Registration No. 811-08279
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. __ / /
Fiscal Year Ended May 31, 1998
________________________________________
RESERVE INVESTMENT FUNDS, INC.
___________________________________________________
(Exact Name of Registrant as Specified in Charter)
100 East Pratt Street, Baltimore, Maryland 21202
___________________________________________ __________
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code 410-345-2000
____________
Henry H. Hopkins
100 East Pratt Street
Baltimore, Maryland 21202
________________________________________
(Name and Address of Agent for Service)
Approximate Proposed Effective Date August 15, 1997
_______________
The purpose of this Registration Statement is to register the Registrant
under the Investment Company Act of 1940.
This Registration Statement has been filed by the Registrant pursuant
to Section 8(b) of the Investment Company Act of 1940, as amended (the
"Investment Company Act"). However, beneficial interests in the Registrant are
not being registered under the Securities Act of 1933, as amended (the "1933
Act") because such interests will be issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the 1933 Act. Investments in the Registrant may be made only
by a limited number of institutional investors, including investment
companies, common or commingled trust funds, group trusts and certain other
"accredited investors" within the meaning of Regulation D under the 1933 Act.
This Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any beneficial interests in the Registrant.
SUBJECT TO COMPLETION
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold, nor may
offers to buy be accepted, prior to the time the Registration Statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation, or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
RESERVE INVESTMENT FUNDS, INC.
CROSS REFERENCE SHEET
N-1A Item No. Location
_____________ ________
PART A
Item 1. Cover Page +
Item 2. Synopsis +
Item 3. Condensed Financial Information +
Item 4. General Description of Fund, Market, and Risk
Registrant Characteristics;
Organization and
Management; Understanding
Performance Information;
Investment Policies and
Practices
Item 5. Management of the Fund Fund, Market, and Risk
Characteristics;
Organization and
Management
Item 6. Capital Stock and Other Distributions and
Securities Taxes;
Item 7. Purchase of Securities Pricing Shares and
Being Offered Receiving Sale Proceeds;
Transaction Procedures and
Special Requirements;
Account Requirements and
Transaction Information;
Item 8. Redemption or Repurchase Pricing Shares and
Receiving Sale Proceeds;
Transaction Procedures and
Special Requirements;
Redeeming Shares
Item 9. Pending Legal Proceedings +
PART B
Item 10. Cover Page +
Item 11. Table of Contents Table of Contents
Item 12. General Information and History +
Item 13. Investment Objectives and Investment Objectives
Policies and Policies; Investment
Objectives and Programs;
Investment Restrictions;
Investment Performance
Item 14. Management of the Registrant Management of Funds
Item 15. Control Persons and Principal Principal Holders of
Holders of Securities Securities
Item 16. Investment Advisory and Other Investment Management
Services Services; Custodian; Legal
Counsel; Independent
Accountants
Item 17. Brokerage Allocation Portfolio Transactions;
Code of Ethics
Item 18. Capital Stock and Other Dividends and
Securities Distributions; Capital
Stock
Item 19. Purchase, Redemption Redemptions in Kind;
and Pricing of Securities Pricing of Securities;
Being Offered Net Asset Value Per Share;
Federal Registration of
Shares
Item 20. Tax Status Tax Status
Item 21. Underwriters Distributor for Funds
Item 22. Calculation of Yield Quotations
of Money Market Funds +
Item 23. Financial Statements +
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement
___________________________________
+ Not applicable or negative answer
Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.
<PAGE>
Reserve Investment Funds, Inc.
Prospectus
August 15, 1997
Contents
1 About the Funds
Fund, Market, and Risk Characteristics 1
2 About Your Account
Pricing Shares and Receiving Sale Proceeds 5
Distributions and Taxes 6
Transaction Procedures and Special Requirements 8
3 More About the Funds
Organization and Management 9
Understanding Performance Information 11
Investment Policies and Practices 12
4 Investing With T. Rowe Price
Account Requirements and Transaction Information 16
Opening a New Account 16
Purchasing Additional Shares 17
Redeeming Shares 17
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ABOUT THE FUNDS
1
These funds are not available for direct purchase by members of the public.
All investments in the funds must be made by T. Rowe Price, Rowe
Price-Fleming International, Inc., or their affiliates on behalf of
institutional clients for which either investment manager has discretionary
investment authority.
FUND, MARKET, AND RISK CHARACTERISTICS: WHAT TO EXPECT
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To help you decide whether the funds are appropriate for you, this section
takes a closer look at their investment objectives and approaches.
What are the funds' objectives and investment programs?
o Government Reserve Investment Fund The fund's investment objectives are to
maximize stability of capital, liquidity, and, consistent with these, the
highest possible current income. The fund invests primarily in a portfolio of
U.S. Treasury securities, which will compose at least 80% of total assets.
The fund may also include other securities directly guaranteed by the U.S.
government.
o Reserve Investment Fund The objectives of the fund are preservation of
capital, liquidity, and, consistent with these, the highest possible current
income through investments primarily in high-quality, money market
securities. The fund invests at least 95% of its total assets in prime money
market instruments, that is, securities receiving the highest credit rating
assigned by at least two established rating agencies, by one rating agency if
the security is rated by only one, or, if unrated, the equivalent rating as
established by T. Rowe Price.
o Each fund's dollar-weighted average maturity will not exceed 90 days.
Neither fund will purchase any security with a maturity of more than 13
months. The funds' yield will fluctuate in response to changes in interest
rates, but share price is managed to remain stable at $1.00. Unlike most bank
accounts or certificates of deposit, the funds are not insured or guaranteed
by the U.S. government.
o There is no assurance the funds will be able to maintain a stable net asset
value of $1.00 per share.
Will the Government Reserve Investment Fund's investment portfolio consist
entirely of U.S. Treasury securities?
No, but other investments will be backed by the full faith and credit of the
U.S. government or collateralized by such investments. The fund may invest up
to 20% of assets in other U.S. government-backed securities. These include,
but
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T. ROWE PRICE 2
are not limited to, securities issued by U.S. agencies such as the Government
National Mortgage Association (GNMA). GNMA pools individual home mortgages to
back a certificate or bond, which is sold to investors such as mutual funds.
Interest and principal payments generated by the underlying mortgages are
passed through to investors.
Are there any tax benefits to owning shares of the Government Reserve
Investment Fund?
Yes. Monthly dividends paid by the fund from income earned on U.S. Treasury
securities are exempt from state and local taxes in most states. Dividends
derived from the fund's other investments may not be exempt from such taxes.
Are securities backed by the U.S. government and its agencies risk-free?
No. While U.S. government-backed securities generally are considered to be of
the highest quality, they are subject to market risk. The Government Reserve
Investment Fund invests in securities backed by the full faith and credit of
the U.S. government, primarily U.S. Treasury securities. The U.S. government
guarantees the timely payment of interest and principal on Treasury
securities, but does not guarantee the fund's share price.
What are the main types of money market securities the Reserve Investment Fund
can invest in?
o Commercial paper Unsecured promissory notes that corporations typically
issue to finance current operations and other expenditures.
o Treasury bills Debt obligations sold at discount and repaid at face value by
the U.S. Treasury. Bills mature in one year or less and are backed by the
full faith and credit of the U.S. government.
o Certificates of deposit Receipts for funds deposited at banks that guarantee
a fixed interest rate over a specified time period.
o Repurchase agreements Contracts, usually involving U.S. government
securities, that require one party to repurchase securities at a fixed price
on a designated date.
o Banker's acceptances Bank-issued commitments to pay for merchandise sold in
the import/export market.
o Agency notes Debt obligations of agencies sponsored by the U.S. government
that are not backed by the full faith and credit of the United States.
o Medium-term notes Unsecured corporate debt obligations that are continuously
offered in a broad range of maturities and structures.
o Bank notes Unsecured obligations of a bank that rank on an equal basis with
other kinds of deposits but do not carry FDIC insurance.
o For further details on the funds' investment programs, risks, and
fundamental policies, please see the Investment Policies and Practices
section.
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ABOUT THE FUNDS 3
What are the main risks of investing in these funds?
Since they are managed to maintain a $1.00 share price, money market funds
should have little risk of principal loss. However, the potential for
realizing a loss of principal in a bond or money market fund could derive
from:
o Credit risk The chance that any of a fund's holdings will have its credit
rating downgraded or will default (fail to make scheduled interest or
principal payments), potentially reducing the fund's income level and share
price. Regulations require that 95% of the holdings in money market funds be
rated in the highest credit category, and that the remaining 5% be rated no
lower than the second highest credit category.
o Interest rate or market risk The decline in the prices of fixed income
securities and funds that may accompany a rise in the overall level of
interest rates. A sharp and unexpected rise in interest rates could cause a
money fund's price to drop below a dollar. However, the extremely short
maturity of securities held in money market portfolios-a means of achieving
an overall fund objective of principal safety-reduces their potential for
price fluctuation.
How does the portfolio manager try to reduce risk?
Consistent with each fund's objective, the portfolio manager actively seek to
reduce risk and increase total return. Risk management tools include:
o Diversification of assets to reduce the impact of a single holding on the
funds' net asset value.
o Thorough credit research by our own analysts.
o Maturity adjustments to reflect the fund manager's interest rate outlook.
What are derivatives and can the funds invest in them?
The term derivative is used to describe financial instruments whose value is
derived from an underlying security (e.g., a stock or bond) or a market
benchmark (e.g., an interest rate index). Many types of investments
representing a wide range of potential risks and rewards fall under the
"derivatives" umbrella-from conventional instruments such as callable bonds,
futures, and options, to more exotic investments such as stripped mortgage
securities and structured notes. While the term "derivative" has only
recently become widely known among the investing public, derivatives have in
fact been employed by investment managers for many years.
The funds do not invest in high-risk, highly leveraged derivatives, and will
invest in derivatives only if the expected risks and rewards are consistent
with the funds' objectives, policies, and overall risk profile as described
in this prospectus.
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T. ROWE PRICE 4
You may want to review some fundamentals that apply to all fixed income
investments.
Is a fund's yield fixed or will it vary?
It will vary. Yield is calculated every day by dividing a fund's net income
per share, expressed at annual rates, by the share price. Since income in a
fund will fluctuate as the short-term securities in its portfolio mature and
the proceeds are reinvested, its yield will vary.
Is a fund's "yield" the same thing as the "total return"?
Yes. The total return reported for the fund is the result of reinvested
distributions (income and capital gains) and the change in share price for a
given time period. Since money funds are managed to maintain a stable share
price, their yield and total return should be the same. Of course, there is
no guarantee a money fund will maintain a $1.00 share price.
What is "credit quality" and how does it affect a money market fund's yield?
Credit quality refers to a borrower's expected ability to make all required
interest and principal payments in a timely manner. Because highly rated
issuers represent less risk, they can borrow at lower interest rates than
less creditworthy issuers. Securities backed by the full faith and credit of
the U.S. government are regarded as free of credit risk. Among money market
securities, Treasury bills generally carry lower yields than other
instruments of comparable maturity.
What is meant by a money market fund's "maturity"?
Every money market instrument has a stated maturity date when the issuer must
repay the entire principal to the investor. The fund has no maturity in the
strict sense of the word, but does have a dollar-weighted average maturity,
expressed in days. This number is an average of the maturities of the
underlying instruments, with each maturity "weighted" by the percentage of
fund assets it represents.
Do money market securities react to changes in interest rates?
Yes. As interest rates change, the prices of money market securities
fluctuate, but changes are usually small because of their very short
maturities. Investments are typically held until maturity in a money fund to
help it maintain a $1.00 share price.
Is there other information I need to review before making a decision?
Be sure to read Investment Policies and Practices in Section 3, which
discusses the principal types of portfolio securities that the funds may
purchase as well as the types of management practices that the funds may use.
<PAGE>
ABOUT YOUR ACCOUNT
2
PRICING SHARES AND RECEIVING SALE PROCEEDS
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How and when shares are priced
The share price (also called "net asset value" or NAV per share) for each
fund is calculated at 4 p.m. ET each day the New York Stock Exchange is open
for business. To calculate the NAV, a fund's assets are valued and totaled,
liabilities are subtracted, and the balance, called net assets, is divided by
the number of shares outstanding. Amortized cost is used to value money fund
securities.
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.
Note: The time at which transactions and shares are priced and the time until
which orders are accepted may be changed in case of an emergency or if the
New York Stock Exchange closes at a time other than 4 p.m. ET.
How you can receive the proceeds from a sale
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.
Proceeds sent by ACH transfer should be credited the second day after the
sale. ACH is an automated method of initiating payments from and receiving
payments in your financial institution account. ACH is a payment system
supported by over 20,000 banks, savings banks, and credit unions, which
electronically exchanges the transactions primarily through the Federal
Reserve Banks. Proceeds sent by bank wire should be credited to your account
the next business day.
o Exception: Under certain circumstances and when deemed to be in the fund's
best interests, your proceeds may not be sent for up to five business days
after receiving your sale or exchange request. If you were exchanging into a
bond or money fund, your new investment would not begin to earn dividends
until the sixth business day.
o If for some reason we cannot accept your request to sell shares, we will
contact you.
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T. ROWE PRICE 6
USEFUL INFORMATION ON DISTRIBUTIONS AND TAXES
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o 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. The advantage of reinvesting distributions arises from compounding;
that is, you receive 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 business
day of the reinvestment and to reinvest all subsequent distributions in
shares of the fund.
Income dividends
o Money funds declare income dividends daily to shareholders of record as of
12 noon ET on that day. Wire purchase orders received before 12 noon ET
receive the dividend for that day. Other purchase orders receive the dividend
on the next business day after payment has been received.
o Bond and money funds pay dividends on the first business day of each month.
o Bond and money fund shares will earn dividends through the date of
redemption; also, shares redeemed on a Friday or prior to a holiday will
continue to earn dividends until the next business day. Generally, if you
redeem all of your 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 shares, all dividends accrued on those
shares will be reinvested, or paid in cash, on the next dividend payment
date.
Capital gains
o Since money funds are managed to maintain a constant share price, the funds
are not expected to make capital gain distributions.
o A capital gain or loss is the difference between the purchase and sale price
of a security.
o If the 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 usually declared and paid during the first
quarter of the following year.
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ABOUT YOUR ACCOUNT 7
Tax Information
o You will be sent timely information for your tax filing needs.
You need to be aware of the possible tax consequences when:
o You sell fund shares, including an exchange from one fund to another.
o 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.
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 accounts opened new or by exchange in 1983
or later, we will provide you with the gain or loss of the shares you sold
during the year, based on the "average cost" 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 immediately
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 distribution made to you. This information will
also be reported to the IRS. All distributions made by the funds are taxable
to you for the year in which they were paid. The only exception is that
distributions declared during the last three months of a calendar year and
paid in January are taxed as though they were paid by December 31. You will
be sent any additional information you need to determine your taxes on fund
distributions, such as the portion of your dividend, if any, that may be
exempt from state income taxes.
Short-term capital gain distributions are taxable as ordinary income and
long-term gain distributions are taxable at the applicable long-term gain
rate. The gain is long- or short-term depending on how long the fund held the
securities, not how long you held shares in the fund. If you realize a loss
on the sale or exchange of fund shares held six months or less, your
short-term loss recognized is reclassified to long-term to the extent of any
long-term capital gain distribution received.
o Distributions are taxable whether reinvested in additional shares or
received in cash.
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T. ROWE PRICE 8
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 will
receive a portion of the money you just invested in the form of a taxable
distribution. Therefore, you may also wish to find out the fund's record date
before investing. Of course, the fund's share price may, at any time, reflect
undistributed capital gains or income and unrealized appreciation. When these
amounts are eventually distributed, they are taxable.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
----------------------------------------------------------
o Following these procedures helps assure timely and accurate transactions.
Purchase Conditions
Nonpayment
If your payment is not received or you pay with a check or ACH transfer that
does not clear, your purchase will 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 fund 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.
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MORE ABOUT THE FUNDS
3
ORGANIZATION AND MANAGEMENT
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How are the funds organized?
The Reserve Investment Funds, Inc. (the "corporation") was incorporated in
Maryland in 1997, and is a "diversified, open-end investment company," or
mutual fund. The Reserve Investment Fund and the Government Reserve
Investment Fund are series of the corporation that were established in 1997.
Mutual funds pool money received from shareholders and invest it to try to
achieve specified objectives.
o Shareholders benefit from T. Rowe Price's 60 years of investment management
experience.
What is meant by "shares"?
As with all mutual funds, investors purchase shares when they put money in a
fund. These shares are part of a fund's authorized capital stock, but share
certificates are not issued.
Each share and fractional share entitles the shareholder to:
o Receive a proportional interest in the fund's income and capital gain
distributions.
o Cast one vote per share on certain fund matters, including the election of
fund directors, changes in fundamental policies, or approval of changes in
the fund's management contract.
Do T. Rowe Price funds have annual shareholder meetings?
The funds are not required to hold annual meetings and, in order to avoid
unnecessary costs to fund shareholders, do not intend to do so except when
certain matters, such as a change in a fund's fundamental policies, are to be
decided. In addition, shareholders representing at least 10% of all eligible
votes may call a special meeting, if they wish, for the purpose of voting on
the removal of any fund director or trustee. If a meeting is held and you
cannot attend, you can vote by proxy. Before the meeting, the fund will send
you proxy materials that explain the issues to be decided and include a
voting card for you to mail back.
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T. ROWE PRICE 10
Who runs the funds?
General Oversight
The corporation is governed by a Board of Directors that meets regularly to
review the funds' investments, performance, expenses, and other business
affairs. The Board elects the corporation's officers. The policy of the
corporation is that a majority of Board members will be independent of T.
Rowe Price.
o All decisions regarding the purchase and sale of fund investments are made
by T. Rowe Price-specifically by the funds' portfolio managers.
Portfolio Management
Each fund has an Investment Advisory Committee whose chairman has day- to-day
responsibility for managing the fund and works with the committee in
developing and executing the fund's investment program. The Investment
Advisory Committees are composed of the following members:
o Reserve Investment Fund Edward A. Wiese, Chairman, Patrice L.
Berchtenbreiter Ely, Paul W. Boltz, Brian E. Burns, Robert P. Campbell, Donna
M. Davis-Ennis, James M. McDonald, Joan R. Potee, Robert M. Rubino, and
Gwendolyn G. Wagner. Mr. Wiese joined T. Rowe Price in 1984 and has been
managing investments since 1985.
o Government Reserve Investment Fund Edward A. Wiese, Chairman, Patrice L.
Berchtenbreiter Ely, Paul W. Boltz, Brian E. Burns, Robert P. Campbell, James
M. McDonald, Joan R. Potee, and Gwendolyn G. Wagner. Mr. Wiese joined T. Rowe
Price in 1984 and has been managing investments since 1985.
Shareholder Services
T. Rowe Price Services, Inc., another wholly owned subsidiary, acts as the
funds' 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 St., Baltimore, MD 21202.
How are fund expenses determined?
The management agreement spells out the expenses to be paid by each fund. The
funds pay 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/trustee
fees and expenses.
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MORE ABOUT THE FUNDS 11
The funds are expected to pay the fees shown in Table 1 for the fiscal period
ending May 31, 1998.
<TABLE>
Table 1 Services Fees Paid
<CAPTION>
Fund Transfer Agent and Shareholder Services Accounting Services
<S> <S> <C> <C>
Government Reserve
Investment $18,000 $60,000
Reserve Investment 18,000 60,000
- -------------------------------------------------------------------------------------------
</TABLE>
UNDERSTANDING PERFORMANCE INFORMATION
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This section should help you understand the terms used to describe fund
performance.
Total Return
This tells you how much an investment in a fund has changed in value over a
given time period. It reflects any net increase or decrease in the share
price and assumes that all dividends and capital gains (if any) paid during
the period were reinvested in additional shares. Including reinvested
distributions means that total return numbers include the effect of
compounding, i.e., you receive income and capital gain distributions on a
rising number of shares.
o Total return is the most widely used performance measure. Detailed
performance information is included in each fund's annual and semiannual
shareholder reports and in the quarterly Performance Update, which are all
available without charge.
Cumulative Total Return
This is the actual rate of return on an investment for a specified period. A
cumulative return does not indicate how much the value of the investment may
have fluctuated between the beginning and end of the period specified.
Average Annual Total Return
This is always hypothetical. Working backward from the actual cumulative
return, it tells you what constant year-by-year return would have produced
the actual cumulative return. By smoothing out all the variations in annual
performance, it gives you an idea of the investment's annual contribution to
your portfolio, provided you held it for the entire period in question.
Yield
The current or "dividend" yield on a fund or any investment tells you the
relationship between the investment's current level of annual income and its
price on a particular day. The dividend yield reflects the actual income paid
to
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T. ROWE PRICE 12
shareholders for a given period, annualized, and divided by the net asset
value. For example, a fund providing $5 of annual income per share and a
price of $50 has a current yield of 10%. Yields can be calculated for any
time period. The fund may compute a "current" yield, reflecting the latest
seven-day income annualized, or an "effective" yield, which assumes the
income has been reinvested in the fund.
INVESTMENT POLICIES AND PRACTICES
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This section takes a detailed look at some of the types of securities the
funds may hold in their portfolios and the various kinds of investment
practices that may be used in day-to-day portfolio management. Each fund's
investment program is subject to further restrictions and risks described in
the Statement of Additional Information.
Shareholder approval is required to substantively change a fund's objective
and certain investment restrictions noted in the following section as
"fundamental policies." The managers also follow certain "operating policies"
that can be changed without shareholder approval. However, significant
changes are discussed with shareholders in fund reports. Each fund adheres to
applicable investment restrictions and policies at the time it makes an
investment. A later change in circumstances will not require the sale of an
investment if it was proper at the time it was made.
Changes in a fund's holdings, a fund's performance, and the contribution of
various investments are discussed in the shareholder reports sent to you.
o Fund managers have considerable leeway in choosing investment strategies
and selecting securities they believe will help the funds achieve their
objectives.
Types of Portfolio Securities
In seeking to meet their investment objectives, the funds may invest in any
type of security or instrument whose investment characteristics are
consistent with the funds' investment programs. The following pages describe
the principal types of portfolio securities and investment management
practices of the funds.
Money Market Securities
Money market securities are IOUs issued by companies or governmental units.
Money market securities may be interest-bearing or discounted to reflect the
rate of interest paid. In the case of interest-bearing securities, the issuer
has a contractual obligation to pay coupon interest at a stated rate on
specific dates and to repay the face value on a specified date. In the case
of a discount security, no coupon interest is paid, but the security's price
is discounted so that the
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MORE ABOUT THE FUNDS 13
interest is realized when the security matures at face value. In either case,
an issuer may have the right to redeem or "call" the security before
maturity, and the investor may have to reinvest the proceeds at lower market
rates.
Except for adjustable rate instruments, a money market security's interest
rate, as reflected in the coupon rate or discount, is usually fixed for the
life of the security. Its current yield (coupon or discount as a percent of
current price) will fluctuate to reflect changes in interest rate levels. A
money market security's price usually rises when interest rates fall, and
vice versa.
Money market securities may be unsecured (backed by the issuer's general
creditworthiness only) or secured (also backed by specified collateral).
Certain money market securities have interest rates that are adjusted
periodically, which tend to minimize fluctuations in their principal value.
When calculating its weighted average maturity, a fund may shorten the
maturity of these securities in accordance with Rule 2a-7.
Operating policy Except as may be permitted by Rule 2a-7, the funds will not
purchase any security (other than a U.S. government security) if it would
cause a fund to have more than: (1) 5% of its total assets in securities of
that issuer, where the securities are prime securities (other than for
certain temporary, limited purposes); or (2) where the securities are not
prime securities, 5% of its total assets in such securities and 1% of its
total assets in the securities of that issuer.
The Government Reserve Investment Fund may also invest in the following types
of securities.
Other Securities Backed by the Full Faith and Credit of the U.S. Government
The fund may purchase securities of U.S. government agencies and
instrumentalities which are backed by the full faith and credit of the U.S.
government, such as securities of the Government National Mortgage
Association (GNMA), the Federal Housing Administration, the Department of the
General Services Administration, the Maritime Administration, and the Small
Business Administration. The fund will not invest in the securities of any
U.S. government agencies which do not carry the full faith and credit of the
U.S. government, such as Fannie Mae (FNMA) or Freddie Mac (FHLMC) securities.
No more than 20% of the fund's total assets will be maintained in non-U.S.
Treasury securities. The fund does not expect to invest in mortgage
securities.
Fundamental policy The fund must invest at least 80% of its total assets in
U.S. Treasury securities and repurchase agreements thereon. However, as an
operating policy the fund has decided not to invest in repurchase agreements.
<PAGE>
T. ROWE PRICE 14
The Reserve Investment Fund may also invest in the following types of
securities.
Asset-Backed Securities
An underlying pool of assets, such as credit card or automobile trade
receivables or corporate loans or bonds, backs these bonds and provides the
interest and principal payments to investors. On occasion, the pool of assets
may also include a swap obligation, which is used to change the cash flows on
the underlying assets. As an example, a swap may be used to allow floating
rate assets to back a fixed rate obligation. Credit quality depends primarily
on the quality of the underlying assets, the level of credit support, if any,
provided by the issuer, and the credit quality of the swap counterparty, if
any. The underlying assets (i.e., loans) are subject to prepayments which can
shorten the securities' weighted average life and may lower their return. The
value of these securities also may change because of actual or perceived
changes in the creditworthiness of the originator, the servicing agent, the
financial institution providing the credit support, or of the swap
counterparty. There is no limit on the fund's investment in these securities.
Foreign Securities
The fund may invest in certain foreign securities-dollar-denominated money
market securities of foreign issuers, foreign branches of U.S. banks, and
U.S. branches of foreign banks. 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.
o Foreign securities increase the fund's diversification and may enhance
return, but involve special risks, especially for developing countries.
Operating policy The fund may invest without limit in U.S. dollar-denominated
foreign securities.
Private Placements
These securities are sold directly to a small number of investors, usually
institutions. Unlike public offerings, such securities are not registered
with the SEC. Although certain of these securities may be readily sold, for
example, under Rule 144A, others may be illiquid, and their sale may involve
substantial delays and additional costs.
Operating policy The fund will not invest more than 10% of its net assets in
illiquid securities.
<PAGE>
MORE ABOUT THE FUNDS 15
Types of Management Practices (both funds)
Borrowing Money and Transferring Assets
Each fund can borrow money from banks as a temporary measure for emergency
purposes, to facilitate redemption requests, or for other purposes consistent
with each fund's investment objective and program. Such borrowings may be
collateralized with fund assets, subject to restrictions.
Fundamental policy Borrowings may not exceed 33 1/3% of total fund
assets.
Operating policy Each fund may not transfer as collateral any portfolio
securities except as necessary in connection with permissible borrowings or
investments, and then such transfers may not exceed 33 1/3% of a
fund's total assets. A fund may not purchase additional securities when
borrowings exceed 5% of total assets.
Lending of Portfolio Securities
Like other mutual funds, the funds may lend securities to broker-dealers,
other institutions, or other persons to earn additional income. The principal
risk is the potential insolvency of the broker-dealer or other borrower. In
this event, a fund could experience delays in recovering its securities and
possibly capital losses.
Fundamental policy The value of loaned securities may not exceed
33 1/3% of total fund assets.
<PAGE>
INVESTING WITH T. ROWE PRICE
4
ACCOUNT REQUIREMENTS AND TRANSACTION INFORMATION
----------------------------------------------------------
Tax Identification Number
We must have your correct Social Security or corporate tax identification number
on a signed New Account Form or W-9 Form. Otherwise, federal law requires the
funds to withhold a percentage (currently 31%) 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, priced at the NAV on the date of redemption.
Always verify your transactions by carefully reviewing the confirmation we send
you. Please report any discrepancies to Shareholder Services promptly.
OPENING A NEW ACCOUNT
----------------------------------------------------------
$1,000 minimum initial investment
All initial and subsequent investments must be made by bank wire. (See
Redemptions in Kind in the funds' Statement of Additional Information for
further information on the issuance of fund shares for securities or assets
other than cash.)
By Wire
Call Investor Services for an account number and give the following wire
information to your bank:
PNC Bank, N.A. (Pittsburgh) ABA# 043000096 T. Rowe Price [fund name] Account#
Complete a New Account Form and mail it to one of the appropriate addresses
T. Rowe Price Account Services 10090 Red Run Blvd. Owings Mills, MD 21117
<PAGE>
INVESTING WITH T. ROWE PRICE 17
Note: No services will be established and IRS penalty withholding may occur
until a signed New Account Form is received.
PURCHASING ADDITIONAL SHARES
----------------------------------------------------------
$1,000 minimum purchase
By Wire
Call Shareholder Services or use the wire address in Opening a New Account.
REDEEMING SHARES
----------------------------------------------------------
By Phone
Call Shareholder Services
If you find our phones busy during unusually volatile markets, please consider
placing your order by your personal computer, Tele*Access (if you have
previously authorized telephone services), mailgram, or express mail.
Redemption proceeds can be mailed to your account address, sent by ACH transfer,
or wired to your bank (provided your bank information is already on file).
There is currently a $5 fee for wire redemptions under $5,000, and your bank may
charge for incoming or outgoing wire transfers regardless of size.
Rights Reserved by the Fund
The fund and its agents reserve the right to waive or lower investment minimums;
to accept initial purchases by telephone or mailgram; to refuse any purchase
order; to cancel or rescind any purchase or exchange (for example, if an account
has been restricted due to excessive trading or fraud) 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; 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; to otherwise modify the
conditions of purchase and any services at any time; or to act on instructions
believed to be genuine.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
Personal Strategy Balanced Fund
Personal Strategy Growth Fund
Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Government Reserve Investment Fund
Reserve Investment Fund
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
(collectively the "Funds" and individually the "Fund")
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the appropriate Fund's prospectus dated October 1,
1996 (August 15, 1997, for the Reserve Investment Funds, Inc.), which may be
obtained from T. Rowe Price Investment Services, Inc., 100 East Pratt Street,
Baltimore, Maryland 21202.
If you would like a prospectus for a Fund of which you are not a
shareholder, please call 1-800-638-5660. A prospectus with more complete
information, including management fees and expenses will be sent to you.
Please read it carefully.
Government Reserve and Reserve Investment Funds are not available for
direct purchase by members of the public.
The date of this Statement of Additional Information is October 1, 1996,
revised to August 15, 1997, for the Reserve Investment Funds, Inc.
C22-043 8/15/97
TABLE OF CONTENTS
Page Page
Capital Stock. . . . . . . . . . . . Legal Counsel. . . . . .
Code of Ethics . . . . . . . . . . . Management of Fund . . . . . .
Custodian. . . . . . . . . . . . . . Net Asset Value Per Share. . . .
Distributor for Fund . . . . . . . . Portfolio Management Practices. .
Dividends and Distributions. . . . . Portfolio Transactions . . . . .
Federal Registration of Shares . . . Pricing of Securities. . . . . .
Independent Accountants. . . . . . . Principal Holders of
Investment Management Securities. . . . . . .
Services . . . . . . . . . . . . . Ratings of Commercial Paper. . . .
Investment Objectives . . . Ratings of Corporate
and Policies . . . . . . . . . . . Debt Securities. . . . . . .
Investment Performance . . . . . . . Risk Factors . . . . . .
Investment Program . . . . . . . . . Tax Status . . . . . . .
Investment Restrictions. . . . . . Yield Information. . . . . . .
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of each Fund's
investment objectives and policies discussed in each Fund's prospectus. The
Funds will not make a material change in their investment objectives without
obtaining shareholder approval. 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/Trustees 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.
Throughout this Statement of Additional Information, "the Fund" is
intended to refer to each Fund listed on the cover page, unless otherwise
indicated.
RISK FACTORS
All Funds
Debt Obligations
Yields on short, intermediate, and long-term securities are dependent on
a variety of factors, including the general conditions of the money and bond
markets, the size of a particular offering, the maturity of the obligation,
and the credit quality and rating of the issue. Debt securities with longer
maturities tend to have higher yields and are generally subject to potentially
greater capital appreciation and depreciation than obligations with shorter
maturities and lower yields. The market prices of debt securities usually
vary, depending upon available yields. An increase in interest rates will
generally reduce the value of portfolio debt securities, and a decline in
interest rates will generally increase the value of portfolio debt securities.
The ability of the Fund to achieve its investment objective is also dependent
on the continuing ability of the issuers of the debt securities in which the
Fund invests to meet their obligations for the payment of interest and
principal when due. Although the Fund seeks to reduce risk by portfolio
diversification, credit analysis, and attention to trends in the economy,
industries and financial markets, such efforts will not eliminate all risk.
There can, of course, be no assurance that the Fund will achieve its
investment objective.
After purchase by the Fund, a debt security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund. For
the Prime Reserve, U.S. Treasury Money, Government Reserve Investment, and
Reserve Investment Funds, the procedures set forth in Rule 2a-7, under the
Investment Company Act of 1940, may require the prompt sale of any such
security. For the other Funds, neither event will require a sale of such
security by the Fund. However, T. Rowe Price will consider such event in its
determination of whether the Fund should continue to hold the security. To the
extent that the ratings given by Moody's or S&P may change as a result of
changes in such organizations or their rating systems, the Fund will attempt
to use comparable ratings as standards for investments in accordance with the
investment policies contained in the prospectus. When purchasing unrated
securities, T. Rowe Price, under the supervision of the Fund's Board of
Directors, determines whether the unrated security is of a qualify comparable
to that which the Fund is allowed to purchase.
Reference is also made to the sections entitled "Types of Securities"
and "Portfolio Management Practices" for discussions of the risks associated
with the investments and practices described therein as they apply to the
Fund.
All Funds (except Prime Reserve, U.S. Treasury Money, Government Reserve
Investment, and Reserve Investment Funds)
Because of its investment policy, the Fund may or may not be suitable or
appropriate for all investors. The Fund is not a money market fund and is not
an appropriate investment for those whose primary objective is principal
stability. The value of the portfolio securities of the Fund will fluctuate
based upon market conditions. Although the Fund seeks to reduce risk by
investing in a diversified portfolio, such diversification does not eliminate
all risk. There can, of course, be no assurance that the Fund will achieve its
investment objective.
Prime Reserve, U.S. Treasury Money, Government Reserve Investment, and
Reserve Investment Funds
There can be no assurance that the Funds will achieve their investment
objectives or be able to maintain their net asset value per share at $1.00.
The price of the Fund is not guaranteed or insured by the U.S. government and
its yield is not fixed. An increase in interest rates could reduce the value
of the Fund's portfolio investments, and a decline in interest rates could
increase the value.
All Funds (except Prime Reserve, U.S. Treasury Money, Government Reserve
Investment, and Reserve Investment Funds)
Mortgage securities differ from conventional bonds in that principal is
paid back over the life of the security rather than at maturity. As a result,
the holder of a mortgage security (i.e., the Fund) receives monthly scheduled
payments of principal and interest, and may receive unscheduled principal
payments representing prepayments on the underlying mortgages. The incidence
of unscheduled principal prepayments is also likely to increase in mortgage
pools owned by the Fund when prevailing mortgage loan rates fall below the
mortgage rates of the securities underlying the individual pool. The effect of
such prepayments in a falling rate environment is to (1) cause the Fund to
reinvest principal payments at the then lower prevailing interest rate, and
(2) reduce the potential for capital appreciation beyond the face amount of
the security. Conversely, the Fund may realize a gain on prepayments of
mortgage pools trading at a discount. Such prepayments will provide an early
return of principal which may then be reinvested at the then higher prevailing
interest rate.
The market value of adjustable rate mortgage securities ("ARMs"), like
other U.S. government securities, will generally vary inversely with changes
in market interest rates, declining when interest rates rise and rising when
interest rates decline. Because of their periodic adjustment feature, ARMs
should be more sensitive to short-term interest rates than long-term rates.
They should also display less volatility than long-term mortgage securities.
Thus, while having less risk of a decline during periods of rapidly rising
rates, ARMs may also have less potential for capital appreciation than other
investments of comparable maturities. Interest rate caps on mortgages
underlying ARM securities may prevent income on the ARM from increasing to
prevailing interest rate levels and cause the securities to decline in value.
In addition, to the extent ARMs are purchased at a premium, mortgage
foreclosures and unscheduled principal prepayments may result in some loss of
the holders' principal investment to the extent of the premium paid. On the
other hand, if ARMs are purchased at a discount, both a scheduled payment of
principal and an unscheduled prepayment of principal will increase current and
total returns and will accelerate the recognition of income which when
distributed to shareholders will be taxable as ordinary income.
Corporate Income, High Yield, New Income, Personal Strategy, and Short-Term
Bond Funds
Risk Factors of Foreign Investing
There are special risks in foreign investing. Certain of these risks are
inherent in any mutual fund investing in foreign securities while others
relate more to the countries in which the Funds will invest. Many of the risks
are more pronounced for investments in developing or emerging countries, such
as many of the countries of Southeast Asia, China, Latin America, Eastern
Europe, the countries of the former Soviet Union, 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 certain
countries may differ favorably or unfavorably from the United States' economy
in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position. The internal politics of certain foreign countries are not as stable
as in the United States. For example, in 1991, the existing government in
Thailand was overthrown in a military coup. In 1992, there were two military
coup attempts in Venezuela and in 1992 the President of Brazil was impeached.
In addition, significant external political risks currently affect some
foreign countries. Both Taiwan and China still claim sovereignty of one
another and there is a demilitarized border between North and South Korea.
Governments in certain foreign countries continue to participate to a
significant degree, through ownership interest or regulation, in their
respective economies. Action by these governments could have a significant
effect on market prices of securities and payment of dividends. The economies
of many foreign countries are heavily dependent upon international trade and
are accordingly affected by protective trade barriers and economic conditions
of their trading partners. The enactment by these trading partners of
protectionist trade legislation could have a significant adverse effect upon
the securities markets of such countries.
Currency Fluctuations. The Funds will invest in securities denominated
in various currencies. Accordingly, a change in the value of any such currency
against the U.S. dollar will result in a corresponding change in the U.S.
dollar value of the Funds' assets denominated in that currency. Such changes
will also affect the Funds' income. Generally, when a given currency
appreciates against the dollar (the dollar weakens) the value of the Fund's
securities denominated in that currency will rise. When a given currency
depreciates against the dollar (the dollar strengthens) the value of the
Funds' securities denominated in that currency would be expected to decline.
Investment and Repatriation Restrictions. Foreign investment in the
securities markets of certain foreign countries is restricted or controlled in
varying degrees. These restrictions may limit at times and preclude investment
in certain of such countries and may increase the cost and expenses of the
Funds. Investments by foreign investors are subject to a variety of
restrictions in many developing countries. These restrictions may take the
form of prior governmental approval, limits on the amount or type of
securities held by foreigners, and limits on the types of companies in which
foreigners may invest. Additional or different restrictions may be imposed at
any time by these or other countries in which the Funds invest. In addition,
the repatriation of both investment income and capital from several foreign
countries is restricted and controlled under certain regulations, including in
some cases the need for certain government consents. For example, capital
invested in Chile normally cannot be repatriated for one year.
Market Characteristics. It is contemplated that most foreign securities,
other than Latin American securities, will be purchased in over-the-counter
markets or on stock 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 ADRs traded in the United States. Foreign stock markets are generally
not as developed or efficient as, and may be more volatile than, those in the
United States. While growing in volume, they usually have substantially less
volume than U.S. markets and the international funds' portfolio securities may
be less liquid and subject to more rapid and erratic price movements than
securities of comparable U.S. companies. Equity securities may trade at
price/earnings multiples higher than comparable United States securities and
such levels may not be sustainable. Fixed commissions on foreign stock
exchanges are generally higher than negotiated commissions on United States
exchanges, although the international funds will endeavor to achieve the most
favorable net results on their portfolio transactions. There is generally less
government supervision and regulation of foreign stock exchanges, brokers, and
listed companies than in the United States. Moreover, settlement practices for
transactions in foreign markets may differ from those in United States
markets. Such differences may include delays beyond periods customary in the
United States and practices, such as delivery of securities prior to receipt
of payment, which increase the likelihood of a "failed settlement." Failed
settlements can result in losses to a Fund.
Investment Funds. The Funds may invest in investment funds which have
been authorized by the governments of certain countries specifically to permit
foreign investment in securities of companies listed and traded on the stock
exchanges in these respective countries. The Funds' investment in these funds
is subject to the provisions of the 1940 Act. If the Funds invest in such
investment funds, the Funds' shareholders will bear not only their
proportionate share of the expenses of the Funds (including operating expenses
and the fees of the investment manager), but also will bear indirectly similar
expenses of the underlying investment funds. In addition, the securities of
these investment funds may trade at a premium over their net asset value.
Information and Supervision. There is generally less publicly available
information about foreign companies comparable to reports and ratings that are
published about companies in the United States. Foreign companies are also
generally not subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable to United
States companies. It also may be more difficult to keep currently informed of
corporate actions which affect the prices of portfolio securities.
Taxes. The dividends and interest payable on certain of the Funds'
foreign portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount of income available for distribution to the Funds'
shareholders.
Other. With respect to certain foreign countries, especially developing
and emerging ones, there is the possibility of adverse changes in investment
or exchange control regulations, expropriation or confiscatory taxation,
limitations on the removal of funds or other assets of the Funds, political or
social instability, or diplomatic developments which could affect investments
by U.S. persons in those countries.
Eastern Europe and Russia. Changes occurring in Eastern Europe and
Russia today could have long-term potential consequences. As restrictions
fall, this could result in rising standards of living, lower manufacturing
costs, growing consumer spending, and substantial economic growth. However,
investment in the countries of Eastern Europe and Russia is highly speculative
at this time. Political and economic reforms are too recent to establish a
definite trend away from centrally-planned economies and state-owned
industries. In many of the countries of Eastern Europe and Russia, there is no
stock exchange or formal market for securities. Such countries may also have
government exchange controls, currencies with no recognizable market value
relative to the established currencies of western market economies, little or
no experience in trading in securities, no financial reporting standards, a
lack of a banking and securities infrastructure to handle such trading, and a
legal tradition which does not recognize rights in private property. In
addition, these countries may have national policies which restrict
investments in companies deemed sensitive to the country's national interest.
Further, the governments in such countries may require governmental or quasi-
governmental authorities to act as custodian of a Fund's assets invested in
such countries and these authorities may not qualify as a foreign custodian
under the Investment Company Act of 1940 and exemptive relief from such Act
may be required. All of these considerations are among the factors which could
cause significant risks and uncertainties to investment in Eastern Europe and
Russia. Each Fund will only invest in a company located in, or a government
of, Eastern Europe and Russia, if it believes the potential return justifies
the risk.
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 have managed
currencies which are maintained at artificial levels to the U.S. dollar rather
than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors. For example, in late 1994
the value of the Mexican peso lost more than one-third of its value relative
to the dollar. Certain Latin American countries also may restrict the free
conversion of their currency into foreign currencies, including the U.S.
dollar. There is no significant foreign exchange market for certain currencies
and it would, as a result, be difficult for the Fund to engage in foreign
currency transactions designed to protect the value of the Fund's interests in
securities denominated in such currencies.
Sovereign Debt. A number of Latin American countries are among the
largest debtors of developing countries. There have been moratoria on, and
reschedulings of, repayment with respect to these debts. Such events can
restrict the flexibility of these debtor nations in the international markets
and result in the imposition of onerous conditions on their economies.
To the extent any securities issued by companies in Eastern Europe,
Russia, and Latin America are considered illiquid, each Fund will be required
to include such securities within its 15% restriction on investing in illiquid
securities.
Corporate Income, High Yield, and Personal Strategy Funds
Special Risks of Investing in Junk Bonds
The following special considerations are additional risk factors
associated with the Fund's investments in lower rated debt securities.
Youth and Growth of the Lower Rated Debt Securities Market. The market
for lower rated debt securities is relatively new and its growth has
paralleled a long economic expansion. Past experience may not, therefore,
provide an accurate indication of future performance of this market,
particularly during periods of economic recession. An economic downturn or
increase in interest rates is likely to have a greater negative effect on this
market, the value of lower rated debt securities in the Fund's portfolio, the
Fund's net asset value and the ability of the bonds' issuers to repay
principal and interest, meet projected business goals and obtain additional
financing than on higher rated securities. These circumstances also may result
in a higher incidence of defaults than with respect to higher rated
securities. An investment in this Fund is more speculative than investment in
shares of a fund which invests only in higher rated debt securities.
Sensitivity to Interest Rate and Economic Changes. Prices of lower rated
debt securities may be more sensitive to adverse economic changes or corporate
developments than higher rated investments. Debt securities with longer
maturities, which may have higher yields, may increase or decrease in value
more than debt securities with shorter maturities. Market prices of lower
rated debt securities structured as zero coupon or pay-in-kind securities are
affected to a greater extent by interest rate changes and may be more volatile
than securities which pay interest periodically and in cash. Where it deems it
appropriate and in the best interests of Fund shareholders, the Fund may incur
additional expenses to seek recovery on a debt security on which the issuer
has defaulted and to pursue litigation to protect the interests of security
holders of its portfolio companies.
Liquidity and Valuation. Because the market for lower rated securities
may be thinner and less active than for higher rated securities, there may be
market price volatility for these securities and limited liquidity in the
resale market. Nonrated securities are usually not as attractive to as many
buyers as rated securities are, a factor which may make nonrated securities
less marketable. These factors may have the effect of limiting the
availability of the securities for purchase by the Fund and may also limit the
ability of the Fund to sell such securities at their fair value either to meet
redemption requests or in response to changes in the economy or the financial
markets. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of lower rated
debt securities, especially in a thinly traded market. To the extent the Fund
owns or may acquire illiquid or restricted lower rated securities, these
securities may involve special registration responsibilities, liabilities and
costs, and liquidity and valuation difficulties. Changes in values of debt
securities which the Fund owns will affect its net asset value per share. If
market quotations are not readily available for the Fund's lower rated or
nonrated securities, these securities will be valued by a method that the
Fund's Board of Directors believes accurately reflects fair value. Judgment
plays a greater role in valuing lower rated debt securities than with respect
to securities for which more external sources of quotations and last sale
information are available.
Taxation. Special tax considerations are associated with investing in
lower rated debt securities structured as zero coupon or pay-in-kind
securities. The Fund accrues income on these securities prior to the receipt
of cash payments. The Fund must distribute substantially all of its income to
its shareholders to qualify for pass-through treatment under the tax laws and
may, therefore, have to dispose of its portfolio securities to satisfy
distribution requirements.
Reference is also made to the sections entitled "Types of Securities"
and "Portfolio Management Practices" for discussions of the risks associated
with the investments and practices described therein as they apply to the
Fund.
INVESTMENT PROGRAM
Types of Securities
Set forth below is additional information about certain of the
investments described in the Fund's prospectus.
Debt Securities
Fixed income securities in which the Fund may invest include, but are
not limited to, those described below.
All Funds
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, Government
National Mortgage Association, Federal Home Loan Bank, Federal Land Banks,
Farmers Home Administration, Banks for Cooperatives, Federal Intermediate
Credit Banks, Federal Financing Bank, Farm Credit Banks, the Small Business
Association, and the Tennessee Valley Authority. Some of these securities are
supported by the full faith and credit of the U.S. Treasury; and the remainder
are supported only by the credit of the instrumentality, which may or may not
include the right of the issuer to borrow from the Treasury.
The GNMA, U.S. Treasury Money, Intermediate, and Long-Term Funds may
only invest in these securities if they are supported by the full faith and
credit of the U.S. government.
All Funds, except GNMA, Government Reserve Investment, U.S. Treasury Money,
Intermediate, and Long-Term Funds
Bank Obligations. Certificates of deposit, bankers' acceptances, and
other short-term debt obligations. Certificates of deposit are short-term
obligations of commercial banks. A bankers' acceptance is a time draft drawn
on a commercial bank by a borrower, usually in connection with international
commercial transactions. Certificates of deposit may have fixed or variable
rates. The Fund may invest in U.S. banks, foreign branches of U.S. banks, U.S.
branches of foreign banks, and foreign branches of foreign banks.
Corporate Debt Securities. Outstanding nonconvertible corporate debt
securities (e.g., bonds and debentures). Corporate notes may have fixed,
variable, or floating rates.
Commercial Paper. Short-term promissory notes issued by corporations
primarily to finance short-term credit needs. Certain notes may have floating
or variable rates.
Foreign Government Securities. Issued or guaranteed by a foreign
government, province, instrumentality, political subdivision or similar unit
thereof.
Savings and Loan Obligations. Negotiable certificates of deposit and
other short-term debt obligations of savings and loan associations.
Supranational Agencies. Securities of certain supranational entities,
such as the International Development Bank.
All Funds (except Prime Reserve, U.S. Treasury Money, Government Reserve
Investment, and Reserve Investment Funds)
Mortgage-Related Securities
Mortgage-related securities in which the Fund may invest include, but
are not limited to, those described below. The GNMA, U.S. Treasury
Intermediate and U.S. Treasury Long-Term Funds may only invest in these
securities to the extent they are backed by the full faith and credit of the
U.S. government.
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 the Government National Mortgage Association
("Ginnie Mae" or "GNMA"), the Federal National Mortgage Association ("Fannie
Mae" or "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, 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 (the "FHLMC Act"). Freddie Mac Certificates represent a pro-rata
interest in a group of mortgage loans (a "Freddie Mac Certificate group")
purchased by Freddie Mac. Freddie Mac guarantees timely payment of interest
and principal on certain securities it issues and timely payment of interest
and eventual payment of principal on other securities is issues. The
obligations of Freddie Mac are obligations solely of Freddie Mac and are not
backed by the full faith and credit of the U.S. government.
Farmer Mac Certificates. The Federal Agricultural Mortgage Corporation
("Farmer Mac") is a federally chartered instrumentality of the United States
established by Title VIII of the Farm Credit Act of 1971, as amended ("Charter
Act"). Farmer Mac was chartered primarily to attract new capital for financing
of agricultural real estate by making a secondary market in certain qualified
agricultural real estate loans. Farmer Mac provides guarantees of timely
payment of principal and interest on securities representing interests in, or
obligations backed by, pools of mortgages secured by first liens on
agricultural real estate ("Farmer Mac Certificates"). Similar to Fannie Mae
and Freddie Mac, Farmer Mac's Certificates are not supported by the full faith
and credit of the U.S. government; rather, Farmer Mac may borrow up from the
U.S. Treasury to meet its guaranty obligations.
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.
Payments to holders of Mortgage-Backed Securities consist of the monthly
distributions of interest and principal less the applicable fees. The actual
yield to be earned by a holder of Mortgage-Backed Securities is calculated by
dividing interest payments by the purchase price paid for the Mortgage-Backed
Securities (which may be at a premium or a discount from the face value of the
certificate).
Monthly distributions of interest, as contrasted to semi-annual
distributions which are common for other fixed interest investments, have the
effect of compounding and thereby raising the effective annual yield earned on
Mortgage-Backed Securities. Because of the variation in the life of the pools
of mortgages which back various Mortgage-Backed Securities, and because it is
impossible to anticipate the rate of interest at which future principal
payments may be reinvested, the actual yield earned from a portfolio of
Mortgage-Backed Securities will differ significantly from the yield estimated
by using an assumption of a certain life for each Mortgage-Backed Security
included in such a portfolio as described above.
U.S. Government Agency Multiclass Pass-Through Securities. Unlike CMOs,
U.S. Government Agency Multiclass Pass-Through Securities, which include FNMA
Guaranteed REMIC Pass-Through Certificates and FHLMC Multi-Class Mortgage
Participation Certificates, are ownership interests in a pool of Mortgage
Assets. Unless the context indicates otherwise, all references herein to CMOs
include multiclass pass-through securities.
Multi-Class Residential Mortgage Securities. Such securities represent
interests in pools of mortgage loans to residential home buyers made by
commercial banks, savings and loan associations or other financial
institutions. Unlike GNMA, FNMA and FHLMC securities, the payment of principal
and interest on Multi-Class Residential Mortgage Securities is not guaranteed
by the U.S. government or any of its agencies. Accordingly, yields on Multi-
Class Residential Mortgage Securities have been historically higher than the
yields on U.S. government mortgage securities. However, the risk of loss due
to default on such instruments is higher since they are not guaranteed by the
U.S. Government or its agencies. Additionally, pools of such securities may be
divided into senior or subordinated segments. Although subordinated mortgage
securities may have a higher yield than senior mortgage securities, the risk
of loss of principal is greater because losses on the underlying mortgage
loans must be borne by persons holding subordinated securities before those
holding senior mortgage securities.
Privately-Issued Mortgage-Backed Certificates. These are pass-through
certificates issued by non-governmental issuers. Pools of conventional
residential mortgage loans created by such issuers generally offer a higher
rate of interest than government and government-related pools because there
are no direct or indirect government guarantees of payment. Timely payment of
interest and principal of these pools is, however, generally supported by
various forms of insurance or guarantees, including individual loan, title,
pool and hazard insurance. The insurance and guarantees are issued by
government entities, private insurance or the mortgage poolers. Such insurance
and guarantees and the creditworthiness of the issuers thereof will be
considered in determining whether a mortgage-related security meets the Fund's
quality standards. The Fund may buy mortgage-related securities without
insurance or guarantees if through an examination of the loan experience and
practices of the poolers, the investment manager determines that the
securities meet the Fund's quality standards.
Collateralized Mortgage Obligations (CMOs). CMOs are bonds that are
collateralized by whole loan mortgages or mortgage pass-through securities.
The bonds issued in a CMO deal are divided into groups, and each group of
bonds is referred to as a "tranche." Under the traditional CMO structure, the
cash flows generated by the mortgages or mortgage pass-through securities in
the collateral pool are used to first pay interest and then pay principal to
the CMO bondholders. The bonds issued under a CMO structure are retired
sequentially as opposed to the pro rata return of principal found in
traditional pass-through obligations. Subject to the various provisions of
individual CMO issues, the cash flow generated by the underlying collateral
(to the extent it exceeds the amount required to pay the stated interest) is
used to retire the bonds. Under the CMO structure, the repayment of principal
among the different tranches is prioritized in accordance with the terms of
the particular CMO issuance. The "fastest-pay" tranche of bonds, as specified
in the prospectus for the issuance, would initially receive all principal
payments. When that tranche of bonds is retired, the next tranche, or
tranches, in the sequence, as specified in the prospectus, receive all of the
principal payments until they are retired. The sequential retirement of bond
groups continues until the last tranche, or group of bonds, is retired.
Accordingly, the CMO structure allows the issuer to use cash flows of long
maturity, monthly-pay collateral to formulate securities with short,
intermediate and long final maturities and expected average lives.
CMO structures may also include floating rate CMOs, planned amortization
classes, accrual bonds and CMO residuals. These structures affect the amount
and timing of principal and interest received by each tranche from the
underlying collateral. Under certain of these structures, given classes of
CMOs have priority over others with respect to the receipt of prepayments on
the mortgages. Therefore, depending on the type of CMOs in which the Fund
invests, the investment may be subject to a greater or lesser risk of
prepayment than other types of mortgage-related securities.
The primary risk of any mortgage security is the uncertainty of the
timing of cash flows. For CMOs, the primary risk results from the rate of
prepayments on the underlying mortgages serving as collateral. An increase or
decrease in prepayment rates (resulting from a decrease or increase in
mortgage interest rates) will affect the yield, average life and price of
CMOs. The prices of certain CMOs, depending on their structure and the rate of
prepayments, can be volatile. Some CMOs may also not be as liquid as other
securities.
Stripped Mortgage-Backed Securities. Stripped Mortgage-Backed securities
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 Internal
Revenue Code of 1986, as amended (the "Code"), POs may generate taxable income
from the current accrual of original issue discount, without a corresponding
distribution of cash to the Fund.
The cash flows and yields on IO and PO classes are extremely sensitive
to the rate of principal payments (including prepayments) on the related
underlying mortgage assets. 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. A rapid or slow rate of principal
payments may have a material adverse effect on the prices of IOs or POs,
respectively. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, an investor may fail to recoup fully its
initial investment in an IO class of a stripped mortgage-backed security, even
if the IO class is rated AAA or Aaa or is derived from a full faith and credit
obligation. Conversely, if the underlying mortgage assets experience slower
than anticipated prepayments of principal, the price on a PO class will be
affected more severely than would be the case with a traditional mortgage-
backed security.
The staff of the Securities and Exchange Commission has advised the Fund
that it believes the Fund should treat IOs and POs, other than government-
issued IOs or POs backed by fixed rate mortgages, as illiquid securities and,
accordingly, limit its investments in such securities, together with all other
illiquid securities, to 15% of the Fund's net assets. Under the Staff's
position, the determination of whether a particular government-issued IO and
PO backed by fixed rate mortgages may be made on a case by case basis under
guidelines and standards established by the Fund's Board of
Directors/Trustees. The Fund's Board of Directors/Trustees has delegated to
T. Rowe Price the authority to determine the liquidity of these investments
based on the following guidelines: the type of issuer; type of collateral,
including age and prepayment characteristics; rate of interest on coupon
relative to current market rates and the effect of the rate on the potential
for prepayments; complexity of the issue's structure, including the number of
tranches; size of the issue and the number of dealers who make a market in the
IO or PO. The Fund will treat non-government-issued IOs and POs not backed by
fixed or adjustable rate mortgages as illiquid unless and until the Securities
and Exchange Commission modifies its position.
Adjustable Rate Mortgages. Adjustable rate mortgage ("ARM") securities
are collateralized by adjustable rate, rather than fixed rate, mortgages.
ARMs, like fixed rate mortgages, have a specified maturity date, and the
principal amount of the mortgage is repaid over the life of the mortgage.
Unlike fixed rate mortgages, the interest rate on ARMs is adjusted at regular
intervals based on a specified, published interest rate "index" such as a
Treasury rate index. The new rate is determined by adding a specific interest
amount, the "margin," to the interest rate of the index. Investment in ARM
securities allows the Fund to participate in changing interest rate levels
through regular adjustments in the coupons of the underlying mortgages,
resulting in more variable current income and lower price volatility than
longer term fixed rate mortgage securities. The ARM securities in which the
Fund expects to invest will generally adjust their interest rates at regular
intervals of one year or less. ARM securities are a less effective means of
locking in long-term rates than fixed rate mortgages since the income from
adjustable rate mortgages will increase during periods of rising interest
rates and decline during periods of falling rates.
Characteristics of Adjustable Rate Mortgage Securities -Interest Rate
Indices. The interest rates paid on adjustable rate securities are readjusted
periodically to an increment over some predetermined interest rate index. Such
readjustments occur at intervals ranging from one to 60 months. There are
three main categories of indexes: (1) those based on U.S. Treasury securities
(2) those derived from a calculated measure such as a cost of funds index
("COFI") or a moving average of mortgage rates and (3) those based on actively
traded or prominently posted short-term, interest rates. Commonly utilized
indexes include the one-year, three-year and five-year constant maturity
Treasury rates, the three-month Treasury bill rate, the 180-day Treasury bill
rate, rates on longer-term Treasury securities, the 11th District Federal Home
Loan Bank Cost of Funds, the National Median Cost of Funds, the one-month,
three-month, six-month or one-year London Interbank Offered Rate (LIBOR), the
prime rate of a specific bank, or commercial paper rates. Some indexes, such
as the one-year constant maturity Treasury rate, closely mirror changes in
market interest rate levels. Others, such as the 11th District Home Loan Bank
Cost of Funds index, tend to lag behind changes in market rate levels. The
market value of the Fund's assets and of the net asset value of the Fund's
shares will be affected by the length of the adjustment period, the degree of
volatility in the applicable indexes and the maximum increase or decrease of
the interest rate adjustment on any one adjustment date, in any one year and
over the life of the securities. These maximum increases and decreases are
typically referred to as "caps" and "floors", respectively.
A number of factors affect the performance of the Cost of Funds Index
and may cause the Cost of Funds Index to move in a manner different from
indices based upon specific interest rates, such as the One Year Treasury
Index. Additionally, there can be no assurance that the Cost of Funds Index
will necessarily move in the same direction or at the same rate as prevailing
interest rates. Furthermore, any movement in the Cost of Funds Index as
compared to other indices based upon specific interest rates may be affected
by changes instituted by the FHLB of San Francisco in the method used to
calculate the Cost of Funds Index. To the extent that the Cost of Funds Index
may reflect interest changes on a more delayed basis than other indices, in a
period of rising interest rates, any increase may produce a higher yield later
than would be produced by such other indices, and in a period of declining
interest rates, the Cost of Funds Index may remain higher than other market
interest rates which may result in a higher level of principal prepayments on
mortgage loans which adjust in accordance with the Cost of Funds Index than
mortgage loans which adjust in accordance with other indices.
LIBOR, the London interbank offered rate, is the interest rate that the
most creditworthy international banks dealing in U.S. dollar-denominated
deposits and loans charge each other for large dollar-denominated loans. LIBOR
is also usually the base rate for large dollar-denominated loans in the
international market. LIBOR is generally quoted for loans having rate
adjustments at one, three, six or 12 month intervals.
Caps and Floors. ARMs will frequently have caps and floors which limit
the maximum amount by which the interest rate to the residential borrower may
move up or down, respectively, each adjustment period and over the life of the
loan. Interest rate caps on ARM securities may cause them to decrease in value
in an increasing interest rate environment. Such caps may also prevent their
income from increasing to levels commensurate with prevailing interest rates.
Conversely, interest rate floors on ARM securities may cause their income to
remain higher than prevailing interest rate levels and result in an increase
in the value of such securities. However, this increase may be tempered by the
acceleration of prepayments.
Mortgage securities generally have a maximum maturity of up to 30 years.
However, due to the adjustable rate feature of ARM securities, their prices
are considered to have volatility characteristics which approximate the
average period of time until the next adjustment of the interest rate. As a
result, the principal volatility of ARM securities may be more comparable to
short- and intermediate-term securities than to longer term fixed rate
mortgage securities. Prepayments, however, will increase their principal
volatility. See also the discussion of Mortgage-Backed Securities on page __.
Several characteristics of ARMs may make them more susceptible to prepayments
than other Mortgage-Backed Securities. An adjustable rate mortgage has greater
incentives to refinance with a fixed rate mortgage during favorable interest
rate environments, in order to avoid interest rate risk. Also, homes financed
with adjustable rate mortgages may be sold more frequently because of the
prevalence of first-time home buyers in the adjustable rate mortgage market.
Also, delinquency and foreclosure rates are higher in this market since many
buyers use adjustable rate mortgages to purchase homes that they could not
otherwise finance on a fixed rate basis. Significant increases in the index
rates for the adjustable rate mortgages may also result in increased
delinquency and default rates, which in turn, may affect prepayment rates on
the ARMs.
Other Mortgage Related Securities. The Fund expects that governmental,
government-related or private entities may create mortgage loan pools offering
pass-through investments in addition to those described above. The mortgages
underlying these securities may be alternative mortgage instruments, that is,
mortgage instruments whose principal or interest payments may vary or whose
terms to maturity may differ from customary long-term fixed rate mortgages. As
new types of mortgage-related securities are developed and offered to
investors, the investment manager will, consistent with the Fund's objective,
policies and quality standards, consider making investments in such new types
of securities.
