<PAGE>
Registration Nos. 002-65539/811-2958
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Post-Effective Amendment No. 72 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940/X/
Amendment No. 56 /X/
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
---------------------------------------
Exact Name of Registrant as Specified in Charter
100 East Pratt Street, Baltimore, Maryland 21202
------------------------------------------ -----
Address of Principal Executive Offices Zip Code
410-345-2000
------------
Registrant's Telephone Number, Including Area Code
Henry H. Hopkins
100 East Pratt Street, Baltimore, Maryland 21202
------------------------------------------------
Name and Address of Agent for Service
Approximate Date of Proposed Public Offering December 31,
------------
1998
----
It is proposed that this filing will become effective (check appropriate
box):
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date), pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/X/ 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
/ /
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
TITLE OF SECURITIES BEING REGISTERED: COMMON STOCK
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.
This Amendment consists of the following:
Cross Reference Sheet
Part A of Form N-1A, Revised Prospectus
Part B of Form N-1A, Statement of Additional Information
Part C of Form N-1A, Other Information
<PAGE>
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
<S> <C> <C>
PART A
Item 1. Cover Page Cover Page
Item 2. Synopsis Transaction and Fund Expenses
Item 3. Condensed Financial +
Information
Item 4. General Description of About the Fund; Fund, Market, and Risk
Registrant Characteristics: What to Expect;
Understanding Fund Performance;
Investment Policies and Practices
Item 5. Management of the Fund Transaction and Fund Expenses;
Organization and Management
Item 6. Capital Stock and Other Useful Information on Distributions and
Securities Taxes; Organization and Management
Item 7. Purchase of Securities Being Pricing Shares and Receiving Sale
Offered Proceeds; Transaction Procedures and
Special Requirements; Account
Requirements and Transaction
Information; Shareholder Services
Item 8. Redemption or Repurchase Pricing Shares and Receiving Sale
Proceeds; Transaction Procedures and
Special Requirements; Shareholder
Services
Item 9. Pending Legal Proceedings +
PART B
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and +
History
Item 13. Investment Objectives and Investment Objectives and Policies;
Policies Risk Factors; Investment Program;
Investment Restrictions; Investment
Performance
Item 14. Management of the Registrant Management of Fund
Item 15. Control Persons and Principal Holders of Securities
Principal Holders of
Securities
Item 16. Investment Advisory and Investment Management Services;
Other Services Custodian; Independent Accountants;
Legal Counsel
Item 17. Brokerage Allocation Portfolio Transactions; Code of Ethics
Item 18. Capital Stock and Other Dividends and Distributions; Capital
Securities Stock
Item 19. Purchase, Redemption and Pricing of Securities; Net Asset Value
Pricing of Securities Being Per Share; Redemptions in Kind; Federal
Offered Registration of Shares
Item 20. Tax Status Tax Status
Item 21. Underwriters Distributor for the Fund
Item 22. Calculation of Yield +
Quotations of Money Market
Funds
Item 23. Financial Statements +
</TABLE>
CROSS REFERENCE SHEET
<PAGE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement
___________________________________
+ Not applicable or negative answer
<PAGE>
<PAGE>
PROSPECTUS
December 1, 1998
International Equity Funds
A choice of international, global, and regional stock funds for investors
seeking capital growth by diversifying beyond U.S. borders.
(T. ROWE PRICE RAM LOGO)
<PAGE>
FACTS AT A GLANCE
International Equity Funds
Investment Goal
Capital appreciation through investment in foreign companies or, for the Global
Stock Fund, investment in a mix of foreign and U.S. companies.
Strategy
Global Stock Fund Invests primarily in well-established foreign and U.S.
companies.
International Stock Fund/(R)/ Invests worldwide primarily in well-established,
non-U.S. companies.
International Discovery Fund/(R)/ Invests primarily in small and medium-sized,
non-U.S. companies.
Emerging Markets Stock Fund Invests primarily in companies located in less
developed "emerging market" countries.
European Stock Fund Invests primarily in companies domiciled in Europe.
Japan Fund Invests primarily in Japanese companies.
Latin America Fund Invests primarily in companies located in Latin America.
New Asia Fund Invests primarily in companies in Asia and the Pacific Basin,
excluding Japan.
International Growth & Income Fund Invests in large-capitalization,
dividend-paying companies outside the U.S. The stock selection reflects a value
orientation.
Risk/Reward
Each fund's share price will fluctuate with changes in market, economic, and
foreign currency exchange conditions, as well as with changes in portfolio
company prospects. Generally, funds investing in a single country, single or
multiple emerging markets, or principally in smaller companies represent higher
risk and potential reward than those with greater geographical diversification
and an orientation toward established companies and more mature economies and
markets.
Investor Profile
Those seeking higher appreciation potential over time and greater
diversification for their equity investments who can accept the price declines
associated with investing in stocks as well as the special risks that accompany
international investing.
Fees and Charges
100% no load. Redemption fees on three funds: the International Discovery,
Latin America, and Emerging Markets Stock Funds impose a 2% redemption fee,
payable to the funds, on shares purchased and held less than one year. No sales
charges; free telephone exchange among T. Rowe Price funds; no 12b-1 marketing
fees.
Investment Manager
Rowe Price-Fleming International, Inc. ("Price-Fleming") was founded in 1979 as
a joint venture between T. Rowe Price Associates, Inc. and Robert Fleming
Holdings, Ltd. As of December 31, 1997, Price-Fleming managed $30 billion in
foreign stocks and bonds through its offices in Baltimore, London, Tokyo,
Singapore, Hong Kong, and Buenos Aires.
<PAGE>
T. Rowe Price International Funds, Inc.
Prospectus
December 1, 1998
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
T. ROWE PRICE
Contents
1
ABOUT THE FUNDS
Transaction and Fund Expenses 2
Financial Highlights 5
Fund, Market, and Risk Characteristics 10
2
ABOUT YOUR ACCOUNT
Pricing Shares and Receiving Sale Proceeds 19
Distributions and Taxes 22
Transaction Procedures and Special Requirements 24
3
MORE ABOUT THE FUNDS
Organization and Management 27
Understanding Performance Information 31
Investment Policies and Practices 32
4
INVESTING WITH T. ROWE PRICE
Account Requirements and Transaction Information 41
Opening a New Account 41
Purchasing Additional Shares 43
Exchanging and Redeeming 44
Rights Reserved by the Fund 45
Shareholder Services 46
Discount Brokerage 48
Investment Information 49
This prospectus contains information you should know before investing. Please
keep it for future reference. A Statement of Additional Information about the
funds, dated December 1, 1998, has been filed with the Securities and Exchange
Commission and is incorporated by reference in this prospectus. To obtain a free
copy, call 1-800-638-5660.
<PAGE>
ABOUT THE FUNDS
1
TRANSACTION AND FUND EXPENSES
----------------------------------------------------------
. Like all T. Rowe Price funds, these funds are 100% no load.
These tables should help you understand the kinds of expenses you will bear
directly or indirectly as a fund shareholder.
Shareholder Transaction Expenses in Table 1 shows that you pay no sales
charges. All the money you invest in a fund goes to work for you, subject to
the fees explained below. Annual Fund Expenses provides an estimate of how
much it will cost to operate each fund for a year, based on 1997 fiscal year
expenses (and any expense limitations shown in Table 3). These are costs you
pay indirectly, because they are deducted from the funds' total assets before
the daily share price is calculated and before dividends and other
distributions are made. In other words, you will not see these expenses on
your account statement.
The main types of expenses, which all mutual funds may charge against fund
assets, are:
. A management fee The percent of fund assets paid to the fund's investment
manager. Each fund's fee comprises both a group fee, 0.32% as of October 31,
1997, and an individual fund fee, as follows: International Stock, Global
Stock and International Growth & Income Funds 0.35%; European Stock, Japan,
and New Asia Funds 0.50%; International Discovery, Latin America, and
Emerging Markets Stock Funds 0.75%. Because the investment programs of the
funds are more costly to implement and maintain, their management fees are
higher than those paid by most U.S. investment companies.
. "Other" administrative expenses Charges primarily for the servicing of
shareholder accounts, such as providing statements and reports and disbursing
dividends, as well as providing custodial services. For the year ended
October 31, 1997, the funds paid the fees shown in Table 6 to T. Rowe Price
Services, Inc., for transfer and dividend disbursing functions and
shareholder services; to T. Rowe Price Retirement Plan Services, Inc., for
recordkeeping services for certain retirement plans; and to T. Rowe Price for
accounting services.
. Marketing or distribution fees An annual charge ("12b-1") to existing
shareholders to defray the cost of selling shares to new shareholders. T.
Rowe Price funds do not levy 12b-1 fees.
<PAGE>
T. ROWE PRICE
For further details on fund expenses, please see Organization and Management.
. Hypothetical example Assume you invest $1,000, the fund returns 5% annually,
expense ratios remain as listed in Table 1, and you close your account at the
end of the time periods shown. Your expenses would be as shown in Table 2.
<TABLE>
Table 1
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <S>
Shareholder Transaction Expenses
Emerging Int'l.
Markets European Global Int'l. Growth & Int'l. Latin New
Stock Stock Stock Discovery Income Stock Japan America Asia
Sales charge "load" None None None None None None None None None
on purchases
---------------------------------------------------------------------------------
Sales charge "load" on
reinvested None None None None None None None None None
distributions
---------------------------------------------------------------------------------
Redemption fees 2% None None 2% None None None 2% None
/a/ /a/ /a/
---------------------------------------------------------------------------------
Exchange fees None None None None None None None None None
Percentage of Fiscal 1997 Average Net Assets
Annual Fund
Expenses
(After reduction)/bcd/ Emerging Int'l.
Markets European Global Int'l. Growth & Int'l. Latin New
Stock Stock Stock Discovery Income Stock Japan America Asia
0. 0.6
Management fee 1.07% 0.82% 01% 1.07% 6 0.67% 0.82% 1.07% 0.82%
%
---------------------------------------------------------------------------------
Marketing fees None None None None None None None None None
(12b-1)
---------------------------------------------------------------------------------
Total other 0.5
(shareholder 9
servicing, custodial, 0.68% 0.24% 1.29% 0.34% % 0.18% 0.42% 0.40% 0.28%
auditing, etc.)
---------------------------------------------------------------------------------
1.
Total fund expenses 1.75% 1.06% 30 1.41% 1.25% 0.85% 1.24% 1.47% 1.10%
%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
/a/
On shares purchased and held for less than one year (details under "Contingent
Redemption Fees" in "Pricing Shares and Receiving Sale Proceeds").
/b/Had Price-Fleming not agreed to waive management fees in accordance with an
expense limitation agreement, the Emerging Markets Stock Fund's management
fee, other expenses, and total expense ratios would have been 1.07%, 0.68%,
and 1.75%, respectively.
/c/Had Price-Fleming not agreed to waive management fees and bear certain
expenses in accordance with an expense limitation agreement, the Global Stock
Fund's management fee, other expenses, and total expense ratios would have
been 0.67%, 1.29%, and 1.96%, respectively.
/d/Had Price-Fleming not agreed to waive management fees and bear certain
expenses in accordance with an expense limitation agreement, the International
Growth & Income Fund's management fee, other expenses, and total expense ratio
would have been 0.67%, 0.59%, and 1.26%, respectively.
Note:A $5 fee is charged for wire redemptions under $5,000, subject to change
without notice, and a $10 fee is charged for small accounts when applicable
(see "Small Account Fee" under "Transaction Procedures and Special
Requirements").
<PAGE>
ABOUT THE FUNDS
<TABLE>
Table 2
<CAPTION>
<S> <C> <C> <C> <C> <S>
Hypothetical Fund Expenses
Fund
Emerging Markets Stock $18 $55 $95 $206
----------------------------------------
European Stock 11 34 58 129
----------------------------------------
Global Stock 13 41 71 157
----------------------------------------
14 45 77 169
International Discovery
----------------------------------------
International Growth & 13 40 69 151
Income
----------------------------------------
International Stock 9 27 47 105
----------------------------------------
Japan 13 39 68 150
----------------------------------------
Latin America 15 46 80 176
----------------------------------------
New Asia 11 35 61 134
- -----------------------------------------------------------------------
</TABLE>
. Table 2 is just an example; actual expenses can be higher or lower than
those shown.
Table 3 sets forth expense ratio limitations and the periods for which they
are effective. For each, Price-Fleming has agreed to waive management fees
and bear certain expenses which would cause the funds' ratio of expenses to
average net assets to exceed the indicated percentage limitations. The
expenses borne by Price-Fleming are subject to reimbursement by the funds
through the indicated reimbursement date, but no reimbursement will be made
if it would result in the funds' expense ratio exceeding its specified limit.
Any amounts reimbursed will have the effect of increasing fees otherwise paid
by a fund.
<TABLE>
Table 3
<CAPTION>
<S> <S> <S> <S> <S>
Expense Ratio Limitations
Expense Ratio
Limitation Period Limitation Reimbursement Date
Emerging Markets
Stock/a/ 11/1/96-10/31/98 1.75% 10/31/00
Global Stock/b/ 11/1/97-10/31/99 1.20% 10/31/01
-----
International Growth
& 12/1/98-10/31/00 1.25% 10/31/02
Income
- --------------------------------------------------------------------------------------------
</TABLE>
/a/
The Emerging Markets Stock Fund previously operated under a 1.75% limitation
that expired October 31, 1996. The reimbursement period for this limitation
extends through October 31, 1998.
/b/The Global Stock Fund previously operated under a 1.30% limitation that
expired October 31, 1997. The reimbursement period for this limitation extends
through October 31, 1999.
<PAGE>
T. ROWE PRICE
FINANCIAL HIGHLIGHTS
----------------------------------------------------------
Table 4, which provides information about each fund's financial history, is
based on a single share outstanding throughout each fiscal year, and for the
unaudited six months ended April 30, 1998. Each fund's section of the table
is part of the financial statements which are included in its annual and
semiannual reports, respectively, and are incorporated by reference into the
Statement of Additional Information (available upon request). The financial
statements in each fund's annual report were audited by the funds'
independent accountants, PricewaterhouseCoopers LLP. The financial statements
in the semiannual report are unaudited.
<TABLE>
Table 4 Financial Highlights
Footnotes are on
page 9.
<CAPTION>
Income From Investment
Activities Less Distributions Net Asset Value
Period Net Asset Net Net Realized Total From Net Net Total Redemption
Ended Value, Investment & Unrealized Investment Investment Realized Distributions Fees Added to
Beginning Income (Loss) Gain (Loss) on Activities Income Gain Paid-in-Capital
of Period Investments
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
International Stock/a/
1988 $ 8.54 $ 0.16 $ 1.36 $ 1.52 $ (0.16) $(0.93 ) $ (1.09 ) --
---------------------------------------------------------------------------------------------------------------
1989 8.97 0.16 1.94 2.10 (0.16) (0.67 ) (0.83 ) --
---------------------------------------------------------------------------------------------------------------
1990 10.24 0.22 (1.13) (0.91) (0.16) (0.36 ) (0.52 ) --
---------------------------------------------------------------------------------------------------------------
1991 8.81 0.15 1.22 1.37 (0.15) (0.49 ) (0.64 ) --
---------------------------------------------------------------------------------------------------------------
1992 9.54 0.14 (0.47) (0.33) (0.16) (0.16 ) (0.32 ) --
---------------------------------------------------------------------------------------------------------------
1993/n/ 8.89 0.10 2.75 2.85 -- -- -- --
---------------------------------------------------------------------------------------------------------------
1994 11.74 0.09 1.30 1.39 (0.09) (0.20 ) (0.29 ) --
---------------------------------------------------------------------------------------------------------------
1995 12.84 0.18 (0.19) (0.01) (0.12) (0.62 ) (0.74 ) --
---------------------------------------------------------------------------------------------------------------
1996 12.09 0.19 1.57 1.76 (0.18) (0.20 ) (0.38 ) --
---------------------------------------------------------------------------------------------------------------
1997 13.47 0.19 0.86 1.05 (0.18) (0.20 ) (0.38 ) --
---------------------------------------------------------------------------------------------------------------
1998/s/ 14.14 0.10 1.88 1.98 (0.20) (0.55 ) (0.75 ) --
International Discovery
1989/b/ $10.00 $ 0.14/c/ $ 4.03 $ 4.17 $ (0.13) $(0.10 ) $ (0.23 ) --
---------------------------------------------------------------------------------------------------------------
1990 13.94 0.14/c/ (1.91) (1.77) (0.15) (0.27 ) (0.42 ) --
---------------------------------------------------------------------------------------------------------------
1991 11.75 0.13/c/ 1.24 1.37 (0.13) -- (0.13 ) --
---------------------------------------------------------------------------------------------------------------
1992 12.99 0.13/c/ (1.31) (1.18) (0.13) -- (0.13 ) --
---------------------------------------------------------------------------------------------------------------
1993/n/ 11.68 0.07/c/ 4.41 4.48 -- -- -- --
---------------------------------------------------------------------------------------------------------------
1994 16.16 0.04 1.52 1.56 (0.07) (0.02 ) (0.09 ) --
---------------------------------------------------------------------------------------------------------------
1995 17.63 0.10 (2.38) (2.28) (0.06) (0.87 ) (0.93 ) $0.01
---------------------------------------------------------------------------------------------------------------
1996 14.43 0.07 1.59 1.66 (0.10) (0.02 ) (0.12 ) --
---------------------------------------------------------------------------------------------------------------
1997 15.97 0.02 0.25 0.27 (0.07) (0.06 ) (0.13 ) --
---------------------------------------------------------------------------------------------------------------
1998/s/ 16.11 0.01 2.21 2.22 -- (0.25 ) (0.25 ) --
- -------------------------------------------------------------------------------------------------------------------------
European Stock
1990/d/ $10.00 $ 0.24/e/ $(0.56) $(0.32) $ (0.20) -- $ (0.20 ) --
---------------------------------------------------------------------------------------------------------------
1991 9.48 0.10 0.59 0.69 (0.08) -- (0.08 ) --
---------------------------------------------------------------------------------------------------------------
1992 10.09 0.14 (0.70) (0.56) (0.17) -- (0.17 ) --
---------------------------------------------------------------------------------------------------------------
1993/n/ 9.36 0.12 1.89 2.01 -- -- -- --
---------------------------------------------------------------------------------------------------------------
1994 11.37 0.14 1.26 1.40 (0.04) $(0.01 ) (0.05 ) --
---------------------------------------------------------------------------------------------------------------
1995 12.72 0.20 1.60 1.80 (0.12) (0.05 ) (0.17 ) --
---------------------------------------------------------------------------------------------------------------
1996 14.35 0.25 2.79 3.04 (0.21) (0.25 ) (0.46 ) --
---------------------------------------------------------------------------------------------------------------
1997 16.93 0.25 3.12 3.37 (0.26) (0.20 ) (0.46 ) --
---------------------------------------------------------------------------------------------------------------
1998/s/ 19.84 0.11 4.53 4.64 (0.25) (1.01 ) (1.26 ) --
Japan
1992/f/ $10.00 $(0.01)/g/ $(1.35) $(1.36) -- -- -- --
---------------------------------------------------------------------------------------------------------------
1993/n/ 8.64 (0.05)/g/ 2.99 2.94 -- -- -- --
---------------------------------------------------------------------------------------------------------------
1994 11.58 (0.06)/g/ 0.97 0.91 -- .85) .85) --
---------------------------------------------------------------------------------------------------------------
1995 11.64 $(0.04) (1.40) (1.44) -- (0.81 ) (0.81 ) --
---------------------------------------------------------------------------------------------------------------
1996 9.39 (0.05) (0.32) (0.37) -- -- -- --
---------------------------------------------------------------------------------------------------------------
1997 9.02 (0.03) (1.02) (1.05) -- -- -- --
---------------------------------------------------------------------------------------------------------------
1998/s/ 7.97 (0.01) (0.94) (0.95) -- -- -- --
New Asia/j/
1990/h/ $ 5.00 $ 0.04/i/ $ 0.04 $ 0.08 $ (0.04) -- $ (0.04 ) --
---------------------------------------------------------------------------------------------------------------
1991 5.04 0.10/i/ 0.87 0.97 (0.10) -- (0.10 ) --
---------------------------------------------------------------------------------------------------------------
1992 5.91 0.10 0.56 0.66 (0.10) $(0.13 ) (0.23 ) --
---------------------------------------------------------------------------------------------------------------
1993/n/ 6.34 0.03 3.51 3.54 -- -- -- --
---------------------------------------------------------------------------------------------------------------
1994 9.88 0.06 0.36 0.42 (0.04) (0.19 ) (0.23 ) --
---------------------------------------------------------------------------------------------------------------
1995 10.07 0.08 (1.07) (0.99) (0.07) (0.89 ) (0.96 ) --
---------------------------------------------------------------------------------------------------------------
1996 8.12 0.06 0.55 0.61 (0.09) -- (0.09 ) --
---------------------------------------------------------------------------------------------------------------
1997 8.64 0.09 (2.71) (2.62) (0.06) (0.01 ) (0.07 ) --
---------------------------------------------------------------------------------------------------------------
1998/s/ 5.95 0.05 (0.34) (0.29) (0.08) -- (0.08 ) --
Latin America
1994/k/ $10.00 $(0.03) $ 0.29/l/ $ 0.26 -- -- -- $0.06
---------------------------------------------------------------------------------------------------------------
1995 10.32 0.05 (3.92) (3.87) -- -- -- 0.04
---------------------------------------------------------------------------------------------------------------
1996 6.49 0.10 1.60 1.70 $ (0.06) -- ) 0.01
---------------------------------------------------------------------------------------------------------------
1997 8.14 0.13 1.44 1.57 (0.11) ) (0.14 ) 0.03
---------------------------------------------------------------------------------------------------------------
1998/s/ 9.60 0.10 1.49 1.59 (0.12) -- (0.12 ) 0.02
- -------------------------------------------------------------------------------------------------------------------------
Emerging Markets Stock
1995/o/ $10.00 $ 0.02/p/ $ 0.44/l/ $ 0.46 -- -- -- $0.02
---------------------------------------------------------------------------------------------------------------
1996 10.48 0.02/p/ 1.08 1.10 $ (0.01) -- ) 0.02
---------------------------------------------------------------------------------------------------------------
1997 11.59 0.02 (0.23) (0.21) (0.04) ) (0.34 ) 0.04
---------------------------------------------------------------------------------------------------------------
1998/s/ 11.08 0.01/p/ 1.33 1.34 -- (0.15 ) (0.15 ) 0.02
Global Stock
1996/q/ $10.00 $ 0.05/r/ $ 1.30 $ 1.35 -- -- -- --
---------------------------------------------------------------------------------------------------------------
1997 11.35 0.06/r/ 1.84 1.90 $ (0.06) $(0.18 ) $ (0.24 ) --
1998/s/ 13.01 0.04/t/ 2.24 2.28 (0.06) (0.53 ) (0.59 )
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Period Net Asset
Ended Value, End
of Period
- ---------------------------
<S> <C> <S>
International Stock/a/
1988 $ 8.97
------------
1989 10.24
------------
1990 8.81
------------
1991 9.54
------------
1992 8.89
------------
1993/n/ 11.74
------------
1994 12.84
------------
1995 12.09
------------
1996 13.47
------------
1997 14.14
------------
1998/s/ 15.37
International Discovery
1989/b/ $13.94
------------
1990 11.75
------------
1991 12.99
------------
1992 11.68
------------
1993/n/ 16.16
------------
1994 17.63
------------
1995 14.43
------------
1996 15.97
------------
1997 16.11
------------
1998/s/ 18.08
- ---------------------------
European Stock
1990/d/ $ 9.48
------------
1991 10.09
------------
1992 9.36
------------
1993/n/ 11.37
------------
1994 12.72
------------
1995 14.35
------------
1996 16.93
------------
1997 19.84
------------
1998/s/ 23.22
Japan
1992/f/ $ 8.64
------------
1993/n/ 11.58
------------
1994 11.64
------------
1995 9.39
------------
1996 9.02
------------
1997 7.97
------------
1998/s/ 7.02
New Asia/j/
1990/h/ $ 5.04
------------
1991 5.91
------------
1992 6.34
------------
1993/n/ 9.88
------------
1994 10.07
------------
1995 8.12
------------
1996 8.64
------------
1997 5.95
------------
1998/s/ 5.58
Latin America
1994/k/ $10.32
------------
1995 6.49
------------
1996 8.14
------------
1997 9.60
------------
1998/s/ 11.09
- ---------------------------
Emerging Markets Stock
1995/o/ $10.48
------------
1996 11.59
------------
1997 11.08
------------
1998/s/ 12.29
Global Stock
1996/q/ $11.35
------------
1997 13.01
1998/s/ 14.70
- ---------------------------
</TABLE>
<PAGE>
ABOUT THE FUNDS
<PAGE>
T. ROWE PRICE
<TABLE>
Table 4 Financial Highlights
Footnotes are on
page 9.
<CAPTION>
Returns, Ratios, and Supplemental Data
Total Return Ratio of Ratio of Net
Period (Includes Net Assets Expenses to Investment Portfolio Average
Ended Reinvested ($ Thousands) Average Net Income to Turnover Commission
Distributions) Assets Average Net Rate Rate Paid
Assets
<S> <C> <C> <C> <C> <C> <C> <S>
International Stock/a/
1988 17.9 % $ 630,114 1.16% 1.78 % 42.4% --
---------------------------------------------------------------------------------
1989 23.7 970,214 1.10 1.63 47.8 --
---------------------------------------------------------------------------------
1990 (8.9 ) 1,030,848 1.09 2.16 47.1 --
---------------------------------------------------------------------------------
1991 15.87 1,476,309 1.10 1.51 45.0 --
---------------------------------------------------------------------------------
1992 (3.47) 1,949,631 1.05 1.49 37.8 --
---------------------------------------------------------------------------------
1993/n/ 32.06 3,746,055 1.01/m/ 1.52/ m/ 29.8/m/ --
---------------------------------------------------------------------------------
1994 12.03 6,205,713 0.96 1.11 22.9 --
---------------------------------------------------------------------------------
1995 0.38 6,385,905 0.91 1.56 17.8 --
---------------------------------------------------------------------------------
1996 14.87 8,775,736 0.88 1.58 11.6 $0.0020
---------------------------------------------------------------------------------
1997 7.90 10,005,170 0.85 1.33 15.8 0.0019
---------------------------------------------------------------------------------
1998/s/ 14.80 10,707,000 0.85/m/ 1.36/ m/ 6.3 0.0047
- ------------------------------------------------------------------------------------------------
International Discovery
1989/b/ 41.8 %/c/ $ 61,166 1.50/cm/ 0.76 %/cm/ 38.3%/m/ --
---------------------------------------------------------------------------------
1990 (12.8 )/c/ 136,660 1.50/c/ 1.10/ c/ 44.0 --
---------------------------------------------------------------------------------
1991 11.69/c/ 166,819 1.50/c/ 1.03/ c/ 56.3 --
---------------------------------------------------------------------------------
1992 (9.08)/c/ 166,362 1.50/c/ 1.07/ c/ 38.0 --
---------------------------------------------------------------------------------
1993/n/ 38.36/c/ 329,001 1.50/cm/ 0.81/ cm/ 71.8/m/ --
---------------------------------------------------------------------------------
1994 9.67 503,442 1.50 0.38 57.4 --
---------------------------------------------------------------------------------
1995 (13.06) 325,374 1.50 0.55 43.5 --
---------------------------------------------------------------------------------
1996 11.60 325,639 1.45 0.40 52.0 $0.0013
---------------------------------------------------------------------------------
1997 1.69 254,430 1.41 0.13 72.7 0.0008
---------------------------------------------------------------------------------
1998/s/ 14.10 252,024 1.43/m/ 0.10/ m/ 20.6 0.0076
European Stock
1990/d/ (3.2 )%/e/ $ 99,447 1.75%/em/ 2.30 %/em/ 34.9%/m/ --
---------------------------------------------------------------------------------
1991 7.31 103,977 1.71 1.04 57.7 --
---------------------------------------------------------------------------------
1992 (5.56) 173,798 1.48 1.23 52.0 --
---------------------------------------------------------------------------------
1993/n/ 21.47 265,784 1.35/m/ 1.79/ m/ 21.3/m/ --
---------------------------------------------------------------------------------
1994 12.35 337,498 1.25 1.19 24.5 --
---------------------------------------------------------------------------------
1995 14.41 490,573 1.20 1.75 17.2 --
---------------------------------------------------------------------------------
1996 21.76 704,887 1.12 1.81 14.1 $0.0248
---------------------------------------------------------------------------------
1997 20.30 984,083 1.06 1.41 17.5 0.0312
---------------------------------------------------------------------------------
1998/s/ 24.63 1,362,000 1.05/m/ 1.11/ m/ 15.1 0.0422
Japan
1992/f/ (13.40)%/g/ $ 45,792 1.50%/g/ (0.22)%/g/ 41.6% --
---------------------------------------------------------------------------------
1993/n/ 33.72/g/ 87,163 1.50/gm/ (0.58)/gm/ 61.4/m/ --
---------------------------------------------------------------------------------
1994 9.25/g/ 203,303 1.50/g/ (0.68)/g/ 61.5 --
---------------------------------------------------------------------------------
1995 (12.87) 181,383 1.50 (0.48) 62.4 --
---------------------------------------------------------------------------------
1996 (3.94) 167,118 1.32 (0.48) 29.8 $0.0540
---------------------------------------------------------------------------------
1997 (11.64) 170,830 1.24 (0.39) 32.3 0.0457
---------------------------------------------------------------------------------
1988/s/ (11.92) 152,353 1.27/m/ (0.22)/m/ 36.4 0.0262
- ------------------------------------------------------------------------------------------------
New Asia
1990/h/ 1.6 %/i/ $ 10,986 1.75%/im/ 2.10 %/im/ 3.2%/m/ --
---------------------------------------------------------------------------------
1991 19.32/i/ 102,922 1.75/i/ 1.75/ i/ 49.0 --
---------------------------------------------------------------------------------
1992 11.24 314,504 1.51 1.64 36.3 --
---------------------------------------------------------------------------------
1993/n/ 55.84 1,650,450 1.29/m/ 1.02/ m/ 40.4/m/ --
---------------------------------------------------------------------------------
1994 4.11 2,302,841 1.22 0.85 63.2 --
---------------------------------------------------------------------------------
1995 (9.70) 1,908,893 1.15 0.97 63.7 --
---------------------------------------------------------------------------------
1996 7.58 2,041,396 1.11 0.66 42.0 $0.0057
---------------------------------------------------------------------------------
1997 (30.61) 876,787 1.10 0.76 41.8 0.0063
---------------------------------------------------------------------------------
1998/s/ (4.89) 770,000 1.24/m/ 1.45/ m/ 33.6 0.0061
Latin America
1994/k/ 3.20% $ 198,435 1.99%/m/ (0.35)%/m/ 12.2%/m/ --
---------------------------------------------------------------------------------
1995 (37.11) 148,600 1.82 0.76 18.9 --
---------------------------------------------------------------------------------
1996 26.52 213,691 1.66 1.29 22.0 $0.0001
---------------------------------------------------------------------------------
1997 19.94 398,066 1.47 1.30 32.7 0.0001
---------------------------------------------------------------------------------
1998/s/ 16.84 385,311 1.46/m/ 1.69/ m/ 6.8 --
Emerging Markets Stock
1995/o/ 4.80%/p/ $ 14,399 1.75%/mp/ 0.54 %/mp/ 28.8%/m/ --
---------------------------------------------------------------------------------
1996 10.69/p/ 67,896 1.75/p/ 0.44/ p/ 41.7 $0.0004
---------------------------------------------------------------------------------
1997 (1.60) 119,285 1.75 0.21 84.3 0.0003
---------------------------------------------------------------------------------
1998/s/ 12.38/p/ 122,813 1.75/mp/ 0.15/ mp/ 27.5 0.0008
Global Stock
1996/q/ 13.50%/r/ $ 14,916 1.30%/mr/ 0.88 %/mr/ 50.0%/m/ $0.0026
---------------------------------------------------------------------------------
1997 16.98/r/ 32,020 1.30r/r/ 0.68/ r/ 41.8 0.0015
---------------------------------------------------------------------------------
1998/s/ 18.29/t/ 42,125 1.20/st/ 0.69/ st/ 24.3 0.0146
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ABOUT THE FUNDS
<PAGE>
T. ROWE PRICE
/a/
All per-share figures reflect the 2-for-1 stock split effective August 31,
1987.
/b/
For the period December 30, 1988 (commencement of operations) to December
31, 1989.
/c/Excludes expenses in excess of a 1.50% voluntary expense limitation in
effect through December 31, 1993.
/d/
For the period February 28, 1990 (commencement of operations) to December
31, 1990.
/e/
Excludes expenses in excess of a 1.75% voluntary expense limitation in effect
through December 31, 1991.
/f/
For the period December 30, 1991 (commencement of operations) to December 31,
1992.
/g/
Excludes expenses in excess of a 1.50% voluntary expense limitation in effect
through October 31, 1995.
/h/
For the period September 28, 1990 (commencement of operations) to December 31,
1990.
/i/
Excludes expenses in excess of a 1.75% voluntary expense limitation in effect
through December 31, 1992.
/j/
All per-share figures reflect the 2-for-1 stock split effective May 27, 1994.
/k/
For the period December 29, 1993 (commencement of operations) to October 31,
1994.
<PAGE>
ABOUT THE FUNDS
/l/
The amount presented is calculated pursuant to a methodology prescribed by the
Securities and Exchange Commission for a share outstanding throughout the
period. This amount is inconsistent with the fund's aggregate gains and losses
because of the timing of sales and redemptions of fund shares in relation to
fluctuating market values for the investment portfolio.
/m/ Annualized.
/n/For the 10 months ended October 31, 1993. Fiscal year-end changed from
December 31 to October 31.
/o/For the period March 31, 1995 (commencement of operations) to October 31,
1995.
/p/
Excludes expenses in excess of a 1.75% voluntary expense limitation in effect
through October 31, 1998.
/q/
For the period December 29, 1995 (commencement of operations) to October 31,
1996.
/r/
Excludes expenses in excess of a 1.30% voluntary expense limitation in effect
through October 31, 1997.
/s/ For the six-month period October 31, 1997, through April 30, 1998.
/t/
Excludes expenses in excess of a 1.20% voluntary expense limitation in effect
through October 31, 1999.
FUND, MARKET, AND RISK CHARACTERISTICS: WHAT TO EXPECT
----------------------------------------------------------
To help you decide whether an international or global equity fund is
appropriate for you, this section takes a closer look at each fund's
investment objective and approach. The funds, which are listed in Table 5,
represent a broad range of potential risks and rewards.
What are some of the potential advantages and disadvantages of investing beyond
U.S. borders?
Since U.S. stocks represent less than half of the world's stock market
capitalization, investing abroad increases the opportunities available to
you. Foreign investments also provide effective diversification for an
all-U.S. portfolio, since historically their returns have not moved in sync
with U.S. stocks over longer periods.
Investing in foreign stocks entails many of the same risks as investing in
U.S. stocks and others as well, such as currency risk. Also, foreign stocks
may not always move counter to U.S. stocks, particularly in the short run.
. Because global funds invest a portion of their assets in U.S. securities,
they represent a more conservative approach to foreign investing than our
international funds, which do not invest in U.S. stocks.
<PAGE>
T. ROWE PRICE
<TABLE>
Table 5
<CAPTION>
<S> <S> <S> <S>
International Funds Comparison Guide
Fund Geographic Emphasis Type of Company
------------------------------------------------
International Stock Worldwide (excluding Large, well
U.S.) established
------------------------------------------------
Global Stock Worldwide (including Large, well
U.S.) established
------------------------------------------------
International Discovery Worldwide (excluding Small to medium-sized
U.S.)
------------------------------------------------
International Growth & Worldwide (excluding Large, well
Income U.S.) established
------------------------------------------------
Emerging Markets Stock Worldwide (excluding All sizes
U.S.)
------------------------------------------------
European Stock Europe (including All sizes
Eastern Europe)
------------------------------------------------
Latin America Latin America All sizes
------------------------------------------------
Far East and Pacific All sizes
New Asia Basin
(excluding Japan)
------------------------------------------------
Japan Japan All sizes
- -------------------------------------------------------------------------------
</TABLE>
What are the funds' objectives and investment programs?
Worldwide funds:
Global Stock Fund
The fund's objective is long-term growth of capital through investments
primarily in common stocks of established companies throughout the world,
including the U.S. The fund will diversify broadly by investing in a variety
of industries in developed and emerging markets. Normally, the fund will
invest in at least five countries, one of which will be the U.S. While the
fund can purchase stocks without regard to a company's market capitalization,
investments will generally be concentrated in established large and, to a
lesser extent, medium-sized companies. The percentage of the fund's assets
invested in U.S. and foreign stocks will vary over time in accordance with
the managers' outlook.
International Stock Fund
The fund's objective is long-term growth of capital through investments
primarily in common stocks of established, non-U.S. companies. The fund
expects to invest substantially all of its assets outside the U.S. and to
diversify broadly among countries throughout the world - developed and
emerging.
International Discovery Fund
The fund's objective is long-term growth of capital through investments
primarily in common stocks of rapidly growing, small to medium-sized non-U.S.
companies. Such companies may be found in developed and emerging markets.
Traditionally, they are more dynamic and offer greater growth potential than
larger companies, but they are generally riskier because they may have
limited product lines, capital, and managerial resources. Their securities
may trade less frequently and with greater price swings. Depending on
conditions, the fund's
<PAGE>
ABOUT THE FUNDS
portfolio should be composed of at least 10 countries and 100 different
companies. Potential fund investors should pay careful attention to the risk
discussion further on in this section.
Emerging Markets Stock Fund
The fund's objective is long-term growth of capital through investment
primarily in common stocks of large and small companies domiciled, or with
primary operations, in emerging markets. An emerging market includes any
country defined as emerging or developing by the International Bank for
Reconstruction and Development (World Bank), the International Finance
Corporation, or the United Nations. The fund's investments are expected to be
diversified geographically across emerging markets in Latin America, Asia,
Europe, Africa, and the Middle East.
