PAGE 1
Registration Nos. 033-08093/811-4525
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Post-Effective Amendment No. 16 / X /
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940 / X /
Amendment No. 13 / X /
Fiscal Year Ended February 28, 1995
________________________________________
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
___________________________________________________
(Exact name of Registrant as Specified in Charter)
100 East Pratt Street, Baltimore, Maryland 21202
___________________________________________ ___________
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 410-547-2000
____________
Henry H. Hopkins
100 East Pratt Street
Baltimore, Maryland 21202
________________________________________
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering July 1, 1995
____________
It is proposed that this filing will become effective (check
appropriate box):
/ / immediately upon filing pursuant to paragraph (b)
/X/ on July 1, 1995 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
PAGE 2
/ / on (date) pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
/ / this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933+
______________________________________________
Pursuant to Section 24f-2 of the Investment Company Act of 1940,
the Registrant has registered an indefinite number of securities
under the Securities Act of 1933 and intends to file a 24f-2
Notice by April 29, 1996.
+Not applicable, as no securities are being registered by this
Post-Effective Amendment No. 16 to the Registration Statement.
PAGE 3
The Registration Statement of T. Rowe Price California Tax-
Free Income Trust on Form N-1A (File Number 33-08093) is hereby
amended under the Securities Act of 1933 to update the
Registrant's financial statements, make other changes in the
Registrant's Prospectus and Statement of Additional Information,
and to satisfy the annual amendment requirements of Rule 8b-16
under the Investment Company Act of 1940.
This Amendment consists of the following:
Cross Reference Sheet
Part A of Form N-1A, Revised Prospectus
Part B of Form N-1A, Statement of Additional Information
Part C of Form N-1A, Other Information
Opinion of Counsel
Accountants' Consent
PAGE 4
CROSS REFERENCE SHEET
N-1A Item No. Location
_____________ _________
PART A
Item 1. Cover Page Cover Page
Item 2. Synopsis Transaction and Fund
Expenses
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Transaction and Fund
Registrant Expenses; Fund,
Market, and Risk
Characteristics; The
Fund's Organization
and Management;
Understanding Fund
Performance;
Investment Policies
and Practices
Item 5. Management of the Fund Transaction and Fund
Expenses; Fund,
Market, and Risk
Characteristics; The
Fund's Organization
and Management
Item 6. Capital Stock and Other Distributions and
Securities Taxes; The Fund's
Organization and
Management
Item 7. Purchase of Securities Being Pricing Shares and
Offered Receiving Sale
Proceeds; Transaction
Procedures and Special
Requirements; Account
Requirements and
Transaction
Information;
Shareholder Services
Item 8. Redemption or Repurchase Pricing Shares and
Receiving Sale
Proceeds; Transaction
Procedures and Special
Requirements;
Exchanging and
Redeeming Shares;
Shareholder Services
Item 9. Pending Legal Proceedings +
PART B
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History +
PAGE 5
Item 13. Investment Objectives and Investment Objectives
Policies and Policies; Risk
Factors Associated
with a California
Portfolio; Investment
Program; Investment
Restrictions; Risk
Factors; Yield
Information;
Investment Performance
Item 14. Management of the Registrant Management of the
Trust
Item 15. Control Persons and Principal Principal Holders of
Holders of Securities Securities
Item 16. Investment Advisory and Other Investment Management
Services Services; Custodian;
Independent
Accountants; Legal
Counsel
Item 17. Brokerage Allocation Portfolio
Transactions; Code of
Ethics
Item 18. Capital Stock and Other Dividends and
Securities Distributions;
Organization of the
Trust
Item 19. Purchase, Redemption and Redemptions in Kind;
Pricing of Securities Being Pricing of Securities;
Offered Net Asset Value Per
Share; Federal and
State Registration of
Shares
Item 20. Tax Status Tax Status
Item 21. Underwriters Distributor for the
Trust
Item 22. Calculation of Yield Quotations Yield Information
of Money Market Funds
Item 23. Financial Statements Incorporated by
Reference from Annual
Report
PART C
Information required to be included in Part C is set forth under
the appropriate item, so numbered, in Part C to this Registration
Statement.
___________________________________
+ Not applicable or negative answer
PAGE 6
Facts at a Glance
Investment Goals
The highest level of income exempt
from federal and California state
income taxes consistent with each
fund's prescribed investment
program.
As with all mutual funds, these
funds may not meet their goals.
Strategy and Risk/Reward
California Tax-Free Money Fund.
Invests in high-quality, short-term
municipal securities. YOUR
INVESTMENT IN THE FUND IS NEITHER
INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE IS NO
ASSURANCE THAT THE FUND WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE
OF $1.00 PER SHARE.
Risk/Reward: Lowest potential risk
and reward.
California Tax-Free Bond Fund.
Invests primarily in investment-
grade municipal bonds. Dollar
weighted average maturity is
expected to be 10 years or longer.
Risk/Reward: Significantly higher
income than the money fund and
greater potential price fluctuation
than a shorter-term bond fund.
Investor Profile
California taxpayers who, because of
their tax bracket, can benefit from
income that is exempt from federal
and California state income taxes.
Not appropriate for tax-deferred
retirement plans, such as IRAs.
Fees and Charges
100% no-load. No fees or charges to
buy or sell shares or to reinvest
PAGE 7
dividends; no 12b-1 marketing fees;
free telephone exchange.
Investment Manager
Founded in 1937 by the late Thomas
Rowe Price, Jr. T. Rowe Price
Associates and its affiliates
managed over $61 billion, including
approximately $5.5 billion in
municipal bond assets, for over 3
million individual and institutional
investor accounts as of March 31,
1995.
THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION,
OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION, OR ANY STATE SECURITIES
COMMISSION, PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. T. Rowe Price
California Tax-Free
Income Trust
July 1, 1995
Prospectus
Contents
________________________
1 About the Funds
________________________
Transaction and Fund
Expenses
________________________
Financial Highlights
________________________
Fund, Market, and
Risk Characteristics
________________________
2 About Your Account
________________________
Pricing Shares;
Receiving Sale Proceeds
________________________
Distributions and Taxes
________________________
PAGE 8
Transaction Procedures
and Special Requirements
________________________
3 More About the Funds
________________________
Organization and
Management
________________________
Understanding Fund
Performance
________________________
Investment Policies and
Practices
________________________
4 Investing With T. Rowe
Price
________________________
Account Requirements
and Transaction
Information
________________________
Opening a New Account
________________________
Purchasing Additional
Shares
________________________
Exchanging and Redeeming
________________________
Shareholder Services
________________________
This prospectus
contains information you
should know before
investing. Please keep
it for future reference.
A Statement of
Additional Information
about the funds, dated
July 1, 1995, has been
filed with the
Securities and Exchange
Commission and is
incorporated by
reference in this
prospectus. To obtain a
free copy, call
1-800-625-5660.
PAGE 9
1 About the Funds
Transaction and Fund Expenses
These tables should help you understand the
kinds of expenses you will bear directly or
indirectly as a fund shareholder.
In table 1 below, "Shareholder
Transaction Expenses," shows that you pay
no sales charges. All the money you invest
in a fund goes to work for you, subject to
the fees explained below. "Annual Fund
Expenses," provides an estimate of how much
it will cost to operate the fund for a
year, based on 1995 fiscal year expenses
(and any applicable expense limitations).
These are costs you pay indirectly, because
they are deducted from the fund's total
assets before the daily share price is
calculated and before dividends and other
distributions are made. In other words,
you will not see these expenses on your
account statement.
________________________
Like all T. Rowe Price
funds, the funds are 100%
no-load. ___________________________________________
Shareholder Transaction Expenses
Money Bond
Fund Fund
__________________________________________
Sales charge "load" None None
on purchases
___________________________________________
Sales charge "load" None None
on reinvested dividends
___________________________________________
Redemption fees None None
___________________________________________
Exchange fees None None
___________________________________________
_________________________
For the fiscal year
ended February 28, 1995,
the Money and Bond Funds
paid $89,000 and $72,000,
respectively, to T. Rowe
Price Services, Inc. for
transfer and dividend
PAGE 10
disbursing functions and
shareholder services, and
$67,000 and $105,000,
respectively, to T. Rowe
Price for accounting
services. Annual Fund Percentage of Fiscal 1995
Expenses Average Net Assets
Money Bond
Fund Fund
___________________________________________
Management fee 0.21%a 0.41%b
(after reduction)
___________________________________________
Marketing fees
(12b-1) None None
___________________________________________
Total other 0.34% 0.24%
(shareholder servicing,
custodial, auditing, etc.)
___________________________________________
Total fund expenses 0.55%a 0.65%b
(after reduction)
___________________________________________
a The money fund's management fee and its
total expense ratio would have been 0.44%
and 0.78%, respectively, had T. Rowe
Price not agreed to reduce management
fees in accordance with the expense
limitation.
b The bond fund's management fee and its
total expense ratio would have been 0.44%
and 0.68%, respectively, had T. Rowe
Price not agreed to reduce management
fees in accordance with the expense
limitation.
Note: The funds charge a $5 fee for wire
redemptions under $5,000, subject to
change without notice.
___________________________________________
Table 1
The main types of expenses, which all
mutual funds may charge against fund
assets, are:
o A management fee: the percent of fund
assets paid to the funds' investment
PAGE 11
manager. Each fund's fee is comprised of
a group fee, discussed later, and an
individual fund fee of 0.10%.
o "Other" administrative expenses:
primarily the servicing of shareholder
accounts, such as providing statements,
reports, disbursing dividends, as well as
custodial services.
o Marketing or distribution fees: an annual
charge ("12b-1") to existing shareholders
to defray the cost of selling shares to
new shareholders. T. Rowe Price funds do
not levy 12b-1 fees.
For further details on fund expenses,
please see "The Funds' Organization and
Management."
o Hypothetical example: Assume you invest
$1,000, the fund returns 5% annually,
expense ratios remain as previously
listed, and you close your account at the
end of the time periods shown. Your
expenses would be:
_________________________
The table at right is
just an example and
actual expenses can be
higher or lower than
those shown.
___________________________________________
Fund 1 year 3 years 5 years 10 years
___________________________________________
Money $6 $18 $31 $69
___________________________________________
Bond $7 $21 $36 $81
___________________________________________
Table 2A
Table 2B sets forth expense ratio
limitations and the periods for which they
are effective. For each, T. Rowe Price has
agreed to waive its fees and bear any
expenses to the extent such fees or
expenses would cause the fund's ratio of
expenses to average net assets to exceed
the indicated percentage limitations. Fees
waived or expenses paid or assumed by T.
PAGE 12
Rowe Price are subject to reimbursement by
the fund through the indicated
reimbursement date, but no reimbursement
will be made if it would result in the
fund's expense ratio exceeding its
specified limit.
___________________________________________
Expense Ratio Limitations
Expense Reim-
Limita- Ratio burse-
tion Limita- ment
Fund Period tion Date
___________________________________________
Moneya March 1, 1993- 0.55% February
February 28, 1995 28, 1997
___________________________________________
Bondb March 1, 1993- 0.65% February
February 28, 1995 28, 1997
___________________________________________
a The money fund previously operated under
a 0.55% limitation that expired February
28, 1995. Effective March 1, 1995, T.
Rowe Price agreed to extend the existing
expense limitation of 0.55%, for a
period of two years from March 1, 1995.
Subject to shareholder approval, fees
waived or expenses paid or assumed under
this agreement are subject to
reimbursement to T. Rowe Price by the
fund whenever the expense ratio is below
0.55%; however, no reimbursement will be
made after February 28, 1995 (for the
first agreement) February 28, 1997 (for
the second agreement) or February 28,
1999 (for the third agreement), or if it
would result in the expense ratio
exceeding 0.55%. Any amounts reimbursed
will have the effect of increasing fees
otherwise paid by the fund.
b The bond fund previously operated under
a 0.60% limitation that expired February
28, 1995. Effective March 1, 1995, T.
Rowe Price agreed to increase the
existing expense limitation of 0.60% to
0.65%, for a period of two years from
March 1, 1995. Subject to shareholder
approval, fees waived or expenses paid
or assumed under these agreements are
PAGE 13
subject to reimbursement to T. Rowe
Price by the fund whenever the expense
ratio is below 0.65%; however, no
reimbursement will be made after
February 28, 1995 (for the first
agreement) February 28, 1997 (for the
second agreement) or February 28, 1999
(for the third agreement), or if it
would result in the expense ratio
exceeding 0.65%. Any amounts reimbursed
will have the effect of increasing fees
otherwise paid by the fund.
___________________________________________
Table 2B
Financial Highlights
The following table provides information
about each fund's financial history. It is
based on a single share outstanding
throughout each fiscal year. The
respective table is part of each fund's
financial statements which are included in
the funds' annual report and are
incorporated by reference into the
Statement of Additional Information. This
document is available to shareholders upon
request. The financial statements in the
annual report have been audited by Coopers
& Lybrand L.L.P., independent accountants,
whose unqualified report covers the periods
shown.
PAGE 14
Investment Activities Distributions
Net Real-
ized and
Net Unreal- Total
Asset ized Gain from
Value, Net (Loss) Invest- Net Net
Begin- Invest- on ment Invest- Real- Total
Year Ended, ning of ment Invest- Activi- ment lized Distri-
February 28 Period Income ments ties Income Gain butions
_________________________________________________________________
Money Fund
1987a $1.000 $0.015b -- $0.015 $(0.015) -- $(0.015)
1988e 1.000 0.041b -- 0.041 (0.041) -- (0.041)
1989 1.000 0.047b -- 0.047 (0.047) -- (0.047)
1990 1.000 0.053 -- 0.053 (0.053) -- (0.053)
1991 1.000 0.046c -- 0.046 (0.046) -- (0.046)
1992e 1.000 0.035c -- 0.035 (0.035) -- (0.035)
1993 1.000 0.023c -- 0.023 (0.023) -- (0.023)
1994 1.000 0.019c -- 0.019 (0.019) -- (0.019)
1995 1.000 0.025c -- 0.025 (0.025) -- (0.025)
_________________________________________________________________
Bond Fund
1987a $10.00 $0.29d $ 0.48 $0.77 $(0.29) -- $(0.29)
1988e 10.48 0.57d (1.04)(0.47) (0.57) -- (0.57)
1989 9.44 0.57d (.13) 0.44 (0.57) -- (0.57)
1990 9.31 0.59d 0.08 0.67 (0.59) -- (0.59)
1991 9.39 0.58d 0.12 0.70 (0.58) -- (0.58)
1992e 9.51 0.59d 0.34 0.93 (0.59) -- (0.59)
1993 9.85 0.57d 0.80 1.37 (0.57) -- (0.57)
1994 10.65 0.56d 0.01 0.57 (0.56) $(0.23)(0.79)
1995 10.43 0.55d (0.41) 0.14 (0.55) (0.02)(0.57)
_________________________________________________________________
PAGE 15
End of Period
Ratio
of
Ratio Net
of Invest-
Net Total Expenses ment Port-
Asset Return to Income folio
Value, (Includes Net Average to Aver- Turn-
Year Ended, End of Reinvested Assets ($ Net age Net over
February 28 Period Dividends) Thousands) Assets Assets Rate
_________________________________________________________________
Money Fund
1987a $1.000 1.52% $ 17,266 0.80%b 3.35% --
1988e 1.000 4.17% 59,673 0.80%b 4.18% --
1989 1.000 4.76% 75,180 0.80%b 4.69% --
1990 1.000 5.40% 87,270 0.80% 5.28% --
1991 1.000 4.73% 82,408 0.71%c 4.64% --
1992e 1.000 3.55% 70,302 0.55%c 3.50% --
1993 1.000 2.31% 66,617 0.55%c 2.29% --
1994 1.000 1.92% 74,016 0.55%c 1.90% --
1995 1.000 2.55% 76,289 0.55%c 2.51% --
_________________________________________________________________
Bond Fund
1987a $10.48 7.79% $ 43,577 0.85%d 6.10% 88.4%
1988e 9.44 (4.17)% 36,379 1.00%d 6.19% 152.4%
1989 9.31 4.93% 42,902 1.00%d 6.23% 77.0%
1990 9.39 7.35% 65,056 0.93%d 6.25% 88.4%
1991 9.51 7.84% 84,375 0.73%d 6.29% 192.7%
1992e 9.85 10.05% 108,494 0.60%d 6.07% 80.3%
1993 10.65 14.41% 143,973 0.60%d 5.69% 57.5%
1994 10.43 5.37% 151,936 0.60%d 5.19% 73.4%
1995 10.00 1.60% 131,953 0.60%d 5.60% 78.0%
_________________________________________________________________
a For the period September 15, 1986 (commencement of
operations) to February 28, 1987.
b Excludes expenses in excess of a 0.80% voluntary expense
limitation in effect through February 28, 1989.
c Excludes expenses in excess of a 0.55% voluntary expense
limitation in effect November 7, 1990 through February 28,
1993.
d Excludes expenses in excess of a 0.60% voluntary expense
limitation in effect November 7, 1990 through February 28,
1995, and an 0.80% voluntary expense limitation in effect
November 1, 1989 through November 6, 1990, a 1.00% voluntary
expense limitation in effect during the years ended February
28, 1989 and February 29, 1988, and a 0.85% voluntary
expense limitation in effect through February 28, 1987.
e Fiscal year ended February 29.
_________________________________________________________________
Table 3
PAGE 16
Fund, Market, and Risk Characteristics: What to Expect
To help you decide if the T. Rowe Price
California funds are appropriate for you,
this section takes a closer look at their
investment programs and the securities
markets in which they invest.
What are the fund's objectives and
investment programs?
_________________________
Income from California
municipal securities is
exempt from federal and
California income taxes. o The California Tax-Free Money Fund's
objective is to provide the highest
possible current income exempt from
federal and California state income taxes
consistent with preservation of principal
and liquidity. The fund generally invests
in municipal securities which mature in
13 months or less. The fund's yield will
fluctuate in response to changes in
interest rates, but the share price is
managed to remain stable at $1.00.
Although the fund has maintained a
constant share price since its inception,
and fund managers will make every effort
to continue to meet this objective in the
future, the price could drop below $1.00
under certain circumstances, such as a
major change in interest rates or default
on one or more fund holdings. Unlike
most bank accounts or certificates of
deposit, your investment in the fund is
not insured or guaranteed by the U.S.
Government.
o The California Tax-Free Bond Fund's
investment objective is to provide,
consistent with prudent portfolio
management, the highest level of income
exempt from federal and California state
income taxes by investing primarily in
investment-grade California municipal
bonds. The fund's dollar weighted
average maturity will usually exceed ten
years.
_________________________
The share price of the
PAGE 17
bond fund will fluctuate.
When you sell your
shares, you may lose
money. Each fund will invest at least 65% of its
total assets in California municipal
securities. However, due to seasonal
variations or shortages in the supply of
suitable short-term California
securities, each fund may invest
periodically in municipals whose interest
is exempt from federal but not California
state income taxes. Every effort will be
made to minimize such investments, but
they could compose up to 10% of each
fund's annual income.
What is the credit quality of each fund?
o The money fund will purchase securities
which are rated within the two highest
rating categories assigned by established
rating agencies, or, if not rated, of
equivalent investment quality as
determined by T. Rowe Price. T. Rowe
Price considers all securities purchased
by the fund to present minimal credit
risks.
o The bond fund will generally purchase
investment-grade securities, which means
their ratings are within the four highest
credit categories (e.g., AAA, AA, A, BBB)
as determined by a national rating
organization or, if unrated, by T. Rowe
Price. The fund may occasionally
purchase below-investment-grade
securities (including those with the
lowest or no rating), but no such
purchase will be made if it would cause
the fund's noninvestment-grade bonds to
exceed 5% of its net assets. Unrated
bonds may be less liquid than rated
bonds.
Investment-grade securities include a
range from the highest rated to medium
quality (BBB). Securities in the BBB
category may be more susceptible to
adverse economic conditions or changing
circumstances and the securities at the
PAGE 18
lower end of the BBB category have
certain speculative characteristics.
At its discretion, the bond fund may
retain a security whose credit quality is
downgraded to a noninvestment-grade level
after purchase. The money fund may also
do so but only in accordance with Rule
2a-7 under the Investment Company Act of
1940.
What are the main risks of investing in
municipal and money market funds?
_________________________
A more detailed
discussion of these and
other risk considerations
is contained in the
funds' Statement of
Additional Information. Since they are managed to maintain a
$1.00 share price, money market funds
should have little risk of principal loss.
The potential for realizing a loss of
principal in a bond or money market fund
could derive from:
o Interest rate or market risk--the decline
in fixed-income securities and funds that
may accompany a rise in the overall level
of interest rates (see Table 4). A sharp
and unexpected rise in interest rates
could cause a money fund's price to drop
below a dollar. However, the extremely
short-term securities held in money
market portfolios--a means of achieving
an overall fund objective of principal
safety--reduces much of their potential
for price fluctuation.
o Credit risk--the chance that any of a
fund's holdings will have its credit
rating downgraded or will default (fail
to make scheduled interest and principal
payments), potentially reducing the
fund's income level and/or share price.
Money funds invest in very highly rated
securities, thus reducing this risk.
o Political risk--the chance that a
significant restructuring of federal
PAGE 19
income tax rates, or even serious
discussion on the topic in Congress,
could cause municipal bond prices to
fall. The demand for municipal bonds is
strongly influenced by the value of tax
exempt income to investors. Broadly
lower tax rates could reduce the
advantage of owning municipal bonds.
o Geographical--the change of price
declines resulting from developments in a
single state.
What are the particular risks associated
with single-state funds versus those that
invest nationally?
_________________________
Significant political and
economic developments
within a state may have
repercussions, direct and
indirect, on virtually
all municipal bonds
issued in the state. A fund investing within a single state is,
by definition, less diversified
geographically than one investing across
many states. The risk arises from the
fund's greater exposure to that state's
economy and politics, factors that loom
large in establishing the credit quality of
bonds issued by the state and its political
subdivisions. For example, general
obligation bonds of a state or locality
that has a high income level, reasonable
debt levels, and a positive long-term
outlook should have a higher credit rating
than those of a state without those
attributes.
Of course, many municipal bonds are not
general obligations backed by the state's
"full faith and credit" (its full taxing
and revenue raising resources) and may not
rely on any government for money to service
their debt. Bonds issued by governmental
authorities may depend wholly on revenues
generated by the project they financed or
on other dedicated revenue streams. The
credit quality of these "revenue" bonds may
PAGE 20
vary significantly from that of the state's
general obligations.
How does T. Rowe Price try to reduce
risk?
_________________________
Neither fund should be
relied upon as a complete
investment program, nor
be used for short-term
trading purposes. Consistent with each fund's objective, the
portfolio manager actively manages bond and
money funds in an effort to manage risk and
increase total return. Risk management
tools include:
o Diversification of assets to reduce the
impact of a single holding on a fund's
net asset value;
o Thorough credit research by our own
analysts; and
o Adjustments in a fund's duration to try
to reduce the negative impact of rising
interest rates or take advantage of the
favorable effects of falling rates.
Depending o market outlook, the
investment manager may shorten or
lengthen the fund's average effective
maturity and duration within the ranges
and guidelines established in this
prospectus.
What is the credit quality of California
general obligations?
_________________________
Credit ratings and the
financial and economic
conditions of the State,
local governments, public
authorities, and others
in which the funds may
invest are subject to
change at any time. As of June 1, 1995, the state was rated AA
by Moody's and A+ by Standard & Poor's.
A combination of the state's constitutional
requirements, its overall revenue structure
and the effects of the recession have
PAGE 21
placed California under fiscal stress in
recent years. Restrictions on taxes and
spending, such as Proposition 13 and
Article XIIB of the constitution, also
resulted in a broad shift by local
governments away from general obligation
debt toward lease revenue financing, which
is subject to annual appropriation and
generally does not require voter approval.
Lease-backed debt is generally viewed as a
less secure form of borrowing and therefore
entails more credit risk than general
obligation borrowing. California will
continue to be exposed to similar
initiatives which could put pressure on the
expenditures of the state and local
governments and restrict their ability to
raise revenues.
What about the quality of the funds' other
holdings?
In addition to the state's general
obligations, the funds will invest a
portion of their assets in bonds that are
rated according to the issuer's individual
creditworthiness, such as bonds of local
governments and public authorities. While
local governments in California depend
principally on their own revenue sources,
they could experience budget shortfalls due
to reallocations of tax revenues or
responsibilities by the state.
The funds may invest in certain sectors
with special risks, for example health
care, which could be affected by federal or
state legislation, electric utilities with
exposure to nuclear power plants, and
private activity bonds without governmental
backing.
The funds sometimes invest in obligations
of the Commonwealth of Puerto Rico and its
public corporations (as well as the U.S.
territories of Guam and the Virgin Islands)
that are exempt from federal and California
state income taxes. These investments
require careful assessment of certain risk
factors, such as reliance on substantial
federal assistance and favorable tax
PAGE 22
programs. As of June 1, 1995, Puerto
Rico's general obligations were rated Baa1
by Moody's and A by Standard & Poor's.
What are derivatives and can the funds
invest in them?
The term derivative is used to describe
financial instruments whose value is
derived from an underlying security (e.g.,
a stock or bond) or a market benchmark
(e.g., an interest rate index). Many types
of investments representing a wide range of
potential risks and rewards fall under the
"derivatives" umbrella--from conventional
instruments such as callable bonds,
futures, and options, to more exotic
investments such as stripped mortgage
securities and structured notes. While it
was only recently that the term derivative
has become widely known among the investing
public, derivatives have in fact been
employed by investment managers for many
years. The funds will invest in
derivatives only if the expected risks and
rewards are consistent with its objective,
policies, and overall risk profile as
described in this prospectus. The money
fund does not invest in high risk, highly
leveraged derivatives. The bond fund
limits its use of derivatives to situations
in which they may enable the fund to:
increase yield; hedge against a decline in
principal value; invest in eligible asset
classes with greater efficiency and lower
cost than is possible through direct
investment; or adjust duration. The bond
fund will not invest in any high risk,
highly leveraged derivative instrument
which is expected to cause the price
volatility of the portfolio to be
meaningfully different than that of a long-
term, investment grade-bond.
Who issues municipal securities?
_________________________
These are some
characteristics of
municipal securities.
State and local governments and
governmental authorities sell notes and
PAGE 23
bonds (usually called "municipals") to pay
for public projects and services.
Who buys municipal securities?
_________________________
Municipal securities are
also called "tax-exempts"
because the interest
income they provide is
usually exempt from
federal income taxes. Individuals are the primary investors, and
a principal way they invest is through
mutual funds. Prices of municipals may be
affected by major changes in flows of money
into or out of municipal funds. For
example, substantial and sustained
redemptions from municipal bond funds could
result in lower prices for these
securities.
Is interest income from municipal issues
always exempt from federal taxes?
No. For example, since 1986, income from
so-called "private activity" municipals has
been subject to the federal alternative
minimum tax (AMT). For example, some bonds
financing airports, stadiums, and student
loan programs fall into this category.
Shareholders subject to the AMT must
include income derived from private-
activity bonds in their AMT calculation.
Relatively few taxpayers are required to
pay the tax. Normally, the funds will not
purchase any security if as a result, more
than 20% of the fund's income would be
subject to the AMT. The funds will report
annually to shareholders the portion of
income, if any, subject to AMT. (Please
see "Distributions and Taxes--Taxes on Fund
Distributions.")
Why are yields on municipals usually below
those on otherwise comparable taxable
securities?
Since the income provided by most
municipals is exempt from federal taxation,
investors are willing to accept lower
yields on a municipal bond than on an
otherwise similar (in quality and maturity)
taxable bond.
PAGE 24
Why are yields on California bonds often
below those of comparable issues from other
states?
Strong demand for California securities,
due to a relatively high state income tax
rate and an often limited supply, tends to
push their prices up and yields down.
Is there an easy way to compare after-tax
yields on a California fund with a similar
tax-exempt fund that invests nationally?
Subtract your state tax rate from 1 and
multiply this number times the yield on the
national fund. The result is the yield to
you on the national fund after paying
California income tax. Compare this with
the California fund's yield.
_________________________
Before choosing a fund,
you may find it helpful
to review some
fundamentals of fixed-
income investing. What are the major differences between
money market and bonds funds?
o Price--Like all bond funds, the fund has
a fluctuating share price. Money market
funds are managed to maintain a stable
share price.
o Maturity - Short and Intermediate-term
bond funds have longer average maturities
(from one to 10 years) than money market
funds (90 days or less). Longer-term
bond funds have the longest average
maturities (10 years or more). Of
course, unlike a money market fund, the
share prices of bond funds will fluctuate
and your investment may be worth more or
less on redemption than at purchase.
o Income--Limited-term bond funds typically
offer more income than money market funds
and less income than longer-term bond
funds.
Is a fund's yield fixed or will it vary?
It will vary. The yield is calculated
every day by dividing a fund's net income
PAGE 25
per share, expressed at annual rates, by
the share price. Since both income and
share price will fluctuate, a fund's yield
will also vary. (Although money fund
prices are stable, income is variable.)
Is a fund's "yield" the same thing as the
"total return"?
"No" for bond funds. Your total return is
the result of reinvested income and the
change in share price for a given time
period. Income is always a positive
contributor to total return and can enhance
a rise in share price or serve as an offset
to a drop in share price. Since money
funds are managed to maintain a stable
share price, their yield and total return
should be the same.
What is "credit quality" and how does it
affect a fund's yield?
Credit quality refers to a bond issuer's
expected ability to make all required
interest and principal payments in a timely
manner. Because highly rated bond issuers
represent less risk, they can borrow at
lower interest rates than less creditworthy
issuers. Therefore, a fund investing in
high-quality securities should have a lower
yield than an otherwise comparable fund
investing in lower credit-quality
securities.
What is meant by a bond or bond fund's
maturity?
Every bond has a stated maturity date when
the issuer must repay the security's entire
principal value to the investor. Some
types of bonds may also have an "effective
maturity" that is shorter than the stated
date. Many corporate and municipal bonds
are "callable," meaning the principal can
be repaid before their stated maturity
dates on (or after) specified call dates.
Bonds are most likely to be called when
interest rates are falling, because the
issuer wants to refinance at a lower rate.
In such an environment, a bond's "effective
maturity" is usually its nearest call
date.
PAGE 26
A bond or money market mutual fund has
no maturity in the strict sense of the
word, but does have a dollar-weighted
average maturity. This number is an
average of the stated maturities of the
underlying bonds, with each maturity
"weighted" by the percentage of fund assets
it represents. Funds that target effective
maturities would use the effective (rather
than stated) maturities of the underlying
instruments when computing the average.
Targeting effective maturity provides
additional flexibility in portfolio
management but, all else being equal, could
result in higher volatility than a fund
targeting a stated maturity or maturity
range.
What is meant by a bond or bond fund's
"duration"?
Duration is the time-weighted value of
discounted future interest and principal
payments express in years. It measures
bond price sensitivity to interest rate
changes more accurately than maturity
because it takes into account the time
value of cash flows generated over the
bond's life. Future interest and principal
payments are discounted to reflect their
present value and then are multiplied by
the number of years they will be received
to produce a value that is expressed in
years, i.e., the duration. Effective
duration takes into account call features
and sinking fund payments which may shorten
a bond's life.
Since duration can also be computed for
bond funds, you can estimate the effect of
interest rates on a bond fund's share
price. Simply multiply the fund's duration
(available for T. Rowe Price bond funds in
our shareholder reports) by an expected
change in interest rates. For example, the
price of a bond fund with a duration of
five years would be expected to fall
approximately 5% if rates rose by one
percentage point.
PAGE 27
How is a municipal's price affected by
changes in interest rates?
When interest rates rise, a municipal's
price usually falls, and vice versa.
_________________________
Generally speaking, the
longer the security's
maturity, the greater the
price increase or
decrease in response to a
change in interest rates,
as shown in the table at
right.
___________________________________________
How Interest Rates Affect Bond Prices
Price Per $1,000
Bond of Bond Face Value
Maturity Coupon if Interest Rates
Increase Decrease
1% 2% 1% 2%
___________________________________________
1 Year 4.30% $990 $981 $1,010 $1,020
___________________________________________
5 Years 4.90% 957 917 1,045 1,092
___________________________________________
10 Years 5.35 927 860 1,080 1,169
___________________________________________
20 Years 5.95 893 801 1,126 1,275
___________________________________________
30 Years 6.00 875 774 1,155 1,348
___________________________________________
Table 4 Coupons reflect yields on AAA-rated
municipals as of April 30, 1995.
This is an illustration and does
not represent expected yields or
share-price changes of any T. Rowe
Price fund.
Do money market securities react to
changes in interest rates?
Yes. As interest rates change, the prices
of money market securities fluctuate, but
changes are usually small because of their
very short maturities.
How can I decide which California fund is
most appropriate for me?
Review your own financial objectives, time
PAGE 28
horizon, and risk tolerance. Use the table
below, which summarizes the funds' main
characteristics, to choose a fund (or
funds) suitable for your particular needs.
If you will need your principal in a
relatively short time, the money fund may
be a good choice. However, if you are
investing for the highest possible tax-free
income and can tolerate some price
volatility, you should consider the longer-
term bond fund.
___________________________________________
Differences Between Funds
Fund Credit Income Risk of Expected
Quality Share Average
Cate- Price Maturity
gories Fluctu-
ation
___________________________________________
Money Two Lowest Stable No more
highest than 90
days
___________________________________________
Bond Primar- Higher Greater 10+
ily four than a than a Years
highest shorter shorter
term term
bond bond
fund fund
___________________________________________
Table 5
Is there additional information about
the two funds to help me make a decision?
You should review the "Investment Policies
and Practices" section which discusses the
following: Types of Portfolio Securities
(municipal securities, private activity
bonds, municipal lease obligations,
municipal warrants, securities with "puts"
or other demand features, securities with
credit enhancements, synthetic or
derivative securities, and private
placements); Types of Management Practices
(cash position, when-issued securities and
forwards, interest rate futures, borrowing
money and transferring assets, portfolio
turnover, sector concentration, and credit
quality considerations).
PAGE 29
2 About Your Account
Pricing Shares and Receiving Sale Proceeds
Here are some procedures you should know
when investing in a fund. This section
applies to all T. Rowe Price tax-free bond
and money funds.
How and when shares are priced
_________________________
The various ways you can
buy, sell, and exchange
shares are explained at
the end of this
prospectus and on the New
Account Form. Bond and Money Funds. The share price
(also called "net asset value" or NAV per
share) for each fund is calculated at 4
p.m. ET each day the New York Stock
Exchange is open for business. To calculate
the NAV, a fund's assets are valued and
totaled, liabilities are subtracted, and
the balance, called net assets, is divided
by the number of shares outstanding.
Money fund NAVs, which are managed to
remain at $1.00, are calculated at noon ET
each day as well as 4 p.m. Amortized cost
or amortized market value is used to value
money fund securities that mature in 60
days or less.
How your purchase, sale, or exchange price
is determined
_________________________
When filling out the New
Account Form, you may
wish to give yourself the
widest range of options
for receiving proceeds
from a sale. If we receive your request in correct form
before 4 p.m. ET, your transaction will be
priced at that day's NAV. If we receive it
after 4 p.m., it will be priced at the next
business day's NAV.
We cannot accept orders that request a
particular day or price for your
transaction or any other special
conditions.
PAGE 30
Note: The time at which transactions are
priced and the time until which orders are
accepted may be changed in case of an
emergency or if the New York Stock Exchange
closes at a time other than 4 p.m. ET.
How you can receive the proceeds from a
sale
If your request is received by 4 p.m. ET in
correct form, proceeds are usually sent on
the next business day. Proceeds can be sent
to you by mail, or to your bank account by
ACH transfer or bank wire. Proceeds sent
by ACH transfer should be credited the
second day after the sale. ACH (Automated
Clearing House) is an automated method of
initiating payments from and receiving
payments in your financial institution
account. ACH is a payment system supported
by over 20,000 banks, savings banks, and
credit unions, which electronically
exchange the transactions primarily through
the Federal Reserve Banks. Proceeds sent
by bank wire should be credited to your
account the next business day.
_________________________
If for some reason we
cannot accept your
request to sell shares,
we will contact you. Exception:
o Under certain circumstances and when
deemed to be in the fund's best
interests, your proceeds may not be sent
for up to five business days after
receiving your sale or exchange request.
If you were exchanging into a bond or
money fund, your new investment would not
begin to earn dividends until the sixth
business day.
Useful Information on Distributions and
Taxes
_________________________
The fund distributes all
net investment income and
realized capital gains to
shareholders. Dividends and other distributions
Dividend and capital gain distributions are
PAGE 31
reinvested in additional fund shares in
your account unless you select another
option on your New Account Form. The
advantage of reinvesting distributions
arises from compounding; that is, you
receive interest and capital gain
distributions on a rising number of shares.
Dividends not reinvested are paid by check
or transmitted to your bank account via
ACH. If the Post Office cannot deliver your
check, or if your check remains uncashed
for six months, the fund reserves the right
to reinvest your distribution check in your
account at the then current NAV and to
reinvest all subsequent distributions in
shares of the fund.
Income dividends
o Bond funds declare income dividends daily
at 4 p.m. ET to shareholders of record at
that time provided payment has been
received on the previous business day.
o Money funds declare income dividends
daily at noon ET to shareholders of
record at that time provided payment has
been received by that time.
o Bond and money funds pay dividends on the
last business day of each month.
o Bond and money fund shares will earn
dividends through the date of redemption;
shares redeemed on a Friday or prior to a
holiday will continue to earn dividends
until the next business day. Generally,
if you redeem all of your shares at any
time during the month, you will also
receive all dividends earned through the
date of redemption in the same check.
When you redeem only a portion of your
shares, all dividends accrued on those
shares will be reinvested, or paid in
cash, on the next dividend payment
date.
Capital gains
PAGE 32
o A capital gain or loss is the difference
between the purchase and sale price of a
security.
o If the fund has net capital gains for the
year (after subtracting any capital
losses), they are usually declared and
paid in December to shareholders of
record on a specified date that month. If
a second distribution is necessary, it is
usually declared and paid during the
first quarter of the following year.
Tax information
_________________________
The funds send timely
information for your tax
filing needs. Although the regular monthly income
dividends you receive from the funds are
expected to be exempt from federal and
state and local (if any) income taxes, you
need to be aware of the possible tax
consequences when:
o you sell fund shares, including an
exchange from one fund to another; or
o the fund makes a short- and/or long-term
capital gain distribution to your
account.
Due to 1993 tax legislation, a portion of
the capital gains realized on the sale of
market discount bonds with maturities
beyond one year may be treated as
ordinary income and cannot be offset by
other capital losses. Therefore, to the
extent the fund invests in these
securities, the likelihood of a taxable
gain distribution will be increased.
Note: You must report your total tax-
exempt income on IRS Form 1040. The IRS
uses this information to help determine
the tax status of any social security
payments you may have received during the
year.
Taxes on fund redemptions. When you sell
shares in any fund, you may realize a gain
PAGE 33
or loss. An exchange from one fund to
another is still a sale for tax purposes.
If you realize a loss on the sale or
exchange of fund shares held six months or
less, your capital loss is reduced by the
tax-exempt dividends received on those
shares.
In January, the funds will send you Form
1099-B, indicating the date and amount of
each sale you made in during the prior
year. This information will also be
reported to the IRS. For accounts opened
new or by exchange in 1983 or later, we
will provide you the gain or loss of the
shares you sold during the year based on
the "average cost" method. This
information is not reported to the IRS, and
you do not have to use it. You may
calculate the cost basis using other
methods acceptable to the IRS, such as
"specific identification."
To help you maintain accurate records, we
send you a confirmation immediately
following each transaction (except for
systematic purchases and redemptions) you
make and a year-end statement detailing all
your transactions in each fund account
during the year.
_________________________
Capital gain
distributions are taxable
whether reinvested in
additional shares or
received in cash. Taxes on fund distributions. In January,
the funds will send you Form 1099-DIV
indicating the tax status of any capital
gain distribution made to you. This
information will also be reported to the
IRS. All capital gain distributions are
taxable to you for the year in which they
were paid. The only exception is that
distributions declared during the last
three months of the year and paid in
January are taxed as though they were paid
by December 31. Dividends are expected to
be tax exempt.
PAGE 34
Short-term capital gain distributions are
taxable as ordinary income and long-term
gain distributions are taxable at the
applicable long-term gain rate. The gain
is long or short term depending on how long
the fund held the securities, not how long
you held shares in the fund. If you
realize a loss on the sale or exchange of
fund shares held six months or less, your
short-term loss recognized is reclassified
to long-term to the extent of any capital
gain distribution received.
If the funds invest in certain "private
activity" bonds, shareholders who are
subject to the alternative minimum tax
(AMT) must include income generated by
these bonds in their AMT computation. The
portion of your fund's income which should
be included in your AMT calculation, if
any, will be reported to you in January.
Tax effect of buying shares before a
capital gain distribution. If you buy
shares shortly before or on the "record
date"--the date that establishes you as the
person to receive the upcoming
distribution--you will receive, in the form
of a taxable distribution, a portion of the
money you just invested. Therefore, you may
wish to find out a fund's record date(s)
before investing. Of course, a fund's share
price may, at any time, reflect
undistributed capital gains or unrealized
appreciation.
Note: For shareholders who receive
social security benefits, the receipt of
tax-exempt interest may increase the
portion of such benefits which are subject
to tax.
Transaction Procedures and Special
Requirements
Purchase Conditions
_________________________
Following these
procedures helps assure
PAGE 35
timely and accurate
transactions. Nonpayment. If your payment is not received
or you pay with a check or ACH transfer
that does not clear, your purchase will be
cancelled. You will be responsible for any
losses or expenses incurred by the fund or
transfer agent, and the fund can redeem
shares you own in this or another
identically registered T. Rowe Price fund
as reimbursement. The fund and its agents
have the right to reject or cancel any
purchase, exchange, or redemption due to
nonpayment.
U.S. dollars. All purchases must be paid
for in U.S. dollars; checks must be drawn
on U.S. banks.
Sale (Redemption) Conditions
10-day hold. If you sell shares that you
just purchased and paid for by check or ACH
transfer, the fund will process your
redemption but will generally delay sending
you the proceeds for up to 10 calendar days
to allow the check or transfer to clear. If
your redemption request was sent by mail or
mailgram, proceeds will be mailed no later
than the seventh calendar day following
receipt unless the check or ACH transfer
has not cleared. If, during the clearing
period, we receive a check drawn against
your bond or money market account, it will
be returned marked "uncollected." (The 10-
day hold does not apply to purchases paid
for by: bank wire; cashier's, certified, or
treasurer's checks; or automatic purchases
through your paycheck.)
Telephone, Tele*Access (registered
trademark) and PC*Access (registered
trademark) Transactions. These exchange and
redemption services are established
automatically when you sign the New Account
Form unless you check the box which states
that you do not want these services. The
fund uses reasonable procedures (including
shareholder identity verification) to
confirm that instructions given by
telephone are genuine. If these procedures
are not followed, it is the opinion of
PAGE 36
certain regulatory agencies that the fund
may be liable for any losses that may
result from acting on the instructions
given. All conversations are recorded, and
a confirmation is sent promptly after the
telephone transaction.
Redemptions over $250,000. Large sales can
adversely affect a portfolio manager's
ability to implement a fund's investment
strategy by causing the premature sale of
securities that would otherwise be held.
If in any 90-day period, you redeem (sell)
more than $250,000, or your sale amounts to
more than 1% of the fund's net assets, the
fund has the right to delay sending your
proceeds for up to five business days after
receiving your request, or to pay the
difference between the redemption amount
and the lesser of the two previously
mentioned figures with securities from the
fund.
Excessive Trading
_________________________
T. Rowe Price may bar
excessive traders from
purchasing shares. Frequent trades involving either
substantial fund assets, or a substantial
portion of your account or accounts
controlled by you, can disrupt management
of the fund and raise its expenses. We
define "excessive trading" as exceeding one
purchase and sale involving the same fund
within any 120-day period.
For example, you are in fund A. You can
move substantial assets from fund A to fund
B, and, within the next 120 days, sell your
shares in fund B to return to fund A or
move to fund C.
If you exceed the number of trades
described above, you may be barred
indefinitely from further purchases of T.
Rowe Price funds.
Three types of transactions are exempt from
excessive trading guidelines: (1) trades
solely between money market funds, (2)
PAGE 37
redemptions that are not part of exchanges,
and (3) systematic purchases or redemptions
(see "Shareholder Services").
Keeping Your Account Open
Due to the relatively high cost to the
funds of maintaining small accounts, we ask
you to maintain an account balance of at
least $1,000. If your balance is below
$1,000 for three months or longer, the fund
has the right to close your account after
giving you 60 days in which to increase
your balance.
Signature Guarantees
_________________________
A signature guarantee is
designed to protect you
and the fund from fraud
by verifying your
signature. You may need to have your signature
guaranteed in certain situations, such as:
o Written requests 1) to redeem over
$50,000 or 2) to wire redemption
proceeds.
o Remitting redemption proceeds to any
person, address, or bank account not on
record.
o Transferring redemption proceeds to a T.
Rowe Price fund account with a different
registration from yours.
o Establishing certain services after the
account is opened.
You can obtain a signature guarantee from
most banks, savings institutions,
broker/dealers and other guarantors
acceptable to T. Rowe Price. We cannot
accept guarantees from notaries public or
organizations that do not provide
reimbursement in the case of fraud.
3 More About the Funds
The Funds' Organization and Management
How are the funds organized?
PAGE 38
_________________________
Shareholders benefit
from T. Rowe Price's 58
years of investment
management
experience. The T. Rowe Price California Tax-Free
Income Trust was organized in 1986 as a
Massachusetts business trust and is a
"diversified, open-end investment company,"
or mutual fund. Mutual funds pool money
received from shareholders and invest it to
try to achieve specified objectives.
What is meant by "shares"?
As with all mutual funds, investors
purchase "shares" when they invest in a
fund. These shares are part of a fund's
authorized capital stock, but share
certificates are not issued.
Each share and fractional share entitles
the shareholder to:
o receive a proportional interest in a
fund's income and capital gain
distributions;
o cast one vote per share on certain fund
matters, including the election of fund
directors/trustees, changes in
fundamental policies, or approval of
changes in a fund's management contract.
Does each fund have an annual shareholder
meeting?
The funds are not required to hold annual
meetings and do not intend to do so except
when certain matters, such as a change in a
fund's fundamental policies, are to be
decided. In addition, shareholders
representing at least 10% of all eligible
votes may call a special meeting if they
wish for the purpose of voting on the
removal of any fund trustee(s). If a
meeting is held and you
cannot attend, you can vote by proxy.
Before the meeting, the fund will send you
proxy materials that explain the issues to
be decided and include a voting card for
you to mail back.
PAGE 39
Who runs the funds?
_________________________
All decisions
regarding the purchase
and sale of fund
investments are made by
T. Rowe Price--
specifically by the
funds' portfolio
managers. General Oversight. The funds are governed
by a Board of Trustees that meets regularly
to review the fund's investments,
performance, expenses, and other business
affairs. The Board elects the funds'
officers. The policy of each fund is that
a majority of Board members will be
independent of T. Rowe Price.
Portfolio Management. The fund's have
an Investment Advisory Committee, composed
of the following members: Mary J. Miller,
Chairman, Patrice L. Berchtenbreiter, Paul
W. Boltz, Patricia S. Deford, Joseph K.
Lynagh, William T. Reynolds, and Theodore
E. Robson. The Committee Chairman has day-
to-day responsibility for managing the
portfolio and works with the Committee in
developing and executing the funds'
investment programs. Mrs. Miller has been
Chairman of the funds' Committee since
1990. She joined T. Rowe Price in 1983 and
has been managing investments since
1987.
Marketing. T. Rowe Price Investment
Services, Inc., a wholly-owned subsidiary
of T. Rowe Price, distributes (sells)
shares of these and all other T. Rowe Price
funds.
Shareholder Services. T. Rowe Price
Services, Inc., another wholly-owned
subsidiary, acts as the funds' transfer and
dividend disbursing agent and provides
shareholder and administrative services.
The address for T. Rowe Price Investment
Services, Inc., and T. Rowe Price Services
is 100 East Pratt St., Baltimore, MD 21202.
PAGE 40
How are fund expenses determined?
The management agreement spells out the
expenses to be paid by each fund. In
addition to the management fee, each fund
pays for the following: shareholder
service expenses; custodial, accounting,
legal, and audit fees; costs of preparing
and printing prospectuses and reports sent
to shareholders; registration fees and
expenses; proxy and annual meeting expenses
(if any); and director/trustee fees and
expenses.
The Management Fee. This fee has two
parts--an "individual fund fee" (discussed
under "Transaction and Fund Expenses"),
which reflects the fund's particular
investment management costs, and a "group
fee." The group fee, which is designed to
reflect the benefits of the shared
resources of the T. Rowe Price investment
management complex, is calculated daily
based on the combined net assets of all T.
Rowe Price funds (except Equity Index and
the Spectrum Funds and any institutional or
private label mutual funds). The group fee
schedule (shown below) is graduated,
declining as the asset total rises, so
shareholders benefit from the overall
growth in mutual fund assets.
0.480% First $1 billion
0.450% Next $1 billion
0.420% Next $1 billion
0.390% Next $1 billion
0.370% Next $1 billion
0.360% Next $2 billion
0.350% Next $2 billion
0.340% Next $5 billion
0.330% Next $10 billion
0.320% Next $10 billion
0.310% Thereafter
Each fund's portion of the group fee is
determined by the ratio of its daily net
assets to the daily net assets of all the
Price funds as described above. Based on
combined Price funds' assets of
approximately $38 billion at April 30,
1995, the Group Fee was 0.34%.
PAGE 41
Understanding Performance Information
This section should help you understand the
terms used to describe the funds'
performance. You will come across them in
shareholder reports you receive from us
four times a year, in our newsletter,
"Insights" reports, in T. Rowe Price
advertisements, and in the media.
_________________________
Total return is the most
widely used performance
measure. Detailed
performance information
is included in the funds'
annual reports and
quarterly shareholder
reports. Total Return
This tells you how much an investment in a
fund has changed in value over a given time
period. It reflects any net increase or
decrease in the share price and assumes
that all dividends and capital gains (if
any) paid during the period were reinvested
in additional shares. Including reinvested
distributions means that total return
numbers include the effect of compounding,
i.e., you receive income and capital gain
distributions on a rising number of shares.
Advertisements for a fund may include
cumulative or compound average annual total
return figures, which may be compared with
various indices, other performance
measures, or other mutual funds.
Cumulative Total Return
This is the actual rate of return on an
investment for a specified period. A
cumulative return does not indicate how
much the value of the investment may have
fluctuated between the beginning and the
end of the period specified.
Average Annual Total Return
This is always hypothetical. Working
backward from the actual cumulative return,
it tells you what constant year-by-year
return would have produced the actual,
PAGE 42
cumulative return. By smoothing out all the
variations in annual performance, it gives
you an idea of the investment's annual
contribution to your portfolio provided you
held it for the entire period in question.
_________________________
You will see frequent
references to the funds'
yields and tax equivalent
yields in our reports,
advertisements, in media
stories, and so on. Yield
The current or "dividend yield" on the fund
or any investment tells you the
relationship between the investment's
current level of annual income and its
price on a particular day. The dividend
yield reflects the actual income paid to
shareholders for a given period,
annualized, and divided by the average
price during the given period. For example,
a fund providing $5 of annual income per
share and a price of $50 has a current
yield of 10%. Yields can be calculated for
any time period. The money fund may
advertise a "current" yield, reflecting the
latest 7-day income annualized, or an
"effective" yield, which assumes the income
has been reinvested in the fund.
The advertised or "SEC yield" is found by
determining the net income per share (as
defined by the SEC) earned by the fund
during a 30-day base period and dividing
this amount by the per-share price on the
last day of the base period. The "SEC
yield" may differ from the dividend yield.
Investment Policies and Practices
_________________________
Fund managers have
considerable leeway in
choosing investment
strategies and selecting
securities they believe
will help the funds
achieve their objectives. This section takes a detailed look at some
of the types of securities the funds may
hold in their portfolios and the various
kinds of investment practices that may be
PAGE 43
used in day-to-day portfolio management.
Each fund's investment program is subject
to further restrictions and risks described
in the "Statement of Additional
Information."
Shareholder approval is required to
substantively change each fund's objective
and certain investment restrictions noted
in the following section as "fundamental
policies." The managers also follow certain
"operating policies" which can be changed
without shareholder approval. However,
significant changes are discussed with
shareholders in fund reports. Each fund
adheres to applicable investment
restrictions and policies at the time it
makes an investment. A later change in
circumstances will not require the sale of
an investment if it was proper at the time
it was made.
The fund's holdings of certain kinds of
investments cannot exceed maximum
percentages of total assets, which are set
forth herein. For instance, the bond fund
is not permitted to invest more than 10% of
total assets in residual interest bonds.
While these restrictions provide a useful
level of detail about the bond fund's
investment program, investors should not
view them as an accurate gauge of the
potential risk of such investments. For
example, in a given period, a 5% investment
in residual interest bonds could have
significantly more than a 5% impact on the
fund's share price. The net effect of a
particular investment depends on its
volatility and the size of its overall
return in relation to the performance of
all the fund's other investments.
Changes in the fund's holdings, the fund's
performance, and the contribution of
various investments are discussed in the
shareholder reports sent to you.
Types of Portfolio Securities
PAGE 44
In seeking to meet their investment
objectives, the funds may invest in any
type of municipal security or instrument
(including certain potentially high-risk
derivatives) whose yield, credit quality,
and maturity characteristics are consistent
with the funds' investment programs. These
and some of the other investment techniques
the funds may use are described in the
following pages.
Fundamental policy: The funds will not
purchase a security if, as a result, with
respect to 75% of its total assets, more
than 5% of its total assets would be
invested in securities of a single issuer
or more than 10% of the voting securities
of the issuer would be held by the fund,
provided that these limitations do not
apply to a fund's purchases of securities
issued or guaranteed by the U.S.
Government, it agencies or
instrumentalities.
Municipal Securities. Each fund's assets
are invested primarily in various tax-free
municipal debt securities. The issuers have
a contractual obligation to pay interest at
a stated rate on specific dates and to
repay principal (the bond's face value) on
a specified date or dates. An issuer may
have the right to redeem or "call" a bond
before maturity, and the investor may have
to reinvest the proceeds at lower rates.
_________________________
In purchasing municipals,
the funds rely on the
opinion of the issuer's
bond counsel regarding
the tax-exempt status of
the investment. There are two broad categories of municipal
bonds. General obligation bonds are backed
by the issuer's "full faith and credit,"
that is, its full taxing and revenue
raising power. Revenue bonds usually rely
exclusively on a specific revenue source,
such as charges for water and sewer
service, to generate money for debt
service.
PAGE 45
Private Activity Bonds. While income from
most municipals is exempt from federal
income taxes, the income from certain types
of so-called private activity bonds (a type
of revenue bond) may be subject to the
alternative minimum tax (AMT). However,
only persons subject to AMT pay this tax.
Private activity bonds may be issued for
purposes such as housing or airports or to
benefit a private company. (Being subject
to the AMT does not mean the investor
necessarily pays this tax. For further
information, please see "Distributions and
Taxes.")
Fundamental policy: Under normal market
conditions, the funds will not purchase any
security if, as a result, less than 80% of
the funds' income would be exempt from
federal and California state income taxes.
The income included under the 80% test does
not include income from securities subject
to the alternative minimum tax.
Operating policy: During periods of
abnormal market conditions, for temporary
defensive purposes, the funds may invest
without limit in high-quality, short-term
securities whose income is subject to
federal and California state income tax.
In addition to general obligation and
revenue bonds, the funds' investments may
include, but are not limited to, the
following types of securities:
Municipal Lease Obligations. A lease is not
a full faith and credit obligation of the
issuer and is usually backed only by the
borrowing government's unsecured pledge to
make annual appropriation for lease
payments. There have been challenges to
the legality of lease financing in numerous
states and, from time to time, certain
municipalities have considered not
appropriating money to make lease payments.
In deciding whether to purchase a lease
obligation, the funds would assess the
financial condition of the borrower, the
merits of the project, the level of public
PAGE 46
support for the project, and the
legislative history of lease financing in
the state. These securities may be less
readily marketable than other municipals.
The funds may also purchase unrated
lease-obligations. Based on information
supplied by T. Rowe Price, the funds' Board
of Trustees will periodically review the
credit quality of non-rated leases and
assess the likelihood of their being
cancelled.
Operating policy: Each fund may invest no
more than 20% of its total assets in lease
obligations.
Municipal Warrants. Municipal warrants
are essentially call options on municipal
bonds. In exchange for a premium, they
give the purchaser the right, but not the
obligation, to purchase a municipal bond in
the future. The fund might purchase a
warrant to lock in forward supply in an
environment where the current issuance of
bonds is sharply reduced. Like options,
warrants may expire worthless and they may
have reduced liquidity.
