<PAGE>
PAGE 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Section 240.14a-11(c) or
Section 240.14a-12
T. Rowe Price Growth & Income Fund, Inc.
_________________________________________________________________
(Name of Registrant as Specified in its Charter)
T. Rowe Price Growth & Income Fund, Inc.
_________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
_________________________________________________________
2) Aggregate number of securities to which transaction
applies:
_________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: (1)
_________________________________________________________
4) Proposed maximum aggregate value of transaction:
_________________________________________________________
1 Set forth the amount on which the filing fee is calculated and
state how it was determined.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing,
1) Amount previously paid:
_________________________________________________________
2) Form, schedule, or Registration Statement no.:
_________________________________________________________
3) Filing party:
PAGE 2
_________________________________________________________
4) Date filed:
_________________________________________________________
<PAGE>
PAGE 3
T. ROWE PRICE
_________________________________________________________________
T. Rowe Price Associates, Inc., 100 East Pratt Street, Baltimore,
MD 21202
James S. Riepe
Managing Director
Dear Shareholder:
All of the T. Rowe Price mutual funds will hold shareholder
meetings in 1994 to elect directors, ratify the selection of
independent accountants, and approve amendments to a number of
investment policies.
The T. Rowe Price funds are not required to hold annual
meetings each year if the only items of business are to elect
directors or ratify accountants. In order to save fund expenses,
most of the funds have not held annual meetings for a number of
years. There are, however, conditions under which the funds must
solicit shareholder approval of directors, and one is to comply
with a requirement that a minimum number have been elected by
shareholders, not appointed by the funds' boards. Since the last
annual meetings of the T. Rowe Price funds, several directors
have retired and new directors have been added. In addition, a
number of directors will be retiring in the near future.
Given this situation, we believed it appropriate to hold
annual meetings for all the T. Rowe Price funds in 1994. At the
same time, we reviewed the investment policies of all of the
funds for consistency and to assure the portfolio managers have
the flexibility they need to manage your money in today's fast
changing financial markets. The changes being recommended, which
are explained in detail in the enclosed proxy material, do not
alter the funds' investment objectives or basic investment
programs.
In many cases the proposals are common to several funds, so
we have combined certain proxy statements to save on fund
expenses. For those of you who own more than one of these funds,
the combined proxy may also save you the time of reading more
than one document before you vote and mail your ballots. The
proposals which are specific to an individual fund are easily
identifiable on the Notice and in the proxy statement discussion.
If you own more than one fund, please note that each fund has a
separate card. You should vote and sign each one, then return
all of them to us in the enclosed postage-paid envelope.
Your early response will be appreciated and could save your
fund the substantial costs associated with a follow-up mailing.
We know we are asking you to review a rather formidable proxy
statement, but this approach represents the most efficient one
for your fund as well as for the other funds. Thank you for your
cooperation. If you have any questions, please call us at 1-800-
225-5132.
Sincerely,
James S. Riepe
Director, Mutual Funds Division
CUSIP# 779551 10 0/FUND# 054
<PAGE>
PAGE 4
T. ROWE PRICE GROWTH & INCOME FUND, INC.
Notice of Meeting of Shareholders
April 20, 1994
The Annual Meeting of Shareholders of the T. Rowe Price
Growth & Income Fund, Inc. (the "Fund"), a Maryland corporation,
will be held on Wednesday, April 20, 1994, at 9:30 o'clock a.m.,
Eastern time, at the offices of the Fund, 100 East Pratt Street,
Baltimore, Maryland 21202. The following matters will be acted
upon at that time:
1. To elect 11 directors to serve until the next annual
meeting, if any, or until their successors shall have
been duly elected and qualified;
2. A. To amend the Fund's fundamental policies to
increase its ability to engage in borrowing
transactions;
B. To amend the Fund's fundamental policies on
investing in commodities and futures contracts to
permit greater flexibility in futures trading;
C. To amend the Fund's fundamental policies to
increase its ability to engage in lending
transactions;
D. To amend the Fund's fundamental policies to
increase the percentage of Fund assets which may be
invested in the securities of any single issuer;
E. To amend the Fund's fundamental policies to permit
the Fund to purchase more than 10% of an issuer's
voting securities;
F. To amend the Fund's fundamental policies concerning
real estate;
G. To adopt a fundamental policy on the issuance of
senior securities;
H. To change from a fundamental to an operating policy
the Fund's policy on control of portfolio
companies;
I. To change from a fundamental to an operating policy
the Fund's policy on investing in other investment
companies;
CUSIP#779551100/fund#054
PAGE 5
J. To change from a fundamental to an operating policy
the Fund's policy on purchasing securities on
margin;
K. To change from a fundamental to an operating policy
the Fund's policy on pledging assets;
L. To change from a fundamental to an operating policy
the Fund's policy on investing in oil and gas
programs;
M. To change from a fundamental to an operating policy
the Fund's policy on investing in options;
N. To change from a fundamental to an operating policy
the Fund's policy on ownership of portfolio
securities by officers and directors;
O. To change from a fundamental to an operating policy
the Fund's policy on purchasing illiquid
securities;
P. To change from a fundamental to an operating policy
the Fund's policy on short sales;
Q. To change from a fundamental to an operating policy
the Fund's policy on unseasoned issuers;
R. To change from a fundamental to an operating policy
the Fund's policy on investing in warrants;
3. To amend the Fund's Articles of Incorporation to delete
the policy on pricing securities;
4. To ratify or reject the selection of the firm of Price
Waterhouse as the independent accountants for the Fund
for the fiscal year 1994; and
5. To transact such other business as may properly come
before the meeting and any adjournments thereof.
LENORA V. HORNUNG
Secretary
March 8, 1994
100 East Pratt Street
Baltimore, Maryland 21202
<PAGE>
PAGE 6
_________________________________________________________________
YOUR VOTE IS IMPORTANT
Shareholders are urged to designate their choices on each of the
matters to be acted upon and to date, sign, and return the
enclosed proxy in the envelope provided, which requires no
postage if mailed in the United States. Your prompt return of
the proxy will help assure a quorum at the meeting and avoid the
additional Fund expense of further solicitation.
_________________________________________________________________
<PAGE>
PAGE 7
T. ROWE PRICE GROWTH & INCOME FUND, INC.
Meeting of Shareholders--April 20, 1994
PROXY STATEMENT
This statement is furnished in connection with the
solicitation of proxies by the T. Rowe Price Growth & Income
Fund, Inc. (the "Fund"), a Maryland corporation, for use at the
Annual Meeting of Shareholders of the Fund to be held on April
20, 1994, and at any adjournments thereof.
Shareholders are entitled to one vote for each full share,
and a proportionate vote for each fractional share, of the Fund
held as of the record date. Under Maryland law, shares owned by
two or more persons (whether as joint tenants, co-fiduciaries, or
otherwise) will be voted as follows, unless a written instrument
or court order providing to the contrary has been filed with the
Fund: (1) if only one votes, that vote will bind all; (2) if
more than one votes, the vote of the majority will bind all; and
(3) if more than one votes and the vote is evenly divided, the
vote will be cast proportionately.
In order to hold the meeting, a majority of the Fund's
shares entitled to be voted must have been received by proxy or
be present at the meeting. In the event that a quorum is present
but sufficient votes in favor of one or more of the Proposals are
not received by the time scheduled for the meeting, the persons
named as proxies may propose one or more adjournments of the
meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of
the shares present in person or by proxy at the session of the
meeting adjourned. The persons named as proxies will vote in
favor of such adjournment if they determine that such adjournment
and additional solicitation is reasonable and in the interests of
the Fund's shareholders.
The individuals named as proxies (or their substitutes) in
the enclosed proxy card (or cards if you have multiple accounts)
will vote in accordance with your directions as indicated thereon
if your proxy is received properly executed. You may direct the
proxy holders to vote your shares on a Proposal by checking the
appropriate box "For" or "Against," or instruct them not to vote
those shares on the Proposal by checking the "Abstain" box.
Alternatively, you may simply sign, date and return your proxy
card(s) with no specific instructions as to the Proposals. If
you properly execute your proxy card and give no voting
instructions with respect to a Proposal, your shares will be
voted for the Proposal. Any proxy may be revoked at any time
prior to its exercise by filing with the Fund a written notice of
revocation, by delivering a duly executed proxy bearing a later
date, or by attending the meeting and voting in person.
PAGE 8
Abstentions and "broker non-votes" (as defined below) are
counted for purposes of determining whether a quorum is present,
but do not represent votes cast with respect to any Proposal.
"Broker non-votes" are shares held by a broker or nominee for
which an executed proxy is received by the Fund, but are not
voted as to one or more Proposals because instructions have not
been received from the beneficial owners or persons entitled to
vote and the broker or nominee does not have discretionary voting
power.
VOTE REQUIRED: A PLURALITY OF ALL VOTES CAST AT THE
MEETING IS SUFFICIENT TO APPROVE PROPOSAL 1 FOR THE FUND. A
MAJORITY OF THE SHARES PRESENT IN PERSON OR BY PROXY AT THE
MEETING IS SUFFICIENT TO APPROVE PROPOSAL 4 FOR THE FUND.
APPROVAL OF PROPOSAL 3 REQUIRES THE AFFIRMATIVE VOTE OF THE
HOLDERS OF A MAJORITY OF THE FUND'S OUTSTANDING SHARES. APPROVAL
OF ALL REMAINING PROPOSALS OF THE FUND REQUIRES THE AFFIRMATIVE
VOTE OF THE HOLDERS OF THE LESSER OF (A) 67% OF THE SHARES
PRESENT AT THE MEETING IN PERSON OR BY PROXY, OR (B) A MAJORITY
OF THE FUND'S OUTSTANDING SHARES.
If the proposed amendments to the Fund's Articles of
Incorporation and fundamental investment policies are approved,
they will become effective on or about May 1, 1994. If any of
the proposed amendments to the Fund's Articles of Incorporation
or fundamental investment policies are not approved, they will
remain unchanged.
The costs of the meeting, including the solicitation of
proxies, will be paid by the Fund. Persons holding shares as
nominees will be reimbursed, upon request, for their reasonable
expenses in sending solicitation materials to the principals of
the accounts. In addition to the solicitation of proxies by
mail, directors, officers, and/or employees of the Fund or of its
investment manager, T. Rowe Price Associates, Inc. ("T. Rowe
Price"), may solicit proxies in person or by telephone.
The approximate date on which this Proxy Statement and form
of proxy is first being mailed to shareholders is March 8, 1994.
<PAGE>
PAGE 9
1. ELECTION OF DIRECTORS
The Fund's Board of Directors has nominated the ten
(10) persons listed below for election as directors, each to hold
office until the next annual meeting (if any) or his successor is
duly elected and qualified. With the exception of Messrs.
Bailey, Fagin, Lanier, Vos and Ms. Merriman, each of the nominees
is a member of the present Board of Directors of the Fund and has
served in that capacity since originally elected. A shareholder
using the enclosed proxy form can vote for all or any of the
nominees of the Board of Directors or withhold his or her vote
from all or any of such nominees. If the proxy card is properly
executed but unmarked, it will be voted for all of the nominees.
Each of the nominees has agreed to serve as a director if
elected; however, should any nominee become unable or unwilling
to accept nomination or election, the persons named in the proxy
will exercise their voting power in favor of such other person or
persons as the Board of Directors of the Fund may recommend.
There are no family relationships among these nominees.
<PAGE>
PAGE 10
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Year Owned, Shares
of Directly Beneficially
Original or Owned
Name, Address Election Indirectly, Directly
and Date of Birth Principal as as of as of
of Nominee Occupations(1) Director 1/31/94(2) 1/31/94
_________________________________________________________________
Leo C. Bailey Retired; Director of the,
3396 S. Placita following T. Rowe Price
Fabula Funds: Growth Stock,
Green Valley, New Era, Science &
AZ 85614 Technology, Index Trust
3/3/24 (since inception), Balanced
(since inception), Mid-Cap
Growth (since inception),
OTC (since inception),
Dividend Growth (since
inception), Blue Chip Growth
(since inception), International,
and Institutional International
(since inception)
*Stephen W. President and 1988
Boesel member of the
100 East Pratt Executive Committee
Street of the Fund; Managing
Baltimore, MD Director, T. Rowe
21202 Price Associates, Inc.
12/28/44
<PAGE>
PAGE 11
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Year Owned, Shares
of Directly Beneficially
Original or Owned
Name, Address Election Indirectly, Directly
and Date of Birth Principal as as of as of
of Nominee Occupations(1) Director 1/31/94(2) 1/31/94
_________________________________________________________________
Donald W. Dick, Partner, Overseas 1982
Jr. Partners, Inc., a
375 Park Avenue financial investment
Suite 3505 firm; formerly
New York, NY (6/65-3/89) Director
10152 and Vice President-
1/27/43 Consumer Products
Division, McCormick &
Company, Inc.,
international food
processors; Director/
Trustee, Waverly Press,
Inc. and the following
T. Rowe Price Funds/Trusts:
Growth Stock, New America
Growth, Capital Appreciation,
Balanced (since inception),
Mid-Cap Growth (since
inception), OTC (since
inception), Dividend Growth
(since inception), Blue Chip
Growth (since inception),
International, and Institutional
International (since inception)
David K. Fagin Chairman, Chief Executive
One Norwest Officer and Director, Golden
Center Star Resources, Ltd.;
1700 Lincoln formerly (1986-7/91)
Street President, Chief Operating
Suite 1950 Officer and Director,
Denver, CO Homestake Mining Company;
80203 Director/Trustee of the
4/9/38 following T. Rowe Price Funds/
Trusts: New Horizons, New Era,
Equity Income, Capital
Appreciation, Balanced (since
inception), Mid-Cap Growth
Fund (since inception), OTC
(since inception), Dividend
Growth (since inception), and
PAGE 12
Blue Chip Growth (since
inception)
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Year Owned, Shares
of Directly Beneficially
Original or Owned
Name, Address Election Indirectly, Directly
and Date of Birth Principal as as of as of
of Nominee Occupations(1) Director 1/31/94(2) 1/31/94
_________________________________________________________________
Addison Lanier Financial
441 Vine Street, management; President
#2310 and Director, Thomas
Cincinnati, OH Emery's Sons, Inc. and
45202-2913 Emery Group, Inc.;
1/12/24 Director/Trustee, Scinet
Development and Holdings,
Inc. and the following T.