Countries in which the fund may invest are listed below and others will be
added as opportunities develop:
Asia China, Hong Kong, Indonesia, India, Korea, Malaysia, Pakistan,
Philippines, Singapore, Sri Lanka, Taiwan, Thailand, and Vietnam.
Latin America Argentina, Belize, Brazil, Chile, Colombia, Mexico,
Panama, Peru, and Venezuela.
Europe Austria, Croatia, Czech Republic, Estonia, Greece, Hungary,
Latvia, Lithuania, Poland, Portugal, Romania, Russia, Slovakia, and
Turkey.
Africa and the Middle East Botswana, Egypt, Israel, Jordan,
Mauritius, Morocco, Nigeria, South Africa, Tunisia, and Zimbabwe.
Emerging market investments rank high on the potential risk and reward
spectrum because a developing country, much like an emerging-growth company,
often advances in fits and starts toward developed status, and may or may not
successfully achieve that status. Potential fund investors should pay careful
attention to the risk discussion further on in this section.
International Growth & Income Fund
The fund's objective is long-term growth of capital and reasonable income
through investments primarily in common stocks of mature, dividend-paying
non-U.S. companies. The fund expects to invest substantially all of its
assets outside the U.S. and to diversify broadly, primarily among developed
countries. Investments in emerging markets will be modest, and limited to
more established developing countries.
<PAGE>
T. ROWE PRICE
Regional or country funds:
European Stock Fund
The fund's objective is long-term growth of capital through investments
primarily in common stocks of both large and small European companies.
Current income is a secondary objective. The fund seeks to take advantage of
opportunities arising from such trends as privatization, the reduction of
trade barriers, and the potential growth of the emerging economies of Eastern
Europe. Normally, at least five countries will be represented in the
portfolio, and investments may be made in any of the countries listed below,
as well as others as their markets develop.
Primary Emphasis France, Germany, Netherlands, Italy, Spain, Sweden,
Switzerland, and United Kingdom.
Others Austria, Belgium, Czech Republic, Denmark, Estonia, Finland,
Greece, Hungary, Ireland, Israel, Latvia, Lithuania, Luxembourg,
Norway, Poland, Portugal, Russia, Slovakia, and Turkey.
Japan Fund
The fund's objective is long-term growth of capital through investments in
common stocks of large and small companies domiciled or with primary
operations in Japan. Assets will normally be invested across a wide range of
industries and companies (both small and large). Investors in a
single-country fund are fully exposed to that country's economic, stock
market, and currency cycles, which could increase both its risks and its
potential rewards compared with a fund invested in several countries or
regions. Potential fund investors should pay careful attention to the risk
discussion further on in this section.
Note: For special pricing and transaction information about the Japan Fund,
please see "Pricing Shares and Receiving Sale Proceeds."
Latin America Fund
The fund's objective is long-term growth of capital through investment
primarily in common stocks of companies domiciled, or with primary
operations, in Latin America. The fund expects to invest primarily in Mexico,
Brazil, Chile, Argentina, Venezuela, Peru, and other markets as opportunities
arise and conditions permit, including, but not limited to Belize, Colombia,
Ecuador, and Guatemala. The portfolio is normally expected to invest in at
least four countries.
The fund expects to make substantial investments (at times more than 25% of
total assets) in the telephone companies of various Latin American countries.
These utilities play a critical role in a country's economic development, but
their stocks could be adversely affected if trends favoring development were
to be reversed.
<PAGE>
ABOUT THE FUNDS
Because Latin America includes many less-developed countries with legacies of
political instability, potential fund investors should pay careful attention
to the risk discussion further on in this section.
. The Latin America Fund is registered as "nondiversified." This means it may
invest a greater portion of assets in a single company and own more of the
company's voting securities than is permissible for a "diversified" fund.
New Asia Fund
The fund's objective is long-term growth of capital through investment in
large and small companies domiciled or with primary operations in Asia,
excluding Japan. The fund may also invest in Pacific Rim countries such as
Australia and New Zealand.
Countries in which the fund may invest include those in the following list as
well as others in the region, such as China, Pakistan, and Vietnam, as their
markets become more accessible. Investments will represent a minimum of five
countries.
Primary Emphasis Hong Kong, Indonesia, India, Malaysia, Philippines,
Singapore, South Korea, Taiwan, Thailand.
Potential investors should pay careful attention to the risk discussion
further on in this section.
What securities can the funds invest in other than common stocks?
Each of the funds expects to invest substantially all of its assets in common
stocks. However, the funds may also invest in a variety of other
equity-related securities, such as preferred stocks, warrants and convertible
securities, as well as corporate and governmental debt securities, when
considered consistent with the funds' investment objectives and programs. The
funds may also engage in a variety of investment management practices, such
as buying and selling futures and options. Under normal market conditions,
the funds' investments in securities other than common stocks are limited to
no more than 35% of total assets. However, for temporary defensive purposes,
the funds may invest all or a significant portion of their assets in U.S.
government and corporate debt obligations. The funds (other than Global Stock
Fund) will not purchase any debt security which at the time of purchase is
rated below investment grade. This would not prevent a fund from retaining a
security downgraded to below investment grade after purchase. The Global
Stock Fund can invest up to 5% of its assets in below-investment-grade debt
securities.
How does the portfolio manager select stocks?
For all funds except International Growth & Income, Price-Fleming blends a
bottom-up approach to individual stock selection based on fundamental
research with an awareness of the economic overview of the countries in our
opportunity
<PAGE>
T. ROWE PRICE
set. Stock selection is the focal point of decision-making, however. Fund
managers weigh a company's prospects for achieving and sustaining
above-average, long-term earnings growth and also look at valuation factors
such as price/earnings, price/cash flow, and price/book value ratios.
The International Growth & Income Fund is more value-oriented than our other
international funds. Price-Fleming combines fundamental research and an
overview of the global economy and each foreign market, as described above,
with proprietary quantitative analysis. The fund will search for stocks with
"value" characteristics such as dividend yields that are higher, or
price/earnings or price/book value ratios that are lower, than the markets in
which they trade. Typically, the fund will invest in large, mature companies
that have favorable prospects for capital appreciation, as determined by
Price-Fleming.
What are the particular risks associated with international and global
investing and these funds?
Stock prices of foreign and U.S. companies are subject to many of the same
influences, such as general economic conditions, company and industry
earnings prospects, and investor psychology. However, investing in foreign
securities also involves additional risks that can increase the potential for
losses in the funds. Normally, these risks are significantly greater for
investments in emerging markets.
. Currency fluctuations Transactions in foreign securities are conducted in
local currencies, so dollars must often be exchanged for another currency
when a stock is bought or sold or a dividend is paid. Likewise, share price
quotations and total return information reflect conversion into dollars.
Fluctuations in foreign exchange rates can significantly increase or decrease
the dollar value of a foreign investment, boosting or offsetting its local
market return. For example, if a French stock rose 10% in price during a
year, but the U.S. dollar gained 5% against the French franc during that
time, the U.S. investor's return would be reduced to 5%. This is because the
franc would "buy" fewer dollars at the end of the year than at the beginning,
or, conversely, a dollar would buy more francs. Each fund's total return will
be affected by currency fluctuations. The exact amount of the impact depends
on the currencies represented in the portfolio and how each one appreciates
or depreciates in relationship to the U.S. dollar.
. Exchange rate movements can be large, unpredictable and last for extended
periods.
. Increased costs It is more expensive for U.S. investors to trade in foreign
markets than in the U.S. Mutual funds offer an efficient way for individuals
to invest abroad, but the overall expense ratios of international funds are
usually higher than those of typical domestic funds.
<PAGE>
ABOUT THE FUNDS
. Political and economic factors The economies, markets, and political
structures of a number of the countries in which each fund can invest do not
compare favorably with the U.S. and other mature economies in terms of wealth
and stability. Therefore, investments in these countries will be riskier and
more subject to erratic and abrupt price movements. This is especially true
for emerging markets. However, even investments in countries with highly
developed economies are subject to risk. For example, the Japanese stock
market historically has experienced wide swings in value.
Some economies are less well developed, overly reliant on particular
industries, and more vulnerable to the ebb and flow of international trade,
trade barriers, and other protectionist or retaliatory measures. This makes
investment in such markets significantly riskier than in other countries.
Many countries have legacies and the risk of hyperinflation and currency
devaluations versus the dollar (which adversely affects returns to U.S.
investors), and may be overly dependent on foreign capital (a risk that is
exacerbated by big currency movements). Investments in countries that have
recently begun moving away from central planning and state-owned industries
toward free markets should be regarded as speculative.
. While certain countries have made progress in economic growth,
liberalization, fiscal discipline, and political and social stability, there
is no assurance these trends will continue.
Certain countries have histories of instability and upheaval with respect to
their internal politics that could cause their governments to act in a
detrimental or hostile manner toward private enterprise or foreign
investment. Actions such as capital controls, nationalizing a company or
industry, expropriating assets, or imposing punitive taxes could have a
severe effect on security prices and impair a fund's ability to repatriate
capital or income. Significant external risks, including war, currently
affect some countries. Governments in many emerging market countries
participate to a significant degree in their economies and securities
markets.
. Legal, regulatory, and operational Certain countries lack uniform
accounting, auditing, and financial reporting standards, have less
governmental supervision of financial markets than in the U.S., do not honor
legal rights enjoyed in the U.S., and have settlement practices, such as
delays, which could subject a fund to risks not customary in the U.S. In
addition, securities markets in these countries have substantially lower
trading volumes than U.S. markets, resulting in less liquidity and more
volatility than in the U.S.
. Pricing Portfolio securities may be listed on foreign exchanges that are
open on days (such as Saturdays) when the funds do not compute their prices.
As a result, the fund's net asset value may be significantly affected by
trading on days
<PAGE>
T. ROWE PRICE
when shareholders cannot make transactions. (For specific information on the
Tokyo Stock Exchange, please see Pricing Shares and Receiving Sale Proceeds.)
. For more details on potential risks of foreign investments, please see
Investment Policies and Practices and the Statement of Additional
Information.
What can I expect in terms of price volatility?
Like U.S. stock investments, common stocks of foreign companies offer
investors a way to build capital over time. Nevertheless, the long-term rise
of foreign stock prices as a group has been punctuated by declines. Share
prices of all companies, even the best managed, most profitable, whether U.S.
or foreign, are subject to market risk, which means they can fluctuate
widely.
In less well-developed stock markets, such as those found in Latin America,
Eastern Europe, Africa, and Asia, volatility may be heightened by actions of
a few major investors. For example, substantial increases or decreases in
cash flows of mutual funds investing in these markets could significantly
affect local stock prices and, therefore, fund share prices.
. Each fund's share price will fluctuate; when you sell your shares, you may
lose money.
How does the portfolio manager try to reduce risk?
The principal tools are intensive research and diversification; currency
hedging techniques are used from time to time.
. In addition to conducting on-site research in portfolio countries and
companies, Price-Fleming has close ties with investment analysts based
throughout the world.
. Diversification significantly reduces but does not eliminate risk. The
impact on a fund's share price from a drop in the price of a particular stock
is reduced substantially by investing in a portfolio with dozens of different
companies. Likewise, the impact of unfavorable developments in a particular
country is reduced when investments are spread among many countries.
Portfolio managers keep close watch on individual investments as well as on
political and economic trends in each country and region. Holdings are
adjusted according to the manager's analysis and outlook.
. Under normal conditions, the funds do not engage in extensive currency
hedging programs. However, when foreign exchange rates are expected to be
unfavorable for U.S. investors, fund managers can hedge the risk through the
use of currency forwards and options. In a general sense, these tools allow a
manager to exchange currencies in the future at a rate specified in the
present. (For more details, please see Foreign Currency Transactions under
Investment Policies and Practices.) If the manager's forecast is wrong, the
hedge may cause a loss. Also, it may be
<PAGE>
ABOUT THE FUNDS
difficult or not practical to hedge currency risk in many emerging countries.
How can I decide which fund is most appropriate for me?
First, be sure that your investment objective is the same as the fund's:
capital appreciation over time. If you will need the money you plan to invest
in the near future, none of these funds is suitable.
Second, your decision should take into account whether you have any other
foreign stock investments. If not, you may wish to invest in the most
diversified funds to gain the broadest exposure to opportunities overseas. If
you are supplementing existing holdings, you may wish to narrow your focus to
a regional or single-country fund.
Third, consider your risk tolerance and the risk profile of the various
funds, as described in this section.
. The fund or funds you select should not be relied upon as a complete
investment program nor be used for short-term trading purposes.
Is there other information I need to review before making a decision?
Be sure to read Investment Policies and Practices in Section 3, which
discusses the principal types of portfolio securities that the fund may
purchase as well as the types of management practices that the fund may use.
You should also review the information in section 2, which discusses
contingent redemption fees for the International Discovery, Latin America,
and Emerging Markets Stock Funds.
<PAGE>
T. ROWE PRICE
ABOUT YOUR ACCOUNT
2
PRICING SHARES AND RECEIVING SALE PROCEEDS
----------------------------------------------------------
Here are some procedures you should know when investing in a T. Rowe Price
international fund.
How and when shares are priced
The share price (also called "net asset value" or NAV per share) for each
fund, except the Japan Fund, is calculated at 4 p.m. ET each day the New York
Stock Exchange is open for business. The share price for the Japan Fund is
calculated at 4 p.m. ET each day the New York Stock Exchange and the Tokyo
Stock Exchange are both 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.
Each fund's portfolio securities usually are valued on the basis of the most
recent closing market prices at 4 p.m. ET when the funds calculate their
NAVs. Most of the securities in which the funds invest, however, are traded
in markets that close before that time. For securities primarily traded in
the Far East, for example, the most recent closing prices may be as much as
15 hours old at 4 p.m. Normally, developments that could affect the values of
portfolio securities that occur between the close of the foreign market and 4
p.m. ET will not be reflected in the funds' NAVs. However, if a fund
determines that such developments are so significant that they will clearly
and materially affect the value of the fund's securities, the fund may adjust
the previous closing prices to reflect fair value or use the next available
opening market prices to value its portfolio securities.
. The various ways you can buy, sell, and exchange shares are explained at the
end of this prospectus and on the New Account Form. These procedures and the
information you receive about them may differ for institutional and
employer-sponsored retirement accounts.
How your purchase, sale, or exchange price is determined
If we receive your request in correct form by 4 p.m. ET, your transaction
will be priced at that day's NAV. If we receive it after 4 p.m., it will be
priced at the next business day's NAV.
<PAGE>
ABOUT THE FUNDS
We cannot accept orders that request a particular day or price for your
transaction or any other special conditions.
Fund shares may be purchased through various third-party intermediaries
including banks, brokers, and investment advisers. Where authorized by a
fund, orders will be priced at the NAV next computed after receipt by the
intermediary. Consult your intermediary to determine when your orders will be
priced. The intermediary may charge a fee for its services.
Note: The time at which transactions and shares are priced and the time until
which orders are accepted may be changed in case of an emergency or if the
New York Stock Exchange closes at a time other than 4 p.m. ET.
Japan Fund: Pricing and Transactions
The fund will not process orders on any day when either the New York or Tokyo
Stock Exchange is closed. Orders received on such days will be priced on the
next day the fund computes its net asset value. As such, you may experience a
delay in purchasing or redeeming fund shares. Exchanges: If you wish to
exchange into the Japan Fund on a day the New York Stock Exchange is open but
the Tokyo Stock Exchange is closed, the exchange out of the other T. Rowe
Price fund will be processed on that day, but Japan Fund shares will not be
purchased until the day the Japan Fund reopens. If you wish to exchange out
of the Japan Fund on a day when the New York Stock Exchange is open but the
Tokyo Stock Exchange is closed, the exchange will be delayed until the Japan
Fund reopens.
The Tokyo Stock Exchange is scheduled to be closed on the following weekdays:
In 1998 - January 1, 2, 15; February 11; April 29; May 4, 5; July 20;
September 15, 23; November 3, 23; and December 23, 31. In 1999 - January 1,
15; February 11; March 22; April 29; May 3, 4, 5; July 20; September 15, 23;
October 11; November 3, 23; and December 23. If the Tokyo Stock Exchange
closes on dates not listed, the fund will not be priced on those dates.
How you can receive the proceeds from a sale
. When filling out the New Account Form, you may wish to give yourself the
widest range of options for receiving proceeds from a sale.
If your request is received by 4 p.m. ET in correct form, proceeds are
usually sent on the next business day. Proceeds can be sent to you by mail or
to your bank account by Automated Clearing House (ACH) transfer or bank wire.
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. The ACH system is supported
by over 20,000 banks, savings banks, and credit unions. Proceeds sent by bank
wire should be credited to your account the next business day.
<PAGE>
T. ROWE PRICE
. 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 we receive 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.
. If for some reason we cannot accept your request to sell shares, we will
contact you.
Contingent Redemption Fee
(Latin America, International Discovery, and Emerging Markets Stock Funds)
The funds can experience substantial price fluctuations and are intended for
long-term investors. Short-term "market timers" who engage in frequent
purchases and redemptions can disrupt the funds' investment program and
create additional transaction costs that are borne by all shareholders. For
these reasons, the funds assess a 2% fee on redemptions (including exchanges)
of fund shares held for less than one year.
Redemption fees are paid to the fund to help offset transaction costs and to
protect the funds' long-term shareholders. The fund will use the "first-in,
first-out" (FIFO) method to determine the one-year holding period. Under this
method, the date of the redemption or exchange will be compared to the
earliest purchase date of shares held in the account. If this holding period
is less than one year, the fee will be charged.
The fee does not apply to any shares purchased through reinvested
distributions (dividends and capital gains) or to shares held in retirement
plans such as 401(k), 403(b), 457, Keogh, profit sharing, SIMPLE IRA,
SEP-IRA, and money purchase pension accounts. The fee does apply to shares
held in IRA accounts and to shares purchased through automatic investment
plans (described under Shareholder Services). The fee may apply to shares in
retirement plans held in broker omnibus accounts.
In determining "one year," the fund will use the anniversary date of a
transaction. Thus, shares purchased on March 1, 1998, for example, will be
subject to the fee if they are redeemed on or prior to February 28, 1999. If
they are redeemed on or after March 1, 1999, they will not be subject to the
fee.
<PAGE>
ABOUT YOUR ACCOUNT
USEFUL INFORMATION ON DISTRIBUTIONS AND TAXES
----------------------------------------------------------
. All net investment income and realized capital gains are distributed to
shareholders.
Dividends and Other Distributions
Dividend and capital gain distributions are reinvested in additional fund
shares in your account unless you select another option on your New Account
Form. 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. No interest will accrue on amounts represented by
uncashed distribution or redemption checks.
Income dividends
. The funds declares and pays dividends (if any) annually.
. The dividends of each fund (other than Global Stock Fund) will not be
eligible for the 70% deduction for dividends received by corporations, if, as
expected, none of the fund's income consists of dividends paid by U.S.
corporations. The dividends of the Global Stock Fund will be eligible for the
70% deduction for dividends received by corporations only to the extent the
fund's income consists of dividends paid by U.S. corporations.
Capital gains
. A capital gain or loss is the difference between the purchase and sale price
of a security.
. If a fund has net capital gains for the year (after subtracting any capital
losses), they are usually declared and paid in December to shareholders of
record on a specified date that month.
Tax Information
. You will be sent timely information for your tax filing needs.
You need to be aware of the possible tax consequences when:
. You sell fund shares, including an exchange from one fund to another.
. The fund makes a distribution to your account.
<PAGE>
T. ROWE PRICE
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 new accounts or those opened by exchange in
1983 or later, we will provide the gain or loss on the shares you sold during
the year, based on the "average cost," single category method. This
information is not reported to the IRS, and you do not have to use it. You
may calculate the cost basis using other methods acceptable to the IRS, such
as "specific identification."
To help you maintain accurate records, we send you a confirmation 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
. The following summary does not apply to retirement accounts, such as IRAs,
which are not subject to current tax.
In January, you will be sent Form 1099-DIV indicating the tax status of any
dividend and capital gain distributions made to you. This information will
also be reported to the IRS. Capital gain and distributions made by a fund
are generally taxable to you for the year in which they were paid. 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.
The tax treatment of a capital gain distribution is determined by how long
the fund held the portfolio securities, not how long you held shares in the
fund. Short-term (one year or less) capital gain distributions are taxable at
the same rate as ordinary income. Reflecting recent changes in the tax code,
gains on securities held more than 12 months are taxed at a maximum rate of
20%. If you realized a loss on the sale or exchange of fund shares which you
held six months or less, your short-term loss will be reclassified to a
long-term loss to the extent you received a long-term capital gain
distribution during the period you held the shares.
Distributions resulting from the sale of certain foreign currencies and debt
securities, to the extent of foreign exchange gains, are taxed as ordinary
income or loss. If the fund pays nonrefundable taxes to foreign governments
during the year, the taxes will reduce the fund's dividends but will still be
included in your taxable income. However, you may be able to claim an
offsetting credit or deduction on your tax return for your portion of foreign
taxes paid by the fund.
<PAGE>
ABOUT YOUR ACCOUNT
. Distributions are taxable whether reinvested in additional shares or
received in cash.
Tax effect of buying shares before a capital gain distribution
If you buy shares shortly before or on the "record date" - the date that
establishes you as the person to receive the upcoming distribution - you will
receive a portion of the money you just invested in the form of a taxable
distribution. Therefore, you may wish to find out a fund's record date before
investing. Of course, a fund's share price may, at any time, reflect
undistributed capital gains, taxable income, or income and unrealized
appreciation, which may result in future taxable distributions.
Note: For information on the tax consequences of hedging, please see
Investment Policies and Practices.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
----------------------------------------------------------
. 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.
Sale (Redemption) Conditions
Holds on immediate redemptions
10-day hold
If you sell shares that you just purchased and paid for by check or ACH
transfer, the fund will process your redemption but will generally delay
sending you the proceeds for up to 10 calendar days to allow the check or
transfer to clear. If your redemption request was sent by mail or mailgram,
proceeds will be mailed no later than the seventh calendar day following
receipt unless the check or ACH transfer has not cleared. (The 10-day hold
does not apply to the following: purchases paid for by bank wire; cashier's,
certified, or treasurer's checks; or automatic purchases through your
paycheck.)
<PAGE>
T. ROWE PRICE
Telephone, Tele*Access/(R)/, and personal computer transactions
Exchange and redemption services through telephone and Tele*Access are
established automatically when you sign the New Account Form unless you check
the box that states you do not want these services. Personal computer
transactions must be authorized separately. T. Rowe Price funds and their
agents use reasonable procedures (including shareholder identity
verification) to confirm that instructions given by telephone are genuine and
they are not liable for acting on these instructions. If these procedures are
not followed, it is the opinion of certain regulatory agencies that the funds
and their agents may be liable for any losses that may result from acting on
the instructions given. A confirmation is sent promptly after a transaction.
All telephone conversations are recorded.
Redemptions over $250,000
Large sales can adversely affect a portfolio manager's ability to implement a
fund's investment strategy by causing the premature sale of securities that
would otherwise be held. If, in any 90-day period, you redeem (sell) more
than $250,000, or your sale amounts to more than 1% of fund net assets, the
fund has the right to pay the difference between the redemption amount and
the lesser of the two previously mentioned figures with securities from the
fund.
Excessive Trading
. T. Rowe Price may bar excessive traders from purchasing shares.
Frequent trades, involving either substantial fund assets or a substantial
portion of your account or accounts controlled by you, can disrupt management
of the fund and raise its expenses.
. Trades placed directly with T. Rowe Price If you trade directly with T. Rowe
Price, you can make one purchase and sale involving the same fund within any
120-day period. For example, if you are in fund A, you can move substantial
assets from fund A to fund B and, within the next 120 days, sell your shares
in fund B to return to fund A or move to fund C. If you exceed this limit,
you are in violation of our excessive trading policy.
Two types of transactions are exempt from this policy: 1) trades solely in
money market funds (exchanges between a money fund and a nonmoney fund are
not exempt); and 2) systematic purchases or redemptions (see Shareholder
Services).
. Trades placed through intermediaries If you purchase fund shares through an
intermediary including a broker, bank, investment adviser, or other third
party and hold them for less than 60 calendar days, you are in violation of
our excessive trading policy.
. If you violate our excessive trading policy, you may be barred indefinitely
and without further notice from further purchases of T. Rowe Price funds.
<PAGE>
ABOUT YOUR ACCOUNT
Keeping Your Account Open
Due to the relatively high cost to a fund of maintaining small accounts, we
ask you to maintain an account balance of at least $1,000. If your balance is
below $1,000 for three months or longer, we have the right to close your
account after giving you 60 days in which to increase your balance.
Small Account Fee
Because of the disproportionately high costs of servicing accounts with low
balances, a $10 fee, paid to T. Rowe Price Services, the fund's' transfer
agent, will automatically be deducted from nonretirement accounts with
balances falling below a minimum level. The valuation of accounts and the
deduction are expected to take place during the last five business days of
September. The fee will be deducted from accounts with balances below $2,000,
except for UGMA/ UTMA accounts, for which the limit is $500. The fee will be
waived for any investor whose aggregate T. Rowe Price mutual fund investments
total $25,000 or more. Accounts employing automatic investing (e.g., payroll
deduction, automatic purchase from a bank account, etc.) are also exempt from
the charge. The fee will not apply to IRAs and other retirement plan
accounts. (A separate custodial fee may apply to IRAs and other retirement
plan accounts.)
Signature Guarantees
. A signature guarantee is designed to protect you and the T. Rowe Price funds
from fraud by verifying your signature.
You may need to have your signature guaranteed in certain situations, such
as:
. Written requests 1) to redeem over $100,000, or 2) to wire redemption
proceeds.
. Remitting redemption proceeds to any person, address, or bank account not on
record.
. Transferring redemption proceeds to a T. Rowe Price fund account with a
different registration (name or ownership) from yours.
. Establishing certain services after the account is opened.
You can obtain a signature guarantee from most banks, savings institutions,
broker-dealers, and other guarantors acceptable to T. Rowe Price. We cannot
accept guarantees from notaries public or organizations that do not provide
reimbursement in the case of fraud.
<PAGE>
T. ROWE PRICE
MORE ABOUT THE FUNDS
3
ORGANIZATION AND MANAGEMENT
----------------------------------------------------------
How are the funds organized?
T. Rowe Price International Funds, Inc. (the "Corporation"), currently
consists of 11 series, each representing a separate class of shares and
having different objectives and investment policies. The 11 series and the
years in which each was established are as follows: International Stock Fund,
1979; International Bond Fund, 1986; International Discovery Fund, 1988;
European Stock Fund, New Asia Fund, Global Government Bond Fund, 1990; Japan
Fund, 1991; Latin America Fund, 1993; Emerging Markets Bond Fund, 1994;
Emerging Markets Stock Fund, Global Stock Fund, 1995, and International
Growth & Income Fund, 1998. (The Global Government Bond, International Bond,
and Emerging Markets Bond Funds are described in a separate prospectus.)
What is meant by "shares"?
As with all mutual funds, investors purchase shares when they put money in a
fund. These shares are part of a fund's authorized capital stock, but share
certificates are not issued.
Each share and fractional share entitles the shareholder to:
. Receive a proportional interest in a fund's income and capital gain
distributions.
. Cast one vote per share on certain fund matters, including the election of
fund directors, changes in fundamental policies, or approval of changes in
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.
<PAGE>
ABOUT YOUR ACCOUNT
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 funds' officers. The policy of the funds is
that a majority of the Board members will be independent of Price-Fleming.
. All decisions regarding the purchase and sale of fund investments are made
by Price-Fleming - specifically by each fund's Investment Advisory Group.
Investment Manager
Price-Fleming is responsible for selection and management of each fund's
portfolio investments. Price-Fleming's U.S. office is located at 100 East
Pratt Street, Baltimore, Maryland 21202. Price-Fleming also has offices in
London, Tokyo, Singapore, Hong Kong, and Buenos Aires. Price-Fleming was
incorporated in Maryland in 1979 as a joint venture between T. Rowe Price and
Robert Fleming Holdings Limited (Flemings).
T. Rowe Price, Flemings, and Jardine Fleming are owners of Price-Fleming. The
common stock of Price-Fleming is 50% owned by a wholly owned subsidiary of T.
Rowe Price, 25% by a subsidiary of Flemings, and 25% by a subsidiary of
Jardine Fleming Group Limited (Jardine Fleming). (Half of Jardine Fleming is
owned by Flemings and half by Jardine Matheson Holdings Limited.) T. Rowe
Price has the right to elect a majority of the Board of Directors of
Price-Fleming, and Flemings has the right to elect the remaining directors,
one of whom will be nominated by Jardine Fleming.
. Flemings is a diversified investment organization which participates in a
global network of regional investment offices in New York, London, Zurich,
Geneva, Tokyo, Hong Kong, Manila, Kuala Lumpur, Seoul, Taipei, Bombay,
Jakarta, Singapore, Bangkok, and Johannesburg.
Portfolio Management
Each fund has an Investment Advisory Group that has day-to-day responsibility
for managing the portfolio and developing and executing each fund's
investment program. The members of each advisory group are listed below.
Global Stock Fund Martin G. Wade, John R. Ford, James B. M. Seddon, Mark C.
J. Bickford-Smith, Robert W. Smith, and David J. L. Warren.
International Stock Fund Martin G. Wade, John R. Ford, James B. M. Seddon,
Mark C. J. Bickford-Smith, Robert W. Smith, and David J. L. Warren.
International Discovery Fund Martin G. Wade, Frances Dydasco, Nichola Pease,
Benedict R. F. Thomas, and David J. L. Warren.
<PAGE>
T. ROWE PRICE
European Stock Fund Martin G. Wade, Nichola Pease, John R. Ford, James B. M.
Seddon, and Robert Revel-Chion.
Japan Fund Martin G. Wade, Ian MacDonald, and David J. L. Warren.
New Asia Fund Martin G. Wade, Frances Dydasco, Mark J. T. Edwards, and David
J. L. Warren.
Latin America Fund Martin G. Wade, John R. Ford, and Benedict R. F. Thomas.
Emerging Markets Stock Fund Martin G. Wade, Frances Dydasco, Christopher D.
Alderson, and Mark C. J. Bickford-Smith.
International Growth & Income Fund Martin G. Wade, Richard T. Whitney, John
R. Ford, James B.M. Seddon, and Robert W. Smith.
Martin Wade joined Price-Fleming in 1979 and has 29 years of experience with
the Fleming Group in research, client service, and investment management.
(Fleming Group includes Robert Fleming and/or Jardine Fleming.) Christopher
Alderson joined Price-Fleming in 1988 and has 12 years of experience with the
Fleming Group in research, and portfolio management. Mark Bickford-Smith
joined Price-Fleming in 1995 and has 13 years of experience with the Fleming
Group in research and financial analysis. Frances Dydasco joined
Price-Fleming in 1996 and has nine years of experience in research and
financial analysis. Mark Edwards joined Price-Fleming in 1987 and has 16
years of experience in financial analysis. John Ford joined Price-Fleming in
1982 and has 18 years of experience with the Fleming Group in research and
portfolio management. Nichola Pease joined Price-Fleming in 1996 and has 14
years of experience in research and financial analysis. James Seddon joined
Price-Fleming in 1987 and has 11 years of experience in portfolio management.
Robert Smith joined Price-Fleming in 1996, and has been with T. Rowe Price
since 1992, and has 11 years of experience in financial analysis. Benedict
Thomas joined Price-Fleming in 1988 and has nine years of portfolio
management experience. David Warren joined Price-Fleming in 1983 and has 17
years of experience in equity research, fixed income research, and portfolio
management. Ian MacDonald joined Price-Fleming in 1998 and has 13 years of
experience in equity research and portfolio management. Robert Revel-Chion
joined Price-Fleming in 1998 and has nine years of experience in investment
management (four years of which were within the Fleming Group). Richard
Whitney joined Price-Fleming in 1998, and has been with T. Rowe Price since
1985, and has 15 years of experience in equity research and portfolio
management.
Portfolio Transactions
Decisions with respect to the purchase and sale of a fund's portfolio
securities on behalf of each fund are made by Price-Fleming. The
Corporation's Board of Directors has authorized Price-Fleming to utilize
affiliates of Flemings and
<PAGE>
MORE ABOUT THE FUNDS
Jardine Fleming in the capacity of broker in connection with the execution of
a fund's portfolio transactions if Price-Fleming believes that doing so would
result in an economic advantage (in the form of lower execution costs or
otherwise) being obtained by the fund.
Marketing
T. Rowe Price Investment Services, Inc., a wholly owned subsidiary of T. Rowe
Price, distributes (sells) shares of this and all other T. Rowe Price funds.
Shareholder Services
T. Rowe Price Services, Inc., another wholly owned subsidiary, acts as the
fund's transfer and dividend disbursing agent and provides shareholder and
administrative services. 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. In
addition to the management fee, 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.
<TABLE>
Table 6 Service Fees Paid to T. Rowe Price Service
Companies
<CAPTION>
<S> <C> <C> <C> <S>
Transfer Agent Sub-accountingServices Accounting
Fund
Emerging Markets Stock $ 282,000 $ 9,000 $ 100,000
--------------------------------------------------------------
European Stock 1,046,000 63,000 104,000
--------------------------------------------------------------
Global Stock 70,000 -- 100,000
--------------------------------------------------------------
International Discovery 513,000 8,000 126,000
--------------------------------------------------------------
International Growth & Income 270,000 -- 103,0000
--------------------------------------------------------------
International Stock 6,465,000 3,411,000 166,000
--------------------------------------------------------------
Japan 320,000 3,000 101,000
--------------------------------------------------------------
Latin America 739,000 98,000 110,000
--------------------------------------------------------------
New Asia 2,745,000 141,000 116,000
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The Management Fee
This fee has two parts - an "individual fund fee" (discussed under
Transaction and Fund Expenses), which reflects a fund's particular investment
management costs, and a "group fee." The group fee, which is designed to
reflect the benefits of the shared resources of the T. Rowe Price investment
management complex, is calculated daily based on the combined net assets of
all T. Rowe Price funds
<PAGE>
T. ROWE PRICE
(except the Spectrum Funds, and any institutional, index, or private label
mutual funds). The group fee schedule (shown below) is graduated, declining
as the asset total rises, so shareholders benefit from the overall growth in
mutual fund assets.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
0.480% First $1 billion 0.360% Next $2 billion 0.310% Next $16 billion
--------------------------
0.450% Next $1 billion 0.350% Next $2 billion 0.305% Next $30 billion
----------------------------------------------------
0.420% Next $1 billion 0.340% Next $5 billion 0.300% Thereafter
----------------------------------------------------
0.390% Next $1 billion 0.330% Next $10 billion
------------------------------------------------------------------------------
0.370% Next $1 billion 0.320% Next $10 billion
</TABLE>
The fund's portion of the group fee is determined by the ratio of its daily
net assets to the daily net assets of all the T. Rowe Price funds described
previously. Based on combined T. Rowe Price funds' assets of over $76 billion
at December 31, 1997, the group fee was 0.32%.
Research and Administration
Certain administrative support is provided by T. Rowe Price, which receives
from Price-Fleming a fee of 0.15% of the market value of all assets in equity
accounts, 0.15% of the market value of all assets in active fixed income
accounts, and 0.035% of the market value of all assets in passive fixed
income accounts under Price-Fleming's management. Additional investment
research and administrative support for equity investments is provided to
Price-Fleming by Fleming Investment Management Limited (FIM) and Jardine
Fleming International Holdings Limited (JFIH), for which each receives from
Price-Fleming a fee of .075% of the market value of all assets in equity
accounts under Price-Fleming's management. Fleming International Fixed
Interest Management Limited (FIFIM) and JFIH provide research and
administration support for fixed income accounts for which each receive a fee
of .075% of the market value of all assets in active fixed income accounts
and .0175% of such market value in passive fixed income accounts under
Price-Fleming's management. FIM and FIFIM are wholly owned subsidiaries of
Flemings. JFIH is a wholly owned subsidiary of Jardine Fleming.
UNDERSTANDING PERFORMANCE INFORMATION
----------------------------------------------------------
This section should help you understand the terms used to describe fund
performance. You will come across them in shareholder reports you receive
from us; in our newsletter, The Price Report; in Insights articles; in T.
Rowe Price advertisements; and in the media.
<PAGE>
MORE ABOUT THE FUNDS
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. Reinvested distributions are
included, which means that total return numbers include the effect of
compounding, i.e., you receive income and capital gain distributions on a
rising number of shares.
Advertisements for a fund may include cumulative or compound average annual
total return figures, which may be compared with various indices, other
performance measures, or other mutual funds.
. 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.
INVESTMENT POLICIES AND PRACTICES
----------------------------------------------------------
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. The funds'
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 objectives
and certain investment restrictions noted in the following section as
"fundamental policies." The managers also follow certain "operating
policies," which can be changed without shareholder approval. However,
significant changes are discussed with shareholders in fund reports. A fund
adheres to applicable investment restrictions and policies at the time it
makes an investment. A later
<PAGE>
T. ROWE PRICE
change in circumstances does not cause a violation of the restriction and
will not require the sale of an investment if it was proper at the time it
was made.
The fund's holdings of certain kinds of investments cannot exceed maximum
percentages of total assets, which are set forth herein. For instance, each
fund is not permitted to invest more than 10% of total assets in hybrid
instruments. While these restrictions provide a useful level of detail about
a fund's investment program, investors should not view them as an accurate
gauge of the potential risk of such investments. For example, in a given
period, a 5% investment in hybrid instruments could have significantly more
of an impact on a fund's share price than its weighting in the portfolio. The
net effect of a particular investment depends on its volatility and the size
of its overall return in relation to the performance of all the funds' other
investments.
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.
. 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 (including certain potentially high-risk
derivatives described in this section) 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.