Operating policy: The fund will not invest
more than 2% of its total assets in
municipal warrants.
Securities with "Puts" or other Demand
Features. Some longer-term municipals give
the investor the right to "put" or sell the
security at par (face value) within a
specified number of days following the
investor's request--usually one to seven
days. This demand feature enhances a
security's liquidity by dramatically
shortening its effective maturity and
enables it to trade at a price equal to or
very close to par. If the demand feature
were terminated prior to being exercised,
the funds would hold the longer-term
security.
Securities with Credit Enhancements.
PAGE 47
o Letters of Credit. Letters of credit are
issued by a third party, usually a bank,
to enhance liquidity and/or ensure
repayment of principal and any accrued
interest if the underlying municipal
security should default.
o Municipal Bond Insurance. This insurance,
which is usually purchased by the bond
issuer from a private, nongovernmental
insurance company, provides an
unconditional and irrevocable guarantee
that the insured bond's principal and
interest will be paid when due.
Insurance does not guarantee the price of
a bond or the share price of any fund.
The credit rating of an insured bond
reflects the credit rating of the
insurer, based on its claims paying
ability. T. Rowe Price periodically
reviews the credit quality of the
insurer.
The obligation of a municipal bond
insurance company to pay a claim extends
over the life of each insured bond.
Although defaults on insured municipal
bonds have been low to date and municipal
bond insurers have met these claims,
there is no assurance this will continue.
A higher than expected default rate
could strain the insurer's loss reserves
and adversely affect its ability to pay
claims to bondholders, such as the funds.
The number of municipal bond insurers is
relatively small, and not all of them
have the highest rating.
o Standby Repurchase Agreements. A Standby
Bond Purchase Agreement (SBPA) is a
liquidity facility provided to pay the
purchase price of bonds that cannot be
remarketed. The obligation of the
liquidity provider (usually a bank) is
only to advance funds to purchase
tendered bonds which cannot be remarketed
and does not cover principal or interest
under any other circumstances. The
liquidity provider's obligations under
the SBPA are usually subject to numerous
PAGE 48
conditions, including the continued
creditworthiness of the underlying
borrower.
Synthetic or Derivative Securities. These
securities are created from existing
municipal bonds:
o Residual Interest Bonds (These are
potentially high-risk derivatives). The
income stream provided by an underlying
bond is divided to create two securities,
one short-term and one long-term. The
interest rate on the short-term component
is reset by an index or auction process
normally every seven to 35 days. After
income is paid on the short-term
securities at current rates, the residual
income goes to the long-term securities.
Therefore, rising short-term interest
rates result in lower income for the
longer-term portion, and vice versa. The
longer-term bonds can be very volatile
and may be less liquid than other
municipals of comparable maturity.
Operating policy: The bond fund will not
invest more than 10% of its total assets
in residual interest bonds.
o Participation Interests. This term covers
various types of securities created by
converting fixed-rate bonds into
short-term, variable-rate certificates.
These securities have been developed in
the secondary market to meet the demand
for short-term, tax-exempt securities.
The funds will invest only in securities
deemed tax-exempt by a nationally
recognized bond counsel, but there is no
guarantee the interest will be exempt
because the IRS has not issued a
definitive ruling on the matter.
o Embedded Interest Rate Swaps and Caps.
In a fixed-rate, long-term municipal bond
with an interest rate swap attached to
it, the bondholder usually receives the
bond's fixed-coupon payment as well as a
variable rate payment that represents the
PAGE 49
difference between a fixed rate for the
term of the swap (which is typically
shorter than the bond it is attached to)
and a variable rate short-term municipal
index. The bondholder receives excess
income when short-term rates remain below
the fixed interest rate swap rate. If
short-term rates rise above the
fixed-income swap rate, the bondholder's
income is reduced. At the end of the
interest rate swap term, the bond reverts
to a single fixed-coupon payment.
Embedded interest rate swaps enhance
yields, but also increase interest rate
risk.
An embedded interest rate cap allows the
bondholder to receive payments whenever
short-term rates rise above a level
established at the time of purchase. They
normally are used to hedge against rising
short-term interest rates.
Both instruments may be volatile and of
limited liquidity and their use may
adversely affect a fund's total return.
Operating policy: The bond fund will not
invest more than 10% of its total assets in
embedded interest rate swaps and caps.
Private Placements. The funds may seek to
enhance their yield through the purchase of
private placements. These securities are
sold through private negotiations, usually
to institutions or mutual funds, and may
have resale restrictions. Their yields are
usually higher than comparable public
securities to compensate the investor for
their limited marketability.
Operating policy: The bond fund may not
invest more than 15% (10% for money fund)
of its net assets in illiquid securities,
including unmarketable private placements.
Types of Management Practices
_________________________
Cash reserves provide
flexibility and serve as
PAGE 50
a short-term defense
during periods of unusual
market volatility. Cash Position (bond fund). The fund will
hold a portion of its assets in short-term,
tax-exempt money market securities maturing
in one year or less. The reserve position:
provides flexibility in meeting
redemptions, expenses, and the timing of
new investments; can help in structuring a
fund's weighted average maturity; and
serves as a short-term defense during
periods of unusual market volatility. The
fund's cash reserve position will be
comprised of short-term, investment-grade
securities including tax-exempt commercial
paper, municipal notes and short- term
maturity bonds. Some of these securities
may have adjustable, variable or floating
rates.
When-Issued Securities (Each Fund) and
Forwards (bond fund). New issues of
municipals are often sold on a
"when-issued" basis, that is, delivery and
payment take place 15-45 days after the
buyer has agreed to the purchase. Some
bonds, called "forwards," have longer than
standard settlement dates, in some cases
exceeding one to three years. When buying
these securities, each fund identifies cash
or high-grade marketable securities held by
its custodian equal in value to its
commitment for these securities. The funds
do not earn interest on when-issued and
forward securities until settlement, and
the value of the securities may fluctuate
between purchase and settlement. Municipal
"forwards" typically carry a substantial
yield premium to compensate the buyer for
their greater interest rate, credit, and
liquidity risks.
Interest Rate Futures (bond fund).
Futures (a potentially high-risk
derivative) are often used to manage risk,
because they enable the investor to buy or
sell an asset in the future at an agreed
upon price. Specifically, the fund may use
futures (and options on futures) to hedge
against a potentially unfavorable change in
PAGE 51
interest rates and to adjust its exposure
to the municipal bond market. The use of
futures for hedging and non-hedging
purposes may not always be successful.
Their prices can be highly volatile, using
them could lower the fund's total return,
and the potential loss from their use could
exceed the fund's initial investment in
such contracts.
Operating policy: Initial margin deposits
on futures and premiums on options used for
non-hedging purposes will not equal more
than 5% of the fund's net asset value.
Borrowing Money and Transferring Assets.
Each fund can borrow money from banks as a
temporary measure for emergency purposes,
to facilitate redemption requests, or for
other proper purposes consistent with each
fund's investment objective and program.
Such borrowings may be collateralized with
fund assets, subject to restrictions.
Fundamental policy: Borrowings may not
exceed 33 1/3% of a fund's total assets.
Operating policy: Each fund may not
transfer as collateral any portfolio
securities except as necessary in
connection with permissible borrowings or
investments and then such transfers may not
exceed 33 1/3% of a fund's total assets.
Each fund may not purchase additional
securities when borrowings exceed 5% of
total assets.
Portfolio Turnover (bond fund). The
fund generally purchases securities with
the intention of holding them for
investment, however, when market conditions
or other circumstances warrant, securities
may be purchased and sold without regard to
the length of time held. Due to the nature
of the fund's investment program, the
fund's portfolio turnover rate may exceed
100%. Although the fund does not expect to
generate any taxable income, a high
turnover rate may increase transaction
costs and may affect taxes paid by
PAGE 52
shareholders to the extent short-term gains
are distributed. The bond fund's portfolio
turnover rates for the fiscal years ended
February 28, 1995, 1994, and 1993, were
78.0%, 73.4%, and 57.5%, respectively.
Sector Concentration. It is possible that
each fund could have a considerable amount
of assets (25% or more) in securities that
would tend to respond similarly to
particular economic or political
developments. An example would be,
securities of issuers related to a single
industry, such as health care or nuclear
energy.
Operating policy: Each fund will not invest
more than 25% of total assets in industrial
development bonds of projects in the same
industry (such as solid waste, nuclear
utility or airlines). Bonds which are
refunded with escrowed U.S. Government
securities are not subject to the 25%
limitation.
Credit Quality Considerations. The credit
quality of most bond issues is evaluated by
rating agencies such as Moody's and
Standard & Poor's. Credit quality refers to
the issuer's ability to meet all required
interest and principal payments. The
highest ratings are assigned to issuers
perceived to be the best credit risks. T.
Rowe Price research analysts also evaluate
all portfolio holdings of each fund,
including those rated by outside agencies.
The lower the rating on a bond, the higher
the yield, other things being equal.
Table 6 shows the rating scale used by the
major rating agencies. T. Rowe Price
considers publicly available ratings, but
emphasizes its own credit analysis when
selecting investments.
___________________________________________
Ratings of Municipal Debt Securities
PAGE 53
Moody's Standard Fitch Definition
Investors & Poor'sInvestors
Service, Corpora-Service,
Inc. tion Inc.
___________________________________________
Long-Term Aaa AAA AAA Highest
quality
_________________________________
Aa AA AA High
quality
_________________________________
A A A Upper
medium
grade
_________________________________
Baa BBB BBB Medium
grade
_________________________________
Moody's S&P Fitch
___________________________________________
Short- MIG1/VMIG1 SP1+ Very F-1+
Term Best quality strong Exception-
quality ally
SP1 Strongstrong
grade quality
F-1 Very
strong
quality
___________________________________________
MIG2/VMIG2 SP2 F-2 Good
High quality Satisfac- credit
tory quality
grade
___________________________________________
Commer- P-1 Superior A-1+ F-1+
cial quality Extremely Exception-
paper strong ally strong
quality quality
A-1 StrongF-1 Very
quality strong
quality
___________________________________
P-2 Strong A-2 F-2 Good
quality Satisfac- credit
tory quality
quality
___________________________________________
Table 6
PAGE 54
The Generic Service Section 4 for the T. Rowe Price California
Tax-Free Income Trust, should be inserted here.
PAGE 1
4 Investing with T. Rowe Price
Account Requirements and Transaction
Information
________________________
Always verify your
transactions by carefully
reviewing the
confirmation we send
you. Please report any
discrepancies to
Shareholder Services. Tax Identification Number
We must have your correct social security
or corporate tax identification number on a
signed New Account Form or W-9 Form.
Otherwise, federal law requires the funds
to withhold a percentage (currently 31%) of
your dividends, capital gain distributions,
and redemptions, and may subject you to an
IRS fine. If this information is not
received within 60 days after your account
is established, your account may be
redeemed, priced at the NAV on the date of
redemption.
Unless you request otherwise, one
shareholder report will be mailed to
multiple account owners with the same tax
identification number and same zip code and
to shareholders who have requested that
their account be combined with someone
else's for financial reporting.
Institutional Accounts
Transaction procedures in the following
sections may not apply to institutional
accounts. For procedures regarding these
accounts, please call your designated
account manager or service
representative.
Opening a New Account: $2,500 minimum
initial investment; $1,000 for gifts or
transfers to minors (UGMA/UTMA) accounts
Account Registration
If you own other T. Rowe Price funds, be
sure to register any new account just like
your existing accounts so you can exchange
among them easily. (The name and account
type would have to be identical.)
PAGE 2
________________________
Regular Mail
T. Rowe Price
Account Services
P.O. Box 17300
Baltimore, MD
21298-9353
Mailgram, Express,
Registered, or Certified
Mail
T. Rowe Price
Account Services
10090 Red Run Blvd.
Owings Mills, MD 21117 By Mail
Please make your check payable to T.
Rowe Price Funds (otherwise it will be
returned) and send your check together
with the New Account Form to the address at
left. We do not accept third party checks
to open new accounts.
By Wire
o Call Investor Services for an account
number and give the following wire address
to your bank:
Morgan Guaranty Trust Co. of New York
ABA #021000238
T. Rowe Price [fund name]
AC-00153938
account name(s) and account number
o Complete a New Account Form and mail it
to one of the appropriate addresses
listed at left.
Note: No services will be established and
IRS penalty withholding may occur until a
signed New Account Form is received.
By Exchange
Call Shareholder Services or use
Tele*Access or PC*Access (see "Automated
Services" under "Shareholder Services").
The new account will have the same
registration as the account from which you
are exchanging. Services for the new
account may be carried over by telephone
request if preauthorized on the existing
account. (See explanation of "Excessive
Trading" under "Transaction
Procedures.")
PAGE 3
In Person
Drop off your New Account Form at any of
the locations listed on the cover and
obtain a receipt.
Note: The fund and its agents reserve
the right to waive or lower investment
minimums; to accept initial purchases by
telephone or mailgram; to cancel or rescind
any purchase or exchange (for example, if
an account has been restricted due to
excessive trading or fraud) upon notice to
the shareholder within five business days
of the trade or if the written confirmation
has not been received by the shareholder,
whichever is sooner; to freeze any account
and suspend account services when notice
has been received of a dispute between the
registered or beneficial account owners or
there is reason to believe a fraudulent
transaction may occur; to otherwise modify
the conditions of purchase and any
services at any time; or to act on
instructions believed to be genuine.
Purchasing Additional Shares: $100
minimum purchase; $50 minimum for Automatic
Asset Builder
By ACH Transfer
Use Tele*Access, PC*Access or call Investor
Services if you have established electronic
transfers using the ACH network.
By Wire
Call Shareholder Services or use the wire
address in "Opening a New Account."
________________________
Regular Mail
T. Rowe Price Funds
Account Services
P.O. Box 89000
Baltimore, MD
21289-1500 By Mail
o Provide your account number and the fund
name on your check.
o Make your check payable to T. Rowe Price
Funds (otherwise it may be returned).
PAGE 4
o Mail the check to us at the address shown
at left with either a fund reinvestment
slip or a note indicating the fund you
want to buy and your fund account
number.
By Automatic Asset Builder
Fill out the Automatic Asset Builder
section on the New Account or Shareholder
Services Form.
Exchanging and Redeeming Shares
By Phone
Call Shareholder Services. If you find our
phones busy during unusually volatile
markets, please consider placing your order
by Tele*Access, PC*Access (if you have
previously authorized telephone services),
mailgram or express mail. For exchange
policies, please see "Transaction
Procedures and Special Requirements--
Excessive Trading."
Redemption proceeds can be mailed to your
account address, sent by ACH transfer, or
wired to your bank (provided your bank
information is already on file). For
charges, see "Electronic Transfers--By
Wire" under "Shareholder Services".
By Mail
Provide account name(s) and numbers, fund
name(s), and exchange or redemption amount.
For exchanges, mail to the appropriate
address, indicate the fund you are
exchanging from and the fund(s) you are
exchanging into. T. Rowe Price requires the
signatures of all owners exactly as
registered, and possibly a signature
guarantee (please see "Transaction
Procedures and Special
Requirements--Signature Guarantees").
Mailgram, Express,
Registered, or
Certified Mail: Regular Mail:
T. Rowe Price T. Rowe Price
PAGE 5
Account Services Account Services
10090 Red Run Blvd. P.O. Box 89000
Owings Mills, MD Baltimore, MD
21117 21289-0220
_______________________
Shareholder Services
1-800-225-5132
1-410-625-6500 Shareholder Services
Many services are available to you as a T.
Rowe Price shareholder; some you receive
automatically and others you must authorize
on the New Account Form. By signing up for
services on the New Account Form rather
than later on, you avoid having to complete
a separate form and obtain a signature
guarantee. This section reviews some of the
principal services currently offered. Our
Services Guide contains detailed
descriptions of these and other services.
If you are a new T. Rowe Price investor,
you will receive a Services Guide with our
Welcome Kit.
Note: Corporate and other institutional
accounts require an original or certified
resolution to establish services and to
redeem by mail. For more information, call
Investor Services.
Retirement Plans
We offer a wide range of plans for
individuals and institutions, including
large and small businesses: IRAs, SEP-IRAs,
Keoghs (profit sharing, money purchase
pension), 401(k), and 403(b)(7). For
information on IRAs, call Investor
Services. For information on all other
retirement plans, please call our Trust
Company at 1-800-492-7670.
________________________
Investor Services
1-800-638-5660
1-410-547-2308 Exchange Service
You can move money from one account to an
existing identically registered account, or
open a new identically registered account.
Remember, exchanges are purchases and sales
for tax purposes. (Exchanges into a state
tax-free fund are limited to investors
living in states where the funds are
PAGE 6
registered.) Some of the T. Rowe Price
funds may impose a redemption fee of .50%
to 2%, payable to such funds, on shares
held for less than one year, or in some
funds, six months.
Automated Services
Tele*Access. 24-hour service via toll-free
number provides information on fund yields
and prices, dividends, account balances,
and your latest transaction as well as the
ability to request prospectuses, account
and tax forms, duplicate statements,
checks, and to initiate purchase,
redemption and exchange orders in your
accounts (see "Electronic Transfers"
below).
PC*Access. 24-hour service via dial-up
modem provides the same information as
Tele*Access, but on a personal computer.
Please call Investor Services for an
information guide.
Telephone and Walk-In Services
Buy, sell, or exchange shares by calling
one of our service representatives or by
visiting one of our investor center
locations whose addresses are listed on the
cover.
Electronic Transfers
By ACH. With no charges to pay, you can
initiate a purchase or redemption for as
little as $100 or as much as $100,000
between your bank account and fund account
using the ACH network. Enter instructions
via Tele*Access, PC*Access, or call
Shareholder Services.
By Wire. Electronic transfers can also be
conducted via bank wire. There is currently
a $5 fee for wire redemptions under $5,000,
and your bank may charge for incoming or
outgoing wire transfers regardless of size.
Checkwriting (Not available for equity
funds or the High Yield Bond or Emerging
Markets Bond Funds)
You may write an unlimited number of free
checks on any money market fund, and most
PAGE 7
bond funds, with a minimum of $500 per
check. Keep in mind, however that a check
results in a redemption; a check written on
a bond fund will create a taxable event
which you and we must report to the IRS.
Automatic Investing ($50 minimum)
You can invest automatically in several
different ways, including:
o Automatic Asset Builder. You instruct us
to move $50 or more once a month or less
often from your bank account, or you can
instruct your employer to send all or a
portion of your paycheck to the fund or
funds you designate.
o Automatic Exchange. You can set up
systematic investments from one fund
account into another, such as from a
money fund into a stock fund.
Discount Brokerage
You can trade stocks, bonds, options,
precious metals, and other securities at a
savings over regular commission rates. Call
Investor Services for information.
Note: If you buy or sell T. Rowe Price
funds through anyone other than T. Rowe
Price, such as broker-dealers or banks, you
may be charged transaction or service fees
by those institutions. No such fees are
charged by T. Rowe Price Investment
Services or the fund for transactions
conducted directly with the fund.
PAGE 55
To Open an Account Prospectus
Investor Services
1-800-638-5660 T. Rowe Price
1-410-547-2308 California Tax-
Free Funds
For Existing Accounts
Shareholder Services
1-800-225-5132
1-410-625-6500 ______________
To help you T. Rowe Price A bond and
For Yields & Prices achieve your California Tax- money market
Tele*Access(registered financial goals, Free fund for
trademark) T. Rowe Price Income Trust investors
1-800-638-2587 offers a wide July 1, 1995 seeking income
1-410-625-7676 range of stock, that is exempt
24 hours, 7 days bond, and money from federal
market and California
Investor Centers investments, as state income
101 East Lombard St. well as taxes.
Baltimore, MD convenient
services and
T. Rowe Price timely,
Financial Center informative
10090 Red Run Blvd. reports.
Owings Mills, MD
Farragut Square
900 17th Street, N.W.
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T. Rowe Price
Invest With
Confidence
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trademark)
PAGE 56
The Statement of Additional Information for the T. Rowe Price
California Tax-Free Income Trust, dated July 1, 1995, should be
inserted here.
STATEMENT OF ADDITIONAL INFORMATION
T. Rowe Price State Tax-Free Income Trust
(the "Trust")
New York Tax-Free Money Fund
New York Tax-Free Bond Fund
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
(collectively the "Funds" and individually the "Fund")
T. Rowe Price California Tax-Free Income Trust
(the "Trust")
California Tax-Free Bond Fund
California Tax-Free Money Fund
(collectively the "Funds" and individually the "Fund")
This Statement of Additional Information is not a prospectus
but should be read in conjunction with the appropriate Fund
prospectus dated July 1, 1995, which may be obtained from T. Rowe
Price Investment Services, Inc., 100 East Pratt Street,
Baltimore, Maryland 21202. The purchase or exchange of shares in
any of the above-listed funds is limited to investors residing in
states where the funds are qualified for sale.
The date of this Statement of Additional Information is July
1, 1995.
PAGE
TABLE OF CONTENTS
Page Page
Capital Stock . . . . . . . . Portfolio Management
Code of Ethics . . . . . . . Practices . . . . . . . . .
Custodian . . . . . . . . . . Pricing of Securities Being
Determination of Maturity of Offered . . . . . . . . . .
Money Market Securities . . Principal Holders of
Distributor for the Trusts . Securities . . . . . . . .
Dividends . . . . . . . . . . Ratings of Commercial Paper .
Federal and State Registration Ratings of Municipal Debt
of Shares . . . . . . . . . Securities . . . . . . . .
Forwards . . . . . . . . . . Ratings of Municipal Notes
Futures Contracts . . . . . . and Variable Securities .
Independent Accountants . . . Risk Factors Associated with a
Investment Management California Portfolio . . .
Services . . . . . . . . . Risk Factors Associated with a
Investment in Taxable Money Florida Portfolio
Market Securities . . . . . Risk Factors Associated with a
Investment Objectives and Georgia Portfolio . . . . .
Policies . . . . . . . . . Risk Factors Associated with a
Investment Performance . . . Maryland Portfolio . . . .
Investment Programs . . . . . Risk Factors Associated with a
Investment Restrictions . . . New Jersey Portfolio . . .
Legal Counsel . . . . . . . . Risk Factors Associated with a
Management of the Trusts . . New York Portfolio . . . .
Municipal Securities . . . . Risk Factors Associated with a
Net Asset Value Per Share . . Virginia Portfolio . . . .
Options . . . . . . . . . . . Tax-Exempt vs. Taxable Yield
Organization of the Trusts . Tax Status . . . . . . . . .
Risk Factors . . . . . . . . When-Issued Securities . . .
Portfolio Transactions . . . Yield Information . . . . . .
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of each
Fund's investment objectives and policies discussed in each
Fund's prospectus. The Funds will not make a material change in
their investment objectives without obtaining shareholder
approval. Unless otherwise specified, the investment programs
and restrictions of the Funds are not fundamental policies. Each
Fund's operating policies are subject to change by each Trust's
Board of Trustees without shareholder approval. However,
shareholders will be notified of a material change in an
operating policy. The fundamental policies of each Fund may not
be changed without the approval of at least a majority of the
outstanding shares of the Fund or, if it is less, 67% of the
shares represented at a meeting of shareholders at which the
holders of 50% or more of the shares of the Fund are represented.
RISK FACTORS
All Funds
The Funds are designed for investors who, because of their
tax bracket, can benefit from investment in municipal bonds whose
income is exempt from federal taxes. The Funds are not
appropriate for qualified retirement plans where income is
already tax deferred.
Municipal Securities
There can be no assurance that the Funds will achieve their
investment objectives. Yields on municipal securities are
dependent on a variety of factors, including the general
conditions of the money market and the municipal bond market, the
size of a particular offering, the maturity of the obligation,
and the rating of the issue. Municipal securities with longer
maturities tend to produce higher yields and are generally
subject to potentially greater capital appreciation and
depreciation than obligations with shorter maturities and lower
yields. The market prices of municipal securities usually vary,
depending upon available yields. An increase in interest rates
will generally reduce the value of portfolio investments, and a
decline in interest rates will generally increase the value of
portfolio investments. The ability of all the Funds to achieve
their investment objectives is also dependent on the continuing
ability of the issuers of municipal securities in which the Funds
invest to meet their obligations for the payment of interest and
principal when due. The ratings of Moody's, S&P, and Fitch
represent their opinions as to the quality of municipal
securities which they undertake to rate. Ratings are not
absolute standards of quality; consequently, municipal securities
with the same maturity, coupon, and rating may have different
yields. There are variations in municipal securities, both
within a particular classification and between classifications,
depending on numerous factors. It should also be pointed out
that, unlike other types of investments, municipal securities
have traditionally not been subject to regulation by, or
registration with, the SEC, although there have been proposals
which would provide for regulation in the future.
The federal bankruptcy statutes relating to the debts of
political subdivisions and authorities of states of the United
States provide that, in certain circumstances, such subdivisions
or authorities may be authorized to initiate bankruptcy
proceedings without prior notice to or consent of creditors,
which proceedings could result in material and adverse changes in
the rights of holders of their obligations. Proposals have been
introduced in Congress to restrict or eliminate the federal
income tax exemption for interest on municipal securities, and
similar proposals may be introduced in the future. Some of the
past proposals would have applied to interest on municipal
securities issued before the date of enactment, which would have
adversely affected their value to a material degree. If such a
proposal were enacted, the availability of municipal securities
for investment by the Funds and the value of a Fund's portfolio
would be affected and, in such an event, a Fund would reevaluate
its investment objectives and policies.
Although the banks and securities dealers with which the
Fund will transact business will be banks and securities dealers
that T. Rowe Price believes to be financially sound, there can be
no assurance that they will be able to honor their obligations to
the Fund with respect to such securities.
After purchase by a Fund, a security may cease to be rated
or its rating may be reduced below the minimum required for
purchase by the Fund. For the Money Fund, the procedures set
forth in Rule 2a-7, under the Investment Company Act of 1940, may
require the prompt sale of any such security. For the other
Funds, neither event would require a sale of such security by the
Fund. However, T. Rowe Price Associates, Inc. ("T. Rowe Price")
will consider such event in its determination of whether the Fund
should continue to hold the security. To the extent that the
ratings given by Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Corporation ("S&P"), or Fitch Investors
Service, Inc. ("Fitch") may change as a result of changes in such
organizations or their rating systems, the Fund will attempt to
use comparable ratings as standards for investments in accordance
with the investment policies contained in the prospectus. When
purchasing unrated securities, T. Rowe Price, under the
supervision of the Fund's Board of Trustees, determines whether
the unrated security is of a quality comparable to that which the
Fund is allowed to purchase.
Municipal Bond Insurance. All of the Funds may purchase
insured bonds from time to time. Municipal bond insurance
provides an unconditional and irrevocable guarantee that the
insured bond's principal and interest will be paid when due. The
guarantee is purchased from a private, non-governmental insurance
company.
There are two types of insured securities that may be
purchased by the Funds, bonds carrying either (1) new issue
insurance or (2) secondary insurance. New issue insurance is
purchased by the issuer of a bond in order to improve the bond's
credit rating. By meeting the insurer's standards and paying an
insurance premium based on the bond's principal value, the issuer
is able to obtain a higher credit rating for the bond. Once
purchased, municipal bond insurance cannot be cancelled, and the
protection it affords continues as long as the bonds are
outstanding and the insurer remains solvent.
The Funds may also purchase bonds which carry secondary
insurance purchased by an investor after a bond's original
issuance. Such policies insure a security for the remainder of
its term. Generally, the Funds expect that portfolio bonds
carrying secondary insurance will have been insured by a prior
investor. However, the Funds may, on occasion, purchase
secondary insurance on their own behalf.
Each of the municipal bond insurance companies has
established reserves to cover estimated losses. Both the method
of establishing these reserves and the amount of the reserves
vary from company to company. The obligation of a municipal bond
insurance company to pay a claim extends over the life of each
insured bond. Municipal bond insurance companies are obligated
to pay a bond's interest and principal when due if the issuing
entity defaults on the insured bond. Although defaults on
insured municipal bonds have been low to date and municipal
insurers have met these claims, there is no assurance this low
rate will continue in the future. A higher than expected default
rate could deplete loss reserves and adversely affect the ability
of a municipal bond insurer to pay claims to holders of insured
bonds, such as the Fund.
Money Funds
The Funds will limit their purchases of portfolio
instruments to those U.S. dollar-denominated securities which the
Fund's Board of Trustees determines present minimal credit risk,
and which are Eligible Securities as defined in Rule 2a-7 under
the Investment Company Act of 1940 (1940 Act). Eligible
Securities are generally securities which have been rated (or
whose issuer has been rated or whose issuer has comparable
securities rated) in one of the two highest short-term rating
categories by nationally recognized statistical rating
organizations or, in the case of any instrument that is not so
rated, is of comparable high quality as determined by T. Rowe
Price pursuant to written guidelines established in accordance
with Rule 2a-7 under the Investment Company Act of 1940 under the
supervision of the Fund's Board of Trustees. In addition, the
Funds may treat variable and floating rate instruments with
demand features as short-term securities pursuant to Rule 2a-7
under the 1940 Act.
There can be no assurance that the Money Funds will achieve
their investment objectives or be able to maintain their net
asset value per share at $1.00. The price stability and
liquidity of the Money Funds may not be equal to that of a
taxable money market fund which exclusively invests in short-term
taxable money market securities. The taxable money market is a
broader and more liquid market with a greater number of
investors, issuers, and market makers than the short-term
municipal securities market. The weighted average maturity of
the Funds varies: the shorter the average maturity of a
portfolio, the less its price will be impacted by interest rate
fluctuations.
Bond Funds
Because of their investment policies, the Bond Funds may not
be suitable or appropriate for all investors. The Funds are
designed for investors who wish to invest in non-money market
funds for income, and who would benefit, because of their tax
bracket, from receiving income that is exempt from federal income
taxes. The Funds' investment programs permit the purchase of
investment grade securities that do not meet the high quality
standards of the Money Funds. Since investors generally perceive
that there are greater risks associated with investment in lower
quality securities, the yields from such securities normally
exceed those obtainable from higher quality securities. In
addition, the principal value of long term lower-rated securities
generally will fluctuate more widely than higher quality
securities. Lower quality investments entail a higher risk of
default--that is, the nonpayment of interest and principal by the
issuer than higher quality investments. The value of the
portfolio securities of the Bond Funds will fluctuate based upon
market conditions. Although these Funds seek to reduce credit
risk by investing in a diversified portfolio, such
diversification does not eliminate all risk. The Funds are also
not intended to provide a vehicle for short-term trading
purposes.
Special Risks of High Yield Investing
Junk bonds are regarded as predominantly speculative with
respect to the issuer's continuing ability to meet principal and
interest payments. Because investment in low and lower-medium
quality bonds involves greater investment risk, to the extent the
Funds invest in such bonds, achievement of their investment
objectives will be more dependent on T. Rowe Price's credit
analysis than would be the case if the Funds were investing in
higher quality bonds. High yield bonds may be more susceptible
to real or perceived adverse economic conditions than investment
grade bonds. A projection of an economic downturn, or higher
interest rates, for example, could cause a decline in high yield
bond prices because the advent of such events could lessen the
ability of highly leverage issuers to make principal and interest
payments on their debt securities. In addition, the secondary
trading market for high yield bonds may be less liquid than the
market for higher grade bonds, which can adversely affect the
ability of a Fund to dispose of its portfolio securities. Bonds
for which there is only a "thin" market can be more difficult to
value inasmuch as objective pricing data may be less available
and judgment may play a greater role in the valuation process.
Reference is also made to the sections entitled "Types of
Securities" and "Portfolio Management Practices" for discussions
of the risks associated with the investments and practices
described therein.
RISK FACTORS ASSOCIATED WITH A NEW YORK PORTFOLIO
The Funds' concentration in the debt obligations of one
state carries a higher risk than a portfolio that is
geographically diversified. In addition to State general
obligation bonds and notes and the debt of various state
agencies, the fund will invest in local bond issues, lease
obligations and revenue bonds, the credit quality and risk of
which will vary according to each security's own structure and
underlying economics.
The Funds' ability to maintain a high level of "triple-
exempt" income is primarily dependent upon the ability of New
York issuers to continue to meet debt service obligations in a
timely fashion. In 1975 the State, New York City, and other
related issuers experienced serious financial difficulties that
ultimately resulted in much lower credit ratings and loss of
access to the public debt markets. A series of fiscal reforms
and an improved economic climate allowed these entities to return
to financial stability by the early 1980s. Credit ratings were
restored or raised and access to the public credit markets was
also restored. During fiscal years 1990-1992, the State and City
experienced renewed fiscal pressures due to sharp shortfalls in
anticipated revenues. During fiscal years 1993 and 1994, the
financial situation of both the State and the City has
stabilized, with revenues coming in at or above budgeted amounts.
New York State
As of December 31, 1993, total State-related bonded debt was
$33.38 billion, of which $5.27 billion was general obligation
debt, $7.5 billion was State moral obligation debt, and $20.6
billion was financed under lease-purchase or other contractual
obligations. In addition, the State had $294 million in bond
anticipation notes outstanding. For the first time since 1952,
the State has no outstanding Tax and Revenue Anticipation Notes.
As of June 1, 1994, the State's general obligation bonds were
rated A by Moody's, A- by Standard & Poor's and A+ by Fitch. All
general obligation bonds must be approved by the voter prior to
issuance.
The fiscal stability of the State is also important for
numerous authorities which have responsibilities for financing,
constructing, and operating revenue-producing public benefit
facilities. As of September 30, 1993 there were 18 authorities
that had aggregate debt outstanding, including refunding bonds,
of $63.5 billion.
The authorities most reliant upon annual direct State
support include the Metropolitan Transit Authority (MTA), the
Urban Development Authority (UDC), and the New York Housing
Finance Agency (HFA). In February 1975, the UDC defaulted on
approximately $1.0 billion of short-term notes. The default was
ultimately cured by the creation of the Project Finance Authority
(PFA), through which the State provided assistance to the UDC,
including support for debt service. Since then, there have been
no additional defaults by State authorities although substantial
annual assistance is required by the MTA and the HFA in
particular.
Subsequent to the fiscal crisis of the mid-70's New York
State maintained balanced operations on a cash basis, although by
1992 it had built up an accumulated general fund deficit of over
$6 billion on a "Generally Accepted Accounting Principles" (GAAP)
basis. This deficit consisted mainly of overdue tax refunds and
payments due localities.
To resolve its accumulated general fund deficit the State
established the Local Government Assistance Corporation (LGAC) in
1990. To date, a total of $4.0 billion in LGAC bonds have been
issued. The proceeds of these bonds are used to provide the
State's assistance to localities and school districts, enabling
the State to reduce its accumulated general fund deficit to $2.55
billion by the end of fiscal year 1993. State short-term
borrowing requirements, which peaked at a record $5.9 billion in
fiscal 1991, have been reduced to zero for fiscal year 1995.
New York State has a large, diversified economy which has
witnessed a basic shift away from manufacturing toward more
service sector employment. Growth in personal income has
exceeded national averages each year since 1981. In 1992, per
capita income in New York State was $23,842, 18.5% above the
national average. Like most northeastern states, New York
suffered a population loss during the 1970s. However, during the
1980s that trend reversed and population actually increased
slightly, standing at 18,197,000 in 1993. During 1990-1992, the
State experienced a slowing of economic growth evidenced by the
loss of 425,000 jobs. Conditions improved slightly in 1993 as
the state added 40,000 jobs. Such economic trends are important
as they influence the growth or contraction of State revenues
available for operations and debt service.
New York City
The financial problems of New York City were acute between
1975 and 1979, highlighted by a default on the City's short-term
obligations. In the subsequent decade, the City made a
significant recovery. The most important contribution to the
City's fiscal recovery was the creation of the Municipal
Assistance Corporation for the City of New York (MAC). Backed by
sales, use, stock transfer, and other taxes, MAC issued bonds and
used the proceeds to purchase City bonds and notes. Although the
MAC bonds met with reluctance by investors at first, the program
has proven to be very successful over the past fifteen years.
Over the past six years, MAC returned substantial funds to the
City for general use as large surplus balances accumulated.
Much progress has been made since the fiscal crisis of 1975.
By 1981, the City achieved a budget balanced in accordance with
Generally Accepted Accounting Principles (GAAP) and has continued
to generate small surpluses on an operating basis. By 1983, the
City eliminated its accumulated General Fund deficit and as of
the fiscal year ending June 30, 1993, had a total General Fund
balance of $88 million. Although the City continues to finance
its seasonal cash flow needs through public borrowings, the total
amount of these borrowings has not exceeded 5% of any year's
revenues and all have been repaid by the end of the fiscal year.
As of June 1, 1994 the City's general obligation bonds are
rated BAA by Moody's, A- by Standard & Poor's and A- by Fitch.
While New York City has sustained a decade long record of
relative financial stability, during the last four fiscal years
budgetary pressures have been evident. Its major revenue
sources, income and sales taxes, were slowed and a downturn in
the real estate market reduced property tax revenues. Also,
State aid cuts were significant, in the $400 to 500 million range
in fiscal years 1992 and 1993. Nonetheless, the City concluded
the 1993 fiscal year with an operating surplus of $409 million,
which was used to prepay fiscal year 1994 operating expenses.
The City's financial plan projects that revenues and expenditures
for the 1994 fiscal year will be balanced in accordance with
GAAP. New York City will require substantial cuts in
expenditures and state approval of several hundred million
dollars in new revenue sources to achieve permanent fiscal
balance in future fiscal years.
Long Island and LILCO
The Long Island Lighting Company (LILCO) is the single
largest property taxpayer in both Nassau and Suffolk Counties.
LILCO has experienced substantial financial difficulty primarily
arising from problems related to its completed but unlicensed 809
megawatt Shoreham Nuclear Power Facility located in Suffolk
County. In 1987, the State Legislature created the Long Island
Power Authority (LIPA). In February, 1989, an agreement was
reached with the state of New York to transfer ownership of the
Shoreham Plant to LIPA for one dollar in exchange for certain
rate benefits to LILCO. The New York Power Authority is
overseeing the decommissioning of Shoreham.
LILCO has challenged various property tax assessments levied
in Suffolk County on its facilities and seeks substantial
refunds. As a result of its Shoreham takeover, LIPA agreed to
make, in-lieu-of-tax payments to Suffolk County, in an amount
equal to the taxes or assessment which would have been paid by
LILCO in the year during which LIPA acquired the Shoreham
facility. In each succeeding year, payments decrease 10% until
such time as payments equal the taxes or assessment which would
have been paid by LILCO based on a nonoperative Shoreham plant.
Various provisions of this agreement are under appeal.
Sectors
Certain areas of potential investment concentration present
unique risks. In 1993, $3.1 billion of tax-exempt debt issued in
New York was for public or non-profit hospitals. A significant
portion of the Fund's assets may be invested in health care
issues. Since 1983, the hospital industry has been under
significant pressure to reduce expenses and shorten length of
stay, a phenomenon which has negatively affected the financial
health of many hospitals. While each hospital bond issue is
separately secured by the individual hospital's revenues, third
party reimbursement sources such as the federal Medicare and
state Medicaid programs or private insurers are common to all
hospitals. To the extent these third party payors reduce
reimbursement levels, the individual hospitals may be affected.
The Clinton Administration has developed a proposal for
national health care reform which would dramatically alter the
health care delivery system in the United States. Currently there
are numerous alternative proposals circulating in the legislative
branch, with sponsors hoping to displace or materially change the
President's proposal. There is no way to predict whether any
reform package will be adopted or the ultimate impact of any such
changes upon hospitals in New York and other states.
The Funds may from time to time invest in electric revenue
issues which have exposure to or participate in nuclear power
plants which could affect the issuers' financial performance.
Such risks include delay in construction and operation due to
increased regulation, unexpected outages or plan shutdowns,
increased Nuclear Regulatory Commission surveillance or
inadequate rate relief.
The Funds may invest in private activity bond issues for
corporate and non-profit borrowers. These issues sold through
various governmental conduits, are backed solely by the revenues
pledged by the respective borrowing corporations. No
governmental support is implied. This category accounted for
7.4% of the tax-exempt debt issued in New York during 1993.
RISK FACTORS ASSOCIATED WITH A CALIFORNIA PORTFOLIO
The Funds' concentration in debt obligations of one state
carries a higher risk than a portfolio that is geographically
diversified. In addition to State general obligations and notes,
the funds will invest in local bond issues, lease obligations and
revenue bonds, the credit quality and risk of which will vary
according to each security's own structure and underlying
economics.
Debt. The State, its agencies and local governmental
entities issued $39.3 billion in long term municipal bonds in
1993. Approximately 9.9% was general obligation debt, backed by
the taxing power of the issuer, and 90.1% were revenue bonds and
lease backed obligations, issued for a wide variety of purposes,
including transportation, housing, education and healthcare.
As of April 22, 1994, the State of California had
approximately $18.1 billion outstanding general obligation bonds
secured by the State's revenue and taxing power. An additional
$5.5 billion authorized but unissued state general obligation
debt remains to be issued to comply with voter initiatives and
legislative mandates. Debt service on roughly 22% of the State's
outstanding debt is met from revenue producing projects such as
water, harbor, and housing facilities. As part of its cash
management program, the State regularly issues short-term notes
to meet its disbursement requirements in advance of revenue
collections. During fiscal 1994, the State issued $7.2 billion
in short-term notes for this purpose.
The State also supports $4.9 billion in lease-purchase
obligations attributable to the State Public Works Board. These
obligations are not backed by the full faith and credit of the
State but instead, are subject to annual appropriations from the
State's General Fund.
In addition to the State obligations described above, bonds
have been issued by special public authorities in California that
are not obligations of the State. These include bonds issued by
the California Housing Finance Agency, the Department of Water
Resources, the Department of Veterans Affairs, California State
University and the California Transportation Commission.
Economy. California's economy is the largest among the 50
states and one of the largest in the world. The 1993 population
of 31.7 million represents 12.3% of the U.S. total. From 1983 to
1993 the State's population grew by 25.3% compared with a 10%
growth rate for the nation as a whole. The State's per capita
personal income in 1992 exceeded the U.S. average by 7%.
Due in part to its rapidly growing population, the
California economy has proven to be more cyclical than that of
the nation. During the recessionary period of the early 1980s
and again in the early 1990s, California's unemployment levels
averaged above the national rate. Federal defense spending cuts
and military base closings have negatively affected the
California economy in recent years. The level of economic
activity within the State is important as it influences the
growth or contraction of State and local government revenues
available for operations and debt service.
Recessionary influences and the effects of overbuilding in
selected areas have resulted in a contraction in real estate
values in many regions of the State during the last four years.
A decline in property values could have a negative effect on the
ability of certain local governments to meet their obligations.
As a state, California is more prone to earthquakes than
most other states in the country, creating potential economic
losses from damages. On January 17, 1994, a major earthquake,
measuring 6.8 on the Richter scale, hit Southern California
centered in the area of Northridge. Total damage has been
estimated at $20 billion. Significant federal aid has been
committed. Given the failure of a $2 billion general obligation
bond funding proposal on June 7, 1994, the state is uncertain
regarding the method of funding for its share of the earthquake
repairs.
Legislative. Due to the Funds' concentration in California
state and its municipal issuers, the Funds may be affected by
certain amendments to the California constitution and state
statutes which limit the taxing and spending authority of
California governmental entities and may affect their ability to
meet their debt service obligations.
In 1978, California voters approved "Proposition 13" adding
Article XIIIA, an amendment to the state constitution which
limits ad valorem taxes on real property to 1% of "full cash
value" and restricts the ability of taxing entities to increase
real property taxes. The full cash value may be adjusted
annually to reflect increases (not to exceed 2%) or decreases in
the consumer price index or comparable local data, or declining
property value caused by damage, destruction or other factors.
In subsequent action, the State substantially increased General
Fund expenditures to provide assistance to its local governments
to offset the losses in revenues and to maintain essential local
services. Due to fiscal pressures at the State level, the
Administration is in the process of phasing out this aid, forcing
local governments to look for alternative revenue sources.
Another constitutional amendment, Article XIIIB, was passed
by voters in 1979 prohibiting the State from spending revenues
beyond its annually adjusted "appropriations limit". Any
revenues exceeding this limit must be returned to the taxpayers
as a revision in the tax rate or fee schedule over the following
two years. Such a refund, in the amount of $1.1 billion,
occurred in fiscal year 1987. Excluded from the appropriation
limit are certain expenditures including debt service on
indebtedness incurred or authorized prior to January 1, 1979 or
subsequently approved by voters.
An effect of the tax and spending limitations in California
has been a broad scale shift by local governments away from
general obligation debt that requires voter approval and pledging
future tax revenues, towards lease revenue financing that is
subject to annual appropriations and does not require voter
approval. Lease backed debt is generally viewed as a less secure
form of borrowing and therefore entails greater credit risk.
Local governments also raise capital through the use of Mello-
Roos, 1915 Act, and Tax Increment Bonds, all of which are
generally riskier than general obligation debt as they rely on
tax revenues to be generated by future development for their
support.
Proposition 98, enacted in 1988, changed the State's method
of funding education for grades below the university level.
Under this constitutional amendment, the schools are guaranteed a
minimum share of State General Fund revenues. The major effect
of Proposition 98 has been to restrict the State's flexibility to
respond to fiscal stress.
Future initiatives, if proposed and adopted or future court
decisions could create renewed pressure on California governments
and their ability to raise revenues. The State and its
underlying localities have displayed flexibility, however, in
overcoming the negative effects of past initiatives.
Financial. California's finances have been under pressure
since 1990 as the effects of recession took their toll on the
State. During fiscal years 1990 through 1994, tax collections
have fallen below estimates and expenditures have risen above
budgeted levels. From 1991 through 1993, ending deficits were
carried over into the following years. Fiscal 1994 is now
expected to end with a negative general fund balance of $2
billion.
In addition to the announced General Fund deficit at the
fiscal year end, the State is also expecting an internal cash
imbalance to occur in the final months of fiscal 1994. Revenue
anticipation warrants in the amount of $3.2 billion were issued
in February 1994 to cover the State's year-end funding
requirements. In May of 1994, the California Attorney General
expressed concerns about potential imbalances in the proposed
fiscal 1994 budget. This may exacerbate the state's cash flow
problems in the coming year.
As a result of the State's continued fiscal imbalance, the
rating services have downgraded California's general obligation
bonds from their prior AAA levels. As of June 1, 1994, the
State's general obligation bonds are rated Aa by Moody's, A+ by
Standard & Poor's and Aa by Fitch.
The consequences of the State's financial problems reach
beyond its own general obligation bond ratings. Many state
agencies and local governments which depend upon state
appropriations have realized significant cutbacks in funding in
recent years. These entities have been forced to make program
reductions or to increase fees or raise special taxes to cover
their debt service and lease obligations.
Sectors
Certain areas of potential investment concentration present
unique risks. In 1993, $3 billion of tax-exempt debt issued in
California was for public or non-profit hospitals. A significant
portion of the Funds' assets may be invested in health care
issues. Since 1983 the hospital industry has been under
significant pressure to reduce expenses and shorten length of
stay, a phenomenon which has negatively affected the financial
health of many hospitals. While each hospital bond issue is
separately secured by the individual hospital's revenues, third
party reimbursement sources such as the federal Medicare and
state MediCal programs or private insurers are common to all
hospitals. To the extent these third party payors reduce
reimbursement levels, the individual hospitals may be affected.
The Clinton Administration has developed a proposal for
national health care reform which would dramatically alter the
health care delivery system in the United States. Currently there
are numerous alternative proposals circulating in the legislative
branch, with sponsors hoping to displace or materially change the
President's proposal. There is no way to predict whether any
reform package will be adopted or the ultimate impact of any such
changes upon hospitals in California and other states.
The Funds may from time to time invest in electric revenue
issues which have exposure to or participate in nuclear power
plants which could affect the issuers' financial performance.
Such risks include delay in construction and operation due to
increased regulation, unexpected outages or plant shutdowns,
increased Nuclear Regulatory Commission surveillance or
inadequate rate relief.
The Funds may invest in private activity bond issues for
corporate and non-profit borrowers. These issues sold through
various governmental conduits, are backed solely by the revenues
pledged by the respective borrower corporations. No governmental
support is implied.
RISK FACTORS ASSOCIATED WITH A MARYLAND PORTFOLIO
Each Fund's concentration in the debt obligations of one
state carries a higher risk than a portfolio that is
geographically diversified. In addition to State of Maryland
general obligations and state agency issues, the fund will invest
in local bond issues, lease obligations and revenue bonds, the
credit quality and risk of which will vary according to each
security's own structure and underlying economics.
Debt. The State of Maryland and its local governments issue
three basic types of debt, with varying degrees of credit risk:
general obligation bonds backed by the unlimited taxing power of
the issuer, revenue bonds secured by specific pledged fees or
charges for a related project, and tax-exempt lease obligations,
secured by annual appropriations by the issuer, usually with no
implied tax or specific revenue appropriations by the issuer. In
1993, $6.6 billion in state and local debt was issued in
Maryland, with approximately 40% representing general obligation
debt and 60% revenue bonds and lease backed debt, compared to 32%
general obligation and 68% revenue backed bonds nationally.
Total combined debt outstanding of the State, Baltimore
City, and all of the counties, towns, and special districts
within Maryland totaled $10.8 billion as of June 30, 1992. The
State of Maryland had $2.28 billion in general obligation bonds
outstanding as of December 31, 1993 along with an additional $1.3
billion in other tax-supported debt. General obligation debt of
the State of Maryland is rated Aaa by Moody's, AAA by Standard &
Poor's and AAA by Fitch. There is no general debt limit imposed
by the State Constitution or public general laws, but State debt
on a per capita basis or as a percentage of property values has
declined over the last five years. The State Constitution
imposes a 15 year maturity limit on State general obligation
bonds. Although voters approved a constitutional amendment in
1982 permitting the State to borrow up to $100 million in short-
term notes in anticipation of taxes and revenues, the State has
not made use of this authority.
Many agencies and other instrumentalities of the State
government are authorized to borrow money under legislation which
expressly provides that the loan obligations shall not be deemed
to constitute a debt or a pledge of the faith and credit of the
State. The Community Development Administration of the
Department of Housing and Community Development, the Maryland
Stadium Authority, the Board of Trustees of St. Mary's College of
Maryland, the Maryland Environmental Service, the Board of
Regents of the University of Maryland System, the Board of
Regents of Morgan State University, the Maryland Food Center
Authority, and the Maryland Water Quality Financing
Administration have issued and have outstanding bonds of this
type. The principal of and interest on bonds issued by these
bodies are payable solely from various sources, principally fees
generated from use of the facilities, enterprises financed by the
bonds, or other dedicated fees. Total outstanding revenue and
enterprise debt of these State units, the Maryland Transportation
Authority and the Maryland Department of Transportation at June
30, 1993 was $4.88 billion.
Economy. The economy of the State of Maryland generally
demonstrates strong performance relative to the nation; however,
the State did witness the loss of 120,000 jobs during the
recession of 1990 to 1992. Employment levels recovered in 1993
with a gain of 52,000 jobs. Unemployment was 6.5% in 1992,
compared to a national average of 7.4%. The State's population
in 1992 was 4.9 million, with 82% concentrated in the Baltimore-
Washington corridor.
Financial. To a large degree, the risk of the Funds is
dependent upon the financial strength of the State of Maryland
and its localities. Over the long term, Maryland's financial
condition has been strong; however, in fiscal 1992, the State
experienced unanticipated shortfalls in revenues, as collections
of major taxes fell during the recession. To address this loss,
the governor enacted a series of mid-year reductions in
expenditures, primarily cuts in local aid. The State concluded
fiscal year 1992 with a general fund deficit of $121 million
(1.5% of general fund expenditures).
Balancing the state budget for fiscal year 1993 involved a
variety of additional taxes, including a higher income tax on
upper income households and an expanded sales tax. The
legislature also adopted further cuts in State aid to localities,
but this action was offset by the ability of localities to
increase the local "piggyback" tax from 50 percent to 60 percent
of the State rate. These actions were successful in restoring
the State's financial condition and replenishing reserves. The
State concluded fiscal 1993 with a General Fund balance of $113
million (1.3% of General Fund expenditures). During fiscal 1994
economic conditions improved, allowing the state to meet or
slightly exceed its revenue forecast for major taxes. The fiscal
1995 budget calls for a partial restoration of state aid to
localities cut in prior fiscal years and the elimination of the
extra one percent income tax on upper income households.
Many local Maryland governments also suffered from fiscal
stress and general declines in financial performance during the
recession. Downturns in real estate related receipts, declines in
the growth of income tax revenues, lower cash positions and
reduced interest income have been the common problems. State aid
to local governments was also reduced during that period. Local
governments closed these gaps by increasing property and local
income tax rates, implementing program cuts, and curtailing pay
raises. Certain counties in Maryland are subject to voter
approval limitations on property tax levy increases or on
increases in governmental spending which limits their flexibility
in responding to external changes.
Initiatives to reform existing tax structures in certain
counties were placed on the November 1992 election ballot and
were adopted in November of 1992. These counties are now
assessing the impacts of these restrictions. Future initiatives,
if proposed and adopted, could create pressure on the counties
and other local governments and their ability to raise revenues.
The Funds cannot predict the impact of any such future tax
limitations on debt quality.
Sectors. Certain areas of potential investment
concentration present unique risks. In recent years, 6 to 12% of
tax-exempt debt issued in Maryland was for public or non-profit
hospitals. A significant portion of the Funds' assets may be
invested in health care issues. Since 1983, the hospital
industry has been under significant pressure to reduce expenses
and shorten length of stay, a phenomenon which has negatively
affected the financial health of many hospitals. While each
hospital bond issue is separately secured by the individual
hospital's revenues, third party reimbursement mechanisms are
common to the group. At the present time Maryland hospitals
operate under a system which reimburses hospitals according to a
State administered set of rates and charges rather than the
Federal Diagnosis Related Group (DRG) system for Medicare
payments. Since 1983, Maryland hospitals, on average over the
trailing three year period, have increased hospital charges at a
level below the national average in terms of Medicare cost
increases, allowing them to continue operating under a Medicare
waiver. Any loss of this waiver in the future may have an
adverse impact upon the credit quality of Maryland hospitals.
The Clinton Administration has developed a proposal for
national health care reform which would dramatically alter the
health care delivery system in the United States. Currently
there are numerous alternative proposals circulating in the
legislative branch, with sponsors hoping to displace or
materially change the President's proposal. There is no way to
predict whether any reform package will be adopted or the
ultimate impact of any such changes upon hospitals in Maryland
and other states.
The Funds may from time to time invest in electric revenue
issues which have exposure to or participate in nuclear power
plants which could affect the issuers' financial performance.
Such risks include delay in construction and operation due to
increased regulation, unexpected outages or plan shutdowns,
increased Nuclear Regulatory Commission surveillance or
inadequate rate relief.
The Funds may invest in private activity bond issues for
corporate and non-profit borrowers. These issues sold through
various governmental conduits, are backed solely by the revenues
pledged by the respective borrowing corporations. No
governmental support is implied. This category accounted for
less than 1% of the tax-exempt debt issued in Maryland during
1993.
RISK FACTORS ASSOCIATED WITH A VIRGINIA PORTFOLIO
The Fund's concentration in the debt obligations of one
state carries a higher risk than a portfolio that is
geographically diversified. In addition to State of Virginia
general obligations and state agency issues, the fund will invest
in local bond issues, lease obligations and revenue bonds, the
credit quality and risk of which will vary according to each
security's own structure and underlying economics.
Debt. The State of Virginia and its local governments
issued $6.9 billion municipal bonds in 1993, approximately 40%
general obligation debt backed by the unlimited taxing power of
the issuer and 60% revenue bonds secured by specific pledged fees
or charges for an enterprise or project. Included within the
revenue bond category are tax-exempt lease obligations that are
subject to annual appropriations of a governmental body to meet
debt service, usually with no implied tax or specific revenue
pledge. Debt issued in 1993 was for a wide variety of public
purposes, including transportation, housing, education, health
care, and industrial development.
As of June 30, 1993 the State of Virginia had $816 million
outstanding general obligation bonds secured by the State's
revenue and taxing power, a modest amount compared to many other
states. Under state law, general obligation debt is limited to
1.15 times the average of the preceding three years' income tax
and sales and use tax collections. The State's outstanding
general obligation debt is well below that limit and over 90% of
the debt service is actually met from revenue producing capital
projects such as universities and toll roads. Debt service
payments on all general obligation bonds represented 1.03% of the
State's Governmental Funds expenditures in fiscal year 1993.
The State also supports $708 million in debt issued by the
Virginia Public Building Authority, the Virginia College Building
Authority, the Virginia Port Authority, and the Innovative
Technology Authority. These bonds are not backed by the full
faith and credit of the State but instead, are subject to annual
appropriations from the State's General Fund.