All Funds (except GNMA, Government Reserve Investment, U.S. Treasury Money,
Intermediate and Long-Term Funds)
Asset-Backed Securities
The credit quality of most asset-backed securities depends primarily on
the credit quality of the assets underlying such securities, how well the
entity issuing the security is insulated from the credit risk of the
originator or any other affiliated entities and the amount and quality of any
credit support provided to the securities. The rate of principal payment on
asset-backed securities generally depends on the rate of principal payments
received on the underlying assets which in turn may be affected by a variety
of economic and other factors. As a result, the yield on any asset-backed
security is difficult to predict with precision and actual yield to maturity
may be more or less than the anticipated yield to maturity. Asset-backed
securities may be classified as pass-through certificates or collateralized
obligations.
Pass-through certificates are asset-backed securities which represent an
undivided fractional ownership interest in an underlying pool of assets.
Pass-through certificates usually provide for payments of principal and interest
received to be passed through to their holders, usually after deduction for
certain costs and expenses incurred in administering the pool. Because pass-
through certificates represent an ownership interest in the underlying assets,
the holders thereof bear directly the risk of any defaults by the obligors on
the underlying assets not covered by any credit support. See "Types of Credit
Support".
Asset-backed securities issued in the form of debt instruments, also
known as collateralized or pay-through obligations, are generally issued as
the debt of a special purpose entity organized solely for the purpose of
owning such assets and issuing such debt. Such assets are most often trade,
credit card or automobile receivables. The assets collateralizing such asset-
backed securities are pledged to a trustee or custodian for the benefit of the
holders thereof. Such issuers generally hold no assets other than those
underlying the asset-backed securities and any credit support provided. As a
result, although payments on such asset-backed securities are obligations of
the issuers, in the event of defaults on the underlying assets not covered by
any credit support (see "Types of Credit Support"), the issuing entities are
unlikely to have sufficient assets to satisfy their obligations on the related
asset-backed securities.
Methods of Allocating Cash Flows. While many asset-backed securities are
issued with only one class of security, many asset-backed securities are
issued in more than one class, each with different payment terms. Multiple
class asset-backed securities are issued for two main reasons. First, multiple
classes may be used as a method of providing credit support. This is
accomplished typically through creation of one or more classes whose right to
payments on the asset-backed security is made subordinate to the right to such
payments of the remaining class or classes. See "Types of Credit Support".
Second, multiple classes may permit the issuance of securities with payment
terms, interest rates or other characteristics differing both from those of
each other and from those of the underlying assets. Examples include so-called
"strips" (asset-backed securities entitling the holder to disproportionate
interests with respect to the allocation of interest and principal of the
assets backing the security), and securities with class or classes having
characteristics which mimic the characteristics of non-asset-backed
securities, such as floating interest rates (i.e., interest rates which adjust
as a specified benchmark changes) or scheduled amortization of principal.
Asset-backed securities in which the payment streams on the underlying
assets are allocated in a manner different than those described above may be
issued in the future. The Fund may invest in such asset-backed securities if
such investment is otherwise consistent with its investment objectives and
policies and with the investment restrictions of the Fund.
Types of Credit Support. Asset-backed securities are often backed by a
pool of assets representing the obligations of a number of different parties.
To lessen the effect of failures by obligors on underlying assets to make
payments, such securities may contain elements of credit support. Such credit
support falls into two classes: liquidity protection and protection against
ultimate default by an obligor on the underlying assets. Liquidity protection
refers to the provision of advances, generally by the entity administering the
pool of assets, to ensure that scheduled payments on the underlying pool are
made in a timely fashion. Protection against ultimate default ensures ultimate
payment of the obligations on at least a portion of the assets in the pool.
Such protection may be provided through guarantees, insurance policies or
letters of credit obtained from third parties ("external credit enhancement"),
through various means of structuring the transaction ("internal credit
enhancement") or through a combination of such approaches. Examples of asset-
backed securities with internal credit enhancement include "senior-
subordinated securities" (multiple class asset-backed securities with certain
classes subordinate to other classes as to the payment of principal thereon,
with the result that defaults on the underlying assets are borne first by the
holders of the subordinated class) and asset-backed securities that have
"reserve funds" (where cash or investments, sometimes funded from a portion of
the initial payments on the underlying assets, are held in reserve against
future losses) or that have been "over collateralized" (where the scheduled
payments on, or the principal amount of, the underlying assets substantially
exceeds that required to make payment of the asset-backed securities and pay
any servicing or other fees). The degree of credit support provided on each
issue is based generally on historical information respecting the level of
credit risk associated with such payments. Depending upon the type of assets
securitized, historical information on credit risk and prepayment rates may be
limited or even unavailable. Delinquency or loss in excess of that anticipated
could adversely affect the return on an investment in an asset-backed
security.
Automobile Receivable Securities. The Fund may invest in Asset Backed
Securities which are backed by receivables from motor vehicle installment
sales contracts or installment loans secured by motor vehicles ("Automobile
Receivable Securities"). Since installment sales contracts for motor vehicles
or installment loans related thereto ("Automobile Contracts") typically have
shorter durations and lower incidences of prepayment, Automobile Receivable
Securities generally will exhibit a shorter average life and are less
susceptible to prepayment risk.
Most entities that issue Automobile Receivable Securities create an
enforceable interest in their respective Automobile Contracts only by filing a
financing statement and by having the servicer of the Automobile Contracts,
which is usually the originator of the Automobile Contracts, take custody
thereof. In such circumstances, if the servicer of the Automobile Contracts
were to sell the same Automobile Contracts to another party, in violation of
its obligation not to do so, there is a risk that such party could acquire an
interest in the Automobile Contracts superior to that of the holders of
Automobile Receivable Securities. Also although most Automobile Contracts
grant a security interest in the motor vehicle being financed, in most states
the security interest in a motor vehicle must be noted on the certificate of
title to create an enforceable security interest against competing claims of
other parties. Due to the large number of vehicles involved, however, the
certificate of title to each vehicle financed, pursuant to the Automobile
Contracts underlying the Automobile Receivable Security, usually is not
amended to reflect the assignment of the seller's security interest for the
benefit of the holders of the Automobile Receivable Securities. Therefore,
there is the possibility that recoveries on repossessed collateral may not, in
some cases, be available to support payments on the securities. In addition,
various state and federal securities laws give the motor vehicle owner the
right to assert against the holder of the owner's Automobile Contract certain
defenses such owner would have against the seller of the motor vehicle. The
assertion of such defenses could reduce payments on the Automobile Receivable
Securities.
Credit Card Receivable Securities. The Fund may invest in Asset Backed
Securities backed by receivables from revolving credit card agreements
("Credit Card Receivable Securities"). Credit balances on revolving credit
card agreements ("Accounts") are generally paid down more rapidly than are
Automobile Contracts. Most of the Credit Card Receivable Securities issued
publicly to date have been Pass-Through Certificates. In order to lengthen the
maturity of Credit Card Receivable Securities, most such securities provide
for a fixed period during which only interest payments on the underlying
Accounts are passed through to the security holder and principal payments
received on such Accounts are used to fund the transfer to the pool of assets
supporting the related Credit Card Receivable Securities of additional credit
card charges made on an Account. The initial fixed period usually may be
shortened upon the occurrence of specified events which signal a potential
deterioration in the quality of the assets backing the security, such as the
imposition of a cap on interest rates. The ability of the issuer to extend the
life of an issue of Credit Card Receivable Securities thus depends upon the
continued generation of additional principal amounts in the underlying
accounts during the initial period and the non-occurrence of specified events.
An acceleration in cardholders' payment rates or any other event which
shortens the period during which additional credit card charges on an Account
may be transferred to the pool of assets supporting the related Credit Card
Receivable Security could shorten the weighted average life and yield of the
Credit Card Receivable Security.
Credit cardholders are entitled to the protection of a number of state
and federal consumer credit laws, many of which give such holder the right to
set off certain amounts against balances owed on the credit card, thereby
reducing amounts paid on Accounts. In addition, unlike most other Asset Backed
Securities, Accounts are unsecured obligations of the cardholder.
Other Assets. Asset Backed Securities backed by assets other than those
described above, including, but not limited to, small business loans and
accounts receivable, equipment leases, commercial real estate loans, boat
loans and manufacturing housing loans. The Fund may invest in such securities
in the future if such investment is otherwise consistent with its investment
objective and policies.
There are, of course, other types of securities that are, or may become
available, which are similar to the foregoing and the Fund reserves the right
to invest in these securities.
High Yield Fund
Collateralized Bond or Loan Obligations
CBOs are bonds collateralized by corporate bonds and CLOs are bonds
collateralized by bank loans. CBOs and CLOs are structured into tranches, and
payments are allocated such that each tranche has a predictable cash flow
stream and average life. Most CBO issues to date have been collateralized by
high yield bonds or loans, with heavy credit enhancement.
Loan Participations and Assignments
Loan participations and assignments (collectively "participations") will
typically be participating interests in loans made by a syndicate of banks,
represented by an agent bank which has negotiated and structured the loan, to
corporate borrowers to finance internal growth, mergers, acquisitions, stock
repurchases, leveraged buy-outs and other corporate activities. Such loans may
also have been made to governmental borrowers, especially governments of
developing countries (LDC debt). LDC debt will involve the risk that the
governmental entity responsible for the repayment of the debt may be unable or
unwilling to do so when due. The loans underlying such participations may be
secured or unsecured, and the Fund may invest in loans collateralized by
mortgages on real property or which have no collateral. The loan
participations themselves may extend for the entire term of the loan or may
extend only for short "strips" that correspond to a quarterly or monthly
floating rate interest period on the underlying loan. Thus, a term or
revolving credit that extends for several years may be subdivided into shorter
periods.
The loan participations in which the Fund will invest will also vary in
legal structure. Occasionally, lenders assign to another institution both the
lender's rights and obligations under a credit agreement. Since this type of
assignment relieves the original lender of its obligations, it is called a
novation. More typically, a lender assigns only its right to receive payments
of principal and interest under a promissory note, credit agreement or similar
document. A true assignment shifts to the assignee the direct debtor-creditor
relationship with the underlying borrower. Alternatively, a lender may assign
only part of its rights to receive payments pursuant to the underlying
instrument or loan agreement. Such partial assignments, which are more
accurately characterized as "participating interests," do not shift the
debtor-creditor relationship to the assignee, who must rely on the original
lending institution to collect sums due and to otherwise enforce its rights
against the agent bank which administers the loan or against the underlying
borrower.
There may not be a recognizable, liquid public market for loan
participations. To the extent this is the case, the Fund would consider the
loan participation as illiquid and subject to the Fund's restriction on
investing no more than 15% of its net assets in illiquid securities.
Where required by applicable SEC positions, the Fund will treat both the
corporate borrower and the bank selling the participation interest as an
issuer for purposes of its fundamental investment restriction on
diversification.
Various service fees received by the Fund from loan participations may
be treated as non-interest income depending on the nature of the fee
(commitment, takedown, commission, service or loan origination). To the extent
the service fees are not interest income, they will not qualify as income
under Section 851(b) of the Internal Revenue Code. Thus the sum of such fees
plus any other non-qualifying income earned by the Fund cannot exceed 10% of
total income.
Trade Claims
Trade claims are non-securitized rights of payment arising from
obligations other than borrowed funds. Trade claims typically arise when, in
the ordinary course of business, vendors and suppliers extend credit to a
company by offering payment terms. Generally, when a company files for
bankruptcy protection, payments on these trade claims cease and the claims are
subject to compromise along with the other debts of the company. Trade claims
typically are bought and sold at a discount reflecting the degree of
uncertainty with respect to the timing and extent of recovery. In addition to
the risks otherwise associated with low-quality obligations, trade claims have
other risks, including the possibility that the amount of the claim may be
disputed by the obligor.
Over the last few years a market for the trade claims of bankrupt
companies has developed. Many vendors are either unwilling or lack the
resources to hold their claim through the extended bankruptcy process with an
uncertain outcome and timing. Some vendors are also aggressive in establishing
reserves against these receivables, so that the sale of the claim at a
discount may not result in the recognition of a loss.
Trade claims can represent an attractive investment opportunity because
these claims typically are priced at a discount to comparable public
securities. This discount is a reflection of both a less liquid market, a
smaller universe of potential buyers and the risks peculiar to trade claim
investing. It is not unusual for trade claims to be priced at a discount to
public securities that have an equal or lower priority claim.
As noted above, investing in trade claims does carry some unique risks
which include:
o Establishing the Amount of the Claim. Frequently, the supplier's
estimate of its receivable will differ from the customer's
estimate of its payable. Resolution of these differences can
result in a reduction in the amount of the claim. This risk can be
reduced by only purchasing scheduled claims (claims already listed
as liabilities by the debtor) and seeking representations from the
seller.
o Defenses to Claims. The debtor has a variety of defenses that can
be asserted under the bankruptcy code against any claim. Trade
claims are subject to these defenses, the most common of which for
trade claims relates to preference payments. (Preference payments
are all payments made by the debtor during the 90 days prior to
the filing. These payments are presumed to have benefited the
receiving creditor at the expense of the other creditors. The
receiving creditor may be required to return the payment unless it
can show the payments were received in the ordinary course of
business.) While none of these defenses can result in any
additional liability of the purchaser of the trade claim, they can
reduce or wipe out the entire purchased claim. This risk can be
reduced by seeking representations and indemnification from the
seller.
o Documentation/Indemnification. Each trade claim purchased
requires documentation that must be negotiated between the buyer
and seller. This documentation is extremely important since it can
protect the purchaser from losses such as those described above.
Legal expenses in negotiating a purchase agreement can be fairly
high. Additionally, it is important to note that the value of an
indemnification depends on the seller's credit.
o Volatile Pricing Due to Illiquid Market. There are only a handful
of brokers for trade claims and the quoted price of these claims
can be volatile. Generally, it is expected that Trade Claims would
be considered illiquid investments.
o No Current Yield/Ultimate Recovery. Trade claims are almost never
entitled to earn interest. As a result, the return on such an
investment is very sensitive to the length of the bankruptcy,
which is uncertain. Although not unique to trade claims, it is
worth noting that the ultimate recovery on the claim is uncertain
and there is no way to calculate a conventional yield to maturity
on this investment. Additionally, the exit for this investment is
a plan of reorganization which may include the distribution of new
securities. These securities may be as illiquid as the original
trade claim investment.
o Tax Issue. Although the issue is not free from doubt, it is
likely that Trade Claims would be treated as non-securities
investments. As a result, any gains would be considered "non-
qualifying" under the Internal Revenue Code. The Fund may have up
to 10% of its gross income (including capital gains) derived from
non-qualifying sources.
High Yield and Personal Strategy Funds
Zero Coupon and Pay-in-Kind Bonds
A zero coupon security has no cash coupon payments. Instead, the issuer
sells the security at a substantial discount from its maturity value. The
interest received by the investor from holding this security to maturity is
the difference between the maturity value and the purchase price. The
advantage to the investor is that reinvestment risk of the income received
during the life of the bond is eliminated. However, zero-coupon bonds, like
other bonds, retain interest rate and credit risk and usually display more
price volatility than those securities that pay a cash coupon.
Pay-in-Kind ("PIK") Instruments are securities that pay interest in
either cash or additional securities, at the issuer's option, for a specified
period. PIK's, like zero coupon bonds, are designed to give an issuer
flexibility in managing cash flow. PIK bonds can be either senior or
subordinated debt and trade flat (i.e., without accrued interest). The price
of PIK bonds is expected to reflect the market value of the underlying debt
plus an amount representing accrued interest since the last payment. PIK's are
usually less volatile than zero coupon bonds, but more volatile than cash pay
securities.
For federal income tax purposes, these types of bonds will require the
recognition of gross income each year even though no cash may be paid to the
Fund until the maturity or call date of the bond. The Fund will nonetheless be
required to distribute substantially all of this gross income each year to
comply with the Internal Revenue Code, and such distributions could reduce the
amount of cash available for investment by the Fund.
High Yield, New Income, and Personal Strategy Funds
Warrants
The Fund may acquire warrants. Warrants are pure speculation in that
they have no voting rights, pay no dividends and have no rights with respect
to the assets of the corporation issuing them. Warrants basically are options
to purchase equity securities at a specific price valid for a specific period
of time. They do not represent ownership of the securities, but only the right
to buy them. Warrants differ from call options in that warrants are issued by
the issuer of the security which may be purchased on their exercise, whereas
call options may be written or issued by anyone. The prices of warrants do not
necessarily move parallel to the prices of the underlying securities.
Corporate Income, High Yield, New Income, Personal Strategy, Short-Term Bond,
and Short-Term U.S. Government Funds
Hybrid Instruments
Hybrid Instruments have been developed and combine the elements of
futures contracts or options with those of debt, preferred equity or a
depository instrument (hereinafter "Hybrid Instruments"). Generally, a Hybrid
Instrument will be a debt security, preferred stock, depository share, trust
certificate, certificate of deposit or other evidence of indebtedness on which
a portion of or all interest payments, and/or the principal or stated amount
payable at maturity, redemption or retirement, is determined by reference to
prices, changes in prices, or differences between prices, of securities,
currencies, intangibles, goods, articles or commodities (collectively
"Underlying Assets") or by another objective index, economic factor or other
measure, such as interest rates, currency exchange rates, commodity indices,
and securities indices (collectively "Benchmarks"). Thus, Hybrid Instruments
may take a variety of forms, including, but not limited to, debt instruments
with interest or principal payments or redemption terms determined by
reference to the value of a currency or commodity or securities index at a
future point in time, preferred stock with dividend rates determined by
reference to the value of a currency, or convertible securities with the
conversion terms related to a particular commodity.
Hybrid Instruments can be an efficient means of creating exposure to a
particular market, or segment of a market, with the objective of enhancing
total return. For example, a Fund may wish to take advantage of expected
declines in interest rates in several European countries, but avoid the
transactions costs associated with buying and currency-hedging the foreign
bond positions. One solution would be to purchase a U.S. dollar-denominated
Hybrid Instrument whose redemption price is linked to the average three year
interest rate in a designated group of countries. The redemption price formula
would provide for payoffs of greater than par if the average interest rate was
lower than a specified level, and payoffs of less than par if rates were above
the specified level. Furthermore, the Fund could limit the downside risk of
the security by establishing a minimum redemption price so that the principal
paid at maturity could not be below a predetermined minimum level if interest
rates were to rise significantly. The purpose of this arrangement, known as a
structured security with an embedded put option, would be to give the Fund the
desired European bond exposure while avoiding currency risk, limiting downside
market risk, and lowering transactions costs. Of course, there is no guarantee
that the strategy will be successful and the Fund could lose money if, for
example, interest rates do not move as anticipated or credit problems develop
with the issuer of the Hybrid.
The risks of investing in Hybrid Instruments reflect a combination of
the risks of investing in securities, options, futures and currencies. Thus,
an investment in a Hybrid Instrument may entail significant risks that are not
associated with a similar investment in a traditional debt instrument that has
a fixed principal amount, is denominated in U.S. dollars or bears interest
either at a fixed rate or a floating rate determined by reference to a common,
nationally published Benchmark. The risks of a particular Hybrid Instrument
will, of course, depend upon the terms of the instrument, but may include,
without limitation, the possibility of significant changes in the Benchmarks
or the prices of Underlying Assets to which the instrument is linked. Such
risks generally depend upon factors which are unrelated to the operations or
credit quality of the issuer of the Hybrid Instrument and which may not be
readily foreseen by the purchaser, such as economic and political events, the
supply and demand for the Underlying Assets and interest rate movements. In
recent years, various Benchmarks and prices for Underlying Assets have been
highly volatile, and such volatility may be expected in the future. Reference
is also made to the discussion of futures, options, and forward contracts
herein for a discussion of the risks associated with such investments.
Hybrid Instruments are potentially more volatile and carry greater
market risks than traditional debt instruments. Depending on the structure of
the particular Hybrid Instrument, changes in a Benchmark may be magnified by
the terms of the Hybrid Instrument and have an even more dramatic and
substantial effect upon the value of the Hybrid Instrument. Also, the prices
of the Hybrid Instrument and the Benchmark or Underlying Asset may not move in
the same direction or at the same time.
Hybrid Instruments may bear interest or pay preferred dividends at below
market (or even relatively nominal) rates. Alternatively, Hybrid Instruments
may bear interest at above market rates but bear an increased risk of
principal loss (or gain). The latter scenario may result if "leverage" is used
to structure the Hybrid Instrument. Leverage risk occurs when the Hybrid
Instrument is structured so that a given change in a Benchmark or Underlying
Asset is multiplied to produce a greater value change in the Hybrid
Instrument, thereby magnifying the risk of loss as well as the potential for
gain.
Hybrid Instruments may also carry liquidity risk since the instruments
are often "customized" to meet the portfolio needs of a particular investor,
and therefore, the number of investors that are willing and able to buy such
instruments in the secondary market may be smaller than that for more
traditional debt securities. In addition, because the purchase and sale of
Hybrid Instruments could take place in an over-the-counter market without the
guarantee of a central clearing organization or in a transaction between the
Fund and the issuer of the Hybrid Instrument, the creditworthiness of the
counter party or issuer of the Hybrid Instrument would be an additional risk
factor which the Fund would have to consider and monitor. Hybrid Instruments
also may not be subject to regulation of the Commodities Futures Trading
Commission ("CFTC"), which generally regulates the trading of commodity
futures by U.S. persons, the SEC, which regulates the offer and sale of
securities by and to U.S. persons, or any other governmental regulatory
authority.
The various risks discussed above, particularly the market risk of such
instruments, may in turn cause significant fluctuations in the net asset value
of the Fund. Accordingly, the Fund will limit its investments in Hybrid
Instruments to 10% of net assets. However, because of their volatility, it is
possible that the Fund's investment in Hybrid Instruments will account for
more than 10% of the Fund's return (positive or negative).
All Funds
When-Issued Securities and Forward Commitment Contracts
The Fund may purchase securities on a "when-issued" or delayed delivery
basis ("When-Issueds") and may purchase securities on a forward commitment
basis ("Forwards"). Any or all of the Fund's investments in debt securities
may be in the form of When-Issueds and Forwards. The price of such securities,
which may be expressed in yield terms, is fixed at the time the commitment to
purchase is made, but delivery and payment take place at a later date.
Normally, the settlement date occurs within 90 days of the purchase for When-
Issueds, but may be substantially longer for Forwards. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The purchase of these securities will
result in a loss if their value declines prior to the settlement date. This
could occur, for example, if interest rates increase prior to settlement. The
longer the period between purchase and settlement, the greater the risks are.
At the time the Fund makes the commitment to purchase these securities, it
will record the transaction and reflect the value of the security in
determining its net asset value. The Fund will cover these securities by
maintaining cash and/or liquid, high-grade debt securities with its custodian
bank equal in value to commitments for them during the time between the
purchase and the settlement. Therefore, the longer this period, the longer the
period during which alternative investment options are not available to the
Fund (to the extent of the securities used for cover). Such securities either
will mature or, if necessary, be sold on or before the settlement date.
To the extent the Fund remains fully or almost fully invested (in
securities with a remaining maturity of more than one year) at the same time
it purchases these securities, there will be greater fluctuations in the
Fund's net asset value than if the Fund did not purchase them.
Additional Adjustable Rate Securities
Certain securities may be issued with adjustable interest rates that are
reset periodically by pre-determined formulas or indexes in order to minimize
movements in the principal value of the investment. Such securities may have
long-term maturities, but may be treated as a short-term investment under
certain conditions. Generally, as interest rates decrease or increase, the
potential for capital appreciation or depreciation on these securities is less
than for fixed-rate obligations. These securities may take the following
forms:
Variable Rate Securities. Variable rate instruments are those whose
terms provide for the adjustment of their interest rates on set dates and
which, upon such adjustment, can reasonably be expected to have a market value
that approximates its par value. A variable rate instrument, the principal
amount of which is scheduled to be paid in 397 days or less, is deemed to have
a maturity equal to the period remaining until the next readjustment of the
interest rate. A variable rate instrument which is subject to a demand feature
entitles the purchaser to receive the principal amount of the underlying
security or securities, either (i) upon notice of no more than 30 days or (ii)
at specified intervals not exceeding 397 days and upon no more than 30 days'
notice, is deemed to have a maturity equal to the longer of the period
remaining until the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through demand.
Floating Rate Securities. Floating rate instruments are those whose
terms provide for the adjustment of their interest rates whenever a specified
interest rate changes and which, at any time, can reasonably be expected to
have a market value that approximates its par value. The maturity of a
floating rate instrument is deemed to be the period remaining until the date
(noted on the face of the instrument) on which the principal amount must be
paid, or in the case of an instrument called for redemption, the date on which
the redemption payment must be made. Floating rate instruments with demand
features are deemed to have a maturity equal to the period remaining until the
principal amount can be recovered through demand.
Put Option Bonds. Long-term obligations with maturities longer than one
year may provide purchasers an optional or mandatory tender of the security at
par value at predetermined intervals, often ranging from one month to several
years (e.g., a 30-year bond with a five-year tender period). These instruments
are deemed to have a maturity equal to the period remaining to the put date.
Corporate Income, High Yield, New Income, Personal Strategy, Prime Reserve,
Reserve Investment, Short-Term Bond, and Short-Term U.S. Government Funds
Illiquid or Restricted Securities
Restricted securities may be sold only in privately negotiated
transactions or in a public offering with respect to which a registration
statement is in effect under the Securities Act of 1933 (the "1933 Act").
Where registration is required, the Fund may be obligated to pay all or part
of the registration expenses and a considerable period may elapse between the
time of the decision to sell and the time the Fund may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell. Restricted securities
will be priced at fair value as determined in accordance with procedures
prescribed by the Fund's Board of Directors/Trustees. If through the
appreciation of illiquid securities or the depreciation of liquid securities,
the Fund should be in a position where more than 15% (10% for Prime Reserve,
U.S. Treasury Money, Government Reserve Investment, and Reserve Investment
Funds) 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/Trustees, will consider whether securities
purchased under Rule 144A are illiquid and thus subject to the Fund's
restriction of investing no more than 15% (10% for Prime Reserve, U.S.
Treasury Money, Government Reserve Investment, and Reserve Investment Funds)
of its net assets in illiquid securities. A determination of whether a Rule
144A security is liquid or not is a question of fact. In making this
determination, T. Rowe Price will consider the trading markets for the
specific security taking into account the unregistered nature of a Rule 144A
security. In addition, T. Rowe Price could consider the (1) frequency of
trades and quotes, (2) number of dealers and potential purchases, (3) dealer
undertakings to make a market, and (4) the nature of the security and of
marketplace trades (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer). The liquidity of
Rule 144A securities would be monitored, and if as a result of changed
conditions it is determined that a Rule 144A security is no longer liquid, the
Fund's holdings of illiquid securities would be reviewed to determine what, if
any, steps are required to assure that the Fund does not invest more than 15%
(10% for Prime Reserve, U.S. Treasury Money, Government Reserve Investment,
and Reserve Investment Funds) 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.
New Income and Short-Term Bond Funds
Industry Concentration
When the market for corporate debt securities is dominated by issues in
the gas utility, gas transmission utility, electric utility, telephone
utility, or petroleum industry, the Fund will as a matter of fundamental
policy concentrate more than 25%, but not more than 50%, of its assets, in any
one such industry, if the Fund has cash for such investment (i.e., will not
sell portfolio securities to raise cash) and, if in T. Rowe Price's judgment,
the return available and the marketability, quality, and availability of the
debt securities of such industry justifies such concentration in light of the
Fund's investment objective. Domination would exist with respect to any one
such industry, when, in the preceding 30-day period, more than 25% of all
new-issue corporate debt offerings (within the four highest grades of Moody's or
S&P and with maturities of 10 years or less) of $25,000,000 or more consisted
of issues in such industry. Although the Fund will normally purchase corporate
debt securities in the secondary market as opposed to new offerings, T. Rowe
Price believes that the new issue-based dominance standard, as defined above,
is appropriate because it is easily determined and represents an accurate
correlation to the secondary market. Investors should understand that
concentration in any industry may result in increased risk. Investments in any
of these industries may be affected by environmental conditions, energy
conservation programs, fuel shortages, difficulty in obtaining adequate return
on capital in financing operations and large construction programs, and the
ability of the capital markets to absorb debt issues. In addition, it is
possible that the public service commissions which have jurisdiction over
these industries may not grant future increases in rates sufficient to offset
increases in operating expenses. These industries also face numerous
legislative and regulatory uncertainties at both federal and state government
levels. Management believes that any risk to the Fund which might result from
concentration in any industry will be minimized by the Fund's practice of
diversifying its investments in other respects. The Fund's policy with respect
to industry concentration is a fundamental policy. (For investment restriction
on industry concentration, see Investment Restriction (3) on page __)
PORTFOLIO MANAGEMENT PRACTICES
Lending of Portfolio Securities
Securities loans are made to broker-dealers or institutional investors
or other persons, pursuant to agreements requiring that the loans be
continuously secured by collateral at least equal at all times to the value of
the securities lent marked to market on a daily basis. The collateral received
will consist of cash, U.S. government securities, letters of credit or such
other collateral as may be permitted under its investment program. While the
securities are being lent, the Fund will continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities, as well as
interest on the investment of the collateral or a fee from the borrower. The
Fund has a right to call each loan and obtain the securities within the lesser
of five business days or the normal settlement period for such securities. The
Fund will not have the right to vote securities while they are being lent, but
it will call a loan in anticipation of any important vote. The risks in
lending portfolio securities, as with other extensions of secured credit,
consist of possible delay in receiving additional collateral or in the
recovery of the securities or possible loss of rights in the collateral should
the borrower fail financially. Loans will only be made to firms deemed by
T. Rowe Price to be of good standing and will not be made unless, in the
judgment of T. Rowe Price, the consideration to be earned from such loans
would justify the risk.
Other Lending/Borrowing
Subject to approval by the Securities and Exchange Commission, the Fund
may make loans to, or borrow funds from, other mutual funds sponsored or
advised by T. Rowe Price or Rowe Price-Fleming International, Inc.
(collectively, "Price Funds"). The Fund has no current intention of engaging
in these practices at this time.
Repurchase Agreements
The Fund may enter into a repurchase agreement through which an investor
(such as the Fund) purchases a security (known as the "underlying security")
from a well-established securities dealer or a bank that is a member of the
Federal Reserve System. Any such dealer or bank will be on T. Rowe Price's
approved list. At that time, the bank or securities dealer agrees to
repurchase the underlying security at the same price, plus specified interest.
Repurchase agreements are generally for a short period of time, often less
than a week. Repurchase agreements which do not provide for payment within
seven days will be treated as illiquid securities. The Fund will only enter
into repurchase agreements where (i) (A) Prime Reserve, U.S. Treasury Money,
Government Reserve Investment, and Reserve Investment Funds--the underlying
securities are either U.S. government securities or securities that, at the
time the repurchase agreement is entered into, are rated in the highest rating
category by the requisite number of NRSROs (as required by Rule 2a-7 under the
1940 Act) and otherwise are of the type (excluding maturity limitations) which
the Fund's investment guidelines would allow it to purchase directly, (B)
GNMA, High Yield, New Income, Personal Strategy, Short-Term Bond, Short-Term
U.S. Government, and U.S. Treasury Intermediate and Long-Term Funds--the
underlying securities are of the type (excluding maturity limitations) which
the Fund's investment guidelines would allow it to purchase directly, (ii) the
market value of the underlying security, including interest accrued, will be
equal to or exceed the value of the repurchase agreement, and (iii) payment
for the underlying security is made only upon physical delivery or evidence of
book-entry transfer to the account of the custodian or a bank acting as agent.
In the event of a bankruptcy or other default of a seller of a repurchase
agreement, the Fund could experience both delays in liquidating the underlying
security and losses, including: (a) possible decline in the value of the
underlying security during the period while the Fund seeks to enforce its
rights thereto; (b) possible subnormal levels of income and lack of access to
income during this period; and (c) expenses of enforcing its rights.
Reverse Repurchase Agreements
Although the Fund has no current intention, in the foreseeable future,
of engaging in reverse repurchase agreements, the Fund reserves the right to
do so. Reverse repurchase agreements are ordinary repurchase agreements in
which a Fund is the seller of, rather than the investor in, securities, and
agrees to repurchase them at an agreed upon time and price. Use of a reverse
repurchase agreement may be preferable to a regular sale and later repurchase
of the securities because it avoids certain market risks and transaction
costs. A reverse repurchase agreement may be viewed as a type of borrowing by
the Fund, subject to Investment Restriction (1). (See "Investment
Restrictions," page __.)
High Yield Fund
Short Sales
The Fund may make short sales for hedging purposes to protect the Fund
against companies whose credit is deteriorating. Short sales are transactions
in which the Fund sells a security it does not own in anticipation of a
decline in the market value of that security. The Fund's short sales would be
limited to situations where the Fund owns a debt security of a company and
would sell short the common or preferred stock or another debt security at a
different level of the capital structure of the same company. No securities
will be sold short if, after the effect is given to any such short sale, the
total market value of all securities sold short would exceed 2% of the value
of the Fund's net assets.
To complete a short sale transaction, the Fund must borrow the security
to make delivery to the buyer. The Fund then is obligated to replace the
security borrowed by purchasing it at the market price at the time of
replacement. The price at such time may be more or less than the price at
which the security was sold by the Fund. Until the security is replaced, the
Fund is required to pay to the lender amounts equal to any dividends or
interest which accrue during the period of the loan. To borrow the security,
the Fund also may be required to pay a premium, which would increase the cost
of the security sold. The proceeds of the short sale will be retained by the
broker, to the extent necessary to meet margin requirements, until the short
position is closed out.
Until the Fund replaces a borrowed security in connection with a short
sale, the Fund will: (a) maintain daily a segregated account, containing cash
or U.S. government securities, at such a level that (i) the amount deposited
in the account plus the amount deposited with the broker as collateral will
equal the current value of the security sold short and (ii) the amount
deposited in the segregated account plus the amount deposited with the broker
as collateral will not be less than the market value of the security at the
time its was sold short; or (b) otherwise cover its short position.
The Fund will incur a loss as a result of the short sale if the price of
the security sold short increases between the date of the short sale and the
date on which the Fund replaces the borrowed security. The Fund will realize a
gain if the security sold short declines in price between those dates. This
result is the opposite of what one would expect from a cash purchase of a long
position in a security. The amount of any gain will be decreased, and the
amount of any loss increased, by the amount of any premium, dividends or
interest the Fund may be required to pay in connection with a short sale. Any
gain or loss on the security sold short would be separate from a gain or loss
on the Fund security being hedged by the short sale.
All Funds (except Prime Reserve, U.S. Treasury Money, Government Reserve
Investment, and Reserve Investment 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 a
Fund. In writing covered call options, the Fund expects to generate additional
premium income which should serve to enhance the Fund's total return and
reduce the effect of any price decline of the security or currency involved in
the option. Covered call options will generally be written on securities or
currencies which, in T. Rowe Price's opinion, are not expected to have any
major price increases or moves in the near future but which, over the long
term, are deemed to be attractive investments for the Fund.
A call option gives the holder (buyer) the "right to purchase" a
security or currency at a specified price (the exercise price) at expiration
of the option (European style) or at any time until a certain date (the
expiration date) (American style). So long as the obligation of the writer of
a call option continues, he may be assigned an exercise notice by the broker-
dealer through whom such option was sold, requiring him to deliver the
underlying security or currency against payment of the exercise price. This
obligation terminates upon the expiration of the call option, or such earlier
time at which the writer effects a closing purchase transaction by
repurchasing an option identical to that previously sold. To secure his
obligation to deliver the underlying security or currency in the case of a
call option, a writer is required to deposit in escrow the underlying security
or currency or other assets in accordance with the rules of a clearing
corporation.
The Fund will write only covered call options. This means that the Fund
will own the security or currency subject to the option or an option to
purchase the same underlying security or currency, having an exercise price
equal to or less than the exercise price of the "covered" option, or will
establish and maintain with its custodian for the term of the option, an
account consisting of cash, U.S. government securities or other liquid high-
grade debt obligations having a value equal to the fluctuating market value of
the optioned securities or currencies.
Portfolio securities or currencies on which call options may be written
will be purchased solely on the basis of investment considerations consistent
with the Fund's investment objective. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk
(in contrast to the writing of naked or uncovered options, which the Fund will
not do), but capable of enhancing the Fund's total return. When writing a
covered call option, a Fund, in return for the premium, gives up the
opportunity for profit from a price increase in the underlying security or
currency above the exercise price, but conversely retains the risk of loss
should the price of the security or currency decline. Unlike one who owns
securities or currencies not subject to an option, the Fund has no control
over when it may be required to sell the underlying securities or currencies,
since it may be assigned an exercise notice at any time prior to the
expiration of its obligation as a writer. If a call option which the Fund has
written expires, the Fund will realize a gain in the amount of the premium;
however, such gain may be offset by a decline in the market value of the
underlying security or currency during the option period. If the call option
is exercised, the Fund will realize a gain or loss from the sale of the
underlying security or currency. The Fund does not consider a security or
currency covered by a call to be "pledged" as that term is used in the Fund's
policy which limits the pledging or mortgaging of its assets.
The premium received is the market value of an option. The premium the
Fund will receive from writing a call option will reflect, among other things,
the current market price of the underlying security or currency, the
relationship of the exercise price to such market price, the historical price
volatility of the underlying security or currency, and the length of the
option period. Once the decision to write a call option has been made, T. Rowe
Price, in determining whether a particular call option should be written on a
particular security or currency, will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will
exist for those options. The premium received by the Fund for writing covered
call options will be recorded as a liability of the Fund. This liability will
be adjusted daily to the option's current market value, which will be the
latest sale price at the time at which the net asset value per share of the
Fund is computed (close of the New York Stock Exchange), or, in the absence of
such sale, the latest asked price. The option will be terminated upon
expiration of the option, the purchase of an identical option in a closing
transaction, or delivery of the underlying security or currency upon the
exercise of the option.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or, to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price or expiration date or both. If the Fund desires to
sell a particular security or currency from its portfolio on which it has
written a call option, or purchased a put option, it will seek to effect a
closing transaction prior to, or concurrently with, the sale of the security
or currency. There is, of course, no assurance that the Fund will be able to
effect such closing transactions at favorable prices. If the Fund cannot enter
into such a transaction, it may be required to hold a security or currency
that it might otherwise have sold. When the Fund writes a covered call option,
it runs the risk of not being able to participate in the appreciation of the
underlying securities or currencies above the exercise price, as well as the
risk of being required to hold on to securities or currencies that are
depreciating in value. This could result in higher transaction costs. The Fund
will pay transaction costs in connection with the writing of options to close
out previously written options. Such transaction costs are normally higher
than those applicable to purchases and sales of portfolio securities.
Call options written by the Fund will normally have expiration dates of
less than nine months from the date written. The exercise price of the options
may be below, equal to, or 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 call
or put options exceeds 25% of the market value of the Fund's net assets. In
calculating the 25% limit, the Fund will offset, against the value of assets
covering written calls and puts, the value of 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 of the exercise price
against delivery of the underlying security or currency. The operation of put
options in other respects, including their related risks and rewards, is
substantially identical to that of call options.
The Fund would write put options only on a covered basis, which means
that the Fund would maintain in a segregated account cash, U.S. government
securities or other liquid high-grade debt obligations in an amount not less
than the exercise price or the Fund will own an option to sell the underlying
security or currency subject to the option having an exercise price equal to
or greater than the exercise price of the "covered" option at all times while
the put option is outstanding. (The rules of a clearing corporation currently
require that such assets be deposited in escrow to secure payment of the
exercise price.)
The Fund would generally write covered put options in circumstances
where T. Rowe Price wishes to purchase the underlying security or currency for
the Fund's portfolio at a price lower than the current market price of the
security or currency. In such event the Fund would write a put option at an
exercise price which, reduced by the premium received on the option, reflects
the lower price it is willing to pay. Since the Fund would also receive
interest on debt securities or currencies maintained to cover the exercise
price of the option, this technique could be used to enhance current return
during periods of market uncertainty. The risk in such a transaction would be
that the market price of the underlying security or currency would decline
below the exercise price less the premiums received. Such a decline could be
substantial and result in a significant loss to the Fund. In addition, the
Fund, because it does not own the specific securities or currencies which it
may be required to purchase in exercise of the put, cannot benefit from
appreciation, if any, with respect to such specific securities or currencies.
The Fund will not write a covered put option if, as a result, the
aggregate market value of all portfolio securities or currencies covering put
or call options exceeds 25% of the market value of the Fund's net assets. In
calculating the 25% limit, the Fund will offset, against the value of assets
covering written puts and calls, the value of purchased puts and calls on
identical securities or currencies with identical maturity dates.
Purchasing Put Options
The Fund may purchase American or European style put options. As the
holder of a put option, the Fund has the right to sell the underlying security
or currency at the exercise price at any time during the option period
(American style) or at the expiration of the option (European style). The Fund
may enter into closing sale transactions with respect to such options,
exercise them or permit them to expire. The Fund may purchase put options for
defensive purposes in order to protect against an anticipated decline in the
value of its securities or currencies. An example of such use of put options
is provided below.
The Fund may purchase a put option on an underlying security or currency
(a "protective put") owned by the Fund as a defensive technique in order to
protect against an anticipated decline in the value of the security or
currency. Such hedge protection is provided only during the life of the put
option when the Fund, as the holder of the put option, is able to sell the
underlying security or currency at the put exercise price regardless of any
decline in the underlying security's market price or currency's exchange
value. For example, a put option may be purchased in order to protect
unrealized appreciation of a security or currency where T. Rowe Price deems it
desirable to continue to hold the security or currency because of tax
considerations. The premium paid for the put option and any transaction costs
would reduce any capital gain otherwise available for distribution when the
security or currency is eventually sold.
The Fund may also purchase put options at a time when the Fund does not
own the underlying security or currency. By purchasing put options on a
security or currency it does not own, the Fund seeks to benefit from a decline
in the market price of the underlying security or currency. If the put option
is not sold when it has remaining value, and if the market price of the
underlying security or currency remains equal to or greater than the exercise
price during the life of the put option, the Fund will lose its entire
investment in the put option. In order for the purchase of a put option to be
profitable, the market price of the underlying security or currency must
decline sufficiently below the exercise price to cover the premium and
transaction costs, unless the put option is sold in a closing sale
transaction.
The Fund will not commit more than 5% of its assets to premiums when
purchasing put and call options. The premium paid by the Fund when purchasing
a put option will be recorded as an asset of the Fund. This asset will be
adjusted daily to the option's current market value, which will be the latest
sale price at the time at which the net asset value per share of the Fund is
computed (close of New York Stock Exchange), or, in the absence of such sale,
the latest bid price. This asset will be terminated upon expiration of the
option, the selling (writing) of an identical option in a closing transaction,
or the delivery of the underlying security or currency upon the exercise of
the option.
Purchasing Call Options
The Fund may purchase American or European style call options. As the
holder of a call option, the Fund has the right to purchase the underlying
security or currency at the exercise price at any time during the option
period (American style) or at the expiration of the option (European style).
The Fund may enter into closing sale transactions with respect to such
options, exercise them or permit them to expire. The Fund may purchase call
options for the purpose of increasing its current return or avoiding tax
consequences which could reduce its current return. The Fund may also purchase
call options in order to acquire the underlying securities or currencies.
Examples of such uses of call options are provided below.
Call options may be purchased by the Fund for the purpose of acquiring
the underlying securities or currencies for its portfolio. Utilized in this
fashion, the purchase of call options enables the Fund to acquire the
securities or currencies at the exercise price of the call option plus the
premium paid. At times the net cost of acquiring securities or currencies in
this manner may be less than the cost of acquiring the securities or
currencies directly. This technique may also be useful to the Fund in
purchasing a large block of securities or currencies that would be more
difficult to acquire by direct market purchases. So long as it holds such a
call option rather than the underlying security or currency itself, the Fund
is partially protected from any unexpected decline in the market price of the
underlying security or currency and in such event could allow the call option
to expire, incurring a loss only to the extent of the premium paid for the
option.
The Fund will not commit more than 5% of its assets to premiums when
purchasing call and put options. The Fund may also purchase call options on
underlying securities or currencies it owns in order to protect unrealized
gains on call options previously written by it. A call option would be
purchased for this purpose where tax considerations make it inadvisable to
realize such gains through a closing purchase transaction. Call options may
also be purchased at times to avoid realizing losses.
Dealer (Over-the-Counter) Options
The Fund may engage in transactions involving dealer options. Certain
risks are specific to dealer options. While the Fund would look to a clearing
corporation to exercise exchange-traded options, if the Fund were to purchase
a dealer option, it would rely on the dealer from whom it purchased the option
to perform if the option were exercised. Failure by the dealer to do so would
result in the loss of the premium paid by the Fund as well as loss of the
expected benefit of the transaction.
Exchange-traded options generally have a continuous liquid market while
dealer options have none. Consequently, the Fund will generally be able to
realize the value of a dealer option it has purchased only by exercising it or
reselling it to the dealer who issued it. Similarly, when the Fund writes a
dealer option, it generally will be able to close out the option prior to its
expiration only by entering into a closing purchase transaction with the
dealer to which the Fund originally wrote the option. While the Fund will seek
to enter into dealer options only with dealers who will agree to and which are
expected to be capable of entering into closing transactions with the Fund,
there can be no assurance that the Fund will be able to liquidate a dealer
option at a favorable price at any time prior to expiration. Until the Fund,
as a covered dealer call option writer, is able to effect a closing purchase
transaction, it will not be able to liquidate securities (or other assets) or
currencies used as cover until the option expires or is exercised. In the
event of insolvency of the contra party, the Fund may be unable to liquidate a
dealer option. With respect to options written by the Fund, the inability to
enter into a closing transaction may result in material losses to the Fund.
For example, since the Fund must maintain a secured position with respect to
any call option on a security it writes, the Fund may not sell the assets
which it has segregated to secure the position while it is obligated under the
option. This requirement may impair a Fund's ability to sell portfolio
securities or currencies at a time when such sale might be advantageous.
The Staff of the SEC has taken the position that purchased dealer
options and the assets used to secure the written dealer options are illiquid
securities. The Fund may treat the cover used for written OTC options as
liquid if the dealer agrees that the Fund may repurchase the OTC option it has
written for a maximum price to be calculated by a predetermined formula. In
such cases, the OTC option would be considered illiquid only to the extent the
maximum repurchase price under the formula exceeds the intrinsic value of the
option. Accordingly, the Fund will treat dealer options as subject to the
Fund's limitation on illiquid securities. If the SEC changes its position on
the liquidity of dealer options, the Fund will change its treatment of such
instrument accordingly.
High Yield Fund
Spread Option Transactions
The Fund may purchase from and sell to securities dealers covered spread
options. Such covered spread options are not presently exchange listed or
traded. The purchase of a spread option gives the Fund the right to put, or
sell, a security that it owns at a fixed dollar spread or fixed yield spread
in relationship to another security that the Fund does not own, but which is
used as a benchmark. The risk to the Fund in purchasing covered spread options
is the cost of the premium paid for the spread option and any transaction
costs. In addition, there is no assurance that closing transactions will be
available. The purchase of spread options will be used to protect the Fund
against adverse changes in prevailing credit quality spreads, i.e., the yield
spread between high quality and lower quality securities. Such protection is
only provided during the life of the spread option. The security covering the
spread option will be maintained in a segregated account by the Fund's
custodian. The Fund does not consider a security covered by a spread option to
be "pledged" as that term is used in the Fund's policy limiting the pledging
or mortgaging of its assets. The Fund may also buy and sell uncovered spread
options. Such options would be used for the same purposes and be subject to
similar risks as covered spread options. However, in an uncovered spread
option, the Fund would not own either of the securities involved in the
spread.
All Funds (except Prime Reserve, U.S. Treasury Money, Government Reserve
Investment, and Reserve Investment Funds)
Futures Contracts
Futures are a type of potentially high-risk derivative.
Transactions in Futures
The Fund may enter into futures contracts, including stock index,
interest rate and currency futures ("futures or futures contracts").
Stock index futures contracts may be used to provide a hedge for a
portion of the Fund's portfolio, as a cash management tool, or as an efficient
way for T. Rowe Price to implement either an increase or decrease in portfolio
market exposure in response to changing market conditions. The Fund may
purchase or sell futures contracts with respect to any stock index.
Nevertheless, to hedge the Fund's portfolio successfully, the Fund must sell
futures contacts with respect to indices or subindices whose movements will
have a significant correlation with movements in the prices of the Fund's
portfolio securities.
Interest rate or currency futures contracts may be used as a hedge
against changes in prevailing levels of interest rates or currency exchange
rates in order to establish more definitely the effective return on securities
or currencies held or intended to be acquired by the Fund. In this regard, the
Fund could sell interest rate or currency futures as an offset against the
effect of expected increases in interest rates or currency exchange rates and
purchase such futures as an offset against the effect of expected declines in
interest rates or currency exchange rates.
The Fund will enter into futures contracts which are traded on national
or foreign futures exchanges, and are standardized as to maturity date and
underlying financial instrument. Futures exchanges and trading in the United
States are regulated under the Commodity Exchange Act by the CFTC. Futures are
traded in London, at the London International Financial Futures Exchange, in
Paris, at the MATIF, and in Tokyo, at the Tokyo Stock Exchange. Although
techniques other than the sale and purchase of futures contracts could be used
for the above-referenced purposes, futures contracts offer an effective and
relatively low cost means of implementing the Fund's objectives in these
areas.
Regulatory Limitations
The Fund will engage in futures contracts and options thereon only for
bona fide hedging, yield enhancement, and risk management purposes, in each
case in accordance with rules and regulations of the CFTC.
The Fund may not purchase or sell futures contracts or related options
if, with respect to positions which do not qualify as bona fide hedging under
applicable CFTC rules, the sum of the amounts of initial margin deposits and
premiums paid on those positions would exceed 5% of the net asset value of the
Fund after taking into account unrealized profits and unrealized losses on any
such contracts it has entered into; provided, however, that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount
may be excluded in calculating the 5% limitation. For purposes of this policy
options on futures contracts and foreign currency options traded on a
commodities exchange will be considered "related options". This policy may be
modified by the Board of Directors/Trustees without a shareholder vote and
does not limit the percentage of the Fund's assets at risk to 5%.
In instances involving the purchase of futures contracts or the writing
of call or put options thereon by the Fund, an amount of cash, U.S. government
securities or other liquid, high-grade debt obligations, equal to the market
value of the futures contracts and options thereon (less any related margin
deposits), will be identified in an account with the Fund's custodian to cover
the position, or alternative cover (such as owning an offsetting position)
will be employed. Assets used as cover or held in an identified account cannot
be sold while the position in the corresponding option or future is open,
unless they are replaced with similar assets. As a result, the commitment of a
large portion of a Fund's assets to cover or identified accounts could impede
portfolio management or the Fund's ability to meet redemption requests or
other current obligations.
If the CFTC or other regulatory authorities adopt different (including
less stringent) or additional restrictions, the Fund would comply with such
new restrictions.
Trading in Futures Contracts
A futures contract provides for the future sale by one party and
purchase by another party of a specified amount of a specific financial
instrument (e.g., units of a debt security) for a specified price, date, time
and place designated at the time the contract is made. Brokerage fees are
incurred when a futures contract is bought or sold and margin deposits must be
maintained. Entering into a contract to buy is commonly referred to as buying
or purchasing a contract or holding a long position. Entering into a contract
to sell is commonly referred to as selling a contract or holding a short
position.
Unlike when the Fund purchases or sells a security, no price would be
paid or received by the Fund upon the purchase or sale of a futures contract.
Upon entering into a futures contract, and to maintain the Fund's open
positions in futures contracts, the Fund would be required to deposit with its
custodian in a segregated account in the name of the futures broker an amount
of cash, U.S. government securities, suitable money market instruments, or
liquid, high-grade debt securities, known as "initial margin." The margin
required for a particular futures contract is set by the exchange on which the
contract is traded, and may be significantly modified from time to time by the
exchange during the term of the contract. Futures contracts are customarily
purchased and sold on margins that may range upward from less than 5% of the
value of the contract being traded.
If the price of an open futures contract changes (by increase in the
case of a sale or by decrease in the case of a purchase) so that the loss on
the futures contract reaches a point at which the margin on deposit does not
satisfy margin requirements, the broker will require an increase in the
margin. However, if the value of a position increases because of favorable
price changes in the futures contract so that the margin deposit exceeds the
required margin, the broker will pay the excess to the Fund.
These subsequent payments, called "variation margin," to and from the
futures broker, are made on a daily basis as the price of the underlying
assets fluctuate making the long and short positions in the futures contract
more or less valuable, a process known as "marking to the market." The Fund
expects to earn interest income on its margin deposits.
Although certain futures contracts, by their terms, require actual
future delivery of and payment for the underlying instruments, in practice
most futures contracts are usually closed out before the delivery date.
Closing out an open futures contract purchase or sale is effected by entering
into an offsetting futures contract sale or purchase, respectively, for the
same aggregate amount of the identical securities and the same delivery date.
If the offsetting purchase price is less than the original sale price, the
Fund realizes a gain; if it is more, the Fund realizes a loss. Conversely, if
the offsetting sale price is more than the original purchase price, the Fund
realizes a gain; if it is less, the Fund realizes a loss. The transaction
costs must also be included in these calculations. There can be no assurance,
however, that the Fund will be able to enter into an offsetting transaction
with respect to a particular futures contract at a particular time. If the
Fund is not able to enter into an offsetting transaction, the Fund will
continue to be required to maintain the margin deposits on the futures
contract.
As an example of an offsetting transaction in which the underlying
instrument is not delivered, the contractual obligations arising from the sale
of one contract of September Treasury Bills on an exchange may be fulfilled at
any time before delivery of the contract is required (i.e., on a specified
date in September, the "delivery month") by the purchase of one contract of
September Treasury Bills on the same exchange. In such instance, the
difference between the price at which the futures contract was sold and the
price paid for the offsetting purchase, after allowance for transaction costs,
represents the profit or loss to the Fund.
A futures contract on the Standard & Poor's 500 Stock Index, composed of
500 selected common stocks, most of which are listed on the New York Stock
Exchange, provides an example of how futures contracts operate. The S&P 500
Index assigns relative weightings to the common stocks included in the Index,
and the Index fluctuates with changes in the market values of those common
stocks. In the case of futures contracts on the S&P 500 Index, the contracts
are to buy or sell 500 units. Thus, if the value of the S&P 500 Index were
$150, one contract would be worth $75,000 (500 units x $150). The contract
specifies that no delivery of the actual stocks making up the index will take
place. Instead, settlement in cash occurs. Over the life of the contract, the
gain or loss realized by the Fund will equal the difference between the
purchase (or sale) price of the contract and the price at which the contract
is terminated. For example, if the Fund enters into the example contract above
and the S&P 500 Index is at $154 on the termination date, the Fund will gain
$2,000 (500 units x gain of $4). If, however, the S&P 500 Index is at $148 on
that future date, the Fund will lose $1,000 (500 units x loss of $2).
Special Risks of Transactions in Futures Contracts
Volatility and Leverage. The prices of futures contracts are volatile
and are influenced, among other things, by actual and anticipated changes in
the market and interest rates, which in turn are affected by fiscal and
monetary policies and national and international political and economic
events.
Most United States futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. The daily
limit establishes the maximum amount that the price of a futures contract may
vary either up or down from the previous day's settlement price at the end of
a trading session. Once the daily limit has been reached in a particular type
of futures contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses, because the limit may
prevent the liquidation of unfavorable positions. Futures contract prices have
occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of futures
positions and subjecting some futures traders to substantial losses.
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. However, the
Fund would presumably have sustained comparable losses if, instead of the
futures contract, it had invested in the underlying financial instrument and
sold it after the decline. Furthermore, in the case of a futures contract
purchase, in order to be certain that the Fund has sufficient assets to
satisfy its obligations under a futures contract, the Fund earmarks to the
futures contract equal in value to the current value of the underlying
instrument less the margin deposit.
Liquidity. The Fund may elect to close some or all of its futures
positions at any time prior to their expiration. The Fund would do so to
reduce exposure represented by long futures positions or short futures
positions. The Fund may close its positions by taking opposite positions which
would operate to terminate the Fund's position in the futures contracts. Final
determinations of variation margin would then be made, additional cash would
be required to be paid by or released to the Fund, and the Fund would realize
a loss or a gain.
Futures contracts may be closed out only on the exchange or board of
trade where the contracts were initially traded. Although the Fund intends to
purchase or sell futures contracts only on exchanges or boards of trade where
there appears to be an active market, there is no assurance that a liquid
market on an exchange or board of trade will exist for any particular contract
at any particular time. In such event, it might not be possible to close a
futures contract, and in the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of variation margin.
However, in the event futures contracts have been used to hedge the underlying
instruments, the Fund would continue to hold the underlying instruments
subject to the hedge until the futures contracts could be terminated. In such
circumstances, an increase in the price of underlying instruments, if any,
might partially or completely offset losses on the futures contract. However,
as described below, there is no guarantee that the price of the underlying
instruments will, in fact, correlate with the price movements in the futures
contract and thus provide an offset to losses on a futures contract.
Hedging Risk. A decision of whether, when, and how to hedge involves
skill and judgment, and even a well-conceived hedge may be unsuccessful to
some degree because of unexpected market behavior, market or interest rate
trends. There are several risks in connection with the use by the Fund of
futures contracts as a hedging device. One risk arises because of the
imperfect correlation between movements in the prices of the futures contracts
and movements in the prices of the underlying instruments which are the
subject of the hedge. T. Rowe Price will, however, attempt to reduce this risk
by entering into futures contracts whose movements, in its judgment, will have
a significant correlation with movements in the prices of the Fund's
underlying instruments sought to be hedged.
Successful use of futures contracts by the Fund for hedging purposes is
also subject to T. Rowe Price's ability to correctly predict movements in the
direction of the market. It is possible that, when the Fund has sold futures
to hedge its portfolio against a decline in the market, the index, indices, or
instruments underlying futures might advance and the value of the underlying
instruments held in the Fund's portfolio might decline. If this were to occur,
the Fund would lose money on the futures and also would experience a decline
in value in its underlying instruments. However, while this might occur to a
certain degree, T. Rowe Price believes that over time the value of the Fund's
portfolio will tend to move in the same direction as the market indices used
to hedge the portfolio. It is also possible that if the Fund were to hedge
against the possibility of a decline in the market (adversely affecting the
underlying instruments held in its portfolio) and prices instead increased,
the Fund would lose part or all of the benefit of increased value of those
underlying instruments that it has hedged, because it would have offsetting
losses in its futures positions. In addition, in such situations, if the Fund
had insufficient cash, it might have to sell underlying instruments to meet
daily variation margin requirements. Such sales of underlying instruments
might be, but would not necessarily be, at increased prices (which would
reflect the rising market). The Fund might have to sell underlying instruments
at a time when it would be disadvantageous to do so.
In addition to the possibility that there might be an imperfect
correlation, or no correlation at all, between price movements in the futures
contracts and the portion of the portfolio being hedged, the price movements
of futures contracts might not correlate perfectly with price movements in the
underlying instruments due to certain market distortions. First, all
participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors might close futures contracts through offsetting
transactions, which could distort the normal relationship between the
underlying instruments and futures markets. Second, the margin requirements in
the futures market are less onerous than margin requirements in the securities
markets, and as a result the futures market might attract more speculators
than the securities markets do. Increased participation by speculators in the
futures market might also cause temporary price distortions. Due to the
possibility of price distortion in the futures market and also because of the
imperfect correlation between price movements in the underlying instruments
and movements in the prices of futures contracts, even a correct forecast of
general market trends by T. Rowe Price might not result in a successful
hedging transaction over a very short time period.
Options on Futures Contracts
The Fund may purchase and sell options on the same types of futures in
which it may invest.
Options on futures are similar to options on underlying instruments
except that options on futures give the purchaser the right, in return for the
premium paid, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put), rather than
to purchase or sell the futures contract, at a specified exercise price at any
time during the period of the option. Upon exercise of the option, the
delivery of the futures position by the writer of the option to the holder of
the option will be accompanied by the delivery of the accumulated balance in
the writer's futures margin account which represents the amount by which the
market price of the futures contract, at exercise, exceeds (in the case of a
call) or is less than (in the case of a put) the exercise price of the option
on the futures contract. Purchasers of options who fail to exercise their
options prior to the exercise date suffer a loss of the premium paid.
As an alternative to writing or purchasing call and put options on
interest rate futures, the Fund may write or purchase call and put options on
financial indices. Such options would be used in a manner similar to the use
of options on futures contracts. From time to time, a single order to purchase
or sell futures contracts (or options thereon) may be made on behalf of the
Fund and other T. Rowe Price Funds. Such aggregated orders would be allocated
among the Funds and the other T. Rowe Price Funds in a fair and non-
discriminatory manner.
Special Risks of Transactions in Options on Futures Contracts
The risks described under "Special Risks of Transactions on Futures
Contracts" are substantially the same as the risks of using options on
futures. In addition, where the Fund seeks to close out an option position by
writing or buying an offsetting option covering the same index, underlying
instrument or contract and having the same exercise price and expiration date,
its ability to establish and close out positions on such options will be
subject to the maintenance of a liquid secondary market. Reasons for the
absence of a liquid secondary market on an exchange include the following: (i)
there may be insufficient trading interest in certain options; (ii)
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; (iii) trading halts, suspensions or other restrictions
may be imposed with respect to particular classes or series of options, or
underlying instruments; (iv) unusual or unforeseen circumstances may interrupt
normal operations on an exchange; (v) the facilities of an exchange or a
clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on the exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no
assurance that higher than anticipated trading activity or other unforeseen
events might not, at times, render certain of the facilities of any of the
clearing corporations inadequate, and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution
of customers' orders.
Additional Futures and Options Contracts
Although the 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
Commission and arbitration proceedings provided by the National Futures
Association or any domestic futures exchange. In particular, funds received
from the Fund for foreign futures or foreign options transactions may not be
provided the same protections as funds received in respect of transactions on
United States futures exchanges. In addition, the price of any foreign futures
or foreign options contract and, therefore, the potential profit and loss
thereon may be affected by any variance in the foreign exchange rate between
the time the Fund's order is placed and the time it is liquidated, offset or
exercised.
U.S. Treasury Intermediate and Long-Term Funds
Limitations on Futures and Options for Intermediate and Long-Term Funds
The Funds will not purchase a futures contract or option thereon if,
with respect to positions in futures or options on futures which do not
represent bona fide hedging, the aggregate initial margin and premiums on such
positions would exceed 5% of the Fund's net asset value. In addition, neither
of the Funds will enter into a futures transaction if it would be obligated to
purchase or deliver under outstanding open futures contracts amounts which
would exceed 15% of the Fund's total assets.
A Fund will not write a covered call option if, as a result, the
aggregate market value of all portfolio securities covering call options or
subject to delivery under put options exceeds 15% of the market value of the
Fund's total assets.
A Fund will not write a covered put option if, as a result, the
aggregate market value of all portfolio securities subject to such put options
or covering call options exceeds 15% of the market value of the Fund's total
assets.
The Funds have no current intention of investing in futures and options.
However, they reserve the right to do so in the future and could be subject to
the following limitations: A Fund may invest up to 15% of its total assets in
premiums on put options and 15% of its total assets in premiums on call
options. The total amount of a Fund's total assets invested in futures and
options will not exceed 15% of the Fund's total assets.
Corporate Income, High Yield, New Income, Personal Strategy, and Short-Term
Bond 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 currency parities will be incorporated into the longer term investment
decisions made with regard to overall diversification strategies. However,
T. Rowe Price believes that it is important to have the flexibility to enter
into such forward contracts when it determines that the best interests of the
Fund will be served.