Fundamental policy With the exception of Latin America Fund, a fund will not
purchase a security if, as a result, with respect to 75% of its total assets,
more than 5% of the fund's total assets would be invested in securities of a
single issuer or more than 10% of the outstanding voting securities of the
issuer would be held by the fund.
Nondiversified Status--Latin America Fund
The fund is registered as a nondiversified mutual fund. This means that the
fund may invest a greater portion of its assets in, and own a greater amount
of the voting securities of, a single company than a diversified fund which
may subject the fund to greater risk with respect to its portfolio
securities. However, because the fund intends to qualify as a "regulated
investment company" under the Internal Revenue Code, it must invest so that,
at the end of each calendar quarter, with respect to 50% of its total assets,
not more than 5% of its assets are invested in the securities of a single
issuer.
<PAGE>
MORE ABOUT THE FUNDS
Common and Preferred Stocks
Stocks represent shares of ownership in a company. Generally, preferred stock
has a specified dividend and ranks after bonds and before common stocks in
its claim on income for dividend payments and on assets should the company be
liquidated. After other claims are satisfied, common stockholders participate
in company profits on a pro-rata basis; profits may be paid out in dividends
or reinvested in the company to help it grow. Increases and decreases in
earnings are usually reflected in a company's stock price, so common stocks
generally have the greatest appreciation and depreciation potential of all
corporate securities. While most preferred stocks pay a dividend, the fund
may purchase preferred stock where the issuer has omitted, or is in danger of
omitting, payment of its dividend. Such investments would be made primarily
for their capital appreciation potential.
Convertible Securities and Warrants
The funds may invest in debt or preferred equity securities convertible into
or exchangeable for equity securities. Traditionally, convertible securities
have paid dividends or interest at rates higher than common stocks but lower
than nonconvertible securities. They generally participate in the
appreciation or depreciation of the underlying stock into which they are
convertible, but to a lesser degree. In recent years, convertibles have been
developed which combine higher or lower current income with options and other
features. Warrants are options to buy a stated number of shares of common
stock at a specified price anytime during the life of the warrants
(generally, two or more years).
Fixed Income Securities
The funds may invest in any type of investment-grade security. The Global
Stock Fund may also invest up to 5% of its total assets in
below-investment-grade bonds, commonly referred to as "junk" bonds. Such
securities would be purchased in companies which meet the investment criteria
for the fund. The price of a bond fluctuates with changes in interest rates,
rising when interest rates fall and falling when interest rates rise. Junk
bond prices can be much more volatile and have a greater risk of default than
investment-grade bonds.
Hybrid Instruments
These instruments (a type of potentially high-risk derivative) can combine
the characteristics of securities, futures, and options. For example, the
principal amount, redemption, or conversion terms of a security could be
related to the market price of some commodity, currency, or securities index.
Such securities may bear interest or pay dividends at below market or even
relatively nominal rates. Under certain conditions, the redemption value of
such an investment could be zero.
. Hybrids can have volatile prices and limited liquidity, and their use by the
fund may not be successful.
<PAGE>
T. ROWE PRICE
Operating policy Each fund may invest up to 10% of its total assets in hybrid
instruments.
Passive Foreign Investment Companies
The fund may purchase the securities of certain foreign investment funds or
trusts called passive foreign investment companies. Such trusts have been the
only or primary way to invest in certain countries. In addition to bearing
their proportionate share of the trust's expenses (management fees and
operating expenses), shareholders will also indirectly bear similar expenses
of such trusts. Capital gains on the sale of such holdings are considered
ordinary income regardless of how long the fund held its investment. In
addition, the fund may be subject to corporate income tax and an interest
charge on certain dividends and capital gains earned from these investments,
regardless of whether such income and gains are distributed to shareholders.
To avoid such tax and interest, the fund intends to treat these securities as
sold on the last day of its fiscal year and recognize any gains for tax
purposes at that time; deductions for losses are allowable only to the extent
of any gains resulting from these deemed sales for prior taxable years. Such
gains and losses will be treated as ordinary income. The fund will be
required to distribute any resulting income even though it has not sold the
security.
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 Each fund will not invest more than 15% of its net assets in
illiquid securities.
Types of Management Practices
Reserve Position
Each fund will hold a certain portion of its assets in cash or cash
equivalents. Each fund's reserve position can consist of shares of a T. Rowe
Price internal money market fund and U.S. and foreign dollar-denominated
money market securities, including repurchase agreements, in the two highest
rating categories, maturing in one year or less. T. Rowe Price internal money
market funds do not receive management fees. For temporary, defensive
purposes, a fund may invest without limitation in such money market funds and
securities. This reserve position provides flexibility in meeting
redemptions, expenses, and the timing of new investments, and serves as a
short-term defense during periods of unusual market volatility.
<PAGE>
MORE ABOUT THE FUNDS
Borrowing Money and Transferring Assets
Each fund can borrow money from banks (and to the extent permitted by the
SEC, other Price funds) 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 policies A 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.
Foreign Currency Transactions
The funds will normally conduct their foreign currency exchange transactions
either on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market, or through entering into forward contracts
to purchase or sell foreign currencies. The funds will generally not enter
into a forward contract with a term greater than one year.
The funds will generally enter into forward foreign currency exchange
contracts only under two circumstances. First, when a fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
Second, when Price-Fleming believes that the currency of a particular foreign
country may suffer or enjoy a substantial movement against another currency,
it may enter into a forward contract to sell or buy the former foreign
currency (or another currency which acts as a proxy for that currency)
approximating the value of some or all of the fund's portfolio securities
denominated in such foreign currency. Under certain circumstances, a fund may
commit a substantial portion or the entire value of its portfolio to be
consummation of these contracts. Price-Fleming will consider the effect such
a commitment of its portfolio to forward contracts would have on the
investment program of the fund and the flexibility of the fund to purchase
additional securities. Although forward contracts will be used primarily to
protect the fund from adverse currency movements, they also involve the risk
that anticipated currency movements will not be accurately predicted and a
fund's total return could be adversely affected as a result.
There are certain markets where it is not possible to engage in effective
foreign currency hedging. This may be true, for example, for the currencies
of various emerging markets where the foreign exchange markets are not
sufficiently developed to permit hedging activity to take place.
<PAGE>
T. ROWE PRICE
1999: The Year of the Euro Currency
On the first business day of 1999, several major European countries will
officially inaugurate the European Economic and Monetary Union (EMU) and
adopt the euro as a single European currency backed by the European Central
Bank. The event could be one of the most significant financial developments
of the century, creating a vast economic and currency bloc equal to the U.S.
in size and power. Since the EMU has far-reaching implications for investors
and funds with exposure to European securities, it is important for you to
understand what is taking place.
The currencies of the original participating countries will become fixed rate
units of the euro, much the same as the nickel, dime, quarter, and half
dollar are denominations of the U.S. dollar. The exchange rates versus the
euro were set in May and will officially be determined by the end of 1998.
<TABLE>
<CAPTION>
Country Currency Euro Rate
- ------- -------- ---------
<S> <S> <C>
Austria Schilling 13.91
Belgium Franc 40.78
Finland Mark 6.01
France Franc 6.63
Germany Mark 1.98
Ireland Punt 0.80
Italy Lira 1958.00
Luxembourg Franc 40.78
Netherlands Guilder 2.23
Portugal Escudo 202.70
Spain Peseta 168.20
</TABLE>
Source: The Wall Street Journal, May 4, 1998
Beginning in January 1999, some European holdings will be redenominated in
euros, particularly government securities. The face value of other
investments might remain in the existing national currencies for a time, but
they will be priced, settled, and valued in euros by stock exchanges and
other agencies. Thus, some of the European holdings in your funds will be
valued in euros.
This will not affect the investment value of your funds in U.S. dollar terms,
since the euro will be converted into the dollar in the same way
deutschemarks, francs, lire, and other European currencies are currently
converted at the prevailing exchange rates.
During the transition period, which lasts from January 1, 1999, until June
30, 2002, other countries that have moved to adopt the economic terms of the
Maastricht Treaty of 1993 will be able to participate in the EMU. The primary
criteria for joining are:
<PAGE>
MORE ABOUT THE FUNDS
. a sustainable budget deficit less than 3% of GDP;
. public debt less than 60% of GDP;
. low inflation and interest rates; and
. no currency devaluations within two years of application.
Some of the original participants are not totally compliant with these terms
but are expected to embrace them by 2002. Countries joining later may have to
be in strict accord before entering the EMU, or at least be well along the
path to achieving them. So far, the transition seems to be progressing
smoothly, but there has been resistance to some of the more stringent terms.
French Socialists, in particular, would prefer to maintain heavy government
subsidies for social programs. Therefore, the jury is still out on whether
complete economic and monetary convergence will be attained as planned.
Assuming all goes well, the national currencies of participating countries
will cease to exist and all accounting will be in euros following the
transition period. However, regardless of whether or not full convergence is
realized on the date specified, we do not expect pricing in euros to have any
special impact on the value of your investment. Of course, problems could
develop that might be unfavorable for the fund, but we do not anticipate them
at this time.
Futures and Options
Futures (a type of potentially high-risk derivative) are often used to manage
risk, because they enable the investor to buy or sell an asset in the future
at an agreed upon price. Options (another type of potentially high-risk
derivative) give the investor the right, but not the obligation, to buy or
sell an asset at a predetermined price in the future. The funds may buy and
sell futures and options contracts for a number of reasons, including: to
manage their exposure to changes in securities prices and foreign currencies;
as an efficient means of adjusting overall exposure to certain markets; in an
effort to enhance income; and to protect the value of portfolio securities.
The funds may purchase, sell, or write call and put options on securities,
financial indices, and foreign currencies.
Futures contracts and options may not always be successful hedges; their
prices can be highly volatile. Using them could lower a fund's total return,
and the potential loss from the use of futures can exceed a fund's initial
investment in such contracts. In many foreign countries, futures and options
markets do not exist or are not sufficiently developed to be effectively used
by the funds.
Operating policies Futures: Initial margin deposits and premiums on options
used for non-hedging purposes will not equal more than 5% of each fund's net
asset value. Options on securities: The total market value of securities
against which each fund writes call or put options may not exceed 25% of its
total assets. Each fund will not commit more than 5% of its total assets to
premiums when purchasing call or put options.
<PAGE>
T. ROWE PRICE
Tax Consequences of Hedging
Under applicable tax law, the funds may be required to limit their gains from
hedging in foreign currency forwards, futures, and options. Although the
funds are expected to comply with such limits, the extent to which these
limits apply is subject to tax regulations as yet unissued. Hedging may also
result in the application of the mark-to-market and straddle provisions of
the Internal Revenue Code. These provisions could result in an increase (or
decrease) in the amount of taxable dividends paid by the funds and could
affect whether dividends paid by the funds are classified as capital gains or
ordinary income.
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 a fund's total assets.
Portfolio Turnover
Turnover is an indication of frequency. The funds will not generally trade in
securities for short-term profits, but when circumstances warrant, securities
may be purchased and sold without regard to the length of time held. The
funds' portfolio turnover rates for the previous three fiscal periods are
shown in Table 7.
<PAGE>
MORE ABOUT THE FUNDS
.
<TABLE>
Table 7
<CAPTION>
<S> <C> <C> <C> <S>
Portfolio Turnover Rates
Fund 1995 1996 1997
Emerging Markets Stock 28.8%* 41.7% 84.3%
------------------------------
European Stock 17.2% 14.1% 17.5%
------------------------------
Global Stock ** 50.0%* 41.8%
------------------------------
International Discovery 43.5% 52.0% 72.7%
------------------------------
International Stock 17.8% 11.6% 15.8%
------------------------------
Japan 62.4% 29.8% 32.3%
------------------------------
Latin America 18.9% 22.0% 32.7%
------------------------------
New Asia 63.7% 42.0% 41.8%
- -------------------------------------------------------------
</TABLE>
European Stock, Japan, New Asia, Latin America, and Emerging Markets Stock
Funds
Location of Company
In determining the domicile or nationality of a company, the funds would
primarily consider the following factors: whether the company is organized
under the laws of a particular country; or, whether the company derives a
significant proportion (at least 50%) of its revenues or profits from goods
produced or sold, investments made, or services performed in the country or
has at least 50% of its assets situated in that country.
Each of these funds will invest at least 65% of its total assets in companies
located (as defined above) in the respective countries or regions indicated.
International Stock, International Discovery, and Global Stock Funds
Each fund will invest at least 65% of its total assets in a manner which
reflects its international or global character, respectively. In the case of
the international funds, this requires that the funds invest in at least
three countries outside of the U.S. For the global fund, this means that the
fund must invest in at least three countries, one of which may include the
U.S.
<PAGE>
T. ROWE PRICE
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.
Employer-Sponsored Retirement Plans and Institutional Accounts T. Rowe Price
Trust Company 1-800-492-7670
Transaction procedures in the following sections may not apply to
employer-sponsored retirement plans and institutional accounts. For procedures
regarding employer-sponsored retirement plans, please call T. Rowe Price Trust
Company or consult your plan administrator. For institutional account
procedures, please call your designated account manager or service
representative.
OPENING A NEW ACCOUNT
----------------------------------------------------------
$2,500 minimum initial investment; $1,000 for retirement plans or gifts or
transfers to minors (UGMA/UTMA) accounts
Account Registration
If you own other T. Rowe Price funds, be sure to register any new account just
like your existing accounts so you can exchange among them easily. (The name and
account type would have to be identical.)
<PAGE>
INVESTING WITH T. ROWE PRICE
By Mail
Please make your check payable to T. Rowe Price Funds (otherwise it will be
returned) and send your check, together with the New Account Form, to the
appropriate address in the next paragraph. We do not accept third-party checks
to open new accounts, except for IRA Rollover checks that are properly endorsed.
Regular Mail
T. Rowe Price Account Services P.O. Box 17300 Baltimore, MD 21298-9353
Mailgram, Express, Registered, or Certified Mail
T. Rowe Price Account Services 10090 Red Run Blvd. Owings Mills, MD 21117
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#
1004397951 name of owner(s) and account number
Complete a New Account Form and mail it to one of the appropriate addresses
listed previously.
Note: No services will be established and IRS penalty withholding may occur
until a signed New Account Form is received. Also, retirement plans cannot be
opened by wire.
By Exchange
Call Shareholder Services or use Tele*Access or your personal computer (see
Automated Services under Shareholder Services). The new account will have the
same registration as the account from which you are exchanging. Services for the
new account may be carried over by telephone request if preauthorized on the
existing account. For limitations on exchanging, see explanation of Excessive
Trading under Transaction Procedures and Special Requirements.
In Person
Drop off your New Account Form at any location listed on the cover and obtain a
receipt.
<PAGE>
PURCHASING ADDITIONAL SHARES
----------------------------------------------------------
$100 minimum purchase; $50 minimum for retirement plans, Automatic Asset
Builder, and gifts or transfers to minors (UGMA/UTMA) accounts
By ACH Transfer
Use Tele*Access or your personal computer or call Investor Services if you have
established electronic transfers using the ACH network.
By Wire
Call Shareholder Services or use the wire address in Opening a New Account.
By Mail
1. Make your check payable to T. Rowe Price Funds (otherwise it may be
returned).
2. Mail the check to us at the following address with either a fund reinvestment
slip or a note indicating the fund you want to buy and your fund account
number.
3. Remember to provide your account number and the fund name on the memo line of
your check.
Regular Mail
T. Rowe Price Funds Account Services P.O. Box 89000 Baltimore, MD 21289-1500
/(For mailgrams, express, registered, or certified mail, see previous /
/section.)/
By Automatic Asset Builder
Fill out the Automatic Asset Builder section on the New Account or Shareholder
Services Form.
<PAGE>
INVESTING WITH T. ROWE PRICE
EXCHANGING AND REDEEMING SHARES
----------------------------------------------------------
Exchange Service
You can move money from one account to an existing identically registered
account or open a new identically registered account. Remember, exchanges are
purchases and sales for tax purposes. (Exchanges into a state tax-free fund are
limited to investors living in states where the fund is registered.) Some of the
T. Rowe Price funds may impose a redemption fee of 0.5% to 2% on shares held for
less than six months or one year, as specified in the prospectus. The fee is
paid to that fund.
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. For
exchange policies, please see Transaction Procedures and Special Requirements -
Excessive Trading.
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). For
charges, see Electronic Transfers - By Wire under Shareholder Services.
By Mail
For each account involved, provide the account name, number, fund name, and
exchange or redemption amount. For exchanges, be sure to indicate any fund you
are exchanging out of and the fund or funds you are exchanging into. Please mail
to the appropriate address below. T. Rowe Price requires the signatures of all
owners exactly as registered, and possibly a signature guarantee (see
Transaction Procedures and Special Requirements - Signature Guarantees).
Regular Mail
For nonretirement and IRA accounts
T. Rowe Price Account Services P.O. Box 89000 Baltimore, MD 21289-0220
<PAGE>
T. ROWE PRICE
For employer-sponsored retirement accounts
T. Rowe Price Trust Company P.O. Box 89000 Baltimore, MD 21289-0300
/(For mailgrams, express, registered, or certified mail, see Opening a / /New
Account.)/
Redemptions from employer-sponsored retirement accounts must be in writing;
please call T. Rowe Price Trust Company or your plan administrator for
instructions. IRA distributions may be requested in writing or by telephone;
please call Shareholder Services to obtain an IRA Distribution Form or an IRA
Shareholder Services Form to authorize the telephone redemption service.
RIGHTS RESERVED BY THE FUNDS
----------------------------------------------------------
Each fund and its agents reserve the following rights: (1) to waive or lower
investment minimums; (2) to accept initial purchases by telephone or mailgram;
(3) to refuse any purchase or exchange order; (4) to cancel or rescind any
purchase or exchange order (including, but not limited to, orders deemed to
result in excessive trading, market timing, fraud, or 5% ownership) upon notice
to the shareholder within five business days of the trade or if the written
confirmation has not been received by the shareholder, whichever is sooner; (5)
to freeze any account and suspend account services when notice has been received
of a dispute between the registered or beneficial account owners or there is
reason to believe a fraudulent transaction may occur; (6) to otherwise modify
the conditions of purchase and any services at any time; or (7) to act on
instructions believed to be genuine. These actions will be taken when, in the
sole discretion of management, they are deemed to be in the best interest of the
fund.
In an effort to protect each fund from the possible adverse effects of a
substantial redemption in a large account, as a matter of general policy no
shareholder or group of related shareholders controlled by the same
<PAGE>
INVESTING WITH T. ROWE PRICE
person or group of persons will knowingly be permitted to purchase in excess of
5% of the outstanding shares of the fund, except upon approval of the fund's
management.
SHAREHOLDER SERVICES
----------------------------------------------------------
Shareholder Services 1-800-225-5132 Investor Services 1-800-638-5660
Many services are available to you as a T. Rowe Price shareholder; some you
receive automatically, and others you must authorize on the New Account Form. By
signing up for services on the New Account Form rather than later on, you avoid
having to complete a separate form and obtain a signature guarantee. This
section reviews some of the principal services currently offered. Our Services
Guide, which we mail to all new shareholders, contains detailed descriptions of
these and other services.
Note: Corporate and other institutional accounts require an original or
certified resolution to establish services and to redeem by mail. For more
information, call Investor Services.
Retirement Plans
We offer a wide range of plans for individuals, institutions, and large and
small businesses: Traditional IRAs, Roth IRAs, SIMPLE IRAs, SEP-IRAs, Keoghs
(profit sharing, money purchase pension), 401(k), and 403(b)(7). For information
on IRAs, call Investor Services. For information on all other retirement plans,
including our no-load variable annuity, please call our Trust Company at
1-800-492-7670.
Automated Services Tele*Access 1-800-638-2587 24 hours, 7 days
Tele*Access
24-hour service via toll-free number enables you to (1) access information on
fund yields, prices, distributions, account balances, and your latest
transaction; (2) request checks, prospectuses, services forms, duplicate
statements, and tax forms; and (3) initiate purchase, redemption, and exchange
transactions in your accounts (see Electronic Transfers on the next page).
<PAGE>
T. ROWE PRICE
Web Address www.troweprice.com
After obtaining proper authorization, account transactions may also be conducted
through our Web site on the Internet. If you subscribe to America Online, you
can access our Web site via keyword "T. Rowe Price" and conduct transactions in
your account.
Plan Account Line 1-800-401-3279
Plan Account Line
This 24-hour service is similar to Tele*Access but is designed specifically to
meet the needs of retirement plan investors.
Telephone and Walk-In Services
Buy, sell, or exchange shares by calling one of our service representatives or
by visiting one of our investor center locations whose addresses are listed on
the cover.
Electronic Transfers
By ACH
With no charges to pay, you can initiate a purchase or redemption for as little
as $100 or as much as $100,000 between your bank account and fund account using
the ACH network. Enter instructions via Tele*Access or your personal computer,
or call Shareholder Services.
By Wire
Electronic transfers can be conducted via bank wire. There is currently a $5 fee
for wire redemptions under $5,000, and your bank may charge for incoming or
outgoing wire transfers regardless of size.
Checkwriting
(Not available for equity funds, or the High Yield or Emerging Markets Bond
Funds) You may write an unlimited number of free checks on any money market
fund, and most bond funds, with a minimum of $500 per check. Keep in mind,
however, that a check results in a redemption; a check written on a bond fund
will create a taxable event which you and we must report to the IRS.
Automatic Investing
($50 minimum) You can invest automatically in several different ways, including:
<PAGE>
INVESTING WITH T. ROWE PRICE
Automatic Asset Builder
You instruct us to move $50 or more from your bank account, or you can instruct
your employer to send all or a portion of your paycheck to the fund or funds you
designate.
Automatic Exchange
You can set up systematic investments from one fund account into another, such
as from a money fund into a stock fund.
DISCOUNT BROKERAGE
----------------------------------------------------------
To open an account 1-800-638-5660 For existing discount brokerage investors
1-800-225-7720
This service gives you the opportunity to consolidate all of your investments
with one company. Investments available through our discount brokerage include
stocks, options, bonds, non-T. Rowe Price mutual funds, and others at
commission savings over full-service brokers. We also provide a wide range of
services, including:
Automated telephone and computer services
You can enter stock and option trades, access quotes, and review account
information around the clock by phone with Tele-Trader or via the Internet with
Internet-Trader. Any trades executed through Tele-Trader save you an additional
10% on commissions. You will save 20% on commissions for stock trades when you
trade through Internet-Trader. All trades are subject to a $35 minimum
commission except stock trades placed through Internet-Trader, which are subject
to a $29.95 minimum commission.
Investor information
A variety of informative reports, such as our Brokerage Insights series, S&P
Market Month newsletter, and select stock reports can help you better evaluate
economic trends and investment opportunities.
Dividend Reinvestment Service
Virtually all stocks held in customer accounts are eligible for this free
service.
<PAGE>
T. ROWE PRICE
/Discount Brokerage is a division of T. Rowe Price Investment / /Services, Inc.,
Member NASD/SIPC./
<PAGE>
INVESTING WITH T. ROWE PRICE
INVESTMENT INFORMATION
----------------------------------------------------------
To help shareholders monitor their current investments and make decisions that
accurately reflect their financial goals, T. Rowe Price offers a wide variety of
information in addition to account statements. Most of this information is also
available on our Web site at www.troweprice.com.
Shareholder Reports
Fund managers' reviews of their strategies and results. If several members of a
household own the same fund, only one fund report is mailed to that address. To
receive additional copies, please call Shareholder Services or write to us at
100 East Pratt Street, Baltimore, Maryland 21202.
The T. Rowe Price Report
A quarterly investment newsletter discussing markets and financial strategies.
Performance Update
A quarterly review of all T. Rowe Price fund results.
Insights
Educational reports on investment strategies and financial markets.
Investment Guides
Asset Mix Worksheet, College Planning Kit, Diversifying Overseas: A T. Rowe
Price Guide to International Investing, Managing Your Retirement Distribution,
Personal Strategy Planner, Retirees Financial Guide, Retirement Planning Kit,
and Tax Considerations for Investors.
<PAGE>
T. ROWE PRICE
To help you achieve your financial goals, T. Rowe Price offers a wide range of
stock, bond, and money market investments, as well as convenient services and
timely, informative reports.
To Open a Mutual Fund Account
Investor Services
1-800-638-5660
1-410-547-2308
For Existing Accounts
Shareholder Services
1-800-225-5132
1-410-625-6500
For Yields, Prices, Account Information, or to Conduct Transactions
Tele*Access/(R)/
1-800-638-2587 24 hours, 7 days
To Open a Discount Brokerage Account
1-800-638-5660
Plan Account Line
1-800-401-3279
For retirement plan
investors
<PAGE>
INVESTING WITH T. ROWE PRICE
Investor Centers
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
Internet Address
www.troweprice.com
(LOGO)
C01-040 12/1/98
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
The date of this Statement of Additional Information is March 1, 1998, or
December 1, 1998.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
International Stock Fund
International Discovery Fund
International Growth & Income Fund
European Stock Fund
Japan Fund
New Asia Fund
Latin America Fund
Emerging Markets Stock Fund
Global Stock Fund
and
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
_____________________________________________________________________
Mailing Address:
T. Rowe Price Investment Services, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
1-800-638-5660
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the appropriate Fund prospectus dated March 1, 1998,
or December 1, 1998, which may be obtained from T. Rowe Price Investment
Services, Inc.
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.
C01-043 12/1/98
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page Page
---- ----
<S> <S> <C> <S> <S>
Capital Stock 41 Investment Restrictions 20
- -------------------------------------- ------------------------------------
Code of Ethics 29 Legal Counsel 42
- -------------------------------------- ------------------------------------
Custodian 29 Management of the Funds 22
- -------------------------------------- ------------------------------------
Distributor for the Funds 28 Net Asset Value Per Share 36
- -------------------------------------- ------------------------------------
Dividends and Distributions 37 Portfolio Management 8
Practices
- -------------------------------------- ------------------------------------
Federal Registration of Shares 42 Portfolio Transactions 30
- -------------------------------------- ------------------------------------
Independent Accountants 42 Pricing of Securities 36
- -------------------------------------- ------------------------------------
Investment Management Services 26 Principal Holders of 26
Securities
- -------------------------------------- ------------------------------------
Investment Objectives and 2 Risk Factors 2
Policies
- -------------------------------------- ------------------------------------
Investment Performance 39 Shareholder Services 29
- -------------------------------------- ------------------------------------
Investment Program 6 Tax Status 37
- -------------------------------------- ------------------------------------
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
-------------------------------------------------------------------------------
The following information supplements the discussion of each Fund's
investment objectives and policies discussed in the Funds' 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 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
The Funds' investment manager, Rowe Price-Fleming International, Inc.
("Price-Fleming"), one of America's largest managers of no-load international
mutual fund assets, regularly analyzes a broad range of international equity
and fixed income markets in order to assess the degree or risk and level of
return that can be expected from each market. Of course, there can be no
assurance that Price-Fleming's forecasts of expected return will be reflected
in the actual returns achieved by the Funds.
Each Fund's share price will fluctuate with market, economic and foreign
exchange conditions, and your investment may be worth more or less when
redeemed than when purchased. The Funds should not be relied upon as a
complete investment program, nor used to play short-term swings in the stock
or foreign exchange markets. The Funds are subject to risks unique to
international investing. See discussion under "Risk Factors
<PAGE>
of Foreign Investing" below. Further, there is no assurance that the
favorable trends discussed below will continue, and the Funds cannot
guarantee they will achieve their objectives.
Risk Factors of Foreign Investing There are special risks in foreign
investing. Certain of these risks are inherent in any international mutual
fund while others relate more to the countries in which the Fund will invest.
Many of the risks are more pronounced for investments in developing or
emerging market countries, such as many of the countries of Asia, Latin
America, Eastern Europe, Russia, Africa, and the Middle East. Although there
is no universally accepted definition, a developing country is generally
considered to be a country which is in the initial stages of its
industrialization cycle with a per capita gross national product of less than
$8,000.
. General Investors should understand that all investments have a risk factor.
There can be no guarantee against loss resulting from an investment in the
Funds, and there can be no assurance that the Funds' investment policies will
be successful, or that its investment objectives will be attained. The Funds
are designed for individual and institutional investors seeking to diversify
beyond the United States in actively researched and managed portfolios, and
are intended for long-term investors who can accept the risks entailed when
investing in foreign securities.
. Political and Economic Factors Individual foreign economies of certain
countries differ favorably or unfavorably from the United States' economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position. The
internal politics of 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 1994-1995,
the Mexican peso plunged in value setting off a severe crisis in the Mexican
economy. Asia is still coming to terms with its own crisis and recessionary
conditions sparked off by widespread currency weakness in late 1997. In
addition, significant external political risks currently affect some foreign
countries. Both Taiwan and China still claim sovereignty of one another and
there is a demilitarized border and hostile relations between North and South
Korea.
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 Fund invests in securities denominated in various
currencies. Accordingly, a change in the value of any such currency against
the U.S. dollar will result in a corresponding change in the U. S. dollar
value of the Fund's assets denominated in that currency. Such changes will
also affect the Fund's income. Generally, when a given currency appreciates
against the dollar (the dollar weakens) the value of the Fund's securities
denominated in that currency will rise. When a given currency depreciates
against the dollar (the dollar strengthens) the value of the Fund's
securities denominated in that currency would be expected to decline.
. Investment and Repatriation of Restrictions Foreign investment in the
securities markets of certain foreign countries is restricted or controlled
in varying degrees. These restrictions limit at times and preclude investment
in certain of such countries and increase the cost and expenses of the Fund.
Investments by foreign investors are subject to a variety of restrictions in
many developing countries. These restrictions may take the form of prior
governmental approval, limits on the amount or type of securities held by
foreigners, and limits on the types of companies in which foreigners may
invest. Additional or different restrictions may be imposed at any time by
these or other countries in which the Funds invest. In addition, the
repatriation of both investment income and capital from several foreign
countries is restricted and controlled under certain regulations, including
in some cases the need for certain government consents. For example, capital
invested in Chile normally cannot be repatriated for one year.
<PAGE>
. Market Characteristics It is contemplated that most foreign 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 more volatile than, those in the United States. While growing in volume,
they usually have substantially less volume than U.S. markets and the Fund's
portfolio securities may be less liquid and subject to more rapid and erratic
price movements than securities of comparable U.S. companies. Equity
securities may trade at price/earnings multiples higher than comparable
United States securities and such levels may not be sustainable. Commissions
on foreign stocks are generally higher than commissions on United States
exchanges, and while there is an increasing number of overseas stock markets
that have adopted a system of negotiated rates, a number are still subject to
an established schedule of minimum commission rates. There is generally less
government supervision and regulation of foreign 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 include delays beyond periods customary in
the United States and practices, such as delivery of securities prior to
receipt of payment, which increase the likelihood of a "failed settlement."
Failed settlements can result in losses to the Fund.
. Investment Funds The Fund may invest in investment funds which have been
authorized by the governments of certain countries specifically to permit
foreign investment in securities of companies listed and traded on the stock
exchanges in these respective countries. The Fund's investment in these funds
is subject to the provisions of the 1940 Act. If the Fund invests in such
investment funds, the Fund's shareholders will bear not only their
proportionate share of the expenses of the Fund (including operating expenses
and the fees of the investment manager), but also will 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 is often 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 Fund's foreign
portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount of income available for distribution to the Fund's
shareholders.
. Other With respect to certain foreign countries, especially developing and
emerging ones, there is the possibility of adverse changes in investment or
exchange control regulations, expropriation or confiscatory taxation,
limitations on the removal of Funds or other assets of the 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 the 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
<PAGE>
uncertainties to investment in Eastern Europe and Russia. The 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 restrict the free conversion of
their currency into foreign currencies, including the U.S. dollar. There is
no significant foreign exchange market for many currencies and it would, as a
result, be difficult for the Fund to engage in foreign currency transactions
designed to protect the value of the Fund's interests in securities
denominated in such currencies.
Sovereign Debt A number of Latin American countries are among the largest
debtors of developing countries. There have been moratoria on, and
reschedulings of, repayment with respect to these debts. Such events can
restrict the flexibility of these debtor nations in the international markets
and result in the imposition of onerous conditions on their economies.
. Japan
The Japan Fund's concentration of its investments in Japan means the Fund
will be more dependent on the investment considerations discussed above and
may be more volatile than a fund which is broadly diversified geographically.
To the extent any of the other funds also invest in Japan, such investments
will be subject to these same factors. Additional factors relating to Japan
include the following:
Japan has experienced earthquakes and tidal waves of varying degrees of
severity, and the risks of such phenomena, and damage resulting therefrom,
continue to exist. Japan also has one of the world's highest population
densities. A significant percentage of the total population of Japan is
concentrated in the metropolitan areas of Tokyo, Osaka and Nagoya.
Energy Japan has historically depended on oil for most of its energy
requirements. Almost all of its oil is imported, the majority from the Middle
East. In the past, oil prices have had a major impact on the domestic
economy, but more recently Japan has worked to reduce its dependence on oil
by encouraging energy conservation and use of alternative fuels. In addition,
a restructuring of industry, with emphasis shifting from basic industries to
processing and assembly type industries, has contributed to the reduction of
oil consumption. However, there is no guarantee this favorable trend will
continue.
Foreign Trade Overseas trade is important to Japan's economy. Japan has few
natural resources and must export to pay for its imports of these basic
requirements. Because of the concentration of Japanese exports in highly
visible products such as automobiles, machine tools and semiconductors and
the large trade surpluses ensuing therefrom, Japan has had difficult
relations with its trading partners, particularly the U.S. It is possible
that trade sanctions or other protectionist measures could impact Japan
adversely in both the short- and long-term.
. Small Companies Small companies may have less experienced management and
fewer management resources than larger firms. A smaller company may have
greater difficulty obtaining access to capital markets, and may pay more for
the capital it obtains. In addition, smaller companies are more likely to be
involved in fewer
<PAGE>
market segments, making them more vulnerable to any downturn in a given
segment. Some of these factors may also apply, to a lesser extent, to medium
size companies. Some of the smaller companies in which the Fund will invest
may be in major foreign markets; others may be leading companies in emerging
countries outside the major foreign markets. Securities analysts generally do
not follow such securities, which are seldom held outside of their respective
countries and which may have prospects for long-term investment returns
superior to the securities of well-established and well-known companies.
Direct investment in such securities may be difficult for United States
investors because, among other things, information relating to such
securities is often not readily available. Of course, there are also risks
associated with such investments, and there is no assurance that such
prospects will be realized.
Asia (ex-Japan)
Political Instability The political history of certain Asian countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such developments,
if they continue to occur, 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 Asian 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 1997 the Thai baht lost
46.75% of its value against the U.S. dollar. Certain Asian 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.
Debt A number of Asian companies are highly dependent on foreign loans for
their operation. In 1997, several Asian countries were forced to negotiate
loans from the IMF and others that impose strict repayment term schedules and
require significant economic and financial restructuring.
INVESTMENT PROGRAM
-------------------------------------------------------------------------------
Types of Securities
Set forth below is additional information about certain of the investments
described in the Fund's prospectus.
Hybrid Instruments
Hybrid Instruments (a type of potentially high-risk derivative) have been
developed and combine the elements of futures contracts or options with those
of debt, preferred equity, or a depository instrument (hereinafter "Hybrid
Instruments"). Generally, a Hybrid Instrument will be a debt security,
preferred stock, depository share, trust certificate, certificate of deposit,
or other evidence of indebtedness on which a portion of or all interest
payments, and/or the principal or stated amount payable at maturity,
redemption, or retirement, is determined by reference to prices, changes in
prices, or differences between prices, of securities, currencies,
intangibles, goods, articles, or commodities (collectively "Underlying
Assets") or by another objective index, economic factor, or other measure,
such as interest rates, currency exchange rates, commodity indices, and
securities indices (collectively "Benchmarks"). Thus, Hybrid Instruments may
take a variety of forms, including, but not limited to, debt instruments with
interest or principal payments or redemption terms determined by reference to
the value of a currency or commodity or securities index at a future point in
time, preferred stock with dividend rates determined by reference to the
value of a currency, or convertible securities with the conversion terms
related to a particular commodity.
Hybrid Instruments can be an efficient means of creating exposure to a
particular market, or segment of a market, with the objective of enhancing
total return. For example, a Fund may wish to take advantage of expected
declines in interest rates in several European countries, but avoid the
transaction costs associated
<PAGE>
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 of 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.
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
<PAGE>
considerable period may elapse between the time of the decision to sell and
the time the Fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions
were to develop, the Fund might obtain a less favorable price than prevailed
when it decided to sell. Restricted securities will be priced at fair value
as determined in accordance with procedures prescribed by the Fund's Board of
Directors. If, through the appreciation of illiquid securities or the
depreciation of liquid securities, the Fund should be in a position where
more than 15% of the value of its net assets is invested in illiquid assets,
including restricted securities, the Fund will take appropriate steps to
protect liquidity.
Notwithstanding the above, the Fund may purchase securities which, while
privately placed, are eligible for purchase and sale under Rule 144A under
the 1933 Act. This rule permits certain qualified institutional buyers, such
as the Fund, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. Price-Fleming, under the
supervision of the Fund's Board of Directors, will consider whether
securities purchased under Rule 144A are illiquid and thus subject to the
Fund's restriction of investing no more than 15% of its net assets in
illiquid securities. A determination of whether a Rule 144A security is
liquid or not is a question of fact. In making this determination,
Price-Fleming will consider the trading markets for the specific security
taking into account the unregistered nature of a Rule 144A security. In
addition, Price-Fleming could consider the (1) frequency of trades and
quotes, (2) number of dealers and potential purchases, (3) dealer
undertakings to make a market, and (4) the nature of the security and of
marketplace trades (e.g., the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of transfer). The liquidity of
Rule 144A securities would be monitored and, if as a result of changed
conditions it is determined that a Rule 144A security is no longer liquid,
the Fund's holdings of illiquid securities would be reviewed to determine
what, if any, steps are required to assure that the Fund does not invest more
than 15% of its net assets in illiquid securities. Investing in Rule 144A
securities could have the effect of increasing the amount of the Fund's
assets invested in illiquid securities if qualified institutional buyers are
unwilling to purchase such securities.