In addition to the State and public authorities described
above, an additional $6.1 billion bonds have been issued by
special public authorities in Virginia that are not obligations
of the State. These bonds include debt issued by the Virginia
Education Loan Authority, the Virginia Public School Authority,
the Virginia Resources Authority, and the Virginia Housing
Development Authority.
Economy. The State of Virginia has a population of
approximately 6.4 million, making it the twelfth largest state.
Since the 1930s the State's population has grown at a rate
exceeding the national average. Stable to strong economic growth
during the 1980s was led by the northern Virginia area outside of
Washington, D.C. where approximately 25% of the State's
population is concentrated. The next largest metropolitan area
is the Norfolk-Virginia Beach-Newport News area, followed by the
Richmond-Petersburg area, including the State's capital of
Richmond. The State's economy is broadly based with a large
concentration in service and governmental jobs, followed by
manufacturing. Per capita income exceeds national averages while
unemployment figures have consistently tracked below national
averages.
Financial. To a large degree, the risk of the portfolio is
dependent on the financial strength of the State of Virginia and
its localities. As of June 1, 1994, the State was rated Aaa by
Moody's, AAA by Standard & Poor's and AAA by Fitch. The State's
budget is prepared on a biennial basis. From 1970 through 1992
the State's General Fund showed a positive balance for all of its
two year budgetary periods. The national recession and its
negative effects on State personal income tax collections did,
however, force the State to draw down its General Fund balances
to a deficit of $122 million in 1992. Mid-cycle spending cuts
and improved economic conditions allowed for positive operations
in fiscal 1993, boosting the General Fund balance to the $78
million level (1.7% of revenues). A balanced budget has been
adopted for the 1994-1996 biennium which began on July 1, 1993.
A significant portion of the Fund's assets is expected to be
invested in the debt obligations of local governments and public
authorities with investment grade ratings of BBB or higher.
While local governments in Virginia are primarily reliant on
independent revenue sources, such as property taxes, they are not
immune to budget shortfalls caused by cutbacks in State aid.
Likewise, certain enterprises such as toll roads or hospitals may
be affected by changes in economic activity.
Sectors. Certain areas of potential investment
concentration present unique risks. In 1993, $763 million of
tax-exempt debt issued in Virginia was for public or non-profit
hospitals. A significant portion of the Fund's assets may be
invested in health care issues. Since 1983 the hospital industry
has been under significant pressure to reduce expenses and
shorten length of stay, a phenomenon which has negatively
affected the financial health of many hospitals. While each
hospital bond issue is separately secured by the individual
hospital's revenues, third party reimbursement sources such as
the federal Medicare and state Medicaid programs or private
insurers are common to all hospitals. To the extent these payors
reduce reimbursement levels, the individual hospitals may be
affected.
The Clinton Administration has developed a proposal for
national health care reform which would dramatically alter the
health care delivery system in the United States. Currently there
are numerous alternative proposals circulating in the legislative
branch, with sponsors hoping to displace or materially change the
President's proposal. There is no way to predict whether any
reform package will be adopted or the ultimate impact of any such
changes upon hospitals in Virginia and other states.
The Fund may from time to time invest in electric revenue
issues which have exposure to or participate in nuclear power
plants which could affect the issuers' financial performance.
Such risks include delay in construction and operation due to
increased regulation, unexpected outages or plant shutdowns,
increased Nuclear Regulatory Commission surveillance or
inadequate rate relief.
The Fund may invest in private activity bond issues for
corporate and non-profit borrowers. These issues sold through
various governmental conduits, are backed solely by the revenues
pledged by the respective borrowing corporations. No
governmental support is implied.
RISK FACTORS ASSOCIATED WITH A NEW JERSEY PORTFOLIO
The Fund's concentration in the debt obligations of one
state carries a higher risk than a portfolio that is
geographically diversified. In addition to State of New Jersey
general obligation bonds, notes and state agency issues, the fund
will invest in local bond issues, lease obligations and revenue
bonds, the credit quality and risk of which will vary according
to each security's own structure and underlying economics.
Debt. The State of New Jersey and its local governments
issued $6.4 billion of municipal bonds in 1993. Of this amount,
approximately 33% was general obligation debt backed by the
unlimited taxing power of the issuer and 67% were revenue bonds
secured by specific pledged fees or charges for an enterprise or
project. Included within the revenue bond sector are tax-exempt
lease obligations that are subject to annual appropriations of a
governmental body, usually with no implied tax or specific
revenue pledge. Debt issued in 1993 was for a wide array of
public purposes, including water and sewer projects, health care,
housing, education, transportation, and pollution control.
The State of New Jersey has approximately $3.6 billion
outstanding general obligation bonds secured by the State's
revenue and taxing power. As of June 1, 1994, its general
obligation bonds were rated Aa1 by Moody's, AA+ by Standard &
Poor's and AA+ by Fitch. In addition to the State's direct debt,
it is obligated for certain lease backed debt issued through the
Mercer County Improvement Authority, the New Jersey Economic
Development Authority and the New Jersey Building Authority.
Under state law, the obligations of certain local school
districts and county college districts have been supported by
State appropriations. The State has also entered into a "moral
obligation" (as opposed to a legal commitment) to make up debt
service shortfalls for the New Jersey Housing and Mortgage
Finance Agency as well as the South Jersey Port Corporation.
While no assistance has ever been required for the New Jersey
Housing and Mortgage Finance Agency, from time to time, the State
has supported the operations and debt service of the South Jersey
Port Corporation. The related obligations of the State described
in this paragraph total an additional $1.7 billion.
A number of other state-created agencies issue tax-exempt
revenue bonds that are not a debt or liability of the State. The
largest such entities include the New Jersey Turnpike Authority,
the New Jersey Educational Facilities Authority and the New
Jersey Health Care Facilities Financing Authority. Altogether,
sixteen agencies have approximately $10 billion in outstanding
debt.
A significant portion of the portfolio's assets is expected
to be invested in the debt obligations of local governments and
public authorities with investment grade ratings of BBB or
higher. While local governments in New Jersey are primarily
reliant on independent revenue sources, such as property taxes,
they are not immune to budget shortfalls caused by economic
downturns or cutbacks in State aid. Likewise, certain
enterprises such as toll roads or hospitals may be affected by
changes in economic activity. Under the New Jersey Local Budget
Law, the State oversees the budget preparation of local
governments and has certain powers to enforce balanced budgets,
limit short term borrowing and regulate overall debt limits.
Economy. New Jersey is the ninth largest and most densely
populated state with 7.8 million residents, and an average of
1,040 persons per square mile. The economic base is diversified
among manufacturing, construction, services, and agricultural
uses. The average per capita income of $26,969 ranks the State
as the second highest in the United States. Over the long term,
the State's economy has been a strong performer, with
unemployment levels generally below national averages. In 1992,
however, New Jersey's unemployment rose above the national
average to a rate of 8.4% versus 7.4% for the nation. During
1993, employment losses continued as the State lagged the U.S. in
recovery from the recession. The State anticipates a turnaround
in 1994 and 1995 with modest gains in employment.
Financial. To a large degree, the risk of the portfolio is
dependent on the financial strength of the State of New Jersey
and its localities. Characteristically the State has
demonstrated solid financial performance, but operations
suffered as the State's economy stagnated during the recent
recession. In fiscal 1990 and 1991 New Jersey utilized non-
recurring revenues and expenditure deferrals to achieve balance,
ending with minimal reserves. In fiscal 1992, the general fund
cushion improved to a 5% level, largely due to a one-time
transfer from the pension fund and a large tax increase.
Improved revenue collections in fiscal 1993 allowed the State to
close out the fiscal year with higher reserves. The State's
General Fund balance at year end 1993 was $1.9 billion (a strong
11.4% of revenues.) The fiscal 1994 budget, however, relied on
nearly $1 billion in non-recurring revenue to achieve balance.
Additional budgetary pressures are expected for fiscal 1995 and
beyond, as the new Governor seeks to implement her campaign
promise to reduce state income taxes by 30 percent over the next
three years. The income tax rollbacks, if fully
implemented, would reduce state revenues by $1.5 billion.
Sectors. Certain areas of potential investment
concentration present unique risks. In 1993, 10% of tax-exempt
debt issued in New Jersey was for public or non-profit hospitals.
A significant portion of the Fund's assets may be invested in
health care issues. Since 1983, the hospital industry has been
under significant pressure to reduce expenses and shorten length
of stay, a phenomenon which has negatively affected the financial
health of many hospitals. While each hospital bond issue is
separately secured by the individual hospital's revenues, third
party reimbursement sources such as the federal Medicare and
state Medicaid programs or private insurers are common to all
hospitals. To the extent these payors reduce reimbursement
levels, the individual hospitals may be affected.
On January 1, 1993, the State of New Jersey implemented
legislation that deregulated hospital reimbursements. This
replaced a highly regulated reimbursement system which governed
hospital charges and provided subsidies for uncompensated care
from a statewide pool. Under the new system, hospitals negotiate
their rates directly with private payors. This deregulation has
forced the State's hospitals to adjust to competition in a
market-driven environment. Each hospital's ability to adapt will
be critical to its ongoing financial success.
The Clinton Administration has developed a proposal for
national health care reform which would dramatically alter the
health care delivery system in the United States. Currently
there are numerous alternative proposals circulating in the
legislative branch, with sponsors hoping to displace or
materially change the President's proposal. There is no way to
predict whether any reform package will be adopted or the
ultimate impact of any such changes upon hospitals in New Jersey
and other states.
The Fund may from time to time invest in electric revenue
issues which have exposure to or participate in nuclear power
plants which could affect the issuers' financial performance.
Such risks include delay in construction and operation due to
increased regulation, unexpected outages or plant shutdowns,
increased Nuclear Regulatory Commission surveillance or
inadequate rate relief.
The Fund may invest in private activity bond issues for
corporate and non-profit borrowers. These issues sold through
governmental conduits, such as the New Jersey Economic
Development Authority and various local issuers, are backed
solely by the revenues pledged by the respective borrowing
corporations. No governmental support is implied. This category
accounted for 2% of the tax-exempt debt issued in New Jersey
during 1993. In the past, a number of New Jersey Economic
Development Authority issues have defaulted as a result of
borrower financial difficulties.
RISK FACTORS ASSOCIATED WITH A GEORGIA PORTFOLIO
The Fund's concentration in the debt obligations of one
state carries a higher risk than a portfolio that is
geographically diversified. In addition to State of Georgia
general obligations and state agency issues, the fund will invest
in local bond issues, lease obligations and revenue bonds, the
credit quality and risk of which will vary according to each
security's own structure and underlying economics.
Debt. The State of Georgia and its local governments issued
$7.5 billion in municipal bonds in 1993, with approximately 34%
general obligation debt backed by the unlimited taxing power of
the issuer and 66% revenue bonds secured by specific pledged fees
or charges for an enterprise or project. This level of debt
issuance is well above the trend of recent years, reflecting a
high volume of debt refunding due to lower interest rates. As of
June 1, 1994, the State was rated Aaa by Moody's, AA+ by Standard
& Poor's and AAA by Fitch.
As of January 31, 1994, the State of Georgia had net direct
obligations of $4 billion. Since 1973, when a Constitutional
Amendment authorizing the issuance of state general obligation
(GO) bonds was implemented, the State has funded most of its
capital needs through the issuance of general obligation (GO)
bonds. Previously, capital requirements were funded through the
issuance of bonds by ten separate authorities and secured by
lease rental agreements and annual state appropriations. The
State Constitution permits the State to issue bonds for two types
of public purposes: (1) general obligation debt and (2)
guaranteed revenue debt. The Constitution imposes certain debt
limits and controls. GO debt service cannot exceed 10% of total
revenue receipts less refunds of the state treasury. GO bonds
have a maximum maturity of 25 years. Currently, maximum GO debt
service requirements are well below the legal limit and are
estimated at 5.4% of Fiscal Year 1994 treasury receipts. Debt
service payments on all general obligation bonds accounted for
4.83% of budget allotments for fiscal year 1993. Debt levels are
expected to increase in fiscal 1995 due to the planned issuance
of a record amount of G.O. bonds.
In addition to the general obligation and lease backed debt
described above, an additional $257 million bonds have been
issued by the Georgia World Congress Authority and $850 million
bonds have been issued and are outstanding by the Georgia State
Housing Authority, none of which represent direct obligations of
the State.
Economy. The State of Georgia has a population of
approximately 6.5 million, making it the 13th largest state.
Since the 1960s, the State's population has grown at a rate
exceeding the national average, with the growth rate during the
1980s nearly twice that of the entire country. Stable to strong
economic growth during the 1980s was led by the Atlanta
metropolitan statistical area, where approximately 44% of the
State's population is located. This area includes the capital
city of Atlanta, and 18 surrounding counties. The next largest
metropolitan area is the Columbus-Muscogee area followed by the
Macon area.
The State's economy is well diversified. The current labor
force of 3.2 million is largely concentrated in wholesale/retail
trade and service jobs, followed by lesser amounts in
manufacturing and government. Employment gains have
substantially exceeded the region and the U.S. since 1980. The
State's economy should continue to grow, boosted by the upcoming
Summer Olympics and the continued demand for consumer durables.
Georgia's per capita income has steadily improved against the
national average since the 1960s and currently is 91% of the U.S,
ranking it 29th among the states.
Financial. To a large degree, the creditworthiness of the
portfolio is dependent on the financial strength of the State of
Georgia and its localities. During the 1980s, the State's strong
economic performance translated into solid financial performance
and the accumulation of substantial governmental fund balances.
These peaked at $2.4 billion in fiscal 1988, equal to 24% of
expenditures. During fiscal 1989 to 1991, the State's financial
condition was affected by three years of revenue shortfalls
brought on by recession. During these periods, the Governor
called special legislative sessions to enact sizeable spending
cuts to achieve budget balance. Economic conditions improved in
1992, allowing the State to restore its financial cushion to $2.1
billion or 15% of expenditures. Results for fiscal 1993 showed a
combination of this positive trend.
A significant portion of the portfolio's assets is expected
to be invested in the debt obligations of local governments and
public authorities with investment grade ratings of BBB or
higher. While local governments in Georgia are primarily reliant
on independent revenue sources, such as property taxes, they are
not immune to budget shortfalls caused by cutbacks in State aid.
The Fund may purchase obligations issued by public authorities in
Georgia which are not backed by the full faith and credit of the
State and may or may not be subject to annual appropriations from
the State's General Fund. Likewise, certain enterprises such as
water and sewer systems or hospitals may be affected by changes
in economic activity.
Sectors. Certain areas of potential investment
concentration present unique risks. In 1993, $863 million of
tax-exempt debt issued in Georgia was for public or non-profit
hospitals. A significant portion of the Fund's assets may be
invested in health care issues. Since 1983, the hospital
industry has been under significant pressure to reduce expenses
and shorten length of stay, a phenomenon which has negatively
affected the financial health of many hospitals. While each
hospital bond issue is separately secured by the individual
hospital's revenues, third party reimbursement sources such as
the federal Medicare and state Medicaid programs or private
insurers are common to all hospitals. To the extent these payors
reduce reimbursement levels, the individual hospitals may be
affected.
The Clinton Administration has developed a proposal for
national health care reform which would dramatically alter the
health care delivery system in the United States. Currently
there are numerous alternative proposals circulating in the
legislative branch, with sponsors hoping to displace or
materially change the President's proposal. There is no way to
predict whether any reform package will be adopted or the
ultimate impact of any such changes upon hospitals in Georgia and
other states.
The Fund may from time to time invest in electric revenue
issues which have exposure to or participate in nuclear power
plants which could affect the issuers' financial performance.
Such risks include delay in construction and operation due to
increased regulation, unexpected outages or plant shutdowns,
increased Nuclear Regulatory Commission surveillance or
inadequate rate relief.
The Fund may invest in private activity bond issues for
corporate and non-profit borrowers. These issues sold through
various governmental conduits, are backed solely by the revenues
pledged by the respective borrowing corporations. No
governmental support is implied. This category accounted for
4.3% of the tax-exempt debt issued in Georgia during 1993.
RISK FACTORS ASSOCIATED WITH A FLORIDA PORTFOLIO
The Fund's program of investing primarily in insured, AAA-
rated Florida municipal bonds should significantly lessen the
credit risks which would be associated with a portfolio of
uninsured Florida bonds. Nevertheless, to a certain degree, the
Fund's concentration in securities issued by the State of Florida
and its political subdivisions involves greater risk than a fund
broadly invested in insured bonds across many states and
municipalities. The credit quality of the Fund will depend upon
the continued financial strength of the insurance companies
insuring the bonds purchased by the Fund as well as the State of
Florida and the numerous public bodies, municipalities and other
issuers of debt securities in Florida.
Debt. The State of Florida and its local governments issue
three basic types of debt, with varying degrees of credit risk:
general obligation bonds backed by the unlimited taxing power of
the issuer, revenue bonds secured by specific pledged funds or
charges for a related project, and tax-exempt lease obligations,
supported by annual appropriations from the issuer, usually with
no implied tax or specific revenue pledge. During 1993, $17.9
billion in state and local debt was issued in Florida, with
approximately 17% representing general obligation debt and 83%
representing revenue bonds and lease-backed obligations. Debt
issued in 1993 was for a wide variety of public purposes,
including transportation, housing, education, health care and
industrial development.
As of June 30, 1993, the State of Florida had $5.6 billion
outstanding general obligation bonds secured by the State's full
faith and credit and taxing power. General bonded debt service
accounted for a modest 2% of all governmental expenditures in
fiscal year 1993. An additional $2.8 billion in bonds, issued by
the State and secured by limited state tax and revenue sources
was outstanding as of June 30, 1993. General obligation debt of
the State of Florida is rated Aa by Moody's, AA by Standard &
Poor's and AA by Fitch as of June 1, 1994. State debt may only
be used to fund capital outlay projects; Florida is not
authorized to issue obligations to fund operations.
Several agencies of the State are also authorized to issue
debt which does not represent a pledge of the state's credit.
The Florida Housing Finance Authority and Florida Board of
Regents are the largest issuers of this type. The principal and
interest on bonds issued by these bodies are payable solely from
specified sources such as mortgage repayments and university
tuition and fees.
Economy. The State of Florida has a population of
approximately 13.2 million, making it the fourth largest state.
Due to a large immigration of residents, the State's population
has grown at a rate exceeding the national average for four
decades. Florida's economy is broadly based with a large
concentration in the service and trade sectors. Tourism is one
of Florida's most important industries. The recent publicized
attacks on tourists in southern Florida may affect the growth of
visitor traffic in 1994.
During most of the 1980's, as Florida's population and
employment base grew, its job growth rate was double that of the
nation. However, beginning in 1988, job grown slowed and
unemployment rates began trending above national levels. During
1992, Florida's unemployment rate was 8.2% versus 7.4% for the
U.S. In 1993, Florida's unemployment rate has fallen back into
line with the national average. Further drops in the
unemployment rate are expected in 1994, as the State has
experienced sharp job growth related to rebuilding after
Hurricane Andrew. State per capita income is 98% of the national
average, well above norms for the Southeast.
Legislative. The State of Florida does not have a personal
income tax. A constitutional amendment would be required in
order to implement such a tax. Although the probability appears
very low, the Fund cannot rule out the possibility that a
personal income tax may be implemented at some time in the
future. If such a tax were to be imposed, there is no assurance
that interest earned on Florida Municipal Obligations would be
exempt from this tax.
Under current Florida law, shares of the Fund will be exempt
from the State's intangible personal property tax to the extent
that on the annual assessment date (January 1) its assets are
solely invested in Florida Municipal Obligations and U.S.
government securities, certain short-term cash investments, or
other exempt securities. There can be no assurance that this
exemption for Florida securities will be maintained. Also, the
constitutionality of the intangibles tax has been challenged in
court. If the constitutionality of the tax were struck down, the
tax-favored status of Florida bonds versus other investments
would be eliminated.
The Florida Constitution limits the total ad valorem
property tax that may be levied by each county, municipality and
school district to ten mills (1.0% of value). The limit applies
only to taxes levied for operating purposes and excludes taxes
levied for the payment of bonds. This restricts the operating
flexibility of local governments in the State and may result from
time to time in budget deficits for some local units.
Financial. The Florida Constitution and Statutes mandate
that the State budget as a whole, and each separate fund within
the State budget, be kept in balance from currently available
revenues each State fiscal year (July 1 - June 30.) The Governor
and Comptroller are responsible for insuring that sufficient
revenues are collected to meet appropriations and that no deficit
occurs in any State fund.
The State's revenue structure is narrowly based, relying on
the sales and use tax for 69% of its general revenues. This
structure, combined with the effects of the recession and heavy
spending demands, created budget shortfalls in fiscal years 1991
and 1992. Through mid-year spending adjustments and a draw upon
its reserves, the State was able to achieve budget balance for
both fiscal years. The State's finances received a substantial
boost in fiscal 1993 as a result of increased economic activity
associated with rebuilding efforts after Hurricane Andrew, which
hit south Florida on August 24, 1992. At the end of 1993, the
State had reserves of $969 million in the General Revenue Fund
(7.8% of revenues), reflecting an increase of 82% over the prior
year. Much of the increment has been transferred to a special
Hurricane Trust Fund for use in state and local rebuilding
projects. The increased economic activity and resulting higher
state tax revenues from the hurricane rebuilding is expected to
be sustained through 1995.
Many local Florida governments are suffering from fiscal
stress. The lagging reimbursement of hurricane repair costs and
the loss of property tax revenues associated with the storm's
damage has resulted in financial strain for certain localities.
Also, the recession has caused downturns in real estate related
receipts, declines in the growth of local option sales tax
receipts and reduced interest income. Remedies are being
instituted to close these gaps and provide additional revenues.
Tax rates have been increased, programs have been cut and pay
raises have been curtailed to assist in controlling expenses.
Sectors. Certain areas of potential investment
concentration present unique risks. In recent years, 10-15% of
tax-exempt debt issued in Florida was for public or non-profit
hospitals. A significant portion of the Fund's assets may be
invested in health care issues.
Since 1983, the hospital industry has been under significant
pressure to reduce expenses and shorten length of stay, a
phenomenon which has negatively affected the financial health of
many hospitals. While each hospital bond issue is separately
secured by the individual hospital's revenues, third party
reimbursement sources such as the federal Medicare and state
Medicaid programs or private insurers are common to all
hospitals. To the extent these payors reduce reimbursement
levels, the individual hospitals may be affected. Due to the
high proportion of elderly residents, Florida hospitals tend to
be highly dependent on Medicare. In addition to the regulation
imposed by Medicare, the State also regulates healthcare. A
State board must approve the budgets of all Florida hospitals;
certificates of need are required for all significant capital
expenditures. The primary management objective is cost control.
The inability of some hospitals to achieve adequate cost control
while operating in a competitive environment has led to a number
of hospital bond defaults.
The Clinton Administration has developed a proposal for
national health care reform which would dramatically alter the
health care delivery system in the United States. Currently
there are numerous alternative proposals circulating in the
legislative branch, with sponsors hoping to displace or
materially change the President's proposal. There is no way to
predict whether any reform package will be adopted or the
ultimate impact of any such changes upon hospitals in Florida and
other states.
The Fund may from time to time invest in electric revenue
issues which have exposure to or participate in nuclear power
plants which could affect the issuers' financial performance.
Such risks include delay in construction and operation due to
increased regulation, unexpected outages or plant shutdowns,
increased Nuclear Regulatory Commission surveillance or
inadequate rate relief.
The Fund may invest in private activity bond issues for
corporate and non-profit borrowers. These issues, sold through
various governmental conduits, are backed solely by the revenues
pledged by the respective borrowing corporations. No government
support is implied. This category accounted for only 1% of the
tax-exempt debt issued in Florida during 1993.
All Funds
Puerto Rico
From time to time the Funds invest in obligations of the
Commonwealth of Puerto Rico and its public corporations which are
exempt from federal, state and city or local income taxes. The
majority of the Commonwealth's debt is issued by ten of the major
public agencies that are responsible for many of the islands'
public functions, such as water, wastewater, highways,
telecommunications, education, and public construction. As of
December 31, 1993, public sector debt issued by the Commonwealth
and its public corporations totaled $15.17 billion.
Since the 1980s, Puerto Rico's economy and financial
operations have paralleled the economic cycles of the United
States. The island's economy, particularly the manufacturing
sector, has experienced substantial gains in employment. Much of
these economic gains are attributable in part to favorable
treatment under Section 936 of the Federal Internal Revenue Code
for United States corporations doing business in Puerto Rico.
Unemployment, while reaching its lowest level in ten years, still
remains high at around 16 percent.
Debt ratios for the Commonwealth are high as it assumes much
of the responsibility for local infrastructure. Sizeable
infrastructure improvements are ongoing to upgrade the island's
water, sewer, and road systems. The Commonwealth's general
obligation debt is secured by a first lien on all available
revenues. The Commonwealth has maintained a fiscal policy which
seeks to correlate the growth in public sector debt to the growth
of the economic base available to service that debt. Between
fiscal years 1989 and 1993, debt increased 22% while gross
product rose 25%. Short term debt remains a modest 7% of total
debt outstanding as of June 30, 1993. The maximum annual debt
service requirement on Commonwealth general obligation debt
totalled 9.6% of governmental revenues for fiscal 1992. This is
well below the 15% limit imposed by the Constitution of Puerto
Rico.
After recording 3 years of positive operating results in the
1989 to 1991 period, the Commonwealth's General Fund moved into a
deficit position, with a $62 million cash deficit for fiscal 1992
and a $140 million deficit for fiscal 1993. The fiscal 1994
budget was balanced with an increase in the "tollgate" tax on
Section 936 companies and improved revenue collections, but the
General Fund is projected to record an ending cash deficit of
$118 million (2.8% of Commonwealth Revenues).
The Commonwealth's economy remains vulnerable to changes in
oil prices, American trade, foreign policy, and levels of federal
assistance. Per capita income levels, while being the highest in
the Caribbean, lag far behind the United States. In November
1993, the voters of Puerto Rico were asked in a non-binding
referendum to consider the options of statehood, continued
Commonwealth status, or independence. 48.4% of the voters
favored continuation of Commonwealth status, 46.2% were for
statehood, and 4.4% were for independence. The status question
appears to be settled for the time being. Any conversion to
statehood or independence in the future would likely have an
adverse effect on the continuation of the Section 936 federal tax
credit program, which has been the principal stimulus for the
growth in Puerto Rico's manufacturing base.
Two events occurred in 1993 which are likely to have a long-
term impact on Puerto Rico's economy and government finances.
First, federal tax legislation was passed which revised the tax
benefits received by U.S. corporations (Section 936 firms) that
operate manufacturing facilities in Puerto Rico. The legislation
provides these firms with two options: a 5 year phased reduction
of the income based tax credit to 40% of the previously allowable
credit or the conversion to a wage based standard, allowing a tax
credit for the first 60% of qualified compensation paid to
employees as defined in the IRS Code. At present, it is
difficult to forecast what the short and long term effects of the
new limitations to the Section 936 credit will have on the
economy of Puerto Rico. Preliminary econometric studies
conducted by the Commonwealth and private sector economists
project only a slight reduction in average annual real growth
rates.
Second, the U. S. Congress passed the North American Free
Trade Agreement (NAFTA) in 1993. This agreement may have a
negative impact on the textile industry on the island. However,
the opening up of trade with Mexico and Canada is likely to be
positive for the pharmaceutical and High Technology industries.
No estimates have been developed for the employment impacts from
NAFTA.
INVESTMENT PROGRAMS
(Throughout the discussion on Investments, the term "the Fund" is
intended to refer to each of the Funds eligible to invest in the
security or engage in the practice being described.)
Municipal Securities
All Funds
Subject to the investment objective and program described in
the prospectus and the additional investment restrictions
described in this Statement of Additional Information, each
Fund's portfolio may consist of any combination of the various
types of municipal securities described below or others that may
be developed. The amount of each Fund's assets invested in any
particular type of municipal security can be expected to vary.
The term "municipal securities" means obligations issued by
or on behalf of states, territories, and possessions of the
United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, as well as certain
other persons and entities, the interest from which is exempt
from federal, state, and/or city or local, if applicable, income
tax. In determining the tax-exempt status of a municipal
security, the Funds rely on the opinion of the issuer's bond
counsel at the time of the issuance of the security. However, it
is possible this opinion could be overturned, and as a result,
the interest received by the Funds from such a security might not
be exempt from federal, state, and/or city or local income tax.
Municipal securities are classified by maturity as notes,
bonds, or adjustable rate securities.
Municipal Notes. Municipal notes generally are used to
provide for short-term operating or capital needs and generally
have maturities of one year or less. Municipal notes include:
Tax Anticipation Notes. Tax anticipation notes are
issued to finance working capital needs of
municipalities. Generally, they are issued in
anticipation of various seasonal tax revenue, such as
income, property, use and business taxes, and are
payable from these specific future taxes.
Revenue Anticipation Notes. Revenue anticipation
notes are issued in expectation of receipt of other
types of revenue, such as federal or state revenues
available under the revenue sharing or grant programs.
Bond Anticipation Notes. Bond anticipation notes are
issued to provide interim financing until long-term
financing can be arranged. In most cases, the
long-term bonds then provide the money for the
repayment of the notes.
Tax-Exempt Commercial Paper. Tax-exempt commercial
paper is a short-term obligation with a stated
maturity of 270 days or less. It is issued by state
and local governments or their agencies to finance
seasonal working capital needs or as short-term
financing in anticipation of longer term financing.
Municipal Bonds. Municipal bonds, which meet longer
term capital needs and generally have maturities of
more than one year when issued, have two principal
classifications: general obligation bonds and revenue
bonds. Two additional categories of potential
purchases are lease revenue bonds and
pre-refunded/escrowed to maturity bonds. Another type
of municipal bond is referred to as an Industrial
Development Bond.
General Obligation Bonds. Issuers of general
obligation bonds include states, counties, cities,
towns, and special districts. The proceeds of these
obligations are used to fund a wide range of public
projects, including construction or improvement of
schools, public buildings, highways and roads, and
general projects not supported by user fees or
specifically identified revenues. The basic security
behind general obligation bonds is the issuer's pledge
of its full faith and credit and taxing power for the
payment of principal and interest. The taxes that can
be levied for the payment of debt service may be
limited or unlimited as to the rate or amount of
special assessments. In many cases voter approval is
required before an issuer may sell this type of bond.
Revenue Bonds. The principal security for a revenue
bond is generally the net revenues derived from a
particular facility, or enterprise, or in some cases,
the proceeds of a special charge or other pledged
revenue source. Revenue bonds are issued to finance a
wide variety of capital projects including: electric,
gas, water and sewer systems; highways, bridges, and
tunnels; port and airport facilities; colleges and
universities; and hospitals. Revenue bonds are
sometimes used to finance various privately operated
facilities provided they meet certain tests
established for tax-exempt status.
Although the principal security behind these bonds may
vary, many provide additional security in the form of
a mortgage or debt service reserve fund. Some
authorities provide further security in the form of
the state's ability (without obligation) to make up
deficiencies in the debt service reserve fund.
Revenue bonds usually do not require prior voter
approval before they may be issued.
Lease Revenue Bonds. Municipal borrowers may also
finance capital improvements or purchases with
tax-exempt leases. The security for a lease is
generally the borrower's pledge to make annual
appropriations for lease payments. The lease payment
is treated as an operating expense subject to
appropriation risk and not a full faith and credit
obligation of the issuer. Lease revenue bonds are
generally considered less secure than a general
obligation or revenue bond and often do not include a
debt service reserve fund. To the extent the Board
determines such securities are illiquid, they will be
subject to the Funds' 15% limit on illiquid securities
(10% limit for the Money Funds). There have also been
certain legal challenges to the use of lease revenue
bonds in various states.
The liquidity of such securities will be determined
based on a variety of factors which may include, among
others: (1) the frequency of trades and quotes for the
obligation; (2) the number of dealers willing to
purchase or sell the security and the number of other
potential buyers; (3) the willingness of dealers to
undertake to make a market in the security; (4) the
nature of the marketplace trades, including, the time
needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer; and
(5) the rating assigned to the obligation by an
established rating agency or T. Rowe Price.
Pre-refunded/Escrowed to Maturity Bonds. Certain
municipal bonds have been refunded with a later bond
issue from the same issuer. The proceeds from the
later issue are used to defease the original issue.
In many cases the original issue cannot be redeemed or
repaid until the first call date or original maturity
date. In these cases, the refunding bond proceeds
typically are used to buy U.S. Treasury securities
that are held in an escrow account until the original
call date or maturity date. The original bonds then
become "pre-refunded" or "escrowed to maturity" and
are considered as high quality investments. While
still tax-exempt, the security is the proceeds of the
escrow account. To the extent permitted by the
Securities and Exchange Commission and the Internal
Revenue Service, a Fund's investment in such
securities refunded with U.S. Treasury securities
will, for purposes of diversification rules applicable
to the Fund, be considered as an investment in the
U.S. Treasury securities.
Private Activity Bonds. Under current tax law all
municipal debt is divided broadly into two groups:
governmental purpose bonds and private activity bonds.
Governmental purpose bonds are issued to finance
traditional public purpose projects such as public
buildings and roads. Private activity bonds may be
issued by a state or local government or public
authority but principally benefit private users and
are considered taxable unless a specific exemption is
provided.
The tax code currently provides exemptions for certain
private activity bonds such as not-for-profit hospital
bonds, small-issue industrial development revenue
bonds and mortgage subsidy bonds, which may still be
issued as tax-exempt bonds. Some, but not all,
private activity bonds are subject to alternative
minimum tax.
Industrial Development Bonds. Industrial development
bonds are considered Municipal Bonds if the interest
paid is exempt from federal income tax. They are
issued by or on behalf of public authorities to raise
money to finance various privately operated facilities
for business and manufacturing, housing, sports, and
pollution control. These bonds are also used to
finance public facilities such as airports, mass
transit systems, ports, and parking. The payment of
the principal and interest on such bonds is dependent
solely on the ability of the facility's user to meet
its financial obligations and the pledge, if any, of
real and personal property so financed as security for
such payment.
Adjustable Rate Securities. Municipal securities may
be issued with adjustable interest rates that are
reset periodically by pre-determined formulas or
indexes in order to minimize movements in the
principal value of the investment. Such securities
may have long-term maturities, but may be treated as a
short-term investment under certain conditions.
Generally, as interest rates decrease or increase, the
potential for capital appreciation or depreciation on
these securities is less than for fixed-rate
obligations. These securities may take the following
forms:
Variable Rate Securities. Variable rate instruments
are those whose terms provide for the adjustment of
their interest rates on set dates and which, upon such
adjustment, can reasonably be expected to have a
market value that approximates its par value. Subject
to the provisions of Rule 2a-7 under the Investment
Company Act of 1940 (1940 Act): (1) a variable rate
instrument, the principal amount of which is scheduled
to be paid in 397 days or less, is deemed to have a
maturity equal to the period remaining until the next
readjustment of the interest; (2) a variable rate
instrument which is subject to a demand feature
entitles the purchaser to receive the principal amount
of the underlying security or securities either (i)
upon notice of usually 30 days, or (ii) at specified
intervals not exceeding 397 days and upon no more than
30 days' notice is deemed to have a maturity equal to
the longer of the period remaining until the next
readjustment of the interest rate or the period
remaining until the principal amount can be recovered
through demand; and (3) an instrument that is issued
or guaranteed by the U.S. Government or any agency
thereof which has a variable rate of interest
readjusted no less frequently than every 762 days may
be deemed to have a maturity equal to the period
remaining until the next readjustment of the interest
rate. Should the provisions of Rule 2a-7 change, the
Fund will determine the maturity of these securities
in accordance with the amended provisions of such
Rule.
Floating Rate Securities. Floating rate instruments
are those whose terms provide for the adjustment of
their interest rates whenever a specified interest
rate changes and which, at any time, can reasonably be
expected to have a market value that approximates its
par value. Subject to the provisions of Rule 2a-7
under the 1940 Act: (1) the maturity of a floating
rate instrument is deemed to be the period remaining
until the date (noted on the face of the instrument)
on which the principal amount must be paid, or in the
case of an instrument called for redemption, the date
on which the redemption payment must be made and (2)
floating rate instruments with demand features are
deemed to have a maturity equal to the period
remaining until the principal amount can be recovered
through demand. Should the provisions of Rule 2a-7
change, the Fund will determine the maturity of these
securities in accordance with the amended provisions
of such Rule.
Put Option Bonds. Long-term obligations with
maturities longer than one year may provide purchasers
an optional or mandatory tender of the security at par
value at predetermined intervals, often ranging from
one month to several years (e.g., a 30-year bond with
a five-year tender period). These instruments are
deemed to have a maturity equal to the period
remaining to the put date.
Residual Interest Bonds (These are a type of
potentially high-risk derivative)(Bond Funds only).
The Funds may purchase municipal bond issues that are
structured as two-part, residual interest bond and
variable rate security offerings. The issuer is
obligated only to pay a fixed amount of tax-free
income that is to be divided among the holders of the
two securities. The interest rate for the holders of
the variable rate securities will be determined by an
auction process held approximately every 35 days while
the bond holders will receive all interest paid by the
issuer minus the amount given to the variable rate
security holders and a nominal auction fee.
Therefore, the coupon of the residual interest bonds,
and thus the income received, will move inversely with
respect to short-term, 35 day tax-exempt interest
rates. There is no assurance that the auction will be
successful and that the variable rate security will
provide short-term liquidity. The issuer is not
obligated to provide such liquidity. In general,
these securities offer a significant yield advantage
over standard municipal securities, due to the
uncertainty of the shape of the yield curve (i.e.,
short-term versus long-term rates)and consequent
income flows. Unlike many adjustable rate securities,
residual interest bonds are not necessarily expected
to trade at par and in fact present significant market
risks. In certain market environments, residual
interest bonds may carry substantial premiums or be at
deep discounts. This is a relatively new product in
the municipal market with limited liquidity to
date.
Participation Interests. The Funds may purchase from
third parties participation interests in all or part
of specific holdings of municipal securities. The
purchase may take different forms: in the case of
short-term securities, the participation may be backed
by a liquidity facility that allows the interest to be
sold back to the third party (such as a trust, broker
or bank) for a predetermined price of par at stated
intervals. The seller may receive a fee from the
Funds in connection with the arrangement.
In the case of longer-term bonds, the Funds may
purchase interests in a pool of municipal bonds or a
single municipal bond or lease without the right to
sell the interest back to the third party.
The Funds will not purchase participation interests
unless a satisfactory opinion of counsel or ruling of
the Internal Revenue Service has been issued that the
interest earned from the municipal securities on which
the Funds holds participation interests is exempt from
federal, state, and/or city or local income tax to the
Funds. However, there is no guarantee the IRS would
treat such interest income as tax-exempt.
Embedded Interest Rate Swaps and Caps (Bond Funds).
In a fixed-rate, long-term municipal bond with an
interest rate swap attached to it, the bondholder
usually receives the bond's fixed-coupon payment as
well as a variable rate payment that represents the
difference between a fixed rate for the term of the
swap (which is typically shorter than the bond it is
attached to) and a variable rate short-term municipal
index. The bondholder receives excess income when
short-term rates remain below the fixed interest rate
swap rate. If short-term rates rise above the fixed-
income swap rate, the bondholder's income is reduced.
At the end of the interest rate swap term, the bond
reverts to a single fixed-coupon payment. Embedded
interest rate swaps enhance yields, but also increase
interest rate risk.
An embedded interest rate cap allows the bondholder to
receive payments whenever short-term rates rise above
a level established at the time of purchase. They
normally are used to hedge against rising short-term
interest rates.
Both instruments may be volatile and of limited
liquidity and their use may adversely affect a Fund's
total return.
The Funds may invest in other types of derivative
instruments as they become available.
There are, of course, other types of municipal
securities that are, or may become, available, and the
Funds reserve the right to invest in them.
For the purpose of the Funds' investment restrictions,
the identification of the "issuer" of municipal
securities which are not general obligation bonds is
made by the Funds' investment manager, T. Rowe Price,
on the basis of the characteristics of the obligation
as described above, the most significant of which is
the source of funds for the payment of principal and
interest on such securities.
When-Issued Securities
All Funds
New issues of municipal securities are often offered on a
when-issued basis; that is, delivery and payment for the
securities normally takes place 15 to 45 days or more after the
date of the commitment to purchase. The payment obligation and
the interest rate that will be received on the securities are
each fixed at the time the buyer enters into the commitment. A
Fund will only make a commitment to purchase such securities with
the intention of actually acquiring the securities. However, a
Fund may sell these securities before the settlement date if it
is deemed advisable as a matter of investment strategy. Each
Fund will establish a segregated account in which it will
maintain cash and high-grade marketable debt securities equal in
value to commitments for when-issued securities. Such segregated
securities either will mature or, if necessary, be sold on or
before the settlement date. Securities purchased on a
when-issued basis and the securities held in a Fund's portfolio
are subject to changes in market value based upon the public
perception of the creditworthiness of the issuer and changes in
the level of interest rates (which will generally result in
similar changes in value; i.e., both experiencing appreciation
when interest rates decline and depreciation when interest rates
rise). Therefore, to the extent a Fund remains substantially
fully invested at the same time that it has purchased securities
on a when-issued basis, there will be greater fluctuations in its
net asset value than if it solely set aside cash to pay for
when-issued securities. In the case of the Money Funds, this
could increase the possibility that the market value of a Fund's
assets could vary from $1.00 per share.
In addition, there will be a greater potential for the
realization of capital gains, which are not exempt from federal,
state and/or city or local income tax. When the time comes to
pay for when-issued securities, a Fund will meet its obligations
from then-available cash flow, sale of securities or, although it
would not normally expect to do so, from sale of the when-issued
securities themselves (which may have a value greater or less
than the payment obligation). The policies described in this
paragraph are not fundamental and may be changed by a Fund upon
notice to its shareholders.
Forwards
Bond Funds
The Funds also may purchase bonds on a when-issued basis
with longer than standard settlement dates, in some cases
exceeding one to two years. In such cases, the Funds must
execute a receipt evidencing the obligation to purchase the bond
on the specified issue date, and must segregate cash internally
to meet that forward commitment. Municipal "forwards" typically
carry a substantial yield premium to compensate the buyer for the
risks associated with a long when-issued period, including:
shifts in market interest rates that could materially impact the
principal value of the bond, deterioration in the credit quality
of the issuer, loss of alternative investment options during the
when-issued period, changes in tax law or issuer actions that
would affect the exempt interest status of the bonds and prevent
delivery, failure of the issuer to complete various steps
required to issue the bonds, and limited liquidity for the buyer
to sell the escrow receipts during the when-issued period. Each
Fund will not invest more than 10% of its total assets in
forwards.
Investment in Taxable Money Market Securities
Although the Funds expect to be invested solely in municipal
securities, it is anticipated that, when it is deemed to be in
the best interests of each Fund's shareholders to do so, the
Funds may also invest a portion of their respective assets on a
temporary basis, in the taxable money market instruments set
forth below. The interest earned on these money market
securities is not exempt from federal, state, and/or city or
local income tax and may be taxable to shareholders as ordinary
income.
U.S. Government Obligations - direct obligations of the
government and its agencies and instrumentalities;
U.S. Government Agency Securities - obligations issued or
guaranteed by U.S. government sponsored enterprises, federal
agencies and international institutions. Some of these
securities are supported by the full faith and credit of the U.S.
Treasury; others are supported by the right of the issuer; and
the remainder are supported only by the credit of the
instrumentality;
Bank Obligations - certificates of deposit, bankers'
acceptances, and other short-term obligations of U.S. and
Canadian banks and their foreign branches;
Commercial Paper - paper rated A-2 or better by S&P, Prime-2
or better by Moody's, or F-2 or better by Fitch or, if not rated,
is issued by a corporation having an outstanding debt
issue rated A or better by Moody's, S&P or Fitch, and, with
respect to the Money Funds, is of equivalent investment quality
as determined by the Board of Trustees; and
Short-Term Corporate Debt Securities - short-term corporate
debt securities rated at least AA by S&P, Moody's or Fitch.
Determination of Maturity of Money Market Securities
The Money Funds may only purchase securities which at the
time of investment have remaining maturities of 397 calendar days
or less, or with respect to U.S. government securities, have
remaining maturities of 762 calendar days or less. The Bond
Funds may also purchase money-market securities. In determining
the maturity of money market securities, the Funds will follow
the provisions of Rule 2a-7 under the 1940 Act.
PORTFOLIO MANAGEMENT PRACTICES
Futures Contracts (Bond Funds only)
Futures are a type of potentially high-risk derivative.
Transactions in Futures
The Fund may enter into interest rate futures contracts
("futures" or "futures contracts"). Interest rate futures
contracts may be used as a hedge against changes in prevailing
levels of interest rates in order to establish more definitely
the effective return on securities held or intended to be
acquired by the Fund. The Fund could sell interest rate futures
as an offset against the effect of expected increases in interest
rates and purchase such futures as an offset against the effect
of expected declines in interest rates. Futures can also be used
as an efficient means of regulating a Fund's exposure to the
market.
The Fund will enter into futures contracts which are traded
on national futures exchanges and are standardized as to maturity
date and underlying financial instrument. A public market exists
in futures contracts covering various taxable fixed income
securities as well as municipal bonds. Futures exchanges and
trading in the United States are regulated under the Commodity
Exchange Act by the Commodity Futures Trading Commission
("CFTC"). Although techniques other than the sale and purchase
of futures contracts could be used for the above-referenced
purposes, futures contracts offer an effective and relatively low
cost means of implementing the Fund's objectives in these areas.
Regulatory Limitations
The Fund will engage in futures contracts and options
thereon only for bona fide hedging, yield enhancement, and risk
management purposes, in each case in accordance with rules and
regulations of the CFTC and applicable state law.
The Fund may not purchase or sell futures contracts or
related options if, with respect to positions which do not
quality as bona fide hedging under applicable CFTC rules, the sum
of the amounts of initial margin deposits and premiums paid on
those positions would exceed 5% of the net asset value of the
Fund after taking into account unrealized profits and unrealized
losses on any such contracts it has entered into; provided,
however, that in the case of an option that is in-the-money at
the time of purchase, the in-the-money amount may be excluded in
calculating the 5% limitation. For purposes of this policy,
options on futures contracts and options traded on a commodities
exchange will be considered "related options." This policy may
be modified by the Board of Trustees without a shareholder vote
and does not limit the percentage of the Fund's assets at risk to
5%.
In accordance with the rules of the State of California, the
Fund will apply the above 5% test without excluding the value of
initial margin and premiums paid for bona fide hedging purposes.
The Fund's use of futures will not result in leverage.
Therefore, to the extent necessary, in instances involving the
purchase of futures contracts or the writing of calls or put
options thereon by the Fund, an amount of cash, U.S. government
securities or other liquid, high-grade debt obligations, equal to
the market value of the futures contracts and options thereon
(less any related margin deposits), will be identified in an
account with the Fund's custodian to cover the position, or
alternative cover (such as owning an offsetting position) will be
employed. Assets used as cover or held in an identified account
cannot be sold while the position in the corresponding option or
future is open, unless they are replaced with similar assets. As
a result, the commitment of a large portion of a Fund's assets to
cover or identified accounts could impede portfolio management or
the Fund's ability to meet redemption requests or other current
obligations.
If the CFTC or other regulatory authorities adopt different
(including less stringent) or additional restrictions, the Fund
would comply with such new restrictions.
Trading in Futures Contracts
A futures contract provides for the future sale by one party
and purchase by another party of a specified amount of a specific
financial instrument (e.g., units of a debt security) for a
specified price, date, time and place designated at the time the
contract is made. Brokerage fees are incurred when a futures
contract is bought or sold and margin deposits must be
maintained. Entering into a contract to buy is commonly referred
to as buying or purchasing a contract or holding a long position.
Entering into a contract to sell is commonly referred to as
selling a contract or holding a short position.
It is possible that the Fund's hedging activities will occur
primarily through the use of municipal bond index futures
contracts since the uniqueness of that index contract should
better correlate with the Fund's portfolio and thereby be more
effective. However, there may be times when it is deemed in the
best interest of shareholders to engage in the use of Treasury
bond futures, and the Fund reserves to right to use Treasury bond
futures at any time. Use of these futures could occur, as an
example, when both the Treasury bond contract and municipal bond
index futures contract are correlating well with municipal bond
prices, but the Treasury bond contract is trading at a more
advantageous price making the hedge less expensive with the
Treasury bond contract than would be obtained with the municipal
bond index futures contract. The Fund's activity in futures
contracts generally will be limited to municipal bond index
futures contracts and Treasury bond and note contracts.
Unlike when the Fund purchases or sells a security, no price
would be paid or received by the Fund upon the purchase or sale
of a futures contract. Upon entering into a futures contract,
and to maintain the Fund's open positions in futures contracts,
the Fund would be required to deposit with its custodian in a
segregated account in the name of the futures broker an amount of
cash, U.S. government securities, suitable money market
instruments, or liquid, high-grade debt securities, known as
"initial margin." The margin required for a particular futures
contract is set by the exchange on which the contract is traded,
and may be significantly modified from time to time by the
exchange during the term of the contract. Futures contracts are
customarily purchased and sold on margins that may range upward
from less than 5% of the value of the contract being traded.
If the price of an open futures contract changes (by
increase in the case of a sale or by decrease in the case of a
purchase) so that the loss on the futures contract reaches a
point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin.
However, if the value of a position increases because of
favorable price changes in the futures contract so that the
margin deposit exceeds the required margin, the broker will pay
the excess to the Fund.
These subsequent payments, called "variation margin," to and
from the futures broker, are made on a daily basis as the price
of the underlying assets fluctuate making the long and short
positions in the futures contract more or less valuable, a
process known as "marking to the market." The Fund expects to
earn interest income on its margin deposits.
Although certain futures contracts, by their terms, require
actual future delivery of and payment for the underlying
instruments, in practice most futures contracts are usually
closed out before the delivery date. Closing out an open futures
contract purchase or sale is effected by entering into an
offsetting futures contract sale or purchase, respectively, for
the same aggregate amount of the identical securities and the
same delivery date. If the offsetting purchase price is less
than the original sale price, the Fund realizes a gain; if it is
more, the Fund realizes a loss. Conversely, if the offsetting
sale price is more than the original purchase price, the Fund
realizes a gain; if it is less, the Fund realizes a loss. The
transaction costs must also be included in these calculations.
There can be no assurance, however, that the Fund will be able to
enter into an offsetting transaction with respect to a particular
futures contract at a particular time. If the Fund is not able
to enter into an offsetting transaction, the Fund will continue
to be required to maintain the margin deposits on the futures
contract.
As an example of an offsetting transaction in which the
underlying instrument is not delivered, the contractual
obligations arising from the sale of one contract of September
municipal bond index futures on an exchange may be fulfilled at
any time before delivery of the contract is required (i.e., on a
specified date in September, the "delivery month") by the
purchase of one contract of September municipal bond index
futures on the same exchange. In such instance, the difference
between the price at which the futures contract was sold and the
price paid for the offsetting purchase, after allowance for
transaction costs, represents the profit or loss to the Fund.
Special Risks of Transactions in Futures Contracts
Volatility and Leverage. The prices of futures contracts
are volatile and are influenced, among other things, by actual
and anticipated changes in the market and interest rates, which
in turn are affected by fiscal and monetary policies and national
and international political and economic events.
Most United States futures exchanges limit the amount of
fluctuation permitted in futures contract prices during a single
trading day. The daily limit establishes the maximum amount that
the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of a trading
session. Once the daily limit has been reached in a particular
type of futures contract, no trades may be made on that day at a
price beyond that limit. The daily limit governs only price
movement during a particular trading day and therefore does not
limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures contract prices
have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting
some futures traders to substantial losses.
Because of the low margin deposits required, futures trading
involves an extremely high degree of leverage. As a result, a
relatively small price movement in a futures contract may result
in immediate and substantial loss, as well as gain, to the
investor. For example, if at the time of purchase, 10% of the
value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract
would result in a total loss of the margin deposit, before any
deduction for the transaction costs, if the account were then
closed out. A 15% decrease would result in a loss equal to 150%
of the original margin deposit, if the contract were closed out.
Thus, a purchase or sale of a futures contract may result in
losses in excess of the amount invested in the futures contract.
However, the Fund would presumably have sustained comparable
losses if, instead of the futures contract, it had invested in
the underlying financial instrument and sold it after the
decline. Furthermore, in the case of a futures contract
purchase, in order to be certain that the Fund has sufficient
assets to satisfy its obligations under a futures contract, the
Fund earmarks to the futures contract money market instruments
equal in value to the current value of the underlying instrument
less the margin deposit.
Liquidity. The Fund may elect to close some or all of its
futures positions at any time prior to their expiration. The
Fund would do so to reduce exposure represented by long futures
positions or short futures positions. The Fund may close its
positions by taking opposite positions which would operate to
terminate the Fund's position in the futures contracts. Final
determinations of variation margin would then be made, additional
cash would be required to be paid by or released to the Fund, and
the Fund would realize a loss or a gain.
Futures contracts may be closed out only on the exchange or
board of trade where the contracts were initially traded.
Although the Fund intends to purchase or sell futures contracts
only on exchanges or boards of trade where there appears to be an
active market, there is no assurance that a liquid market on an
exchange or board of trade will exist for any particular contract
at any particular time. In such event, it might not be possible
to close a futures contract, and in the event of adverse price
movements, the Fund would continue to be required to make daily
cash payments of variation margin. However, in the event futures
contracts have been used to hedge the underlying instruments, the
Fund would continue to hold the underlying instruments subject to
the hedge until the futures contracts could be terminated. In
such circumstances, an increase in the price of underlying
instruments, if any, might partially or completely offset losses
on the futures contract. However, as described below, there is
no guarantee that the price of the underlying instruments will,
in fact, correlate with the price movements in the futures
contract and thus provide an offset to losses on a futures
contract.
Hedging Risk. A decision of whether, when, and how to hedge
involves skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of unexpected market
behavior, market or interest rate trends. There are several
risks in connection with the use by the Fund of futures contracts
as a hedging device. One risk arises because of the imperfect
correlation between movements in the prices of the futures
contracts and movements in the prices of the underlying
instruments which are the subject of the hedge. T. Rowe Price
will, however, attempt to reduce this risk by entering into
futures contracts whose movements, in its judgment, will have a
significant correlation with movements in the prices of the
Fund's underlying instruments sought to be hedged.
Successful use of futures contracts by the Fund for hedging
purposes is also subject to T. Rowe Price's ability to correctly
predict movements in the direction of the market. It is possible
that, when the Fund has sold futures to hedge its portfolio
against a decline in the market, the index, indices, or
instruments underlying futures are written might advance and the
value of the underlying instruments held in the Fund's portfolio
might decline. If this were to occur, the Fund would lose money
on the futures and also would experience a decline in value in
its underlying instruments. However, while this might occur to a
certain degree, T. Rowe Price believes that over time the value
of the Fund's portfolio will tend to move in the same direction
as the market indices used to hedge the portfolio. It is also
possible that if the Fund were to hedge against the possibility
of a decline in the market (adversely affecting the underlying
instruments held in its portfolio) and prices instead increased,
the Fund would lose part or all of the benefit of increased value
of those underlying instruments that it has hedged, because it
would have offsetting losses in its futures positions. In
addition, in such situations, if the Fund had insufficient cash,
it might have to sell underlying instruments to meet daily
variation margin requirements. Such sales of underlying
instruments might be, but would not necessarily be, at increased
prices (which would reflect the rising market). The Fund might
have to sell underlying instruments at a time when it would be
disadvantageous to do so.
In addition to the possibility that there might be an
imperfect correlation, or no correlation at all, between price
movements in the futures contracts and the portion of the
portfolio being hedged, the price movements of futures contracts
might not correlate perfectly with price movements in the
underlying instruments due to certain market distortions. First,
all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors might close
futures contracts through offsetting transactions, which could
distort the normal relationship between the underlying
instruments and futures markets. Second, the margin requirements
in the futures market are less onerous than margin requirements
in the securities markets, and as a result the futures market
might attract more speculators than the securities markets do.
Increased participation by speculators in the futures market
might also cause temporary price distortions. Due to the
possibility of price distortion in the futures market and also
because of the imperfect correlation between price movements in
the underlying instruments and movements in the prices of futures
contracts, even a correct forecast of general market trends by T.
Rowe Price might not result in a successful hedging transaction
over a very short time period.
Options on Futures Contracts
The Fund might trade in municipal bond index option futures
or similar options on futures developed in the future. In
addition, the Fund may also trade in options on futures contracts
on U.S. government securities and any U.S. government securities
futures index contract which might be developed. In the opinion
of T. Rowe Price, there is a high degree of correlation in the
interest rate, and price movements of U.S. government securities
and municipal securities. However, the U.S. government
securities market and municipal securities markets are
independent and may not move in tandem at any point in time.