Rowe Price Funds/Trusts: New
America Growth, Equity Income,
Small-Cap Value, Balanced (since
inception), Mid-Cap Growth (since
inception), OTC (since inception),
Dividend Growth (since inception),
Blue Chip Growth (since inception),
International, and Institutional
International (since inception)
John K. Major Chairman of the 1982
126 E. 26 Place Board and President,
Tulsa, OK KCMA Incorporated,
74114-2422 Tulsa, Oklahoma;
8/3/24 Director/Trustee of the
following T. Rowe Price
Funds/Trusts: Growth Stock,
New Horizons, New Era,
Capital Appreciation,
Science & Technology,
Balanced (since inception),
Mid-Cap Growth (since
inception), OTC (since
inception), Dividend Growth
(since inception), and
Blue Chip Growth (since
inception)
<PAGE>
PAGE 13
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Year Owned, Shares
of Directly Beneficially
Original or Owned
Name, Address Election Indirectly, Directly
and Date of Birth Principal as as of as of
of Nominee Occupations(1) Director 1/31/94(2) 1/31/94
_________________________________________________________________
Hanne M. Retail business consultant;
Merriman formerly, President and
655 15th Street Chief Operating officer
Suite 300 (1991-92), Nan Duskin,
Washington, Inc., a women's specialty
D.C. 20005 store, Director (1984-90)
11/16/41 and Chairman (1989-90) Federal
Reserve Bank of Richmond, and
President and Chief Executive Officer
(1988-89), Honeybee, Inc.,
a division of Spiegel, Inc.;
Director, Central Illinois
Public Service Company, CIPSCO
Incorporated, The Rouse Company,
State Farm Mutual Automobile
Insurance Company and USAir
Group, Inc.
*James S. Riepe Chairman of the 1982
100 East Pratt Board and member
Street of the Executive
Baltimore, MD Committee of the
21202 Fund; Managing
6/25/43 Director, T. Rowe
Price Associates, Inc.;
President and Director,
T. Rowe Price Investment
Services, Inc.; Chairman
of the Board, T. Rowe
Price Services, Inc., T.
Rowe Price Trust Company,
T. Rowe Price Retirement
Plan Services, Inc., and the
following T. Rowe Price Funds:
Spectrum (since inception),
Balanced (since inception),
and Mid-Cap Growth (since
inception); Vice President of
the following T. Rowe Price
Funds/Trusts: New Era, New America
Growth, Prime Reserve,
PAGE 14
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Year Owned, Shares
of Directly Beneficially
Original or Owned
Name, Address Election Indirectly, Directly
and Date of Birth Principal as as of as of
of Nominee Occupations(1) Director 1/31/94(2) 1/31/94
_________________________________________________________________
International, and
Institutional International
(since inception); Vice President
and Director/Trustee of the 24
other T. Rowe Price Funds/Trusts;
Director, T. Rowe Price Tax-Free
Insured Intermediate Bond Fund,
Inc. (since inception) and
Rhone-Poulenc Rorer, Inc.
*M. David Testa Managing Director,
100 East Pratt T. Rowe Price
Street Associates, Inc.;
Baltimore, MD Chairman of the
21202 Board, Rowe Price-
4/22/44 Fleming International,
Inc. and the following T. Rowe
Price Funds: Growth Stock,
International, and Institutional
International (since inception);
Vice President and
Director, T. Rowe Price
Trust Company and T. Rowe
Price Balanced Fund, Inc.
(since inception); Director of
the following T. Rowe Price
Funds: Dividend Growth (since
inception) and Blue Chip Growth
(since inception); Vice President,
T. Rowe Price Spectrum
Fund, Inc. (since inception)
Hubert D. Vos President, Stonington
1231 State Capital Corporation, a
Street private investment company;
Suite 210 Director/Trustee of the following
Santa Barbara, T. Rowe Price Funds/Trust: New
CA Horizons, New Era, Equity Income,
93190-0409 Capital Appreciation, Science &
8/2/33 Technology, Small-Cap Value,
Balanced (since inception),
PAGE 15
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Year Owned, Shares
of Directly Beneficially
Original or Owned
Name, Address Election Indirectly, Directly
and Date of Birth Principal as as of as of
of Nominee Occupations(1) Director 1/31/94(2) 1/31/94
_________________________________________________________________
Mid-Cap Growth (since inception),
OTC (since inception), Dividend Growth
(since inception), and Blue Chip
Growth (since inception)
Paul M. Wythes Founding General 1982
755 Page Mill Partner, Sutter
Road Hill Ventures, a venture
Suite A200 capital limited partnership
Palo Alto, CA providing equity capital
94304 to young high technology
6/23/33 companies throughout the
United States; Director/Trustee,
Teltone Corporation,
Interventional Technologies,
Inc., Stuart Medical, Inc. and
the following T. Rowe Price Funds/
Trusts: New Horizons,
New America Growth, Science &
Technology, Small-Cap Value,
Index Trust (since inception),
Balanced (since inception),
Mid-Cap Growth (since inception),
OTC (since inception), Dividend
Growth (since inception), and
Blue Chip Growth (since inception)
*Nominees considered "interested persons" of T. Rowe Price.
(1) Except as otherwise noted, each individual has held the
office indicated, or other offices in the same company, for
the last five years.
(2) In addition to the shares owned beneficially and of record
by each of the nominees, the amounts shown reflect the
proportionate interests of Messrs. Boesel and Riepe in _____
shares of the Fund which are owned by a wholly-owned
subsidiary of the Fund's investment manager, T. Rowe Price,
and by a wholly-owned subsidiary of T. Rowe Price.<PAGE>
PAGE 16
The directors of the Fund who are officers or employees
of T. Rowe Price receive no remuneration from the Fund. For the
year 1993, Messrs. Dick, Major and Wythes were each paid a
director's fee by the Fund in accordance with the following fee
schedule: a fee of $25,000 per year as the initial fee for the
first Price Fund/Trust on which a director serves; a fee of
$5,000 for each of the second, third, and fourth Price
Funds/Trusts on which a director serves; a fee of $2,500 for each
of the fifth and sixth Price Funds/Trusts on which a director
serves; and a fee of $1,000 for each of the seventh and any
additional Price Funds/Trusts on which a director serves. For
the year ended December 31, 1993, this group of directors
received from the Fund directors' fees aggregating $25,564,
including expenses. Those nominees indicated by an asterisk (*)
are persons who, for purposes of Section 2(a)(19) of the
Investment Company Act of 1940 are considered "interested
persons" of T. Rowe Price. Each such nominee is deemed to be an
"interested person" by virtue of his officership, directorship
and/or employment with T. Rowe Price. Messrs. Dick, Major and
Wythes are the independent directors of the Fund.<PAGE>
PAGE 17
The Price Funds have established a Joint Audit
Committee, which is comprised of at least one independent
director representing each of the Funds. Messrs. Bailey and Vos,
directors of the Fund, are members of the Committee. The other
members are Anthony W. Deering and Lawrence P. Naylor, III.
These directors also receive a fee of $500 for each Committee
meeting attended. The Audit Committee holds two regular meetings
during each fiscal year, at which time it meets with the
independent accountants of the Price Funds to review: (1) the
services provided; (2) the findings of the most recent audit; (3)
management's response to the findings of the most recent audit;
(4) the scope of the audit to be performed; (5) the accountants'
fees; and (6) any accounting questions relating to particular
areas of the Price Funds' operations or the operations of parties
dealing with the Price Funds, as circumstances indicate.
The Board of Directors of the Fund has an Executive
Committee which is authorized to assume all the powers of the
Board to manage the Fund, in the intervals between meetings of
the Board, except the powers prohibited by statute from being
delegated.
The Board of Directors of the Fund has a Nominating
Committee, which is comprised of all the Price Fund's independent
directors. The Nominating Committee, which functions only in an
advisory capacity, is responsible for reviewing and recommending
to the full Board candidates for election as independent
directors to fill vacancies on the Fund's Board of Directors.
The Nominating Committee will consider written recommendations
from shareholders for possible nominees. Shareholders should
submit their recommendations to the Secretary of the Fund.
Members of the Nominating Committee met informally during the
last full fiscal year, but the Committee as such held no formal
meetings.
The Board of Directors held seven meetings during the
last full fiscal year. With the exception of Mr. Major, each
director standing for reelection attended 75% or more of the
aggregate of (i) the total number of meetings of the Board of
Directors (held during the period for which he was a director)
and (ii) the total number of meetings held by all committees of
the Board on which he served.<PAGE>
PAGE 18
2. APPROVAL OR DISAPPROVAL OF CHANGES TO THE FUND'S FUNDAMENTAL
INVESTMENT POLICIES
The Investment Company Act of 1940 (the "1940 Act") requires
investment companies such as the Fund to adopt certain specific
investment policies that can be changed only by shareholder vote.
An investment company may also elect to designate other policies
that may be changed only by shareholder vote. Both types of
policies are often referred to as "fundamental policies."
Certain of the Fund's fundamental policies have been adopted in
the past to reflect regulatory, business or industry conditions
that are no longer in effect. Accordingly, the Fund's Board of
Directors has approved, and has authorized the submission to each
Fund's shareholders for their approval, the amendment and/or
reclassification of certain of the fundamental policies
applicable to the Fund.
The proposed amendments would (i) simplify and modernize the
limitations that are required to be fundamental by the 1940 Act
and (ii) eliminate as fundamental any limitations that are not
required to be fundamental by that Act. By reducing to a minimum
those limitations that can be changed only by shareholder vote,
the Fund would be able to minimize the costs and delay associated
with holding frequent annual shareholders' meetings. The
Directors also believe that T. Rowe Price's ability to manage the
Fund's assets in a changing investment environment will be
enhanced and that investment management opportunities will be
increased by these changes.
A. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY TO
INCREASE ITS ABILITY TO ENGAGE IN BORROWING TRANSACTIONS
Because the Fund may occasionally need to borrow money to meet
substantial shareholder redemption or exchange requests when
available cash is not sufficient to satisfy these needs, the Board
of Directors has proposed an amendment to the Fund's fundamental
policy which would permit the Fund greater flexibility to engage in
borrowing transactions. The current restriction is not required by
applicable law. The new restriction would (1) allow the Fund to
borrow larger amounts of money; (2) borrow from other Price Funds
or persons to the extent permitted by applicable law; and (3)
clarify that the Fund's restriction on borrowing does not prohibit
the Fund from entering into reverse repurchase agreements and other
proper investments and transactions. The new restriction would
also conform the Fund's policy on borrowing to one which is
expected to become standard for all T. Rowe Price mutual funds.
The Board believes that standardized policies will assist the Fund
and T. Rowe Price in monitoring compliance with the various
investment restrictions to which the T. Rowe Price mutual funds are
subject. The Board has directed that such proposals be submitted
to shareholders for approval or disapproval.
PAGE 19
The Fund's current fundamental policy in the area of borrowing
is as follows:
"[As a matter of fundamental policy, the Fund may not:] Borrow
money, except the Fund may borrow from banks as a temporary
measure for extraordinary or emergency purposes, and then only
from banks in amounts not exceeding 15% of its total assets
valued at market. The Fund will not borrow in order to
increase income (leveraging), but only to facilitate redemption
requests which might otherwise require untimely disposition of
portfolio securities (see page __ of prospectus). Interest
paid on any such borrowings will reduce net investment income.
The Fund may also enter into futures contracts as set forth in
[its fundamental policy on futures];"
As amended, the Fund's fundamental policy on borrowing would
be as follows:
"[As a matter of fundamental policy, the Fund may not:] 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."
If approved, the primary effect of the proposals would be to
allow the Fund to: (1) borrow up to 33 1/3% (or such higher amount
permitted by law) of its total assets (including the amount
borrowed) less liabilities (other than borrowings) as opposed to
the current limitation of 15%; (2) borrow from persons other than
banks including other mutual funds advised by T. Rowe Price or Rowe
Price-Fleming International, Inc. ("Price Funds"); and (3) enter
into reverse repurchase agreements and other investments consistent
with the Fund's investment objective and program.
33 1/3% Limitation
The increase in the amount of money which the Fund could borrow
is designed to allow the Fund greater flexibility to meet
shareholder redemption requests should the need arise. As is the
case under its current policy, the Fund would not borrow to
increase income through leveraging. It is possible the Fund's
ability to borrow a larger percentage of its assets could adversely
affect the Fund if the Fund were unable to liquidate sufficient
securities, or the Fund were forced to liquidate securities at
PAGE 20
unfavorable prices, to pay back the borrowed sums. However, the
Directors believe the risks of such possibilities are outweighed by
the greater flexibility the Fund would have in borrowing. The
increased ability to borrow should permit the Fund, if it were
faced with substantial shareholder redemptions, to avoid
liquidating securities at unfavorable prices or times to a greater
degree than would be the case under the current policy.
Borrowing From Other Price Funds
Current law prohibits the Fund from borrowing from other Price
Funds. However, if the proposed amendments to the Fund's
fundamental investment policy on borrowing are approved by
shareholders, the Fund may apply to the SEC for an exemption from
this prohibition. There is, of course, no assurance that the SEC
would act favorably on such a request. If the SEC did grant such
an order, the Fund could be allowed to borrow from other Price
Funds. T. Rowe Price believes that the ability to engage in
borrowing transactions with the participating Price Funds as part
of a program, referred to as the "interfund lending program," may
allow the Fund to obtain lower interest rates on money borrowed for
temporary or emergency purposes. Any existing Price Fund
participating in the interfund lending program would only do so
upon approval of its shareholders.
As noted above, when the Fund is required to borrow money, it
currently may do so only from banks. When the Fund borrows money
from banks, it typically pays interest on those borrowings at a
rate that is higher than rates available contemporaneously from
investments in repurchase agreements. If the proposed amendment is
approved, eligible Price Funds would be permitted to participate in
an interfund lending program to allow various of the Price Funds,
through a master loan agreement, to lend available cash to and
borrow from other Price Funds. Each lending fund could lend
available cash to another Price Fund only when the interfund rate
was higher than repurchase agreement rates or rates on other
comparable short-term investments. Each borrowing fund could
borrow through the interfund lending program only when the
interfund loan rate was lower than available bank loan rates.
In determining to recommend the proposed amendment to
shareholders for approval, T. Rowe Price and the Directors
considered the possible risks to the Fund from participation in the
interfund lending program. T. Rowe Price does not view the
difference in rates available on bank borrowings and repurchase
agreements or other short-term investments as reflecting a material
difference in the quality of the risk of the transactions, but
rather as an indication of the ability of banks to earn a higher
rate of interest on loans than they pay on repurchase agreements or
other short-term investments. There is a risk that a lending fund
could experience a delay in obtaining prompt repayment of a loan
and, unlike repurchase agreements, the lending fund would not
PAGE 21
necessarily have received collateral for its loan, although it
could require that collateral be provided as a condition for making
a loan. A delay in obtaining prompt payment could cause a lending
fund to miss an investment opportunity or to incur costs to borrow
money to replace the delayed payment. There is also a risk that a
borrowing fund could have a loan recalled on one day's notice. In
these circumstances, the borrowing fund might have to borrow from
a bank at a higher interest cost if money to lend were not
available from another Price Fund. The Directors consider that the
benefits to the Fund of participating in the program outweigh the
possible risks to the Fund from such participation.