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.
There are, of course, other types of securities that are, or may become
available, which are similar to the foregoing and the Funds may invest in
these securities.
PORTFOLIO MANAGEMENT PRACTICES
-------------------------------------------------------------------------------
All Funds except Foreign Equity Fund
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 such period of time which coincides with the normal settlement period
for purchases and sales of such securities in the
<PAGE>
respective markets. The Fund will not have the right to vote on securities
while they are being lent, but it will call a loan in anticipation of any
important vote. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of 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 Price-Fleming to be of good standing and will
not be made unless, in the judgment of Price-Fleming, the consideration to be
earned from such loans would justify the risk.
All Funds
Other Lending/Borrowing
Subject to approval by the SEC, 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. ("Price-Fleming"), (collectively, "Price
Funds").
Repurchase Agreements
The Fund may enter into a repurchase agreement through which an investor
(such as the Fund) purchases a security (known as the "underlying security")
from a well-established securities dealer or a bank that is a member of the
Federal Reserve System. Any such dealer or bank will be on T. Rowe Price's
approved list and have a credit rating with respect to its short-term debt of
at least A1 by Standard & Poor's Corporation, P1 by Moody's Investors
Services, Inc., or the equivalent rating by T. Rowe Price. At that time, the
bank or securities dealer agrees to repurchase the underlying security at the
same price, plus specified interest. Repurchase agreements are generally for
a short period of time, often less than a week. Repurchase agreements which
do not provide for payment within seven days will be treated as illiquid
securities. The Fund will only enter into repurchase agreements where (i) the
underlying securities are of the type (excluding maturity limitations) which
the Fund's investment guidelines would allow it to purchase directly, (ii)
the market value of the underlying security, including interest accrued, will
be at all times equal to or exceed the value of the repurchase agreement, and
(iii) payment for the underlying security is made only upon physical delivery
or evidence of book-entry transfer to the account of the custodian or a bank
acting as agent. In the event of a bankruptcy or other default of a seller of
a repurchase agreement, the Fund could experience both delays in liquidating
the underlying security and losses, including: (a) possible decline in the
value of the underlying security during the period while the Fund seeks to
enforce its rights thereto; (b) possible subnormal levels of income and lack
of access to income during this period; and (c) expenses of enforcing its
rights.
Money Market Reserves
It is expected that the Fund will invest its cash reserves primarily in one
or more money market funds established for the exclusive use of the T. Rowe
Price family of mutual funds and other clients of T. Rowe Price and
Price-Fleming. Currently, two such money market funds are in
operation-Reserve Investment Fund ("RIF") and Government Reserve Investment
Fund ("GRF"), each a series of the Reserve Investment Funds, Inc. Additional
series may be created in the future. These funds were created and operate
under an Exemptive Order issued by the Securities and Exchange Commission
(Investment Company Act Release No. IC-22770, July 29, 1997).
Both funds must comply with the requirements of Rule 2a-7 under the 1940 Act
governing money market funds. The RIF invests at least 95% of its total
assets in prime money market instruments receiving the highest credit rating.
The GRF invests primarily in a portfolio of U.S. government-backed
securities, primarily U.S. Treasuries, and repurchase agreements thereon.
The RIF and GRF provide a very efficient means of managing the cash reserves
of the Fund. While neither RIF or GRF pay an advisory fee to the Investment
Manager, they will incur other expenses. However, the RIF and GRF are
expected by T. Rowe Price to operate at very low expense ratios. The Fund
will only invest in RIF or GRF to the extent it is consistent with its
objective and program.
Neither fund is insured or guaranteed by the U.S. government, and there is no
assurance they will maintain a stable net asset value of $1.00 per share.
<PAGE>
Options
Options are a type of potentially high-risk derivative.
Writing Covered Call Options
The Fund may write (sell) American or European style "covered" call options
and purchase options to close out options previously written by the Fund. In
writing covered call options, the Fund expects to generate additional premium
income which should serve to enhance the Fund's total return and reduce the
effect of any price decline of the security or currency involved in the
option. Covered call options will generally be written on securities or
currencies which, in Price-Fleming'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, other liquid high-grade debt
obligations, or other suitable cover as permitted by the SEC having a value
equal to the fluctuating market value of the optioned securities or
currencies.
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, Price-Fleming, 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
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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 written call
or put options exceeds 25% of the market value of the Fund's net assets. In
calculating the 25% limit, the Fund will offset, against the value of assets
covering written calls and puts, the 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 to the
exercise price against delivery of the underlying security or currency. The
operation of put options in other respects, including their related risks and
rewards, is substantially identical to that of call options.
The Fund would write put options only on a covered basis, which means that
the Fund would maintain in a segregated account cash, U.S. government
securities, other liquid high-grade debt obligations, or other suitable cover
as determined by the SEC, in an amount not less than the exercise price 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.)
<PAGE>
The Fund would generally write covered put options in circumstances where
Price-Fleming 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 next.
The Fund may purchase a put option on an underlying security or currency (a
"protective put") owned by the Fund as a defensive technique in order to
protect against an anticipated decline in the value of the security or
currency. Such hedge protection is provided only during the life of the put
option when the Fund, as the holder of the put option, is able to sell the
underlying security or currency at the put exercise price regardless of any
decline in the underlying security's market price or currency's exchange
value. For example, a put option may be purchased in order to protect
unrealized appreciation of a security or currency where T. Rowe Price deems
it desirable to continue to hold the security or currency because of tax
considerations. The premium paid for the put option and any transaction costs
would reduce any capital gain otherwise available for distribution when the
security or currency is eventually sold.
The Fund may also purchase put options at a time when the Fund does not own
the underlying security or currency. By purchasing put options on a security
or currency it does not own, the Fund seeks to benefit from a decline in the
market price of the underlying security or currency. If the put option is not
sold when it has remaining value, and if the market price of the underlying
security or currency remains equal to or greater than the exercise price
during the life of the put option, the Fund will lose its entire investment
in the put option. In order for the purchase of a put option to be
profitable, the market price of the underlying security or currency must
decline sufficiently below the exercise price to cover the premium and
transaction costs, unless the put option is sold in a closing sale
transaction.
The Fund will not commit more than 5% of its assets to premiums when
purchasing put and call options. The premium paid by the Fund when purchasing
a put option will be recorded as an asset of the Fund. 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
<PAGE>
period (American style) or at the expiration of the option (European style).
The Fund may enter into closing sale transactions with respect to such
options, exercise them or permit them to expire. The Fund may purchase call
options for the purpose of increasing its current return or avoiding tax
consequences which could reduce its current return. The Fund may also
purchase call options in order to acquire the underlying securities or
currencies. Examples of such uses of call options are provided next.
Call options may be purchased by the Fund for the purpose of acquiring the
underlying securities or currencies for its portfolio. Utilized in this
fashion, the purchase of call options enables the Fund to acquire the
securities or currencies at the exercise price of the call option plus the
premium paid. At times the net cost of acquiring securities or currencies in
this manner may be less than the cost of acquiring the securities or
currencies directly. This technique may also be useful to the Fund in
purchasing a large block of securities or currencies that would be more
difficult to acquire by direct market purchases. So long as it holds such a
call option 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.
<PAGE>
Futures Contracts
Futures contracts are a type of potentially high-risk derivative.
Transactions in Futures
The Fund may enter into futures contracts including; stock index, interest
rate, and currency futures ("futures" or "futures contracts") for hedging,
yield or return enhancement and risk management purposes.
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
Price-Fleming 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. Although
techniques other than the sale and purchase of futures contracts could be
used for the above-referenced purposes, futures contracts offer an effective
and relatively low cost means of implementing the Fund's objectives in these
areas.
Regulatory Limitations
If the Fund purchases or sells futures contracts or related options which do
not qualify as bona fide hedging under applicable CFTC rules, the aggregate
initial margin deposits and premium required to establish those positions can
not exceed 5% of the liquidation value of the Fund after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into; provided, however, that in the case of an option that is in-the-money
at the time of purchase, the in-the-money amount may be excluded in
calculating the 5% limitation. For purposes of this policy, options on
futures contracts and foreign currency options traded on a commodities
exchange will be considered "related options." This policy may be modified by
the Board of Directors without a shareholder vote and does not limit the
percentage of the Fund's assets at risk to 5%.
In instances involving the purchase of futures contracts or the writing of
call or put options thereon by the Fund, an amount of cash, liquid assets, or
other suitable cover as permitted by the SEC, equal to the market value of
the futures contracts and options thereon (less any related margin deposits),
will be identified by the Fund to cover the position, or alternative cover
(such as owning an offsetting position) will be employed. Assets used as
cover or held in an identified account cannot be sold while the position in
the corresponding option or future is open, unless they are replaced with
similar assets. As a result, the commitment of a large portion of a Fund's
assets to cover or identified accounts could impede portfolio management or
the Fund's ability to meet redemption requests or other current obligations.
If the CFTC or other regulatory authorities adopt different (including less
stringent) or additional restrictions, the Fund would comply with such new
restrictions.
Trading in Futures Contracts
A futures contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument (e.g.,
units of a stock index) for a specified price, date, time and place
designated at the time the contract is made. Brokerage fees are incurred when
a futures contract is bought or sold and margin deposits must be maintained.
Entering into a contract to buy is commonly
<PAGE>
referred to as buying or purchasing a contract or holding a long position.
Entering into a contract to sell is commonly referred to as selling a
contract or holding a short position.
Unlike when the Fund purchases or sells a security, no price would be paid or
received by the Fund upon the purchase or sale of a futures contract. Upon
entering into a futures contract, and to maintain the Fund's open positions
in futures contracts, the Fund would be required to deposit with its
custodian in a segregated account in the name of the futures broker an amount
of cash, or liquid assets known as "initial margin." The margin required for
a particular futures contract is set by the exchange on which the contract is
traded, and may be significantly modified from time to time by the exchange
during the term of the contract. Futures contracts are customarily purchased
and sold on margins that may range upward from less than 5% of the value of
the contract being traded.
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 market."
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.
Settlement of a stock index futures contract may or may not be in the
underlying security. If not in the underlying security, then settlement will
be made in cash, equivalent over time to the difference between the contract
price and the actual price of the underlying asset (as adjusted by a
multiplier) at the time the stock index futures contract expires.
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
<PAGE>
at the time of purchase, 10% of the value of the futures contract is
deposited as margin, a subsequent 10% decrease in the value of the futures
contract would result in a total loss of the margin deposit, before any
deduction for the transaction costs, if the account were then closed out. A
15% decrease would result in a loss equal to 150% of the original margin
deposit, if the contract were closed out. Thus, a purchase or sale of a
futures contract may result in losses in excess of the amount invested in the
futures contract.
. Liquidity The Fund may elect to close some or all of its futures positions
at any time prior to their expiration. The Fund would do so to reduce
exposure represented by long futures positions or short futures positions.
The Fund may close its positions by taking opposite positions which would
operate to terminate the Fund's position in the futures contracts. Final
determinations of 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 next, there is no guarantee that the
price of the underlying instruments will, in fact, correlate with the price
movements in the futures contract and thus provide an offset to losses on a
futures contract.
. Hedging Risk A decision of whether, when, and how to hedge involves skill
and judgment, and even a well-conceived hedge may be unsuccessful to some
degree because of unexpected market 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. Price-Fleming 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 Price-Fleming'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, Price-Fleming 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
<PAGE>
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 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
Price-Fleming might not result in a successful hedging transaction over a
very short time period.
Options on Futures Contracts
The Fund may purchase and sell options on the same types of futures in which
it may invest.
Options (another type of potentially high-risk derivative) on futures are
similar to options on underlying instruments except that options on futures
give the purchaser the right, in return for the premium paid, to assume a
position in a futures contract (a long position if the option is a call and a
short position if the option is a put), rather than to purchase or sell the
futures contract, at a specified exercise price at any time during the period
of the option. Upon exercise of the option, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by the delivery of the accumulated balance in the writer's
futures margin account which represents the amount by which the market price
of the futures contract, at exercise, exceeds (in the case of a call) or is
less than (in the case of a put) the exercise price of the option on the
futures contract. Purchasers of options who fail to exercise their options
prior to the exercise date suffer a loss of the premium paid.
As an alternative to writing or purchasing call and put options on stock
index futures, the Fund may write or purchase call and put options on
financial indices. Such options would be used in a manner similar to the use
of options on futures contracts. From time to time, a single order to
purchase or sell futures contracts (or options thereon) may be made on behalf
of the Fund and other T. Rowe Price Funds. Such aggregated orders would be
allocated among the Funds and the other T. Rowe Price Funds in a fair and
nondiscriminatory manner.
Special Risks of Transactions in Options on Futures Contracts
The risks described under "Special Risks in Transactions on Futures
Contracts" are substantially the same as the risks of using options on
futures. If the Fund, were to write an option on a futures contract, it would
be required to deposit and maintain initial and variation margin in the same
manner as a regular futures contract. In addition, where the Fund seeks to
close out an option position by writing or buying an offsetting option
covering the same index, underlying instrument or contract and having the
same exercise price and expiration date, its ability to establish and close
out positions on such options will be subject to the maintenance of a liquid
secondary market. Reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading
interest in certain options; (ii) restrictions may be imposed by an exchange
on opening transactions or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of options, or underlying instruments; (iv) unusual or
unforeseen circumstances may interrupt normal operations on an exchange; (v)
the facilities of an exchange or a clearing corporation may not at all times
be adequate to handle current trading volume; or (vi) one or more exchanges
could, for economic or other reasons, decide or be compelled at some future
date to discontinue the trading of options (or a particular class or series
of options), in which event the secondary market on that exchange (or in the
class or series of options) would cease to exist, although outstanding
options on the exchange that had been issued by a clearing corporation as a
result of trades on that exchange would continue to be exercisable in
accordance with their terms. There is no assurance that higher than
anticipated trading activity or other unforeseen events might not, at times,
render certain of the facilities of any of the clearing corporations
inadequate, and thereby result in the institution by an exchange of special
procedures which may interfere with the timely execution of customers'
orders.
<PAGE>
Additional Futures and Options Contracts
Although the Fund has no current intention of engaging in futures or options
transactions other than those described above, it reserves the right to do
so. Such futures and options trading might involve risks which differ from
those involved in the futures and options described above.
Foreign Futures and Options
Participation in foreign futures and foreign options transactions involves
the execution and clearing of trades on or subject to the rules of a foreign
board of trade. Neither the National Futures Association nor any domestic
exchange regulates activities of any foreign boards of trade, including the
execution, delivery and clearing of transactions, or has the power to compel
enforcement of the rules of a foreign board of trade or any applicable
foreign law. This is true even if the exchange is formally linked to a
domestic market so that a position taken on the market may be liquidated by a
transaction on another market. Moreover, such laws or regulations will vary
depending on the foreign country in which the foreign futures or foreign
options transaction occurs. For these reasons, when the Fund trades foreign
futures or foreign options contracts, it may not be afforded certain of the
protective measures provided by the Commodity Exchange Act, the CFTC's
regulations and the rules of the National Futures Association and any
domestic exchange, including the right to use reparations proceedings before
the CFTC and arbitration proceedings provided by the National Futures
Association or any domestic futures exchange. In particular, funds received
from the Fund for foreign futures or foreign options transactions may not be
provided the same protections as funds received 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.
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 Price-Fleming 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
<PAGE>
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 parties will be incorporated into
the longer term investment decisions made with regard to overall
diversification strategies. However, Price-Fleming believes that it is
important to have the flexibility to enter into such forward contracts when
it determines that the best interests of the Fund will be served.
The Fund may enter into forward contacts for any other purpose consistent
with the Fund's investment objective and program. However, the Fund will not
enter into a forward contract, or maintain exposure to any such contract(s),
if the amount of foreign currency required to be delivered thereunder would
exceed the Fund's holdings of liquid, high-grade debt securities, currency
available for cover of the forward contract(s) or other suitable cover as
permitted by the SEC. In determining the amount to be delivered under a
contract, the Fund may net offsetting positions.
At the maturity of a forward contract, the Fund may sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and either extend the maturity of the forward contract (by "rolling"
that contract forward) or may initiate a new forward contract.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If the Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward prices decline
during the period between the Fund's entering into a forward contract 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 Price-Fleming. 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 that 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 (taxable at a maximum rate of 20%) or loss and
40% short-term capital gain or loss regardless of the holding period of the
instrument (ordinary income or loss for foreign exchange contracts). The Fund
will
<PAGE>
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. The holding period of the security
offsetting an "in-the-money qualified covered call" option on an equity
security will not include the period of time the option is outstanding.
Losses on written covered calls and purchased puts on securities, excluding
certain "qualified covered call" options on equity securities, may be
long-term capital losses, if the security covering the option was held for
more than 12 months prior to the writing of the option.
In order for the Fund to continue to qualify for federal income tax treatment
as a regulated investment company, at least 90% of its gross income for a
taxable year must be derived from qualifying income, i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities or currencies. Tax regulations could be issued limiting the extent
that net gain realized from option, futures or foreign forward exchange
contracts on currencies is qualifying income for purposes of the 90%
requirement.
As a result of the "Taxpayer Relief Act of 1997," entering into certain
options, futures contracts, or forward contracts may result in the
"constructive sale" of offsetting stocks or debt securities of the Fund.
INVESTMENT RESTRICTIONS
-------------------------------------------------------------------------------
Fundamental policies may not be changed without the approval of the lesser of
(1) 67% of the Fund's shares present at a meeting of shareholders if the
holders of more than 50% of the outstanding shares are present in person or
by proxy or (2) more than 50% of a Fund's outstanding shares. Other
restrictions in the form of operating policies are subject to change by the
Fund's Board of Directors without shareholder approval. Any investment
restriction which involves a maximum percentage of securities or assets shall
not be considered to be violated unless an excess over the percentage occurs
immediately after, and is caused by, an acquisition of securities or assets
of, or borrowings by, the Fund. Calculation of the Fund's total assets for
compliance with any of the following fundamental or operating policies or any
other investment restrictions set forth in the Fund's prospectus or Statement
of Additional Information will not include cash collateral held in connection
with securities lending activities.
Fundamental Policies
As a matter of fundamental policy, the Fund may not:
(1) Borrowing Borrow money except that the Fund may (i) borrow for
non-leveraging, temporary or emergency purposes; and (ii) engage in
reverse repurchase agreements and make other investments or engage in
other transactions, which may involve a borrowing, in a manner consistent
with the Fund's investment objective and program, provided that the
combination of (i) and (ii) shall not exceed 33/1//\\/3/\\% of the value
of the Fund's total assets (including the amount borrowed) less
liabilities (other than borrowings) or such other percentage permitted by
law. Any borrowings which come to exceed this amount will be reduced in
accordance with applicable law. The Fund may borrow from banks, other
Price Funds, or other persons to the extent permitted by applicable law;
(2) Commodities Purchase or sell physical commodities; except that it may
enter into futures contracts and options thereon;
<PAGE>
(3) Industry Concentration Purchase the securities of any issuer if, as a
result, more than 25% of the value of the Fund's total assets would be
invested in the securities of issuers having their principal business
activities in the same industry;
All Funds except Foreign Equity Fund
(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;
All Funds except Latin America Fund
(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 a 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);
All Funds
(7) Real Estate Purchase or sell real estate, including limited partnership
interests therein, unless acquired as a result of ownership of securities
or other instruments (but this shall not prevent the Fund from investing
in securities or other instruments backed by real estate or securities of
companies engaged in the real estate business);
(8) Senior Securities Issue senior securities except in compliance with the
1940 Act; or
(9) Underwriting Underwrite securities issued by other persons, except to the
extent that the Fund may be deemed to be an underwriter within the
meaning of the Securities Act of 1933 in connection with the purchase and
sale of its portfolio securities in the ordinary course of pursuing its
investment program.
NOTES
The following Notes should be read in connection with the above-described
fundamental policies. The Notes are not fundamental policies.
With respect to investment restrictions (1) and (4), the Fund will not
borrow from or lend to any other Price Fund (defined as any other mutual
fund managed by or for which T. Rowe Price or Price-Fleming acts as
adviser) unless each Fund applies for and receives an exemptive order
from the SEC or the SEC issues rules permitting such transactions. There
is no assurance the SEC would grant any order requested by the Fund or
promulgate any rules allowing the transactions.
With respect to investment restriction (2), the Fund does not consider
currency contracts or hybrid investments to be commodities.
For purposes of investment restriction (3), U.S., state or local
governments, or related agencies or instrumentalities, are not considered
an industry. Industries are determined by reference to the
classifications of industries set forth in the Fund's semiannual and
annual reports. It is the position of the Staff of the SEC that foreign
governments are industries for purposes of this restriction.
For purposes of investment restriction (4), the Fund will consider the
acquisition of a debt security to include the execution of a note or
other evidence of an extension of credit with a term of more than nine
months.
<PAGE>
Operating Policies
As a matter of operating policy, the Fund may not:
(1) Borrowing Purchase additional securities when money borrowed exceeds 5%
of its total assets;
(2) Control of Portfolio Companies Invest in companies for the purpose of
exercising management or control;
(3) Futures Contracts Purchase a futures contract or an option thereon, if,
with respect to positions in futures or options on futures which do not
represent bona fide hedging, the aggregate initial margin and premiums on
such options would exceed 5% of the Fund's net asset value;
(4) Illiquid Securities Purchase illiquid securities if, as a result, more
than 15% of its net assets would be invested in such securities;
(5) Investment Companies Purchase securities of open-end or closed-end
investment companies except (i) in compliance with the 1940 Act; or (ii)
securities of the Reserve Investment or Government Reserve Investment
Funds;
(6) Margin Purchase securities on margin, except (i) for use of short-term
credit necessary for clearance of purchases of portfolio securities and
(ii) it may make margin deposits in connection with futures contracts or
other permissible investments;
(7) Mortgaging Mortgage, pledge, hypothecate or, in any manner, transfer any
security owned by the Fund as security for indebtedness except as may be
necessary in connection with permissible borrowings or investments and
then such mortgaging, pledging or hypothecating may not exceed
33/1//\\/3/\\% of the Fund's total assets at the time of borrowing or
investment;
(8) Oil and Gas Programs Purchase participations or other direct interests
in, or enter into leases with respect to oil, gas, or other mineral
exploration or development programs if, as a result thereof, more than 5%
of the value of the total assets of the Fund would be invested in such
programs;
(9) Options, etc. Invest in puts, calls, straddles, spreads, or any
combination thereof, except to the extent permitted by the prospectus and
Statement of Additional Information;
(10) Short Sales Effect short sales of securities; or
(11) Warrants Invest in warrants if, as a result thereof, more than 10% of
the value of the net assets of the Fund would be invested in warrants.
In addition to the restrictions described above, some foreign countries
limit, or prohibit, all direct foreign investment in the securities of their
companies. However, the governments of some countries have authorized the
organization of investment funds to permit indirect foreign investment in
such securities. For tax purposes, these funds may be known as Passive
Foreign Investment Companies. Each Fund is subject to certain percentage
limitations under the 1940 Act and certain states relating to the purchase of
securities of investment companies, and may be subject to the limitation that
no more than 10% of the value of the Fund's total assets may be invested in
such securities.
MANAGEMENT OF THE FUNDS
-------------------------------------------------------------------------------
The officers and directors of the Fund are listed below. Unless otherwise
noted, the address of each is 100 East Pratt Street, Baltimore, Maryland
21202. Except as indicated, each has been an employee of T. Rowe Price for
more than five years. In the list below, the Fund's directors who are
considered "interested persons" of T. Rowe Price as defined under Section
2(a)(19) of the Investment Company Act of 1940 are noted with an asterisk
(*). These directors are referred to as inside directors by virtue of their
officership, directorship, and/ or employment with T. Rowe Price.
<PAGE>
Independent Directors
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 and Chief Executive Officer, Western Exploration and
Development, Ltd.; Director Golden Star Resources Ltd. and Miranda Mining
Development Corporation; formerly (1986-7/91) President, Chief Operating
Officer and Director, Homestake Mining Company; Address: 1660 Lincoln Street,
Suite 3000, Denver, Colorado 80264-3001
HANNE M. MERRIMAN, Retail business consultant; formerly President and Chief
Operating Officer (1991-92), Nan Duskin, Inc., a women's specialty store,
Director (1984-90) 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, Finlay Enterprises, Inc., 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: 1231 State Street, Suite 247, 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
Officers
* 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
* MARTIN G. WADE, Director and President -President, Director, Chief
Investment Officer Price-Fleming; Director, Robert Fleming Holdings Limited;
Director, Robert Fleming Asset Management; Address: 25 Copthall Avenue,
London, EC2R 7DR, England
/a/ PETER B. ASKEW, Executive Vice President -Executive Vice President,
Price-Fleming
/ab/ EDWARD A. WIESE, Executive Vice President -Vice President, T. Rowe Price,
Price-Fleming, and T. Rowe Price Trust Company
CHRISTOPHER D. ALDERSON, Vice President -Vice President, Price-Fleming
/a/ ROBERT P. CAMPBELL, Vice President -Vice President, T. Rowe Price and
Price-Fleming
/a/ FRANCES DYDASCO, Vice President -Vice President and portfolio manager of
Price-Fleming (Singapore); formerly (1994-1996) an Investment Manager at LGT
Asset Management Ltd. (Hong Kong); and (1993-1994) with East Asia Hamon Asset
(Hong Kong)
/a/ MARK J.T. EDWARDS, Vice President -Vice President, Price-Fleming
JOHN R. FORD, Vice President -Executive Vice President, Price-Fleming;
Chartered Financial Analyst
HENRY H. HOPKINS, Vice President-Vice President, Price-Fleming and T. Rowe
Price Retirement Plan Services, Inc.; 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
/a/ STEPHEN ILOTT, Vice President -Vice President, Price-Fleming
GEORGE A. MURNAGHAN, Vice President -Managing Director, T. Rowe Price; Vice
President, Price-Fleming, T. Rowe Price Trust Company, and T. Rowe Price
Investment Services, Inc.
<PAGE>
/a/ NICHOLA PEASE, Vice President -Vice President and portfolio manager of
Price-Fleming; formerly (1987-1996) a Director of Smith New Court PLC
(London)
JAMES S. RIEPE, Vice President -Vice Chairman of the Board and Managing
Director, T. Rowe Price; Chairman of the Board, T. Rowe Price Investment
Services, Inc., T. Rowe Price Services, Inc., T. Rowe Price Retirement Plan
Services, Inc., and T. Rowe Price Trust Company; Director, Price-Fleming and
General Re Corporation
/a/ CHRISTOPHER ROTHERY, Vice President -Vice President, Price-Fleming
/b/ R. TODD RUPPERT, Vice President -Managing Director, T. Rowe Price; Vice
President, T. Rowe Price Trust Company and T. Rowe Price Retirement Plan
Services, Inc.
JAMES B.M. SEDDON, Vice President -Vice President, Price-Fleming
/a/ MARK C.J. BICKFORD-SMITH, Vice President -Vice President and portfolio
manager of Price-Fleming; formerly a Director and portfolio manager of
Jardine Fleming Investment Management
/a/ CHARLES P. SMITH, Vice President -Managing Director, T. Rowe Price; Vice
President, Price-Fleming
/a/ BENEDICT R.F. THOMAS, Vice President -Vice President, Price-Fleming;
Chartered Financial Analyst
/a/ PETER VAN DYKE, Vice President -Managing Director, T. Rowe Price; Vice
President, Price-Fleming
DAVID J. L. WARREN, Vice President -Executive Vice President, Price-Fleming
WILLIAM F. WENDLER II, Vice President -Vice President, T. Rowe Price,
Price-Fleming, and T. Rowe Price Investment Services, Inc.
/ab/ EDWARD A. WIESE, Vice President -Vice President, T. Rowe Price,
Price-Fleming, and T. Rowe Price Trust Company
PATRICIA S. LIPPERT, Secretary-Assistant Vice President, T. Rowe Price and T.
Rowe Price Investment Services, Inc.
CARMEN F. DEYESU, Treasurer-Vice President, T. Rowe Price, T. Rowe Price
Services, Inc., and T. Rowe Price Trust Company
DAVID S. MIDDLETON, Controller-Vice President, T. Rowe Price, T. Rowe Price
Services, Inc., and T. Rowe Price Trust Company
/a/ ANN B. CRANMER, Assistant Vice President-Vice President, Price-Fleming
ROGER L. FIERY III, Assistant Vice President-Vice President, Price-Fleming
and T. Rowe Price
/a/ LEAH P. HOLMES, Assistant Vice President-Vice President, Price-Fleming;
Assistant Vice President, T. Rowe Price
INGRID I. VORDEMBERGE, Assistant Vice President-Employee, T. Rowe Price
(a) Mr. Askew is an Executive Vice President of the International Funds
only. Messrs. Campbell, Dydasco, Edwards, Ilott, Pease, Rothery,
Bickford-Smith, Smith, Thomas, Van Dyke, and Wiese are Vice Presidents of
the International Funds only. Mmes. Cranmer and Holmes are Assistant Vice
Presidents of the International Funds only.
(b) Mr. Wiese is an Executive Vice President, and Mr. Ruppert is a Vice
President of the Foreign Equity Fund.
<PAGE>
Compensation Table
The Funds do not pay pension or retirement benefits to their officers or
directors. Also, any director of a Fund who is an officer or employee of T.
Rowe Price or Price-Fleming does not receive any remuneration from the Fund.
<TABLE>
<CAPTION>
Name of Person, Aggregate Compensation from Total Compensation from Fund and
Position Fund(a) Fund Complex Paid to Directors(b)
- -------------------------------------- -------------------------------------------- ---------------------------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
International Stock Fund
Anthony W. Deering, Director $8,531 $81,000
Donald W. Dick, Director 7,388 81,000
Paul M. Wythes, Director 7,388 80,000
- --------------------------------------------------------------------------------------------------------------------------
International Discovery Fund
Anthony W. Deering, Director $1,903 $81,000
Donald W. Dick, Director 1,851 81,000
Paul M. Wythes, Director 1,851 80,000
- --------------------------------------------------------------------------------------------------------------------------
European Stock Fund
Anthony W. Deering, Director $2,309 $81,000
Donald W. Dick, Director 2,166 81,000
Paul M. Wythes, Director 2,166 80,000
- --------------------------------------------------------------------------------------------------------------------------
Japan Fund
Anthony W. Deering, Director $1,797 $81,000
Donald W. Dick, Director 1,767 81,000
Paul M. Wythes, Director 1,767 80,000
- --------------------------------------------------------------------------------------------------------------------------
New Asia Fund
Anthony W. Deering, Director $3,129 $81,000
Donald W. Dick, Director 2,802 81,000
Paul M. Wythes, Director 2,802 80,000
- --------------------------------------------------------------------------------------------------------------------------
Latin America Fund
Anthony W. Deering, Director $1,925 $81,000
Donald W. Dick, Director 1,866 81,000
Paul M. Wythes, Director 1,866 80,000
- --------------------------------------------------------------------------------------------------------------------------
Emerging Markets Stock Fund
Anthony W. Deering, Director $1,750 $81,000
Donald W. Dick, Director 1,732 81,000
Paul M. Wythes, Director 1,732 80,000
- --------------------------------------------------------------------------------------------------------------------------
Global Stock Fund
Anthony W. Deering, Director $1,717 $81,000
Donald W. Dick, Director 1,705 81,000
Paul M. Wythes, Director 1,705 80,000
- --------------------------------------------------------------------------------------------------------------------------
Foreign Equity Fund
Anthony W. Deering, Director $3,770 $81,000
Donald W. Dick, Director 3,294 81,000
Paul M. Wythes, Director 3,294 80,000
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Amounts in this column are based on accrued compensation from November
1, 1996 to October 31, 1997.
<PAGE>
(b) Amounts in this column are based on compensation received from January
1, 1997, to December 31, 1997. The T. Rowe Price complex included 84 funds
as of December 31, 1997.
All Funds
The Fund's Executive Committee, consisting of the Fund's interested
directors, has been authorized by its respective Board of Directors to
exercise all powers of the Board to manage the Funds in the intervals between
meetings of the Board, except the powers prohibited by statute from being
delegated.
PRINCIPAL HOLDERS OF SECURITIES
-------------------------------------------------------------------------------
As of the date of the prospectus, the officers and directors of the Fund, as
a group, owned less than 1% of the outstanding shares of the Fund.
As of February 1, 1998, the following shareholders beneficially owned more
than 5% of the outstanding shares of:
International Stock, New Asia, Japan and European Stock Funds, respectively:
Charles Schwab & Co. Inc., Reinvestment Account, Attn.: Mutual Fund Dept.,
101 West Montgomery Street, San Francisco, California 94104-4122. Each of the
following shareholders beneficially owned more than 5% of the outstanding
shares of the Foreign Equity Fund: PACO, c/o Mutual Funds Unit #38615, P.O.
Box 3577, Los Angeles, California 90051-1577.
INVESTMENT MANAGEMENT SERVICES
-------------------------------------------------------------------------------
Services
Under the Management Agreement, Price-Fleming provides the Fund with
discretionary investment services. Specifically, Price-Fleming 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. Price-Fleming 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,
Price-Fleming 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 Price-Fleming's employees to serve
as officers, directors, and committee members of the Fund without cost to the
Fund.
The Management Agreement also provides that Price-Fleming, 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.
Under the Management Agreement, Price-Fleming is permitted to utilize the
services or facilities of others to provide it or the Funds with statistical
and other factual information, advice regarding economic factors and trends,
advice as to occasional transactions in specific securities, and such other
information, advice or assistance as Price-Fleming may deem necessary,
appropriate, or convenient for the discharge of its obligations under the
Management Agreement or otherwise helpful to the Funds.
Certain administrative support is provided by T. Rowe Price, which receives
from Price-Fleming a fee of 0.15% of the market value of all assets in equity
accounts, 0.15% of the market value of all assets in active fixed income
accounts, and 0.035% of the market value of all assets in passive fixed
income accounts under Price-Fleming's management. Additional investment
research and administrative support for equity
<PAGE>
investments is provided to Price-Fleming by Fleming Investment Management
Limited (FIM) and Jardine Fleming International Holdings Limited (JFIH), for
which each receives from Price-Fleming a fee of 0.075% of the market value of
all assets in equity accounts under Price-Fleming's management. Fleming
International Fixed Interest Management Limited (FIFIM) and JFIH provide
research and administration support for fixed income accounts for which each
receive a fee of 0.075% of the market value of all assets in active fixed
income accounts and 0.175% of such market value in passive fixed income
accounts under Price-Fleming's management. FIM and FIFIM are wholly owned
subsidiaries of Flemings. JFIH is a wholly owned subsidiary of Jardine
Fleming.
All Funds except Foreign Equity Fund
Management Fee
The Fund pays Price-Fleming 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 Price-Fleming 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 Price Fund's net assets for that day to the sum
of the aggregate net assets of the Price Funds for that day. The Daily Price
Funds' Group Fee Accrual for any particular day is calculated by multiplying
the fraction of one (1) over the number of calendar days in the year by the
annualized Daily Price Funds' Group Fee Accrual for that day as determined in
accordance with the following schedule:
<TABLE>
Price Funds' Annual Group Base Fee Rate for Each Level of
Assets
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
0.480% First $1 billion 0.360% Next $2 billion 0.310% Next $16
billion
---------------------------------------------------------------------------
0.450% Next $1 billion 0.350% Next $2 billion 0.305% Next $30
billion
---------------------------------------------------------------------------
0.420% Next $1 billion 0.340% Next $5 billion 0.300% Thereafter
---------------------------------------------------------------------------
0.390% Next $1 billion 0.330% Next $10 billion
---------------------------------------------------------------------------
0.370% Next $1 billion 0.320% Next $10 billion
</TABLE>
For the purpose of calculating the Group Fee, the Price Funds include all the
mutual funds distributed by T. Rowe Price Investment Services, Inc.,
(excluding the T. Rowe Price Spectrum Funds, and any institutional, index, or
private label mutual funds). For the purpose of calculating the Daily Price
Funds' Group Fee Accrual for any particular day, the net assets of each Price
Fund are determined in accordance with the Funds' 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 of each Fund are listed in the following
chart:
<TABLE>
<CAPTION>
<S> <C>
International Stock Fund 0.35%
International Discovery Fund 0.75
International Growth & Income Fund
European Stock Fund 0.50
Japan Fund 0.50
New Asia Fund 0.50
Latin America Fund 0.75
Emerging Markets Stock Fund 0.75
Global Stock Fund 0.35
</TABLE>
<PAGE>
The following chart sets forth the total management fees if any, paid to
Price-Fleming by the Funds, during the last three years:
<TABLE>
<CAPTION>
Fund 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C>
International Stock $67,678,000 $52,565,000 $41,829,000
International Discovery 3,313,000 3,538,000 4,381,000
Japan 1,444,000 1,730,000 1,523,000
European Stock 7,315,000 5,007,000 3,547,000
New Asia 15,273,000 17,871,000 16,864,000
Latin America 3,989,000 2,096,000 1,765,000
Emerging Markets Stock 1,402,000 349,000 --
Global Stock 5,000 -- (a)
- --------------------------------------------------------------------------------------------------------
</TABLE>
(a) Prior to commencement of operations.
Limitation on Fund Expenses
The Management Agreement between each Fund and Price-Fleming provides that
each Fund will bear all expenses of its operations not specifically assumed
by Price-Fleming. Set forth in the prospectus are details of various expense
limitations agreed to by Price-Fleming and the Funds.
T. Rowe Price Spectrum Fund, Inc.
The Funds are parties to Special Servicing Agreements ("Agreement") between
and among T. Rowe Price Spectrum Fund, Inc. ("Spectrum Fund"), T. Rowe Price,
Price-Fleming, and various other T. Rowe Price funds which, along with the
Funds, are funds in which Spectrum Fund invests (collectively all such funds
"Underlying Price Funds").