The Fund will purchase put options on futures contracts to
hedge its portfolio of municipal securities against the risk of
rising interest rates, and the consequent decline in the prices
of the municipal securities it owns. The Funds will also write
call options on futures contracts as a hedge against a modest
decline in prices of the municipal securities held in the Fund's
portfolio. If the futures price at expiration of a written call
option is below the exercise price, the Fund will retain the full
amount of the option premium, thereby partially hedging against
any decline that may have occurred in the Fund's holdings of debt
securities. If the futures price when the option is exercised is
above the exercise price, however, the Fund will incur a loss,
which may be wholly or partially offset by the increase of the
value of the securities in the Fund's portfolio which were being
hedged.
Writing a put option on a futures contract serves as a
partial hedge against an increase in the value of securities the
Fund intends to acquire. If the futures price at expiration of
the option is above the exercise price, the Fund will retain the
full amount of the option premium which provides a partial hedge
against any increase that may have occurred in the price of the
debt securities the Fund intends to acquire. If the futures
price when the option is exercised is below the exercise price,
however, the Fund will incur a loss, which may be wholly or
partially offset by the decrease in the price of the securities
the Fund intends to acquire.
Options on futures are similar to options on underlying
instruments except that options on futures give the purchaser the
right, in return for the premium paid, to assume a position in a
futures contract (a long position if the option is a call and a
short position if the option is a put), rather than to purchase
or sell the futures contract, at a specified exercise price at
any time during the period of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the
option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's futures
margin account which represents the amount by which the market
price of the futures contract, at exercise, exceeds (in the case
of a call) or is less than (in the case of a put) the exercise
price of the option on the futures contract. Purchasers of
options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.
From time to time a single order to purchase or sell futures
contracts (or options thereon) may be made on behalf of the Fund
and other T. Rowe Price Funds. Such aggregated orders would be
allocated among the Fund and the other T. Rowe Price Funds in a
fair and non-discriminatory manner.
Special Risks of Transactions in Options on Futures Contracts
The risks described under "Special Risks of Transactions on
Futures Contracts" are substantially the same as the risks of
using options on futures. In addition, where the Fund seeks to
close out an option position by writing or buying an offsetting
option covering the same index, underlying instrument or contract
and having the same exercise price and expiration date, its
ability to establish and close out positions on such options will
be subject to the maintenance of a liquid secondary market.
Reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient
trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing
transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or
series of options, or underlying instruments; (iv) unusual or
unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing
corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that
exchange (or in the class or series of options) would cease to
exist, although outstanding options on the exchange that had been
issued by a clearing corporation as a result of trades on that
exchange would continue to be exercisable in accordance with
their terms. There is no assurance that higher than anticipated
trading activity or other unforeseen events might not, at times,
render certain of the facilities of any of the clearing
corporations inadequate, and thereby result in the institution by
an exchange of special procedures which may interfere with the
timely execution of customers' orders. In the event no such
market exists for a particular contract in which the Fund
maintains a position, in the case of a written option, the Fund
would have to wait to sell the underlying securities or futures
positions until the option expires or is exercised. The Fund
would be required to maintain margin deposits on payments until
the contract is closed. Options on futures are treated for
accounting purposes in the same way as the analogous option on
securities are treated.
In addition, the correlation between movements in the price
of options on futures contracts and movements in the price of the
securities hedged can only be approximate. This risk is
significantly increased when an option on a U.S. government
securities future or an option on a municipal securities index
future is used to hedge a municipal bond portfolio. Another risk
is that the movements in the price of options on futures
contracts may not move inversely with changes in interest rates.
If the Fund has written a call option on a futures contract and
the value of the call increases by more than the increase in the
value of the securities held as cover, the Fund may realize a
loss on the call which is not completely offset by the
appreciation in the price of the securities held as cover and the
premium received for writing the call.
The successful use of options on futures contracts requires
special expertise and techniques different from those involved in
portfolio securities transactions. A decision of whether, when
and how to hedge involves skill and judgment, and even a well-
conceived hedge may be unsuccessful to some degree because of
unexpected market behavior or interest rate trends. During
periods when municipal securities market prices are appreciating,
the Fund may experience poorer overall performance than if it had
not entered into any options on futures contracts.
General Considerations
Transactions by the Fund in options on futures will be
subject to limitations established by each of the exchanges,
boards of trade or other trading facilities governing the maximum
number of options in each class which may be written or purchased
by a single investor or group of investors acting in concert,
regardless of whether the options are written on the same or
different exchanges, boards of trade or other trading facilities
or are held or written in one or more accounts or through one or
more brokers. Thus, the number of contracts which the Fund may
write or purchase may be affected by contracts written or
purchased by other investment advisory clients of T. Rowe Price.
An exchange, board of trade or other trading facility may order
the liquidations of positions found to be in excess of these
limits, and it may impose certain other sanctions.
Additional Futures and Options Contracts
Although the Funds have no current intention of engaging in
futures and options on futures transactions other than those
described above, they reserve the right to do so. Such futures
and options trading might involve risks which differ from those
involved in the futures and options described above.
Federal Tax Treatment of Futures Contracts
Although the Fund invests almost exclusively in securities
which generate income which is exempt from federal income taxes,
the instruments described above are not exempt from such taxes.
Therefore, use of the investment techniques described above could
result in taxable income to shareholders of the Fund.
Generally, the Fund is required, for federal income tax
purposes, to recognize as income for each taxable year its net
unrealized gains and losses on futures contracts as of the end of
the year as well as those actually realized during the year.
Gain or loss recognized with respect to a futures contract will
generally be 60% long-term capital gain or loss and 40% short-
term capital gain or loss, without regard to the holding period
of the contract.
Futures contracts which are intended to hedge against a
change in the value of securities may be classified as "mixed
straddles," in which case the recognition of losses may be
deferred to a later year. In addition, sales of such futures
contracts on securities may affect the holding period of the
hedged security and, consequently, the nature of the gain or loss
on such security on disposition.
In order for the Fund to continue to qualify for federal
income tax treatment as a regulated investment company, at least
90% of its gross income for a taxable year must be derived from
qualifying income; i.e., dividends, interest, income derived from
loans of securities, and gains from the sale of securities.
Gains realized on the sale or other disposition of securities,
including futures contracts on securities held for less than
three months, must be limited to less than 30% of the Fund's
annual gross income. In order to avoid realizing excessive gains
on securities held less than three months, the Fund may be
required to defer the closing out of futures contracts beyond the
time when it would otherwise be advantageous to do so. It is
anticipated that unrealized gains on futures contracts, which
have been open for less than three months as of the end of the
Fund's fiscal year and which are recognized for tax purposes,
will not be considered gains on securities held less than three
months for purposes of the 30% test.
The Fund will distribute to shareholders annually any net
gains which have been recognized for federal income tax purposes
from futures transactions (including unrealized gains at the end
of the Fund's fiscal year). Such distributions will be combined
with distributions of ordinary income or capital gains realized
on the Fund's other investments. Shareholders will be advised of
the nature of the payments. The Fund's ability to enter into
transactions in options on futures contracts may be limited by
the Internal Revenue Code's requirements for qualification as a
regulated investment company.
Options on Securities
Options are another type of potentially high-risk
derivative.
Bond Funds
The Funds have no current intention of investing in options
on securities, although they reserve the right to do so.
Appropriate disclosure would be added to the Funds' prospectus
and Statement of Additional Information when and if the Funds
decide to invest in options.
INVESTMENT RESTRICTIONS
Fundamental policies of the Funds may not be changed without
the approval of the lesser of (1) 67% of a Fund's shares present
at a meeting of shareholders if the holders of more than 50% of
the outstanding shares are present in person or by proxy or (2)
more than 50% of a Fund's outstanding shares. Other
restrictions, in the form of operating policies, are subject to
change by the Trusts' Board of Trustees without shareholder
approval. Any investment restriction which involves a maximum
percentage of securities or assets shall not be considered to be
violated unless an excess over the percentage occurs immediately
after, and is caused by, an acquisition of securities or assets
of, or borrowings by, a Fund.
Fundamental Policies
As a matter of fundamental policy, the Fund may not:
(1) Borrowing. Borrow money except that the Fund may (i)
borrow for non-leveraging, temporary or emergency
purposes and (ii) engage in reverse repurchase
agreements and make other investments or engage in
other transactions, which may involve a borrowing, in a
manner consistent with the Fund's investment objective
and program, provided that the combination of (i) and
(ii) shall not exceed 33 1/3% of the value of the
Fund's total assets (including the amount borrowed)
less liabilities (other than borrowings) or such other
percentage permitted by law. Any borrowings which come
to exceed this amount will be reduced in accordance
with applicable law. The Fund may borrow from banks,
other Price Funds or other persons to the extent
permitted by applicable law.
(2) Commodities. Purchase or sell physical commodities;
except that the Fund (other than the Money Funds) may
enter into futures contracts and options thereon;
(3) Industry Concentration. Purchase the securities of any
issuer if, as a result, more than 25% of the value of
the Fund's total assets would be invested in the
securities of issuers having their principal business
activities in the same industry;
(4) Loans. Make loans, although the Fund may (i) lend
portfolio securities and participate in an interfund
lending program with other Price Funds provided that no
such loan may be made if, as a result, the aggregate of
such loans would exceed 33 1/3% of the value of the
Fund's total assets; (ii) purchase money market
securities and enter into repurchase agreements; and
(iii) acquire publicly-distributed or privately-placed
debt securities and purchase debt;
(5) Percent Limit on Assets Invested in Any One Issuer
(California Funds only). Purchase a security if, as a
result, with respect to 75% of the value of its total
assets, more than 5% of the value of the Fund's total
assets would be invested in the securities of a single
issuer, except securities issued or guaranteed by the
U.S. Government or any of its agencies or
instrumentalities;
(6) Percent Limit on Share Ownership of Any One Issuer
(California Funds only). Purchase a security if, as a
result, with respect to 75% of the value of the Fund's
total assets, more than 10% of the outstanding voting
securities of any issuer would be held by the Fund
(other than obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities);
(7) Real Estate. Purchase or sell real estate unless
acquired as a result of ownership of securities or
other instruments (but this shall not prevent the Fund
from investing in securities or other instruments
backed by real estate or securities of companies
engaged in the real estate business);
(8) Senior Securities. Issue senior securities except in
compliance with the Investment Company Act of 1940;
(9) Taxable Securities. During periods of normal market
conditions, purchase any security if, as a result, less
than 80% of the Fund's income would be exempt from
federal and, if applicable, state, city or local income
tax. The income included under the 80% test does not
include income from securities subject to the
alternative minimum tax (AMT); or
(10) Underwriting. Underwrite securities issued by other
persons, except to the extent that the Fund may be
deemed to be an underwriter within the meaning of the
Securities Act of 1933 in connection with the purchase
and sale of its portfolio securities in the ordinary
course of pursuing its investment program.
NOTES
The following Notes should be read in connection with
the above-described fundamental policies. The Notes
are not fundamental policies.
With respect to investment restrictions (1) and (4) the
Fund will not borrow from or lend to any other T. Rowe
Price Fund unless they apply for and receive an
exemptive order from the SEC or the SEC issues rules
permitting such transactions. The Fund has no current
intention of engaging in any such activity and there is
no assurance the SEC would grant any order requested by
the Fund or promulgate any rules allowing the
transactions.
With respect to investment restriction (1), the Money
Funds have no current intention of engaging in any
borrowing transactions. With respect to investment
restriction (2), the Fund does not consider hybrid
instruments to be commodities.
For purposes of investment restriction (3), U.S., state
or local governments, or related agencies or
instrumentalities, are not considered an industry.
Industrial development bonds issued by nongovernmental
users are not considered municipal securities for
purposes of this exception.
Operating Policies
As a matter of operating policy, the Fund may not:
(1) Borrowing. The Fund will not purchase additional
securities when money borrowed exceeds 5% of its total
assets.
(2) Control of Portfolio Companies. Invest in companies
for the purpose of exercising management or control;
(3) Equity Securities. Purchase any equity security or
security convertible into an equity security provided
that the Fund (other than the Money Funds) may invest
up to 10% of its total assets in equity securities
which pay tax-exempt dividends and which are otherwise
consistent with the Fund's investment objective and,
further provided, that the Money Funds may invest up to
10% of their total assets in equity securities of other
tax-free open-end money market funds;
(4) Futures Contracts. Purchase a futures contract or an
option thereon if, with respect to positions in futures
or options on futures which do not represent bona fide
hedging, the aggregate initial margin and premiums on
such positions would exceed 5% of the Fund's net asset
value.
(5) Illiquid Securities. Purchase illiquid securities if,
as a result, more than 15% (10% for the Money Funds) of
its net assets would be invested in such securities;
(6) Investment Companies. Purchase securities of open-end
or closed-end investment companies except in compliance
with the Investment Company Act of 1940 and applicable
state law provided that, the Money Funds may only
purchase the securities of other tax-free open-end
money market investment companies;
(7) Margin. Purchase securities on margin, except (i) for
use of short-term credit necessary for clearance of
purchases of portfolio securities and (ii) it may make
margin deposits in connection with futures contracts or
other permissible investments;
(8) Mortgaging. Mortgage, pledge, hypothecate or, in any
manner, transfer any security owned by the Fund as
security for indebtedness except as may be necessary in
connection with permissible borrowings or investments
and then such mortgaging, pledging or hypothecating may
not exceed 33 1/3% of the Fund's total assets at the
time of borrowing or investment;
(9) Oil and Gas Programs. Purchase participations or other
direct interests or enter into leases with respect to,
oil, gas, or other mineral exploration or development
programs;
(10) Options, Etc. Invest in puts, calls, straddles,
spreads, or any combination thereof, except to the
extent permitted by the prospectus and Statement of
Additional Information;
(11) Ownership of Portfolio Securities by Officers and
Directors. Purchase or retain the securities of any
issuer if, 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.
(12) Short Sales. Effect short sales of securities;
(13) Unseasoned Issuers. 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 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; or
(14) Warrants. Invest in warrants if, as a result thereof,
more than 2% of the value of the net 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 net 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.
For purposes of investment restriction (6), the Fund has no
current intention of purchasing the securities of other
investment companies. Duplicate fees could result from any
such purchases.
For purposes of investment restriction (13), the Fund will
not consider industrial development bonds issued by
nongovernmental users as municipal securities.
RATINGS OF MUNICIPAL DEBT SECURITIES
Moody's Investors Service, Inc.
Aaa - Bonds rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edge."
Aa - Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds.
A - Bonds rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations.
Baa - Bonds rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba - Bonds rated Ba are judged to have speculative elements:
their futures cannot be considered as well assured. Often the
protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterize
bonds in this class.
B - Bonds rated B generally lack the characteristics of a
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca - Bonds rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default
or have other marked short-comings.
C - Lowest-rated; extremely poor prospects of ever attaining
investment standing.
Standard & Poor's Corporation
AAA - This is the highest rating assigned by Standard &
Poor's to a debt obligation and indicates an extremely strong
capacity to pay principal and interest.
AA - Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very
strong.
A - Bonds rated A have a strong capacity to pay principal
and interest, although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions.
BBB - Bonds rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally
exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay principal and interest for bonds in this
category than for bonds in the A category.
BB, C, CCC, CC - Bonds rated BB, B, CCC, and CC are regarded
on balance, as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal. BB
indicates the lowest degree of speculation and CC the highest
degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse
conditions.
D - In default.
Fitch Investors Service, Inc.
AAA - Bonds rated AAA are considered to be investment grade and
of the highest credit quality. The obligor has an exceptionally
strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events.
AA - Bonds rated AA are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest
and repay principal is very strong, although not quite as strong
as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rate
F-1+.
A - Bonds rated A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB - Bonds rated BBB are considered to be investment grade and
of satisfactory credit quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
BB, B, CCC, CC, and C are regarded on balance as predominantly
speculative with respect to the issuer's capacity to repay
interest and repay principal in accordance with the terms of the
obligation for bond issues not in default. BB indicates the
lowest degree of speculation and C the highest degree of
speculation. The rating takes into consideration special
features of the issue, its relationship to other obligations of
the issuer, and the current and prospective financial condition
and operating performance of the issuer.
RATINGS OF MUNICIPAL NOTES AND VARIABLE SECURITIES
Moody's Investors Services, Inc.
VMIG-1/MIG-1: the best quality. VMIG-2/MIG-2: high quality,
with margins of protection ample though not so large as in the
preceding group.
VMIG-3/MIG-3: favorable quality, with all security elements
accounted for, but lacking the undeniable strength of the
preceding grades. Market access for refinancing, in particular,
is likely to be less well established. VMIG-4/MIG-4: adequate
quality but there is specific risk.
Standard & Poor's Corporation
SP-1: very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation. SP-2:
satisfactory capacity to pay principal and interest.
SP-3: speculative capacity to pay principal and interest.
Fitch Investors Service, Inc.
F-1+: exceptionally strong credit quality, strongest degree of
assurance for timely payment. F-1: very strong credit quality.
F-2: good credit quality, having a satisfactory degree of
assurance for timely payment. F-3: fair credit quality,
assurance for timely payment is adequate but adverse changes
could cause the securities to be rated below investment grade.
F-S: weak credit quality, having characteristics suggesting a
minimal degree of assurance for timely payment.
RATINGS OF COMMERCIAL PAPER
Moody's Investors Service, Inc.
P-1: Superior capacity for repayment. P-2: strong capacity for
repayment.
P-3: acceptable capacity for repayment of short-term promissory
obligations.
Standard & Poor's Corporation
A-1: highest category, degree of safety regarding timely payment
is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+)
designation. A-2: satisfactory capacity to pay principal and
interest.
A-3: adequate capacity for timely payment, but are vulnerable to
adverse effects of changes in circumstances than higher rated
issues. B, and C: speculative capacity to pay principal and
interest.
Fitch Investors Service, Inc.
F-1+: exceptionally strong credit quality, strongest degree of
assurance for timely payment. F-1: very strong credit quality.
F-2: good credit quality, having a satisfactory degree of
assurance for timely payment. F-3: fair credit quality,
assurance for timely payment is adequate but adverse changes
could cause the securities to be rated below investment grade.
F-5: weak credit quality, having characteristics suggesting a
minimal degree of assurance for timely payment.
MANAGEMENT OF THE TRUSTS
The officers and trustees of each Trust are listed below.
Unless otherwise noted, the address of each is 100 East Pratt
Street, Baltimore, Maryland 21202. Except as indicated, each has
been an employee of T. Rowe Price for more than five years. In
the list below, the trustees who are considered "interested
persons" of T. Rowe Price or the Funds as defined under Section
2(a)(19) of the Investment Company Act of 1940 are noted with an
asterisk (*). These trustees are referred to as inside trustees
by virtue of their officership, directorship, and/or employment
with T. Rowe Price.
ROBERT P. BLACK, Trustee--Retired; formerly President, Federal
Reserve Bank of Richmond; Address: 10 Dahlgren Road, Richmond,
Virginia 23233
CALVIN W. BURNETT, PH.D., Trustee--President, Coppin State
College; Board of Directors, McDonogh School, Inc. and Provident
Bank of Maryland; President, Baltimore Area Council Boy Scouts of
America; Vice President, Board of Directors, The Walters Art
Gallery; Address: 2000 North Warwick Avenue, Baltimore, Maryland
21216
aGEORGE J. COLLINS, Chairman of the Board--President, Chief
Executive Officer and Managing Director, T. Rowe Price; Director,
Price-Fleming, T. Rowe Price Retirement Plan Services, Inc. and
T. Rowe Price Trust Company; Chartered Investment Counselor
ANTHONY W. DEERING, Trustee--Director, President and Chief
Executive Officer, The Rouse Company, real estate developers,
Columbia, Maryland; Advisory Director, Kleinwort, Benson (North
America) Corporation, a registered broker-dealer; Address: 10275
Little Patuxent Parkway, Columbia, Maryland 21044
F. PIERCE LINAWEAVER, Trustee--President, F. Pierce Linaweaver &
Associates, Inc.; formerly (1987-1991) Executive Vice President,
EA Engineering, Science, and Technology, Inc., and (1987-1990)
President, EA Engineering, Inc., Baltimore, Maryland; Address:
The Legg Mason Tower, 111 South Calvert Street, Suite 2700,
Baltimore, Maryland 21202
JOHN G. SCHREIBER, Trustee--President, Schreiber Investments,
Inc., a real estate investment company; Director and formerly
(1/80-12/90) Executive Vice President, JMB Realty Corporation, a
national real estate investment manager and developer; Address:
1115 East Illinois Road, Lake Forest, Illinois 60045
ANNE MARIE WHITTEMORE, Trustee--Partner, law firm of McGuire,
Woods, Battle & Boothe, L.L.P., Richmond, Virginia; formerly,
Chairman (1991-1993) and Director (1989-1993), Federal Reserve
Bank of Richmond; Director, Owens & Minor, Inc., USF&G
Corporation, James River Corporation and Wilderness Conservancy
at Mountain Lake, Inc.; Board of Visitors, Old Dominion
University; Member, Virginia State Bar and American Bar
Association; Address: One James Center, 901 East Cary Street,
Richmond, Virginia 23219-4030
aWILLIAM T. REYNOLDS, President and Trustee--Managing Director,
T. Rowe Price
JAMES S. RIEPE, Vice President and Trustee--Managing Director, T.
Rowe Price; Chairman of the Board, T. Rowe Price Services, Inc.,
T. Rowe Price Retirement Plan Services, Inc. and T. Rowe Price
Trust Company; President and Director, T. Rowe Price Investment
Services, Inc.; Director, Rhone-Poulenc Rorer, Inc.
bMARY J. MILLER, President--Managing Director, T. Rowe Price
JANET G. ALBRIGHT, Vice President--Vice President, T. Rowe Price
PATRICE L. BERCHTENBREITER, Vice President--Vice President, T.
Rowe Price
MICHAEL P. BUCKLEY, Vice President--Vice President, T. Rowe Price
PATRICIA S. DEFORD, Vice President--Vice President, T. Rowe Price
CHARLES B. HILL, Vice President--Assistant Vice President, T.
Rowe Price; formerly (9/86-11/91) managed municipal bonds at
Riggs National Bank, Washington, D.C.
CHARLES O. HOLLAND, Vice President--Vice President, T. Rowe Price
HENRY H. HOPKINS, Vice President--Vice President, Price-Fleming
and T. Rowe Price Retirement Plan Services, Inc.; Managing
Director, T. Rowe Price; Vice President and Director, T. Rowe
Price Investment Services, Inc., T. Rowe Price Services, Inc. and
T. Rowe Price Trust Company
LAURA MCAREE, Vice President--Assistant Vice President, T. Rowe
Price; formerly (4/90-11/90) trader, Boeing Company, Seattle,
Washington and (8/87-3/90) financial analyst, Harvard Management
Company, Boston, Massachusetts
HUGH D. MCGUIRK, Vice President--Assistant Vice President, T.
Rowe Price; formerly (1987-1989) account marketing
representative, IBM, (summer of 1990) summer associate in capital
markets, Goldman Sachs & Company, and (1991-1993) municipal
underwriter, Alex. Brown & Sons, Inc., Baltimore, Maryland
KONSTANTINE B. MALLAS, Vice President--Assistant Vice President,
T. Rowe Price
ALAN P. RICHMAN, Vice President--Vice President, T. Rowe Price;
formerly (10/89-6/91) Manager, Public Finance, Credit Local de
France, New York, New York and Public Finance, Tokai Bank, New
York, New York
cTHEODORE E. ROBSON, Vice President--Employee, T. Rowe Price
WILLIAM F. SNIDER, JR., Vice President--Assistant Vice President,
T. Rowe Price
C. STEPHEN WOLFE, II, Vice President--Vice President, T. Rowe
Price
GWENDOLYN G. WAGNER, Vice President--Assistant Vice President and
Economist, T. Rowe Price
LENORA V. HORNUNG, Secretary--Vice President, T. Rowe Price
PATRICIA S. BUTCHER, Assistant Secretary--Assistant Vice
President, T. Rowe Price and T. Rowe Price Investment Services,
Inc.
CARMEN F. DEYESU, Treasurer--Vice President, T. Rowe Price, T.
Rowe Price Services, Inc., and T. Rowe Price Trust Company
DAVID S. MIDDLETON, Controller--Vice President, T. Rowe Price,
and T. Rowe Price Trust Company
ROGER L. FIERY, Assistant Vice President--Vice President, Price-
Fleming and T. Rowe Price
JOSEPH LYNAGH, Assistant Vice President--Employee, T. Rowe Price
EDWARD T. SCHNEIDER, Assistant Vice President--Vice President, T.
Rowe Price
INGRID I. VORDEMBERGE, Assistant Vice President--Employee, T.
Rowe Price
a Mr. Reynolds is President and Trustee of the State Tax-Free
Income Trust and Vice President and Trustee of the
California Tax-Free Income Trust.
b Ms. Miller is President of the California Tax-Free Income
Trust and Executive Vice President of the State Tax-Free
Income Trust.
c Mr. Robson is an Assistant Vice President of the State Tax-
Free Income Trust only.
Each Trust's Executive Committee, comprised of Messrs.
Collins, Reynolds, and Riepe, has been authorized by its Board of
Trustees to exercise all powers of the Board to manage the Funds
in the intervals between meetings of the Board, except the powers
prohibited by statute from being delegated.
COMPENSATION TABLE
_________________________________________________________________
Pension or Total Compensation
Aggregate Retirement from Fund and
Name of Compensation Benefits Fund Group
Person, from Accrued as Paid to
Position Fund(a) Part of Fund(b) Directors(c)
_________________________________________________________________
California Tax-Free Bond Fund
Robert P. Black,
Director $1,024 N/A $52,667
Calvin W. Burnett,
Director 1,024 N/A 55,583
George J. Collins,
Director(d) -- N/A --
Anthony W. Deering,
Director 1,024 N/A 66,333
F. Pierce Linaweaver,
Director 1,024 N/A 55,583
William T. Reynolds,
Director(d) -- N/A --
James S. Riepe,
Director(d) -- N/A --
John Schreiber,
Director 1,024 N/A 55,667
Anne Marie Whittemore,
Director 1,024 N/A 32,667
_________________________________________________________________
California Tax-Free Money Fund
Robert P. Black,
Director $941 N/A $52,667
Calvin W. Burnett,
Director 941 N/A 55,583
George J. Collins,
Director(d) -- N/A --
Anthony W. Deering,
Director 941 N/A 66,333
F. Pierce Linaweaver,
Director 941 N/A 55,583
William T. Reynolds,
Director(d) -- N/A --
James S. Riepe,
Director(d) -- N/A --
John Schreiber,
Director 941 N/A 55,667
Anne Marie Whittemore,
Director 941 N/A 32,667
_________________________________________________________________
Florida Insured Intermediate Tax-Free Fund
Robert P. Black,
Director $848 N/A $52,667
Calvin W. Burnett,
Director 848 N/A 55,583
George J. Collins,
Director(d) -- N/A --
Anthony W. Deering,
Director 848 N/A 66,333
F. Pierce Linaweaver,
Director 848 N/A 55,583
William T. Reynolds,
Director(d) -- N/A --
James S. Riepe,
Director(d) -- N/A --
John Schreiber,
Director 848 N/A 55,667
Anne Marie Whittemore,
Director 848 N/A 32,667
_________________________________________________________________
Georgia Tax-Free Bond Fund
Robert P. Black,
Director $812 N/A $52,667
Calvin W. Burnett,
Director 812 N/A 55,583
George J. Collins,
Director(d) -- N/A --
Anthony W. Deering,
Director 812 N/A 66,333
F. Pierce Linaweaver,
Director 812 N/A 55,583
William T. Reynolds,
Director(d) -- N/A --
James S. Riepe,
Director(d) -- N/A --
John Schreiber,
Director 812 N/A 55,667
Anne Marie Whittemore,
Director 812 N/A 32,667
_________________________________________________________________
Maryland Tax-Free Bond Fund
Robert P. Black,
Director $2,413 N/A $52,667
Calvin W. Burnett,
Director 2,413 N/A 55,583
George J. Collins,
Director(d) -- N/A --
Anthony W. Deering,
Director 2,413 N/A 66,333
F. Pierce Linaweaver,
Director 2,413 N/A 55,583
William T. Reynolds,
Director(d) -- N/A --
James S. Riepe,
Director(d) -- N/A --
John Schreiber,
Director 2,413 N/A 55,667
Anne Marie Whittemore,
Director 2,413 N/A 32,667
_________________________________________________________________
Maryland Short-Term Tax-Free Bond Fund
Robert P. Black,
Director $935 N/A $52,667
Calvin W. Burnett,
Director 935 N/A 55,583
George J. Collins,
Director(d) -- N/A --
Anthony W. Deering,
Director 935 N/A 66,333
F. Pierce Linaweaver,
Director 935 N/A 55,583
William T. Reynolds,
Director(d) -- N/A --
James S. Riepe,
Director(d) -- N/A --
John Schreiber,
Director 935 N/A 55,667
Anne Marie Whittemore,
Director 935 N/A 32,667
_________________________________________________________________
New Jersey Tax-Free Bond Fund
Robert P. Black,
Director $971 N/A $52,667
Calvin W. Burnett,
Director 971 N/A 55,583
George J. Collins,
Director(d) -- N/A --
Anthony W. Deering,
Director 971 N/A 66,333
F. Pierce Linaweaver,
Director 971 N/A 55,583
William T. Reynolds,
Director(d) -- N/A --
James S. Riepe,
Director(d) -- N/A --
John Schreiber,
Director 971 N/A 55,667
Anne Marie Whittemore,
Director 971 N/A 32,667
_________________________________________________________________
New York Tax-Free Bond Fund
Robert P. Black,
Director $1,026 N/A $52,667
Calvin W. Burnett,
Director 1,026 N/A 55,583
George J. Collins,
Director(d) -- N/A --
Anthony W. Deering,
Director 1,026 N/A 66,333
F. Pierce Linaweaver,
Director 1,026 N/A 55,583
William T. Reynolds,
Director(d) -- N/A --
James S. Riepe,
Director(d) -- N/A --
John Schreiber,
Director 1,026 N/A 55,667
Anne Marie Whittemore,
Director 1,026 N/A 32,667
_________________________________________________________________
New York Tax-Free Money Fund
Robert P. Black,
Director $900 N/A $52,667
Calvin W. Burnett,
Director 900 N/A 55,583
George J. Collins,
Director(d) -- N/A --
Anthony W. Deering,
Director 900 N/A 66,333
F. Pierce Linaweaver,
Director 900 N/A 55,583
William T. Reynolds,
Director(d) -- N/A --
James S. Riepe,
Director(d) -- N/A --
John Schreiber,
Director 900 N/A 55,667
Anne Marie Whittemore,
Director 900 N/A 32,667
_________________________________________________________________
Virginia Tax-Free Bond Fund
Robert P. Black,
Director $1,104 N/A $52,667
Calvin W. Burnett,
Director 1,104 N/A 55,583
George J. Collins,
Director(d) -- N/A --
Anthony W. Deering,
Director 1,104 N/A 66,333
F. Pierce Linaweaver,
Director 1,104 N/A 55,583
William T. Reynolds,
Director(d) -- N/A --
James S. Riepe,
Director(d) -- N/A --
John Schreiber,
Director 1,104 N/A 55,667
Anne Marie Whittemore,
Director 1,104 N/A 32,667
_________________________________________________________________
Virginia Short-Term Tax-Free Bond Fund(e)
Robert P. Black,
Director $473 N/A $52,667
Calvin W. Burnett,
Director 473 N/A 55,583
George J. Collins,
Director(d) -- N/A --
Anthony W. Deering,
Director 473 N/A 66,333
F. Pierce Linaweaver,
Director 473 N/A 55,583
William T. Reynolds,
Director(d) -- N/A --
James S. Riepe,
Director(d) -- N/A --
John Schreiber,
Director 473 N/A 55,667
Anne Marie Whittemore,
Director 473 N/A 32,667
a Amounts in this Column are for the period March 1, 1994 to
February 28, 1995.
b Not applicable. The Fund does not pay pension or retirement
benefits to officers or directors/trustees of the Fund.
c Amounts in this column are for fiscal year 1995, including 68
funds at February 28, 1995.
d Any director/trustee of the Fund who is an officer or
employee of T. Rowe Price receives no remuneration from the
Fund.
e Amounts for this Fund include estimated future payments.
PRINCIPAL HOLDERS OF SECURITIES
As of the date of the prospectus, the officers and trustees
of the Funds, as a group, owned less than 1% of the outstanding
shares of each Fund.
As of April 30, 1995, the following shareholder of the New
York Money Fund beneficially owned more than 5% of the
outstanding shares of beneficial interest of the Fund:
Coleman M. Brandt and Grace L. Brandt JT TEN, 330 West 72nd
Street, Apt. 10A, New York, New York 10023-2649.
H. Mark Glasberg and Paula D. Glasberg, Jt. Ten., 205 West
End Avenue, New York, New York 10023-4804.
INVESTMENT MANAGEMENT SERVICES
Services
Under the Management Agreement with each Trust relating to
its Funds, T. Rowe Price provides each Fund with discretionary
investment services. Specifically, T. Rowe Price is responsible
for supervising and directing the investments of each Fund in
accordance with each Fund's investment objective, program, and
restrictions as provided in its prospectus and this Statement of
Additional Information. T. Rowe Price is also responsible for
effecting all security transactions on behalf of each Fund,
including the allocation of principal business and portfolio
brokerage and the negotiation of commissions. In addition to
these services, T. Rowe Price provides each Fund with certain
administrative services, including: maintaining each Trust's
existence and records; registering and qualifying each Fund's
shares of beneficial interest under federal and state laws;
monitoring the financial, accounting, and administrative
functions of each Fund; maintaining liaison with the agents
employed by each Trust such as the Funds' custodian and transfer
agent; assisting the Funds in the coordination of such agents'
activities; and permitting T. Rowe Price employees to serve as
officers, trustees, and committee members of the Funds without
cost to the Funds.
The Management Agreements also provide that T. Rowe Price,
its directors, officers, employees, and certain other persons
performing specific functions for the Funds will only be liable
to the Funds for losses resulting from willful misfeasance, bad
faith, gross negligence, or reckless disregard of duty.
Management Fee
Each Fund pays T. Rowe Price a fee ("Fee") which consists of
two components: a Group Management Fee ("Group Fee") and an
Individual Fund Fee ("Fund Fee"). The Fee is paid monthly to T.
Rowe Price on the first business day of the next succeeding
calendar month and is calculated as described below.
The monthly Group Fee ("Monthly Group Fee") is the sum of
the daily Group Fee accruals ("Daily Group Fee Accruals") for
each month. The Daily Group Fee Accrual for any particular day
is computed by multiplying the Price Funds' group fee accrual as
determined below ("Daily Price Funds' Group Fee Accrual") by the
ratio of each Fund's net assets for that day to the sum of the
aggregate net assets of the Price Funds for that day. The Daily
Price Funds' Group Fee Accrual for any particular day is
calculated by multiplying the fraction of one (1) over the number
of calendar days in the year by the annualized Daily Price Funds'
Group Fee Accrual for that day as determined in accordance with
the following schedule:
Price Funds'
Annual Group Base Fee
Rate for Each Level of Assets
_____________________________
0.480% First $1 billion
0.450% Next $1 billion
0.420% Next $1 billion
0.390% Next $1 billion
0.370% Next $1 billion
0.360% Next $2 billion
0.350% Next $2 billion
0.340% Next $5 billion
0.330% Next $10 billion
0.320% Next $10 billion
0.310% Thereafter
For the purpose of calculating the Group Fee, the Price
Funds include all the mutual funds distributed by T. Rowe Price
Investment Services, Inc. (excluding T. Rowe Price Spectrum Fund,
Inc. and Equity Index Fund and any institutional or private label
mutual funds). For the purpose of calculating the Daily Price
Funds' Group Fee Accrual for any particular day, the net assets
of each Price Fund are determined in accordance with each Fund's
prospectus as of the close of business on the previous business
day on which the Fund was open for business.
The monthly Fund Fee ("Monthly Fund Fee") is the sum of the
daily Fund Fee accruals ("Daily Fund Fee Accruals") for each
month. The Daily Fund Fee Accrual for any particular day is
computed by multiplying the fraction of one (1) over the number
of calendar days in the year by the Individual Fund Fee Rate of
0.10% (0.05% for the Florida Insured Intermediate Fund) and
multiplying this product by the net assets of each Fund for that
day, as determined in accordance with each Fund's prospectus as
of the close of business on the previous business day on which
the Funds were open for business.
The following chart sets forth the total management fees, if
any, paid to T. Rowe Price by the Funds for the fiscal years
ended February 28, 1995, February 28, 1994, and February 28,
1993:
New York Money New York Bond
1995 $122,000 1995 $392,000
1994 77,000 1994 410,000
1993 56,429 1993 240,464
California Money California Bond
1995 $169,000 1995 $492,000
1994 127,000 1994 575,000
1993 96,485 1993 405,811
Maryland Bond Maryland Short-Term Bond
1995 $3,243,000 1995 $242,000
1994 3,517,000 1994 59,000
1993 2,644,367 1993 0+
Virginia Bond Virginia Short-Term Bond
1995 $611,000 1995 +
1994 532,000
1993 168,131
Florida Tax-Free Georgia Bond
1995 $13,000 1995 +
1994 + 1994 +
1993 * 1993 *
New Jersey Bond
1995 $135,000
1994 87,000
1993 0+
+ Due to effect of expense limitation discussed below, the
Virginia Short-Term and Georgia Bond Funds did not pay T. Rowe
Price an investment management fee.
* Prior to commencement of operations.
Limitation on Fund Expenses
All Funds
The Management Agreements between each Fund and T. Rowe
Price provides that each 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 each Fund for any expenses (excluding interest, taxes,
brokerage, other expenditures which are capitalized in accordance
with generally accepted accounting principles, and extraordinary
expenses) which in any year exceed the limits prescribed by any
state in which that Fund's shares are qualified for sale.
Currently, the State Tax-Free Income Trust has not qualified any
Fund's shares for sale in any state which prescribes such expense
ratio limitations. However, the California Tax-Free Income Trust
is subject to the most restrictive expense limitation imposed by
any state, which is 2.5% of the first $30 million of each Fund's
average daily net assets, 2.0% of the next $70 million of each
Fund's assets, and 1.5% of net assets in excess of $100 million.
For the purpose of determining whether a Fund is entitled to
reimbursement, the expenses of the Fund are calculated on a
monthly basis. If a 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.
New York and California Funds
Effective November 1, 1989 for the Bond Funds and March 1,
1990 for the Money Funds, T. Rowe Price agreed to waive its fees
and bear any expenses through February 28, 1994, which would
cause each Fund's ratio of expenses to average net assets to
exceed 0.80%.
Effective November 7, 1990, T. Rowe Price agreed to waive
its fees and bear any expenses through February 28, 1993, to the
extent such fees or expenses would cause the Funds' ratio of
expenses to average net assets to exceed 0.55% for the Money
Funds and 0.60% for the Bond Funds. Effective March 1, 1993, T.
Rowe Price agreed to extend the Money Funds' 0.55% and the Bond
Funds' 0.60% expense limitations for a period of two years
through February 28, 1995. Fees waived or expenses paid or
assumed under each agreement are subject to reimbursement to T.
Rowe Price by the Funds whenever the expense ratio is below 0.55%
for the Money Funds and 0.60% for the Bond Funds; however, no
reimbursement will be made after February 28, 1995 (for the first
agreement) or February 28, 1997 (for the second agreement) or if
it would result in the expense ratio exceeding 0.55% for the
Money Fund and 0.60% for the Bond Funds.
Pursuant to the present expense limitations for the
California Bond and Money Funds, $102,000 and $179,000,
respectively, of management fees were not accrued for the year
ended February 28, 1995 and $154,000 and $225,000 remain
unaccrued from prior periods for the California Bond and Money
Funds, respectively. Pursuant to these present expense
limitations, $132,000 and $158,000 of management fees for the New
York Bond and Money Funds, respectively, were not accrued for the
year ended February 28, 1995 and $228,000 and $377,000 remain
unaccrued from prior periods for the New York Bond and Money
Funds, respectively. Subject to shareholder approval, these
expenses may be reimbursed to T. Rowe Price, provided that the
recapture of fees would not cause the ratio of expenses to
average net assets to exceed the above-mentioned ratios.
Pursuant to a past expense limitation, $364,000 and $485,000,
respectively, of unaccrued fees for the California Bond and Money
Funds have been permanently waived at February 28, 1995.
Pursuant to a past expense limitation, $362,000 and $432,000 of
unaccrued fees for the New York Bond and Money Funds,
respectively, have been permanently waived at February 28,
1995.
Maryland Short-Term Tax-Free Bond Fund
In the interest of limiting the expenses of the Fund during
its initial period of operations, T. Rowe Price has agreed to
waive its fees and bear any expenses through February 28, 1995,
to the extent such fees or expenses would cause the Fund's ratio
of expenses to average net assets to exceed 0.65%. However, any
fees waived or expenses paid or assumed by T. Rowe Price pursuant
to this expense ratio limitation is subject to reimbursement by
the Fund to T. Rowe Price whenever the Fund's expense ratio is
below 0.65%, provided, that no such reimbursement shall be made
to T. Rowe Price after February 28, 1997, and any such
reimbursement shall only be made to the extent that it does not
result in the Fund's aggregate expenses exceeding an expense
ratio limitation of 0.65% The Management Agreement also provide
that one or more additional expense limitation periods (of the
same or different time periods) may be implemented after the
expiration of the current one on February 28, 1995, and that with
respect to any such additional limitation period, the Fund may
reimburse T. Rowe Price, provided the reimbursement does not
result in the Fund's aggregate expense exceeding the additional
expense limitation. Pursuant to its present expense limitation,
$106,000 of management fees were not accrued by the Maryland
Short-Term Fund for the year ended February 28, 1995.
Additionally, $157,000 of unaccrued fees and expenses from the
prior period are subject to future reimbursement.
Virginia Tax-Free and New Jersey Funds
In the interest of limiting the expenses of each Fund during
its initial periods of operations, T. Rowe Price agreed to waive
its fees and bear any expenses through February 28, 1993, to the
extent such fees or expenses would cause each Fund's ratio of
expenses to average net assets to exceed 0.65%. Effective March
1, 1993, T. Rowe Price agreed to extend each Fund's 0.65% expense
limitation for a period of two years through February 28, 1995.
Fees waived or expenses paid or assumed under each agreement are
subject to reimbursement to T. Rowe Price by the Funds whenever a
Fund's expense ratio is below 0.65%; however, no reimbursement
will be made after February 28, 1995 (for the first agreement) or
February 28, 1997 (for the second agreement), or if it would
result in the expense ratio exceeding 0.65%. The Management
Agreement also provides that one or more additional expense
limitation periods (of the same or different levels and time
periods) may be implemented after the expiration of the current
one on February 28, 1995, and that with respect to any such
additional limitation period, the Fund may reimburse T. Rowe
Price, provided the reimbursement does not result in the Fund's
aggregate expense exceeding the additional expense limitation.
Pursuant to the past and present expense limitations, $123,000 of
management fees were not accrued by the New Jersey Fund for the
year ended February 28, 1995. Pursuant to Virginia Bond Fund's
present expense limitation, $69,000 of management fees were not
accrued by the Fund for the year ended February 28, 1995.
Additionally, $144,000 and $119,000 of unaccrued fees and
expenses for the New Jersey and Virginia Funds, respectively,
from the prior period are subject to reimbursement through
February 28, 1995. Pursuant to a past expense limitation,
$292,000 and $260,000 of unaccrued fees for the Virginia Bond and
New Jersey Bond Funds, respectively, have been permanently waived
at February 28, 1995.
Georgia Fund
In the interest of limiting the expenses of the Fund during
its initial period of operations, T. Rowe Price agreed to waive
its fees and bear any expenses through February 28, 1995, to the
extent such fees or expenses would cause the Fund's ratio of
expenses to average net assets to exceed 0.65%. Fees waived or
expenses paid or assumed under this agreement are subject to
reimbursement to T. Rowe Price by the Fund whenever the Fund's
expense ratio is below 0.65%; however, no reimbursement will be
made after February 28, 1997, or if it would result in the
expense ratio exceeding 0.65%. The Management Agreement also
provides that one or more additional expense limitation periods
(of the same or different levels and time periods) may be
implemented after the expiration of the current one on February
28, 1995, and that with respect to any such additional limitation
period, the Fund may reimburse T. Rowe Price, provided the
reimbursement does not result in the Fund's aggregate expense
exceeding the additional expense limitation. Pursuant to the
present expense limitations, $94,000 of management fees for the
Georgia Bond Fund were not accrued for the year ended February
28, 1995, and $72,000 of other Fund expenses for the Georgia Bond
Fund were borne by T. Rowe Price and are subject to future
reimbursement. Additionally, $119,000 remains unaccrued.
Florida Fund
In the interest of limiting the expenses of the Fund during
its initial period of operations, T. Rowe Price agreed to waive
its fees and bear any expenses through February 28, 1995, to the
extent such fees or expenses would cause the Fund's ratio of
expenses to average net assets to exceed 0.60%. Fees waived or
expenses paid or assumed under this agreement are subject to
reimbursement to T. Rowe Price by the Fund whenever the Fund's
expense ratio is below 0.60%; however, no reimbursement will be
made after February 28, 1997, or if it would result in the
expense ratio exceeding 0.60%. The Management Agreement also
provides that one or more additional expense limitation periods
(of the same or different levels and time periods) may be
implemented after the expiration of the current one on February
28, 1995, and that with respect to any such additional limitation
period, the Fund may reimburse T. Rowe Price, provided the
reimbursement does not result in the Fund's aggregate expense
exceeding the additional expense limitation. Pursuant to the
present expense limitation, $147,000 of management fees for the
Florida Insured Fund were not accrued for the year ended February
28, 1995, and $130,000 of other Fund expenses for the Florida
Insured Fund were borne by T. Rowe Price and are subject to
future reimbursement.
Virginia Short-Term Bond Fund
In the interest of limiting the expenses of the Fund during
its initial period of operations, T. Rowe Price has agreed to
waive its fees and bear any expenses through February 28, 1996,
to the extent such fees or expenses would cause the Fund's ratio
of expenses to average net assets to exceed 0.65%. However, any
fees waived or expenses paid or assumed by T. Rowe Price pursuant
to this expense ratio limitation is subject to reimbursement by
the Fund to T. Rowe Price whenever the Fund's expense ratio is
below 0.65%, provided, that no such reimbursement shall be made
to T. Rowe Price after February 28, 1998, and any such
reimbursement shall only be made to the extent that it does not
result in the Fund's aggregate expenses exceeding an expense
ratio limitation of 0.65%. Pursuant to the present expense
limitation, $3,000 of management fees for the Virginia Short-Term
Bond Fund were not accrued for the year ended February 28, 1995,
and $23,000 of other Fund expenses for the Virginia Short-Term
Bond Fund were borne by T. Rowe Price and are subject to future
reimbursement.
DISTRIBUTOR FOR THE TRUSTS
T. Rowe Price Investment Services, Inc. (Investment
Services), a Maryland corporation formed in 1980 as a
wholly-owned subsidiary of T. Rowe Price, serves as the
distributor of each Trust. Investment Services is registered as
a broker-dealer under the Securities Exchange Act of 1934 and is
a member of the National Association of Securities Dealers, Inc.
The offering of shares of beneficial interest pertaining to each
Fund is continuous.
Investment Services is located at the same address as the
Trusts and T. Rowe Price Associates -- 100 East Pratt Street,
Baltimore, Maryland 21202.
Investment Services serves as distributor to the Trusts
pursuant to an Underwriting Agreement ("Underwriting Agreement"),
which provides that each Fund will pay all fees and expenses in
connection with: registering and qualifying its shares under the
various state "blue sky" laws; preparing, setting in type,
printing, and mailing its prospectuses and reports to
shareholders; and issuing its shares, including expenses of
confirming purchase orders.
The Underwriting Agreement provides that Investment Services
will pay all fees and expenses in connection with: printing and
distributing prospectuses and reports for use in offering and
selling Fund shares; preparing, setting in type, printing, and
mailing all sales literature and advertising; Investment
Services' federal and state registrations as a broker-dealer; and
offering and selling Fund shares, except for those fees and
expenses specifically assumed by the Funds. Investment Services'
expenses are paid by T. Rowe Price.
Investment Services acts as the agent of the Trusts in
connection with the sale of the Funds' shares in all states in
which the shares are qualified and in which Investment Services
is qualified as a broker-dealer. Under the Underwriting
Agreement, Investment Services accepts orders for Fund shares at
net asset value. No sales charges are paid by investors or the
Funds.
CUSTODIAN
State Street Bank and Trust Company (the "Bank") is the
custodian for each Fund's securities and cash, but it does not
participate in the Funds' investment decisions. Each Trust, on
behalf of the Funds, has authorized the Bank to deposit certain
portfolio securities in central depository systems as allowed by
Federal law. In addition, the Funds are authorized to maintain
certain of its securities, in particular variable rate demand
notes, in uncertificated form in the proprietary deposit systems
of various dealers in municipal securities. State Street Bank's
main office is 225 Franklin Street, Boston, Massachusetts 02110.
CODE OF ETHICS
The Fund's investment adviser (T. Rowe Price) has a written
Code of Ethics which requires all employees to obtain prior
clearance before engaging in any personal securities
transactions. In addition, all employees must report their
personal securities transactions within ten days of execution.
Employees will not be permitted to effect transactions in a
security: If there are pending client orders in the security;
the security has been purchased or sold by a client within seven
calendar days; the security is being considered for purchase for
a client; a change has occurred in T. Rowe Price's rating of the
security within five days; or the security is subject to internal
trading restrictions. In addition, employees are prohibited from
engaging in short-term trading (e.g., purchases and sales
involving the same security within 60 days). Any material
violation of the Code of Ethics is reported to the Board of the
Fund. The Board also reviews the administration of the Code of
Ethics on an annual basis.
PORTFOLIO TRANSACTIONS
Investment or Brokerage Discretion
Decisions with respect to the purchase and sale of portfolio
securities on behalf of the Fund are made by T. Rowe Price. T.
Rowe Price is also responsible for implementing these decisions,
including the negotiation of commissions and the allocation of
portfolio brokerage and principal business. The Fund's purchases
and sales of portfolio securities are normally done on a
principal basis and do not involve the payment of a commission
although they may involve the designation of selling concessions.
That part of the discussion below relating solely to brokerage
commissions would not normally apply to the Funds. However, it
is included because T. Rowe Price does manage a significant
number of common stock portfolios which do engage in agency
transactions and pay commissions and because some research and
services resulting from the payment of such commissions may
benefit the Fund.
How Brokers and Dealers are Selected
Fixed Income Securities
Fixed income securities are generally purchased from the
issuer or a primary market-maker acting as principal for the
securities on a net basis, with no brokerage commission being
paid by the client although the price usually includes an
undisclosed compensation. Transactions placed through dealers
serving as primary market-makers reflect the spread between the
bid and asked prices. Securities may also be purchased from
underwriters at prices which include underwriting fees.
T. Rowe Price may effect principal transactions on behalf of
the Fund with a broker or dealer who furnishes brokerage and/or
research services, designate any such broker or dealer to receive
selling concessions, discounts or other allowances, or otherwise
deal with any such broker or dealer in connection with the
acquisition of securities in underwritings. T. Rowe Price may
receive brokerage and research services in connection with such
designations in fixed price 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.
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 to
generate all of the information presently provided by brokers and
dealers. T. Rowe Price pays cash for certain research services
received from external sources. T. Rowe Price also allocates
brokerage for research services which are available for cash.
While receipt of research services from brokerage firms has not
reduced T. Rowe Price's normal research activities, the expenses
of T. Rowe Price could be materially increased if it attempted to
generate such additional information through its own staff. To
the extent that research services of value are provided by
brokers or dealers, T. Rowe Price may be relieved of expenses
which it might otherwise bear.
T. Rowe Price has a policy of not allocating brokerage
business in return for products or services other than brokerage
or research services. In accordance with the provisions of
Section 28(e) of the Securities Exchange Act of 1934, T. Rowe
Price may from time to time receive services and products which
serve both research and non-research functions. In such event,
T. Rowe Price makes a good faith determination of the anticipated
research and non-research use of the product or service and
allocates brokerage only with respect to the research component.
Commissions to Brokers who Furnish Research Services
Certain brokers and dealers who provide quality brokerage
and execution services also furnish research services to T. Rowe
Price. With regard to the payment of brokerage commissions, T.
Rowe Price has adopted a brokerage allocation policy embodying
the concepts of Section 28(e) of the Securities Exchange Act of
1934, which permits an investment adviser to cause an account to
pay commission rates in excess of those another broker or dealer
would have charged for effecting the same transaction, if the
adviser determines in good faith that the commission paid is
reasonable in relation to the value of the brokerage and research
services provided. The determination may be viewed in terms of
either the particular transaction involved or the overall
responsibilities of the adviser with respect to the accounts over
which it exercises investment discretion. Accordingly, while T.
Rowe Price cannot readily determine the extent to which
commission rates or net prices charged by broker-dealers reflect
the value of their research services, T. Rowe Price would expect
to assess the reasonableness of commissions in light of the total
brokerage and research services provided by each particular
broker. T. Rowe Price may receive research, as defined in
Section 28(e), in connection with selling concessions and
designations in fixed price offerings in which the Funds
participate.
Internal Allocation Procedures
T. Rowe Price has a policy of not precommitting a specific
amount of business to any broker or dealer over any specific time
period. Historically, the majority of brokerage placement has
been determined by the needs of a specific transaction such as
market-making, availability of a buyer or seller of a particular
security, or specialized execution skills. However, T. Rowe
Price does have an internal brokerage allocation procedure for
that portion of its discretionary client brokerage business where
special needs do not exist, or where the business may be
allocated among several brokers or dealers which are able to meet
the needs of the transaction.
Each year, T. Rowe Price assesses the contribution of the
brokerage and research services provided by brokers or dealers,
and attempts to allocate a portion of its brokerage business in
response to these assessments. Research analysts, counselors,
various investment committees, and the Trading Department each
seek to evaluate the brokerage and research services they receive
from brokers or dealers and make judgments as to the level of
business which would recognize such services. In addition,
brokers or dealers sometimes suggest a level of business they
would like to receive in return for the various brokerage and
research services they provide. Actual brokerage received by any
firm may be less than the suggested allocations but can, and
often does, exceed the suggestions, because the total business is
allocated on the basis of all the considerations described above.
In no case is a broker or dealer excluded from receiving business
from T. Rowe Price because it has not been identified as
providing research services.
Miscellaneous
T. Rowe Price's brokerage allocation policy is consistently
applied to all its fully discretionary accounts, which represent
a substantial majority of all assets under management. Research
services furnished by brokers or dealers through which T. Rowe
Price effects securities transactions may be used in servicing
all accounts (including non-Fund accounts) managed by T. Rowe
Price. Conversely, research services received from brokers or
dealers which execute transactions for the Fund are not
necessarily used by T. Rowe Price exclusively in connection with
the management of the Fund.
From time to time, orders for clients may be placed through
a computerized transaction network. The Fund does not allocate
business to any broker-dealer on the basis of its sales of the
Fund's shares. However, this does not mean that broker-dealers
who purchase Fund shares for their clients will not receive
business from the Fund.
Some of T. Rowe Price's other clients have investment
objectives and programs similar to those of the Fund. T. Rowe
Price may occasionally make recommendations to other clients
which result in their purchasing or selling securities
simultaneously with the Fund. As a result, the demand for
securities being purchased or the supply of securities being sold
may increase, and this could have an adverse effect on the price
of those securities. It is T. Rowe Price's policy not to favor
one client over another in making recommendations or in placing
orders. T. Rowe Price frequently follows the practice of
grouping orders of various clients for execution which generally
results in lower commission rates being attained. In certain
cases, where the aggregate order is executed in a series of
transactions at various prices on a given day, each participating
client's proportionate share of such order reflects the average
price paid or received with respect to the total order. T. Rowe
Price has established a general investment policy that it will
ordinarily not make additional purchases of a common stock of a
company for its clients (including the T. Rowe Price Funds) if,
as a result of such purchases, 10% or more of the outstanding
common stock of such company would be held by its clients in the
aggregate.
To the extent possible, T. Rowe Price intends to recapture
solicitation fees paid in connection with tender offers through
T. Rowe Price Investment Services, Inc., the Fund's distributor.
At the present time, T. Rowe Price does not recapture commissions
or underwriting discounts or selling group concessions in
connection with taxable securities acquired in underwritten
offerings. T. Rowe Price does, however, attempt to negotiate
elimination of all or a portion of the selling-group concession
or underwriting discount when purchasing tax-exempt municipal
securities on behalf of its clients in underwritten offerings.
