PAGE 1
Registration No. 33-10992/811-4998
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Post-Effective Amendment No. 11 / X /
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940 / X /
Amendment No. 15 / X /
Fiscal Year Ended December 31, 1996
______________________________________
T. ROWE PRICE SPECTRUM FUND, INC.
____________________________________________________
(Exact Name of Registrant as Specified in Charter)
100 East Pratt Street, Baltimore, Maryland 21202
__________________________________________ __________
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 410-547-2000
____________
Henry H. Hopkins
100 East Pratt Street
Baltimore, Maryland 21202
_________________________________________
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering February 14,
1997
____________
It is proposed that this filing will become effective (check
appropriate box):
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/X/ 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
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/ / 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 February 28, 1997.
*Not applicable, as no securities are being registered by this
Post-Effective Amendment No. 11 to the Registration Statement.
PAGE 3
The Registration Statement of T. Rowe Price Spectrum Fund,
Inc. on Form N-1A (File Number 33-10992) is hereby amended under
the Securities Act of 1933 to make other changes in the
Registrant's Prospectus and Statement of Additional Information.
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
(Incorporated by reference from Post-effective amendment no.
10, filed December 16, 1996.
Part C of Form N-1A, Other Information
Accountants' Consent
PAGE 4 CROSS REFERENCE SHEET
N-1A Item No. Location
____________ _________
PART A
Item 1. Cover Page Cover Page
Item 2. Synopsis Summary of Fund's Fees
and Expenses
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Transaction and Fund
Registrant Expenses; Fund,
Market, and Risk
Characteristics;
Organization and
Management;
Understanding
Performance
Information;
Description of
Underlying Price
Funds; Investment
Policies and Practices
of Underlying Price
Funds
Item 5. Management of the Fund Transaction and Fund
Expenses; Fund,
Market, and Risk
Characteristics;
Organization and
Management; Management
Fee
Item 6. Capital Stock and Other Distributions and
Securities Taxes; Organization
and Management
Item 7. Purchase of Securities Being Pricing Shares and
Offered Receiving Sale
Proceeds; Transaction
Procedures and Special
Requirements; and
Account Requirements
and Transaction
Information; Opening a
New Account;
Purchasing Additional
Shares; Shareholder
Services
Item 8. Redemption or Repurchase Pricing Shares and
Receiving Sale
Proceeds; Transaction
Procedures and Special
Requirements;
Exchanging and
PAGE 5
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
Item 13. Investment Objectives and Investment Objectives
Policies and Policies; Risk
Factors; Investment
Program; Investment
Policies; Investment
Restrictions;
Investment Performance
Item 14. Management of the Registrant Management of Fund
Item 15. Control Persons and Principal Principal Holders of
Holders of Securities Securities
Item 16. Investment Advisory and Investment Management
Other 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; Capital
Stock
Item 19. Purchase, Redemption and Pricing of Securities;
Pricing of Securities Being Net Asset Value Per
Offered Share; Redemptions in
Kind; Federal and
State Registration of
Shares
Item 20. Tax Status Tax Status
Item 21. Underwriters Distributor for the
Fund
Item 22. Calculation of Yield Quotations +
of Money Market Funds
Item 23. Financial Statements Incorporated by
Reference from Annual
Report
___________________________________
+ Not applicable or negative answer
PAGE 6
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.
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The printed version of this prospectus appears in a dual column
format.
PAGE 8
Facts at a Glance
Investment Goals
Spectrum Income Fund seeks a high level of current income
consistent with moderate share price fluctuation.
Spectrum Growth Fund seeks long-term capital appreciation and
growth of income, with current income a secondary objective.
Spectrum International Fund seeks long-term capital appreciation.
As with any mutual fund, there is no guarantee the funds will
achieve their goals.
Strategy
Each fund diversifies its assets within set limits among specific
underlying T. Rowe Price funds. Allocation decisions reflect
Spectrum fund managers' outlook for the relative valuations of
the underlying funds, and the various economies and financial
markets.
Spectrum Income Fund invests primarily in domestic bond funds and
also in a foreign bond fund, but may allocate up to 25% of assets
to a stock fund.
Spectrum Growth Fund invests primarily in domestic stock funds
and also in a foreign stock fund.
Spectrum International Fund invests primarily in international
stock and to a lesser extent bond funds.
Risk/Reward
Spectrum Income Fund: The potential for investors to achieve high
current income with modest share price appreciation through
diversification of assets.
Spectrum Growth Fund: The potential for investors to achieve
long-term capital appreciation and growth of income through
diversification.
Spectrum International Fund: The potential for investors to
achieve long-term capital appreciation through diversification
among international markets.
Investors in each fund should be prepared for share price
volatility and the possibility of losing money. Under normal
PAGE 9
conditions, Spectrum Income Fund will experience the least
volatility and Spectrum International Fund the most of all three
funds. Before investing, you should carefully consider the risks
explained in more detail in "Investment Policies and Practices."
Investor Profile
Spectrum Income Fund: Individuals seeking high current income
through diversification primarily among various bond funds.
Spectrum Growth Fund: Individuals seeking long-term capital
appreciation and growth of income through diversification among
different stock funds.
Spectrum International Fund: Individuals seeking long-term
capital appreciation through diversification among international
stock and bond funds and who can accept the risks of
international investing.
Investors in each fund should be prepared to accept the
possibility of share price declines. Appropriate for both
regular and tax-deferred accounts, such as IRAs.
Fees and Charges
100% no load. No fees or charges to buy or sell shares or to
reinvest dividends; no 12b-1 marketing fees; free telephone
exchange.
Investment Manager
Spectrum Income and Spectrum Growth Funds: T. Rowe Price
Associates, Inc. ("T. Rowe Price"), founded in 1937 by the late
Thomas Rowe Price, Jr., and its affiliates managed over $92
billion for over four million individual and institutional
investor accounts as of September 30, 1996.
Spectrum International Fund: Rowe Price-Fleming International,
Inc. ("Price-Fleming"), was founded in 1979 as a joint venture
between T. Rowe Price and Robert Fleming Holdings Ltd. Price-
Fleming managed over $27 billion in foreign stocks and bonds
through its offices in Baltimore, London, Tokyo, and Hong Kong as
of September 30, 1996.
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.
PAGE 10
T. Rowe Price
Spectrum Fund, Inc.
December __, 1996
Prospectus
This prospectus contains information you should know about the
fund before investing. Please keep it for future reference. A
Statement of Additional Information about the fund, dated
December __, 1996, has been filed with the Securities and
Exchange Commission and is incorporated by reference in this
prospectus. To obtain a free copy, call 1-800-638-5660.
Contents
1 About the Funds
Transaction and Fund Expenses
Financial Highlights
Fund, Market, and Risk
Characteristics
2 About Your Account
Pricing Shares and Receiving Sale Proceeds
Distributions and Taxes
Transaction Procedures and Special Requirements
3 More About the Funds
Organization and Management
Understanding Performance Information
Special Risks and Considerations
Description of Underlying Price Funds
Spectrum Fund Investment Policies
Investment Policies and Practices of Underlying Price Funds
4 Investing With T. Rowe Price
Account Requirements and
Transaction Information
Opening a New Account
Purchasing Additional Shares
Exchanging and Redeeming
Shareholder Services
Discount Brokerage
Investment Information
1 About the Funds
Transaction and Fund Expenses
Like all T. Rowe Price funds, these funds are 100% no load.