Third, the Fund may use forward contracts when the Fund wishes to hedge
out of the dollar into a foreign currency in order to create a synthetic bond
or money market instrument--the security would be issued in U.S. dollars but
the dollar component would be transformed into a foreign currency through a
forward contract.
The Fund may enter into forward contracts for any other purpose
consistent with the Fund's investment objective and program. However, the Fund
will not enter into a forward contract, or maintain exposure to any such
contract(s), if the amount of foreign currency required to be delivered
thereunder would exceed the Fund's holdings of liquid, high-grade debt
securities, currency available for cover of the forward contract(s), or other
suitable cover. In determining the amount to be delivered under a contract,
the Fund may net offsetting positions.
At the maturity of a forward contract, the Fund may sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and either extend the maturity of the forward contract (by "rolling"
that contract forward) or may initiate a new forward contract.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If the Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward prices decline
during the period between the Fund's entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting contract
for the purchase of the foreign currency, the Fund will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase. Should forward prices increase, the
Fund will suffer a loss to the extent of the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
The Fund's dealing in forward foreign currency exchange contracts will
generally be limited to the transactions described above. However, the Fund
reserves the right to enter into forward foreign currency contracts for
different purposes and under different circumstances. Of course, the Fund is
not required to enter into forward contracts with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate
by T. Rowe Price. It also should be realized that this method of hedging
against a decline in the value of a currency does not eliminate fluctuations
in the underlying prices of the securities. It simply establishes a rate of
exchange at a future date. Additionally, although such contracts tend to
minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time, they tend to limit any potential gain which might
result from an increase in the value of that currency.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. It will do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the difference (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire to resell that currency to the dealer.
Federal Tax Treatment of Options, Futures Contracts and Forward Foreign
Exchange Contracts
The Fund may enter into certain options, futures, and forward foreign
exchange contracts, including options and futures on currencies, which will be
treated as Section 1256 contracts or straddles.
Transactions which are considered Section 1256 contracts will be
considered to have been closed at the end of the Fund's fiscal year and any
gains or losses will be recognized for tax purposes at that time. Such gains
or losses from the normal closing or settlement of such transactions will be
characterized as 60% long-term capital gain or loss and 40% short-term capital
gain or loss regardless of the holding period of the instrument. The Fund will
be required to distribute net gains on such transactions to shareholders even
though it may not have closed the transaction and received cash to pay such
distributions.
Options, futures and forward foreign exchange contracts, including
options and futures on currencies, which offset a foreign dollar denominated
bond or currency position may be considered straddles for tax purposes, in
which case a loss on any position in a straddle will be subject to deferral to
the extent of unrealized gain in an offsetting position. The holding period of
the securities or currencies comprising the straddle will be deemed not to
begin until the straddle is terminated. For securities offsetting a purchased
put, this adjustment of the holding period may increase the gain from sales of
securities held less than three months. The holding period of the security
offsetting an "in-the-money qualified covered call" option on an equity
security will not include the period of time the option is outstanding.
Losses on written covered calls and purchased puts on securities,
excluding certain "qualified covered call" options on equity securities, may
be long-term capital loss, if the security covering the option was held for
more than twelve months prior to the writing of the option.
In order for the Fund to continue to qualify for federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities or currencies. Pending tax regulations could limit the extent that
net gain realized from option, futures or foreign forward exchange contracts
on currencies is qualifying income for purposes of the 90% requirement. In
addition, gains realized on the sale or other disposition of securities,
including option, futures or foreign forward exchange contracts on securities
or securities indexes and, in some cases, currencies, held for less than three
months, must be limited to less than 30% of the Fund's annual gross income. In
order to avoid realizing excessive gains on securities or currencies held less
than three months, the Fund may be required to defer the closing out of
option, futures or foreign forward exchange contracts) beyond the time when it
would otherwise be advantageous to do so. It is anticipated that unrealized
gains on Section 1256 option, futures and foreign forward exchange contracts,
which have been open for less than three months as of the end of the Fund's
fiscal year and which are recognized for tax purposes, will not be considered
gains on securities or currencies held less than three months for purposes of
the 30% test.
INVESTMENT RESTRICTIONS
Fundamental policies may not be changed without the approval of the
lesser of (1) 67% of the Fund's shares present at a meeting of shareholders if
the holders of more than 50% of the outstanding shares are present in person
or by proxy or (2) more than 50% of the Fund's outstanding shares. Other
restrictions in the form of operating policies are subject to change by the
Fund's Board of Directors/Trustees without shareholder approval. Any
investment restriction which involves a maximum percentage of securities or
assets shall not be considered to be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition of
securities or assets of, or borrowings by, the Fund.
Fundamental Policies
As a matter of fundamental policy, the Fund may not:
(1) Borrowing. Borrow money except that the Fund may (i) borrow for
non-leveraging, temporary or emergency purposes and (ii) engage in
reverse repurchase agreements and make other investments or engage
in other transactions, which may involve a borrowing, in a manner
consistent with the Fund's investment objective and program,
provided that the combination of (i) and (ii) shall not exceed
33 1/3% of the value of the Fund's total assets (including the
amount borrowed) less liabilities (other than borrowings) or such
other percentage permitted by law. Any borrowings which come to
exceed this amount will be reduced in accordance with applicable
law. The Fund may borrow from banks, other Price Funds or other
persons to the extent permitted by applicable law.
(2) Commodities. Purchase or sell physical commodities; except that
the Fund (other than the Prime Reserve, U.S. Treasury Money,
Government Reserve Investment, and Reserve Investment Funds) may
enter into futures contracts and options thereon;
(3) (a) Industry Concentration (All Funds, except High Yield, New
Income, Prime Reserve, Reserve Investment, and Short-Term Bond
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 (High Yield Fund). 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 the Fund will
normally invest more than 25% of its total assets in the
securities of the banking industry including, but not limited to,
bank certificates of deposit and bankers' acceptances, when the
Fund's position in issues maturing in one year or less equals 35%
or more of the Fund's total assets;
(c) Industry Concentration (New Income Fund). 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 the Fund will invest
more than 25% of its total assets, but not more than 50%, in any
one of the gas utility, gas transmission utility, electric
utility, telephone utility, and petroleum industries under certain
circumstances, and further provided that this limitation does not
apply to securities of the banking industry including, but not
limited to, certificates of deposit and bankers' acceptances;
(d) Industry Concentration (Prime Reserve and Reserve Investment
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
this limitation does not apply to securities of the banking
industry including, but not limited to, certificates of deposit
and bankers' acceptances; and
(e) Industry Concentration (Short-Term Bond Fund). 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 the Fund will
normally invest more than 25% of its total assets in the
securities of the banking industry including, but not limited to,
bank certificates of deposit and bankers' acceptances when the
Fund's position in issues maturing in one year or less equals 35%
or more of the Fund's total assets; provided, further, that the
Fund will invest more than 25% of its total assets, but not more
than 50%, in any one of the gas utility, gas transmission utility,
electric utility, telephone utility, and petroleum industries
under certain circumstances;
(4) Loans. Make loans, although the Fund may (i) lend portfolio
securities and participate in an interfund lending program with
other Price Funds provided that no such loan may be made if, as a
result, the aggregate of such loans would exceed 33 1/3% of the
value of the Fund's total assets; (ii) purchase money market
securities and enter into repurchase agreements; and (iii) acquire
publicly distributed or privately placed debt securities and
purchase debt;
(5) Percent Limit on Assets Invested in Any One Issuer. Purchase a
security if, as a result, with respect to 75% of the value of its
total assets, more than 5% of the value of the Fund's total assets
would be invested in the securities of a single issuer, except
securities issued or guaranteed by the U.S. government or any of
its agencies or instrumentalities;
(6) Percent Limit on Share Ownership of Any One Issuer. Purchase a
security if, as a result, with respect to 75% of the value of the
Fund's total assets, more than 10% of the outstanding voting
securities of any issuer would be held by the Fund (other than
obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities);
(7) Real Estate. Purchase or sell real estate unless acquired as a
result of ownership of securities or other instruments (but this
shall not prevent the Fund from investing in securities or other
instruments backed by real estate or securities of companies
engaged in the real estate business);
(8) Senior Securities. Issue senior securities except in compliance
with the Investment Company Act of 1940; or
(9) Underwriting. Underwrite securities issued by other persons,
except to the extent that the Fund may be deemed to be an
underwriter within the meaning of the Securities Act of 1933 in
connection with the purchase and sale of its portfolio securities
in the ordinary course of pursuing its investment program.
NOTES
The following Notes should be read in connection with the above-
described fundamental policies. The Notes are not fundamental
policies.
With respect to investment restrictions (1) and (4) the Fund will
not borrow from or lend to any other T. Rowe Price Fund unless
each Fund applies for and receives an exemptive order from the SEC
or the SEC issues rules permitting such transactions. The Fund has
no current intention of engaging in any such activity and there is
no assurance the SEC would grant any order requested by the Fund
or promulgate any rules allowing the transactions.
With respect to investment restriction (1), the Prime Reserve,
U.S. Treasury Money, Government Reserve Investment, and Reserve
Investment Funds have no current intention of engaging in any
borrowing transactions.
With respect to investment restriction (2), the Fund does not
consider currency contracts or hybrid instruments to be
commodities.
For purposes of investment restriction (3), U.S., state or local
governments, or related agencies or instrumentalities, are not
considered an industry. Industries are determined by reference to
the classifications of industries set forth in the Fund's
Semiannual and Annual Reports.
For purposes of investment restriction (4), the Fund will consider
the acquisition of a debt security to include the execution of a
note or other evidence of an extension of credit with a term of
more than nine months.
For purposes of investment restriction (5), the Fund will consider
a repurchase agreement fully collateralized with U.S. government
securities to be U.S. government securities.
Operating Policies
As a matter of operating policy, the Fund may not:
(1) Borrowing. The Fund will not 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) (a) Equity Securities (All Funds, except High Yield and New Income
Funds). Purchase any equity securities, or securities convertible
into equity securities except as set forth in its prospectus and
operating policy on investment companies;
(b) Equity Securities (High Yield Fund). Invest more than 20% of
the Fund's total assets in equity securities (including up to 5%
in warrants);
(c) Equity Securities (New Income Fund). Invest more than 25% of
its total assets in equity securities;
(4) Futures Contracts. Purchase a futures contract or an option
thereon if, with respect to positions in futures or options on
futures which do not represent bona fide hedging, the aggregate
initial margin and premiums on such positions would exceed 5% of
the Fund's net asset value.
(5) Illiquid Securities. Purchase illiquid securities if, as a
result, more than 15% (10% for the Prime Reserve, U.S. Treasury
Money, Government Reserve Investment, and Reserve Investment
Funds) of its net of a Fund's net assets would be invested in such
securities;
(6) Investment Companies. Purchase securities of open-end or closed-
end investment companies except in compliance with the Investment
Company Act of 1940, and in the case of the Prime Reserve, U.S.
Treasury Money, Government Reserve Investment, and Reserve
Investment Funds, only securities of other money market funds;
(7) Margin. Purchase securities on margin, except (i) for use of
short-term credit necessary for clearance of purchases of
portfolio securities and (ii) it may make margin deposits in
connection with futures contracts or other permissible
investments;
(8) Mortgaging. Mortgage, pledge, hypothecate or, in any manner,
transfer any security owned by the Fund as security for
indebtedness except as may be necessary in connection with
permissible borrowings or investments and then such mortgaging,
pledging or hypothecating may not exceed 33 1/3% of the Fund's
total assets at the time of borrowing or investment;
(9) Oil and Gas Programs. Purchase participations or other direct
interests or enter into leases with respect to, oil, gas, or other
mineral exploration or development programs if, as a result
thereof, more than 5% of the value of the total assets of the Fund
would be invested in such programs;
(10) Options, etc. Invest in puts, calls, straddles, spreads, or any
combination thereof, except to the extent permitted by the
prospectus and Statement of Additional Information;
(11) (a) Short Sales (All Funds except High Yield Fund). Effect short
sales of securities;
(b) Short Sales (High Yield Fund). Effect short sales of
securities, other than as set forth in its prospectus and
Statement of Additional Information;
(12) Warrants. Invest in warrants if, as a result thereof, more than
10% of the value of the net assets of the Fund would be invested
in warrants.
Personal Strategy 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 FUNDS
The officers and directors/trustees of the Fund are listed below. Unless
otherwise noted, the address of each is 100 East Pratt Street, Baltimore,
Maryland 21202. Except as indicated, each has been an employee of T. Rowe
Price for more than five years. In the list below, the Fund's
directors/trustees who are considered "interested persons" of T. Rowe Price as
defined under Section 2(a)(19) of the Investment Company Act of 1940 are noted
with an asterisk (*). These directors/trustees are referred to as inside
directors by virtue of their officership, directorship, and/or employment with
T. Rowe Price.
All Funds, except Personal Strategy Funds
Independent Directors/Trustees
ROBERT P. BLACK, Retired; formerly President, Federal Reserve Bank of
Richmond; Address: 10 Dahlgren Road, Richmond, Virginia 23233
CALVIN W. BURNETT, Ph.D., President, Coppin State College; Director, Maryland
Chamber of Commerce and Provident Bank of Maryland; Former President,
Baltimore Area Council Boy Scouts of America; Vice President, Board of
Directors, The Walters Art Gallery; Address: 2500 West North Avenue,
Baltimore, Maryland 21216
ANTHONY W. DEERING, Director, President and Chief Operating Officer, The Rouse
Company, real estate developers, Columbia, Maryland; Advisory Director,
Kleinwort, Benson (North America) Corporation, a registered broker-dealer;
Address: 10275 Little Patuxent Parkway, Columbia, Maryland 21044
F. PIERCE LINAWEAVER, President, F. Pierce Linaweaver & Associates, Inc.,
Consulting Environmental & Civil Engineer(s); formerly Executive Vice
President, EA Engineering, Science, and Technology, Inc., and President, EA
Engineering, Inc., Baltimore, Maryland; Address: 224 Wendover Road, Baltimore,
Maryland 21218
JOHN G. SCHREIBER, President, Schreiber Investments, Inc., a real estate
investment company; Director, AMLI Residential Properties Trust and Urban
Shopping Centers, Inc.; Partner, Blackstone Real Estate Partners, L.P.;
Director and formerly Executive Vice President, JMB Realty Corporation, a
national real estate investment manager and developer; Address: 1115 East
Illinois Road, Lake Forest, Illinois 60045
Personal Strategy Funds
DONALD W. DICK, JR., Principal, EuroCapital Advisors, LLC, an acquisition
and management advisory firm; formerly (5/89-6/95) Principal, Overseas
Partners, Inc., a financial investment firm; formerly (6/65-3/89) Director and
Vice President-Consumer Products Division, McCormick & Company, Inc.,
international food processors; Director, Waverly, Inc., Baltimore, Maryland;
Address: P.O. Box 491, Chilmark, MA 02535-0491
DAVID K. FAGIN, Chairman, Chief Executive Officer and Director, Golden Star
Resources, Ltd.; formerly (1986-7/91) President, Chief Operating Officer and
Director, Homestake Mining Company; Address: 1660 Lincoln Street, Suite 3000,
Denver, Colorado 80264
HANNE M. MERRIMAN, Retail business consultant; formerly President and Chief
Operating Officer (1991-92), Nan Duskin, Inc., a women's specialty store,
Director (1984-1990) and Chairman (1989-90) Federal Reserve Bank of Richmond,
and President and Chief Executive Officer (1988-89), Honeybee, Inc., a
division of Spiegel, Inc.; Director, Central Illinois Public Service Company,
CIPSCO Incorporated, The Rouse Company, State Farm Mutual Automobile Insurance
Company and USAir Group, Inc.; Address: 3201 New Mexico Avenue, N.W., Suite
350, Washington, D.C. 20016
HUBERT D. VOS, President, Stonington Capital Corporation, a private investment
company; Address: 1114 State Street, Suite 247, P.O. Box 90409, Santa Barbara,
California 93190-0409
PAUL M. WYTHES, Founding General Partner, Sutter Hill Ventures, a venture
capital limited partnership, providing equity capital to young high technology
companies throughout the United States; Director, Teltone Corporation,
Interventional Technologies Inc. and Stuart Medical, Inc.; Address: 755 Page
Mill Road, Suite A200, Palo Alto, California 94304-1005
All Funds
Officers/Directors
*JAMES S. RIEPE, Vice President and Director--Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and T. Rowe
Price Investment Services, Inc; President and Trust Officer, T. Rowe Price
Trust Company; Director, Rowe Price-Fleming International, Inc. and Rhone-
Poulenc Rorer, Inc.
*M. DAVID TESTA, Vice President and Director--Chairman of the Board,
Price-Fleming; Vice Chairman of the Board, Chief Investment Officer, and
Managing Director, T. Rowe Price; Vice President and Director, T. Rowe Price
Trust Company; Chartered Financial Analyst; Chartered Investment Counselor
HENRY H. HOPKINS, Vice President--Director and Managing Director, T. Rowe
Price; Vice President and Director, T. Rowe Price Investment Services, Inc.,
T. Rowe Price Services, Inc., and T. Rowe Price Trust Company; Vice President,
Price-Fleming and T. Rowe Price Retirement Plan Services, Inc.
LENORA V. HORNUNG, Secretary--Vice President, T. Rowe Price
PATRICIA S. BUTCHER, Assistant Secretary--Assistant Vice President, T. Rowe
Price and T. Rowe Price Investment Services, Inc.
CARMEN F. DEYESU, Treasurer--Vice President, T. Rowe Price, T. Rowe Price
Services, Inc., and T. Rowe Price Trust Company
DAVID S. MIDDLETON, Controller--Vice President, T. Rowe Price, and T. Rowe
Price Trust Company
INGRID I. VORDEMBERGE, Assistant Vice President--Employee, T. Rowe Price
Corporate Income Fund
*WILLIAM T. REYNOLDS, Chairman of the Board--Director and Managing Director,
T. Rowe Price; Chartered Financial Analyst
PETER VAN DYKE, President--Managing Director, T. Rowe Price; Vice President,
Price-Fleming and T. Rowe Price Trust Company
MARK J. VASELKIV, Executive Vice President--Vice President, T. Rowe Price
STEVEN G. BROOKS, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
PATRICK S. CASSIDY, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
DONNA M. DAVIS-ENNIS, Vice President--Assistant Vice President, T. Rowe Price
HEATHER R. LANDON, Vice President--Vice President, T. Rowe Price and T. Rowe
Price Trust Company
ROBERT M. RUBINO, Vice President--Vice President, T. Rowe Price
EDWARD T. SCHNEIDER, Vice President--Vice President, T. Rowe Price
CHARLES P. SMITH, Vice President--Managing Director, T. Rowe Price; Vice
President, Price-Fleming
VIRGINIA A. STIRLING, Vice President--Vice President, T. Rowe Price; formerly
Vice President of Thomson Bank Watch and Standard & Poor's Corporation
THOMAS E. TEWKSBURY, Vice President--Vice President, T. Rowe Price; formerly
senior bond trader, Scudder, Stevens & Clark, New York, New York
THEA N. WILLIAMS, Vice President--Vice President, T. Rowe Price
GNMA Fund
*WILLIAM T. REYNOLDS, Trustee--Director and Managing Director, T. Rowe Price;
Chartered Financial Analyst
PETER VAN DYKE, President--Managing Director, T. Rowe Price; Vice President,
Price-Fleming and T. Rowe Price Trust Company
PAUL W. BOLTZ, Vice President--Vice President and Financial Economist of
T. Rowe Price
DEBORAH L. BOYER, Vice President--Assistant Vice President, T. Rowe Price;
formerly Assistant Vice President and Government Bond Trader for First Chicago
NBD Corporation
HEATHER R. LANDON, Vice President--Vice President, T. Rowe Price and T. Rowe
Price Trust Company
JAMES M. McDONALD, Vice President--Vice President, T. Rowe Price
EDMUND M. NOTZON, Vice President--Managing Director, T. Rowe Price; Vice
President, T. Rowe Price Trust Company
ROBERT M. RUBINO, Vice President--Vice President, T. Rowe Price
EDWARD T. SCHNEIDER, Vice President--Vice President, T. Rowe Price
CHARLES P. SMITH, Vice President--Managing Director, T. Rowe Price; Vice
President, Price-Fleming
High Yield Fund
*WILLIAM T. REYNOLDS, Chairman of the Board--Director and Managing Director,
T. Rowe Price; Chartered Financial Analyst
MARK J. VASELKIV, President--Vice President, T. Rowe Price
ANDREW M. BROOKS, Vice President--Vice President, T. Rowe Price
NATHANIEL S. LEVY, Vice President--Vice President, T. Rowe Price
MICHAEL J. McGONIGLE, Vice President--Assistant Vice President, T. Rowe Price
EDWARD T. SCHNEIDER, Vice President--Vice President, T. Rowe Price
HUBERT M. STILES, JR., Vice President--Vice President, T. Rowe Price
THOMAS E. TEWKSBURY, Vice President--Vice President, T. Rowe Price; formerly
senior bond trader, Scudder, Stevens & Clark, New York, New York
PETER VAN DYKE, Vice President--Managing Director, T. Rowe Price; Vice
President, Price-Fleming and T. Rowe Price Trust Company
THEA N. WILLIAMS, Vice President--Vice President, T. Rowe Price
PAUL A. KARPERS, Assistant Vice President--Employee, T. Rowe Price; formerly
an Investment Analyst at the Vanguard Group, Philadelphia, Pennsylvania
KEVIN P. LOOME, Assistant Vice President--Employee, T. Rowe Price; formerly a
Corporate Finance Analyst for Morgan Stanley in both London and New York
New Income Fund
*WILLIAM T. REYNOLDS, Chairman of the Board--Director and Managing Director,
T. Rowe Price; Chartered Financial Analyst
CHARLES P. SMITH, President--Managing Director, T. Rowe Price; Vice President,
Price-Fleming
ROBERT M. RUBINO, Executive Vice President--Vice President, T. Rowe Price
PAUL W. BOLTZ, Vice President--Vice President and Financial Economist of
T. Rowe Price
STEVEN G. BROOKS, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
PATRICK S. CASSIDY, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
DONNA M. DAVIS-ENNIS, Vice President--Assistant Vice President, T. Rowe Price
HEATHER R. LANDON, Vice President--Vice President, T. Rowe Price and T. Rowe
Price Trust Company
JAMES M. McDONALD, Vice President--Vice President, T. Rowe Price
EDMUND M. NOTZON, Vice President--Managing Director, T. Rowe Price; Vice
President, T. Rowe Price Trust Company
JOAN R. POTEE, Vice President--Vice President, T. Rowe Price
EDWARD T. SCHNEIDER, Vice President--Vice President, T. Rowe Price
VIRGINIA A. STIRLING, Vice President--Vice President, T. Rowe Price; formerly
Vice President of Thomson Bank Watch and Standard & Poor's Corporation
PETER VAN DYKE, Vice President--Managing Director, T. Rowe Price; Vice
President, Price-Fleming and T. Rowe Price Trust Company
GWENDOLYN G. WAGNER, Vice President--Vice President and Economist, T. Rowe
Price; Chartered Financial Analyst
Personal Strategy Balanced, Growth, and Income Funds
*M. DAVID TESTA, Chairman of the Board--Chairman of the Board, Price-Fleming;
Vice Chairman of the Board, Chief Investment Officer, and Managing Director,
T. Rowe Price; Vice President and Director, T. Rowe Price Trust Company;
Chartered Financial Analyst; Chartered Investment Counselor
*JAMES A. C. KENNEDY III, Director--Director and Managing Director, T. Rowe
Price; Chartered Financial Analyst
PETER VAN DYKE, President--Managing Director, T. Rowe Price; Vice President of
Price-Fleming, T. Rowe Price Trust Company and T. Rowe Price Retirement Plan
Services, Inc., Chartered Investment Counselor
STEPHEN W. BOESEL, Executive Vice President--Managing Director, T. Rowe Price
EDMUND M. NOTZON, Executive Vice President--Managing Director, T. Rowe Price;
Vice President, T. Rowe Price Trust Company
LARRY J. PUGLIA, Executive Vice President--Vice President, T. Rowe Price
HEATHER R. LANDON, Vice President--Vice President, T. Rowe Price and T. Rowe
Price Trust Company
JOHN H. LAPORTE, Vice President--Managing Director, T. Rowe Price; Chartered
Financial Analyst
DONALD J. PETERS, Vice President--Vice President, T. Rowe Price; formerly
portfolio manager, Geewax Terker and Company
BRIAN C. ROGERS, Vice President--Director and Managing Director, T. Rowe
Price; Chartered Financial Analyst
MARK J. VASELKIV, Vice President--Vice President, T. Rowe Price
JUDITH B. WARD, Vice President--Assistant Vice President, T. Rowe Price
RICHARD T. WHITNEY, Vice President--Managing Director, T. Rowe Price; Vice
President, T. Rowe Price Trust Company; Chartered Financial Analyst
J. JEFFREY LANG, Assistant Vice President--Assistant Vice President, T. Rowe
Price
M. CHRISTINE MUNOZ, Assistant Vice President--Assistant Vice President,
T. Rowe Price
Prime Reserve Fund
*WILLIAM T. REYNOLDS, Chairman of the Board--Managing Director, T. Rowe Price;
Chartered Financial Analyst
EDWARD A. WIESE, President--Vice President, T. Rowe Price, Price-Fleming and
T. Rowe Price Trust Company
ROBERT P. CAMPBELL, Executive Vice President--Vice President, T. Rowe Price
and Price-Fleming; formerly Vice President and Director, Private Finance, New
York Life Insurance Company, New York, New York
JAMES M. MCDONALD, Executive Vice President--Vice President, T. Rowe Price
PATRICE L. BERCHTENBREITER ELY, Vice President--Vice President, T. Rowe Price
PAUL W. BOLTZ, Vice President--Vice President and Financial Economist of
T. Rowe Price
BRIAN E. BURNS, Vice President--Assistant Vice President, T. Rowe Price
DONNA M. DAVIS-ENNIS, Vice President--Assistant Vice President, T. Rowe Price
JOAN R. POTEE, Vice President--Vice President, T. Rowe Price
ROBERT M. RUBINO, Vice President--Vice President, T. Rowe Price
EDWARD T. SCHNEIDER, Vice President--Vice President, T. Rowe Price
PETER VAN DYKE, Vice President--Managing Director, T. Rowe Price; Vice
President, Price-Fleming, T. Rowe Price Trust Company and T. Rowe Price
Retirement Plan Services, Inc., Chartered Investment Counselor
GWENDOLYN G. WAGNER, Vice President--Vice President and Economist, T. Rowe
Price; Chartered Financial Analyst
Government Reserve Investment and Reserve Investment Funds
*WILLIAM T. REYNOLDS, Chairman of the Board--Managing Director, T. Rowe Price;
Chartered Financial Analyst
EDWARD A. WIESE, President--Vice President, T. Rowe Price, Price-Fleming and
T. Rowe Price Trust Company
ROBERT P. CAMPBELL, Executive Vice President--Vice President, T. Rowe Price
and Price-Fleming; formerly Vice President and Director, Private Finance, New
York Life Insurance Company, New York, New York
JAMES M. MCDONALD, Executive Vice President--Vice President, T. Rowe Price
PATRICE L. BERCHTENBREITER ELY, Vice President--Vice President, T. Rowe Price
PAUL W. BOLTZ, Vice President--Vice President and Financial Economist of
T. Rowe Price
BRIAN E. BURNS, Vice President--Assistant Vice President, T. Rowe Price
DONNA M. DAVIS-ENNIS, Vice President--Assistant Vice President, T. Rowe Price
JOAN R. POTEE, Vice President--Vice President, T. Rowe Price
ROBERT M. RUBINO, Vice President--Vice President, T. Rowe Price
EDWARD T. SCHNEIDER, Vice President--Vice President, T. Rowe Price
PETER VAN DYKE, Vice President--Managing Director, T. Rowe Price; Vice
President of Price-Fleming, T. Rowe Price Trust Company and T. Rowe Price
Retirement Plan Services, Inc., Chartered Investment Counselor
GWENDOLYN G. WAGNER, Vice President--Vice President and Economist of T. Rowe
Price; Financial Analyst
Short-Term Bond Fund
*WILLIAM T. REYNOLDS, Chairman of the Board--Managing Director, T. Rowe Price;
Chartered Financial Analyst
EDWARD A. WIESE, President--Vice President, T. Rowe Price, Price-Fleming and
T. Rowe Price Trust Company
PAUL W. BOLTZ, Vice President--Vice President and Financial Economist of
T. Rowe Price
STEVEN G. BROOKS, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
ROBERT P. CAMPBELL, Vice President--Vice President, T. Rowe Price and Price-
Fleming; formerly Vice President and Director, Private Finance, New York Life
Insurance Company, New York, New York
PATRICK S. CASSIDY, Vice President--Vice President, T. Rowe Price; Chartered
Financial Analyst
DONNA M. DAVIS-ENNIS, Vice President--Assistant Vice President, T. Rowe Price
CHARLES B. HILL, Vice President--Vice President, T. Rowe Price
JAMES M. MCDONALD, Vice President--Vice President, T. Rowe Price
CHERYL A. REDWOOD, Vice President--Assistant Vice President, T. Rowe Price
ROBERT M. RUBINO, Vice President--Vice President, T. Rowe Price
EDWARD T. SCHNEIDER, Vice President--Vice President, T. Rowe Price
CHARLES P. SMITH, Vice President--Managing Director, T. Rowe Price; Vice
President, Price-Fleming
VIRGINIA A. STIRLING, Vice President--Vice President, T. Rowe Price; formerly
Vice President of Thomson Bank Watch and Standard & Poor's Corporation
PETER VAN DYKE, Vice President--Managing Director, T. Rowe Price; Vice
President, Price-Fleming and T. Rowe Price Trust Company
GWENDOLYN G. WAGNER, Vice President--Vice President and Economist of T. Rowe
Price; Financial Analyst
Short-Term U.S. Government Fund
*WILLIAM T. REYNOLDS, Chairman of the Board--Director and Managing Director,
T. Rowe Price; Chartered Financial Analyst
PETER VAN DYKE, President--Managing Director, T. Rowe Price; Vice President of
Price-Fleming and T. Rowe Price Trust Company
HEATHER R. LANDON, Executive Vice President--Vice President, T. Rowe Price and
T. Rowe Price Trust Company
JAMES M. MCDONALD, Vice President--Vice President, T. Rowe Price
EDMUND M. NOTZON, Vice President--Managing Director, T. Rowe Price; Vice
President, T. Rowe Price Trust Company
EDWARD T. SCHNEIDER, Vice President--Vice President, T. Rowe Price
CHARLES P. SMITH, Vice President--Managing Director, T. Rowe Price; Vice
President, Price-Fleming
GWENDOLYN G. WAGNER, Vice President--Vice President and Economist, T. Rowe
Price
U.S. Treasury Intermediate, Long-Term and Money Funds
*WILLIAM T. REYNOLDS, Director--Director and Managing Director, T. Rowe Price;
Chartered Financial Analyst
PETER VAN DYKE, President--Managing Director, T. Rowe Price; Vice President,
Price-Fleming and T. Rowe Price Trust Company
CHARLES P. SMITH, Executive Vice President--Managing Director, T. Rowe Price;
Vice President, Price-Fleming
EDWARD A. WIESE, Executive Vice President--Managing Director, T. Rowe Price;
Vice President, Price-Fleming
PATRICE L. BERCHTENBREITER ELY, Vice President--Vice President, T. Rowe Price
PAUL W. BOLTZ, Vice President--Vice President and Financial Economist of
T. Rowe Price
BRIAN E. BURNS, Vice President--Assistant Vice President, T. Rowe Price
ROBERT P. CAMPBELL, Vice President--Vice President, T. Rowe Price and Price-
Fleming; formerly Vice President and Director, Private Finance, New York Life
Insurance Company, New York, New York
HEATHER R. LANDON, Vice President--Vice President, T. Rowe Price and T. Rowe
Price Trust Company
JAMES M. McDONALD, Vice President--Vice President, T. Rowe Price
EDMUND M. NOTZON, Vice President--Managing Director, T. Rowe Price; Vice
President, T. Rowe Price Trust Company
JOAN R. POTEE, Vice President--Vice President, T. Rowe Price
ROBERT M. RUBINO, Vice President--Vice President, T. Rowe Price
EDWARD T. SCHNEIDER, Vice President--Vice President, T. Rowe Price
GWENDOLYN G. WAGNER, Vice President--Vice President and Economist, T. Rowe
Price; Chartered Financial Analyst
Each Fund's Executive Committee, consisting of the Fund's interested
directors/trustees, has been authorized by its respective Board of
Directors/Trustees to exercise all powers of the Board to manage the Fund in
the intervals between meetings of the Board, except the powers prohibited by
statute from being delegated.
Compensation Table
The Funds do not pay pension or retirement benefits to their officers or
directors/trustees. Also, any director/trustee of the Fund who is an officer
or employee of T. Rowe Price does not receive any remuneration from the Fund.
_________________________________________________________________
Total
Compensation
Aggregate From Fund and
Name of Compensation Fund Complex
Person, From Paid to
Position Fund (a) Directors (b)
_________________________________________________________________
GNMA Fund
Robert P. Black, Trustee $2,703 $56,000
Calvin W. Burnett, Ph.D, Trustee 2,703 56,000
Anthony W. Deering, Trustee 1,627 68,250
F. Pierce Linaweaver, Trustee 2,703 56,000
John G. Schreiber, Trustee 2,703 56,000
_________________________________________________________________
High Yield Fund
Robert P. Black, Director $3,413 $56,000
Calvin W. Burnett, Ph.D, Director 3,413 56,000
Anthony W. Deering, Director 1,890 68,250
F. Pierce Linaweaver, Director 3,413 56,000
John G. Schreiber, Director 3,413 56,000
_________________________________________________________________
New Income Fund
Robert P. Black, Director $4,098 $56,000
Calvin W. Burnett, Ph.D, Director 4,098 56,000
Anthony W. Deering, Director 2,141 68,250
F. Pierce Linaweaver, Director 4,098 56,000
John G. Schreiber, Director 4,098 56,000
_________________________________________________________________
Personal Strategy Balanced Fund
Donald W. Dick, Jr., Director $1,068 $70,083
David K. Fagin, Director 1,191 57,833
Hanne M. Merriman, Director 1,191 57,833
Hubert D. Vos, Director 1,191 57,833
Paul M. Wythes, Director 1,068 57,833
_________________________________________________________________
Personal Strategy Growth
Donald W. Dick, Jr., Director $1,004 $70,083
David K. Fagin, Director 1,033 57,833
Hanne M. Merriman, Director 1,033 57,833
Hubert D. Vos, Director 1,033 57,833
Paul M. Wythes, Director 1,004 57,833
_________________________________________________________________
Personal Strategy Income
Donald W. Dick, Jr., Director $998 $70,083
David K. Fagin, Director 1,025 57,833
Hanne M. Merriman, Director 1,025 57,833
Hubert D. Vos, Director 1,025 57,833
Paul M. Wythes, Director 998 57,833
_________________________________________________________________
Prime Reserve Fund
Robert P. Black, Director $8,211 $56,000
Calvin W. Burnett, Ph.D., Director 8,211 56,000
Anthony W. Deering, Director 3,967 68,250
F. Pierce Linaweaver, Director 8,211 $56,000
John G. Schreiber, Director 8,211 56,000
_________________________________________________________________
Short-Term Bond Fund
Robert P. Black, Director $1,782 $56,000
Calvin W. Burnett, Ph.D., Director 1,782 56,000
Anthony W. Deering, Director 1,288 68,250
F. Pierce Linaweaver, Director 1,782 56,000
John G. Schreiber, Director 1,782 56,000
_________________________________________________________________
Short-Term U.S. Government Fund
Robert P. Black, Director $1,271 $56,000
Calvin W. Burnett, Ph.D., Director 1,271 56,000
Anthony W. Deering, Director 1,105 68,250
F. Pierce Linaweaver, Director 1,271 56,000
John G. Schreiber, Director 1,271 $56,000
_________________________________________________________________
U.S. Treasury Intermediate Fund
Robert P. Black, Director $1,210 $56,000
Calvin W. Burnett, Ph.D., Director 1,210 56,000
Anthony W. Deering, Director 1,071 68,250
F. Pierce Linaweaver, Director 1,210 56,000
John G. Schreiber, Director 1,210 56,000
_________________________________________________________________
U.S. Treasury Long-Term Fund
Robert P. Black, Director $1,933 $56,000
Calvin W. Burnett, Ph.D., Director 1,933 56,000
Anthony W. Deering, Director 1,366 66,333
F. Pierce Linaweaver, Director 1,933 56,000
John G. Schreiber, Director 1,933 56,000
_________________________________________________________________
U.S. Treasury Money Fund
Robert P. Black, Director $1,798 $56,000
Calvin W. Burnett, Ph.D., Director 1,798 56,000
Anthony W. Deering, Director 1,271 68,250
F. Pierce Linaweaver, Director 1,798 56,000
John G. Schreiber, Director 1,798 56,000
_________________________________________________________________
(a) Amounts in this column are based on accrued compensation for the period
June 1, 1996 through May 31, 1997.
(b) Amounts in this column are based on compensation received from January
1, 1996, to December 31, 1996. The T. Rowe Price complex included 76
funds as of December 31, 1996.
Note: Government Reserve Investment Fund and Reserve Investment Fund will not
incur director's fees.
PRINCIPAL HOLDERS OF SECURITIES
As of the date of the prospectus, the officers and directors of the
Fund, as a group, owned less than 1% of the outstanding shares of the Fund.
As of July 31, 1997, the following shareholders beneficially owned more
than 5% of the outstanding shares of the funds listed:
Yachtcrew & Co., FBO Spectrum Income Account, State Street Bank and Trust Co.,
1776 Heritage Drive-4W, North Quincy, MA 02171-2010 of the GNMA, High Yield,
New Income, Short-Term Bond Funds;
Saxon & Co., FBO 42-43-202-215665, Retirement Plan/Salary & Non-Union
Employees of Huls America, P.O. Box 7780-1888, Philadelphia, PA 19182 of the
U.S. Treasury Long-Term Bond Fund;
T. Rowe Price RPS Inc. Co. Simplex Time ESOP, Plan #104850, New Business Group
#12, P.O. Box 17215, Baltimore, MD 21203-7215 of the Personal Strategy
Balanced Fund.
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 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.
All Funds (except Reserve Investment and Government Reserve Investment
Funds)
Management Fee
The Fund pays T. Rowe Price 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
below.
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
Accrual") by the ratio of the 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:
Price Funds' Annual Group Base Fee Rate for Each Level of Assets
0.480% First $1 billion 0.350% Next $2 billion
0.450% Next $1 billion 0.340% Next $5 billion
0.420% Next $1 billion 0.330% Next $10 billion
0.390% Next $1 billion 0.320% Next $10 billion
0.370% Next $1 billion 0.310% Next $16 billion
0.360% Next $2 billion 0.305% Next $30 billion
0.300% Thereafter
For the purpose of calculating the Group Fee, the Price Funds include
all the mutual funds distributed by T. Rowe Price Investment Services, Inc.,
(excluding the Spectrum Funds, Equity Index Fund, and any institutional 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 for each Fund are listed in the chart below:
Individual Fund Fees
Corporate Income Fund 0.15%
GNMA Fund 0.15%
High Yield Fund 0.30%
New Income Fund 0.15%
Personal Strategy Growth Fund 0.30%
Personal Strategy Balanced Fund 0.25%
Personal Strategy Income Fund 0.15%
Prime Reserve Fund 0.05%
Short-Term Bond Fund 0.10%
Short-Term U.S. Government Fund 0.10%
U.S. Treasury Intermediate Fund 0.05%
U.S. Treasury Long-Term Fund 0.05%
U.S. Treasury Money Fund 0.00%
The following chart sets forth the total management fees, if any, paid
to T. Rowe Price by each Fund, for the fiscal years ended May 31, 1997, May
31, 1996, and May 31, 1995:
Fund 1997 1996 1995
Corporate Income (a) (a) (b)
GNMA $4,398,000 $4,223,000 $3,835,000
High Yield 8,206,000 7,752,000 7,367,000
New Income 7,984,000 7,886,000 6,972,000
Personal Strategy Income 22,000 (a) (a)
Personal Strategy Balanced 897,000 150,000 (a)
Personal Strategy Growth 92,000 (a) (a)
Prime Reserve 16,431,000 15,320,000 14,784,000
Short-Term Bond 1,795,000 2,099,000 2,280,000
Short-Term U.S. Government 250,000 281,000 284,000
U.S. Treasury Intermediate 694,000 684,000 671,000
U.S. Treasury Long-Term 276,000 240,000 157,000
U.S. Treasury Money 2,585,000 2,507,000 2,341,000
(a) Due to the Fund's expense limitation in effect at that time, no
management fee was paid by the Fund to T. Rowe Price.
(b) Prior to commencement.
Limitation on Fund Expenses
The Management Agreement between the Fund and T. Rowe Price provides
that the Fund will bear all expenses of its operations not specifically
assumed by T. Rowe Price.
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 which would cause the Fund's ratio of expenses to average net
assets to exceed the indicated percentage limitations. 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.
Expense
Limitation Ratio Reimbursement
Fund Period Limitation Date
Personal Strategy June 1, 1996- 0.95% May 31, 2000
Income Fund May 31, 1998
Personal Strategy June 1, 1996- 1.05% May 31, 2000
Balanced Fund May 31, 1998
Personal Strategy June 1, 1996- 1.10% May 31, 2000
Growth Fund May 31, 1998
Short-Term U.S. March 1, 1996- 0.70% May 31, 2000
Government Fund(a) May 31, 1998
U.S. Treasury June 1, 1997- 0.80% May 31, 2001
Long-Term Fund(b) May 31, 1999
Corporate Income (c) June 1, 1997- 0.80% May 31, 2001
May 31, 1999
(a) The Short-Term U.S. Government Fund previously operated under a 0.70%
limitation that expired May 31, 1996. The reimbursement period for this
limitation extends through May 31, 1998.
(b) The Long-Term Fund operated under 0.80% limitations that expired
February 28, 1995, and May 31, 1997. The reimbursement period for these
limitations extends through February 28, 1997 (for the first agreement),
and May 31, 1999 (for the second agreement).
(c) The Corporate Income Fund operated under a 0.80% limitation that expired
May 31, 1997. The reimbursement period for this limitation extends
through May 31, 1999.
Each of the above-referenced Fund's Management Agreements 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 Corporate Income Fund's current expense limitation,
$76,000 of management fees were not accrued by the fund for the year ended May
31, 1997, and $106,000 of other expenses were borne by the manager.
Additionally, $79,000 of unaccrued fees and expenses related to a prior period
are subject to reimbursement through May 31, 1999.
Pursuant to the Short-Term U.S. Government Fund's current expense
limitation, $155,000 of management fees were not accrued by the Fund for the
year ended May 31, 1997. Additionally, $779,000 of unaccrued management fees
related to a previous expense limitation are subject to reimbursement through
May 31, 1998.
Pursuant to the Long-Term Fund's current expense limitation, $23,000 of
management fees were not accrued by the Fund for the fiscal year ended May 31,
1997, and $22,000 of unaccrued management fees from the prior period remain
subject to reimbursement through May 31, 1999.
GNMA, High Yield, New Income, Prime Reserve, Reserve Investment, and Short-
Term Bond Funds
T. Rowe Price Spectrum Fund, Inc.
The Fund is a party to a Special Servicing Agreement ("Agreement")
between and among T. Rowe Price Spectrum Fund, Inc. ("Spectrum Fund"), T. Rowe
Price, T. Rowe Price Services, Inc. and various other T. Rowe Price funds
which, along with the Fund, are funds in which Spectrum Fund invests
(collectively all such funds "Underlying Price Funds").
The Agreement provides that, if the Board of Directors/Trustees 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.
Management Fee
Government Reserve Investment and Reserve Investment Funds
Neither Fund pays T. Rowe Price an investment management fee.
All Funds (except Government Reserve Investment and Reserve Investment
Funds)
DISTRIBUTOR FOR FUND
T. Rowe Price Investment Services, Inc. ("Investment Services"), a
Maryland corporation formed in 1980 as a wholly owned subsidiary of T. Rowe
Price, serves as the Fund's distributor. Investment Services is registered as
a broker-dealer under the Securities Exchange Act of 1934 and is a member of
the National Association of Securities Dealers, Inc. The offering of the
Fund's shares is continuous.
Investment Services is located at the same address as the Fund and
T. Rowe Price -- 100 East Pratt Street, Baltimore, Maryland 21202.
Investment Services serves as distributor to the Fund pursuant to an
Underwriting Agreement ("Underwriting Agreement"), which provides that the
Fund will pay all fees and expenses in connection with: necessary state
filings; preparing, setting in type, printing, and mailing its prospectuses
and reports to shareholders; and issuing its shares, including expenses of
confirming purchase orders.
The Underwriting Agreement provides that Investment Services will pay
all fees and expenses in connection with: printing and distributing
prospectuses and reports for use in offering and selling Fund shares;
preparing, setting in type, printing, and mailing all sales literature and
advertising; Investment Services' federal and state registrations as a broker-
dealer; and offering and selling Fund shares, except for those fees and
expenses specifically assumed by the Fund. Investment Services' expenses are
paid by T. Rowe Price.
Investment Services acts as the agent of the Fund in connection with the
sale of its shares in the various states in which Investment Services is
qualified as a broker-dealer. Under the Underwriting Agreement, Investment
Services accepts orders for Fund shares at net asset value. No sales charges
are paid by investors or the Fund.
SHAREHOLDER SERVICES
The Fund from time to time may enter into agreements with outside
parties through which shareholders hold Fund shares. The shares would be held
by such parties in omnibus accounts. The agreements would provide for payments
by the Fund to the outside party for shareholder services provided to
shareholders in the omnibus accounts.
CUSTODIAN
State Street Bank and Trust Company is the custodian for the Fund's
domestic securities and cash, but it does not participate in the Fund's
investment decisions. Portfolio securities purchased in the U.S. are
maintained in the custody of the Bank and may be entered into the Federal
Reserve Book Entry System, or the security depository system of the Depository
Trust Corporation. The Fund (other than the GNMA, Prime Reserve, U.S. Treasury
Intermediate, Long-Term, Money, Government Reserve Investment, and Reserve
Investment Funds) has entered into a Custodian Agreement with The Chase
Manhattan Bank, N.A., London, pursuant to which portfolio securities which are
purchased outside the United States are maintained in the custody of various
foreign branches of The Chase Manhattan Bank and such other custodians,
including foreign banks and foreign securities depositories as are approved by
the Fund's Board of Directors/Trustees in accordance with regulations under
the Investment Company Act of 1940. State Street's main office is at 225
Franklin Street, Boston, Massachusetts 02110. The address for The Chase
Manhattan Bank, N.A., London is Woolgate House, Coleman Street, London, EC2P
2HD, England.
CODE OF ETHICS
The Funds' investment adviser ("T. Rowe Price") has a written Code of
Ethics which requires all employees to obtain prior clearance before engaging
in any personal securities transactions. In addition, all employees must
report their personal securities transactions within 10 days of their
execution. Employees will not be permitted to effect transactions in a
security: If there are pending client orders in the security; the security has
been purchased or sold by a client within seven calendar days; the security is
being considered for purchase for a client; a change has occurred in T. Rowe
Price's rating of the security within five days; or the security is subject to
internal trading restrictions. In addition, employees are prohibited from
engaging in short-term trading (e.g., purchases and sales involving the same
security within 60 days). Any material violation of the Code of Ethics is
reported to the Board of the Fund. The Board also reviews the administration
of the Code of Ethics on an annual basis.
PORTFOLIO TRANSACTIONS
Investment or Brokerage Discretion
Decisions with respect to the purchase and sale of portfolio securities
on behalf of the Fund are made by T. Rowe Price. T. Rowe Price is also
responsible for implementing these decisions, including the negotiation of
commissions and the allocation of portfolio brokerage and principal business.
The Fund's purchases and sales of fixed-income portfolio securities are
normally done on a principal basis and do not involve the payment of a
commission although they may involve the designation of selling concessions.
That part of the discussion below relating solely to brokerage commissions
would not normally apply to the Fund (except to the extent it purchases equity
securities (High Yield, New Income, and Personal Strategy Funds only)).
However, it is included because T. Rowe Price does manage a significant number
of common stock portfolios which do engage in agency transactions and pay
commissions and because some research and services resulting from the payment
of such commissions may benefit the Fund.
How Brokers and Dealers Are Selected
Equity Securities
In purchasing and selling the Fund's portfolio securities, it is T. Rowe
Price's policy to obtain quality execution at the most favorable prices
through responsible brokers and dealers and, in the case of agency
transactions, at competitive commission rates. However, under certain
conditions, the Fund may pay higher brokerage commissions in return for
brokerage and research services. As a general practice, over-the-counter
orders are executed with market-makers. In selecting among market-makers,
T. Rowe Price generally seeks to select those it believes to be actively and
effectively trading the security being purchased or sold. In selecting broker-
dealers to execute the Fund's portfolio transactions, consideration is given
to such factors as the price of the security, the rate of the commission, the
size and difficulty of the order, the reliability, integrity, financial
condition, general execution and operational capabilities of competing brokers
and dealers, and brokerage and research services provided by them. It is not
the policy of T. Rowe Price to seek the lowest available commission rate where
it is believed that a broker or dealer charging a higher commission rate would
offer greater reliability or provide better price or execution.
Fixed Income Securities
Fixed income securities are generally purchased from the issuer or a
primary market-maker acting as principal for the securities on a net basis,
with no brokerage commission being paid by the client although the price
usually includes an undisclosed compensation. Transactions placed through
dealers serving as primary market-makers reflect the spread between the bid
and asked prices. Securities may also be purchased from underwriters at prices
which include underwriting fees.
With respect to equity and fixed income securities, T. Rowe Price may
effect principal transactions on behalf of the Fund with a broker or dealer
who furnishes brokerage and/or research services, designate any such broker or
dealer to receive selling concessions, discounts or other allowances, or
otherwise deal with any such broker or dealer in connection with the
acquisition of securities in underwritings. T. Rowe Price may receive research
services in connection with brokerage transactions, including designations in
fixed price offerings.
How Evaluations Are Made of the Overall Reasonableness of Brokerage
Commissions Paid
On a continuing basis, T. Rowe Price seeks to determine what levels of
commission rates are reasonable in the marketplace for transactions executed
on behalf of the Fund. In evaluating the reasonableness of commission rates,
T. Rowe Price considers: (a) historical commission rates, both before and
since rates have been fully negotiable; (b) rates which other institutional
investors are paying, based on available public information; (c) rates quoted
by brokers and dealers; (d) the size of a particular transaction, in terms of
the number of shares, dollar amount, and number of clients involved; (e) the
complexity of a particular transaction in terms of both execution and
settlement; (f) the level and type of business done with a particular firm
over a period of time; and (g) the extent to which the broker or dealer has
capital at risk in the transaction.
Description of Research Services Received from Brokers and Dealers
T. Rowe Price receives a wide range of research services from brokers
and dealers. These services include information on the economy, industries,
groups of securities, individual companies, statistical information,
accounting and tax law interpretations, political developments, legal
developments affecting portfolio securities, technical market action, pricing
and appraisal services, credit analysis, risk measurement analysis,
performance analysis and analysis of corporate responsibility issues. These
services provide both domestic and international perspective. Research
services are received primarily in the form of written reports, computer
generated services, telephone contacts and personal meetings with security
analysts. In addition, such services may be provided in the form of meetings
arranged with corporate and industry spokespersons, economists, academicians
and government representatives. In some cases, research services are generated
by third parties but are provided to T. Rowe Price by or through broker-dealers.
Research services received from brokers and dealers are supplemental to
T. Rowe Price's own research effort and, when utilized, are subject to
internal analysis before being incorporated by T. Rowe Price into its
investment process. As a practical matter, it would not be possible for
T. Rowe Price's Equity Research Division to generate all of the information
presently provided by brokers and dealers. T. Rowe Price pays cash for certain
research services received from external sources. T. Rowe Price also allocates
brokerage for research services which are available for cash. While receipt of
research services from brokerage firms has not reduced T. Rowe Price's normal
research activities, the expenses of T. Rowe Price could be materially
increased if it attempted to generate such additional information through its
own staff. To the extent that research services of value are provided by
brokers or dealers, T. Rowe Price may be relieved of expenses which it might
otherwise bear.
T. Rowe Price has a policy of not allocating brokerage business in
return for products or services other than brokerage or research services. In
accordance with the provisions of Section 28(e) of the Securities Exchange Act
of 1934, T. Rowe Price may from time to time receive services and products
which serve both research and non-research functions. In such event, T. Rowe
Price makes a good faith determination of the anticipated research and non-
research use of the product or service and allocates brokerage only with
respect to the research component.
Commissions to Brokers Who Furnish Research Services
Certain brokers and dealers who provide quality brokerage and execution
services also furnish research services to T. Rowe Price. With regard to the
payment of brokerage commissions, T. Rowe Price has adopted a brokerage
allocation policy embodying the concepts of Section 28(e) of the Securities
Exchange Act of 1934, which permits an investment adviser to cause an account
to pay commission rates in excess of those another broker or dealer would have
charged for effecting the same transaction, if the adviser determines in good
faith that the commission paid is reasonable in relation to the value of the
brokerage and research services provided. The determination may be viewed in
terms of either the particular transaction involved or the overall
responsibilities of the adviser with respect to the accounts over which it
exercises investment discretion. Accordingly, while T. Rowe Price cannot
readily determine the extent to which commission rates or net prices charged
by broker-dealers reflect the value of their research services, T. Rowe Price
would expect to assess the reasonableness of commissions in light of the total
brokerage and research services provided by each particular broker. T. Rowe
Price may receive research, as defined in Section 28(e), in connection with
selling concessions and designations in fixed price offerings in which the
Funds participate.
Internal Allocation Procedures
T. Rowe Price has a policy of not precommitting a specific amount of
business to any broker or dealer over any specific time period. Historically,
the majority of brokerage placement has been determined by the needs of a
specific transaction such as market-making, availability of a buyer or seller
of a particular security, or specialized execution skills. However, T. Rowe
Price does have an internal brokerage allocation procedure for that portion of
its discretionary client brokerage business where special needs do not exist,
or where the business may be allocated among several brokers or dealers which
are able to meet the needs of the transaction.
Each year, T. Rowe Price assesses the contribution of the brokerage and
research services provided by brokers or dealers, and attempts to allocate a
portion of its brokerage business in response to these assessments. Research
analysts, counselors, various investment committees, and the Trading
Department each seek to evaluate the brokerage and research services they
receive from brokers or dealers and make judgments as to the level of business
which would recognize such services. In addition, brokers or dealers sometimes
suggest a level of business they would like to receive in return for the
various brokerage and research services they provide. Actual brokerage
received by any firm may be less than the suggested allocations but can, and
often does, exceed the suggestions, because the total business is allocated on
the basis of all the considerations described above. In no case is a broker or
dealer excluded from receiving business from T. Rowe Price because it has not
been identified as providing research services.
Miscellaneous
T. Rowe Price's brokerage allocation policy is consistently applied to
all its fully discretionary accounts, which represent a substantial majority
of all assets under management. Research services furnished by brokers or
dealers through which T. Rowe Price effects securities transactions may be
used in servicing all accounts (including non-Fund accounts) managed by
T. Rowe Price. Conversely, research services received from brokers or dealers
which execute transactions for the Fund are not necessarily used by T. Rowe
Price exclusively in connection with the management of the Fund.
From time to time, orders for clients may be placed through a
computerized transaction network.
The Fund does not allocate business to any broker-dealer on the basis of
its sales of the Fund's shares. However, this does not mean that broker-
dealers who purchase Fund shares for their clients will not receive business
from the Fund.
Some of T. Rowe Price's other clients have investment objectives and
programs similar to those of the Fund. T. Rowe Price may occasionally make
recommendations to other clients which result in their purchasing or selling
securities simultaneously with the Fund. As a result, the demand for
securities being purchased or the supply of securities being sold may
increase, and this could have an adverse effect on the price of those
securities. It is T. Rowe Price's policy not to favor one client over another
in making recommendations or in placing orders. T. Rowe Price frequently
follows the practice of grouping orders of various clients for execution which
generally results in lower commission rates being attained. In certain cases,
where the aggregate order is executed in a series of transactions at various
prices on a given day, each participating client's proportionate share of such
order reflects the average price paid or received with respect to the total
order. T. Rowe Price has established a general investment policy that it will
ordinarily not make additional purchases of a common stock of a company for
its clients (including the T. Rowe Price Funds) if, as a result of such
purchases, 10% or more of the outstanding common stock of such company would
be held by its clients in the aggregate.
To the extent possible, T. Rowe Price intends to recapture solicitation
fees paid in connection with tender offers through T. Rowe Price Investment
Services, Inc., the Fund's distributor. At the present time, T. Rowe Price
does not recapture commissions or underwriting discounts or selling group
concessions in connection with taxable securities acquired in underwritten
offerings. T. Rowe Price does, however, attempt to negotiate elimination of
all or a portion of the selling-group concession or underwriting discount when
purchasing tax-exempt municipal securities on behalf of its clients in
underwritten offerings.
High Yield, New Income, Personal Strategy, Short-Term Bond, and Short-Term
U.S. Government Funds
Transactions With Related Brokers and Dealers
As provided in the Investment Management Agreement between the Fund and
T. Rowe Price, T. Rowe Price is responsible not only for making decisions with
respect to the purchase and sale of the Fund's portfolio securities, but also
for implementing these decisions, including the negotiation of commissions and
the allocation of portfolio brokerage and principal business. It is expected
that T. Rowe Price may place orders for the Fund's portfolio transactions with
broker-dealers through the same trading desk T. Rowe Price uses for portfolio
transactions in domestic securities. The trading desk accesses brokers and
dealers in various markets in which the Fund's foreign securities are located.
These brokers and dealers may include certain affiliates of Robert Fleming
Holdings Limited ("Robert Fleming Holdings") and Jardine Fleming Group Limited
("JFG"), persons indirectly related to T. Rowe Price. Robert Fleming Holdings,
through Copthall Overseas Limited, a wholly owned subsidiary, owns 25% of the
common stock of Rowe Price-Fleming International, Inc. ("RPFI"), an investment
adviser registered under the Investment Advisers Act of 1940. Fifty percent of
the common stock of RPFI is owned by TRP Finance, Inc., a wholly owned
subsidiary of T. Rowe Price, and the remaining 25% is owned by Jardine Fleming
Holdings Limited, a subsidiary of JFG. JFG is 50% owned by Robert Fleming
Holdings and 50% owned by Jardine Matheson Holdings Limited. Orders for the
Fund's portfolio transactions placed with affiliates of Robert Fleming
Holdings and JFG will result in commissions being received by such affiliates.
The Board of Directors/Trustees of the Fund has authorized T. Rowe Price
to utilize certain affiliates of Robert Fleming and JFG in the capacity of
broker in connection with the execution of the Fund's portfolio transactions.
These affiliates include, but are not limited to, Jardine Fleming Securities
Limited ("JFS"), a wholly owned subsidiary of JFG, Robert Fleming & Co.
Limited ("RF&Co."), Jardine Fleming Australia Securities Limited, and Robert
Fleming, Inc. (a New York brokerage firm). Other affiliates of Robert Fleming
Holding and JFG also may be used. Although it does not believe that the Fund's
use of these brokers would be subject to Section 17(e) of the Investment
Company Act of 1940, the Board of Directors/Trustees of the Fund has agreed
that the procedures set forth in Rule 17e-1 under that Act will be followed
when using such brokers.
Other
For the fiscal years ended May 31, 1997, May 31, 1996, and May 31, 1995,
the Funds engaged in portfolio transactions involving broker-dealers in the
following amounts:
Fund 1997 1996 1995
Corporate Income $176,025,000 $47,773,000 N/A
GNMA 3,521,560,000 2,878,094,000 $2,605,743,000
High Yield 7,709,749,000 8,397,015,000 14,045,057,000
New Income 9,166,858,000 5,290,374,000 5,469,278,000
Prime Reserve 84,827,266,000 52,505,379,000 53,302,615,000
Short-Term Bond 3,380,454,000 4,596,925,000 4,874,827,000
Short-Term U.S.
Government 640,894,000 646,520,000 1,033,107,000
U.S. Treasury
Intermediate 806,082,000 215,529,000 235,797,000
U.S. Treasury
Long-Term 352,705,000 149,585,000 185,478,000
U.S. Treasury Money 6,115,390,000 5,834,599,000 5,593,158,000
Personal Strategy
Income ___________ 230,017,000 178,662,000
Personal Strategy
Balanced ___________ 554,041,000 70,729,000
Personal Strategy
Growth ___________ 128,451,000 111,347,000
With respect to the GNMA, Prime Reserve, Short-Term U.S. Government,
U.S. Treasury Intermediate, Long-Term and Money Funds the entire amount for
each of these years represented principal transactions as to which the Funds
have no knowledge of the profits or losses realized by the respective broker-
dealers for the fiscal years ended May 31, 1997, May 31, 1996, and May 31,
1995.
With respect to the Corporate Income, High Yield, New Income, Short-Term
Bond, Personal Strategy Income, Personal Strategy Growth, and Personal
Strategy Balanced Funds, the following amounts consisted of principal
transactions as to which the Funds have no knowledge of the profits or losses
realized by the respective broker-dealers for the fiscal years ended May 31,
1997, May 31, 1996, and May 31, 1995:
Fund 1997 1996 1995
Corporate Income $174,157,000 $46,566,000 N/A
High Yield 7,056,968,000 7,702,492,000 13,782,740,000
New Income 9,061,109,000 5,273,923,000 5,469,278,000
Short-Term Bond 3,372,793,000 4,590,728,000 4,874,827,000
Personal Strategy
Income ___________ 220,100,000 170,562,000
Personal Strategy
Growth ___________ 111,536,000 62,481,000
Personal Strategy
Balanced ___________ 479,660,000 103,137,000
The following amounts involved trades with brokers acting as agents or
underwriters for the fiscal years ended May 31, 1997, May 31, 1996, and May
31, 1995:
Fund 1997 1996 1995
Corporate Income $1,868,000 $1,207,000 N/A
High Yield 652,781,000 694,523,000 $262,317,000
New Income 105,749,000 16,451,000 0
Short-Term Bond 7,661,000 6,197,000 0
Personal Strategy
Income ___________ 9,917,000 8,100,000
Personal Strategy
Growth ___________ 16,915,000 8,248,000
Personal Strategy
Balanced ___________ 74,381,000 8,210,000
The amounts shown below involved trades with brokers acting as agents or
underwriters, in which such brokers received total commissions, including
discounts received in connection with underwritings for the fiscal years ended
May 31, 1997, May 31, 1996, and May 31, 1995:
Fund 1997 1996 1995
Corporate Income $90,000 $34,000 N/A
High Yield 17,280,000 15,925,000 $4,704,000
New Income 74,000 61,000 0
Short-Term Bond 23,000 21,000 0
GNMA 0 0 3,000
Personal Strategy
Income ___________ 136,000 47,000
Personal Strategy
Growth ___________ 124,000 11,000
Personal Strategy
Balanced ___________ 334,000 13,000
The percentage of total portfolio transactions, placed with firms which
provided research, statistical, or other services to T. Rowe Price in
connection with the management of the Funds, or in some cases, to the Funds
for the fiscal years ended May 31, 1997, May 31, 1996, and May 31, 1995, are
shown below:
Fund 1997 1996 1995
Corporate Income 82% 66% N/A
GNMA 98% 99% 97%
High Yield 83% 85% 97%
New Income 87% 71% 73%
Prime Reserve 79% 72% 90%
Short-Term Bond 81% 64% 66%
Short-Term U.S.