In order to permit the Fund to engage in interfund lending
transactions, regulatory approval of the SEC is required because,
among other reasons, the transactions may be considered to be among
affiliated parties. If the proposed amendment is approved by
shareholders, the proposed interfund lending program would be
implemented only to the extent permitted by rule or by order of the
SEC and to the extent that the transactions were otherwise
consistent with the investment objectives and limitations of each
participating Price Fund. If exemptive relief from the SEC is not
granted, the Fund, as previously noted, will not be able to engage
in the interfund lending program even though shareholders have
approved the proposal. As noted, no prediction can be made as to
whether the SEC would grant such relief.
Shareholders are being asked to approve an amendment to the
Fund's fundamental policy on borrowing in this proposal.
Shareholders are also being asked to vote separately on an
amendment to the Fund's fundamental policy on lending (see page
___). If both amendments are adopted, the Fund, subject to its
investment objective and policies, will be able to participate in
the interfund lending program as both a lender and a borrower. If
only one of the two proposals is adopted, then the Fund's
participation in the interfund lending program will be confined to
either lending or borrowing, depending on which amendment is
approved.
The Directors believe the proposed amendment may benefit the
Fund by facilitating its flexibility to explore cost-effective
alternatives to satisfy its borrowing requirements and by borrowing
money from other Price Funds. Implementation of interfund
borrowing would be accomplished consistent with applicable
regulatory requirements, including the provisions of any order the
SEC might issue to the Fund and to other Price Funds.
Reverse Repurchase Agreements
To facilitate portfolio liquidity, it is possible the Fund
could enter into reverse repurchase agreements. Reverse repurchase
agreements are ordinary repurchase agreements in which a fund is a
seller of, rather than the investor in, securities, and agrees to
PAGE 22
repurchase them at an agreed upon time and price. Reverse
repurchase agreements can avoid certain market risks and
transaction costs associated with an outright sale and repurchase.
Reverse repurchase agreements, however, may be viewed as
borrowings. To the extent they are, the proposed amendment would
clarify that the Fund's restrictions on borrowing would not
prohibit the Fund from entering into a reverse repurchase
agreement.
Other Changes
The other proposed changes in the Fund's fundamental policy -
to allow the Fund to borrow from persons other than banks and other
Price Funds to the extent consistent with applicable law - and to
engage in transactions other than reverse repurchase agreements
which may involve a borrowing - are simply designed to permit the
Fund the greatest degree of flexibility permitted by law in
pursuing its investment program. All activities of the Fund are,
of course, subject to the 1940 Act and the rules and regulations
thereunder as well as various state securities laws.
The Board of Directors recommends that shareholders vote FOR
the proposal.
B. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL POLICIES ON INVESTING
IN COMMODITIES AND FUTURES CONTRACTS TO PROVIDE GREATER
FLEXIBILITY IN FUTURES TRADING
The Board of Directors has proposed amendments to the
Fundamental Investment Policies of the Fund to provide the Fund
with greater flexibility in buying and selling futures. The
provisions of the Fund's current fundamental investment policies in
this area are not required by applicable law and the Directors
believe the Fund's investment manager, T. Rowe Price, should have
greater flexibility to enter into futures contracts consistent with
the Fund's investment objective and program and as market and
regulatory developments require and permit without the necessity of
seeking further shareholder approval. The new restriction would
also conform the Fund's policy on commodities and futures to one
which is expected to become standard for all T. Rowe Price mutual
funds. The Board believes that standardized policies will assist
the Fund and T. Rowe Price in monitoring compliance with the
various investment restrictions to which the T. Rowe Price mutual
funds are subject. The Board has directed that such amendments be
submitted to shareholders for approval or disapproval.
The Fund's current fundamental policies in the area of
investing in commodities and futures are as follows:
Commodities
PAGE 23
"[As a matter of fundamental policy, the Fund may not:]
Purchase or sell commodities or commodity contracts; except
that it may enter into futures contracts, subject to [its
fundamental policy on futures];"
Futures Contracts
"[As a matter of fundamental policy, the Fund may not:] Enter
into a futures contract or options thereon if, as a result
thereof, (i) the then current aggregate futures market prices
of securities required to be delivered under option futures
contract sales plus the then current aggregate purchase prices
of securities required to be purchased under open futures
contract purchases would exceed 30% of the Fund's total assets
(taken at market at the time of entering into the contract) or
(ii) more than 5% of the Fund's total assets (taken at market
value at the time of entering into the contract) would be
committed to margin on such futures contracts or premiums on
options; provided, however, that in the case of an option which
is in-the-money at the time of purchase, the in-the-money
amount as defined under certain CFTC regulations may be
excluded in computing such 5%;"
As amended, the Fund's fundamental policy on investing in
commodities and futures would be combined and would be as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase or sell physical commodities; except that it may enter
into futures contracts and options thereon;"
In addition, the Board of Directors intends to adopt the
following operating policy, which may be changed by the Board of
Directors without further shareholder approval.
"[As a matter of operating policy, the Fund will not:]
Purchase a futures contract or an option thereon if, with
respect to positions in futures or options on futures which do
not represent bona fide hedging, the aggregate initial margin
and premiums on such positions would exceed 5% of the Fund's
net asset value (the "New Operating Policy")."
If approved, the primary effects of the amendments would be to:
(i) eliminate the restriction that the Fund may not enter into a
futures contract if, as a result, more than 30% of the Fund's total
assets would be represented by such contracts (the "30%
Limitation"); and (ii) replace the restriction that the Fund may
not commit more than 5% of its total assets to initial margin on
futures contracts or premiums on options (the "5% Limitation") with
the New Operating Policy. Although not specifically described in
the amended restriction, the Fund would have the ability to invest
in forward foreign currency contracts and instruments which have
the characteristics of futures and securities or whose value is
PAGE 24
determined, in whole or in part, by reference to commodity prices.
Although it has no current intention of doing so, the new policy
would also permit the Fund to enter into any type of futures
contract, not just those described in its current prospectus. The
risks of such futures could differ from the risks of the Fund's
currently permitted futures activity.
The 30% Limitation
The SEC formerly required mutual funds trading in futures to
have no more than 30% of their assets represented by futures
contracts. The SEC no longer imposes this percentage limitation.
Although the Fund has no current intention of engaging in
substantial trading in futures, this situation could change, and
the Directors believe the best interest of the Fund would be served
by removing this requirement from the Fund's fundamental policy on
futures. Removal of the 30% Limitation could allow the Fund,
subject to applicable margin requirements, to hedge 100% of the
value of its portfolio and to enter into futures contracts and
options thereon to a greater degree than is currently permitted.
All trading in futures by the Fund would be subject to applicable
SEC and Commodity Futures Trading Commission ("CFTC") rules
prohibiting the use of futures for speculation and leveraging and
applicable state law.
The 5% Limitation
The 5% Limitation was previously required by rules of the CFTC
in order for the Fund to be excluded from status as a commodity
pool operator under applicable CFTC regulations, even if the Fund
used futures for hedging purposes only. The CFTC no longer applies
the 5% test to bona fide hedging activities, which is generally the
type of futures activity in which the Fund engages. Although
applicable state law may still require compliance with similar
limitations, the Board of Directors believes the best interest of
the Fund would be served by replacing the 5% Limitation with the
New Operating Policy. This would provide the Fund with the
flexibility to adapt to changes in CFTC regulations and any state
laws without seeking further shareholder approval.
The Board of Directors recommends that shareholders vote FOR
the proposal.
C. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING THE MAKING OF LOANS
The Board of Directors has proposed an amendment to the
Fundamental Investment Policies of the Fund in order to: (i)
specify the amount of its assets which may be subject to its
lending policy; (ii) authorize the Fund to participate as a lender
in an interfund lending program involving the funds advised by T.
PAGE 25
Rowe Price or Rowe Price-Fleming International, Inc. (the "Price
Funds"); and (iii) allow the Fund to purchase the entire or any
portion of the debt of a company. The new restriction would also
conform the Fund's policy on lending to one which is expected to
become standard for all T. Rowe Price mutual funds. The Board
believes that standardized policies will assist the Fund and T.
Rowe Price in monitoring compliance with the various investment
restrictions to which the T. Rowe Price mutual funds are subject.
The Board has directed that such amendment be submitted to
shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of making
loans is as follows:
"[As a matter of fundamental policy, the Fund may not:] Make
loans, although it may acquire portions of issues of publicly
distributed bonds, debentures, notes, and other debt
securities; engage in repurchase agreements; lend portfolio
securities; and purchase debt securities at private placement
within the limits imposed above on the acquisition of
restricted securities;"
As amended, the Fund's fundamental policy on loans would be as
follows:
"[As a matter of fundamental policy, the Fund may not:] 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;"
33 1/3% Restriction
The Fund's current fundamental policy on loans does not impose
any specific limit on the amount of the Fund's assets which may be
involved in such activity. The new policy would restrict such
lending to 33 1/3% of the Fund's total assets.
Interfund Lending Program
The proposed amendments to the Fund's fundamental policy would
allow the Fund to participate in an interfund lending program with
other Price mutual funds. The nature of this program and the risks
associated with the Fund's participation are set forth under
"Borrowing from Other Price Funds" beginning on page ____.
Shareholders are being asked to consider, and vote separately, on
the Fund's participation in the interfund lending program as a
borrower and as a lender.
PAGE 26
The Directors believe that the interfund lending program: (i)
may benefit the Fund by providing it with greater flexibility to
engage in lending transactions; and (ii) would facilitate the
Fund's ability to earn a higher return on short-term investments by
allowing it to lend cash to other Price Funds. Implementation of
interfund lending would be accomplished consistent with applicable
regulatory requirements, including the provisions of any order the
SEC might issue to the Fund and to other Price Funds.
Purchase of Debt
The Fund's fundamental policy on lending allows the Fund to
purchase debt securities as an exception to the general limitations
on making loans. However, there is no similar exception for the
purchase of straight debt, e.g., debt held by a bank for example
which might not be considered a debt security. Such an investment
might be subject to greater risks of liquidity and unavailability
of public information than would be the case for an investment in
a publicly held security. The primary purpose of this proposal is
to conform the Fund's fundamental policy in this area to one that
is expected to become standard for all Price Funds. The Fund will
continue to invest primarily in equity securities. However, the
Board of Directors believes that increased standardization will
help promote operational efficiencies and facilitate monitoring of
compliance with the Fund's investment restrictions.
Other Changes
The proposed new policy on lending would specifically refer to
the Fund's ability to purchase money market securities. These are
investments which the Fund is permitted to make already and these
changes to the Fund's fundamental policy are intended to be
clarifying only. Finally, for purposes of the restriction on
lending, 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.
The Board of Directors recommends that shareholders vote FOR
the proposal.
D. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL POLICY TO INCREASE THE
PERCENTAGE OF FUND ASSETS WHICH MAY BE INVESTED IN ANY ONE
ISSUER
The Board of Directors has proposed an amendment to the
Fundamental Investment Policies of the Fund to conform such
policies to Section 5(b)(1) of the Investment Company Act of 1940
(the "1940 Act") and to permit the Fund greater flexibility to
invest in securities considered by T. Rowe Price to present
attractive investment opportunities. Under the amended policy, the
Fund would be limited, with respect to 75% of its total assets, to
PAGE 27
investing no more than 5% of its total assets in the securities of
any one issuer. However, no such limitation would apply with
respect to the remaining 25% of the Fund's assets. It should be
understood that the proposed amendment, by permitting the Fund to
invest a greater percentage of its assets with a single issuer,
could increase the risk to the Fund in the event of adverse
developments affecting the securities of such issuer. In addition,
as under the current policy, the new restrictions would apply, to
repurchase agreements. The Board has directed that such amendment
be submitted to shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of investing
in the securities of a single issuer is as follows:
"[As a matter of fundamental policy, the Fund may not: Purchase
the securities of any issuer (other than securities issued or
guaranteed by the U.S. government, its agencies or
instrumentalities) if, as a result:] . . . More than 5% of the
value of the Fund's total assets would be invested in the
securities of a single issuer;"
As amended, the Fund's fundamental policy on investing in the
securities of a single issuer would be as follows:
"[As a matter of fundamental policy, the Fund may not:]
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;"
The proposed amendments will not affect the status of the Fund
as a diversified investment company under the 1940 Act. However,
the proposed amendments would allow the Fund to invest a
significantly larger portion of its assets in the securities of a
single issuer. Thus, for example, the Fund could invest 25% of its
total assets in the securities of a single issuer, or 10% of its
total assets in securities of one issuer and 15% of its total
assets in securities of another issuer. This would cause the
Fund's net asset value per share to be more affected by changes in
the value of, and market, credit and business developments with
respect to, the securities of such issuer(s). In addition, if the
Fund were to have a substantial portion of its assets invested in
the securities of a single issuer, the liquidity of the Fund's
investment in that issuer could be reduced. However, the Fund's
Board of Directors believes the Fund should have the increased
flexibility to pursue its investment program which the proposed
amendment would allow.
The Board of Directors recommends that shareholders vote FOR
the proposal.
PAGE 28
E. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL POLICY REGARDING
PURCHASING MORE THAN 10% OF AN ISSUER'S VOTING SECURITIES
The Board of Directors has proposed an amendment to the
Fundamental Investment Restrictions of the Fund to conform such
policies to Section 5(b)(1) of the 1940 Act and to provide the Fund
with greater flexibility to invest its assets in the outstanding
voting securities of various companies. Under the amended policy,
the Fund would be restricted from owning more than 10% of an
issuer's outstanding voting securities only with respect to 75% of
the value of its total assets, as opposed to 100% under the current
policy. By permitting the Fund to own more than 10% of the
outstanding voting securities of an issuer, the proposed amendment,
if adopted, could increase the risk to the Fund with respect to
adverse developments concerning such securities. The Board of
Directors, however, believes the Fund should have the increased
flexibility which the amendment would provide. The Board has
directed that such change be submitted to shareholders for approval
or disapproval.