The Agreement provides that, if the Board of Directors of any Underlying
Price Fund determines that such Underlying Fund's share of the aggregate
expenses of Spectrum Fund is less than the estimated savings to the
Underlying Price Fund from the operation of Spectrum Fund, the Underlying
Price Fund will bear those expenses in proportion to the average daily value
of its shares owned by Spectrum Fund, provided further that no Underlying
Price Fund will bear such expenses in excess of the estimated savings to it.
Such savings are expected to result primarily from the elimination of
numerous separate shareholder accounts which are or would have been invested
directly in the Underlying Price Funds and the resulting reduction in
shareholder servicing costs. Although such cost savings are not certain, the
estimated savings to the Underlying Price Funds generated by the operation of
Spectrum Fund are expected to be sufficient to offset most, if not all, of
the expenses incurred by Spectrum Fund.
Foreign Equity Fund
For its services to the Fund under the Management Agreement, Price-Fleming is
paid an annual fee, in monthly installments, based on the Fund's average
daily net assets at the rate of 0.70%. For the years 1997, 1996, and 1995,
Price-Fleming received from the Fund management fees totaling $20,250,000,
$13,871,000, and $8,673,000, respectively.
DISTRIBUTOR FOR THE FUNDS
-------------------------------------------------------------------------------
T. Rowe Price Investment Services, Inc. ("Investment Services"), a Maryland
corporation formed in 1980 as a wholly owned subsidiary of T. Rowe Price,
serves as the Fund's distributor. Investment Services is registered as a
broker-dealer under the Securities Exchange Act of 1934 and is a member of
the National Association of Securities Dealers, Inc. The offering of the
Fund's shares is continuous.
Investment Services is located at the same address as the Fund and T. Rowe
Price-100 East Pratt Street, Baltimore, Maryland 21202.
<PAGE>
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.
CUSTODIAN
-------------------------------------------------------------------------------
State Street Bank and Trust Company is the custodian for the Fund's U.S.
securities and cash, but it does not participate in the Fund's investment
decisions. Portfolio securities purchased in the U.S. are maintained in the
custody of the Bank and may be entered into the Federal Reserve Book Entry
System, or the security depository system of the Depository Trust
Corporation. State Street Bank's main office is at 225 Franklin Street,
Boston, Massachusetts 02110.
The Fund 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
in accordance with regulations under the Investment Company Act of 1940. The
address for The Chase Manhattan Bank, N.A., London is Woolgate House, Coleman
Street, London, EC2P 2HD, England.
SHAREHOLDER SERVICES
-------------------------------------------------------------------------------
T. Rowe Price Services, Inc., another wholly owned subsidiary, acts as the
Fund's transfer and dividend disbursing agent and provides shareholder and
administrative services. 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.
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.
CODE OF ETHICS
-------------------------------------------------------------------------------
The Fund's investment adviser (Price-Fleming) has a written Code of Ethics
which requires all employees to obtain prior clearance before engaging in
personal securities transactions. Transactions must be executed within three
business days of their clearance. In addition, all employees must report
their personal securities transactions within 10 days after the end of the
calendar quarter. 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; or the
<PAGE>
security is subject to internal trading restrictions. In addition, employees
are prohibited from profiting from short-term trading (e.g., purchases and
sales involving the same security within 60 days). Any material violation of
the Code of Ethics is reported to the Board of the Fund. The Board also
reviews the administration of the Code of Ethics on an annual basis.
PORTFOLIO TRANSACTIONS
-------------------------------------------------------------------------------
Investment or Brokerage Discretion
Decisions with respect to the purchase and sale of portfolio securities on
behalf of the Fund are made by Price-Fleming. Price-Fleming is also
responsible for implementing these decisions, including the negotiation of
commissions and the allocation of portfolio brokerage and principal business.
How Brokers and Dealers Are Selected
Equity Securities
In purchasing and selling the Fund's portfolio securities, it is
Price-Fleming'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,
Price-Fleming 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 Price-Fleming 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.
Transactions on stock exchanges involve the payment of brokerage commissions.
In transactions on stock exchanges in the United States, these commissions
are negotiated. Traditionally, commission rates have generally not been
negotiated on stock markets outside the United States. In recent years,
however, an increasing number of overseas stock markets have adopted a system
of negotiated rates, although a number of markets continue to be subject to
an established schedule of minimum commission rates. It is expected that
equity securities will ordinarily be purchased in the primary markets,
whether over-the-counter or listed, and that listed securities may be
purchased in the over-the-counter market if such market is deemed the primary
market. In the case of securities traded on the over-the-counter markets,
there is generally no stated commission, but the price usually includes an
undisclosed commission or markup. In underwritten offerings, the price
includes a disclosed, fixed commission or discount.
Fixed Income Securities
For fixed income securities, it is expected that purchases and sales will
ordinarily be transacted with the issuer, the issuer's underwriter, or with a
primary market maker acting as principal on a net basis, with no brokerage
commission being paid by the Fund. However, the price of the securities
generally includes compensation which is not disclosed separately.
Transactions placed through dealers who are serving as primary market makers
reflect the spread between the bid and asked prices.
With respect to equity and fixed income securities, Price-Fleming may effect
principal transactions on behalf of the Funds 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. The prices the Fund pays to
underwriters of newly-issued securities usually include a concession paid by
the issuer to the underwriter. Price-Fleming may receive research services in
connection with brokerage transactions, including designations in fixed price
offerings.
<PAGE>
Price-Fleming may cause a Fund to pay a broker-dealer who furnishes brokerage
and/or research services a commission for executing a transaction that is in
excess of the commission another broker-dealer would have received for
executing the transaction if it is determined that such commission is
reasonable in relation to the value of the brokerage and/or research services
which have been provided. In some cases, research services are generated by
third parties but are provided to Price-Fleming by or through broker-dealers.
Descriptions of Research Services Received From Brokers and Dealers
Price-Fleming receives a wide range of research services from brokers and
dealers covering investment opportunities throughout the world, including
information on the economies, industries, groups of securities, individual
companies, statistics, political developments, technical market action,
pricing and appraisal services, and performance analyses of all the countries
in which a Fund's portfolio is likely to be invested. Price-Fleming cannot
readily determine the extent to which commissions charged by brokers reflect
the value of their research services, but brokers occasionally suggest a
level of business they would like to receive in return for the brokerage and
research services they provide. To the extent that research services of value
are provided by brokers, Price-Fleming may be relieved of expenses which it
might otherwise bear. In some cases, research services are generated by third
parties but are provided to Price-Fleming by or through brokers.
Commissions to Brokers Who Furnish Research Services
Certain brokers-dealers that provide quality execution services also furnish
research services to Price-Fleming. Price-Fleming 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 its
clients to pay a broker which furnishes brokerage or research services a
higher commission than that which might be charged by another broker 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, viewed in terms of either that particular transaction or the
overall responsibilities of the adviser with respect to the accounts as to
which it exercises investment discretion. Accordingly, Price-Fleming may
assess the reasonableness of commissions in light of the total brokerage and
research services provided by each particular broker.
Miscellaneous
Research services furnished by brokers through which Price-Fleming effects
securities transactions may be used in servicing all accounts managed by
Price-Fleming. Conversely, research services received from brokers which
execute transactions for a particular Fund will not necessarily be used by
Price-Fleming exclusively in connection with the management of that Fund.
Some of Price-Fleming's other clients have investment objectives and programs
similar to those of the Fund. Price-Fleming 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 Price-Fleming's policy not to favor one client over another
in making recommendations or in placing orders. Price-Fleming 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. Price-Fleming has established a general investment policy
that it will ordinarily not make additional purchases of a common stock of a
company for its clients (including the T. Rowe Price Funds) if, as a result
of such purchases, 10% or more of the outstanding common stock of such
company would be held by its clients in the aggregate.
At the present time, T. Rowe Price does not recapture commissions or
underwriting discounts or selling group concessions in connection with
taxable securities acquired in underwritten offerings. T. Rowe Price does,
however, attempt to negotiate elimination of all or a portion of the
selling-group concession or
<PAGE>
underwriting discount when purchasing tax-exempt municipal securities on
behalf of its clients in underwritten offerings.
None of the Funds allocates 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.
Transactions With Related Brokers and Dealers
As provided in the Investment Management Agreement between the Fund and
Price-Fleming, Price-Fleming 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 Price-Fleming will often place orders for the Fund's
portfolio transactions with broker-dealers through the trading desks of
certain affiliates of Robert Fleming Holdings Limited ("Robert Fleming"), an
affiliate of Price-Fleming. Robert Fleming, through Copthall Overseas
Limited, a wholly owned subsidiary, owns 25% of the common stock of
Price-Fleming. Fifty percent of the common stock of Price-Fleming 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
Jardine Fleming Group Limited ("JFG"). JFG is 50% owned by Robert Fleming and
50% owned by Jardine Matheson Holdings Limited. The affiliates through whose
trading desks such orders may be placed include Fleming Investment Management
Limited ("FIM"), Fleming International Fixed Interest Management Limited
("FIFIM"), and Robert Fleming & Co. Limited ("RF&Co."). FIM, FIFIM, and
RF&Co. are wholly owned subsidiaries of Robert Fleming. These trading desks
will operate under strict instructions from the Fund's portfolio manager with
respect to the terms of such transactions. Neither Robert Fleming, JFG, nor
their affiliates will receive any commission, fee, or other remuneration for
the use of their trading desks, although orders for a Fund's portfolio
transactions may be placed with affiliates of Robert Fleming and JFG who may
receive a commission.
The Board of Directors of the Funds has authorized Price-Fleming to utilize
certain affiliates of Robert Fleming and JFG in the capacity of broker in
connection with the execution of each Fund's portfolio transactions, provided
that Price-Fleming believes that doing so will result in an economic
advantage (in the form of lower execution costs or otherwise) being obtained
for each Fund. These affiliates include Jardine Fleming Securities Limited
("JFS"), RF&Co., Robert Fleming, Inc. (a New York brokerage firm), Ord
Minnett, Stockbrokers Botswana Ltd, and Fleming Martin.
The above-referenced authorization was made in accordance with Section 17(e)
of the Investment Company Act of 1940 (the "1940 Act") and Rule 17e-1
thereunder which require the Funds' independent Directors to approve the
procedures under which brokerage allocation to affiliates is to be made and
to monitor such allocations on a continuing basis. It is not expected that
any portion of the commissions, fees, brokerage, or similar payments received
by the affiliates of Robert Fleming in such transactions will be recaptured
by the Funds. The Directors have reviewed and from time to time may continue
to review whether other recapture opportunities are legally permissible and
available and, if they appear to be, determine whether it would be advisable
for a Fund to seek to take advantage of them.
The tables below present information on affiliated brokers. Column 1
represents the total dollar amount of brokerage commissions paid to the
broker. The dollar amount of brokerage commissions paid for the two previous
fiscal year ends are also listed as marked. The second column represents the
percentage that the commissions paid to the affiliated broker representing
the aggregate brokerage commission paid by the Fund. The third column shows
the percentage that the dollar amount of transaction involving the payment of
commissions effected through the affiliated broker represents the aggregate
dollar amount of brokerage transactions.
<PAGE>
The following amounts and percentages were paid to JFS during the year 1997:
<TABLE>
<CAPTION>
Fund Total Brokerage Aggregate Brokerage Aggregate Dollar
---- --------------- ------------------- ----------------
Commissions Commissions Amount
----------- ----------- ------
<S> <C> <C> <C>
International Stock $ 228,000 3% 2%
International Discovery 180,995 12 10
European Stock -- -- --
Japan 127,117 29 25
New Asia 1,051,831 13 12
Foreign Equity 70,010 2 1
Latin America -- -- --
Emerging Markets Stock 69,648 9 8
Global Stock 206 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following brokerage commission amounts were paid to JFS during the years
1996 and 1995:
<TABLE>
<CAPTION>
Fund 1996 1995
---- ---- ----
<S> <C> <C>
International Stock $ 295,800 $ 6,029,012
International Discovery 204,812 1,548,256
European Stock -- --
Japan 141,333 781,356
New Asia 1,342,379 10,230,880
Foreign Equity 93,205 2,077,591
Latin America -- 293,894
Emerging Markets Stock 7,924 25,786
Global Stock 710 --
- --------------------------------------------------------------
</TABLE>
The following amounts and percentages were paid to RF&Co during the year
1997:
<TABLE>
<CAPTION>
Fund Total Brokerage % of Aggregate % of Aggregate
---- --------------- -------------- --------------
Commissions Brokerage Commissions Dollar Amount
----------- --------------------- -------------
<S> <C> <C> <C>
International Stock $317,208 3% 4%
International Discovery 22,867 2 2
European Stock 51,846 5 6
Japan 6,478 1 1
New Asia -- -- --
Foreign Equity 96,488 3 3
Latin America 95,295 10 9
Emerging Markets Stock 27,548 4 4
Global Stock 402 1 1
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The following brokerage commission amounts were paid to RF&Co during the
years 1996 and 1995:
<TABLE>
<CAPTION>
Fund 1996 1995
---- ---- ----
<S> <C> <C>
International Stock $439,567 $236,915
International Discovery 35,075 30,702
European Stock 34,646 28,980
Japan 733 59,539
New Asia -- --
Foreign Equity 86,928 46,833
Latin America 28,793 10,135
Emerging Markets Stock 7,519 4,869
Global Stock 731 --
- -------------------------------------------------------------
</TABLE>
The following amounts and percentages were paid to Ord Minnett during the
year 1997:
<TABLE>
<CAPTION>
Fund Total Brokerage Aggregate Brokerage Aggregate Dollar
---- --------------- ------------------- ----------------
Commissions Commissions Amount
----------- ----------- ------
<S> <C> <C> <C>
International Stock $43,327 1% 1%
International
Discovery 17,775 1 1
European Stock 358 1 1
Japan -- -- --
New Asia -- -- --
Foreign Equity 14,063 1 1
Latin America -- -- --
Emerging Markets Stock -- -- --
Global Stock 131 1 1
- --------------------------------------------------------------------------------
</TABLE>
The following brokerage commission amounts were paid to Ord Minnett during
the years 1996 and 1995:
<TABLE>
<CAPTION>
Fund 1996 1995
---- ---- ----
<S> <C> <C>
International Stock $60,141 $174,136
International Discovery 11,317 30,612
European Stock -- --
Japan -- --
New Asia 6,202 336,088
Foreign Equity 20,544 49,051
Latin America -- --
Emerging Markets Stock -- --
Global Stock 32 --
- -------------------------------------------------------------
</TABLE>
<PAGE>
The following amounts and percentages were paid to Fleming Martin during the
year 1997:
<TABLE>
<CAPTION>
Fund Total Brokerage Aggregate Brokerage Aggregate Dollar
---- --------------- ------------------- ----------------
Commissions Commissions Amount
----------- ----------- ------
<S> <C> <C> <C>
International Stock -- -- --
International
Discovery $34,413 2% 2%
European Stock -- -- --
Japan -- -- --
New Asia -- -- --
Foreign Equity -- -- --
Latin America -- -- --
Emerging Markets Stock 5,339 1 1
Global Stock -- -- --
- ---------------------------------------------------------------------------------
</TABLE>
In accordance with the written procedures adopted pursuant to Rule 17e-1, the
independent directors of each Fund reviewed the 1997 transactions with
affiliated brokers and determined that such transactions resulted in an
economic advantage to the Funds either in the form of lower execution costs
or otherwise.
Other
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 1997, 1996, and 1995:
<TABLE>
<CAPTION>
Fund 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C>
International Stock $9,102,292 $7,100,046 $6,029,012
International Discovery 1,526,634 1,278,239 1,548,256
European Stock 1,016,985 595,811 290,226
Japan 440,701 474,365 781,356
New Asia 7,978,905 5,383,653 10,230,880
Foreign Equity 3,506,559 2,052,024 2,077,591
Latin America 927,301 362,820 293,894
Emerging Markets Stock 780,941 382,407 72,181
Global Stock 61,979 50,058 --
- ---------------------------------------------------------------------------
</TABLE>
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 year ended 1997, 1996, and 1995, are shown below:
<TABLE>
<CAPTION>
Fund 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C>
International Stock 94% 89% 85%
International Discovery 83 80 73
European Stock 95 94 90
Japan 70 70 69
New Asia 87 75 75
Foreign Equity 95 92 86
Latin America 90 92 97
Emerging Markets Stock 87 75 58
- ----------------------------------------------------------------------------------------------------------------
Global Stock 99 97 --
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The portfolio turnover rate for each Fund for the fiscal years ended 1997,
1996, and 1995, was as follows:
<TABLE>
<CAPTION>
Fund 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C>
International Stock 15.8% 11.6% 17.8%
International Discovery 72.7 52.0 43.5
European Stock 17.5 14.1 17.2
Japan 32.3 29.8 62.4
New Asia 41.8 42.0 63.7
Foreign Equity 15.9 13.8 18.8
Latin America 32.7 22.0 18.9
Emerging Markets Stock 84.3 41.7 28.8(b)
Global Stock 41.8 50.0(a) --
- -------------------------------------------------------------------------------
</TABLE>
(a) From the commencement of operations December 29, 1995, to October 31,
1996.
(b) From the commencement of operations March 31, 1995, to October 31,
1995.
PRICING OF SECURITIES
-------------------------------------------------------------------------------
Equity securities listed or regularly traded on a securities exchange are
valued at the last quoted sales price at the time the valuations are made. A
security that is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for such
security. Listed securities not traded on a particular day and securities
regularly traded in the over-the-counter market are valued at the mean of the
latest bid and asked prices. Other equity securities are valued at a price
within the limits of the latest bid and asked prices deemed by the Board of
Directors, or by persons delegated by the Board, best to reflect fair value.
Debt securities are generally traded in the over-the-counter market and are
valued at a price deemed best to reflect fair value as quoted by dealers who
make markets in these securities or by an independent pricing service.
Short-term debt securities are valued at their amortized cost in local
currency which, when combined with accrued interest, approximates fair value.
For the purposes of determining the Fund's net asset value per share, the
U.S. dollar value of all assets and liabilities initially expressed in
foreign currencies is determined by using the mean of the bid and offer
prices of such currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value, are stated at fair
value as determined in good faith by or under the supervision of the officers
of the Fund, as authorized by the Board of Directors.
Trading in the portfolio securities of each Fund may take place in various
foreign markets on certain days (such as Saturday) when the Funds are not
open for business and do not calculate their net asset values. In addition,
trading in a Fund's portfolio securities may not occur on days when the Fund
is open.
NET ASSET VALUE PER SHARE
-------------------------------------------------------------------------------
The purchase and redemption price of the Fund's shares is equal to the Fund's
net asset value per share or share price. The Fund determines its net asset
value per share by subtracting its liabilities (including accrued
<PAGE>
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, other than the
Japan Fund, is calculated as of the close of trading on the New York Stock
Exchange ("NYSE") every day the NYSE is open for trading. The net asset value
per share of the Japan Fund is calculated as of the close of trading on the
NYSE each day the NYSE and the Tokyo Stock Exchange ("TSE") are both open.
The NYSE is closed on the following days: New Year's Day, Dr. Martin Luther
King, Jr. Holiday, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day. The TSE is scheduled to
be closed on the following week days in 1998: January 1, 2, 15; February 11;
April 29; May 4,5; July 20; September 15, 23; November 3, 23; and December
23, 31, as well as the following weekdays in 1999: January 1, 15; February
11; March 22; April 29; May 3, 4, 5; July 20; September 15, 23; October 11;
November 3, 23; and December 23. If the TSE closes on any additional or
different dates, the Japan Fund will be closed on such dates.
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, or in
the case of the Japan Fund, either the NYSE or TSE is closed, (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, dividends and capital gain distributions, 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 Code.
Dividends and distributions paid by the Fund (other than Global Stock Fund)
are not eligible for the dividends-received deduction for corporate
shareholders, if as expected, none of the Fund's income consists of dividends
paid by United States corporations. Income dividends paid by the Global Stock
Fund are eligible for the dividends-received deduction for corporate
shareholders, only to the extent the Global Stock Fund's income consists of
dividends paid by United States Corporations. Capital gain distributions paid
from this Fund is never eligible for this deduction. 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 December 31 to avoid federal income tax.
Foreign currency gains and losses, including the portion of gain or loss on
the sale of debt securities attributable to foreign exchange rate
fluctuation, 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 classified as a return of capital. Adjustments, to reflect these gains
and losses will be made at the end of the Fund's taxable year.
<PAGE>
At the time of your purchase, the Fund's net asset value may reflect
undistributed income, capital gains or net unrealized appreciation of
securities held by the Fund. A subsequent distribution to you of such
amounts, although constituting a return of your investment, would be taxable
either as dividends or capital gain distributions. For federal income tax
purposes, the Fund is permitted to carry forward its net realized capital
losses, if any, for eight years and realize net capital gains up to the
amount of such losses without being required to pay taxes on, or distribute
such gains.
Income received by the Fund from sources within various foreign countries may
be subject to foreign income taxes withheld at the source. Under the Code, if
more than 50% of the value of the Fund's total assets at the close of its
taxable year comprise securities issued by foreign corporations or
governments, the Fund may file an election with the Internal Revenue Service
to "pass through" to the Fund's shareholders the amount of any foreign income
taxes paid by the Fund. Pursuant to this election, shareholders will be
required to: (i) include in gross income, even though not actually received,
their respective pro rata share of foreign taxes paid by the Fund; (ii) treat
their pro rata share of foreign taxes as paid by them; and (iii) either
deduct their pro rata share of foreign taxes in computing their taxable
income, or use it as a foreign tax credit against U.S. income taxes (but not
both). No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions.
The Fund intends to meet the requirements of the Code to "pass through" to
its shareholders foreign income taxes paid, but there can be no assurance
that a Fund will be able to do so. Each shareholder will be notified within
60 days after the close of each taxable year of the Fund, if the Fund will
"pass through" foreign taxes paid for that year, and, if so, the amount of
each shareholder's pro rata share (by country) of (i) the foreign taxes paid,
and (ii) the Fund's gross income from foreign sources. Of course,
shareholders who are not liable for federal income taxes, such as retirement
plans qualified under Section 401 of the Code, will not be affected by any
such "pass through" of foreign tax credits.
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 without deduction
for dividends or other distributions to shareholders; (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), and the Fund may qualify for the 70% deduction for dividends
received by corporations; and (iii) foreign tax credits would not "pass
through" to shareholders.
Taxation of Foreign Shareholders
The Code provides that dividends from net income (which are deemed to include
for this purpose each shareholder's pro rata share of foreign taxes paid by
the Fund--see discussion of "pass through" of the foreign tax credit to U.S.
shareholders), 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.
Passive Foreign Investment Companies
Each fund may purchase the securities of certain foreign investment funds or
trusts called passive foreign investment companies. Such trusts have been the
only or primary way to invest in certain countries. In addition to bearing
their proportionate share of the trust's expenses (management fees and
operating expenses), shareholders will also indirectly bear similar expenses
of such trusts. Capital gains on the sale of such holdings are considered
ordinary income regardless of how long the fund held its investment. In
addition, the fund may be subject to corporate income tax and an interest
charge on certain dividends and capital gains earned from these investments,
regardless of whether such income and gains are distributed to shareholders.
<PAGE>
To avoid such tax and interest, each fund intends to treat these securities
as sold on the last day of its fiscal year and recognize any gains for tax
purposes at that time; deductions for losses are allowable only to the extent
of any gains resulting from these deemed sales for prior taxable years. Such
gains and losses will be treated as ordinary income. The fund will be
required to distribute any resulting income even though it has not sold the
security.
INVESTMENT PERFORMANCE
-------------------------------------------------------------------------------
Total Return Performance
The Fund's calculation of total return performance includes the reinvestment
of all capital gain distributions and income dividends for the period or
periods indicated, without regard to tax consequences to a shareholder in the
Fund. Total return is calculated as the percentage change between the
beginning value of a static account in the Fund and the ending value of that
account measured by the then current net asset value, including all shares
acquired through reinvestment of income and capital gain dividends. The
results shown are historical and should not be considered indicative of the
future performance of the Fund. Each average annual compound rate of return
is derived from the cumulative performance of the Fund over the time period
specified. The annual compound rate of return for the Fund over any other
period of time will vary from the average.
<TABLE>
<CAPTION>
Cumulative Performance Percentage Change
1 Yr. Ended 5 Yrs. Ended 10 Yrs. Ended % Since Inception Date
----------- ------------ ------------- ------- --------------
- ------------------------ 10/31/97 10/31/97 10/31/97 Inception
-------- -------- -------- ---------
------------------------------------------ 10/31/97
--------
-------------------------------
<S> <C> <C> <C> <C> <S>
S&P 500 32.11% 147.48% 389.01% -- --
Dow Jones Industrial
Average 25.82 161.29 406.78 -- --
CPI 2.08 13.96 40.16 -- --
Lipper International
Funds 10.39 82.99 158.84 -- --
International Stock
Fund 7.90 86.69 193.51 923.25% 05/09/80
International
Discovery Fund 1.69 48.23 -- 87.84 12/30/88
European Stock Fund 20.30 132.83 -- 124.41 02/28/90
Japan Fund -11.64 9.05 -- -6.43 12/30/91
Latin America Fund 19.94 -- -- -1.52 12/29/93
New Asia Fund -30.61 6.44 -- 47.48 09/28/90
Emerging Markets Stock
Fund -1.60 -- -- 14.15 03/31/95
Global Stock Fund 16.98 -- -- 32.77 12/29/95
Foreign Equity Fund 8.30 87.67 -- 101.32 09/07/89
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Average Annual Compound Rates of Return
1 Yr. Ended 5 Yrs. Ended 10 Yrs. Ended % Since Inception Date
----------- ------------ ------------- ------- --------------
- ------------------------ 10/31/97 10/31/97 10/31/97 Inception
-------- -------- -------- ---------
------------------------------------------ 10/31/97
--------
-------------------------------
<S> <C> <C> <C> <C> <S>
S&P 500 32.11 19.87 17.20 -- --
Dow Jones Industrial
Average 25.82 21.18 17.62 -- --
CPI 2.08 2.65 3.43 -- --
Lipper International
Funds 10.39 12.67 9.68 -- --
International Stock
Fund 7.90 13.30 11.37 14.23 05/09/80
International
Discovery Fund 1.69 8.19 -- 7.40 12/30/88
European Stock Fund 20.30 18.42 -- 11.11 02/28/90
Japan Fund -11.64 1.75 -- -1.13 12/30/91
Latin America Fund 19.94 -- -- -0.40 12/29/93
New Asia Fund -30.61 1.26 -- 5.63 09/28/90
Emerging Markets Stock
Fund -1.60 -- -- 5.25 03/31/95
Global Stock Fund 16.98 -- -- 16.67 12/29/95
Foreign Equity Fund 8.30 13.42 -- 8.97 09/07/89
- -------------------------------------------------------------------------------------------------
</TABLE>
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
broadbased 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 securities 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 nonqualified 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 Investment
Services, T. Rowe Price mutual fund portfolio managers may discuss economic,
financial and political developments in the U.S. and abroad and how these
conditions have affected or may affect securities prices or the Fund;
individual securities within the Fund's portfolio; and their philosophy
regarding the selection of individual stocks, including why specific stocks
have been added, removed or excluded from the Fund's portfolio.
Other Features and Benefits
The Fund is a member of the T. Rowe Price family of Funds and may help
investors achieve various long-term investment goals, which include, but are
not limited to, investing money for retirement, saving for a down payment on
a home, or paying college costs. To explain how the Fund could be used to
assist investors in planning for these goals and to illustrate basic
principles of investing, various worksheets and guides prepared by T. Rowe
Price Associates, Inc. and/or Investment Services may be made available.
<PAGE>
No-Load Versus Load and 12b-1 Funds
Unlike the T. Rowe Price funds, many mutual funds charge sales fees to
investors or use fund assets to finance distribution activities. These fees
are in addition to the normal advisory fees and expenses charged by all
mutual funds. There are several types of fees charged which vary in magnitude
and which may often be used in combination. A sales charge (or "load") can be
charged at the time the fund is purchased (front-end load) or at the time of
redemption (back-end load). Front-end loads are charged on the total amount
invested. Back-end loads or "redemption fees" are charged either on the
amount originally invested or on the amount redeemed. 12b-1 plans allow for
the payment of marketing and sales expenses from fund assets. These expenses
are usually computed daily as a fixed percentage of assets.
The Fund is a no-load fund which imposes no sales charges or 12b-1 fees.
No-load funds are generally sold directly to the public without the use of
commissioned sales representatives. This means that 100% of your purchase is
invested for you.
Redemptions in Kind
In the unlikely event a shareholder were to receive an in kind redemption of
portfolio securities of the Fund, brokerage fees could be incurred by the
shareholder in a subsequent sale of such securities.
Issuance of Fund Shares for Securities
Transactions involving issuance of Fund shares for securities or assets other
than cash will be limited to (1) bona fide reorganizations; (2) statutory
mergers; or (3) other acquisitions of portfolio securities that: (a) meet the
investment objective and policies of the Fund; (b) are acquired for
investment and not for resale except in accordance with applicable law; (c)
have a value that is readily ascertainable via listing on or trading in a
recognized United States or international exchange or market; and (d) are not
illiquid.
CAPITAL STOCK
-------------------------------------------------------------------------------
The T. Rowe Price International Funds, Inc. (the "International Corporation")
is a Maryland corporation. The Institutional International Funds, Inc. (the
"Institutional Corporation") was organized in 1989, as a Maryland
corporation. Each Corporation is registered with the Securities and Exchange
Commission under the 1940 Act as a diversified, open-end investment company,
commonly known as a "mutual fund."
Currently, the International Corporation consists of the following 12 series,
each representing a separate class of shares and having different objectives
and investment policies. The 12 series are as follows: International Stock
Fund, International Bond Fund, International Discovery Fund, European Stock
Fund, New Asia Fund, Global Bond Fund, Japan Fund, Latin America Fund,
Emerging Markets Bond Fund, Emerging Markets Stock Fund, Global Stock Fund,
and International Growth & Income Fund. Effective May 1, 1998, the T. Rowe
Price Global Government Bond Fund changed its name to the T. Rowe Price
Global Bond Fund. (The bond funds are described in a separate Statement of
Additional Information.) Currently, the Institutional Corporation consists of
one series, the Foreign Equity Fund. Each Charter also provides that the
Board of Directors may issue additional series of shares.
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
<PAGE>
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.
Each share of each series has equal voting rights with every other share of
every other series, and all shares of all series vote as a single group
except where a separate vote of any class or series is required by the 1940
Act, the laws of the State of Maryland, the Corporation's Articles of
Incorporation, the By-Laws of the Corporation, or as the Board of Directors
may determine in its sole discretion. Where a separate vote is required with
respect to one or more classes or series, then the shares of all other
classes or series vote as a single class or series, provided that, as to any
matter which does not affect the interest of a particular class or series,
only the holders of shares of the one or more affected classes or series is
entitled to vote. The preferences, rights, and other characteristics
attaching to any series of shares, including the present series of capital
stock, might be altered or eliminated, or the series might be combined with
another series, by action approved by the vote of the holders of a majority
of all the shares of all series entitled to be voted on the proposal, without
any additional right to vote as a series by the holders of the capital stock
or of another affected series.
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.
FEDERAL REGISTRATION OF SHARES
-------------------------------------------------------------------------------
The Fund's shares are registered for sale under the Securities Act of 1933.
Registration of the Fund's shares is not required under any state law, but
the Fund is required to make certain filings with and pay fees to the states
in order to sell its shares in the states.
LEGAL COUNSEL
-------------------------------------------------------------------------------
Swidler Berlin Shereff Friedman, LLP, whose address is 919 Third Avenue, New
York, New York 10022-9998, is legal counsel to the Fund.
INDEPENDENT ACCOUNTANTS
-------------------------------------------------------------------------------
PricewaterhouseCoopers LLP, 250 West Pratt Street, 21st Floor, Baltimore,
Maryland 21201, are the independent accountants to the Funds.
<PAGE>
All Funds
The report of independent accountants are included in each Fund's Annual
Report for the year ended October 31, 1997. A copy of each Annual and
Semiannual Report accompanies this Statement of Additional Information. The
following financial statements and the report of independent accountants
appearing in each Annual Report for the year ended October 31, 1997, and the
unaudited semiannual report for the six months ended April 30, 1998, are
incorporated into this Statement of Additional Information by reference:
<TABLE>
<CAPTION>
ANNUAL REPORT REFERENCES:
INTERNATIONAL INTERNATIONAL EUROPEAN
STOCK DISCOVERY STOCK
----- --------- -----
<S> <S> <S> <S>
Report of Independent Accountants 35 27 25
Statement of Net Assets, October
31, 1997 13-28 10-20 9-18
Statement of Operations, year
ended October 31, 1997 29 21 19
Statement of Changes in Net
Assets, years ended
October 31, 1997 and October 31,
1996 30 22 20
Notes to Financial Statements,
October 31, 1997 31-34 23-26 21-24
Financial Highlights 12 9 8
</TABLE>
<TABLE>
<CAPTION>
LATIN NEW ASIA JAPAN FOREIGN
AMERICA -------- ----- EQUITY
------- ------
<S> <S> <S> <S> <S>
Report of Independent Accountants 21 20 19 22
Statement of Net Assets, October 31,
1997 11-14 9-13 9-12 10-17
Statement of Operations, year ended
October 31, 1997 15 14 13 18
Statement of Changes in Net Assets,
years ended
October 31, 1997 and October 31, 1996 16 15 14 19
Notes to Financial Statements, October
31, 1997 17-20 16-19 15-18 20-21
Financial Highlights 10 8 8 9
</TABLE>
<TABLE>
<CAPTION>
EMERGING
MARKETS STOCK
-------------
<S> <S>
Report of Independent Accountants 26
Statement of Net Assets, October 31, 1997 11-19
Statement of Operations, year ended October 31, 1997 20
Statement of Changes in Net Assets, years ended October 31,
1997 and October 31, 1996 21
Notes to Financial Statements, October 31, 1997 22-25
Financial Highlights 10
</TABLE>
<TABLE>
<CAPTION>
GLOBAL STOCK
------------
<S> <S>
Report of Independent Accountants 37
Statement of Net Assets, October 31, 1997 13-30
Statement of Operations, year ended October 31, 1997 31
Statement of Changes in Net Assets, from year ended October
31, 1997 and December 29, 1995 (commencement of operations) to
October 31, 1996 32
Notes to Financial Statements, October 31, 1997 33-36
Financial Highlights 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED SEMIANNUAL REPORT REFERENCES:
INTERNATIONAL GLOBAL LATIN
DISCOVERY STOCK AMERICA
--------- ----- -------
<S> <S> <S> <C>
Statement of Net Assets, April 30, 1998 11-20 13-29 9-11
Statement of Operations, six months ended
April 30, 1998 21 30 12
Statement of Changes in Net Assets, six
months ended April 30, 1998 and year ended
October 31, 1997 22 31 13
Notes to Financial Statements, April 30,
1998 23-26 32-35 14-17
Financial Highlights 10 12 8
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EUROPEAN NEW ASIA
STOCK STOCK --------
----- -----
<S> <C> <C> <C>
Portfolio of Investments, April 30, 1998 12-25 10-18 9-12
Statement of Assets and Liabilities, April
30, 1998 26 19 13
Statement of Operations, six months ended
April 30, 1998 27 20 14
Statement of Changes in Net Assets, six
months ended April 30, 1998 and year ended
October 31, 1997 28 21 15
Notes to Financial Statements, April 30,
1998 29-32 22-25 16-19
Financial Highlights 11 9 8
</TABLE>
<TABLE>
<CAPTION>
JAPAN
-----
<S> <S>
Portfolio of Investments, April 30, 1998 9-11
Statement of Assets and Liabilities, April 30, 1998 12
Statement of Operations, six months ended April 30, 1998 13
Statement of Changes in Net Assets, six months ended
April 30, 1998 and year ended October 31, 1997 14
Notes to Financial Statements, April 30, 1998 15-18
Financial Highlights 8
</TABLE>
<TABLE>
<CAPTION>
EMERGING FOREIGN
MARKETS STOCK EQUITY
------------- ------
<S> <S> <C>
Statement of Net Assets, April 30, 1998 9-15 9-15
Statement of Operations, six months ended April 30,
1998 16 16
Statement of Changes in Net Assets, six months ended
April 30, 1998 and year ended October 31, 1997 17 17
Notes to Financial Statements, April 30, 1998 18-21 18-19
Financial Highlights 8 8
</TABLE>
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
International Stock, International Discovery, European Stock, New Asia, Japan,
Latin America, Emerging Markets Stock, and Global Stock Funds.
Condensed Financial Information (Financial Highlights table) is included in
Part A of the Registration Statement.
Statement of Net Assets, Statement of Operations, and Statement of Changes
in Net Assets are included in each fund's Annual Report to Shareholders, the
pertinent portions of which are incorporated by reference in Part B of the
Registration Statement.