These tables should help you understand the kinds of expenses you
will bear indirectly as a Spectrum Fund shareholder. The
Spectrum funds will indirectly bear their pro rata share of the
expenses of the underlying funds.
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In Table 1 below, "Shareholder Transaction Expenses," shows that
you pay no sales charges. All the money you invest in a Spectrum
fund goes to work for you. Shown below are all expenses and fees
the Spectrum Income and Spectrum Growth Funds incurred during
their fiscal year (expenses and fees for the Spectrum
International Fund are estimated). More information about these
expenses may be found below and under "Management Fees of
Underlying Funds" and in the Statement of Additional Information
under "Management Fee and Expenses."
Spectrum Spectrum Spectrum
Income Growth Interna
Fund Fund tional
Fund
Shareholder Transaction
Expenses
Sales charge "load" on
purchases None None None
Sales charge "load" on
reinvested dividends None None None
Redemption fees None None None
Exchange fees None None None
Annual Fund Expenses
Management fee None None None
Marketing (12b-1) fees None None None
Total other expenses
(shareholder servicing,
custodial, auditing, etc.) None None None
Total fund expenses None None None
Note: The funds charge a $5 fee for wire redemptions under
$5,000, subject to change without notice, and a $10 fee is
charged for small accounts when applicable (see "Small Account
Fee" under "Transaction Procedures and Special Requirements").
____________________________________________
Table 1
The Spectrum funds will operate at a zero expense level (see
"Expenses" for an explanation of the Special Servicing Agreements
under "Organization and Management"). However, the Spectrum
funds will indirectly bear their pro rata share of fees and
expenses incurred by the underlying funds and the investment
returns of the Spectrum funds will be net of the expenses of the
underlying funds. The following chart provides the expense
ratios for each of the underlying funds in which each Spectrum
fund will invest (based on information as of September 30, 1996).
Where applicable, expense ratios are restated to reflect current
fees.
PAGE 12
Expense Ratio
______________
Spectrum Income Fund
Prime Reserve Fund 0.67%
Equity Income Fund 0.82
Short-Term Bond Fund 0.74
International Bond Fund 0.88
GNMA Fund 0.76
High Yield Fund 0.85
New Income Fund 0.77
Spectrum Growth Fund
Prime Reserve Fund 0.67%
Equity Income Fund 0.82
Growth & Income Fund 0.83
International Stock Fund 0.88
New Era Fund 0.77
New Horizons Fund 0.91
Growth Stock Fund 0.78
Spectrum International Fund
International Stock Fund 0.88%
Emerging Markets Stock Fund 1.75(a)
International Discovery Fund 1.44
International Bond Fund 0.88
New Asia Fund 1.11
Japan Fund 1.32
European Stock Fund 1.12
Latin America Fund 1.66
Emerging Markets Bond Fund 1.25(b)
Prime Reserve Fund 0.67
(a) Price-Fleming agreed to waive management fees and bear
certain expenses in accordance with an expense limitation
agreement in effect through October 31, 1996. Effective October
31, 1996, Price-Fleming agreed to extend this expense limitation
through October 31, 1998. Had Price-Fleming not agreed to waive a
portion of its management fees, Emerging Markets Stock's total
expense ratio would have been 2.05%.
(b) Price-Fleming agreed to waive management fees and bear
certain expenses in accordance with an expense limitation
agreement in effect through December 31, 1996. Effective as of
December 31, 1996, Price-Fleming has agreed to extend this
expense limitation through December 31, 1998. Had Price-Fleming
not agreed to waive a portion of its management fees, Emerging
PAGE 13
Markets Bond's total expense ratio would have been 2.34%.
____________________________________________
Table 2
Based on the foregoing, the range of the average weighted expense
ratio is expected to be 0.75% to 0.82% for the Spectrum Income
Fund, 0.77% to 0.85% for the Spectrum Growth Fund, and 0.83% to
1.37% for the Spectrum International Fund. A range is provided
since the average assets invested in each of the underlying funds
will fluctuate.
o Hypothetical example: Using the midpoint of the above ranges,
the following example illustrates the expenses you would incur on
a $1,000 investment, assuming you invest $1,000, the fund returns
5% annually, expense ratios remain as listed previously, 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; actual expenses can be
higher or lower than those shown.
Fund Spectrum Spectrum Spectrum
Income Growth International
1 year $8 $8 $9
3 years $25 $26 $28
5 years $44 $46 $49
10 years $98 $101 $83
____________________________________________
Table 3
Financial Highlights
The following table provides information about the Spectrum
Income and Spectrum Growth Funds' financial history. It is based
on a single share outstanding throughout each fiscal year (which
ends on the last day of December), and for the six months ended
June 30, 1996. The table is part of the Spectrum Income and Spec-
trum Growth Funds' audited and unaudited financial statements
which are included in T. Rowe Price Spectrum Fund's annual and
semiannual reports, respectively, which are incorporated by
reference into the Statement of Additional Information. This
document is available to shareholders upon request. The financial
statements in the annual report have been audited by Price
Waterhouse LLP, independent accountants, whose unqualified report
covers the periods shown. The financial statements in the
semiannual report are unaudited.
PAGE 14
Investment Activities Distributions
Net Real-
ized and
Net Unreal- Total
Asset ized Gain from Net
Value, Net (Loss) Invest- Net Real-
Year Begin- Invest- on ment Invest-lized Total
Ended, ning of ment Invest- Activi- ment Gain Distri-
December31Period Income ments ties Income(Loss) butions
______________________________________________________________
Income Fund
1991 9.77 0.82 1.03 1.85 (0.83) (0.06) (0.89)
1992 10.73 0.76 0.05 0.81 (0.76) (0.08) (0.84)
1993 10.70 0.69 0.60 1.29 (0.69) (0.19) (0.88)
1994 11.11 0.69 (0.90) (0.21) (0.69) (0.10) (0.79)
1995 10.11 0.72 1.16 1.88 (0.72) (0.03) (0.75)
1996c 11.24 0.35 (0.24) 0.11 (0.35) (0.01) (0.36)
End of Period
Ratio
of
Ratio Net
Total of Invest-
Net Return Expenses ment Port-
Asset (Includes to Income folio
Value, Re- Net Average to Aver- Turn-
Year Ended,End of invested Assets ($ Net age Net over
December 31Period Dividends) Thousands) Assets Assets Rate
______________________________________________________________
Income Fund
1991 10.73 19.6% 147,859 0.00% 8.03% 18.8%
1992 10.70 7.8% 376,435 0.00% 7.10% 14.2%
1993 11.11 12.4% 587,931 0.00% 6.19% 14.4%
1994 10.11 (1.9%) 624,940 0.00% 6.48% 23.1%
1995 11.24 19.4% 986,701 0.00% 6.43% 20.2%
1996c 10.99 1.02% 1,195,135 0.00%b 6.40%a 21.0%a
PAGE 15
Investment Activities Distributions
Net Real-
ized and
Net Unreal- Total
Asset ized Gain from Net
Value, Net (Loss) Invest- Net Real-
Year Begin- Invest- on ment Invest-lized Total
Ended, ning of ment Invest- Activi- ment Gain Distri-
December31Period Income ments ties Income(Loss) butions
______________________________________________________________
Growth Fund
1991 8.52 0.21 2.33 2.54 (0.21) (0.32) (0.53)
1992 10.53 0.20 0.56 0.76 (0.20) (0.55) (0.75)
1993 10.54 0.16 2.05 2.21 (0.16) (0.72) (0.88)
1994 11.87 0.17 (0.01) 0.16 (0.17) (0.73) (0.90)
1995 11.13 0.21 3.12 3.33 (0.21) (0.76) (0.97)
1996c 13.49 0.05 1.27 1.32 -- -- --
End of Period
Ratio
of
Ratio Net
Total of Invest-
Net Return Expenses ment Port-
Asset (Includes to Income folio
Value, Re- Net Average to Aver- Turn-
Year Ended,End of invested Assets ($ Net age Net over
December 31Period Dividends) Thousands) Assets Assets Rate
______________________________________________________________
Growth Fund
1991 10.53 29.9% 148,661 0.00% 2.77% 14.6%
1992 10.54 7.2% 355,134 0.00% 2.15% 7.9%
1993 11.87 21.0% 584,876 0.00% 1.57% 7.0%
1994 11.13 1.4% 879,366 0.00% 1.60% 20.7%
1995 13.49 30.0% 1,358,344 0.00% 1.81% 7.4%
1996(c) 14.81 9.79% 1,803,765 0.00%d 0.74%a 1.7%a
a Annualized.