Government 85% 68% 81%
U.S. Treasury
Intermediate 99% 94% 95%
U.S. Treasury
Long-Term 100% 96% 100%
U.S. Treasury Money 71% 56% 67%
Personal Strategy
Income ___________ 46% 30%
Personal Strategy
Growth ___________ 46% 30%
Personal Strategy
Balanced ___________ 36% 40%
The portfolio turnover rates for the following Funds for the fiscal
years ended May 31, 1997, May 31, 1996, and May 31, 1995, are as follows:
Fund 1997 1996 1995
Corporate Income 119.5% 70.5% N/A
GNMA 115.9% 113.6% 121.3%
High Yield 111.3% 100.1% 74.2%
New Income 87.1% 35.5% 54.1%
Personal Strategy Income 44.8% 34.1% 50.5 (a)
Personal Strategy Growth 39.6% 39.5% 25.7% (a)
Personal Strategy Balanced 54.0% 47.7% 25.8% (a)
Short-Term Bond 103.9% 118.7% 136.9%
Short-Term U.S. Government 82.9% 152.8% 100.0%
U.S. Treasury Intermediate 57.9% 40.7% 81.1%
U.S. Treasury Long-Term 67.6% 60.1% 99.3%
(a) Annualized.
Prime Reserve, U.S. Treasury Money, Government Reserve Investment, and Reserve
Investment Funds
The Fund, in pursuing its objectives, may engage in short-term trading
to take advantage of market variations. The Fund will seek to protect
principal, improve liquidity of its securities, or enhance yield by purchasing
and selling securities based upon existing or anticipated market
discrepancies.
PRICING OF SECURITIES
Corporate Income, GNMA, High Yield, New Income, Personal Strategy, Short-Term
Bond, Short-Term U.S. Government, U.S. Treasury Intermediate and Long-Term
Funds
Fixed income securities are generally traded in the over-the-counter
market. Investments in domestic securities with remaining maturities of one
year or more and foreign securities are stated at fair value using a bid-side
valuation as 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. Domestic securities with
remaining maturities less than one year are stated at fair value which is
determined by using a matrix system that establishes a value for each security
based on bid-side money market yields. The Personal Strategy Funds value
short-term debt securities at their cost in local currency which, when
combined with accrued interest, approximates fair value.
There are a number of pricing services available, and the Board of
Directors/Trustees, on the basis of ongoing evaluation of these services, may
use or may discontinue the use of any pricing service in whole or in part.
Corporate Income, High Yield, New Income, and Personal Strategy Funds
Equity securities listed or regularly traded on a securities exchange
are valued at the last quoted sales price at the time the valuations are made.
A security which is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary market for such
security. Listed securities that are not traded on a particular day and
securities that are regularly traded in the over-the-counter market are valued
at the mean of the latest bid and asked prices. Other equity securities are
valued at a price within the limits of the latest bid and asked prices deemed
by the Board of Directors/Trustees, or by persons delegated by the Board, best
to reflect fair value.
Prime Reserve, U.S. Treasury Money, Government Reserve Investment, and
Reserve Investment Funds
Securities are valued at amortized cost.
All Funds
For the purposes of determining the Fund's net asset value per share,
all assets and liabilities initially expressed in foreign currencies are
converted into U.S. dollars at the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by any major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair
value, as determined in good faith by or under the supervision of officers of
the Funds, as authorized by the Board of Directors/Trustees.
Prime Reserve, U.S. Treasury Money, Government Reserve Investment, and
Reserve Investment Funds
Maintenance of Net Asset Value Per Share
It is the policy of the Fund to attempt to maintain a net asset value of
$1.00 per share by using the amortized cost method of valuation as permitted
by Rule 2a-7 under the Investment Company Act of 1940. Under this method,
securities are valued by reference to the fund's acquisition cost as adjusted
for amortization of premium or accumulation of discount rather than by
reference to their market value. Under Rule 2a-7:
(a) The Board of Directors must establish written procedures
reasonably designed, taking into account current market conditions
and the fund's investment objectives, to stabilize the fund's net
asset value per share, as computed for the purpose of
distribution, redemption and repurchase, at a single value;
(b) The Fund must (i) maintain a dollar-weighted average portfolio
maturity appropriate to its objective of maintaining a stable
price per share, (ii) not purchase any instrument with a remaining
maturity greater than 397 days, and (iii) maintain a dollar-
weighted average portfolio maturity of 90 days or less;
(c) The Fund must limit its purchase of portfolio instruments,
including repurchase agreements, to those U.S. dollar-denominated
instruments which the Fund's Board of Directors determines present
minimal credit risks, and which are eligible securities as defined
by Rule 2a-7; and
(d) The Board of Directors must determine that (i) it is in the best
interest of the Fund and its shareholders to maintain a stable net
asset value per share under the amortized cost method; and (ii)
the Fund will continue to use the amortized cost method only so
long as the Board of Directors believes that it fairly reflects
the Fund's market based net asset value per share.
Although the Fund believes that it will be able to maintain its net
asset value at $1.00 per share under most conditions, there can be no absolute
assurance that it will be able to do so on a continuous basis. If the Fund's
net asset value per share declined, or was expected to decline, below $1.00
(rounded to the nearest one cent), the Board of Directors of the Fund might
temporarily reduce or suspend dividend payments in an effort to maintain the
net asset value at $1.00 per share. As a result of such reduction or
suspension of dividends, an investor would receive less income during a given
period than if such a reduction or suspension had not taken place. Such action
could result in an investor receiving no dividend for the period during which
he holds his shares and in his receiving, upon redemption, a price per share
lower than that which he paid. On the other hand, if the Fund's net asset
value per share were to increase, or were anticipated to increase above $1.00
(rounded to the nearest one cent), the Board of Directors of the Fund might
supplement dividends in an effort to maintain the net asset value at $1.00 per
share.
Prime Reserve and Reserve Investment Funds
Prime Money Market Securities Defined. Prime money market securities are
those which are described as First Tier Securities under Rule 2a-7 of the
Investment Company Act of 1940. These include any security with a remaining
maturity of 397 days or less that is rated (or that has been issued by an
issuer that is rated with respect to a class of short-term debt obligations,
or any security within that class that is comparable in priority and security
with the security) by any two nationally recognized statistical rating
organizations (NRSROs) (or if only one NRSRO has issued a rating, that NRSRO)
in the highest rating category for short-term debt obligations (within which
there may be sub-categories). First Tier Securities also include unrated
securities comparable in quality to rated securities, as determined by T. Rowe
Price under the supervision of the Fund's Board of Directors.
All Funds
NET ASSET VALUE PER SHARE
The purchase and redemption price of the Fund's shares is equal to the
Fund's net asset value per share or share price. The Fund determines its net
asset value per share by subtracting the Fund's liabilities (including accrued
expenses and dividends payable) from its total assets (the market value of the
securities the Fund holds plus cash and other assets, including income accrued
but not yet received) and dividing the result by the total number of shares
outstanding. The net asset value per share of the Fund is normally calculated
as of the close of trading on the New York Stock Exchange ("NYSE") every day
the NYSE is open for trading. The NYSE is closed on the following days: New
Year's Day, Dr. Martin Luther King, Jr., Holiday, President's 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 Securities and Exchange Commission (or
any succeeding governmental authority) shall govern as to whether the
conditions prescribed in (b), (c), or (d) exist.
DIVIDENDS AND DISTRIBUTIONS
Unless you elect otherwise, the Fund's annual capital gain distribution,
if any, will be reinvested on the reinvestment date using the NAV per share of
that date. The reinvestment date normally precedes the payment date by about
10 days although the exact timing is subject to change.
TAX STATUS
The Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended ("Code").
A portion of the dividends paid by the Fund may be eligible for the
dividends-received deduction for corporate shareholders. For tax purposes, it
does not make any difference whether dividends and capital gain distributions
are paid in cash or in additional shares. The Fund must declare dividends by
December 31 of each year equal to at least 98% of ordinary income (as of
December 31) and capital gains (as of October 31) in order to avoid a federal
excise tax and distribute within 12 months 100% of ordinary income and capital
gains as of its tax year-end to avoid federal income tax.
At the time of your purchase, the Fund's net asset value may reflect
undistributed 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 as a capital gain
distribution. 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. On May 31, 1997, the books of each
Fund indicated that each Fund's aggregate net assets included undistributed
net income, net realized capital gains, and unrealized appreciation which are
listed below.
Net Realized Unrealized
Undistributed Capital Gains/ Appreciation/
Fund Net Income (Losses) (Depreciation)
Corporate Income $ 21,000 $ (177,000) $ (127,000)
GNMA (5,457,000) (25,606,000) (10,737,00)
High Yield 1,462,000 (224,197,000) 32,836,000
New Income 2,701,000 (6,766,000) 7,328,000
Personal Strategy
Income 364,000 795,000 3,484,000
Personal Strategy
Balanced 1,173,000 3,270,000 18,339,000
Personal Strategy
Growth 444,000 312,000 8,195,000
Prime Reserve 814,000 (1,273,000) 0
Short-Term Bond (1,873,000) (36,724,000) (330,000)
Short-Term U.S.
Government (471,000) (23,738,000) (173,000)
U.S. Treasury
Intermediate (917,000) (1,309,000) 171,000
U.S. Treasury
Long-Term 12,000 (805,000) 1,641,000
U.S. Treasury Money 81,000 140,000 0
If, in any taxable year, the Fund should not qualify as a regulated
investment company under the Code: (i) the Fund would be taxed at normal
corporate rates on the entire amount of its taxable income, if any, without
deduction for dividends or other distributions to shareholders; and (ii) the
Fund's distributions to the extent made out of the Fund's current or
accumulated earnings and profits would be taxable to shareholders as ordinary
dividends (regardless of whether they would otherwise have been considered
capital gain dividends).
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 a nonresident
alien individual who was physically present in the U.S. during the tax year
for more than 182 days.
To the extent a 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. Capital gains on the
sale of such holdings will be deemed to be ordinary income regardless of how
long the Fund holds its investment. In addition to bearing their proportionate
share of the funds expenses (management fees and operating expenses)
shareholders will also indirectly bear similar expenses of such funds. In
addition, the Funds may be subject to corporate income tax and an interest
charge on certain dividends and capital gains earned from these investments,
regardless of whether such income and gains were distributed to shareholders.
To avoid such tax and interest, the Fund in accordance with tax
regulations, intends to treat these securities as sold on the last day of the
Fund's fiscal year and recognize any gains for tax purposes at that time;
losses will not be recognized. Such gains will be considered ordinary income
which the Fund will be required to distribute even though it has not sold the
security and received cash to pay such distributions.
Foreign Currency Gains and Losses
Foreign currency gains and losses, including the portion of gain or loss
on the sale of debt securities attributable to foreign exchange rate
fluctuations, are taxable as ordinary income. If the net effect of these
transactions is a gain, the ordinary income dividend paid by the Fund will be
increased. If the result is a loss, the income dividend paid by the Fund will
be decreased, or to the extent such dividend has already been paid, a portion
may be reclassified as a return of capital. Adjustments to reflect these gains
and losses will be made at the end of the Fund's taxable year.
YIELD INFORMATION
From time to time, the Fund may advertise a yield figure calculated in
the following manner:
GNMA and Short-Term U.S. Government Funds
In conformity with regulations of the Securities and Exchange
Commission, an income factor is calculated for each security in the portfolio
based upon the security's coupon rate. The income factors are then adjusted
for any gains or losses which have resulted from prepayments of principal
during the period. The income factors are then totaled for all securities in
the portfolio. Next, expenses of the Fund for the period net of expected
reimbursements, are deducted from the income to arrive at net income, which is
then converted to a per-share amount by dividing net income by the average
number of shares outstanding during the period. The net income per share is
divided by the net asset value on the last day of the period to produce a
monthly yield which is then annualized. Quoted yield factors are for
comparison purposes only, and are not intended to indicate future performance
or forecast the dividend per share of the Fund.
The yields of the GNMA and Short-Term U.S. Government Funds calculated
under the above-described method for the month ended May 31, 1997, were 6.96%
and 6.11%, respectively.
Corporate Income, High Yield, New Income, Short-Term Bond, U.S. Treasury
Intermediate and U.S. Treasury Long-Term Funds
An income factor is calculated for each security in the portfolio based
upon the security's market value at the beginning of the period and yield as
determined in conformity with regulations of the Securities and Exchange
Commission. The income factors are then totaled for all securities in the
portfolio. Next, expenses of the Fund for the period net of expected
reimbursements are deducted from the income to arrive at net income, which is
then converted to a per-share amount by dividing net income by the average
number of shares outstanding during the period. The net income per share is
divided by the net asset value on the last day of the period to produce a
monthly yield which is then annualized. Quoted yield factors are for
comparison purposes only, and are not intended to indicate future performance
or forecast the dividend per share of the Fund.
The yields of the Corporate Income, High Yield, New Income, Short-Term
Bond, Intermediate and Long-Term Treasury Funds calculated under the above-
described method for the month ended May 31, 1997, were 7.95%, 8.61%, 6.52%,
6.01%, 6.02%, and 6.35%, respectively.
Prime Reserve, U.S. Treasury Money, Government Reserve Investment, and
Reserve Investment Funds
The Fund's current and historical yield for a period is calculated by
dividing the net change in value of an account (including all dividends
accrued and dividends reinvested in additional shares) by the account value at
the beginning of the period to obtain the base period return. This base period
return is divided by the number of days in the period then multiplied by 365
to arrive at the annualized yield for that period. The Fund's annualized
compound yield for such period is compounded by dividing the base period
return by the number of days in the period, and compounding that figure over
365 days.
The seven-day yields ending May 31, 1997, for the Prime Reserve and U.S.
Treasury Money Funds were 4.97% and 4.62%, respectively, and the Funds'
compound yield for the same period were 5.09% and 4.73%, respectively.
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 gains
dividends. The results shown are historical and should not be considered
indicative of the future performance of the Fund. Each average annual compound
rate of return is derived from the cumulative performance of the Fund over the
time period specified. The annual compound rate of return for the Fund over
any other period of time will vary from the average.
Cumulative Performance Percentage Change
1 Yr. 5 Yrs. 10 Yrs. Since
Ended Ended Ended Inception-
5/31/97 5/31/97 5/31/97 5/31/97
Corporate Income Fund 10.35% N/A N/A 10.45%
(10/31/95)
GNMA Fund 8.46% 36.00% 117.74% 140.60%
(11/26/85)
High Yield Fund 13.49% 60.05% 132.76% 242.68%
(12/31/84)
New Income Fund 7.70% 37.74% 119.42% 640.98%
(8/31/73)
Personal Strategy
Income 14.70% N/A N/A 47.41%
(7/29/94)
Personal Strategy
Balanced 17.21% N/A N/A 58.12%
(7/29/94)
Personal Strategy
Growth 19.89% N/A N/A 70.30%
(7/29/94)
Prime Reserve Fund 4.92% 22.27% 71.45% 382.17%
(1/26/76)
Short-Term Bond Fund 6.28% 25.12% 85.34% 151.76%
(3/2/84)
Short-Term U.S.
Government Fund 6.90% 22.71% N/A 28.10%
(9/30/91)
U.S. Treasury
Intermediate Fund 6.48% 34.27% N/A 74.22%
(9/29/89)
U.S. Treasury
Long-Term Fund 7.97% 43.19% N/A 82.81%
(9/29/89)
Average Annual Compound Rates of Return
1 Yr. 5 Yrs. 10 Yrs. Since
Ended Ended Ended Inception-
5/31/97 5/31/97 5/31/97 5/31/97
Corporate Income Fund 10.35% N/A N/A 6.48%
(10/31/95)
GNMA Fund 8.46% 6.34% 8.09% 7.93%
(11/26/85)
High Yield Fund 13.49% 9.86% 8.82% 10.43%
(12/31/84)
New Income Fund 7.70% 6.61% 8.17% 8.80%
(8/31/73)
Personal Strategy
Income 14.70% N/A N/A 14.65%
(7/29/94)
Personal Strategy
Balanced 17.21% N/A N/A 17.52%
(7/29/94)
Personal Strategy
Growth 19.89% N/A N/A 20.63%
(7/29/94)
Prime Reserve Fund 4.92% 4.10% 5.54% 7.65%
(1/26/76)
Short-Term Bond Fund 6.28% 4.58% 6.36% 7.22%
(3/2/84)
Short-Term U.S. Government
Fund 6.90% 4.18% N/A 4.47%
(9/30/91)
U.S. Treasury
Intermediate Fund 6.48% 6.07% N/A 7.51%
(9/29/89)
U.S. Treasury
Long-Term Fund 7.97% 7.44% N/A 8.18%
(9/29/89)
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: (i) a
broad based index; (ii) other groups of mutual funds, including T. Rowe Price
Funds, tracked by independent research firms ranking entities, or financial
publications; (iii) indices of stocks comparable to those in which the Fund
invests; (2) the Consumer Price Index (or any other measure for inflation,
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 non-qualified retirement plans or any other tax
advantage product, may be illustrated by graphs, charts, etc.; and (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.
Other Publications
From time to time, in newsletters and other publications issued by
T. Rowe Price Investment Services, Inc., 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 Associates,
Inc. and/or T. Rowe Price Investment Services, Inc. may be made available.
Redemptions in Kind
In the unlikely event a shareholder were to receive an in kind
redemption of portfolio securities of a Fund, brokerage fees could be incurred
by the shareholder in a subsequent sale of such securities.
Issuance of Fund Shares for Securities
Transactions involving issuance of 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.
All Funds, except GNMA Fund
CAPITAL STOCK
The Fund's Charter authorizes the Board of Directors to classify and
reclassify any and all shares which are then unissued, including unissued
shares of capital stock into any number of classes or series, each class or
series consisting of such number of shares and having such designations, such
powers, preferences, rights, qualifications, limitations, and restrictions, as
shall be determined by the Board subject to the Investment Company Act and
other applicable law. The shares of any such additional classes or series
might therefore differ from the shares of the present class and series of
capital stock and from each other as to preferences, conversions or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption, subject to applicable
law, and might thus be superior or inferior to the capital stock or to other
classes or series in various characteristics. The Board of Directors may
increase or decrease the aggregate number of shares of stock or the number of
shares of stock of any class or series that the Fund has authorized to issue
without shareholder approval.
Except to the extent that the Fund's Board of Directors might provide by
resolution that holders of shares of a particular class are entitled to vote
as a class on specified matters presented for a vote of the holders of all
shares entitled to vote on such matters, there would be no right of class vote
unless and to the extent that such a right might be construed to exist under
Maryland law. The Charter contains no provision entitling the holders of the
present class of capital stock to a vote as a class on any matter.
Accordingly, the preferences, rights, and other characteristics attaching to
any class of shares, including the present class of capital stock, might be
altered or eliminated, or the class might be combined with another class or
classes, by action approved by the vote of the holders of a majority of all
the shares of all classes entitled to be voted on the proposal, without any
additional right to vote as a class by the holders of the capital stock or of
another affected class or classes.
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 (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 unless and
until such time as less than a majority of the directors holding office have
been elected by shareholders, at which time the directors then in office will
call a shareholders' meeting for the election of directors. Except as set
forth above, the directors shall continue to hold office and may appoint
successor directors. Voting rights are not cumulative, so that the holders of
more than 50% of the shares voting in the election of directors can, if they
choose to do so, elect all the directors of the Fund, in which event the
holders of the remaining shares will be unable to elect any person as a
director. As set forth in the By-Laws of the Fund, a special meeting of
shareholders of the Fund shall be called by the Secretary of the Fund on the
written request of shareholders entitled to cast at least 10% of all the votes
of the Fund entitled to be cast at such meeting. Shareholders requesting such
a meeting must pay to the Fund the reasonably estimated costs of preparing and
mailing the notice of the meeting. The Fund, however, will otherwise assist
the shareholders seeking to hold the special meeting in communicating to the
other shareholders of the Fund to the extent required by Section 16(c) of the
Investment Company Act of 1940.
GNMA Fund
DESCRIPTION OF THE FUND
For tax and business reasons, the Fund was organized in 1985 as a
Massachusetts Business Trust and is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 as a diversified,
open-end investment company, commonly known as a "mutual fund."
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 Investment Company Act of 1940, holders of record of not less than two-
thirds of 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.
FEDERAL REGISTRATION OF SHARES
The Funds' shares (except for Government Reserve and Reserve Investment
Funds) are registered for sale under the Securities Act of 1933. Registering
of the Funds' shares is not required under any state law, but the Funds are
required to make certain filings with and pay fees to the states in order to
sell their shares in the states.
LEGAL COUNSEL
Shereff, Friedman, Hoffman, & Goodman, L.L.P., whose address is 919
Third Avenue, New York, New York 10022, is legal counsel to the Fund.
INDEPENDENT ACCOUNTANTS
Corporate Income, GNMA, Government Reserve Investment, High Yield, U.S.
Treasury Intermediate, U.S. Treasury Long-Term, New Income, Prime Reserve,
Reserve Investment, Short-Term Bond, Short-Term U.S. Government, and U.S.
Treasury Money Funds
Price Waterhouse LLP, 1306 Concourse Drive, Suite 100, Linthicum,
Maryland 21090-1020, are independent accountants to the Funds.
Effective June 1, 1994, Price Waterhouse LLP became the independent
accountants to the Intermediate and Long-Term Funds, and effective June 1,
1995, Price Waterhouse LLP became the independent accountant to the Short-Term
U.S. Government Fund.
Personal Strategy Funds
Coopers & Lybrand L.L.P., 217 East Redwood Street, Baltimore, Maryland
21202, are independent accountants to the Fund.
Financial Statements (All Funds except Government Reserve Investment and
Reserve Investment Funds)
The financial statements of the Fund for the year ended May 31, 1997,
and the report of independent accountants are included in the Fund's Annual
Report for the year ended May 31, 1997. A copy of the Annual Report
accompanies this Statement of Additional Information. The following financial
statements and the report of independent accountants appearing in the Annual
Report for the year ended May 31, 1997, are incorporated into this Statement
of Additional Information by reference:
HIGH NEW PRIME
GNMA YIELD INCOME RESERVE
____ ______ _______ ________
Report of Independent
Accountants 17 25 18 20
Statement of Net Assets,
May 31, 1997 8-10 9-18 7-12 8-15
Statement of Operations,
fiscal year ended
May 31, 1997 12 19 13 16
Statement of Changes in Net
Assets, fiscal years
ended May 31, 1997 and
May 31, 1996 13 20 14 17
Notes to Financial
Statements
May 31, 1997 14-16 21-24 15-17 18-19
Financial Highlights 6 8 6 7
SHORT SHORT-
TERM- TERM U.S.
BOND GOVERNMENT
______ ________
Report of Independent
Accountants 19 16
Statement of Net Assets,
May 31, 1997 8-13 7-10
Statement of Operations,
fiscal year ended
May 31, 1997 14 11
Statement of Changes in Net
Assets, fiscal years
ended May 31, 1997, and
May 31, 1996 15 12
Notes to Financial Statements
May 31, 1997 16-18 13-15
Financial Highlights 7 6
U.S.
U.S. TREASURY U.S.
TREASURY INTER- TREASURY
MONEY MEDIATE LONG-TERM
_______ _______ _______
Report of Independent
Accountants 28 28 28
Statement of Net Assets,
May 31, 1997 13-14 15-17 18-19
Statement of Operations,
fiscal year ended
May 31, 1997 20 20 20
Statement of Changes in Net
Assets, fiscal year
ended May 31, 1997, and
May 31, 1996 21 22 23
Notes to Financial Statements
May 31, 1997 24-27 24-27 24-27
Financial Highlights 10 11 12
PERSONAL PERSONAL PERSONAL
STRATEGY STRATEGY STRATEGY
BALANCED GROWTH INCOME
________ ________ ________
Report of Independent
Accountants 30 28 28
Statement of Net Assets,
May 31, 1997 3-22 3-20 3-20
Statement of Operations,
fiscal year ended
May 31, 1997 23 21 21
Statement of Changes in Net
Assets, fiscal years
ended May 31, 1997,
and May 31, 1996 24 22 22
Notes to Financial Statements,
May 31, 1997 25-29 23-27 23-27
Financial Highlights 2 2 2
CORPORATE INCOME
______________
Report of Independent Accountants 20
Statement of Net Assets, May 31, 1997 9-13
Statement of Operations, fiscal year ended
May 31, 1997 14
Statement of Changes in Net Assets,
fiscal year ended
May 31, 1997 and October 31, 1995 to
May 31, 1996 15
Notes to Financial Statements,
May 31, 1997 16-19
Financial Highlights 8
RESERVE INVESTMENT FUNDS, INC., on behalf of its two separate series,
Reserve Investment Fund and Government Reserve Investment Fund
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 13, 1997
Assets
Receivable for Fund shares sold $100,000
Deferred organizational expenses 2,190
________
Total assets 102,190
Liabilities
Amount due Manager 190
Accrued expenses 2,000
________
Total liabilities 2,190
________
Net Assets - offering and redemption
price of $1.00 per share; 7,000,000,000
shares of $0.0001 par value capital
stock authorized, 100,000 shares
outstanding $100,000
_________
_________
NOTE TO STATEMENT OF ASSETS AND LIABILITIES
Reserve Investment Funds, Inc. (the "Corporation") consisting of two
separate series, the Reserve Investment Fund and the Government Reserve
Investment Fund, was organized on January 23, 1997, as a Maryland corporation
and is to be registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The Corporation has had
no operations other than those matters related to organization and
registration as an investment company, and the sale of 50,000 shares of the
Reserve Investment Fund and 50,000 shares of the Government Reserve Investment
Fund at $1.00 per share on August 13, 1997 to T. Rowe Price Associates, Inc.
via share exchange from a T. Rowe Price money market mutual fund. The exchange
will settle in the ordinary course of business on August 14, 1997 with the
transfer of $100,000 cash ($50,000 has been allocated to each series of the
Corporation). The Corporation has entered into an investment management
agreement with T. Rowe Price Associates, Inc. (the Manager) which is described
in the Statement of Additional Information under the heading "Investment
Management Services."
Organizational expenses for the Corporation in the amount of $2,190 have
been accrued at August 13, 1997, and will be amortized on a straight-line
basis over a period not to exceed sixty months. The Manager has agreed to
advance certain organizational expenses incurred by the Corporation and will
be reimbursed for such expenses approximately six months after the
commencement of the Corporation's operations.
The Manager has also agreed that in the event any of its initial shares
are redeemed during the 60-month amortization period of the deferred
organizational expenses, proceeds from a redemption of the shares representing
the initial capital will be reduced by a pro rata portion of any unamortized
organizational expenses.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
Reserve Investment Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of the Reserve
Investment Funds, Inc. (comprised of the Government Reserve Investment Fund
and the Reserve Investment Fund, hereafter referred to as the "Funds"), at
August 13, 1997, in accordance with generally accepted accounting principles.
This financial statement is the responsibility of the Fund's management; our
responsibility is to express an opinion on this financial statement based on
our audit. We conducted our audit of this financial statement in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP
Baltimore, Maryland
August 14, 1997
RATINGS OF COMMERCIAL PAPER
High Yield, Prime Reserve, Short-Term Bond, Short-Term U.S. Government,
Government Reserve Investment, and Reserve Investment Funds
Moody's Investors Service, Inc.: The rating of Prime-1 is the highest
commercial paper rating assigned by Moody's. Among the factors considered by
Moody's in assigning ratings are the following: valuation of the management of
the issuer; economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas;
evaluation of the issuer's products in relation to competition and customer
acceptance; liquidity; amount and quality of long-term debt; trend of earnings
over a period of 10 years; financial strength of the parent company and the
relationships which exist with the issuer; and recognition by the management
of obligations which may be present or may arise as a result of public
interest questions and preparations to meet such obligations. These factors
are all considered in determining whether the commercial paper is rated P1,
P2, or P3.
Standard & Poor's Corporation: Commercial paper rated A (highest quality) by
S&P has the following characteristics: liquidity ratios are adequate to meet
cash requirements; long-term senior debt is rated "A" or better, although in
some cases "BBB" credits may be allowed. The issuer has access to at least two
additional channels of borrowing. Basic earnings and cash flow have an upward
trend with allowance made for unusual circumstances. Typically, the issuer's
industry is well established and the issuer has a strong position within the
industry. The reliability and quality of management are unquestioned. The
relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A1, A2, or A3.
Prime Reserve, Government Reserve Investment, and Reserve Investment
Funds
Fitch Investors Service, Inc.: Fitch 1 - Highest grade. Commercial paper
assigned this rating is regarded as having the strongest degree of assurance
for timely payment. Fitch 2 - Very good grade. Issues assigned this rating
reflect an assurance of timely payment only slightly less in degree than the
strongest issues.
RATINGS OF CORPORATE DEBT SECURITIES
High Yield, New Income, Personal Strategy, Short-Term Bond, and Short-Term
U.S. Government Funds
Moody's Investors Services, Inc. (Moody's)
Aaa-Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge."
Aa-Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds.
A-Bonds rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations.
Baa-Bonds rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba-Bonds rated Ba are judged to have speculative elements: their futures
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterize bonds in this class.
B-Bonds rated B generally lack the characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa-Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca-Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked short-comings.
Standard & Poor's Corporation (S&P)
AAA-This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA-Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong.
A-Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB-Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds
in this category than for bonds in the A category.
BB, C, CCC, CC-Bonds rated BB, B, CCC, and CC are regarded on balance,
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal. BB indicates the lowest degree of speculation
and CC the highest degree of speculation. While such bonds will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
D-In default.
Fitch Investors Service, Inc.
AAA-High grade, broadly marketable, suitable for investment by trustees
and fiduciary institutions, and liable to but slight market fluctuation other
than through changes in the money rate. The prime feature of a "AAA" bond is
the showing of earnings several times or many times interest requirements for
such stability of applicable interest that safety is beyond reasonable
question whenever changes occur in conditions. Other features may enter, such
as a wide margin of protection through collateral, security or direct lien on
specific property. Sinking funds or voluntary reduction of debt by call or
purchase or often factors, while guarantee or assumption by parties other than
the original debtor may influence their rating.
AA-Of safety virtually beyond question and readily salable. Their merits
are not greatly unlike those of "AAA" class but a bond so rated may be junior
though of strong lien, or the margin of safety is less strikingly broad. The
issue may be the obligation of a small company, strongly secured, but
influenced as to rating by the lesser financial power of the enterprise and
more local type of market.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements. A Statement of Assets and Liabilities
of Registrant as of August 13, 1997, appears in the
Statement of Additional Information. Such Statement has been
examined by Price Waterhouse LLP, independent accountants,
and has been included in the Statement of Additional
Information in reliance on the report of such accountants
appearing in the Statement of Additional Information given
upon their authority as experts in auditing and accounting.+
All other financial statements, schedules, and historical
information have been omitted as the subject matter is not
required, not present, or not present in amounts sufficient
to require submission.
(b) Exhibits.
(1) Articles of Incorporation
(2) By-Laws of Registrant
(3) Inapplicable
(4) See Article SIXTH, Capital Stock, subparagraphs (b)-(g)
of the Articles of Incorporation and Article II,
Shareholders, in its entirety, and Article VIII,
Capital Stock, in its entirety, of the By-laws
electronically filed as exhibits to this Registration
Statement.
(5)(a) Investment Management Agreement between Registrant, on
behalf of Reserve Investment Fund, and T. Rowe Price
Associates, Inc.
(b) Investment Management Agreement between Registrant, on
behalf of Government Reserve Investment Fund, and
T. Rowe Price Associates, Inc.
(7) Inapplicable
+ Omitted from Registration Statement as initially filed since
Registrant has no assets or liabilities and has never had any
assets or liabilities. Registrant proposes to raise its minimum
capital through an initial private offering of shares at $1.00 per
share.
(8) Custodian Agreement between T. Rowe Price Funds and
State Street Bank and Trust Company, dated September
28, 1987, as amended to June 24, 1988, October 19,
1988, February 22, 1989, July 19, 1989, September 15,
1989, December 15, 1989, December 20, 1989, January
25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6,
1991, September 12, 1991, November 6, 1991, April 23,
1992, September 2, 1992, November 3, 1992, December
16, 1992, December 21, 1992, January 28, 1993, April
22, 1993, September 16, 1993, November 3, 1993, March
1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, November 2, 1994, January 25,
1995, September 20, 1995, November 1, 1995, December
11, 1995, April 24, 1996, August 2, 1996, November 12,
1996, February 4, 1997, and April 24, 1997 (to be
filed by amendment)
(9)(a) Transfer Agency and Service Agreement between T. Rowe
Price Services, Inc. and T. Rowe Price Funds, dated
January 1, 1997, as amended February 4, 1997, and
April 24, 1997 (to be filed by amendment)
(9)(b) Agreement between T. Rowe Price Associates, Inc. and
T. Rowe Price Funds for Fund Accounting Services,
dated January 1, 1997, as amended February 4, 1997,
and April 24, 1997 (to be filed by amendment)
(10) Inapplicable
(11) Consent of Independent Accountants
(12) Inapplicable
(13) Inapplicable
(14) Inapplicable
(15) Inapplicable
(16) Incorporated by reference from Post-Effective
Amendment No. 42 and Amendment No. 19 of the T. Rowe
Price New Income Fund, Inc. (SEC. File Nos. 2-48848
and 811-2396 and CIK 80249) electronically filed and
dated April 25, 1994.
(17) Financial Data Schedules for Reserve Investment Fund
and Government Reserve Investment Fund, dated August
13, 1997
(18) Inapplicable
(19) Other Exhibits:
(a) Power of Attorney for the Reserve Investment
Funds, Inc.
Item 25. Persons Controlled by or Under Common Control With Registrant.
None.
Item 26. Number of Holders of Securities.
As of August 15, 1997, there were zero shareholders in the Funds.
Item 27. Indemnification.
The Registrant maintains comprehensive Errors and Omissions and Officers
and Directors insurance policies written by the Evanston Insurance Company,
The Chubb Group, and ICI Mutual. These policies provide coverage for the named
insureds, which include T. Rowe Price Associates, Inc. ("Manager"), Rowe
Price-Fleming International, Inc. ("Price-Fleming"), T. Rowe Price Investment
Services, Inc., T. Rowe Price Services, Inc., T. Rowe Price Trust Company, T.
Rowe Price Stable Asset Management, Inc., RPF International Bond Fund, and
forty-eight investment companies, including, 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., Institutional
International Funds, Inc., T. Rowe Price U.S. Treasury Funds, Inc., T. Rowe
Price Index Trust, Inc., T. Rowe Price Spectrum Fund, Inc., T. Rowe Price
Balanced Fund, Inc., T. Rowe Price Short-Term U.S. Government Fund, Inc., T.
Rowe Price Mid-Cap Growth Fund, Inc., T. Rowe Price Small-Cap Stock Fund,
Inc., T. Rowe Price Tax-Free Insured Intermediate Bond Fund, Inc., T. Rowe
Price Dividend Growth Fund, Inc., T. Rowe Price Blue Chip Growth Fund, Inc.,
T. Rowe Price Summit Funds, Inc., T. Rowe Price Summit Municipal Funds, Inc.,
T. Rowe Price Equity Series, Inc., T. Rowe Price International Series, Inc.,
T. Rowe Price Fixed Income Series, Inc., T. Rowe Price Personal Strategy
Funds, Inc., T. Rowe Price Value Fund, Inc., T. Rowe Price Capital Opportunity
Fund, Inc., T. Rowe Price Corporate Income Fund, Inc., T. Rowe Price Health
Sciences Fund, Inc., T. Rowe Price Mid-Cap Value Fund, Inc., Institutional
Equity Funds, Inc., T. Rowe Price Financial Services Fund, Inc., T. Rowe Price
Tax-Efficient Balanced Fund, Inc., T. Rowe Price Diversified Small-Cap Growth
Fund, Inc., and T. Rowe Price Media & Telecommunications Fund, Inc. The
Registrant and the forty-eight investment companies listed above, with the
exception of Institutional International Funds, Inc., will be collectively
referred to as the Price Funds. The investment manager for the Price Funds,
excluding T. Rowe Price International Funds, Inc. and T. Rowe Price
International Series, Inc., is the Manager. Price-Fleming is the manager to
T. Rowe Price International Funds, Inc., T. Rowe Price International Series,
Inc. and Institutional International Funds, Inc. and is 50% owned by TRP
Finance, Inc., a wholly owned subsidiary of the Manager, 25% owned by Copthall
Overseas Limited, a wholly owned subsidiary of Robert Fleming Holdings
Limited, and 25% owned by Jardine Fleming International Holdings Limited. In
addition to the corporate insureds, the policies also cover the officers,
directors, and employees of each of the named insureds. The premium is
allocated among the named corporate insureds in accordance with the provisions
of Rule 17d-1(d)(7) under the Investment Company Act of 1940.
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 applicable Maryland law, as from time to time amended. 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 applicable Maryland law, as from time to time amended. 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 applicable Maryland law, as
from time to time amended.
Notwithstanding the foregoing, nothing herein shall protect or
purport to protect any Indemnitee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the
conduct of his office ("Disabling Conduct").
Anything in this Article X to the contrary notwithstanding, no
indemnification shall be made by the Corporation to any Indemnitee
unless:
(a) there is a final decision on the merits by a court or other
body before whom the Proceeding was brought that the
Indemnitee was not liable by reason of Disabling Conduct; or
(b) in the absence of such a decision, there is a reasonable
determination, based upon a review of the facts, that the
Indemnitee was not liable by reason of Disabling Conduct,
which determination shall be made by:
(i) the vote of a majority of a quorum of directors who
are neither "interested persons" of the Corporation as
defined in Section 2(a)(19) of the Investment Company
Act nor parties to the proceedings; 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 of
1940, nor parties to the Proceeding; or
(ii) an independent legal counsel in a written opinion.
Section 10.02 of the Registrant's By-Laws provides as follows:
Section 10.02. Insurance of Officers, Directors, Employees and
Agents. To the fullest extent permitted by applicable Maryland law and
by Section 17(h) of the Investment Company Act 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 28. Business and Other Connections of Investment Manager.
Rowe Price-Fleming International, Inc. ("Price-Fleming"), a Maryland
corporation, is a corporate joint venture 50% owned by TRP Finance, Inc., a
wholly owned subsidiary of the Manager. Price-Fleming was incorporated in
Maryland in 1979 to provide investment counsel service with respect to foreign
securities for institutional investors in the United States. In addition to
managing private counsel client accounts, Price-Fleming also sponsors
registered investment companies which invest in foreign securities, serves as
general partner of RPFI International Partners, Limited Partnership, and
provides investment advice to the T. Rowe Price Trust Company, trustee of the
International Common Trust Fund.
T. Rowe Price Investment Services, Inc. ("Investment Services"), a
wholly owned subsidiary of the Manager, was incorporated in Maryland in 1980
for the purpose of acting as the principal underwriter and distributor for the
Price Funds. Investment Services is registered as a broker-dealer under the
Securities Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. In 1984, Investment Services expanded its activities
to include a discount brokerage service.
TRP Distribution, Inc., a wholly owned subsidiary of Investment
Services, was incorporated in Maryland in 1991. It was organized for and
engages in the sale of certain investment related products prepared by
Investment Services.
T. Rowe Price Associates Foundation, Inc. (the "Foundation"), was
incorporated in 1981 (and is not a subsidiary of the Manager). The
Foundation's overall objective emphasizes various community needs by giving to
a broad range of educational, civic, cultural, and health-related
institutions. The Foundation has a very generous matching gift program whereby
employee gifts designated to qualifying institutions are matched according to
established guidelines.
T. Rowe Price Services, Inc. ("Price Services"), a wholly owned
subsidiary of the Manager, was incorporated in Maryland in 1982 and is
registered as a transfer agent under the Securities Exchange Act of 1934.
Price Services provides transfer agent, dividend disbursing, and certain other
services, including shareholder services, to the Price Funds.
T. Rowe Price Retirement Plan Services, Inc. ("RPS"), a wholly owned
subsidiary of the Manager, was incorporated in Maryland in 1991 and is
registered as a transfer agent under the Securities Exchange Act of 1934. RPS
provides administrative, recordkeeping, and subaccounting services to
administrators of employee benefit plans.
T. Rowe Price Trust Company ("Trust Company"), a wholly owned subsidiary
of the Manager, is a Maryland-chartered limited-purpose trust company,
organized in 1983 for the purpose of providing fiduciary services. The Trust
Company serves as trustee/custodian for employee benefit plans, individual
retirement accounts, and common trust funds and as trustee/investment agent
for one trust.
T. Rowe Price Investment Technologies, Inc. was incorporated in Maryland
in 1996. A wholly owned subsidiary of the Manager, it owns the technology
rights, hardware, and software of the Manager and affiliated companies and
provides technology services to them.
T. Rowe Price Threshold Fund Associates, Inc., a wholly owned subsidiary
of the Manager, was incorporated in Maryland in 1994 and serves as the general
partner of T. Rowe Price Threshold Fund III, L.P., a Delaware limited
partnership established in 1994.
T. Rowe Price Threshold Fund II, L.P., a Delaware limited partnership,
was organized in 1986 by the Manager and invests in private financings of
small companies with high growth potential; the Manager is the General Partner
of the partnership.
T. Rowe Price Threshold Fund III, L.P., a Delaware limited partnership,
was organized in 1994 by the Manager and invests in private financings of
small companies with high growth potential; T. Rowe Price Threshold Fund
Associates, Inc. is the General Partner of this partnership.
RPFI International Partners, L.P., is a Delaware limited partnership
organized in 1985 for the purpose of investing in a diversified group of small
and medium-sized non-U.S. companies. Price-Fleming is the general partner of
this partnership, and certain institutional investors, including advisory
clients of Price-Fleming, are its limited partners.
T. Rowe Price Real Estate Group, Inc. ("Real Estate Group"), is a
Maryland corporation and a wholly owned subsidiary of the Manager established
in 1986 to provide real estate services. Subsidiaries of Real Estate Group
are: T. Rowe Price Realty Income Fund I Management, Inc., a Maryland
corporation (General Partner of T. Rowe Price Realty Income Fund I, A No-Load
Limited Partnership), T. Rowe Price Realty Income Fund II Management, Inc., a
Maryland corporation (General Partner of T. Rowe Price Realty Income Fund II,
America's Sales-Commission-Free Real Estate Limited Partnership), T. Rowe
Price Realty Income Fund III Management, Inc., a Maryland corporation (General
Partner of T. Rowe Price Realty Income Fund III, America's
Sales-Commission-Free Real Estate Limited Partnership, and T. Rowe Price
Realty Income Fund IV Management, Inc., a Maryland corporation (General
Partner of T. Rowe Price Realty Income Fund IV, America's
Sales-Commission-Free Real Estate Limited Partnership). Real Estate Group
serves as investment manager to T. Rowe Price Renaissance Fund, Ltd., A
Sales-Commission-Free Real Estate Investment, established in 1989 as a
Maryland corporation which qualifies as a REIT.
T. Rowe Price Stable Asset Management, Inc. ("Stable Asset Management"),
was incorporated in Maryland in 1988 as a wholly owned subsidiary of the
Manager. Stable Asset Management, is registered as an investment adviser under
the Investment Advisers Act of 1940, and specializes in the management of
investment portfolios which seek stable and consistent investment returns
through the use of guaranteed investment contracts, bank investment contracts,
structured investment contracts, and short-term fixed income securities.
T. Rowe Price Recovery Fund Associates, Inc., a Maryland corporation, is
a wholly owned subsidiary of the Manager organized in 1988 for the purpose of
serving as the General Partner of T. Rowe Price Recovery Fund, L.P., T. Rowe
Price Recovery Fund II, L.P., Delaware limited partnerships which invest in
financially distressed companies.
T. Rowe Price Recovery Fund II Associates, Inc., is a Maryland limited
liability Company organized in 1996. Wholly owned by the Manager, it serves as
the General Partner of T. Rowe Price Recovery Fund II, L.P., a Delaware
limited partnership which also invests in financially distressed companies.
T. Rowe Price (Canada), Inc. ("TRP Canada") is a Maryland corporation
organized in 1988 as a wholly owned subsidiary of the Manager. This entity is
registered as an investment adviser under the Investment Advisers Act of 1940
and as a non-Canadian Adviser under the Securities Act (Ontario).
T. Rowe Price Insurance Agency, Inc., is a wholly owned subsidiary of T.
Rowe Price Associates, Inc. organized in Maryland in 1994 and licensed to do
business in several states to act primarily as an insurance agency in
connection with the sale of the Price Funds' variable annuity products.
Since 1983, the Manager has organized several distinct Maryland limited
partnerships, which are informally called the Pratt Street Ventures
partnerships, for the purpose of acquiring interests in growth-oriented
businesses.
TRP Suburban, Inc., is a Maryland corporation organized in 1990 as a
wholly owned subsidiary of the Manager. It entered into agreements with
McDonogh School and CMANE-McDonogh-Rowe Limited Partnership to construct an
office building in Owings Mills, Maryland, which currently houses the
Manager's transfer agent, plan administrative services, retirement plan
services, and operations support functions.
TRP Suburban Second, Inc., a wholly owned Maryland subsidiary of T. Rowe
Price Associates, Inc., was incorporated in 1995 to primarily engage in the
development and ownership of real property located in Owings Mills, Maryland.
TRP Finance, Inc., a wholly owned subsidiary of the Manager, is a
Delaware corporation organized in 1990 to manage certain passive corporate
investments and other intangible assets.
T. Rowe Price Strategic Partners Fund II, L.P. is a Delaware limited
partnership organized in 1992 for the purpose of investing in small public and
private companies seeking capital for expansion or undergoing a restructuring
of ownership. The general partner of the Fund is T. Rowe Price Strategic
Partners, L.P., ("Strategic Partners"), a Delaware limited partnership whose
general partner is T. Rowe Price Strategic Partners Associates, Inc., a
Maryland corporation which is a wholly owned subsidiary of the Manager.
Listed below are the directors of the Manager who have other substantial
businesses, professions, vocations, or employment aside from that of Director
of the Manager:
GEORGE J. COLLINS is a Director of the Manager and of Price-Fleming. Mr.
Collins retired from his positions as Chairman of the Board, Chief Executive
Officer, and President of the Manager effective as of May 31, 1997. He
continues to serve on the Board of Directors .
JAMES E. HALBKAT, JR., Director of the Manager. Mr. Halbkat is President of
U.S. Monitor Corporation, a provider of public response systems. Mr. Halbkat's
address is: P.O. Box 23109, Hilton Head Island, South Carolina 29925.
RICHARD L. MENSCHEL, Director of the Manager. Mr. Menschel is a limited
partner of The Goldman Sachs Group, L.P. Mr. Menschel's address is 85 Broad
Street, 2nd Floor, New York, New York 10004.
JOHN W. ROSENBLUM, Director of the Manager. Mr. Rosenblum is the Dean of the
Jepson School of Leadership Studies at the University of Richmond and a
director of: Chesapeake Corporation, a manufacturer of paper products; Cadmus
Communications Corp., a provider of printing and communication services;
Comdial Corporation, a manufacturer of telephone systems for businesses; Cone
Mills Corporation, a textiles producer; and Providence Journal Company, a
publisher of newspapers and owner of broadcast television stations. Mr.
Rosenblum's address is: University of Richmond, Virginia 23173.
ROBERT L. STRICKLAND, Director of the Manager. Mr. Strickland is Chairman of
Lowe's Companies, Inc., a retailer of specialty home supplies and a Director
of Hannaford Bros., Co., a food retailer. Mr. Strickland's address is 604 Two
Piedmont Plaza Building, Winston-Salem, North Carolina 27104.
PHILIP C. WALSH, Director of the Manager. Mr. Walsh is a Consultant to Cyprus
Amax Minerals Company, Englewood, Colorado. Mr. Walsh's address is: Pleasant
Valley, Peapack, New Jersey 07977.
ANNE MARIE WHITTEMORE, Director of the Manager. Mrs. Whittemore is a partner
of the law firm of McGuire, Woods, Battle & Boothe and is a director of Owens
& Minor, Inc.; USF&G Corporation; the James River Corporation of Virginia; and
Albemarle Corporation. Mrs. Whittemore's address is One James Center,
Richmond, Virginia 23219.
With the exception of Messrs. Collins, Halbkat, Menschel, Rosenblum,
Strickland, and Walsh, and Mrs. Whittemore, all of the following directors of
the Manager are employees of the Manager.
James S. Riepe, who is a Vice-Chairman of the Board, Director, and Managing
Director of the Manager, is also a Director of Price-Fleming.
George A. Roche, who is Chairman of the Board, President, a Director, and
Managing Director of the Manager, is a Director and Vice President of
Price-Fleming.
M. David Testa, who is a Vice-Chairman of the Board, Director, Cheif
Investment Officer and Managing Director of the Manager, is Chairman of the
Board of Price-Fleming.
Henry H. Hopkins, who is a Director and Managing Director of the Manager, is a
Vice President of Price-Fleming.
Charles P. Smith and Peter Van Dyke, who are Managing Directors of the
Manager, are Vice Presidents of Price-Fleming.
James A. C. Kennedy III, John H. Laporte, Jr., William T. Reynolds, and Brian
C. Rogers are Directors and Managing Directors of the Manager.
Preston G. Athey, Brian W.H. Berghuis, Edward C. Bernard, Stephen W. Boesel,
Thomas H. Broadus, Jr., Michael A. Goff, Andrew C. Goresh, Mary J. Miller,
Charles A. Morris, Edmund M. Notzon, III, R. Todd Ruppert, Charles E. Vieth,
and Richard T. Whitney are Managing Directors of the Manager.
George A. Murnaghan, who is a Managing Director of the Manager, is also an
Executive Vice President of Price-Fleming.
Robert P. Campbell, Michael J. Conelius, Roger L. Fiery III, R. Aran Gordon,
Veena A. Kutler, Heather R. Landon, Nancy M. Morris, Robert W. Smith, William
F. Wendler II, and Edward A. Wiese, who are Vice Presidents of the Manager,
are Vice Presidents of Price-Fleming.
Todd J. Henry, and Kathleen G. Polk, who are employees of the Manager, are
Vice Presidents of Price-Fleming.
Kimberly A. Haker, an Assistant Vice President of the Manager, is Assistant
Vice President and Controller of Price-Fleming.
Alvin M. Younger, Jr., who is Chief Financial Officer, Managing Director,
Secretary, and Treasurer of the Manager, is Secretary and Treasurer of
Price-Fleming.
Nolan L. North, who is a Vice President and Assistant Treasurer of the
Manager, is Assistant Treasurer of Price-Fleming.
Leah P. Holmes, who is an Assistant Vice President of the Manager, is a Vice
President of Price-Fleming.
Ava M. Rainey, who is an Assistant Vice President of the Manager, is Assistant
Vice President of Price-Fleming.
Barbara A. Van Horn, who is Assistant Secretary of the Manager, is Assistant
Secretary of Price-Fleming.
Elsie S. Crawford. employee of the Manager, is Assistant Vice President of
Price-Fleming.
Certain directors and officers of the Manager are also officers and/or
directors of one or more of the Price Funds and/or one or more of the
affiliated entities listed herein.
See also "Management of Fund," in Registrant's Statement of Additional
Information.
Item 29. Principal Underwriters.
(a) The principal underwriter for the Registrant is Investment
Services. Investment Services acts as the principal underwriter
for seventy-nine Price Funds. Investment Services, a wholly owned
subsidiary of the Manager, is registered as a broker-dealer under
the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. Investment
Services has been formed for the limited purpose of distributing
the shares of the Price Funds and will not engage in the general
securities business. Since the Price Funds are sold on a no-load
basis, Investment Services will not receive any commission or
other compensation for acting as principal underwriter.
(b) The address of each of the directors and officers of Investment
Services listed below is 100 East Pratt Street, Baltimore,
Maryland 21202.
Principal
Name and Positions and Offices Offices With
Business Address With Underwriter Registrant
__________________ ______________________ _____________
James S. Riepe Chairman of the Board Vice President
and Director
Edward C. Bernard President None
Henry H. Hopkins Vice President and Vice
Director President
Charles E. Vieth Vice President and
Director None
Patricia M. Archer Vice President None
Joseph C. Bonasorte Vice President None
Darrell N. Braman Vice President None
Ronae M. Brock Vice President None
Meredith C. Callanan Vice President None
Christine M. Carolan Vice President None
Laura H. Chasney Vice President None
Renee M. Christoff Vice President None
Victoria C. Collins Vice President None
Alana S. Curtice Vice President None
Christopher W. Dyer Vice President None
Christine S. Fahlund Vice President None
Forrest R. Foss Vice President None
Andrea G. Griffin Vice President None
Douglas E. Harrison Vice President None
David J. Healy Vice President None
Joseph P. Healy Vice President None
Walter J. Helmlinger Vice President None
Eric G. Knauss Vice President None
Douglas G. Kremer Vice President None
Sharon R. Krieger Vice President None
Keith W. Lewis Vice President None
James Link Vice President None
Sarah McCafferty Vice President None
Maurice A. Minerbi Vice President None
Nancy M. Morris Vice President None
George A. Murnaghan Vice President None
Steven E. Norwitz Vice President None
Kathleen M. O'Brien Vice President None
Scott R. Powell Vice President None
Pamela D. Preston Vice President None
Corbin D. Riemer Vice President None
Lucy B. Robins Vice President None
John R. Rockwell Vice President None
Christopher S. Ross Vice President None
Kenneth J. Rutherford Vice President None
Daniel S. Schreiner Vice President None
Kristin E. Seeberger Vice President None
Monica R. Tucker Vice President None
William F. Wendler II Vice President None
Jane F. White Vice President None
Thomas R. Woolley Vice President None
Alvin M. Younger, Jr. Secretary and Treasurer None
Mark S. Finn Controller and
Vice President None
Richard J. Barna Assistant Vice President None
Catherine L.
Berkenkemper Assistant Vice President None
Robin C.B. Binkley Assistant Vice President None
Patricia S. Butcher Assistant Vice President Assistant
Secretary
Cheryl L. Emory Assistant Vice President None
John A. Galateria Assistant Vice President None
Edward F. Giltenan Assistant Vice President None
Janelyn A. Healey Assistant Vice President None
Kathleen Hussey Assistant Vice President None
Valerie King Assistant Vice President None
Steven A. Larson Assistant Vice President None
Jeanette M. LeBlanc Assistant Vice President None
C. Lillian Matthews Assistant Vice President None
Janice D. McCrory Assistant Vice President None
Sandra J. McHenry Assistant Vice President None
Mark J. Mitchell Assistant Vice President None
Danielle N. Nicholson Assistant Vice President None
Barbara A. O'Connor Assistant Vice President None
JeanneMarie B.
Patella Assistant Vice President None
Carin C. Quinn Assistant Vice President None
David A. Roscum Assistant Vice President None
Arthur J. Silber Assistant Vice President None
Jerome Tuccille Assistant Vice President None
Linda C. Wright Assistant Vice President None
Nolan L. North Assistant Treasurer None
Barbara A. Van Horn Assistant Secretary None
(c) Not applicable. Investment Services will not receive any
compensation with respect to its activities as underwriter for the
Price Funds since the Price Funds are sold on a no-load basis.
Item 30. Location of Accounts and Records.
All accounts, books, and other documents required to be maintained by
Reserve Investment Funds, Inc., under Section 31(a) of the Investment Company
Act of 1940 and the rules thereunder will be maintained by Reserve Investment
Funds, Inc., 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 100 East Pratt Street,
Baltimore, Maryland 21202. Custodian activities for Reserve Investment Funds,
Inc., are performed at State Street Bank and Trust Company's Service Center
(State Street South), 1776 Heritage Drive, Quincy, Massachusetts 02171.
Item 31. Management Services.
Registrant is not a party to any management related service contract,
other than as set forth in the Prospectus.
Item 32. Undertakings.
(a) The undersigned Registrant hereby undertakes to file an
amendment to the Registration Statement with certified
financial statements showing the initial capital received
before accepting subscriptions from any persons in excess of
25 if it raises its initial capital pursuant to Section
14(a)(3) of the 1940 Act.
(b) The Fund will file, within four to six months from the
effective date of its registration statement, a
post-effective amendment using financial statements which
need not be certified.
(c) If requested to do so by the holders of at least 10% of all
votes entitled to be cast, the Registrant will call a
meeting of shareholders for the purpose of voting on the
question of removal of a director or directors and will
assist in communications with other shareholders to the
extent required by Section 16(c).
(d) The Fund agrees to furnish, upon request and without charge,
a copy of its latest Annual Report to each person to whom a
prospectus is delivered.
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Baltimore, State of Maryland, this 15th day of August, 1997.
RESERVE INVESTMENT FUNDS, INC.
/s/William T. Reynolds
By: William T. Reynolds,
Chairman of the Board
Pursuant to the requirements of the Investment Company Act of 1940, 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/William T. Reynolds Chairman of the Board August 15, 1997
William T. Reynolds (Chief Executive Officer)
/s/Carmen F. Deyesu Treasurer August 15, 1997
Carmen F. Deyesu (Chief Financial Officer)
* Director August 15, 1997
Robert P. Black
* Director August 15, 1997
Calvin W. Burnett
* Director August 15, 1997
Anthony W. Deering
* Director August 15, 1997
F. Pierce Linaweaver
/s/James S. Riepe Vice President and August 15, 1997
James S. Riepe Director
* Director August 15, 1997
John G. Schreiber
/s/M. David Testa Director August 15, 1997
M. David Testa
/s/Henry H. Hopkins, Attorney-In-Fact August 15, 1997
Henry H. Hopkins
RESERVE INVESTMENT FUNDS, INC.
ARTICLES OF INCORPORATION
FIRST: THE UNDERSIGNED, Henry H. Hopkins, whose address is 100 East
Pratt Street, Baltimore, Maryland 21202, being at least eighteen years of age,
acting as incorporator, does hereby form a corporation under the General Laws
of the State of Maryland.
SECOND: (a) The name of the corporation (which is hereinafter called
the "Corporation") is:
RESERVE INVESTMENT FUNDS, INC.
(b) The Corporation acknowledges that if it should at any time use
"T. Rowe Price" in its corporate name it would be doing so through permission
of T. Rowe Price Associates, Inc., a Maryland corporation (hereinafter
referred to as "Price Associates"), and acknowledges that Price Associates has
the sole and exclusive right to use or license the use of the name "T. Rowe
Price" in commerce. The Corporation agrees that if at any time and for any
cause, the investment adviser or distributor of the Corporation ceases to be
Price Associates or an affiliate of Price Associates, the Corporation shall at
the written request of Price Associates take all requisite action to amend its
charter to eliminate the name "T. Rowe Price" from the Corporation's corporate
name and from the designations of its shares of capital stock. The
Corporation further acknowledges that Price Associates reserves the right to
grant the non-exclusive right to use the name "T. Rowe Price" to any other
corporation, including other investment companies, whether now in existence or
hereafter created.
THIRD: (a) The purposes for which the Corporation is formed and the
business and objects to be carried on and promoted by it are:
(1) To engage generally in the business of investing, reinvesting,
owning, holding or trading in securities, as defined in the Investment
Company Act of 1940, as from time to time amended (hereinafter referred
to as the "Investment Company Act"), as an investment company classified
under the Investment Company Act as a management company.
(2) To engage in any one or more businesses or transactions, or to
acquire all or any portion of any entity engaged in any one or more
businesses or transactions, which the Board of Directors may from time
to time authorize or approve, whether or not related to the business
described elsewhere in this Article or to any other business at the time
or theretofore engaged in by the Corporation.
(b) The foregoing enumerated purposes and objects shall be in no way
limited or restricted by reference to, or inference from, the terms of any
other clause of this or any other Article of the charter of the Corporation,
and each shall be regarded as independent; and they are intended to be and
shall be construed as powers as well as purposes and objects of the
Corporation and shall be in addition to and not in limitation of the general
powers of corporations under the General Laws of the State of Maryland.
FOURTH: The present address of the principal office of the Corporation
in this State is:
100 East Pratt Street
Baltimore, Maryland 21202
FIFTH: The name and address of the resident agent of the Corporation in
this State are:
Henry H. Hopkins
100 East Pratt Street
Baltimore, Maryland 21202
Said resident agent is a citizen of the State of Maryland, and actually
resides therein.
SIXTH: (a) The total number of shares of stock of all classes and
series which the Corporation initially has authority to issue is Seven Billion
(7,000,000,000) shares of capital stock (par value $0.0001 per share),
amounting in aggregate par value to Seven Hundred Thousand Dollars ($700,000).
All of such shares are initially classified as "Common Stock" of the "Reserve
Investment Fund" and the "Government Reserve Investment Fund." Each such
series shall consist, until further changed, of the lesser of (x)
1,000,000,000 shares or (y) the number of shares that could be issued by
issuing all of the shares of any series currently or hereafter classified less
the total number of shares then issued and outstanding in all of such series.
The Board of Directors may classify and reclassify any unissued shares of
capital stock (whether or not such shares have been previously classified or
reclassified) by setting or changing in any one or more respects the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption of such shares of stock.
(b) The following is a description of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the shares of Common
Stock classified as the "Reserve Investment Fund" and the "Government Reserve
Investment Fund" series and any additional series of Common Stock of the
Corporation (unless provided otherwise by the Board of Directors with respect
to any such additional series at the time it is established and designated):
(1) Assets Belonging to Series. All consideration received by the
Corporation from the issue or sale of shares of a particular series,
together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any investment or
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the
rights of creditors, and shall be so recorded upon the books of account
of the Corporation. Such consideration, assets, income, earnings,
profits and proceeds, together with any General Items allocated to that
series as provided in the following sentence, are herein referred to
collectively as "assets belonging to" that series. In the event that
there are any assets, income, earnings, profits or proceeds which are
not readily identifiable as belonging to any particular series
(collectively, "General Items"), such General Items shall be allocated
by or under the supervision of the Board of Directors to and among any
one or more of the series established and designated from time to time
in such manner and on such basis as the Board of Directors, in its sole
discretion, deems fair and equitable; and any General Items so allocated
to a particular series shall belong to that series. Each such allocation
by the Board of Directors shall be conclusive and binding for all
purposes.
(2) Liabilities of Series. The assets belonging to each particular
series shall be charged with the liabilities of the Corporation in
respect of that series and all expenses, costs, charges and reserves
attributable to that series, and any general liabilities, expenses,
costs, charges or reserves of the Corporation which are not readily
identifiable as pertaining to any particular series, shall be allocated
and charged by or under the supervision of the Board of Directors to and
among any one or more of the series established and designated from time
to time in such manner and on such basis as the Board of Directors, in
its sole discretion, deems fair and equitable. The liabilities,
expenses, costs, charges and reserves allocated and so charged to a
series are herein referred to collectively as "liabilities of" that
series. Each allocation of liabilities, expenses, costs, charges and
reserves by or under the supervision of the Board of Directors shall be
conclusive and binding for all purposes.