International Growth & Income Fund
Financial Statements
Inapplicable
(b) Exhibits
(1)(a)Articles of Amendment and Restatement of T. Rowe Price
International Funds, Inc., dated February 16, 1990 (electronically
filed with Amendment No. 42 dated February 28, 1994)
(1)(b)
Articles Supplementary of T. Rowe Price International Funds, Inc.,
dated March 4, 1991
(1)(c)
Articles of Amendment of T. Rowe Price International Funds, Inc.,
dated May 1, 1991
(1)(d)
Articles Supplementary of T. Rowe Price International Funds, Inc.,
dated October 18, 1991
(1)(e)
Articles Supplementary of T. Rowe Price International Funds, Inc.,
dated May 4, 1992 (electronically filed with Amendment No. 44 dated
December 22, 1994)
(1)(f)
Articles Supplementary of T. Rowe Price International Funds, Inc.,
dated November 4, 1993 (electronically filed with Amendment No. 41
dated December 16, 1993)
<PAGE>
(1)(g)
Articles Supplementary of T. Rowe Price International Funds, Inc.
dated February 18, 1994 (electronically filed with Amendment No. 42
dated February 28, 1994)
(1)(h)
Articles Supplementary of T. Rowe Price International Funds, Inc.
dated November 2, 1994 (electronically filed with Amendment No. 44
dated December 22, 1994)
(1)(i)
Articles Supplementary of T. Rowe Price International Funds, Inc.
dated January 25, 1995 (electronically filed with Amendment No. 49
dated March 22, 1995)
(1)(j)
Articles Supplementary of T. Rowe Price International Funds, Inc.
dated October 11, 1995 (electronically filed with Amendment No. 50
dated October 12, 1995)
(1)(k)
Articles Supplementary of T. Rowe Price International Funds, Inc.,
on behalf of T. Rowe Price International Growth & Income Fund dated
November __, 1998 (to be filed by Amendment)
(2)
By-Laws of Registrant, as amended to May 1, 1991 and September 30,
1993 (electronically filed with Amendment No. 41 dated December 16,
1993)
(3) Inapplicable
(4)(a)
Specimen Stock Certificate for International Bond Fund (filed with
Amendment No. 10)
(4)(b)
Specimen Stock Certificate for International Stock Fund (filed with
Amendment No. 10)
(4)(c)
Specimen Stock Certificate for International Discovery Fund (filed
with Amendment No. 14)
(4)(d)
Specimen Stock Certificate for European Stock Fund (filed with
Amendment No. 18)
(4)(e)
Specimen Stock Certificate for New Asia Fund (filed with Amendment
No. 21)
(4)(f)
Specimen Stock Certificate for Global Government Bond Fund (filed
with Amendment No. 24)
(4)(g)
T. Rowe Price Japan, T. Rowe Price Short-Term Global Income, T.
Rowe Price Latin America, T. Rowe Price
<PAGE>
Emerging Markets Bond, T. Rowe Price Emerging Markets Bond, T. Rowe
Price Global Stock, and T. Rowe Price International Growth & Income
Funds. See Article FIFTH, Capital Stock, Paragraphs (A)-(E) of the
Articles of Amendment and Restatement electronically filed with
Amendment No. 19, Article II, Shareholders, Sections 2.01-2.11 and
Article VIII, Capital Stock, Sections 8.01-8.06 of the Bylaws
(filed with Amendment No. 19)
(5)(a)
Investment Management Agreement between Registrant and Rowe
Price-Fleming International, Inc., on behalf of T. Rowe Price
International Bond Fund, dated May 1, 1990 (electronically filed
with Amendment No. 42 dated February 28, 1994)
(5)(b)
Investment Management Agreement between Registrant and Rowe
Price-Fleming International, Inc., on behalf of T. Rowe Price
International Stock Fund, dated May 1, 1990 (electronically filed
with Amendment No. 42 dated February 28, 1994)
(5)(c)
Investment Management Agreement between Registrant and Rowe
Price-Fleming International, Inc., on behalf of T. Rowe Price
International Discovery Fund, dated May 1, 1991 (electronically
filed with Amendment No. 42 dated February 28, 1994)
(5)(d)
Investment Management Agreement between Registrant and Rowe
Price-Fleming International, Inc., on behalf of T. Rowe Price
European Stock Fund, dated May 1, 1990 (electronically filed with
Amendment No. 42 dated February 28, 1994)
(5)(e)
Investment Management Agreement between Registrant and Rowe
Price-Fleming International, Inc., on behalf of T. Rowe Price New
Asia Fund, dated May 1, 1991 (electronically filed with Amendment
No. 42 dated February 28, 1994)
(5)(f)
Investment Management Agreement between Registrant and Rowe
Price-Fleming International, Inc., on behalf of T. Rowe Price
Global Government Bond Fund, dated November 7, 1990 (electronically
filed with Amendment No. 42 dated February 28, 1994)
(5)(g)
Investment Management Agreement between Registrant and Rowe
Price-Fleming International, Inc., on behalf of T. Rowe Price Japan
Fund, dated November 6, 1991 (electronically filed with Amendment
No. 42 dated February 28, 1994)
<PAGE>
(5)(h)
Investment Management Agreement between Registrant and Rowe
Price-Fleming International, Inc., on behalf of T. Rowe Price
Short-Term Global Income Fund, dated April 23, 1992 (electronically
filed with Amendment No. 42 dated February 28, 1994)
(5)(i)
Investment Management Agreement between Registrant and Rowe
Price-Fleming International, Inc., on behalf of T. Rowe Price Latin
America Fund, dated November 3, 1993 (electronically filed with
Amendment No. 41 dated December 16, 1993)
(5)(j)
Investment Management Agreement between Registrant and Rowe
Price-Fleming International, Inc., on behalf of T. Rowe Price
Emerging Markets Bond Fund, dated November 2, 1994 (electronically
filed with Amendment No. 44 dated December 22, 1994)
(5)(k)
Investment Management Agreement between Registrant and Rowe
Price-Fleming International, Inc., on behalf of T. Rowe Price
Emerging Markets Stock Fund, dated January 25, 1995 (electronically
filed with Amendment No. 49 dated March 22, 1995)
(5)(l)
Investment Management Agreement between Registrant and Rowe
Price-Fleming International, Inc., on behalf of T. Rowe Price
Global Stock Fund, dated November 1, 1995 (electronically filed
with Amendment No. 51 dated December 20, 1995)
(5)(m)
Investment Management Agreement between Registrant and Rowe
Price-Fleming International, Inc., on behalf of T. Rowe Price
International Growth & Income Fund, dated November 4, 1998
(6)Underwriting Agreement between Registrant and T. Rowe Price
Investment Services, Inc., dated May 1, 1990 (electronically filed
with Amendment No. 42 dated February 28, 1994)
(7) Inapplicable
(8) Custody Agreements
(8)(a)
Custodian Agreement between T. Rowe Price Funds and State Street
Bank and Trust Company, dated January 28, 1998, as amended November
11, 1998
(8)(b)
Global Custody Agreement between The Chase Manhattan Bank, N.A.,
and T. Rowe Price Funds, dated January 3,
<PAGE>
1994, as amended April 18, 1994, August 15, 1994, November 28,
1994, May 31, 1995, November 1, 1995, July 31, 1996, July 23, 1997,
September 3, 1997, and October 29, 1997 (to be filed by amendment)
(9) Other Agreements
(9)(a)
Transfer Agency and Service Agreement between T. Rowe Price
Services, Inc. and T. Rowe Price Funds, dated January 1, 1998, as
amended January 21, 1998, October 30, 1998, and November 11, 1998
(9)(b)
Agreement between T. Rowe Price Associates, Inc. and T. Rowe Price
Funds for Fund Accounting Services, dated January 1, 1998, as
amended January 21, 1998, October 30, 1998, and November 11, 1998
(9)(c)
Agreement between T. Rowe Price Retirement Plan Services, Inc. and
the Taxable Funds, dated January 1, 1998, as amended January 21,
1998, October 30, 1998, and November 11, 1998
(10) Inapplicable
(11) Consent of Independent Accountants
(12) Inapplicable
(13) Inapplicable
(14) Inapplicable
(15) Inapplicable
(16) Total Return Performance Methodology
(17) Financial Data Schedules
(18) Inapplicable
(19) Other Exhibits
(a)Power of Attorney
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of January 31, 1998, there were 13,107 shareholders in the T. Rowe Price
Emerging Markets Stock Fund, 58,028 shareholders in the T. Rowe Price European
Stock Fund, 3,929 shareholders in the T. Rowe Price Global Stock Fund, 20,597
shareholders in the T. Rowe Price International Discovery Fund, 268,320
shareholders in the T. Rowe Price International Stock Fund, 13,696 shareholders
in the T. Rowe Price Japan Fund, 36,715 shareholders in the T. Rowe Price Latin
America Fund, and 96,861 shareholders in the T. Rowe Price New Asia Fund.
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 fifty
other 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
<PAGE>
Equity Funds, Inc., T. Rowe Price Financial Services Fund, Inc., T. Rowe Price
Diversified Small-Cap Growth Fund, Inc., T. Rowe Price Tax-Efficient Balanced
Fund, Inc., Reserve Investment Funds, Inc., T. Rowe Price Media &
Telecommunications Fund, Inc.,and T. Rowe Price Real Estate Fund, Inc. The
Registrant and the fifty investment companies listed above, with the exception
of Institutional International Funds, Inc., and Institutional Equity Funds,
Inc., will be collectively referred to as the Price Funds. The investment
manager for Institutional Equity Funds, Inc., and 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
subsidiary of the Manager, 25% owned by Copthall Overseas Limited, a 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.
GENERAL. The Charter of the Corporation provides that to the fullest extent
permitted by Maryland or federal law, no director or officer of the Corporation
shall be personally liable to the Corporation or the holders of Shares for money
damages and each director and officer shall be indemnified by the Corporation;
PROVIDED, HOWEVER, that nothing herein shall be deemed to protect any director
or officer of the Corporation against any liability to the Corporation of the
holders of Shares to which such director or officer would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office.
Article X, Section 10.01 of the Registrant's By-Laws provides as follows:
SECTION 10.01. INDEMNIFICATION AND PAYMENT OF EXPENSES IN ADVANCE. The
Corporation shall indemnify any individual ("Indemnitee") who is a present or
former director, officer, employee, or agent of the Corporation, or who is or
has been serving at the request of the Corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise, who, by reason of his position was, is, or is threatened to be
made, a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative
(hereinafter collectively referred to as a "Proceeding") against any judgments,
penalties, fines, settlements, and reasonable expenses (including attorneys'
fees) incurred by such Indemnitee
<PAGE>
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 of 1940, 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:
<PAGE>
(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
<PAGE>
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
M. David Testa, who is Chairman of the Board of the Manager, is also a
Vice-Chairman of the Board, Chief Investment Officer, Director, and Managing
Director of T. Rowe Price.
George J. Collins is a Director of the Manager and is also a Director of T. Rowe
Price.
D. William J. Garrett, a Director of the Manager, is Chairman of Robert Fleming
Securities Limited, a Director of Robert Fleming Holdings Limited ("Robert
Fleming Holdings"), a parent of the Manager which is a United Kingdom holding
company duly organized and existing under the laws of the United Kingdom, Robert
Fleming Management Services Limited, Robert Fleming & Co. Limited, and Fleming
Investments Limited. Mr. Garrett also serves as Director and/or officer of other
companies related to or affiliated with the above listed companies.
P. John Manser, a Director of the Manager, is Chief Executive of Robert Fleming
Holdings, Chairman of Robert Fleming & Co. Limited, Director of Jardine Fleming
Group Limited, Robert Fleming Management Services Limited, Fleming Investment
Management Limited, Robert Fleming Asset Management Limited, Jardine Fleming
Holdings Limited, and Robert Fleming Asset Management Limited and also serves as
a director of the U.K. Securities and Investments Board. Mr. Manser also serves
as Director and/or officer of other companies related to or affiliated with the
above listed companies.
James S. Riepe, who is a Director of the Manager, is also a Vice-Chairman of the
Board, Director, and Managing Director of T. Rowe Price, and a Director of
Rhone-Poulenc Rorer, Inc.
George A. Roche, who is a Director and Vice President of the Manager, is also
Chairman of the Board, President, a Director, and Managing Director of T. Rowe
Price.
Henry C. T. Strutt, a Director of the Manager, is Managing Director and General
Manager of Jardine Fleming Holdings Ltd. and Director of Robert Fleming Holdings
Ltd.
Alvin M. Younger, Jr., who is Secretary and Treasurer of the Manager, is also
the Chief Financial Officer, Managing Director, Secretary, and Treasurer of T.
Rowe Price.
<PAGE>
Martin G. Wade, Director and President of the Manager; Director, Robert Fleming
Holdings Limited and Robert Fleming Asset Management.
With the exception of Christopher D. Alderson, Peter B. Askew, Mark
Bickford-Smith, Ann B. Cranmer, Mark J. T. Edwards, Carol A. Eve, John R. Ford,
Sally Patterson, Nichola Pease, Christopher Rothery, James B. M. Seddon,
Benedict R. F. Thomas, Christine To, David J. L. Warren, and Martin G. Wade, all
officers of the Manager are officers and/or employees of Price Associates and
may also be officers and/or directors of one or more subsidiaries of Price
Associates and/or one or more of the registered investment companies which Price
Associates or the Manager serves as investment adviser. Mr. Ilott is an employee
of Fleming Investment Management Limited, an investment adviser registered under
the Investment Advisers Act of 1940. Ms. Cranmer is an employee of Fleming
Investment Management Limited. Mr. Wade, who is Director and President of the
Manager, is also a Non-Executive Director of Robert Fleming Holdings.
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. The Manager is the general partner of this
partnership, and certain institutional investors, including advisory clients of
the Manager, are its limited partners.
See also "Management of Fund," in the 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
eighty-eight Price Funds. Investment Services is 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 commissions or other
compensation for acting as principal underwriter.
(b)
The address of each of the directors and officers of Investment
Services listed below is 100 East Pratt Street, Baltimore, Maryland
21202.
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
<S> <C> <C>
James S. Riepe Chairman of the Board and Vice President
Director
Edward C. Bernard President None
and Director
Henry H. Hopkins Vice President and Director Vice 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
Joseph A. Carrier Vice President None
Laura H. Chasney Vice President None
Renee M. Christoff Vice President None
Victoria C. Collins 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
Sharon R. Krieger Vice President None
Keith W. Lewis 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
David Oestricher Vice President None
Pamela D. Preston 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
Kristin E. Seeberger Vice President None
William F. Wendler II Vice President None
Jane F. White Vice President None
Thomas R. Woolley Vice President None
Alvin M. Younger, Jr. Secretary and Treasurer None
Mark S. Finn Controller & Vice President None
Richard J. Barna Assistant Vice President None
Catherine L.Berkenkemper Assistant Vice President None
Robin C. B. Binkley Assistant Vice President None
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
Sandra J. Kiefler Assistant Vice President None
Valerie King-Calloway Assistant Vice President None
Steven A. Larson Assistant Vice President None
Jeanette M. LeBlanc Assistant Vice President None
Patricia S. Lippert Assistant Vice President Secretary
C. Lillian Matthews Assistant Vice President None
Janice D. McCrory 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
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
</TABLE>
<PAGE>
<PAGE>
(c)Not applicable. Investment Services will not receive any
compensation with respect to its activities as underwriter for the
Price Funds since the Price Funds are sold on a no-load basis.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, and other documents required to be maintained by T.
Rowe Price International Funds, Inc. under Section 31(a) of the Investment
Company Act of 1940 and the rules thereunder will be maintained by T. Rowe Price
International Funds, Inc. at its offices at 100 East Pratt Street, Baltimore,
Maryland 21202. Transfer, dividend disbursing, and shareholder service
activities are performed T. Rowe Price Services, Inc., at 10090 Red Run Blvd.,
Owings Mills, Maryland 21117. Custodian activities for T. Rowe Price
International Funds, Inc. are performed at State Street Bank and Trust Company's
Service Center (State Street South), 1776 Heritage Drive, Quincy, Massachusetts
02171.
Custody of Registrant's portfolio securities which are purchased outside
the United States is maintained by The Chase Manhattan Bank, N.A., London, in
its foreign branches or with other U.S. banks. The Chase Manhattan Bank, N.A.,
London, is located at Woolgate House, Coleman Street, London EC2P 2HD England.
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
Not applicable
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, and
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, duly
authorized, in the City of Baltimore, State of Maryland, this November 19, 1998.
T. Rowe Price International Funds, Inc.
/s/M. David Testa
By: M. David Testa
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/M. David Testa Chairman of the Board November 19, 1998
M. David Testa (Chief Executive Officer)
/s/Carmen F. Deyesu Treasurer (Chief November 19, 1998
Carmen F. Deyesu Financial Officer)
/s/Martin G. Wade President and November 19, 1998
Martin G. Wade Director
* Director November 19, 1998
Anthony W. Deering
* Director November 19, 1998
Donald W. Dick, Jr.
* Director November 19, 1998
Paul M. Wythes
/s/Henry H. Hopkins Attorney-In-Fact November 19, 1998
Henry H. Hopkins
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
BETWEEN
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
AND
ROWE PRICE-FLEMING INTERNATIONAL, INC.
INVESTMENT MANAGEMENT AGREEMENT, made as of the 4th day of November, 1998,
by and between T. ROWE PRICE INTERNATIONAL FUNDS, INC., a Maryland corporation
(the "Corporation"), and ROWE PRICE-FLEMING INTERNATIONAL, 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 is engaged in business as an open-end management
investment company and is registered 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 T. Rowe Price International Growth & Income 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
<PAGE>
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:
(1)
buy, sell, exchange, convert, lend, and otherwise trade in any stocks, bonds,
and other securities or assets; and
(2)
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 Corporation'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 they may, at any time or from time to time, reasonably
request or as the Manager may deem helpful to the Fund.
D.
REPORTS AND OTHER COMMUNICATIONS TO FUND 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.
<PAGE>
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 FUND 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 of the Corporation or Fund, as
appropriate, 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 for 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 Fund
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 Fund's 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 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;
<PAGE>
(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's 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 Fund with respect to the
sale of the Fund shares under securities laws of various states or
jurisdictions, and, under all other laws applicable to the Fund, or its business
activities (including registering the Fund as a broker-dealer, or any officer of
the Fund or any person as agent or salesman of the Fund in any state);
(12)
ISSUE AND REDEMPTION OF FUND SHARES. All expenses incurred in connection with
the issue, redemption, and transfer of the Fund's shares, including the expense
of confirming all share transactions;
(13)
BONDING AND INSURANCE. All expenses of bond, liability, and other insurance
coverage required by law or deemed advisable by the Corporation's 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 pay the Manager a fee ("Fee") which will consist
of two components: a Group Management Fee ("Group Fee") and an Individual Fund
Fee ("Fund Fee"). The Fee shall be paid monthly to the Manager on the first
business day of the next succeeding calendar month and shall be calculated as
follows:
A.
GROUP FEE. The monthly Group Fee ("Monthly Group Fee") shall be the sum of the
daily Group Fee accruals ("Daily Group Fee Accruals") for each month. The Daily
Group Fee
<PAGE>
Accrual for any particular day will be 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 shall be 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
0.450% Next $1 billion
0.420% Next $1 billion
0.390% Next $1 billion
0.370% Next $1 billion
0.360% Next $2 billion
0.350% Next $2 billion
0.340% Next $5 billion
0.330% Next $10 billion
0.320% Next $10 billion
0.310% Next $16 billion
0.305% Next $30 billion
0.300% Thereafter
The Price Funds shall include all the mutual funds distributed by T. Rowe
Price Investment Services, Inc., (other than institutional or "private label"
funds, Index Trust, Spectrum Funds and Reserve Investment Funds). For the
purposes of calculating the Daily Price Funds' Group Fee Accrual for any
particular day, the net assets of each Price Fund shall be 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.
B.
FUND FEE. The monthly Fund Fee ("Monthly Fund Fee") shall be the sum of the
daily Fund Fee accruals ("Daily Fund Fee Accruals") for each month. The Daily
Fund Fee Accrual for any particular day will be computed by multiplying the
fraction of one (1) over the number of calendar days in the year by the Fund Fee
Rate of 0.35% 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.
C.
EXPENSE LIMITATION. As part of the consideration for the Fund entering into this
Agreement, the Manager hereby agrees to limit the aggregate expenses of every
character incurred by the Fund, including but not limited to Fees of the Manager
computed as hereinabove set forth, but excluding interest, taxes, brokerage, and
other expenditures which are capitalized in accordance with generally accepted
accounting principles and extraordinary expenses, ("Manager Limitation"). Under
the Manager Limitation, the Manager agrees that through October 31, 2000, such
expenses shall not exceed 1.25% of the average daily net assets of the Fund
("1.25% Expense Limitation"). To determine the Manager's liability for the
Fund's expenses over the 1.25% Expense Limitation, the
<PAGE>
amount of allowable year-to-date expenses shall be computed daily by pro rating
the 1.25% Expense Limitation based on the number of days elapsed within the
fiscal year of the Fund, or limitation period, if shorter ("Pro Rated
Limitation"). The Pro Rated Limitation shall be compared to the expenses of the
Fund recorded through the prior day in order to produce the allowable expenses
to be recorded for the current day ("Allowable Expenses"). If the Fund's
Management Fee and other expenses for the current day exceed the Allowable
Expenses, the Management Fee for the current day shall be reduced by such excess
("Unaccrued Fees"). In the event the excess exceeds the amount due as the
Management Fee, the Manager shall be responsible to the Fund for the additional
excess ("Other Expenses Exceeding Limit"). If at any time up through and
including October 31, 2000, the Fund's Management Fee and other expenses for the
current day are less than the Allowable Expenses, the differential shall be due
to the Manager as payment of cumulative Unaccrued Fees (if any) or as payment
for cumulative Other Expenses Exceeding Limit (if any). If cumulative Unaccrued
Fees or cumulative Other Expenses Exceeding Limit remain at October 31, 2000,
these amounts shall be paid to the Manager in the future provided that: (1) no
such payment shall be made to the Manager after October 31, 2002; and (2) such
payment shall only be made to the extent that it does not result in the Fund's
aggregate expenses exceeding an expense limit of 1.25% of average daily net
assets. The Manager may voluntarily agree to an additional expense limitation
(any such additional expense limitation hereinafter referred to as an
"Additional Expense Limitation"), at the same or a different level and for the
same or a different period of time beyond October 31, 2000 (any such additional
period being hereinafter referred to an as "Additional Period") provided,
however, that: (1) the calculations and methods of payment shall be as described
above; (2) no payment for cumulative Unaccrued Fees or cumulative Other Expenses
Exceeding Limit shall be made to the Manager more than two years after the end
of an Additional Period; and (3) payment for cumulative Unaccrued Fees or
cumulative Other Expenses Exceeding Limit after the expiration of the Additional
Period shall only be made to the extent it does not result in the Fund's
aggregate expenses exceeding the Additional Expense Limitation to which the
unpaid amounts relate.
D.
PRORATION OF FEE. If this Agreement becomes effective or terminates before the
end of any month, the Fee for the period from the effective date to the end of
such month or from the beginning of such month to the date of termination, as
the case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
4.
BROKERAGE. Subject to the approval of the board of directors, 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
<PAGE>
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.
USE OF MANAGER'S NAME. The Corporation or Fund may use the name "T. Rowe Price
International Funds, Inc." or any other name derived from the name "T. Rowe
Price" only for so long as this Agreement or any extension, renewal or amendment
hereof remains in effect, including any similar agreement with any organization
which shall have succeeded to the business of the Manager as investment manager.
At such time as this Agreement or any extension, renewal or amendment hereof, or
such other similar agreement shall no longer be in effect, the Corporation or
Fund will (by corporate action, if necessary) cease to use any name derived from
the name "T. Rowe Price," any name similar thereto or any other name indicating
that it is advised by or otherwise connected with the Manager, or with any
organization which shall have succeeded to the Manager's business as investment
manager.
<PAGE>
11.
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, 1999. 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 such continuation shall be specifically approved at least annually
(a) by either the board of directors of the Corporation, or by vote of a
majority of the outstanding voting securities of the Fund; (b) in either event
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 (c) the Manager shall not have notified the Corporation, in
writing, at least 60 days prior to April 30, 1999 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.
12.
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.
13.
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 of the Corporation 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.
14. 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, 9, 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
<PAGE>
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: T. ROWE PRICE
INTERNATIONAL FUNDS, INC.
/s/Patricia S. Lippert /s/M. David Testa
___________________________ By: _________________________________
Patricia S. Lippert, M. David Testa,
Secretary Chairman of the Board
Attest: ROWE
PRICE-FLEMING INTERNATIONAL, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
___________________________ By: _________________________________
Barbara A. Van Horn, Henry H. Hopkins,
Assistant Secretary Vice President
<PAGE>
The Custodian Agreement dated January 28, 1998, between State Street Bank
and Trust Company and T. Rowe Price Funds, as amended.
<PAGE>
CUSTODIAN AGREEMENT
THIS AGREEMENT is made as of January 28, 1998 by and between each entity
set forth on Appendix A hereto (as such Appendix A may be amended from time to
time) which executes a copy of this Agreement (each referred to herein as the
"FUND"), and State Street Bank and Trust Company, a Massachusetts trust company
with its principal place of business at 225 Franklin Street, Boston,
Massachusetts 02110 (the "CUSTODIAN").
WITNESSETH:
WHEREAS, each Fund desires to retain the Custodian to act as custodian of
certain of the assets of the Fund, and the Custodian is willing to provide such
services to each Fund, upon the terms and conditions hereinafter set forth; and
WHEREAS, except as otherwise set forth herein, this Agreement is intended
to supersede that certain custodian contract among the parties hereto dated
September 28, 1987, as amended; and
WHEREAS, the Funds have retained CHASE MANHATTAN BANK, N.A. to act as the
Funds' custodian with respect to the assets of each such Fund to be held outside
of the United States of America (except as otherwise set forth in this
Agreement) pursuant to a written custodian agreement (the "FOREIGN CUSTODIAN
AGREEMENT"),
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, each of the parties hereto agrees as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT.
Each Fund hereby employs the Custodian as the custodian of certain of its
assets, including those securities it desires to be held within the United
States of America ("DOMESTIC SECURITIES") and those securities it desires to be
held outside the United States of America (the "UNITED STATES") which are (i)
not held on the Funds' behalf by CHASE MANHATTAN BANK, N.A. pursuant to the
Foreign Custodian Agreement and (ii) described with greater particularity in
Section 3 hereof (such securities shall be referred to herein as "FOREIGN
SECURITIES"). Each Fund agrees to deliver to the Custodian all domestic
securities, foreign securities and cash owned by it from time to time, and all
payments of income, payments of principal or capital distributions received by
it with respect to
<PAGE>
securities held by it hereunder, and the cash consideration received by it for
such new or treasury shares of capital stock of each Fund as may be issued or
sold from time to time ("SHARES"). The Custodian shall not be responsible for
any property of any Fund held or received by such Fund (i) not delivered to the
Custodian, or (ii) held in the custody of CHASE MANHATTAN BANK N.A.
The Custodian is authorized to employ one or more sub-custodians located
within the United States, provided that the Custodian shall have obtained the
written acknowledgment of the Fund with respect to such employment. The
Custodian is authorized to employ sub-custodians located outside the United
States as noted on Schedule A attached hereto (as such Schedule A may be amended
from time to time). The Custodian shall have no more or less responsibility or
liability to any Fund on account of any actions or omissions of any
sub-custodian so employed than any such sub-custodian has to the Custodian and
shall not release any sub-custodian from any responsibility or liability unless
so agreed in writing by the Custodian and the applicable Fund. With the
exception of State Street Bank and Trust Company (London branch), the Custodian
shall not be liable for losses arising from the bankruptcy, insolvency or
receivership of any sub-custodian located outside the United States.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUNDS HELD
BY THE CUSTODIAN IN THE UNITED STATES.
SECTION 2.1
HOLDING SECURITIES. The Custodian shall hold and physically segregate for the
account of each Fund all 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 2.9 in a clearing agency
which acts as a securities depository or in a book-entry system authorized by
the United States Department of the Treasury and certain federal agencies (each,
a "U.S. 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 (the "DIRECT PAPER
SYSTEM") pursuant to Section 2.10.
SECTION 2.2
DELIVERY OF INVESTMENTS. The Custodian shall release and deliver domestic
investments owned by a Fund held by the Custodian or in a U.S. Securities System
account of the Custodian or in the Custodian's Direct Paper System account
("DIRECT PAPER SYSTEM ACCOUNT") only upon receipt of Proper Instructions, which
<PAGE>
may be continuing instructions when agreed to by the parties, and only in the
following cases:
1)Upon sale of such investments for the account of the Fund and
receipt of payment therefor;
2)Upon the receipt of payment in connection with any repurchase
agreement related to such investments entered into by the Fund;
3)
In the case of a sale effected through a U.S. Securities System, in
accordance with the provisions of Section 2.9 hereof;
4)
To the depository agent in connection with tender or other similar
offers for portfolio investments of the Fund;
5)
To the issuer thereof or its agent when such investments 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)
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 2.8 or into the name or nominee name of any
sub-custodian appointed pursuant to Section 1; or for exchange for a
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, in any such case, the new securities are to be
delivered to the Custodian;
7)
Upon the sale of such investments for the account of the Fund, to
the broker or its clearing agent, against a receipt, for examination
in accordance with usual "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 investments
prior to receiving payment for such investments except as may arise
from the Custodian's own negligence or willful misconduct;
<PAGE>
8)For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the investments of the issuer of such investments, or pursuant to
provisions for conversion contained in such investments, or pursuant
to any deposit agreement; provided that, in any such case, the new
investments and cash, if any, are to be delivered to the Custodian;
9)In the case of warrants, rights or similar investments, the
surrender thereof in the exercise of such warrants, rights or
similar investments or the surrender of interim receipts or
temporary investments for definitive investments; provided that, in
any such case, the new investments and cash, if any, are to be
delivered to the Custodian or against a receipt;
10)
For delivery in connection with any loans of investments made on
behalf of the Fund, but only against receipt of adequate collateral
as agreed upon from time to time by the Fund or its duly-appointed
agent (which may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities, or such
other property as the Fund may agree), 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 investments owned by the Fund prior
to the receipt of such collateral in the absence of the Custodian's
negligence or willful misconduct;
11)
For delivery as security in connection with any borrowing 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 and delivered for
that purpose;
12)
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"),
<PAGE>
relating to compliance with the rules of The Options Clearing
Corporation, the rules of any registered national securities
exchange or of any similar organization or organizations, or under
the Investment Company Act of 1940, as amended from time to time
(the "1940 ACT"), regarding escrow or other arrangements in
connection with transactions by the Fund;
13)
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, or any similar organization or organizations,
or under the 1940 Act, regarding account deposits in connection with
transactions by the Fund;
14)
Upon receipt of instructions from the transfer agent for the Fund
(the "TRANSFER AGENT"), 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, statement of additional information or other offering
documents (all, as amended, supplemented or revised from time to
time, the "PROSPECTUS"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15)
For any other purpose, but only upon receipt of Proper Instructions
specifying (a) the investments to be delivered, (b) setting forth
the purpose for which such delivery is to be made, and (c) naming
the person or persons to whom delivery of such investments shall be
made.
SECTION 2.3
REGISTRATION OF INVESTMENTS. Domestic investments 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 2.8 or in the
name or nominee name of any sub-custodian appointed pursuant to Section 1. All
securities accepted by the Custodian on behalf of the Fund under the terms of
<PAGE>
this Agreement shall be in good deliverable form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund of relevant corporate actions including,
without limitation, pendency of calls, maturities, tender or exchange offers.
SECTION 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 Agreement, 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 1940 Act. Monies held by the Custodian for the Fund may be deposited
by the Custodian to its credit as custodian in the banking department of the
Custodian or in such other banks or trust companies as it may in its discretion
deem necessary or desirable in the performance of its duties hereunder;
provided, however, that every such bank or trust company shall be qualified to
act as a custodian under the 1940 Act, 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 or the board of
trustees of the applicable Fund (as appropriate and in each case, the "BOARD").
Such funds shall be deposited by the Custodian in its capacity as custodian and
shall be withdrawable by the Custodian only in that capacity.
SECTION 2.5
COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the Custodian
shall collect on a timely basis all income and other payments with respect to
United States registered investments held hereunder to which the Fund shall be
entitled either by law or pursuant to custom in the investments business, and
shall collect on a timely basis all income and other payments with respect to
United States bearer investments if, on the date of payment by the issuer, such
investments are held by the Custodian or its agent thereof and shall credit such
income, 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, collect interest when due on investments held hereunder, and receive
and collect all stock dividends, rights and other items of like nature as and
when they become due and payable. With respect to income due the Fund on United
States investments of the Fund loaned (pursuant to the provisions of Section 2.2
(10))
<PAGE>
in accordance with a separate agreement between the Fund and the Custodian in
its capacity as lending agent, collection thereof shall be in accordance with
the terms of such agreement. Except as otherwise set forth in the immediately
preceding sentence, income due the Fund on United States investments of the Fund
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.
SECTION 2.6
PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions, which may be
continuing instructions when agreed to by the parties, the Custodian shall, from
monies of the Fund held by the Custodian, pay out such monies in the following
cases only:
1)Upon the purchase of domestic investments, options, futures
contracts or options on futures contracts for the account of the
Fund but only (a) against the delivery of such investments, 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 1940 Act to act as a custodian and has been
designated by the Custodian as its agent for this purpose in
accordance with Section 2.8) registered in the name of the Fund or
in the name of a nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in the case of a purchase
effected through a U.S. Securities System, in accordance with the
conditions set forth in Section 2.9 hereof; (c) in the case of a
purchase involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.10 hereof; or (d) for transfer to
a time deposit account of the Fund in any bank, whether domestic or
foreign, such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank pursuant to
Proper Instructions;
2)
In connection with conversion, exchange or surrender of investments
owned by the Fund as set forth in Section 2.2 hereof;
<PAGE>
3)
For the redemption or repurchase of Shares as set forth in Section 4
hereof;
4)
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 fees, accounting fees,
transfer agent fees, legal fees, and operating expenses of the Fund
(whether or not such expenses are to be in whole or part capitalized
or treated as deferred expenses);
5) For the payment of any dividends declared by the Board;
6)For payment of the amount of dividends received in respect of
investments sold short;
7)
For repayment of a loan upon redelivery of pledged securities and
upon surrender of the note(s), if any, evidencing the loan; or
8)
In connection with any repurchase agreement entered into by the Fund
with respect to which the collateral is held by the Custodian, the
Custodian shall act as the Fund's "securities intermediary"( as that
term is defined in Part 5 of Article 8 of the Massachusetts Uniform
Commercial Code, as amended), and, as securities intermediary, the
Custodian shall take the following steps on behalf of the Fund: (a)
provide the Fund with notification of the receipt of the purchased
securities, and (b), by book-entry identify on the books of the
Custodian as belonging to the Fund uncertificated securities
registered in the name of the Fund and held in the Custodian's
account at the Federal Reserve Bank. In connection with any
repurchase agreement entered into by the Fund with respect to which
the collateral is not held by the Custodian, the Custodian shall (a)
provide the Fund with such notification as it may receive with
respect to such collateral, and (b), by book-entry or otherwise,
identify as belonging to the Fund securities as shown in the
Custodian's account on the books of the entity appointed by the Fund
to hold such collateral.
9)
For any other purpose, but only upon receipt of Proper Instructions
specifying (a) the amount of such payment,
<PAGE>
(b) setting forth the purpose for which such payment is to be made,
and (c) naming the person or persons to whom such payment is to be
made.
SECTION 2.7
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.
SECTION 2.8
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 1940 Act to act as a custodian, as its agent to carry
out such of the provisions of this Section 2 as the Custodian may from time to
time direct; provided, however, that the appointment of any such agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder.
SECTION 2.9
DEPOSIT OF INVESTMENTS IN U.S. SECURITIES SYSTEMS. The Custodian may deposit
and/or maintain domestic investments owned by the Fund in a U.S. Securities
System in accordance with applicable Federal Reserve Board and United States
Securities and Exchange Commission ("SEC") rules and regulations, if any,
subject to the following provisions:
1)
The Custodian may keep domestic investments of the Fund in a U.S.
Securities System provided that such investments are represented in
an account of the Custodian in the U.S. Securities System
("ACCOUNT") which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise for
customers;
2)
The records of the Custodian with respect to domestic investments of
the Fund which are maintained in a U.S. Securities System shall
identify by book-entry those investments belonging to the Fund;
3)
The Custodian shall pay for domestic investments purchased for the
account of the Fund upon (i) receipt of advice from the U.S.
Securities System that such investments have been transferred to the
Account, and
<PAGE>
(ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund. The
Custodian shall transfer domestic investments sold for the account
of the Fund upon (i) receipt of advice from the U.S. Securities
System that payment for such investments 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 U.S. Securities System of
transfers of domestic investments 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. Upon 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 U.S. Securities System for
the account of the Fund;
4)
The Custodian shall provide the Fund with any report obtained by the
Custodian on the U.S. Securities System's accounting system,
internal accounting control and procedures for safeguarding domestic
investments deposited in the U.S. Securities System;
5)
The Custodian shall have received from the Fund the initial or
annual certificate, as the case may be, described in Section 10
hereof; and
6)
Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to the
Fund resulting from use of the U.S. Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or any of
its agents or of any of its or their employees, or from failure of
the Custodian or any such agent to enforce effectively such rights
as it may have against the U.S. Securities System. At the election
of the Fund, the Fund shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim against the U.S.
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
<PAGE>
the Fund has not been made whole for any such loss, expense or
damage.
SECTION 2.10
FUND ASSETS HELD IN THE DIRECT PAPER SYSTEM. The Custodian may deposit and/or
maintain investments owned by the Fund in the Direct Paper System subject to the
following provisions:
1)
No transaction relating to investments in the Direct Paper System
will be effected in the absence of Proper Instructions;
2)
The Custodian may keep investments of the Fund in the Direct Paper
System only if such investments are represented in the Direct Paper
System Account, which account 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 investments of the Fund
which are maintained in the Direct Paper System shall identify by
book-entry those investments belonging to the Fund;
4)
The Custodian shall pay for investments 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 investments to the account
of the Fund. The Custodian shall transfer investments sold for the
account of the Fund upon the making of an entry on the records of
the Custodian to reflect such transfer and receipt of payment for
the account of the Fund;
5)
The Custodian shall furnish the Fund confirmation of each transfer
to or from the account of the Fund, in the form of a written advice
or notice, of Direct Paper on the next business day following such
transfer and shall furnish to the Fund copies of daily transaction
sheets reflecting each day's transaction in the Direct Paper System
for the account of the Fund; and
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.