b The annualized weighted average expense ratio of the under-
lying funds was 0.79% for the six months ended June 30, 1996.
c Unaudited figures for the six months ended June 30, 1996.
d The annualized weighted average expense ratio of the
underlying funds was 0.83% for the six months ended June 30,
1996.
____________________________________________
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Table 4
Fund, Market, and Risk Characteristics: What to Expect
These funds should not be relied upon as a complete investment
program, nor be used for short-term trading purposes.
To help you decide whether the funds are appropriate for you,
this section takes a closer look at their investment objec-
tives and approaches.
What are the Spectrum Funds' objectives?
The objective of Spectrum Income Fund is to provide a high
level of current income with moderate share price fluctuation.
The objective of Spectrum Growth Fund is to provide long-term
capital appreciation and growth of income, with current income
a secondary objective. The objective of Spectrum International
Fund is to provide long-term capital appreciation.
What are the Spectrum Funds' investment programs?
Spectrum Income Fund will allocate its assets among a
diversified group of seven underlying T. Rowe Price funds that
invest primarily in fixed income securities. Spectrum Growth
Fund will allocate its assets among a diversified group of
seven underlying T. Rowe Price funds that invest primarily in
stocks. Spectrum International Fund will allocate its assets
among a group of T. Rowe Price funds that invest primarily in
international stocks and, to a lesser degree, international
bonds.
Each Spectrum Fund will diversify within set limits based on
the managers' outlook for the domestic and international econ-
omies, financial markets, and relative market valuations of
each underlying fund, and, in the case of Spectrum Interna-
tional Fund, additional factors inherent in international in-
vesting. The underlying funds in which each Spectrum Fund will
invest and the amounts which they may allocate to each
underlying fund are set forth in the chart below. The Spectrum
Growth and Income Funds will not purchase shares of any
underlying fund that would result in the Spectrum Funds'
owning more than 30% of an underlying fund's outstanding
voting shares. This restriction does not apply to the Spectrum
International Fund.
For details about the funds' investment program and practices,
please see the "Investment Policies and Practices" section.
PAGE 17
Spectrum Investment Spectrum Investment
Income Range (% of Growth Range (% of
Fund Spectrum Fund Spectrum
Fund assets Fund assets
Short-Term Prime Reserve
Bond Fund 0-15% Fund 0-25%
GNMA Fund 5-20% Equity Income
Fund 5-20%
International Growth & Income
Bond Fund 5-20% Fund 5-20%
Equity Income International
Fund 10-25% Stock Fund 5-20%
High Yield New Era Fund 10-25%
Fund 10-25%
Prime Reserve New Horizons
Fund 5-30% Fund 10-25%
New Income Growth Stock
Fund 15-30% Fund 15-30%
Spectrum International Fund Investment Range (% of
Spectrum International
Fund Assets)
International Stock 35-65%
International Discovery 0-20%
Emerging Markets Stock 0-20%
Japan Fund 0-30%
New Asia 0-20%
European Stock 0-30%
Latin America 0-15%
International Bond 0-20%
Emerging Markets Bond 0-15%
Prime Reserve 0-25%
____________________________________________
Table 5
What are some of the Spectrum Funds' potential risks?
Each Spectrum fund's share price will fluctuate as the share
prices of the underlying funds rise or fall with changing
market conditions.
With Spectrum Income Fund, the risks are generally the same as
with many income funds:
For Spectrum Income, a rise in interest rates is an important
PAGE 18
source of risk.
o Interest rate or market risk: the decline in bond prices
that accompanies a rise in the overall level of interest
rates.
o Credit risk: the chance that holdings of the underlying
funds will have their credit ratings downgraded or will
default, potentially reducing the underlying fund's share
price and income level. This risk is even greater with high-
yield ("junk") bonds, whose issuers are more vulnerable to
business setbacks and to economic changes, such as a
recession, that may impair their ability to make timely
interest and principal payments.
o Prepayment risk: with mortgage-backed securities, there is a
chance that, when interest rates are falling, homeowners will
accelerate principal payments on mortgages, causing a loss to
investors in mortgage securities that were originally
purchased at a price above par.
o Currency risk: the risk that weak foreign currencies versus
the U.S. dollar could result in losses for U.S. investors.
Also, Spectrum Income Fund's maximum 25% exposure to the
Equity Income Fund subjects that portion of assets to the
risks associated with stocks (see below).
For Spectrum Growth, a decline in stock prices is an important
source of risk.
With Spectrum Growth Fund, the major risk is the same inherent
in all stock funds. Since economic growth has been punctuated
by declines, share prices of even the best-managed, most
profitable companies are subject to market risk. Swings in
investor psychology and significant trading by large
institutions can result in price declines. For this reason,
equity investors should have a long-term investment horizon
and be willing to wait out bear markets.
A significant portion of the total assets of each underlying
fund may also be exposed to the risks of foreign investing,
including currency risk, as previously defined. The economies,
markets, and political structures of some countries in which
the underlying funds can invest do not compare favorably with
the U.S. and other mature economies in terms of wealth and
stability. Therefore, investments in these countries will be
riskier and more subject to erratic and abrupt price
movements.
PAGE 19
With Spectrum International Fund, in addition to the risks
associated with stock investing, international investing has
other unique risks:
For Spectrum International, volatility of foreign currency
markets is an important source of risk.
o Currency risk: The risk that weakening foreign currencies
versus the U.S. dollar could result in losses for U.S.
investors. Transactions in foreign markets are conducted in
local currencies, so dollars are exchanged for foreign
currency when a security is bought or sold or a dividend is
paid. Likewise, share price quotations and total return
information reflect conversion into dollars. Fluctuations in
foreign exchange rates can significantly increase or decrease
the dollar value of a foreign investment, boosting or
offsetting its local market return. For example, if a French
security rose 10% in price during a year, but the U.S. dollar
gained 5% against the French franc during that time, the U.S.
investor's return would be reduced to 5%. This is because the
franc would "buy" fewer dollars at the end of the year than at
the beginning, or, conversely, a dollar would cost more
francs.
o Increased costs: It is more expensive for U.S. investors to
trade in foreign markets than in the U.S. Mutual funds offer a
very efficient way for individuals to invest abroad, but the
overall expense ratios of international funds are usually
somewhat higher than those of typical domestic funds.
o Political and economic factors: The economies, markets, and
political structures of a number of the countries in which the
underlying funds can invest do not compare favorably with the
U.S. and other mature economies in terms of wealth and
stability. Therefore, investments in these countries will be
riskier and subject to more erratic and abrupt price
movements. This is especially true for emerging markets.
