sciences Fund                  0.35%
Media & Telecommunications Fund       0.35%
Mid-Cap Growth Fund                   0.35%
Mid-Cap Value Fund                    0.35%
New America Growth Fund               0.35%
New Era Fund                          0.25%
New Horizons Fund                     0.35%
Real Estate Fund                      0.30%
Science & Technology Fund             0.35%
Small-Cap Stock Fund                  0.45%
Small-Cap Value Fund                  0.35%
Value Fund                            0.35%
</TABLE>






                                       61

<PAGE>


   Equity Index 500 Fund
   The fund pays T. Rowe Price an annual investment management fee in monthly
   installments of 0.15% of the average daily net asset value of the fund.

   Extended Equity Market Index and Total Equity Market Index Funds
   The Management Agreement between each fund and T. Rowe Price provides that
   each fund pays T. Rowe

   Price an annual fee of 0.40%. The agreement also provides that T. Rowe Price
   will pay all expenses of each fund's operations, except interest, taxes,
   brokerage commissions, and other charges incident to the purchase, sale, or
   lending of the fund's portfolio securities, directors' fees, and expenses
   (including counsel fees and expenses) and such non-recurring 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 for the funds 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.

   Institutional Large-Cap Growth Fund
   The fund pays T. Rowe Price an annual investment management fee in monthly
   installments of 0.55% of the average daily net asset value of the fund.

   Institutional Large-Cap Value Fund
   The fund pays T. Rowe Price an annual investment management fee in monthly
   installments of 0.55% of the average daily net asset value of the fund.

   Institutional Mid-Cap Equity Growth Fund
   The fund pays T. Rowe Price an annual investment management fee in monthly
   installments of 0.60% of the average daily net asset value of the fund.

   Institutional Small-Cap Stock Fund
   The fund pays T. Rowe Price an annual investment management fee in monthly
   installments of 0.65% of the average daily net asset value of the fund.


                     Expense Limitations and Reimbursements

   The following chart sets forth expense ratio limitations and the periods for
   which they are effective. For each, T. Rowe Price has agreed to bear any fund
   expenses (other than interest, taxes, brokerage, and other expenditures that
   are capitalized in accordance with generally accepted accounting principles
   and extraordinary expenses) which would cause the fund's ratio of expenses to

   average net assets to exceed the indicated percentage limitation. . (The
   expense limitation for the Advisor Class relates to operating expenses other
   than management fees and certain other portfolio level expenses such as fees
   for custody, outside directors, and auditors.) The expenses borne by T. Rowe
   Price are subject to reimbursement by the fund through the indicated
   reimbursement date, provided no reimbursement will be made if it would result

  in the fund's expense ratio exceeding its applicable limitation. .

<TABLE>
<CAPTION>
                                                                                                Expense       Reimbursement
                                Fund                                     Limitation Period      -------       -------------
                                ----                                     -----------------       Ratio            Date
-----------------------------------------------------------------------------------------------  -----            ----
                                                                                               Limitation
                                                                                               ----------
                                                                                               -------------------------------
<S>                                                                    <C>
                                                                       January 1, 2002 -
Blue Chip Growth Fund-Advisor Class                                    December 31, 2003                   December 31, 2005
                                                                       August 31, 2000 -
Developing Technologies                                                December 31, 2002         1.50%     December 31, 2004
                                                                       May 1, 2002 - April
Diversified Small-Cap Growth(a)                                        30, 2004                            April 30, 2006
                                                                       January 1, 2002 -
Equity Income Fund-Advisor Class(b)                                    December 31, 2003                   December 31, 2005
                                                                       January 1, 2001 -
Equity Index 500(c)                                                    December 31, 2003                   December 31, 2005
                                                                       September 29, 2000 -
Global Technology                                                      December 31, 2002         1.50%     December 31, 2004
                                                                       January 1, 2002 -
Growth Stock Fund-Advisor Class                                        December 31, 2003                   December 31, 2005
Institutional Large-Cap Growth                                         October 31, 2001 -                  December 31, 2004
                                                                       December 31, 2002
------------------------------------------------------------------------------------------------------------------------------
                                                                       January 1, 2002 -
Institutional Large-Cap Value(d)                                       December 31, 2003                   December 31, 2005
                                                                       January 1, 2002 -
Institutional Small-Cap Stock(e)                                       December 31, 2003                   December 31, 2005
                                                                       January 1, 2002 -
Mid-Cap Growth Fund-Advisor Class(f)                                   December 31, 2003                   December 31, 2005
                                                                       January 1, 2002 -
Real Estate(g)                                                         December 31, 2003                   December 31, 2005
                                                                       January 1, 2002 -
Science & Technology Fund-Advisor Class(h)                             December 31, 2003                   December 31, 2005
                                                                       January 1, 2002 -
Small-Cap Stock Fund-Advisor Class(i)                                  December 31, 2003                   December 31, 2005
                                                                       January 1, 2002 -
Small-Cap Value Fund-Advisor Class(j)                                  December 31, 2003                   December 31, 2005
Value Fund-Advisor Class(k)                                            January 1, 2002 -                   December 31, 2005
                                                                       December 31, 2003
------------------------------------------------------------------------------------------------------------------------------
</TABLE>






                                       62

<PAGE>


 (a) The Diversified Small-Cap Growth Fund previously operated under a
   1.25% limitation that expired December 31, 2000. The reimbursement
   period for this limitation extends through December 31, 2002.

 (b) The Equity Income Fund-Advisor Class previously operated under a 1.00%
   limitation that expired December 31, 2001. The reimbursement period for
   this limitation extends through December 31, 2003.

 (c) The Equity Index 500 Fund previously operated under a 0.35% limitation
   that expired December 31, 2000. The reimbursement period for this
   limitation extends through December 31, 2002.

 (d) The Institutional Large-Cap Value Fund previously operated under a
   0.65% limitation that expired December 31, 2001. The reimbursement
   period for this limitation extends through December 31, 2003.

 (e) The Institutional Small-Cap Stock Fund previously operated under a
   0.75% limitation that expired December 31, 2001. The reimbursement
   period for this limitation extends through December 31, 2003.

 (f) The Mid-Cap Growth Fund-Advisor Class previously operated under a
   1.10% limitation that expired December 31, 2001. The reimbursement
   period for this limitation extends through December 31, 2003.

 (g) The Real Estate Fund previously operated under a 1.00% limitation that
   expired December 31, 2001. The reimbursement period for this limitation
   extends through December 31, 2003.

 (h) The Science & Technology Fund-Advisor Class previously operated under
   a 1.15% limitation that expired December 31, 2001. The reimbursement
   period for this limitation extends through December 31, 2003.

 (i) The Small-Cap Stock Fund-Advisor Class previously operated under a
   1.20% limitation that expired December 31, 2001. The reimbursement
   period for this limitation extends through December 31, 2003.

 (j) The Small-Cap Value Fund-Advisor Class previously operated under a
   1.15% limitation that expired December 31, 2001. The reimbursement
   period for this limitation extends through December 31, 2003.

 (k) The Value Fund-Advisor Class previously operated under a 1.10%
   limitation that expired December 31, 2001. The reimbursement period for
   this limitation extends through December 31, 2003.


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

   Pursuant to the Developing Technologies Fund's current expense limitation,
   $122,000 of management fees were not accrued by the fund for the period ended
   December 31, 2001. At December 31, 2001, unaccrued fees and other expenses in
   the amount of $199,000 remain subject to reimbursement by the fund through
   December 31, 2004.

   Pursuant to the Diversified Small-Cap Growth Fund's previous expense
   limitation, $114,000 of unaccrued fees remain subject to reimbursement by the
   fund through December 31, 2002.


                                       63

<PAGE>


   Pursuant to the Equity Index 500 Fund's previous expense limitation,
   $1,822,000 of management fees were not accrued by the fund for the year ended
   December 31, 2001. At December 31, 2001, unaccrued fees in the amount of
   $1,822,000 remain subject to reimbursement by the fund through December 31,
   2003.

   Pursuant to the Global Technology Fund's current expense limitation, $185,000
   of management fees were not accrued by the fund for the year ended December
   31, 2001.

   Pursuant to the Institutional Large-Cap Growth Fund's current expense
   limitation, $2,000 of management fees were not accrued by the fund for the
   period ended December 31, 2001, and $15,000 of other fund expenses were borne
   by the manager. At December 31, 2001, unaccrued fees and other expenses in
   the amount of $17,000 remain subject to reimbursement by the fund through
   December 31, 2004.

   Pursuant to the Institutional Large-Cap Value Fund's current expense
   limitation, $13,000 of management fees were not accrued by the fund for the
   period ended December 31, 2001, and $89,000 of other fund expenses were borne
   by the manager. At December 31, 2001, unaccrued fees and other expenses in
   the amount of $179,000 remain subject to reimbursement by the fund through
   December 31, 2003.

   Pursuant to the Institutional Small-Cap Stock Fund's current expense
   limitation, $76,000 of previously unaccrued management fees were accrued as
   expenses of the fund for the period ended December 31, 2001.

   Pursuant to the Real Estate Fund's current expense limitation, $140,000 of
   management fees were not accrued by the fund for the year ended December 31,
   2001. At December 31, 2001, unaccrued fees and other expenses in the amount
   of $284,000 remain subject to reimbursement by the fund through December 31,
   2003.


                         Management Fee Compensation

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

<TABLE>
<CAPTION>
                           Fund                                 2001           2000            1999
                           ----                                 ----           ----            ----
<S>                                                         <C>
Balanced                                                     $ 8,542,000    $ 9,675,000     $ 9,154,000
Blue Chip Growth*                                             41,035,000     45,037,000      34,536,000
Capital Appreciation                                           7,570,000      4,963,000       5,793,000
Capital Opportunity                                              559,000        686,000         763,000
Developing Technologies                                           62,000            (b)             (a)
Diversified Small-Cap Growth                                     480,000        679,000         292,000
Dividend Growth                                                3,676,000      4,010,000       6,522,000
Equity Income*                                                57,395,000     58,470,000      75,676,000
Equity Index 500                                               3,554,000      6,234,000       8,301,000
Extended Equity Market Index**                                   300,000        354,000         131,000
Financial Services                                             2,122,000      1,388,000       1,266,000
Global Technology                                                569,000        274,000             (a)
Growth & Income                                               14,691,000     18,013,000      20,605,000
Growth Stock*                                                 27,400,000     33,072,000      29,222,000
Health Sciences                                                5,675,000      4,403,000       2,038,000
Institutional Large-Cap Growth                                       (b)            (a)             (a)
Institutional Large-Cap Value                                        (b)            (b)             (a)
Institutional Mid-Cap Equity Growth                            1,704,000      1,896,000       1,238,000
Institutional Small-Cap Stock                                  1,624,000        432,000             (a)
Media & Telecommunications                                     4,885,000      7,174,000       3,144,000
Mid-Cap Growth*                                               42,179,000     39,493,000      27,412,000
Mid-Cap Value                                                  2,445,000      1,495,000       1,427,000
---------------------------------------------------------------------------------------------------------
New America Growth                                             8,612,000     11,988,000      13,511,000
New Era                                                        6,414,000      6,223,000       6,131,000
New Horizons                                                  36,074,000     45,642,000      33,020,000
Real Estate                                                      207,000        589,000             (b)
Science & Technology*                                         46,472,000     89,979,000      47,361,000
Small-Cap Stock*                                              20,306,000     15,623,000      10,276,000
Small-Cap Value*                                              11,370,000      8,294,000       9,213,000
Total Equity Market Index**                                      766,000        863,000         512,000
Value*                                                         8,231,000      5,644,000       5,699,000
---------------------------------------------------------------------------------------------------------
</TABLE>





                                       64

<PAGE>

  (a) Prior to commencement of operations.

  (b) Due to the fund's expense limitation in effect at that time, no
     management fees were paid by the fund to T. Rowe Price.

  *  The fund has two classes of shares. The management fee is allocated to
     each class based on relative net assets.

  ** All-inclusive fee including Investment Management Fees and
     Administrative Expenses.


   Blue Chip Growth, Equity Income, Growth & Income, Growth Stock, Mid-Cap
   Value, New Era, and New Horizons Funds

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


   Each Agreement provides that, if the Board of Directors of any underlying
   Price fund determines that such underlying fund's share of the aggregate
   expenses of Spectrum Fund is less than the estimated savings to the
   underlying Price fund from the operation of Spectrum Fund, the underlying
   Price fund will bear those expenses in proportion to the average daily value
   of its shares owned by Spectrum Fund, provided further that no underlying
   Price fund will bear such expenses in excess of the estimated savings to it.
   Such savings are expected to result primarily from the elimination of
   numerous separate shareholder accounts which are or would have been invested
   directly in the underlying Price funds and the resulting reduction in
   shareholder servicing costs. Although such cost savings are not certain, the
   estimated savings to the underlying Price funds generated by the operation of
   Spectrum Fund are expected to be sufficient to offset most, if not all, of
   the expenses incurred by Spectrum Fund.

   All funds except Extended Equity Market Index and Total Equity Market Index
   Funds

   Management Related Services

   As noted above, the Management Agreement spells out the expenses to be paid
   by the fund. In addition to the Management Fee, the fund pays for the
   following: shareholder service expenses; custodial, accounting, legal, and
   audit fees; costs of preparing and printing prospectuses and reports sent to
   shareholders; registration fees and expenses; proxy and annual meeting
   expenses (if any); and director fees and expenses.

   T. Rowe Price Services, Inc., a wholly owned subsidiary of T. Rowe Price,
   acts as the fund's transfer and dividend disbursing agent and provides
   shareholder and administrative services. Services for certain types of
   retirement plans are provided by T. Rowe Price Retirement Plan Services,
   Inc., also a wholly owned subsidiary. The address for each is 100 East Pratt
   Street, Baltimore, MD 21202. Additionally, T. Rowe Price, under a separate
   agreement with the fund, provides accounting services to the fund.


   The funds paid the expenses shown in the following table for the fiscal year
   ended December 31, 2001, to T. Rowe Price and its affiliates.