(3) Dividends and Distributions. Dividends and capital gains
distributions on shares of a particular series may be paid with such
frequency, in such form and in such amount as the Board of Directors may
determine by resolution adopted from time to time, or pursuant to a
standing resolution or resolutions adopted only once or with such
frequency as the Board of Directors may determine, after providing for
actual and accrued liabilities of that series. All dividends on shares
of a particular series shall be paid only out of the income belonging to
that series and all capital gains distributions on shares of a
particular series shall be paid only out of the capital gains belonging
to that series. All dividends and distributions on shares of a
particular series shall be distributed pro rata to the holders of that
series in proportion to the number of shares of that series held by such
holders at the date and time of record established for the payment of
such dividends or distributions, except that in connection with any
dividend or distribution program or procedure, the Board of Directors
may determine that no dividend or distribution shall be payable on
shares as to which the shareholder's purchase order and/or payment have
not been received by the time or times established by the Board of
Directors under such program or procedure.
Dividends and distributions may be paid in cash, property or
additional shares of the same or another series, or a combination
thereof, as determined by the Board of Directors or pursuant to any
program that the Board of Directors may have in effect at the time for
the election by shareholders of the form in which dividends or
distributions are to be paid. Any such dividend or distribution paid in
shares shall be paid at the current net asset value thereof.
(4) Voting. On each matter submitted to a vote of the
shareholders, each holder of shares shall be entitled to one vote for
each share standing in his name on the books of the Corporation,
irrespective of the series thereof, and all shares of all series shall
vote as a single class ("Single Class Voting"); provided, however, that
(i) as to any matter with respect to which a separate vote of any series
is required by the Investment Company Act or by the Maryland General
Corporation Law, such requirement as to a separate vote by that series
shall apply in lieu of Single Class Voting; (ii) in the event that the
separate vote requirement referred to in (i) above applies with respect
to one or more series, then, subject to (iii) below, the shares of all
other series shall vote as a single class; and (iii) as to any matter
which does not affect the interest of a particular series, including
liquidation of another series as described in subsection (7) below, only
the holders of shares of the one or more affected series shall be
entitled to vote.
(5) Redemption by Shareholders. Each holder of shares of a
particular series shall have the right at such times as may be permitted
by the Corporation to require the Corporation to redeem all or any part
of his shares of that series, at a redemption price per share equal to
the net asset value per share of that series next determined after the
shares are properly tendered for redemption, less such redemption fee or
sales charge, if any, as may be established by the Board of Directors in
its sole discretion. Payment of the redemption price shall be in cash;
provided, however, that if the Board of Directors determines, which
determination shall be conclusive, that conditions exist which make
payment wholly in cash unwise or undesirable, the Corporation may, to
the extent and in the manner permitted by the Investment Company Act,
make payment wholly or partly in securities or other assets belonging to
the series of which the shares being redeemed are a part, at the value
of such securities or assets used in such determination of net asset
value.
Notwithstanding the foregoing, the Corporation may postpone
payment of the redemption price and may suspend the right of the holders
of shares of any series to require the Corporation to redeem shares of
that series during any period or at any time when and to the extent
permissible under the Investment Company Act.
(6) Redemption by Corporation. The Board of Directors may cause
the Corporation to redeem at net asset value the shares of any series
from a holder (i) if the Board of Directors of the Corporation
determines in its sole discretion that failure to so redeem such shares
may have materially adverse consequences to the holders of shares of the
Corporation or any series, or (ii) upon such other conditions with
respect to the maintenance of shareholder accounts of a minimum amount
as may from time to time be established by the Board of Directors in its
sole discretion.
(7) Liquidation. In the event of the liquidation of a particular
series, the shareholders of the series that is being liquidated shall be
entitled to receive, as a class, when and as declared by the Board of
Directors, the excess of the assets belonging to that series over the
liabilities of that series. The holders of shares of any particular
series shall not be entitled thereby to any distribution upon
liquidation of any other series. The assets so distributable to the
shareholders of any particular series shall be distributed among such
shareholders in proportion to the number of shares of that series held
by them and recorded on the books of the Corporation. The liquidation of
any particular series in which there are shares then outstanding may be
authorized by vote of a majority of the Board of Directors then in
office, subject to the approval of a majority of the outstanding voting
securities of that series, as defined in the Investment Company Act, and
without the vote of the holders of shares of any other series. The
liquidation of a particular series may be accomplished, in whole or in
part, by the transfer of assets of such series to another series or by
the exchange of shares of such series for the shares of another series.
(8) Net Asset Value Per Share. The net asset value per share of
any series shall be the quotient obtained by dividing the value of the
net assets of that series (being the value of the assets belonging to
that series less the liabilities of that series) by the total number of
shares of that series outstanding, all as determined by or under the
direction of the Board of Directors in accordance with generally
accepted accounting principles and the Investment Company Act. Subject
to the applicable provisions of the Investment Company Act, the Board of
Directors, in its sole discretion, may prescribe and shall set forth in
the By-Laws of the Corporation or in a duly adopted resolution of the
Board of Directors such bases and times for determining the value of the
assets belonging to, and the net asset value per share of outstanding
shares of, each series, or the net income attributable to such shares,
as the Board of Directors deems necessary or desirable. The Board of
Directors shall have full discretion, to the extent not inconsistent
with the Maryland General Corporation Law and the Investment Company
Act, to determine which items shall be treated as income and which items
as capital and whether any item of expense shall be charged to income or
capital. Each such determination and allocation shall be conclusive and
binding for all purposes.
The Board of Directors may determine to maintain the net asset
value per share of any series at a designated constant dollar amount and
in connection therewith may adopt procedures not inconsistent with the
Investment Company Act for the continuing declaration of income
attributable to that series as dividends and for the handling of any
losses attributable to that series. Such procedures may provide that in
the event of any loss, each shareholder shall be deemed to have
contributed to the capital of the Corporation attributable to that
series his pro-rata portion of the total number of shares required to be
canceled in order to permit the net asset value per share of that series
to be maintained, after reflecting such loss, at the designated constant
dollar amount. Each shareholder of the Corporation shall be deemed to
have agreed, by his investment in any series with respect to which the
Board of Directors shall have adopted any such procedure, to make the
contribution referred to in the preceding sentence in the event of any
such loss.
(9) Equality. All shares of each particular series shall represent
an equal proportionate interest in the assets belonging to that series
(subject to the liabilities of that series), and each share of any
particular series shall be equal to each other share of that series. The
Board of Directors may from time to time divide or combine the shares of
any particular series into a greater or lesser number of shares of that
series without thereby changing the proportionate interest in the assets
belonging to that series or in any way affecting the rights of holders
of shares of any other series.
(10) Conversion or Exchange Rights. Subject to compliance with the
requirements of the Investment Company Act, the Board of Directors shall
have the authority to provide that holders of shares of any series shall
have the right to convert or exchange said shares into shares of one or
more other classes or series of shares in accordance with such
requirements and procedures as may be established by the Board of
Directors.
(c) The shares of Common Stock of the Corporation, or of any series of
Common Stock of the Corporation to the extent such Common Stock is divided
into series, may be further subdivided into classes (which may, for
convenience of reference be referred to a term other than "class"). Unless
otherwise provided in the Articles Supplementary establishing such classes,
all such shares, or all shares of a series of Common Stock in a series, shall
have identical voting, dividend, and liquidation rights. Shares of the classes
shall also be subject to such front-end sales loads, contingent deferred sales
charges, expenses (including, without limitation, distribution expenses under
a Rule 12b-1 plan and administrative expenses under an administration or
service agreement, plan or other arrangement, however designated), conversion
rights, and class voting rights as shall be consistent with Maryland law, the
Investment Company Act of 1940, and the rules and regulations of the National
Association of Securities Dealers and shall be contained in Articles
Supplementary establishing such classes.
(d) For the purposes hereof and of any articles supplementary to the
charter providing for the classification or reclassification of any shares of
capital stock or of any other charter document of the Corporation (unless
otherwise provided in any such articles or document), any class or series of
stock of the Corporation shall be deemed to rank:
(1) prior to another class or series either as to dividends or
upon liquidation, if the holders of such class or series shall be
entitled to the receipt of dividends or of amounts distributable on
liquidation, dissolution or winding up, as the case may be, in
preference or priority to holders of such other class or series;
(2) on a parity with another class or series either as to
dividends or upon liquidation, whether or not the dividend rates,
dividend payment dates or redemption or liquidation price per share
thereof be different from those of such others, if the holders of such
class or series of stock shall be entitled to receipt of dividends or
amounts distributable upon liquidation, dissolution or winding up, as
the case may be, in proportion to their respective dividend rates or
redemption or liquidation prices, without preference or priority over
the holders of such other class or series; and
(3) junior to another class or series either as to dividends or
upon liquidation, if the rights of the holders of such class or series
shall be subject or subordinate to the rights of the holders of such
other class or series in respect of the receipt of dividends or the
amounts distributable upon liquidation, dissolution or winding up, as
the case may be.
(e) Unless otherwise prohibited by law, so long as the Corporation is
registered as an open-end management investment company under the Investment
Company Act, the Board of Directors shall have the power and authority,
without the approval of the holders of any outstanding shares, to increase or
decrease the number of shares of capital stock or the number of shares of
capital stock of any class or series that the Corporation has authority to
issue.
(f) The Corporation may issue and sell fractions of shares of capital
stock having pro rata all the rights of full shares, including, without
limitation, the right to vote and to receive dividends, and wherever the words
"share" or "shares" are used in the charter or By-Laws of the Corporation,
they shall be deemed to include fractions of shares, where the context does
not clearly indicate that only full shares are intended.
(g) The Corporation shall not be obligated to issue certificates
representing shares of any class or series of capital stock. At the time of
issue or transfer of shares without certificates, the Corporation shall
provide the shareholder with such information as may be required under the
Maryland General Corporation Law.
SEVENTH: The number of directors of the Corporation shall initially be
one (1), which number may be increased or decreased pursuant to the By-Laws of
the Corporation, but shall never be less than the minimum number permitted by
the General Laws of the State of Maryland now or hereafter in force. James S.
Riepe shall serve as director until the first annual meeting and until his
successor is elected and qualified.
EIGHTH: (a) The following provisions are hereby adopted for the purpose
of defining, limiting, and regulating the powers of the Corporation and of the
directors and shareholders:
(1) The Board of Directors is hereby empowered to authorize the
issuance from time to time of shares of its stock of any class or
series, whether now or hereafter authorized, or securities convertible
into shares of its stock of any class or series, whether now or
hereafter authorized, for such consideration as may be deemed advisable
by the Board of Directors and without any action by the shareholders.
(2) No holder of any stock or any other securities of the
Corporation, whether now or hereafter authorized, shall have any
preemptive right to subscribe for or purchase any stock or any other
securities of the Corporation other than such, if any, as the Board of
Directors, in its sole discretion, may determine and at such price or
prices and upon such other terms as the Board of Directors, in its sole
discretion, may fix; and any stock or other securities which the Board
of Directors may determine to offer for subscription may, as the Board
of Directors in its sole discretion shall determine, be offered to the
holders of any class, series or type of stock or other securities at the
time outstanding to the exclusion of the holders of any or all other
classes, series or types of stock or other securities at the time
outstanding.
(3) The Board of Directors of the Corporation shall, consistent
with applicable law, have power in its sole discretion to determine from
time to time in accordance with sound accounting practice or other
reasonable valuation methods what constitutes annual or other net
profits, earnings, surplus, or net assets in excess of capital; to
determine that retained earnings or surplus shall remain in the hands of
the Corporation; to set apart out of any funds of the Corporation such
reserve or reserves in such amount or amounts and for such proper
purpose or purposes as it shall determine and to abolish any such
reserve or any part thereof; to distribute and pay distributions or
dividends in stock, cash or other securities or property, out of surplus
or any other funds or amounts legally available therefor, at such times
and to the shareholders of record on such dates as it may, from time to
time, determine; and to determine whether and to what extent and at what
times and places and under what conditions and regulations the books,
accounts and documents of the Corporation, or any of them, shall be open
to the inspection of shareholders, except as otherwise provided by
statute or by the By-Laws, and, except as so provided, no shareholder
shall have any right to inspect any book, account or document of the
Corporation unless authorized so to do by resolution of the Board of
Directors.
(4) Notwithstanding any provision of law requiring the
authorization of any action by a greater proportion than a majority of
the total number of shares of all classes and series of capital stock or
of the total number of shares of any class or series of capital stock
entitled to vote as a separate class, such action shall be valid and
effective if authorized by the affirmative vote of the holders of a
majority of the total number of shares of all classes and series
outstanding and entitled to vote thereon, or of the class or series
entitled to vote thereon as a separate class, as the case may be, except
as otherwise provided in the charter of the Corporation.
(5) The Corporation shall indemnify (i) its past and present
directors and officers, whether serving the Corporation or at its
request any other entity, to the full extent required or permitted by
the General Laws of the State of Maryland now or hereafter in force,
including the advance of expenses under the procedures and to the full
extent permitted by law, and (ii) other employees and agents to such
extent as shall be authorized by the Board of Directors or the By-Laws
and as permitted by law. Nothing contained herein shall be construed to
protect any director or officer of the Corporation against any liability
to the Corporation or its security holders 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. The foregoing rights of indemnification shall not be
exclusive of any other rights to which those seeking indemnification may
be entitled. The Board of Directors may take such action as is necessary
to carry out these indemnification provisions and is expressly empowered
to adopt, approve and amend from time to time such by-laws, resolutions
or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of
the charter of the Corporation or repeal of any of its provisions shall
limit or eliminate the right of indemnification provided hereunder with
respect to acts or omissions occurring prior to such amendment or
repeal.
(6) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, and the Investment Company
Act, no director or officer of the Corporation shall be personally
liable to the Corporation or its shareholders for money damages;
provided, however, that nothing herein shall be construed to protect any
director or officer of the Corporation against any liability to the
Corporation or its security holders 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. No amendment of the charter of the Corporation or repeal of any
of its provisions shall limit or eliminate the limitation of liability
provided to directors and officers hereunder with respect to any act or
omission occurring prior to such amendment or repeal.
(7) The Corporation reserves the right from time to time to make
any amendments of its charter which may now or hereafter be authorized
by law, including any amendments changing the terms or contract rights,
as expressly set forth in its charter, of any of its outstanding stock
by classification, reclassification or otherwise.
(b) The enumeration and definition of particular powers of the Board of
Directors included in the foregoing shall in no way be limited or restricted
by reference to or inference from the terms of any other clause of this or any
other Article of the charter of the Corporation, or construed as or deemed by
inference or otherwise in any manner to exclude or limit any powers conferred
upon the Board of Directors under the General Laws of the State of Maryland
now or hereafter in force.
NINTH: The duration of the Corporation shall be perpetual.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation,
acknowledging the same to be my act, on this 23rd day of January, 1997.
Witness:
/s/Patricia S. Butcher /s/Henry H. Hopkins
______________________ _______________________
Patricia S. Butcher Henry H. Hopkins
RESERVE INVESTMENT FUNDS, INC.
(A Maryland Corporation)
BY-LAWS
ARTICLE I
NAME OF CORPORATION, LOCATION OF OFFICES, AND SEAL
Section 1.01. Name: The name of the Corporation is RESERVE
INVESTMENT FUNDS, INC.
Section 1.02. Principal Office: The principal office of the
Corporation in the State of Maryland shall be located in the City of
Baltimore. The Corporation may, in addition, establish and maintain such
other offices and places of business, within or outside the State of Maryland,
as the Board of Directors may from time to time determine. [MGCL, Sections
2-103(4), 2-108(a)(1)]
Section 1.03. Seal: The corporate seal of the Corporation shall be
circular in form, and shall bear the name of the Corporation, the year of its
incorporation, and the words "Corporate Seal, Maryland." The form of the seal
shall be subject to alteration by the Board of Directors and the seal may be
used by causing it or a facsimile to be impressed or affixed or printed or
otherwise reproduced. In lieu of affixing the corporate seal to any document
it shall be sufficient to meet the requirements of any law, rule, or
regulation relating to a corporate seal to affix the word "(Seal)" adjacent to
the signature of the authorized officer of the Corporation. Any officer or
Director of the Corporation shall have authority to affix the corporate seal
of the Corporation to any document requiring the same. [MGCL, Sections
1-304(b), 2-103(3)]
ARTICLE II
SHAREHOLDERS
Section 2.01. Annual Meetings: The Corporation shall not be
required to hold an annual meeting of its shareholders in any year unless the
Investment Company Act of 1940 requires an election of directors by
shareholders. In the event that the Corporation shall be so required to hold
an annual meeting, such meeting shall be held at a date and time set by the
Board of Directors, which date shall be no later than 120 days after the
occurrence of the event requiring the meeting. Any shareholders' meeting held
in accordance with the preceding sentence shall for all purposes constitute
the annual meeting of shareholders for the fiscal year of the corporation in
which the meeting is held. At any such meeting, the shareholders shall elect
directors to hold the offices of any directors who have held office for more
than one year or who have been elected by the Board of Directors to fill
vacancies which result from any cause. Except as the Articles of
Incorporation or statute provides otherwise, Directors may transact any
business within the powers of the Corporation as may properly come before the
meeting. Any business of the Corporation may be transacted at the annual
meeting without being specially designated in the notice, except such business
as is specifically required by statute to be stated in the notice. [MGCL,
Section 2-501]
Section 2.02. Special Meetings: Special meetings of the
shareholders may be called at any time by the Chairman of the Board, the
President, any Vice President, or by the Board of Directors. Special meetings
of the shareholders shall be called by the Secretary on the written request of
shareholders entitled to cast at least ten (10) percent of all the votes
entitled to be cast at such meeting, provided that (a) such request shall
state the purpose or purposes of the meeting and the matters proposed to be
acted on, and (b) the shareholders requesting the meeting shall have paid to
the Corporation the reasonably estimated cost of preparing and mailing the
notice thereof, which the Secretary shall determine and specify to such
shareholders. Unless requested by shareholders entitled to cast a majority of
all the votes entitled to be cast at the meeting, a special meeting need not
be called to consider any matter which is substantially the same as a matter
voted upon at any special meeting of the shareholders held during the
preceding twelve (12) months. [MGCL, Section 2-502]
Section 2.03. Place of Meetings: All shareholders' meetings shall
be held at such place within the United States as may be fixed from time to
time by the Board of Directors. [MGCL, Section 2-503]
Section 2.04. Notice of Meetings: Not less than ten (10) days, nor
more than ninety (90) days before each shareholders' meeting, the Secretary or
an Assistant Secretary of the Corporation shall give to each shareholder
entitled to vote at the meeting, and each other shareholder entitled to notice
of the meeting, written notice stating (1) the time and place of the meeting,
and (2) the purpose or purposes of the meeting if the meeting is a special
meeting or if notice of the purpose is required by statute to be given. Such
notice shall be personally delivered to the shareholder, or left at his
residence or usual place of business, or mailed to him at his address as it
appears on the records of the Corporation. Notice shall be deemed to be given
when deposited in the United States mail addressed to the shareholders as
aforesaid. No notice of a shareholders' meeting need be given to any
shareholder who shall sign a written waiver of such notice, whether before or
after the meeting, which is filed with the records of shareholders' meetings,
or to any shareholder who is present at the meeting in person or by proxy.
Notice of adjournment of a shareholders' meeting to another time or place need
not be given if such time and place are announced at the meeting, unless the
adjournment is for more than one hundred twenty (120) days after the original
record date. Irregularities in the notice of any meeting to, or the
nonreceipt of any such notice by, any of the stockholders shall not invalidate
any action otherwise properly taken by or at any such meeting. [MGCL,
Sections 2-504, 2-511(d)]
Section 2.05. Voting - In General: Except as otherwise specifically
provided in the Articles of Incorporation or these By-Laws, or as required by
provisions of the Investment Company Act with respect to the vote of a series,
if any, of the Corporation, at every shareholders' meeting, each shareholder
shall be entitled to one vote for each share of stock of the Corporation
validly issued and outstanding and held by such shareholder, except that no
shares held by the Corporation shall be entitled to a vote. Fractional shares
shall be entitled to fractional votes. Except as otherwise specifically
provided in the Articles of Incorporation, or these By-Laws, or as required by
provisions of the Investment Company Act, a majority of all the votes cast at
a meeting at which a quorum is present is sufficient to approve any matter
which properly comes before the meeting. The vote upon any question shall be
by ballot whenever requested by any person entitled to vote, but, unless such
a request is made, voting may be conducted in any way approved by the meeting.
[MGCL, Sections 2-214(a)(i), 2-506(a)(2), 2-507(a), 2-509(b)]
At any meeting at which there is an election of Directors, the Chairman
of the meeting may, and upon the request of the holders of ten (10) percent of
the stock entitled to vote at such election shall, appoint two inspectors of
election who shall first subscribe an oath or affirmation to execute
faithfully the duties of inspectors at such election with strict impartiality
and according to the best of their ability, and shall, after the election,
make a certificate of the result of the vote taken. No candidate for the
office of Director shall be appointed as an inspector.
Section 2.06. Shareholders Entitled to Vote: If, pursuant to
Section 8.05 hereof, a record date has been fixed for the determination of
shareholders entitled to notice of or to vote at any shareholders' meeting,
each shareholder of the Corporation shall be entitled to vote in person or by
proxy, each share or fraction of a share of stock outstanding in his name on
the books of the Corporation on such record date. If no record date has been
fixed for the determination of shareholders, the record date for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day on which notice of
the meeting is mailed or the 30th day before the meeting, whichever is the
closer date to the meeting, or, if notice is waived by all shareholders, at
the close of business on the tenth (10th) day next preceding the date of the
meeting. [MGCL, Sections 2-507, 2-511]
Section 2.07. Voting - Proxies: The right to vote by proxy shall
exist only if the instrument authorizing such proxy to act shall have been
executed in writing by the shareholder himself, or by his attorney thereunto
duly authorized in writing. No proxy shall be valid more than eleven (11)
months after its date unless it provides for a longer period. All proxies
shall be delivered to the Secretary of the Corporation or to the person acting
as Secretary of the meeting before being voted, who shall decide all questions
concerning qualification of voters, the validity of proxies, and the
acceptance or rejection of votes. If inspectors of election have been
appointed by the chairman of the meeting, such inspectors shall decide all
such questions. A proxy with respect to stock held in the name of two or more
persons shall be valid if executed by one of them unless at or prior to
exercise of such proxy the Corporation receives a specific written notice to
the contrary from any one of them. A proxy purporting to be executed by or on
behalf of a shareholder shall be deemed valid unless challenged at or prior to
its exercise. [MGCL, Section 2-507(b)]
Section 2.08. Quorum: The presence at any shareholders' meeting, in
person or by proxy, of shareholders entitled to cast a majority of the votes
entitled to be cast at the meeting shall constitute a quorum. [MGCL, Section
2-506(a)]
Section 2.09. Absence of Quorum: In the absence of a quorum, the
holders of a majority of shares entitled to vote at the meeting and present
thereat in person or by proxy, or, if no shareholder entitled to vote is
present in person or by proxy, any officer present who is entitled to preside
at or act as Secretary of such meeting, may adjourn the meeting sine die or
from time to time. Any business that might have been transacted at the
meeting originally called may be transacted at any such adjourned meeting at
which a quorum is present.
Section 2.10. Stock Ledger and List of Shareholders: It shall be
the duty of the Secretary or Assistant Secretary of the Corporation to cause
an original or duplicate stock ledger to be maintained at the office of the
Corporation's transfer agent, containing the names and addresses of all
shareholders and the number of shares of each class held by each shareholder.
Such stock ledger may be in written form, or any other form capable of being
converted into written form within a reasonable time for visual inspection.
Any one or more persons, who together are and for at least six (6) months have
been shareholders of record of at least five percent (5%) of the outstanding
capital stock of the Corporation, may submit (unless the Corporation at the
time of the request maintains a duplicate stock ledger at its principal
office) a written request to any officer of the Corporation or its resident
agent in Maryland for a list of the shareholders of the Corporation. Within
twenty (20) days after such a request, there shall be prepared and filed at
the Corporation's principal office a list, verified under oath by an officer
of the Corporation or by its stock transfer agent or registrar, which sets
forth the name and address of each shareholder and the number of shares of
each class which the shareholder holds. [MGCL, Sections 2-209, 2-513]
Section 2.11. Informal Action By Shareholders: Any action required
or permitted to be taken at a meeting of shareholders may be taken without a
meeting if the following are filed with the records of shareholders' meetings:
(a) A unanimous written consent which sets forth the action and
is signed by each shareholder entitled to vote on the
matter; and
(b) A written waiver of any right to dissent signed by each
shareholder entitled to notice of the meeting, but not
entitled to vote at it.
[MGCL, Section 2-505]
ARTICLE III
BOARD OF DIRECTORS
Section 3.01. Number and Term of Office: The Board of Directors
shall consist of one (1) Director, which number may be increased by a
resolution of a majority of the entire Board of Directors, provided that the
number of Directors shall not be more than fifteen (15) nor less than the
lesser of (i) three (3) or (ii) the number of shareholders of the Corporation.
Each Director (whenever elected) shall hold office until the next annual
meeting of shareholders and until his successor is elected and qualifies or
until his earlier death, resignation, or removal. [MGCL, Sections 2-402,
2-404, 2-405]
Section 3.02. Qualification of Directors: No member of the Board of
Directors need be a shareholder of the Corporation, but at least one member of
the Board of Directors shall be a person who is not an interested person (as
such term is defined in the Investment Company Act) of the investment adviser
of the Corporation, nor an officer or employee of the Corporation. [MGCL,
Section 2-403; Investment Company Act, Section 10(d)]
Section 3.03. Election of Directors: Until the first annual meeting
of shareholders, or until successors are duly elected and qualified, the Board
of Directors shall consist of the persons named as such in the Articles of
Incorporation. Thereafter, except as otherwise provided in Sections 3.04 and
3.05 hereof, at each annual meeting, the shareholders shall elect Directors to
hold office until the next annual meeting and/or until their successors are
elected and qualify. In the event that Directors are not elected at an annual
shareholders' meeting, then Directors may be elected at a special
shareholders' meeting. Directors shall be elected by vote of the holders of a
plurality of the shares present in person or by proxy and entitled to vote.
[MGCL, Section 2-404]
Section 3.04. Removal of Directors: At any meeting of shareholders,
duly called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any Director or Directors from office, either with or without
cause, and may elect a successor or successors to fill any resulting vacancies
for the unexpired terms of removed Directors. [MGCL, Sections 2-406, 2-407]
Section 3.05. Vacancies and Newly Created Directorships: If any
vacancies occur in the Board of Directors by reason of resignation, removal or
otherwise, or if the authorized number of Directors is increased, the
Directors then in office shall continue to act, and such vacancies (if not
previously filled by the shareholders) may be filled by a majority of the
Directors then in office, whether or not sufficient to constitute a quorum,
provided that, immediately after filling such vacancy, at least two-thirds of
the Directors then holding office shall have been elected to such office by
the shareholders of the Corporation. In the event that at any time, other
than the time preceding the first meeting of shareholders, less than a
majority of the Directors of the Corporation holding office at that time were
so elected by the shareholders, a meeting of the shareholders shall be held
promptly and in any event within sixty (60) days for the purpose of electing
Directors to fill any existing vacancies in the Board of Directors unless the
Securities and Exchange Commission shall by order extend such period. Except
as provided in Section 3.04 hereof, a Director elected by the Board of
Directors to fill a vacancy shall be elected to hold office until the next
annual meeting of shareholders or until his successor is elected and
qualifies. [MGCL, Section 2-407; Investment Company Act, Section 16(a)]
Section 3.06. General Powers:
(a) The property, business, and affairs of the Corporation shall
be managed under the direction of the Board of Directors
which may exercise all the powers of the Corporation except
such as are by law, by the Articles of Incorporation, or by
these By-Laws conferred upon or reserved to the shareholders
of the Corporation. [MGCL, Section 2-401]
(b) All acts done by any meeting of the Directors or by any
person acting as a Director, so long as his successor shall
not have been duly elected or appointed, shall,
notwithstanding that it be afterwards discovered that there
was some defect in the election of the Directors or such
person acting as a Director or that they or any of them were
disqualified, be as valid as if the Directors or such
person, as the case may be, had been duly elected and were
or was qualified to be Directors or a Director of the
Corporation.
Section 3.07. Power to Issue and Sell Stock: The Board of Directors
may from time to time authorize by resolution the issuance and sale of any of
the Corporation's authorized shares to such persons as the Board of Directors
shall deem advisable and such resolution shall set the minimum price or value
of consideration for the stock or a formula for its determination, and shall
include a fair description of any consideration other than money and a
statement of the actual value of such consideration as determined by the Board
of Directors or a statement that the Board of Directors has determined that
the actual value is or will be not less than a certain sum. [MGCL, Section
2-203]
Section 3.08. Power to Declare Dividends:
(a) The Board of Directors, from time to time as it may deem
advisable, may declare and the Corporation pay dividends, in
cash, property, or shares of the Corporation available for
dividends out of any source available for dividends, to the
shareholders according to their respective rights and
interests. [MGCL, Section 2-309]
(b) The Board of Directors shall cause to be accompanied by a
written statement any dividend payment wholly or partly from
any source other than the Corporation's accumulated
undistributed net income (determined in accordance with good
accounting practice and the rules and regulations of the
Securities and Exchange Commission then in effect) not
including profits or losses realized upon the sale of
securities or other properties. Such statement shall
adequately disclose the source or sources of such payment
and the basis of calculation and shall be otherwise in such
form as the Securities and Exchange Commission may
prescribe. [Investment Company Act, Section 19; SEC Rule
19a-1; MGCL, Section 2-309(c)]
(c) Notwithstanding the above provisions of this Section 3.08,
the Board of Directors may at any time declare and
distribute pro rata among the shareholders a stock dividend
out of the Corporation's authorized but unissued shares of
stock, including any shares previously purchased by the
Corporation, provided that such dividend shall not be
distributed in shares of any class with respect to any
shares of a different class. The shares so distributed
shall be issued at the par value thereof, and there shall be
transferred to stated capital, at the time such dividend is
paid, an amount of surplus equal to the aggregate par value
of the shares issued as a dividend and there may be
transferred from earned surplus to capital surplus such
additional amount as the Board of Directors may determine.
[MGCL, Section 2-309]
Section 3.09. Annual and Regular Meetings: The annual meeting of
the Board of Directors for choosing officers and transacting other proper
business shall be held after the annual shareholders' meeting at such time and
place as may be specified in the notice of such meeting of the Board of
Directors or, in the absence of such annual shareholders' meeting, at such
time and place as the Board of Directors may provide. The Board of Directors
from time to time may provide by resolution for the holding of regular
meetings and fix their time and place (within or outside the State of
Maryland). [MGCL, Section 2-409(a)]
Section 3.10. Special Meetings: Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board, the
President (or, in the absence or disability of the President, by any Vice
President), the Treasurer, or two or more Directors, at the time and place
(within or outside the State of Maryland) specified in the respective notices
or waivers of notice of such meetings.
Section 3.11. Notice: Notice of annual, regular, and special
meetings shall be in writing, stating the time and place, and shall be mailed
to each Director at his residence or regular place of business or caused to be
delivered to him personally or to be transmitted to him by telegraph, cable,
or wireless at least two (2) days before the day on which the meeting is to be
held. Except as otherwise required by the By-Laws or the Investment Company
Act, such notice need not include a statement of the business to be transacted
at, or the purpose of, the meeting. [MGCL, Section 2-409(b)]
Section 3.12. Waiver of Notice: No notice of any meeting need be
given to any Director who is present at the meeting or to any Director who
signs a waiver of the notice of the meeting (which waiver shall be filed with
the records of the meeting), whether before or after the meeting. [MGCL,
Section 2-409(c)]
Section 3.13. Quorum and Voting: At all meetings of the Board of
Directors the presence of one-third of the total number of Directors
authorized, but not less than two (2) Directors if there are at least two
directors, shall constitute a quorum. In the absence of a quorum, a majority
of the Directors present may adjourn the meeting, from time to time, until a
quorum shall be present. The action of a majority of the Directors present at
a meeting at which a quorum is present shall be the action of the Board of
Directors unless the concurrence of a greater proportion is required for such
action by law, by the Articles of Incorporation or by these By-Laws. [MGCL,
Section 2-408]
Section 3.14. Conference Telephone: Members of the Board of
Directors or of any committee designated by the Board, may participate in a
meeting of the Board or of such committee by means of a conference telephone
or similar communications equipment if all persons participating in the
meeting can hear each other at the same time, and participation by such means
shall constitute presence in person at such meeting. [MGCL, Section 2-409(d)]
Section 3.15. Compensation: Each Director may receive such
remuneration for his services as shall be fixed from time to time by
resolution of the Board of Directors.
Section 3.16. Action Without a Meeting: Except as otherwise
provided under the Investment Company Act, any action required or permitted to
be taken at any meeting of the Board of Directors or any committee thereof may
be taken without a meeting if a unanimous written consent which sets forth the
action is signed by all members of the Board or of such committee and such
written consent is filed with the minutes of proceedings of the Board or
committee. [MGCL, Section 2-408(c)]
Section 3.17. Director Emeritus: Upon the retirement of a Director
of the Corporation, the Board of Directors may designate such retired Director
as a Director Emeritus. The position of Director Emeritus shall be honorary
only and shall not confer upon such Director Emeritus any responsibility, or
voting authority, whatsoever with respect to the Corporation. A Director
Emeritus may, but shall not be required to, attend the meetings of the Board
of Directors and receive materials normally provided Directors relating to the
Corporation. The Board of Directors may establish such compensation as it may
deem appropriate under the circumstances to be paid by the Corporation to a
Director Emeritus.
ARTICLE IV
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 4.01. How Constituted: By resolution adopted by the Board
of Directors, the Board may appoint from among its members one or more
committees, including an Executive Committee, each consisting of at least two
(2) Directors. Each member of a committee shall hold office during the
pleasure of the Board. [MGCL, Section 2-411]
Section 4.02. Powers of the Executive Committee: Unless otherwise
provided by resolution of the Board of Directors, the Executive Committee, in
the intervals between meetings of the Board of Directors, shall have and may
exercise all of the powers of the Board of Directors to manage the business
and affairs of the Corporation except the power to:
(a) Declare dividends or distributions on stock;
(b) Issue stock other than as provided in Section 2-411(b) of
Corporations and Associations Article of the Annotated Code
of Maryland;
(c) Recommend to the shareholders any action which requires
shareholder approval;
(d) Amend the By-Laws; or
(e) Approve any merger or share exchange which does not require
shareholder approval.
[MGCL, Section 2-411(a)]
Section 4.03. Other Committees of the Board of Directors: To the
extent provided by resolution of the Board, other committees shall have and
may exercise any of the powers that may lawfully be granted to the Executive
Committee. [MGCL, Section 2-411(a)]
Section 4.04. Proceedings, Quorum, and Manner of Acting: In the
absence of appropriate resolution of the Board of Directors, each committee
may adopt such rules and regulations governing its proceedings, quorum and
manner of acting as it shall deem proper and desirable, provided that the
quorum shall not be less than two (2) Directors. In the absence of any member
of any such committee, the members thereof present at any meeting, whether or
not they constitute a quorum, may appoint a member of the Board of Directors
to act in the place of such absent member. [MGCL, Section 2-411(c)]
Section 4.05. Other Committees: The Board of Directors may appoint
other committees, each consisting of one or more persons who need not be
Directors. Each such committee shall have such powers and perform such duties
as may be assigned to it from time to time by the Board of Directors, but
shall not exercise any power which may lawfully be exercised only by the Board
of Directors or a committee thereof.
ARTICLE V
OFFICERS
Section 5.01. General: The officers of the Corporation shall be a
President, one or more Vice Presidents (one or more of whom may be designated
Executive Vice President), a Secretary, and a Treasurer, and may include one
or more Assistant Vice Presidents, one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 5.11 hereof. The Board of Directors
may elect, but shall not be required to elect, a Chairman of the Board.
[MGCL, Section 2-412]
Section 5.02. Election, Term of Office and Qualifications: The
officers of the Corporation (except those appointed pursuant to Section 5.11
hereof) shall be elected by the Board of Directors at its first meeting and
thereafter at each annual meeting of the Board. If any officer or officers
are not elected at any such meeting, such officer or officers may be elected
at any subsequent regular or special meeting of the Board. Except as provided
in Sections 5.03, 5.04, and 5.05 hereof, each officer elected by the Board of
Directors shall hold office until the next annual meeting of the Board of
Directors and until his successor shall have been chosen and qualified. Any
person may hold two or more offices of the Corporation, except that neither
the Chairman of the Board, nor the President, may hold the office of Vice
President, but no person shall execute, acknowledge, or verify any instrument
in more than one capacity if such instrument is required by law, the Articles
of Incorporation, or these By-Laws to be executed, acknowledged, or verified
by two or more officers. The Chairman of the Board shall be selected from
among the Directors of the Corporation and may hold such office only so long
as he continues to be a Director. No other officer need be a Director.
[MGCL, Sections 2-412, 2-413 and 2-415]
Section 5.03. Resignation: Any officer may resign his office at any
time by delivering a written resignation to the Board of Directors, the
President, the Secretary, or any Assistant Secretary. Unless otherwise
specified therein, such resignation shall take effect upon delivery.
Section 5.04. Removal: Any officer may be removed from office by
the Board of Directors whenever in the judgment of the Board of Directors the
best interests of the Corporation will be served thereby. [MGCL, Section
2-413(c)]
Section 5.05 Vacancies and Newly Created Offices: If any vacancy
shall occur in any office by reason of death, resignation, removal,
disqualification or other cause, or if any new office shall be created, such
vacancies or newly created offices may be filled by the Board of Directors at
any meeting or, in the case of any office created pursuant to Section 5.11
hereof, by any officer upon whom such power shall have been conferred by the
Board of Directors. [MGCL, Section 2-413(d)]
Section 5.06. Chairman of the Board: Unless otherwise provided by
resolution of the Board of Directors, the Chairman of the Board, if there be
such an officer, shall be the chief executive and operating officer of the
Corporation, shall preside at all shareholders' meetings, and at all meetings
of the Board of Directors. He shall be ex officio a member of all standing
committees of the Board of Directors. Subject to the supervision of the Board
of Directors, he shall have general charge of the business, affairs, property,
and operation of the Corporation and its officers, employees, and agents. He
may sign (unless the President or a Vice President shall have signed)
certificates representing stock of the Corporation authorized for issuance by
the Board of Directors and shall have such other powers and perform such other
duties as may be assigned to him from time to time by the Board of Directors.
Section 5.07. President: Unless otherwise provided by resolution of
the Board of Directors, the President shall, at the request of or in the
absence or disability of the Chairman of the Board, or if no Chairman of the
Board has been chosen, he shall preside at all shareholders' meetings and at
all meetings of the Board of Directors and shall in general exercise the
powers and perform the duties of the Chairman of the Board. He may sign
(unless the Chairman or a Vice President shall have signed) certificates
representing stock of the Corporation authorized for issuance by the Board of
Directors. Except as the Board of Directors may otherwise order, he may sign
in the name and on behalf of the Corporation all deeds, bonds, contracts, or
agreements. He shall exercise such other powers and perform such other duties
as from time to time may be assigned to him by the Board of Directors.
Section 5.08. Vice President: The Board of Directors shall, from
time to time, designate and elect one or more Vice Presidents (one or more of
whom may be designated Executive Vice President) who shall have such powers
and perform such duties as from time to time may be assigned to them by the
Board of Directors or the President. At the request or in the absence or
disability of the President, the Vice President (or, if there are two or more
Vice Presidents, the Vice President in order of seniority of tenure in such
office or in such other order as the Board of Directors may determine) may
perform all the duties of the President and, when so acting, shall have all
the powers of and be subject to all the restrictions upon the President. Any
Vice President may sign (unless the Chairman, the President, or another Vice
President shall have signed) certificates representing stock of the
Corporation authorized for issuance by the Board of Directors.
Section 5.09. Treasurer and Assistant Treasurers: The Treasurer
shall be the principal financial and accounting officer of the Corporation and
shall have general charge of the finances and books of account of the
Corporation. Except as otherwise provided by the Board of Directors, he shall
have general supervision of the funds and property of the Corporation and of
the performance by the custodian of its duties with respect thereto. He may
countersign (unless an Assistant Treasurer or Secretary or Assistant Secretary
shall have countersigned) certificates representing stock of the Corporation
authorized for issuance by the Board of Directors. He shall render to the
Board of Directors, whenever directed by the Board, an account of the
financial condition of the Corporation and of all his transactions as
Treasurer; and as soon as possible after the close of each fiscal year he
shall make and submit to the Board of Directors a like report for such fiscal
year. He shall cause to be prepared annually a full and correct statement of
the affairs of the Corporation, including a balance sheet and a financial
statement of operations for the preceding fiscal year, which shall be
submitted at the annual meeting of shareholders and filed within twenty (20)
days thereafter at the principal office of the Corporation. He shall perform
all the acts incidental to the office of the Treasurer, subject to the control
of the Board of Directors. Any Assistant Treasurer may perform such duties of
the Treasurer as the Treasurer or the Board of Directors may assign, and, in
the absence of the Treasurer, he may perform all the duties of the Treasurer.
Section 5.10. Secretary and Assistant Secretaries: The Secretary
shall attend to the giving and serving of all notices of the Corporation and
shall record all proceedings of the meetings of the shareholders and Directors
in one or more books to be kept for that purpose. He shall keep in safe
custody the seal of the Corporation and shall have charge of the records of
the Corporation, including the stock books and such other books and papers as
the Board of Directors may direct and such books, reports, certificates and
other documents required by law to be kept, all of which shall at all
reasonable times be open to inspection by any Director. He shall countersign
(unless the Treasurer, an Assistant Treasurer or an Assistant Secretary shall
have countersigned) certificates representing stock of the Corporation
authorized for issuance by the Board of Directors. He shall perform such
other duties as appertain to his office or as may be required by the Board of
Directors. Any Assistant Secretary may perform such duties of the Secretary
as the Secretary or the Board of Directors may assign, and, in the absence of
the Secretary, he may perform all the duties of the Secretary.
Section 5.11. Subordinate Officers: The Board of Directors from
time to time may appoint such other officers or agents as it may deem
advisable, each of whom shall have such title, hold office for such period,
have such authority and perform such duties as the Board of Directors may
determine. The Board of Directors from time to time may delegate to one or
more officers or agents the power to appoint any such subordinate officers or
agents and to prescribe their respective rights, terms of office, authorities,
and duties. Any officer or agent appointed in accordance with the provisions
of this Section 5.11 may be removed, either with or without cause, by any
officer upon whom such power of removal shall have been conferred by the Board
of Directors. [MGCL, Section 2-412(b)]
Section 5.12. Remuneration: The salaries or other compensation of
the officers of the Corporation shall be fixed from time to time by resolution
of the Board of Directors, except that the Board of Directors may by
resolution delegate to any person or group of persons the power to fix the
salaries or other compensation of any subordinate officers or agents appointed
in accordance with the provisions of Section 5.11 hereof.
Section 5.13. Surety Bond: The Board of Directors may require any
officer or agent of the Corporation to execute a bond (including, without
limitation, any bond required by the Investment Company Act and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder)
to the Corporation in such sum and with such surety or sureties as the Board
of Directors may determine, conditioned upon the faithful performance of his
or her duties to the Corporation, including responsibility for negligence and
for the accounting for any of the Corporation's property, funds or securities
that may come into his or her hands.
ARTICLE VI
CUSTODY OF SECURITIES AND CASH
Section 6.01. Employment of a Custodian: The Corporation shall
place and at all times maintain in the custody of a Custodian (including any
sub-custodian for the Custodian) all funds, securities, and similar
investments owned by the Corporation. The Custodian shall be a bank having an
aggregate capital, surplus, and undivided profits of not less than
$10,000,000. Subject to such rules, regulations, and orders as the Securities
and Exchange Commission may adopt as necessary or appropriate for the
protection of investors, the Corporation's Custodian may deposit all or a part
of the securities owned by the Corporation in a sub-custodian or sub-
custodians situated within or without the United States. The Custodian shall
be appointed and its remuneration fixed by the Board of Directors.
[Investment Company Act, Section 17(f)]
Section 6.02. Central Certificate Service: Subject to such rules,
regulations, and orders as the Securities and Exchange Commission may adopt as
necessary or appropriate for the protection of investors, the Corporation's
Custodian may deposit all or any part of the securities owned by the
Corporation in a system for the central handling of securities established by
a national securities exchange or national securities association registered
with the Commission under the Securities Exchange Act of 1934, or such other
person as may be permitted by the Commission, pursuant to which system all
securities of any particular class or series of any issuer deposited within
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities. [Investment
Company Act, Section 17(f)]
Section 6.03. Cash Assets: The cash proceeds from the sale of
securities and similar investments and other cash assets of the Corporation
shall be kept in the custody of a bank or banks appointed pursuant to Section
6.01 hereof, or in accordance with such rules and regulations or orders as the
Securities and Exchange Commission may from time to time prescribe for the
protection of investors, except that the Corporation may maintain a checking
account or accounts in a bank or banks, each having an aggregate capital,
surplus, and undivided profits of not less than $10,000,000, provided that the
balance of such account or the aggregate balances of such accounts shall at no
time exceed the amount of the fidelity bond, maintained pursuant to the
requirements of the Investment Company Act and rules and regulations
thereunder, covering the officers or employees authorized to draw on such
account or accounts. [Investment Company Act, Section 17(f)]
Section 6.04. Free Cash Accounts: The Corporation may, upon
resolution of its Board of Directors, maintain a petty cash account free of
the foregoing requirements of this Article VI in an amount not to exceed $500,
provided that such account is operated under the imprest system and is
maintained subject to adequate controls approved by the Board of Directors
over disbursements and reimbursements including, but not limited to, fidelity
bond coverage for persons having access to such funds. [Investment Company
Act, Rule 17f-3]
Section 6.05. Action Upon Termination of Custodian Agreement: Upon
resignation of a custodian of the Corporation or inability of a custodian to
continue to serve, the Board of Directors shall promptly appoint a successor
custodian, but in the event that no successor custodian can be found who has
the required qualifications and is willing to serve, the Board of Directors
shall call as promptly as possible a special meeting of the shareholders to
determine whether the Corporation shall function without a custodian or shall
be liquidated. If so directed by vote of the holders of a majority of the
outstanding shares of stock of the Corporation, the custodian shall deliver
and pay over all property of the Corporation held by it as specified in such
vote.
Section 6.06. Other Arrangements: The Corporation may make such
other arrangements for the custody of its assets (including deposit
arrangements) as may be required by any applicable law, rule or regulation.
ARTICLE VII
EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES
Section 7.01. Execution of Instruments: All deeds, documents,
transfers, contracts, agreements, requisitions or orders, promissory notes,
assignments, endorsements, checks and drafts for the payment of money by the
Corporation, and other instruments requiring execution by the Corporation
shall be signed by the Chairman, the President, a Vice President, or the
Treasurer, or as the Board of Directors may otherwise, from time to time,
authorize. Any such authorization may be general or confined to specific
instances.
Section 7.02. Voting of Securities: Unless otherwise ordered by the
Board of Directors, the Chairman, the President, or any Vice President shall
have full power and authority on behalf of the Corporation to attend and to
act and to vote, or in the name of the Corporation to execute proxies to vote,
at any meeting of shareholders of any company in which the Corporation may
hold stock. At any such meeting such officer shall possess and may exercise
(in person or by proxy) any and all rights, powers, and privileges incident to
the ownership of such stock. The Board of Directors may by resolution from
time to time confer like powers upon any other person or persons. [MGCL,
Section 2-509]
ARTICLE VIII
CAPITAL STOCK
Section 8.01. Ownership of Shares:
(a) Certificates certifying the ownership of shares will not be
issued for shares purchased or otherwise acquired. The
ownership of shares, full or fractional, shall be recorded
on the books of the Corporation or its agent. The record
books of the Corporation as kept by the Corporation or its
agent, as the case may be, shall be conclusive as to the
number of shares held from time to time by each such
shareholder.
Section 8.02. Transfer of Capital Stock:
(a) Shares of stock of the Corporation shall be transferable
only upon the books of the Corporation kept for such
purpose.
(b) The Corporation shall be entitled to treat the holder of
record of any share of stock as the absolute owner thereof
for all purposes, and accordingly shall not be bound to
recognize any legal, equitable, or other claim or interest
in such share on the part of any other person, whether or
not it shall have express or other notice thereof, except as
otherwise expressly provided by the statutes of the State of
Maryland.
Section 8.03. Transfer Agents and Registrars: The Board of
Directors may, from time to time, appoint or remove transfer agents and
registrars of transfers of shares of stock of the Corporation, and it may
appoint the same person as both transfer agent and registrar.
Section 8.04. Transfer Regulations: The shares of stock of the
Corporation may be freely transferred, and the Board of Directors may, from
time to time, adopt lawful rules and regulations with reference to the method
of transfer of the shares of stock of the Corporation.
Section 8.05. Fixing of Record Date: The Board of Directors may fix
in advance a date as a record date for the determination of the shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or to receive payment of any dividend or other distribution
or allotment of any rights, or to exercise any rights in respect of any
change, conversion, or exchange of stock, or for any other proper purpose,
provided that such record date shall be a date not more than sixty (60) days
nor, in the case of a meeting of shareholders, less than ten (10) days prior
to the date on which the particular action, requiring such determination of
shareholders, is to be taken. In such case, only such shareholders as shall
be shareholders of record on the record date so fixed shall be entitled to
such notice of, and to vote at, such meeting or adjournment, or to give such
consent, or to receive payment of such dividend or other distribution, or to
receive such allotment of rights, or to exercise such rights, or to take other
action, as the case may be, notwithstanding any transfer of any shares on the
books of the Corporation after any such record date. A meeting of
shareholders convened on the date for which it was called may be adjourned
from time to time without notice to a date not more than one hundred twenty
(120) days after the original record date. [MGCL, Section 2-511]
ARTICLE IX
FISCAL YEAR, ACCOUNTANT
Section 9.01. Fiscal Year: The fiscal year of the Corporation shall
be the twelve (12) calendar months beginning on the 1st day of June in each
year and ending on the last day of the following May, or such other period of
twelve (12) calendar months as the Board of Directors may by resolution
prescribe.
Section 9.02. Accountant:
(a) The Corporation shall employ an independent public
accountant or firm of independent public accountants for
each series of the Corporation to examine the accounts of
the Corporation with respect to such series and to sign and
certify financial statements filed by the Corporation with
respect to such series. The certificates and reports of the
accountant(s) shall be addressed both to the Board of
Directors and to the shareholders. The Corporation may
employ a different accountant with respect to each series.
(b) A majority of the members of the Board of Directors who are
not interested persons (as such term is defined in the
Investment Company Act) of the Corporation shall select the
accountant for each series, by vote cast in person, at any
meeting held within such period of time as may be allowed
under the Investment Company Act. Such selection shall be
submitted for ratification or rejection at the next
succeeding annual shareholders' meeting for such series. If
such meeting shall reject such selection, the accountant for
such series shall be selected by majority vote of the
Corporation's outstanding voting securities of such series,
either at the meeting at which the rejection occurred or at
a subsequent meeting of shareholders for such series called
for the purpose.
(c) Any vacancy occurring between annual meetings, due to the
death or resignation of the accountant of a series, may be
filled by the vote of a majority of those members of the
Board of Directors who are not interested persons (as so
defined) of the Corporation, cast in person at a meeting
called for the purpose of voting on such action.
(d) The employment of the accountant of a series shall be
conditioned upon the right of such series of the Corporation
by vote of a majority of the outstanding voting securities
of such series at any meeting called for the purpose to
terminate such employment forthwith without any penalty.
[Investment Company Act, Section 32(a)]
ARTICLE X
INDEMNIFICATION AND INSURANCE
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").
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 Company Act, as from time to time amended, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee, or agent of the Corporation, or who is
or was serving at the request of the Corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust,
or other enterprise, against any liability asserted against him and incurred
by him in or arising out of his position, whether or not the Corporation would
have the power to indemnify him against such liability. [MGCL, Section
2-418(k)]
Section 10.03. Amendment: No amendment, alteration or repeal of this
Article or the adoption, alteration or amendment of any other provision of the
Articles of Incorporation or By-Laws inconsistent with this Article shall
adversely affect any right or protection of any person under this Article with
respect to any act or failure to act which occurred prior to such amendment,
alteration, repeal or adoption.
ARTICLE XI
AMENDMENTS
Section 11.01. General: Except as provided in Section 11.02 hereof,
all By-Laws of the Corporation, whether adopted by the Board of Directors or
the shareholders, shall be subject to amendment, alteration, or repeal, and
new By-Laws may be made, by the affirmative vote of a majority of either:
(a) the holders of record of the outstanding shares of stock of
the Corporation entitled to vote, at any annual or special
meeting the notice or waiver of notice of which shall have
specified or summarized the proposed amendment, alteration,
repeal, or new By-Law; or
(b) the Directors present at any regular or special meeting at
which a quorum is present if the notice or waiver of notice
thereof or material sent to the Directors in connection
therewith on or prior to the last date for the giving of
such notice under these By-Laws shall have specified or
summarized the proposed amendment, alteration, repeal, or
new By-Law.
Section 11.02. By Shareholders Only:
(a) No amendment of any section of these By-Laws shall be made
except by the shareholders of the Corporation if the
shareholders shall have provided in the By-Laws that such
section may not be amended, altered, or repealed except by
the shareholders.
(b) From and after the issue of any shares of the Capital Stock
of the Corporation, no amendment of this Article XI shall be
made except by the shareholders of the Corporation.
ARTICLE XII
MISCELLANEOUS
Section 12.01. Use of the Term "Annual Meeting:" The use of the term
"annual meeting" in these By-Laws shall not be construed as implying a
requirement that a shareholder meeting be held annually.
TABLE OF CONTENTS
Page
ARTICLE I. NAME OF CORPORATION, LOCATION OF
OFFICES, AND SEAL 1
1.01. Name 1
1.02. Principal Office 1
1.03. Seal 1
ARTICLE II. SHAREHOLDERS 2
2.01. Annual Meetings 2
2.02. Special Meetings 2
2.03. Place of Meetings 2
2.04. Notice of Meetings 2
2.05. Voting - in General 3
2.06. Shareholders Entitled to Vote 3
2.07. Voting - Proxies 3
2.08. Quorum 3
2.09. Absence of Quorum 3
2.10. Stock Ledger and List of Shareholders 4
2.11. Informal Action by Shareholders 4
ARTICLE III. BOARD OF DIRECTORS 5
3.01. Number and Term of Office 5
3.02. Qualification of Directors 5
3.03. Election of Directors 5
3.04. Removal of Directors 5
3.05. Vacancies and Newly Created Directorships 5
3.06. General Powers 6
3.07. Power to Issue and Sell Stock 6
3.08. Power to Declare Dividends 6
3.09. Annual and Regular Meetings 7
3.10. Special Meetings 7
3.11. Notice 7
3.12. Waiver of Notice 7
3.13. Quorum and Voting 7
3.14. Conference Telephone 7
3.15. Compensation 7
3.16. Action without a Meeting 7
3.17. Director Emeritus 7
ARTICLE IV. EXECUTIVE COMMITTEE AND OTHER COMMITTEES 8
4.01. How Constituted 8
4.02. Powers of the Executive Committee 8
4.03. Other Committees of the Board of Directors 8
4.04. Proceedings, Quorum and Manner of Acting 8
4.05. Other Committees 8
ARTICLE V. OFFICERS 9
5.01. General 9
5.02. Election, Term of Office and Qualifications 9
5.03. Resignation 9
ARTICLE V. OFFICERS (continued)
5.04. Removal 9
5.05. Vacancies and Newly Created Offices 9
5.06. Chairman of the Board 9
5.07. President 9
5.08. Vice President 10
5.09. Treasurer and Assistant Treasurers 10
5.10. Secretary and Assistant Secretaries 10
5.11. Subordinate Officers 10
5.12. Remuneration 11
5.13. Surety Bond 11
ARTICLE VI. CUSTODY OF SECURITIES AND CASH 12
6.01. Employment of a Custodian 12
6.02. Central Certificate Service 12
6.03. Cash Assets 12
6.04. Free Cash Accounts 12
6.05. Action Upon Termination of
Custodian Agreement 12
6.06. Other Arrangements 12
ARTICLE VII. EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES 13
7.01. Execution of Instruments 13
7.02. Voting of Securities 13
ARTICLE VIII. CAPITAL STOCK 14
8.01. Ownership of Shares 14
8.02. Transfer of Capital Stock 14
8.03. Transfer Agents and Registrars 14
8.04. Transfer Regulations 14
8.05. Fixing of Record Date 14
ARTICLE IX. FISCAL YEAR, ACCOUNTANT 15
9.01. Fiscal Year 15
9.02. Accountant 15
ARTICLE X. INDEMNIFICATION AND INSURANCE 16
10.01. Indemnification and Payment of
Expenses in Advance 16
10.02. Insurance of Officers, Directors,
Employees and Agents 17
10.03. Amendment 17
ARTICLE XI. AMENDMENTS 18
11.01. General 18
11.02. By Shareholders Only 18
ARTICLE XII. MISCELLANEOUS 18
12.01 Use of the Term "Annual Meeting" 18
INVESTMENT MANAGEMENT AGREEMENT
Between
RESERVE INVESTMENT FUNDS, INC.
and
T. ROWE PRICE ASSOCIATES, INC.
INVESTMENT MANAGEMENT AGREEMENT, made as of the 4th day of February,
1997, by and between RESERVE INVESTMENT FUNDS, INC., a Maryland corporation
(hereinafter called the "Corporation"), and T. ROWE PRICE ASSOCIATES, INC., a
corporation organized and existing under the laws of the State of Maryland
(hereinafter called the "Manager").
W I T N E S E T H:
WHEREAS, the Corporation proposes to engage in business as an open-end
management investment company and to register as such under the federal
Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Corporation is authorized to issue shares of capital stock
("Shares") in the Reserve Investment Fund (the "Fund"), a separate series of
the Corporation whose Shares represent interests in a separate portfolio of
securities and other assets ("Fund Shares"); and
WHEREAS, the Manager is engaged principally in the business of rendering
investment supervisory services and is registered as an investment adviser
under the federal Investment Advisers Act of 1940, as amended; and
WHEREAS, the Fund desires the Manager to render investment supervisory
services to the Fund in the manner and on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the parties hereto agree as follows:
1. Duties and Responsibilities of Manager.
A. Investment Management Services. The Manager shall act as
investment manager and shall supervise and direct the investments of the Fund
in accordance with the Fund's investment objective, program and restrictions
as provided in the Corporation's prospectus, on behalf of the Fund, as amended
from time to time, and such other limitations as the Corporation may impose by
notice in writing to the Manager. The Manager shall obtain and evaluate such
information relating to the economy, industries, businesses, securities
markets and securities as it may deem necessary or useful in the discharge of
its obligations hereunder and shall formulate and implement a continuing
program for the management of the assets and resources of the Fund in a manner
consistent with its investment objective. In furtherance of this duty, the
Manager, as agent and attorney-in-fact with respect to the Corporation, is
authorized, in its discretion and without prior consultation with the
Corporation, to:
(i) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds, and other securities or assets; and
(ii) directly or through the trading desks of T. Rowe Price Associates,
Inc. ("Price Associates"), Robert Fleming Holdings Limited
("Holdings") and their affiliates place orders and negotiate the
commissions (if any) for the execution of transactions in
securities with or through such brokers, dealers, underwriters or
issuers as the Manager may select.
B. Financial, Accounting, and Administrative Services. The Manager
shall maintain the existence and records of the Corporation; maintain the
registrations and qualifications of Fund Shares under federal and state law;
monitor the financial, accounting, and administrative functions of the Fund;
maintain liaison with the various agents employed for the benefit of the Fund
by the Corporation (including the Fund'S transfer agent, custodian,
independent accountants and legal counsel) and assist in the coordination of
their activities on behalf of the Fund.
C. Reports to Fund. The Manager shall furnish to or place at the
disposal of the Corporation or Fund, as appropriate, such information,
reports, evaluations, analyses and opinions as the Fund may, at any time or
from time to time, reasonably request or as the Manager may deem helpful.
D. Reports and Other Communications to Shareholders. The Manager
shall assist in developing all general shareholder communications, including
regular shareholder reports.
E. Fund Personnel. The Manager agrees to permit individuals who are
officers or employees of the Manager to serve (if duly elected or appointed)
as officers, directors, members of any committee of directors, members of any
advisory board, or members of any other committee of the Corporation, without
remuneration or other cost to the Fund or the Corporation.
F. Personnel, Office Space, and Facilities of Manager. The Manager
at its own expense shall furnish or provide and pay the cost of such office
space, office equipment, office personnel, and office services as the Manager
requires in the performance of its investment advisory and other obligations
under this Agreement.
2. Allocation of Expenses.
A. Expenses Paid by Manager.
(1) Salaries and Fees of Officers. The Manager shall pay all
salaries, expenses, and fees of the officers and directors
of the Corporation who are affiliated with the Manager.
(2) Assumption of Expenses by Manager. The payment or
assumption by the Manager of any expense of the Corporation
or Fund, as appropriate, that the Manager is not required by
this Agreement to pay or assume shall not obligate the
Manager to pay or assume the same or any similar expense on
any subsequent occasion.
B. Expenses Paid by Fund. The Corporation or Fund, as appropriate,
shall bear all expenses of its organization, operations, and business not
specifically assumed or agreed to be paid by the Manager as provided in this
Agreement. In particular, but without limiting the generality of the
foregoing, the Corporation or Fund, as appropriate, shall pay:
(1) Custody and Accounting Services. All expenses of the
transfer, receipt, safekeeping, servicing and accounting for
the cash, securities, and other property of the Corporation,
for the benefit of the Fund, including all charges of
depositories, custodians, and other agents, if any;
(2) Shareholder Servicing. All expenses of maintaining and
servicing shareholder accounts, including all charges of the
Fund'S transfer, shareholder recordkeeping, dividend
disbursing, redemption, and other agents for the benefit of
the Fund, if any;
(3) Shareholder Communications. All expenses of preparing,
setting in type, printing, and distributing reports and
other communications to shareholders;
(4) Shareholder Meetings. All expenses incidental to holding
meetings of shareholders, including the printing of notices
and proxy material, and proxy solicitation therefor;
(5) Prospectuses. All expenses of preparing, setting in type,
and printing of annual or more frequent revisions of the
prospectus and of mailing them to shareholders;
(6) Pricing. All expenses of computing the Fund'S net asset
value per share, including the cost of any equipment or
services used for obtaining price quotations;
(7) Communication Equipment. All charges for equipment or
services used for communication between the Manager or the
Corporation or the Fund and the custodian, transfer agent or
any other agent selected by the Corporation;
(8) Legal and Accounting Fees and Expenses. All charges for
services and expenses of the Corporation'S legal counsel and
independent auditors for the benefit of the Fund;
(9) Directors' Fees and Expenses. All compensation of
directors, other than those affiliated with the Manager, and
all expenses incurred in connection with their service;
(10) Federal Registration Fees. All fees and expenses of
registering and maintaining the registration of the
Corporation under the Act and the registration of the Fund
Shares under the Securities Act of 1933, as amended (the
"'33 Act"), including all fees and expenses incurred in
connection with the preparation, setting in type, printing,
and filing of any registration statement and prospectus
under the '33 Act or the Act, and any amendments or
supplements that may be made from time to time;
(11) State Filing Fees. All fees and expenses imposed on the
Corporation or Fund, as appropriate, with respect to the
sale of Fund Shares under securities laws of various states
or jurisdictions, and under all other laws applicable to the
Corporation or Fund, as appropriate, or its business
activities (including registering the Corporation as a
broker-dealer, or any officer of the Corporation or any
person as agent or salesman of the Corporation in any
state);
(12) Issue and Redemption of Fund Shares. All expenses incurred
in connection with the issue, redemption, and transfer of
Fund Shares, including the expense of confirming all Fund
Share transactions, and of preparing and transmitting the
Fund'S stock certificates;
(13) Bonding and Insurance. All expenses of bond, liability, and
other insurance coverage required by law or deemed advisable
by the board of directors;
(14) Brokerage Commissions. All brokers' commissions and other
charges incident to the purchase, sale, or lending of the
Fund'S portfolio securities;
(15) Taxes. All taxes or governmental fees payable by or with
respect of the Corporation or Fund, as appropriate to
federal, state, or other governmental agencies, domestic or
foreign, including stamp or other transfer taxes;
(16) Trade Association Fees. All fees, dues, and other expenses
incurred in connection with the Corporation'S or Fund'S, as
appropriate, membership in any trade association or other
investment organization; and
(17) Nonrecurring and Extraordinary Expenses. Such nonrecurring
expenses as may arise, including the costs of actions,
suits, or proceedings to which the Corporation or Fund, as
appropriate, is a party and the expenses the Corporation or
Fund, as appropriate, may incur as a result of its legal
obligation to provide indemnification to its officers,
directors, and agents.