However, even investments in countries with highly developed
economies are subject to risk.
Some economies are less developed, heavily dependent on
particular industries, and more vulnerable to the ebb and flow
of international trade, trade barriers, and other
protectionist or retaliatory measures. This makes investment
in such markets significantly riskier than in other countries.
Some countries are grappling with severe inflation and high
levels of national debt. Investments in countries that have
been moving away from central planning and state-owned
industries toward free markets should be regarded as
speculative.
PAGE 20
Certain areas have histories of instability and upheaval with
respect to their internal politics that could cause their
governments to act in a detrimental or hostile manner toward
private enterprise or foreign investment. Actions such as
nationalizing a company or industry, expropriating assets, or
imposing punitive taxes could have a severe effect on security
prices and impair an underlying fund's ability to repatriate
capital or income. Significant external risks, including war,
currently affect some countries. Governments in many emerging
market countries participate to a significant degree in their
economies and securities markets.
The funds' share prices will fluctuate; when you sell your
shares, you may lose money.
o Legal, regulatory, and operational: Certain countries lack
uniform accounting, auditing, and financial reporting
standards, have less governmental supervision of financial
markets than in the U.S., do not honor legal rights enjoyed in
the U.S., and have settlement practices, such as delays, which
could subject the underlying funds to risks of loss not
customary in the U.S. In addition, securities markets in some
countries have substantially lower trading volumes than U.S.
markets, resulting in less liquidity and more volatility than
experienced in the U.S.
o Pricing: Portfolio securities of the underlying funds may be
listed on foreign exchanges that are open on days when the
underlying funds do not compute their prices. As a result, the
underlying funds', and consequently the Spectrum International
Fund's, net asset value may be significantly affected by
trading on days when shareholders cannot make transactions.
o The above risks can be significantly magnified for
investments in emerging markets. Additionally, to the extent
the fund invests in International Bond Fund and Emerging
Markets Bond Fund, it will be subject to risks associated with
international fixed income investing. See the risks associated
with Spectrum Income Fund.
What are some of the Spectrum Funds' potential rewards?
The Spectrum funds offer a professionally managed allocation
of assets among a broad range of underlying funds. By
investing in a variety of underlying funds, each Spectrum
fund's performance could benefit from diversification.
For example, Spectrum Income Fund invests in funds holding
high-quality domestic and foreign bonds, high-yield bonds,
short- and long-term securities, and dividend-paying stocks.
PAGE 21
Spectrum Growth Fund invests in underlying funds holding
domestic and foreign stocks, small- and large-cap stocks, and
growth and value stocks. Moreover, the diversified nature of
the funds' investments could cushion declines in falling
markets.
Spectrum International Fund invests in stock and to a lesser
degree bond funds with investments in many different foreign
countries industrialized as well as emerging markets and large
and small companies.
The theory of diversification holds that investors can reduce
their overall risk by spreading assets among a variety of
investments. Each type of investment follows a cycle of its
own and responds differently to changes in the economy and the
marketplace. A decline in one investment can be balanced by
returns in other investments that are stable or rising.
Therefore, a major benefit of the Spectrum funds is the
potential for attractive long-term returns with reduced
volatility.
What are the characteristics of the underlying funds?
For a full description of the underlying funds, please see
"Description of Underlying Funds" in Section 3.
The major characteristics of the underlying T. Rowe Price
funds are as follows:
______________________________________________________________
Fixed Income Relative Fixed Objective/Program
Income Risk
Prime Reserve Fund Lowest Stable share price and
liquidity while
generating current
income
Short-Term Bond Fund Low High income
with limited share
price fluctuation
GNMA Fund Moderate High income consistent
with maximum credit
protection and
moderate share price
fluctuation
New Income Fund Moderate High income with
PAGE 22 moderate share price
fluctuation
High Yield Fund High High income and
capital appreciation
through investments in
high-yield
("junk") bonds
______________________________________________________________
Relative
Equity Equity Risk Objective/Program
Equity Income Fund Low Substantial
dividend income and
capital appreciation
Growth & Income Low Capital appreciation
and reasonable
dividend income
Growth Stock Fund Moderate Capital appreciation
and increasing income
through investments in
growth stocks
New Era Fund Moderate Capital appreciation
through investments in
natural resource
stocks
New Horizons Fund High Aggressive
capital appreciation
through investments in
small-company stocks
______________________________________________________________
Relative
International
International Risk Objective/Program
International Bond Moderate High income and
Fund(a) capital appreciation
through investments in
high-quality foreign
bonds
International Stock Moderate Capital appreciation
Fund through investments in
stocks of established
foreign companies
PAGE 23
International High Capital appreciation
Discovery through investments in
Fund small- and medium-
sized non-U.S.
companies
European Stock Fund High Capital appreciation
through investments
primarily in companies
domiciled in Europe
Emerging Markets Very High High current income
Bond Fund and capital
appreciation through
investments primarily
in high-yielding and
high-risk government
and corporate debt
securities of lesser
developed countries
PAGE 24
Japan Fund High Capital appreciation
through investments in
companies operating in
Japan
New Asia Fund High Capital appreciation
through investments in
companies operating in
Asia, excluding Japan
Emerging Markets Very High Capital appreciation
Stock Fund through investments in
companies in emerging
markets
Latin America Fund Very High Capital appreciation
through investments
primarily in companies
located in Latin
America
______________________________________________________________
(a) International Bond Fund is considered to have relatively
high risk in comparison to other funds in the Spectrum Income
portfolio, but a moderate risk relative to funds in which
Spectrum International Funds invests.
______________________________________________________________
Table 6
How can I decide if one of these funds is right for me?
Consider your investment goals, your time horizon for
achieving them, and your tolerance for risk. If you would like
a one-stop approach to broad diversification and can accept
the possibility of moderate share price declines in an effort
to achieve relatively high income, Spectrum Income Fund could
be an appropriate part of your overall investment strategy. If
you seek one-stop diversification and can accept the
possibility of greater share price declines in an effort to
achieve long-term capital appreciation, Spectrum Growth Fund
could be an appropriate part of your overall investment
strategy. If your goal is long-term capital appreciation with
a one-stop approach to diversification across the
international markets, and you can accept the possibility of
significant share price declines, Spectrum International Fund
could be an appropriate part of your overall investing
strategy.
For an IRA, retirement plan, or other long-term investment,
PAGE 25
the funds can offer investment programs that seek to combine
attractive returns with the benefits of broad diversification.
Is there additional information about the Spectrum Funds to
help me decide if they are appropriate for me?
Be sure to review "Special Risks and Considerations,"
"Description of Underlying funds," "Investment Policies of the
Spectrum Funds," and "Investment Policies and Practices of
Underlying funds" in Section 3 for further discussion of the
funds' policies.
2 About Your Account
Pricing Shares and Receiving Sale Proceeds
Here are some procedures you should know when investing in a
T. Rowe Price fund.
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. These procedures may differ for institutional and
employer-sponsored retirement accounts.
The share price (also called "net asset value" or NAV per
share) for the fund is calculated at 4 p.m. ET each day the
New York Stock Exchange is open for business. To calculate the
NAV, the fund's assets are valued and totaled, liabilities are
subtracted, and the balance, called net assets, is divided by
the number of shares outstanding.