                                       65

<PAGE>


<TABLE>
<CAPTION>
                               Transfer Agent and    Retirement     Accounting
            Fund              Shareholder Services  Subaccounting    Services
            ----              --------------------    Services       --------
                                                      --------
<S>                           <C>
                                   $  812,000                        $ 86,000
Balanced                                             $ 4,385,000
                                    6,167,000                          76,000
Blue Chip Growth                                      10,809,000
Blue Chip Growth
Fund-Advisor Class                      1,000                  0        3,000
                                      900,000                          64,000
Capital Appreciation                                   1,310,000
                                      218,000                          64,000
Capital Opportunity                                       32,000
                                                                       64,000
Developing Technologies                70,000            (*)
                                      250,000                          64,000
Diversified Small-Cap Growth                               1,000
                                      988,000                          64,000
Dividend Growth                                          532,000
                                    7,516,000                          99,000
Equity Income                                         11,264,000
Equity Income Fund-Advisor
Class                                   3,000                  0          (*)
                                    3,570,000                          65,000
Equity Index 500                                       3,500,000
                                      174,000                          65,000
Extended Equity Market Index                              58,000
                                      528,000                          64,000
Financial Services                                        59,000
                                      497,000                          84,000
Global Technology                                        (*)
                                    2,360,000                          84,000
Growth & Income                                        2,648,000
                                    3,087,000                         104,000
Growth Stock                                           4,560,000
                                    1,817,000                          64,000
Health Sciences                                          220,000
Institutional Large-Cap
Growth                                    (*)                  0       11,000
Institutional Large-Cap
Value                                   1,000                  0       64,000
Institutional Mid-Cap Equity
Growth                                  1,000                  0       64,000
Institutional Small-Cap
Stock                                   2,000                  0       64,000
                                    1,795,000                          64,000
Media & Telecommunications                               196,000
Mid-Cap Growth                      3,627,000          5,621,000       80,000

------------------------------
Mid-Cap Growth Fund-Advisor
Class                                   3,000                  0          (*)
                                      740,000                          64,000
Mid-Cap Value                                             58,000
                                    1,185,000                          64,000
New America Growth                                     1,950,000
                                      930,000                          64,000
New Era                                                  254,000
                                    3,634,000                          84,000
New Horizons                                           6,604,000
                                      139,000                          64,000
Real Estate                                                9,000
                                    9,908,000                          72,000
Science & Technology                                   5,137,000
Science & Technology
Fund-Advisor Class                      1,000                  0        7,000
                                    1,379,000                          98,000
Small-Cap Stock                                        2,239,000
Small-Cap Stock Fund-Advisor
Class                                   4,000                  0        1,000
                                    1,071,000                          79,000
Small-Cap Value                                        1,741,000
Small-Cap Value Fund-Advisor
Class                                   1,000                  0          (*)
                                      399,000                          64,000
Total Equity Market Index                                 12,000
                                    1,066,000                          79,000
Value                                                  1,365,000
Value Fund-Advisor Class                1,000                  0          (*)
-------------------------------------------------------------------------------
</TABLE>






                                       66

<PAGE>


  (*) Less than $1,000.



 SERVICES BY OUTSIDE PARTIES
 -------------------------------------------------------------------------------
   The shares of some fund shareholders are held in omnibus accounts maintained
   by various third parties, including retirement plan sponsors, insurance
   companies, banks, and broker-dealers. The fund has adopted an administrative
   fee payment ("AFP") program that authorizes the fund to make payments to
   these third parties. The payments are made for transfer agent, recordkeeping,
   and other administrative services provided by, or on behalf of, the third
   parties with respect to such shareholders and the omnibus accounts. Under the

   AFP program, the funds paid the amounts set forth below to various third
   parties in calendar year 2001.


<TABLE>
<CAPTION>
<S>                              <C>
                                  $  146,413
Balanced Fund
                                     750,963
Blue Chip Growth Fund
Capital Appreciation Fund             52,598

---------------------------------------------
                                       1,207
Capital Opportunity Fund
                                       4,474
Dividend Growth Fund
                                     711,597
Equity Income Fund
                                     108,344
Equity Index 500 Fund
                                       9,513
Financial Services Fund
                                      71,544
Growth & Income Fund
                                      97,325
Growth Stock Fund
                                      30,863
Health Sciences Fund
                                         504
Media & Telecommunications Fund
                                   1,602,030
Mid-Cap Growth Fund
                                       8,268
Mid-Cap Value Fund
                                     115,482
New America Growth Fund
                                      38,459
New Era Fund
                                     914,498
New Horizons Fund
                                     525,912
Science & Technology Fund
                                     668,769
Small-Cap Stock Fund
                                     197,468
Small-Cap Value Fund
                                      50,018
Value Fund
</TABLE>






                                       67

<PAGE>


   Each Advisor Class has adopted an Advisor Class administrative fee payment
   program ("Advisor Class AFP") under which various intermediaries, including
   intermediaries receiving 12b-1 payments, may receive payments from the
   Advisor Class in addition to 12b-1 fees for providing various recordkeeping
   and transfer agent type services to the Advisor classes and/or shareholders
   thereof. These services include, but are not limited to: transmission of net
   purchase and redemption orders; maintenance of separate records for
   shareholders reflecting purchases, redemptions, and share balances; mailing
   of shareholder confirmations and periodic statements; and telephone services
   in connection with the above. Under the Advisor Class AFP program, the funds
   paid the amounts set forth below to various third parties in calendar year
   2001.


<TABLE>
<CAPTION>
<S>                                      <C>
                                          $1,026,704
Blue Chip Growth Fund-Advisor Class
Equity Income Fund-Advisor Class             112,600

------------------------------------------------------
                                              15,391
Mid-Cap Growth Fund-Advisor Class
                                           2,153,287
Science & Technology Fund-Advisor Class
                                              60,806
Small-Cap Stock Fund-Advisor Class
                                              31,931
Small-Cap Value Fund-Advisor Class
                                              17,257
Value Fund-Advisor Class
</TABLE>






                                       68

<PAGE>

   Control of Investment Advisor

   T. Rowe Price Group, Inc., ("Group") owns 100% of the stock of T. Rowe Price
   Associates, Inc. Group was formed in 2000 as a holding company for the T.
   Rowe Price-affiliated companies.



 DISTRIBUTOR FOR THE FUNDS
 -------------------------------------------------------------------------------
   Investment Services, a Maryland corporation formed in 1980 as a wholly owned
   subsidiary of T. Rowe Price, serves as the fund's distributor for all T. Rowe
   Price mutual funds on a continuous basis. 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.

   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 Price funds, pursuant to an
   Underwriting Agreement ("Underwriting Agreement"), which provides that the
   funds (other than Extended Equity Market Index Fund and Total Equity Market
   Index Fund) will pay all fees and expenses in connection with: necessary
   state filings; preparing, setting in type, printing, and mailing of
   prospectuses and reports to shareholders; and issuing shares, including
   expenses of confirming purchase orders. For Extended Equity Market Index Fund
   and Total Equity Market Index Fund, these expenses are the responsibility of
   Investment Services.

   The Underwriting Agreement also provides that Investment Services will pay
   all fees and expenses in connection with: printing and distributing
   prospectuses and reports for use in offering and selling fund shares;
   preparing, setting in type, printing, and mailing all sales literature and
   advertising; Investment Services' federal and state registrations as a
   broker-dealer; and offering and selling shares for each fund, 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 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.

   Blue Chip Growth, Equity Income, Growth Stock, Mid-Cap Growth, Science &
   Technology, Small-Cap Stock, Small-Cap Value, Value Advisor Classes


                   Distribution and Shareholder Services Plan


   The fund Directors adopted a Plan pursuant to Rule 12b-1 on February 9, 2000,
   with respect to each Advisor Class. Each Plan provides that the Advisor Class
   may compensate Investment Services or such other persons as the fund or
   Investment Services designates, to finance any or all of the distribution,
   shareholder servicing, maintenance of shareholder accounts, and/or other
   administrative services with respect to Advisor Class shares. It is expected
   that most, if not all, payments under the Plan will be made (either directly,
   or indirectly through Investment Services) to brokers, dealers, banks,
   insurance companies, and intermediaries other than Investment Services. Under
   the Plan, each Advisor Class pays a fee at the annual rate of up to 0.25% of
   that


                                       69

<PAGE>


   class's average daily net assets. Normally, the full amount of the fee is
   paid to the intermediary on shares sold through that intermediary. However, a
   lesser amount may be paid based on the level of services provided.
   Intermediaries may use the payments for, among other purposes, compensating
   employees engaged in sales and/or shareholder servicing of the Advisor Class,
   as well as for a wide variety of other purposes associated with supporting,
   distributing, and servicing the Advisor Class shares. The amount of fees paid
   by an Advisor Class during any year may be more or less than the cost of
   distribution and other services provided to the Advisor Class and its
   investors. NASD rules limit the amount of annual distribution and service
   fees that may be paid by a mutual fund and impose a ceiling on the cumulative
   distribution fees paid. The Plan complies with these rules.

   The Plan requires that Investment Services provide, or cause to be provided,
   a quarterly written report identifying the amounts expended by each Advisor
   Class and the purposes for which such expenditures were made, to the fund
   Directors for their review.

   Prior to approving the Plan, the fund considered various factors relating to
   the implementation of the Plan and determined that there is a reasonable
   likelihood that the Plan will benefit each fund, its Advisor Class, and the
   Advisor Class's shareholders. The fund Directors noted that to the extent the
   Plan allows a fund to sell Advisor Class shares in markets to which it would
   not otherwise have access, the Plan may result in additional sales of fund
   shares. This may enable a fund to achieve economies of scale that could
   reduce expenses. In addition, certain ongoing shareholder services may be
   provided more effectively by intermediaries with which shareholders have an
   existing relationship.

   The Plan is renewable from year to year with respect to each fund, so long as
   its continuance is approved at least annually (1) by the vote of a majority
   of the fund Directors and (2) by a vote of the majority of the Rule 12b-1
   Directors, cast in person at a meeting called for the purpose of voting on
   such approval. The Plan may not be amended to increase materially the amount
   of fees paid by any Advisor Class thereunder unless such amendment is
   approved by a majority vote of the outstanding shares of such Advisor Class
   and by the fund Directors in the manner prescribed by Rule 12b-1 under the
   1940 Act. The Plan is terminable with respect to an Advisor Class at any time
   by a vote of a majority of the Rule 12b-1 Directors or by a majority vote of
   the outstanding shares in the Advisor Class.

   The following payments for the period ended December 31, 2001 were made to
   third-party intermediaries, including broker-dealers and insurance companies,
   for the distribution, shareholder servicing, maintenance of shareholder
   accounts, and/or other administration services under the 12b-1 Plan.


<TABLE>
<CAPTION>
<S>                                      <C>
                                             $  729,000
Blue Chip Growth Fund-Advisor Class
                                                 81,000
Equity Income Fund-Advisor Class
                                                 14,000
Mid-Cap Growth Fund-Advisor Class
                                              1,319,000
Science & Technology Fund-Advisor Class
                                                 51,000
Small-Cap Stock Fund-Advisor Class
                                                 25,000
Small-Cap Value Fund-Advisor Class
                                                 12,000
Value Fund-Advisor Class
</TABLE>






                                       70

<PAGE>

   All funds

 CUSTODIAN
 -------------------------------------------------------------------------------
   State Street Bank and Trust Company 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. State Street Bank's main office is at 225 Franklin Street,
   Boston, Massachusetts 02110.


   The fund (other than Equity Index 500, Extended Equity Market Index, and
   Total Equity Market Index

   Funds) has entered into a Custodian Agreement with The Chase Manhattan Bank,
   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 in accordance with
   regulations under the 1940 Act. The address for The Chase Manhattan Bank,
   London is Woolgate House, Coleman Street, London, EC2P 2HD, England.



 CODE OF ETHICS
 -------------------------------------------------------------------------------
   The fund, its investment adviser (T. Rowe Price), and its principal
   underwriter (T. Rowe Price Investment Services), have a written Code of
   Ethics which requires persons with access to investment information ("Access
   Persons") to obtain prior clearance before engaging in personal securities
   transactions. In addition, all Access Persons must report their personal
   securities transactions within 10 days of their execution. Access Persons
   will not be permitted to effect transactions in a security: if there are
   pending client orders in the security; the security has been purchased or
   sold by a client within seven calendar days; the security is being considered

   for purchase for a client; ; a change has occurred in T. Rowe Price's rating
   of the security within seven calendar days prior to the date of the proposed

   transaction; ; or the security is subject to internal trading restrictions.
   In addition, Access Persons are prohibited from profiting from short-term
   trading (e.g., purchases and sales involving the same security within 60
   days). Any person becoming an Access Person must file a statement of personal
   securities holdings within 10 days of this date. All Access Persons are
   required to file an annual statement with respect to their personal
   securities holdings. 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
   and the use of affiliates to assist in routing orders for execution.


                      How Brokers and Dealers Are Selected

   Equity Securities

   In purchasing and selling equity 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 where such rates are negotiable. 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


                                       71

<PAGE>


   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, their expertise in
   particular markets, and brokerage and research services provided by them. It
   is not the policy of T. Rowe Price to seek the lowest available commission
   rate where it is believed that a broker or dealer charging a higher
   commission rate would offer greater reliability or provide better price or
   execution.

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


   Equity and Fixed-Income Securities
   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; (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.


       Descriptions 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. In addition, such services may include computers
   and related hardware.

   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.


                                       72

<PAGE>


   Subject to its policy on directed brokerage (see below), 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.


                               Directed Brokerage

   In 2002, the T. Rowe Price Funds that invest in domestic equity securities
   adopted a commission recapture program. Under the program, a percentage of
   commissions generated by the portfolio transactions of those funds is rebated
   to the funds by the brokers and used to pay for certain fund operating
   expenses.


              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. Therefore, research may not necessarily
   benefit all accounts paying commissions to such brokers. Accordingly, while
   T. Rowe Price cannot readily determine the extent to which commission rates
   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 fund participates. Research is used overall to benefit such
   accounts which purchase in the offering.