3. Management Fee. The Fund shall not pay the Manager a management fee.
4. Brokerage. Subject to the approval of the board of directors of the
Fund, the Manager, in carrying out its duties under Paragraph 1.A., may cause
the Corporation, with respect to the Fund, to pay a broker-dealer which
furnishes brokerage or research services [as such services are defined under
Section 28(e) of the Securities Exchange Act of 1934, as amended (the "'34
Act")] a higher commission than that which might be charged by another broker-
dealer which does not furnish brokerage or research services or which
furnishes brokerage or research services deemed to be of lesser value, if such
commission is deemed reasonable in relation to the brokerage and research
services provided by the broker-dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the Manager with
respect to the accounts as to which it exercises investment discretion (as
such term is defined under Section 3(a)(35) of the '34 Act).
5. Manager'S Use of the Services of Others. The Manager may (at its cost
except as contemplated by Paragraph 4 of this Agreement) employ, retain or
otherwise avail itself of the services or facilities of other persons or
organizations for the purpose of providing the Manager or the Corporation or
Fund, as appropriate, with such statistical and other factual information,
such advice regarding economic factors and trends, such advice as to
occasional transactions in specific securities or such other information,
advice or assistance as the Manager may deem necessary, appropriate or
convenient for the discharge of its obligations hereunder or otherwise helpful
to the Corporation or Fund, as appropriate, or in the discharge of Manager'S
overall responsibilities with respect to the other accounts which it serves as
investment manager.
6. Ownership of Records. All records required to be maintained and
preserved by the Corporation or Fund pursuant to the provisions of rules or
regulations of the Securities and Exchange Commission under Section 31(a) of
the Act and maintained and preserved by the Manager on behalf of the
Corporation or Fund, as appropriate, are the property of the Corporation or
Fund, as appropriate, and will be surrendered by the Manager promptly on
request by the Corporation or Fund, as appropriate.
7. Reports to Manager. The Corporation or Fund, as appropriate, shall
furnish or otherwise make available to the Manager such prospectuses,
financial statements, proxy statements, reports, and other information
relating to the business and affairs of the Corporation or Fund, as
appropriate, as the Manager may, at any time or from time to time, reasonably
require in order to discharge its obligations under this Agreement.
8. Services to Other Clients. Nothing herein contained shall limit the
freedom of the Manager or any affiliated person of the Manager to render
investment supervisory and corporate administrative services to other
investment companies, to act as investment manager or investment counselor to
other persons, firms or corporations, or to engage in other business
activities; but so long as this Agreement or any extension, renewal or
amendment hereof shall remain in effect or until the Manager shall otherwise
consent, the Manager shall be the only investment manager to the Fund.
9. Limitation of Liability of Manager. Neither the Manager nor any of its
officers, directors, or employees, nor any person performing executive,
administrative, trading, or other functions for the Corporation or Fund (at
the direction or request of the Manager) or the Manager in connection with the
Manager'S discharge of its obligations undertaken or reasonably assumed with
respect to this Agreement, shall be liable for any error of judgment or
mistake of law or for any loss suffered by the Corporation or Fund in
connection with the matters to which this Agreement relates, except for loss
resulting from willful misfeasance, bad faith, or gross negligence in the
performance of its or his duties on behalf of the Corporation or Fund or from
reckless disregard by the Manager or any such person of the duties of the
Manager under this Agreement.
10. Term of Agreement. The term of this Agreement shall begin on the date
first above written, and unless sooner terminated as hereinafter provided,
this Agreement shall remain in effect through April 30, 1998. Thereafter,
this Agreement shall continue in effect from year to year, with respect to the
Fund, subject to the termination provisions and all other terms and conditions
hereof, so long as: (a) such continuation shall be specifically approved at
least annually by the board of directors of the Corporation, or by vote of a
majority of the outstanding voting securities of the Fund and, concurrently
with such approval by the board of directors or prior to such approval by the
holders of the outstanding voting securities of the Fund, as the case may be,
by the vote, cast in person at a meeting called for the purpose of voting on
such approval, of a majority of the directors of the Corporation, with respect
to the Fund, who are not parties to this Agreement or interested persons of
any such party; and (b) the Manager shall not have notified the Corporation,
in writing, at least 60 days prior to April 30, 1998 or prior to April 30th of
any year thereafter, that it does not desire such continuation. The Manager
shall furnish to the Corporation, promptly upon its request, such information
as may reasonably be necessary to evaluate the terms of this Agreement or any
extension, renewal or amendment hereof.
11. Amendment and Assignment of Agreement. This Agreement may not be
amended or assigned without the affirmative vote of a majority of the
outstanding voting securities of the Fund, and this Agreement shall
automatically and immediately terminate in the event of its assignment.
12. Termination of Agreement. This Agreement may be terminated by either
party hereto, without the payment of any penalty, upon 60 days' prior notice
in writing to the other party; provided, that in the case of termination by
the Corporation, with respect to the Fund, such action shall have been
authorized by resolution of a majority of the directors who are not parties to
this Agreement or interested persons of any such party, or by vote of a
majority of the outstanding voting securities of the Fund.
13. Miscellaneous.
A. Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
B. Interpretation. Nothing herein contained shall be deemed to
require the Corporation to take any action contrary to its Articles of
Incorporation or By-Laws, or any applicable statutory or regulatory
requirement to which it is subject or by which it is bound, or to relieve or
deprive the board of directors of the Corporation of its responsibility for
and control of the conduct of the affairs of the Fund.
C. Definitions. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the Act shall be resolved by reference to such term or
provision of the Act and to interpretations thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange
Commission validly issued pursuant to the Act. Specifically, the terms "vote
of a majority of the outstanding voting securities," "interested person,"
"assignment," and "affiliated person," as used in Paragraphs 2, 8, 11, 12, and
13 hereof, shall have the meanings assigned to them by Section 2(a) of the
Act. In addition, where the effect of a requirement of the Act reflected in
any provision of this Agreement is relaxed by a rule, regulation or order of
the Securities and Exchange Commission, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
Attest: RESERVE INVESTMENT FUNDS, INC.
/S/Patricia S. Butcher /S/Edward A. Wiese
By:
_________________________ ________________________________
Patricia S. Butcher Edward A. Wiese
Assistant Secretary President
Attest: T. ROWE PRICE ASSOCIATES, INC.
/S/Barbara A. Van Horn /S/Henry H. Hopkins
By:
_________________________ _________________________________
Barbara A. Van Horn Henry H. Hopkins
Assistant Secretary Managing Director
INVESTMENT MANAGEMENT AGREEMENT
Between
RESERVE INVESTMENT FUNDS, INC.
and
T. ROWE PRICE ASSOCIATES, INC.
INVESTMENT MANAGEMENT AGREEMENT, made as of the 4th day of February,
1997, by and between RESERVE INVESTMENT FUNDS, INC., a Maryland corporation
(hereinafter called the "Corporation"), and T. ROWE PRICE ASSOCIATES, INC., a
corporation organized and existing under the laws of the State of Maryland
(hereinafter called the "Manager").
W I T N E S S E T H:
WHEREAS, the Corporation proposes to engage in business as an open-end
management investment company and to register as such under the federal
Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Corporation is authorized to issue shares of capital stock
("Shares") in the Government Reserve Investment Fund (the "Fund"), a separate
series of the Corporation whose Shares represent interests in a separate
portfolio of securities and other assets ("Fund Shares"); and
WHEREAS, the Manager is engaged principally in the business of rendering
investment supervisory services and is registered as an investment adviser
under the federal Investment Advisers Act of 1940, as amended; and
WHEREAS, the Fund desires the Manager to render investment supervisory
services to the Fund in the manner and on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the parties hereto agree as follows:
1. Duties and Responsibilities of Manager.
A. Investment Management Services. The Manager shall act as
investment manager and shall supervise and direct the investments of the Fund
in accordance with the Fund's investment objective, program and restrictions
as provided in the Corporation's prospectus, on behalf of the Fund, as amended
from time to time, and such other limitations as the Corporation may impose by
notice in writing to the Manager. The Manager shall obtain and evaluate such
information relating to the economy, industries, businesses, securities
markets and securities as it may deem necessary or useful in the discharge of
its obligations hereunder and shall formulate and implement a continuing
program for the management of the assets and resources of the Fund in a manner
consistent with its investment objective. In furtherance of this duty, the
Manager, as agent and attorney-in-fact with respect to the Corporation, is
authorized, in its discretion and without prior consultation with the
Corporation, to:
(i) buy, sell, exchange, convert, lend, and otherwise trade in
any stocks, bonds, and other securities or assets; and
(ii) directly or through the trading desks of T. Rowe Price
Associates, Inc. ("Price Associates"), Robert Fleming
Holdings Limited ("Holdings") and their affiliates place
orders and negotiate the commissions (if any) for the
execution of transactions in securities with or through such
brokers, dealers, underwriters or issuers as the Manager may
select.
B. Financial, Accounting, and Administrative Services. The Manager
shall maintain the existence and records of the Corporation; maintain the
registrations and qualifications of Fund Shares under federal and state law;
monitor the financial, accounting, and administrative functions of the Fund;
maintain liaison with the various agents employed for the benefit of the Fund
by the Corporation (including the Fund'S transfer agent, custodian,
independent accountants and legal counsel) and assist in the coordination of
their activities on behalf of the Fund.
C. Reports to Fund. The Manager shall furnish to or place at the
disposal of the Corporation or Fund, as appropriate, such information,
reports, evaluations, analyses and opinions as the Fund may, at any time or
from time to time, reasonably request or as the Manager may deem helpful.
D. Reports and Other Communications to Shareholders. The Manager
shall assist in developing all general shareholder communications, including
regular shareholder reports.
E. Fund Personnel. The Manager agrees to permit individuals who are
officers or employees of the Manager to serve (if duly elected or appointed)
as officers, directors, members of any committee of directors, members of any
advisory board, or members of any other committee of the Corporation, without
remuneration or other cost to the Fund or the Corporation.
F. Personnel, Office Space, and Facilities of Manager. The Manager
at its own expense shall furnish or provide and pay the cost of such office
space, office equipment, office personnel, and office services as the Manager
requires in the performance of its investment advisory and other obligations
under this Agreement.
2. Allocation of Expenses.
A. Expenses Paid by Manager.
(1) Salaries and Fees of Officers. The Manager shall pay all
salaries, expenses, and fees of the officers and directors
of the Corporation who are affiliated with the Manager.
(2) Assumption of Expenses by Manager. The payment or
assumption by the Manager of any expense of the Corporation
or Fund, as appropriate, that the Manager is not required by
this Agreement to pay or assume shall not obligate the
Manager to pay or assume the same or any similar expense on
any subsequent occasion.
B. Expenses Paid by Fund. The Corporation or Fund, as appropriate,
shall bear all expenses of its organization, operations, and business not
specifically assumed or agreed to be paid by the Manager as provided in this
Agreement. In particular, but without limiting the generality of the
foregoing, the Corporation or Fund, as appropriate, shall pay:
(1) Custody and Accounting Services. All expenses of the
transfer, receipt, safekeeping, servicing and accounting for
the cash, securities, and other property of the Corporation,
for the benefit of the Fund, including all charges of
depositories, custodians, and other agents, if any;
(2) Shareholder Servicing. All expenses of maintaining and
servicing shareholder accounts, including all charges of the
Fund'S transfer, shareholder recordkeeping, dividend
disbursing, redemption, and other agents for the benefit of
the Fund, if any;
(3) Shareholder Communications. All expenses of preparing,
setting in type, printing, and distributing reports and
other communications to shareholders;
(4) Shareholder Meetings. All expenses incidental to holding
meetings of shareholders, including the printing of notices
and proxy material, and proxy solicitation therefor;
(5) Prospectuses. All expenses of preparing, setting in type,
and printing of annual or more frequent revisions of the
prospectus and of mailing them to shareholders;
(6) Pricing. All expenses of computing the Fund'S net asset
value per share, including the cost of any equipment or
services used for obtaining price quotations;
(7) Communication Equipment. All charges for equipment or
services used for communication between the Manager or the
Corporation or the Fund and the custodian, transfer agent or
any other agent selected by the Corporation;
(8) Legal and Accounting Fees and Expenses. All charges for
services and expenses of the Corporation'S legal counsel and
independent auditors for the benefit of the Fund;
(9) Directors' Fees and Expenses. All compensation of
directors, other than those affiliated with the Manager, and
all expenses incurred in connection with their service;
(10) Federal Registration Fees. All fees and expenses of
registering and maintaining the registration of the
Corporation under the Act and the registration of the Fund
Shares under the Securities Act of 1933, as amended (the
"'33 Act"), including all fees and expenses incurred in
connection with the preparation, setting in type, printing,
and filing of any registration statement and prospectus
under the '33 Act or the Act, and any amendments or
supplements that may be made from time to time;
(11) State Filing Fees. All fees and expenses imposed on the
Corporation or Fund, as appropriate, with respect to the
sale of Fund Shares under securities laws of various states
or jurisdictions, and under all other laws applicable to the
Corporation or Fund, as appropriate, or its business
activities (including registering the Corporation as a
broker-dealer, or any officer of the Corporation or any
person as agent or salesman of the Corporation in any
state);
(12) Issue and Redemption of Fund Shares. All expenses incurred
in connection with the issue, redemption, and transfer of
Fund Shares, including the expense of confirming all Fund
Share transactions, and of preparing and transmitting the
Fund's stock certificates;
(13) Bonding and Insurance. All expenses of bond, liability, and
other insurance coverage required by law or deemed advisable
by the board of directors;
(14) Brokerage Commissions. All brokers' commissions and other
charges incident to the purchase, sale, or lending of the
Fund'S portfolio securities;
(15) Taxes. All taxes or governmental fees payable by or with
respect of the Corporation or Fund, as appropriate to
federal, state, or other governmental agencies, domestic or
foreign, including stamp or other transfer taxes;
(16) Trade Association Fees. All fees, dues, and other expenses
incurred in connection with the Corporation'S or Fund'S, as
appropriate, membership in any trade association or other
investment organization; and
(17) Nonrecurring and Extraordinary Expenses. Such nonrecurring
expenses as may arise, including the costs of actions,
suits, or proceedings to which the Corporation or Fund, as
appropriate, is a party and the expenses the Corporation or
Fund, as appropriate, may incur as a result of its legal
obligation to provide indemnification to its officers,
directors, and agents.
3. Management Fee. The Fund shall not pay the Manager a management fee.
4. Brokerage. Subject to the approval of the board of directors of the
Fund, the Manager, in carrying out its duties under Paragraph 1.A., may cause
the Corporation, with respect to the Fund, to pay a broker-dealer which
furnishes brokerage or research services [as such services are defined under
Section 28(e) of the Securities Exchange Act of 1934, as amended (the "'34
Act")] a higher commission than that which might be charged by another broker-
dealer which does not furnish brokerage or research services or which
furnishes brokerage or research services deemed to be of lesser value, if such
commission is deemed reasonable in relation to the brokerage and research
services provided by the broker-dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the Manager with
respect to the accounts as to which it exercises investment discretion (as
such term is defined under Section 3(a)(35) of the '34 Act).
5. Manager'S Use of the Services of Others. The Manager may (at its cost
except as contemplated by Paragraph 4 of this Agreement) employ, retain or
otherwise avail itself of the services or facilities of other persons or
organizations for the purpose of providing the Manager or the Corporation or
Fund, as appropriate, with such statistical and other factual information,
such advice regarding economic factors and trends, such advice as to
occasional transactions in specific securities or such other information,
advice or assistance as the Manager may deem necessary, appropriate or
convenient for the discharge of its obligations hereunder or otherwise helpful
to the Corporation or Fund, as appropriate, or in the discharge of Manager'S
overall responsibilities with respect to the other accounts which it serves as
investment manager.
6. Ownership of Records. All records required to be maintained and
preserved by the Corporation or Fund pursuant to the provisions of rules or
regulations of the Securities and Exchange Commission under Section 31(a) of
the Act and maintained and preserved by the Manager on behalf of the
Corporation or Fund, as appropriate, are the property of the Corporation or
Fund, as appropriate, and will be surrendered by the Manager promptly on
request by the Corporation or Fund, as appropriate.
7. Reports to Manager. The Corporation or Fund, as appropriate, shall
furnish or otherwise make available to the Manager such prospectuses,
financial statements, proxy statements, reports, and other information
relating to the business and affairs of the Corporation or Fund, as
appropriate, as the Manager may, at any time or from time to time, reasonably
require in order to discharge its obligations under this Agreement.
8. Services to Other Clients. Nothing herein contained shall limit the
freedom of the Manager or any affiliated person of the Manager to render
investment supervisory and corporate administrative services to other
investment companies, to act as investment manager or investment counselor to
other persons, firms or corporations, or to engage in other business
activities; but so long as this Agreement or any extension, renewal or
amendment hereof shall remain in effect or until the Manager shall otherwise
consent, the Manager shall be the only investment manager to the Fund.
9. Limitation of Liability of Manager. Neither the Manager nor any of its
officers, directors, or employees, nor any person performing executive,
administrative, trading, or other functions for the Corporation or Fund (at
the direction or request of the Manager) or the Manager in connection with the
Manager'S discharge of its obligations undertaken or reasonably assumed with
respect to this Agreement, shall be liable for any error of judgment or
mistake of law or for any loss suffered by the Corporation or Fund in
connection with the matters to which this Agreement relates, except for loss
resulting from willful misfeasance, bad faith, or gross negligence in the
performance of its or his duties on behalf of the Corporation or Fund or from
reckless disregard by the Manager or any such person of the duties of the
Manager under this Agreement.
10. Term of Agreement. The term of this Agreement shall begin on the date
first above written, and unless sooner terminated as hereinafter provided,
this Agreement shall remain in effect through April 30, 1998. Thereafter,
this Agreement shall continue in effect from year to year, with respect to the
Fund, subject to the termination provisions and all other terms and conditions
hereof, so long as: (a) such continuation shall be specifically approved at
least annually by the board of directors of the Corporation, or by vote of a
majority of the outstanding voting securities of the Fund and, concurrently
with such approval by the board of directors or prior to such approval by the
holders of the outstanding voting securities of the Fund, as the case may be,
by the vote, cast in person at a meeting called for the purpose of voting on
such approval, of a majority of the directors of the Corporation, with respect
to the Fund, who are not parties to this Agreement or interested persons of
any such party; and (b) the Manager shall not have notified the Corporation,
in writing, at least 60 days prior to April 30, 1998 or prior to April 30th of
any year thereafter, that it does not desire such continuation. The Manager
shall furnish to the Corporation, promptly upon its request, such information
as may reasonably be necessary to evaluate the terms of this Agreement or any
extension, renewal or amendment hereof.
11. Amendment and Assignment of Agreement. This Agreement may not be
amended or assigned without the affirmative vote of a majority of the
outstanding voting securities of the Fund, and this Agreement shall
automatically and immediately terminate in the event of its assignment.
12. Termination of Agreement. This Agreement may be terminated by either
party hereto, without the payment of any penalty, upon 60 days' prior notice
in writing to the other party; provided, that in the case of termination by
the Corporation, with respect to the Fund, such action shall have been
authorized by resolution of a majority of the directors who are not parties to
this Agreement or interested persons of any such party, or by vote of a
majority of the outstanding voting securities of the Fund.
13. Miscellaneous.
A. Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
B. Interpretation. Nothing herein contained shall be deemed to
require the Corporation to take any action contrary to its Articles of
Incorporation or By-Laws, or any applicable statutory or regulatory
requirement to which it is subject or by which it is bound, or to relieve or
deprive the board of directors of the Corporation of its responsibility for
and control of the conduct of the affairs of the Fund.
C. Definitions. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the Act shall be resolved by reference to such term or
provision of the Act and to interpretations thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange
Commission validly issued pursuant to the Act. Specifically, the terms "vote
of a majority of the outstanding voting securities," "interested person,"
"assignment," and "affiliated person," as used in Paragraphs 2, 8, 11, 12, and
13 hereof, shall have the meanings assigned to them by Section 2(a) of the
Act. In addition, where the effect of a requirement of the Act reflected in
any provision of this Agreement is relaxed by a rule, regulation or order of
the Securities and Exchange Commission, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
Attest: RESERVE INVESTMENT FUNDS, INC.
/S/Patricia S. Butcher /S/Edward A. Wiese
By:
_________________________ ______________________________
Patricia S. Butcher Edward A. Wiese
Assistant Secretary President
Attest: T. ROWE PRICE ASSOCIATES, INC.
/S/Barbara A. Van Horn /S/Henry H. Hopkins
By:
_________________________ _______________________________
Barbara A. Van Horn Henry H. Hopkins
Assistant Secretary Managing Director
The Custodian Agreement dated September 28, 1987, as amended, between
State Street Bank and Trust Company and T. Rowe Price Funds
PAGE 1
CUSTODIAN CONTRACT
Between
STATE STREET BANK AND TRUST COMPANY
and
EACH OF THE PARTIES INDICATED
ON APPENDIX A
DATED: SEPTEMBER 28, 1987
FRF 07/87
<PAGE>
PAGE 2
TABLE OF CONTENTS
1. Employment of Custodian and Property to be Held By It. . . 1
2. Duties of the Custodian with Respect to Property of the Fund
Held by the Custodian in the United States.. . . . . . . 2
2.1 Holding Securities. . . . . . . . . . . . . . . . . . 2
2.2 Delivery of Securities. . . . . . . . . . . . . . . . 2
1) Sale . . . . . . . . . . . . . . . . . . . . . . 2
2) Repurchase Agreement . . . . . . . . . . . . . . 2
3) Securities System. . . . . . . . . . . . . . . . 3
4) Tender Offer . . . . . . . . . . . . . . . . . . 3
5) Redemption by Issuer . . . . . . . . . . . . . . 3
6) Transfer to Issuer, Nominee, Exchange. . . . . . 3
7) Sale to Broker . . . . . . . . . . . . . . . . . 3
8) Exchange or Conversion . . . . . . . . . . . . . 4
9) Warrants, Rights . . . . . . . . . . . . . . . . 4
10) Loans of Securities. . . . . . . . . . . . . . . 4
11) Borrowings . . . . . . . . . . . . . . . . . . . 4
12) Options. . . . . . . . . . . . . . . . . . . . . 5
13) Futures. . . . . . . . . . . . . . . . . . . . . 5
14) In-Kind Distributions. . . . . . . . . . . . . . 5
15) Miscellaneous. . . . . . . . . . . . . . . . . . 5
16) Type of Payment. . . . . . . . . . . . . . . . . 6
2.3 Registration of Securities. . . . . . . . . . . . . . 6
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . 7
2.5 Sale of Shares and Availability of Federal Funds. . . 7
2.6 Collection of Income, Dividends . . . . . . . . . . . 7
2.7 Payment of Fund Monies. . . . . . . . . . . . . . . . 8
1) Purchases. . . . . . . . . . . . . . . . . . . . 8
2) Exchanges. . . . . . . . . . . . . . . . . . . . 9
3) Redemptions. . . . . . . . . . . . . . . . . . . 9
4) Expense and Liability. . . . . . . . . . . . . . 9
5) Dividends. . . . . . . . . . . . . . . . . . . . 9
6) Short Sale Dividend. . . . . . . . . . . . . . .10
7) Loan . . . . . . . . . . . . . . . . . . . . . .10
8) Miscellaneous. . . . . . . . . . . . . . . . . .10
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased. . . . . . . . . . . . . . . .10
2.9 Appointment of Agents . . . . . . . . . . . . . . . .10
2.10 Deposit of Securities in Securities System. . . . . .10
1) Account of Custodian . . . . . . . . . . . . . .11
2) Records. . . . . . . . . . . . . . . . . . . . .11
3) Payment of Fund Monies, Delivery of
Securities . . . . . . . . . . . . . . . . . .11
4) Reports. . . . . . . . . . . . . . . . . . . . .12
5) Annual Certificate . . . . . . . . . . . . . . .12
6) Indemnification. . . . . . . . . . . . . . . . .12
2.11 Fund Assets Held in the Custodian's Direct Paper
System. . . . . . . . . . . . . . . . . . . . . . .13
PAGE 3
2.12 Segregated Account. . . . . . . . . . . . . . . . . .14
2.13 Ownership Certificates for Tax Purposes . . . . . . .15
2.14 Proxies . . . . . . . . . . . . . . . . . . . . . . .15
2.15 Communications Relating to Fund Portfolio
Securities. . . . . . . . . . . . . . . . . . . . .15
2.16 Reports to Fund by Independent Public
Accountants . . . . . . . . . . . . . . . . . . . .16
3. Duties of the Custodian with Respect to Property
of the Fund Held Outside of the United States. . . . . .16
3.1 Appointment of Foreign Sub-Custodians . . . . . . . .16
3.2 Assets to be Held . . . . . . . . . . . . . . . . . .17
3.3 Foreign Securities Depositories . . . . . . . . . . .17
3.4 Segregation of Securities . . . . . . . . . . . . . .17
3.5 Access of Independent Accountants of the Fund . . . .17
3.6 Reports by Custodian. . . . . . . . . . . . . . . . .18
3.7 Transactions in Foreign Assets of the Fund. . . . . .18
3.8 Responsibility of Custodian, Sub-Custodian and
Fund. . . . . . . . . . . . . . . . . . . . . . . .18
3.9 Monitoring Responsibilities . . . . . . . . . . . . .19
3.10 Branches of U.S. Banks. . . . . . . . . . . . . . . .19
4. Payments for Repurchases or Redemptions and Sales of
Shares of the Fund . . . . . . . . . . . . . . . . . . .19
5. Proper Instructions. . . . . . . . . . . . . . . . . . . .20
6. Actions Permitted Without Express Authority. . . . . . . .21
7. Evidence of Authority, Reliance on Documents . . . . . . .21
8. Duties of Custodian with Respect to the Books of
Account and Calculations of Net Asset Value and
Net Income . . . . . . . . . . . . . . . . . . . . . . .22
9. Records, Inventory . . . . . . . . . . . . . . . . . . . .22
10. Opinion of Fund's Independent Accountant . . . . . . . . .23
11. Compensation of Custodian. . . . . . . . . . . . . . . . .23
12. Responsibility of Custodian. . . . . . . . . . . . . . . .23
13. Effective Period, Termination and Amendment. . . . . . . .25
14. Successor Custodian. . . . . . . . . . . . . . . . . . . .26
15. Interpretive and Additional Provisions . . . . . . . . . .28
16. Notice . . . . . . . . . . . . . . . . . . . . . . . . . .28
17. Bond . . . . . . . . . . . . . . . . . . . . . . . . . . .28
18. Confidentiality. . . . . . . . . . . . . . . . . . . . . .29
19. Exemption from Liens . . . . . . . . . . . . . . . . . . .29
20. Massachusetts Law to Apply . . . . . . . . . . . . . . . .29
21. Prior Contracts. . . . . . . . . . . . . . . . . . . . . .29
22. The Parties. . . . . . . . . . . . . . . . . . . . . . . .30
23. Governing Documents. . . . . . . . . . . . . . . . . . . .30
24. Subcustodian Agreement . . . . . . . . . . . . . . . . . .30
25. Directors and Trustees . . . . . . . . . . . . . . . . . .30
26. Massachusetts Business Trust . . . . . . . . . . . . . . .30
27. Successors of Parties. . . . . . . . . . . . . . . . . . .31
<PAGE>
PAGE 4
CUSTODIAN CONTRACT
This Contract by and between State Street Bank and Trust
Company, a Massachusetts trust company, having its principal
place of business at 225 Franklin Street, Boston, Massachusetts,
02110 (hereinafter called the "Custodian"), and each fund which
is listed on Appendix A (as such Appendix may be amended from
time to time) and which evidences its agreement to be bound
hereby by executing a copy of this Contract (each such fund
individually hereinafter called the "Fund," whose definition may
be found in Section 22),
WITNESSETH: That in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto agree as
follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of
its assets, including securities it desires to be held in places
within the United States ("domestic securities") and securities
it desires to be held outside the United States ("foreign
securities") pursuant to the Governing Documents of the Fund.
The Fund agrees to deliver to the Custodian all securities and
cash now or hereafter owned or acquired by it, and all payments
of income, payments of principal or capital distributions
received by it with respect to all securities owned by the Fund
from time to time, and the cash consideration received by it for
such new or treasury shares of capital stock ("Shares") of the
Fund as may be issued or sold from time to time. The Custodian
shall not be responsible for any property of the Fund held or
received by the Fund and not delivered to the Custodian.
With respect to domestic securities, upon receipt of "Proper
Instructions" (within the meaning of Article 5), the Custodian
shall from time to time employ one or more sub-custodians located
in the United States, but only in accordance with an applicable
vote by the Board of Directors/Trustees of the Fund, and provided
that the Custodian shall have no more or less responsibility or
liability to the Fund on account of any actions or omissions of
any sub-custodian so employed than any such sub-custodian has to
the Custodian, and further provided that the Custodian shall not
release the sub-custodian from any responsibility or liability
unless mutually agreed upon by the parties in writing. With
respect to foreign securities and other assets of the Fund held
outside the United States, the Custodian shall employ Chase
Manhattan Bank, N.A., as a sub-custodian for the Fund in
accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund
Held By the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of the Fund all
PAGE 5
non-cash property, to be held by it in the United States,
including all domestic securities owned by the Fund, other
than (a) securities which are maintained pursuant to Section
2.10 in a clearing agency which acts as a securities
depository or in a book-entry system authorized by the U.S.
Department of the Treasury, collectively referred to herein
as "Securities System," and (b) commercial paper of an
issuer for which the Custodian acts as issuing and paying
agent ("Direct Paper") which is deposited and/or maintained
in the Direct Paper System of the Custodian pursuant to
Section 2.11.
2.2 Delivery of Securities. The Custodian shall release
and deliver domestic securities owned by the Fund held by
the Custodian or in a Securities System account of the
Custodian or in the Custodian's Direct Paper book entry
system account ("Direct Paper System Account") only upon
receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by mutual agreement of
the parties, and only in the following cases:
1) Sale. Upon sale of such securities for the
account of the Fund and receipt of payment
therefor;
2) Repurchase Agreement. Upon the receipt of payment
in connection with any repurchase agreement
related to such securities entered into by the
Fund;
3) Securities System. In the case of a sale effected
through a Securities System, in accordance with
the provisions of Section 2.10 hereof;
4) Tender Offer. To the depository agent or other
receiving agent in connection with tender or other
similar offers for portfolio securities of the
Fund;
5) Redemption by Issuer. To the issuer thereof or
its agent when such securities are called,
redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) Transfer to Issuer, Nominee. Exchange. To the
issuer thereof, or its agent, for transfer into
the name of the Fund or into the name of any
nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or
nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other
evidence representing the same aggregate face
amount or number of units and bearing the same
PAGE 6
interest rate, maturity date and call provisions,
if any; provided that, in any such case, the new
securities are to be delivered to the Custodian;
7) Sale to Broker or Dealer. Upon the sale of such
securities for the account of the Fund, to the
broker or its clearing agent or dealer, against a
receipt, for examination in accordance with
"street delivery" custom; provided that in any
such case, the Custodian shall have no
responsibility or liability for any loss arising
from the delivery of such securities prior to
receiving payment for such securities except as
may arise from the Custodian's failure to act in
accordance with its duties as set forth in
Section 12.
8) Exchange or Conversion. For exchange or
conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization,
split-up of shares, change of par value or
readjustment of the securities of the issuer of
such securities, or pursuant to provisions for
conversion contained in such securities, or
pursuant to any deposit agreement provided that,
in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
9) Warrants, Rights. In the case of warrants, rights
or similar securities, the surrender thereof in
the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or
temporary securities for definitive securities;
provided that, in any such case, the new
securities and cash, if any, are to be delivered
to the Custodian;
10) Loans of Securities. For delivery in connection
with any loans of securities made by the Fund, but
only against receipt of adequate collateral as
agreed upon from time to time by the Custodian and
the Fund, which may be in the form of cash,
obligations issued by the United States
government, its agencies or instrumentalities, or
such other property as mutually agreed by the
parties, except that in connection with any loans
for which collateral is to be credited to the
Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury,
the Custodian will not be held liable or
responsible for the delivery of securities owned
by the Fund prior to the receipt of such
collateral, unless the Custodian fails to act in
PAGE 7
accordance with its duties set forth in
Article 12;
11) Borrowings. For delivery as security in
connection with any borrowings by the Fund
requiring a pledge of assets by the Fund, but only
against receipt of amounts borrowed, except where
additional collateral is required to secure a
borrowing already made, subject to Proper
Instructions, further securities may be released
for that purpose;
12) Options. For delivery in accordance with the
provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange
Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing
Corporation, any registered national securities
exchange, any similar organization or
organizations, or the Investment Company Act of
1940, regarding escrow or other arrangements in
connection with transactions by the Fund;
13) Futures. For delivery in accordance with the
provisions of any agreement among the Fund, the
Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act,
relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any
Contract Market, any similar organization or
organizations, or the Investment Company Act of
1940, regarding account deposits in connection
with transactions by the Fund;
14) In-Kind Distributions. Upon receipt of
instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in
connection with distributions in kind, as may be
described from time to time in the Fund's
currently effective prospectus and statement of
additional information ("prospectus"), in
satisfaction of requests by holders of Shares for
repurchase or redemption;
15) Miscellaneous. For any other proper corporate
purpose, but only upon receipt of, in addition to
Proper Instructions, a certified copy of a
resolution of the Board of Directors/Trustees or
of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an
PAGE 8
Assistant Secretary, specifying the securities to
be delivered, setting forth the purpose for which
such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of
such securities shall be made; and
16) Type of Payment. In any or all of the above
cases, payments to the Fund shall be made in cash,
by a certified check upon or a treasurer's or
cashier's check of a bank, by effective bank wire
transfer through the Federal Reserve Wire System
or, if appropriate, outside of the Federal Reserve
Wire System and subsequent credit to the Fund's
Custodian account, or, in case of delivery through
a stock clearing company, by book-entry credit by
the stock clearing company in accordance with the
then current street custom, or such other form of
payment as may be mutually agreed by the parties,
in all such cases collected funds to be promptly
credited to the Fund.
2.3 Registration of Securities. Domestic securities held
by the Custodian (other than bearer securities) shall be
registered in the name of the Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian which
nominee shall be assigned exclusively to the Fund, unless
the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered
investment companies having the same investment adviser as
the Fund, or in the name or nominee name of any agent
appointed pursuant to Section 2.9 or in the name or nominee
name of any sub-custodian appointed pursuant to Article 1.
All securities accepted by the Custodian on behalf of the
Fund under the terms of this Contract shall be in "street
name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the United States in
the name of the Fund, subject only to draft or order by the
Custodian acting pursuant to the terms of this Contract, and
shall hold in such account or accounts, subject to the
provisions hereof all cash received by it from or for the
account of the Fund, other than cash maintained by the Fund
in a bank account established and used in accordance with
Rule 17f-3 under the Investment Company Act of 1940. Funds
held by the Custodian for the Fund may be deposited for the
Fund's credit in the Banking Department of the Custodian or
in such other banks or trust companies as the Custodian may
in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company
PAGE 9
Act of 1940 and that each such bank or trust company and the
funds to be deposited with each such bank or trust company
shall be approved by vote of a majority of the Board of
Directors/Trustees of the Fund. Such funds shall be
deposited by the Custodian in its capacity as Custodian and
shall be withdrawable by the Custodian only in that
capacity.
2.5 Sale of Shares and Availability of Federal Funds. Upon
mutual agreement between the Fund and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions,
make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for
Shares of the Fund which are deposited into the Fund's
account.
2.6 Collection of Income, Dividends. The Custodian shall
collect on a timely basis all income and other payments with
respect to United States registered securities held
hereunder to which the Fund shall be entitled either by law
or pursuant to custom in the securities business, and shall
collect on a timely basis all income and other payments with
respect to United States bearer securities if, on the date
of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such income
or other payments, as collected, to the Fund's custodian
account. Without limiting the generality of the foregoing,
the Custodian shall detach and present for payment all
coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on
securities held hereunder. The Custodian will also receive
and collect all stock dividends, rights and other items of
like nature as and when they become due or payable. Income
due the Fund on United States securities loaned pursuant to
the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty
or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be
necessary to assist the Fund in arranging for the timely
delivery to the Custodian of the income to which the Fund is
properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper
Instructions,
which may be continuing instructions when deemed appropriate
by mutual agreement of the parties, the Custodian shall pay
out monies of the Fund in the following cases only:
1) Purchases. Upon the purchase of domestic
securities, options, futures contracts or options
on futures contracts for the account of the Fund
but only (a) against the delivery of such
PAGE 10
securities, or evidence of title to such options,
futures contracts or options on futures contracts,
to the Custodian (or any bank, banking firm or
trust company doing business in the United States
or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian
as its agent for this purpose in accordance with
Section 2.9 hereof) registered in the name of the
Fund or in the name of a nominee of the Fund or of
the Custodian referred to in Section 2.3 hereof or
in other proper form for transfer; (b) in the case
of a purchase effected through a Securities
System, in accordance with the conditions set
forth in Section 2.10 hereof or (c) in the case of
a purchase involving the Direct Paper System, in
accordance with the conditions set forth in
Section 2.11; or (d) in the case of repurchase
agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer
which is a member of NASD, (i) against delivery of
the securities either in certificate form or
through an entry crediting the Custodian's account
at the Federal Reserve Bank with such securities
or (ii) against delivery of the receipt evidencing
purchase by the Fund of securities owned by the
Custodian along with written evidence of the
agreement by the Custodian to repurchase such
securities from the Fund. All coupon bonds
accepted by the Custodian shall have the coupons
attached or shall be accompanied by a check
payable on coupon payable date for the interest
due on such date.
2) Exchanges. In connection with conversion,
exchange or surrender of securities owned by the
Fund as set forth in Section 2.2 hereof;
3) Redemptions. For the redemption or repurchase of
Shares issued by the Fund as set forth in Article
4 hereof;
4) Expense and Liability. For the payment of any
expense or liability incurred by the Fund,
including but not limited to the following
payments for the account of the Fund: interest,
taxes, management, accounting, transfer agent and
legal fees, and operating expenses of the Fund
whether or not such expenses are to be in whole or
part capitalized or treated as deferred expenses;
<PAGE>
PAGE 11
5) Dividends. For the payment of any dividends or
other distributions to shareholders declared
pursuant to the Governing Documents of the Fund;
6) Short Sale Dividend. For payment of the amount of
dividends received in respect of securities sold
short;
7) Loan. For repayment of a loan upon redelivery of
pledged securities and upon surrender of the
note(s), if any, evidencing the loan;
8) Miscellaneous. For any other proper purpose, but
only upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of
the Board of Directors/Trustees or of the
Executive Committee of the Fund signed by an
officer of the Fund and certified by its Secretary
or an Assistant Secretary, specifying the amount
of such payment, setting forth the purpose for
which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be
made.
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased. In any and every case where payment
for purchase of domestic securities for the account of the
Fund is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the
Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been
received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time
or times in its discretion appoint (and may at any time
remove) any other bank or trust company, which is itself
qualified under the Investment Company Act of 1940, as
amended, to act as a custodian, as its agent to carry out
such of the provisions of this Article 2 as the Custodian
may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian of
its responsibilities or liabilities hereunder.
2.10 Deposit of Securities in Securities Systems. The
Custodian may deposit and/or maintain domestic securities
owned by the Fund in a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal
agencies, collectively referred to herein as "Securities
System" in accordance with applicable Federal Reserve Board
and Securities and Exchange Commission rules and
PAGE 12
regulations, if any, and subject to the following
provisions:
1) Account of Custodian. The Custodian may keep
domestic securities of the Fund in a Securities
System provided that such securities are
represented in an account ("Account") of the
Custodian in the Securities System which shall not
include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise
for customers;
2) Records. The records of the Custodian, with
respect to domestic securities of the Fund which
are maintained in a Securities System, shall
identify by book-entry those securities belonging
to the Fund;
3) Payment of Fund Monies, Delivery of Securities.
Subject to Section 2.7, the Custodian shall pay
for domestic securities purchased for the account
of the Fund upon (i) receipt of advice from the
Securities System that such securities have been
transferred to the Account, and (ii) the making of
an entry on the records of the Custodian to
reflect such payment and transfer for the account
of the Fund. Subject to Section 2.2, the
Custodian shall transfer domestic securities sold
for the account of the Fund upon (i) receipt of
advice from the Securities System that payment for
such securities has been transferred to the
Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer
and payment for the account of the Fund. Copies
of all advices from the Securities System of
transfers of domestic securities for the account
of the Fund shall identify the Fund, be maintained
for the Fund by the Custodian and be provided to
the Fund at its request. The Custodian shall
furnish the Fund confirmation of each transfer to
or from the account of the Fund in the form of a
written advice or notice and shall furnish to the
Fund copies of daily transaction sheets reflecting
each day's transactions in the Securities System
for the account of the Fund;
4) Reports. The Custodian shall provide the Fund
with any report obtained by the Custodian on the
Securities System's accounting system, internal
accounting control and procedures for safeguarding
domestic securities deposited in the Securities
System, and further agrees to provide the Fund
with copies of any documentation it has relating
PAGE 13
to its arrangements with the Securities Systems as
set forth in this Agreement or as otherwise
required by the Securities and Exchange
Commission;
5) Annual Certificate. The Custodian shall have
received the initial or annual certificate, as the
case may be, required by Article 13 hereof;
6) Indemnification. Anything to the contrary in this
Contract notwithstanding, the Custodian shall be
liable to the Fund for any loss or expense,
including reasonable attorneys fees, or damage to
the Fund resulting from use of the Securities
System by reason of any failure by the Custodian
or any of its agents or of any of its or their
employees or agents or from failure of the
Custodian or any such agent to enforce effectively
such rights as it may have against the Securities
System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the
Custodian with respect to any claim against the
Securities System or any other person which the
Custodian may have as a consequence of any such
loss, expense or damage if and to the extent that
the Fund has not been made whole for any such
loss, expense or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper
System. The Custodian may deposit and/or maintain
securities owned by the Fund in the Direct Paper System of
the Custodian subject to the following provisions:
1) No transaction relating to securities in the
Direct Paper System will be effected in the
absence of Proper Instructions;
2) The Custodian may keep securities of the Fund in
the Direct Paper System only if such securities
are represented in an account ("Account") of the
Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to
securities of the Fund which are maintained in the
Direct Paper System shall identify by book-entry
those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased
for the account of the Fund upon the making of an
entry on the records of the Custodian to reflect
such payment and transfer of securities to the
account of the Fund. The Custodian shall transfer
securities sold for the account of the Fund upon
PAGE 14
the making of an entry on the records of the
Custodian to reflect such transfer and receipt of
payment for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation
of each transfer to or from the account of the
Fund, in the form of a written advice or notice,
of Direct Paper on the next business day following
such transfer and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's
transaction in the Securities System for the
account of the Fund;
6) The Custodian shall provide the Fund with any
report on its system of internal accounting
control as the Fund may reasonably request from
time to time;
2.12 Segregated Account. The Custodian shall, upon receipt
of Proper Instructions, which may be of a continuing nature
where deemed appropriate by mutual agreement of the parties,
establish and maintain a segregated account or accounts for
and on behalf of the Fund, into which account or accounts
may be transferred cash and/or securities, including
securities maintained in an account by the Custodian
pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund, the Custodian
and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization
or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund, (ii) for purposes
of segregating cash or government securities in connection
with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or
sold by the Fund, (iii) for the purposes of compliance by
the Fund with the procedures required by Investment Company
Act Release No. 10666, or any subsequent release, rule or
policy, of the Securities and Exchange Commission relating
to the maintenance of segregated accounts by registered
investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt
of, in addition to Proper Instructions, a certified copy of
a resolution of the Board of Directors/Trustees or of the
Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary,
setting forth the purpose or purposes of such segregated
PAGE 15
account and declaring such purposes to be proper corporate
purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to domestic securities of the Fund held by it and in
connection with transfers of such securities.
2.14 Proxies. If the securities are registered other than
in the name of the Fund or a nominee of the Fund, the
Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the
registered holder of such securities, all proxies, without
indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Fund such proxies,
all proxy soliciting materials and all notices relating to
such securities.
2.15 Communications Relating to Fund Portfolio Securities.
The Custodian shall transmit promptly to the Fund all
written information (including, without limitation, pendency
of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the
maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers of the domestic
securities being held for the Fund by the Custodian, an
agent appointed under Section 2.9, or sub-custodian
appointed under Section 1. With respect to tender or
exchange offers, the Custodian shall transmit promptly to
the Fund all written information received by the Custodian,
an agent appointed under Section 2.9, or sub-custodian
appointed under Section 1 from issuers of the domestic
securities whose tender or exchange is sought and from the
party (or his agents) making the tender or exchange offer.
If the Fund desires to take action with respect to any
tender offer, exchange offer or any other similar
transaction, the Fund shall notify the Custodian of such
desired action at least 72 hours (excluding holidays and
weekends) prior to the time such action must be taken under
the terms of the tender, exchange offer, or other similar
transaction, and it will be the responsibility of the
Custodian to timely transmit to the appropriate person(s)
the Fund's notice. Where the Fund does not notify the
Custodian of its desired action within the aforesaid 72 hour
period, the Custodian shall use its best efforts to timely
transmit the Fund's notice to the appropriate person.
2.16 Reports to Fund by Independent Public Accountants. The
Custodian shall provide the Fund, at such times as the Fund
may reasonably require, with reports by independent public
PAGE 16
accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including
domestic securities deposited and/or maintained in a
Securities System, relating to the services provided by the
Custodian under this Contract; such reports shall be of
sufficient scope and in sufficient detail, as may reasonably
be required by the Fund to provide reasonable assurance that
any material inadequacies existing or arising since the
prior examination would be disclosed by such examination.
The reports must describe any material inadequacies
disclosed and, if there are no such inadequacies, the
reports shall so state.
3. Duties of the Custodian with Respect to Property of the Fund
Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Custodian
is authorized and instructed to employ Chase Manhattan Bank,
N.A, ("Chase") as sub-custodian for the Fund's securities,
cash and other assets maintained outside of the United
States ("foreign assets") all as described in the
Subcustodian Agreement between the Custodian and Chase.
Upon receipt of "Proper Instructions", together with a
certified resolution of the Fund's Board of
Directors/Trustees, the Custodian and the Fund may agree to
designate additional proper institutions and foreign
securities depositories to act as sub-custodians of the
Fund's foreign assets. Upon receipt of Proper Instructions
from the Fund, the Custodian shall cease the employment of
any one or more of such sub-custodians for maintaining
custody of the Fund's foreign assets.
3.2 Assets to be Held. The Custodian shall limit the
foreign assets maintained in the custody of foreign sub-
custodians to foreign assets specified under the terms of
the Subcustodian Agreement between the Custodian and Chase.
3.3 Foreign Securities Depositories. Except as may
otherwise be agreed upon in writing by the Custodian and the
Fund, foreign assets of the Fund shall be maintained in
foreign securities depositories only through arrangements
implemented by the banking institutions serving as sub-
custodians pursuant to the terms hereof.
3.4 Segregation of Securities. The Custodian shall
identify on its books as belonging to the Fund, the foreign
assets of the Fund held by Chase and by each foreign sub-
custodian.
3.5 Access of Independent Accountants of the Fund. Upon
request of the Fund, the Custodian will use its best efforts
(subject to applicable law) to arrange for the independent
accountants, officers or other representatives of the Fund
PAGE 17
or the Custodian to be afforded access to the books and
records of Chase and any banking or other institution
employed as a sub-custodian for the Fund by Chase or the
Custodian insofar as such books and records relate to the
performance of Chase or such banking or other institution
under any agreement with the Custodian or Chase. Upon
request of the Fund, the Custodian shall furnish to the Fund
such reports (or portions thereof) of Chase's external
auditors as are available to the Custodian and which relate
directly to Chase's system of internal accounting controls
applicable to Chase's duties as a subcustodian or which
relate to the internal accounting controls of any
subcustodian employed by Chase with respect to foreign
assets of the Fund.
3.6 Reports by Custodian. The Custodian will supply to the
Fund from time to time, as mutually agreed upon, statements
in respect of the foreign assets of the Fund held pursuant
to the terms of the Subcustodian Agreement between the
Custodian and Chase, including but not limited, to an
identification of entities having possession of the Fund's
foreign assets and advices or notifications of any transfers
of foreign assets to or from each custodial account
maintained by any sub-custodian on behalf of the Fund
indicating, as to foreign assets acquired for the Fund, the
identity of the entity having physical possession of such
foreign assets.
3.7 Transactions in Foreign Assets of the Fund. All
transactions with respect to the Fund's foreign assets shall
be in accordance with, and subject to, the provisions of the
Subcustodian Agreement between Chase and the Custodian.
3.8 Responsibility of Custodian, Sub-Custodian, and Fund.
Notwithstanding anything to the contrary in this Custodian
Contract, the Custodian shall not be liable to the Fund for
any loss, damage, cost, expense, liability or claim arising
out of or in connection with the maintenance of custody of
the Fund's foreign assets by Chase or by any other banking
institution or securities depository employed pursuant to
the terms of any Subcustodian Agreement between Chase and
the Custodian, except that the Custodian shall be liable for
any such loss, damage, cost, expense, liability or claim to
the extent provided in the Subcustodian Agreement between
Chase and the Custodian or attributable to the failure of
the Custodian to exercise the standard of care set forth in
Article 12 hereof in the performance of its duties under
this Contract or such Subcustodian Agreement. At the
election of the Fund, the Fund shall be entitled to be
subrogated to the rights of the Custodian under the
Subcustodian Agreement with respect to any claims arising
PAGE 18
thereunder against Chase or any other banking institution or
securities depository employed by Chase if and to the extent
that the Fund has not been made whole therefor. As between
the Fund and the Custodian, the Fund shall be solely
responsible to assure that the maintenance of foreign
securities and cash pursuant to the terms of the
Subcustodian Agreement complies with all applicable rules,
regulations, interpretations and orders of the Securities
and Exchange Commission, and the Custodian assumes no
responsibility and makes no representations as to such
compliance.
3.9 Monitoring Responsibilities. With respect to the
Fund's foreign assets, the Custodian shall furnish annually
to the Fund, during the month of June, information
concerning the sub-custodians employed by the Custodian.
Such information shall be similar in kind and scope to that
furnished to the Fund in connection with the initial
approval of this Contract. In addition, the Custodian will
promptly inform the Fund in the event that the Custodian
learns of a material adverse change in the financial
condition of a sub-custodian.
3.10 Branches of U.S. Banks. Except as otherwise set forth
in this Contract, the provisions of this Article 3 shall not
apply where the custody of the Fund's assets is maintained
in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment
Company Act of 1940 which meets the qualification set forth
in Section 26(a) of said Act. The appointment of any such
branch as a sub-custodian shall be governed by Section 1 of
this Contract.
4. Payments for Repurchases or Redemptions and Sales of Shares
of the Fund
From such funds as may be available for the purpose but
subject to the limitations of the Governing Documents of the Fund
and any applicable votes of the Board of Directors/Trustees of
the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer
Agent a request for redemption or repurchase of their Shares. In
connection with the redemption or repurchase of Shares of the
Fund, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholder. In connection with
the redemption or repurchase of Shares of the Fund, the Custodian
shall honor checks drawn on the Custodian by a holder of Shares,
which checks have been furnished by the Fund to the holder of
Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to
time between the Fund and the Custodian.
PAGE 19
The Custodian shall receive from the distributor for the
Fund's Shares or from the Transfer Agent of the Fund and deposit
as received into the Fund's account such payments as are received
for Shares of the Fund issued or sold from time to time by the
Fund. The Custodian will provide timely notification to the Fund
and the Transfer Agent of any receipt by it of payments for
Shares of the Fund.
5. Proper Instructions
Proper Instructions as used herein means a writing signed or
initialled by one or more person or persons as the Board of
Directors/Trustees shall have from time to time authorized. Each
such writing shall set forth the specific transaction or type of
transaction involved, including a specific statement of the
purpose for which such action is requested, or shall be a blanket
instruction authorizing specific transactions of a repeated or
routine nature. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all
oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the
authorization by the Board of Directors/Trustees of the Fund
accompanied by a detailed description of procedures approved by
the Board of Directors/Trustees, Proper Instructions may include
communications effected directly between electro-mechanical or
electronic devices provided that the Board of Directors/Trustees
and the Custodian are satisfied that such procedures afford
adequate safeguards for the Fund's assets.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express
authority from the Fund:
1) make payments to itself or others for minor
expenses of handling securities or other similar
items relating to its duties under this Contract,
provided that all such payments shall be accounted
for to the Fund;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the Fund,
checks, drafts and other negotiable instruments on
the same day as received; and
4) in general, attend to all non-discretionary
details in connection with the sale, exchange,
substitution, purchase, transfer and other
dealings with the securities and property of the
Fund except as otherwise directed by the Board of
Directors/Trustees of the Fund.
<PAGE>
PAGE 20
7. Evidence of Authority, Reliance on Documents
The Custodian shall be protected in acting upon any
instructions, notice, request, consent, certificate or other
instrument or paper reasonably and in good faith believed by it
to be genuine and to have been properly executed by or on behalf
of the Fund in accordance with Article 5 hereof. The Custodian
may receive and accept a certified copy of a vote of the Board of
Directors/Trustees of the Fund as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or
(b) of any determination or of any action by the Board of
Directors/Trustees pursuant to the Governing Documents of the
Fund as described in such vote, and such vote may be considered
as in full force and effect until receipt by the Custodian of
written notice to the contrary. So long as and to the extent
that it is in the exercise of the standard of care set forth in
Article 12 hereof, the Custodian shall not be responsible for the
title, validity or genuineness of any property or evidence of
title thereto received by it or delivered by it pursuant to this
Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party
or parties.
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary
information to the person or persons appointed by the Board of
Directors/Trustees of the Fund to keep the books of account of
the Fund and/or compute the net asset value per share of the
outstanding shares of the Fund or, if directed in writing to do
so by the Fund, shall itself keep such books of account and/or
compute such net asset value per share. If so directed, the
Custodian shall also calculate daily the net income of the Fund
as described in the Fund's currently effective prospectus and
shall advise the Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an
officer of the Fund to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various
components. The calculations of the net asset value per share
and the daily income of the Fund shall be made at the time or
times and in the manner described from time to time in the Fund's
currently effective prospectus.
9. Records, Inventory
The Custodian shall create and maintain all records relating
to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the
Investment Company Act of 1940, with particular attention to
Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the
PAGE 21
Fund. All such records shall be the property of the Fund and
shall at all times during the regular business hours of the
Custodian be open for inspection and audit by duly authorized
officers, employees or agents of the Fund and employees and
agents of the Securities and Exchange Commission, and, in the
event of termination of this Agreement, will be delivered in
accordance with Section 14 hereof. The Custodian shall, at the
Fund's request, supply the Fund with a tabulation of securities
owned by the Fund and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall
be agreed upon between the Fund and the Custodian, include
certificate numbers in such tabulations. The Custodian shall
conduct a periodic inventory of all securities and other property
subject to this Agreement and provide to the Fund a periodic
reconciliation of the vaulted position of the Fund to the
appraised position of the Fund. The Custodian will promptly
report to the Fund the results of the reconciliation, indicating
any shortages or discrepancies uncovered thereby, and take
appropriate action to remedy any such shortages or discrepancies.
10. Opinion of Fund's Independent Accountant
The Custodian shall cooperate with the Fund's independent
public accountants in connection with the annual and other audits
of the books and records of the Fund and take all reasonable
action, as the Fund may from time to time request, to provide
from year to year the necessary information to such accountants
for the expression of their opinion without any qualification as
to the scope of their examination, including but not limited to,
any opinion in connection with the preparation of the Fund's Form
N-lA, and Form N-SAR or other annual reports to the Securities
and Exchange Commission and with respect to any other
requirements of such Commission.
11. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation
for its services and expenses as Custodian, as agreed upon from
time to time between the Fund and the Custodian.
12. Responsibility of Custodian
Notwithstanding anything to the contrary in this Agreement,
the Custodian shall be held to the exercise of reasonable care in
carrying out the provisions of this Contract, but shall be kept
indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence.
In order for the indemnification provision contained in this
Section to apply, it is understood that if in any case the Fund
may be asked to indemnify or save the Custodian harmless, the
Fund shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further
understood that the Custodian will use all reasonable care to
identify and notify the Fund promptly concerning any situation
PAGE 22
which presents or appears likely to present the probability of
such a claim for indemnification against the Fund. The Fund,
shall have the option to defend the Custodian against any claim
which may be the subject of this indemnification, and in the
event that the Fund so elects, it will so notify the Custodian,
and thereupon the Fund shall take over complete defense of the
claim and the Custodian shall in such situation initiate no
further legal or other expenses for which it shall seek
indemnification under this Section. The Custodian shall in no
case confess any claim or make any compromise in any case in
which the Fund will be asked to indemnify the Custodian except
with the Fund's prior written consent. Nothing herein shall be
construed to limit any right or cause of action on the part of
the Custodian under this Contract which is independent of any
right or cause of action on the part of the Fund. The Custodian
shall be entitled to rely on and may act upon advice of counsel
(who may be counsel for the Fund or such other counsel as may be
agreed to by the parties) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to
such advice. Notwithstanding the foregoing, the responsibility
of the Custodian with respect to redemptions effected by check
shall be in accordance with a separate Agreement entered into
between the Custodian and the Fund.
If the Fund requires the Custodian to take any action with
respect to securities, which action involves the payment of money
or which action may, in the opinion of the Custodian, result in
the Custodian or its nominee assigned to the Fund being liable
for the payment of money or incurring liability of some other
form, the Fund, as a prerequisite to requiring the Custodian to
take such action, shall provide indemnity to the Custodian in an
amount and form satisfactory to it.
If the Fund requires the Custodian to advance cash or
securities for any purpose or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to
act or willful misconduct, any property at any time held for the
account of the Fund shall be security therefor and should the
Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of the Fund's
assets to the extent necessary to obtain reimbursement, provided
that the Custodian gives the Fund reasonable notice to repay such
cash or securities advanced, however, such notice shall not
preclude the Custodian's right to assert any lien under this
provision.
13. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution,
shall continue in full force and effect until terminated as
PAGE 23
hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either
party by an instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take effect not
sooner than sixty (60) days after the date of such delivery or
mailing in the case of a termination by the Fund, and not sooner
than 180 days after the date of such delivery or mailing in the
case of a termination by the Custodian; provided, however that
the Custodian shall not act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or
an Assistant Secretary that the Board of Directors/Trustees of
the Fund has approved the initial use of a particular Securities
System and the receipt of an annual certificate of the Secretary
or an Assistant Secretary that the Board of Directors/Trustees
has reviewed the use by the Fund of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company
Act of 1940, as amended and that the Custodian shall not act
under Section 2.11 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the
Board of Directors/Trustees has approved the initial use of the
Direct Paper System and the receipt of an annual certificate of
the Secretary or an Assistant Secretary that the Board of
Directors/Trustees has reviewed the use by the Fund of the Direct
Paper System; provided further, however, that the Fund shall not
amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the
Governing Documents of the Fund, and further provided, that the
Fund may at any time by action of its Board of Directors/Trustees
(i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event
at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements, provided that the Custodian
shall not incur any costs, expenses or disbursements specifically
in connection with such termination unless it has received prior
approval from the Fund, which approval shall not be unreasonably
withheld.
14. Successor Custodian
If a successor custodian shall be appointed by the Board of
Directors/Trustees of the Fund, the Custodian shall, upon
termination, deliver to such successor custodian at the office of
the Custodian, duly endorsed and in the form for transfer, all
securities, funds and other properties then held by it hereunder
PAGE 24
and shall transfer to an account of the successor custodian all
of the Fund's securities held in a Securities System. The
Custodian shall also use its best efforts to assure that the
successor custodian will continue any subcustodian agreement
entered into by the Custodian and any subcustodian on behalf of
the Fund.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified copy
of a vote of the Board of Directors/Trustees of the Fund, deliver
at the office of the Custodian and transfer such securities,
funds and other properties in accordance with such vote.
In the event that no written order designating a successor
custodian or certified copy of a vote of the Board of
Directors/Trustees shall have been delivered to the Custodian on
or before the date when such termination shall become effective,
then the Custodian shall have the right to deliver to a bank
or trust company, which is a "bank" as defined in the Investment
Company Act of 1940, doing business in Boston, Massachusetts, of
its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not
less than $25,000,000, all securities, funds and other properties
held by the Custodian and all instruments held by the Custodian
relative thereto and all other property held by it under this
Contract and to transfer to an account of such successor
custodian all of the Fund's securities held in any Securities
System. Thereafter, such bank or trust company shall be the
successor of the Custodian under this Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to procure the
certified copy of the vote referred to or of the Board of
Directors/Trustees to appoint a successor custodian, the
Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such
securities, funds and other properties and the provisions of this
Contract relating to the duties and obligations of the Custodian
shall remain in full force and effect. If while this Contract is
in force the Fund shall be liquidated pursuant to law, the
Custodian shall distribute, either in cash or (if the Fund so
orders) in the portfolio securities and other assets of the Fund,
pro rata among the holders of shares of the Fund as certified by
the Transfer Agent, the property of the Fund which remains after
paying or satisfying all expenses and liabilities of the Fund.
Section 12 hereof shall survive any termination of this Contract.
<PAGE>
PAGE 25
15. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Fund may from time to time agree on such
provisions interpretive of or in addition to the provisions of
this Contract as may in their joint opinion be consistent with
the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Governing Documents of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Contract.
16. Notice
Any notice shall be sufficiently given when sent by
registered or certified mail, or by such other means as the
parties shall agree, to the other party at the address of such
party set forth above or at such other address as such party may
from time to time specify in writing to the other party.
17. Bond
The Custodian shall, at all times, maintain a bond in such
form and amount as is acceptable to the Fund which shall be
issued by a reputable fidelity insurance company authorized to do
business in the place where such bond is issued against larceny
and embezzlement, covering each officer and employee of the
Custodian who may, singly or jointly with others, have access to
securities or funds of the Fund, either directly or through
authority to receive and carry out any certificate instruction,
order request, note or other instrument required or permitted by
this Agreement. The Custodian agrees that it shall not cancel,
terminate or modify such bond insofar as it adversely affects the
Fund except after written notice given to the Fund not less than
10 days prior to the effective date of such cancellation,
termination or modification. The Custodian shall furnish to the
Fund a copy of each such bond and each amendment thereto.