Other
The Funds engaged in portfolio transactions involving
broker-dealers in the following amounts for the fiscal years
ended February 28, 1995, February 28, 1994, and February 28,
1993:
1995 1994 1993
New York Tax-Free
Money Fund $ 318,998,000 $ 314,975,000 $347,427,000
New York Tax-Free
Bond Fund 523,495,000 443,455,000 190,586,907
California Tax-Free
Money Fund 531,661,000 142,908,000 500,683,740
California Tax-Free
Bond Fund 360,305,000 544,865,000 348,247,460
Maryland Tax-Free
Bond Fund 1,004,363,000 815,516,000 743,400,957
Maryland Short-Term
Tax-Free Bond 318,873,000 232,994,000 34,180,169+
Virginia Tax-Free
Bond Fund 513,098,000 477,407,000 325,426,540
New Jersey Tax-Free
Bond Fund 295,898,000 201,915,000 164,425,076
Georgia Tax-Free
Bond Fund 117,380,000 112,606,000* **
Florida Insured
Intermediate
Tax-Free Fund 116,527,000 142,908,000* **
Virginia Short-Term
Tax-Free Bond Fund 10,600,000 * *
The following amounts consisted of principal transactions as
to which the Funds have no knowledge of the profits or losses
realized by the respective broker-dealers for the fiscal years
ended February 28, 1995, February 28, 1994, and February 28,
1993:
1995 1994 1993
New York Tax-Free
Money Fund $318,998,000 $314,975,000 $343,371,806
New York Tax-Free
Bond Fund 510,410,000 413,748,000 176,478,095
California Tax-Free
Money Fund 531,661,000 340,724,000 500,683,740
California Tax-Free
Bond Fund 351,902,000 492,219,000 335,622,104
Maryland Tax-Free
Bond Fund 969,185,000 667,535,000 691,453,707
Maryland Short-Term
Tax-Free Bond Fund 313,554,000 221,759,000 33,681,314+
Virginia Tax-Free
Bond Fund 484,867,000 430,706,000 318,014,247
New Jersey Tax-Free
Bond Fund 288,542,000 192,008,000 162,241,723
Georgia Tax-Free
Bond Fund 109,324,000 108,245,000 *
Florida Insured
Intermediate
Tax-Free Fund 114,179,000 136,112,000 *
Virginia Short-Term
Tax-Free Bond Fund 10,550,000 * *
The following amounts involved trades with brokers
acting as agents or underwriters for the fiscal years ended
February 28, 1995, February 28, 1994, and February 28, 1993:
1995 1994 1993
New York Tax-Free
Money Fund $ 0 $ 0 $4,055,019
New York Tax-Free
Bond Fund 13,085,000 29,707,000 14,108,812
California Tax-Free
Money Fund 0 0 0
California Tax-Free
Bond Fund 8,403,000 52,646,000 12,625,356
Maryland Tax-Free
Bond Fund 35,178,000 147,981,000 51,947,250
Maryland Short-Term
Tax-Free Bond Fund 5,319,000 11,235,000 498,855+
Virginia Tax-Free
Bond Fund 28,231,000 46,702,000 7,412,293
New Jersey Tax-Free
Bond Fund 7,356,000 9,907,000 2,183,353
Georgia Tax-Free
Bond Fund 8,056,000 4,360,000* **
Florida Insured
Intermediate
Tax-Free Fund 2,348,000 6,796,000* **
Virginia Short-Term
Tax-Free Bond Fund 50,000 ** **
The following amounts involved trades with brokers acting as
agents or underwriters, in which such brokers received total
commissions, including discounts received in connection with
underwritings for the fiscal years ended February 28, 1995,
February 28, 1994, and February 28, 1993:
1995 1994 1993
New York Tax-Free Money Fund $ 0 $ 0 $ 8,938
New York Tax-Free Bond Fund 51,875 150,000 99,728
California Tax-Free Money Fund 0 0 0
California Tax-Free Bond Fund 43,750 323,000 88,219
Maryland Tax-Free Bond Fund 204,475 990,000 271,901
Maryland Short-Term Tax-Free 17,620 55,000 2,500 +
Bond Fund
Virginia Tax-Free Bond Fund 38,201 332,000 50,088
New Jersey Tax-Free Bond Fund 43,375 70,000 17,700
Georgia Tax-Free Bond Fund 52,475 25,000 * **
Florida Insured Intermediate
Tax-Free Fund 11,625 64,000 **
Virginia Short-Term Tax-Free
Bond Fund 188 ** **
* For the 11-month fiscal period ended February 28, 1994.
** Prior to commencement of operations.
+ For the one-month fiscal period ended February 28, 1993.
++ For the 10-month fiscal period ended February 29, 1992.
Of all such portfolio transactions, none were placed with
firms which provided research, statistical, or other services to
T. Rowe Price in connection with the management of the Funds, or
in some cases, to the Funds.
The portfolio turnover rates of the Funds for the fiscal
years ended February 28, 1995, February 28, 1994, and February
28, 1993, have been as follows:
1995 1994 1993
New York Tax-Free Money Fund N/A N/A N/A
New York Tax-Free Bond Fund 134.3% 84.9% 41.5%
California Tax-Free Money Fund N/A N/A N/A
California Tax-Free Bond Fund 78.0% 73.4% 57.5%
Maryland Tax-Free Bond Fund 28.9% 24.3% 22.3%
Maryland Short-Term
Tax-Free Bond Fund 105.3% 20.5% 96.9%+
Virginia Tax-Free Bond Fund 89.1% 61.8% 68.5%
New Jersey Tax-Free Bond Fund 139.1% 68.8% 103.3%
Georgia Tax-Free Bond Fund 170.2% 154.8%* **
Florida Insured Intermediate
Tax-Free Fund 140.5% 70.6%* **
Virginia Short-Term Tax-Free
Bond Fund 14.8% ** **
* Figure is annualized and is for the 11-month fiscal period
ended February 28, 1994.
** Prior to commencement of operations.
+ Figure is annualized and is for the one-month fiscal period
ended February 28, 1993.
++ Figure is annualized and is for the 10-month fiscal period
ended February 29, 1992.
PRICING OF SECURITIES BEING OFFERED
Fixed income securities are generally traded in the over-
the-counter market. Investments in securities with remaining
maturities of one year or more are stated at fair value using a
bid-side valuation as furnished by dealers who make markets in
such securities or by an independent pricing service, which
considers yield or price of bonds of comparable quality, coupon,
maturity, and type, as well as prices quoted by dealers who make
markets in such securities.
Except with respect to certain securities held by the Money
Funds, securities with remaining maturities less than one
year are stated at fair value which is determined by using a
matrix system that establishes a value for each security based on
bid-side money market yields. Securities originally purchased by
the Money Funds with remaining maturities of 60 days or less are
valued at amortized cost. In addition, securities purchased by
the Money Funds with maturities in excess of 60 days, but which
currently have maturities of 60 days or less, are valued at their
amortized cost for the 60 days prior to maturity--such
amortization being based on the fair value of the securities on
the 61st day prior to maturity.
For the Bond Funds, there are a number of pricing services
available, and the Boards of Trustees, on the basis of ongoing
evaluation of these services, may use or may discontinue the use
of any pricing service in whole or in part.
Securities or other assets for which the above valuation
procedures are inappropriate or are deemed not to reflect fair
value are stated at fair value, as determined in good faith by or
under the supervision of officers of the Funds, as authorized by
its Board of Trustees.
Maintenance of New York and California Money Funds' Net Asset
Value Per Share at $1.00
It is the policy of the Funds to attempt to maintain a net
asset value of $1.00 per share by rounding to the nearest one
cent. This method of valuation is commonly referred to as "penny
rounding" and is permitted by Rule 2a-7 under the Investment
Company Act of 1940. Under Rule 2a-7:
(a) The Board of Trustees of each Fund must undertake to
assure, to the extent reasonably practical taking
into account current market conditions affecting a
Fund's investment objectives, that a Fund's net
asset value will not deviate from $1.00 per share;
(b) Each Fund must (i) maintain a dollar-weighted
average portfolio maturity appropriate to its
objective of maintaining a stable price per share,
(ii) not purchase any instrument with a remaining
maturity greater than 397 days (in the case of U.S.
government securities greater than 762 days), and
(iii) maintain a dollar-weighted average portfolio
maturity of 90 days or less;
(c) Each Fund must limit its purchase of portfolio
instruments, including repurchase agreements, to
those U.S. dollar-denominated instruments which a
Fund's Board of Trustees determines present minimal
credit risks, and which are eligible securities as
defined by Rule 2a-7. Eligible securities are
generally securities which have been rated (or whose
issuer has been rated or whose issuer has comparable
securities rated) in or of the two highest rating
categories by nationally recognized statistical
rating organizations or, in the case of any
instrument that is not so rated, is of comparable
quality as determined by procedures adopted by the
Funds' Boards of Trustees; and
(d) Each Board of Trustees must determine that (i) it is
in the best interest of a Fund and its shareholders
to maintain a stable price per share under the penny
rounding method; and (ii) a Fund will continue to
use the penny rounding method only so long as each
Board of Trustees believes that it fairly reflects
the market based net asset value per share.
Although the Funds believe that it will be able to maintain
its net asset value at $1.00 per share under most conditions,
there can be no absolute assurance that it will be able to do so
on a continuous basis. If a Fund's net asset value per share
declined, or was expected to decline, below $1.00 (rounded to the
nearest one cent), the Board of Trustees of a Fund might
temporarily reduce or suspend dividend payments in an effort to
maintain the net asset value at $1.00 per share. As a result of
such reduction or suspension of dividends, an investor would
receive less income during a given period than if such a
reduction or suspension had not taken place. Such action could
result in an investor receiving no dividend for the period during
which he holds his shares and in his receiving, upon redemption,
a price per share lower than that which he paid. On the other
hand, if a Fund's net asset value per share were to increase, or
were anticipated to increase above $1.00 (rounded to the nearest
one cent), the Board of Trustees of a Fund might supplement
dividends in an effort to maintain the net asset value at $1.00
per share.
NET ASSET VALUE PER SHARE
The purchase and redemption price of each Fund's shares is
equal to that Fund's net asset value per share (or share price).
Each Fund determines its net asset value per share by subtracting
its liabilities (including accrued expenses and dividends
payable) from its total assets (the market value of the
securities a Fund holds plus cash and other assets, including
income accrued but not yet received) and dividing the result by
the total number of shares outstanding. The net asset value per
share of each Fund is calculated as of the close of trading on
the New York Stock Exchange ("NYSE") every day the NYSE is open
for trading. The NYSE is closed on the following days: New
Year's Day, Washington's Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Determination of net asset value (and the offering, sale,
redemption and repurchase of shares) for a Fund may be suspended
at times (a) during which the NYSE is closed, other than
customary weekend and holiday closings, (b) during which trading
on the NYSE is restricted (c) during which an emergency exists as
a result of which disposal by a Fund of securities owned by it is
not reasonably practicable or it is not reasonably practicable
for a Fund fairly to determine the value of its net assets, or
(d) during which a governmental body having jurisdiction over the
Funds may by order permit such a suspension for the protection of
the Funds' shareholders; provided that applicable rules and
regulations of the Securities and Exchange Commission (or any
succeeding governmental authority) shall govern as to whether the
conditions prescribed in (b), (c), or (d) exist.
DIVIDENDS
Unless you elect otherwise, each Fund's annual capital gain
distribution, if any, will be reinvested on the reinvestment date
using the NAV per share of that date. The reinvestment date
normally precedes the payment date by about 10 days although the
exact timing is subject to change.
TAX STATUS
Each Fund intends to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986,
as amended ("Code").
Dividends and distributions paid by the Funds are not
eligible for the dividends-received deduction for corporate
shareholders. For tax purposes, it does not make any difference
whether dividends and capital gain distributions are paid in cash
or in additional shares. The Funds must declare by its year end
dividends equal to at least 90% of net tax-exempt income (as of
its tax year-end) to permit the pass-through of tax-exempt income
to shareholders, and declare by December 31, 98% of capital gains
(as of October 31) in order to avoid a federal excise tax and
distribute within 12 months, 100% of capital gains (as of its tax
year-end) to avoid federal income tax.
At the time of your purchase, each Fund's net asset value
may reflect undistributed capital gains or net unrealized
appreciation of securities held by the Funds. A subsequent
distribution to you of such amounts, although constituting a
return of your investment, would be taxable as a capital gain
distribution. For federal income tax purposes, the Funds are
permitted to carry forward its net realized capital losses, if
any, for eight years and realize net capital gains up to the
amount of such losses without being required to pay taxes on, or
distribute such gains. On April 30, 1995, the books of each Fund
indicated that the Fund's aggregate net assets included:
Realized Capital Unrealized
Gains/(Losses) Appreciation
(Depreciation)
________________ ____________
New York Tax-Money Fund $ 0 $ (3,392)
New York Tax-Free Bond Fund 109,899 (644,287)
California Tax-Free Money Fund 56 4,649
California Tax-Free Bond Fund 288,776 (813,889)
Maryland Tax-Free Bond Fund 429,154 (2,813,060)
Maryland Short-Term Tax-Free
Bond Fund 800 14,039
Virginia Tax-Free Bond Fund 366,024 (892,086)
New Jersey Tax-Free Bond Fund 136,623 (414,779)
Georgia Tax-Free Bond Fund 10,432 (134,108)
Florida Insured Intermediate
Tax-Free Fund 159,969 (200,362)
Virginia Short-Term Tax-Free
Bond Fund 2,243 (2,223)
If, in any taxable year, a Fund should not qualify as a
regulated investment company under the Code: (i) the Fund would
be taxed at normal corporate rates on the entire amount of its
taxable income, if any, without deduction for dividends or other
distributions to shareholders and (ii) the Fund's distributions
to the extent made out of the Fund's current or accumulated
earnings and profits would be taxable to shareholders as ordinary
dividends (regardless of whether they would otherwise have been
considered capital gain dividends or tax-exempt dividends).
Each year, the Funds will mail you information on the tax
status of dividends and distributions. The Funds anticipate that
substantially all of its dividends to be paid will be exempt from
federal, state, and/or city or local income taxes. However, due
to seasonal variations in the supply of short-term investments,
there may be periods when it would not be unusual for a certain
percentage of dividends of a Fund to be derived from out of state
securities. Any such dividends would be subject to state and
local income taxes (if any). If any portion of a Fund's
dividends is not exempt from federal income taxes, you will
receive a Form 1099 stating the taxable portion. The Funds will
also advise you of the percentage of your dividends, if any,
which should be included in the computation of alternative
minimum tax.
Because the interest on municipal securities is tax exempt,
any interest on money you borrow that is directly or
indirectly used to purchase shares of a Fund is not deductible.
(See Section 265(a)(2) of the Internal Revenue Code.) Further,
entities or persons who are "substantial users" (or persons
related to "substantial users") of facilities financed by
industrial development bonds should consult their tax advisers
before purchasing shares of a Fund. The income from such bonds
may not be tax exempt for such substantial users.
Georgia Tax-Free Bond Fund
Investments in the Fund are subject to the Georgia
intangible personal property tax. Because the Fund is a series
of the T. Rowe Price State Tax-Free Income Trust, a Massachusetts
business trust, investments in the Fund are taxed at a lower rate
than would be applied if the Fund were organized as a
corporation.
Florida Insured Intermediate Tax-Free Fund
Although Florida does not have a state income tax, it does
impose an intangible personal property tax (intangibles tax) on
assets, including shares of mutual funds. This tax is based on
the net asset value of shares owned on January 1.
Under Florida law, shares of the Fund will be exempt from
the intangibles tax to the extent that, on January 1, the Fund's
assets are solely invested in certain exempt Florida securities,
U.S. government securities, certain short-term cash investments,
or other exempt securities. If, on January 1, the Fund's assets
are invested in these tax-exempt securities and other non-tax-
exempt securities, only that portion of a share's net asset value
represented by U.S. government securities will be exempt from the
intangibles tax. Because the Fund will make every effort to have
its portfolio invested exclusively in exempt Florida municipal
obligations (and other qualifying investments) on January 1,
shares of the Fund should be exempt from the intangibles tax.
However, under certain circumstances, the Fund may invest in
securities other than Florida municipal obligations and there can
be no guarantee that such non-exempt investments would not be in
the Fund's portfolio on January 1. In such cases, all or a
portion of the value of the Fund's shares may be subject to the
intangibles tax, and a portion of the Fund's income may be
subject to federal income taxes.
YIELD INFORMATION
Bond Funds
From time to time, the Funds may advertise a yield figure
calculated in the following manner:
An income factor is calculated for each security in the
portfolio based upon the security's market value at the beginning
of the period and yield as determined in conformity with
regulations of the Securities and Exchange Commission. The
income factors are then totalled for all securities in the
portfolio. Next, expenses of each Fund for the period net of
expected reimbursements are deducted from the income to arrive at
net income, which is then converted to a per-share amount by
dividing net income by the average number of shares outstanding
during the period. The net income per share is divided by the
net asset value on the last day of the period to produce a
monthly yield which is then annualized. A taxable equivalent
yield is calculated by dividing this yield by one minus the sum
of the effective federal, state, and/or city or local income tax
rates. Quoted yield factors are for comparison purposes only,
and are not intended to indicate future performance or forecast
the dividend per share of each Fund.
The yield of each Fund calculated under the above-described
method for the month ended February 28, 1995, was as follows:
New York Tax-Free Bond Fund 5.64%
California Tax-Free Bond Fund 5.59%
Maryland Tax-Free Bond Fund 5.54%
Maryland Short-Term Tax-Free Bond Fund 4.18%
Virginia Tax-Free Bond Fund 5.56%
New Jersey Tax-Free Bond Fund 5.62%
Georgia Tax-Free Bond Fund 5.51%
Florida Insured Intermediate 4.77%
Tax-Free Fund
The tax equivalent yields (assuming a federal tax bracket of
31.0%) for each Fund for the same period were as follows:
New York Tax-Free Bond Fund(a) 9.28%
California Tax-Free Bond Fund(b) 9.00%
Maryland Tax-Free Bond Fund(c) 8.72%
Maryland Short-Term Tax-Free 6.58%
Bond Fund(c)
Virginia Tax-Free Bond Fund(d) 8.55%
New Jersey Tax-Free Bond Fund(e) 8.73%
Georgia Tax-Free Bond Fund(f) 8.49%
Florida Insured Intermediate 7.11%
Tax-Free Fund(g)
(a) Assumes a state tax bracket of 7.50% and a local tax bracket
of 4.4%
(b) Assumes a state tax bracket of 10.0%.
(c) Assumes a state tax bracket of 5.0% and a local tax bracket
of 3.0%.
(d) Assumes a state tax bracket of 5.75%.
(e) Assumes a state tax bracket of 6.65%.
(f) Assumes a state tax bracket of 6.0%.
(g) Assumes an intangible tax rate of 0.2%.
The tax equivalent yields (assuming a federal tax bracket of
28.0%) for each Fund for the same period were as follows:
New York Tax-Free Bond Fund(a) 8.90%
California Tax-Free Bond Fund(b) 8.56%
Maryland Tax-Free Bond Fund(c) 8.37%
Maryland Short-Term Tax-Free Bond Fund(c) 6.31%
Virginia Tax-Free Bond Fund(d) 8.19%
New Jersey Tax-Free Bond Fund(e) 8.31%
Georgia Tax-Free Bond Fund(f) 8.14%
Florida Insured Intermediate 6.83%
Tax-Free Fund(g)
(a) Assumes a state tax bracket of 7.50% and a local tax bracket
of 4.4%
(b) Assumes a state tax bracket of 9.3%.
(c) Assumes a state tax bracket of 5.0% and a local tax bracket
of 3.0%.
(d) Assumes a state tax bracket of 5.75%.
(e) Assumes a state tax bracket of 6.18%.
(f) Assumes a state tax bracket of 6.0%.
(g) Assumes an intangible tax rate of 0.2%.
New York Money and California Money Funds
Each Fund's current and historical yield for a period is
calculated by dividing the net change in value of an account
(including all dividends accrued and dividends reinvested in
additional shares) by the account value at the beginning of the
period to obtain the base period return. This base period return
is divided by the number of days in the period then multiplied by
365 to arrive at the annualized yield for that period. Each
Fund's annualized compound yield for such period is compounded by
dividing the base period return by the number of days in the
period, and compounding that figure over 365 days.
The Money Funds' current yield and compound yield for the
seven days ended February 28, 1995 were:
Current Compound
Yield Yield
_______ ________
New York Tax-Free Money Fund 3.39% 3.45%
California Tax-Free Money Fund 3.41% 3.47%
From time to time, a Fund may also illustrate the effect of
tax equivalent yields using information such as that set forth
below:
TAX-EXEMPT VS. TAXABLE YIELDS
New York Funds
_________________________________________________________________
Your Taxable Income (1995)(a) Tax Rates
Joint Return Single Return Comb-
Federal(d) Local(b) ined
State Margin-
al(c)
_________________________________________________________________
$ 27,001- $ 39,000 $15,001- $23,350 15.0 7.50 4.40 25.1
39,001- 94,250 23,351- 56,550 28.0 7.50 4.40 36.6
94,251- 108,000 56,551- 60,000 31.0 7.50 4.40 39.2
108,001- 143,600 60,001- 117,950 31.0 7.50 4.46 39.3
143,601- 256,500 117,951- 256,500 36.0 7.50 4.46 43.7
256,501 and above 256,501 and above 39.6 7.50 4.46 46.8
_________________________________________________________________
A Tax-Exempt Yield Of:
3% 4% 5% 6% 7% 8% 9% 10%
Is Equivalent to a Taxable Yield of:
_________________________________________________________________
4.01 5.34 6.68 8.01 9.35 10.68 12.02 13.35
4.73 6.31 7.89 9.46 11.04 12.62 14.20 15.77
4.93 6.58 8.22 9.87 11.51 13.16 14.80 16.45
4.94 6.59 8.24 9.88 11.53 13.18 14.83 16.47
5.33 7.10 8.88 10.66 12.43 14.21 15.99 17.76
5.64 7.52 9.40 11.28 13.16 15.04 16.92 18.80
(a) Net amount subject to federal income tax after deductions
and exemptions.
(b) Tax rates are for New York City Residents.
(c) Combined marginal rate assumes the deduction of state and
local income taxes on the federal return.
(d) Marginal rates may vary depending on family size and nature
and amount of itemized deductions.
California Funds
_________________________________________________________________
Your Taxable Income (1995)(a) Marginal Tax Rates
Joint Return Single Return Comb-
Federal(c) ined
Margin-
State al(b)
_________________________________________________________________
$35,325- $39,000 $17,663- $23,350 15.0 6.0 20.1
39,001- 49,038 23,351- 24,519 28.0 6.0 32.3
49,039- 61,974 24,520- 30,987 28.0 8.0 33.8
61,975- 94,250 30,988- 56,550 28.0 9.3 34.7
94,251- 143,600 56,551- 107,464 31.0 9.3 37.4
107,465- 117,950 31.0 10.0 37.9
143,601- 214,928 36.0 9.3 42.0
214,929- 256,500 117,951- 214,929 36.0 10.0 42.4
214,930- 256,500 36.0 11.0 43.0
256,501- 429,858 39.6 10.0 45.6
429,859 and above 256,501 and above 39.6 11.0 46.2
_________________________________________________________________
A Tax-Exempt Yield Of:
3% 4% 5% 6% 7% 8% 9% 10%
Is Equivalent to a Taxable Yield of:
_________________________________________________________________
3.75 5.01 6.26 7.51 8.76 10.01 11.26 12.52
4.43 5.91 7.39 8.86 10.34 11.82 13.29 14.77
4.53 6.04 7.55 9.0 10.57 12.08 13.60 15.11
4.59 6.13 7.66 9.19 10.72 12.25 13.78 15.31
4.79 6.39 7.99 9.58 11.18 12.78 14.38 15.97
4.83 6.44 8.05 9.66 11.27 12.88 14.49 16.10
5.17 6.90 8.62 10.34 12.07 13.79 15.52 17.24
5.21 6.94 8.68 10.42 12.15 13.89 15.63 17.36
5.26 7.02 8.77 10.53 12.28 14.04 15.79 17.54
5.51 7.35 9.19 11.03 12.87 14.71 16.54 18.38
5.58 7.43 9.29 11.15 13.01 14.87 16.73 18.59
(a) Net amount subject to federal income tax after deductions
and exemptions.
(b) Combined marginal rate assumes the deduction of state income
taxes on the federal return.
(c) Marginal rates may vary depending on family size and nature
and amount of itemized deductions.
PAGE
Maryland Funds
_________________________________________________________________
Your Taxable Income (1995)(a) Marginal Tax Rates
Joint Return Single Return Combined
Federal(d) Local(b) Mar-
State ginal(c)
_________________________________________________________________
$39,001- $94,250 $23,351- $56,550 28.0 5.0 3.0 33.8
94,251- 143,600 56,551- 100,000 31.0 5.0 3.0 36.5
100,001- 117,950 31.0 5.0 3.0 36.5
143,601- 150,000 36.0 5.0 3.0 41.1
150,001- 256,500 117,951- 256,500 36.0 5.0 3.0 41.1
256,501 and above 256,501 and above 39.6 5.0 3.0 44.4
_________________________________________________________________
A Tax-Exempt Yield Of:
3% 4% 5% 6% 7% 8% 9% 10%
Is Equivalent to a Taxable Yield of:
_________________________________________________________________
4.53 6.04 7.55 9.06 10.57 12.08 13.60 15.11
4.72 6.30 7.87 9.45 11.02 12.60 14.17 15.75
4.72 6.30 7.87 9.45 11.02 12.60 14.17 15.75
5.09 6.79 8.49 10.19 11.88 13.58 15.28 16.98
5.09 6.79 8.49 10.19 11.88 13.58 15.28 16.98
5.40 7.19 8.99 10.79 12.59 14.39 16.19 17.99
_________________________________________________________________
(a) Net amount subject to federal income tax after deductions
and exemptions.
(b) Assumes a local tax rate equal to 60% of the state rate for
residents in the 5% state bracket.
(c) Combined marginal rate assumes the deduction of state and
local income taxes on the federal return.
(d) Marginal rates may vary depending on family size and nature
and amount of itemized deductions.
PAGE
New Jersey Fund
_________________________________________________________________
Your Taxable Income (1995)(a) Tax Rates
Joint Return Single Return Combined
Federal(c)State Mar-
ginal(b)
_________________________________________________________________
$ 0- $20,000 $ 0- $20,000 15.00 1.90 16.60
20,001- 39,000 20,001- 23,350 15.00 2.38 17.00
39,001- 50,000 23,351- 35,000 28.00 2.38 29.70
50,001- 70,000 28.00 3.33 30.40
70,001- 80,000 35,001- 40,000 28.00 4.75 31.40
80,001- 94,250 40,001- 56,550 28.00 6.18 32.40
94,251- 143,600 56,551- 75,000 31.00 6.18 35.30
75,001- 117,950 31.00 6.65 35.60
143,601- 150,000 36.00 6.18 40.00
150,001- 256,500 117,951- 256,500 36.00 6.65 40.30
256,501 and above 256,501 and above 39.60 6.65 43.60
_________________________________________________________________
A Tax-Exempt Yield Of:
3% 4% 5% 6% 7% 8% 9% 10%
Is Equivalent to a Taxable Yield of:
_________________________________________________________________
3.60 4.80 6.00 7.19 8.39 9.59 10.79 11.99
3.61 4.82 6.02 7.23 8.43 9.64 10.84 12.05
4.27 5.69 7.11 8.53 9.96 11.38 12.80 14.22
4.31 5.75 7.18 8.62 10.06 11.49 12.93 14.37
4.37 5.83 7.29 8.75 10.20 11.66 13.12 14.58
4.44 5.92 7.40 8.88 10.36 11.83 13.31 14.79
4.64 6.18 7.73 9.27 10.82 12.36 13.91 15.46
4.66 6.21 7.76 9.32 10.87 12.42 13.98 15.53
5.00 6.67 8.33 10.00 11.67 13.33 15.00 16.67
5.03 6.70 8.38 10.05 11.73 13.40 15.08 16.75
5.32 7.09 8.87 10.64 12.41 14.18 15.96 17.73
_________________________________________________________________
(a) Net amount subject to federal income tax after deductions
and exemptions.
(b) Combined marginal rate assumes the deduction of state income
taxes on the federal return.
(c) Marginal rates may vary depending on family size and nature
and amount of itemized deductions.
PAGE
Virginia Funds
_________________________________________________________________
Your Taxable Income (1995)(a) Marginal Tax Rates
Joint Return Single Return Combined
Federal(c) State Mar-
ginal(b)
_________________________________________________________________
$39,001- $94,250 $23,351- $56,550 28.0 5.75 32.1
94,251- 143,600 56,551- 117,950 31.0 5.75 35.0
143,601- 256,500 117,951- 256,500 36.0 5.75 39.7
256,501 and above 256,501 and above 39.6 5.75 43.1
_________________________________________________________________
A Tax-Exempt Yield Of:
3% 4% 5% 6% 7% 8% 9% 10%
Is Equivalent to a Taxable Yield of:
_________________________________________________________________
4.42 5.89 7.36 8.84 10.31 11.78 13.25 14.73
4.62 6.15 7.69 9.23 10.77 12.31 13.85 15.38
4.98 6.63 8.29 9.95 11.61 13.27 14.93 16.58
5.27 7.03 8.79 10.54 12.30 14.06 15.82 17.57
_________________________________________________________________
(a) Net amount subject to federal income tax after deductions
and exemptions.
(b) Combined marginal rate assumes the deduction of state income
taxes on the federal return.
(c) Marginal rates may vary depending on family size and nature
and amount of itemized deductions.
PAGE
Georgia Tax-Free Bond Fund
_________________________________________________________________
Your Taxable Income (1995)(a) Tax Rates
Joint Return Single Return Combined
Federal(c) State Mar-
ginal(b)
_________________________________________________________________
$39,001- $94,250 $23,351- $56,550 28.0 6.00 32.3
94,251- 143,600 56,551- 117,950 31.0 6.00 35.1
143,601- 256,500 117,951- 256,500 36.0 6.00 39.8
256,501 and above 256,501 and above 39.6 6.00 43.2
_________________________________________________________________
A Tax-Exempt Yield Of:
3% 4% 5% 6% 7% 8% 9% 10%
Is Equivalent to a Taxable Yield of:
_________________________________________________________________
4.43 5.91 7.39 8.86 10.34 11.82 13.29 14.77
4.62 6.16 7.70 9.24 10.79 12.33 13.87 15.41
4.98 6.64 8.31 9.97 11.63 13.29 14.95 16.61
5.28 7.04 8.80 10.56 12.32 14.08 15.85 17.61
_________________________________________________________________
(a) Net amount subject to federal income tax after deductions
and exemptions.
(b) Combined marginal rate assumes the deduction of state income
taxes on the federal return.
(c) Marginal rates may vary depending on family size and nature
and amount of itemized deductions.
PAGE
Florida Fund
EFFECTIVE YIELD FACTORING IN INTANGIBLES TAX
_________________________________________________________________
Your Taxable Income (1995)(a)
Joint Return Single Return Federal Intangible
Tax Rate(c) Tax Rate
_________________________________________________________________
$ 39,001- $ 94,250 $ 23,351- $ 56,550
And Your Intangible Assets on 1/1/95 Total:
40,000 or less 20,000 or less 28 N/A
40,001- 200,000 20,001- 100,000 28 0.1
200,001 and above 100,001 and above 28 0.2
_________________________________________________________________
$ 94,251- $143,600 $ 56,551- $117,950
And Your Intangible Assets on 1/1/95 Total:
40,000 or less 20,000 or less 31 N/A
40,001- 200,000 20,001- 100,000 31 0.1
200,001 and above 100,001 and above 31 0.2
_________________________________________________________________
$143,601- $256,500 $117,951- $256,500
And Your Intangible Assets on 1/1/95 Total:
40,000 or less 20,000 or less 36 N/A
40,001- 200,000 20,001- 100,000 36 0.1
200,001 and above 100,001 and above 36 0.2
_________________________________________________________________
$256,501 and above+ $256,501 and above+
And Your Intangible Assets on 1/1/95 Total:
40,000 or less 20,000 or less 39.6 N/A
40,001- 200,000 20,001- 100,000 39.6 0.1
200,001 and above 100,001 and above 39.6 0.2
_________________________________________________________________
A Tax-Exempt Yield Of (b):
3% 4% 5% 6% 7% 8% 9% 10% 11%
Is Equivalent to a Taxable Yield of:
_________________________________________________________________
4.17 5.56 6.94 8.33 9.72 11.11 12.50 13.89 15.28
4.27 5.66 7.04 8.43 9.82 11.21 12.60 13.99 15.38
4.37 5.76 7.14 8.53 9.92 11.31 12.70 14.09 15.48
_________________________________________________________________
4.35 5.80 7.25 8.70 10.14 11.59 13.04 14.49 15.94
4.45 5.90 7.35 8.80 10.24 11.69 13.14 14.59 16.04
4.55 6.00 7.45 8.90 10.34 11.79 13.24 14.69 16.14
_________________________________________________________________
4.69 6.25 7.81 9.38 10.94 12.50 14.06 15.63 17.19
4.79 6.35 7.91 9.48 11.04 12.60 14.16 15.73 17.29
4.89 6.45 8.01 9.58 11.14 12.70 14.26 15.83 17.39
________________________________________________________________
4.97 6.62 8.28 9.93 11.59 13.25 14.90 16.56 18.21
5.07 6.72 8.38 10.03 11.69 13.35 15.00 16.66 18.31
5.17 6.82 8.48 10.13 11.79 13.45 15.10 16.76 18.41
_________________________________________________________________
(a) Net amount subject to federal income tax after deductions
and exemptions.
(b) Assumes 100% exemption from federal income and Florida
intangible property taxes.
(c) Federal rates may vary depending on family size and nature
and amount of itemized deductions.
INVESTMENT PERFORMANCE
Total Return Performance
Each Fund's calculation of total return performance includes
the reinvestment of all capital gain distributions and income
dividends for the period or periods indicated, without regard to
tax consequences to a shareholder in each Fund. Total return is
calculated as the percentage change between the beginning value
of a static account in each Fund and the ending value of that
account measured by the then current net asset value, including
all shares acquired through reinvestment of income and capital
gains dividends. The results shown are historical and should not
be considered indicative of the future performance of each Fund.
Each average annual compound rate of return is derived from the
cumulative performance of each Fund over the time period
specified. The annual compound rate of return for each Fund over
any other period of time will vary from the average.
Cumulative Performance Percentage Change
Since
Inception
1 Year 5 Years Date
Inception Ended Ended through
Date 2/28/95 2/28/95 2/28/95
________ ________ ________ ________
New York Tax-Free Bond Fund 8/28/86 0.74%(a) 47.85% 78.29%(b)
California Tax-Free Bond Fund9/15/86 1.60%(c) 45.35% 69.11%(d)
Maryland Tax-Free Bond Fund 3/31/87 1.43%(e) 44.53% 64.10%(f)
Maryland Short-Term Tax-Free
Bond Fund 1/29/93 2.64%(g) N/A 7.99%(h)
Virginia Tax-Free Bond Fund 4/30/91 1.51%(i) N/A 32.74%(j)
New Jersey Tax-Free Bond Fund4/30/91 0.37%(k) N/A 33.81%(l)
Florida Insured Intermediate
Bond Fund 3/31/93 3.01% N/A 10.05%
Georgia Tax-Free Bond Fund 3/31/93 1.42% N/A 9.99%(o)
Average Annual Compound Rates of Return
Since
Inception
1 Year 5 Years Date
Inception Ended Ended through
Date 2/28/95 2/28/95 2/28/95
________ ________ ________ ________
New York Tax-Free Bond Fund 8/28/86 0.74%(a) 8.13% 7.04%(b)
California Tax-Free Bond Fund9/15/86 1.60%(c) 7.77% 6.41%(d)
Maryland Tax-Free Bond Fund 3/31/87 1.43%(e) 7.64% 6.46%(f)
Maryland Short-Term Tax-Free
Bond Fund 1/29/93 2.64%(g) N/A 3.76%(h)
Virginia Tax-Free Bond Fund 4/30/91 1.51%(i) N/A 7.67%(j)
New Jersey Tax-Free Bond Fund4/30/91 0.37%(k) N/A 7.89%(l)
Florida Insured Intermediate
Bond Fund 3/31/93 3.01%(m) N/A 5.13%(n)
Georgia Tax-Free Bond Fund 3/31/93 1.42%(o) N/A 5.10%(p)
(a) If you invested $1,000 on 2/28/94, the total return of the
New York Bond Fund on 2/28/95 would be $1,007.40.10 ($1,000
x 1.0074).
(b) Assumes purchase of one share of the New York Bond Fund at
the inception price of $10.00 on 8/25/86.
(c) If you invested $1,000 on 2/28/94, the total return of the
California Bond Fund on 2/28/95 would be $1,016.00 ($1,000 x
1.0160).
(d) Assumes purchase of one share of the California Bond Fund at
the inception price of $10.00 on 9/11/86.
(e) If you invested $1,000 on 2/28/94, the total return of the
Maryland Bond Fund on 2/28/95 would be $1,014.30 ($1,000 x
1.0143).
(f) Assumes purchase of one share of the Maryland Bond Fund at
the inception price of $10.00 on 3/31/87.
(g) If you invested $1,000 at the 2/28/94, the total return of
the Maryland Short-Term Fund on 2/28/95 would be $1,026.40
($1,000 x 1.0264).
(h) Assumes purchase of one share of the Maryland Short-Term
Fund at the inception price of $5.00 on 1/29/93.
(i) If you invested $1,000 on 2/28/94, the total return of the
Virginia Bond Fund on 2/28/95 would be $1,015.10 ($1,000 x
1.0151).
(j) Assumes purchase of one share of the Virginia Bond Fund at
the inception price of $10.00 on 4/30/91.
(k) If you invested $1,000 on 2/28/94, the total return of the
New Jersey Bond Fund on 2/28/95 would be $1,003.70 ($1,000 x
1.0037).
(l) Assumes purchase of one share of the New Jersey Bond Fund at
the inception price of $10.00 on 4/30/91.
(m) If you invested $1,000 on 2/28/94,, the total return of the
Florida Insured Fund on 2/28/95 would be $1,030.10 ($1,000 x
1.0301).
(n) Assumes purchase of one share of the Florida Insured Fund at
the inception price of $10.00 on 3/31/93.
(o) If you invested $1,000 on 2/28/94, the total return of the
Georgia Bond Fund on 2/28/95 would be $1,014.20 ($1,000 x
1.0142).
(p) Assumes purchase of one share of the Georgia Bond Fund at
the inception price of $10.00 on 3/31/93.
From time to time, in reports and promotional literature,
each Fund's performance will be compared to any one or
combination of the following: (1) indices of broad groups of
managed and unmanaged securities considered to be representative
of or similar to Fund portfolio holdings, (2) other mutual funds,
or (3) other measures of performance set forth in publications
such as:
Bond Buyer 20 - an estimation of the yield which would be offered
on 20-year general obligation bonds with a composite rating of
approximately "A." Published weekly by The Bond Buyer, a trade
paper of the municipal securities industry;
Donoghue's Tax-Exempt Money Fund Avg. - an average of municipal
money market funds as reported in Donoghue's Money Fund Report,
which tracks the performance of all money market mutual funds;
Lipper Analytical Services, Inc. - a widely used independent
research firm which ranks mutual funds by overall performance,
investment objectives, and assets;
Lipper General Purpose Municipal Bond Avg. - an average of
municipal mutual funds which invest 60% or more of their assets
in the top four tax-exempt credit ratings;
Lipper High-Yield Municipal Bond Avg. - an average of municipal
mutual funds which may utilize lower rated bonds for 50% of their
portfolio;
Lipper Intermediate Municipal Avg. - an average of municipal
mutual funds which restrict their holdings to bonds with
maturities between 5 and 10 years;
Lipper Short Municipal Debt Avg. - an average of municipal funds
that invest in municipal debt issues with dollar-weighted average
maturities of less than five years;
Lipper State Municipal Bond Funds Average - an average of
municipal mutual funds which limit at least 80% of their
investments to those securities which are exempt from taxation of
state and/or city income taxation;
Morningstar, Inc. - a widely used independent research firm which
rates mutual funds by overall performance, investment objectives,
and assets;
Prime General Obligations - bonds with maturities from 1-30 years
which are secured by the full faith and credit of issuers with
taxing power; and
Shearson Lehman/American Express Municipal Bond Index - a
composite measure of the total return performance of the
municipal bond market. Based upon approximately 1500 bonds.
New York and California Funds only
Donoghue's Tax-Exempt State Money Fund Average - an average of
municipal money market funds which concentrate their investments
in securities which are exempt from state and/or city income
taxes, as reported in Donoghue's Money Fund Report, which tracks
the performance of all money market mutual funds; and
Lipper State Short-Term Municipal Funds Average - an average of
municipal mutual funds concentrating their investments in
securities which are exempt from state and/or city income taxes.
This average is compiled from the Lipper Short-Term Municipal
Bond Funds average which restricts inclusion to those funds with
an average weighted maturity of no more than 90 days. Most funds
restrict their longest maturity to one year.
All Funds
Indices prepared by the research departments of such a
financial organizations as Merrill Lynch, Pierce, Fenner & Smith,
Inc., will be used, as well as information provided by the
Federal Reserve Board.
Information reported in the Bank Rate Monitor, an
independent publication which tracks the performance of certain
bank products, such as money market deposit accounts and
certificates of deposit, will also be used. Bank Certificates of
Deposit differ from mutual funds in several ways: the interest
rate established by the sponsoring bank is fixed for the term of
a CD; there are penalties for early withdrawal from CDs; and the
principal on a CD is insured.
Performance rankings and ratings reported periodically in
national financial publications such as MONEY, FORBES, BUSINESS
WEEK, and BARRON'S may also be used.
Other Features and Benefits
The Funds are members of the T. Rowe Price Family of Funds
and may help investors achieve various long-term investment
goals, such as saving for a down payment on a home or paying
college costs. To explain how the Funds could be used to assist
investors in planning for these goals and to illustrate basic
principles of investing, various worksheets and guides prepared
by T. Rowe Price Associates, Inc. and/or T. Rowe Price Investment
Services, Inc. may be made available. These currently include:
the Asset Mix Worksheet which is designed to show shareholders
how to reduce their investment risk by developing a diversified
investment plan, the College Planning Guide which discusses
various aspects of financial planning to meet college expenses
and assists parents in projecting the costs of a college
education for their children. Tax Considerations for Investors
discusses the tax advantages of annuities and municipal bonds and
how to assess whether they are suitable for your portfolio,
reviews pros and cons of placing assets in a gift to minors
account and summarizes the benefits and types of tax-deferred
retirement plans currently available. From time to time, other
worksheets and guides may be made available as well. Of course,
an investment in a Fund cannot guarantee that such goals will be
met.
From time to time, Insights, a T. Rowe Price publication of
reports on specific investment topics and strategies, may be
included in each Fund's fulfillment kit. Such reports may
include information concerning: calculating taxable gains and
losses on mutual fund transactions, coping with stock market
volatility, benefiting from dollar cost averaging, understanding
international markets, investing in high-yield "junk" bonds,
growth stock investing, conservative stock investing, value
investing, investing in small companies, tax-free investing,
fixed income investing, investing in mortgage-backed securities,
as well as other topics and strategies. Personal Strategy Planner
simplifies investment decision making by helping investors define
personal financial goals, establish length of time the investor
intends to invest, determine risk "comfort zone" and select
diversified investment mix.
Other Publications
From time to time, in newsletters and other publications
issued by T. Rowe Price Investment Services, Inc., reference may
be made to economic, financial and political developments in the
U.S. and abroad and their effect on securities prices. Such
discussions may take the form of commentary on these developments
by T. Rowe Price mutual fund portfolio managers and their views
and analysis on how such developments could affect investments in
mutual funds.
No-Load Versus Load and 12b-1 Funds
Unlike the T. Rowe Price funds, many mutual funds charge
sales fees to investors or use fund assets to finance
distribution activities. These fees are in addition to the
normal advisory fees and expenses charged by all mutual funds.
There are several types of fees charged which vary in magnitude
and which may often be used in combination. A sales charge (or
"load") can be charged at the time the fund is purchased
(front-end load) or at the time of redemption (back-end load).
Front-end loads are charged on the total amount invested.
Back-end loads or "redemption fees" are charged either on the
amount originally invested or on the amount redeemed. 12b-1
plans allow for the payment of marketing and sales expenses from
fund assets. These expenses are usually computed daily as a
fixed percentage of assets.
The Funds are no-load funds which impose no sales charges or
12b-1 fees. No-load funds are generally sold directly to the
public without the use of commissioned sales representatives.
This means that 100% of your purchase is invested for you.
The examples in the attached table show the impact on
investment performance of the most common types of sales charges.
For each example the investor has $10,000 to invest and each fund
performs at a compound annual rate of 6% per year (net of fund
expenses, including management fees) for ten years. The "Total
After 10 Years" shows the amount the investor would receive from
the fund after ten years. Net charges are the total sales fee(s)
paid by the investor or charged to the fund's assets. Figures
for total return are net of each Fund's expenses including
management fees.
The table is for illustrative purposes and is not intended
to reflect the anticipated performance of the Funds.
If a $10,000 investment produced a 6% annual total return
for ten years in a mutual fund that has . . .
A Sales A 1.00%
Charge 12b-1
No A of 2% A Plan
Sales Redemp- With a Sales Distri-
Charge tion Fee 1% Redemp- Charge bution
"No-Load" of 1% tion Fee of 8.5% Fee
_________ ________ __________ _______ _______
Original
Investment $10,000 $10,000 $10,000 $10,000 $10,000
(Sales Charge) N/C 2 N/C (200) (850) N/C
_______ _______ _______ _______ _______
Amount Credited
to Account $10,000 $10,000 $ 9,800 $ 9,150 $10,000
Compounded at 6%
For Ten Years $17,908 $17,908 $17,550 $16,386 $16,196
Less Redemption Fee N/C (179) (176) N/C N/C
_______ _______ _______ _______ _______
Total After
10 Years $17,908 $17,729 $17,374 $16,386 $16,196
Net Charges $0 ($179) ($376) ($850)($1,332)
1 Figures have been rounded
2 N/C - No charge
3 Net of 12b-1 plan distribution charges
Redemptions in Kind
In the unlikely event a shareholder were to receive an in
kind redemption of portfolio securities of the Funds, brokerage
fees could be incurred by the shareholder in a subsequent sale of
such securities.
Issuance of Fund Shares for Securities
Transactions involving issuance of Fund shares for
securities or assets other than cash will be limited to (1) bona
fide reorganizations; (2) statutory mergers; or (3) other
acquisitions of portfolio securities that: (a) meet the
investment objective and policies of a Fund; (b) are acquired for
investment and not for resale except in accordance with
applicable law; (c) have a value that is readily ascertainable
via listing on or trading in a recognized United States or
international exchange or market; and (d) are not illiquid.
ORGANIZATION OF THE TRUSTS
For tax and business reasons, the Trusts were organized in
1986 as Massachusetts Business Trusts. The State Tax-Free Income
Trust and California Tax-Free Income Trust are registered with
the Securities and Exchange Commission under the Investment
Company Act of 1940 as, respectively, a non-diversified and
diversified, open-end investment company, commonly known as a
"mutual fund."
The Declaration of Trust permits the Board of Trustees to
issue an unlimited number of full and fractional shares of
beneficial interest of a single class without par value.
Currently, the State Tax-Free Income Trust consists of nine
series (i.e., the New York Tax-Free Bond Fund, the New York
Tax-Free Money Fund, the Maryland Tax-Free Bond Fund, the
Maryland Short-Term Tax-Free Bond Fund, the Virginia Tax-Free
Bond Fund, Virginia Short-Term Tax-Free Bond Fund the New Jersey
Tax-Free Bond Fund, the Georgia Tax-Free Bond Fund, and the
Florida Insured Intermediate Tax-Free Fund), and the California
Tax-Free Income Trust consists of two series (i.e., the Bond Fund
and the Money Fund) each of which represents a separate class of
each Trust's shares and has different objectives and investment
policies. The Declaration of Trust also provides that the Board
of Trustees may issue additional series of shares. Each share of
each Fund represents an equal proportionate beneficial interest
in that Fund, with each other share, and is entitled to such
dividends and distributions of income belonging to that fund as
are declared by the Trustees. In the event of the liquidation of
a Fund, each share is entitled to a pro rata share of the net
assets of that Fund.
Shareholders of each Fund are entitled to one vote for each
full share held (and fractional votes for fractional shares held)
irrespective of the relative net asset values of the Funds' share
and will vote in the election of or removal of trustees (to the
extent hereinafter provided); however, on matters affecting an
individual Fund, a separate vote of that Fund is required.
Shareholders of a Fund are not entitled to vote on any matter
which does not affect that Fund and which requires a separate
vote of the other Funds. There will normally be no meetings of
shareholders for the purpose of electing trustees unless and
until such time as less than a majority of the trustees holding
office have been elected by shareholders, at which time the
trustees then in office will call a shareholders' meeting for the
election of trustees. Pursuant to Section 16(c) of the
Investment Company Act of 1940, holders of record of not less
than two-thirds of the outstanding shares may remove a trustee by
a vote cast in person or by proxy at a meeting called for that
purpose. Except as set forth above, the trustees shall continue
to hold office and may appoint successor trustees. Voting rights
are not cumulative, so that the holders of more than 50% of the
shares voting in the election of trustees can, if they choose to
do so, elect all the trustees of each Trust, in which event the
holders of the remaining shares will be unable to elect any
person as a trustee.
Shares have no preemptive or conversion rights; the right of
redemption and the privilege of exchange are described in the
prospectus. Shares are fully paid and nonassessable, except as
set forth below. The Trusts may be terminated (i) upon the sale
of its assets to another diversified, open-end management
investment company, if approved by the vote of the holders of
two-thirds of the outstanding shares of each Trust, or (ii) upon
liquidation and distribution of the assets of each Trust, if
approved by the vote of the holders of a majority of the
outstanding shares of each Trust. If not so terminated, each
Trust will continue indefinitely. Under Massachusetts law,
shareholders could, under certain circumstances, be held
personally liable for the obligations of each Trust. However,
the Declarations of Trust disclaims shareholder liability for
acts or obligations of the Trusts and requires that notice of
such disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Trusts or a Trustee.
The Declarations of Trust provides for indemnification from Trust
property for all losses and expenses of any shareholder held
personally liable for the obligations of the Trusts. Thus, the
risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which each
Trust itself would be unable to meet its obligations, a
possibility which Price Associates believes is remote. Upon
payment of any liability incurred by a Fund, the shareholders of
the Fund paying such liability will be entitled to reimbursement
from the general assets of the Fund. The Trustees intend to
conduct the operations of each Fund in such a way so as to avoid,
as far as possible, ultimate liability of the shareholders for
liabilities of such Fund.
FEDERAL AND STATE REGISTRATION OF SHARES
Each Fund's shares are registered for sale under the
Securities Act of 1933 and each Fund or their shares are
registered under the laws of all states which require
registration, as well as the District of Columbia and Puerto
Rico.
LEGAL COUNSEL
Shereff, Friedman, Hoffman & Goodman, L.L.P. whose address
is 919 Third Avenue, New York, New York 10022, is legal counsel
to the Funds.
INDEPENDENT ACCOUNTANTS
Georgia Fund
Price Waterhouse LLP, 7 St. Paul Street, Suite 1700,
Baltimore, Maryland 21202, are independent accountants to the
Fund. The financial statements of the Georgia Fund for the
fiscal year ended February 28, 1995 and the report of independent
accountants are included in the Fund's Annual Report for the
fiscal year ended February 28, 1995 on pages 4-11. A copy of the
Annual Report accompanies this Statement of Additional
Information. The following financial statements and the report
of independent accountants appearing in the Annual Report for the
fiscal year ended February 28, 1995 are incorporated into this
Statement of Additional Information by reference:
All Funds except Georgia Fund
Coopers & Lybrand L.L.P., 217 East Redwood Street,
Baltimore, Maryland 21202, are independent accountants to the
Trusts. The financial statements of the New York, California,
Maryland, Virginia Tax-Free Bond, New Jersey, and Florida Funds
for the fiscal year ended February 28, 1995 and the report of
independent accountants, are included in each Fund's Annual
Report for the fiscal year ended February 28, 1995 on pages 7-18,
8-19, 7-22, 6-17, 5-13, and 4-11, respectively. A copy of the
Annual Report accompanies this Statement of Additional
Information. The following financial statements and the report
of independent accountants appearing in each Annual Report for
the fiscal year ended February 28, 1995 are incorporated into
this Statement of Additional Information by reference:
New York
Funds' Annual
Report Page
____________
Report of Independent Accountants 18
Statement of Net Assets, February 28, 1995 7-11
Statement of Operations, year ended
February 28, 1995 12
Statement of Changes in Net Assets, years ended
February 28, 1995 and February 28, 1994 13
Notes to Financial Statements, February 28, 199514-15
Financial Highlights 16-17
California
Funds' Annual
Report Page
_____________
Report of Independent Accountants 19
Statement of Net Assets, February 28, 1995 8-12
Statement of Operations, year ended
February 28, 1995 13
Statement of Changes in Net Assets, years
ended February 28, 1995 and February 28, 1994 14
Notes to Financial Statements, February 28, 199515-16
Financial Highlights 17-18
Maryland
Fund's Annual
Report Page
______________
Report of Independent Accountants 22
Statement of Net Assets, February 28, 1995 7-15
Statement of Operations, year ended
February 28, 1995 16
Statement of Changes in Net Assets, years
ended February 28, 1995 and February 28, 1994 17
Notes to Financial Statements, February 28, 199518-19
Financial Highlights 20-21
Virginia
Fund's Annual
Report Page
_____________
Report of Independent Accountants 17
Portfolio of Investments, February 28, 1995 6-7
Statement of Assets and Liabilities,
February 28, 1995 7
Statement of Net Assets, year ended
February 28, 1995 8-10
Statement of Operations, year
ended February 28, 1995 11
Statement of Changes in Net Assets, years
ended February 28, 1995 and February 28, 1994 12
Notes to Financial Statements, February 28, 199513-14
Financial Highlights 15-16
New Jersey
Fund's Annual
Report Page
___________
Report of Independent Accountants 13
Statement of Net Assets, February 28, 1995 5-7
Statement of Operations, year
ended February 28, 1995 8
Statement of Changes in Net Assets, years
ended February 28, 1995 and February 28, 1994 9
Notes to Financial Statements, February 28, 199510-11
Financial Highlights 12
Florida
Fund's Annual
Report Page
_____________
Report of Independent Accountants 11
Statement of Net Assets, February 28, 1995 4-5
Statement of Operations, year
ended February 28, 1995 6
Statement of Changes in Net Assets, years
ended February 28, 1995 and February 28, 1994 7
Notes to Financial Statements, February 28, 1995 8-9
Financial Highlights 10
Georgia
Fund's Annual
Report Page
___________
Report of Independent Accountants 11
Statement of Net Assets, February 28, 1995 4-5
Statement of Operations, year
ended February 28, 1995 6
Statement of Changes in Net Assets, years
ended February 28, 1995 and February 28, 1994 7
Notes to Financial Statements, February 28, 1995 8-9
Financial Highlights 10
PAGE 57
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements. Condensed Financial Information
(Financial Highlights table) is included in Part A of the
Registration Statement.
Portfolio of Investments, Statement of Assets and
Liabilities, Statement of Operations, and Statement of
Changes in Net Assets are included in the Annual Report to
Shareholders, the pertinent portions of which are
incorporated by reference in Part B of the Registration
Statement.
(b) Exhibits.
(1)(a) Master Trust Agreement of Registrant, dated July 3,
1986 (electronically filed with Amendment No. 12
dated April 28, 1994)
(1)(b) Amendment to Master Trust Agreement, dated August 1,
1986 (electronically filed with Amendment No. 12
dated April 28, 1994)
(2) By-Laws of Registrant, dated July 23, 1986
(electronically filed with Amendment No. 12 dated
April 28, 1994)
(3) Inapplicable
(4) Specimen Stock Certificate (filed with Amendment
No. 1)
(5)(a) Investment Management Agreement between California
Tax-Free Bond Fund and T. Rowe Price Associates,
Inc., dated July 1, 1987 (electronically filed with
Amendment No. 12 dated April 28, 1994)
(5)(b) Investment Management Agreement between California
Tax-Free Money Fund and T. Rowe Price Associates,
Inc., dated July 1, 1987 (electronically filed with
Amendment No. 12 dated April 28, 1994)
(6) Underwriting Agreement between Registrant and T.
Rowe Price Investment Services, Inc., dated July 23,
1986 (electronically filed with Amendment No. 12
dated April 28, 1994)
PAGE 58
(7) Inapplicable
(8) Custodian Agreement between T. Rowe Price Funds and
State Street Bank and Trust Company, dated September
28, 1987, as amended to June 24, 1988, October 19,
1988, February 22, 1989, July 19, 1989, September
15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990,
July 18, 1990, October 15, 1990, February 13, 1991,
March 6, 1991, September 12, 1991, November 6, 1991,
April 23, 1992, September 2, 1992, November 3, 1992,
December 16, 1992, December 21, 1992, January 28,
1993, April 22, 1993, September 16, 1993, November
3, 1993, March 1, 1994, April 21, 1994, July 27,
1994, September 21, 1994, November 1, 1994, November
2, 1994, and January 25, 1995
(9)(a) Transfer Agency and Service Agreement between T.