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


                                  Miscellaneous

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


                                       73

<PAGE>

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

   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.


                            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 relative sizes of the participating client portfolios or the
   relative sizes of the participating client orders depending upon the market
   involved. 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., available
   cash, industry or issuer concentration, duration, and credit exposure).


                                      Other


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


<TABLE>
<CAPTION>
                               2001                2000                1999
         Fund           Commissions    %    Commissions    %    Commissions     %
         ----           -----------    -    -----------    -    -----------     -
<S>                     <C>
                                     10.9%               11.5%                10.6%
Balanced                $ 1,203,000         $   399,000         $   720,000
Blue Chip Growth          7,972,000  39.8     7,485,000  58.5     7,088,000   45.8
------------------------------------------------------------------------------------
Capital Appreciation      2,345,000  14.1     1,305,000  32.5     1,142,000   38.4
Capital Opportunity         101,000  31.5       121,000  24.5       298,000   28.9
Developing
Technologies                 72,000  10.9        42,000   3.1             *      *
Diversified Small-Cap
Growth                       55,000   2.4       105,000   1.3        75,000    1.5
Dividend Growth             640,000  66.5     1,070,000  72.0     1,420,000   57.5
Equity Income             7,344,000  26.2     8,687,000  47.3     9,653,000   45.3
Equity Index 500            193,000   0.8       331,000   0.8       378,000    0.0
Extended Equity Market
Index                        42,000   0.1        51,000   0.0        27,000    0.4
Financial Services          539,000  51.4       348,000  56.3       507,000   20.1
Global Technology           510,000  45.4       362,000  15.9             *      *
Growth & Income           4,538,000  49.5     6,522,000  57.4     2,428,000   35.8
Growth Stock              8,332,000  52.7    10,878,000  41.3     8,923,000   42.5
Health Sciences           2,732,000  60.4     2,560,000  30.3       593,000   33.1
Institutional
Large-Cap Growth              2,000   6.7             *     *             *      *
Institutional
Large-Cap Value               5,000  18.1         3,000  58.9             *      *
Institutional Mid-Cap
Equity Growth               565,000             547,000  25.1       654,000   34.7
Institutional
Small-Cap Stock             265,000  33.9       128,000  41.4             *      *
Media &
Telecommunications        3,993,000           3,517,000  36.5     2,041,000   12.9
Mid-Cap Growth           11,886,000  18.3     8,893,000  22.9    12,136,000   35.1
Mid-Cap Value             1,050,000  75.5       272,000  61.8       303,000   37.1
New America Growth        1,823,000  36.4     3,730,000  29.1     4,556,000   17.1
New Era                   1,411,000  40.4     2,352,000  32.5     2,122,000   52.3
New Horizons              7,929,000   7.1    13,876,000   3.8    12,816,000    4.2
Real Estate                 114,000  36.8        51,000  27.8        59,000   37.4
Science & Technology     15,035,000          13,388,000  39.5     9,172,000   33.9
Small-Cap Stock           2,865,000  38.0     2,214,000  38.4     2,851,000   26.6
Small-Cap Value           1,656,000  50.0       891,000  49.5       998,000   46.1
Total Equity Market
Index                        40,000   0.0        30,000   0.0        45,000    0.0
Value                     2,221,000  55.1     1,330,000  74.6     1,847,000   52.0
------------------------------------------------------------------------------------
</TABLE>






                                       74

<PAGE>

 (*) Prior to commencement of operations.

   On December 31, 2001, the Balanced Fund held stock of American Express, Bank
   of America, Goldman Sachs Group, Morgan Stanley Dean Witter, J.P. Morgan
   Chase, Credit Suisse Group, and Deutsche Bank AG, with values of $5,632,000,
   $12,064,000, $2,319,000, $7,809,000, $7,456,000, $1,152,000, and $1,531,000,
   respectively. The fund also held bonds of American Express, Goldman Sachs
   Group, Morgan Stanley Dean Witter, and J.P. Morgan Chase, with values of
   $1,227,000, $4,133,000, $4,238,000, and $5,473,000, respectively. On December
   31, 2000, the fund held stock of Goldman Sachs Group, UBS, Chase Manhattan,
   and Morgan Stanley Dean Witter, with values of $2,674,000, $5,251,000,
   $9,320,000, and $11,063,000, respectively. The fund also held bonds of
   Goldman Sachs Group, Lehman Brothers, Morgan Stanley, and UBS, with values of
   $4,181,000, $1,535,000, $3,986,000, and $1,021,000, respectively. On December
   31, 1999, the fund held stock of Goldman Sachs and Morgan Stanley, with
   values of $2,355,000 and $9,964,000, respectively. The fund also held bonds
   of Morgan Stanley, Lehman Brothers, and Paine Webber, with values of
   $3,853,000, $5,278,000, and $3,650,000, respectively.

   On December 31, 2001, the Blue Chip Growth Fund held stock of Goldman Sachs
   Group, Merrill Lynch, and Morgan Stanley Dean Witter, with values of
   $30,144,000, $22,412,000, and $61,534,000, respectively. On


                                       75

<PAGE>

   December 31, 2000, the fund held stock of Charles Schwab, Goldman Sachs
   Group, and Morgan Stanley Dean Witter, with values of $14,188,000,
   $22,457,000, and $64,985,000, respectively. On December 31, 1999, the fund
   held stock of Goldman Sachs, Bank America, and Morgan Stanley, with values of
   $11,425,000, $23,588,000, and $57,957,000, respectively.

   On December 31, 2001, the Blue Chip Growth Portfolio held stock of Goldman
   Sachs Group, Merrill Lynch, and Morgan Stanley Dean Witter, with values of
   $28,000, $21,000, and $52,000, respectively.

   On December 31, 2001, the Capital Opportunity Fund held stock of J.P. Morgan
   Chase and Merrill Lynch, with values of $334,000 and $438,000, respectively.
   On December 31, 2000, the fund held stock of FleetBoston Financial, Goldman
   Sachs Group, and Morgan Stanley Dean Witter, with values of $447,000,
   $332,000, and $699,000, respectively. On December 31, 1999, the fund held
   stock of Bank of America and Morgan Stanley, with values of $703,000 and
   $879,000, respectively.

   On December 31, 2001, the Diversified Small-Cap Growth Fund held stock of
   Investment Technology Group with a value of $369,000. On December 31, 1999,
   the fund held stock of Investment Technology Group with a value of $144,000.

   On December 31, 2001, the Dividend Growth Fund held stock of Morgan Stanley
   Dean Witter with a value of $4,755,000. On December 31, 2000, the fund held
   stock of Chase Manhattan and Morgan Stanley Dean Witter, with values of
   $3,181,000 and $3,566,000, respectively.

   On December 31, 2001, the Equity Income Fund held stock of J.P. Morgan Chase
   with a value of $106,578,000. On December 31, 2000, the fund held stock of
   J.P. Morgan with a value of $142,330,000. On December 31, 1999, the fund held
   stock of J.P. Morgan with a value of $126,625,000.

   On December 31, 2001, the Equity Income Portfolio held stock of J.P. Morgan
   Chase with a value of $8,018,000. On December 31, 1999, the portfolio held
   stock of Goldman Sachs and Morgan Stanley, with values of $565,000 and
   $47,000, respectively.


   On December 31, 2001, the Equity Index 500 Fund held stock of J.P. Morgan
   Chase, Lehman Brothers, Merrill Lynch, and Morgan Stanley Dean Witter, with
   values of $23,468,000, $5,386,000, $14,208,000 and $20,230,000, respectively.
   On December 31, 2000, the fund held stock of Bank America, Chase Manhattan,
   Morgan Stanley Dean Witter, and J.P. Morgan, with values of $25,682,000,
   $20,472,000, $30,539,000, and $9,253,000, respectively. On December 31, 1999,
   the fund held stock of Lehman Brothers with a value of $4,130,000.

   On December 31, 2001, the Equity Index 500 Portfolio held stock of Bear
   Stearns, J.P. Morgan Chase, Lehman Brothers, Merrill Lynch, and Morgan
   Stanley Dean Witter, with values of $3,000, $33,000, $7,000, $20,000, and
   $29,000, respectively.

   On December 31, 2001, the Extended Equity Market Index Fund held stock of
   Goldman Sachs Group, Investment Technology Group, Jeffries Group, and Knight
   Trading Group, with values of $487,000, $53,000, $34,000, and $35,000,
   respectively. On December 31, 2000, the fund held stock of Goldman Sachs
   Group, Investment Technology Group, and Knight Trading Group, with values of
   $364,000, $38,000, and $46,000, respectively. On December 31, 1999, the fund
   held stock of Donaldson, Lufkin & Jenrette with a value of $68,000.

   On December 31, 2001, the Financial Services Fund held stock of Goldman Sachs
   Group, Legg Mason, Merrill Lynch, and Morgan Stanley Dean Witter, with values
   of $10,175,000, $2,849,000, $4,691,000, and $1,399,000, respectively. On
   December 31, 2000, the fund held stock of Goldman Sachs Group, Merrill Lynch,
   and Morgan Stanley Dean Witter, with values of $12,373,000, $1,023,000, and
   $10,699,000, respectively. On December 31, 1999, the fund held stock of
   Goldman Sachs with a value of $2,261,000.


   On December 31, 2001, the Growth & Income Fund held stock of FleetBoston
   Financial, Goldman Sachs Group, J.P. Morgan Chase, and Morgan Stanley Dean
   Witter, with values of $30,543,000, $13,449,000, $29,989,000, and
   $31,886,000, respectively. On December 31, 2000, the fund held stock of Bear
   Stearns, Bank of America, and Morgan Stanley Dean Witter, with values of
   $7,096,000, $12,845,000, and


                                       76

<PAGE>


   $33,285,000, respectively. On December 31, 1999, the fund held stock of Bear
   Stearns and Morgan Stanley Dean Witter, with values of $22,156,000 and
   $28,550,000, respectively.

   On December 31, 2001, the Growth Stock Fund held stock of Morgan Stanley Dean
   Witter and Merrill Lynch, with values of $31,606,000 and $38,048,000,
   respectively. On December 31, 2000, the fund held stock of Morgan Stanley
   Dean Witter with a value of $42,002,000. On December 31, 1999, the fund held
   stock of Mellon Bank with a value of $19,703,000.


   On December 31, 2001, the Total Equity Market Index Fund held stock of
   Goldman Sachs Group, Investment Technology Group, Jeffries Group, J.P. Morgan
   Chase, Knight Trading Group, Lehman Brothers, Merrill Lynch, and Morgan
   Stanley Dean Witter, with values of $269,000, $23,000, $13,000, $1,087,000,
   $23,000, $261,000, $667,000, and $923,000, respectively. On December 31,
   2000, the fund held stock of Morgan Stanley Dean Witter, Goldman Sachs Group,
   Bank of America, J.P. Morgan, Chase Manhattan, Knight Trading Group, and
   Investment Technology Group, with values of $1,252,000, $214,000, $1,043,000,
   $381,000, $822,000, $22,000, and $17,000, respectively. On December 31, 1999,
   the fund held stock of Goldman Sachs, Lehman Brothers, and Donaldson, Lufkin
   & Jenrette, with values of $151,000, $119,000, and $73,000, respectively.

   On December 31, 2001, the Institutional Large-Cap Value Fund held stock of
   Bank of America and Merrill Lynch, with values of $63,000 and $52,000,
   respectively.

   On December 31, 2001, the New America Growth Fund held stock of Goldman Sachs
   Group and Morgan Stanley Dean Witter, with values of $12,521,000 and
   $12,027,000, respectively. On December 31, 2000, the fund held stock of
   Goldman Sachs Group and Morgan Stanley Dean Witter, with values of
   $10,694,000 and $33,681,000, respectively.

   On December 31, 2001, the New America Growth Portfolio held stock of Goldman
   Sachs Group and Morgan Stanley Dean Witter, with values of $951,000 and
   $923,000, respectively. On December 31, 2000, the portfolio held stock of
   Goldman Sachs Group and Morgan Stanley Dean Witter, with values of $770,000
   and $2,417,000, respectively.


   On December 31, 2001, the Personal Strategy Balanced Portfolio held stock of
   Credit Suisse Group, Goldman Sachs Group, Morgan Stanley Dean Witter,
   Deutsche Bank AG, and Merrill Lynch, with values of $123,000, $272,000,
   $363,000, $116,000, and $47,000, respectively. On December 31, 2000, the
   Personal Strategy Balanced Portfolio held stock of Goldman Sachs Group and
   Morgan Stanley Dean Witter, with values of $64,000 and $174,000,
   respectively. The fund held bonds in Goldman Sachs Group, Lehman Brothers,
   and Morgan Stanley Dean Witter, with values of $418,000, $258,000, and
   $211,000, respectively. On December 31, 1999, the fund held stock of Goldman
   Sachs and Morgan Stanley Dean Witter with values of $19,000 and $114,000,
   respectively. The fund also held bonds of Paine Webber, with a value of
   $730,000.

   On December 31, 2001, the Value Fund held stock of Merrill Lynch with a value
   of $13,030,000. On December 31, 2000, the fund held stock of Bank of America
   with a value of $8,028,000. On December 31, 1999, the fund held stock of Bank
   of America with a value of $7,528,000.