SECTION 2.11
SEGREGATED ACCOUNT. The Custodian shall, upon receipt of Proper Instructions,
establish and maintain a segregated
<PAGE>
account or accounts for and on behalf of the Fund, into which account or
accounts may be transferred cash and/or investments, including investments
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 investments 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 1940 Act Release No. 10666, or any other procedures
subsequently required under the 1940 Act relating to the maintenance of
segregated accounts by registered investment companies, and (iv) for other
purposes, but only, in the case of clause (iv) upon receipt of Proper
Instructions specifying (a) the investments to be delivered, (b) setting forth
the purpose for which such delivery is to be made, and (c) naming the person or
persons to whom delivery of such investments shall be made.
SECTION 2.12
OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute ownership
and other certificates and affidavits for all United States federal and state
tax purposes in connection with receipt of income or other payments with respect
to domestic investments of the Fund held by it hereunder and in connection with
transfers of such investments.
SECTION 2.13
PROXIES. The Custodian shall, with respect to the domestic investments held
hereunder, cause to be promptly executed by the registered holder of such
investments, if the investments are registered otherwise than in the name of the
Fund or a nominee of the Fund, 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 received by the Custodian and all
notices received relating to such investments.
SECTION 2.14
COMMUNICATIONS RELATING TO FUND INVESTMENTS. Subject to the provisions of
Section 2.3, the Custodian shall transmit promptly to the Fund all written
information (including, without limitation, pendency of calls and maturities of
domestic investments and expirations of rights in connection therewith and
notices of
<PAGE>
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 in connection
with the domestic investments being held for the Fund pursuant to this
Agreement. With respect to tender or exchange offers, the Custodian shall
transmit to the Fund all written information received by the Custodian, any
agent appointed pursuant to Section 2.8 hereof, or any sub-custodian appointed
pursuant to Section 1 hereof, from issuers of the domestic investments 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 at least two (2) New York Stock Exchange business
days 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) such notice.
Where the Fund provides the Custodian with less than two (2) New York Stock
Exchange business days notice of its desired action, 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 agree to alternative procedures with
respect to such two (2) New York Stock Exchange business days notice period on a
selective and individual basis.
SECTION 2.15
REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS. The Custodian shall provide
the Fund, at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding investments, futures contracts and
options on futures contracts, including domestic investments deposited and/or
maintained in a U.S. Securities System, relating to the services provided by the
Custodian under this Agreement. Such reports shall be of sufficient scope and
detail, as may reasonably be required by the Fund, to provide reasonable
assurance that any material inadequacies would be disclosed by such examination,
and if there are no such inadequacies the reports shall so state.
SECTION 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO CERTAIN PROPERTY OF THE
FUNDS HELD OUTSIDE OF THE UNITED STATES
SECTION 3.1
DEFINITIONS. The following capitalized terms shall have the respective following
meanings:
"FOREIGN SECURITIES SYSTEM" means a clearing agency or a securities depository
listed on Schedule A hereto.
<PAGE>
"FOREIGN SUB-CUSTODIAN" means a foreign banking institution set forth on
Schedule A hereto.
SECTION 3.2
HOLDING SECURITIES. The Custodian shall identify on its books as belonging to
the Funds the foreign securities held by each Foreign Sub-Custodian or Foreign
Securities System. The Custodian may hold foreign securities for all of its
customers, including the Funds, with any Foreign Sub-Custodian in an account
that is identified as belonging to the Custodian for the benefit of its
customers, provided however, that (i) the records of the Custodian with respect
to foreign securities of the Funds which are maintained in such account shall
identify those securities as belonging to the Funds and (ii) the Custodian shall
require that securities so held by the Foreign Sub-Custodian be held separately
from any assets of such Foreign Sub-Custodian or of other customers of such
Foreign Sub-Custodian.
SECTION 3.3
FOREIGN SECURITIES SYSTEMS. Foreign securities shall be maintained in a Foreign
Securities System in a designated country only through arrangements implemented
by the Foreign Sub-Custodian in such country pursuant to the terms of this
Agreement.
SECTION 3.4 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
3.4.1.
Delivery of Foreign Securities. The Custodian or a Foreign Sub-Custodian shall
- -------- -- ------- -----------
release and deliver foreign securities of the Funds held by such Foreign
Sub-Custodian, or in a Foreign Securities System account, only upon receipt of
Proper Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
(i)
upon the sale of such foreign securities for the Funds in accordance
with reasonable market practice in the country where such foreign
securities are held or traded, including, without limitation: (A)
delivery against expectation of receiving later payment; or (B) in
the case of a sale effected through a Foreign Securities System in
accordance with the rules governing the operation of the Foreign
Securities System;
(ii)
in connection with any repurchase agreement related to foreign
securities;
<PAGE>
(iii)
to the depository agent in connection with tender or other similar
offers for foreign securities of the Funds;
(iv)
to the issuer thereof or its agent when such foreign securities are
called, redeemed, retired or otherwise become payable;
(v)
to the issuer thereof, or its agent, for transfer into the name of
the Custodian (or the name of the respective Foreign Sub-Custodian
or of any nominee of the Custodian or such Foreign Sub-Custodian)
or for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or number
of units;
(vi)
to brokers, clearing banks or other clearing agents for examination
or trade execution in accordance with market custom; provided that
in any such case the Foreign Sub-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 Foreign Sub-Custodian's own negligence
or willful misconduct;
(vii)for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization 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;
(viii)
in the case of warrants, rights or similar foreign 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;
(ix)
or delivery as security in connection with any borrowing by the
Funds requiring a pledge of assets by the Funds;
(x)in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
<PAGE>
(xi) in connection with the lending of foreign securities; and
(xii)
for any other proper purpose, but only upon receipt of Proper
Instructions specifying the foreign securities to be delivered,
setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper Fund purpose, and naming the
person or persons to whom delivery of such securities shall be made.
3.4.2.
Payment of Fund Monies. Upon receipt of Proper Instructions, which may be
- ------- -- ---- -------
continuing instructions when deemed appropriate by the parties, the Custodian
shall pay out, or direct the respective Foreign Sub-Custodian or the respective
Foreign Securities System to pay out, monies of a Fund in the following cases
only:
(i)upon the purchase of foreign securities for the Fund, unless
otherwise directed by Proper Instructions, by (A) delivering money
to the seller thereof or to a dealer therefor (or an agent for such
seller or dealer) against expectation of receiving later delivery of
such foreign securities; or (B) in the case of a purchase effected
through a Foreign Securities System, in accordance with the rules
governing the operation of such Foreign Securities System;
(ii)
in connection with the conversion, exchange or surrender of foreign
securities of the Fund;
(iii)
for the payment of any expense or liability of the Fund, including
but not limited to the following payments: interest, taxes,
investment advisory fees, transfer agency fees, fees under this
Agreement, legal fees, accounting fees, and other operating
expenses;
(iv)
for the purchase or sale of foreign exchange or foreign exchange
contracts for the Fund, including transactions executed with or
through the Custodian or its Foreign Sub-Custodians;
(v)in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
<PAGE>
(vii)
in connection with the borrowing or lending of foreign securities;
and
(viii)
for any other proper Fund purpose, but only upon receipt of Proper
Instructions 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 Fund purpose, and naming the person or
persons to whom such payment is to be made.
3.4.3.
Market Conditions. Notwithstanding any provision of this Agreement to the
- ------ -----------
contrary, settlement and payment for foreign securities received for the account
of the Funds and delivery of foreign securities maintained for the account of
the Funds may be effected in accordance with the customary established
securities trading or processing practices and procedures in the country or
market in which the transaction occurs, including, without limitation,
delivering foreign securities to the purchaser thereof or to a dealer therefor
(or an agent for such purchaser or dealer) with the expectation of receiving
later payment for such foreign securities from such purchaser or dealer.
SECTION 3.5
REGISTRATION OF FOREIGN SECURITIES. The foreign securities maintained in the
custody of a Foreign Custodian (other than bearer securities) shall be
registered in the name of the applicable Fund or in the name of the Custodian or
in the name of any Foreign Sub-Custodian or in the name of any nominee of the
foregoing, and the Fund agrees to hold any such nominee harmless from any
liability as a holder of record of such foreign securities. The Custodian or a
Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a
Fund under the terms of this Agreement unless the form of such securities and
the manner in which they are delivered are in accordance with reasonable market
practice.
SECTION 3.6
BANK ACCOUNTS. A bank account or bank accounts opened and maintained outside
the United States on behalf of a Fund with a Foreign Sub-Custodian shall be
subject only to draft or order by the Custodian or such Foreign Sub-Custodian,
acting pursuant to the terms of this Agreement to hold cash received by or from
or for the account of the Fund.
SECTION 3.7
COLLECTION OF INCOME. The Custodian shall use reasonable commercial efforts to
collect all income and other payments with respect to the foreign securities
held hereunder to which the Funds shall be entitled and shall credit such
income, as
<PAGE>
collected, to the applicable Fund. In the event that extraordinary measures are
required to collect such income, the Fund and the Custodian shall consult as to
such measures and as to the compensation and expenses of the Custodian relating
to such measures.
SECTION 3.8
PROXIES. With respect to the foreign securities held under this Section 3, the
Custodian will use reasonable commercial efforts to facilitate the exercise of
voting and other shareholder proxy rights, subject always to the laws,
regulations and practical constraints that may exist in the country where such
securities are issued. The Fund acknowledges that local conditions, including
lack of regulation, onerous procedural obligations, lack of notice and other
factors may have the effect of severely limiting the ability of the Fund to
exercise shareholder rights.
SECTION 3.9
COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian shall transmit
promptly to the Fund written information (including, without limitation,
pendency of calls and maturities of foreign securities and expirations of rights
in connection therewith) received by the Custodian in connection with the
foreign securities being held for the account of the Fund. With respect to
tender or exchange offers, the Custodian shall transmit promptly to the Fund
written information so received by the Custodian in connection with the foreign
securities whose tender or exchange is sought or from the party (or its agents)
making the tender or exchange offer.
SECTION 3.10
LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES SYSTEMS. Each
agreement pursuant to which the Custodian employs as a Foreign Sub-Custodian
shall, to the extent possible, require the Foreign Sub-Custodian to exercise
reasonable care in the performance of its duties and, to the extent possible, to
indemnify, and hold harmless, the Custodian from and against any loss, damage,
cost, expense, liability or claim arising out of or in connection with the
Foreign Sub-Custodian's performance of such obligations. At the Fund's
election, the Funds shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a Foreign Sub-Custodian as a
consequence of any such loss, damage, cost, expense, liability or claim if and
to the extent that the Funds have not been made whole for any such loss, damage,
cost, expense, liability or claim.
SECTION 3.11
TAX LAW. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as custodian
of the Funds by
<PAGE>
the tax law of the United States or of any state or political subdivision
thereof. It shall be the responsibility of the Fund to notify the Custodian of
the obligations imposed on the Fund or the Custodian as custodian of the Funds
by the tax law of countries set forth on Schedule A hereto, including
responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for exemption or
refund under the tax law of countries for which the Fund has provided such
information.
SECTION 4. PAYMENTS FOR REPURCHASES OR REDEMPTIONS AND SALES OF SHARES.
From such funds as may be available for the purpose, the Custodian shall,
upon receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares which have delivered to the Transfer Agent a
request for redemption or repurchase of their Shares. In connection with the
redemption or repurchase of Shares, the Custodian is authorized upon receipt of,
and in accordance with, instructions from the Transfer Agent to wire funds to or
through a commercial bank designated by the redeeming shareholders. In
connection with the redemption or repurchase of Shares, 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 written procedures and controls as may be
mutually agreed upon from time to time between the Fund and the Custodian.
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent and deposit to the account of the Fund such payments as are
received by the distributor or the Transfer Agent, as the case may be, for
Shares issued or sold from time to time. The Custodian will notify the Fund and
the Transfer Agent of any payments for Shares received by it from time to time.
SECTION 5. 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
entity or entities appointed by the Board to keep the books of account of the
Fund and/or compute the net asset value per Share of the outstanding Shares or,
if directed in writing
<PAGE>
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 (i)
calculate daily the net income of the Fund as described in the Prospectus and
shall advise the Fund and the Transfer Agent daily of the total amounts of such
net income, and/ or (ii) 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 described from time to time in the Prospectus.
SECTION 6. PROPER INSTRUCTIONS.
"Proper Instructions," as such term is used throughout this Agreement,
means either (i) a writing, including a facsimile transmission, signed by one or
more persons as set forth on, and in accordance with, an "Authorized Persons
List," as such term is defined herein (each such instruction a "Written Proper
Instruction"), (ii) a "Client Originated Electronic Financial Instruction," as
such term is defined in the Data Access Services Addendum hereto, given in
accordance with the terms of such Addendum, or (iii) instructions received by
the Custodian from a third party in accordance with any three-party agreement
which requires a segregated asset account in accordance with Section 2.11.
Each Written Proper Instruction shall set forth a brief description of the
type of transaction involved (choosing from among the types of transactions set
forth on the Authorized Persons List), including a specific statement of the
purpose for which such action is requested, and any modification to a Written
Proper Instruction must itself be a Written Proper Instruction and subject to
all the provisions herein relating to Written Proper Instructions. The Fund
will provide the Custodian with an "Authorized Persons List," which list shall
set forth (a) the names of the individuals (each an "Authorized Person") who are
authorized by the Board to give Written Proper Instructions with respect to the
transactions described therein, and (b) the number of Authorized Persons whose
signature or approval, as the case may be, is necessary for the Custodian to be
able to act in accordance with such Written Proper Instructions with respect to
a particular type of transaction. The Custodian may accept oral instructions or
instructions delivered via electronic mail as Proper Instructions if the
Custodian reasonably believes such instructions to have been given by an
Authorized Person or Persons (as appropriate to the type of transaction);
provided, however, that in no event will instructions delivered orally or via
electronic mail be considered Proper
<PAGE>
Instructions with respect to transactions involving the movement of cash,
securities or other assets of a Fund. The Custodian shall be entitled to rely
upon instructions given in accordance with an Authorized Persons List until it
actually receives written notice from the Board of the applicable Fund to the
contrary.
SECTION 7. EVIDENCE OF AUTHORITY.
Subject to Section 9 hereof, 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. The Custodian may receive
and accept a copy of a vote of the Board, certified by the secretary or an
assistant secretary of the applicable 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 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.
SECTION 8. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY.
The Custodian may in its discretion and without express authority from the
Fund:
1)
make payments to itself or others for minor expenses of handling
investments or other similar items relating to its duties under this
Agreement, provided that all such payments shall be accounted for to
the Fund;
2) surrender investments in temporary form for investments in definitive
form;
3) endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other
dealings with the investments and property of the Fund except as
otherwise directed by the Board.
SECTION 9. RESPONSIBILITY OF CUSTODIAN.
<PAGE>
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 Agreement 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,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. Notwithstanding anything to the
contrary herein, the Custodian shall be held to the exercise of reasonable care
in carrying out the provisions of this Agreement, and it 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 by the Custodian to indemnify or hold
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 reasonable care to identify, and notify
the Fund promptly concerning, any situation which presents or appears likely to
present the probability of such a claim for indemnification. The Fund shall
have the option to defend the Custodian against any claim which may be the
subject of a claim for indemnification hereunder, and in the event that the Fund
so elects, it will notify the Custodian thereof and, thereupon, (i) the Fund
shall take over complete defense of the claim and (ii) the Custodian shall
initiate no further legal or other expenses with respect to such claim. The
Custodian shall in no case confess any claim or make any compromise with respect
to any claim for which it will seek indemnity from the Fund 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 Agreement 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 other such counsel as agreed to by the parties)
on all matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice. The Custodian shall be entitled to rely
upon, and shall have no duty of inquiry with respect to, the accuracy of any
representation or warranty given to it by the Fund or any duly-authorized
employee or agent thereof, and shall be without liability for any action
reasonably taken or omitted by it in reliance thereon. Regardless of whether
assets held pursuant to this Agreement are maintained in the custody of a
foreign banking institution, a foreign securities depository, or a branch or
affiliate of a U.S. bank, the Custodian shall not be liable for any loss,
damage, cost, expense, liability
<PAGE>
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 Agreement 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,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. Notwithstanding anything to the
contrary herein, the Custodian shall be held to the exercise of reasonable care
in carrying out the provisions of this Agreement, and it 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 by the Custodian to indemnify or hold
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 reasonable care to identify, and notify
the Fund promptly concerning, any situation which presents or appears likely to
present the probability of such a claim for indemnification. The Fund shall
have the option to defend the Custodian against any claim which may be the
subject of a claim for indemnification hereunder, and in the event that the Fund
so elects, it will notify the Custodian thereof and, thereupon, (i) the Fund
shall take over complete defense of the claim and (ii) the Custodian shall
initiate no further legal or other expenses with respect to such claim. The
Custodian shall in no case confess any claim or make any compromise with respect
to any claim for which it will seek indemnity from the Fund 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 Agreement 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 other such counsel as agreed to by the parties)
on all matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice. The Custodian shall be entitled to rely
upon, and shall have no duty of inquiry with respect to, the accuracy of any
representation or warranty given to it by the Fund or any duly-authorized
employee or agent thereof, and shall be without liability for any action
reasonably taken or omitted by it in reliance thereon. Regardless of whether
assets held pursuant to this Agreement are maintained in the custody of a
foreign banking institution, a foreign securities depository, or a branch or
affiliate of a U.S. bank, the Custodian shall not be liable for any loss,
damage, cost, expense, liability
<PAGE>
If the Fund requires the Custodian to take any action with respect to
investments, which action involves the payment of money or which action may, in
the reasonable 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 Custodian, or any of its affiliates, subsidiaries or agents,
advances cash or investments to the Fund for any purpose (including but not
limited to securities settlements, foreign exchange contracts and assumed
settlement), 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 Agreement, 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
assets to the extent necessary to obtain reimbursement, provided that the
Custodian gives the Fund reasonable notice to repay such cash or securities
advanced, and provided further that such notice requirement shall not preclude
the Custodian's right to assert and execute on such lien.
Except as may arise from the Custodian's own negligence or willful
misconduct, or the negligence or willful misconduct of a subcustodian or agent
appointed by the Custodian, the Fund agrees to indemnify and hold the Custodian
harmless from and against any and all costs, expenses, losses, damages, charges,
reasonable counsel fees, payments and liabilities which may be asserted against
the Custodian (i) acting in accordance with any Proper Instruction, or (ii) for
any acts or omissions of CHASE MANHATTAN BANK N.A.
Notwithstanding any provision herein to the contrary, to the extent the
Custodian is found to be liable hereunder for any loss, liability, claim,
expense or damage, the Custodian shall be liable only for such loss, liability,
claim, expense or damage which was reasonably foreseeable.
<PAGE>
SECTION 10. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT.
This Agreement shall become effective as of the date of its execution,
shall continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties hereto,
and may be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect not
sooner than thirty (30) days after the date of such delivery or mailing in the
case of a termination by the Fund, and not sooner than one hundred eighty (180)
days after the date of such delivery or mailing in the case of termination by
the Custodian; provided, however that the Custodian shall not act under Section
2.9 hereof in the absence of receipt of an initial certificate of a Fund's
secretary, or an assistant secretary thereof, that the Board has approved the
initial use of a particular U.S. Securities System, as required by the 1940 Act
or any applicable Rule thereunder, and that the Custodian shall not act under
Section 2.10 hereof in the absence of receipt of an initial certificate of a
Fund's secretary, or an assistant secretary thereof, that the Board has approved
the initial use of the Direct Paper System; provided further, however, that the
Fund shall not amend or terminate this Agreement in contravention of any
applicable federal or state regulations, or any provision of the Fund's articles
of incorporation, agreement of trust, by-laws and/or registration statement (as
applicable, the "GOVERNING DOCUMENTS"); and further provided that the Fund may
at any time by action of its Board (i) substitute another bank or trust company
for the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for the Custodian by the United States 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 Agreement, 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 reasonable 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, such approval not to be unreasonably withheld.
<PAGE>
SECTION 11. SUCCESSOR CUSTODIAN.
If a successor custodian shall be appointed by the Board, the Custodian
shall, upon termination, deliver to such successor custodian at the offices of
the Custodian, duly endorsed and in the form for transfer, all investments and
other properties then held by it hereunder, and shall transfer to an account of
the successor custodian all of the Fund's investments held in a Securities
System. If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a copy of a vote of the Board, certified by the
secretary or an assistant secretary of the applicable Fund, deliver at the
offices of the Custodian and transfer such investments, 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 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 1940 Act, doing
business in Boston, Massachusetts, or New York, New York, of its own selection
and having an aggregate capital, surplus, and undivided profits, as shown by its
last published report, of not less than $100,000,000, all property held by the
Custodian under this Agreement and to transfer to an account of such successor
custodian all of the Fund's investments held in any Securities System;
thereafter, such bank or trust company shall be the successor of the Custodian
under this Agreement.
In the event that any property held pursuant to this Agreement remains 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 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 property, and the provisions of this Agreement relating to
the duties and obligations of the Custodian shall remain in full force and
effect.
SECTION 12. GENERAL.
SECTION 12.1
COMPENSATION OF CUSTODIAN. The Custodian shall be entitled to compensation for
its services and reimbursement of its expenses as Custodian as agreed upon from
time to time between the Fund and the Custodian.
<PAGE>
SECTION 12.2
MASSACHUSETTS LAW TO APPLY. This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with laws of The
Commonwealth of Massachusetts.
SECTION 12.3
RECORDS. The Custodian shall create and maintain all records relating to its
activities and obligations under this Agreement in such manner as will meet the
obligations of the Fund under the 1940 Act, with particular attention to Section
31 thereof and Rules 31a-1 and 31a-2 thereunder. 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 by duly authorized officers, employees or
agents of the Fund and employees and agents of the SEC. The Custodian shall, at
the Fund's request, supply the Fund with a tabulation of investments owned by
the Fund and held by the Custodian hereunder, and shall, when requested to do so
by an officer of the Fund, and for such compensation as shall be agreed upon
between the Fund and the Custodian, include certificate numbers in such
tabulations.
SECTION 12.4
OPINION OF FUND'S INDEPENDENT ACCOUNTANT. The Custodian shall take all
reasonable action as the Fund may from time to time request to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the preparation of the Fund's
Form N-1A, the preparation of the Fund's Form N-SAR, the preparation of any
other annual reports to the SEC with respect to the Fund, and with respect to
any other requirements of the SEC.
SECTION 12.5
INTERPRETIVE AND ADDITIONAL PROVISIONS. In connection with the operation of
this Agreement, the Custodian and the Fund may from time to time agree 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 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. No interpretive
or additional provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Agreement.
SECTION 12.6
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
<PAGE>
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, upon request, furnish to the Fund a copy of each such bond and each
amendment thereto.
SECTION 12.7
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.
SECTION 12.8
EXEMPTION FROM LIEN. Except as set forth in Section 9 hereof, the securities
and other assets held by the Custodian hereunder shall not be subject to lien or
charge of any kind in favor of the Custodian or any person claiming through the
Custodian. 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.
SECTION 12.9
ASSIGNMENT. This Agreement may not be assigned by either party without the
written consent of the other, except that either party may assign its rights and
obligations hereunder to a party controlling, controlled by, or under common
control with such party.
SECTION 12.10 PRIOR AGREEMENTS. Without derogating the rights established
thereunder prior to the date of this Agreement, this Agreement supersedes and
terminates, as of the date hereof, all prior agreements between the Fund and the
Custodian relating to the custody of Fund assets.
SECTION 12.11 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all such
counterparts taken together shall constitute but one and the same Agreement.
<PAGE>
SECTION 12.12 NOTICES. Any notice, instruction or other instrument
required to be given hereunder may be delivered in person to the offices of the
parties as set forth herein during normal business hours or delivered prepaid
registered mail or by telex, cable or telecopy to the parties at the following
addresses or such other addresses as may be notified by any party from time to
time.
To any Fund: c/o T. ROWE PRICE ASSOCIATES, INC.
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Carmen Deyesu
Telephone: 410-345-6658
Telecopy: 410-685-8827/8830
To the Custodian: STATE STREET BANK AND TRUST COMPANY
1776 Heritage Drive
North Quincy, Massachusetts 02171, U.S.A.
Attention: Carol C. Ayotte
Telephone: 617-985-6894
Telecopy: 617-537-6321
Such notice, instruction or other instrument shall be deemed to have been
served in the case of a registered letter at the expiration of five business
days after posting, in the case of cable twenty-four hours after dispatch and,
in the case of telex, immediately on dispatch and if delivered outside normal
business hours it shall be deemed to have been received at the next time after
delivery when normal business hours commence and in the case of cable, telex or
telecopy on the business day after the receipt thereof. Evidence that the
notice was properly addressed, stamped and put into the post shall be conclusive
evidence of posting.
SECTION 12.13 ENTIRE AGREEMENT. This Agreement (including all schedules,
appendices, exhibits and attachments hereto) constitutes the entire Agreement
between the parties with respect to the subject matter hereof.
SECTION 12.14 HEADINGS NOT CONTROLLING. Headings used in this Agreement
are for reference purposes only and shall not be deemed a part of this
Agreement.
SECTION 12.15 SURVIVAL. All provisions regarding indemnification,
confidentiality, warranty, liability and limits thereon shall survive following
the expiration or termination of this Agreement.
<PAGE>
SECTION 12.16 SEVERABILITY. In the event any provision of this Agreement
is held illegal, void or unenforceable, the balance shall remain in effect.
SECTION 12.17 THE PARTIES. All references herein to the "Fund" are to each
of the funds listed on Appendix A hereto individually, as if this Agreement 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 Agreement to "the parties"
shall mean the Custodian and such other individual Fund as to which the matter
pertains. Each Fund hereby represents and warranties that (i) it has the
requisite power and authority under applicable laws and its Governing Documents
to enter into and perform this Agreement, (ii) all requisite proceedings have
been taken to authorize it to enter into and perform this Agreement, and (iii)
its entrance into this Agreement shall not cause a material breach or be in
material conflict with any other agreement or obligation of the Fund or any law
or regulation applicable to it.
SECTION 12.18 DIRECTORS AND TRUSTEES. It is understood and is expressly
stipulated that neither the holders of Shares nor any member of the Board be
personally liable hereunder. Whenever reference is made herein to an action
required to be taken by the Board, such action may also be taken by the Board's
executive committee.
SECTION 12.19 MASSACHUSETTS BUSINESS TRUST. 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 of such trust, as the same may be
amended from time to time (the "DECLARATION OF TRUST"). It is expressly agreed
that the obligations of any such Fund hereunder shall not be binding upon any of
the trustees, shareholders, nominees, officers, agents or employees of the Fund
personally, but bind only the trust property of the Fund as set forth in the
applicable Declaration of Trust. In the case of each Fund which is a
Massachusetts business trust (in each case, a "TRUST"), the execution and
delivery of this Agreement on behalf of the Trust has been authorized by the
trustees, and signed by an authorized officer, of the Trust, in each case acting
in such capacity and not individually, and neither such authorization by the
trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them
<PAGE>
individually, but shall bind only the trust property of the Trust as provided in
its Declaration of Trust.
SECTION 12.20 REPRODUCTION OF DOCUMENTS. This Agreement and all schedules,
exhibits, attachments and amendments hereto may be reproduced by any
photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process. The parties hereto all/each agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
SECTION 12.21 SHAREHOLDER COMMUNICATIONS ELECTION. SEC Rule 14b-2 requires
banks which hold securities for the account of customers to respond to requests
by issuers of securities for the names, addresses and holdings of beneficial
owners of securities of that issuer held by the bank unless the beneficial owner
has expressly objected to disclosure of this information. In order to comply
with the rule, the Custodian needs the Fund to indicate whether it authorizes
the Custodian to provide the Fund's name, address, and share position to
requesting companies whose securities the Fund owns. If the Fund tells the
Custodian "no", the Custodian will not provide this information to requesting
companies. If the Fund tells the Custodian "yes" or does not check either "yes"
or "no" below, the Custodian is required by the rule to treat the Fund as
consenting to disclosure of this information for all securities owned by the
Fund or any funds or accounts established by the Fund. For the Fund's
protection, the Rule prohibits the requesting company from using the Fund's name
and address for any purpose other than corporate communications. Please
indicate below whether the Fund consents or objects by checking one of the
alternatives below.
YES [ ]
The Custodian is authorized to release the Fund's name, address,
and share positions.
NO [X]
The Custodian is not authorized to release the Fund's name,
address, and share positions.
<PAGE>
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
Addendum to the Custodian Agreement (as defined below) between each fund
listed on Appendix A to the Custodian Agreement, 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 Agreement (the "CUSTODIAN AGREEMENT")
dated as of January 28, 1998, 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 HORIZON/R/
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's 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 Addendum.
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 Addendum 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 HORIZON/R/ 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
<PAGE>
CONFIGURATION") or on any designated substitute or back-up equipment
configuration 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 Addendum 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 access the System to (i)
originate electronic instructions to State Street in order to (a) effect the
transfer or movement of cash or securities held under custody by State Street or
(b) transmit accounting or other information (the transactions described in
(i)(a) and (i)(b) above are referred to herein as "CLIENT ORIGINATED ELECTRONIC
FINANCIAL INSTRUCTIONS"), and (ii) access data for the purpose of reporting and
analysis, which shall all be deemed to be Data Access Services for purposes of
this Addendum.
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
Addendum. In the absence of any other written agreement concerning such
additional systems, the term "SYSTEM" shall include, and this Addendum 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 Addendum, 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
<PAGE>
and maintaining the Designated Configuration at the Designated Locations. State
Street and the Fund agree that each will engage or retain the services of
trained personnel to enable both parties to perform their respective obligations
under this Addendum. 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 Addendum, (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
<PAGE>
facilities or 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 Agreement.
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 Addendum. 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
<PAGE>
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 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 Addendum. 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
Addendum, 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 Addendum.
<PAGE>
5. LIMITATION ON LIABILITY
a.
Standard of Care and Limitation on Amount and Time for Bringing Action. State
- -------- -- ---- --- ---------- -- ------ --- ---- --- -------- ------
Street shall be held to a standard of reasonable care with respect to all of its
duties and obligations under this Addendum. 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. The foregoing limitation shall relate
solely to State Street's provision of the Data Access Services pursuant to this
Addendum and is not intended to limit State Street's responsibility to perform
in accordance with the Custodian Agreement, including its duty to act in
accordance with Proper Instructions. 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
<PAGE>
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 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 Addendum, 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 Addendum.
<PAGE>
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
(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 Addendum.
9. SUPPORT
During the term of this Addendum, State Street agrees to provide the
support services set out in Attachment D to this Addendum.
10. TERM
a.
Term. This Addendum 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. Either party may terminate this Addendum (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 Addendum 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 Addendum and the rights granted hereunder shall, at
the option of State Street, immediately terminate with notice to the Fund. This
Addendum shall in any event terminate as to any Fund within ninety (90) days
after the termination of the Custodian Agreement.
<PAGE>
c.
Termination of the Right to Use. Upon termination of this Addendum 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 Addendum 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 Addendum or the Custodian Agreement 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.
11. MISCELLANEOUS
a.Year 2000. State Street will take all steps necessary to ensure that its
---- ----
products (and those of its third-party suppliers) reflect the available state of
the art technology to offer products that are Year 2000 compliant, including,
but not limited to, century recognition of dates, calculations that correctly
compute same century and multi-century formulas and date values, and interface
values that reflect the date issues arising between now and the next one-hundred
years. If any changes are required, State Street will make the changes to its
products at no cost to the Fund and in a commercially reasonable time frame and
will require third-party suppliers to do likewise.
b.
Assignment; Successors. This Addendum 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 Addendum 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.
c.
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 Addendum.
d.
Entire Agreement. This Addendum 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
<PAGE>
be modified or altered except in a writing duly executed by the parties. This
Addendum is not intended to supersede or modify the duties and liabilities of
the parties hereto under the Custodian Agreement 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.
e. Severability.
------------
If any provision or provisions of this Addendum 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.
f.
Governing Law. This Addendum 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.
<PAGE>
ATTACHMENT A
MULTICURRENCY HORIZON/R/ ACCOUNTING SYSTEM
SYSTEM PRODUCT DESCRIPTION
I. The Multicurrency HORIZON/R/ 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. GlobalQuest/R/ GlobalQuest/R/ is designed to provide customer access to
the following information maintained on The Multicurrency HORIZON/R/ 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. HORIZON/R/ Gateway. HORIZON/R/ Gateway provides customers with the
ability to (i) generate reports using information maintained on the
Multicurrency HORIZON/R/ 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.
ATTACHMENT C
UNDERTAKING
(FUND ACCOUNTANTS)
<PAGE>
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 Agreement dated as of January 28, 1998 (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>
[The Fund Accountants]
By: ______________________________
Title: ______________________________
Date: ______________________________
<PAGE>
ATTACHMENT C-1
UNDERTAKING
(AUDITOR)
The undersigned understands that in the course of its employment as Auditor
to each fund listed on Appendix A (as amended from time to time) to that certain
Custodian Agreement dated as of January 28, 1998 (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>
[The Auditor]
By: ______________________________
Title: ______________________________
Date: ______________________________
<PAGE>
ATTACHMENT D
SUPPORT
During the term of this Addendum, State Street agrees to provide the
following on-going support services:
a.
Telephone Support. The Fund Designated Persons may contact State Street's
HORIZON/R/ 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
<PAGE>
modifications may be undertaken by State Street in its sole discretion in
accordance with the Fee Schedule.
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 Addendum.
In WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and on its behalf by its duly authorized representative as
of the date and year first written above.
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
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
<PAGE>
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 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market 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 SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE MID-CAP GROWTH 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 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>
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 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 DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
T. ROWE PRICE SMALL CAP STOCK FUND, INC.
T. Rowe Price Small Cap Stock Fund
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE TAX EFFICIENT BALANCED FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Government Reserve Investment Fund
Reserve Investment Fund
<PAGE>
SIGNATURE ATTESTED TO: EXECUTED ON BEHALF OF EACH FUND:
/s/Suzanne E. Fraunhoffer /s/Carmen Deyesu
By: _____________________ By:____________________
Name: Suzanne E. Fraunhoffer Name: Carmen Deyesu
Title: Legal Assistant Title: Treasurer for
each of the foregoing
SIGNATURE ATTESTED TO:
STATE STREET BANK AND TRUST COMPANY
/s/Glenn Ciotti /s/Ronald E. Logue
By: _____________________ By:____________________
Name: Glenn Ciotti Name: Ronald E. Logue
Title: VP & Assoc. Counsel Title: Executive Vice
President
<PAGE>
SCHEDULE A
COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
United Kingdom State Street Bank None;
and Trust Company The Bank of England,
The Central Gilts Office (CGO);
The Central Moneymarkets Office (CMO)
Euroclear (The Euroclear System)/ State Street London Limited
<PAGE>
APPENDIX A
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
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
<PAGE>
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 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market 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 SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE MID-CAP GROWTH 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 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 Mid-Cap Growth Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
<PAGE>
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 DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
T. ROWE PRICE SMALL CAP STOCK FUND, INC.
T. Rowe Price Small Cap Stock Fund
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE TAX EFFICIENT BALANCED FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Government Reserve Investment Fund
Reserve Investment Fund
<PAGE>
AMENDMENT NO. 1
CUSTODIAN AGREEMENT BETWEEN
STATE STREET BANK AND TRUST COMPANY
AND
THE T. ROWE PRICE FUNDS
The Custodian Agreement of January 28, 1998, between State Street Bank and Trust
Company, and each of the Parties listed on Appendix A thereto is hereby amended,
as of November 11, 1998, by adding thereto T. Rowe Price Index Trust, Inc., on
behalf of T. Rowe Price International Funds, Inc., on behalf of T. Rowe Price
International Growth & Income 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.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
<PAGE>
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 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market 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 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 Growth & Income Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
<PAGE>
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
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 REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
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 STOCK 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 Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
<PAGE>
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 INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE 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.
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 VALUE FUND, INC.
Attest:
/s/Patricia S. Lippert /s/Carmen F. Deyesu
______________________ ______________________________
Patricia S. Lippert, By: Carmen F. Deyesu
Secretary Treasurer
Attest: STATE STREET BANK AND TRUST COMPANY
/s/Glenn Ciotti /s/Ronald E. Logue
______________________ ______________________________
Glenn Ciotti, Vice By: Ronald E. Logue,
President & Assoc. Counsel Executive Vice President
The Transfer Agency and Service Agreement between T. Rowe Price Services,
Inc. and T. Rowe Price Funds, dated January 1, 1998, as amended.
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
between
T. ROWE PRICE SERVICES, INC.
and
EACH OF THE PARTIES INDICATED ON APPENDIX A
<PAGE>
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 5
3. Transfers 7
4. Confirmations 7
5. Returned Checks and ACH Debits 7
6. Redemption of Shares under Ten Day Hold 8
7. Dividends, Distributions and Other
Corporate Actions 10
8. Unclaimed Payments and Certificates 11
9. Books and Records 11
10. Authorized Issued and Outstanding Shares 14
11. Tax Information 14
12. Information to be Furnished to the Fund 14
13. Correspondence 15
14. Lost or Stolen Securities 15
15. Telephone Services 15
16. Collection of Shareholder Fees 16
17. Form N-SAR 16
18. Cooperation With Accountants 16
19. Blue Sky 16
20. Other Services 16
21. Fees and Out-of-Pocket Expenses 17
Article C Representations and Warranties of the Price
Services 19
Article D Representations and Warranties of the Fund 19
Article E Standard of Care/Indemnification 20
Article F Dual Interests 22
Article G Documentation 22
Article H References to Price Services 24
Article I Compliance with Governmental Rules and
Regulations 25
Article J Ownership of Software and Related Material 25
Article K Quality Service Standards 25
Article L As of Transactions 25
Article M Term and Termination of Agreement 29
Article N Notice 29
Article O Assignment 29
Article P Amendment/Interpretive Provisions 30
Article Q Further Assurances 30
Article R Maryland Law to Apply 30
Article S Merger of Agreement 30
<PAGE>
Article T Counterparts 30
Article U The Parties 30
Article V Directors, Trustees, Shareholders and Massachusetts
Business Trust 31
Article W Captions 31
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the first day of January, 1998, 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 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;
<PAGE>
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.