The Fund's current fundamental policy in the area of purchasing
more than 10% of an issuer's voting securities is as follows:
"[As a matter of fundamental policy, the Fund may not purchase
the securities of any issuer (other than securities issued or
guaranteed by the U.S. government, its agencies or
instrumentalities) if, as a result:] . . . more than 10% of the
outstanding voting securities of any issuer would be held by
the Fund;"
As amended, the Fund's fundamental policy on purchasing more
than 10% of an issuer's voting securities would be as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase a security if, as a result, with respect to 75% of the
value of the Fund's total assets, more than 10% of the
outstanding voting securities of any issuer would be held by
the Fund (other than obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities);"
The proposed amendments will not affect the status of the Fund
as a diversified investment company under the 1940 Act. However,
the proposed amendments would permit the Fund, with respect to 25%
of its assets, to take a larger position in the voting securities
of companies than under the current investment limitation. Thus,
for example, the Fund could purchase 100% of the voting securities
of one or more companies. This would cause the Fund's net asset
value per share to be more affected by changes in the value of, and
market, credit and business developments with respect to, the
securities of such companies. In addition, if the Fund were to own
a substantial percentage of an issuer's voting or other securities,
there is a risk that the liquidity of those securities would be
PAGE 29
reduced. However, the Fund's Board of Directors believes the Fund
should have the increased flexibility to pursue its investment
program which the proposed amendment would allow.
The Board of Directors recommends that shareholders vote FOR
the proposal.
F. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICIES
CONCERNING REAL ESTATE
The Board of Directors has proposed an amendment to the
Fundamental Investment Policies of the Fund to clarify the types of
securities in which the Fund is authorized to invest and to conform
the Fund's fundamental policy on investing in real estate to a
policy that is expected to become standard for all Price Funds.
The proposed amendment is not expected to affect the investment
program of the Fund or instruments in which the Fund invests. The
Fund will not purchase or sell real estate. The Board has directed
that such amendments be submitted to shareholders for approval or
disapproval.
The Fund's current fundamental policy in the area of investing
in real estate is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase or sell real estate (although it may purchase
securities secured by real estate or interests therein, or
issued by companies which invest in real estate therein);"
As amended, the Fund's fundamental policy on investing in real
estate would be as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall
not prevent the Fund from investing in securities or other
instruments backed by real estate or securities of companies
engaged in the real estate business);"
The Board of Directors recommends that shareholders vote FOR
the proposal.
G. PROPOSAL TO ADOPT A NEW FUNDAMENTAL INVESTMENT POLICY ON THE
ISSUANCE OF SENIOR SECURITIES
The Fund's Board of Directors has proposed that a new
fundamental policy on senior securities be adopted by the Fund.
The Fund currently does not have a policy on issuing senior
securities. The new policy, if adopted, would permit the Fund to
issue senior securities to the extent permitted by the 1940 Act.
PAGE 30
The new fundamental policy on issuing senior securities would
be as follows:
"[As a matter of fundamental policy, the Fund may not:] Issue
senior securities except in compliance with the Investment
Company Act of 1940;"
The 1940 Act limits a Fund's ability to issue senior securities
or engage in investment techniques which could be deemed to create
a senior security. Although the definition of a "senior security"
involves complex statutory and regulatory concepts, a senior
security is generally thought of as a class of security preferred
over shares of the Fund with respect to the Fund's assets or
earnings. It generally does not include temporary or emergency
borrowings by the Fund (which might occur to meet shareholder
redemption requests) in accordance with federal law and the Fund's
investment limitations. Various investment techniques that
obligate the Fund to pay money at a future date (e.g., the purchase
of securities for settlement on a date that is longer than required
under normal settlement practices) occasionally raise questions as
to whether a "senior security" is created. The Fund utilizes such
techniques only in accordance with applicable regulatory
requirements under the 1940 Act. Although the Fund has no current
intention of issuing senior securities, the proposed change will
clarify the Fund's authority to issue senior securities in
accordance with the 1940 Act without the need to seek shareholder
approval.
The Board of Directors recommends that shareholders vote FOR
the proposal.
H. PROPOSAL TO CHANGE THE DESIGNATION OF THE FUND'S FUNDAMENTAL
POLICY ON INVESTING FOR CONTROL OF PORTFOLIO COMPANIES
The Fund's Board of Directors has proposed that the Fund's
Fundamental Investment Policy on investing for control of portfolio
companies be changed from a fundamental policy to an identical
operating policy. Fundamental policies may only be changed with
shareholder approval, while operating policies may be changed by
vote of the Board of Directors without shareholder approval. While
the Fund has no current intention of investing in companies for the
purpose of obtaining or exercising control, the proposed change
would allow the Fund to do so if the Board of Directors determined
to change the new operating policy. No additional shareholder vote
would be necessary. The Board believes that the proposed amendment
will provide the Fund with greater flexibility to respond to market
and regulatory developments and has directed that such change be
submitted to shareholders for approval or disapproval.
As changed, the Fund's operating policy on investing for
control of portfolio companies would be as follows:
PAGE 31
"[As a matter of operating policy, the Fund may not:] Invest
in companies for the purpose of exercising management or
control;"
The Board of Directors recommends that shareholders vote FOR
the proposal.
I. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL POLICY ON INVESTING
IN THE SECURITIES OF OTHER INVESTMENT COMPANIES
The Board of Directors has proposed that the Fund's Fundamental
Investment Policy on investing in the securities of other
investment companies be eliminated and replaced with a
substantially similar operating policy. Fundamental policies may
be changed only by shareholder vote, while operating policies may
be changed by vote of the Board of Directors without shareholder
approval. The current policy of the Fund is not required by
applicable law to be fundamental. The purpose of the proposed
change is to provide the Fund greater flexibility in pursuing its
investment objective and in responding to regulatory and market
developments. Although the Fund does not typically invest in the
securities of other open-end investment companies and would only,
on occasion, purchase securities of closed-end investment
companies, the proposed change would permit the Fund to invest in
the securities of other investment companies to the maximum extent
permitted under the 1940 Act and applicable state law, as described
below, without further shareholder approval. The Board has
directed that such change be submitted to shareholders for approval
or disapproval.
The Fund's current fundamental policy in the area of investing
in the securities of other investment companies is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase securities of other investment companies, except by
purchase in the open market involving only customary broker's
commissions, or in connection with a merger, consolidation,
acquisition, or reorganization. Duplicate fees may result from
such purchases;"
The operating policy on investing in the securities of other
investment companies, to be adopted by the Fund, would be as
follows:
"[As a matter of operating policy, the Fund may not:] Purchase
securities of open-end or closed-end investment companies except
in compliance with the Investment Company Act of 1940 and
applicable state law. Duplicate fees may result from such
purchases;"
Under the 1940 Act, the Fund is subject to various restrictions
PAGE 32
in purchasing the securities of closed-end and open-end investment
companies. The 1940 Act limits the Fund, immediately after a
purchase, (1) to investing no more than 10% of its total assets in
the securities of other investment companies; (2) to owning no more
than 3% of the total outstanding voting stock of any other
investment company; and (3) to having no more than 5% of its total
assets invested in securities of another investment company.
Additionally, in the case of a closed-end investment company, the
Fund, and all other mutual funds having T. Rowe Price as an
investment manager, are limited to owning no more than 10% of the
total outstanding voting stock of any closed-end company.
The 1940 Act provides an alternative set of restrictions if the
Fund were to exceed certain of these percentage limitations. Under
the alternative, the Fund could invest any or all of its assets in
other investment companies, provided the Fund and all of its
affiliates, immediately after a purchase, did not own more than 3%
of the total outstanding stock of the other investment company.
Under this alternative restriction, the rate at which the Fund
could redeem its investment in the other investment companies in
which it invests might be restricted which could result in a
situation where the Fund would not be able to redeem a portfolio
security when it appears to T. Rowe Price to be in the best
interest of the Fund to do so. T. Rowe Price would consider the
effect on the Fund's liquidity and the Fund's ability to timely
dispose of securities, before purchasing the securities of another
investment company.
Certain states impose further limitations on the purchase by the
Fund of the securities of other investment companies. At the
present time, these restrictions could prohibit the Fund, with
certain exceptions, from: (i) purchasing or retaining the
securities of any open-end investment company; (ii) purchasing the
securities of any closed-end investment company except through a
purchase in the open market where no commission or profit to a
sponsor or dealer results from such purchase other than the
customary broker's commission or when the purchase is part of a
plan of merger, consolidation, reorganization or acquisition; and
(iii) investing more than 10% of its assets in one or more
investment companies.
It is possible the requirements of the 1940 Act or the states
regarding the Fund's investment in the securities of closed-end and
open-end investment companies could change, or that the Fund could
obtain a waiver of their application. The Board of Directors
believes the Fund should have the ability to respond to potential
changes in these areas without the necessity of holding a further
meeting of shareholders.
The Board of Directors recommends that shareholders vote FOR the
proposal.
PAGE 33
J. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY
ON PURCHASING SECURITIES ON MARGIN
The Board of Directors has proposed that the Fund's Fundamental
Investment Policy on purchasing securities on margin be changed
from a fundamental policy to an operating policy. Fundamental
policies may be changed only by shareholder vote, while operating
policies may be changed by the Board of Directors without
shareholder approval. The purpose of the proposal is to allow the
Fund greater flexibility in responding to market and regulatory
developments by providing the Board of Directors with the authority
to make changes in the Fund's policy on margin without further
shareholder approval. The new restriction would also conform the
Fund's policy on margin to one which is expected to become standard
for all T. Rowe Price mutual funds. The Board believes that
standardized policies will assist the Fund and T. Rowe Price in
monitoring compliance with the various investment restrictions to
which the T. Rowe Price mutual funds are subject. The Board has
directed that such amendment be submitted to shareholders for
approval or disapproval.
The Fund's current fundamental policy in the area of purchasing
securities on margin is as follows:
"[As a matter of fundamental policy, the Fund may not:] Purchase
securities on margin, except for use of short-term credit
necessary for clearance of purchases of portfolio securities,
and except for margin deposits made in connection with futures
contracts, subject to [its fundamental policy on futures];"
As amended, the Fund's operating policy on purchasing securities
on margin would be as follows:
"[As a matter of operating policy, the Fund may not:] 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;"
Both the Fund's current policy and the proposed operating policy
prohibit the purchase of securities on margin but allow the Fund to
make margin deposits in connection with futures contracts and use
such short-term credit as is necessary for clearance of purchases
of portfolio securities. The proposed operating policy also would
acknowledge that the Fund is permitted to make margin deposits in
connection with other investments in addition to futures. Such
investments might include, but are not limited to, written options
where the Fund could be required to put up margin with a broker as
security for the Fund's obligation to deliver the security on which
the option is written.
PAGE 34
The Board of Directors recommends that shareholders vote FOR the
proposal.
K. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY
ON PLEDGING ITS ASSETS
The Board of Directors has proposed that the Fund's
Fundamental Investment Restriction on pledging its assets be
eliminated and replaced with an operating policy. Fundamental
policies may be changed by shareholder vote, while operating
policies may be changed by vote of the Board of Directors without
shareholder approval. Applicable law does not require the current
percentage limitation set forth in the policy and does not require
such policy to be fundamental. The new operating policy would
allow the Fund to pledge, in connection with Fund indebtedness 33
1/3% of its total assets (an increase from the current restriction)
and allow the Fund to pledge assets in connection with permissible
investments. The Board of Directors believes it is advisable to
provide the Fund with greater flexibility in pursuing its
investment objective and program and responding to regulatory and
market developments. The new restriction would also conform the
Fund's policy on pledging it assets to one which is expected to
become standard for all T. Rowe Price mutual funds. The Board
believes that standardized policies will assist the Fund and T.
Rowe Price in monitoring compliance with the various investment
restrictions to which the T. Rowe Price mutual funds are subject.
The Board has directed that such proposals be submitted to
shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of pledging
its assets is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Mortgage, pledge, hypothecate or, in any other manner,
transfer as security for indebtedness any security owned by
the Fund, except (i) as may be necessary in connection with
permissible borrowings, in which event such mortgaging,
pledging, or hypothecating may not exceed 15% of the Fund's
assets, valued at cost, provided, however, that as a matter of
operating policy, the Fund will limit any such mortgaging,
pledging, or hypothecating to 10% of its net assets, valued at
market, in order to comply with certain state investment
restrictions; and (ii) it may enter into futures contracts;"
The operating policy on pledging of assets, to be adopted by
the Fund, would be as follows:
PAGE 35
"[As a matter of operating policy, the Fund may not:]
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 the borrowing or investment;"
The operating policy would allow the Fund to pledge 33 1/3% of
its total assets instead of the current 15% as set forth in the
Fund's fundamental policy (and 10% as set forth in the Fund's
current operating policy). The new policy, in addition to allowing
pledging in connection with indebtedness would clarify the Fund's
ability to pledge its assets in connection with permissible
investments. Such pledging could arise, for example, when the Fund
engages in futures or options transactions or purchases securities
on a when-issued or forward basis. As an operating policy, the
Board of Directors could modify the proposed policy on pledging in
the future as the need arose, without seeking further shareholder
approval.
Pledging assets to other parties is not without risk.
Because assets that have been pledged to other parties may not be
readily available to the Fund, the Fund may have less flexibility
in liquidating such assets if needed. Therefore, the new policy,
by allowing the Fund to pledge a greater portion of its assets,
could, to a greater extent than the current policy, impair the
Fund's ability to meet current obligations, or impede portfolio
management. On the other hand, these potential risks should be
considered together with the potential benefits, such as increased
flexibility to borrow and the increased ability of the Fund to
pursue its investment program.
The Board of Directors recommends that shareholders vote
FOR the proposal.
L. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON
INVESTING IN OIL AND GAS PROGRAMS
The Fund's Board of Directors has proposed that the Fund's
Fundamental Policy on investing in oil and gas programs be
eliminated and replaced with a substantially similar operating
policy. Fundamental policies may be changed only by shareholder
vote, while operating policies may be changed by the Board of
Directors without shareholder approval. The current policy of the
Fund is not required by applicable law to be fundamental. The
purpose of the proposal is to provide the Fund with greater
flexibility in pursuing its investment objective and program. The
new restriction would also conform the Fund's policy on investing
in oil and gas programs to one which is expected to become standard
for all T. Rowe Price mutual funds. The Board believes that
PAGE 36
standardized policies will assist the Fund and T. Rowe Price in
monitoring compliance with the various investment restrictions to
which the T. Rowe Price mutual funds are subject. The Board has
directed that the proposal be submitted to shareholders for
approval or disapproval.
The Fund's current fundamental policy in the area of investing
in oil and gas programs is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase participations or other direct interests or enter into
leases with respect to oil, gas, other mineral exploration or
development programs;"
The operating policy on investing in oil and gas programs, to
be adopted by the Fund, would be as follows:
"[As a matter of operating policy, the Fund may not:] Purchase
participations or other direct interests or enter into leases
with respect to, oil, gas or other mineral exploration or
development programs;"
The current fundamental policy was formerly required by certain
states to be fundamental. This is no longer the case and the
replacement of the policy with an operating policy will adequately
protect the Fund while providing greater flexibility to the Fund to
respond to market or regulatory developments by allowing the Board
of Directors the authority to make changes in this policy without
seeking further shareholder approval. Like the current
restriction, the new operating policy would allow the Fund to
invest in securities of companies which are engaged in the oil and
gas business.