How your purchase, sale, or exchange price is determined
If we receive your request in correct form by 4 p.m. ET, your
transaction will be priced at that day's NAV. If we receive it
after 4 p.m., it will be priced at the next business day's
NAV.
We cannot accept orders that request a particular day or price
for your transaction or any other special conditions.
Note: The time at which transactions and shares are priced and
the time until which orders are accepted may be changed in
case of an emergency or if the New York Stock Exchange closes
at a time other than 4 p.m. ET.
How you can receive the proceeds from a sale
PAGE 26
When filling out the New Account Form, you may wish to give
yourself the widest range of options for receiving proceeds
from a sale.
If your request is received by 4 p.m. ET in correct form,
proceeds are usually sent on the next business day. Proceeds
can be sent to you by mail or to your bank account by 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
exchanges 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 funds' 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
Dividends and Other Distributions
All net investment income and realized capital gains are
distributed to shareholders.
Dividend and capital gain distributions are reinvested in
additional fund shares in your account unless you select
another option on your New Account Form. The advantage of
reinvesting distributions arises from compounding; that is,
you receive income dividends and capital gain distributions on
a rising number of shares.
Distributions not reinvested are paid by check or transmitted
to your bank account via ACH. If the Post Office cannot
deliver your check, or if your check remains uncashed for six
months, the fund reserves the right to reinvest your
distribution check in your account at the NAV on the business
day of the reinvestment and to reinvest all subsequent
distributions in shares of the fund.
PAGE 27
Spectrum Income Fund dividends
o The fund declares 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 The fund pays dividends on the first business day of each
month.
o Fund shares will earn dividends through the date of
redemption; also, shares redeemed on a Friday or prior to a
holiday will continue to earn dividends until the next
business day. Generally, if you redeem all of your shares at
any time during the month, you will also receive all dividends
earned through the date of redemption in the same check. When
you redeem only a portion of your shares, all dividends
accrued on those shares will be reinvested, or paid in cash,
on the next dividend payment date.
Spectrum Growth Fund dividends
o The fund declares and pays dividends (if any) annually.
o All or part of the fund's dividends will be eligible for the
70% deduction for dividends received by corporations.
Spectrum International Fund dividends
o The fund declares and pays dividends (if any) annually.
o The dividends of the fund will not be eligible for the 70%
deduction for dividends received by corporations, if, as
expected, none of the fund's income consists of dividends paid
by U.S. corporations.
Capital gains (all funds)
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
You will be sent timely information for your tax filing needs.
PAGE 28
You need to be aware of the possible tax consequences when:
o You sell fund shares, including an exchange from one fund to
another.
o The fund makes a distribution to your account.
Taxes on fund redemptions. When you sell shares in any fund,
you may realize a gain or loss. An exchange from one fund to
another is still a sale for tax purposes.
In January, you will be sent Form 1099-B, indicating the date
and amount of each sale you made in the fund during the prior
year. This information will also be reported to the IRS. For
accounts opened new or by exchange in 1983 or later, we will
provide you with the gain or loss on 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.
Taxes on fund distributions. The following summary does not
apply to retirement accounts, such as IRAs, which are tax-
deferred until you withdraw money from them.
Distributions are taxable whether reinvested in additional
shares or received in cash.
In January, you will be sent Form 1099-DIV indicating the tax
status of any dividend and capital gain distribution made to
you. This information will also be reported to the IRS. All
distributions made by the fund 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. You will be sent any additional information you
need to determine your taxes on fund distributions, such as
the portion of your dividend, if any, that may be exempt from
state income taxes.
Short-term capital gain distributions are taxable as ordinary
income and long-term gain distributions are taxable at the
PAGE 29
applicable long-term gain rate. The gain is long- or short-
term depending on how long the fund held the securities, not
how long you held shares in the fund. If you realize a loss on
the sale or exchange of fund shares held six months or less,
your short-term loss recognized is reclassified to long-term
to the extent of any long-term capital gain distribution
received.
Gains and losses from the sale of foreign currencies and the
foreign currency gain or loss resulting from the sale of a
foreign debt security can increase or decrease the fund's
ordinary income dividend. Net foreign currency losses may
result in the fund's dividend being classified as a return of
capital.
If the fund pays nonrefundable taxes to foreign governments
during the year, the taxes will reduce the fund's dividends,
but will still be included in your taxable income. However,
you may be able to claim an offsetting credit or deduction on
your tax return for your portion of foreign taxes paid by the
fund.
Tax effect of buying shares before a capital gain or dividend
distribution. If you buy shares shortly before or on the
"record date"--the date that establishes you as the person to
receive the upcoming distribution--you will receive, in the
form of a taxable distribution, a portion of the money you
just invested. Therefore, you may also wish to find out a
fund's record date before investing. Of course, a fund's share
price may, at any time, reflect undistributed capital gains or
income and unrealized appreciation. When these amounts are
eventually distributed, they are taxable.
Transaction Procedures and Special Requirements
Purchase Conditions
Following these procedures helps assure 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 canceled. You will be responsible for any losses or
expenses incurred by the fund or transfer agent, and the fund
can redeem shares you own in this or another identically
registered T. Rowe Price fund as reimbursement. The fund and
its agents have the right to reject or cancel any purchase,
exchange, or redemption due to nonpayment.
U.S. dollars. All purchases must be paid for in U.S. dollars;
PAGE 30
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 the following: purchases paid for by
bank wire; cashier's, certified, or treasurer's checks; or
automatic purchases through your paycheck.)
Telephone, Tele*AccessR, and personal computer 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 and is not liable
for acting on these instructions. If these procedures are not
followed, it is the opinion of certain regulatory agencies
that the fund may be liable for any losses that may result
from acting on the instructions given. A confirmation is sent
promptly after the telephone transaction. All conversations
are recorded.
Redemptions over $250,000. Large sales can adversely affect a
portfolio manager's ability to implement a fund's investment
strategy by causing the premature sale of securities that
would otherwise be held. If, in any 90-day period, you redeem
(sell) more than $250,000, or your sale amounts to more than
1% of 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
PAGE 31
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)
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 a fund of maintaining small
accounts, we ask you to maintain an account balance of at
least $1,000. If your balance is below $1,000 for three months
or longer, we have the right to close your account after
giving you 60 days in which to increase your balance.
Small Account Fee
Because of the disproportionately high costs of servicing
accounts with low balances, a $10 fee, paid to T. Rowe Price
Services, the fund's transfer agent, will automatically be
deducted from nonretirement accounts with balances falling
below a minimum level. The valuation of accounts and the
deduction are expected to take place during the last five
business days of September. The fee will be deducted from
accounts with balances below $2,000, except for UGMA/UTMA
accounts, for which the limit is $500. The fee will be waived
for any investor whose aggregate T. Rowe Price mutual fund
investments total $25,000 or more. Accounts employing
automatic investing (e.g., payroll deduction, automatic
purchase from a bank account, etc.) are also exempt from the
charge. The fee will not apply to IRAs and other retirement
plan accounts. (A separate custodial fee may apply to IRAs and
other retirement plan accounts.)
Signature Guarantees
You may need to have your signature guaranteed in certain
situations, such as:
A signature guarantee is designed to protect you and the T.
Rowe Price funds from fraud by verifying your signature.
PAGE 32
o Written requests 1) to redeem over $100,000, 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 (name/ownership) 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
Organization and Management
Shareholders benefit from T. Rowe Price's 59 years of
investment management experience.
How are the funds organized?