   The portfolio turnover rate for each fund for the last three fiscal years was
   as follows:

<TABLE>
<CAPTION>
               Fund                     2001          2000           1999
               ----                     ----          ----           ----
<S>                                  <C>
Balanced                                 36.0%         16.5%          20.7%
Blue Chip Growth                         48.3          50.9           41.3
Capital Appreciation                     25.1          32.4           28.3
Capital Opportunity                      53.6          64.7          133.1
Developing Technologies(b)              107.5         232.6*           (a)
Diversified Small-Cap Growth             30.3          66.0           49.4
Dividend Growth                          34.9          35.7           37.8
Equity Income                            17.3          21.9           21.8
Equity Index 500                          4.0           9.1            5.2
Extended Equity Market Index             31.3          30.5           23.4
Financial Services                       54.8          32.5           37.1
Global Technology                       189.2         123.6*           (a)
Growth & Income(c)                       65.9          80.3           20.3
Growth Stock                             64.1          74.3           55.8
Health Sciences                          74.6         110.6           81.9
Institutional Large-Cap Growth           98.2*          (a)            (a)
Institutional Large-Cap Value           106.3          58.4*           (a)
Institutional Mid-Cap Equity Growth      48.6          67.5           55.4
Institutional Small-Cap Stock            26.9          15.8*           (a)
Media & Telecommunications(b)           241.1         197.5           57.6
Mid-Cap Growth                           43.0          53.6           53.3
Mid-Cap Value                            57.5          31.9           26.8
New America Growth(d)                    52.1          81.4           39.7
New Era                                  17.9          28.5           32.5
New Horizons                             27.4          47.2           44.7
Real Estate                              37.2          19.0           26.9
Science & Technology                    143.6         134.1          128.0
Small-Cap Stock                          16.5          32.8           42.3
Small-Cap Value                          16.8          14.4            7.3
Total Equity Market Index                 8.6           7.6            3.2
Value                                    42.2          55.9           67.8
-------------------------------------------------------------------------------
</TABLE>





                                       77

<PAGE>

    *  Annualized.

    (a) Prior to commencement of operations.

    (b) The funds' high portfolio turnover was due to extreme volatility in
       the companies in which the funds invest.


    (c) The increase in the fund's portfolio turnover rate from 1999 to
       2000 was the result of the fund's new portfolio manager emphasizing
       a greater balance between growth and value stocks and significant
       market volatility.

    (d) The increase in the fund's portfolio turnover rate from 1999 to
       2000 was primarily the result of the fund's decision effective May
       1, 2000, to adopt a broader investment focus and invest in companies
       believed to be in the fastest growing sectors of the economy. This
       involved selling some existing holdings and replacing them with
       other ones.


   All funds


 PRICING OF SECURITIES
 -------------------------------------------------------------------------------

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


                                       78

<PAGE>


   Debt securities are generally traded in the over-the-counter market.
   Securities with original maturities of one year or more are valued using
   prices furnished by dealers who make markets in such securities or by an
   independent pricing service, which considers yield or price of bonds of
   comparable quality, coupon, maturity, and type, as well as prices quoted by
   dealers who make markets in such securities. Securities with original
   maturities less than one year are valued at amortized cost in local currency,
   which approximates fair value when combined with accrued interest.

   Investments in mutual funds are valued at the closing net asset value per
   share of the mutual fund on the day of valuation.


   Assets and liabilities denominated in foreign currencies are translated into
   U.S. dollar values each day at the prevailing exchange rate, using the mean
   of the bid and ask 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
 -------------------------------------------------------------------------------
   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 its liabilities (including accrued expenses
   and dividends payable) from its total assets (the market value of the
   securities the fund holds plus cash and other assets, including income
   accrued but not yet received) and dividing the result by the total number of
   shares outstanding. The net asset value per share of the fund is normally
   calculated as of the close of trading on the New York Stock Exchange ("NYSE")
   every day the NYSE is open for trading. The NYSE is closed on the following
   days: New Year's Day, Dr. Martin Luther King, Jr. Holiday, Presidents' Day,
   Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
   Christmas Day.

   Determination of net asset value (and the offering, sale, redemption, and
   repurchase of shares) for the fund may be suspended at times (a) during which

   the NYSE is closed, other than customary weekend and holiday closings, , (b)
   during which trading on the NYSE is restricted, (c) during which an emergency
   exists as a result of which disposal by the fund of securities owned by it is
   not reasonably practicable or it is not reasonably practicable for the fund
   fairly to determine the value of its net assets, or (d) during which a
   governmental body having jurisdiction over the fund may by order permit such
   a suspension for the protection of the fund's shareholders, provided that
   applicable rules and regulations of the SEC (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 capital gain distributions, final
   quarterly dividend (Balanced, Dividend Growth, Equity Income, Equity Index
   500, Growth & Income, and Real Estate Funds), and annual dividend (other
   funds), 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 one day, although the exact timing is subject to change and can be as
   great as 10 days.



 TAX STATUS
 -------------------------------------------------------------------------------
   The fund intends to qualify as a "regulated investment company" under
   Subchapter M of the Code.


                                       79

<PAGE>


   A portion of the dividends paid by the fund may be eligible for the

   dividends-received deduction applicable to corporate shareholders.
   . Long-term capital gain distributions paid from the fund are never eligible
   for the dividend received deduction. For tax purposes, it does not make any
   difference whether dividends and capital gain distributions are paid in cash
   or in additional shares. Each 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
   its tax year-end) to avoid a federal income tax.


   At the time of your purchase, the fund's net asset value may reflect

   undistributed income , capital gains, or net unrealized appreciation of
   securities held by the fund. A subsequent distribution to you of such
   amounts, although constituting a return of your investment, would be taxable
   either as dividend or capital gain distributions. For federal income tax
   purposes, the fund is permitted to carry forward its net realized capital
   losses, if any, for eight years and realize net capital gains up to the
   amount of such losses without being required to pay taxes on, or distribute,
   such gains.

   If, in any taxable year, the fund should not qualify as a regulated
   investment company under the Code: (1) the fund would be taxed at normal
   corporate rates on the entire amount of its taxable income, if any, without a
   deduction for dividends or other distributions to shareholders; and (2) the
   fund's distributions to the extent made out of the fund's current or
   accumulated earnings and profits would be taxable to shareholders as ordinary
   dividends (regardless of whether they would otherwise have been considered
   capital gain dividends) and the fund may qualify for the 70% deduction for

                     dividends received by corporations.



                        Taxation of Foreign Shareholders


   The code provides that dividends from net income will be subject to U.S. tax.
   For shareholders who are not engaged in a business in the U.S., this tax
   would be imposed at the rate of 30% upon the gross amount of the dividends in
   the absence of a Tax Treaty providing for a reduced rate or exemption from
   U.S. taxation. Distributions of net long-term capital gains realized by the
   fund are not subject to tax unless the foreign shareholder is engaged in a
   business in the U.S. and the gains are connected with that business, or the
   shareholder is a nonresident alien individual who was physically present in
   the U.S. during the tax year for more than 182 days.

   All funds except Equity Index 500, Extended Equity Market Index, and Total
   Equity Market Index Funds

   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 for U.S. tax purposes.
   Such foreign investment funds or trusts have been the only or primary way to
   invest in certain countries. 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 foreign investment funds
   or trusts. Capital gains on the sale of such holdings are considered ordinary
   income regardless of how long the fund held its investment. In addition, the
   fund may be subject to corporate income tax and an interest charge on certain
   dividends and capital gains earned from these investments, regardless of
   whether such income and gains are distributed to shareholders.

   To avoid such tax and interest, the fund intends to treat these securities as
   sold on the last day of its fiscal year and recognize any gains for tax
   purposes at that time; deductions for losses are allowable only to the extent
   of any gains resulting from these deemed sales for prior taxable years. Such
   gains and losses will be treated as ordinary income. The fund will be
   required to distribute any resulting income 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,


                                       80

<PAGE>

   the income dividend paid by the fund will be decreased, or to the extent such
   dividend has already been paid, it may be classified as a return of capital.
   Adjustments to reflect these gains and losses will be made at the end of the
   fund's taxable year.


   All funds


 INVESTMENT PERFORMANCE
 -------------------------------------------------------------------------------

                            Total Return Performance


   The fund's calculation of total return performance includes the reinvestment
   of all capital gain distributions and income dividends for the period or
   periods indicated, without regard to tax consequences to a shareholder in the
   fund. Total return is calculated as the percentage change between the
   beginning value of a static account in the fund and the ending value of that
   account measured by the then current net asset value, including all shares
   acquired through reinvestment of income and capital gain 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 period of
   time will vary from the average.


<TABLE>
<CAPTION>
                  Cumulative Performance Percentage Change
                           Periods ended 12/31/01
           Fund              1 Yr.    5 Yrs.   10 Yrs.   % Since     Inception
           ----              -----    ------   -------   -------     ---------
                                                        Inception      Date
                                                        ---------      ----
<S>                          <C>
                              -3.98%   49.12%  155.13%  42,677.36%   12/31/39
Balanced
                             -14.42    64.52               234.00    06/30/93
Blue Chip Growth                                --
Blue Chip Growth
Fund-Advisor Class           -14.42    --       --         -21.39    03/31/00
                              10.26    77.27   233.25      575.59    06/30/86
Capital Appreciation
                             -10.10    24.79               122.64    11/30/94
Capital Opportunity                             --
                             -30.58                        -49.94    08/31/00
Developing Technologies                --       --
Diversified Small-Cap
Growth                        -9.81    --       --          17.18    06/30/97
                              -3.64    55.04               212.36    12/30/92
Dividend Growth                                 --
                               1.64    67.96   269.46      804.16    10/31/85
Equity Income
Equity Income Fund-Advisor
Class                          1.51    --       --          18.38    03/31/00
                             -12.17    63.84   226.56      323.27    03/30/90
Equity Index 500
Extended Equity Market
Index                         -9.55    --       --          14.67    01/30/98
                              -3.13   112.57               141.05    09/30/96
Financial Services                              --
                             -36.07                        -52.50    09/29/00
Global Technology                      --       --
                              -2.17    50.28   221.57      868.53    12/21/82
Growth & Income
                              -9.79    78.17   250.92   30,189.56    04/11/50
Growth Stock
                              -5.97   125.80               186.21    12/29/95
Health Sciences                                 --
Institutional Large-Cap
Growth                        --       --       --          14.00    10/31/01
Institutional Large-Cap
Value                          4.44    --       --          20.71    03/31/00
Institutional Mid-Cap
Equity Growth                 -1.18    91.71    --         122.58    07/31/96
Institutional Small-Cap
Stock                          7.26    --       --          14.80    03/31/00
Media &
Telecommunications(a)         -6.93   132.90    --         227.89    10/13/93
                              -0.98    90.08               427.37    06/30/92
Mid-Cap Growth                                  --
Mid-Cap Growth Fund-Advisor
Class                         -1.10    --       --          -3.30    03/31/00
                              14.36    87.28               117.81    06/28/96
Mid-Cap Value                                   --
                             -11.89    26.90   162.56      651.36    09/30/85
New America Growth
                              -4.35    39.56   159.28    2,411.80    01/20/69
New Era
                              -2.84    47.38             9,816.24    06/03/60
New Horizons
                               8.87                         30.22    10/31/97
Real Estate                            --       --
                             -41.19    12.64   241.88      593.91    09/30/87
Science & Technology
Science & Technology
Fund-Advisor Class           -41.19    --       --         -65.34    03/31/00
                               6.81    77.43   288.04                06/01/56
Small-Cap Stock
Small-Cap Stock
Fund-Advisor Class             6.60    --       --          13.84    03/31/00
                              21.94    65.47   291.78      429.74    06/30/88
Small-Cap Value
Small-Cap Value
Fund-Advisor Class            21.84    --       --          41.04    03/31/00
                             -11.20                         20.90    01/30/98
Total Equity Market Index              --       --
                               1.60    77.29               228.50    09/30/94
Value                                           --
Value Fund-Advisor Class       1.45    --       --          16.78    03/31/00

-------------------------------------------------------------------------------
</TABLE>






                                       81

<PAGE>



                                       82

<PAGE>


 (a) The five-year and inception figures are based partly on the fund's
   performance as a closed-end investment company traded on the New York
   Stock Exchange until July 28, 1997, when it was converted to an open-end
   mutual fund.


<TABLE>
<CAPTION>
                   Average Annual Compound Rates of Return
                           Periods ended 12/31/01
            Fund              1 Yr.    5 Yrs.   10 Yrs.   % Since    Inception
            ----              -----    ------   -------   -------    ---------
                                                         Inception     Date
                                                         ---------     ----
<S>                           <C>
                               -3.98%   8.32%    9.82%     10.27%    12/31/39
Balanced
                              -14.42   10.47               15.24     06/30/93
Blue Chip Growth                                --
Blue Chip Growth
Fund-Advisor Class            -14.42   --       --        -12.82     03/31/00
                               10.26   12.13    12.79      13.11     06/30/86
Capital Appreciation
                              -10.10    4.53               11.96     11/30/94
Capital Opportunity                             --
                              -30.58                      -40.49     08/31/00
Developing Technologies                --       --
                               -9.81                        3.58     06/30/97
Diversified Small-Cap Growth           --       --
                               -3.64    9.17               13.49     12/30/92
Dividend Growth                                 --
                                1.64   10.93    13.96      14.59     10/31/85
Equity Income
Equity Income Fund-Advisor
Class                           1.51   --       --         10.10     03/31/00
                              -12.17   10.38    12.56      13.06     03/30/90
Equity Index 500
                               -9.55                        3.55     01/30/98
Extended Equity Market Index           --       --
                               -3.13   16.28               18.24     09/30/96
Financial Services                              --
                              -36.07                      -44.77     09/29/00
Global Technology                      --       --
                               -2.17    8.49    12.39      12.67     12/21/82
Growth & Income
                               -9.79   12.25    13.38      11.68     04/11/50
Growth Stock
                               -5.97   17.69               19.14     12/29/95
Health Sciences                                 --
Institutional Large-Cap
Growth                         --      --       --        (a)        10/31/01
Institutional Large-Cap
Value                           4.44   --       --         11.33     03/31/00
Institutional Mid-Cap Equity
Growth                         -1.18   13.90    --         15.91     07/31/96
Institutional Small-Cap
Stock                           7.26   --       --          8.19     03/31/00
Media &
Telecommunications(b)          -6.93   18.42    --         15.55     10/13/93
                               -0.98   13.71               19.12     06/30/92
Mid-Cap Growth                                  --
Mid-Cap Growth Fund-Advisor
Class                          -1.10   --       --         -1.89     03/31/00
                               14.36   13.37               15.18     06/28/96
Mid-Cap Value                                   --
                              -11.89    4.88    10.13      13.21     09/30/85
New America Growth
                               -4.35    6.89    10.00      10.28     01/20/69
New Era
                               -2.84    8.07    13.75      11.69     06/03/60
New Horizons
                                8.87                        6.54     10/31/97
Real Estate                            --       --
                              -41.19    2.41    13.08      14.56     09/30/87
Science & Technology
Science & Technology
Fund-Advisor Class            -41.19   --       --        -45.34     03/31/00
                                6.81   12.15    14.52      14.14     06/01/56
Small-Cap Stock
Small-Cap Stock Fund-Advisor
Class                           6.60   --       --          7.67     03/31/00
                               21.94   10.60    14.63      13.14     06/30/88
Small-Cap Value
Small-Cap Value Fund-Advisor
Class                          21.84   --       --         21.66     03/31/00
                              -11.20                        4.96     01/30/98
Total Equity Market Index              --       --
                                1.60   12.13               17.82     09/30/94
Value                                           --
Value Fund-Advisor Class        1.45   --       --          9.25     03/31/00

-------------------------------------------------------------------------------
</TABLE>






                                       83

<PAGE>



                                       84

<PAGE>


 (a) No figure is provided because the fund's performance is for a period
   of less than one year.