The Board of Directors recommends that shareholders vote FOR the
proposal.
M. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY
ON OPTIONS
The Fund's Board of Directors has proposed that the Fund's
Fundamental Investment Policy on investing in options be eliminated
and replaced with a substantially similar operating policy.
Fundamental policies may be changed only by shareholder vote, while
operating policies may be changed by vote of the Board of Directors
without shareholder approval. Under the new operating policy, the
Fund would be permitted to purchase and sell options of any type
for any purpose consistent with the Fund's investment program. The
purpose of the proposal is to allow the Fund greater flexibility in
responding to market and regulatory developments by allowing the
Board of Directors the authority to make changes in the Fund's
policy on options without seeking further shareholder approval.
PAGE 37
The new restriction would also conform the Fund's policy on
investing in options to one which is expected to become standard
for all T. Rowe Price mutual funds. The Board believes that
standardized policies will assist the Fund and T. Rowe Price in
monitoring compliance with the various investment restrictions to
which the T. Rowe Price mutual funds are subject. The Board has
directed that such change be submitted to shareholders for approval
or disapproval.
The Fund's current fundamental policy in the area of investing
in options is as follows:
"[As a matter of fundamental policy, the Fund may not:] Invest
in puts, calls, straddles, spreads, or any combination thereof,
except that the Fund may invest in or commit its assets to
writing covered call and put options and purchasing put and call
options to the extent permitted by the prospectus and Statement
of Additional of Information;"
The operating policy on investing in options, to be adopted by
the Fund, would be as follows:
"[As a matter of operating policy, the Fund may not:] Invest
in puts, calls, straddles, spreads, or any combination thereof,
except to the extent permitted by the prospectus and Statement
of Additional Information;"
The Board of Directors recommends that shareholders vote FOR the
proposal.
N. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY
ON OWNERSHIP OF PORTFOLIO SECURITIES BY OFFICERS AND DIRECTORS
The Fund's Board of Directors has proposed that the Fund's
Fundamental Policy on the ownership of portfolio securities by
officers and directors of the Fund and T. Rowe Price be eliminated
and replaced with a substantially similar operating policy.
Fundamental policies may be changed only by shareholder vote, while
operating policies may be changed by vote of the Board of Directors
without shareholder approval. The current policy of the Fund is
not required by applicable law to be fundamental. The current
fundamental policy was formerly required by certain states. This
is no longer the case. The Board has directed that the proposal be
submitted to shareholders for approval or disapproval.
As changed, the Fund's operating policy in the area of ownership
of portfolio securities by officers and directors would be as
follows:
PAGE 38
"[As a matter of operating policy, the Fund may not:] Purchase
or retain the securities of any issuer if, to the knowledge of
the Fund's management, those officers and directors of the Fund,
and of its investment manager, who each own beneficially more
than .5% of the outstanding securities of such issuer, together
own beneficially more than 5% of such securities."
The Board of Directors recommends that shareholders vote FOR the
proposal.
O. PROPOSAL TO CHANGE THE DESIGNATION OF THE FUND'S FUNDAMENTAL
INVESTMENT POLICY REGARDING THE PURCHASE OF ILLIQUID SECURITIES
The Board of Directors has proposed that the Fund's Fundamental
Investment Policy on purchasing unmarketable securities be changed
from a fundamental policy to an operating policy. Fundamental
policies may be changed only by shareholder vote, while operating
polices may be changed by the Board of Directors without
shareholder approval. If the proposed change is approved by
shareholders, the Board of Directors of the Fund intends to adopt
an operating policy which would (1) allow the Fund to invest up to
15% of its net assets in illiquid securities and (2) conform the
Fund's operating policy in this area to one which is expected to
become standard for all T. Rowe Price Funds. The Fund's current
fundamental policy in this area is not required by applicable law
and the proposed change should provide the Fund with greater
flexibility in responding to market and regulatory developments.
The Board has directed that such change be submitted to
shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of purchasing
illiquid securities is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase a security if, as a result, more than 10% of the value
of the Fund's total assets would be invested in: (a) securities
with legal or contractual restrictions on resale; (b)
securities for which market quotations are not readily
available; and (c) repurchase agreements which do not provide
for payment within seven (7) days;"
As changed, the operating policy on investing in illiquid
securities, to be adopted by the Fund, would be as follows:
<PAGE>
PAGE 39
"[As a matter of operating policy, the Fund may not:] Purchase
illiquid securities and securities of unseasoned issuers if,
as a result, more than 15% of its net assets would be invested
in such securities, provided that the Fund will not invest more
than 5% of its total assets in restricted securities and not
more than 5% in securities of unseasoned issuers. Securities
eligible for resale under Rule 144A of the Securities Act of
1933 are not included in the 5% limitation but are subject to
the 15% limitation;"
Illiquid Securities
As an open-end investment company, the Fund may not hold a
significant amount of illiquid securities because such securities
may present problems of accurate valuation and it is possible the
Fund could have difficulty satisfying redemptions within seven days
as required under the 1940 Act. In general, the SEC defines an
illiquid security as one which can not be sold in the ordinary
course of business within seven days at approximately the value at
which the Fund has valued the security. Illiquid securities have
included those enumerated in the Fund's fundamental restriction on
restricted securities -- securities with legal or contractual
restrictions on resale ("restricted securities") and repurchase
agreements of a duration of more than seven days.
The securities markets, however, are evolving and new types of
instruments have developed. In light of these developments, the
Fund's fundamental investment restriction, by essentially assuming
restricted securities and securities for which market quotations
are not readily available are unmarketable, may be overbroad and
unnecessarily restrictive. For example, the markets for various
types of securities -- repurchase agreements, commercial paper, and
some corporate bonds and notes -- are almost exclusively
institutional. These instruments are often either exempt from
registration or sold in transactions not requiring registration.
Although these securities may be legally classified as
"restricted," institutional investors will often justifiably rely
either on the issuer's ability to honor a demand for repayment in
less than seven days or on an efficient institutional market in
which the unregistered security can be readily resold. The fact
that the securities may be restricted because of legal or
contractual restrictions on resale to the general public will,
therefore, not be dispositive of the liquidity of such investments.
In recognition of the increased size and liquidity of the
institutional markets for unregistered securities and the
importance of institutional investors in the capital formation
process, the SEC has adopted rules, including Rule 144A under the
Securities Act of 1933, designed to further facilitate efficient
trading among institutional investors. These rules permit a
broader institutional trading market for securities subject to
restriction on resale to the general public. If institutional
markets develop which trade in these securities, the Fund could be
PAGE 40
constrained by its current investment restrictions. Accordingly,
T. Rowe Price recommends that the Fund eliminate its fundamental
limitations in this area so that restricted securities that are
nonetheless liquid may be purchased without regard to the Fund's
limit on investing in illiquid securities. Of course, the Fund
would modify its operating policy to comply with future regulatory
and market developments.
If this proposal is approved by shareholders, the specific
types of securities that may be deemed to be illiquid will be
determined from time to time by T. Rowe Price under the supervision
of the Directors, with reference to legal, regulatory and market
developments. By making the Fund's policy on illiquid securities
non-fundamental, the Fund will be able to respond more quickly to
such developments because no shareholder vote will be required to
redefine what types of securities may be deemed illiquid.
Percentage Limitations
The Fund's fundamental policy limits it to investing no more
than 10% of the value of its total assets in restricted and
unmarketable securities. The new operating policy to be adopted by
the Board of Directors, if shareholders approve elimination of the
fundamental policy, would allow the Fund to invest 15% of its net
assets in illiquid securities. The 15% limitation represents a
higher percentage than the Fund was previously allowed to invest in
illiquid securities and is the result of a 1992 liberalization by
the SEC in this area. If the fundamental policy is changed to an
operating policy, the Fund will, without the necessity of any
further shareholder vote, be able to take advantage of any future
changes in SEC policy in this area.
Notwithstanding the 15% limitation, in conformity with various
state laws, the Fund's new operating policy would limit the Fund to
investing no more than 5% of its assets in restricted securities
(other than Rule 144A securities) and no more than 5% of its assets
in the securities of unseasoned issuers (as defined). Shareholders
are being asked separately to eliminate the Fund's fundamental
policy on investing in unseasoned issuers. If that action is
approved, the Directors intend to incorporate the Fund's policy on
investing in unseasoned issuers with the Fund's policy on investing
in illiquid securities.
The Board of Directors recommends that shareholders vote FOR
the proposal.
<PAGE>
PAGE 41
P. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY
ON SHORT SALES
The Fund's Board of Directors has proposed that the Fund's
Fundamental Policy on effecting short sales be eliminated and
replaced with a substantially similar operating policy.
Fundamental policies may be changed only by shareholder vote, while
operating policies may be changed by the Board of Directors without
shareholder approval. The current policy of the Fund is not
required by applicable law to be fundamental. The purpose of the
proposal is to provide the Fund with greater flexibility in
pursuing its investment objective and program. The Board has
directed that the proposal be submitted to shareholders for
approval or disapproval.
The Fund's current fundamental policy in the area of effecting
short sales of securities is as follows:
"[As a matter of fundamental policy, the Fund may not:] Effect
short sales of securities . . .;"
The operating policy on short sales, to be adopted by the Fund,
would be as follows:
"[As a matter of operating policy, the Fund may not:] Effect
short sales of securities;"
The current fundamental policy was formerly required by certain
states to be fundamental. This is no longer the case and the
replacement of the policy with an operating policy will adequately
protect the Fund while providing greater flexibility to the Fund to
respond to market or regulatory developments by allowing the Board
of Directors the authority to make changes in this policy without
seeking further shareholder approval.
In a short sale, an investor, such as the Fund, sells a borrowed
security and must return the same security to the lender. Although
the Board has no current intention of allowing the Fund to engage
in short sales, if the proposed amendment is adopted, the Board
would be able to authorize the Fund to engage in short sales at any
time without further shareholder action. In such a case, the
Fund's prospectus would be amended and a description of short sales
and their risks would be set forth therein.
The Board of Directors recommends that shareholders vote FOR the
proposal.
Q. PROPOSAL TO CHANGE THE DESIGNATION OF THE FUND'S FUNDAMENTAL
INVESTMENT POLICY ON INVESTING IN UNSEASONED ISSUERS
The Board of Directors has proposed that the Fund's fundamental
PAGE 42
policy on investing in the securities of unseasoned issuers be
eliminated and replaced by a substantially similar operating
policy. Fundamental policies may only be changed with shareholder
approval, while operating policies may be changed by vote of the
Board of Directors without shareholder approval. The proposed
change should provide the Fund with greater flexibility in
responding to market and regulatory developments without the
necessity of seeking further shareholder approval. The new
restriction would also conform the Fund's policy on investing in
unseasoned issuers to one which is expected to become standard for
all T. Rowe Price mutual funds. The Board believes that
standardized policies will assist the Fund and T. Rowe Price in
monitoring compliance with the various investment restrictions to
which the T. Rowe Price mutual funds are subject. The Board has
directed that such change be submitted to shareholders for approval
or disapproval.
The Fund's current fundamental policy in the area of investing
in unseasoned issuers is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities) if, as a result: . . . More than 5% of the
value of the Fund's total assets would be invested in the
securities of issuers which at the time of purchase had been in
operation for less than three years including predecessors and
unconditional guarantors;"
The operating policy on investing in unseasoned issuers, to be
adopted by the Fund, would be as follows:
"[As a matter of operating policy, the Fund may not:] Purchase
a security (other than obligations issued or guaranteed by the
U.S., any foreign, state or local government, their agencies or
instrumentalities) if, as a result, more than 5% of the value
of the Fund's total assets would be invested in the securities
of issuers which at the time of purchase had been in operation
for less than three years (for this purpose, the period of
operation of any issuer shall include the period of operation
of any predecessor or unconditional guarantor of such issuer).
This restriction does not apply to securities of pooled
investment vehicles or mortgage or asset-backed securities;"
The new operating policy would add securities issued or
guaranteed by foreign, state or local governments, as well as
securities of pooled investment vehicles and mortgage and asset-
backed securities, to the list of those which are excluded from the
percentage restriction on investing in unseasoned issuers.
The Board of Directors recommends that shareholders vote FOR the
proposal.
PAGE 43
R. TO ELIMINATE THE FUND'S FUNDAMENTAL POLICY ON INVESTING IN
WARRANTS
The Fund's Board of Directors has proposed that the Fund's
Fundamental Policy on investing in warrants be eliminated and
replaced with a substantially similar operating policy.
Fundamental policies may be changed only by shareholder vote while
operating policies may be changed by the Board of Directors without
the approval of shareholders. The current policy of the Fund is
not required by applicable law to be fundamental. The purpose of
the proposal is to provide the Fund with greater flexibility in
pursuing its investment objective and program. The new restriction
would also conform the Fund's policy on investing in warrants to
one which is expected to become standard for all T. Rowe Price
mutual funds. The Board believes that standardized policies will
assist the Fund and T. Rowe Price in monitoring compliance with the
various investment restrictions to which the T. Rowe Price mutual
funds are subject. The Board has directed that the proposal be
submitted to shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of investing
in warrants is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase the securities of any issuer if, as a result, more than
2% of the value of the total assets of the Fund would be
invested in warrants which are not listed on the New York Stock
Exchange, the American Stock Exchange, or more than 5% of the
value of the total assets of the Fund would be invested in
warrants whether or not so listed, such warrants in each case
to be valued at the lesser of cost or market, but assigning no
value to warrants acquired by the Fund in units with or attached
to debt securities."
The operating policy on investing in warrants, to be adopted by
the Fund, would be as follows:
"[As a matter of operating policy, the Fund may not:] Invest
in warrants if, as a result thereof, more than 2% of the value
of the total assets of the Fund would be invested in warrants
which are not listed on the New York Stock Exchange, the
American Stock Exchange, or a recognized foreign exchange, or
more than 5% of the value of the total assets of the Fund would
be invested in warrants whether or not so listed. For purposes
of these percentage limitations, the warrants will be valued at
the lower of cost or market and warrants acquired by the Fund
in units or attached to securities may be deemed to be without
value."
The current fundamental policy was formerly required by certain
states to be fundamental. This is no longer the case and the
replacement of the policy with an operating policy will adequately
PAGE 44
protect the Fund while providing greater flexibility to the Fund to
respond to market or regulatory developments by allowing the Board
of Directors the authority to make changes in this policy without
seeking further shareholder approval. Unlike the current
restriction, the new policy would allow the Fund to invest in
warrants listed on a recognized foreign exchange to the same extent
that the Fund can invest in warrants listed on the New York and
American Stock Exchanges. However, the new policy, like the
current one, would still limit the Fund to investing no more than
2% of the value of its total assets in unlisted warrants and no
more than 5% of the value of its total assets in warrants whether
or not listed. The new policy also states that warrants acquired
by the Fund in units or attached to securities may be deemed to be
without value. Such warrants may be acquired, for example, as
"sweeteners" with respect to a transaction in which the Fund
acquires a security.