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.
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:
<PAGE>
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);
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;
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.
<PAGE>
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 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;
oFor 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 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;
<PAGE>
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;
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 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
<PAGE>
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 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 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
<PAGE>
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.
oAll 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 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.
<PAGE>
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.
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;
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;
<PAGE>
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;
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 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
<PAGE>
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.
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 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.
<PAGE>
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 relating
to lost, stolen or missing securities as may be mutually agreed upon by both
parties.
15. Telephone Services
Maintain a Telephone Servicing Staff of representatives ("Representatives")
sufficient to timely respond to all telephonic inquiries reasonably foreseeable.
The Representatives will also effect telephone purchases, redemptions,
exchanges, and other transactions mutually agreed upon by both parties, for
those Shareholders who have authorized telephone services. The Representatives
shall require each Shareholder effecting a telephone transaction to properly
identify himself/herself before the transaction is effected, in accordance with
procedures agreed upon between by both parties. Procedures for processing
telephone transactions will be mutually agreed upon by both parties. Price
Services will also be responsible for providing Tele*Access, PC*Access and such
other Services as may be offered by the Funds from time to time. Price Services
will maintain a special Shareholder Servicing staff to service certain
Shareholders with substantial relationships with the Funds.
<PAGE>
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.
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
<PAGE>
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.
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
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
<PAGE>
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:
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;
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;
<PAGE>
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 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>
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;"
othe 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
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.
<PAGE>
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 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
oAs 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;
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:
<PAGE>
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;
oA certified copy of each amendment to the Articles of Incorporation or
Declaration of Trust, and the By-Laws of the Fund;
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.
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
<PAGE>
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) 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 due to an
act or omission of Price Services. "As Of Processing" refers to the processing
of these Transactions. 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.
3.
With respect to any Transaction which causes Dilution to the Fund of $100,000 or
more, immediately provide the
<PAGE>
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.
2.
Where a Transaction causes Dilution to a Fund greater than $25,000 ("Significant
Transaction"), but less than $100,000, 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 significant 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
significant Transactions causing Dilution of $100,000 or more will not be
entered into until approved by the Board. The factors to consider in making any
determination regarding the settlement of a Significant Transaction would
include but not be limited to:
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;
<PAGE>
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".
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
oThis 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.
o
This Agreement may be terminated by the Fund upon one hundred twenty (120) days'
written notice to Price Services; and
<PAGE>
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.
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.
<PAGE>
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.
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.
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
<PAGE>
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.
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: ________________________
James S. Riepe Carmen F. Deyesu
DATED: ________________________ DATED: _______________________
<PAGE>
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 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.
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>
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 MEDIA & TELECOMMUNICATIONS FUND, INC.
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 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 REAL ESTATE FUND, INC.
<PAGE>
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
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 STOCK 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 INSURED INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE 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>
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>
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, 1998, between T. Rowe
Price Services, Inc., and each of the Parties listed on Appendix A thereto is
hereby amended, as of January 21, 1998, by adding thereto T. Rowe Price Index
Trust, Inc., on behalf of T. Rowe Price Extended Equity Market Index Fund and T.
Rowe Price Total Equity Market Index 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
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>
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 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market 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 MEDIA & TELECOMMUNICATIONS FUND, INC.
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.
<PAGE>
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
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 REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
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 STOCK 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>
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE 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.
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 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>
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, 1998, as amended January
21, 1998 between T. Rowe Price Services, Inc., and each of the Parties listed on
Appendix A thereto is hereby amended, as of October 30, 1998, by adding thereto
T. Rowe Price Prime Reserve Fund, Inc., on behalf of T. Rowe Price Prime Reserve
Fund--PLUS Class and T. Rowe Price Tax-Exempt Money Fund, Inc., on behalf of T.
Rowe Price Tax-Exempt Money Fund--PLUS Class.
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>
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 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market 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 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 MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
<PAGE>
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 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 Prime Reserve Fund--PLUS Class
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
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 STOCK 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 Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
<PAGE>
T. ROWE PRICE TAX-EFFICIENT BALANCED FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. Rowe Price Tax-Exempt Money Fund--PLUS Class
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE 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.
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 VALUE FUND, INC.
Attest:
/s/Patricia S. Lippert /s/Carmen F. Deyesu
______________________ ______________________________
Patricia S. Lippert, By: Carmen F. Deyesu
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>
AMENDMENT NO. 3
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, 1998, as amended January
21, 1998, and October 30, 1998 between T. Rowe Price Services, Inc., and each of
the Parties listed on Appendix A thereto is hereby amended, as of November 11,
1998, by adding thereto T. Rowe Price International Funds, Inc., on behalf of T.
Rowe Price International Growth & Income 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.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
<PAGE>
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 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market 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 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 Growth & Income Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
<PAGE>
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
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 Prime Reserve Fund--PLUS Class
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
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 STOCK 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 Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT BALANCED FUND, INC.
<PAGE>
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. Rowe Price Tax-Exempt Money Fund--PLUS Class
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE 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.
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 VALUE FUND, INC.
Attest:
/s/Patricia S. Lippert /s/Carmen F. Deyesu
______________________ ______________________________
Patricia S. Lippert, By: Carmen F. Deyesu
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
The Agreement between T. Rowe Price Associates, Inc. and T. Rowe Price
Funds for Fund Accounting Services, dated January 1, 1998, as amended.
<PAGE>
AGREEMENT
between
T. ROWE PRICE ASSOCIATES, INC.
and
THE T. ROWE PRICE FUNDS
for
FUND ACCOUNTING SERVICES
<PAGE>
TABLE OF CONTENTS
Page
Article A Terms of Appointment/Duties of Price Associates 1
Article B Fees and Out-of-Pocket Expenses 3
Article C Representations and Warranties of Price Associates3
Article D Representations and Warranties of the Fund 4
Article E Ownership of Software and Related Material 4
Article F Quality Service Standards 4
Article G Standard of Care/Indemnification 4
Article H Dual Interests 7
Article I Documentation 7
Article J Recordkeeping/Confidentiality 7
Article K Compliance with Governmental Rules and
Regulations 8
Article L Terms and Termination of Agreement 8
Article M Notice 9
Article N Assignment 9
Article O Amendment/Interpretive Provisions 9
Article P Further Assurances 10
Article Q Maryland Law to Apply 10
Article R Merger of Agreement 10
Article S Counterparts 10
Article T The Parties 10
Article U Directors, Trustee and Shareholders and
Massachusetts Business Trust 10
Article V Captions 11
<PAGE>
AGREEMENT made as of the first day of January, 1998, 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:
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
<PAGE>
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 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 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
<PAGE>
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 serviced 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.
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
<PAGE>
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:
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;"
<PAGE>
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 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
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.
<PAGE>
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.
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
<PAGE>
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 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.
<PAGE>
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 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.
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.
<PAGE>
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 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
<PAGE>
only the trust property of the Trust as provided in its Declaration of Trust.
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 Younger, Jr. /s/Carmen F. Deyesu
BY: ____________________ BY: _____________________
Alvin Younger, Jr. Carmen F. Deyesu
DATED: __________________ DATED: _____________________
<PAGE>
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 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.
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>
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 MEDIA & TELECOMMUNICATIONS FUND, INC.
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 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 REAL ESTATE FUND, INC.
<PAGE>
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
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 STOCK 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 INSURED INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE 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>
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 VALUE FUND, INC.
<PAGE>
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, 1998, between T. Rowe
Price Associates, Inc. and each of the Parties listed on Appendix A thereto is
hereby amended, as of January 21, 1998, by adding thereto T. Rowe Price Index
Trust, Inc., on behalf of T. Rowe Price Extended Equity Market Index Fund and T.
Rowe Price Total Equity Market Index 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
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
<PAGE>
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 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market 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 MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
<PAGE>
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 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 REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
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 STOCK 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>
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 INSURED INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE 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.
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 VALUE FUND, INC.
<PAGE>
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>
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, 1998, as amended
January 21, 1998 between T. Rowe Price Associates, Inc. and each of the Parties
listed on Appendix A thereto is hereby further amended, as of October 30, 1998,
by adding thereto T. Rowe Price Prime Reserve Fund, Inc., on behalf of T. Rowe
Price Prime Reserve Fund--PLUS Class and T. Rowe Price Tax-Exempt Money Fund,
Inc., on behalf of T. Rowe Price Tax-Exempt Money Fund--PLUS Class.
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
<PAGE>
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 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market 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 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 MEDIA & TELECOMMUNICATIONS FUND, INC.
<PAGE>
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 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 REAL ESTATE FUND, INC.
T. Rowe Price Prime Reserve Fund--PLUS Class
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
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 STOCK 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>
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 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-Exempt Money Fund--PLUS Class
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE 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.
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 VALUE FUND, INC.
<PAGE>
Attest:
/s/Patricia S. Lippert /s/Carmen F. Deyesu
________________________ ______________________________
Patricia S. Lippert, By: Carmen F. Deyesu
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>
AMENDMENT NO. 3
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, 1998, as amended
January 21, 1998, and October 30, 1998 between T. Rowe Price Associates, Inc.
and each of the Parties listed on Appendix A thereto is hereby further amended,
as of November 11, 1998, by adding thereto T. Rowe Price International Funds,
Inc., on behalf of T. Rowe Price International Growth & Income 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
<PAGE>
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 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market 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 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 Growth & Income Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
<PAGE>
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 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 REAL ESTATE FUND, INC.
T. Rowe Price Prime Reserve Fund--PLUS Class
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
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 STOCK 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
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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 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-Exempt Money Fund--PLUS Class
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE 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.
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 VALUE FUND, INC.
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Attest:
/s/Patricia S. Lippert /s/Carmen F. Deyesu
________________________ ______________________________
Patricia S. Lippert, By: Carmen F. Deyesu
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
The Agreement between T. Rowe Price Retirement Plan Services, Inc. and
the Taxable Funds, dated January 1, 1998, as amended.
<PAGE>
AGREEMENT
between
T. ROWE PRICE RETIREMENT PLAN SERVICES, INC.
and
EACH OF THE PARTIES INDICATED ON APPENDIX A
<PAGE>
TABLE OF CONTENTS
Page
Article A Terms of Appointment 2
Article B Duties of RPS 2
1. Contributions - Retirement Plans and
Retirement Accounts 2
2. Retirement Plans - Redemptions to Cover
Distributions 3
3. Other Provisions 4
4. Exchanges 5
5. Books and Records 5
6. Tax Information 6
7. Other Information to be Furnished to the
Funds 6
8. Telephone 6
9. Correspondence 6
10. Prospectuses/Confirmation Statements 7
11. Proxies 7
12. Form N-SAR 7
13. Withholding 7
Article C Fee and Out-of-Pocket Expenses 7
1. Postage 8
2. Proxies 8
3. Communications 8
4. Record Retention 9
5. Disaster Recovery 9
Article D Representations and Warranties of RPS 9
Article E Representations and Warranties of the Fund 9
Article F Standard of Care/Indemnification 10
Article G Dual Interests 12
Article H Documentation 13
Article I Recordkeeping/Confidentiality 14
Article J Ownership of Software and Related Material 15
Article K As of Transactions 15
1. Reporting 15
2. Liability 16
Article L Term and Termination of Agreement 18
Article M Notice 19
Article N Assignment 19
Article O Amendment/Interpretive Provisions 19
Article P Further Assurances 19
Article Q Maryland Law to Apply 19
Article R Merger of Agreement 20
Article S Counterparts 20
<PAGE>
Article T The Parties 20
Article U Directors, Trustees and Shareholders and
Massachusetts Business Trust 20
Article V Captions 21
<PAGE>
AGREEMENT, made as of the first day of January, 1998, by and between T.
ROWE PRICE RETIREMENT PLAN SERVICES, INC., a Maryland corporation having its
principal office and place of business at 100 East Pratt Street, Baltimore,
Maryland 21202 ("RPS"), 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 Fund hereinafter
referred to as "the Fund") whose definition may be found in Article T;
WHEREAS, the Funds are named investment options under various tax-sheltered
plans, including, but not limited to, state and local government deferred
compensation plans, 403(b) plans, and profit sharing, thrift, 401(k) and money
purchase pension plans for self-employed individuals, professional partnerships
and corporations (collectively referred to as "Retirement Plans"); and the Fund
has determined that such investments of Retirement Plans in the Funds are in the
best long-term interest of the Funds;
WHEREAS, RPS has the capability of providing special services, on behalf of
the Fund, for the accounts of individuals ("Participants") participating in
these Retirement Plans ("Retirement Accounts");
WHEREAS, RPS 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 ("the '34 Act");
WHEREAS, RPS may subcontract or jointly contract with other parties on
behalf of the Funds to perform certain of the functions described herein, RPS
may also enter into, on behalf of the Funds, certain banking relationships to
perform various banking services, including, but not limited to, check deposits,
disbursements, automatic clearing house transactions ("ACH") and wire transfers.
Subject to guidelines mutually agreed upon by the Funds and RPS, excess
balances, if any, resulting from these banking relationships will be invested
and the income therefrom will be used to offset fees which would otherwise be
charged to the Funds under this Agreement;
WHEREAS, the Fund desires to contract with RPS to provide the functions and
services described herein in connection with the Retirement Plans and Retirement
Accounts;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
<PAGE>
A. Terms of Appointment
Subject to the terms and conditions set forth in this Agreement, the Fund
hereby employs and appoints RPS to perform the services and functions described
herein in connection with certain Retirement Plan and Retirement Accounts as
agreed upon by the parties.
B. Duties of RPS
RPS agrees that it will perform the following services:
1. Contributions - Retirement Plans and Retirement Accounts
After RPS has received monies from Retirement Plans and has determined
the proper allocation of such monies to the Retirement Accounts of Participants
based upon instructions received from Participants, Retirement Plans or their
designees, or Retirement Plan Administrator(s) ("Administrator(s)"), RPS will,
as a responsibility under the Agreement:
a.
In the case of a new Participant, establish and maintain a Retirement Account
for such Participant;
b.
Compute the number of shares of each Fund to which the Participant is entitled
in accordance with the price per share of such Fund as calculated and provided
by the Fund for orders received at that time and date, and purchase the
appropriate shares in each such Retirement Account;
c.
Calculate the aggregate of all purchases in the Retirement Accounts and transmit
the net purchase order to T. Rowe Price Services, Inc. ("Services") or directly
to the Fund, as the case may be, for purchase into an omnibus account
established in each Fund registered in RPS' or its affiliates' name as agent for
Retirement Plans or in the individual Retirement Plan's name ("Omnibus
Account"); and
d.
Transmit to Services, by wire, at a time mutually agreed upon by both parties,
the aggregate money allocated to coincide with the purchase order.
2. Retirement Plans - Redemptions to Cover Distributions.
After RPS has received instructions from the Administrator regarding
distributions to be made to Participants
<PAGE>
or their designated beneficiaries from Funds designated as investment options
under the Retirement Plan, RPS will, as a responsibility under the Agreement:
a.
Compute the number of shares to be redeemed from each such Retirement Account
for such distributions in accordance with the price per share of such Fund as
calculated and provided by the Fund for orders received in good order at that
time and date.
b.
After such computation, calculate the aggregate amount of all redemptions in the
Retirement Accounts.
c.
Transmit any net redemption order to Services or directly to the Fund, as the
case may be, for the Omnibus Account of each Fund. Services will wire proceeds
to RPS to coincide with the redemption order for each Omnibus Account. RPS will
Distribute to Participants or their designated beneficiaries the amount to be
disbursed.
d.
After RPS has received instructions from the Administrator regarding
disbursements to be made regarding the payment of fees due the Administrator, or
other persons including RPS, RPS will, as a responsibility under this Agreement:
i.
Compute the number of shares to be redeemed from each Retirement Account to pay
for such disbursements and the total number of all shares to be redeemed in
accordance with the price per share for order received in good order at that
time and date, of such Fund as calculated and provided by the Fund;
ii.
Inform Services, or the Funds directly, as the case may be, of the necessary
Shares to be redeemed from the Omnibus Account of the Funds to cover such
disbursements; and
iii.
Mail or wire to the Administrator or such other person as designated by the
Administrator the amount to be disbursed.
3. Other Provisions
a.
If any instruction tendered by an Administrator to purchase or redeem shares in
a Retirement Account is not satisfactory to RPS, RPS shall promptly notify the
Administrator of such fact together with the reason therefor;
b.
The authority of RPS to perform its responsibilities under Paragraph B(2) with
respect to each Fund shall be suspended
<PAGE>
upon RPS's receipt of notification from such Fund of the suspension of the
determination of the Fund's net asset value per share and shall remain suspended
until RPS receives proper notification from the Fund; and
c.
The Fund will promptly inform RPS of the declaration of any dividend or
distribution on account of the capital stock of any Fund so that RPS may
properly credit income and capital gain payments to each Retirement Account.
4. Exchanges
Effect exchanges of shares of the Funds in the Retirement Accounts
upon receipt of appropriate instructions from the Administrator and/or
Participant in accordance with the price per share of the Funds as calculated
and provided by the Fund for orders received in good order at that time and
date. Calculate and transmit a net purchase and redemption order to Services or
the Fund, as the case may be, for the Omnibus Account of each Fund. RPS will
transmit by wire the aggregate monies allocated to each Fund to Services to
coincide with any net purchase order or instruct Services to wire to it monies
from each Fund's Omnibus Account to coincide with any net redemption order.
5. Books and Records
RPS shall maintain records showing for each Retirement Plan or
Retirement Account, the following:
a. Names, addresses and tax identification numbers, when provided;
b. Number of shares held of each Fund;
c.
Historical information regarding the account of each Participant and/or
Retirement Plan, including dividends and capital gain distributions invested in
shares;
d.
Any instructions from a Participant or Administrator, including all forms
executed by a Participant with respect to elections with respect to payment
options in connection with the redemption of shares or distribution elections,
if applicable; and
e.
Any information required in order for RPS to perform the calculations
contemplated under this Agreement.
<PAGE>
Any such records maintained pursuant to Rule 31a-1 under the
Investment Company Act of 1940 ("the Act") will be preserved for the periods
prescribed in Rule 31a-2 thereunder. Disposition of such records after such
prescribed periods shall be as mutually agreed upon from time to time by RPS and
the Funds. The retention of such records, which may be inspected by the Fund at
reasonable times, shall be at the expense of the Funds. All records maintained
by RPS in connection with the performance of its duties under this Agreement
will remain the property of the Funds and, in the event of termination of this
Agreement, will be delivered to the Fund as of the date of termination of this
agreement or at such other time as may be mutually agreed upon.
6. Tax Information
RPS shall also prepare and file with appropriate federal and state
agencies, such information returns and reports as required by applicable Federal
statutes relating to redemptions effected in Retirement Accounts which
constitute reportable distributions. RPS will also prepare and submit to
Participants, such reports containing information as is required by applicable
Federal law.
7. Other Information to be Furnished to the Funds
RPS will furnish to the Fund, such information, including Participant
lists and statistical information as may be agreed upon from time to time
between RPS and the Fund. Permission of the Administrator may also be required.
8. Telephone
RPS will promptly respond to any telephone calls from Administrators
and/or Participants relating to the Retirement Accounts and/or questions
pertaining to the Funds.
9. Correspondence
RPS will promptly and fully answer correspondence from Administrators
and Participants relating to Retirement Accounts and transfer agent procedures,
and such other correspondence as may from time to time be mutually agreed upon
with the Funds. Copies of all correspondence will be retained by RPS in
accordance with applicable law.
<PAGE>
10. Prospectuses/Confirmation Statements
RPS will be responsible for mailing all confirmations and statements
of transactions, prospectuses, semi-annual and annual reports of the Funds and
other enclosures and mailings, as may be requested by the Funds or required by
applicable Federal law.
11. Proxies
As requested by the Funds, RPS shall assist in the mailing of proxy
cards and other material required to be mailed by the Fund in connection with
shareholder meetings of the Fund and shall assist in the receipt, examination
and tabulation of returned proxies and the certification of the vote to the
Fund.
12. Form N-SAR
RPS shall maintain such records, if any, as shall enable the Fund to
fulfill the requirements of Form N-SAR.
13. Withholding
The Fund and RPS shall agree to procedures to be followed with respect
to RPS's responsibilities in connection with compliance for federal withholding
on distributions to Participants from Retirement Accounts.
C. Fees and Out-of-Pocket Expenses
Each Fund shall pay to RPS for its services hereunder fees computed as set
forth in the Schedule attached hereto. Except as provided below, RPS will be
responsible for all expenses relating to the providing of services. Each Fund,
however, will reimburse RPS for the following out-of-pocket expenses and charges
incurred in providing services:
1.
Postage. The cost of postage and freight for mailing materials, including
confirmations and statements as well as Fund prospectuses and Fund shareholder
reports, to Participants, or their agents, including overnight delivery, UPS and
other express mail services and special courier services required to transport
mail between RPS locations and mail processing vendors.
2.
Proxies. The cost to mail proxy cards and other material supplied to it by the
Fund and costs related to the receipt,
<PAGE>
examination and tabulation of returned proxies and the certification of the vote
to the Fund.
3. Communications
a.
Print. The printed forms used internally and externally for documentation and
processing Participant, or their agent's, inquiries and requests; paper and
envelope supplies for letters, notices, and other written communications sent to
Administrators and Participants, or their agents.
b.
Print & Mail House. The cost of internal and third party printing and mail
house services, including printing of statements and reports.
c.
Voice and Data. The cost of equipment (including associated maintenance),
supplies and services used for communicating with the Participants or their
Administrator, the Fund's transfer agent, other Fund offices, and other agents
of either the Fund or RPS. These charges shall include:
o
telephone toll charges (both incoming and outgoing, local, long distance and
mailgrams); and
o
data and telephone lines and associated equipment such as modems, multiplexers,
and facsimile equipment.
4.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.
5.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.
D. Representations and Warranties of RPS
RPS represents and warrants to the Fund that:
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.
<PAGE>
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 has and will continue to have access to the necessary facilities, equipment
and personnel to perform its duties and obligations under this Agreement.
6.
It is registered with the Securities and Exchange Commission as a Transfer Agent
pursuant to Section 17A of the '34 Act.
E. Representations and Warranties of the Fund
The Fund represents and warrants to RPS 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.
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.
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 filing have been made and will continue to be made, with respect to all
shares of the Fund being offered for sale.
F. Standard of Care/Indemnification
Notwithstanding anything to the contrary in this Agreement:
1. RPS shall not be liable to the 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
<PAGE>
this Agreement provided RPS 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 RPS harmless from and against all losses,
costs, damages, claims, actions and expenses, including reasonable expenses for
legal counsel, incurred by RPS resulting from: (i) any action or omission by RPS
or its agents or subcontractors in the performance of their duties hereunder;
(ii) RPS acting upon instructions reasonably believed by it to have been
executed by a duly authorized officer of the Fund; or (iii) RPS acting upon
information provided by the Fund in form and under policies agreed to by RPS and
the Fund. RPS shall not be entitled to such indemnification in respect of
actions or omissions constituting negligence or willful misconduct of RPS or
where RPS has not exercised reasonable care in selecting or monitoring the
performance of its agents or subcontractors.
3. Except as provided in Article K of this Agreement, RPS 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 negligence or willful misconduct of RPS or which result from RPS'
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 RPS.
4. In determining RPS' liability, an isolated error or omission will normally
not be deemed to constitute negligence when it is determined that:
o RPS had in place "appropriate procedures".
o
the employees 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 employees.
It is understood that RPS 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
<PAGE>
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
loss, cost, damage, claims, actions or expense resulting from such failure to
perform or otherwise from such causes.
6.
In order that the indemnification provisions contained in this Article F 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.
G. Dual Interests
It is understood that some person or persons may be directors, officers, or
shareholders of both RPS and the Fund 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.
H. Documentation
1.
As requested by RPS, the Fund shall promptly furnish to RPS the following:
<PAGE>
a.
A certified copy of the resolution of the Directors/ Trustees of the Fund
authorizing the appointment of RPS and the execution and delivery of this
Agreement;
b.
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;
c.
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
d.
A copy of the Fund's current and new prospectuses and shareholder reports issued
by the Fund.
The delivery of any such document to either party hereto for the purpose of
any other agreement to which the Fund and RPS are or were parties shall be
deemed to be delivery for the purposes of this Agreement.
2.
As requested by RPS, the Fund will also furnish to RPS from time to time the
following documents:
a.
Each resolution of the Board of Directors/Trustees of the Fund authorizing the
original issue of its shares;
b.
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;
c.
A certified copy of each amendment to the Articles of Incorporation or
Declaration of Trust, and the By-Laws of the Fund;
d.
Certified copies of each vote of the Board of Directors/Trustees authorizing
officers to give instructions to the Fund; and
e.
Such other documents or opinions which RPS, in its discretion, may reasonably
deem necessary or appropriate in the proper performance of its duties under this
Agreement.
3.
RPS hereby agrees to establish and maintain facilities and procedures reasonably
acceptable to the Fund for safekeeping
<PAGE>
of check forms and facsimile signature imprinting devices, if any, and for the
preparation or use, and for keeping account of, such forms and devices.
I. Recordkeeping/Confidentiality
1.
RPS shall keep records relating to the services to be performed hereunder, in
the form and manner as it may deem advisable, provided that RPS shall keep all
records in such form and in such manner as required by applicable law, including
the Act and the '34 Act.
2.
RPS 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 RPS or
the Fund may be exposed to civil or criminal contempt proceedings for failure to
comply; (b) when requested to divulge such information by duly constituted
governmental authorities; (c) after so requested by the other party hereto; or
(d) by the Administrator. The permission of the Administrator may be required
before disclosure is made to the Funds.
J. Ownership of Software and Related Material
All computer programs, magnetic tapes, written procedures and similar items
purchased and/or developed and used by RPS in performance of the Agreement shall
be the property of RPS and will not become the property of the Fund.
K. As Of Transactions
For purposes of this Article K, the term "Transaction" shall mean any
single or "related transaction" (as defined below) involving the purchase or
redemption of shares (including exchanges) 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 RPS due to an act or omission of
RPS. "As Of Processing" refers to the processing of these Transactions. 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.
<PAGE>
1. Reporting
RPS shall:
a.
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 hereinafter referred to as
"Cumulative."
b.
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.
c.
With respect to any Transaction which causes Dilution to the Fund of $100,000 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 RPS has or intends to take to
prevent the reoccurrence of such as of processing ("Report").
2. Liability
a.
It will be the normal practice of the Fund not to hold RPS liable with respect
to any Transaction which causes Dilution to any single Fund of less than
$25,000. RPS 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, RPS, in
consultation with counsel to the Fund, will make appropriate inquiry to
determine whether it should take any remedial action. RPS will report to the
Board of Directors/Trustees of the Fund ("Board"), as appropriate, any action it
has taken.
b.
Where a Transaction causes Dilution to a Fund greater than $25,000 ("Significant
Transaction") but less than $100,000, RPS will review with Counsel to the Fund
the circumstances surrounding the underlying Significant Transaction to
determine whether the Significant Transaction was caused by or occurred as a
result of a negligent act or omission by RPS. If it is determined that the
Dilution is the result of a negligent action or omission by RPS, RPS and outside
counsel for the Fund will negotiate
<PAGE>
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 Significant 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 Significant Transactions causing Dilution of $100,000 or more
will not be entered into until approved by the Board. The factors to consider in
making any determination regarding the settlement of a Significant Transaction
would include but not be limited to:
i.
Procedures and controls adopted by RPS to prevent As Of Processing;
ii.
Whether such procedures and controls were being followed at the time of the
Significant Transaction;
iii.
The absolute and relative volume of all transactions processed by RPS on the day
of the Significant Transaction;
iv.
The number of Transactions processed by RPS during prior relevant periods, and
the net Dilution/Gain as a result of all such Significant Transactions to the
Fund and to all other Funds; and
v.
The prior response of RPS to recommendations made by the Funds regarding
improvement to RPS's As Of Processing procedures.
c.In determining RPS' liability with respect to Significant Transaction, an
isolated error or omission will normally not be deemed to constitute negligence
when it is determined that:
o RPS had in place "appropriate procedures".
o
the employees 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 employees.
It is understood that RPS 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
<PAGE>
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.
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 Funds upon one hundred twenty (120)
days' prior written notice to RPS; and by RPS, upon three hundred sixty-five
(365) days' prior written notice to the Fund.
3.
Upon termination hereof, the Fund shall pay to RPS 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 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.
<PAGE>
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, RPS 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.
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 Schedule supersede any prior
agreement with respect to the subject hereof, whether oral or written.
S. Counterparts
This Agreement may be executed by the parties hereto in any number of
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
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 RPS. 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 Agreement to "the parties" shall mean RPS and
<PAGE>
such other individual Fund as to which the matter pertains. The "Fund" also
includes any T. Rowe Price Fund which may be established after the date of this
Agreement.
Any reference in this Agreement to "the parties" shall mean the Funds and
RPS.
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.
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.
<PAGE>
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 RETIREMENT PLAN T. ROWE PRICE FUNDS
SERVICES, INC.
/s/Charles E. Vieth /s/Carmen F. Deyesu
BY: ____________________ BY: ___________________
Charles E. Vieth Carmen F. Deyesu
DATED: ____________________ DATED: ___________________
<PAGE>
APPENDIX A
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH 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 FINANCIAL SERVICES FUND, INC.
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>
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 MEDIA & TELECOMMUNICATIONS FUND, INC.
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 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 REAL ESTATE 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 STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
<PAGE>
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International 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 SUMMIT FUNDS, INC. on behalf of:
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE VALUE FUND, INC.
<PAGE>
AMENDMENT NO. 1
AGREEMENT
BETWEEN
T. ROWE PRICE RETIREMENT PLAN SERVICES, INC.
AND
EACH OF THE PARTIES INDICATED ON APPENDIX A
The Retirement Plan Services Contract of January 1, 1998, between T. Rowe
Price Retirement Plan Services, Inc. and each of the Parties listed on Appendix
A thereto is hereby amended, as of January 21, 1998, by adding thereto T. Rowe
Price Index Trust, Inc., on behalf of T. Rowe Price Extended Equity Market Index
Fund and T. Rowe Price Total Equity Market Index Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH 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 FINANCIAL SERVICES FUND, INC.
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.
<PAGE>
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
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 MEDIA & TELECOMMUNICATIONS FUND, INC.
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 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 REAL ESTATE FUND, INC.
<PAGE>
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 STOCK 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 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.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA 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 RETIREMENT PLAN
SERVICES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
_____________________ ____________________________
Barbara A. Van Horn, By: Henry H. Hopkins,
Assistant Secretary Vice President
<PAGE>
AMENDMENT NO. 2
AGREEMENT
BETWEEN
T. ROWE PRICE RETIREMENT PLAN SERVICES, INC.
AND
EACH OF THE PARTIES INDICATED ON APPENDIX A
The Retirement Plan Services Contract of January 1, 1998, as amended January 21,
1998 between T. Rowe Price Retirement Plan Services, Inc. and each of the
Parties listed on Appendix A thereto is hereby further amended, as of October
30, 1998, by adding thereto T. Rowe Price Prime Reserve Fund, Inc., on behalf of
T. Rowe Price Prime Reserve Fund--PLUS Class.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE 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 FINANCIAL SERVICES FUND, INC.
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.
<PAGE>
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
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 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 MEDIA & TELECOMMUNICATIONS FUND, INC.
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 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 Prime Reserve Fund--PLUS Class
<PAGE>
T. ROWE PRICE REAL ESTATE 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 STOCK 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 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.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE VALUE FUND, INC.
Attest:
/s/Patricia S. Lippert /s/Carmen F. Deyesu
_____________________ _________________________
Patricia S. Lippert, By: Carmen F. Deyesu
Secretary Treasurer
Attest: T. ROWE PRICE RETIREMENT PLAN
SERVICES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
_____________________ ____________________________
Barbara A. Van Horn, By: Henry H. Hopkins,
Assistant Secretary Vice President
<PAGE>
AMENDMENT NO. 3
AGREEMENT
BETWEEN
T. ROWE PRICE RETIREMENT PLAN SERVICES, INC.
AND
EACH OF THE PARTIES INDICATED ON APPENDIX A
The Retirement Plan Services Contract of January 1, 1998, as amended January 21,
1998, and October 30, 1998 between T. Rowe Price Retirement Plan Services, Inc.
and each of the Parties listed on Appendix A thereto is hereby further amended,
as of November 11, 1998, by adding thereto T. Rowe Price International Funds,
Inc., on behalf of T. Rowe Price International Growth & Income Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE 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 FINANCIAL SERVICES FUND, INC.
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.
<PAGE>
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
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 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 Growth & Income Fund
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
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 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 Prime Reserve Fund--PLUS Class
<PAGE>
T. ROWE PRICE REAL ESTATE 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 STOCK 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 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.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE VALUE FUND, INC.
Attest:
/s/Patricia S. Lippert /s/Carmen F. Deyesu
_____________________ _________________________
Patricia S. Lippert, By: Carmen F. Deyesu
Secretary Treasurer
Attest: T. ROWE PRICE RETIREMENT PLAN
SERVICES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
_____________________ ____________________________
Barbara A. Van Horn, By: Henry H. Hopkins,
Assistant Secretary Vice President
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting the registration statement on Form N-1A (the
"Registration Statement") of our reports dated November 19, 1997, relating to
the financial statements and financial highlights appearing in the October 31,
1997 Annual Reports to the Shareholders of the T. Rowe Price International Stock
Fund, T. Rowe Price International Discovery Fund, T. Rowe Price European Stock
Fund, T. Rowe Price Japan Fund, T. Rowe Price New Asia Fund, T. Rowe Price Latin
America Fund, T. Rowe Price Emerging Markets Stock Fund, and T. Rowe Price
Global Stock Fund, eight of the funds comprising T. Rowe Price International
Funds, Inc., and Foreign Equity Fund, comprising the Institutional International
funds, Inc., which are incorporated by reference into the Registration
Statement. We also consent to the references to us under the heading
"Independent Accountants" in the Statement of Additional Information.
/s/PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Baltimore, Maryland
November 16, 1998
<PAGE>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 210,336
<INVESTMENTS-AT-VALUE> 249,333
<RECEIVABLES> 13,288
<ASSETS-OTHER> 1,049
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 263,670
<PAYABLE-FOR-SECURITIES> 366
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11,280
<TOTAL-LIABILITIES> 11,646
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 206,775
<SHARES-COMMON-STOCK> 13,940
<SHARES-COMMON-PRIOR> 15,795
<ACCUMULATED-NII-CURRENT> 117
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,218
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 38,913
<NET-ASSETS> 252,024
<DIVIDEND-INCOME> 1,457
<INTEREST-INCOME> 355
<OTHER-INCOME> 0
<EXPENSES-NET> 1,695
<NET-INVESTMENT-INCOME> 117
<REALIZED-GAINS-CURRENT> 6,195
<APPREC-INCREASE-CURRENT> 25,086
<NET-CHANGE-FROM-OPS> 31,398
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (3,754)
<PAGE>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 956
<NUMBER-OF-SHARES-REDEEMED> (3,048)
<SHARES-REINVESTED> 237
<NET-CHANGE-IN-ASSETS> (2,406)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3,777
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,271
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,695
<AVERAGE-NET-ASSETS> 238,928
<PER-SHARE-NAV-BEGIN> 16.11
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 2.21
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.25)
<RETURNS-OF-CAPITAL> 0
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<PAGE>
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<NAME> T. ROWE PRICE INTERNATIONAL STOCK FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 7,790,560
<INVESTMENTS-AT-VALUE> 10,608,316
<RECEIVABLES> 2,950,287
<ASSETS-OTHER> 2,444
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,561,047
<PAYABLE-FOR-SECURITIES> 17,247
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,837,128
<TOTAL-LIABILITIES> 2,854,375
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,769,506
<SHARES-COMMON-STOCK> 696,515
<SHARES-COMMON-PRIOR> 707,704
<ACCUMULATED-NII-CURRENT> 61,900
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 57,740
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,817,527
<NET-ASSETS> 10,706,673
<DIVIDEND-INCOME> 100,487
<INTEREST-INCOME> 10,572
<OTHER-INCOME> 0
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T. ROWE PRICE INTERNATIONAL FUNDS, INC.
(on behalf of T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price Global Bond Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund)
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
(on behalf of Foreign Equity Fund)
T. ROWE PRICE INTERNATIONAL SERIES, INC.
(on behalf of T. Rowe Price International Stock Portfolio)
POWER OF ATTORNEY
RESOLVED, that each of the above listed Corporations (collectively the
"Corporations" and individually the "Corporation") and each of its directors do
hereby constitute and authorize, M. David Testa, 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.
<PAGE>
IN WITNESS WHEREOF, the Corporations have caused these presents to be
signed and the same attested by their Secretary, each thereunto duly authorized
by their Board of Directors, and each of the undersigned has hereunto set his
hand and seal as of the day set opposite his name.
/s/M. David Testa
By:________________________________
M. David Testa, Chairman of
the Board
April 22, 1998
Attest:
/s/Patricia S. Butcher
______________________________
Patricia S. Butcher, Secretary
(Signatures Continued)
<PAGE>
/s/M. David Testa
____________________________ Chairman of the Board April 22, 1998
M. David Testa (Principal Executive Officer)
/s/Martin G. Wade
____________________________ President and Director April 22, 1998
Martin G. Wade
/s/Carmen F. Deyesu
____________________________ Treasurer (Principal April 22, 1998
Carmen F. Deyesu Financial Officer)
/s/Anthony W. Deering
____________________________ Director April 22, 1998
Anthony W. Deering
/s/Donald W. Dick, Jr.
____________________________ Director April 22, 1998
Donald W. Dick, Jr.
/s/Paul M. Wythes
____________________________ Director April 22, 1998
Paul M. Wythes
<PAGE>