 (b) The five-year and inception figures are based partly on the fund's
   performance as a closed-end investment company traded on the New York
   Stock Exchange until July 28, 1997, when it was converted to an open-end
   mutual fund.


                         Outside Sources of Information


   From time to time, in reports and promotional literature: (1) the fund's
   total return performance, ranking, or any other measure of the fund's
   performance may be compared to any one or combination of the following: (a) a
   broad-based index, (b) other groups of mutual funds, including T. Rowe Price
   funds, tracked by independent research firms, ranking entities, or financial
   publications; (c) indices of securities comparable to those in which the fund
   invests; (2) the consumer price index (or any other measure for inflation),
   or government statistics, such as GNP, may be used to illustrate investment
   attributes of the fund or the general economic, business, investment, or
   financial environment in which the fund operates; (3) various financial,
   economic, and market statistics developed by brokers, dealers, and other
   persons may be used to illustrate aspects of the fund's performance; (4) the
   effect of tax-deferred compounding on the fund's investment returns, or on
   returns in general in both qualified and nonqualified retirement plans or any
   other tax advantaged product, may be illustrated by graphs, charts, etc.; (5)
   the sectors or industries in which the fund invests may be compared to
   relevant indices or surveys in order to evaluate the fund's historical
   performance or current or potential value with respect to the particular
   industry or sector; (6) the fund may disclose the performance of other funds
   or accounts managed by T. Rowe Price in a manner similar to the fund; and (7)
   the blended total returns or performance rankings of the funds may be
   disclosed.


                               Other Publications

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


                           Other Features and Benefits

   The fund is a member of the T. Rowe Price family of funds and may help
   investors achieve various long-term investment goals, which include, but are
   not limited to, investing money for retirement, saving for a down payment on
   a home, or paying college costs. To explain how the fund could be used to
   assist investors in planning for these goals and to illustrate basic
   principles of investing, various worksheets and guides prepared by T. Rowe
   Price and/or Investment Services may be made available.


                       No-Load Versus Load and 12b-1 Funds

   Many mutual funds charge sales fees to investors or use fund assets to
   finance distribution activities. These fees are in addition to the normal
   advisory fees and expenses charged by all mutual funds. There are several
   types of fees charged which vary in magnitude and which may often be used in
   combination. A sales charge (or "load") can be charged at the time the fund
   is purchased (front-end load) or at the time of redemption (back-end load).
   Front-end loads are charged on the total amount invested. Back-end loads are
   charged either on the


                                       85

<PAGE>

   amount originally invested or on the amount redeemed. 12b-1 plans allow for
   the payment of marketing and sales expenses from fund assets. These expenses
   are usually computed daily as a fixed percentage of assets.

   The T. Rowe Price funds, including the Advisor Classes, are considered to be
   "no-load" funds. They impose no front-end or back-end sales loads. However,
   the Advisor Classes do charge 12b-1 fees. Under applicable National
   Association of Securities Dealers Regulation, Inc. ("NASDR") regulations,
   mutual funds that have no front-end or deferred sales charges and whose total
   asset-based charges for sales-related expenses and/or service fees (as
   defined by NASDR) do not exceed 0.25% of average net assets per year may be
   referred to as no-load funds.


                               Redemptions in Kind

   The fund has filed a notice of election under Rule 18f-1 of the 1940 Act.
   This permits the fund to effect redemptions in kind and in cash as set forth
   in its prospectus.


   In the unlikely event a shareholder were to receive an in-kind redemption of
   portfolio securities of the fund, it would be the responsibility of the
   shareholder to dispose of the securities. The shareholder would be at risk
   that the value of the securities would decline prior to their sale, that it
   would be difficult to sell the securities, and that brokerage fees could be
   incurred.


                     Issuance of Fund Shares for Securities

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

   Balanced Fund

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

   Media & Telecommunications Fund

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

   Small-Cap Stock Fund

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

   Equity Index 500 Fund

   Effective January 30, 1998, the fund's name was changed from T. Rowe Price
   Equity Index Fund to the T. Rowe Price Equity Index 500 Fund.


   All funds except Capital Appreciation, Equity Income, and New America Growth
   Funds


 CAPITAL STOCK
 -------------------------------------------------------------------------------

   The fund's Charter authorizes the Board of Directors/Trustees 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 1940 Act


                                       86

<PAGE>


   and other applicable law. The shares of any such additional classes or series
   might therefore differ from the shares of the present class and series of
   capital stock and from each other as to preferences, conversions, or other
   rights, voting powers, restrictions, limitations as to dividends,
   qualifications, or terms or conditions of redemption, subject to applicable
   law, and might thus be superior or inferior to the capital stock or to other
   classes or series in various characteristics. The Board of Directors/Trustees
   may increase or decrease the aggregate number of shares of stock or the
   number of shares of stock of any class or series that the fund has authorized
   to issue without shareholder approval.

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

   Shareholders are entitled to one vote for each full share held (and
   fractional votes for fractional shares held) and will vote in the election of
   or removal of directors/trustees (to the extent hereinafter provided) and on
   other matters submitted to the vote of shareholders. There will normally be
   no meetings of shareholders for the purpose of electing directors/trustees
   unless and until such time as less than a majority of the directors/

   trustees holding office have been elected by shareholders, at which time the
   directors/trustees then in office will call a shareholders' meeting for the
   election of directors/trustees. Except as set forth above, the directors/

   trustees shall continue to hold office and may appoint successor
   directors/trustees. Voting rights are not cumulative, so that the holders of
   more than 50% of the shares voting in the election of directors/trustees can,
   if they choose to do so, elect all the directors/trustees of the fund, in
   which event the holders of the remaining shares will be unable to elect any
   person as a director/trustee. As set forth in the By-Laws of the fund, a
   special meeting of shareholders of the fund shall be called by the Secretary
   of the fund on the written request of shareholders entitled to cast at least
   10% of all the votes of the fund entitled to be cast at such meeting.
   Shareholders requesting such a meeting must pay to the fund the reasonably
   estimated costs of preparing and mailing the notice of the meeting. The fund,
   however, will otherwise assist the shareholders seeking to hold the special
   meeting in communicating to the other shareholders of the fund to the extent
   required by Section 16(c) of the 1940 Act.


   Capital Appreciation, Equity Income, and New America Growth Funds


 ORGANIZATION OF THE FUNDS
 -------------------------------------------------------------------------------

   For tax and business reasons, the funds were organized as Massachusetts
   Business Trusts, and are registered with the SEC under the 1940 Act as
   diversified, open-end investment companies, commonly known as "mutual funds."


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

   Shareholders are entitled to one vote for each full share held (and
   fractional votes for fractional shares held) and will vote in the election of
   or removal of trustees (to the extent hereinafter provided) and on other
   matters submitted to the vote of shareholders. There will normally be no
   meetings of shareholders for the purpose of electing trustees unless and
   until such time as less than a majority of the trustees holding office have
   been elected by shareholders, at which time the trustees then in office will
   call a shareholders' meeting for the election of trustees. Pursuant to
   Section 16(c) of the 1940 Act, holders of record of not less than two-thirds
   of


                                       87

<PAGE>

   the outstanding shares of the fund may remove a trustee by a vote cast in
   person or by proxy at a meeting called for that purpose. Except as set forth
   above, the trustees shall continue to hold office and may appoint successor
   trustees. Voting rights are not cumulative, so that the holders of more than
   50% of the shares voting in the election of trustees can, if they choose to
   do so, elect all the trustees of the Trust, in which event the holders of the
   remaining shares will be unable to elect any person as a trustee. No
   amendments may be made to the Declaration of Trust without the affirmative
   vote of a majority of the outstanding shares of the Trust.

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

   Under Massachusetts law, shareholders could, under certain circumstances, be
   held personally liable for the obligations of the fund. However, the
   Declaration of Trust disclaims shareholder liability for acts or obligations
   of the fund and requires that notice of such disclaimer be given in each
   agreement, obligation, or instrument entered into or executed by the fund or
   a Trustee. The Declaration of Trust provides for indemnification from fund
   property for all losses and expenses of any shareholder held personally
   liable for the obligations of the fund. Thus, the risk of a shareholder
   incurring financial loss on account of shareholder liability is limited to
   circumstances in which the fund itself would be unable to meet its
   obligations, a possibility which T. Rowe

   Price believes is remote. Upon payment of any liability incurred by the fund,
   the shareholders of the fund paying such liability will be entitled to
   reimbursement from the general assets of the fund. The Trustees intend to
   conduct the operations of the fund in such a way so as to avoid, as far as
   possible, ultimate liability of the shareholders for liabilities of such
   fund.


   All funds


 FEDERAL REGISTRATION OF SHARES
 -------------------------------------------------------------------------------
   The fund's shares are registered for sale under the 1933 Act. 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
 -------------------------------------------------------------------------------

   Shearman & Sterling, whose address is 599 Lexington Avenue, New York, New
   York 10022, is legal counsel to the fund.



 INDEPENDENT ACCOUNTANTS
 -------------------------------------------------------------------------------

   PricewaterhouseCoopers LLP, 250 West Pratt Street, 21st Floor, Baltimore,
   Maryland 21201, are the independent accountants to the funds.

   The financial statements of the funds listed below for the periods ended
   December 31, 2001, and the report of independent accountants are included in
   each fund's Annual Report for the periods ended December 31,
   2001. A copy of each Annual Report accompanies this Statement of Additional
   Information. The following financial statements and the report of independent
   accountants appearing in each Annual Report for the periods ended December
   31, 2001, are incorporated into this Statement of Additional Information by
   reference (references are to page numbers in the Reports):


                                       88

<PAGE>


<TABLE>
<CAPTION>
                          ANNUAL REPORT REFERENCES:
                                 EQUITY       FINANCIAL  NEW AMERICA  NEW ERA
                                 INCOME       SERVICES   GROWTH       -------
                                 ------       --------   ------
<S>                              <C>
Financial Highlights, December                    1           1
31, 2001                              8           0           0         10
Statement of Net Assets,
December 31, 2001                   10-17       11-13       11-16       11-15
Statement of Operations, year
ended
December 31, 2001                    18          14          17          16
Statement of Changes in Net
Assets, years ended December
31, 2001, and December 31, 2000     19-20        15          18          17
Notes to Financial Statements,
December 31, 2001                   21-25       16-19       19-22       18-22
Report of Independent
Accountants                          26          20          23          23
</TABLE>





<TABLE>
<CAPTION>
                                    DIVIDEND  GROWTH   BLUE CHIP  CAPITAL
                                    GROWTH    STOCK    GROWTH     OPPORTUNITY
                                    ------    -----    ------     -----------
<S>                                 <C>
Financial Highlights, December 31,
2001                                   9         9        11           8
Statement of Net Assets, December
31, 2001                             10-16     10-16     13-19        9-20
Statement of Operations, year
ended
December 31, 2001                      17       17        20           21
Statement of Changes in Net
Assets, years ended
December 31, 2001, and December
31, 2000                               18       18       21-22         22
Notes to Financial Statements,
December 31, 2001                    19-22     19-24     23-27        23-26
Report of Independent Accountants      23       25        28           27
</TABLE>





<TABLE>
<CAPTION>
                                              MID-CAP  REAL    INSTITUTIONAL
                                     VALUE    VALUE    ESTATE  MID-CAP EQUITY
                                     -----    -----    ------  GROWTH
                                                               ------
<S>                                  <C>
Financial Highlights, December 31,
2001                                    8        9       9           7
Statement of Net Assets, December
31, 2001                              10-16    10-16   10-12         8-10
Statement of Operations, year ended
December 31, 2001                      17       17       13           11
Statement of Changes in Net Assets,
years ended
December 31, 2001, and December 31,
2000                                  18-19     18       14           12
Notes to Financial Statements,
December 31, 2001                     20-24    19-22   15-18        13-14
Report of Independent Accountants      25       23       19           15
</TABLE>






                                       89

<PAGE>


<TABLE>
<CAPTION>
                                       EXTENDED      TOTAL EQUITY
                                       EQUITY        MARKET INDEX
                                       MARKET INDEX  ------------
                                       ------------
<S>                                    <C>
Financial Highlights, December 31,
2001                                        2             2
Portfolio of Investments,
December 31, 2001                          3-86           3-68
Statement of Assets and Liabilities,
December 31, 2001                           87            69
Statement of Operations, year ended
December 31, 2001                           88             70
Statement of Changes in Net Assets,
years ended December 31, 2001, and
December 31, 2000                           89             71
Notes to Financial Statements,
December 31, 2001                         90-93          72-75
Report of Independent Accountants           94             76
</TABLE>