The Board of Directors recommends that shareholders vote FOR the
proposal.
3. PROPOSAL TO AMEND THE FUND'S ARTICLES OF INCORPORATION TO
ELIMINATE THE POLICY ON PRICING SECURITIES
The Board of Directors has proposed that the Fund amend its
Articles of Incorporation by deleting subparagraph (iii) of
Paragraph 3.04 (2) of Article SEVENTH regarding the policy on
pricing securities in its portfolio. The manner in which the Fund
prices its securities is currently set forth in the Fund's
Statement of Additional Information and the Fund's policy on
pricing securities is not required to be included in its Articles
of Incorporation. The purpose of the proposed amendment is to
provide the Fund with greater flexibility to respond to regulatory
and market developments in pricing its securities, should the need
arise. Although there is no current intention to change the manner
in which the Fund's portfolio securities are priced, the proposal,
if adopted, would allow the Fund's Board of Directors to make
changes in the Fund's policy on pricing, in a manner consistent
with applicable law, without seeking further shareholder approval.
The Board has directed that the proposal be submitted to
shareholders for approval or disapproval.
The Funds's policy on pricing securities as stated in the
Articles of Incorporation is as follows:
"Article SEVENTH
(2) Valuation of Assets. The value of such assets is to be
determined as follows:
PAGE 45
(iii) Securities. Securities listed or traded on a national
securities exchange ("Listed Securities") are valued at the last
quoted sales prices on the day the valuations are made. Listed
securities that are not traded on a particular day, and
securities regularly traded in the over-the-counter market, are
valued at the 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 their fair value. All
other assets and securities are valued in the manner determined
in good faith by the Board, or its delegates, to reflect their
fair value."
The Board of Directors recommends that these provisions of the
Articles of Incorporation be deleted and that the Fund's policy on
pricing securities be described only in the Fund's Statement of
Additional Information.
The Board of Directors recommends that shareholders vote FOR the
proposal.
4. RATIFICATION OR REJECTION OF SELECTION OF INDEPENDENT
ACCOUNTANTS
The selection by the Board of Directors of the firm of
Price Waterhouse as the independent accountants for the Fund for
the fiscal year 1994 is to be submitted for ratification or
rejection by the shareholders at the Shareholder Meeting. The firm
of Price Waterhouse has served the Fund as independent accountants
since inception. The independent accountants have advised the Fund
that they have no direct or material indirect financial interest in
the Fund. Representatives of the firm of Price Waterhouse are
expected to be present at the Shareholder Meeting and will be
available to make a statement, if they desire to do so, and to
respond to appropriate questions which the shareholders may wish to
address to them.
INVESTMENT MANAGER
The Fund's investment manager is T. Rowe Price, a Maryland
corporation, 100 East Pratt Street, Baltimore, Maryland 21202. The
principal executive officer of T. Rowe Price is George J. Collins,
who together with Mr. Riepe, Thomas H. Broadus, Jr., James E.
Halbkat, Jr., Carter O. Hoffman, Henry H. Hopkins, George A. Roche,
John W. Rosenblum, Charles H. Salisbury, Jr., Robert L. Strickland,
M. David Testa, and Philip C. Walsh, constitute its Board of
Directors. The address of each of these persons, with the
exception of Messrs. Halbkat, Rosenblum, Stickland and Walsh, is
100 East Pratt Street, Baltimore, Maryland 21202, and, with the
exception of Messrs. Halbkat, Rosenblum, Strickland, and Walsh, all
are employed by T. Rowe Price. Mr. Halbkat is President of U.S.
Monitor Corporation, a provider of public response systems, P.O.
PAGE 46
Box 23109, Hilton Head Island, South Carolina 29925. Mr.
Rosenblum, whose address is P.O. Box 6550, Charlottesville,
Virginia 22906, is the Taylor Murphy Professor at the University of
Virginia, and a director of: Chesapeake Corporation, a manufacturer
of paper products; Cadmus Communications Corp., a provider of
printing and communication services; Comdial Corporation, a
manufacturer of telephone systems for businesses; and Cone Mills
Corporation, a textiles producer. Mr. Strickland is Chairman of
Lowe's Companies, Inc., a retailer of specialty home supplies, 604
Two Piedmont Plaza Building, Winston-Salem, North Carolina 27104.
Mr. Walsh, whose address is Blue Mill Road, Morristown, New Jersey
07960, is a consultant to Cyprus Amax Minerals Company, Englewood,
Colorado, and a director of Piedmont Mining Company, Charlotte,
North Carolina.
The officers of the Fund (other than the nominees for
election as directors) and their positions with T. Rowe Price are
as follows:
_________________________________________________________________
Position Position with
Officer with Fund Manager
_________________________________________________________________
Andrew M. Brooks Vice President Vice President
Arthur B. Cecil, III Vice President Vice President
Brent W. Clum Vice President Assistant Vice
President
Henry H. Hopkins Vice President Managing Director
Gregory A. McCrickard Vice President Vice President
Larry J. Puglia Vice President Vice President
Richard T. Whitney Vice President Vice President
Lenora V. Hornung Secretary Vice President
Carmen F. Deyesu Treasurer Vice President
David S. Middleton Controller Vice President
Roger L. Fiery Assistant Vice Assistant Vice
President President
Edward T. Schneider Assistant Vice Assistant Vice
President President
Ingrid I. Vordemberge Assistant Vice Employee
President
The Fund has an Underwriting Agreement with T. Rowe Price
Investment Services, Inc. ("Investment Services"), a Transfer
Agency Agreement with T. Rowe Price Services, Inc. ("Price
Services") and an Agreement with T. Rowe Price Retirement Plan
Services, Inc., which are wholly-owned subsidiaries of T. Rowe
Price. In addition, the Fund has an Agreement with T. Rowe Price
to perform fund accounting services. James S. Riepe, Chairman of
the Board of the Fund, is Chairman of the Board of Price Services
and Retirement Services and President and Director of Investment
Services. Henry H. Hopkins, a Vice President of the Fund, is a
Vice President and Director of both Investment Services and Price
PAGE 47
Services and a Vice President of Retirement Services. Edward T.
Schneider, an Assistant Vice President of the Fund, is a Vice
President of Price Services. Certain officers of the Fund own
shares of the common stock of T. Rowe Price, its only class of
securities.
The following information pertains to transactions
involving common stock of T. Rowe Price, par value $.20 per share
("Stock"), during the period January 1, 1993 through December 31,
1993. There were no transactions during the period by any director
or officer of the Fund, or any director or officer of T. Rowe Price
which involved more than 1% of the outstanding Stock of T. Rowe
Price. These transactions did not involve, and should not be
mistaken for, transactions in the stock of the Fund.
During the period, the holders of certain options
purchased a total of 343,525 shares of common stock at varying
prices from $0.67 to $18.75 per share. Pursuant to the terms of T.
Rowe Price's Employee Stock Purchase Plan, eligible employees of T.
Rowe Price and its subsidiaries purchased an aggregate of 96,931
shares at fair market value. Such shares were purchased in the
open market during this period for employees' accounts.
The Company's Board of Directors has approved the
repurchase of shares of its common stock in the open market.
During 1993, the Company purchased 80,000 common shares under this
plan, leaving 1,432,000 shares authorized for future repurchase at
December 31, 1993.
During the period, T. Rowe Price issued 1,154,000 common
stock options with an exercise price of $28.13 per share to certain
employees under terms of the 1990 and 1993 Stock Incentive Plans.
An audited consolidated balance sheet of T. Rowe Price as
of December 31, 1993, is included in this Proxy Statement.
INVESTMENT MANAGEMENT AGREEMENT
T. Rowe Price serves as investment manager to the Fund
pursuant to an Investment Management Agreement dated May 1, 1987
(the "Management Agreement"), which was approved by the
shareholders of the Fund on April 21, 1987. By its terms, the
Management Agreement will continue in effect from year to year as
long as it is approved annually by the Fund's Board of Directors
(at a meeting called for that purpose) or by vote of a majority of
the Fund's outstanding shares. In either case, renewal of the
Management Agreement must be approved by a majority of the Fund's
independent directors. On March 1, 1994, the directors of the
Fund, including all of the independent directors, voted to extend
the Management Agreement for an additional period of one year,
commencing May 1, 1994, and terminating April 30, 1995. The
Management Agreement is subject to termination by either party
PAGE 48
without penalty on 60 days' written notice to the other and will
terminate automatically in the event of assignment.
Under the Management Agreement, T. Rowe Price provides
the Fund with discretionary investment services. Specifically, T.
Rowe Price is responsible for supervising and directing the
investments of the Fund in accordance with the Fund's investment
objectives, program, and restrictions as provided in its prospectus
and Statement of Additional Information. T. Rowe Price is also
responsible for effecting all securities transactions on behalf of
the Fund, including the negotiation of commissions and the
allocation of principal business and portfolio brokerage. In
addition to these services, T. Rowe Price provides the Fund with
certain corporate administrative services, including: maintaining
the Fund's corporate existence and corporate records; registering
and qualifying Fund shares under federal and state laws; monitoring
the financial, accounting, and administrative functions of the
Fund; maintaining liaison with the agents employed by the Fund such
as the Fund's custodian and transfer agent; assisting the Fund in
the coordination of such agents' activities; and permitting T. Rowe
Price's employees to serve as officers, directors, and committee
members of the Fund without cost to the Fund.
The Management Agreement also provides that T. Rowe
Price, its directors, officers, employees and certain other persons
performing specific functions for the Fund will only be liable to
the Fund for losses resulting from willful misfeasance, bad faith,
gross negligence, or reckless disregard of duty.
The Management Agreement provides that the Fund will bear
all expenses of its operations not specifically assumed by T. Rowe
Price. However, in compliance with certain state regulations, T.
Rowe Price will reimburse the Fund for certain expenses which in
any year exceed the limits prescribed by any state in which the
Fund's shares are qualified for sale. Presently, the most
restrictive expense ratio limitation imposed by any state is 2.5%
of the first $30 million of the Fund's average daily net assets, 2%
of the next $70 million of the Fund's assets, and 1.5% of net
assets in excess of $100 million. For the purpose of determining
whether the Fund is entitled to reimbursement, the expenses of the
Fund are calculated on a monthly basis. If the Fund is entitled to
reimbursement, that month's management fee will be reduced or
postponed, with any adjustment made after the end of the year. For
the years ended December 31, 1993, December 31, 1992, and December
31, 1991, the ratios of operating expenses to average net assets of
the Fund were .83%, .85%, and .93%, respectively.
For its services to the Fund under the Management
Agreement, T. Rowe Price is paid a management fee ("Management
Fee") consisting of two elements: a "group" fee ("Group Fee") and
an "individual" fund fee ("Individual Fund Fee"). The Group Fee
varies and is based on the combined net assets of all of the Price
PAGE 49
Funds distributed by T. Rowe Price Investment Services, Inc., other
than institutional or "private label" products. For this purpose,
the Price Funds include all funds managed and sponsored by T. Rowe
Price as well as those Funds managed and sponsored by Rowe Price-
Fleming International, Inc. The Fund pays, as its portion of the
Group Fee, an amount equal to the ratio of its daily net assets to
the daily net assets of all the Price Funds. The Fund pays a flat
Individual Fund Fee of 0.15% based on the net assets of the Fund.
Based on combined Price Funds' assets of approximately $34.7
billion at December 31, 1993, the Group Fee was 0.35% and the total
management fee for the year would have been an annual rate of 0.50%
of net assets. At December 31, 1993, the net assets of the Fund
were $1,167,493,920, and a management fee of $5,209,477 was paid by
the Fund to T. Rowe Price.
PORTFOLIO TRANSACTIONS
Investment or Brokerage Discretion
Decisions with respect to the purchase and sale of portfolio
securities on behalf of the Fund are made by T. Rowe Price. T.
Rowe Price is also responsible for implementing these decisions,
including the negotiation of commissions and the allocation of
portfolio brokerage and principal business.
How Brokers and Dealers are Selected
Equity Securities
In purchasing and selling the Fund's portfolio securities, it
is T. Rowe Price's policy to obtain quality execution at the most
favorable prices through responsible brokers and dealers and, in
the case of agency transactions, at competitive commission rates.
However, under certain conditions, the Fund may pay higher
brokerage commissions in return for brokerage and research
services. As a general practice, over-the-counter orders are
executed with market-makers. In selecting among market-makers, T.
Rowe Price generally seeks to select those it believes to be
actively and effectively trading the security being purchased or
sold. In selecting broker-dealers to execute the Fund's portfolio
transactions, consideration is given to such factors as the price
of the security, the rate of the commission, the size and
difficulty of the order, the reliability, integrity, financial
condition, general execution and operational capabilities of
competing brokers and dealers, and brokerage and research services
provided by them. It is not the policy of T. Rowe Price to seek
the lowest available commission rate where it is believed that a
broker or dealer charging a higher commission rate would offer
greater reliability or provide better price or execution.
Fixed Income Securities
PAGE 50
Fixed income securities are generally purchased from the
issuer or a primary market-maker acting as principal for the
securities on a net basis, with no brokerage commission being paid
by the client. Transactions placed through dealers serving as
primary market-makers reflect the spread between the bid and asked
prices. Securities may also be purchased from underwriters at
prices which include underwriting fees.
With respect to equity and fixed income securities, T. Rowe
Price may effect principal transactions on behalf of the Fund with
a broker or dealer who furnishes brokerage and/or research
services, designate any such broker or dealer to receive selling
concessions, discounts or other allowances, or otherwise deal with
any such broker or dealer in connection with the acquisition of
securities in underwritings.
How Evaluations are Made of the Overall Reasonableness of Brokerage
Commissions Paid
On a continuing basis, T. Rowe Price seeks to determine what
levels of commission rates are reasonable in the marketplace for
transactions executed on behalf of the Fund. In evaluating the
reasonableness of commission rates, T. Rowe Price considers: (a)
historical commission rates, both before and since rates have been
fully negotiable; (b) rates which other institutional investors are
paying, based on available public information; (c) rates quoted by
brokers and dealers; (d) the size of a particular transaction, in
terms of the number of shares, dollar amount, and number of clients
involved; (e) the complexity of a particular transaction in terms
of both execution and settlement; (f) the level and type of
business done with a particular firm over a period of time; and (g)
the extent to which the broker or dealer has capital at risk in the
transaction.