Rowe Price Services, Inc. and T. Rowe Price Funds,
dated January 1, 1995, as amended January 25, 1995
(9)(b) Agreement between T. Rowe Price Associates, Inc. and
T. Rowe Price Funds for Fund Accounting Services,
dated January 1, 1995, as amended January 25, 1995
(10) Opinion of Counsel
(11) Consent of Independent Accountants
(12) Inapplicable
(13) Inapplicable
(14) Inapplicable
(15) Inapplicable
(16) The Registrant hereby incorporates by reference the
methodology used in calculating the performance
information included in Post-Effective Amendment No.
36 and Amendment No. 20 of the T. Rowe Price Tax-
Free Income Fund, Inc. (SEC. File Nos. 2-57265 and
811-2684 and CIK 202927) dated April 22, 1994.
Item 25. Persons Controlled by or Under Common Control With
Registrant.
None
PAGE 59
Item 26. Number of Holders of Securities
As of April 30, 1995, there were 4,068 shareholders in the
Bond Fund.
As of April 30, 1995, there were 2,660 shareholders in the
Money Fund.
Item 27. Indemnification
The Registrant maintains comprehensive Errors and Omissions
and Officers and Directors insurance policies written by the
Evanston Insurance Company, The Chubb Group and ICI Mutual.
These policies provide coverage for the named insureds, which
include T. Rowe Price Associates, Inc. ("Manager"), Rowe
Price-Fleming International, Inc. ("Price-Fleming"), T. Rowe
Price Investment Services, Inc., T. Rowe Price Services, Inc., T.
Rowe Price Trust Company, T. Rowe Price Stable Asset Management,
Inc., RPF International Bond Fund and thirty-nine other
investment companies, namely, T. Rowe Price Growth Stock Fund,
Inc., T. Rowe Price New Horizons Fund, Inc., T. Rowe Price New
Era Fund, Inc., T. Rowe Price New Income Fund, Inc., T. Rowe
Price Prime Reserve Fund, Inc., T. Rowe Price Tax-Free Income
Fund, Inc., T. Rowe Price Tax-Exempt Money Fund, Inc., T. Rowe
Price International Funds, Inc., T. Rowe Price Growth & Income
Fund, Inc., T. Rowe Price Tax-Free Short-Intermediate Fund, Inc.,
T. Rowe Price Short-Term Bond Fund, Inc., T. Rowe Price High
Yield Fund, Inc., T. Rowe Price Tax-Free High Yield Fund, Inc.,
T. Rowe Price New America Growth Fund, T. Rowe Price Equity
Income Fund, T. Rowe Price GNMA Fund, T. Rowe Price Capital
Appreciation Fund, T. Rowe Price State Tax-Free Income Trust, T.
Rowe Price Science & Technology Fund, Inc., T. Rowe Price
Small-Cap Value Fund, Inc., Institutional International Funds,
Inc., T. Rowe Price U.S. Treasury Funds, Inc., T. Rowe Price
Index Trust, Inc., T. Rowe Price Spectrum Fund, Inc., T. Rowe
Price Balanced Fund, Inc., T. Rowe Price Adjustable Rate U.S.
Government Fund, Inc., T. Rowe Price Mid-Cap Growth Fund, Inc.,
T. Rowe Price OTC Fund, Inc., T. Rowe Price Tax-Free Insured
Intermediate Bond Fund, Inc., T. Rowe Price Dividend Growth Fund,
Inc., T. Rowe Price Blue Chip Growth Fund, Inc., T. Rowe Price
Summit Funds, Inc., T. Rowe Price Summit Municipal Funds, Inc.,
T. Rowe Price Equity Series, Inc., T. Rowe Price International
Series, Inc., T. Rowe Price Fixed Income Series, Inc., T. Rowe
Price Personal Strategy Funds, Inc., T. Rowe Price Value Fund,
Inc., and T. Rowe Price Capital Opportunity Fund, Inc. The
Registrant and the thirty-nine investment companies listed above,
with the exception of Institutional International Funds, Inc.,
will be collectively referred to as the Price Funds. The
investment manager for the Price Funds, (excluding T. Rowe Price
International Funds, Inc., T. Rowe Price International Series,
PAGE 60
Inc. and Institutional International Funds, Inc.), is the
Manager. Price-Fleming is the manager to T. Rowe Price
International Funds, Inc., T. Rowe Price International Series,
Inc. and Institutional International Funds, Inc. and is 50% owned
by TRP Finance, Inc., a wholly-owned subsidiary of the Manager,
25% owned by Copthall Overseas Limited, a wholly-owned subsidiary
of Robert Fleming Holdings Limited, and 25% owned by Jardine
Fleming International Holdings Limited. In addition to the
corporate insureds, the policies also cover the officers,
directors, and employees of each of the named insureds. The
premium is allocated among the named corporate insureds in
accordance with the provisions of Rule l7d-1(d)(7) under the
Investment Company Act of 1940.
Article VI, Section 6.4 of the Registrant's Master Trust
Agreement provides as follows:
Section 6.4. Indemnification of Trustees, Officers,
etc. The Trust shall indemnify (from the assets of the Sub-
Trust or Sub-Trusts in question) each of its Trustees and
officers (including persons who serve at the Trust's request
as directors, officers or trustees of another organization
in which the Trust has any interest as a shareholder,
creditor or otherwise [ hereinafter referred to as a
"Covered Person" ]) against all liabilities, including but
not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses,
including reasonable accountants' and counsel fees, incurred
by any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding, whether
civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may
have been involved as a party or otherwise or with which
such person may be or may have been threatened, while in
office or thereafter, by reason of being or having been such
a Trustee or officer, director or trustee, except with
respect to any matter as to which it has been determined
that such Covered Person (i) did not act in good faith in
the reasonable belief that such Covered Person's action was
in or not opposed to the best interests of the Trust or (ii)
had acted with wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in
the conduct of such Covered Person's office (either and both
of the conduct described in (i) and (ii) being referred to
hereafter as "Disabling Conduct"). A determination that the
Covered Person is entitled to indemnification may be made by
(i) a final decision on the merits by a court or other body
before whom the proceeding was brought that the person to be
indemnified was not liable by reason of Disabling Conduct,
(ii) dismissal of a court action or an administrative
PAGE 61
proceeding against a Covered Person for insufficiency of
evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the
indemnitee was not liable by reason of Disabling Conduct by
(a) a vote of a majority of a quorum of Trustees who are
neither "interested persons" of the Trust as defined in
section 2(a)(19) of the 1940 Act nor parties to the
proceeding, or (b) an independent legal counsel in a written
opinion. Expenses, including accountants' and counsel fees
so incurred by any such Covered Person (but excluding
amounts paid in satisfaction of judgments, in compromise or
as fines or penalties), may be paid from time to time by the
Sub-Trust in question in advance of the final disposition of
any such action, suit or proceeding, provided that the
Covered Person shall have undertaken to repay the amounts so
paid to the Sub-Trust in question if it is ultimately
determined that indemnification of such expenses is not
authorized under this Article VI and (i) the Covered Person
shall have provided security for such undertaking, (ii) the
Trust shall be insured against losses arising by reason of
any lawful advances, or (iii) a majority of a quorum of the
disinterested Trustees who are not a party to the
proceeding, or an independent legal counsel in a written
opinion, shall have determined, based on a review of readily
available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Covered Person
ultimately will be found entitled to indemnification.
Section 6.6 of the Registrant's Master Trust Agreement
provides as follows:
Section 6.6 Indemnification Not Exclusive, etc. The
right of indemnification provided by this Article VI shall
not be exclusive of or affect any other rights to which any
such Covered Person may be entitled. As used in this
Article VI, "Covered Person" shall include such person's
heirs, executors and administrators, an "interested Covered
Person" is one against whom the action, suit or other
proceeding in question or another action, suit or other
proceeding on the same or similar grounds is then or has
been pending or threatened, and a "disinterested" person is
a person against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on
the same or similar grounds is then or has been pending or
threatened. Nothing contained in this article shall affect
any rights to indemnification to which personnel of the
Trust, other than Trustees and officers, and other persons
may be entitled by contract or otherwise under law, nor the
power of the Trust to purchase and maintain liability
insurance on behalf of any such person.
PAGE 62
Article III, Section 3.2(l) of the Registrant's Master Trust
Agreement provides as follows:
Section 3.2(l) Insurance. To purchase and pay for
entirely out of Trust property such insurance as they may
deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies
insuring the assets of the Trust and payment of
distributions and principal on its portfolio investments,
and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, consultants, investment
advisers, managers, administrators, distributors, principal
underwriters, or independent contractors, or any thereof (or
any person connected therewith), of the Trust individually
against all claims and liabilities of every nature arising
by reason of holding, being or having held any such office
or position, or by reason of any action alleged to have been
taken or omitted by any such person in any such capacity,
including any action taken or omitted that may be determined
to constitute negligence, whether or not the Trust would
have the power to indemnify such person against such
liability.
Insofar as indemnification for liability under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant
to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Manager.
Rowe Price-Fleming International, Inc. ("Price-Fleming"), a
Maryland corporation, is a corporate joint venture 50% owned by
TRP Finance, Inc., a wholly-owned subsidiary of the Manager.
PAGE 63
Price-Fleming was organized in 1979 to provide investment counsel
service with respect to foreign securities for institutional
investors in the United States. In addition to managing private
counsel client accounts, Price-Fleming also sponsors registered
investment companies which invest in foreign securities, serves
as general partner of RPFI International Partners, Limited
Partnership, and provides investment advice to the T. Rowe Price
Trust Company, trustee of the International Common Trust
Fund.
T. Rowe Price Investment Services, Inc. ("Investment Services"),
a wholly-owned subsidiary of the Manager, is a Maryland
corporation organized in 1980 for the purpose of acting as the
principal underwriter and distributor for the Price Funds.
Investment Services is registered as a broker-dealer under the
Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. In 1984, Investment
Services expanded its activities to include a discount brokerage
service.
TRP Distribution, Inc., a wholly-owned subsidiary of Investment
Services, is a Maryland corporation organized in 1991. It was
organized for and engages in the sale of certain investment
related products prepared by Investment Services.
T. Rowe Price Associates Foundation, Inc., was organized in 1981
for the purpose of making charitable contributions to religious,
charitable, scientific, literary and educational organizations.
The Foundation (which is not a subsidiary of the Manager) is
funded solely by contributions from the Manager and income from
investments.
T. Rowe Price Services, Inc. ("Price Services"), a wholly-owned
subsidiary of the Manager, is a Maryland corporation organized in
1982 and is registered as a transfer agent under the Securities
Exchange Act of 1934. Price Services provides transfer agent,
dividend disbursing, and certain other services, including
shareholder services, to the Price Funds.
T. Rowe Price Retirement Plan Services, Inc. ("RPS"), a
wholly-owned subsidiary of the Manager, was incorporated in
Maryland in 1991 and is registered as a transfer agent under the
Securities Exchange Act of 1934. RPS provides administrative,
recordkeeping, and subaccounting services to administrators of
employee benefit plans.
T. Rowe Price Trust Company ("Trust Company"), a wholly-owned
subsidiary of the Manager, is a Maryland-chartered limited
purpose trust company, organized in 1983 for the purpose of
providing fiduciary services. The Trust Company serves as
PAGE 64
trustee/custodian for employee benefit plans, individual
retirement accounts and common trust funds and as
trustee/investment agent for a few trusts.
T. Rowe Price Threshold Fund Associates, Inc., a wholly-owned
subsidiary of the Manager, is a Maryland corporation organized in
1994 and serves as the general partner of T. Rowe Price Threshold
Fund III, L.P., a Delaware limited partnership established in
1994.
T. Rowe Price Threshold Fund II, L.P., a Delaware limited
partnership, was organized in 1986 by the Manager, and invests in
private financings of small companies with high growth potential;
the Manager is the General Partner of the partnership.
T. Rowe Price Threshold Fund III, L.P., a Delaware limited
partnership was organized in 1994 by the Manager, and invests in
private financings of small companies with high growth potential;
T. Rowe Price Threshold Fund Associates, Inc. is the General
Partner of this partnership.
RPFI International Partners, Limited Partnership, is a Delaware
limited partnership organized in 1985 for the purpose of
investing in a diversified group of small and medium-sized
non-U.S. companies. Price-Fleming is the general partner of this
partnership, and certain institutional investors, including
advisory clients of Price-Fleming are its limited partners.
T. Rowe Price Real Estate Group, Inc. ("Real Estate Group"), is a
Maryland corporation and a wholly-owned subsidiary of the Manager
established in 1986 to provide real estate services.
Subsidiaries of Real Estate Group are: T. Rowe Price Realty
Income Fund I Management, Inc., a Maryland corporation (General
Partner of T. Rowe Price Realty Income Fund I, A No-Load Limited
Partnership), T. Rowe Price Realty Income Fund II Management,
Inc., a Maryland corporation (General Partner of T. Rowe Price
Realty Income Fund II, America's Sales-Commission-Free Real
Estate Limited Partnership), T. Rowe Price Realty Income Fund III
Management, Inc., a Maryland corporation (General Partner of T.
Rowe Price Realty Income Fund III, America's
Sales-Commission-Free Real Estate Limited Partnership, a Delaware
limited partnership), and T. Rowe Price Realty Income Fund IV
Management, Inc., a Maryland corporation (General Partner of T.
Rowe Price Realty Income Fund IV, America's Sales-Commission-Free
Real Estate Limited Partnership). Real Estate Group serves as
investment manager to T. Rowe Price Renaissance Fund, Ltd., A
Sales-Commission-Free Real Estate Investment, established in 1989
as a Maryland corporation which qualifies as a REIT.
PAGE 65
T. Rowe Price Stable Asset Management, Inc. ("Stable Asset
Management") is a Maryland corporation organized in 1988 as a
wholly-owned subsidiary of the Manager. Stable Asset Management,
which is registered as an investment adviser under the Investment
Advisers Act of 1940, specializes in the management of investment
portfolios which seek stable and consistent investment returns
through the use of guaranteed investment contracts, bank
investment contracts, structured investment contracts, and
short-term fixed-income securities.
T. Rowe Price Recovery Fund Associates, Inc., a Maryland
corporation, is a wholly-owned subsidiary of the Manager
organized in 1988 for the purpose of serving as the General
Partner of T. Rowe Price Recovery Fund, L.P., a Delaware limited
partnership which invests in financially distressed companies.
T. Rowe Price (Canada), Inc. ("TRP Canada") is a Maryland
corporation organized in 1988 as a wholly-owned subsidiary of the
Manager. This entity is registered as an investment adviser
under the Investment Advisers Act of 1940, and as a non-Canadian
Adviser under the Securities Act (Ontario). TRP Canada provides
certain services to the RPF International Bond Fund, a trust
(whose shares are sold in Canada), and Price-Fleming serves as
investment adviser to TRP Canada.
Since 1983, the Manager has organized several distinct Maryland
limited partnerships, which are informally called the Pratt
Street Ventures partnerships, for the purpose of acquiring
interests in growth-oriented businesses.
Tower Venture, Inc., a wholly-owned subsidiary of the Manager, is
a Maryland corporation organized in 1989 for the purpose of
serving as a general partner of 100 East Pratt St., L.P., a
Maryland limited partnership whose limited partners also include
the Manager. The purpose of the partnership is to further
develop and improve the property at 100 East Pratt Street, the
site of the Manager's headquarters, through the construction of
additional office, retail and parking space.
TRP Suburban, Inc. is a Maryland corporation organized in 1990 as
a wholly-owned subsidiary of the Manager. TRP Suburban has
entered into agreements with McDonogh School and
CMANE-McDonogh-Rowe Limited Partnership to construct an office
building in Owings Mills, Maryland, which houses the Manager's
transfer agent, plan administrative services, retirement plan
services and operations support functions.
TRP Finance, Inc., a wholly-owned subsidiary of the Manager,
and TRP Finance MRT, Inc., a wholly-owned subsidiary of TRP
Finance, Inc., are Delaware corporations organized in 1990 to
PAGE 66
manage certain passive corporate investments and other intangible
assets. TRP Finance MRT, Inc. was dissolved on October 4,
1993.
T. Rowe Price Strategic Partners Fund, L.P. is a Delaware limited
partnership organized in 1990 for the purpose of investing in
small public and private companies seeking capital for expansion
or undergoing a restructuring of ownership. The general partner
of the Fund is T. Rowe Price Strategic Partners, L.P., a Delaware
limited partnership whose general partner is T. Rowe Price
Strategic Partners Associates, Inc., ("Strategic Associates"), a
Maryland corporation which is a wholly-owned subsidiary of the
Manager. Strategic Associates also serves as the general partner
of T. Rowe Price Strategic Partners II, L.P., a Delaware limited
partnership established in 1992, which in turn serves as general
partner of T. Rowe Price Strategic Partners Fund II, L.P., a
Delaware limited partnership organized in 1992.
Listed below are the directors of the Manager who have other
substantial businesses, professions, vocations, or employment
aside from that of Director of the Manager:
JAMES E. HALBKAT, JR., Director of the Manager. Mr. Halbkat is
President of U.S. Monitor Corporation, a provider of public
response systems. Mr. Halbkat's address is: P.O. Box 23109,
Hilton Head Island, South Carolina 29925.
JOHN W. ROSENBLUM, Director of the Manager. Mr. Rosenblum is the
Tayloe 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. Rosenblum's address is: P.O. Box 6550,
Charlottesville, Virginia 22906.
ROBERT L. STRICKLAND, Director of the Manager. Mr. Strickland
is Chairman of Lowe's Companies, Inc., a retailer of specialty
home supplies and a Director of Hannaford Bros., Co., a food
retailer. Mr. Strickland's address is 604 Two Piedmont Plaza
Building, Winston-Salem, North Carolina 27104.
PHILIP C. WALSH, Director of the Manager. Mr. Walsh is a
Consultant to Cyprus Amax Minerals Company, Englewood, Colorado,
and a director of Piedmont Mining Company, Inc., Charlotte, North
Carolina. Mr. Walsh's address is: 200 East 66th Street, Apt. A-
1005, New York, New York 10021.
PAGE 67
With the exception of Messrs. Halbkat, Rosenblum, Strickland, and
Walsh, all of the directors of the Manager are employees of the
Manager.
George J. Collins, who is Chief Executive Officer, President, and
a Managing Director of the Manager, is a Director of
Price-Fleming.
George A. Roche, who is Chief Financial Officer and a Managing
Director of the Manager, is a Vice President and a Director of
Price-Fleming.
M. David Testa, who is a Managing Director of the Manager, is
Chairman of the Board of Price-Fleming.
Henry H. Hopkins, Charles P. Smith, and Peter Van Dyke, who are
Managing Directors of the Manager, are Vice Presidents of
Price-Fleming.
Robert P. Campbell, Roger L. Fiery, III, Robert C. Howe, Veena
A. Kutler, Heather R. Landon, Nancy M. Morris, George A.
Murnaghan, William F. Wendler, II, and Edward A. Wiese, who are
Vice Presidents of the Manager, are Vice Presidents of
Price-Fleming.
Michael J. Conelius, who is an Assistant Vice President of the
Manager, is a Vice President of Price-Fleming.
Kimberly A. Haker, an employee of the Manager, is Assistant Vice
President and Controller of Price-Fleming.
Alvin M. Younger, Jr., who is a Managing Director and the
Secretary and Treasurer of the Manager, is Secretary and
Treasurer of Price-Fleming.
Nolan L. North, who is a Vice President and Assistant Treasurer
of the Manager, is Assistant Treasurer of Price-Fleming.
Leah P. Holmes, who is an Assistant Vice President of the
Manager, is a Vice President of Price-Fleming.
Barbara A. Van Horn, who is Assistant Secretary of the Manager,
is Assistant Secretary of Price-Fleming.
Certain directors and officers of the Manager are also officers
and/or directors of one or more of the Price Funds and/or one or
more of the affiliated entities listed herein.
See also "Management of Fund," in Registrant's Statement of
Additional Information.
PAGE 68
Item 29. Principal Underwriters.
(a) The principal underwriter for the Registrant is
Investment Services. Investment Services acts as the principal
underwriter for the other sixty-eight Price Funds. Investment
Services is a wholly-owned subsidiary of the Manager, is
registered as a broker-dealer under the Securities Exchange Act
of 1934 and is a member of the National Association of Securities
Dealers, Inc. Investment Services has been formed for the
limited purpose of distributing the shares of the Price Funds and
will not engage in the general securities business. Since the
Price Funds are sold on a no-load basis, Investment Services will
not receive any commissions or other compensation for acting as
principal underwriter.
(b) The address of each of the directors and officers of
Investment Services listed below is 100 East Pratt Street,
Baltimore, Maryland 21202.
Positions and
Name and Principal Positions and Offices Offices With
Business Address With Underwriter Registrant
__________________ ______________________ ______________
James Sellers Riepe President and Director Vice President
and Trustee
Henry Holt Hopkins Vice President and Vice President
Director
Charles E. Vieth Vice President and None
Director
Mark E. Rayford Director None
Patricia M. Archer Vice President None
Edward C. Bernard Vice President None
Joseph C. Bonasorte Vice President None
Meredith C. Callanan Vice President None
Laura H. Chasney Vice President None
Victoria C. Collins Vice President None
Christopher W. Dyer Vice President None
Forrest R. Foss Vice President None
Patricia O'Neil Goodyear Vice President None
James W. Graves Vice President None
Andrea G. Griffin Vice President None
David J. Healy Vice President None
Joseph P. Healy Vice President None
Walter J. Helmlinger Vice President None
Eric G. Knauss Vice President None
Douglas G. Kremer Vice President None
Sharon Renae Krieger Vice President None
Keith Wayne Lewis Vice President None
PAGE 69
David L. Lyons Vice President None
Sarah McCafferty Vice President None
Maurice Albert Minerbi Vice President None
Nancy M. Morris Vice President None
George A. Murnaghan Vice President None
Steven Ellis Norwitz Vice President None
Kathleen M. O'Brien Vice President None
Pamela D. Preston Vice President None
Lucy Beth Robins Vice President None
John Richard Rockwell Vice President None
Monica R. Tucker Vice President None
William F. Wendler, II Vice President None
Terri L. Westren Vice President None
Jane F. White Vice President None
Thomas R. Woolley Vice President None
Alvin M. Younger, Jr. Secretary and None
Treasurer
Mark S. Finn Controller None
Richard J. Barna Assistant Vice President None
Catherine L. Berkenkemper Assistant Vice President None
Ronae M. Brock Assistant Vice President None
Brenda E. Buhler Assistant Vice President None
Patricia S. Butcher Assistant Vice President Assistant
Secretary
John A. Galateria Assistant Vice President None
Janelyn A. Healey Assistant Vice President None
Keith J. Langrehr Assistant Vice President None
C. Lillian Matthews Assistant Vice President None
Janice D. McCrory Assistant Vice President None
Sandra J. McHenry Assistant Vice President None
JeanneMarie B. Patella Assistant Vice President None
Kristin E. Seeberger Assistant Vice President None
Arthur J. Silber Assistant Vice President None
Nolan L. North Assistant Treasurer None
Barbara A. VanHorn Assistant Secretary None
(c) Not applicable. Investment Services will not receive
any compensation with respect to its activities as underwriter
for the Price Funds since the Price Funds are sold on a no-load
basis.
Item 30. Location of Accounts and Records.
All accounts, books, and other documents required to be
maintained by Section 31(a) of the Investment Company Act of
1940 and the rules thereunder will be maintained by the T.
Rowe Price California Tax-Free Income Trust at its offices
at 100 East Pratt Street, Baltimore, Maryland 21202.
Transfer, dividend disbursing, and shareholder service
activities are performed by T. Rowe Price Services, Inc., at
PAGE 70
100 East Pratt Street, Baltimore, Maryland 21202. Custodian
activities for the T. Rowe Price California Tax-Free Income
Trust are performed at State Street Bank and Trust Company's
Service Center (State Street South), 1776 Heritage Drive,
Quincy, Massachusetts 02171.
Item 31. Management Services.
Registrant is not a party to any management-related service
contract, other than as set forth in the Prospectus.
Item 32. Undertakings.
(a) Each series of the Registrant agrees to furnish, upon
request and without charge, a copy of its latest Annual
Report to each person to whom its prospectus is
delivered.
PAGE 71
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Baltimore, State of Maryland, this 9th
day of June, 1995.
T. ROWE PRICE CALIFORNIA TAX-FREE
INCOME TRUST
/s/George J. Collins
By: George J. Collins
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Registration Statement has been signed below by
the following persons in the capacities and on the dates
indicated:
SIGNATURE TITLE DATE
_________ ______ _____
/s/George J. Collins Chairman of the Board June 9, 1995
George J. Collins (Chief Executive Officer)
/s/Carmen F. Deyesu Treasurer June 9, 1995
Carmen F. Deyesu (Chief Financial Officer)
/s/Robert P. Black Trustee June 9, 1995
Robert P. Black
/s/Calvin W. Burnett Trustee June 9, 1995
Calvin W. Burnett
/s/Anthony W. Deering Trustee June 9, 1995
Anthony W. Deering
/s/F. Pierce Linaweaver Trustee June 9, 1995
F. Pierce Linaweaver
/s/William T. Reynolds Vice President and June 9, 1995
William T. Reynolds Trustee
/s/James S. Riepe Vice President and June 9, 1995
James S. Riepe Trustee
/s/John G. Schreiber Trustee June 9, 1995
John G. Schreiber
/s/Anne Marie Whittemore Trustee June 9, 1995
Anne Marie Whittemore
The Custodian Agreement dated September 28, 1987, as
amended, between State Street Bank and Trust Company and T. Rowe
Price Funds should be inserted here.
PAGE 1
CUSTODIAN CONTRACT
Between
STATE STREET BANK AND TRUST COMPANY
and
EACH OF THE PARTIES INDICATED
ON APPENDIX A
DATED: SEPTEMBER 28, 1987
FRF 07/87
PAGE 2
TABLE OF CONTENTS
1. Employment of Custodian and Property to be Held By It1
2. Duties of the Custodian with Respect to Property of the Fund
Held by the Custodian in the United States. . . 2
2.1 Holding Securities . . . . . . . . . . . . . 2
2.2 Delivery of Securities . . . . . . . . . . . 2
1) Sale . . . . . . . . . . . . . . . . . . 2
2) Repurchase Agreement . . . . . . . . . . 2
3) Securities System . . . . . . . . . . . . 3
4) Tender Offer . . . . . . . . . . . . . . 3
5) Redemption by Issuer . . . . . . . . . . 3
6) Transfer to Issuer, Nominee, Exchange . . 3
7) Sale to Broker . . . . . . . . . . . . . 3
8) Exchange or Conversion . . . . . . . . . 4
9) Warrants, Rights . . . . . . . . . . . . 4
10) Loans of Securities . . . . . . . . . . . 4
11) Borrowings . . . . . . . . . . . . . . . 4
12) Options . . . . . . . . . . . . . . . . . 5
13) Futures . . . . . . . . . . . . . . . . . 5
14) In-Kind Distributions . . . . . . . . . . 5
15) Miscellaneous . . . . . . . . . . . . . . 5
16) Type of Payment . . . . . . . . . . . . . 6
2.3 Registration of Securities . . . . . . . . . 6
2.4 Bank Accounts . . . . . . . . . . . . . . . . 7
2.5 Sale of Shares and Availability of Federal Funds7
2.6 Collection of Income, Dividends . . . . . . . 7
2.7 Payment of Fund Monies . . . . . . . . . . . 8
1) Purchases . . . . . . . . . . . . . . . . 8
2) Exchanges . . . . . . . . . . . . . . . . 9
3) Redemptions . . . . . . . . . . . . . . . 9
4) Expense and Liability . . . . . . . . . . 9
5) Dividends . . . . . . . . . . . . . . . . 9
6) Short Sale Dividend . . . . . . . . . . . 10
7) Loan . . . . . . . . . . . . . . . . . . 10
8) Miscellaneous . . . . . . . . . . . . . . 10
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased . . . . . . . . . . . 10
2.9 Appointment of Agents . . . . . . . . . . . . 10
2.10 Deposit of Securities in Securities System . 10
1) Account of Custodian . . . . . . . . . . 11
2) Records . . . . . . . . . . . . . . . . . 11
3) Payment of Fund Monies, Delivery of
Securities . . . . . . . . . . . . . . 11
4) Reports . . . . . . . . . . . . . . . . . 12
5) Annual Certificate . . . . . . . . . . . 12
6) Indemnification . . . . . . . . . . . . . 12
2.11 Fund Assets Held in the Custodian's Direct Paper
System . . . . . . . . . . . . . . . . . . 13
2.12 Segregated Account . . . . . . . . . . . . . 14
PAGE 3
2.13 Ownership Certificates for Tax Purposes . . . 15
2.14 Proxies . . . . . . . . . . . . . . . . . . . 15
2.15 Communications Relating to Fund Portfolio
Securities . . . . . . . . . . . . . . . . 15
2.16 Reports to Fund by Independent Public
Accountants . . . . . . . . . . . . . . . . 16
3. Duties of the Custodian with Respect to Property
of the Fund Held Outside of the United States . 16
3.1 Appointment of Foreign Sub-Custodians . . . . 16
3.2 Assets to be Held . . . . . . . . . . . . . . 17
3.3 Foreign Securities Depositories . . . . . . . 17
3.4 Segregation of Securities . . . . . . . . . . 17
3.5 Access of Independent Accountants of the Fund 17
3.6 Reports by Custodian . . . . . . . . . . . . 18
3.7 Transactions in Foreign Assets of the Fund . 18
3.8 Responsibility of Custodian, Sub-Custodian and
Fund . . . . . . . . . . . . . . . . . . . 18
3.9 Monitoring Responsibilities . . . . . . . . . 19
3.10 Branches of U.S. Banks . . . . . . . . . . . 19
4. Payments for Repurchases or Redemptions and Sales of
Shares of the Fund . . . . . . . . . . . . . . . 19
5. Proper Instructions . . . . . . . . . . . . . . . 20
6. Actions Permitted Without Express Authority . . . 21
7. Evidence of Authority, Reliance on Documents . . . 21
8. Duties of Custodian with Respect to the Books of
Account and Calculations of Net Asset Value and
Net Income . . . . . . . . . . . . . . . . . . . 22
9. Records, Inventory . . . . . . . . . . . . . . . . 22
10. Opinion of Fund's Independent Accountant . . . . . 23
11. Compensation of Custodian . . . . . . . . . . . . 23
12. Responsibility of Custodian . . . . . . . . . . . 23
13. Effective Period, Termination and Amendment . . . 25
14. Successor Custodian . . . . . . . . . . . . . . . 26
15. Interpretive and Additional Provisions . . . . . . 28
16. Notice . . . . . . . . . . . . . . . . . . . . . . 28
17. Bond . . . . . . . . . . . . . . . . . . . . . . . 28
18. Confidentiality . . . . . . . . . . . . . . . . . 29
19. Exemption from Liens . . . . . . . . . . . . . . . 29
20. Massachusetts Law to Apply . . . . . . . . . . . . 29
21. Prior Contracts . . . . . . . . . . . . . . . . . 29
22. The Parties . . . . . . . . . . . . . . . . . . . 30
23. Governing Documents . . . . . . . . . . . . . . . 30
24. Subcustodian Agreement . . . . . . . . . . . . . . 30
25. Directors and Trustees . . . . . . . . . . . . . . 30
26. Massachusetts Business Trust . . . . . . . . . . . 30
27. Successors of Parties . . . . . . . . . . . . . . 31
PAGE 4
CUSTODIAN CONTRACT
This Contract by and between State Street Bank and Trust
Company, a Massachusetts trust company, having its principal
place of business at 225 Franklin Street, Boston, Massachusetts,
02110 (hereinafter called the "Custodian"), and each fund which
is listed on Appendix A (as such Appendix may be amended from
time to time) and which evidences its agreement to be bound
hereby by executing a copy of this Contract (each such fund
individually hereinafter called the "Fund," whose definition may
be found in Section 22),
WITNESSETH: That in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto agree as
follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of
its assets, including securities it desires to be held in places
within the United States ("domestic securities") and securities
it desires to be held outside the United States ("foreign
securities") pursuant to the Governing Documents of the Fund.
The Fund agrees to deliver to the Custodian all securities and
cash now or hereafter owned or acquired by it, and all payments
of income, payments of principal or capital distributions
received by it with respect to all securities owned by the Fund
from time to time, and the cash consideration received by it for
such new or treasury shares of capital stock ("Shares") of the
Fund as may be issued or sold from time to time. The Custodian
shall not be responsible for any property of the Fund held or
received by the Fund and not delivered to the Custodian.
With respect to domestic securities, upon receipt of "Proper
Instructions" (within the meaning of Article 5), the Custodian
shall from time to time employ one or more sub-custodians located
in the United States, but only in accordance with an applicable
vote by the Board of Directors/Trustees of the Fund, and provided
that the Custodian shall have no more or less responsibility or
liability to the Fund on account of any actions or omissions of
any sub-custodian so employed than any such sub-custodian has to
the Custodian, and further provided that the Custodian shall not
release the sub-custodian from any responsibility or liability
unless mutually agreed upon by the parties in writing. With
respect to foreign securities and other assets of the Fund held
outside the United States, the Custodian shall employ Chase
Manhattan Bank, N.A., as a sub-custodian for the Fund in
accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund
Held By the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of the Fund all
PAGE 5
non-cash property, to be held by it in the United States,
including all domestic securities owned by the Fund, other
than (a) securities which are maintained pursuant to Section
2.10 in a clearing agency which acts as a securities
depository or in a book-entry system authorized by the U.S.
Department of the Treasury, collectively referred to herein
as "Securities System," and (b) commercial paper of an
issuer for which the Custodian acts as issuing and paying
agent ("Direct Paper") which is deposited and/or maintained
in the Direct Paper System of the Custodian pursuant to
Section 2.11.
2.2 Delivery of Securities. The Custodian shall release
and deliver domestic securities owned by the Fund held by
the Custodian or in a Securities System account of the
Custodian or in the Custodian's Direct Paper book entry
system account ("Direct Paper System Account") only upon
receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by mutual agreement of
the parties, and only in the following cases:
1) Sale. Upon sale of such securities for the
account of the Fund and receipt of payment
therefor;
2) Repurchase Agreement. Upon the receipt of payment
in connection with any repurchase agreement
related to such securities entered into by the
Fund;
3) Securities System. In the case of a sale effected
through a Securities System, in accordance with
the provisions of Section 2.10 hereof;
4) Tender Offer. To the depository agent or other
receiving agent in connection with tender or other
similar offers for portfolio securities of the
Fund;
5) Redemption by Issuer. To the issuer thereof or
its agent when such securities are called,
redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) Transfer to Issuer, Nominee. Exchange. To the
issuer thereof, or its agent, for transfer into
the name of the Fund or into the name of any
nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or
nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other
evidence representing the same aggregate face
amount or number of units and bearing the same
interest rate, maturity date and call provisions,
PAGE 6
if any; provided that, in any such case, the new
securities are to be delivered to the Custodian;
7) Sale to Broker or Dealer. Upon the sale of such
securities for the account of the Fund, to the
broker or its clearing agent or dealer, against a
receipt, for examination in accordance with
"street delivery" custom; provided that in any
such case, the Custodian shall have no
responsibility or liability for any loss arising
from the delivery of such securities prior to
receiving payment for such securities except as
may arise from the Custodian's failure to act in
accordance with its duties as set forth in
Section 12.
8) Exchange or Conversion. For exchange or
conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization,
split-up of shares, change of par value or
readjustment of the securities of the issuer of
such securities, or pursuant to provisions for
conversion contained in such securities, or
pursuant to any deposit agreement provided that,
in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
9) Warrants, Rights. In the case of warrants, rights
or similar securities, the surrender thereof in
the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or
temporary securities for definitive securities;
provided that, in any such case, the new
securities and cash, if any, are to be delivered
to the Custodian;
10) Loans of Securities. For delivery in connection
with any loans of securities made by the Fund, but
only against receipt of adequate collateral as
agreed upon from time to time by the Custodian and
the Fund, which may be in the form of cash,
obligations issued by the United States
government, its agencies or instrumentalities, or
such other property as mutually agreed by the
parties, except that in connection with any loans
for which collateral is to be credited to the
Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury,
the Custodian will not be held liable or
responsible for the delivery of securities owned
by the Fund prior to the receipt of such
collateral, unless the Custodian fails to act in
accordance with its duties set forth in
Article 12;
PAGE 7
11) Borrowings. For delivery as security in
connection with any borrowings by the Fund
requiring a pledge of assets by the Fund, but only
against receipt of amounts borrowed, except where
additional collateral is required to secure a
borrowing already made, subject to Proper
Instructions, further securities may be released
for that purpose;
12) Options. For delivery in accordance with the
provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange
Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing
Corporation, any registered national securities
exchange, any similar organization or
organizations, or the Investment Company Act of
1940, regarding escrow or other arrangements in
connection with transactions by the Fund;
13) Futures. For delivery in accordance with the
provisions of any agreement among the Fund, the
Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act,
relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any
Contract Market, any similar organization or
organizations, or the Investment Company Act of
1940, regarding account deposits in connection
with transactions by the Fund;
14) In-Kind Distributions. Upon receipt of
instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in
connection with distributions in kind, as may be
described from time to time in the Fund's
currently effective prospectus and statement of
additional information ("prospectus"), in
satisfaction of requests by holders of Shares for
repurchase or redemption;
15) Miscellaneous. For any other proper corporate
purpose, but only upon receipt of, in addition to
Proper Instructions, a certified copy of a
resolution of the Board of Directors/Trustees or
of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities to
be delivered, setting forth the purpose for which
such delivery is to be made, declaring such
PAGE 8
purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of
such securities shall be made; and
16) Type of Payment. In any or all of the above
cases, payments to the Fund shall be made in cash,
by a certified check upon or a treasurer's or
cashier's check of a bank, by effective bank wire
transfer through the Federal Reserve Wire System
or, if appropriate, outside of the Federal Reserve
Wire System and subsequent credit to the Fund's
Custodian account, or, in case of delivery through
a stock clearing company, by book-entry credit by
the stock clearing company in accordance with the
then current street custom, or such other form of
payment as may be mutually agreed by the parties,
in all such cases collected funds to be promptly
credited to the Fund.
2.3 Registration of Securities. Domestic securities held
by the Custodian (other than bearer securities) shall be
registered in the name of the Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian which
nominee shall be assigned exclusively to the Fund, unless
the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered
investment companies having the same investment adviser as
the Fund, or in the name or nominee name of any agent
appointed pursuant to Section 2.9 or in the name or nominee
name of any sub-custodian appointed pursuant to Article 1.
All securities accepted by the Custodian on behalf of the
Fund under the terms of this Contract shall be in "street
name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the United States in
the name of the Fund, subject only to draft or order by the
Custodian acting pursuant to the terms of this Contract, and
shall hold in such account or accounts, subject to the
provisions hereof all cash received by it from or for the
account of the Fund, other than cash maintained by the Fund
in a bank account established and used in accordance with
Rule 17f-3 under the Investment Company Act of 1940. Funds
held by the Custodian for the Fund may be deposited for the
Fund's credit in the Banking Department of the Custodian or
in such other banks or trust companies as the Custodian may
in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the
funds to be deposited with each such bank or trust company
shall be approved by vote of a majority of the Board of
Directors/Trustees of the Fund. Such funds shall be
PAGE 9
deposited by the Custodian in its capacity as Custodian and
shall be withdrawable by the Custodian only in that
capacity.
2.5 Sale of Shares and Availability of Federal Funds. Upon
mutual agreement between the Fund and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions,
make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for
Shares of the Fund which are deposited into the Fund's
account.
2.6 Collection of Income, Dividends. The Custodian shall
collect on a timely basis all income and other payments with
respect to United States registered securities held
hereunder to which the Fund shall be entitled either by law
or pursuant to custom in the securities business, and shall
collect on a timely basis all income and other payments with
respect to United States bearer securities if, on the date
of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such income
or other payments, as collected, to the Fund's custodian
account. Without limiting the generality of the foregoing,
the Custodian shall detach and present for payment all
coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on
securities held hereunder. The Custodian will also receive
and collect all stock dividends, rights and other items of
like nature as and when they become due or payable. Income
due the Fund on United States securities loaned pursuant to
the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty
or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be
necessary to assist the Fund in arranging for the timely
delivery to the Custodian of the income to which the Fund is
properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper
Instructions,
which may be continuing instructions when deemed appropriate
by mutual agreement of the parties, the Custodian shall pay
out monies of the Fund in the following cases only:
1) Purchases. Upon the purchase of domestic
securities, options, futures contracts or options
on futures contracts for the account of the Fund
but only (a) against the delivery of such
securities, or evidence of title to such options,
futures contracts or options on futures contracts,
to the Custodian (or any bank, banking firm or
trust company doing business in the United States
or abroad which is qualified under the Investment
PAGE 10
Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian
as its agent for this purpose in accordance with
Section 2.9 hereof) registered in the name of the
Fund or in the name of a nominee of the Fund or of
the Custodian referred to in Section 2.3 hereof or
in other proper form for transfer; (b) in the case
of a purchase effected through a Securities
System, in accordance with the conditions set
forth in Section 2.10 hereof or (c) in the case of
a purchase involving the Direct Paper System, in
accordance with the conditions set forth in
Section 2.11; or (d) in the case of repurchase
agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer
which is a member of NASD, (i) against delivery of
the securities either in certificate form or
through an entry crediting the Custodian's account
at the Federal Reserve Bank with such securities
or (ii) against delivery of the receipt evidencing
purchase by the Fund of securities owned by the
Custodian along with written evidence of the
agreement by the Custodian to repurchase such
securities from the Fund. All coupon bonds
accepted by the Custodian shall have the coupons
attached or shall be accompanied by a check
payable on coupon payable date for the interest
due on such date.
2) Exchanges. In connection with conversion,
exchange or surrender of securities owned by the
Fund as set forth in Section 2.2 hereof;
3) Redemptions. For the redemption or repurchase of
Shares issued by the Fund as set forth in Article
4 hereof;
4) Expense and Liability. For the payment of any
expense or liability incurred by the Fund,
including but not limited to the following
payments for the account of the Fund: interest,
taxes, management, accounting, transfer agent and
legal fees, and operating expenses of the Fund
whether or not such expenses are to be in whole or
part capitalized or treated as deferred expenses;
5) Dividends. For the payment of any dividends or
other distributions to shareholders declared
pursuant to the Governing Documents of the Fund;
6) Short Sale Dividend. For payment of the amount of
dividends received in respect of securities sold
short;
7) Loan. For repayment of a loan upon redelivery of
pledged securities and upon surrender of the
PAGE 11
note(s), if any, evidencing the loan;
8) Miscellaneous. For any other proper purpose, but
only upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of
the Board of Directors/Trustees or of the
Executive Committee of the Fund signed by an
officer of the Fund and certified by its Secretary
or an Assistant Secretary, specifying the amount
of such payment, setting forth the purpose for
which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be
made.
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased. In any and every case where payment
for purchase of domestic securities for the account of the
Fund is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the
Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been
received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time
or times in its discretion appoint (and may at any time
remove) any other bank or trust company, which is itself
qualified under the Investment Company Act of 1940, as
amended, to act as a custodian, as its agent to carry out
such of the provisions of this Article 2 as the Custodian
may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian of
its responsibilities or liabilities hereunder.
2.10 Deposit of Securities in Securities Systems. The
Custodian may deposit and/or maintain domestic securities
owned by the Fund in a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal
agencies, collectively referred to herein as "Securities
System" in accordance with applicable Federal Reserve Board
and Securities and Exchange Commission rules and
regulations, if any, and subject to the following
provisions:
1) Account of Custodian. The Custodian may keep
domestic securities of the Fund in a Securities
System provided that such securities are
represented in an account ("Account") of the
Custodian in the Securities System which shall not
include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise
PAGE 12
for customers;
2) Records. The records of the Custodian, with
respect to domestic securities of the Fund which
are maintained in a Securities System, shall
identify by book-entry those securities belonging
to the Fund;
3) Payment of Fund Monies, Delivery of Securities.
Subject to Section 2.7, the Custodian shall pay
for domestic securities purchased for the account
of the Fund upon (i) receipt of advice from the
Securities System that such securities have been
transferred to the Account, and (ii) the making of
an entry on the records of the Custodian to
reflect such payment and transfer for the account
of the Fund. Subject to Section 2.2, the
Custodian shall transfer domestic securities sold
for the account of the Fund upon (i) receipt of
advice from the Securities System that payment for
such securities has been transferred to the
Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer
and payment for the account of the Fund. Copies
of all advices from the Securities System of
transfers of domestic securities for the account
of the Fund shall identify the Fund, be maintained
for the Fund by the Custodian and be provided to
the Fund at its request. The Custodian shall
furnish the Fund confirmation of each transfer to
or from the account of the Fund in the form of a
written advice or notice and shall furnish to the
Fund copies of daily transaction sheets reflecting
each day's transactions in the Securities System
for the account of the Fund;
4) Reports. The Custodian shall provide the Fund
with any report obtained by the Custodian on the
Securities System's accounting system, internal
accounting control and procedures for safeguarding
domestic securities deposited in the Securities
System, and further agrees to provide the Fund
with copies of any documentation it has relating
to its arrangements with the Securities Systems as
set forth in this Agreement or as otherwise
required by the Securities and Exchange
Commission;
5) Annual Certificate. The Custodian shall have
received the initial or annual certificate, as the
case may be, required by Article 13 hereof;
6) Indemnification. Anything to the contrary in this
Contract notwithstanding, the Custodian shall be
liable to the Fund for any loss or expense,
PAGE 13
including reasonable attorneys fees, or damage to
the Fund resulting from use of the Securities
System by reason of any failure by the Custodian
or any of its agents or of any of its or their
employees or agents or from failure of the
Custodian or any such agent to enforce effectively
such rights as it may have against the Securities
System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the
Custodian with respect to any claim against the
Securities System or any other person which the
Custodian may have as a consequence of any such
loss, expense or damage if and to the extent that
the Fund has not been made whole for any such
loss, expense or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper
System. The Custodian may deposit and/or maintain
securities owned by the Fund in the Direct Paper System of
the Custodian subject to the following provisions:
1) No transaction relating to securities in the
Direct Paper System will be effected in the
absence of Proper Instructions;
2) The Custodian may keep securities of the Fund in
the Direct Paper System only if such securities
are represented in an account ("Account") of the
Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to
securities of the Fund which are maintained in the
Direct Paper System shall identify by book-entry
those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased
for the account of the Fund upon the making of an
entry on the records of the Custodian to reflect
such payment and transfer of securities to the
account of the Fund. The Custodian shall transfer
securities sold for the account of the Fund upon
the making of an entry on the records of the
Custodian to reflect such transfer and receipt of
payment for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation
of each transfer to or from the account of the
Fund, in the form of a written advice or notice,
of Direct Paper on the next business day following
such transfer and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's
transaction in the Securities System for the
account of the Fund;
PAGE 14
6) The Custodian shall provide the Fund with any
report on its system of internal accounting
control as the Fund may reasonably request from
time to time;
2.12 Segregated Account. The Custodian shall, upon receipt
of Proper Instructions, which may be of a continuing nature
where deemed appropriate by mutual agreement of the parties,
establish and maintain a segregated account or accounts for
and on behalf of the Fund, into which account or accounts
may be transferred cash and/or securities, including
securities maintained in an account by the Custodian
pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund, the Custodian
and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization
or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund, (ii) for purposes
of segregating cash or government securities in connection
with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or
sold by the Fund, (iii) for the purposes of compliance by
the Fund with the procedures required by Investment Company
Act Release No. 10666, or any subsequent release, rule or
policy, of the Securities and Exchange Commission relating
to the maintenance of segregated accounts by registered
investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt
of, in addition to Proper Instructions, a certified copy of
a resolution of the Board of Directors/Trustees or of the
Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary,
setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate
purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to domestic securities of the Fund held by it and in
connection with transfers of such securities.
2.14 Proxies. If the securities are registered other than
in the name of the Fund or a nominee of the Fund, the
Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the
PAGE 15
registered holder of such securities, all proxies, without
indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Fund such proxies,
all proxy soliciting materials and all notices relating to
such securities.
2.15 Communications Relating to Fund Portfolio Securities.
The Custodian shall transmit promptly to the Fund all
written information (including, without limitation, pendency
of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the
maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers of the domestic
securities being held for the Fund by the Custodian, an
agent appointed under Section 2.9, or sub-custodian
appointed under Section 1. With respect to tender or
exchange offers, the Custodian shall transmit promptly to
the Fund all written information received by the Custodian,
an agent appointed under Section 2.9, or sub-custodian
appointed under Section 1 from issuers of the domestic
securities whose tender or exchange is sought and from the
party (or his agents) making the tender or exchange offer.
If the Fund desires to take action with respect to any
tender offer, exchange offer or any other similar
transaction, the Fund shall notify the Custodian of such
desired action at least 72 hours (excluding holidays and
weekends) prior to the time such action must be taken under
the terms of the tender, exchange offer, or other similar
transaction, and it will be the responsibility of the
Custodian to timely transmit to the appropriate person(s)
the Fund's notice. Where the Fund does not notify the
Custodian of its desired action within the aforesaid 72 hour
period, the Custodian shall use its best efforts to timely
transmit the Fund's notice to the appropriate person.
2.16 Reports to Fund by Independent Public Accountants. The
Custodian shall provide the Fund, at such times as the Fund
may reasonably require, with reports by independent public
accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including
domestic securities deposited and/or maintained in a
Securities System, relating to the services provided by the
Custodian under this Contract; such reports shall be of
sufficient scope and in sufficient detail, as may reasonably
be required by the Fund to provide reasonable assurance that
any material inadequacies existing or arising since the
prior examination would be disclosed by such examination.
The reports must describe any material inadequacies
disclosed and, if there are no such inadequacies, the
reports shall so state.
PAGE 16
3. Duties of the Custodian with Respect to Property of the Fund
Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Custodian
is authorized and instructed to employ Chase Manhattan Bank,
N.A, ("Chase") as sub-custodian for the Fund's securities,
cash and other assets maintained outside of the United
States ("foreign assets") all as described in the
Subcustodian Agreement between the Custodian and Chase.
Upon receipt of "Proper Instructions", together with a
certified resolution of the Fund's Board of
Directors/Trustees, the Custodian and the Fund may agree to
designate additional proper institutions and foreign
securities depositories to act as sub-custodians of the
Fund's foreign assets. Upon receipt of Proper Instructions
from the Fund, the Custodian shall cease the employment of
any one or more of such sub-custodians for maintaining
custody of the Fund's foreign assets.
3.2 Assets to be Held. The Custodian shall limit the
foreign assets maintained in the custody of foreign sub-
custodians to foreign assets specified under the terms of
the Subcustodian Agreement between the Custodian and Chase.
3.3 Foreign Securities Depositories. Except as may
otherwise be agreed upon in writing by the Custodian and the
Fund, foreign assets of the Fund shall be maintained in
foreign securities depositories only through arrangements
implemented by the banking institutions serving as sub-
custodians pursuant to the terms hereof.
3.4 Segregation of Securities. The Custodian shall
identify on its books as belonging to the Fund, the foreign
assets of the Fund held by Chase and by each foreign sub-
custodian.
3.5 Access of Independent Accountants of the Fund. Upon
request of the Fund, the Custodian will use its best efforts
(subject to applicable law) to arrange for the independent
accountants, officers or other representatives of the Fund
or the Custodian to be afforded access to the books and
records of Chase and any banking or other institution
employed as a sub-custodian for the Fund by Chase or the
Custodian insofar as such books and records relate to the
performance of Chase or such banking or other institution
under any agreement with the Custodian or Chase. Upon
request of the Fund, the Custodian shall furnish to the Fund
such reports (or portions thereof) of Chase's external
auditors as are available to the Custodian and which relate
directly to Chase's system of internal accounting controls
applicable to Chase's duties as a subcustodian or which
relate to the internal accounting controls of any
subcustodian employed by Chase with respect to foreign
assets of the Fund.
PAGE 17
3.6 Reports by Custodian. The Custodian will supply to the
Fund from time to time, as mutually agreed upon, statements
in respect of the foreign assets of the Fund held pursuant
to the terms of the Subcustodian Agreement between the
Custodian and Chase, including but not limited, to an
identification of entities having possession of the Fund's
foreign assets and advices or notifications of any transfers
of foreign assets to or from each custodial account
maintained by any sub-custodian on behalf of the Fund
indicating, as to foreign assets acquired for the Fund, the
identity of the entity having physical possession of such
foreign assets.
3.7 Transactions in Foreign Assets of the Fund. All
transactions with respect to the Fund's foreign assets shall
be in accordance with, and subject to, the provisions of the
Subcustodian Agreement between Chase and the Custodian.
3.8 Responsibility of Custodian, Sub-Custodian, and Fund.
Notwithstanding anything to the contrary in this Custodian
Contract, the Custodian shall not be liable to the Fund for
any loss, damage, cost, expense, liability or claim arising
out of or in connection with the maintenance of custody of
the Fund's foreign assets by Chase or by any other banking
institution or securities depository employed pursuant to
the terms of any Subcustodian Agreement between Chase and
the Custodian, except that the Custodian shall be liable for
any such loss, damage, cost, expense, liability or claim to
the extent provided in the Subcustodian Agreement between
Chase and the Custodian or attributable to the failure of
the Custodian to exercise the standard of care set forth in
Article 12 hereof in the performance of its duties under
this Contract or such Subcustodian Agreement. At the
election of the Fund, the Fund shall be entitled to be
subrogated to the rights of the Custodian under the
Subcustodian Agreement with respect to any claims arising
thereunder against Chase or any other banking institution or
securities depository employed by Chase if and to the extent
that the Fund has not been made whole therefor. As between
the Fund and the Custodian, the Fund shall be solely
responsible to assure that the maintenance of foreign
securities and cash pursuant to the terms of the
Subcustodian Agreement complies with all applicable rules,
regulations, interpretations and orders of the Securities
and Exchange Commission, and the Custodian assumes no
responsibility and makes no representations as to such
compliance.
3.9 Monitoring Responsibilities. With respect to the
Fund's foreign assets, the Custodian shall furnish annually
to the Fund, during the month of June, information
concerning the sub-custodians employed by the Custodian.
PAGE 18
Such information shall be similar in kind and scope to that
furnished to the Fund in connection with the initial
approval of this Contract. In addition, the Custodian will
promptly inform the Fund in the event that the Custodian
learns of a material adverse change in the financial
condition of a sub-custodian.
3.10 Branches of U.S. Banks. Except as otherwise set forth
in this Contract, the provisions of this Article 3 shall not
apply where the custody of the Fund's assets is maintained
in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment
Company Act of 1940 which meets the qualification set forth
in Section 26(a) of said Act. The appointment of any such
branch as a sub-custodian shall be governed by Section 1 of
this Contract.
4. Payments for Repurchases or Redemptions and Sales of Shares
of the Fund
From such funds as may be available for the purpose but
subject to the limitations of the Governing Documents of the Fund
and any applicable votes of the Board of Directors/Trustees of
the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer
Agent a request for redemption or repurchase of their Shares. In
connection with the redemption or repurchase of Shares of the
Fund, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholder. In connection with
the redemption or repurchase of Shares of the Fund, the Custodian
shall honor checks drawn on the Custodian by a holder of Shares,
which checks have been furnished by the Fund to the holder of
Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to
time between the Fund and the Custodian.
The Custodian shall receive from the distributor for the
Fund's Shares or from the Transfer Agent of the Fund and deposit
as received into the Fund's account such payments as are received
for Shares of the Fund issued or sold from time to time by the
Fund. The Custodian will provide timely notification to the Fund
and the Transfer Agent of any receipt by it of payments for
Shares of the Fund.
5. Proper Instructions
Proper Instructions as used herein means a writing signed or
initialled by one or more person or persons as the Board of
Directors/Trustees shall have from time to time authorized. Each
such writing shall set forth the specific transaction or type of
transaction involved, including a specific statement of the
purpose for which such action is requested, or shall be a blanket
instruction authorizing specific transactions of a repeated or
PAGE 19
routine nature. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all
oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the
authorization by the Board of Directors/Trustees of the Fund
accompanied by a detailed description of procedures approved by
the Board of Directors/Trustees, Proper Instructions may include
communications effected directly between electro-mechanical or
electronic devices provided that the Board of Directors/Trustees
and the Custodian are satisfied that such procedures afford
adequate safeguards for the Fund's assets.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express
authority from the Fund:
1) make payments to itself or others for minor
expenses of handling securities or other similar
items relating to its duties under this Contract,
provided that all such payments shall be accounted
for to the Fund;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the Fund,
checks, drafts and other negotiable instruments on
the same day as received; and
4) in general, attend to all non-discretionary
details in connection with the sale, exchange,
substitution, purchase, transfer and other
dealings with the securities and property of the
Fund except as otherwise directed by the Board of
Directors/Trustees of the Fund.