18. Confidentiality
The Custodian agrees to treat all records and other
information relative to the Fund and its prior, present or future
shareholders as confidential, and the Custodian, on behalf of
itself and its employees, agrees to keep confidential all such
information except, after prior notification to and approval in
writing by the Fund, which approval shall not be unreasonably
withheld and may not be withheld where the Custodian may be
exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Fund.
<PAGE>
PAGE 26
19. Exemption from Liens
The securities and other assets held by the Custodian for
the Fund shall be subject to no lien or charge of any kind in
favor of the Custodian or any person claiming through the
Custodian, but nothing herein shall be deemed to deprive the
Custodian of its right to invoke any and all remedies available
at law or equity to collect amounts due it under this Agreement.
Neither the Custodian nor any sub-custodian appointed pursuant to
Section 1 hereof shall have any power or authority to assign,
hypothecate, pledge or otherwise dispose of any securities held
by it for the Fund, except upon the direction of the Fund, duly
given as herein provided, and only for the account of the Fund.
20. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth
of Massachusetts.
21. Prior Contracts
Without derogating any of the rights established by such
contracts, this Contract supersedes and terminates, as of the
date hereof, all prior contracts between the Fund and the
Custodian relating to the custody of the Fund's assets.
22. The Parties
All references herein to "the Fund" are to each of the funds
listed on Appendix A individually, as if this Contract were
between such individual fund and the Custodian. In the case of a
series fund or trust, all references to "the Fund" are to the
individual series or portfolio of such fund or trust, or to such
fund or trust on behalf of the individual series or portfolio, as
appropriate. Any reference in this Contract to "the parties"
shall mean the Custodian and such other individual Fund as to
which the matter pertains.
23. Governing Documents.
The term "Governing Documents" means the Articles of
Incorporation, Agreement of Trust, By-Laws and Registration
Statement filed under the Securities Act of 1933, as amended from
time to time.
24. Subcustodian Agreement.
Reference to the "Subcustodian Agreement" between the
Custodian and Chase shall mean any such agreement which shall be
in effect from time to time between Chase and the Custodian with
respect to foreign assets of the Fund.
25. Directors and Trustees.
It is understood and is expressly stipulated that neither
the holders of shares in the Fund nor any Directors or Trustees
of the Fund shall be personally liable hereunder.
26. Massachusetts Business Trust
With respect to any Fund which is a party to this Contract
and which is organized as a Massachusetts business trust, the
term Fund means and refers to the trustees from time to time
PAGE 27
serving under the applicable trust agreement (Declaration of
Trust) of such Trust as the same may be amended from time to
time. It is expressly agreed that the obligations of any such
Trust hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the
Trust, personally, but bind only the trust property of the Trust,
as provided in the Declaration of Trust of the Trust. The
execution and delivery of this Contract has been authorized by
the trustees and signed by an authorized officer of the Trust,
acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officer shall be deemed
to have been made by any of them but shall bind only the trust
property of the Trust as provided in its Declaration of Trust.
27. Successors of Parties.
This Contract shall be binding on and shall inure to the
benefit of the Fund and the Custodian and their respective
successors.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the dates indicated below.
DATED: September 28, 1987
__________________
STATE STREET BANK AND TRUST COMPANY
ATTEST:
/s/Kathleen M. Kubit /s/Charles Cassidy
_____________________ By: ___________________________
Assistant Secretary Vice President
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Stock Fund
PAGE 28
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
New York Tax-Free Money Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
New York Tax-Free Bond Fund
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
<PAGE>
PAGE 29
DATED: September 28, 1987
___________________
ATTEST:
/s/Nancy J. Wortman /s/Carmen F. Deyesu
_______________________ By: _____________________________
<PAGE>
PAGE 30
Appendix A
The following Funds are parties to this Agreement and have
so indicated their intention to be bound by such Agreement by
executing the Agreement on the dates indicated thereon.
T. Rowe Price California Tax-Free Income Trust
on behalf of the
California Tax-Free Bond Fund and
California Tax-Free Money Fund
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Equity Income Fund
T. Rowe Price GNMA Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Institutional Trust on behalf of the
Tax-Exempt Reserve Portfolio
T. Rowe Price International Trust on behalf of the
T. Rowe Price International Bond Fund and
T. Rowe Price International Stock Fund
T. Rowe Price New America Growth Fund
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Prime Reserve Fund, Inc.
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price State Tax-Free Income Trust on behalf of the
Maryland Tax-Free Bond Fund,
New York Tax-Free Bond Fund and
New York Tax-Free Money Fund
T. Rowe Price Tax-Exempt Money Fund, Inc.
T. Rowe Price Tax-Free High Yield Fund, Inc.
T. Rowe Price Tax-Free Income Fund, Inc.
T. Rowe Price Tax-Free Short-Intermediate Fund, Inc.
T. Rowe Price U.S. Treasury Money Fund, Inc.<PAGE>
PAGE 31
AMENDMENT NO. 1 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
THIS AGREEMENT, made as of this 24th day of June, 1988, by
and between: T. Rowe Price Growth Stock Fund, Inc., T. Rowe Price
New Horizons Fund, Inc., T. Rowe Price New Era Fund, Inc., T.
Rowe Price New Income Fund, Inc., T. Rowe Price Prime Reserve
Fund, Inc., T. Rowe Price International Trust, T. Rowe Price U.S.
Treasury Money Fund, Inc., T. Rowe Price Growth & Income Fund,
Inc., T. Rowe Price Tax-Exempt Money Fund, Inc., T. Rowe Price
Tax-Free Income Fund, Inc., T. Rowe Price Tax-Free Short-
Intermediate Fund, Inc., T. Rowe Price Short-Term Bond Fund,
Inc., T. Rowe Price High Yield Fund, Inc., T. Rowe Price Tax-Free
High Yield Fund, Inc., T. Rowe Price New America Growth Fund, T.
Rowe Price Equity Income Fund, T. Rowe Price GNMA Fund, T. Rowe
Price Capital Appreciation Fund, T. Rowe Price Institutional
Trust, T. Rowe Price State Tax-Free Income Trust, T. Rowe Price
California Tax-Free Income Trust, T. Rowe Price Science &
Technology Fund, Inc., (hereinafter together called the "Funds"
and individually "Fund") and State Street Bank and Trust Company,
a Massachusetts trust,
W I T N E S S E T H:
It is mutually agreed that the Custodian Contract made by
the parties on the 28th day of September, 1987, is hereby amended
by adding thereto the T. Rowe Price Small-Cap Value Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE NEW HORIZONS FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE NEW ERA FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
<PAGE>
PAGE 32
(SIGNATURES CONTINUED)
T. ROWE PRICE NEW INCOME FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE PRIME RESERVE FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE INTERNATIONAL TRUST
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
/s/Henry H.Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE GROWTH & INCOME FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
PAGE 33
(SIGNATURES CONTINUED)
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE HIGH YIELD FUND, INC.
/s/ Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE NEW AMERICA GROWTH FUND
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE EQUITY INCOME FUND
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE GNMA FUND
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE CAPITAL APPRECIATION FUND
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
<PAGE>
PAGE 34
(SIGNATURES CONTINUED)
T. ROWE PRICE INSTITUTIONAL TRUST
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
STATE STREET BANK AND TRUST COMPANY
/s/William Blackwell
______________________________________________
By:
<PAGE>
PAGE 35
AMENDMENT NO. 2 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, between State Street Bank and Trust Company and
each of the Parties listed on Appendix A thereto is hereby
further amended, as of October 19, 1988, by adding thereto the T.
Rowe Price International Discovery Fund, Inc., a separate series
of T. Rowe Price International Trust.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
PAGE 36
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Guy R. Sturgeon
______________________________________________
By:
<PAGE>
PAGE 37
AMENDMENT NO. 3 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988 and October 19, 1988, between State Street Bank and
Trust Company and each of the Parties listed on Appendix A
thereto is hereby further amended, as of February 22, 1989, by
adding thereto the T. Rowe Price International Equity Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
PAGE 38
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
STATE STREET BANK AND TRUST COMPANY
/s/K. Donelson
______________________________________________
By:
<PAGE>
PAGE 39
AMENDMENT NO. 4 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988 and February 22, 1989, between
State Street Bank and Trust Company and each of the Parties
listed on Appendix A thereto is hereby further amended, as of
July 19, 1989, by adding thereto the Institutional International
Funds, Inc., on behalf of the Foreign Equity Fund.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
PAGE 40
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
______________________________________________
By:
<PAGE>
PAGE 41
AMENDMENT NO. 5 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, and July 19,
1989 between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of September 15, 1989, by adding thereto the T. Rowe Price
U.S. Treasury Funds, Inc., on behalf of the U.S. Treasury
Intermediate Fund and the U.S. Treasury Long-Term Fund.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
PAGE 42
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
/s/Henry H. Hopkins
____________________________________
By: Henry H. Hopkins
Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
____________________________________
By:
<PAGE>
PAGE 43
AMENDMENT NO. 6 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19, 1989
and September 15, 1989, between State Street Bank and Trust
Company and each of the Parties listed on Appendix A thereto is
hereby further amended, as of December 15, 1989, by restating
Section 2.15 as follows:
2.15 Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Fund all written
information (including, without limitation, pendency of calls and
maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put
options written by the Fund and the maturity of futures contracts
purchased or sold by the Fund) received by the Custodian from
issuers of the domestic securities being held for the Fund by the
Custodian, an agent appointed under Section 2.9, or sub-custodian
appointed under Section 1. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund all
written information received by the Custodian, an agent appointed
under Section 2.9, or sub-custodian appointed under Section 1
from issuers of the domestic securities whose tender or exchange
is sought and from the party (or his agents) making the tender or
exchange offer. If the Fund desires to take action with respect
to any tender offer, exchange offer or any other similar
transaction, the Fund shall notify the Custodian of such desired
action at least 48 hours (excluding holidays and weekends) prior
to the time such action must be taken under the terms of the
tender, exchange offer, or other similar transaction, and it will
be the responsibility of the Custodian to timely transmit to the
appropriate person(s) the Fund's notice. Where the Fund does not
notify the custodian of its desired action within the aforesaid
48 hour period, the Custodian shall use its best efforts to
timely transmit the Fund's notice to the appropriate person. It
is expressly noted that the parties may negotiate and agree to
alternative procedures with respect to such 48 hour notice period
on a selective and individual basis.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
PAGE 44
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
PAGE 45
T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U. S. TREASURY FUNDS, INC.
U. S. Treasury Intermediate Fund
U. S. Treasury Long-Term Fund
/s/Carmen F. Deyesu
_________________________________________
By: Carmen F. Deyesu,
Treasurer
STATE STREET BANK AND TRUST COMPANY
/s/ E. D. Hawkes, Jr.
_________________________________________
By: E. D. Hawkes, Jr.
Vice President
<PAGE>
PAGE 46
Amendment No. 7 filed on Form SE January 25, 1990 with
International Trust (CIK 313212) Post Effective Amendment No. 17.
<PAGE>
PAGE 47
AMENDMENT NO. 8 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, and December 20,
1989, between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of January 25, 1990, by adding thereto the T. Rowe Price
European Stock Fund, a separate series of T. Rowe Price
International Trust.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
PAGE 48
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
/s/Henry H. Hopkins
_________________________________________
By: Henry H. Hopkins
Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
_________________________________________
By:
<PAGE>
PAGE 49
AMENDMENT NO. 9 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
and January 25, 1990 between State Street Bank and Trust Company
and each of the Parties listed on Appendix A thereto is hereby
further amended, as of February 21, 1990, by adding thereto the
T. Rowe Price Index Trust, Inc., on behalf of the T. Rowe Price
Equity Index Fund.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
PAGE 50
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins
Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
______________________________________
By:
<PAGE>
PAGE 51
AMENDMENT NO. 10 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, between State Street Bank
and Trust Company and each of the Parties listed on Appendix A
thereto is hereby further amended, as of June 12, 1990, by adding
thereto the T. Rowe Price Spectrum Fund, Inc., on behalf of the
Spectrum Growth Fund and the Spectrum Income Fund.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
PAGE 52
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
______________________________________
By:
<PAGE>
PAGE 53
AMENDMENT NO. 11 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, and June 12, 1990 between
State Street Bank and Trust Company and each of the Parties
listed on Appendix A thereto is hereby further amended, as of
July 18, 1990, by adding thereto the T. Rowe Price New Asia Fund,
a separate series of the T. Rowe Price International Funds, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
PAGE 54
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/ Guy R. Sturgeon
______________________________________
By: Guy R. Sturgeon
<PAGE>
PAGE 55
AMENDMENT NO. 12 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, and July 18,
1990 between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of October 15, 1990, by adding thereto the T. Rowe Price
Global Government Bond Fund, a separate series of the T. Rowe
Price International Funds, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
PAGE 56
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/ Guy R. Sturgeon
______________________________________
By:<PAGE>
PAGE 57
AMENDMENT NO. 13 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, and October 15, 1990, between State Street Bank and Trust
Company and each of the Parties listed on Appendix A thereto is
hereby further amended, as of February 13, 1991, by adding
thereto the Virginia Tax-Free Bond Fund and New Jersey Tax-Free
Bond Fund, two separate series of the T. Rowe Price State Tax-
Free Income Trust
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
PAGE 58
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/ Guy Sturgeon
______________________________________
By: Vice President<PAGE>
PAGE 59
AMENDMENT NO. 14 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, and February 13, 1991, between State
Street Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of March 6,
1991, by adding thereto the T. Rowe Price Balanced Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
PAGE 60
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
______________________________________
By:<PAGE>
PAGE 61
AMENDMENT NO. 15 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, and March 6, 1991,
between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of September 12, 1991, by adding thereto the T. Rowe Price
Adjustable Rate U.S. Government Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
PAGE 62
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S.
GOVERNMENT FUND, INC.
/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President
PAGE 63
STATE STREET BANK AND TRUST COMPANY
/s/
______________________________________
By:
<PAGE>
PAGE 64
AMENDMENT NO. 16 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991 and
September 12, 1991, between State Street Bank and Trust Company
and each of the Parties listed on Appendix A thereto is hereby
further amended, as of November 6, 1991, by adding thereto the T.
Rowe Price Japan Fund, a separate series of the T. Rowe Price
International Funds, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
PAGE 65
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
<PAGE>
PAGE 66
/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
______________________________________
By:
<PAGE>
PAGE 67
AMENDMENT NO. 17 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991 and November 6, 1991, between State Street
Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of April 23,
1992, by adding thereto the T. Rowe Price Mid-Cap Growth Fund,
Inc. and T. Rowe Price Short-Term Global Income Fund, a separate
series of the T. Rowe Price International Funds, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
PAGE 68
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
PAGE 69
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
/s/Henry H. Hopkins
_________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
____________________________________
By:
<PAGE>
PAGE 70
AMENDMENT NO. 18 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, and April 23, 1992, between
State Street Bank and Trust Company and each of the Parties
listed on Appendix A thereto is hereby further amended, as of
September 2, 1992, by adding thereto the T. Rowe Price OTC Fund,
a series of the T. Rowe Price OTC Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
<PAGE>
PAGE 71
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
PAGE 72
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
/s/Henry H. Hopkins
__________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
__________________________________
By:
<PAGE>
PAGE 73
AMENDMENT NO. 19 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, and
September 2, 1992, between State Street Bank and Trust Company
and each of the Parties listed on Appendix A thereto is hereby
further amended, as of November 3, 1992, by adding thereto the T.
Rowe Price Tax-Free Insured Intermediate Bond Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
PAGE 74
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
<PAGE>
PAGE 75
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
/s/Henry H. Hopkins
_________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
_________________________________________
By:
<PAGE>
PAGE 76
AMENDMENT NO. 20 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, and November 3, 1992, between State Street Bank and
Trust Company and each of the Parties listed on Appendix A
thereto is hereby further amended, as of December 16, 1992, by
adding thereto the T. Rowe Price Dividend Growth Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
PAGE 77
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
<PAGE>
PAGE 78
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
/s/Henry H. Hopkins
_________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
_________________________________________
By:
<PAGE>
PAGE 79
AMENDMENT NO. 21 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, and December 16, 1992, between State
Street Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of December 21,
1992, by adding thereto the Maryland Short-Term Tax-Free Bond
Fund, an additional series to the T. Rowe Price State Tax-Free
Income Trust.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
PAGE 80
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
PAGE 81
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
/s/Henry H. Hopkins
_________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
_________________________________________
By:
<PAGE>
PAGE 82
AMENDMENT NO. 22 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, and December 21,
1992, between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of January 28, 1993, by adding thereto the Georgia Tax-Free
Bond Fund and the Florida Insured Intermediate Tax-Free Fund,
additional series to the T. Rowe Price State Tax-Free Income
Trust.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
<PAGE>
PAGE 83
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
PAGE 84
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
/s/Henry H. Hopkins
_________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
_________________________________________
By:
<PAGE>
PAGE 85
AMENDMENT NO. 23 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
and January 28, 1993, between State Street Bank and Trust Company
and each of the Parties listed on Appendix A thereto is hereby
further amended, as of April 22, 1993, by adding thereto the T.
Rowe Price Blue Chip Growth Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
PAGE 86
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
<PAGE>
PAGE 87
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
/s/Henry H. Hopkins
_________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
__________________________________________
By:
<PAGE>
PAGE 88
AMENDMENT NO. 24 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, between State Street Bank and
Trust Company and each of the Parties listed on Appendix A
thereto is hereby further amended, as of September 16, 1993, by
adding thereto the T. Rowe Price Summit Funds, Inc. and T. Rowe
Price Summit Municipal Funds, Inc.
Notwithstanding anything to the contrary herein, it is
understood that the T. Rowe Price Summit Funds, Inc. and T. Rowe
Price Summit Municipal Funds, Inc. (collectively referred to as
the "Funds") shall not be responsible for paying any of the fees
or expenses set forth herein but that, in accordance with the
Investment Management Agreement, dated September 16, 1993,
between the Funds and T. Rowe Price Associates, Inc. ("T. Rowe
Price"), the Funds will require T. Rowe Price to pay all such
fees and expenses.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
PAGE 89
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
<PAGE>
PAGE 90
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
/s/Henry H. Hopkins
________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
________________________________________
By:
<PAGE>
PAGE 91
AMENDMENT NO. 25 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, and September 16, 1993, between
State Street Bank and Trust Company and each of the Parties
listed on Appendix A thereto is hereby further amended, as of
November 3, 1993, by adding thereto the T. Rowe Price Latin
America Fund, a separate series of the T. Rowe Price
International Funds, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
<PAGE>
PAGE 92
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
PAGE 93
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
/s/Henry H. Hopkins
________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
________________________________________
By:
<PAGE>
PAGE 94
AMENDMENT NO. 26 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, and
November 3, 1993, between State Street Bank and Trust Company and
each of the Parties listed on Appendix A thereto is hereby
further amended, as of March 1, 1994, by adding thereto the T.
Rowe Price Equity Income Portfolio and T. Rowe Price New America
Growth Portfolio, two separate series of the T. Rowe Price Equity
Series, Inc. and T. Rowe Price International Stock Portfolio, a
separate series of the T. Rowe Price International Series, Inc.
Notwithstanding anything to the contrary herein, it is
understood that the T. Rowe Price Equity Series, Inc. and T. Rowe
Price International Series, Inc. (collectively referred to as the
"Funds") shall not be responsible for paying any of the fees or
expenses set forth herein but that, in accordance with the
Investment Management Agreements, dated March 1, 1994, between
the Funds and T. Rowe Price Associates, Inc. and Rowe Price-
Fleming International, Inc. (collectively referred to as "T. Rowe
Price"), the Funds will require T. Rowe Price to pay all such
fees and expenses.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
<PAGE>
PAGE 95
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
PAGE 96
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
PAGE 97
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
/s/Henry H. Hopkins
________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
________________________________________
By:
<PAGE>
PAGE 98
AMENDMENT NO. 27 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, and March 1, 1994, between State Street Bank and Trust
Company and each of the Parties listed on Appendix A thereto is
hereby further amended, as of April 21, 1994, by adding thereto
the T. Rowe Price Limited-Term Bond Portfolio, a separate series
of the T. Rowe Price Fixed Income Series, Inc.
Notwithstanding anything to the contrary herein, it is
understood that the T. Rowe Price Fixed Income Series, Inc.
(referred to as the "Fund") shall not be responsible for paying
any of the fees or expenses set forth herein but that, in
accordance with the Investment Management Agreement, dated April
21, 1994, between the Fund and T. Rowe Price Associates, Inc.
(referred to as "T. Rowe Price"), the Fund will require T. Rowe
Price to pay all such fees and expenses.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
PAGE 99
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
PAGE 100
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
<PAGE>
PAGE 101
/s/Henry H. Hopkins
________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
________________________________________
By:
<PAGE>
PAGE 102
AMENDMENT NO. 28 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, and April 21, 1994, between State Street
Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of July 27,
1994, by adding thereto the T. Rowe Price Personal Strategy
Balanced Fund, T. Rowe Price Personal Strategy Growth Fund, and
T. Rowe Price Personal Strategy Income Fund, three separate
series of the T. Rowe Price Personal Strategy Funds, Inc.
Notwithstanding anything to the contrary herein, it is
understood that the T. Rowe Price Personal Strategy Funds, Inc.
(collectively referred to as the "Funds") shall not be
responsible for paying any of the fees or expenses set forth
herein but that, in accordance with the Investment Management
Agreements, dated July 27, 1994, between the Funds and T. Rowe
Price Associates, Inc. (referred to as "T. Rowe Price"), the
Funds will require T. Rowe Price to pay all such fees and
expenses.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
<PAGE>
PAGE 103
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
PAGE 104
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
PAGE 105
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
/s/Henry H. Hopkins
________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
________________________________________
By:
<PAGE>
PAGE 106
AMENDMENT NO. 29 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, and April 21, 1994, between State Street
Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of July 27,
1994, by adding thereto the T. Rowe Price Personal Strategy
Balanced Strategy Balanced Portfolio, a separate series of the T.
Rowe Price Equity Series, Inc.
Notwithstanding anything to the contrary herein, it is
understood that the T. Rowe Price Personal Strategy Balanced
Portfolio, a separate series of the T. Rowe Price Equity Series,
Inc. (referred to as the "Fund) shall not be responsible for
paying any of the fees or expenses set forth herein but that, in
accordance with the Investment Management Agreement, dated July
27, 1994, between the Fund and T. Rowe Price Associates, Inc.
(referred to as "T. Rowe Price"), the Fund will require T. Rowe
Price to pay all such fees and expenses.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
<PAGE>
PAGE 107
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
PAGE 108
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
<PAGE>
PAGE 109
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
/s/Henry H. Hopkins
________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
________________________________________
By:
<PAGE>
PAGE 110
AMENDMENT NO. 30 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, and July 27, 1994 between
State Street Bank and Trust Company and each of the Parties
listed on Appendix A thereto is hereby further amended, as of
September 21, 1994, by adding thereto the T. Rowe Price Value
Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
PAGE 111
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
PAGE 112
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE VALUE FUND, INC.
<PAGE>
PAGE 113
/s/Henry H. Hopkins
________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Carol C. Ayotte
________________________________________
By:Carol C. Ayotte, Vice President
<PAGE>
PAGE 114
AMENDMENT NO. 31 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, and September
21, 1994 between State Street Bank and Trust Company and each of
the Parties listed on Appendix A thereto is hereby further
amended, as of November 1, 1994, by adding thereto the T. Rowe
Price Virginia Short-Term Tax-Free Bond Fund, a separate series
of the T. Rowe Price State Tax-Free Income Trust.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
PAGE 115
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
<PAGE>
PAGE 116
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
PAGE 117
T. ROWE PRICE VALUE FUND, INC.
/s/Henry H. Hopkins
________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Carol C. Ayotte
________________________________________
By: Carol C. Ayotte, Vice President
<PAGE>
PAGE 118
AMENDMENT NO. 32 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, and November 1, 1994 between State Street Bank and Trust
Company and each of the Parties listed on Appendix A thereto is
hereby further amended, as of November 2, 1994, by adding thereto
the T. Rowe Price Capital Opportunity Fund, Inc. and the T. Rowe
Price Emerging Markets Bond Fund, a separate series of the T.
Rowe Price International Funds, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
PAGE 119
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
PAGE 120
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
PAGE 121
T. ROWE PRICE VALUE FUND, INC.
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
/s/Henry H. Hopkins
________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Carol C. Ayotte
________________________________________
By:Carol C. Ayotte, Vice President
<PAGE>
PAGE 122
AMENDMENT NO. 33 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, and November 2, 1994 between State Street
Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of January 25,
1995, by adding thereto the T. Rowe Price Emerging Markets Stock
Fund, a separate series of the T. Rowe Price International Funds,
Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
PAGE 123
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
<PAGE>
PAGE 124
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
<PAGE>
PAGE 125
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE VALUE FUND, INC.
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
/s/Henry H. Hopkins
_____________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Carol C. Ayotte
_____________________________________________
By: Carol C. Ayotte, Vice President
<PAGE>
PAGE 126
AMENDMENT NO. 34 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, November 2, 1994, and January 25, 1995,
between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of September 20, 1995, by adding thereto the T. Rowe Price
Corporate Income Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
PAGE 127
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
PAGE 128
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC., now known as T. ROWE PRICE SHORT-TERM U.S.
GOVERNMENT FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
<PAGE>
PAGE 129
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE VALUE FUND, INC.
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
/s/Henry H. Hopkins
_____________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Carol C. Ayotte
_____________________________________________
By: Carol C. Ayotte, Vice President
<PAGE>
PAGE 130
AMENDMENT NO. 35 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, November 2, 1994, January 25, 1995,
September 20, 1995, and October 11, 1995, between State Street
Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of November 1,
1995, by adding thereto the T. Rowe Price Global Stock Fund, a
separate series of the T. Rowe Price International Funds, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
PAGE 131
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
<PAGE>
PAGE 132
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC., now known as T. ROWE PRICE SHORT-TERM U.S.
GOVERNMENT FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
PAGE 133
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE VALUE FUND, INC.
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
/s/Henry H. Hopkins
_____________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Carol C. Ayotte
_____________________________________________
By: Carol C. Ayotte, Vice President
<PAGE>
PAGE 134
AMENDMENT NO. 36 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, November 2, 1994, January 25, 1995,
September 20, 1995, October 11, 1995, and November 1, 1995,
between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of December 11, 1995, by adding thereto the T. Rowe Price
Health Sciences Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
PAGE 135
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
<PAGE>
PAGE 136
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC., now known as T. ROWE PRICE SHORT-TERM U.S.
GOVERNMENT FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
PAGE 137
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE VALUE FUND, INC.
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
/s/Henry H. Hopkins
_____________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Carol C. Ayotte
_____________________________________________
By: Carol C. Ayotte, Vice President
<PAGE>
PAGE 138
AMENDMENT NO. 37 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, November 2, 1994, January 25, 1995,
September 20, 1995, October 11, 1995, November 1, 1995, and
December 11, 1995, between State Street Bank and Trust Company
and each of the Parties listed on Appendix A thereto is hereby
further amended, as of April 24, 1996, by adding thereto the T.
Rowe Price Mid-Cap Value Fund, Inc. and Mid-Cap Equity Growth
Fund, a separate series of the Institutional Domestic Equity
Funds, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
PAGE 139
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
PAGE 140
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC., now known as T. ROWE PRICE SHORT-TERM U.S.
GOVERNMENT FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
PAGE 141
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE VALUE FUND, INC.
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
INSTITUTIONAL DOMESTIC EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
/s/Henry H. Hopkins
_____________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Carol C. Ayotte
_____________________________________________
By: Carol C. Ayotte, Vice President
<PAGE>
PAGE 142
AMENDMENT NO. 38 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, November 2, 1994, January 25, 1995,
September 20, 1995, October 11, 1995, November 1, 1995, December
11, 1995, and April 24, 1996, between State Street Bank and Trust
Company and each of the Parties listed on Appendix A thereto is
hereby further amended, as of August 2, 1996, by adding thereto
the T. Rowe Price Financial Services Fund, Inc., Mid-Cap Growth
Portfolio, a separate series of the T. Rowe Price Equity Series,
Inc. and Prime Reserve Portfolio, a separate series of the T.
Rowe Price Fixed Income Series, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
PAGE 143
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
PAGE 144
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC., now known as T. ROWE PRICE SHORT-TERM U.S.
GOVERNMENT FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
<PAGE>
PAGE 145
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE VALUE FUND, INC.
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
INSTITUTIONAL DOMESTIC EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
/s/Henry H. Hopkins
_____________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Carol C. Ayotte
_____________________________________________
By: Carol C. Ayotte, Vice President
<PAGE>
PAGE 146
AMENDMENT NO. 39 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, November 2, 1994, January 25, 1995,
September 20, 1995, October 11, 1995, November 1, 1995, December
11, 1995, April 24, 1996, and August 2, 1996, between State
Street Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of November 12,
1996, by adding thereto the T. Rowe Price Spectrum International
Fund, a separate series of the T. Rowe Price Spectrum Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
PAGE 147
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
T. Rowe Price Maryland Tax-Free Bond Fund
T. Rowe Price Maryland Short-Term Tax-Free Bond
Fund
T. Rowe Price New York Tax-Free Bond Fund
T. Rowe Price New York Tax-Free Money Fund
T. Rowe Price Virginia Tax-Free Bond Fund
T. Rowe Price Virginia Short-Term Tax-Free Bond
Fund
T. Rowe Price New Jersey Tax-Free Bond Fund
T. Rowe Price Georgia Tax-Free Bond Fund
T. Rowe Price Florida Insured Intermediate Tax-
Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
T. Rowe Price California Tax-Free Bond Fund
T. Rowe Price California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
PAGE 148
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
T. Rowe Price U.S. Treasury Intermediate Fund
T. Rowe Price U.S. Treasury Long-Term Fund
T. Rowe Price U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
T. Rowe Price Spectrum Growth Fund
T. Rowe Price Spectrum Income Fund
T. Rowe Price Spectrum International Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC., now known as T. ROWE PRICE SHORT-TERM U.S.
GOVERNMENT FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
PAGE 149
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE VALUE FUND, INC.
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
INSTITUTIONAL DOMESTIC EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
/s/Henry H. Hopkins
_____________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Carol C. Ayotte
_____________________________________________
By: Carol C. Ayotte, Vice President
<PAGE>
PAGE 150
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN CONTRACT
Agreement between each fund listed on Appendix A to
the Custodian Contract (as defined below), as such Appendix A is
amended from time to time (each such fund listed on Appendix A
shall be individually referred to herein as the "Fund"), and
State Street Bank and Trust Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as
custodian of certain assets of the Fund pursuant to a certain
Custodian Contract (the "Custodian Contract") dated as of
September 28, 1987, and amended thereafter from time to time;
WHEREAS, State Street has developed and utilizes
proprietary accounting and other systems, including State
Street's proprietary Multicurrency HORIZONR Accounting System, in
its role as custodian of the Fund, and maintains certain
Fund-related data ("Fund Data") in databases under the control
and ownership of State Street (the "Data Access Services"); and
WHEREAS, State Street makes available to the Fund
(and certain of the Fund' agents as set forth herein) certain
Data Access Services solely for the benefit of the Fund, and
intends to provide additional services, consistent with the terms
and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements herein contained, and for other good and
valuable consideration, the parties agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a. System. Subject to the terms and conditions of
this Agreement and solely for the purpose of providing access to
Fund Data as set forth herein, State Street hereby agrees to
provide the Fund, or certain third parties approved by State
Street that serve as the Fund's investment advisors, investment
managers or fund accountants (the "Fund Accountants") or as the
Fund's independent auditors (the "Auditor"), with access to State
Street's Multicurrency HORIZONR Accounting System and the other
information systems described in Attachment A (collectively, the
"System") on a remote basis solely on the computer hardware,
system software and telecommunication links described in
Attachment B (the "Designated Configuration") or on any
designated substitute or back-up equipment configuration
PAGE 151
consented to in writing by State Street, such consent not to be
unreasonably withheld.
b. Data Access Services. State Street agrees to
make available to the Fund the Data Access Services subject to
the terms and conditions of this Agreement and such data access
operating standards and procedures as may be issued by State
Street from time to time. The Fund shall be able to originate
electronic instructions to State Street in order to (i) effect
the transfer or movement of cash or securities held under custody
by State Street or (ii) transmit accounting or other information
(the transactions described in (i) and (ii) above are referred to
herein as "Client Originated Electronic Financial Instructions"),
and (iii) access data for the purpose of reporting and analysis,
which shall all be deemed to be Data Access Services for purposes
of this Agreement.
c. Additional Services. State Street may from
time to time agree to make available to the Fund additional
Systems that are not described in the attachments to this
Agreement. In the absence of any other written agreement
concerning such additional systems, the term "System" shall
include, and this Agreement shall govern, the Fund's access to
and use of any additional System made available by State Street
and/or accessed by the Fund.
2. NO USE OF THIRD PARTY SYSTEMS-LEVEL SOFTWARE
State Street and the Fund acknowledge that in
connection with the Data Access Services provided under this
Agreement, the Fund will have access, through the Data Access
Services, to Fund Data and to functions of State Street's
proprietary systems; provided, however that in no event will the
Fund have direct access to any third party systems-level software
that retrieves data for, stores data from, or otherwise supports
the System.
3. LIMITATION ON SCOPE OF USE
a. Designated Equipment; Designated Locations.
The System and the Data Access Services shall be used and
accessed solely on and through the Designated Configuration at
the offices of the Fund or the Fund Accountants in Baltimore,
Maryland or Owings Mills, Maryland ("Designated Locations").
b. Designated Configuration; Trained Personnel.
State Street and the Fund shall be responsible for supplying,
installing and maintaining the Designated Configuration at the
Designated Locations. State Street and the Fund agree that each
PAGE 152
will engage or retain the services of trained personnel to enable
both parties to perform their respective obligations under this
Agreement. State Street agrees to use commercially reasonable
efforts to maintain the System so that it remains serviceable,
provided, however, that State Street does not guarantee or assure
uninterrupted remote access use of the System.
c. Scope of Use. The Fund will use the System and
the Data Access Services only for the processing of securities
transactions, the keeping of books of account for the Fund and
accessing data for purposes of reporting and analysis. The Fund
shall not, and shall cause its employees and agents not to (i)
permit any unauthorized third party to use the System or the Data
Access Services, (ii) sell, rent, license or otherwise use the
System or the Data Access Services in the operation of a service
bureau or for any purpose other than as expressly authorized
under this Agreement, (iii) use the System or the Data Access
Services for any fund, trust or other investment vehicle), other
than as set forth herein, without the prior written consent of
State Street, (iv) allow access to the System or the Data Access
Services through terminals or any other computer or
telecommunications facilities located outside the Designated
Locations, (v) allow or cause any information (other than
portfolio holdings, valuations of portfolio holdings, and other
information reasonably necessary for the management or
distribution of the assets of the Fund) transmitted from State
Street's databases, including data from third party sources,
available through use of the System or the Data Access Services
to be redistributed or retransmitted to another computer,
terminal or other device for other than use for or on behalf of
the Fund or (vi) modify the System in any way, including without
limitation developing any software for or attaching any devices
or computer programs to any equipment, system, software or
database which forms a part of or is resident on the Designated
Configuration.
d. Other Locations. Except in the event of an
emergency or of a planned System shutdown, the Fund's access to
services performed by the System or to Data Access Services at
the Designated Locations may be transferred to a different
location only upon the prior written consent of State Street. In
the event of an emergency or System shutdown, the Fund may use
any back-up site included in the Designated Configuration or any
other back-up site agreed to by State Street, which agreement
will not be unreasonably withheld. The Fund may secure from
State Street the right to access the System or the Data Access
Services through computer and telecommunications facilities or
PAGE 153
devices complying with the Designated Configuration at additional
locations only upon the prior written consent of State Street and
on terms to be mutually agreed upon by the parties.
e. Title. Title and all ownership and proprietary
rights to the System, including any enhancements or modifications
thereto, whether or not made by State Street, are and shall
remain with State Street.
f. No Modification. Without the prior written
consent of State Street, the Fund shall not modify, enhance or
otherwise create derivative works based upon the System, nor
shall the Fund reverse engineer, decompile or otherwise attempt
to secure the source code for all or any part of the System.
g. Security Procedures. The Fund shall comply
with data access operating standards and procedures and with user
identification or other password control requirements and other
security procedures as may be issued from time to time by State
Street for use of the System on a remote basis and to access the
Data Access Services. The Fund shall have access only to the
Fund Data and authorized transactions agreed upon from time to
time by State Street and, upon notice from State Street, the Fund
shall discontinue remote use of the System and access to Data
Access Services for any security reasons cited by State Street;
provided, that, in such event, State Street shall, for a period
not less than 180 days (or such other shorter period specified by
the Fund) after such discontinuance, assume responsibility to
provide accounting services under the terms of the Custodian
Contract.
h. Inspections. State Street shall have the right
to inspect the use of the System and the Data Access Services by
the Fund, the Fund Accountants and the Auditor to ensure
compliance with this Agreement. The on-site inspections shall be
upon prior written notice to Fund, the Fund Accountants and the
Auditor and at reasonably convenient times and frequencies so as
not to result in an unreasonable disruption of the Fund's or the
Fund Accountants' or the Auditor respective businesses.
4. PROPRIETARY INFORMATION
a. Proprietary Information. The Fund acknowledges
and State Street represents that the System and the databases,
computer programs, screen formats, report formats, interactive
design techniques, documentation and other information made
available to the Fund by State Street as part of the Data Access
Services and through the use of the System constitute
copyrighted, trade secret, or other proprietary information of
PAGE 154
substantial value to State Street. Any and all such information
provided by State Street to the Fund shall be deemed proprietary
and confidential information of State Street (hereinafter
"Proprietary Information"). The Fund agrees that it will hold
such Proprietary Information in the strictest confidence and
secure and protect it in a manner consistent with its own
procedures for the protection of its own confidential information
and to take appropriate action by instruction or agreement with
its employees or agents who are permitted access to the
Proprietary Information to satisfy its obligations hereunder.
The Fund further acknowledges that State Street shall not be
required to provide the Fund Accountants or the Auditor with
access to the System unless it has first received from the Fund
Accountants and the Auditor an undertaking with respect to State
Street's Proprietary Information in the form of Attachment C
and/or Attachment C-1 to this Agreement. The Fund shall use all
commercially reasonable efforts to assist State Street in
identifying and preventing any unauthorized use, copying or
disclosure of the Proprietary Information or any portions thereof
or any of the logic, formats or designs contained therein.
b. Cooperation. Without limitation of the
foregoing, the Fund shall advise State Street immediately in the
event the Fund learns or has reason to believe that any person to
whom the Fund has given access to the Proprietary Information, or
any portion thereof, has violated or intends to violate the terms
of this Agreement, and the Fund will, at its reasonable expense,
cooperate with State Street in seeking injunctive or other
equitable relief in the name of the Fund or State Street against
any such person.
c. Injunctive Relief. The Fund acknowledges that
the disclosure of any Proprietary Information, or of any
information which at law or equity ought to remain confidential,
will immediately give rise to continuing irreparable injury to
State Street inadequately compensable in damages at law. In
addition, State Street shall be entitled to obtain immediate
injunctive relief against the breach or threatened breach of any
of the foregoing undertakings, in addition to any other legal
remedies which may be available.
d. Survival. The provisions of this Section 4
shall survive the termination of this Agreement.
5. LIMITATION ON LIABILITY
a. Standard of Care and Limitation on Amount and
Time for Bringing Action. State Street shall be held to a
PAGE 155
standard of reasonable care with respect to all of its duties and
obligations under this Agreement. The Fund agrees that any
liability of State Street to the Fund or any third party arising
with respect to the System or State Street's provision of Data
Access Services under this Data Access Services Addendum shall be
limited to the amount paid by the Fund for the preceding 24
months for such services. In no event shall State Street be
liable to the Fund or any other party pursuant to this Addendum
for any special, indirect, punitive or consequential damages even
if advised of the possibility of such damages. No action,
regardless of form, arising out of the terms of this Addendum may
be brought by the Fund more than two years after the Fund has
knowledge that the cause of action has arisen.
b. Limited Warranties. NO OTHER WARRANTIES,
WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, ARE MADE BY STATE STREET.
c. Third-Party Data. Organizations from which
State Street may obtain certain data included in the System or
the Data Access Services are solely responsible for the contents
of such data, and State Street shall have no liability for claims
arising out of the contents of such third-party data, including,
but not limited to, the accuracy thereof.
d. Regulatory Requirements. As between State
Street and the Fund, the Fund shall be solely responsible for the
accuracy of any accounting statements or reports produced using
the Data Access Services and the System and the conformity
thereof with any requirements of law.
e. Force Majeure. Neither party shall be liable
for any costs or damages due to delay or nonperformance under
this Data Access Services Addendum arising out of any cause or
event beyond such party's control, including, without limitation,
cessation of services hereunder or any damages resulting
therefrom to the other party as a result of work stoppage, power
or other mechanical failure, computer virus, natural disaster,
governmental action, or communication disruption.
6. INDEMNIFICATION
The Fund agrees to indemnify and hold State Street
harmless from any loss, damage or expense including reasonable
attorney's fees, (a "loss") suffered by State Street arising from
(i) the negligence or willful misconduct in the use by the Fund
of the Data Access Services or the System, including any loss
incurred by State Street resulting from a security breach at the
PAGE 156
Designated Locations or committed by the Fund's employees or
agents or the Fund Accountants or the and Auditor, and (ii) any
loss resulting from incorrect Client Originated Electronic
Financial Instructions. State Street shall be entitled to rely
on the validity and authenticity of Client Originated Electronic
Financial Instructions without undertaking any further inquiry as
long as such instruction is undertaken in conformity with
security procedures established by State Street from time to
time.
7. FEES
Fees and charges for the use of the System and the
Data Access Services and related payment terms shall be as set
forth in the custody fee schedule in effect from time to time
between the parties (the "Fee Schedule"). Any tariffs, duties or
taxes imposed or levied by any government or governmental agency
by reason of the transactions contemplated by this Agreement,
including, without limitation, federal, state and local taxes,
use, value added and personal property taxes (other than income,
franchise or similar taxes which may be imposed or assessed
against State Street) shall be borne by the Fund. Any claimed
exemption from such tariffs, duties or taxes shall be supported
by proper documentary evidence delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide
training, at a designated State Street training facility or at
the Designated Locations, to the Fund's personnel in connection
with the use of the System on the Designated Configuration. The
Fund agrees that it will set aside, during regular business hours
or at other times agreed upon by both parties, sufficient time to
enable all operators of the System and the Data Access Services,
designated by the Fund, to receive the training offered by State
Street pursuant to this Agreement.
b. Installation and Conversion. State Street and
the Fund shall be responsible for the technical installation and
conversion ("Installation and Conversion") of the Designated
Configuration. The Fund shall have the following
responsibilities in connection with Installation and Conversion
of the System:
(i) The Fund shall be solely responsible for the
timely acquisition and maintenance of the hardware and software
that attach to the Designated Configuration in order to use the
Data Access Services at the Designated Locations, and
PAGE 157
(ii) State Street and the Fund each agree that they
will assign qualified personnel to actively participate during
the Installation and Conversion phase of the System
implementation to enable both parties to perform their respective
obligations under this Agreement.
9. SUPPORT
During the term of this Agreement, State Street
agrees to provide the support services set out in Attachment D to
this Agreement.
10. TERM OF AGREEMENT
a. Term of Agreement. This Agreement shall become
effective on the date of its execution by State Street and shall
remain in full force and effect until terminated as herein
provided.
b. Termination of Agreement. Either party may
terminate this Agreement (i) for any reason by giving the other
party at least one-hundred and eighty (180) days' prior written
notice in the case of notice of termination by State Street to
the Fund or thirty (30) days' notice in the case of notice from
the Fund to State Street of termination; or (ii) immediately for
failure of the other party to comply with any material term and
condition of the Agreement by giving the other party written
notice of termination. In the event the Fund shall cease doing
business, shall become subject to proceedings under the
bankruptcy laws (other than a petition for reorganization or
similar proceeding) or shall be adjudicated bankrupt, this
Agreement and the rights granted hereunder shall, at the option
of State Street, immediately terminate with notice to the Fund.
This Agreement shall in any event terminate as to any Fund within
ninety (90) days after the termination of the Custodian Contract.
c. Termination of the Right to Use. Upon
termination of this Agreement for any reason, any right to use
the System and access to the Data Access Services shall terminate
and the Fund shall immediately cease use of the System and the
Data Access Services. Immediately upon termination of this
Agreement for any reason, the Fund shall return to State Street
all copies of documentation and other Proprietary Information in
its possession; provided, however, that in the event that either
party terminates this Agreement or the Custodian Contract for any
reason other than the Fund's breach, State Street shall provide
the Data Access Services for a period of time and at a price to
be agreed upon in writing by the parties.
PAGE 158
11. MISCELLANEOUS
a. Assignment; Successors. This Agreement and the
rights and obligations of the Fund and State Street hereunder
shall not be assigned by either party without the prior written
consent of the other party, except that State Street may assign
this Agreement to a successor of all or a substantial portion of
its business, or to a party controlling, controlled by, or under
common control with State Street.
b. Survival. All provisions regarding
indemnification, warranty, liability and limits thereon, and
confidentiality and/or protection of proprietary rights and trade
secrets shall survive the termination of this Agreement.
c. Entire Agreement. This Agreement and the
attachments hereto constitute the entire understanding of the
parties hereto with respect to the Data Access Services and the
use of the System and supersedes any and all prior or
contemporaneous representations or agreements, whether oral or
written, between the parties as such may relate to the Data
Access Services or the System, and cannot be modified or altered
except in a writing duly executed by the parties. This Agreement
is not intended to supersede or modify the duties and liabilities
of the parties hereto under the Custodian Contract or any other
agreement between the parties hereto except to the extent that
any such agreement specifically refers to the Data Access
Services or the System. No single waiver or any right hereunder
shall be deemed to be a continuing waiver.
d. Severability. If any provision or provisions of
this Agreement shall be held to be invalid, unlawful, or
unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or
impaired.
e. Governing Law. This Agreement shall be
interpreted and construed in accordance with the internal laws of
The Commonwealth of Massachusetts without regard to the conflict
of laws provisions thereof.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
<PAGE>
PAGE 159
Signature Page (page 1 of 4)
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement effective as of September 28, 1987.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Prime Reserve Fund, Inc.
T. Rowe Price International Funds, Inc.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Tax-Free Income Fund, Inc.
T. Rowe Price Tax-Exempt Money Fund, Inc.
T. Rowe Price Tax-Free Short-Intermediate Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
<PAGE>
PAGE 160
Signature Page (page 2 of 4)
T. Rowe Price Tax-Free High Yield Fund, Inc.
T. Rowe Price New America Growth Fund
T. Rowe Price Equity Income Fund
T. Rowe Price GNMA Fund
T. Rowe Price Capital Appreciation Fund
T. Rowe Price State Tax-Free Income Trust
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. Rowe Price California Tax-Free Income Trust
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
Institutional International Funds, Inc.
Foreign Equity Fund
T. Rowe Price U.S. Treasury Funds, Inc.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. Rowe Price Index Trust, Inc.
T. Rowe Price Equity Index Fund
<PAGE>
PAGE 161
Signature Page (page 3 of 4)
T. Rowe Price Spectrum Fund, Inc.
Spectrum Growth Fund
Spectrum Income Fund
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Adjustable Rate U.S. Government Fund, Inc., now
known as T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price OTC Fund, Inc.
T. Rowe Price OTC Fund
T. Rowe Price Tax-Free Insured Intermediate Bond Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Summit Funds, Inc.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. Rowe Price Summit Municipal Funds, Inc.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio
<PAGE>
PAGE 162
Signature Page (page 4 of 4)
T. Rowe Price Fixed Income Series, Inc.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Personal Strategy Funds, Inc.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Value Fund, Inc.
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price Health Sciences Fund, Inc.
T. Rowe Price Mid-Cap Value Fund, Inc.
Institutional Domestic Equity Funds, Inc.
Mid-Cap Equity Growth Fund
By T. Rowe Price Associates, Inc., as Treasurer
for each of the foregoing
/s/Carmen F. Deyesu
By: ______________________________
Title: ______________________________
STATE STREET BANK AND TRUST COMPANY
/s/Ronald E. Logue
By: ______________________________
Title: Executive Vice President
<PAGE>
PAGE 163
ATTACHMENT A
Multicurrency HORIZONR Accounting System
System Product Description
I. The Multicurrency HORIZONR Accounting System is
designed to provide lot level portfolio and general ledger
accounting for SEC and ERISA type requirements and includes the
following services: 1) recording of general ledger entries; 2)
calculation of daily income and expense; 3) reconciliation of
daily activity with the trial balance, and 4) appropriate
automated feeding mechanisms to (i) domestic and international
settlement systems, (ii) daily, weekly and monthly evaluation
services, (iii) portfolio performance and analytic services, (iv)
customer's internal computing systems and (v) various State
Street provided information services products.
II. GlobalQuestR GlobalQuestR is designed to provide
customer access to the following information maintained on The
Multicurrency HORIZONR Accounting System: 1) cash transactions
and balances; 2) purchases and sales; 3) income receivables; 4)
tax refund; 5) daily priced positions; 6) open trades; 7)
settlement status; 8) foreign exchange transactions; 9) trade
history; and 10) daily, weekly and monthly evaluation services.
III. HORIZONR Gateway. HORIZONR Gateway provides
customers with the ability to (i) generate reports using
information maintained on the Multicurrency HORIZONR Accounting
System which may be viewed or printed at the customer's location;
(ii) extract and download data from the Multicurrency HORIZONR
Accounting System; and (iii) access previous day and historical
data. The following information which may be accessed for these
purposes: 1) holdings; 2) holdings pricing; 3) transactions,
4) open trades; 5) income; 6) general ledger and 7) cash.
IV. State Street Interchange. State Street Interchange
is an open information delivery architecture wherein proprietary
communication products, data formats and workstation tools are
replaced by industry standards and is designed to enable the
connection of State Street's network to customer networks,
thereby facilitating the sharing of information.
<PAGE>
PAGE 164
ATTACHMENT C
Undertaking
(Fund Accountants)
The undersigned understands that in the course of
its employment as Fund Accountant to each fund listed on Appendix
A (as amended from time to time) to that certain Custodian
Contract dated as of September 28, 1987 (the "Fund"), it will
have access to State Street Bank and Trust Company's
Multicurrency HORIZON Accounting System and other information
systems (collectively, the "System").
The undersigned acknowledges that the System and
the databases, computer programs, screen formats, report formats,
interactive design techniques, documentation, and other
information made available to the Undersigned by State Street
Bank and Trust Company ("State Street") as part of the Data
Access Services provided to the Fund and through the use of the
System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all
such information provided by State Street to the Undersigned
shall be deemed proprietary and confidential information of State
Street (hereinafter "Proprietary Information"). The undersigned
agrees that it will hold such Proprietary Information in
confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or
agreement with its employees who are permitted access to the
Proprietary Information to satisfy its obligations hereunder.
The undersigned will not attempt to intercept data,
gain access to data in transmission, or attempt entry into any
system or files for which it is not authorized. It will not
intentionally adversely affect the integrity of the System
through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any
right to use the System and access to the Data Access Services
shall terminate and the Undersigned shall immediately cease use
of the System and the Data Access Services. Immediately upon
notice by State Street for any reason, the undersigned shall
return to State Street all copies of documentation and other
Proprietary Information in its possession.
<PAGE>
PAGE 165
[The Fund Accountants]
By: /s/David S. Middleton
Title: Vice President
Date: 12/3/96
<PAGE>
PAGE 166
ATTACHMENT C-1
Undertaking
(Auditor)
The undersigned understands that in the course of
its employment as Auditor the funds listed on Appendix A which
are audited by Price Waterhouse LLP (as amended from time to
time) to that certain Custodian Contract dated as of September
28, 1987 (the "Fund") it will have access to State Street Bank
and Trust Company's Multicurrency HORIZON Accounting System and
other information systems (collectively, the "System").
The undersigned acknowledges that the System and
the databases, computer programs, screen formats, report formats,
interactive design techniques, documentation, and other
information made available to the Undersigned by State Street
Bank and Trust Company ("State Street") as part of the Data
Access Services provided to the Fund and through the use of the
System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all
such information provided by State Street to the Undersigned
shall be deemed proprietary and confidential information of State
Street (hereinafter "Proprietary Information"). The undersigned
agrees that it will hold such Proprietary Information in
confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or
agreement with its employees who are permitted access to the
Proprietary Information to satisfy its obligations hereunder.
The undersigned will not attempt to intercept data,
gain access to data in transmission, or attempt entry into any
system or files for which it is not authorized. It will not
intentionally adversely affect the integrity of the System
through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any
right to use the System and access to the Data Access Services
shall terminate and the Undersigned shall immediately cease use
of the System and the Data Access Services. Immediately upon
notice by State Street for any reason, the undersigned shall
return to State Street all copies of documentation and other
Proprietary Information in its possession.
<PAGE>
PAGE 167
[The Auditor]
By: /s/D.E. Bender
Title: Partner, Price Waterhouse LLP
Date: 12/11/96
<PAGE>
PAGE 168
Undertaking
(Auditor)
The undersigned understands that in the course of
its engagement as Independent Auditor to T. Rowe Price (the
"Customer") it will have access to State Street Bank and Trust
Company's ("State Street") Multicurrency HORIZON Accounting
System (the "System").
The undersigned acknowledges that the System and
the databases, computer programs, screen formats, report formats,
interactive design techniques, documentation, and other
information made available to the Undersigned by State Street
through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to
State Street. Any and all such information provided by State
Street to the Undersigned shall be deemed proprietary and
confidential information of State Street (hereinafter
"Proprietary Information"). The Undersigned agrees that it will
hold such Proprietary Information in confidence (although the
Undersigned may share it, as needed, with the Customer) and
secure and protect it in a manner consistent with its own
procedures for the protection of its own confidential information
and to take appropriate action by instruction or agreement with
its employees who are permitted access to the Proprietary
Information to satisfy its obligations hereunder.
The Undersigned will not intentionally and
wrongfully attempt to intercept data, gain access to data in
transmission, or attempt entry into any System files for which it
is not authorized. It will not intentionally adversely affect
the integrity of the System through the introduction of
unauthorized code or data, or through unauthorized deletion.
Upon notice by State Street for any reason, any
right to use the System shall terminate and the Undersigned shall
immediately cease use of the System. Promptly upon notice by
State Street for any reason, the Undersigned shall return to
State Street all copies of Proprietary Information in its
possession, subject to the Undersigned's professional obligation
to retain its workpaper record of its services to the Customer.
<PAGE>
PAGE 169
/s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
By: /s/J.A. Carrier
Title: Partner
Date: 2/19/97
<PAGE>
PAGE 170
ATTACHMENT D
Support
During the term of this Agreement, State Street
agrees to provide the following on-going support services:
a. Telephone Support. The Fund Designated Persons
may contact State Street's HORIZONR Help Desk and Fund Assistance
Center between the hours of 8 a.m. and 6 p.m. (Eastern time) on
all business days for the purpose of obtaining answers to
questions about the use of the System, or to report apparent
problems with the System. From time to time, the Fund shall
provide to State Street a list of persons who shall be permitted
to contact State Street for assistance (such persons being
referred to as the "Fund Designated Persons").
b. Technical Support. State Street will provide
technical support to assist the Fund in using the System and the
Data Access Services. The total amount of technical support
provided by State Street shall not exceed 10 resource days per
year. State Street shall provide such additional technical
support as is expressly set forth in the fee schedule in effect
from time to time between the parties (the "Fee Schedule").
Technical support, including during installation and testing, is
subject to the fees and other terms set forth in the Fee
Schedule.
c. Maintenance Support. State Street shall use
commercially reasonable efforts to correct system functions that
do not work according to the System Product Description as set
forth on Attachment A in priority order in the next scheduled
delivery release or otherwise as soon as is practicable.
d. System Enhancements. State Street will provide
to the Fund any enhancements to the System developed by State
Street and made a part of the System; provided that State Street
offer the Fund reasonable training on the enhancement. Charges
for system enhancements shall be as provided in the Fee Schedule.
State Street retains the right to charge for related systems or
products that may be developed and separately made available for
use other than through the System.
e. Custom Modifications. In the event the Fund
desires custom modifications in connection with its use of the
System, the Fund shall make a written request to State Street
providing specifications for the desired modification. Any
custom modifications may be undertaken by State Street in its
sole discretion in accordance with the Fee Schedule.
<PAGE>
PAGE 171
f. Limitation on Support. State Street shall have
no obligation to support the Fund's use of the System: (1) for
use on any computer equipment or telecommunication facilities
which does not conform to the Designated Configuration or (ii) in
the event the Fund has modified the System in breach of this
Agreement.
<PAGE>
PAGE 172
AMENDMENT NO. 40 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, November 2, 1994, January 25, 1995,
September 20, 1995, October 11, 1995, November 1, 1995, December
11, 1995, April 24, 1996, August 2, 1996, and November 12, 1996,
between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of February 4, 1997, by adding thereto the Reserve Investment
Funds, Inc., on behalf of its two separate portfolios, the
Government Reserve Investment Fund and the Reserve Investment
Fund.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
PAGE 173
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
T. Rowe Price Maryland Tax-Free Bond Fund
T. Rowe Price Maryland Short-Term Tax-Free Bond
Fund
T. Rowe Price New York Tax-Free Bond Fund
T. Rowe Price New York Tax-Free Money Fund
T. Rowe Price Virginia Tax-Free Bond Fund
T. Rowe Price Virginia Short-Term Tax-Free Bond
Fund
T. Rowe Price New Jersey Tax-Free Bond Fund
T. Rowe Price Georgia Tax-Free Bond Fund
T. Rowe Price Florida Insured Intermediate Tax-
Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
T. Rowe Price California Tax-Free Bond Fund
T. Rowe Price California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
<PAGE>
PAGE 174
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
T. Rowe Price U.S. Treasury Intermediate Fund
T. Rowe Price U.S. Treasury Long-Term Fund
T. Rowe Price U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
T. Rowe Price Spectrum Growth Fund
T. Rowe Price Spectrum Income Fund
T. Rowe Price Spectrum International Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC., now known as T. ROWE PRICE SHORT-TERM U.S.
GOVERNMENT FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC., formerly
known as T. ROWE PRICE OTC FUND, INC.
T. Rowe Price Small-Cap Stock Fund, formerly
known as T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
<PAGE>
PAGE 175
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE VALUE FUND, INC.
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
INSTITUTIONAL DOMESTIC EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Government Reserve Investment Fund
Reserve Investment Fund
/s/Henry H. Hopkins
By: ______________________________________
Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Carol C. Ayotte
By: ______________________________________
Carol C. Ayotte, Vice President
<PAGE>
PAGE 176
AMENDMENT NO. 41 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, November 2, 1994, January 25, 1995,
September 20, 1995, October 11, 1995, November 1, 1995, December
11, 1995, April 24, 1996, August 2, 1996, November 12, 1996, and
February 4, 1997 between State Street Bank and Trust Company and
each of the Parties listed on Appendix A thereto is hereby
further amended, as of April 24, 1997 by adding thereto the
T. Rowe Price Tax-Efficient Balanced Fund, Inc. and T. Rowe Price
Diversified Small-Cap Growth Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
PAGE 177
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
PAGE 178
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND,
INC., now known as T. ROWE PRICE SHORT-TERM U.S.
GOVERNMENT FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC., formerly
known as T. ROWE PRICE OTC FUND, INC.
T. Rowe Price Small-Cap Stock Fund, formerly
known as T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
PAGE 179
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE VALUE FUND, INC.
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
INSTITUTIONAL DOMESTIC EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Government Reserve Investment Fund
Reserve Investment Fund
/s/Henry H. Hopkins
_____________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Carol C. Ayotte
_____________________________________________
By: Carol C. Ayotte, Vice President
Transfer Agency and Service Agreement between T. Rowe Price Services,
Inc. and T. Rowe Price Funds, dated January 1, 1997, as amended
PAGE 1
TRANSFER AGENCY AND SERVICE AGREEMENT
between
T. ROWE PRICE SERVICES, INC.
and
EACH OF THE PARTIES INDICATED ON APPENDIX A
<PAGE>
PAGE 2
TABLE OF CONTENTS
Page
Article A Terms of Appointment. . . . . . . . . . . . . 2
Article B Duties of Price Services. . . . . . . . . . . 3
1. Receipt of Orders/Payments. . . . . . . . 3
2. Redemptions . . . . . . . . . . . . . . . 4
3. Transfers . . . . . . . . . . . . . . . . 6
4. Confirmations . . . . . . . . . . . . . . 6
5. Returned Checks and ACH Debits. . . . . . 6
6. Redemption of Shares under Ten Day Hold . 7
7. Dividends, Distributions and Other
Corporate Actions . . . . . . . . . . . . 9
8. Unclaimed Payments and Certificates . . . 9
9. Books and Records . . . . . . . . . . . .10
10. Authorized Issued and Outstanding Shares.11
11. Tax Information . . . . . . . . . . . . .12
12. Information to be Furnished to the Fund .12
13. Correspondence. . . . . . . . . . . . . .12
14. Lost or Stolen Securities . . . . . . . .13
15. Telephone Services. . . . . . . . . . . .13
16. Collection of Shareholder Fees. . . . . .13
17. Form N-SAR. . . . . . . . . . . . . . . .13
18. Cooperation With Accountants. . . . . . .14
19. Blue Sky. . . . . . . . . . . . . . . . .14
20. Other Services. . . . . . . . . . . . . .14
21. Fees and Out-of-Pocket Expenses . . . . .14
Article C Representations and Warranties of the Price
Services. . . . . . . . . . . . . . . . . . .16
Article D Representations and Warranties of the Fund. .17
Article E Standard of Care/Indemnification. . . . . . .17
Article F Dual Interests. . . . . . . . . . . . . . . .19
Article G Documentation . . . . . . . . . . . . . . . .19
Article H References to Price Services. . . . . . . . .21
Article I Compliance with Governmental Rules and
Regulations . . . . . . . . . . . . . . . . .21
Article J Ownership of Software and Related Material. .21
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Article K Quality Service Standards . . . . . . . . . .22
Article L As of Transactions. . . . . . . . . . . . . .22
Article M Term and Termination of Agreement . . . . . .25
Article N Notice. . . . . . . . . . . . . . . . . . . .25
Article O Assignment. . . . . . . . . . . . . . . . . .25
Article P Amendment/Interpretive Provisions . . . . . .25
Article Q Further Assurances. . . . . . . . . . . . . .26
Article R Maryland Law to Apply . . . . . . . . . . . .26
Article S Merger of Agreement . . . . . . . . . . . . .26
Article T Counterparts. . . . . . . . . . . . . . . . .26
Article U The Parties . . . . . . . . . . . . . . . . .26
Article V Directors, Trustees, Shareholders and
Massachusetts Business Trust. . . . . . . . .27
Article W Captions. . . . . . . . . . . . . . . . . . .27
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TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the first day of January, 1997, by and
between T. ROWE PRICE SERVICES, INC., a Maryland corporation having
its principal office and place of business at 100 East Pratt
Street, Baltimore, Maryland 21202 ("Price Services"), and EACH FUND
WHICH IS LISTED ON APPENDIX A (as such Appendix may be amended from
time to time) and which evidences its agreement to be bound hereby
by executing a copy of this Agreement (each such Fund individually
hereinafter referred to as "the Fund", whose definition may be
found in Article U);
WHEREAS, the Fund desires to appoint Price Services as its
transfer agent, dividend disbursing agent and agent in connection
with certain other activities, and Price Services desires to accept
such appointment;
WHEREAS, Price Services represents that it is registered with
the Securities and Exchange Commission as a Transfer Agent under
Section 17A of the Securities Exchange Act of 1934 ("'34 Act") and
will notify each Fund promptly if such registration is revoked or
if any proceeding is commenced before the Securities and Exchange
Commission which may lead to such revocation;
WHEREAS, Price Services has the capability of providing
shareholder services on behalf of the Funds for the accounts of
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shareholders in the Funds, including banks and brokers on behalf of
underlying clients;
WHEREAS, certain of the Funds are named investment options
under various tax-sheltered retirement plans including, but not
limited to, individual retirement accounts, Sep-IRA s, SIMPLE
plans, deferred compensation plans, 403(b) plans, and profit
sharing, thrift, and money purchase pension plans for self-employed
individuals and professional partnerships and corporations,
(collectively referred to as "Retirement Plans");
WHEREAS, Price Services also has the capability of providing
special services, on behalf of the Funds, for the accounts of
shareholders participating in these Retirement Plans ("Retirement
Accounts").