<TABLE>
<CAPTION>
                                           DIVERSIFIED   GROWTH      HEALTH
                                           SMALL-CAP     & INCOME    SCIENCES
                                           GROWTH        --------    --------
                                           ------
<S>                                        <C>
Financial Highlights, December 31, 2001         9            9          9
Statement of Net Assets, December 31,
2001                                          10-23        10-15       10-15
Statement of Operations, year ended
December 31, 2001                               24           16          16
Statement of Changes in Net Assets, years
ended
December 31, 2001, and December 31, 2000        25           17          17
Notes to Financial Statements, December
31, 2001                                      26-29        18-22       18-22
Report of Independent Accountants               30           23          23
</TABLE>





<TABLE>
<CAPTION>
                                                    GLOBAL       DEVELOPING
                                                    TECHNOLOGY   TECHNOLOGIES
                                                    ----------   ------------
<S>                                                 <C>
Financial Highlights, December 31, 2001                  8            8
Statement of Net Assets, December 31, 2001             9-13           9-13
Statement of Operations, December 31, 2001              14             14
Statement of Changes in Net Assets, periods ended
December 31, 2001, and December 31, 2000                15             15
Notes to Financial Statements, December 31, 2001       16-20         16-19
                                                         2
Report of Independent Accountants                        1            20
</TABLE>






                                       90

<PAGE>


<TABLE>
<CAPTION>
                                                  SCIENCE &     EQUITY
                                                  TECHNOLOGY    INDEX 500
                                                  ----------    ---------
<S>                                               <C>
Financial Highlights, December 31, 2001                8             1
Statement of Net Assets, December 31, 2001           10-14          2-20
                                                                     2
Statement of Operations, December 31, 2001             15            1
Statement of Changes in Net Assets, years ended                      2
December 31, 2001, and December 31, 2000             16-17           2
                                                                     2
Notes to Financial Statements, December 31, 2001     18-22          3-28
Report of Independent Accountants                      23            29
</TABLE>





<TABLE>
<CAPTION>
                                                 NEW       CAPITAL     MID-CAP
                                       BALANCED  HORIZONS  APPRECIATIONGROWTH
                                       --------  --------          ----------
<S>                                    <C>
Financial Highlights, December 31,                                        1
2001                                      10        11         8          2
Portfolio of Investments, December
31, 2001                                11-39     12-22       9-15       14-19
Statement of Assets and Liabilities,
December 31, 2001                         40        23         16          20
Statement of Operations, year ended
December 31, 2001                         41        24         17          21
Statement of Changes in Net Assets,
years ended
December 31, 2001, and December 31,
2000                                      42        25         18        22-23
Notes to Financial Statements,
December 31, 2001                       43-47     26-29      19-22       24-28
Report of Independent Accountants         48        30         23          29
</TABLE>





<TABLE>
<CAPTION>
                                                  SMALL-CAP  MEDIA &
                                                  STOCK      TELECOMMU-
                                                  -----      NICATIONS
                                                             ---------
<S>                                               <C>
Financial Highlights, December 31, 2001              10          7
Portfolio of Investments, December 31, 2001         12-22        8-10
Statement of Assets and Liabilities,
December 31, 2001                                    23           11
Statement of Operations, year ended
December 31, 2001                                    24           12
Statement of Changes in Net Assets, years ended
December 31, 2001, and December 31, 2000            25-26         13
Notes to Financial Statements, December 31, 2001    27-31       14-17
Report of Independent Accountants                    32           18
</TABLE>






                                       91

<PAGE>


<TABLE>
<CAPTION>
                                                  INSTITUTIONAL  SMALL-CAP
                                                  LARGE-CAP      VALUE
                                                  VALUE          -----
                                                  -----
<S>                                               <C>
Financial Highlights, December 31, 2001                 5             8
Portfolio of Investments, December 31, 2001            6-8           10-21
Statement of Assets and Liabilities, December
31,
2001                                                    9              22
Statement of Operations, year ended December 31,
2001                                                   10              23
Statement of Changes in Net Assets, years ended
December 31, 2001, and December 31, 2000               11            24-25
Notes to Financial Statements, December 31, 2001      12-13          26-30
Report of Independent Accountants                      14              31
</TABLE>





<TABLE>
<CAPTION>
                                          INSTITUTIONAL
                                          SMALL-CAP STOCK
                                          ---------------
<S>                                       <C>
Financial Highlights, December 31, 2001          6
Statement of Net Assets, December 31,
2001                                            7-11
Statement of Operations, December 31,
2001                                             12
Statement of Changes in Net Assets,
December 31, 2001                                13
Notes to Financial Statements, December
31, 2001                                        14-15
                                                 1
Report of Independent Accountants                6
</TABLE>





<TABLE>
<CAPTION>
                                          INSTITUTIONAL
                                          LARGE-CAP GROWTH
                                                    ------
<S>                                       <C>
Financial Highlights, December 31, 2001         4
Statement of Net Assets, December 31,
2001                                            5-6
Statement of Operations, for the period
ended December 31, 2001                          7
Statement of Changes in Net Assets, for
the period ended December 31, 2001               8
Notes to Financial Statements, December
31, 2001                                        9-10
                                                1
Report of Independent Accountants               1
</TABLE>






                                       92

<PAGE>


<TABLE>
<CAPTION>
                                 BLUE CHIP      EQUITY INCOME
                                 GROWTH         FUND-ADVISOR    VALUE FUND-
                                 FUND-ADVISOR   CLASS           ADVISOR CLASS
                                 CLASS          -----           -------------
                                 -----
<S>                              <C>
Financial Highlights, December
31, 2001                              12              9               9
                                                      10
Statement of Net Assets,                              -1
December 31, 2001                    13-19            7              10-16
Statement of Operations, year                         1
ended December 31, 2001               20              8               17
Statement of Changes in Net
Assets, for the periods ended
December 31, 2001, and December                       1
31, 2000                             21-22           9-20            18-19
                                                      2
Notes to Financial Statements,                        1
December                                              -
31, 2001                             23-27            25             20-24
Report of Independent                  2                              2
Accountants                            8              26              5
</TABLE>






<TABLE>
<CAPTION>
                                                 MID-CAP        SMALL-CAP STOCK
                                                 GROWTH FUND-   FUND-
                                                 ADVISOR CLASS  ADVISOR CLASS
                                                 -------------  -------------
<S>                                              <C>
                                                       1
Financial Highlights, December 31, 2001                3             11
                                                       1
                                                       4
                                                      -1
Portfolio of Investments, December 31, 2001            9             12-22
Statement of Assets and Liabilities, December
31, 2001                                              20              23
Statement of Operations, year ended December           2
31, 2001                                               1              24
Statement of Changes in Net Assets, for the
periods ended December 31, 2001, and December         22
31, 2000                                              -23            25-26
                                                       2
                                                       4
Notes to Financial Statements, December 31,           -2
2001                                                   8             27-31
                                                       2
Report of Independent Accountants                      9              32
</TABLE>





<TABLE>
<CAPTION>
                                                            SMALL-CAP VALUE
                                                            FUND-ADVISOR CLASS
                                                                         -----
<S>                                                         <C>
Financial Highlights, December 31, 2001                            9
Portfolio of Investments, December 31, 2001                       10-21
Statement of Assets and Liabilities, December 31, 2001              22
Statement of Operations, year ended December 31, 2001               23
Statement of Changes in Net Assets, for the periods ended
December 31, 2001, and December 31, 2000                          24-25
Notes to Financial Statements, December 31, 2001                  26-30
Report of Independent Accountants                                   31
</TABLE>





                                       93

<PAGE>


<TABLE>
<CAPTION>
                                                            SCIENCE &
                                                            TECHNOLOGY
                                                            FUND-ADVISOR
                                                            CLASS
                                                            -----
<S>                                                         <C>
Financial Highlights, December 31, 2001                           9
Statement of Net Assets, December 31, 2001                       10-14
Statement of Operations, year ended December 31, 2001             15
Statement of Changes in Net Assets, for the periods ended
December 31, 2001, and December 31, 2000                         16-17
Notes to Financial Statements, December 31, 2001                 18-22
Report of Independent Accountants                                 23
</TABLE>






 RATINGS OF CORPORATE DEBT SECURITIES
 -------------------------------------------------------------------------------

                         Moody's Investors Service, Inc.

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


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

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

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

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

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

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


                          Standard & Poor's Corporation

   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.


                                       94

<PAGE>

   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, B, CCC, CC, C-Bonds rated BB, B, CCC, CC, and C 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 C the highest degree of speculation. While such bonds will likely have
   some quality and protective characteristics, these are outweighed by large
   uncertainties or major risk exposures to adverse conditions.

   D-In default.


                                Fitch IBCA, Inc.

   AAA-High grade, broadly marketable, suitable for investment by trustees and
   fiduciary institutions, and liable to 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 wide margin of protection through collateral, security, or direct lien on
   specific property. Sinking funds or voluntary reduction of debt by call or
   purchase are often factors, while guarantee or assumption by parties other
   than the original debtor may influence their rating.

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

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

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

   BB, B, CCC, CC, and C-Bonds rated BB, B, CCC, CC, and C are regarded on
   balance as predominantly speculative with respect to the issuer's capacity to
   pay 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.


                                       95




PAGE 2
                                     PART C
                               OTHER INFORMATION

ITEM 23. EXHIBITS

(a)      Articles of Incorporation of Registrant, dated May 1, 1991
         (electronically filed with Amendment No. 21 dated February 28, 1994)

(b)      By-Laws of Registrant, as amended July 21, 1999 (electronically filed
         with Amendment No. 35 dated April 28, 2000)

(c)      Specimen Stock Certificate of Small-Cap Value Fund, Inc. (filed with
         Amendment No. 13)

(d)      Investment Management Agreement between Registrant and T. Rowe Price
         Associates, Inc., dated May 1, 1991 (electronically filed with
         Amendment No. 21 dated February 28, 1994)

(e)      Underwriting Agreement between Registrant and T. Rowe Price Investment
         Services, Inc., dated June 24, 1988 (electronically filed with
         Amendment No. 21 dated February 28, 1994)

(f)      Inapplicable

(g)      Custody Agreements


(g)(1)   Custodian Agreement between T. Rowe Price Funds and State Street Bank
         and Trust Company, dated January 28, 1998, as amended November 4, 1998,
         April 21, 1999, February 9, 2000, April 19, 2000, July 18, 2000,
         October 25, 2000, February 7, 2001, June 7, 2001, and July 24, 2001


(g)(2)   Global Custody Agreement between The Chase Manhattan Bank 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, July 31,
         1996, July 23, 1997, September 3, 1997, October 29, 1997, December 15,
         1998, October 6, 1999, February 9, 2000, April 19, 2000, July 18, 2000,
         October 25, 2000, April 25, 2001, and July 24, 2001

(h)      Other Agreements


(h)(1)   Transfer Agency and Service Agreement between T. Rowe Price Services,
         Inc. and T. Rowe Price Funds, dated January 1, 2002

<PAGE>



PAGE 3

(h)(2)   Agreement between T. Rowe Price Associates, Inc. and T. Rowe Price
         Funds for Fund Accounting Services, dated January 1, 2002


(h)(3)   Agreement between T. Rowe Price Retirement Plan Services, Inc. and the
         Taxable Funds, dated January 1, 2002

(i)      Inapplicable

(j)      Other Opinions


(j)(1)   Consent of Independent Accountants


(j)(2)   Opinion of Counsel


(j)(3)   Power of Attorney


(j)(4)   Certificate of Vice President pursuant to Rule 306 of Regulation S-T


(k)      Inapplicable

(l)      Inapplicable


(m)(1)   Rule 12b-1 Plan dated February 9, 2000 (electronically filed with
         Amendment No. 33 dated March 27, 2000)


(m)(2)   Form of Selling Agreement to be used by T. Rowe Price Investment
         Services, Inc. (electronically filed with Amendment No. 33, dated March
         27, 2000)

(n)      Rule 18f-3 Plan dated February 9, 2000 (electronically filed with
         Amendment No. 33 dated March 27, 2000)


(p)      Code of Ethics, dated April 1, 2002

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

         None

ITEM 25. INDEMNIFICATION

         The Registrant maintains comprehensive Errors and Omissions and
Officers and Directors insurance policies written by the Evanston Insurance
Company and ICI Mutual. These policies provide coverage for T. Rowe Price
Associates, Inc. ("Manager"), and its subsidiaries and affiliates as listed in
Item 26 of this Registration Statement (with the exception of the T. Rowe Price
Associates Foundation, Inc.), and all other investment companies in the T. Rowe
Price family of mutual funds. In addition to the
<PAGE>



PAGE 4
corporate insureds, the policies also cover the officers, directors, and
employees of the Manager, its subsidiaries, and affiliates. 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.

GENERAL. The Charter of the Corporation provides that to the fullest extent
permitted by Maryland or federal law, no director or 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 therein 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.

         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").
<PAGE>



PAGE 5

         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

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

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

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

         SECTION 10.02. INSURANCE OF OFFICERS, DIRECTORS, EMPLOYEES, AND AGENTS.
To the fullest extent permitted by applicable Maryland law and by Section 17(h)
of the Investment
<PAGE>



PAGE 6
Company Act of 1940, as from time to time amended, the Corporation may purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee, or agent of the Corporation, or who is or was serving at the
request of the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against any
liability asserted against him and incurred by him in or arising out of his
position, whether or not the Corporation would have the power to indemnify him
against such liability.

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

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT MANAGER

         T. Rowe Price Group, Inc., ("GROUP") owns 100% of the stock of T. Rowe
Price Associates, Inc. Group was formed in 2000 as a holding company for the T.
Rowe Price affiliated companies.

         T. Rowe Price Associates, Inc. ("PRICE ASSOCIATES"), a Maryland
corporation, serves as investment adviser to individual and institutional
investors, including investment companies. Price Associates is registered as an
investment adviser under the Investment Advisers Act of 1940.

         T. Rowe Price Savings Bank ("SAVINGS BANK"), a wholly owned subsidiary
of T. Rowe Price Associates, Inc., commenced operations in 2000. The Savings
Bank is a federally chartered savings bank, and provides federally insured bank
products to a national customer base.