Description of Research Services Received from Brokers and Dealers
T. Rowe Price receives a wide range of research services from
brokers and dealers. These services include information on the
economy, industries, groups of securities, individual companies,
statistical information, accounting and tax law interpretations,
political developments, legal developments affecting portfolio
securities, technical market action, pricing and appraisal
services, credit analysis, risk measurement analysis, performance
analysis and analysis of corporate responsibility issues. These
services provide both domestic and international perspective.
Research services are received primarily in the form of written
reports, computer generated services, telephone contacts and
personal meetings with security analysts. In addition, such
services may be provided in the form of meetings arranged with
corporate and industry spokespersons, economists, academicians and
government representatives. In some cases, research services are
generated by third parties but are provided to T. Rowe Price by or
through broker-dealers.
PAGE 51
Research services received from brokers and dealers are
supplemental to T. Rowe Price's own research effort and, when
utilized, are subject to internal analysis before being
incorporated by T. Rowe Price into its investment process. As a
practical matter, it would not be possible for T. Rowe Price's
Equity Research Division to generate all of the information
presently provided by brokers and dealers. T. Rowe Price pays cash
for certain research services received from external sources. T.
Rowe Price also allocates brokerage for research services which are
available for cash. While receipt of research services from
brokerage firms has not reduced T. Rowe Price's normal research
activities, the expenses of T. Rowe Price could be materially
increased if it attempted to generate such additional information
through its own staff. To the extent that research services of
value are provided by brokers or dealers, T. Rowe Price may be
relieved of expenses which it might otherwise bear.
T. Rowe Price has a policy of not allocating brokerage
business in return for products or services other than brokerage or
research services. In accordance with the provisions of Section
28(e) of the Securities Exchange Act of 1934, T. Rowe Price may
from time to time receive services and products which serve both
research and non-research functions. In such event, T. Rowe Price
makes a good faith determination of the anticipated research and
non-research use of the product or service and allocates brokerage
only with respect to the research component.
Commissions to Brokers who Furnish Research Services
Certain brokers who provide quality execution services also
furnish research services to T. Rowe Price. In order to be assured
of continuing to receive research services considered of value to
its clients, T. Rowe Price has adopted a brokerage allocation
policy embodying the concepts of Section 28(e) of the Securities
Exchange Act of 1934, which permits an investment adviser to cause
an account to pay commission rates in excess of those another
broker or dealer would have charged for effecting the same
transaction, if the adviser determines in good faith that the
commission paid is reasonable in relation to the value of the
brokerage and research services provided. The determination may be
viewed in terms of either the particular transaction involved or
the overall responsibilities of the adviser with respect to the
accounts over which it exercises investment discretion.
Accordingly, while T. Rowe Price cannot readily determine the
extent to which commission rates or net prices charged by broker-
dealers reflect the value of their research services, T. Rowe Price
would expect to assess the reasonableness of commissions in light
of the total brokerage and research services provided by each
particular broker.
Internal Allocation Procedures
PAGE 52
T. Rowe Price has a policy of not precommitting a specific
amount of business to any broker or dealer over any specific time
period. Historically, the majority of brokerage placement has been
determined by the needs of a specific transaction such as market-
making, availability of a buyer or seller of a particular security,
or specialized execution skills. However, T. Rowe Price does have
an internal brokerage allocation procedure for that portion of its
discretionary client brokerage business where special needs do not
exist, or where the business may be allocated among several brokers
which are able to meet the needs of the transaction.
Each year, T. Rowe Price assesses the contribution of the
brokerage and research services provided by brokers, and attempts
to allocate a portion of its brokerage business in response to
these assessments. Research analysts, counselors, various
investment committees, and the Trading Department each seek to
evaluate the brokerage and research services they receive from
brokers and make judgments as to the level of business which would
recognize such services. In addition, brokers sometimes suggest a
level of business they would like to receive in return for the
various brokerage and research services they provide. Actual
brokerage received by any firm may be less than the suggested
allocations but can, and often does, exceed the suggestions,
because the total brokerage business is allocated on the basis of
all the considerations described above. In no case is a broker
excluded from receiving business from T. Rowe Price because it has
not been identified as providing research services.
Miscellaneous
T. Rowe Price's brokerage allocation policy is consistently
applied to all its fully discretionary accounts, which represent a
substantial majority of all assets under management. Research
services furnished by brokers through which T. Rowe Price effects
securities transactions may be used in servicing all accounts
(including non-Fund accounts) managed by T. Rowe Price.
Conversely, research services received from brokers which execute
transactions for the Fund are not necessarily used by T. Rowe Price
exclusively in connection with the management of the Fund.
From time to time, orders for clients may be placed through a
computerized transaction network.
The Fund does not allocate business to any broker-dealer on
the basis of its sales of the Fund's shares. However, this does
not mean that broker-dealers who purchase Fund shares for their
clients will not receive business from the Fund.
Some of T. Rowe Price's other clients have investment
objectives and programs similar to those of the Fund. T. Rowe
Price may occasionally make recommendations to other clients which
result in their purchasing or selling securities simultaneously
PAGE 53
with the Fund. As a result, the demand for securities being
purchased or the supply of securities being sold may increase, and
this could have an adverse effect on the price of those securities.
It is T. Rowe Price's policy not to favor one client over another
in making recommendations or in placing orders. T. Rowe Price
frequently follows the practice of grouping orders of various
clients for execution which generally results in lower commission
rates being attained. In certain cases, where the aggregate order
is executed in a series of transactions at various prices on a
given day, each participating client's proportionate share of such
order reflects the average price paid or received with respect to
the total order. T. Rowe Price has established a general
investment policy that it will ordinarily not make additional
purchases of a common stock of a company for its clients (including
the Price Funds) if, as a result of such purchases, 10% or more of
the outstanding common stock of such company would be held by its
clients in the aggregate.
To the extent possible, T. Rowe Price intends to recapture
solicitation fees paid in connection with tender offers through T.
Rowe Price Investment Services, Inc., the Fund's distributor. At
the present time, T. Rowe Price does not recapture commissions or
underwriting discounts or selling group concessions in connection
with taxable securities acquired in underwritten offerings. T.
Rowe Price does, however, attempt to negotiate elimination of all
or a portion of the selling-group concession or underwriting
discount when purchasing tax-exempt municipal securities on behalf
of its clients in underwritten offerings.
Transactions with Related Brokers and Dealers
As provided in the Investment Management Agreement between the
Fund and T. Rowe Price, T. Rowe Price is responsible not only for
making decisions with respect to the purchase and sale of the
Fund's portfolio securities, but also for implementing these
decisions, including the negotiation of commissions and the
allocation of portfolio brokerage and principal business. It is
expected that T. Rowe Price may place orders for the Fund's
portfolio transactions with broker-dealers through the same trading
desk T. Rowe Price uses for portfolio transactions in domestic
securities. The trading desk accesses brokers and dealers in
various markets in which the Fund's foreign securities are located.
These brokers and dealers may include certain affiliates of Robert
Fleming Holdings Limited ("Robert Fleming Holdings") and Jardine
Fleming Group Limited ("JFG"), persons indirectly related to T.
Rowe Price. Robert Fleming Holdings, through Copthall Overseas
Limited, a wholly-owned subsidiary, owns 25% of the common stock of
Rowe Price-Fleming International, Inc. ("RPFI"), an investment
adviser registered under the Investment Advisers Act of 1940.
Fifty percent of the common stock of RPFI is owned by TRP Finance,
Inc., a wholly-owned subsidiary of T. Rowe Price, and the remaining
25% is owned by Jardine Fleming Holdings Limited, a subsidiary of
JFG. JFG is 50% owned by Robert Fleming Holdings and 50% owned by
PAGE 54
Jardine Matheson Holdings Limited. Orders for the Fund's portfolio
transactions placed with affiliates of Robert Fleming Holdings and
JFG will result in commissions being received by such affiliates.
The Board of Directors of the Fund has authorized T. Rowe
Price to utilize certain affiliates of Robert Fleming and JFG in
the capacity of broker in connection with the execution of the
Fund's portfolio transactions. These affiliates include, but are
not limited to, Jardine Fleming Securities Limited ("JFS"), a
wholly-owned subsidiary of JFG, Robert Fleming & Co. Limited
("RF&Co."), Jardine Fleming Australia Securities Limited, and
Robert Fleming, Inc. (a New York brokerage firm). Other affiliates
of Robert Fleming Holdings and JFG also may be used. Although it
does not believe that the Fund's use of these brokers would be
subject to Section 17(e) of the Investment Company Act of 1940, the
Board of Directors of the Fund has agreed that the procedures set
forth in Rule 17e-1 under that Act will be followed when using such
brokers.
Other
For the years ended December 31, 1993, 1992, and 1991, the
total brokerage commissions paid by the Fund, including the
discounts received by securities dealers in connection with
underwritings, were $2,815,000, $2,218,000, and $2,051,000,
respectively. Of these commissions, approximately 27%, 24%, and
31%, respectively, were paid to firms which provided research,
statistical, or other services to T. Rowe Price in connection with
the management of the Fund or, in some cases, to the Fund.
The portfolio turnover rate for the Fund for each of the last
three years has been as follows: 1993--22.4%, 1992--29.9%, and
1991--47.9%.
OTHER BUSINESS
The management of the Fund knows of no other business
which may come before the meeting. However, if any additional
matters are properly presented at the meeting, it is intended that
the persons named in the enclosed proxy, or their substitutes, will
vote such proxy in accordance with their judgment on such matters.
GENERAL INFORMATION
As of December 31, 1993, there were 70,450,668 shares of
the capital stock of the Fund outstanding, each with a par value of
$.01. Of those shares, approximately ________________,
representing ____% of the outstanding stock, were registered to the
T. Rowe Price Trust Company as Trustee for participants in the T.
Rowe Price Funds Retirement Plan for Self-Employed (Keogh), as
Trustee for participants in T. Rowe Price Funds 401(k) plans, as
PAGE 55
Custodian for participants in the T. Rowe Price Funds Individual
Retirement Account (IRA), as Custodian for participants in various
403(b)(7) plans, and as Custodian for various Profit Sharing and
Money Purchase plans. The T. Rowe Price Trust Company has no
beneficial interest in such accounts, nor in any other account for
which it may serve as trustee or custodian.
As of December 31, 1993, approximately ________________
shares of the Fund, representing approximately __% of the
outstanding stock, were owned by various private counsel clients of
T. Rowe Price, as to which T. Rowe Price has discretionary
authority. Accordingly, such shares are deemed to be owned
beneficially by T. Rowe Price only for the limited purpose as that
term is defined in Rule 13d-3 under the Securities Exchange Act of
1934. T. Rowe Price disclaims actual beneficial ownership of such
shares. In addition, as of December 31, 1993, a wholly-owned
subsidiary of T. Rowe Price owned directly 58,565 shares of the
Fund representing approximately 0.08% of the outstanding stock.
As of December 31, 1993, the officers and directors of
the Fund, as a group, beneficially owned, directly or indirectly,
_______ shares, representing approximately _.__% of the Fund's
outstanding stock. The ownership of the officers and directors
reflects their proportionate interests, if any, in _____ shares of
the Fund which are owned by a wholly-owned subsidiary of the Fund's
investment manager, T. Rowe Price, and their interests in ______
shares owned by the T. Rowe Price Associates, Inc. Profit Sharing
Trust.
A copy of the Annual Report of the Fund for the year
ended December 31, 1993, including financial statements, has been
mailed to shareholders of record at the close of business on that
date and to persons who became shareholders of record between that
time and the close of business on February 18, 1994, the record
date for the determination of the shareholders who are entitled to
be notified of and to vote at the meeting.
ANNUAL MEETINGS
Under Maryland General Corporation Law, any corporation
registered under the Investment Company Act of 1940 ("the Act") is
not required to hold an annual meeting in any year in which the Act
does not require action by shareholders on the election of
directors. The Board of Directors of the Fund has determined that
in order to avoid the significant expense associated with holding
annual meetings, including legal, accounting, printing and mailing
fees incurred in preparing proxy materials, the Fund will take
advantage of these Maryland law provisions. Accordingly, no annual
meetings shall be held in any year in which a meeting is not
otherwise required to be held by the Act for the election of
Directors unless the Board of Directors otherwise determines that
there should be an annual meeting. However, special meetings will
PAGE 56
be held in accordance with applicable law or when otherwise
determined by the Board of Directors. The Fund's By-Laws reflect
this policy.
SHAREHOLDER PROPOSALS
If a shareholder wishes to present a proposal to be
included in the Proxy Statement for the next Annual Meeting, and if
such Annual Meeting is held in April, 1995, such proposal must be
submitted in writing and received by the Corporation's Secretary at
its Baltimore office prior to November 9, 1994.
FINANCIAL STATEMENT OF INVESTMENT MANAGER
The audited consolidated balance sheet of T. Rowe Price
which follows is required by the Investment Company Act of 1940,
and should not be confused with, or mistaken for, the financial
statements of T. Rowe Price Growth & Income Fund, Inc., which are
set forth in the Annual Report of the Fund.
<PAGE>
PAGE 57
T. ROWE PRICE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
(in thousands)
ASSETS
Cash and cash equivalents $ 46,218
Accounts receivable 43,102
Investments in sponsored mutual funds
Short-term bond and money market mutual funds
held as trading securities 27,647
Other funds held as available-for-sale securities 69,423
Partnership and other investments 19,606
Property and equipment 39,828
Goodwill and deferred expenses 9,773
Other assets 7,803
________
$ 263,400
________
________
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 15,111
Accrued retirement and other compensation costs 19,844
Income taxes payable 5,097
Dividends payable 3,784
Debt 12,915
Deferred revenues 1,548
Minority interests in consolidated subsidiaries 9,148
________
Total liabilities 67,447
________
Commitments and contingent liabilities
Stockholders' equity
Common stock, $.20 par value - authorized 48,000,000
shares; issued and outstanding 29,095,039 shares 5,819
Capital in excess of par value 1,197
Unrealized security holding gains 5,345
Retained earnings 183,592
________
Total stockholders' equity 195,953
________
$ 263,400
________
________
The accompanying notes are an integral part of the consolidated
balance sheet.
PAGE 58
T. ROWE PRICE ASSOCIATES, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Associates, Inc. and its consolidated subsidiaries
(the "Company") provide investment advisory and administrative
services to sponsored mutual funds and investment products, and
to private accounts of other institutional and individual
investors.
Basis of preparation
The Company's financial statements are prepared in accordance
with generally accepted accounting principles.
Principles of consolidation
The consolidated financial statements include the accounts of all
majority owned subsidiaries and, by virtue of the Company's
controlling interest, its 50%-owned subsidiary, Rowe Price-
Fleming International, Inc. ("RPFI"). All material intercompany
accounts are eliminated in consolidation.