The T. Rowe Price Spectrum Fund, Inc. (Spectrum Fund) is a
Maryland corporation organized in 1987 and is registered with
the Commission under the 1940 Act as a nondiversified, open-
end investment company, commonly known as a "mutual fund."
Mutual funds pool money received from shareholders and invest
it to try to achieve specified objectives.
Currently, Spectrum Fund consists of three series, the
Spectrum Income Fund, the Spectrum Growth Fund, and the
Spectrum International Fund, (collectively referred to as "the
funds") each of which represents a separate class of shares
and has different objectives and investment policies. The
Spectrum Fund's Charter provides that the Board of Directors
may issue additional series of shares and/or additional
classes of shares for each series.
What is meant by "shares"?
As with all mutual funds, investors purchase shares when they
put money in a fund. These shares are part of a fund's
authorized capital stock, but share certificates are not
issued.
PAGE 33
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, changes in fundamental
policies, or approval of changes in the fund's management
contract.
Do T. Rowe Price funds have annual shareholder meetings?
The funds are not required to hold annual meetings and 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 of a fund may call a special meeting if they
wish for the purpose of voting on the removal of any fund
director or trustee. If a meeting is held and you cannot
attend, you can vote by proxy. Before the meeting, the fund
will send you proxy materials that explain the issues to be
decided and include a voting card for you to mail back.
Who runs the funds?
All decisions regarding the purchase and sale of fund
investments are made by the funds' portfolio managers.
General Oversight. Spectrum Fund is governed by a Board of
Directors that meets regularly to review the funds'
investments, performance, expenses, and other business
affairs. The Board elects the funds' officers. The policy of
the funds is that a majority of the Board members will be
independent of T. Rowe Price and Price-Fleming and that none
of the independent directors will be directors of any
underlying fund. In exercising their responsibilities, the
Board, among other things, will refer to the Special Servicing
Agreements and policies and guidelines included in the
Exemptive Order ("Order") issued by the Securities and
Exchange Commission in connection with the operation of the
funds. The interested directors and the officers of Spectrum
Fund and T. Rowe Price and Price-Fleming also serve in similar
positions with most of the underlying funds. Thus, if the
interests of a Spectrum Fund and the underlying funds were
ever to become divergent, it is possible that a conflict of
interest could arise and affect how the interested directors
and officers fulfill their fiduciary duties to that fund and
the underlying funds. The directors of Spectrum Fund believe
they have structured each fund to avoid these concerns.
However, conceivably, a situation could occur where proper
PAGE 34
action for a Spectrum Fund could be adverse to the interests
of an underlying fund, or the reverse could occur. If such a
possibility arises, the directors and officers of the affected
funds and T. Rowe Price or Price-Fleming, as applicable, will
carefully analyze the situation and take all steps they
believe reasonable to minimize and, where possible, eliminate
the potential conflict. Moreover, limitations on aggregate
investments in the underlying funds and other restrictions
have been adopted by Spectrum Fund to minimize this
possibility, and close and continuous monitoring will be
exercised to avoid, insofar as possible, these concerns.
Spectrum Income and Spectrum Growth Funds Portfolio
Management. Spectrum Income and Spectrum Growth Funds have an
Investment Advisory Committee composed of the following
members: Peter Van Dyke, Chairman, Stephen W. Boesel, Edmund
M. Notzon, James S. Riepe, Charles P. Smith, and M. David
Testa. The committee chairman has day-to-day responsibility
for managing the Spectrum Income and Spectrum Growth Funds and
works with the committee in developing and executing these
funds investment programs. Mr. Van Dyke has been chairman of
the committee since 1990. He has been managing investments
since joining T. Rowe Price in 1985.
Spectrum International Fund Portfolio Management. Spectrum
International Fund has an Investment Advisory Committee
composed of the following members: John R. Ford, Chairman, M.
David Testa, Martin G. Wade, and David J.L. Warren. The
committee chairman has day-to-day responsibility for managing
this fund and works with the committee in developing and
executing the fund's investment program. Mr. Ford, joined
Prime-Fleming in 1982 and has 15 years of experience in
managing investments.
Management of the Underlying Funds.
T. Rowe Price serves as investment manager to all of the
underlying domestic funds. Price-Fleming serves as investment
manager to all of the underlying international funds. Each
manager is responsible for selection and management of the
underlying funds' portfolio investments. T. Rowe Price serves
as investment manager to a variety of individual and
institutional investors, including limited and real estate
partnerships and other mutual funds.
Price-Fleming was incorporated in Maryland in 1979 as a joint
venture between T. Rowe Price and Robert Fleming Holdings
Limited (Flemings). Flemings is a diversified investment
organization which participates in a global network of
PAGE 35
regional investment offices in New York, London, Zurich,
Geneva, Tokyo, Hong Kong, Manila, Kuala Lumpur, Seoul, Taipei,
Bombay, Jakarta, Singapore, Bangkok, and Johannesburg.
Flemings was incorporated in 1974 in the United Kingdom as
successor to the business founded by Robert Fleming in 1873.
T. Rowe Price, Flemings, and Jardine Fleming are owners of
Price-Fleming. The common stock of Price-Fleming is 50% owned
by a wholly owned subsidiary of T. Rowe Price, 25% of a
subsidiary of Flemings and 25% by Jardine Fleming Group
Limited (Jardine Fleming). (Half of Jardine Fleming is owned
by Flemings and half by Jardine Matheson Holdings Limited.)
T. Rowe Price has the right to elect a majority of the Board
of Directors of Price-Fleming, and Flemings has the right to
elect the remaining directors, one of whom will be nominated
by Jardine Fleming.
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. Services for certain types of
retirement plans are provided by T. Rowe Price Retirement Plan
Services, Inc., also a wholly owned subsidiary. The address
for each is 100 East Pratt St., Baltimore, MD 21202.
How are fund expenses determined?
Each Spectrum Fund will operate at a zero expense ratio.
However, each fund will incur its pro rata share of the fees
and expenses of the underlying funds in which they invest. The
payment of each fund's operational expenses is subject to a
Special Servicing Agreement described below as well as certain
undertakings made by T. Rowe Price or Price-Fleming, under
their respective Investment Management Agreements with each
Spectrum Fund. Fund expenses include: shareholder servicing
fees and expenses; custodian and accounting fees and expenses;
legal and auditing fees; expenses of preparing and printing
prospectuses and shareholder reports; registration fees and
expenses; proxy and annual meeting expenses, if any; and
directors' fees and expenses.
Here is some information regarding the Special Servicing
Agreements.
One Special Servicing Agreement (Agreement) is between and
PAGE 36
among Spectrum Fund on behalf of Spectrum Income and Spectrum
Growth Funds, the underlying funds, and T. Rowe Price. A
second Special Servicing Agreement (Agreement) is between and
among Spectrum Fund, on behalf of Spectrum International, the
underlying funds, Price-Fleming, and T. Rowe Price.
Each Agreement provides that, if the Board of
Directors/Trustees of any underlying fund determines that such
underlying fund's share of the aggregate expenses of Spectrum
Fund is less than the estimated savings to the underlying fund
from the operation of Spectrum Fund, the underlying fund will
bear those expenses in proportion to the average daily value
of its shares owned by Spectrum Fund, provided further that no
underlying fund will bear such expenses in excess of the
estimated savings to it. Such savings are expected to result
primarily from the elimination of numerous separate
shareholder accounts which are or would have been invested
directly in the underlying funds and the resulting reduction
in shareholder servicing costs. Although such cost savings are
not certain, the estimated savings to the underlying funds
generated by the operation of Spectrum Fund are expected to be
sufficient to offset most, if not all, of the expenses
incurred by Spectrum Fund.