7. Evidence of Authority, Reliance on Documents
The Custodian shall be protected in acting upon any
instructions, notice, request, consent, certificate or other
instrument or paper reasonably and in good faith believed by it
to be genuine and to have been properly executed by or on behalf
of the Fund in accordance with Article 5 hereof. The Custodian
may receive and accept a certified copy of a vote of the Board of
Directors/Trustees of the Fund as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or
(b) of any determination or of any action by the Board of
Directors/Trustees pursuant to the Governing Documents of the
Fund as described in such vote, and such vote may be considered
as in full force and effect until receipt by the Custodian of
written notice to the contrary. So long as and to the extent
that it is in the exercise of the standard of care set forth in
Article 12 hereof, the Custodian shall not be responsible for the
title, validity or genuineness of any property or evidence of
title thereto received by it or delivered by it pursuant to this
PAGE 20
Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party
or parties.
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary
information to the person or persons appointed by the Board of
Directors/Trustees of the Fund to keep the books of account of
the Fund and/or compute the net asset value per share of the
outstanding shares of the Fund or, if directed in writing to do
so by the Fund, shall itself keep such books of account and/or
compute such net asset value per share. If so directed, the
Custodian shall also calculate daily the net income of the Fund
as described in the Fund's currently effective prospectus and
shall advise the Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an
officer of the Fund to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various
components. The calculations of the net asset value per share
and the daily income of the Fund shall be made at the time or
times and in the manner described from time to time in the Fund's
currently effective prospectus.
9. Records, Inventory
The Custodian shall create and maintain all records relating
to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the
Investment Company Act of 1940, with particular attention to
Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the
Fund. All such records shall be the property of the Fund and
shall at all times during the regular business hours of the
Custodian be open for inspection and audit by duly authorized
officers, employees or agents of the Fund and employees and
agents of the Securities and Exchange Commission, and, in the
event of termination of this Agreement, will be delivered in
accordance with Section 14 hereof. The Custodian shall, at the
Fund's request, supply the Fund with a tabulation of securities
owned by the Fund and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall
be agreed upon between the Fund and the Custodian, include
certificate numbers in such tabulations. The Custodian shall
conduct a periodic inventory of all securities and other property
subject to this Agreement and provide to the Fund a periodic
reconciliation of the vaulted position of the Fund to the
appraised position of the Fund. The Custodian will promptly
report to the Fund the results of the reconciliation, indicating
any shortages or discrepancies uncovered thereby, and take
appropriate action to remedy any such shortages or discrepancies.
PAGE 21
10. Opinion of Fund's Independent Accountant
The Custodian shall cooperate with the Fund's independent
public accountants in connection with the annual and other audits
of the books and records of the Fund and take all reasonable
action, as the Fund may from time to time request, to provide
from year to year the necessary information to such accountants
for the expression of their opinion without any qualification as
to the scope of their examination, including but not limited to,
any opinion in connection with the preparation of the Fund's Form
N-lA, and Form N-SAR or other annual reports to the Securities
and Exchange Commission and with respect to any other
requirements of such Commission.
11. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation
for its services and expenses as Custodian, as agreed upon from
time to time between the Fund and the Custodian.
12. Responsibility of Custodian
Notwithstanding anything to the contrary in this Agreement,
the Custodian shall be held to the exercise of reasonable care in
carrying out the provisions of this Contract, but shall be kept
indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence.
In order for the indemnification provision contained in this
Section to apply, it is understood that if in any case the Fund
may be asked to indemnify or save the Custodian harmless, the
Fund shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further
understood that the Custodian will use all reasonable care to
identify and notify the Fund promptly concerning any situation
which presents or appears likely to present the probability of
such a claim for indemnification against the Fund. The Fund,
shall have the option to defend the Custodian against any claim
which may be the subject of this indemnification, and in the
event that the Fund so elects, it will so notify the Custodian,
and thereupon the Fund shall take over complete defense of the
claim and the Custodian shall in such situation initiate no
further legal or other expenses for which it shall seek
indemnification under this Section. The Custodian shall in no
case confess any claim or make any compromise in any case in
which the Fund will be asked to indemnify the Custodian except
with the Fund's prior written consent. Nothing herein shall be
construed to limit any right or cause of action on the part of
the Custodian under this Contract which is independent of any
right or cause of action on the part of the Fund. The Custodian
shall be entitled to rely on and may act upon advice of counsel
(who may be counsel for the Fund or such other counsel as may be
agreed to by the parties) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to
such advice. Notwithstanding the foregoing, the responsibility
PAGE 22
of the Custodian with respect to redemptions effected by check
shall be in accordance with a separate Agreement entered into
between the Custodian and the Fund.
If the Fund requires the Custodian to take any action with
respect to securities, which action involves the payment of money
or which action may, in the opinion of the Custodian, result in
the Custodian or its nominee assigned to the Fund being liable
for the payment of money or incurring liability of some other
form, the Fund, as a prerequisite to requiring the Custodian to
take such action, shall provide indemnity to the Custodian in an
amount and form satisfactory to it.
If the Fund requires the Custodian to advance cash or
securities for any purpose or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to
act or willful misconduct, any property at any time held for the
account of the Fund shall be security therefor and should the
Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of the Fund's
assets to the extent necessary to obtain reimbursement, provided
that the Custodian gives the Fund reasonable notice to repay such
cash or securities advanced, however, such notice shall not
preclude the Custodian's right to assert any lien under this
provision.
13. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution,
shall continue in full force and effect until terminated as
hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either
party by an instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take effect not
sooner than sixty (60) days after the date of such delivery or
mailing in the case of a termination by the Fund, and not sooner
than 180 days after the date of such delivery or mailing in the
case of a termination by the Custodian; provided, however that
the Custodian shall not act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or
an Assistant Secretary that the Board of Directors/Trustees of
the Fund has approved the initial use of a particular Securities
System and the receipt of an annual certificate of the Secretary
or an Assistant Secretary that the Board of Directors/Trustees
has reviewed the use by the Fund of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company
Act of 1940, as amended and that the Custodian shall not act
under Section 2.11 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the
Board of Directors/Trustees has approved the initial use of the
Direct Paper System and the receipt of an annual certificate of
PAGE 23
the Secretary or an Assistant Secretary that the Board of
Directors/Trustees has reviewed the use by the Fund of the Direct
Paper System; provided further, however, that the Fund shall not
amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the
Governing Documents of the Fund, and further provided, that the
Fund may at any time by action of its Board of Directors/Trustees
(i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event
at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements, provided that the Custodian
shall not incur any costs, expenses or disbursements specifically
in connection with such termination unless it has received prior
approval from the Fund, which approval shall not be unreasonably
withheld.
14. Successor Custodian
If a successor custodian shall be appointed by the Board of
Directors/Trustees of the Fund, the Custodian shall, upon
termination, deliver to such successor custodian at the office of
the Custodian, duly endorsed and in the form for transfer, all
securities, funds and other properties then held by it hereunder
and shall transfer to an account of the successor custodian all
of the Fund's securities held in a Securities System. The
Custodian shall also use its best efforts to assure that the
successor custodian will continue any subcustodian agreement
entered into by the Custodian and any subcustodian on behalf of
the Fund.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified copy
of a vote of the Board of Directors/Trustees of the Fund, deliver
at the office of the Custodian and transfer such securities,
funds and other properties in accordance with such vote.
In the event that no written order designating a successor
custodian or certified copy of a vote of the Board of
Directors/Trustees shall have been delivered to the Custodian on
or before the date when such termination shall become effective,
then the Custodian shall have the right to deliver to a bank
or trust company, which is a "bank" as defined in the Investment
Company Act of 1940, doing business in Boston, Massachusetts, of
its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not
PAGE 24
less than $25,000,000, all securities, funds and other properties
held by the Custodian and all instruments held by the Custodian
relative thereto and all other property held by it under this
Contract and to transfer to an account of such successor
custodian all of the Fund's securities held in any Securities
System. Thereafter, such bank or trust company shall be the
successor of the Custodian under this Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to procure the
certified copy of the vote referred to or of the Board of
Directors/Trustees to appoint a successor custodian, the
Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such
securities, funds and other properties and the provisions of this
Contract relating to the duties and obligations of the Custodian
shall remain in full force and effect. If while this Contract is
in force the Fund shall be liquidated pursuant to law, the
Custodian shall distribute, either in cash or (if the Fund so
orders) in the portfolio securities and other assets of the Fund,
pro rata among the holders of shares of the Fund as certified by
the Transfer Agent, the property of the Fund which remains after
paying or satisfying all expenses and liabilities of the Fund.
Section 12 hereof shall survive any termination of this Contract.
15. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Fund may from time to time agree on such
provisions interpretive of or in addition to the provisions of
this Contract as may in their joint opinion be consistent with
the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Governing Documents of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Contract.
16. Notice
Any notice shall be sufficiently given when sent by
registered or certified mail, or by such other means as the
parties shall agree, to the other party at the address of such
party set forth above or at such other address as such party may
from time to time specify in writing to the other party.
17. Bond
The Custodian shall, at all times, maintain a bond in such
form and amount as is acceptable to the Fund which shall be
issued by a reputable fidelity insurance company authorized to do
business in the place where such bond is issued against larceny
PAGE 25
and embezzlement, covering each officer and employee of the
Custodian who may, singly or jointly with others, have access to
securities or funds of the Fund, either directly or through
authority to receive and carry out any certificate instruction,
order request, note or other instrument required or permitted by
this Agreement. The Custodian agrees that it shall not cancel,
terminate or modify such bond insofar as it adversely affects the
Fund except after written notice given to the Fund not less than
10 days prior to the effective date of such cancellation,
termination or modification. The Custodian shall furnish to the
Fund a copy of each such bond and each amendment thereto.
18. Confidentiality
The Custodian agrees to treat all records and other
information relative to the Fund and its prior, present or future
shareholders as confidential, and the Custodian, on behalf of
itself and its employees, agrees to keep confidential all such
information except, after prior notification to and approval in
writing by the Fund, which approval shall not be unreasonably
withheld and may not be withheld where the Custodian may be
exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Fund.
19. Exemption from Liens
The securities and other assets held by the Custodian for
the Fund shall be subject to no lien or charge of any kind in
favor of the Custodian or any person claiming through the
Custodian, but nothing herein shall be deemed to deprive the
Custodian of its right to invoke any and all remedies available
at law or equity to collect amounts due it under this Agreement.
Neither the Custodian nor any sub-custodian appointed pursuant to
Section 1 hereof shall have any power or authority to assign,
hypothecate, pledge or otherwise dispose of any securities held
by it for the Fund, except upon the direction of the Fund, duly
given as herein provided, and only for the account of the Fund.
20. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth
of Massachusetts.
21. Prior Contracts
Without derogating any of the rights established by such
contracts, this Contract supersedes and terminates, as of the
date hereof, all prior contracts between the Fund and the
Custodian relating to the custody of the Fund's assets.
22. The Parties
All references herein to "the Fund" are to each of the funds
listed on Appendix A individually, as if this Contract were
between such individual fund and the Custodian. In the case of a
series fund or trust, all references to "the Fund" are to the
individual series or portfolio of such fund or trust, or to such
fund or trust on behalf of the individual series or portfolio, as
PAGE 26
appropriate. Any reference in this Contract to "the parties"
shall mean the Custodian and such other individual Fund as to
which the matter pertains.
23. Governing Documents.
The term "Governing Documents" means the Articles of
Incorporation, Agreement of Trust, By-Laws and Registration
Statement filed under the Securities Act of 1933, as amended from
time to time.
24. Subcustodian Agreement.
Reference to the "Subcustodian Agreement" between the
Custodian and Chase shall mean any such agreement which shall be
in effect from time to time between Chase and the Custodian with
respect to foreign assets of the Fund.
25. Directors and Trustees.
It is understood and is expressly stipulated that neither
the holders of shares in the Fund nor any Directors or Trustees
of the Fund shall be personally liable hereunder.
26. Massachusetts Business Trust
With respect to any Fund which is a party to this Contract
and which is organized as a Massachusetts business trust, the
term Fund means and refers to the trustees from time to time
serving under the applicable trust agreement (Declaration of
Trust) of such Trust as the same may be amended from time to
time. It is expressly agreed that the obligations of any such
Trust hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the
Trust, personally, but bind only the trust property of the Trust,
as provided in the Declaration of Trust of the Trust. The
execution and delivery of this Contract has been authorized by
the trustees and signed by an authorized officer of the Trust,
acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officer shall be deemed
to have been made by any of them but shall bind only the trust
property of the Trust as provided in its Declaration of Trust.
27. Successors of Parties.
This Contract shall be binding on and shall inure to the
benefit of the Fund and the Custodian and their respective
successors.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the dates indicated below.
DATED: September 28, 1987
__________________
PAGE 27
STATE STREET BANK AND TRUST
COMPANY
ATTEST:
/s/Kathleen M. Kubit By/s/Charles Cassidy
_____________________ _________________________________
Assistant Secretary Vice President
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Stock Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
PAGE 28
(SIGNATURES CONTINUED)
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
New York Tax-Free Money Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
New York Tax-Free Bond Fund
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
DATED: September 28, 1987
___________________
ATTEST:
/s/Nancy J. Wortman By/s/Carmen F. Deyesu
____________________________ __________________________________
PAGE 29
Appendix A
The following Funds are parties to this Agreement and have
so indicated their intention to be bound by such Agreement by
executing the Agreement on the dates indicated thereon.
T. Rowe Price California Tax-Free Income Trust on behalf of
the
California Tax-Free Bond Fund and
California Tax-Free Money Fund
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Equity Income Fund
T. Rowe Price GNMA Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Institutional Trust on behalf of the
Tax-Exempt Reserve Portfolio
T. Rowe Price International Trust on behalf of the
T. Rowe Price International Bond Fund and
T. Rowe Price International Stock Fund
T. Rowe Price New America Growth Fund
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Prime Reserve Fund, Inc.
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price State Tax-Free Income Trust on behalf of the
Maryland Tax-Free Bond Fund,
New York Tax-Free Bond Fund and
New York Tax-Free Money Fund
T. Rowe Price Tax-Exempt Money Fund, Inc.
T. Rowe Price Tax-Free High Yield Fund, Inc.
T. Rowe Price Tax-Free Income Fund, Inc.
T. Rowe Price Tax-Free Short-Intermediate Fund, Inc.
T. Rowe Price U.S. Treasury Money Fund, Inc.
PAGE 30
AMENDMENT NO. 1 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
THIS AGREEMENT, made as of this 24th day of June, 1988, by
and between: T. Rowe Price Growth Stock Fund, Inc., T. Rowe Price
New Horizons Fund, Inc., T. Rowe Price New Era Fund, Inc., T.
Rowe Price New Income Fund, Inc., T. Rowe Price Prime Reserve
Fund, Inc., T. Rowe Price International Trust, T. Rowe Price U.S.
Treasury Money Fund, Inc., T. Rowe Price Growth & Income Fund,
Inc., T. Rowe Price Tax-Exempt Money Fund, Inc., T. Rowe Price
Tax-Free Income Fund, Inc., T. Rowe Price Tax-Free Short-
Intermediate Fund, Inc., T. Rowe Price Short-Term Bond Fund,
Inc., T. Rowe Price High Yield Fund, Inc., T. Rowe Price Tax-Free
High Yield Fund, Inc., T. Rowe Price New America Growth Fund, T.
Rowe Price Equity Income Fund, T. Rowe Price GNMA Fund, T. Rowe
Price Capital Appreciation Fund, T. Rowe Price Institutional
Trust, T. Rowe Price State Tax-Free Income Trust, T. Rowe Price
California Tax-Free Income Trust, T. Rowe Price Science &
Technology Fund, Inc., (hereinafter together called the "Funds"
and individually "Fund") and State Street Bank and Trust Company,
a Massachusetts trust,
W I T N E S S E T H:
It is mutually agreed that the Custodian Contract made by
the parties on the 28th day of September, 1987, is hereby amended
by adding thereto the T. Rowe Price Small-Cap Value Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE NEW HORIZONS FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE NEW ERA FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
PAGE 31
(SIGNATURES CONTINUED)
T. ROWE PRICE NEW INCOME FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE PRIME RESERVE FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE INTERNATIONAL TRUST
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
/s/Henry H.Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE GROWTH & INCOME FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
PAGE 32
(SIGNATURES CONTINUED)
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE HIGH YIELD FUND, INC.
/s/ Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE NEW AMERICA GROWTH FUND
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE EQUITY INCOME FUND
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE GNMA FUND
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE CAPITAL APPRECIATION FUND
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE INSTITUTIONAL TRUST
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
PAGE 33
(SIGNATURES CONTINUED)
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
STATE STREET BANK AND TRUST COMPANY
/s/William Blackwell
______________________________________________
By:
PAGE 34
AMENDMENT NO. 2 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, between State Street Bank and Trust Company and
each of the Parties listed on Appendix A thereto is hereby
further amended, as of October 19, 1988, by adding thereto the T.
Rowe Price International Discovery Fund, Inc., a separate series
of T. Rowe Price International Trust.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
PAGE 35
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Guy R. Sturgeon
______________________________________________
By:
PAGE 36
AMENDMENT NO. 3 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988 and October 19, 1988, between State Street Bank and
Trust Company and each of the Parties listed on Appendix A
thereto is hereby further amended, as of February 22, 1989, by
adding thereto the T. Rowe Price International Equity Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
PAGE 37
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
STATE STREET BANK AND TRUST COMPANY
/s/K. Donelson
______________________________________________
By:
PAGE 38
AMENDMENT NO. 4 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988 and February 22, 1989, between
State Street Bank and Trust Company and each of the Parties
listed on Appendix A thereto is hereby further amended, as of
July 19, 1989, by adding thereto the Institutional International
Funds, Inc., on behalf of the Foreign Equity Fund.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
PAGE 39
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
/s/Henry H. Hopkins
______________________________________________
By: Henry H. Hopkins
Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
______________________________________________
By:
PAGE 40
AMENDMENT NO. 5 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, and July 19,
1989 between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of September 15, 1989, by adding thereto the T. Rowe Price
U.S. Treasury Funds, Inc., on behalf of the U.S. Treasury
Intermediate Fund and the U.S. Treasury Long-Term Fund.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
PAGE 41
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
/s/Henry H. Hopkins
____________________________________
By: Henry H. Hopkins
Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
____________________________________
By:
PAGE 42
AMENDMENT NO. 6 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19, 1989
and September 15, 1989, between State Street Bank and Trust
Company and each of the Parties listed on Appendix A thereto is
hereby further amended, as of December 15, 1989, by restating
Section 2.15 as follows:
2.15 Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Fund all written
information (including, without limitation, pendency of calls and
maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put
options written by the Fund and the maturity of futures contracts
purchased or sold by the Fund) received by the Custodian from
issuers of the domestic securities being held for the Fund by the
Custodian, an agent appointed under Section 2.9, or sub-custodian
appointed under Section 1. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund all
written information received by the Custodian, an agent appointed
under Section 2.9, or sub-custodian appointed under Section 1
from issuers of the domestic securities whose tender or exchange
is sought and from the party (or his agents) making the tender or
exchange offer. If the Fund desires to take action with respect
to any tender offer, exchange offer or any other similar
transaction, the Fund shall notify the Custodian of such desired
action at least 48 hours (excluding holidays and weekends) prior
to the time such action must be taken under the terms of the
tender, exchange offer, or other similar transaction, and it will
be the responsibility of the Custodian to timely transmit to the
appropriate person(s) the Fund's notice. Where the Fund does not
notify the custodian of its desired action within the aforesaid
48 hour period, the Custodian shall use its best efforts to
timely transmit the Fund's notice to the appropriate person. It
is expressly noted that the parties may negotiate and agree to
alternative procedures with respect to such 48 hour notice period
on a selective and individual basis.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
PAGE 43
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.
PAGE 44
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U. S. TREASURY FUNDS, INC.
U. S. Treasury Intermediate Fund
U. S. Treasury Long-Term Fund
/s/Carmen F. Deyesu
_________________________________________
By: Carmen F. Deyesu,
Treasurer
STATE STREET BANK AND TRUST COMPANY
/s/ E. D. Hawkes, Jr.
_________________________________________
By: E. D. Hawkes, Jr.
Vice President
PAGE 45
Amendment No. 7 filed on Form SE January 25, 1990 with
International Trust (CIK 313212) Post Effective Amendment No. 17.
PAGE 46
AMENDMENT NO. 8 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, and December 20,
1989, between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of January 25, 1990, by adding thereto the T. Rowe Price
European Stock Fund, a separate series of T. Rowe Price
International Trust.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
PAGE 47
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
/s/Henry H. Hopkins
_________________________________________
By: Henry H. Hopkins
Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
_________________________________________
By:
PAGE 48
AMENDMENT NO. 9 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
and January 25, 1990 between State Street Bank and Trust Company
and each of the Parties listed on Appendix A thereto is hereby
further amended, as of February 21, 1990, by adding thereto the
T. Rowe Price Index Trust, Inc., on behalf of the T. Rowe Price
Equity Index Fund.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
PAGE 49
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins
Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
______________________________________
By:
PAGE 50
AMENDMENT NO. 10 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, between State Street Bank
and Trust Company and each of the Parties listed on Appendix A
thereto is hereby further amended, as of June 12, 1990, by adding
thereto the T. Rowe Price Spectrum Fund, Inc., on behalf of the
Spectrum Growth Fund and the Spectrum Income Fund.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL TRUST
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. ROWE PRICE U.S. TREASURY MONEY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
PAGE 51
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
______________________________________
By:
PAGE 52
AMENDMENT NO. 11 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, and June 12, 1990 between
State Street Bank and Trust Company and each of the Parties
listed on Appendix A thereto is hereby further amended, as of
July 18, 1990, by adding thereto the T. Rowe Price New Asia Fund,
a separate series of the T. Rowe Price International Funds, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
PAGE 53
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/ Guy R. Sturgeon
______________________________________
By: Guy R. Sturgeon
PAGE 54
AMENDMENT NO. 12 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, and July 18,
1990 between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of October 15, 1990, by adding thereto the T. Rowe Price
Global Government Bond Fund, a separate series of the T. Rowe
Price International Funds, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
PAGE 55
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE INSTITUTIONAL TRUST
Tax-Exempt Reserve Portfolio
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/ Guy R. Sturgeon
______________________________________
By:
PAGE 56
AMENDMENT NO. 13 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, and October 15, 1990, between State Street Bank and Trust
Company and each of the Parties listed on Appendix A thereto is
hereby further amended, as of February 13, 1991, by adding
thereto the Virginia Tax-Free Bond Fund and New Jersey Tax-Free
Bond Fund, two separate series of the T. Rowe Price State Tax-
Free Income Trust
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
PAGE 57
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/ Guy Sturgeon
______________________________________
By: Vice President
PAGE 58
AMENDMENT NO. 14 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, and February 13, 1991, between State
Street Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of March 6,
1991, by adding thereto the T. Rowe Price Balanced Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
PAGE 59
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
______________________________________
By:
PAGE 60
AMENDMENT NO. 15 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, and March 6, 1991,
between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of September 12, 1991, by adding thereto the T. Rowe Price
Adjustable Rate U.S. Government Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
PAGE 61
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S.
GOVERNMENT FUND, INC.
/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President
PAGE 62
STATE STREET BANK AND TRUST COMPANY
/s/
______________________________________
By:
PAGE 63
AMENDMENT NO. 16 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991 and
September 12, 1991, between State Street Bank and Trust Company
and each of the Parties listed on Appendix A thereto is hereby
further amended, as of November 6, 1991, by adding thereto the T.
Rowe Price Japan Fund, a separate series of the T. Rowe Price
International Funds, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
PAGE 64
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY
FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL
EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S.
GOVERNMENT FUND, INC.
PAGE 65
/s/Henry H. Hopkins
_____________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
______________________________________
By:
PAGE 66
AMENDMENT NO. 17 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991 and November 6, 1991, between State Street
Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of April 23,
1992, by adding thereto the T. Rowe Price Mid-Cap Growth Fund,
Inc. and T. Rowe Price Short-Term Global Income Fund, a separate
series of the T. Rowe Price International Funds, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
PAGE 67
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
PAGE 68
/s/Henry H. Hopkins
_________________________________
By:Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
____________________________________
By:
PAGE 69
AMENDMENT NO. 18 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, and April 23, 1992, between
State Street Bank and Trust Company and each of the Parties
listed on Appendix A thereto is hereby further amended, as of
September 2, 1992, by adding thereto the T. Rowe Price OTC Fund,
a series of the T. Rowe Price OTC Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
PAGE 70
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
PAGE 71
/s/Henry H. Hopkins
__________________________________
By:Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
__________________________________
By:
PAGE 72
AMENDMENT NO. 19 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, and
September 2, 1992, between State Street Bank and Trust Company
and each of the Parties listed on Appendix A thereto is hereby
further amended, as of November 3, 1992, by adding thereto the T.
Rowe Price Tax-Free Insured Intermediate Bond Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
PAGE 73
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
PAGE 74
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
/s/Henry H. Hopkins
_________________________________________
By:Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
_________________________________________
By:
PAGE 75
AMENDMENT NO. 20 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, and November 3, 1992, between State Street Bank and
Trust Company and each of the Parties listed on Appendix A
thereto is hereby further amended, as of December 16, 1992, by
adding thereto the T. Rowe Price Dividend Growth Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
PAGE 76
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
PAGE 77
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
/s/Henry H. Hopkins
_________________________________________
By:Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
_________________________________________
By:
PAGE 78
AMENDMENT NO. 21 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, and December 16, 1992, between State
Street Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of December 21,
1992, by adding thereto the Maryland Short-Term Tax-Free Bond
Fund, an additional series to the T. Rowe Price State Tax-Free
Income Trust.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
PAGE 79
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
PAGE 80
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
/s/Henry H. Hopkins
_________________________________________
By:Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
_________________________________________
By:
PAGE 81
AMENDMENT NO. 22 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, and December 21,
1992, between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended,
as of January 28, 1993, by adding thereto the Georgia Tax-Free
Bond Fund and the Florida Insured Intermediate Tax-Free Fund,
additional series to the T. Rowe Price State Tax-Free Income
Trust.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
PAGE 82
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
PAGE 83
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
/s/Henry H. Hopkins
_________________________________________
By:Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
_________________________________________
By:
PAGE 84
AMENDMENT NO. 23 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
and January 28, 1993, between State Street Bank and Trust Company
and each of the Parties listed on Appendix A thereto is hereby
further amended, as of April 22, 1993, by adding thereto the T.
Rowe Price Blue Chip Growth Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
PAGE 85
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
PAGE 86
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
/s/Henry H. Hopkins
_________________________________________
By:Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
__________________________________________
By:
PAGE 87
AMENDMENT NO. 24 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, between State Street Bank and
Trust Company and each of the Parties listed on Appendix A
thereto is hereby further amended, as of September 16, 1993, by
adding thereto the T. Rowe Price Summit Funds, Inc. and T. Rowe
Price Summit Municipal Funds, Inc.
Notwithstanding anything to the contrary herein, it is
understood that the T. Rowe Price Summit Funds, Inc. and T. Rowe
Price Summit Municipal Funds, Inc. (collectively referred to as
the "Funds") shall not be responsible for paying any of the fees
or expenses set forth herein but that, in accordance with the
Investment Management Agreement, dated September 16, 1993,
between the Funds and T. Rowe Price Associates, Inc. ("T. Rowe
Price"), the Funds will require T. Rowe Price to pay all such
fees and expenses.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
PAGE 88
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
PAGE 89
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
/s/Henry H. Hopkins
________________________________________
By:Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
________________________________________
By:
PAGE 90
AMENDMENT NO. 25 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, and September 16, 1993, between
State Street Bank and Trust Company and each of the Parties
listed on Appendix A thereto is hereby further amended, as of
November 3, 1993, by adding thereto the T. Rowe Price Latin
America Fund, a separate series of the T. Rowe Price
International Funds, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
PAGE 91
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
PAGE 92
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
/s/Henry H. Hopkins
________________________________________
By:Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
________________________________________
By:
PAGE 93
AMENDMENT NO. 26 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, and
November 3, 1993, between State Street Bank and Trust Company and
each of the Parties listed on Appendix A thereto is hereby
further amended, as of March 1, 1994, by adding thereto the T.
Rowe Price Equity Income Portfolio and T. Rowe Price New America
Growth Portfolio, two separate series of the T. Rowe Price Equity
Series, Inc. and T. Rowe Price International Stock Portfolio, a
separate series of the T. Rowe Price International Series, Inc.
Notwithstanding anything to the contrary herein, it is
understood that the T. Rowe Price Equity Series, Inc. and T. Rowe
Price International Series, Inc. (collectively referred to as the
"Funds") shall not be responsible for paying any of the fees or
expenses set forth herein but that, in accordance with the
Investment Management Agreements, dated March 1, 1994, between
the Funds and T. Rowe Price Associates, Inc. and Rowe Price-
Fleming International, Inc. (collectively referred to as "T. Rowe
Price"), the Funds will require T. Rowe Price to pay all such
fees and expenses.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
PAGE 94
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
PAGE 95
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
PAGE 96
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
/s/Henry H. Hopkins
________________________________________
By:Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
________________________________________
By:
PAGE 97
AMENDMENT NO. 27 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, and March 1, 1994, between State Street Bank and Trust
Company and each of the Parties listed on Appendix A thereto is
hereby further amended, as of April 21, 1994, by adding thereto
the T. Rowe Price Limited-Term Bond Portfolio, a separate series
of the T. Rowe Price Fixed Income Series, Inc.
Notwithstanding anything to the contrary herein, it is
understood that the T. Rowe Price Fixed Income Series, Inc.
(referred to as the "Fund") shall not be responsible for paying
any of the fees or expenses set forth herein but that, in
accordance with the Investment Management Agreement, dated April
21, 1994, between the Fund and T. Rowe Price Associates, Inc.
(referred to as "T. Rowe Price"), the Fund will require T. Rowe
Price to pay all such fees and expenses.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
PAGE 98
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
PAGE 99
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
PAGE 100
/s/Henry H. Hopkins
________________________________________
By:Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
________________________________________
By:
PAGE 101
AMENDMENT NO. 28 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, and April 21, 1994, between State Street
Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of July 27,
1994, by adding thereto the T. Rowe Price Personal Strategy
Balanced Fund, T. Rowe Price Personal Strategy Growth Fund, and
T. Rowe Price Personal Strategy Income Fund, three separate
series of the T. Rowe Price Personal Strategy Funds, Inc.
Notwithstanding anything to the contrary herein, it is
understood that the T. Rowe Price Personal Strategy Funds, Inc.
(collectively referred to as the "Funds") shall not be
responsible for paying any of the fees or expenses set forth
herein but that, in accordance with the Investment Management
Agreements, dated July 27, 1994, between the Funds and T. Rowe
Price Associates, Inc. (referred to as "T. Rowe Price"), the
Funds will require T. Rowe Price to pay all such fees and
expenses.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
PAGE 102
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
PAGE 103
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
PAGE 104
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
/s/Henry H. Hopkins
________________________________________
By:Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
________________________________________
By:
PAGE 105
AMENDMENT NO. 29 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, and April 21, 1994, between State Street
Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of July 27,
1994, by adding thereto the T. Rowe Price Personal Strategy
Balanced Strategy Balanced Portfolio, a separate series of the T.
Rowe Price Equity Series, Inc.
Notwithstanding anything to the contrary herein, it is
understood that the T. Rowe Price Personal Strategy Balanced
Portfolio, a separate series of the T. Rowe Price Equity Series,
Inc. (referred to as the "Fund) shall not be responsible for
paying any of the fees or expenses set forth herein but that, in
accordance with the Investment Management Agreement, dated July
27, 1994, between the Fund and T. Rowe Price Associates, Inc.
(referred to as "T. Rowe Price"), the Fund will require T. Rowe
Price to pay all such fees and expenses.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
PAGE 106
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
PAGE 107
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
PAGE 108
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
/s/Henry H. Hopkins
________________________________________
By:Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/
________________________________________
By:
PAGE 109
AMENDMENT NO. 30 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, and July 27, 1994 between
State Street Bank and Trust Company and each of the Parties
listed on Appendix A thereto is hereby further amended, as of
September 21, 1994, by adding thereto the T. Rowe Price Value
Fund, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
PAGE 110
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
PAGE 111
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
PAGE 112
T. ROWE PRICE VALUE FUND, INC.
/s/Henry H. Hopkins
________________________________________
By:Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Carol C. Ayotte
________________________________________
By:Carol C. Ayotte, Vice President
PAGE 113
AMENDMENT NO. 31 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, and September
21, 1994 between State Street Bank and Trust Company and each of
the Parties listed on Appendix A thereto is hereby further
amended, as of November 1, 1994, by adding thereto the T. Rowe
Price Virginia Short-Term Tax-Free Bond Fund, a separate series
of the T. Rowe Price State Tax-Free Income Trust.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
PAGE 114
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
PAGE 115
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
PAGE 116
T. ROWE PRICE VALUE FUND, INC.
/s/Henry H. Hopkins
________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Carol C. Ayotte
________________________________________
By:Carol C. Ayotte, Vice President
PAGE 117
AMENDMENT NO. 32 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, and November 1, 1994 between State Street Bank and Trust
Company and each of the Parties listed on Appendix A thereto is
hereby further amended, as of November 2, 1994, by adding thereto
the T. Rowe Price Capital Opportunity Fund, Inc. and the T. Rowe
Price Emerging Markets Bond Fund, a separate series of the T.
Rowe Price International Funds, Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
PAGE 118
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
PAGE 119
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE VALUE FUND, INC.
PAGE 120
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
/s/Henry H. Hopkins
________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Carol C. Ayotte
________________________________________
By:Carol C. Ayotte, Vice President
PAGE 121
AMENDMENT NO. 33 TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
W I T N E S S E T H:
The Custodian Contract of September 28, 1987, as amended
June 24, 1988, October 19, 1988, February 22, 1989, July 19,
1989, September 15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990, July 18,
1990, October 15, 1990, February 13, 1991, March 6, 1991,
September 12, 1991, November 6, 1991, April 23, 1992, September
2, 1992, November 3, 1992, December 16, 1992, December 21, 1992,
January 28, 1993, April 22, 1993, September 16, 1993, November 3,
1993, March 1, 1994, April 21, 1994, July 27, 1994, September 21,
1994, November 1, 1994, and November 2, 1994 between State Street
Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of January 25,
1995, by adding thereto the T. Rowe Price Emerging Markets Stock
Fund, a separate series of the T. Rowe Price International Funds,
Inc.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
PAGE 122
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
PAGE 123
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE VALUE FUND, INC.
PAGE 124
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
_____________________________________________
By: Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
_____________________________________________
By: Carol C. Ayotte, Vice President
The Transfer Agency and Service Agreement between T. Rowe
Price Services, Inc. and T. Rowe Price Funds, dated January 1,
1995, as amended, should be inserted here.
PAGE 1
TRANSFER AGENCY AND SERVICE AGREEMENT
between
T. ROWE PRICE SERVICES, INC.
and
EACH OF THE PARTIES INDICATED ON APPENDIX A
PAGE 2
TABLE OF CONTENTS
Page
Article A Terms of Appointment . . . . . . . . . . . . . 2
Article B Duties of Price Services . . . . . . . . . . . 2
1. Receipt of Orders/Payments . . . . . . . . 3
2. Written Redemptions . . . . . . . . . . . 4
3. Transfers . . . . . . . . . . . . . . . . 5
4. Confirmations . . . . . . . . . . . . . . 6
5. Returned Checks and ACH Debits . . . . . . 6
6. Redemptions of Shares under Ten Day Hold . 6
7. Dividends, Distributions and Other
Corporate Actions . . . . . . . . . . . . 8
8. Unclaimed Payments and Certificates . . . 9
9. Books and Records . . . . . . . . . . . . 9
10. Authorized Issued and Outstanding Shares 11
11. Tax Information . . . . . . . . . . . . 11
12. Information to be Furnished to the Fund 12
13. Correspondence . . . . . . . . . . . . . 12
14. Lost or Stolen Securities . . . . . . . 12
15. Telephone Services . . . . . . . . . . . 12
16. Proxies . . . . . . . . . . . . . . . . 13
17. Form N-SAR . . . . . . . . . . . . . . . 13
18. Cooperation With Accountants . . . . . . 13
19. Blue Sky . . . . . . . . . . . . . . . . 13
20. Other Services . . . . . . . . . . . . . 14
21. Fees and Out-of-Pocket Expenses . . . . 14
Article C Representations and Warranties of the Price
Services . . . . . . . . . . . . . . . . . . 15
Article D Representations and Warranties of the Fund . 16
Article E Standard of Care/Indemnification . . . . . . 17
Article F Dual Interests . . . . . . . . . . . . . . . 19
Article G Documentation . . . . . . . . . . . . . . . . 19
PAGE 3
Article H References to Price Services . . . . . . . . 20
Article I Compliance with Governmental Rules and
Regulations . . . . . . . . . . . . . . . . . 21
Article J Ownership of Software and Related Material . 21
Article K Quality Service Standards . . . . . . . . . . 21
Article L As of Transactions . . . . . . . . . . . . . 21
Article M Term and Termination of Agreement . . . . . . 24
Article N Notice . . . . . . . . . . . . . . . . . . . 25
Article O Assignment . . . . . . . . . . . . . . . . . 25
Article P Amendment/Interpretive Provisions . . . . . . 25
Article Q Further Assurances . . . . . . . . . . . . . 25
Article R Maryland Law to Apply . . . . . . . . . . . . 26
Article S Merger of Agreement . . . . . . . . . . . . . 26
Article T Counterparts . . . . . . . . . . . . . . . . 26
Article U The Parties . . . . . . . . . . . . . . . . . 26
Article V Directors, Trustees, Shareholders and
Massachusetts Business Trust . . . . . . . . 26
Article W Captions . . . . . . . . . . . . . . . . . . 27
PAGE 4
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the first day of January, 1995, by and
between T. ROWE PRICE SERVICES, INC., a Maryland corporation
having its principal office and place of business at 100 East
Pratt Street, Baltimore, Maryland 21202 ("Price Services"), and
EACH FUND WHICH IS LISTED ON APPENDIX A (as such Appendix may be
amended from time to time) and which evidences its agreement to
be bound hereby by executing a copy of this Agreement (each such
Fund individually hereinafter referred to as "the Fund", whose
definition may be found in Article U);
WHEREAS, the Fund desires to appoint Price Services as its
transfer agent, dividend disbursing agent and agent in connection
with certain other activities, and Price Services desires to
accept such appointment;
WHEREAS, Price Services represents that it is registered
with the Securities and Exchange Commission as a Transfer Agent
under Section 17A of the Securities Exchange Act of 1934 ("'34
Act") and will notify each Fund promptly if such registration is
revoked or if any proceeding is commenced before the Securities
and Exchange Commission which may lead to such revocation;
WHEREAS, certain of the Funds are named investment options
under various tax-sheltered retirement plans including, but not
limited to, individual retirement accounts, simplified employee
PAGE 5
pension plans, deferred compensation plans, 403(b) plans, and
profit sharing, thrift, and money purchase pension plans for
self-employed individuals and professional partnerships and
corporations, (collectively referred to as "Retirement Plans");
WHEREAS, Price Services has the capability of providing
special services, on behalf of the Funds, for the accounts of
shareholders participating in these Retirement Plans ("Retirement
Accounts").
WHEREAS, Price Services may subcontract or jointly contract
with other parties, on behalf of the Funds, including, but not
limited to, DST, SRI, Moore Business Forms, Boston Financial Data
Services, Inc., and The Analytical Sciences Corporation, to
perform certain of the functions and services described herein
including services to Retirement Plans and Retirement Accounts.
Price Services may also enter into, on behalf of the Funds,
certain banking relationships to perform various banking services
including, but not limited to, check deposits, check
disbursements, automated clearing house transactions ("ACH") and
wire transfers. Subject to guidelines mutually agreed upon by
the Funds and Price Services, excess balances, if any, resulting
from these banking relationships will be invested and the income
therefrom will be used to offset fees which would otherwise be
charged to the Funds under this Agreement.
PAGE 6
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
A. Terms of Appointment
Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints Price Services to
act, and Price Services agrees to act, as the Fund's transfer
agent, dividend disbursing agent and agent in connection with:
(1) the Fund's authorized and issued shares of its common stock
or shares of beneficial interest (all such stock and shares to be
referred to as "Shares"); (2) any accumulation, open-account or
similar plans provided to the shareholders of the Fund
("Shareholders"), including, without limitation, any periodic
investment plan or periodic withdrawal program; and (3) certain
Retirement Plan and Retirement Accounts as agreed upon by the
parties.
The parties to the Agreement hereby acknowledge that from
time to time, Price Services and T. Rowe Price Trust Company may
enter into contracts ("Other Contracts") with employee benefit
plans and/or their sponsors for the provision of certain plan
participant services to Retirement Plans and Retirement Accounts.
Compensation paid to Price Services pursuant to this Agreement
is with respect to the services described herein and not with
respect to services provided under Other Contracts.
PAGE 7
B. Duties of Price Services
Price Services agrees that it will perform the following
services:
1. Receipt of Orders/Payments
Receive for acceptance, orders/payments for the
purchase of Shares and promptly deliver payment and
appropriate documentation thereof to the authorized
custodian of the Fund (the "Custodian"). Upon receipt of
any check or other instrument drawn or endorsed to it as
agent for, or identified as being for the account of, the
Fund, Price Services will process the order as follows:
o Examine the check to determine if the check conforms to
the Funds' acceptance procedures (including certain
third-party check procedures). If the check conforms,
Price Services will endorse the check and include the
date of receipt, will process the same for payment, and
deposit the net amount to the parties agreed upon
designated bank account prior to such deposit in the
Custodial account, and will notify the Fund and the
Custodian, respectively, of such deposits (such
notification to be given on a daily basis of the total
amount deposited to said accounts during the prior
business day);
PAGE 8
o Open a new account, if necessary, and credit the
account of the investor with the number of Shares to be
purchased according to the price of the Fund's Shares
in effect for purchases made on that date, subject to
any instructions which the Fund may have given to Price
Services with respect to acceptance of orders for
Shares relating to payments so received by it;
o Maintain a record of all unpaid purchases and report
such information to the Fund daily;
o Process periodic payment orders, as authorized by
investors, in accordance with the payment procedures
for pre-authorized checking ("PAC") and ACH purchases
mutually agreed upon by both parties;
o Receive monies from Retirement Plans and determine the
proper allocation of such monies to the Retirement
Accounts based upon instructions received from
Retirement Plan participants or Retirement Plan
administrators ("Administrators"); and
o Process telephone orders for purchases of Fund shares
from the Shareholder's bank account (via wire or ACH)
to the Fund in accordance with procedures mutually
agreed upon by both parties.
PAGE 9
Upon receipt of funds through the Federal Reserve Wire
System that are designated for purchases in Funds which declare
dividends at 12:00 p.m. (or such time as set forth in the Fund's
current prospectus), Price Services shall promptly notify the
Fund and the Custodian of such deposit.
2. Redemptions
Receive for acceptance redemption requests, including
telephone redemptions and requests received from
Administrators for distributions to participants or their
designated beneficiaries or for payment of fees due the
Administrator or such other person, including Price
Services, and deliver the appropriate documentation thereof
to the Custodian. Price Services shall receive and stamp
with the date of receipt, all requests for redemptions of
Shares (including all certificates delivered to it for
redemption) and shall process said redemption requests as
follows, subject to the provisions of Section 7 hereof:
o Examine the redemption request and, for written
redemptions, the supporting documentation, to determine
that the request is in good order and all requirements
have been met;
PAGE 10
o Notify the Fund on the next business day of the total
number of Shares presented and covered by all such
requests;
o As set forth in the prospectus of the Fund, and in any
event, on or prior to the seventh (7th) calendar day
succeeding any such request for redemption, Price
Services shall, from funds available in the accounts
maintained by Price Services as agent for the Funds,
pay the applicable redemption price in accordance with
the current prospectus of the Fund, to the investor,
participant, beneficiary, Administrator or such other
person, as the case may be;
o If any request for redemption does not comply with the
Fund's requirements, Price Services shall promptly
notify the investor of such fact, together with the
reason therefore, and shall effect such redemption at
the price in effect at the time of receipt of all
appropriate documents;
o Make such withholdings as may be required under
applicable Federal and State
taxlaw;
o In the event redemption proceeds for the payment of
fees are to be wired through the Federal Reserve Wire
PAGE 11
System or by bank wire, Price Services shall cause such
proceeds to be wired in Federal funds to the bank
account designated; and
o Process periodic redemption orders as authorized by the
investor in accordance with the periodic withdrawal
procedures for Systematic Withdrawal Plan ("SWP") and
systematic ACH redemptions mutually agreed upon by both
parties.
Procedures and requirements for effecting and accepting
redemption orders from investors by telephone, Tele*Access,
Mailgram, or written instructions shall be established by
mutual agreement between Price Services and the Fund
consistent with the Fund's current prospectus.
3. Transfers
Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions and
documentation and examine such instructions for conformance
with appropriate procedures and requirements. In this
regard, Price Services, upon receipt of a proper request for
transfer, including any transfer involving the surrender of
certificates of Shares, is authorized to transfer, on the
records of the Fund, Shares of the Fund, including
cancellation of surrendered certificates, if any, to credit
PAGE 12
a like amount of Shares to the transferee and to
countersign, issue and deliver new certificates, if
requested, for those Funds issuing certificates.
4. Confirmations
Mail all confirmations and other enclosures requested
by the Fund to the shareholder, and in the case of
Retirement Accounts, to the Administrators, as may be
required by the Funds or by applicable Federal or state law.
5. Returned Checks and ACH Debits
In order to minimize the risk of loss to the Fund by
reason of any check being returned unpaid, Price Services
will promptly identify and follow-up on any check or ACH
debit returned unpaid. For items returned, Price Services
may telephone the investor and/or redeposit the check or
debit for collection or cancel the purchase, as deemed
appropriate.
6. Redemption of Shares under Ten Day Hold
o Uncollected Funds
Shares purchased by personal, corporate, or
governmental check, or by ACH will be considered
uncollected until the tenth calendar date following the
trade date of the trade ("Uncollected Funds");
PAGE 13
o Good Funds
Shares purchased by treasurer's, cashier, certified, or
official check, or by wire transfer will be considered
collected immediately ("Good Funds"). Absent
information to the contrary (i.e., notification from
the payee institution), Uncollected Funds will be
considered Good Funds on the tenth calendar day
following trade date.
o Redemption of Uncollected Funds
o Shareholders making telephone requests for
redemption of shares purchased with Uncollected
Funds will be given two options:
1. The Shareholder will be permitted to exchange
to a money market fund to preserve principal until
the payment is deemed Good Funds,
2. The redemption can be processed utilizing the
same procedures for written redemptions described
below.
o If a written redemption request is made for shares
where any portion of the payment for said shares
is in Uncollected Funds, and the request is in
good order, Price Services will promptly obtain
the information relative to the payment necessary
PAGE 14
to determine when the payment becomes Good Funds.
The redemption will be processed in accordance
with normal procedures, and the proceeds will be
held until confirmation that the payment is Good
Funds. On the seventh (7th) calendar day after
trade date, and each day thereafter until either
confirmation is received or the tenth (10th)
calendar day, Price Services will call the paying
institution to request confirmation that the check
or ACH in question has been paid. On the tenth
calendar day after trade date, the redemption
proceeds will be released, regardless of whether
confirmation has been received.
o Checkwriting Redemptions.
o Daily, all checkwriting redemptions $10,000 and
over reported as Uncollected Funds or insufficient
funds will be reviewed. An attempt will be made
to contact the shareholder to make good the funds
(through wire, exchange, transfer). Generally by
12:00 p.m. the same day, if the matter has not
been resolved, the redemption request will be
rejected and the check returned to the
Shareholder.
PAGE 15
o All checkwriting redemptions under $10,000
reported as Uncollected or insufficient funds will
be rejected and the check returned to the
Shareholder.
o Confirmations of Available Funds
The Fund expects that situations may develop whereby it
would be beneficial to determine if a person who has
placed an order for Shares has sufficient funds in his
or her checking account to cover the payment for the
Shares purchased. When this situation occurs, Price
Services may call the bank in question and request that
it confirm that sufficient funds to cover the purchase
are currently credited to the account in question.
Price Services will maintain written documentation or a
recording of each telephone call which is made under
the procedures outlined above. None of the above
procedures shall preclude Price Services from inquiring
as to the status of any check received by it in payment
for the Fund's Shares as Price Services may deem
appropriate or necessary to protect both the Fund and
Price Services. If a conflict arises between Section 2
and this Section 7, Section 7 will govern.
PAGE 16
7. Dividends, Distributions and Other Corporate Actions
o The Fund will promptly inform Price Services of the
declaration of any dividend, distribution, stock split
or any other distributions of a similar kind on account
of its Capital Stock.
o Price Services shall act as Dividend Disbursing Agent
for the Fund, and as such, shall prepare and make
income and capital gain payments to investors. As
Dividend Disbursing Agent, Price Services will on or
before the payment date of any such dividend or
distribution, notify the Custodian of the estimated
amount required to pay any portion of said dividend or
distribution which is payable in cash, and the Fund
agrees that on or before the payment date of such
distribution, it shall instruct the Custodian to make
available to Price Services sufficient funds for the
cash amount to be paid out. If an investor is entitled
to receive additional Shares by virtue of any such
distribution or dividend, appropriate credits will be
made to his or her account.
8. Unclaimed Payments and Certificates
In accordance with procedures agreed upon by both
parties, report abandoned property to appropriate state and
PAGE 17
governmental authorities of the Fund. Price Services shall,
90 days prior to the annual reporting of abandoned property
to each of the states, make reasonable attempts to locate
Shareholders for which (a) checks or share certificates have
been returned; (b) for which accounts have aged outstanding
checks; or (c) accounts with unissued shares that have been
coded with stop mail and meet the dormancy period guidelines
specified in the individual states. Price Services shall
make reasonable attempts to contact shareholders for those
accounts which have significant aged outstanding checks.
9. Books and Records
Maintain records showing for each Shareholder's
account, Retirement Plan or Retirement Account, as the case
may be, the following:
o Names, address and tax identification number;
o Number of Shares held;
o Certain historical information regarding the
account of each Shareholder, including dividends
and distributions distributed in cash or invested
in Shares;
PAGE 18
o Pertinent information regarding the establishment
and maintenance of Retirement Plans and Retirement
Accounts necessary to properly administer each
account;
o Information with respect to the source of
dividends and distributions allocated among income
(taxable and nontaxable income), realized short-
term gains and realized long-term gains;
o Any stop or restraining order placed against a
Shareholder's account;
o Information with respect to withholdings on
domestic and foreign accounts;
o Any instructions from a Shareholder including, all
forms furnished by the Fund and executed by a
Shareholder with respect to (i) dividend or
distribution elections, and (ii) elections with
respect to payment options in connection with the
redemption of Shares;
o Any correspondence relating to the current
maintenance of a Shareholder's account;
o Certificate numbers and denominations for any
Shareholder holding certificates;
PAGE 19
o Any information required in order for Price
Services to perform the calculations contemplated
under this Agreement.
Price Services shall maintain files and furnish
statistical and other information as required under this
Agreement and as may be agreed upon from time to time by
both parties or required by applicable law. However, Price
Services reserves the right to delete, change or add any
information to the files maintained; provided such
deletions, changes or additions do not contravene the terms
of this Agreement or applicable law and do not materially
reduce the level of services described in this Agreement.
Price Services shall also use its best efforts to obtain
additional statistical and other information as each Fund
may reasonably request for additional fees as may be agreed
to by both parties.
Any such records maintained pursuant to Rule 31a-1
under the Investment Company Act of 1940 ("the Act") will be
preserved for the periods and maintained in a manner
prescribed in Rule 31a-2 thereunder. Disposition of such
records after such prescribed periods shall be as mutually
agreed upon by the Fund and Price Services. The retention
of such records, which may be inspected by the Fund at
PAGE 20
reasonable times, shall be at the expense of the Fund. All
records maintained by Price Services in connection with the
performance of its duties under this Agreement will remain
the property of the Fund and, in the event of termination of
this Agreement, will be delivered to the Fund as of the date
of termination or at such other time as may be mutually
agreed upon.
All books, records, information and data pertaining to
the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of
this Agreement shall remain confidential, and shall not be
voluntarily disclosed to any other person, except after
prior notification to and approval by the other party
hereto, which approval shall not be unreasonably withheld
and may not be withheld where Price Services or the Fund may
be exposed to civil or criminal contempt proceedings for
failure to comply; when requested to divulge such
information by duly constituted governmental authorities; or
after so requested by the other party hereto.
10. Authorized Issued and Outstanding Shares
Record the issuance of Shares of the Fund and maintain,
pursuant to Rule 17Ad-10(e) of the '34 Act, a record of the
total number of Shares of the Fund which are authorized,
PAGE 21
issued and outstanding, based upon data provided to it by
the Fund. Price Services shall also provide the Fund on a
regular basis the total number of Shares which are
authorized and issued and outstanding. Price Services shall
have no obligation, when recording the issuance of Shares,
to monitor the issuance of such Shares or to take cognizance
of any laws relating to the issuance or sale of such Shares.
11. Tax Information
Prepare and file with the Internal Revenue Service and
with other appropriate state agencies and, if required, mail
to investors, those returns for reporting dividends and
distributions paid as required to be so filed and mailed,
and shall withhold such sums required to be withheld under
applicable Federal and state income tax laws, rules, and
regulations. Additionally, Price Services will file and, as
applicable, mail to investors, any appropriate information
returns required to be filed in connection with Retirement
Plan processing, such as 1099R, 5498, as well as any other
appropriate forms that the Fund or Price Services may deem
necessary. The Fund and Price Services shall agree to
procedures to be followed with respect to Price Services'
responsibilities in connection with compliance with back-up
withholding and other tax laws.
PAGE 22
12. Information to be Furnished to the Fund
Furnish to the Fund such information as may be agreed
upon between the Fund and Price Services including any
information that the Fund and Price Services agree is
necessary to the daily operations of the business.
13. Correspondence
Promptly and fully answer correspondence from
shareholders and Administrators relating to Shareholder
Accounts, Retirement Accounts, transfer agent procedures,
and such other correspondence as may from time to time be
mutually agreed upon with the Funds. Unless otherwise
instructed, copies of all correspondence will be retained by
Price Services in accordance with applicable law and
procedures.
14. Lost or Stolen Securities
Pursuant to Rule 17f-1 of the '34 Act, report to the
Securities Information Center and/or the FBI or other
appropriate person on Form X-17-F-1A all lost, stolen,
missing or counterfeit securities. Provide any other
services relating to lost, stolen or missing securities as
may be mutually agreed upon by both parties.
15. Telephone Services
Maintain a Telephone Servicing Staff of representatives
PAGE 23
("Representatives") sufficient to timely respond to all
telephonic inquiries reasonably foreseeable. The
Representatives will also effect telephone purchases,
redemptions, exchanges, and other transactions mutually
agreed upon by both parties, for those Shareholders who have
authorized telephone services. The Representatives shall
require each Shareholder effecting a telephone transaction
to properly identify himself/herself before the transaction
is effected, in accordance with procedures agreed upon
between by both parties. Procedures for processing
telephone transactions will be mutually agreed upon by both
parties. Price Services will also be responsible for
providing Tele*Access, PC*Access and such other Services as
may be offered by the Funds from time to time. Price
Services will maintain a special Shareholder Servicing staff
to service certain Shareholders with substantial
relationships with the Funds.
16. Proxies
Monitor the mailing of proxy cards and other material
supplied to it by the Fund in connection with Shareholder
meetings of the Fund and shall coordinate the receipt,
examination and tabulation of returned proxies and the
certification of the vote to the Fund.
PAGE 24
17. Form N-SAR
Maintain such records, if any, as shall enable the Fund
to fulfill the requirements of Form N-SAR.
18. Cooperation With Accountants
Cooperate with each Fund's independent public
accountants and take all reasonable action in the
performance of its obligations under the Agreement to assure
that the necessary information is made available to such
accountants for the expression of their opinion without any
qualification as to the scope of their examination,
including, but not limited to, their opinion included in
each such Fund's annual report on Form N-SAR and annual
amendment to Form N-1A.
19. Blue Sky
Provide to the Fund or its agent, on a daily, weekly,
monthly and quarterly basis, and for each state in which the
Fund's Shares are sold, sales reports and other materials
for blue sky compliance purposes as shall be agreed upon by
the parties.