         T. Rowe Price International, Inc. (formerly Rowe Price-Fleming
International, Inc.), a Maryland corporation, is a wholly owned subsidiary of T.
Rowe Price Finance, Inc. T. Rowe Price International, Inc. ("T. ROWE PRICE
INTERNATIONAL") was
<PAGE>



PAGE 7
incorporated in Maryland in 2000 and provides investment counsel service with
respect to foreign securities for institutional investors in the United States
and elsewhere. In addition to managing private counsel client accounts, T. Rowe
Price International also sponsors and serves as adviser and subadviser to U.S.
and foreign registered investment companies which invest in foreign securities,
and provides investment advice to the T. Rowe Price Trust Company, trustee of
the International Common Trust Fund.


         T. Rowe Price Global Investment Services Limited ("GLOBAL INVESTMENT
SERVICES") is an English Corporation, organized in 2000, and a wholly owned
subsidiary of T. Rowe Price Group, Inc. Global Investment Services is also
regulated by the English Financial Services Authority and provides investment
management, sales, and client servicing to non-U.S. institutional and retail
investors.


         T. Rowe Price Global Asset Management Limited ("GLOBAL ASSET
MANAGEMENT"), an English corporation, is an SEC registered investment adviser
under the Investment Advisers Act of 1940. Global Asset Management provides
investment management services to Japanese investment trusts and other accounts
for institutional investors in Japan pursuant to one or more delegation
agreements entered into between Daiwa SB Investments, Ltd. and Global Asset
Management or other advisory agreements. Global Asset Management is a
wholly-owned subsidiary of T. Rowe Price Group, Inc.

         T. Rowe Price Investment Services, Inc. ("INVESTMENT SERVICES"), a
wholly owned subsidiary of T. Rowe Price Associates, Inc., was incorporated in
Maryland in 1980 for the specific purpose of acting as principal underwriter and
distributor for the registered investment companies which T. Rowe Price
Associates, Inc. sponsors and serves as investment adviser (the "PRICE FUNDS").
Investment Services also serves as distributor for any proprietary variable
annuity products. 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 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 and T. Rowe Price Retirement Plan Services.

         T. Rowe Price Associates Foundation, Inc. (the "FOUNDATION"), was
incorporated in 1981 (and is not a subsidiary of T. Rowe Price Associates,
Inc.). The Foundation's overall objective is to improve the quality of life in
the community at
<PAGE>



PAGE 8
large by making charitable contributions to nonprofit organizations benefiting
education, arts and culture, civic and community, and human services interests.
In addition to grant making, the Foundation also has a very generous matching
gift program whereby contributions its employees make to qualifying
organizations of their choice are matched according to established guidelines.

         T. Rowe Price Services, Inc. ("PRICE SERVICES"), a wholly owned
subsidiary of T. Rowe Price Associates, Inc., 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 T. Rowe Price Associates, Inc., 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 T. Rowe Price Associates, Inc., is a Maryland-chartered
limited-service trust company, organized in 1983 for the purpose of providing
fiduciary services. The Trust Company serves as trustee and/or custodian of
certain qualified and non-qualified employee benefit plans, individual
retirement accounts, and common trust funds.

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

         TRPH Corporation, a wholly owned subsidiary of T. Rowe Price
Associates, Inc., was organized in 1997 to acquire an interest in a UK-based
corporate finance advisory firm.

         T. Rowe Price Threshold Fund Associates, Inc., a wholly owned
subsidiary of T. Rowe Price Associates, Inc., 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.

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



PAGE 9

         T. Rowe Price Stable Asset Management, Inc. ("STABLE ASSET
MANAGEMENT"), was incorporated in Maryland in 1988 as a wholly owned subsidiary
of T. Rowe Price Associates, Inc. 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 investment returns
through the use of guaranteed investment contracts, bank investment contracts,
structured investment contracts issued by insurance companies and banks, as well
as fixed income securities.

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

         T. Rowe Price Recovery Fund II Associates, L.L.C., is a Maryland
limited liability company (with T. Rowe Price Associates, Inc. and T. Rowe Price
Trust Company as its members) organized in 1996 to serve as 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 T. Rowe Price Associates, Inc.
This entity is registered as an investment adviser under the Investment Advisers
Act of 1940 as well as with the Ontario Securities Commission to provide
advisory services to individual and institutional clients residing in Canada.

         T. Rowe Price Insurance Agency, Inc., is a wholly owned subsidiary of
T. Rowe Price Group, Inc., organized in Maryland in 1994 and licensed to do
business in several states to act primarily as a distributor of proprietary
variable annuity products.

         Since 1983, T. Rowe Price Associates, Inc. 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 T. Rowe Price Associates, Inc. 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
T. Rowe Price Associates' transfer agent, plan administrative services,
retirement plan services, and operations support functions.

<PAGE>



PAGE 10
         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 Suburban Third, Inc., a wholly owned Maryland subsidiary of T. Rowe
Price Associates, Inc., was incorporated in 1999 to primarily engage in the
development and ownership of real property located in Colorado Springs,
Colorado.

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

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

         T. Rowe Price Advisory Services, Inc., ("ADVISORY SERVICES"), a wholly
owned subsidiary of T. Rowe Price Group, Inc. was incorporated in Maryland in
2000 Advisory Services is registered as an investment adviser under the
Investment Advisers Act of 1940, and provides investment advisory services to
individuals, including shareholders of the Price Funds.


         Listed below are the directors, executive officers and managing
directors of T. Rowe Price Group, Inc. who have other substantial businesses,
professions, vocations, or employment aside from their association with T. Rowe
Price Associates, Inc.:

                     DIRECTORS OF T. ROWE PRICE GROUP, INC.

D. WILLIAM J. GARRETT, Director of T. Rowe Price Group, Inc. Mr. Garrett was the
Group Chief Executive of Robert Fleming Holdings Limited from 1997 until 2000
when the company was acquired by the Chase Manhattan Corporation. He also served
as a director of Rowe Price-Fleming International, Inc. (now T. Rowe Price
International) from 1981 until 2000. Mr. Garrett's address is 13 Stanley
Crescent, London W11 2NA, England.


JAMES H. GILLIAM, JR., Director of T. Rowe Price Group, Inc. Mr. Gilliam is an
attorney, private investor and consultant; counsel to Knickerbocker LLC, a
private investment company; and director
<PAGE>



PAGE 11
or trustee at several institutions. Mr. Gilliam's address is: Brandywine Plaza,
105 Foulk Road, Suite 101, Wilmington, Delaware 19803.

DONALD B. HEBB, JR., Director of T. Rowe Price Group, Inc. Mr. Hebb is the
managing general partner of ABS Capital Partners. Mr. Hebb's address is One
South Street, 25th Floor, Baltimore, Maryland 21202.

RICHARD L. MENSCHEL, Director of T. Rowe Price Group, Inc. Mr. Menschel is a
limited partner of The Goldman Sachs Group, L.P., an investment banking firm.
Mr. Menschel's address is: 85 Broad Street, 2nd Floor, New York, New York 10004.

ANNE MARIE WHITTEMORE, Director of T. Rowe Price Group, Inc. Mrs. Whittemore is
a partner of the law firm of McGuire, Woods, Battle & Boothe L.L.P. and a
Director of Owens & Minor, Inc.; Fort James Corporation; and Albemarle
Corporation. Mrs. Whittemore's address is: One James Center, Richmond, Virginia
23219.

All of the following directors of T. Rowe Price Group, Inc. are employees of T.
Rowe Price Associates, Inc.

EDWARD C. BERNARD, Director and Managing Director of T. Rowe Price Group, Inc.,
and T. Rowe Price Associates, Inc.; Director and President of T. Rowe Price
Insurance Agency, Inc. and T. Rowe Price Investment Services, Inc.; Director of
T. Rowe Price Services, Inc.; Vice President of TRP Distribution, Inc.; Chairman
of the Board and Director of T. Rowe Price Savings Bank.

HENRY H. HOPKINS, Director and Managing Director of T. Rowe Price Group, Inc.;
Managing Director of T. Rowe Price Associates, Inc.; Director of T. Rowe Price
Insurance Agency, Inc.; Vice President and Director of T. Rowe Price (Canada),
Inc., T. Rowe Price Investment Services, Inc., T. Rowe Price Services, Inc., T.
Rowe Price Threshold Fund Associates, Inc., T. Rowe Price Trust Company, TRP
Distribution, Inc., and TRPH Corporation; Vice President of T. Rowe Price
International, T. Rowe Price Real Estate Group, Inc., T. Rowe Price Retirement
Plan Services, Inc., T. Rowe Price Stable Asset Management, Inc., and T. Rowe
Price Strategic Partners Associates, Inc.

JAMES A.C. KENNEDY, Director and Managing Director of T. Rowe Price Group, Inc.,
and T. Rowe Price Associates, Inc.; President and Director of T. Rowe Price
Strategic Partners Associates, Inc.; Director and Vice President of T. Rowe
Price Threshold Fund Associates, Inc.

JOHN H. LAPORTE, JR., Director and Managing Director of T. Rowe Price Group,
Inc.; Managing Director of T. Rowe Price Associates, Inc.
<PAGE>



PAGE 12


WILLIAM T. REYNOLDS, Director and Managing Director of T. Rowe Price Group,
Inc., and T. Rowe Price Associates, Inc.; Chairman of the Board and Director of
T. Rowe Price Stable Asset Management, Inc.; Director of TRP Finance, Inc.;
Director of T. Rowe Price Global Asset Management Limited.


JAMES S. RIEPE, Vice-Chairman of the Board, Director, and Managing Director of
T. Rowe Price Group, Inc.; Director and Managing Director of T. Rowe Price
Associates, Inc.; Chairman of the Board, Director, President, and Trust Officer
of T. Rowe Price Trust Company; Chairman of the Board and Director of T. Rowe
Price (Canada), Inc., T. Rowe Price Investment Services, Inc., T. Rowe Price
Investment Technologies, Inc., T. Rowe Price Retirement Plan Services, Inc., and
T. Rowe Price Services, Inc.; Director of T. Rowe Price International, Inc., T.
Rowe Price Global Investment Services Limited, T. Rowe Price Insurance Agency,
Inc., and TRPH Corporation; Director and President of TRP Distribution, Inc.,
TRP Suburban, Inc., TRP Suburban Second, Inc., and TRP Suburban Third, Inc.; and
Director and Vice President of T. Rowe Price Stable Asset Management, Inc.


GEORGE A. ROCHE, Chairman of the Board, President, Director, and Managing
Director of T. Rowe Price Group, Inc.; President, Director and Managing Director
of T. Rowe Price Associates, Inc.; Chairman of the Board and Director of TRP
Finance, Inc.; Director of T. Rowe Price International, Inc., T. Rowe Price
Retirement Plan Services, Inc., and T. Rowe Price Strategic Partners, Inc., and
Director and Vice President of T. Rowe Price Threshold Fund Associates, Inc.,
TRP Suburban, Inc., TRP Suburban Second, Inc., and TRP Suburban Third, Inc.

BRIAN C. ROGERS, Director and Managing Director of T. Rowe Price Group, Inc.;
Managing Director of T. Rowe Price Associates, Inc.; Vice President of T. Rowe
Price Trust Company.


M. DAVID TESTA, Vice Chairman of the Board, Chief Investment Officer, Director,
and Managing Director of T. Rowe Price Group, Inc.; Director, Chief Investment
Officer, and Managing Director of T. Rowe Price Associates, Inc.; Director, T.
Rowe Price International, Inc. and T. Rowe Price Global Investment Services
Limited; Chairman of the Board and Director of T. Rowe Price Global Asset
Management Limited; President and Director of T. Rowe Price (Canada), Inc.;
Director and Vice President of T. Rowe Price Trust Company; and Director of TRPH
Corporation.


MARTIN G. WADE, Director and Managing Director of T. Rowe Price Group, Inc.;
Managing Director of T. Rowe Price Associates, Inc.; Chairman of the Board and
Director of T. Rowe Price International, Inc. and T. Rowe Price Global
Investment Services Limited; Director, T. Rowe Price Global Asset Management
Limited.
<PAGE>



PAGE 13

                         ADDITIONAL EXECUTIVE OFFICERS


CRISTINA WASIAK, Managing Director and Chief Financial Officer of T. Rowe Price
Group, Inc.; Vice President of T. Rowe Price Associates, Inc.

  ADDITIONAL MANAGING DIRECTORS OF T. ROWE PRICE GROUP, INC. AND T. ROWE PRICE
                                ASSOCIATES, INC.


CHRISTOPHER ALDERSON, Managing Director of T. Rowe Price Group, Inc. and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price International, Inc.


PRESTON G. ATHEY, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price Trust Company; Vice
President of T. Rowe Price Trust Company.


BRIAN W.H. BERGHUIS, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.


STEPHEN W. BOESEL, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price Trust Company.


JOHN H. CAMMACK, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price Investment Services,
Inc. and T. Rowe Price Trust Company.

JOHN R. FORD, Managing Director of T. Rowe Price Group, Inc. and T. Rowe Price
Associates, Inc.; Director and Chief Investment Officer of T. Rowe Price
International, Inc.

MICHAEL A. GOFF, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.; Director and the President of T. Rowe Price Investment
Technologies, Inc.

IAN D. KELSON, Managing Director of T. Rowe Price Group, Inc. and T. Rowe Price
Associates, Inc.; Vice President of T. Rowe Price International, Inc.


GREGORY A. McCRICKARD, Managing Director of T. Rowe Price Group, Inc., and T.
Rowe Price Associates, Inc.; Vice President of T. Rowe Price Trust Company.


MARY J. MILLER, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.

<PAGE>



PAGE 14

NANCY M. MORRIS, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price International, Inc., T.
Rowe Price Investment Services, Inc., and T. Rowe Price Stable Asset Management,
Inc.; Director and Vice President of T. Rowe Price Trust Company; Director of T.
Rowe Price Global Asset Management Limited.


GEORGE A. MURNAGHAN, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price Investment Services,
Inc. and T. Rowe Price Trust Company; Vice President of T. Rowe Price
International, Inc.