Under the Investment Management Agreements with the funds, and
the Special Servicing Agreement, T. Rowe Price and Price-
Fleming, respectively, have agreed to bear any expenses of
Spectrum Fund which exceed the estimated savings to each of
the underlying funds. Thus, Spectrum Fund will operate at a
zero expense ratio. Of course, shareholders of each Spectrum
Fund will still indirectly bear their fair and proportionate
share of the cost of operating the underlying funds owned by
each Spectrum Fund.
Management Fee. T. Rowe Price will act as the investment
manager for the Spectrum Income Fund and the Spectrum Growth
Fund and Price-Fleming will act as investment manager for the
Spectrum International Fund. Neither will be paid a management
fee for performing such services. However, T. Rowe Price and
Price-Fleming receive management fees from managing the
underlying funds in which each fund invests.
The determination of how Spectrum Income Fund's and Spectrum
Growth Fund's assets will be invested in the underlying funds
will be made by T. Rowe Price or by Price-Fleming for the
Spectrum International Fund, pursuant to the investment
objectives and policies of each fund set forth in this
prospectus and procedures and guidelines established by the
Board of Directors for the Spectrum Fund. The Directors for
Spectrum Fund will periodically monitor the allocations made
PAGE 37
and the basis upon which such allocations were made or
maintained. Each fund, as a shareholder in any underlying
fund, will indirectly bear its proportionate share of any
investment management fees and other expenses paid by the
underlying funds.
Each underlying fund pays T. Rowe Price or Price-Fleming an
investment management fee consisting of two parts: an
"individual fund fee" (discussed below) and a "group fee."
The group fee, which reflects the benefits each underlying
fund derives from sharing the 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 0.350% Next $2 billion
0.450% Next $1 billion 0.340% Next $5 billion
0.420% Next $1 billion 0.330% Next $10 billion
0.390% Next $1 billion 0.320% Next $10 billion
0.370% Next $1 billion 0.310% Next $16 billion
0.360% Next $2 billion 0.305% Thereafter
The underlying fund's portion of the group fee is determined
by the ratio of its daily net assets to the daily net assets
of all the T. Rowe Price funds described above. Based on the
combined T. Rowe Price funds' assets of approximately $60.3
billion at September 30, 1996, the group fee was 0.33%.
The Individual Fund Fees and total management fees of the
underlying funds as of September 30, 1996 are as follows:
Individual Fee Total
as a % of Fund Management
Fund Net Assets Fee Paid
______________________________________________________________
International Bond 0.35% 0.68%
International Stock 0.35 0.68
New Horizons 0.35 0.68
High Yield 0.30 0.63
PAGE 38
Equity Income 0.25 0.58
Growth Stock 0.25 0.58
New Era 0.25 0.58
GNMA 0.15 0.48
Growth & Income 0.25 0.58
New Income 0.15 0.48
Short-Term Bond 0.10 0.43
Prime Reserve 0.05 0.38
Emerging Markets Bond 0.45 0.00(a)
International Discovery 0.75 1.08
Emerging Markets Stock 0.75 0.78(b)
Japan Fund 0.50 0.83
New Asia 0.50 0.83
European Stock 0.50 0.83
Latin America 0.75 1.08
______________________________________________________________
(a) Price-Fleming agreed to waive management fees and bear
certain expenses in accordance with an expense limitation
agreement in effect through December 31, 1996. Effective as of
December 31, 1996, Price-Fleming has agreed to extend this
fund's current expense limitation through December 31, 1998.
Had Price-Fleming not agreed to waive a portion of its
management fees, Emerging Markets Bond's total management fee
paid would have been 0.78%.
(b) Price-Fleming agreed to waive management fees and bear
certain expenses in accordance with an expense limitation
agreement in effect through October 31, 1996. Effective
October 31, 1996, Price-Fleming agreed to extend this fund's
current expense limitation through October 31, 1998. Had
Price-Fleming not agreed to waive a portion of its management
fees, Emerging Markets Stock's total management fee paid would
have been 1.08%.
______________________________________________________________
Table 7
PAGE 39
The total combined management fee for each of the underlying
funds was an annual rate as shown above.
Understanding Performance Information
This section should help you understand the terms used to
describe fund performance. You will come across them in
shareholder reports you receive from us, in our newsletter,
The Price Report, in Insights articles, in T. Rowe Price
advertisements, and in the media.
Total Return
Total return is the most widely used performance measure.
Detailed performance information is included in the funds'
annual and semiannual shareholder reports, and in the
quarterly Performance Update, which are all available without
charge.
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 cumulative return. By
smoothing out all the variations in annual performance, it
gives you an idea of the investment's annual contribution to
your portfolio provided you held it for the entire period in
question.
Yield (Spectrum Income Fund)
PAGE 40
You will see frequent references to a fund's yield in our
reports, in advertisements, in media stories, and so on.
The current or "dividend" yield on a fund or any investment
tells you the relationship between the investment's current
level of annual income and its price on a particular day. The
dividend yield reflects the actual income paid to 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 advertised or "SEC" yield is found by determining the net
income per share (as defined by the SEC) earned by a 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.
Special Risks and Considerations
Prospective investors should consider the following factors:
o The investments of each Spectrum fund are concentrated in
the underlying funds, so each fund's investment performance is
directly related to the investment performance of these
underlying funds.
o As a matter of fundamental policy, Spectrum Income and
Growth Funds must allocate their investments among the
underlying funds within certain ranges. As a result, they do
not have the same flexibility to invest as a mutual fund
without such constraints. Spectrum International Fund
allocates its assets among the underlying funds pursuant to an
operating policy which may be changed without shareholder
approval.
o As an operating policy, the Spectrum Income and Spectrum
Growth Funds will not redeem more than 1% of any underlying
fund's assets during any period less than 15 days, except when
necessary to meet the fund's shareholder redemption requests.
As a result, the funds may not be able to reallocate assets
among the underlying funds as efficiently and rapidly as would
be the case in the absence of this constraint. This limitation
does not apply to Spectrum International Fund.
o In addition to their principal investments, certain
underlying funds may: invest a portion or all of their assets
in foreign securities; enter into forward currency
transactions; lend their portfolio securities; enter into
stock index, interest rate, and currency futures contracts,
PAGE 41
and options on such contracts; engage in options transactions;
make short sales; purchase zero coupon bonds and payment-in-
kind bonds; and engage in various other investment practices.
o Events affecting the values of portfolio securities of the
underlying international funds that occur between the time
their prices are determined and the time such underlying
funds' net asset values are calculated will not be reflected
in the underlying international funds' net asset values unless
Price-Fleming, under the supervision of the underlying
international funds' Board of Directors determines that the
particular event should be taken into account in computing the
funds' net asset values.
Further information on these investment policies and practices
can be found under "Investment Policies of the Underlying
funds" and in the Statement of Additional Information as well
as in the prospectuses of each of the underlying funds.
o The officers, interested directors, and the investment
managers of the Spectrum Funds, presently serve as officers,
interested directors, and investment managers of the
underlying funds. Therefore, conflicts may arise as these
persons fulfill their fiduciary responsibilities to the
Spectrum Funds and the underlying funds.
o Spectrum Income Fund must invest at least 10% and can invest
as much as 25% of its assets in the T. Rowe Price High Yield
Fund. As a result, Spectrum Income Fund will be subject to
some of the risks resulting from high-yield investing.
o Each of the funds may invest in underlying funds which
invest in medium-grade bonds. If these bonds are downgraded,
the funds will consider whether to increase or decrease their
investment in the affected underlying fund.
o Spectrum Income Fund may invest in underlying funds which
concentrate their assets in certain industries. Under certain
unusual circumstances, this could result in the Spectrum
Income Fund being indirectly concentrated in these industries.