WHEREAS, Price Services may subcontract or jointly contract
with other parties, on behalf of the Funds to perform certain of
the functions and services described herein including services to
Retirement Plans and Retirement Accounts;
WHEREAS, Price Services may also enter into, on behalf of the
Funds, certain banking relationships to perform various banking
services including, but not limited to, check deposits, check
disbursements, automated clearing house transactions ("ACH") and
wire transfers.
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NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
A. Terms of Appointment
Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints Price Services to
act, and Price Services agrees to act, as the Fund's transfer
agent, dividend disbursing agent and agent in connection with: (1)
the Fund's authorized and issued shares of its common stock or
shares of beneficial interest (all such stock and shares to be
referred to as "Shares"); (2) any dividend reinvestment or other
services provided to the shareholders of the Fund ("Shareholders"),
including, without limitation, any periodic investment plan or
periodic withdrawal program; and (3) certain Retirement Plan and
Retirement Accounts as agreed upon by the parties.
The parties to the Agreement hereby acknowledge that from time
to time, Price Services and T. Rowe Price Trust Company may enter
into contracts ("Other Contracts") with employee benefit plans
and/or their sponsors for the provision of certain plan participant
services to Retirement Plans and Retirement Accounts.
Compensation paid to Price Services pursuant to this Agreement is
with respect to the services described herein and not with respect
to services provided under Other Contracts.
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B. Duties of Price Services
Price Services agrees that it will perform the following
services:
1. Receipt of Orders/Payments
Receive for acceptance, orders/payments for the purchase
of Shares and promptly deliver payment and appropriate
documentation thereof to the authorized custodian of the Fund
(the "Custodian"). Upon receipt of any check or other
instrument drawn or endorsed to it as agent for, or identified
as being for the account of, the Fund, Price Services will
process the order as follows:
o Examine the check to determine if the check conforms to
the Funds' acceptance procedures (including certain
third-party check procedures). If the check conforms,
Price Services will endorse the check and include the
date of receipt, will process the same for payment, and
deposit the net amount to the parties agreed upon
designated bank account prior to such deposit in the
Custodial account, and will notify the Fund and the
Custodian, respectively, of such deposits (such
notification to be given on a daily basis of the total
amount deposited to said accounts during the prior
business day);
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o Subject to guidelines mutually agreed upon by the Funds
and Price Services, excess balances, if any, resulting
from deposit in these designated bank accounts will be
invested and the income therefrom will be used to offset
fees which would otherwise be charged to the Funds under
this Agreement;
o Ensure that any documentation received from Shareholder
is in "good order" and all appropriate documentation is
received to establish an account.
o Open a new account, if necessary, and credit the account
of the investor with the number of Shares to be purchased
according to the price of the Fund's Shares in effect for
purchases made on that date, subject to any instructions
which the Fund may have given to Price Services with
respect to acceptance of orders for Shares;
o Maintain a record of all unpaid purchases and report such
information to the Fund daily;
o Process periodic payment orders, as authorized by
investors, in accordance with the payment procedures
mutually agreed upon by both parties;
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o Receive monies from Retirement Plans and determine the
proper allocation of such monies to the Retirement
Accounts based upon instructions received from Retirement
Plan participants or Retirement Plan administrators
("Administrators");
o Process orders received from recordkeepers and banks and
brokers for omnibus accounts in accordance with internal
policies and procedures established in executed agency
agreements and other agreements negotiated with banks and
brokers; and
o Process telephone orders for purchases of Fund shares
from the Shareholder's bank account (via wire or ACH) to
the Fund in accordance with procedures mutually agreed
upon by both parties.
Upon receipt of funds through the Federal Reserve Wire
System that are designated for purchases in Funds which declare
dividends at 12:00 p.m. (or such time as set forth in the Fund's
current prospectus), Price Services shall promptly notify the Fund
and the Custodian of such deposit.
2. Redemptions
Receive for acceptance redemption requests, including
telephone redemptions and requests received from
Administrators for distributions to participants or their
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designated beneficiaries or for payment of fees due the
Administrator or such other person, including Price Services,
and deliver the appropriate documentation thereof to the
Custodian. Price Services shall receive and stamp with the
date of receipt, all requests for redemptions of Shares
(including all certificates delivered to it for redemption)
and shall process said redemption requests as follows, subject
to the provisions of Section 6 hereof:
o Examine the redemption request and, for written
redemptions, the supporting documentation, to determine
that the request is in good order and all requirements
have been met;
o Notify the Fund on the next business day of the total
number of Shares presented and covered by all such
requests;
o For those Funds that impose redemption fees, calculate
the fee owed on the redemption in accordance with the
guidelines established between the Fund and Price
Services;
o As set forth in the prospectus of the Fund, and in any
event, on or prior to the seventh (7th) calendar day
succeeding any such request for redemption, Price
Services shall, from funds available in the accounts
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maintained by Price Services as agent for the Funds, pay
the applicable redemption price in accordance with the
current prospectus of the Fund, to the investor,
participant, beneficiary, Administrator or such other
person, as the case may be;
o Instruct custodian to wire redemption proceeds to a
designated bank account of Price Services. Subject to
guidelines mutually agreed upon by the Funds and Price
Services, excess balances, if any, resulting from deposit
in these bank accounts will be invested and the income
therefrom will be used to offset fees which would
otherwise be charged to the Funds under this Agreement;
o If any request for redemption does not comply with the
Fund's requirements, Price Services shall promptly notify
the investor of such fact, together with the reason
therefore, and shall effect such redemption at the price
in effect at the time of receipt of all appropriate
documents;
o Make such withholdings as may be required under
applicable Federal tax laws;
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o In the event redemption proceeds for the payment of fees
are to be wired through the Federal Reserve Wire System
or by bank wire, Price Services shall cause such proceeds
to be wired in Federal funds to the bank account
designated by Shareholder; and
o Process periodic redemption orders as authorized by the
investor in accordance with the periodic withdrawal
procedures for Systematic Withdrawal Plan ("SWP") and
systematic ACH redemptions mutually agreed upon by both
parties.
Procedures and requirements for effecting and accepting
redemption orders from investors by telephone, Tele*Access,
computer, or written instructions shall be established by
mutual agreement between Price Services and the Fund
consistent with the Fund's current prospectus.
3. Transfers
Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions and
documentation and examine such instructions for conformance
with appropriate procedures and requirements. In this regard,
Price Services, upon receipt of a proper request for transfer,
including any transfer involving the surrender of certificates
of Shares, is authorized to transfer, on the records of the
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Fund, Shares of the Fund, including cancellation of
surrendered certificates, if any, to credit a like amount of
Shares to the transferee.
4. Confirmations
Mail all confirmations and other enclosures requested by
the Fund to the shareholder, and in the case of Retirement
Accounts, to the Administrators, as may be required by the
Funds or by applicable Federal or state law.
5. Returned Checks and ACH Debits
In order to minimize the risk of loss to the Fund by
reason of any check being returned unpaid, Price Services will
promptly identify and follow-up on any check or ACH debit
returned unpaid. For items returned, Price Services may
telephone the investor and/or redeposit the check or debit for
collection or cancel the purchase, as deemed appropriate.
Price Services and the Funds will establish procedures for the
collection of money owed the Fund from investors who have
caused losses due to these returned items.
6. Redemption of Shares under Ten Day Hold
o Uncollected Funds
Shares purchased by personal, corporate, or governmental
check, or by ACH will be considered uncollected until the
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tenth calendar date following the trade date of the trade
("Uncollected Funds");
o Good Funds
Shares purchased by treasurer's, cashier, certified, or
official check, or by wire transfer will be considered
collected immediately ("Good Funds"). Absent information
to the contrary (i.e., notification from the payee
institution), Uncollected Funds will be considered Good
Funds on the tenth calendar day following trade date.
o Redemption of Uncollected Funds
o Shareholders making telephone requests for
redemption of shares purchased with Uncollected
Funds will be given two options:
1. The Shareholder will be permitted to exchange
to a money market fund to preserve principal until
the payment is deemed Good Funds;
2. The redemption can be processed utilizing the
same procedures for written redemptions described
below.
o If a written redemption request is made for shares
where any portion of the payment for said shares is
in Uncollected Funds, and the request is in good
order, Price Services will promptly obtain the
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information relative to the payment necessary to
determine when the payment becomes Good Funds. The
redemption will be processed in accordance with
normal procedures, and the proceeds will be held
until confirmation that the payment is Good Funds.
On the seventh (7th) calendar day after trade date,
and each day thereafter until either confirmation
is received or the tenth (10th) calendar day, Price
Services will call the paying institution to
request confirmation that the check or ACH in
question has been paid. On the tenth calendar day
after trade date, the redemption proceeds will be
released, regardless of whether confirmation has
been received.
o Checkwriting Redemptions.
o Daily, all checkwriting redemptions $10,000 and
over reported as Uncollected Funds or insufficient
funds will be reviewed. An attempt will be made to
contact the shareholder to make good the funds
(through wire, exchange, transfer). Generally by
12:00 p.m. the same day, if the matter has not been
resolved, the redemption request will be rejected
and the check returned to the Shareholder.
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o All checkwriting redemptions under $10,000 reported
as Uncollected or insufficient funds will be
rejected and the check returned to the Shareholder.
The Funds and Services may agree to contact
shareholders presenting checks under $10,000
reported as insufficient to obtain alternative
instructions for payment.
o Confirmations of Available Funds
The Fund expects that situations may develop whereby it
would be beneficial to determine if a person who has
placed an order for Shares has sufficient funds in his or
her checking account to cover the payment for the Shares
purchased. When this situation occurs, Price Services
may call the bank in question and request that it confirm
that sufficient funds to cover the purchase are currently
credited to the account in question. Price Services will
maintain written documentation or a recording of each
telephone call which is made under the procedures
outlined above. None of the above procedures shall
preclude Price Services from inquiring as to the status
of any check received by it in payment for the Fund's
Shares as Price Services may deem appropriate or
necessary to protect both the Fund and Price Services. If
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a conflict arises between Section 2 and this Section 6,
Section 6 will govern.
7. Dividends, Distributions and Other Corporate Actions
o The Fund will promptly inform Price Services of the
declaration of any dividend, distribution, stock split
or any other distributions of a similar kind on account
of its Capital Stock.
o Price Services shall act as Dividend Disbursing Agent for
the Fund, and as such, shall prepare and make income and
capital gain payments to investors. As Dividend
Disbursing Agent, Price Services will on or before the
payment date of any such dividend or distribution, notify
the Custodian of the estimated amount required to pay any
portion of said dividend or distribution which is payable
in cash, and the Fund agrees that on or about the payment
date of such distribution, it shall instruct the
Custodian to make available to Price Services sufficient
funds for the cash amount to be paid out. If an investor
is entitled to receive additional Shares by virtue of any
such distribution or dividend, appropriate credits will
be made to his or her account.
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8. Unclaimed Payments and Certificates
In accordance with procedures agreed upon by both
parties, report abandoned property to appropriate state and
governmental authorities of the Fund. Price Services shall,
90 days prior to the annual reporting of abandoned property to
each of the states, make reasonable attempts to locate
Shareholders for which (a) checks or share certificates have
been returned; (b) for which accounts have aged outstanding
checks; or (c) accounts with unissued shares that have been
coded with stop mail and meet the dormancy period guidelines
specified in the individual states. Price Services shall
make reasonable attempts to contact shareholders for those
accounts which have significant aged outstanding checks and
those checks meet a specified dollar threshold.
9. Books and Records
Maintain records showing for each Shareholder's account,
Retirement Plan or Retirement Account, as the case may be, the
following:
o Names, address and tax identification number;
o Number of Shares held;
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PAGE 19
o Certain historical information regarding the
account of each Shareholder, including dividends
and distributions distributed in cash or invested
in Shares;
o Pertinent information regarding the establishment
and maintenance of Retirement Plans and Retirement
Accounts necessary to properly administer each
account;
o Information with respect to the source of dividends
and distributions allocated among income (taxable
and nontaxable income), realized short-term gains
and realized long-term gains;
o Any stop or restraining order placed against a
Shareholder's account;
o Information with respect to withholdings on
domestic and foreign accounts;
o Any instructions from a Shareholder including, all
forms furnished by the Fund and executed by a
Shareholder with respect to (i) dividend or
distribution elections, and (ii) elections with
respect to payment options in connection with the
redemption of Shares;
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o Any correspondence relating to the current
maintenance of a Shareholder's account;
o Certificate numbers and denominations for any
Shareholder holding certificates;
o Any information required in order for Price
Services to perform the calculations contemplated
under this Agreement.
Price Services shall maintain files and furnish
statistical and other information as required under this
Agreement and as may be agreed upon from time to time by both
parties or required by applicable law. However, Price
Services reserves the right to delete, change or add any
information to the files maintained; provided such deletions,
changes or additions do not contravene the terms of this
Agreement or applicable law and do not materially reduce the
level of services described in this Agreement. Price Services
shall also use its best efforts to obtain additional
statistical and other information as each Fund may reasonably
request for additional fees as may be agreed to by both
parties.
Any such records maintained pursuant to Rule 31a-1 under
the Investment Company Act of 1940 ("the Act") will be
preserved for the periods and maintained in a manner
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prescribed in Rule 31a-2 thereunder. Disposition of such
records after such prescribed periods shall be as mutually
agreed upon by the Fund and Price Services. The retention of
such records, which may be inspected by the Fund at reasonable
times, shall be at the expense of the Fund. All records
maintained by Price Services in connection with the
performance of its duties under this Agreement will remain the
property of the Fund and, in the event of termination of this
Agreement, will be delivered to the Fund as of the date of
termination or at such other time as may be mutually agreed
upon.
All books, records, information and data pertaining to
the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of
this Agreement shall remain confidential, and shall not be
voluntarily disclosed to any other person, except after prior
notification to and approval by the other party hereto, which
approval shall not be unreasonably withheld and may not be
withheld where Price Services or the Fund may be exposed to
civil or criminal contempt proceedings for failure to comply;
when requested to divulge such information by duly constituted
governmental authorities; or after so requested by the other
party hereto.
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10. Authorized Issued and Outstanding Shares
Record the issuance of Shares of the Fund and maintain,
pursuant to Rule 17Ad-10(e) of the '34 Act, a record of the
total number of Shares of the Fund which are authorized,
issued and outstanding, based upon data provided to it by the
Fund. Price Services shall also provide the Fund on a regular
basis the total number of Shares which are authorized and
issued and outstanding. Price Services shall have no
obligation, when recording the issuance of Shares, to monitor
the issuance of such Shares or to take cognizance of any laws
relating to the issuance or sale of such Shares.
11. Tax Information
Prepare and file with the Internal Revenue Service and
with other appropriate state agencies and, if required, mail
to investors, those returns for reporting dividends and
distributions paid as required to be so filed and mailed, and
shall withhold such sums required to be withheld under
applicable Federal income tax laws, rules, and regulations.
Additionally, Price Services will file and, as applicable,
mail to investors, any appropriate information returns
required to be filed in connection with Retirement Plan
processing, such as 1099R, 5498, as well as any other
appropriate forms that the Fund or Price Services may deem
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necessary. The Fund and Price Services shall agree to
procedures to be followed with respect to Price Services'
responsibilities in connection with compliance with back-up
withholding and other tax laws.
12. Information to be Furnished to the Fund
Furnish to the Fund such information as may be agreed
upon between the Fund and Price Services including any
information that the Fund and Price Services agree is
necessary to the daily operations of the business.
13. Correspondence
Promptly and fully answer correspondence from
shareholders and Administrators relating to Shareholder
Accounts, Retirement Accounts, transfer agent procedures, and
such other correspondence as may from time to time be mutually
agreed upon with the Funds. Unless otherwise instructed,
copies of all correspondence will be retained by Price
Services in accordance with applicable law and procedures.
14. Lost or Stolen Securities
Pursuant to Rule 17f-1 of the '34 Act, report to the
Securities Information Center and/or the FBI or other
appropriate person on Form X-17-F-1A all lost, stolen, missing
or counterfeit securities. Provide any other services
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relating to lost, stolen or missing securities as may be
mutually agreed upon by both parties.
15. Telephone Services
Maintain a Telephone Servicing Staff of representatives
("Representatives") sufficient to timely respond to all
telephonic inquiries reasonably foreseeable. The
Representatives will also effect telephone purchases,
redemptions, exchanges, and other transactions mutually agreed
upon by both parties, for those Shareholders who have
authorized telephone services. The Representatives shall
require each Shareholder effecting a telephone transaction to
properly identify himself/herself before the transaction is
effected, in accordance with procedures agreed upon between by
both parties. Procedures for processing telephone
transactions will be mutually agreed upon by both parties.
Price Services will also be responsible for providing
Tele*Access, PC*Access and such other Services as may be
offered by the Funds from time to time. Price Services will
maintain a special Shareholder Servicing staff to service
certain Shareholders with substantial relationships with the
Funds.
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16. Collection of Shareholder Fees
Calculate and notify shareholders of any fees owed the
Fund, its affiliates or its agents. Such fees include the
small account fee IRA custodial fee and wire fee.
17. Form N-SAR
Maintain such records, if any, as shall enable the Fund
to fulfill the requirements of Form N-SAR.
18. Cooperation With Accountants
Cooperate with each Fund's independent public accountants
and take all reasonable action in the performance of its
obligations under the Agreement to assure that the necessary
information is made available to such accountants for the
expression of their opinion without any qualification as to
the scope of their examination, including, but not limited to,
their opinion included in each such Fund's annual report on
Form N-SAR and annual amendment to Form N-1A.
19. Blue Sky
Provide to the Fund or its agent, on a daily, weekly,
monthly and quarterly basis, and for each state in which the
Fund's Shares are sold, sales reports and other materials for
blue sky compliance purposes as shall be agreed upon by the
parties.
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20. Other Services
Provide such other services as may be mutually agreed
upon between Price Services and the Fund.
21. Fees and Out-of-Pocket Expenses
Each Fund shall pay to Price Services and/or its agents
for its Transfer Agent Services hereunder, fees computed as
set forth in Schedule A attached. Except as provided below,
Price Services will be responsible for all expenses relating
to the providing of Services. Each Fund, however, will
reimburse Price Services for the following out-of-pocket
expenses and charges incurred in providing Services:
o Postage. The cost of postage and freight for
mailing materials to Shareholders and Retirement
Plan participants, or their agents, including
overnight delivery, UPS and other express mail
services and special courier services required to
transport mail between Price Services locations and
mail processing vendors.
o Proxies. The cost to mail proxy cards and other
material supplied to it by the Fund and costs
related to the receipt, examination and tabulation
of returned proxies and the certification of the
vote to the Fund.
PAGE 27
o Communications
o Print. The printed forms used internally and
externally for documentation and processing
Shareholder and Retirement Plan participant,
or their agent's inquiries and requests; paper
and envelope supplies for letters, notices,
and other written communications sent to
Shareholders and Retirement Plan participants,
or their agents.
o Print & Mail House. The cost of internal and
third party printing and mail house services,
including printing of statements and reports.
o Voice and Data. The cost of equipment
(including associated maintenance), supplies
and services used for communicating to and
from the Shareholders of the Fund and
Retirement Plan participants, or their agents,
the Fund's transfer agent, other Fund offices,
and other agents of either the Fund or Price
Services. These charges shall include:
o telephone toll charges (both incoming and
outgoing, local, long distance and
mailgrams); and
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o data and telephone lines and associated
equipment such as modems, multiplexers,
and facsimile equipment.
o Record Retention. The cost of maintenance and
supplies used to maintain, microfilm, copy,
record, index, display, retrieve, and
store, in microfiche or microfilm form,
documents and records.
o Disaster Recovery. The cost of services,
equipment, facilities and other charges
necessary to provide disaster recovery for any
and all services listed in this Agreement.
Out-of-pocket costs will be billed at cost to the Funds.
Allocation of monthly costs among the Funds will generally be made
based upon the number of Shareholder and Retirement Accounts
serviced by Price Services each month. Some invoices for these
costs will contain costs for both the Funds and other funds
serviced by Price Services. These costs will be allocated based on
a reasonable allocation methodology. Where possible, such as in
the case of inbound and outbound WATS charges, allocation will be
made on the actual distribution or usage.
C. Representations and Warranties of Price Services
Price Services represents and warrants to the Fund that:
PAGE 29
1. It is a corporation duly organized and existing and in
good standing under the laws of Maryland;
2. It is duly qualified to carry on its business in
Maryland, California and Florida;
3. It is empowered under applicable laws and by its charter
and by-laws to enter into and perform this Agreement;
4. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement;
5. It is registered with the Securities and Exchange
Commission as a Transfer Agent pursuant to Section 17A of the
'34 Act; and
6. It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
D. Representations and Warranties of the Fund
The Fund represents and warrants to Price Services that:
1. It is a corporation or business trust duly organized and
existing and in good standing under the laws of Maryland or
Massachusetts, as the case may be;
2. It is empowered under applicable laws and by its Articles
of Incorporation or Declaration of Trust, as the case may be,
and By-Laws to enter into and perform this Agreement;
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PAGE 30
3. All proceedings required by said Articles of
Incorporation or Declaration of Trust, as the case may be, and
By-Laws have been taken to authorize it to enter into and
perform this Agreement;
4. It is an investment company registered under the Act; and
5. A registration statement under the Securities Act of 1933
("the '33 Act") is currently effective and will remain
effective, and appropriate state securities law filings have
been made and will continue to be made, with respect to all
Shares of the Fund being offered for sale.
E. Standard of Care/Indemnification
Notwithstanding anything to the contrary in this Agreement:
1. Price Services shall not be liable to any Fund for any
act or failure to act by it or its agents or subcontractors on
behalf of the Fund in carrying or attempting to carry out the
terms and provisions of this Agreement provided Price Services
has acted in good faith and without negligence or willful
misconduct and selected and monitored the performance of its
agents and subcontractors with reasonable care.
2. The Fund shall indemnify and hold Price Services harmless
from and against all losses, costs, damages, claims, actions
and expenses, including reasonable expenses for legal counsel,
incurred by Price Services resulting from: (i) any action or
PAGE 31
omission by Price Services or its agents or subcontractors in
the performance of their duties hereunder; (ii) Price Services
acting upon instructions believed by it to have been executed
by a duly authorized officer of the Fund; or (iii) Price
Services acting upon information provided by the Fund in form
and under policies agreed to by Price Services and the Fund.
Price Services shall not be entitled to such indemnification
in respect of actions or omissions constituting negligence or
willful misconduct of Price Services or where Price Services
has not exercised reasonable care in selecting or monitoring
the performance of its agents or subcontractors.
3. Except as provided in Article L of this Agreement, Price
Services shall indemnify and hold harmless the Fund from all
losses, costs, damages, claims, actions and expenses,
including reasonable expenses for legal counsel, incurred by
the Fund resulting from the negligence or willful misconduct
of Price Services or which result from Price Services' failure
to exercise reasonable care in selecting or monitoring the
performance of its agents or subcontractors. The Fund shall
not be entitled to such indemnification in respect of actions
or omissions constituting negligence or willful misconduct of
such Fund or its agents or subcontractors; unless such
negligence or misconduct is attributable to Price Services.
PAGE 32
4. In determining Price Services' liability, an isolated
error or omission will normally not be deemed to constitute
negligence when it is determined that:
o Price Services had in place "appropriate procedures;"
o the employee(s) responsible for the error or omission had
been reasonably trained and were being appropriately
monitored; and
o the error or omission did not result from wanton or
reckless conduct on the part of the employee(s).
It is understood that Price Services is not obligated to have
in place separate procedures to prevent each and every
conceivable type of error or omission. The term "appropriate
procedures" shall mean procedures reasonably designed to
prevent and detect errors and omissions. In determining the
reasonableness of such procedures, weight will be given to
such factors as are appropriate, including the prior
occurrence of any similar errors or omissions when such
procedures were in place and transfer agent industry standards
in place at the time of the occurrence.
5. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts
of God, strikes or other causes reasonably beyond its control,
such party shall not be liable to the other party for any
PAGE 33
loss, cost, damage, claim, action or expense resulting from
such failure to perform or otherwise from such causes.
6. In order that the indemnification provisions contained in
this Article E shall apply, upon the assertion of a claim for
which either party may be required to indemnify the other, the
party seeking indemnification shall promptly notify the other
party of such assertion, and shall keep the other party
advised with respect to all developments concerning such
claim. The party who may be required to indemnify shall have
the option to participate with the party seeking
indemnification in the defense of such claim, or to defend
against said claim in its own name or in the name of the other
party. The party seeking indemnification shall in no case
confess any claim or make any compromise in any case in which
the other party may be required to indemnify it except with
the other party's prior written consent.
7. Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of
this Agreement.
F. Dual Interests
It is understood that some person or persons may be directors,
officers, or shareholders of both the Funds and Price Services
(including Price Services's affiliates), and that the existence of
PAGE 34
any such dual interest shall not affect the validity of this
Agreement or of any transactions hereunder except as otherwise
provided by a specific provision of applicable law.
G. Documentation
o As requested by Price Services, the Fund shall promptly
furnish to Price Services the following:
o A certified copy of the resolution of the
Directors/Trustees of the Fund authorizing the
appointment of Price Services and the execution and
delivery of this Agreement;
o A copy of the Articles of Incorporation or
Declaration of Trust, as the case may be, and By-
Laws of the Fund and all amendments thereto;
o As applicable, specimens of all forms of
outstanding and new stock/share certificates in the
forms approved by the Board of Directors/Trustees
of the Fund with a certificate of the Secretary of
the Fund as to such approval;
o All account application forms and other documents
relating to Shareholders' accounts;
<PAGE>
PAGE 35
o An opinion of counsel for the Fund with respect to
the validity of the stock, the number of Shares
authorized, the status of redeemed Shares, and the
number of Shares with respect to which a
Registration Statement has been filed and is in
effect; and
o A copy of the Fund's current prospectus.
The delivery of any such document for the purpose of any other
agreement to which the Fund and Price Services are or were parties
shall be deemed to be delivery for the purposes of this Agreement.
o As requested by Price Services, the Fund will also
furnish from time to time the following documents:
o Each resolution of the Board of Directors/Trustees of the
Fund authorizing the original issue of its Shares;
o Each Registration Statement filed with the Securities and
Exchange Commission and amendments and orders thereto in
effect with respect to the sale of Shares with respect to
the Fund;
o A certified copy of each amendment to the Articles of
Incorporation or Declaration of Trust, and the By-Laws of
the Fund;
<PAGE>
PAGE 36
o Certified copies of each vote of the Board of
Directors/Trustees authorizing officers to give
instructions to the Transfer Agent;
o Such other documents or opinions which Price Services, in
its discretion, may reasonably deem necessary or
appropriate in the proper performance of its duties; and
o Copies of new prospectuses issued.
Price Services hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Fund for
safekeeping of stock certificates, check forms and facsimile
signature imprinting devices, if any; and for the preparation or
use, and for keeping account of, such certificates, forms and
devices.
H. References to Price Services
Each Fund agrees not to circulate any printed matter which
contains any reference to Price Services without the prior approval
of Price Services, excepting solely such printed matter that merely
identifies Price Services as agent of the Fund. The Fund will
submit printed matter requiring approval to Price Services in draft
form, allowing sufficient time for review by Price Services and its
legal counsel prior to any deadline for printing.
<PAGE>
PAGE 37
I. Compliance With Governmental Rules and Regulations
Except as otherwise provided in the Agreement and except for
the accuracy of information furnished to the Fund by Price
Services, each Fund assumes full responsibility for the
preparation, contents and distribution of its prospectuses and
compliance with all applicable requirements of the Act, the '34
Act, the '33 Act, and any other laws, rules and regulations of
governmental authorities having jurisdiction over the Fund. Price
Services shall be responsible for complying with all laws, rules
and regulations of governmental authorities having jurisdiction
over transfer agents and their activities.
J. Ownership of Software and Related Material
All computer programs, magnetic tapes, written procedures and
similar items purchased and/or developed and used by Price Services
in performance of the Agreement shall be the property of Price
Services and will not become the property of the Fund.
K. Quality Service Standards
Price Services and the Fund may from time to time agree to
certain quality service standards, as well as incentives and
penalties with respect to Price Services' hereunder.
L. As Of Transactions
For purposes of this Article L, the term "Transaction" shall
mean any single or "related transaction" (as defined below)
PAGE 38
involving the purchase or redemption of Shares (including
exchanges) that is processed at a time other than the time of the
computation of the Fund's net asset value per Share next computed
after receipt of any such transaction order by Price Services. If
more than one Transaction ("Related Transaction") in the Fund is
caused by or occurs as a result of the same act or omission, such
transactions shall be aggregated with other transactions in the
Fund and be considered as one Transaction.
o Reporting
Price Services shall:
1. Utilize a system to identify all Transactions, and
shall compute the net effect of such Transactions upon
the Fund on a daily, monthly and rolling 365 day basis.
The monthly and rolling 365 day periods are hereafter
referred to as "Cumulative".
2. Supply to the Fund, from time to time as mutually
agreed upon, a report summarizing the Transactions and
the daily and Cumulative net effects of such Transactions
both in terms of aggregate dilution and loss ("Dilution")
or gain and negative dilution ("Gain") experienced by the
Fund, and the impact such Gain or Dilution has had upon
the Fund's net asset value per Share.
<PAGE>
PAGE 39
3. With respect to any Transaction which causes
Dilution to the Fund of $25,000 or more, immediately
provide the Fund: (i) a report identifying the
Transaction and the Dilution resulting therefrom, (ii)
the reason such Transaction was processed as described
above, and (iii) the action that Price Services has or
intends to take to prevent the reoccurrence of such as of
processing ("Report").
o Liability
1. It will be the normal practice of the Funds not to
hold Price Services liable with respect to any
Transaction which causes Dilution to any single Fund of
less than $25,000. Price Services will, however, closely
monitor for each Fund the daily and Cumulative
Gain/Dilution which is caused by Transactions of less
than $25,000. When the Cumulative Dilution to any Fund
exceeds 3/10 of 1% per share, Price Services, in
consultation with counsel to the Fund, will make
appropriate inquiry to determine whether it should take
any remedial action. Price Services will report to the
Board of Directors/Trustees of the Fund ("Board") any
action it has taken.
<PAGE>
PAGE 40
2. Where a transaction causes dilution to a Fund
greater than $25,000 and less than $100,000 ("Significant
Transaction"), Price Services will review with Counsel to
the Fund the circumstances surrounding the underlying
transaction to determine whether the transaction was
caused by or occurred as a result of a negligent act or
omission by Price Services. If it is determined that the
dilution is the result of a negligent action or omission
by Price Services, Price Services and outside counsel for
the Fund will negotiate settlement. All such Significant
Transactions will be reported to the Audit Committee at
its annual meeting (unless the settlement fully
compensates the Fund for any dilution). Any "as of"
transaction, however, causing dilution in excess of the
lesser of $100,000 or a penny per share will be promptly
reported to the Board and resolved at the next scheduled
Board Meeting. Settlement for "as of" transactions
causing dilution of $100,000 or more will not be entered
into until approved by the Board. The factors the Board
would be expected to consider in making any determination
regarding the settlement of a Significant Transaction
would include but not be limited to:
<PAGE>
PAGE 41
o Procedures and controls adopted by Price Services
to prevent "As Of" processing;
o Whether such procedures and controls were being
followed at the time of the Significant
Transaction;
o The absolute and relative volume of all
transactions processed by Price Services on the day
of the Significant Transaction;
o The number of Transactions processed by Price
Services during prior relevant periods, and the net
Dilution/Gain as a result of all such transactions
to the Fund and to all other Price Funds;
o The prior response of Price Services to
recommendations made by the Funds regarding
improvement to the Transfer Agent's "As Of"
Processing Procedures.
3. In determining Price Services' liability with respect to
a Significant Transaction, an isolated error or omission
will normally not be deemed to constitute negligence when
it is determined that:
o Price Services had in place "appropriate
procedures".
<PAGE>
PAGE 42
o the employee(s) responsible for the error or
omission had been reasonably trained and were being
appropriately monitored; and
o the error or omission did not result from wanton or
reckless conduct on the part of the employee(s).
It is understood that Price Services is not obligated to
have in place separate procedures to prevent each and
every conceivable type of error or omission. The term
"appropriate procedures" shall mean procedures reasonably
designed to prevent and detect errors and omissions. In
determining the reasonableness of such procedures, weight
will be given to such factors as are appropriate,
including the prior occurrence of any similar errors or
omissions when such procedures were in place and transfer
agent industry standards in place at the time of the
occurrence.
M. Term and Termination of Agreement
o This Agreement shall run for a period of one (1) year from the
date first written above and will be renewed from year to year
thereafter unless terminated by either party as provided
hereunder.
<PAGE>
PAGE 43
o This Agreement may be terminated by the Fund upon one hundred
twenty (120) days' written notice to Price Services; and by
Price Services, upon three hundred sixty-five (365) days'
writing notice to the Fund.
o Upon termination hereof, the Fund shall pay to Price Services
such compensation as may be due as of the date of such
termination, and shall likewise reimburse for out-of-pocket
expenses related to its services hereunder.
N. Notice
Any notice as required by this Agreement shall be sufficiently
given (i) when sent to an authorized person of the other party at
the address of such party set forth above or at such other address
as such party may from time to time specify in writing to the other
party; or (ii) as otherwise agreed upon by appropriate officers of
the parties hereto.
O. Assignment
Neither this Agreement nor any rights or obligations hereunder
may be assigned either voluntarily or involuntarily, by operation
of law or otherwise, by either party without the prior written
consent of the other party, provided this shall not preclude Price
Services from employing such agents and subcontractors as it deems
appropriate to carry out its obligations set forth hereunder.
<PAGE>
PAGE 44
P. Amendment/Interpretive Provisions
The parties by mutual written agreement may amend this
Agreement at any time. In addition, in connection with the
operation of this Agreement, Price Services and the Fund may agree
from time to time on such provisions interpretive of or in addition
to the provisions of this Agreement as may in their joint opinion
be consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions are to be signed by all
parties and annexed hereto, but no such provision shall contravene
any applicable Federal or state law or regulation and no such
interpretive or additional provision shall be deemed to be an
amendment of this Agreement.
Q. Further Assurances
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes
hereof.
R. Maryland Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of Maryland.
S. Merger of Agreement
This Agreement, including the attached Appendices and
Schedules supersedes any prior agreement with respect to the
subject hereof, whether oral or written.
PAGE 45
T. Counterparts
This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together
shall be deemed to constitute one and the same instruments.
U. The Parties
All references herein to "the Fund" are to each of the Funds
listed on Appendix A individually, as if this Agreement were
between such individual Fund and Price Services. In the case of a
series Fund or trust, all references to "the Fund" are to the
individual series or portfolio of such Fund or trust, or to such
Fund or trust on behalf of the individual series or portfolio, as
appropriate. The "Fund" also includes any T. Rowe Price Funds
which may be established after the execution of this Agreement.
Any reference in this Agreement to "the parties" shall mean Price
Services and such other individual Fund as to which the matter
pertains.
V. Directors, Trustees and Shareholders and Massachusetts
Business Trust
It is understood and is expressly stipulated that neither the
holders of Shares in the Fund nor any Directors or Trustees of the
Fund shall be personally liable hereunder.
<PAGE>
PAGE 46
With respect to any Fund which is a party to this Agreement
and which is organized as a Massachusetts business trust, the term
"Fund" means and refers to the trustees from time to time serving
under the applicable trust agreement (Declaration of Trust) of such
Trust as the same may be amended from time to time. It is
expressly agreed that the obligations of any such Trust hereunder
shall not be binding upon any of the trustees, shareholders,
nominees, officers, agents or employees of the Trust, personally,
but bind only the trust property of the Trust, as provided in the
Declaration of Trust of the Trust. The execution and delivery of
this Agreement has been authorized by the trustees and signed by an
authorized officer of the Trust, acting as such, and neither such
authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them, but
shall bind only the trust property of the Trust as provided in its
Declaration of Trust.
W. Captions
The captions in the Agreement are included for convenience of
reference only and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.
<PAGE>
PAGE 47
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf under
their seals by and through their duly authorized officers.
T. ROWE PRICE SERVICES, INC. T. ROWE PRICE FUNDS
/s/James S. Riepe /s/Carmen F. Deyesu
BY: ________________________ BY: ________________________
DATED: _____________________ DATED: _____________________
<PAGE>
PAGE 48
APPENDIX A
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. ROWE PRICE CALIFORNIA TAX-FREE
INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
<PAGE>
PAGE 49
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
PAGE 50
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC. on behalf of the:
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. on behalf of the:
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
<PAGE>
PAGE 51
AMENDMENT NO. 1
TRANSFER AGENCY AND SERVICE AGREEMENT
Between
T. ROWE PRICE SERVICES, INC.
And
THE T. ROWE PRICE FUNDS
The Transfer Agency and Service Agreement of January 1, 1997,
between T. Rowe Price Services, Inc., and each of the Parties
listed on Appendix A thereto is hereby amended, as of February 4,
1997, by adding thereto Reserve Investment Funds, Inc., on behalf
of Government Reserve Investment Fund and Reserve Investment Fund.
RESERVE INVESTMENT FUNDS, INC.
Government Reserve Investment Fund
Reserve Investment Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
PAGE 52
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
PAGE 53
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE OTC FUND, INC., now known as T.
ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. Rowe Price OTC Fund, now known as T. Rowe
Price Small-Cap Stock Fund
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
<PAGE>
PAGE 54
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE
BOND FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC. on behalf of
the:
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. on
behalf of the:
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
Attest:
/s/Patricia S. Butcher /s/Carmen F. Deyesu
______________________ ______________________________
Patricia S. Butcher, By: Carmen F. Deyesu
Assistant Secretary Treasurer
Attest: T. ROWE PRICE SERVICES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
______________________ ______________________________
Barbara A. Van Horn, By: Henry H. Hopkins,
Assistant Secretary Vice President
<PAGE>
PAGE 55
AMENDMENT NO. 2
TRANSFER AGENCY AND SERVICE AGREEMENT
Between
T. ROWE PRICE SERVICES, INC.
And
THE T. ROWE PRICE FUNDS
The Transfer Agency and Service Agreement of January 1, 1997,
as amended February 4, 1997, between T. Rowe Price Services, Inc.
and each of the Parties listed on Appendix A thereto is hereby
further amended, as of April 24, 1997, by adding thereto the
T. Rowe Price Tax-Efficient Balanced Fund, Inc. and T. Rowe Price
Diversified Small-Cap Growth Fund, Inc.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
<PAGE>
PAGE 56
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
PAGE 57
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT BALANCED FUND,
INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
PAGE 58
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE
BOND FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC. on behalf of
the:
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. on
behalf of the:
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
Attest:
/s/Patricia S. Butcher /s/Carmen F. Deyesu
______________________ ______________________________
Patricia S. Butcher, By: Carmen F. Deyesu
Assistant Secretary Treasurer
Attest: T. ROWE PRICE SERVICES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
______________________ ______________________________
Barbara A. Van Horn, By: Henry H. Hopkins,
Assistant Secretary Vice President
Agreement between T. Rowe Price Associates, Inc. and T. Rowe Price Funds
for Fund Accounting Services, dated January 1, 1997, as amended
PAGE 1
AGREEMENT
between
T. ROWE PRICE ASSOCIATES, INC.
and
THE T. ROWE PRICE FUNDS
for
FUND ACCOUNTING SERVICES
<PAGE>
PAGE 2
TABLE OF CONTENTS
Page
Article A Terms of Appointment/Duties of Price
Associates . . . . . . . . . . . . . . . . . . . . . . .1
Article B Fees and Out-of-Pocket Expenses. . . . . . . . . .2
Article C Representations and Warranties of Price
Associates . . . . . . . . . . . . . . . . . . . . . . .3
Article D Representations and Warranties of the Fund . . . .3
Article E Ownership of Software and Related Material . . . .3
Article F Quality Service Standards. . . . . . . . . . . . .4
Article G Standard of Care/Indemnification . . . . . . . . .4
Article H Dual Interests . . . . . . . . . . . . . . . . . .6
Article I Documentation. . . . . . . . . . . . . . . . . . .6
Article J Recordkeeping/Confidentiality. . . . . . . . . . .6
Article K Compliance with Governmental Rules and
Regulations. . . . . . . . . . . . . . . . . . . . . . .7
Article L Terms and Termination of Agreement . . . . . . . .7
Article M Notice . . . . . . . . . . . . . . . . . . . . . .7
Article N Assignment . . . . . . . . . . . . . . . . . . . .7
Article O Amendment/Interpretive Provisions. . . . . . . . .8
Article P Further Assurances . . . . . . . . . . . . . . . .8
Article Q Maryland Law to Apply. . . . . . . . . . . . . . .8
Article R Merger of Agreement. . . . . . . . . . . . . . . .8
Article S Counterparts . . . . . . . . . . . . . . . . . . .8
Article T The Parties. . . . . . . . . . . . . . . . . . . .8
Article U Directors, Trustee and Shareholders and
Massachusetts Business Trust . . . . . . . . . . . . . .9
PAGE 3
Article V Captions . . . . . . . . . . . . . . . . . . . . .9
<PAGE>
PAGE 4
AGREEMENT made as of the first day of January, 1997, by and
between T. ROWE PRICE ASSOCIATES, INC., a Maryland corporation
having its principal office and place of business at 100 East Pratt
Street, Baltimore, Maryland 21202 ("Price Associates"), and each
Fund which is listed on Appendix A (as such Appendix may be amended
from time to time) and which evidences its agreement to be bound
hereby by executing a copy of this Agreement (each such Fund
individually hereinafter referred to as "the Fund", whose
definition may be found in Article T);
WHEREAS, Price Associates has the capability of providing the
Funds with certain accounting services ("Accounting Services");
WHEREAS, the Fund desires to appoint Price Associates to
provide these Accounting Services and Price Associates desires to
accept such appointment;
WHEREAS, the Board of Directors of the Fund has authorized the
Fund to utilize various pricing services for the purpose of
providing to Price Associates securities prices for the calculation
of the Fund's net asset value.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:<PAGE>
PAGE 5
A. Terms of Appointment/Duties of Price Associates
Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints Price Associates to
provide, and Price Associates agrees to provide, the following
Accounting Services:
a. Maintain for each Fund a daily trial balance, a general
ledger, subsidiary records and capital stock accounts;
b. Maintain for each Fund an investment ledger, including
amortized bond and foreign dollar denominated costs where
applicable;
c. Maintain for each Fund all records relating to the Fund's
income and expenses;
d. Provide for the daily valuation of each Fund's portfolio
securities and the computation of each Fund's daily net
asset value per share. Such daily valuations shall be
made in accordance with the valuation policies
established by each of the Fund's Board of Directors
including, but not limited to, the utilization of such
pricing valuation sources and/or pricing services as
determined by the Boards. Price Associates shall have no
liability for any losses or damages incurred by the Fund
as a result of erroneous portfolio security evaluations
provided by such designated sources and/or pricing
services; provided that, Price Associates reasonably<PAGE>
PAGE 6
believes the prices are accurate, has adhered to its
normal verification control procedures, and has otherwise
met the standard of care as set forth in Article G of
this Agreement;
e. Provide daily cash flow and transaction status
information to each Fund's adviser;
f. Authorize the payment of Fund expenses, either through
instruction of custodial bank or utilization of
custodian's automated transfer system;
g. Prepare for each Fund such financial information that is
reasonably necessary for shareholder reports, reports to
the Board of Directors and to the officers of the Fund,
and reports to the Securities and Exchange Commission,
the Internal Revenue Service and other Federal and state
regulatory agencies;
h. Provide each Fund with such advice that may be reasonably
necessary to properly account for all financial
transactions and to maintain the Fund's accounting
procedures and records so as to insure compliance with
generally accepted accounting and tax practices and
rules;
i. Maintain for each Fund all records that may be reasonably
required in connection with the audit performed by each
Fund's independent accountant, the Securities and
Exchange Commission, the Internal Revenue Service or such
other Federal or state regulatory agencies; and
j. Cooperate with each Fund's independent public accountants
and take all reasonable action in the performance of its
PAGE 7
obligations under the Agreement to assure that the
necessary information is made available to such
accountants for the expression of their opinion without
any qualification as to the scope of their examination
including, but not limited to, their opinion included in
each such Fund's annual report on Form N-SAR and annual
amendment to Form N-1A.
B. Fees and Out-of-Pocket Expenses
Each Fund shall pay to Price Associates for its Accounting
Services hereunder, fees as set forth in the Schedule attached
hereto. In addition, each Fund will reimburse Price Associates for
out-of-pocket expenses such as postage, printed forms, voice and
data transmissions, record retention, disaster recovery, third
party vendors, equipment leases and other similar items as may be
agreed upon between Price Associates and the Fund. Some invoices
will contain costs for both the Funds and other funds services by
Price Associates. In these cases, a reasonable allocation
methodology will be used to allocate these costs to the Funds.
C. Representations and Warrantees of Price Associates
Price Associates represents and warrants to the Fund that:
1. It is a corporation duly organized and existing in good
standing under the laws of Maryland.
2. It is duly qualified to carry on its business in
Maryland.
3. It is empowered under applicable laws and by its charter
and By-Laws to enter into and perform this Agreement.
4. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
PAGE 8
5. It has, and will continue to have, access to the
necessary facilities, equipment and personnel to perform its duties
and obligations under this Agreement.
D. Representations and Warrantees of the Fund
The Fund represents and warrants to Price Associates that:
1. It is a corporation or business trust, as the case may
be, duly organized and existing and in good standing under the laws
of Maryland or Massachusetts, as the case may be.
2. It is empowered under applicable laws and by its Articles
of Incorporation or Declaration of Trust, as the case may be, and
By-Laws have been taken to authorize it to enter into and perform
this Agreement.
3. All proceedings required by said Articles of
Incorporation or Declaration of Trust, as the case may be, and By-
Laws have been taken to authorize it to enter into and perform this
Agreement.
E. Ownership of Software and Related Material
All computer programs, magnetic tapes, written procedures, and
similar items purchased and/or developed and used by Price
Associates in performance of the Agreement shall be the property of
Price Associates and will not become the property of the Funds.
F. Quality Service Standards
Price Associates and the Fund may, from time to time, agree to
certain quality service standards, with respect to Price
Associates' services hereunder.
G. Standard of Care/Indemnification
Notwithstanding anything to the contrary in this Agreement:
PAGE 9
1. Where a Pricing Error results in loss or dilution to a
Fund of less than $10,000, the determination of liability for the
error will be made by Price Associates. Where a Pricing Error
results in loss or dilution to a Fund of $10,000 or more but less
than $100,000, liability for the error will be resolved through
negotiations between Fund Counsel and Price Associates. Where a
Pricing Error results in loss or dilution to a Fund of the lesser
of 1/2 of 1% of NAV or $100,000 or more, the error will be promptly
reported to the Board of Directors of the Fund (unless the Fund is
fully compensated for the loss or dilution), provided that final
settlement with respect to such errors will not be made until
approved by the Board of Directors of the Fund. A summary of all
Pricing Errors and their effect on the Funds will be reported to
the Funds Audit Committee on an annual basis. In determining the
liability of Price Associates for a Pricing Error, an error or
omission will not be deemed to constitute negligence when it is
determined that:
o Price Associates had in place "appropriate procedures and
an adequate system of internal controls;"
o the employee responsible for the error or omission had
been reasonably trained and was being appropriately
monitored; and
o the error or omission did not result from wanton or
reckless conduct on the part of the employee.
It is understood that Price Associates is not obligated to
have in place separate procedures to prevent each and every
conceivable type of error or omission. The term "appropriate
procedures and adequate system of internal controls" shall
PAGE 10
mean procedures and controls reasonably designed to prevent
and detect errors and omissions. In determining the
reasonableness of such procedures and controls, weight will be
given to such factors as are appropriate, including the prior
occurrence of any similar errors or omissions, when such
procedures and controls were in place and fund accounting
industry standards in place at the time of the error.
2. The Fund shall indemnify and hold Price Associates
harmless from and against all losses, costs, damages, claims,
actions, and expenses, including reasonable expenses for legal
counsel, incurred by Price Associates resulting from: (i) any
action or omission by Price Associates or its agents or
subcontractors in the performance of their duties hereunder; (ii)
Price Associates acting upon instructions believed by it to have
been executed by a duly authorized officer of the Fund; or (iii)
Price Associates acting upon information provided by the Fund in
form and under policies agreed to by Price Associates and the Fund.
Price Associates shall not be entitled to such indemnification in
respect of actions or omissions constituting negligence or willful
misconduct of Price Associates or where Price Associates has not
exercised reasonable care in selecting or monitoring the
performance of its agents or subcontractors.
3. Price Associates shall indemnify and hold harmless the
Fund from all losses, costs, damages, claims, actions and expenses,
including reasonable expenses for legal counsel, incurred by the
Fund resulting from the negligence or willful misconduct of Price
Associates or which result from Price Associates' failure to
PAGE 11
exercise reasonable care in selecting or monitoring the performance
of its agents or subcontractors. The Fund shall not be entitled to
such indemnification with respect to actions or omissions
constituting negligence or willful misconduct of such Fund or its
agents or subcontractors; unless such negligence or misconduct is
attributable to Price Associates.
4. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of
God, strikes or other causes reasonably beyond its control, such
party shall not be liable to the other party for any loss, cost,
damage, claim, action or expense resulting from such failure to
perform or otherwise from such causes.
5. In order that the indemnification provisions contained in
this Article G shall apply, upon the assertion of a claim for which
either party may be required to indemnify the other, the party
seeking indemnification shall promptly notify the other party of
such assertion, and shall keep the other party advised with respect
to all developments concerning such claim. The party who may be
required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim, or to
defend against said claim in its own name or in the name of the
other party. The party seeking indemnification shall in no case
confess any claim or make any compromise in any case in which the
other party may be required to indemnify it except with the other
party's prior written consent.
6. Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this
Agreement.
PAGE 12
H. Dual Interests
It is understood that some person or persons may be directors,
officers, or shareholders of both the Fund and Price Associates
(including Price Associates' affiliates), and that the existence of
any such dual interest shall not affect the validity of this
Agreement or of any transactions hereunder except as otherwise
provided by a specific provision of applicable law.
I. Documentation
As requested by Price Associates, the Fund shall promptly
furnish to Price Associates such documents as it may reasonably
request and as are necessary for Price Associates to carry out its
responsibilities hereunder.
J. Recordkeeping/Confidentiality
1. Price Associates shall keep records relating to the
services to be performed hereunder, in the form and manner as it
may deem advisable, provided that Price Associates shall keep all
records in such form and in such manner as required by applicable
law, including the Investment Company Act of 1940 ("the Act") and
the Securities Exchange Act of 1934 ("the '34 Act").
2. Price Associates and the Fund agree that all books,
records, information and data pertaining to the business of the
other party which are exchanged or received pursuant to the
negotiation or the carrying out of this Agreement shall remain
confidential, and shall not be voluntarily disclosed to any other
person, except: (a) after prior notification to and approval in
writing by the other party hereto, which approval shall not be
unreasonably withheld and may not be withheld where Price
Associates or Fund may be exposed to civil or criminal contempt
PAGE 13
proceedings for failure to comply; (b) when requested to divulge
such information by duly constituted governmental authorities; or
(c) after so requested by the other party hereto.
K. Compliance With Governmental Rules and Regulations
Except as otherwise provided in the Agreement and except for
the accuracy of information furnished to the Funds by Price
Associates, each Fund assumes full responsibility for the
preparation, contents and distribution of its prospectuses, and for
complying with all applicable requirements of the Act, the '34 Act,
the Securities Act of 1933 (the "33 Act"), and any laws, rules and
regulations of governmental authorities having jurisdiction over
the Funds.
L. Term and Termination of Agreement
1. This Agreement shall run for a period of one (1) year
from the date first written above and will be renewed from year to
year thereafter unless terminated by either party as provided
hereunder.
2. This Agreement may be terminated by the Fund upon sixty
(60) days' written notice to Price Associates; and by Price
Associates, upon three hundred sixty-five (365) days' writing
notice to the Fund.
3. Upon termination hereof, the Fund shall pay to Price
Associates such compensation as may be due as of the date of such
termination, and shall likewise reimburse for out-of-pocket
expenses related to its services hereunder.
M. Notice
Any notice as required by this Agreement shall be sufficiently
given (i) when sent to an authorized person of the other party at
PAGE 14
the address of such party set forth above or at such other address
as such party may from time to time specify in writing to the other
party; or (ii) as otherwise agreed upon by appropriate officers of
the parties hereto.
N. Assignment
Neither this Agreement nor any rights or obligations hereunder
may be assigned either voluntarily or involuntarily, by operation
of law or otherwise, by either party without the prior written
consent of the other party, provided this shall not preclude Price
Associates from employing such agents and subcontractors as it
deems appropriate to carry out its obligations set forth hereunder.
O. Amendment/Interpretive Provisions
The parties by mutual written agreement may amend this
Agreement at any time. In addition, in connection with the
operation of this Agreement, Price Associates and the Fund may
agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement.
Any such interpretive or additional provisions are to be signed by
all parties and annexed hereto, but no such provision shall
contravene any applicable Federal or state law or regulation and no
such interpretive or additional provision shall be deemed to be an
amendment of this Agreement.
<PAGE>
PAGE 15
P. Further Assurances
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes
hereof.
Q. Maryland Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of Maryland.
R. Merger of Agreement
This Agreement, including the attached Appendix and Schedule
supersedes any prior agreement with respect to the subject hereof,
whether oral or written.
S. Counterparts
This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together
shall be deemed to constitute one and the same instruments.
T. The Parties
All references herein to "the Fund" are to each of the Funds
listed on Appendix A individually, as if this Agreement were
between such individual Fund and Price Associates. In the case of
a series Fund or trust, all references to "the Fund" are to the
individual series or portfolio of such Fund or trust, or to such
Fund or trust on behalf of the individual series or portfolio, as
appropriate. The "Fund" also includes any T. Rowe Price Funds
which may be established after the execution of this Agreement.
Any reference in this Agreement to "the parties" shall mean Price
PAGE 16
Associates and such other individual Fund as to which the matter
pertains.
U. Directors, Trustees and Shareholders and Massachusetts
Business Trust
It is understood and is expressly stipulated that neither the
holders of shares in the Fund nor any Directors or Trustees of the
Fund shall be personally liable hereunder.
With respect to any Fund which is a party to this Agreement
and which is organized as a Massachusetts business trust, the term
"Fund" means and refers to the trustees from time to time serving
under the applicable trust agreement (Declaration of Trust) of such
Trust as the same may be amended from time to time. It is
expressly agreed that the obligations of any such Trust hereunder
shall not be binding upon any of the trustees, shareholders,
nominees, officers, agents or employees of the Trust, personally,
but bind only the trust property of the Trust, as provided in the
Declaration of Trust of the Trust. The execution and delivery of
this Agreement has been authorized by the trustees and signed by an
authorized officer of the Trust, acting as such, and neither such
authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them, but
shall bind only the trust property of the Trust as provided in its
Declaration of Trust.
<PAGE>
PAGE 17
V. Captions
The captions in the Agreement are included for convenience of
reference only and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf under
their seals by and through their duly authorized officers.
T. ROWE PRICE ASSOCIATES, INC. T. ROWE PRICE FUNDS
/s/Alvin M. Younger /s/Carmen F. Deyesu
BY:_____________________ BY:_____________________
DATED:__________________ DATED:__________________
<PAGE>
PAGE 18
APPENDIX A
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE CALIFORNIA TAX-FREE
INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
<PAGE>
PAGE 19
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
<PAGE>
PAGE 20
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC. on behalf of the:
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. on
behalf of the:
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
<PAGE>
PAGE 21
AMENDMENT NO. 1
AGREEMENT
between
T. ROWE PRICE ASSOCIATES, INC.
and
THE T. ROWE PRICE FUNDS
for
FUND ACCOUNTING SERVICES
The Agreement for Fund Accounting Services of January 1, 1997,
between T. Rowe Price Associates, Inc. and each of the Parties
listed on Appendix A thereto is hereby amended, as of February 4,
1997, by adding thereto Reserve Investment Funds, Inc., on behalf
of Government Reserve Investment Fund and Reserve Investment Fund.
RESERVE INVESTMENT FUNDS, INC.
Government Reserve Investment Fund
Reserve Investment Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
PAGE 22
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE OTC FUND, INC., now known as T. ROWE
PRICE SMALL-CAP STOCK FUND, INC.
T. Rowe Price OTC Fund, now known as T. Rowe Price
Small-Cap Stock Fund
<PAGE>
PAGE 23
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND,
INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC., on behalf of
the:
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
PAGE 24
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC., on
behalf of the:
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
Attest:
/s/Patricia S. Butcher /s/Carmen F. Deyesu
________________________ ___________________________________
Patricia S. Butcher, By: Carmen F. Deyesu
Assistant Secretary Treasurer
Attest: T. ROWE PRICE ASSOCIATES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
________________________ ___________________________________
Barbara A. Van Horn, By: Henry H. Hopkins,
Assistant Secretary Managing Director
<PAGE>
PAGE 25
AMENDMENT NO. 2
AGREEMENT
between
T. ROWE PRICE ASSOCIATES, INC.
and
THE T. ROWE PRICE FUNDS
for
FUND ACCOUNTING SERVICES
The Agreement for Fund Accounting Services of January 1, 1997,
as amended February 4, 1997, between T. Rowe Price Associates, Inc.
and each of the Parties listed on Appendix A thereto is hereby
further amended, as of April 24, 1997, by adding thereto the T.
Rowe Price Tax-Efficient Balanced Fund, Inc. and T. Rowe Price
Diversified Small-Cap Growth Fund, Inc.
RESERVE INVESTMENT FUNDS, INC.
Government Reserve Investment Fund
Reserve Investment Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND,
INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
PAGE 26
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
PAGE 27
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND,
INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT BALANCED FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
<PAGE>
PAGE 28
T. ROWE PRICE SUMMIT FUNDS, INC. on behalf of the:
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. on
behalf of the:
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
Attest:
/s/Patricia S. Butcher /s/Carmen F. Deyesu
________________________ ___________________________________
Patricia S. Butcher, By: Carmen F. Deyesu
Assistant Secretary Treasurer
Attest: T. ROWE PRICE ASSOCIATES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
________________________ ___________________________________
Barbara A. Van Horn, By: Henry H. Hopkins,
Assistant Secretary Managing Director
PAGE 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this registration statement on Form N-1A (the
"Registration Statement") of our report dated August 13, 1997, relating to the
statement of assets and liabilities of the Reserve Investment Funds, Inc.,
which appears in such Statement of Additional Information. We also consent to
the reference to us under the heading "Independent Accountants" in the
Statement of Additional Information.
/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP
Baltimore, Maryland
August 13, 1997
PAGE 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this registration statement on
Form N-1A (the "Registration Statement") of our reports dated June 18, 1997,
relating to the financial statements and financial highlights appearing in the
May 31, 1997 Semiannual Reports to the Shareholders of the T. Rowe Price
Corporate Income Fund, Inc., T. Rowe Price GNMA Fund, T. Rowe Price High Yield
Fund, Inc., T. Rowe Price New Income Fund, Inc., T. Rowe Price Prime Reserve
Fund, Inc., T. Rowe Price Short-Term Bond Fund, Inc., T. Rowe Price Short-Term
U.S. Government Fund, Inc., and T. Rowe Price U.S. Treasury Funds, Inc. We
also consent to the reference to us under the heading "Independent
Accountants" in the Statement of Additional Information.
/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP
Baltimore, Maryland
August 13, 1997
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PAGE 1
RESERVE INVESTMENT FUNDS, INC.
Government Reserve Investment Fund
Reserve Investment Fund
POWER OF ATTORNEY
RESOLVED, that the Corporation and each of its directors do hereby
constitute and authorize, William T. Reynolds, Joel H. Goldberg, and Henry H.
Hopkins, and each of them individually, their true and lawful attorneys and
agents to take any and all action and execute any and all instruments which
said attorneys and agents may deem necessary or advisable to enable the
Corporation to comply with the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, and any rules, regulations, orders
or other requirements of the United States Securities and Exchange Commission
thereunder, in connection with the registration under the Securities Act of
1933, as amended, of shares of the Corporation, to be offered by the
Corporation, and the registration of the Corporation under the Investment
Company Act of 1940, as amended, including specifically, but without
limitation of the foregoing, power and authority to sign the name of the
Corporation on its behalf, and to sign the names of each of such directors and
officers on his behalf as such director or officer to any amendment or
supplement (including Post-Effective Amendments) to the Registration Statement
on Form N-1A of the Corporation filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, and the Registration
Statement on Form N-1A of the Corporation under the Investment Company Act of
1940, as amended, and to any instruments or documents filed or to be filed as
a part of or in connection with such Registration Statement.
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed by its Chairman of the Board and the same attested by its Secretary,
each thereunto duly authorized by its Board of Directors, and each of the
undersigned has hereunto set his hand and seal as of the day set opposite his
name.
RESERVE INVESTMENT FUNDS, INC.
By: /S/William T. Reynolds
William T. Reynolds,
Chairman of the Board
April 24, 1997
Attest:
/s/Lenora V. Hornung
Lenora V. Hornung, Secretary
/s/William T. Reynolds Chairman of the Board April 24, 1997
William T. Reynolds (Principal Executive Officer)
/s/ Edward A Wiese President April 24, 1997
Edward A. Wiese
/s/Carmen F. Deyesu Treasurer April 24, 1997
Carmen F. Deyesu (Principal Financial Officer)
/s/ Robert P. Black Director April 24, 1997
Robert P. Black
/s/ Calvin W. Burnett Director April 24, 1997
Calvin W. Burnett
/s/ Anthony W. Deering Director April 24, 1997
Anthony W. Deering
/s/F. Pierce Linaweaver Director April 24, 1997
F. Pierce Linaweaver
/s/James S. Riepe Vice President April 24, 1997
James S. Riepe and Director
/s/ John G. Schreiber Director April 24, 1997
John G. Schreiber
/s/ M. David Testa Director April 24, 1997
M. David Testa