20. Other Services
Provide such other services as may be mutually agreed
upon between Price Services and the Fund.
PAGE 25
21. Fees and Out-of-Pocket Expenses
Each Fund shall pay to Price Services and/or its agents
for its Transfer Agent Services hereunder, fees computed as
set forth in Schedule A attached. Except as provided below,
Price Services will be responsible for all expenses relating
to the providing of Services. Each Fund, however, will
reimburse Price Services for the following out-of-pocket
expenses and charges incurred in providing Services:
o Postage. The cost of postage and freight for
mailing materials to Shareholders and Retirement
Plan participants, or their agents, including
overnight delivery, UPS and other express mail
services and special courier services required to
transport mail between Price Services locations
and mail processing vendors.
o Proxies. The cost to mail proxy cards and other
material supplied to it by the Fund and costs
related to the receipt, examination and tabulation
of returned proxies and the certification of the
vote to the Fund.
o Communications
o Print. The printed forms used internally and
externally for documentation and processing
PAGE 26
Shareholder and Retirement Plan participant,
or their agent's inquiries and requests;
paper and envelope supplies for letters,
notices, and other written communications
sent to Shareholders and Retirement Plan
participants, or their agents.
o Print & Mail House. The cost of internal
and third party printing and mail house
services, including printing of statements
and reports.
o Voice and Data. The cost of equipment
(including associated maintenance), supplies
and services used for communicating to and
from the Shareholders of the Fund and
Retirement Plan participants, or their
agents, the Fund's transfer agent, other Fund
offices, and other agents of either the Fund
or Price Services. These charges shall
include:
o telephone toll charges (both incoming
and outgoing, local, long distance and
mailgrams); and
PAGE 27
o data and telephone lines and associated
equipment such as modems, multiplexers,
and facsimile equipment.
o Record Retention. The cost of maintenance
and supplies used to maintain, microfilm,
copy, record, index, display, retrieve, and
store, in microfiche or microfilm form,
documents and records.
o Disaster Recovery. The cost of services,
equipment, facilities and other charges
necessary to provide disaster recovery for
any and all services listed in this
Agreement.
Out-of-pocket costs will be billed at cost to the
Funds. Allocation of monthly costs among the Funds will
generally be made based upon the number of Shareholder and
Retirement Accounts serviced by Price Services each month. Some
invoices for these costs will contain costs for both the Funds
and other funds serviced by Price Services. These costs will be
allocated based on a reasonable allocation methodology. Where
possible, such as in the case of inbound and outbound WATS
charges, allocation will be made on the actual distribution or
usage.
PAGE 28
C. Representations and Warranties of Price Services
Price Services represents and warrants to the Fund that:
1. It is a corporation duly organized and existing and in
good standing under the laws of Maryland;
2. It is duly qualified to carry on its business in
Maryland, California and Florida;
3. It is empowered under applicable laws and by its
charter and by-laws to enter into and perform this
Agreement;
4. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement;
5. It is registered with the Securities and Exchange
Commission as a Transfer Agent pursuant to Section 17A of
the '34 Act; and
6. It has and will continue to have access to the
necessary facilities, equipment and personnel to perform its
duties and obligations under this Agreement.
D. Representations and Warranties of the Fund
The Fund represents and warrants to Price Services that:
1. It is a corporation or business trust duly organized
and existing and in good standing under the laws of Maryland
or Massachusetts, as the case may be;
2. It is empowered under applicable laws and by its
PAGE 29
Articles of Incorporation or Declaration of Trust, as the
case may be, and By-Laws to enter into and perform this
Agreement;
3. All proceedings required by said Articles of
Incorporation or Declaration of Trust, as the case may be,
and By-Laws have been taken to authorize it to enter into
and perform this Agreement;
4. It is an investment company registered under the Act;
and
5. A registration statement under the Securities Act of
1933 ("the '33 Act") is currently effective and will remain
effective, and appropriate state securities law filings have
been made and will continue to be made, with respect to all
Shares of the Fund being offered for sale.
E. Standard of Care/Indemnification
Notwithstanding anything to the contrary in this Agreement:
1. Price Services shall not be liable to any Fund for any
act or failure to act by it or its agents or subcontractors
on behalf of the Fund in carrying or attempting to carry out
the terms and provisions of this Agreement provided Price
Services has acted in good faith and without negligence or
willful misconduct and selected and monitored the
PAGE 30
performance of its agents and subcontractors with reasonable
care.
2. The Fund shall indemnify and hold Price Services
harmless from and against all losses, costs, damages,
claims, actions and expenses, including reasonable expenses
for legal counsel, incurred by Price Services resulting
from: (i) any action or omission by Price Services or its
agents or subcontractors in the performance of their duties
hereunder; (ii) Price Services acting upon instructions
believed by it to have been executed by a duly authorized
officer of the Fund; or (iii) Price Services acting upon
information provided by the Fund in form and under policies
agreed to by Price Services and the Fund. Price Services
shall not be entitled to such indemnification in respect of
actions or omissions constituting negligence or willful
misconduct of Price Services or where Price Services has not
exercised reasonable care in selecting or monitoring the
performance of its agents or subcontractors.
3. Except as provided in Article L of this Agreement,
Price Services shall indemnify and hold harmless the Fund
from all losses, costs, damages, claims, actions and
expenses, including reasonable expenses for legal counsel,
incurred by the Fund resulting from the negligence or
PAGE 31
willful misconduct of Price Services or which result from
Price Services' failure to exercise reasonable care in
selecting or monitoring the performance of its agents or
subcontractors. The Fund shall not be entitled to such
indemnification in respect of actions or omissions
constituting negligence or willful misconduct of such Fund
or its agents or subcontractors; unless such negligence or
misconduct is attributable to Price Services.
4. In determining Price Services' liability, an isolated
error or omission will normally not be deemed to constitute
negligence when it is determined that:
o Price Services had in place "appropriate procedures".
o the employee(s) responsible for the error or omission
had been reasonably trained and were being
appropriately monitored; and
o the error or omission did not result from wanton or
reckless conduct on the part of the employee(s).
It is understood that Price Services is not obligated to
have in place separate procedures to prevent each and every
conceivable type of error or omission. The term
"appropriate procedures" shall mean procedures reasonably
designed to prevent and detect errors and omissions. In
determining the reasonableness of such procedures, weight
PAGE 32
will be given to such factors as are appropriate, including
the prior occurrence of any similar errors or omissions when
such procedures were in place and transfer agent industry
standards in place at the time of the occurrence.
5. In the event either party is unable to perform its
obligations under the terms of this Agreement because of
acts of God, strikes or other causes reasonably beyond its
control, such party shall not be liable to the other party
for any loss, cost, damage, claim, action or expense
resulting from such failure to perform or otherwise from
such causes.
6. In order that the indemnification provisions contained
in this Article E shall apply, upon the assertion of a claim
for which either party may be required to indemnify the
other, the party seeking indemnification shall promptly
notify the other party of such assertion, and shall keep the
other party advised with respect to all developments
concerning such claim. The party who may be required to
indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim,
or to defend against said claim in its own name or in the
name of the other party. The party seeking indemnification
shall in no case confess any claim or make any compromise in
PAGE 33
any case in which the other party may be required to
indemnify it except with the other party's prior written
consent.
7. Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of
this Agreement.
F. Dual Interests
It is understood that some person or persons may be
directors, officers, or shareholders of both the Funds and Price
Services (including Price Services's affiliates), and that the
existence of any such dual interest shall not affect the validity
of this Agreement or of any transactions hereunder except as
otherwise provided by a specific provision of applicable law.
G. Documentation
o As requested by Price Services, the Fund shall promptly
furnish to Price Services the following:
o A certified copy of the resolution of the
Directors/Trustees of the Fund authorizing the
appointment of Price Services and the execution and
delivery of this Agreement;
o A copy of the Articles of Incorporation or
Declaration of Trust, as the case may be, and By-
Laws of the Fund and all amendments thereto;
PAGE 34
o Specimens of all forms of outstanding and new
stock/share certificates in the forms approved by the
Board of Directors/Trustees of the Fund with a
certificate of the Secretary of the Fund as to such
approval;
o All account application forms and other documents
relating to Shareholders' accounts;
o An opinion of counsel for the Fund with respect to
the validity of the stock, the number of Shares
authorized, the status of redeemed Shares, and the
number of Shares with respect to which a
Registration Statement has been filed and is in
effect; and
o A copy of the Fund's current prospectus.
The delivery of any such document for the purpose of any
other agreement to which the Fund and Price Services are or were
parties shall be deemed to be delivery for the purposes of this
Agreement.
o As requested by Price Services, the Fund will also furnish
from time to time the following documents:
o Each resolution of the Board of Directors/Trustees of
the Fund authorizing the original issue of its Shares;
PAGE 35
o Each Registration Statement filed with the Securities
and Exchange Commission and amendments and orders
thereto in effect with respect to the sale of Shares
with respect to the Fund;
o A certified copy of each amendment to the Articles of
Incorporation or Declaration of Trust, and the By-Laws
of the Fund;
o Certified copies of each vote of the Board of
Directors/Trustees authorizing officers to give
instructions to the Transfer Agent;
o Specimens of all new certificates accompanied by the
Board of Directors/Trustees' resolutions approving such
forms;
o Such other documents or opinions which Price Services,
in its discretion, may reasonably deem necessary or
appropriate in the proper performance of its duties;
and
o Copies of new prospectuses issued.
Price Services hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Fund for
safekeeping of stock certificates, check forms and facsimile
signature imprinting devices, if any; and for the preparation or
PAGE 36
use, and for keeping account of, such certificates, forms and
devices.
H. References to Price Services
Each Fund agrees not to circulate any printed matter which
contains any reference to Price Services without the prior
approval of Price Services, excepting solely such printed matter
that merely identifies Price Services as agent of the Fund. The
Fund will submit printed matter requiring approval to Price
Services in draft form, allowing sufficient time for review by
Price Services and its legal counsel prior to any deadline for
printing.
I. Compliance With Governmental Rules and Regulations
Except as otherwise provided in the Agreement and except for
the accuracy of information furnished to the Fund by Price
Services, each Fund assumes full responsibility for the
preparation, contents and distribution of its prospectuses and
compliance with all applicable requirements of the Act, the '34
Act, the '33 Act, and any other laws, rules and regulations of
governmental authorities having jurisdiction over the Fund.
Price Services shall be responsible for complying with all laws,
rules and regulations of governmental authorities having
jurisdiction over transfer agents and their activities.
PAGE 37
J. Ownership of Software and Related Material
All computer programs, magnetic tapes, written procedures
and similar items purchased and/or developed and used by Price
Services in performance of the Agreement shall be the property of
Price Services and will not become the property of the Fund.
K. Quality Service Standards
Price Services and the Fund may from time to time agree to
certain quality service standards, as well as incentives and
penalties with respect to Price Services' hereunder.
L. As Of Transactions
For purposes of this Article L, the term "Transaction" shall
mean any single or "related transaction" (as defined below)
involving the purchase or redemption of Shares (including
exchanges) that is processed at a time other than the time of the
computation of the Fund's net asset value per Share next computed
after receipt of any such transaction order by Price Services.
If more than one Transaction ("Related Transaction") in the Fund
is caused by or occurs as a result of the same act or omission,
such transactions shall be aggregated with other transactions in
the Fund and be considered as one Transaction.
o Reporting
Price Services shall:
PAGE 38
1. Utilize a system to identify all Transactions,
and shall compute the net effect of such Transactions
upon the Fund on a daily, monthly and rolling 365 day
basis. The monthly and rolling 365 day periods are
hereafter referred to as "Cumulative".
2. Supply to the Fund, from time to time as mutually
agreed upon, a report summarizing the Transactions
and the daily and Cumulative net effects of such
Transactions both in terms of aggregate dilution and
loss ("Dilution") or gain and negative dilution
("Gain") experienced by the Fund, and the impact
such Gain or Dilution has had upon the Fund's net
asset value per Share.
3. With respect to any Transaction which causes
Dilution to the Fund of $25,000 or more, immediately
provide the Fund: (i) a report identifying the
Transaction and the Dilution resulting therefrom, (ii)
the reason such Transaction was processed as described
above, and (iii) the action that Price Services has or
intends to take to prevent the reoccurrence of such as
of processing ("Report").
PAGE 39
o Liability
1. It will be the normal practice of the Funds not
to hold Price Services liable with respect to any
Transaction which causes Dilution to any single Fund of
less than $25,000. Price Services will, however,
closely monitor for each Fund the daily and Cumulative
Gain/Dilution which is caused by Transactions of less
than $25,000. When the Cumulative Dilution to any Fund
exceeds 3/10 of 1% per share, Price Services, in
consultation with counsel to the Fund, will make
appropriate inquiry to determine whether it should take
any remedial action. Price Services will report to the
Board of Directors/Trustees of the Fund ("Board") any
action it has taken.
2. Where a Transaction causes Dilution to a Fund of
$25,000 or more ("Significant Transaction"), Price
Services will review with counsel to the Fund the
Report and the circumstances surrounding the underlying
Transaction to determine whether the Transaction was
caused by or occurred as a result of a negligent act or
omission by Price Services. If it is determined that
the Dilution is the result of a negligent action or
omission by Price Services, Price Services and outside
PAGE 40
counsel for the Fund will negotiate settlement. All
such Significant Transactions will be reported to the
Board at its next meeting (unless the settlement fully
compensates the Fund for any Dilution). Any
Significant Transaction, however, causing Dilution in
excess of the lesser of $100,000 or a penny per Share
will be promptly reported to the Board. Settlement
will not be entered into with Price Services until
approved by the Board. The factors the Board would be
expected to consider in making any determination
regarding the settlement of a Significant Transaction
would include but not be limited to:
o Procedures and controls adopted by Price Services to
prevent "As Of" processing;
o Whether such procedures and controls were being
followed at the time of the Significant Transaction;
o The absolute and relative volume of all transactions
processed by Price Services on the day of the
Significant Transaction;
o The number of Transactions processed by Price
Services during prior relevant periods, and the net
Dilution/Gain as a result of all such transactions
to the Fund and to all other Price Funds;
PAGE 41
o The prior response of Price Services to
recommendations made by the Funds regarding
improvement to the Transfer Agent's "As Of"
Processing Procedures.
3. In determining Price Services' liability with respect
to a Significant Transaction, an isolated error or
omission will normally not be deemed to constitute
negligence when it is determined that:
o Price Services had in place "appropriate
procedures".
o the employee(s) responsible for the error or
omission had been reasonably trained and were
being appropriately monitored; and
o the error or omission did not result from wanton
or reckless conduct on the part of the
employee(s).
It is understood that Price Services is not obligated
to have in place separate procedures to prevent each
and every conceivable type of error or omission. The
term "appropriate procedures" shall mean procedures
reasonably designed to prevent and detect errors and
omissions. In determining the reasonableness of such
procedures, weight will be given to such factors as are
PAGE 42
appropriate, including the prior occurrence of any
similar errors or omissions when such procedures were
in place and transfer agent industry standards in place
at the time of the occurrence.
M. Term and Termination of Agreement
o This Agreement shall run for a period of one (1) year from
the date first written above and will be renewed from year
to year thereafter unless terminated by either party as
provided hereunder.
o This Agreement may be terminated by the Fund upon one
hundred twenty (120) days' written notice to Price Services;
and by Price Services, upon three hundred sixty-five (365)
days' writing notice to the Fund.
o Upon termination hereof, the Fund shall pay to Price
Services such compensation as may be due as of the date of
such termination, and shall likewise reimburse for out-of-
pocket expenses related to its services hereunder.
N. Notice
Any notice as required by this Agreement shall be
sufficiently given (i) when sent to an authorized person of the
other party at the address of such party set forth above or at
such other address as such party may from time to time specify in
PAGE 43
writing to the other party; or (ii) as otherwise agreed upon by
appropriate officers of the parties hereto.
O. Assignment
Neither this Agreement nor any rights or obligations
hereunder may be assigned either voluntarily or involuntarily, by
operation of law or otherwise, by either party without the prior
written consent of the other party, provided this shall not
preclude Price Services from employing such agents and
subcontractors as it deems appropriate to carry out its
obligations set forth hereunder.
P. Amendment/Interpretive Provisions
The parties by mutual written agreement may amend this
Agreement at any time. In addition, in connection with the
operation of this Agreement, Price Services and the Fund may
agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their
joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions are to
be signed by all parties and annexed hereto, but no such
provision shall contravene any applicable Federal or state law or
regulation and no such interpretive or additional provision shall
be deemed to be an amendment of this Agreement.
PAGE 44
Q. Further Assurances
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the
purposes hereof.
R. Maryland Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of Maryland.
S. Merger of Agreement
This Agreement, including the attached Appendices and
Schedules supersedes any prior agreement with respect to the
subject hereof, whether oral or written.
T. Counterparts
This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same
instruments.
U. The Parties
All references herein to "the Fund" are to each of the Funds
listed on Appendix A individually, as if this Agreement were
between such individual Fund and Price Services. In the case of
a series Fund or trust, all references to "the Fund" are to the
individual series or portfolio of such Fund or trust, or to such
Fund or trust on behalf of the individual series or portfolio, as
PAGE 45
appropriate. The "Fund" also includes any T. Rowe Price Funds
which may be established after the execution of this Agreement.
Any reference in this Agreement to "the parties" shall mean Price
Services and such other individual Fund as to which the matter
pertains.
V. Directors, Trustees and Shareholders and Massachusetts
Business Trust
It is understood and is expressly stipulated that neither
the holders of Shares in the Fund nor any Directors or Trustees
of the Fund shall be personally liable hereunder. With respect to
any Fund which is a party to this Agreement and which is
organized as a Massachusetts business trust, the term "Fund"
means and refers to the trustees from time to time serving under
the applicable trust agreement (Declaration of Trust) of such
Trust as the same may be amended from time to time. It is
expressly agreed that the obligations of any such Trust hereunder
shall not be binding upon any of the trustees, shareholders,
nominees, officers, agents or employees of the Trust, personally,
but bind only the trust property of the Trust, as provided in the
Declaration of Trust of the Trust. The execution and delivery of
this Agreement has been authorized by the trustees and signed by
an authorized officer of the Trust, acting as such, and neither
such authorization by such Trustees nor such execution and
PAGE 46
delivery by such officer shall be deemed to have been made by any
of them, but shall bind only the trust property of the Trust as
provided in its Declaration of Trust.
W. Captions
The captions in the Agreement are included for convenience
of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or
effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf under
their seals by and through their duly authorized officers.
DATED: ______________________ T. ROWE PRICE SERVICES, INC.
ATTEST:
/s/Wayne D. O'Melia
___________________________ BY: _________________________
Wayne D. O'Melia
PAGE 47
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
PAGE 48
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
PAGE 49
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE VALUE FUND, INC.
DATED: ______________________
ATTEST:
/s/Carmen F. Deyesu
_________________________ BY: __________________________
Carmen F. Deyesu
PAGE 50
APPENDIX A
The following Funds are parties to this Agreement, and have so
indicated their intention to be bound by such Agreement by
executing the Agreement on the dates indicated thereon.
T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price California Tax-Free Income Trust on behalf of the
California Tax-Free Bond Fund and
California Tax-Free Money Fund
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Equity Series, Inc. on behalf of the
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Fixed Income Series, Inc. on behalf of the
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price GNMA Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Index Trust, Inc. on behalf of the
T. Rowe Price Equity Index Fund
PAGE 51
Institutional International Funds, Inc. on behalf of the
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of the
T. Rowe Price International Bond Fund and
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price International Series, Inc. on behalf of the
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund
T. Rowe Price New America Growth Fund
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Personal Strategy Funds, Inc.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Prime Reserve Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of the
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
PAGE 52
T. Rowe Price Spectrum Fund, Inc. on behalf of the
Spectrum Growth Fund
Spectrum Income Fund
T. Rowe Price State Tax-Free Income Trust on behalf of the
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. Rowe Price Tax-Exempt Money Fund, Inc.
T. Rowe Price Tax-Free High Yield Fund, Inc.
T. Rowe Price Tax-Free Income Fund, Inc.
T. Rowe Price Tax-Free Insured Intermediate Bond Fund, Inc.
T. Rowe Price Tax-Free Short-Intermediate Fund, Inc.
T. Rowe Price U.S. Treasury Funds, Inc. on behalf of the
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. Rowe Price Value Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of the
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. Rowe Price Summit Municipal Funds, Inc. on behalf of the
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
PAGE 53
SCHEDULE A - FEE SCHEDULE
Effective January 1, 1995 to December 31, 1995,
For the account of:
THE T. ROWE PRICE FUNDS
EQUITY FUNDS
T. Rowe Price New American Growth Fund
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price International Stock Fund
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small Capital Value Fund, Inc.
T. Rowe Price International Discovery Fund
Foreign Equity Fund
T. Rowe Price Equity Index Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Spectrum Growth Fund
T.Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price Over-the-Counter Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price International Stock Portfolio
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Value Fund, Inc.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
PAGE 54
BOND FUNDS
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Tax-Free Income Fund, Inc.
T. Rowe Price New Jersey Tax-Free Bond Fund
T. Rowe Price Virginia Tax-Free Bond Fund
T. Rowe Price Virginia Short-Term Tax-Free Bond Fund
T. Rowe Price Short Term Bond Fund, Inc.
T. Rowe Price Tax-Free Short Intermediate Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Tax-Free High Yield Fund, Inc.
T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price GNMA Fund
T. Rowe Price New York Tax-Free Bond Fund
T. Rowe Price California Tax-Free Bond Fund
T. Rowe Price International Bond Fund
T. Rowe Price Maryland Short-Term Tax-Free Bond Fund
T. Rowe Price Maryland Tax-Free Bond Fund
T. Rowe Price U.S. Treasury Intermediate Fund
T. Rowe Price U.S. Treasury Long-Term Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Spectrum Income Fund
T. Rowe Price Short-term Global Bond Fund
T. Rowe Price Tax-Free Insured Intermediate Fund, Inc.
T. Rowe Price Georgia Tax-Free Bond Fund
T. Rowe Price Florida Insured Intermediate Tax-Free Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Personal Strategy Income Fund
Money Market Funds
T. Rowe Price Prime Reserve Fund, Inc.
T. Rowe Price Tax-Exempt Money Fund, Inc.
T. Rowe Price U.S. Treasury Money Fund
T. Rowe Price New York Tax-Free Money Fund
T. Rowe Price California Tax-Free Money Fund
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Municipal Money Market Fund
PAGE 55
The following fees for services provided by T. Rowe Price
Services, Inc. (TRPS) and vendors will be billed by TRPS for
1995:
I. T. Rowe Price Services Maintenance and Transaction Charges -
Billable Monthly
A. Base Fee
1. Per Fund - Beginning January 1, 1995, chargeable at
the rate of $1,000 per month to each Fund shown on
the previous page. The fee is waived for new Funds
for the first 6 months after effective date.
2. Monthly - $5,987,000 payable in twelve monthly
installments of $498,917.
B. Per Account Annual Fee - $3.63 for each Equity, Bond, and
Money Market Account serviced.
The Per Account Annual Fee will be billed monthly at a
rate of 1/12 of the annual fee for each. Fund account
serviced during the month. Accounts serviced is defined
as all open accounts at month end plus accounts which
closed during the month.
C. Transaction Fees
1. New Account Fees
a. $3.00 for every account opened, including
fiduciary accounts, excluding those opened by
exchange and those established as described in
(b) below.
b. A fee of $1.00 will be assessed for accounts
established within the model and list functions
programs and under the agreement that the
registrant's name will be quality controlled
subsequent to its establishment.
2. Non-Automated Transactions
a. $1.05 for each non-automated transaction and
maintenance item processed for the Fund Group as
a whole during a month. The non-automated
transaction count will include all manually
PAGE 56
processed price dependent and maintenance
transactions. Also, the number of new account
setups will be excluded from the number of non-
automated transactions.
b. Fee to be charged to the Funds based on each
Fund's number of total non-automated
transactions and maintenance.
c. Fee to be billed monthly for that month.
d. NOTE: The transaction count should not include
correction of transactions caused by
non-shareholder errors.
D. Telephone Fee
Billed at the rate of $5.20 per call for shareholder
servicing calls received in excess of 34,000 calls per
month. Calls received in Retail Services are allocated
to the Funds based on accounts serviced and calls
received in Telephone Services are allocated based on
actual calls received.
E. Items Scanned
$.29 will be billed for each document page scanned. It
will be allocated based on the number of items indexed to
each Fund.
F. Tele*Access
Base fee, per month for all calls is $50,000.
G. Institutional Electronic Interface
Maximum fee calculated is 10 basis points or less per
Fund.
10 basis points < $500 million
8 basis points > $500 million < $1 billion
5 basis points > $1 billion < $2 billion
PAGE 57
H. Correspondence
$4.20 billed for each shareholder correspondence request
completed in writing or by phone. Allocated to the Funds
based on accounts serviced.
I. Telephone Transaction Fee
Each price dependent transaction initiated through the
Telephone Services Group will be charged $.50.
II. Vendor Fees
A. DST
1. Annual Open Account Fee
a. $1.82 for each Equity Fund account serviced.
b. $4.33 for each Bond Fund account serviced.
c. $4.33 for each Money Market Fund account
serviced.
The Open Account Fee will be billed monthly at a rate
of 1/12 of the annual fee for each Fund account
serviced during the month.
2. Closed Account Fee (Annualized)
Payable at an annual rate of $1.48. The Closed
Account Fee will be billed monthly at a rate of 1/12
of the annual rate and will be charged in the month
following the month during which such account is
closed and shall cease to be charged in the month
following the Purge Date.
3. Fiduciary Sub-Accounting
Payable at the rate of $1.00 per month for each
fiduciary account. Fiduciary accounts closed during
the prior year will not be included as billable
items.
PAGE 58
4. Annual Base Fee Per Fund
Annual Fee of $7,422.00 will be charged at a monthly
rate of $618.50. The fee is waived for the first six
(6) months after a new Fund is effective. The
definition of new Fund excludes Funds created by
mergers, purchases, or reorganizations.
5. Bank Account Reconciliation System (Comp/Recon)
Annual charge of $120,000 payable at a rate of
$10,000 per month.
6. TRAC 2000 - $7.00 per participant, per year; For
TRAC+ $5.00 per participant, per year.
7. Voice Response Unit
a. $500 Set-up Fee will be charged for each
investment company unit.
b. $2,500 Maintenance Fee will be billed each
month.
c. $.50 will be billed per call connected to the
VRU.
8. Contingent Deferred Sales Charge.
Billed to each Fund utilizing this service at an
annual rate of $1.06 per open account.
B. State Street Bank
1. NSCC Settlements
a. $11.65 for net redemptions
b. $ 5.30 per net purchases
2. Checkwriting Fees
$.585 for each checkwriting item processed (i.e.
those resulting in either redemptions or returned as
non-processable). This includes signature card
maintenance and verification, manual or special
processing of checks, stop payment processing,
PAGE 59
settlement functions, and postage and mailing
expenses to return canceled checks to shareholders.
3. ACH Transactions
$.06 for each ACH transaction processed by the Bank
and submitted to the ACH network.
4. Internal Book Transfers
$1.11 billed for money movement between TRP DDA's at
the Bank. Money is transferred by debit and credit
memos.
or Recon WT $.70 -$.35 credit
-$.35 debit
5. Wire Fees
$4.12 for each incoming, manual, and internal bank
transfer wire; $3.87 for each outgoing transmission
wire.
6. Paid checks
$.19 for each paid check processed.
7. DDA Research
$1.06 per request.
8. Nightly Audits
$.0310 per page for the audit of the DST nightly
update.
10. VAX Computer Usage
Billed at the rate of $8,709.56 per month which
covers both:
a. System Fee - for use of sub-systems such as
capital stock interface, PDPS, Direct Deposit,
etc.
b. Communication Fee - charge for the line, modems,
and statistical multiplexers.
PAGE 60
11. Abandoned Property
Services based on the following fee schedule:
a. Administrative charge $125/Fund
b. Processing charges $1.00/account
c. Due Diligence Mailings $1.35/account
d. Labor will be charged based on the number of
hours required.
e. Lost shareholder recovery $2.25/account
initial attempt
$5.00/s/o any s/o
located
$500.00 one time
set up charge
12. Account maintenance $16.49 per account per month
13. Reporting (SSCAN) for selected accounts - $51.54 per
account per month
14. FDIC Passthrough - charged at prevailing FDIC rates
C. J.P. Morgan Bank
1. Wire Transfer Fees
Annual Account Maintenance $250.00
Annual MORCOM/CASH
First Account $5,000.00
Subsequent Accounts $3,000.00
Batch File Transfer (BFT)
Transmission $15.00 each
(capped at 10 per month)
BFT Per Outgoing Wire
Peak (8 a.m. and 8 p.m.) $0.064
Off Peak (8 p.m. and 8 a.m.) $0.032
Outgoing Wires
Straight-through (Repetitive or Freetype)
80% of total volume $3.25
Book Transfer (IBT) $1.50
Repair (Freeform) $7.00
Zero Balance Transfer $1.00
PAGE 61
Incoming Wires
Fed or CHIPS $3.25
Book (IBT) $1.50
FDIC Passthrough - charged at prevailing FDIC rates
2. Controlled Disbursement Fees
Annual Account Maintenance
(capped at 6 accounts) $760.00 per
account
Annual MORCOM Next Day $1,385.00 per
account
Annual MORCOM Check $715.00 per
account
Batch File Transfer (BFT)
Transmission (capped at 10 per month) $15.00 each
Same Day Match Pay (Dividend & Redemption Checks)
DCD Match $2,500.00 per
account
TRPS Matches .005 per item
Checks Paid
Up to 500,000 items $0.051
Up to 750,000 items $0.042
Up to 1,000,000 items $0.035
Stops
On-line $3.00
Returned Checks $5.00 per item
3. The bank may charge interest at a rate in excess of
normal borrowing rates if the TRPS balance is
overdrawn or is in a negative collected balance
status.
PAGE 62
D. First National Bank of Maryland
1. Internal Fund Transfer $6.00
2. Returned Items $2.70
3. Deposit Items Charge varies
1
4. Deposit Tickets $.45
5. Return/redeposit items $3.00
6. Deposit Corrections $4.50
7. Check copy $9.00
8. First Facts
CDA Repetitive Wire $3.95
System Reports/Per Module $27.00
Per Report Previous Day $1.80
Per Report Current Day $3.60
9. Account maintenance $11.25
10. Debit item $.54
11. Credit transaction $.54
12. Foreign Deposit Check amount $1,000-$4,999 $7.50
$5,000-19,999 $15.00
< $20,000 $20.00
13. ACH Debit $.117
14. Tax Deposits $.90
15. Film - Monthly $121.50
16. TRPS may be charged interest when TRPS's
balance at FNB is in a negative collected
balance status. TRPS may also receive
balance credits on a positive investable balance
17. FDIC Passthrough charged at prevailing FDIC rates
III. New Funds
Funds added during the term of this contract may have their
Maintenance and Transaction charges and other charges (Section
I) waived for a period of time, as agreed to by TRPS and Fund
Directors, following the establishment of the Fund. Out-of-
pocket expenses will be billed to the Fund from the Fund's
inception.
____________________
1Charge varies by District, $ .0247 to $ .1147
PAGE 63
IN WITNESS WHEREOF, T.Rowe Price Funds and T.Rowe Price Services,
Inc. have agreed upon this fee schedule to be executed in their
names and on their behalf through their duly authorized officers:
T. ROWE PRICE FUNDS T. ROWE PRICE SERVICES, INC.
NAME ____________________ NAME _________________________
TITLE ______________________ TITLE _________________________
DATE _______________________ DATE _________________________
PAGE 64
AMENDMENT NO. 1
TRANSFER AGENCY AND SERVICE AGREEMENT
Between
T. ROWE PRICE SERVICES, INC.
And
THE T. ROWE PRICE FUNDS
The Transfer Agency and Service Agreement of January 1,
1995, between T. Rowe Price Services, Inc. and each of the
Parties listed on Appendix A thereto is hereby amended, as of
January 25, 1995, by adding thereto the T. Rowe Price Emerging
Markets Stock Fund, a separate series of the T. Rowe Price
International Funds, Inc.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. ROWE PRICE GNMA FUND
PAGE 65
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
PAGE 66
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE
FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
PAGE 67
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE VALUE FUND, INC.
Attest:
/s/Patricia S. Butcher /s/Carmen F. Deyesu
______________________ ______________________________
Patricia S. Butcher, By: Carmen F. Deyesu
Assistant Secretary
Attest: T. ROWE PRICE SERVICES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
______________________ ______________________________
Barbara A. Van Horn, By: Henry H. Hopkins,
Assistant Secretary Vice President
The Agreement between T. Rowe Price Associates, Inc. and
T. Rowe Price Funds for Fund Accounting Services, dated January
1, 1995, as amended, should be inserted here.
PAGE 1
AGREEMENT
between
T. ROWE PRICE ASSOCIATES, INC.
and
THE T. ROWE PRICE FUNDS
for
FUND ACCOUNTING SERVICES
PAGE 2
TABLE OF CONTENTS
Page
Article A Terms of Appointment/Duties of Price
Associates . . . . . . . . . . . . . . . . . . 1
Article B Fees and Out-of-Pocket Expenses . . . . . . . . 2
Article C Representations and Warranties of Price
Associates . . . . . . . . . . . . . . . . . . 3
Article D Representations and Warranties of the Fund . . 3
Article E Ownership of Software and Related Material . . 3
Article F Quality Service Standards . . . . . . . . . . . 4
Article G Standard of Care/Indemnification . . . . . . . 4
Article H Dual Interests . . . . . . . . . . . . . . . . 5
Article I Documentation . . . . . . . . . . . . . . . . . 5
Article J Recordkeeping/Confidentiality . . . . . . . . . 5
Article K Compliance with Governmental Rules and
Regulations . . . . . . . . . . . . . . . . . . 6
Article L Terms and Termination of Agreement . . . . . . 6
Article M Notice . . . . . . . . . . . . . . . . . . . . 6
Article N Assignment . . . . . . . . . . . . . . . . . . 7
Article O Amendment/Interpretive Provisions . . . . . . . 7
Article P Further Assurances . . . . . . . . . . . . . . 7
Article Q Maryland Law to Apply . . . . . . . . . . . . . 7
Article R Merger of Agreement . . . . . . . . . . . . . . 7
Article S Counterparts . . . . . . . . . . . . . . . . . 8
Article T The Parties . . . . . . . . . . . . . . . . . . 8
PAGE 3
Article U Directors, Trustee and Shareholders and
Massachusetts Business Trust . . . . . . . . . 8
Article V Captions . . . . . . . . . . . . . . . . . . . 9
PAGE 4
AGREEMENT made as of the first day of January, 1995, by and
between T. ROWE PRICE ASSOCIATES, INC., a Maryland corporation
having its principal office and place of business at 100 East
Pratt Street, Baltimore, Maryland 21202 ("Price Associates"), and
each Fund which is listed on Appendix A (as such Appendix may be
amended from time to time) and which evidences its agreement to
be bound hereby by executing a copy of this Agreement (each such
Fund individually hereinafter referred to as "the Fund", whose
definition may be found in Article T);
WHEREAS, Price Associates has the capability of providing
the Funds with certain accounting services ("Accounting
Services");
WHEREAS, the Fund desires to appoint Price Associates to
provide these Accounting Services and Price Associates desires to
accept such appointment;
WHEREAS, the Board of Directors of the Fund has authorized
the Fund to utilize various pricing services for the purpose of
providing to Price Associates securities prices for the
calculation of the Fund's net asset value.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
PAGE 5
A. Terms of Appointment/Duties of Price Associates
Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints Price Associates
to provide, and Price Associates agrees to provide, the following
Accounting Services:
a. Maintain for each Fund a daily trial balance, a general
ledger, subsidiary records and capital stock accounts;
b. Maintain for each Fund an investment ledger, including
amortized bond and foreign dollar denominated costs
where applicable;
c. Maintain for each Fund all records relating to the
Fund's income and expenses;
d. Provide for the daily valuation of each Fund's
portfolio securities and the computation of each Fund's
daily net asset value per share. Such daily valuations
shall be made in accordance with the valuation policies
established by each of the Fund's Board of Directors
including, but not limited to, the utilization of such
pricing valuation sources and/or pricing services as
determined by the Boards. Price Associates shall have
no liability for any losses or damages incurred by the
Fund as a result of erroneous portfolio security
evaluations provided by such designated sources and/or
PAGE 6
pricing services; provided that, Price Associates
reasonably believes the prices are accurate, has
adhered to its normal verification control procedures,
and has otherwise met the standard of care as set forth
in Article G of this Agreement;
e. Provide daily cash flow and transaction status
information to each Fund's adviser;
f. Prepare for each Fund such financial information that
is reasonably necessary for shareholder reports,
reports to the Board of Directors and to the officers
of the Fund, and reports to the Securities and Exchange
Commission and the Internal Revenue Service and other
Federal and state regulatory agencies;
g. Provide each Fund with such advice that may be
reasonably necessary to properly account for all
financial transactions and to maintain the Fund's
accounting procedures and records so as to insure
compliance with generally accepted accounting and tax
practices and rules;
h. Maintain for each Fund all records that may be
reasonably required in connection with the audit
performed by each Fund's independent accountant, the
Securities and Exchange Commission, the Internal
PAGE 7
Revenue Service or such other Federal or state
regulatory agencies; and
i. Cooperate with each Fund's independent public
accountants and take all reasonable action in the
performance of its obligations under the Agreement to
assure that the necessary information is made available
to such accountants for the expression of their opinion
without any qualification as to the scope of their
examination including, but not limited to, their
opinion included in each such Fund's annual report on
Form N-SAR and annual amendment to Form N-1A.
B. Fees and Out-of-Pocket Expenses
Each Fund shall pay to Price Associates for its Accounting
Services hereunder, fees as set forth in the Schedule attached
hereto. In addition, each Fund will reimburse Price Associates
for out-of-pocket expenses such as postage, printed forms, voice
and data transmissions, record retention, disaster recovery,
third party vendors, equipment leases and other similar items as
may be agreed upon between Price Associates and the Fund. Some
invoices will contain costs for both the Funds and other funds
services by Price Associates. In these cases, a reasonable
allocation methodology will be used to allocate these costs to
the Funds.
PAGE 8
C. Representations and Warrantees of Price Associates
Price Associates represents and warrants to the Fund that:
1. It is a corporation duly organized and existing in good
standing under the laws of Maryland.
2. It is duly qualified to carry on its business in
Maryland.
3. It is empowered under applicable laws and by its
charter and By-Laws to enter into and perform this Agreement.
4. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
5. It has, and will continue to have, access to the
necessary facilities, equipment and personnel to perform its
duties and obligations under this Agreement.
D. Representations and Warrantees of the Fund
The Fund represents and warrants to Price Associates that:
1. It is a corporation or business trust, as the case may
be, duly organized and existing and in good standing under the
laws of Maryland or Massachusetts, as the case may be.
2. It is empowered under applicable laws and by its
Articles of Incorporation or Declaration of Trust, as the case
may be, and By-Laws have been taken to authorize it to enter into
and perform this Agreement.
PAGE 9
3. All proceedings required by said Articles of
Incorporation or Declaration of Trust, as the case may be, and
By-Laws have been taken to authorize it to enter into and perform
this Agreement.
E. Ownership of Software and Related Material
All computer programs, magnetic tapes, written procedures,
and similar items purchased and/or developed and used by Price
Associates in performance of the Agreement shall be the property
of Price Associates and will not become the property of the
Funds.
F. Quality Service Standards
Price Associates and the Fund may, from time to time, agree
to certain quality service standards, with respect to Price
Associates' services hereunder.
G. Standard of Care/Indemnification
Notwithstanding anything to the contrary in this Agreement:
1. Price Associates shall not be liable to any Fund for
any act or failure to act by it or its agents or subcontractors
on behalf of the Fund in carrying or attempting to carry out the
terms and provisions of the Agreement provided Price Associates
has acted in good faith and without negligence or willful
misconduct and selected and monitored the performance of its
agents and subcontractors with reasonable care.
PAGE 10
2. The Fund shall indemnify and hold Price Associates
harmless from and against all losses, costs, damages, claims,
actions, and expenses, including reasonable expenses for legal
counsel, incurred by Price Associates resulting from: (i) any
action or omission by Price Associates or its agents or
subcontractors in the performance of their duties hereunder; (ii)
Price Associates acting upon instructions believed by it to have
been executed by a duly authorized officer of the Fund; or (iii)
Price Associates acting upon information provided by the Fund in
form and under policies agreed to by Price Associates and the
Fund. Price Associates shall not be entitled to such
indemnification in respect of actions or omissions constituting
negligence or willful misconduct of Price Associates or where
Price Associates has not exercised reasonable care in selecting
or monitoring the performance of its agents or subcontractors.
3. Price Associates shall indemnify and hold harmless the
Fund from all losses, costs, damages, claims, actions and
expenses, including reasonable expenses for legal counsel,
incurred by the Fund resulting from the negligence or willful
misconduct of Price Associates or which result from Price
Associates' failure to exercise reasonable care in selecting or
monitoring the performance of its agents or subcontractors. The
Fund shall not be entitled to such indemnification with respect
PAGE 11
to actions or omissions constituting negligence or willful
misconduct of such Fund or its agents or subcontractors; unless
such negligence or misconduct is attributable to Price
Associates.
4. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of
God, strikes or other causes reasonably beyond its control, such
party shall not be liable to the other party for any loss, cost,
damage, claim, action or expense resulting from such failure to
perform or otherwise from such causes.
5. In order that the indemnification provisions contained
in this Article F shall apply, upon the assertion of a claim for
which either party may be required to indemnify the other, the
party seeking indemnification shall promptly notify the other
party of such assertion, and shall keep the other party advised
with respect to all developments concerning such claim. The
party who may be required to indemnify shall have the option to
participate with the party seeking indemnification in the defense
of such claim, or to defend against said claim in its own name or
in the name of the other party. The party seeking
indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required
PAGE 12
to indemnify it except with the other party's prior written
consent.
6. Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this
Agreement.
H. Dual Interests
It is understood that some person or persons may be
directors, officers, or shareholders of both the Fund and Price
Associates (including Price Associates' affiliates), and that the
existence of any such dual interest shall not affect the validity
of this Agreement or of any transactions hereunder except as
otherwise provided by a specific provision of applicable law.
I. Documentation
As requested by Price Associates, the Fund shall promptly
furnish to Price Associates such documents as it may reasonably
request and as are necessary for Price Associates to carry out
its responsibilities hereunder.
J. Recordkeeping/Confidentiality
1. Price Associates shall keep records relating to the
services to be performed hereunder, in the form and manner as it
may deem advisable, provided that Price Associates shall keep all
PAGE 13
records in such form and in such manner as required by applicable
law, including the Investment Company Act of 1940 ("the Act") and
the Securities Exchange Act of 1934 ("the '34 Act").
2. Price Associates and the Fund agree that all books,
records, information and data pertaining to the business of the
other party which are exchanged or received pursuant to the
negotiation or the carrying out of this Agreement shall remain
confidential, and shall not be voluntarily disclosed to any other
person, except: (a) after prior notification to and approval in
writing by the other party hereto, which approval shall not be
unreasonably withheld and may not be withheld where Price
Associates or Fund may be exposed to civil or criminal contempt
proceedings for failure to comply; (b) when requested to divulge
such information by duly constituted governmental authorities; or
(c) after so requested by the other party hereto.
K. Compliance With Governmental Rules and Regulations
Except as otherwise provided in the Agreement and except for
the accuracy of information furnished to the Funds by Price
Associates, each Fund assumes full responsibility for the
preparation, contents and distribution of its prospectuses, and
for complying with all applicable requirements of the Act, the
'34 Act, the Securities Act of 1933 (the "33 Act"), and any laws,
PAGE 14
rules and regulations of governmental authorities having
jurisdiction over the Funds.
L. Term and Termination of Agreement
1. This Agreement shall run for a period of one (1) year
from the date first written above and will be renewed from year
to year thereafter unless terminated by either party as provided
hereunder.
2. This Agreement may be terminated by the Fund upon sixty
(60) days' written notice to Price Associates; and by Price
Associates, upon three hundred sixty-five (365) days' writing
notice to the Fund.
3. Upon termination hereof, the Fund shall pay to Price
Associates such compensation as may be due as of the date of such
termination, and shall likewise reimburse for out-of-pocket
expenses related to its services hereunder.
M. Notice
Any notice as required by this Agreement shall be
sufficiently given (i) when sent to an authorized person of the
other party at the address of such party set forth above or at
such other address as such party may from time to time specify in
writing to the other party; or (ii) as otherwise agreed upon by
appropriate officers of the parties hereto.
PAGE 15
N. Assignment
Neither this Agreement nor any rights or obligations
hereunder may be assigned either voluntarily or involuntarily, by
operation of law or otherwise, by either party without the prior
written consent of the other party, provided this shall not
preclude Price Associates from employing such agents and
subcontractors as it deems appropriate to carry out its
obligations set forth hereunder.
O. Amendment/Interpretive Provisions
The parties by mutual written agreement may amend this
Agreement at any time. In addition, in connection with the
operation of this Agreement, Price Associates and the Fund may
agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their
joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions are to
be signed by all parties and annexed hereto, but no such
provision shall contravene any applicable Federal or state law or
regulation and no such interpretive or additional provision shall
be deemed to be an amendment of this Agreement.
PAGE 16
P. Further Assurances
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the
purposes hereof.
Q. Maryland Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of Maryland.
R. Merger of Agreement
This Agreement, including the attached Appendices and
Schedules supersedes any prior agreement with respect to the
subject hereof, whether oral or written.
S. Counterparts
This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same
instruments.
T. The Parties
All references herein to "the Fund" are to each of the Funds
listed on Appendix A individually, as if this Agreement were
between such individual Fund and Price Associates. In the case
of a series Fund or trust, all references to "the Fund" are to
the individual series or portfolio of such Fund or trust, or to
such Fund or trust on behalf of the individual series or
PAGE 17
portfolio, as appropriate. The "Fund" also includes any T. Rowe
Price Funds which may be established after the execution of this
Agreement. Any reference in this Agreement to "the parties"
shall mean Price Associates and such other individual Fund as to
which the matter pertains.
U. Directors, Trustees and Shareholders and Massachusetts
Business Trust
It is understood and is expressly stipulated that neither
the holders of shares in the Fund nor any Directors or Trustees
of the Fund shall be personally liable hereunder.With respect to
any Fund which is a party to this Agreement and which is
organized as a Massachusetts business trust, the term "Fund"
means and refers to the trustees from time to time serving under
the applicable trust agreement (Declaration of Trust) of such
Trust as the same may be amended from time to time. It is
expressly agreed that the obligations of any such Trust hereunder
shall not be binding upon any of the trustees, shareholders,
nominees, officers, agents or employees of the Trust, personally,
but bind only the trust property of the Trust, as provided in the
Declaration of Trust of the Trust. The execution and delivery of
this Agreement has been authorized by the trustees and signed by
an authorized officer of the Trust, acting as such, and neither
such authorization by such Trustees nor such execution and
PAGE 18
delivery by such officer shall be deemed to have been made by any
of them, but shall bind only the trust property of the Trust as
provided in its Declaration of Trust.
V. Captions
The captions in the Agreement are included for convenience
of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or
effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf under
their seals by and through their duly authorized officers.
DATED: ______________________ T. ROWE PRICE ASSOCIATES, INC.
ATTEST:
/s/Barbara A. Van Horn /s/Alvin M. Younger, Jr.
______________________________ BY: __________________________
Barbara A. Van Horn, Managing Director
Assistant Secretary
PAGE 19
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
PAGE 20
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MID-CAP GROWTH FUND
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
PAGE 21
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND,
INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
DATED: ______________________
ATTEST:
/s/Patricia S. Butcher /s/Carmen F. Deyesu
______________________________ BY: ___________________________
Patricia S. Butcher, Carmen F. Deyesu
Assistant Secretary
PAGE 22
APPENDIX A
The following Funds are parties to this Agreement, and have so
indicated their intention to be bound by such Agreement by
executing the Agreement on the dates indicated thereon.
T. Rowe Price Adjustable Rate U.S. Government
Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price California Tax-Free Income
Trust on behalf of the
California Tax-Free Bond Fund and
California Tax-Free Money Fund
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Equity Series, Inc. on behalf
of the:
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
T. Rowe Price Fixed Income Series, Inc. on
behalf of the:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price GNMA Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
PAGE 23
T. Rowe Price Index Trust, Inc. on behalf of
the:
T. Rowe Price Equity Index Fund
Institutional International Funds, Inc. on
behalf of the:
Foreign Equity Fund
T. Rowe Price International Equity Fund, Inc.
T. Rowe Price International Funds, Inc. on
behalf of the:
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Fund
T. Rowe Price Latin American Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Mid-Cap Growth Fund
T. Rowe Price New America Growth Fund
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of
the:
T. Rowe Price OTC Fund
T. Rowe Price Prime Reserve Fund, Inc.
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
PAGE 24
T. Rowe Price Spectrum Fund, Inc. on behalf
of the:
Spectrum Growth Fund
Spectrum Income Fund
T. Rowe Price State Tax-Free Income Trust on
behalf of the:
Maryland Tax-Free Bond Fund,
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund and
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Bond
Fund
Georgia Tax-Free Bond Fund
T. Rowe Price Tax-Exempt Money Fund, Inc.
T. Rowe Price Tax-Free Insured Intermediate
Bond Fund, Inc.
T. Rowe Price Tax-Free High Yield Fund, Inc.
T. Rowe Price Tax-Free Income Fund, Inc.
T. Rowe Price Tax-Free Short-Intermediate
Fund, Inc.
T. Rowe Price U.S. Treasury Funds, Inc. on
behalf of the:
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. Rowe Price Summit Funds, Inc. on behalf of
the:
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond
Fund
T. Rowe Price Summit GNMA Fund
PAGE 25
T. Rowe Price Summit Municipal Funds, Inc. on
behalf of the:
T. Rowe Price Summit Municipal Money
Market Fund
T. Rowe Price Summit Municipal
Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. Rowe Price Value Fund, Inc.
PAGE 26
FUND ACCOUNTING SERVICES FEE SCHEDULE
Between
T. ROWE PRICE ASSOCIATES, INC.
And
THE T. ROWE PRICE FUNDS
January 1, 1995 to December 31, 1995
PAGE 27
FUND ACCOUNTING SERVICES
1995 FEE SCHEDULE
A. Fee Structure
1. Base Fee
Domestic Funds $60,000 each
International Funds $100,000 each
Spectrum Funds $35,000 each
Per Fund fee for basic recordkeeping
and financial reporting
2. Individual Fund Fee
Total fees reflecting special $ 933,000
characteristics of each Fund
3. Stock Lending Fee
Allocated to each Fund based $ 75,000
on ratio of net earnings from
stock loans
4. Additional Funds
Domestic Funds $60,000 each
International Funds $100,000 each
Spectrum Funds $35,000 each
B. Total Cost Per Fund
Growth Stock Fund $ 114,000
New Horizons Fund 95,000
Equity Income Fund 85,000
New Era Fund 72,000
International Stock Fund 115,000
Growth & Income Fund 85,000
New America Growth Fund 70,000
Capital Appreciation Fund 85,000
Small-Cap Value Fund 60,000
Foreign Equity Fund 105,000
International Discovery Fund 125,000
Science & Technology Fund 60,000
High Yield Fund 165,000
Tax-Free Income Fund 110,000
PAGE 28
New Income Fund 100,000
Tax-Free High Yield Fund 110,000
European Stock Fund 100,000
Equity Index Fund 60,000
New Asia Fund 110,000
Spectrum Growth Fund 35,000
GNMA Fund 120,000
International Bond Fund 125,000
Balanced Fund 90,000
Maryland Bond Fund 81,000
Tax-Free Short Intermediate Fund 85,000
Short-Term Bond Fund 120,000
California Bond Fund 72,000
New York Bond Fund 72,000
U.S. Treasury Short-Intermediate Fund 60,000
U.S. Treasury Long-Term Bond Fund 60,000
Spectrum Income Fund 35,000
Prime Reserve Fund 85,000
Tax-Exempt Money Fund 93,000
U.S. Treasury Money Fund 60,000
California Money Fund 67,000
New York Money Fund 67,000
Adjustable Rate Government Fund 110,000
Virginia Bond Fund 60,000
New Jersey Bond Fund 60,000
Global Government Bond Fund 100,000
OTC Fund 85,000
Japan Fund 100,000
Mid-Cap Growth Fund 60,000
Short-Term Global Fund 110,000
Maryland Short-Term Tax-Free Bond Fund 60,000
Florida Insured Intermediate Tax-Free Fund 60,000
Georgia Tax-Free Bond Fund 60,000
Tax-Free Insured Intermediate Bond Fund 60,000
Blue Chip Growth Fund 60,000
Dividend Growth Fund 65,000
Latin America Fund 110,000
Summit Cash Reserve Fund 60,000
Summit Limited-Term Bond Fund 60,000
Summit GNMA Fund 60,000
Summit Municipal Money Market Fund 60,000
Summit Municipal Intermediate Fund 60,000
Summit Municipal Income Fund 60,000
International Stock Portfolio 100,000
Personal Strategy Income Fund 70,000
Equity Income Portfolio 60,000
Personal Strategy Balanced Fund 70,000
PAGE 29
New America Growth Portfolio 60,000
Personal Strategy Growth Fund 70,000
Limited-Term Bond Portfolio 60,000
IN WITNESS WHEREOF, T. Rowe Price Funds and T. Rowe Price
Associates, Inc. have agreed upon this fee schedule to be
executed in their names and on their behalf through their duly
authorized officers:
T. ROWE PRICE FUNDS T. ROWE PRICE ASSOCIATES, INC.
/s/Carmen F. Deyesu /s/Alvin M. Younger
Name _________________________ Name ______________________
Carmen F. Deyesu Alvin M. Younger
Title Treasurer Title Treasurer and Managing
Director
Date _________________________ Date ______________________
PAGE 30
AMENDMENT NO. 1
AGREEMENT
between
T. ROWE PRICE ASSOCIATES, INC.
and
THE T. ROWE PRICE FUNDS
for
FUND ACCOUNTING SERVICES
The Agreement for Fund Accounting Services of January 1,
1995, between T. Rowe Price Associates, Inc. and each of the
Parties listed on Appendix A thereto is hereby amended, as of
January 25, 1995, by adding thereto the T. Rowe Price Emerging
Markets Stock Fund, a separate series of the T. Rowe Price
International Funds, Inc.
T. ROWE PRICE ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME
TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced
Portfolio
PAGE 31
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL EQUITY FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Short-Term Global Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MID-CAP GROWTH FUND
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE OTC FUND, INC.
T. Rowe Price OTC Fund
PAGE 32
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T.ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market
Fund
T. Rowe Price Summit Municipal Intermediate
Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE
FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
PAGE 33
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE
FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T.ROWE PRICE VALUE FUND, INC.
Attest:
/s/Patricia S. Butcher /s/Carmen F. Deyesu
________________________ ___________________________________
Patricia S. Butcher, By: Carmen F. Deyesu
Assistant Secretary
Attest: T. ROWE PRICE ASSOCIATES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
________________________ ___________________________________
Barbara A. Van Horn, By: Henry H. Hopkins,
Assistant Secretary Managing Director
June 6, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: T. Rowe Price California Tax-Free Income Trust
("Registrant")--consisting of two separate series
California Tax-Free Bond Fund ("Bond Fund")
California Tax-Free Money Fund ("Money Fund")
File Nos.: 33-08093/811-4525
Commissioners:
We are counsel to the above-referenced registrant which
proposes to file, pursuant to paragraph (b) of Rule 485 (the
"Rule"), Post-Effective Amendment No. 16 (the "Amendment") to its
registration statement under the Securities Act of 1933, as
amended.
Pursuant to paragraph (e) of the Rule, we represent that the
Amendment does not contain disclosures which would render it
ineligible to become effective pursuant to paragraph (b) of the
Rule.
Sincerely,
/s/Shereff, Friedman, Hoffman & Goodman, LLP
Shereff, Friedman, Hoffman & Goodman, LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
T. Rowe Price California Tax-Free Income Trust
We consent to the incorporation by reference in Post-
Effective Amendment No. 16 to the Registration Statement of the
T. Rowe Price California Tax-Free Income Trust, Inc. (the
"Trust") on Form N-1A (File No. 33-08093O of our report dated
March 17, 1995, on our audit of the financial statements and
financial highlights of the California Tax-Free Money Fund and
California Tax-Free Bond Fund (two of the portfolios included in
the Trust), which report is included in the Annual Report to
Shareholders for the period ended February 28, 1995, which is
incorporated by reference in the Registration Statement. We also
consent to the reference to our Firm under the caption "Financial
Highlights" in the Prospectus and "Independent Accountants" in
the Statement of Additional Information.
/s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
June 6, 1995
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