EDMUND M. NOTZON III, Managing Director of T. Rowe Price Group, Inc., and T.
Rowe Price Associates, Inc.; Vice President of T. Rowe Price Investment
Services, Inc., and T. Rowe Price Trust Company.


WAYNE D. O'MELIA, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.; Director and Vice President of T. Rowe Price Investment
Services, Inc.; Director and President of T. Rowe Price Services, Inc.; Vice
President of T. Rowe Price Trust Company.


LARRY J. PUGLIA, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price (Canada), Inc.


JOHN R. ROCKWELL, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.; Director and Senior Vice President of T. Rowe Price
Retirement Plan Services, Inc.; Director and Vice President of T. Rowe Price
Stable Asset Management, Inc. and T. Rowe Price Trust Company; Vice President of
T. Rowe Price Investment Services, Inc.


R. TODD RUPPERT, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.; Director and President of T. Rowe Price Global Asset
Management Limited and T. Rowe Price Global Investment Services Limited;
President and Director of TRPH Corporation; Vice President of T. Rowe Price
Retirement Plan Services, Inc. and T. Rowe Price Trust Company.


ROBERT W. SMITH, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price International, Inc.


WILLIAM J. STROMBERG, Managing Director of T. Rowe Price Group, Inc., and T.
Rowe Price Associates, Inc.

<PAGE>



PAGE 15

MARK J. VASELKIV, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price Recovery Fund
Associates, Inc. and T. Rowe Price Recovery Fund II Associates, L.L.C.


CHARLES E. VIETH, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.; Director and President of T. Rowe Price Retirement Plan
Services, Inc.; Director and Vice President of T. Rowe Price Investment
Services, Inc. and T. Rowe Price Services, Inc.; Vice President of T. Rowe Price
(Canada), Inc., T. Rowe Price Trust Company, and TRP Distribution, Inc.


DAVID J.L. WARREN, Managing Director of T. Rowe Price Group, Inc. and T. Rowe
Price Associates, Inc.; Director, Chief Executive Officer, and President of T.
Rowe Price International, Inc.; Director of T. Rowe Price Global Asset
Management Limited.


RICHARD T. WHITNEY, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price International, Inc. and
T. Rowe Price Trust Company.


         Certain directors and officers of T. Rowe Price Group, Inc., and T.
Rowe Price Associates, Inc. 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 the Funds," in Registrant's Statement of
Additional Information.

ITEM 27. PRINCIPAL UNDERWRITERS


(a)      The principal underwriter for the Registrant is Investment Services.
         Investment Services acts as the principal underwriter for the T. Rowe
         Price family of mutual funds, including the following investment
         companies: T. Rowe Price Growth Stock Fund, Inc., T. Rowe Price New
         Horizons Fund, Inc., T. Rowe Price New Era Fund, Inc., T. Rowe Price
         New Income Fund, Inc., T. Rowe Price Prime Reserve Fund, Inc., T. Rowe
         Price Tax-Free Income Fund, Inc., T. Rowe Price Tax-Exempt Money Fund,
         Inc., T. Rowe Price International Funds, Inc., T. Rowe Price Growth &
         Income Fund, Inc., T. Rowe Price Tax-Free Short-Intermediate Fund,
         Inc., T. Rowe Price Short-Term Bond Fund, Inc., T. Rowe Price High
         Yield Fund, Inc., T. Rowe Price Tax-Free High Yield Fund, Inc., T. Rowe
         Price New America Growth Fund, T. Rowe Price Equity Income Fund, T.
         Rowe Price GNMA Fund, T. Rowe Price Capital Appreciation Fund, T. Rowe
         Price California Tax-Free Income Trust, T. Rowe Price State Tax-Free
         Income Trust, T. Rowe Price Science & Technology Fund, Inc., T. Rowe
         Price Small-Cap Value Fund, Inc., T. Rowe
<PAGE>



PAGE 16
         Price 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
         Mid-Cap Growth Fund, Inc., T. Rowe Price Small-Cap Stock Fund, Inc., T.
         Rowe Price Tax-Free 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., T. Rowe Price Institutional Equity Funds,
         Inc., T. Rowe Price Financial Services Fund, Inc., T. Rowe Price
         Diversified Small-Cap Growth Fund, Inc., T. Rowe Price Tax-Efficient
         Funds, Inc., T. Rowe Price Reserve Investment Funds, Inc., T. Rowe
         Price Media & Telecommunications Fund, Inc., T. Rowe Price Real Estate
         Fund, Inc., T. Rowe Price Developing Technologies Fund, Inc., and T.
         Rowe Price Global Technology Fund, Inc., T. Rowe Price U.S. Bond Index
         Fund, Inc., and T. Rowe Price International Index Fund, Inc.

         Investment Services is a wholly owned subsidiary of T. Rowe Price
         Associates, Inc., 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
         commissions 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.


<TABLE>
<CAPTION>
NAME                                                               POSITIONS AND                   POSITIONS AND
                                                                   OFFICES WITH                    OFFICES WITH
                                                                   UNDERWRITER                     REGISTRANT
<S>                                                                <C>                             <C>
James S. Riepe                                                     Chairman of the Board           Director and
                                                                   and Director                    Vice President
Edward C. Bernard                                                  President and Director          None
Henry H. Hopkins                                                   Vice President and Director     Vice President
Wayne D. O'Melia                                                   Vice President and Director     None
Charles E. Vieth                                                   Vice President and Director     None
Janet G. Albright                                                  Vice President                  None
Patricia M. Archer                                                 Vice President                  None
Steven J. Banks                                                    Vice President                  None
Richard S. Behrman                                                 Vice President                  None
John T. Bielski                                                    Vice President                  None
Robert Birch                                                       Vice President                  None
John H. Boyd                                                       Vice President                  None
Darrell N. Braman                                                  Vice President                  None
Ronae M. Brock                                                     Vice President                  None
Brace Brooks                                                       Vice President                  None
Edwin J. Brooks III                                                Vice President                  None
Barbara J. Burdett                                                 Vice President                  None
Meredith C. Callanan                                               Vice President                  None
John H. Cammack                                                    Vice President                  None
Ann R. Campbell                                                    Vice President                  None
Christopher W. Carlson                                             Vice President                  None
Christine M. Carolan                                               Vice President                  None
Joseph A. Carrier                                                  Vice President                  None
Laura H. Chasney                                                   Vice President                  None
Renee M. Christoff                                                 Vice President                  None
Jerome A. Clark                                                    Vice President                  None
Todd M. Cleary                                                     Vice President                  None
Joseph A. Crumbling                                                Vice President                  None
Christine S. Fahlund                                               Vice President                  None
Forrest R. Foss                                                    Vice President                  None
Thomas A. Gannon                                                   Vice President                  None
John R. Gilner                                                     Vice President                  None
David R. Giroux                                                    Vice President                  None
John Halaby                                                        Vice President                  None
Douglas E. Harrison                                                Vice President                  None
David J. Healy                                                     Vice President                  None
Joanne M. Healy                                                    Vice President                  None
Joseph P. Healy                                                    Vice President                  None
Walter J. Helmlinger                                               Vice President                  None
Salvador G. LaBella                                                Vice President                  None
Steven A. Larson                                                   Vice President                  None
Cynthia W. LaRue                                                   Vice President                  None
Christopher R. Leonard                                             Vice President                  None
Gayle A. Lomax                                                     Vice President                  None
Anh Lu                                                             Vice President                  None
Sarah McCafferty                                                   Vice President                  None
Mark J. Mitchell                                                   Vice President                  None
Nancy M. Morris                                                    Vice President                  None
Ram C. Mouli                                                       Vice President                  None
George A. Murnaghan                                                Vice President                  None
Timothy D. Noel                                                    Vice President                  None
Steven E. Norwitz                                                  Vice President                  None
Edmund M. Notzon III                                               Vice President                  None
Barbara A. O'Connor                                                Vice President                  None
David Oestreicher                                                  Vice President                  None
Regina M. Pizzonia                                                 Vice President                  None
Pamela D. Preston                                                  Vice President                  None
Suzanne J. Ricklin                                                 Vice President                  None
George D. Riedel                                                   Vice President                  None
James Robertson, Jr.                                               Vice President                  None
Theodore E. Robson                                                 Vice President                  None
John R. Rockwell                                                   Vice President                  None
Christopher J. Rohan                                               Vice President                  None
Kenneth J. Rutherford                                              Vice President                  None
Alexander Savich                                                   Vice President                  None
Kristin E. Seeberger                                               Vice President                  None
John W. Seufert                                                    Vice President                  None
Donna B. Singer                                                    Vice President                  None
Carole H. Smith                                                    Vice President                  None
William W. Strickland, Jr.                                         Vice President                  None
Walter P. Stuart III                                               Vice President                  None
Scott Such                                                         Vice President                  None
Jerome Tuccille                                                    Vice President                  None
Walter Wdowiak                                                     Vice President                  None
Jane F. White                                                      Vice President                  None
Candler R. Young                                                   Vice President                  None
Barbara A. O'Connor                                                Treasurer and Controller        None
Kimberly B. Andersen                                               Assistant Vice President        None
Richard J. Barna                                                   Assistant Vice President        None
Catherine L. Berkenkemper                                          Assistant Vice President        None
Patricia Cannon                                                    Assistant Vice President        None
Jodi Ann Casson                                                    Assistant Vice President        None
Jon Derek Dry                                                      Assistant Vice President        None
Cheryl L. Emory                                                    Assistant Vice President        None
John A. Galateria                                                  Assistant Vice President        None
Karen Glooch                                                       Assistant Vice President        None
Jason L. Gounaris                                                  Assistant Vice President        None
David A.J. Groves                                                  Assistant Vice President        None
Kristen L. Heerema                                                 Assistant Vice President        None
David A. Hueser                                                    Assistant Vice President        None
Suzanne M. Knoll                                                   Assistant Vice President        None
Patricia B. Lippert                                                Assistant Vice President        Secretary
Gayatri Malik                                                      Assistant Vice President        None
C. Lillian Matthews                                                Assistant Vice President        None
Janice D. McCrory                                                  Assistant Vice President        None
John T. McGuigan                                                   Assistant Vice President        None
Daniel M. Middelton                                                Assistant Vice President        None
Laurie K. Mitchell                                                 Assistant Vice President        None
Clark P. Neel                                                      Assistant Vice President        None
Danielle Nicholson Smith                                           Assistant Vice President        None
JeanneMarie B. Patella                                             Assistant Vice President        None
Kylelane Purcell                                                   Assistant Vice President        None
Jean E. Ramos-Izquierdo                                            Assistant Vice President        None
Jennifer L. Richardson                                             Assistant Vice President        None
Kristin M. Rodriguez                                               Assistant Vice President        None
Ramon D. Rodriguez                                                 Assistant Vice President        None
Deborah Seidel                                                     Assistant Vice President        None
Kevin C. Shea                                                      Assistant Vice President        None
John A. Stranovsky                                                 Assistant Vice President        None
Nancy R. Tabor                                                     Assistant Vice President        None
Judith B. Ward                                                     Assistant Vice President        None
William R. Weker, Jr.                                              Assistant Vice President        None
Natalie F. Widdowson                                               Assistant Vice President        None
Mary G. Williams                                                   Assistant Vice President        None
Timothy R. Yee                                                     Assistant Vice President        None
Theodore J. Zamerski III                                           Assistant Vice President and    None
                                                                   Assistant Controller
Barbara A. Van Horn                                                Secretary                       None
</TABLE>


<PAGE>



PAGE 17
<PAGE>



PAGE 18
<PAGE>



PAGE 19
(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 28. LOCATION OF ACCOUNTS AND RECORDS

         All accounts, books, and other documents required to be maintained by
the Registrant under Section 31(a) of the Investment Company Act of 1940 and the
rules thereunder will be maintained by the Registrant at its offices at 100 East
Pratt Street, Baltimore, Maryland 21202. Transfer, dividend disbursing, and
shareholder service activities are performed by T. Rowe Price Services, Inc., at
4515 Painters Mill Road, Owings Mills, Maryland 21117. Custodian activities for
the Registrant are performed at State Street Bank and Trust Company's Service
Center (State Street South), 1776 Heritage Drive, Quincy, Massachusetts 02171.


         Custody of Registrant's portfolio securities which are purchased
outside the United States is maintained by JPMorgan Chase Bank, London, in its
foreign branches or with other U.S. banks. JPMorgan Chase Bank, London, is
located at Woolgate House, Coleman Street, London EC2P 2HD England.

ITEM 29. MANAGEMENT SERVICES

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

ITEM 30. UNDERTAKINGS

(a)      Not applicable
<PAGE>



PAGE 20

         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, duly authorized, in the City of Baltimore, State of Maryland, this
April 18, 2002.

       T. Rowe Price Small-Cap Value Fund

       /s/Preston G. Athey
By:    Preston G. Athey
       President

         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/Preston G. Athey       President             April 18, 2002
Preston G. Athey          (Chief Executive Officer)


/s/Joseph A. Carrier     Treasurer (Chief       April 18, 2002
Joseph A. Carrier        Financial Officer)


*                        Director               April 18, 2002
Calvin W. Burnett

*                        Director               April 18, 2002
Anthony W. Deering

*                        Director               April 18, 2002
Donald W. Dick, Jr.


*                        Director               April 18, 2002
David K. Fagin


/s/John H. Laporte        Director              April 18, 2002
John H. Laporte


*                        Director               April 18, 2002
F. Pierce Linaweaver

*                        Director               April 18, 2002
Hanne M. Merriman


/s/James S. Riepe        Director and           April 18, 2002
James S. Riepe           Vice President
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PAGE 21


*                        Director               April 18, 2002
John G. Schreiber

/s/M. David Testa        Director               April 18, 2002
M. David Testa


*                        Director               April 18, 2002
Hubert D. Vos


*                        Director               April 18, 2002
Paul M. Wythes


*/s/Henry H. Hopkins     Vice President and     April 18, 2002
Henry H. Hopkins          Attorney-In-Fact