Cash equivalents
For purposes of financial statement disclosure, cash equivalents
consist of all short-term, highly liquid investments including
certain money market mutual funds and all overnight commercial
paper investments. The cost of these investments is equivalent
to fair value.
Investments in sponsored mutual funds
The Company has historically accounted for its investments in
stock and bond mutual funds at the lower of aggregate cost or
market. On December 31, 1993, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," which
requires the Company to state its mutual fund investments at fair
value and to classify these holdings as either trading (held for
only a short period of time) or available-for-sale securities.
Unrealized holding gains on available-for-sale securities at
December 31, 1993 are reported net of income tax effects in a
separate component of stockholders' equity.
Concentration of credit risk
Financial instruments which potentially expose the Company to
concentrations of credit risk as defined by SFAS No. 105 consist
primarily of investments in sponsored money market and bond
mutual funds and accounts receivable. Credit risk is believed to
be minimal in that counterparties to these financial instruments
have substantial assets including the diversified portfolios
under management by the Company which aggregate $54.4 billion at
December 31, 1993.<PAGE>
PAGE 59
T. ROWE PRICE ASSOCIATES, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Partnership and other investments
The Company invests in various partnerships and ventures
including those sponsored by the Company. These investments
which hold equity securities, venture capital investments, debt
securities and real estate are stated at cost adjusted for the
Company's share of the earnings or losses of the investees
subsequent to the date of investment. Because the majority of
these entities carry their investments at fair value and include
unrealized gains and losses in their reported earnings, the
Company's carrying value for these investments approximates fair
value.
Property and equipment
Property and equipment is stated at cost net of accumulated
depreciation and amortization computed using the straight-line
method. Provisions for depreciation and amortization are based
on the following estimated useful lives: computer and
communications equipment and furniture and other equipment, 3 to
7 years; building, 40 years; leased land, the 50-year lease term;
and leasehold improvements, the shorter of their useful lives or
the remainder of the lease term.
<PAGE>
PAGE 60
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET
NOTE 1 - INVESTMENTS IN SPONSORED MUTUAL FUNDS
Investments in sponsored money market mutual funds, which are
classified as cash equivalents in the accompanying consolidated
financial statements, aggregate $45,272,000 at December 31, 1993.
The Company's investments in sponsored mutual funds held as
available-for-sale at December 31, 1993 (in thousands) include:
Gross
unrealized Aggregate
Aggregate holding fair
cost gains value
________ _________ _________
Stock funds $ 34,990 $ 7,025 $ 42,015
Bond funds 26,190 1,218 27,408
________ _______ _________
Total $ 61,180 $ 8,243 $ 69,423
________ _______ _________
________ _______ _________
The Company provides investment advisory and administrative
services to the T. Rowe Price family of mutual funds which had
aggregate assets under management at December 31, 1993 of $34.7
billion. All services rendered by the Company are provided under
contracts that set forth the services to be provided and the fees
to be charged. These contracts are subject to periodic review
and approval by each of the funds' boards of directors and, with
respect to investment advisory contracts, also by the funds'
shareholders. Services rendered to the funds accounted for 71%
of 1993 revenues.
Accounts receivable from the sponsored mutual funds aggregated
$21,741,000 at December 31, 1993.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1993 (in thousands)
consists of:
Computer and communications equipment $ 31,431
Building and leased land 19,756
Furniture and other equipment 13,889
Leasehold improvements 4,691
_________
69,767
Accumulated depreciation and amortization (29,939)
_________
$ 39,828
_________
_________
<PAGE>
PAGE 61
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (Continued)
NOTE 3 - GOODWILL AND DEFERRED EXPENSES
On September 2, 1992, the Company acquired an investment
management subsidiary of USF&G Corporation and combined six USF&G
mutual funds with aggregate net assets of $.5 billion into the T.
Rowe Price family of funds. The total transaction cost which has
been recognized using the purchase method of accounting was
approximately $11,024,000, including goodwill of $8,139,000 which
is being amortized over 11 years using the straight-line method.
Prepaid non-compete and transition services agreements totaling
$2,500,000 are being amortized over their three-year life.
Accumulated amortization at December 31, 1993 aggregates
$2,216,000.
Goodwill of $1,980,000 from an earlier corporate acquisition is
being amortized over 40 years using the straight-line method.
Accumulated amortization was $1,039,000 at December 31, 1993.
NOTE 4 - DEBT
In June 1991, the Company completed the long-term financing
arrangements for its administrative services facility. Terms of
the $13,500,000 secured promissory note with Confederation Life
Insurance Company include an interest rate of 9.77%, monthly
principal and interest payments totaling $128,000 for 10 years,
and a final principal payment of $9,845,000 in 2001. A
prepayment option is available under the terms of the note;
however, the payment of a substantial premium would have been
required to retire the debt at December 31, 1993. Related debt
issuance costs of $436,000 are included in deferred expenses and
are being amortized over the life of the loan to produce an
effective annual interest rate of 10.14%.
The outstanding principal balance for this note was $12,904,000
at December 31, 1993. A fair value of $16,030,000 was estimated
based on the cost of risk-free assets that could be acquired to
extinguish the obligation at December 31, 1993.
A maximum of $20,000,000 is available to the Company under unused
bank lines of credit at December 31, 1993.
NOTE 5 - INCOME TAXES
Deferred income taxes arise from differences between taxable
income for financial statement and income tax return purposes and
are calculated using the liability method prescribed by SFAS No.
109, "Accounting for Income Taxes."
PAGE 62
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (Continued)
The net deferred tax liability of $2,596,000 included in income
taxes payable at December 31, 1993 consists of total deferred tax
liabilities of $5,609,000 and total deferred tax assets of
$3,013,000. Deferred tax liabilities include $2,898,000 arising
from unrealized holding gains on available-for-sale securities,
$1,353,000 arising from unrealized capital gains allocated from
the Company's partnership investments, and $677,000 from
differences in the recognition of depreciation expense. Deferred
tax assets include $1,100,000 from differences in the recognition
of the costs of the defined benefit retirement plan and
postretirement benefits.
NOTE 6 - COMMON STOCK AND EMPLOYEE STOCK INCENTIVE PLANS
Shares Authorized
At December 31, 1993, the Company had reserved 8,151,315 shares
of its unissued common stock for issuance upon the exercise of
stock options and 420,000 shares for issuance under an employee
stock purchase plan.
Share Repurchases
The Company's board of directors has authorized the future
repurchase of up to 1,432,000 common shares at December 31, 1993.
Executive Stock
At December 31, 1993, there were outstanding 1,226,540 shares of
common stock ("Executive Stock") which were sold to certain
officers of the Company in 1982 at a discount. These shares are
subject to restrictions which require payment of the discount of
$.32 per share to the Company at the earlier of the sale of such
stock or termination of employment.
<PAGE>
PAGE 63
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (Continued)
Stock Incentive Plans
The following table summarizes the status of noncompensatory
stock options granted at market value to certain officers and
directors of the Company.
Options
Unexer- Options Unexer- Exer-
cised Options Granted cised cisable
Options Exer- (Canceled) Options at
Year at Decem- cised During Decem- Decem- Exer-
of ber 31, During ber 31, ber 31, ber 31, cise
Grant 1992 1993 1993 1993 1993 Price
____ ________ ________ ________ ________ ________ ______
1983-4 53,000 (30,600) -- 22,400 22,400 $.67 &
$.75
1987 309,410 (68,064) -- 241,346 241,346 $5.38 &
$9.38
1988 359,000 (66,586) -- 292,414 292,414 $7.94
1989 632,280 (46,288) (5,600) 580,392 312,404 $11.38
1990 681,500 (83,387) (11,800) 586,313 141,313 $7.19 &
$8.50
1991 811,450 (37,000) (14,000) 760,450 283,450 $17.00
1992 926,000 (11,600) (27,400) 887,000 168,600 $18.75
1993 -- -- 1,154,000 1,154,000 -- $28.13
_________ ________ _________ _________ _________
3,772,640 (343,525) 1,095,200 4,524,315 1,461,927
_________ ________ _________ _________ _________
_________ ________ _________ _________ _________
The right to exercise stock options generally vests over the
five-year period following the grant. After the tenth year
following the grant, the right to exercise the related stock
options lapses and the options are canceled.
NOTE 7 - EMPLOYEE RETIREMENT PLANS
The Company sponsors two defined contribution retirement plans:
a profit-sharing plan based on participant compensation and a
401(k) plan.
The Company also has a defined benefit plan covering those
employees whose annual base salaries do not exceed a specified
salary limit. Participant benefits are based on the final
month's base pay and years of service subsequent to January 1,
1987. The Company's funding policy is to contribute annually the
maximum amount that can be deducted for federal income tax
purposes. The following table sets forth the plan's funded
status and the amounts recognized in the Company's consolidated
balance sheet (in thousands) at December 31, 1993.<PAGE>
PAGE 64
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (Continued)
Actuarial present value of
Accumulated benefit obligation for service rendered
Vested $ 780
Non-vested 1,362
______
Total 2,142
Obligation attributable to estimated future compensation
increases 2,594
______
Projected benefit obligation 4,736
Plan assets held in sponsored mutual funds, at fair value 2,594
______
Projected benefit obligation in excess of plan assets 2,142
Unrecognized loss from decreases in discount rate 407
______
Accrued retirement costs $ 1,735
______
______
Discount rate used in determining actuarial present
values 6.40%
______
______
NOTE 8 - COMMITMENTS AND CONTINGENT LIABILITIES
The Company is a minority partner in the joint venture which owns
the land and building in which the Company leases its corporate
offices. Future minimum rental payments under the Company's
lease agreement are $3,110,000 in 1994 and 1995, $3,220,000 in
1996, $3,769,000 in 1997 and 1998, and $33,755,000 in 1999
through 2006. Other assets at December 31, 1992 includes a
receivable from the venture of $3,485,000 for leasehold
improvements made by the Company and reimbursed by the venture in
1993.
The Company leases office facilities and equipment under other
noncancelable operating leases. Future minimum rental payments
under these leases aggregate $4,621,000 in 1994, $4,123,000 in
1995, $1,776,000 in 1996, $1,259,000 in 1997, $696,000 in 1998,
and $4,806,000 in later years.
At December 31, 1993, the Company had outstanding commitments to
invest an additional $6,757,000 in various investment
partnerships and ventures.
The Company has contingent obligations at December 31, 1993 under
a $500,000 direct pay letter of credit expiring not later than
1999 and a $780,000 standby letter of credit which is renewable
annually.
<PAGE>
PAGE 65
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (Continued)
Consolidated stockholders' equity at December 31, 1993 includes
$32,635,000 which is restricted as to use under various
regulations and agreements to which the Company and its
subsidiaries are subject in the ordinary course of business.
From time to time, the Company is a party to various employment-
related claims, including claims of discrimination, before
federal, state and local administrative agencies and courts. The
Company vigorously defends itself against these claims. In the
opinion of management, after consultation with counsel, it is
unlikely that any adverse determination in one or more pending
employment-related claims would have a material adverse effect on
the Company's financial position.
<PAGE>
PAGE 66
REPORT OF INDEPENDENT ACCOUNTANTS
_________________________________
To the Stockholders and Board of Directors
of T. Rowe Price Associates, Inc.
In our opinion, the accompanying consolidated balance sheet
presents fairly, in all material respects, the financial position
of T. Rowe Price Associates, Inc. and its subsidiaries at
December 31, 1993 in conformity with generally accepted
accounting principles. This financial statement is the
responsibility of the Company's management; our responsibility is
to express an opinion on this financial statement based on our
audit. We conducted our audit in accordance with generally
accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Baltimore, Maryland
January 25, 1994
<PAGE>
PAGE 67
T. ROWE PRICE (LOGO) PROXY
_______________________________________________________________
INSTRUCTIONS:
1. Cast your vote by checking the appropriate boxes on the
reverse side. If you do not check a box, your vote will be
cast FOR that proposal.
2. Sign and date the card below.
3. Please return the signed card promptly using the enclosed
postage paid envelope, even if you will be attending the
meeting.
4. Please do not enclose checks or any other correspondence.
Please fold and detach card at perforation before mailing.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
T. ROWE PRICE GROWTH & INCOME FUND, INC.
MEETING: 9:30 A.M. EASTERN TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Stephen W. Boesel and James S.
Riepe, as proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote, as
designated below, all shares of stock of the Fund, which the
undersigned is entitled to vote at the Annual Meeting of
Shareholders to be held on Wednesday, April 20, 1994, at the time
indicated above, at the offices of the Fund, 100 East Pratt
Street, Baltimore, Maryland 21202, and at any and all
adjournments thereof, with respect to the matters set forth below
and described in the Notice of Annual Meeting and Proxy Statement
dated March 8, 1994, receipt of which is hereby acknowledged.
Please sign exactly as name
appears. Only authorized officers
should sign for corporations. For
information as to the voting of
stock registered in more than one
name, see page ___ of the Notice of
Annual Meeting and Proxy Statement.
Dated: __________________, 1994
___________________________________
___________________________________
Signature(s)
CUSIP#779551100/fund#054
(Front)<PAGE>
PAGE 68
T. ROWE PRICE (LOGO) WE NEED YOUR PROXY VOTE BEFORE APRIL 20,
1994
_________________________________________________________________
Please refer to the Proxy Statement discussion of each of these
matters.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE SHAREHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR ALL PROPOSALS.
Please fold and detach card at perforation before mailing.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
1. Election of FOR all nominees / / WITHHOLD AUTHORITY / /1.
directors. listed below (except to vote for all
as marked to the nominees listed below
contrary)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL
NOMINEE STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW.)
Leo C. Bailey Stephen W. Boesel Donald W. Dick, Jr.
David K. Fagin Addison Lanier John K. Major Hanne M. Merriman
James S. Riepe M. David Testa Hubert D. Vos Paul M. Wythes
2. Approve changes to the Fund's fundamental policies.
FOR each policy / / ABSTAIN / / 2.
listed below (except as
marked to the contrary)
PLEASE CHECK THE BOX FOR any policy change you do NOT
(underscored) wish to approve:
/ / / / / / / / / / / / / / / / / / / / / / / / / /
A B C D E F G H I J K L M
/ / / / / / / / / /
N O P Q R
3. Amend Articles of Incorporation to delete policy on pricing
securities. FOR / / AGAINST / / ABSTAIN / / 3.
4. Ratify the selection of Price Waterhouse as independent
accountants. FOR / / AGAINST / / ABSTAIN / / 4.
5. I authorize the Proxies, in their discretion, to vote upon
such other business as may properly come before the meeting.
CUSIP#779551100/fund#054
(BACK)