If this were to occur, the Spectrum Income Fund would consider
whether to maintain or change its investments in such
underlying funds.
o Spectrum Income Fund must invest at least 5% and can invest
as much as 20% of its assets in the International Bond Fund,
which invests primarily in foreign fixed income securities;
the Spectrum Growth Fund must invest at least 5% and can
invest as much as 20% of its assets in the International Stock
Fund, which invests primarily in foreign equity securities.
PAGE 42
These investments will subject the funds to risks associated
with investing in foreign securities.
o Spectrum International Fund's underlying funds can invest in
securities of emerging markets. Many emerging market countries
are experiencing substantial economic and political changes,
such as moving from one-party rule to a multi-party democracy,
from agrarian to industrialized economies, and from
nationalized to free market, privatized industries. Investors
should be prepared for the substantial price volatility that
can result from investing in emerging market countries.
Description of Underlying Funds
The following is a brief description of the principal
investment programs of the underlying funds. Additional
investment practices are described under "Special Risks and
Considerations," the Statement of Additional Information, and
in the prospectuses for each of the underlying funds.
Underlying Fund of each Spectrum Fund
o T. Rowe Price Prime Reserve Fund is a money market fund
which is managed to maintain a stable share price of $1.00.
This policy has been maintained since its inception; however,
the $1.00 price is neither insured by the U.S. government, nor
is its yield fixed. The fund invests at least 95% of its total
assets in prime money market instruments, that is, securities
receiving the highest credit rating. The dollar-weighted
average maturity of the fund will not exceed 90 days. Since
the fund is managed to maintain a constant share price, its
total return should be composed entirely of income.
Underlying Fund of both the Spectrum Income and Spectrum
Growth Funds
o T. Rowe Price Equity Income Fund's objective is to provide
substantial dividend income as well as long-term capital
appreciation through investments in common stocks of
established companies. Under normal circumstances, the fund
will invest at least 65% of total assets in the common stocks
of established companies paying above-average dividends. These
companies are expected to have favorable prospects for
dividend growth and capital appreciation, according to T. Rowe
Price.
Underlying Fund of both the Spectrum Growth and Spectrum
International Funds
PAGE 43
o T. Rowe Price International Stock Fund's objective is to
seek long-term growth of capital through investments primarily
in common stocks of established, non-U.S. companies. The fund
expects to invest substantially all of its assets outside the
U.S. and to diversify broadly among countries throughout the
world in developed, newly industrialized, and emerging
economies.
Underlying Fund of both the Spectrum Income and Spectrum
International Funds
o T. Rowe Price International Bond Fund's objective is to
provide high current income and capital appreciation by
investing in high-quality, nondollar-denominated government
and corporate bonds outside the U.S. The fund also seeks to
moderate price fluctuation by actively managing its maturity
structure and currency exposure. The fund will invest at least
65% of its assets in high-quality bonds, but may invest up to
20% of assets in below-investment-grade, high-risk bonds,
including bonds in default or those with the lowest rating.
Although the fund expects to maintain an intermediate to long
weighted average maturity, it has no maturity restrictions on
the overall portfolio or on individual securities. Normally,
the fund does not hedge its foreign currency exposure back to
the dollar, nor involve more than 50% of total assets in cross
hedging transactions. Therefore, changes in foreign interest
rates and currency exchange rates are likely to have a
significant impact on total return and the market value of
portfolio securities.
Spectrum Income Fund
Each of the underlying funds in the Spectrum Income Fund seeks
the highest level of income consistent with its individual
investment program.
o T. Rowe Price Short-Term Bond Fund's objective is to provide
a high level of income consistent with minimum fluctuation in
principal value and liquidity. The fund will invest in a
diversified portfolio of short- and intermediate-term
corporate, government, and mortgage debt securities. Under
normal circumstances, at least 65% of total assets will be
invested in short-term bonds. The fund's dollar-weighted
average effective maturity will not exceed three years.
Securities purchased by the fund will be rated within the four
highest credit categories.
o T. Rowe Price GNMA Fund's objective is to provide a high
level of current income consistent with maximum credit
PAGE 44
protection and moderate price fluctuation by investing
exclusively in securities backed by the full faith and credit
of the U.S. government and instruments involving these
securities. The fund invests primarily in mortgage-backed
securities issued and guaranteed by the Government National
Mortgage Association (GNMA). The GNMA guarantee does not apply
in any way to the price of GNMA securities or to the fund,
both of which will fluctuate with market conditions.
Mortgage-Backed Securities. Mortgage lenders pool individual
home mortgages with similar characteristics to back a
certificate or bond, which is then sold to investors. Interest
and principal payments generated by the underlying mortgages
are passed through to the investor. There is a risk of
homeowner prepayments; that is, when interest rates are
falling, homeowners may accelerate principal payments on the
mortgages that underlie the GNMA securities. Prepayments cause
a loss to investors, such as this fund, on mortgages that were
originally purchased at a premium (price above par).
o T. Rowe Price High Yield Fund has high current income and,
secondarily, capital appreciation as its objective. Under
normal conditions, the fund expects to invest at least 80% of
its total assets in a widely diversified portfolio of high-
yield bonds (so-called "junk" bonds) and income-producing
convertible securities and preferred stocks. The fund's longer
average maturity (expected to be in the 8- to 12-year range)
makes its price more sensitive to broad changes in interest
rate movements than shorter-term bond funds. The portfolio
manager buys defaulted bonds only if significant potential for
capital appreciation is expected.
Special Risks of High-Yield Investing. This fund is expected
to have greater price swings than are associated with most
bond funds emphasizing high-quality investments. The total
return and yield of lower-quality (high-yield/high-risk)
bonds, commonly referred to as "junk" bonds, can be expected
to fluctuate more than the total return and yield of higher-
quality bonds. Junk bonds are regarded as predominately
speculative with respect to the issuer's continuing ability to
meet principal and interest payments. Successful investment in
low- and lower-medium-quality bonds involves greater
investment risk and is highly dependent on T. Rowe Price's
credit analysis. A real or perceived economic downturn or
higher rates could cause a decline in high-yield bond prices
because such events could lessen the ability of issuers to
make principal and interest payments. In addition, the entire
junk bond market can experience sudden and sharp price swings
due to a variety of factors.
PAGE 45
The High Yield Fund imposes a redemption fee of 1% on all
redemptions (including exchanges) of shares held in the fund
for less than one year. The redemption fee is paid to the High
Yield Fund. Spectrum Fund is subject to this fee if it redeems
shares held in the High Yield Fund for less than one year.
For more information about an underlying fund, call:
1-800-638-5660
1-410-547-2308
o T. Rowe Price New Income Fund's objective is to provide the
highest level of income over time consistent with the
preservation of capital through investment primarily in
marketable debt securities. At least 80% of total assets will
be invested in income-producing, investment-grade instruments,
including (but not limited to) U.S. government and agency
obligations, mortgage-backed securities, corporate debt
securities, asset-backed securities, bank obligations, CMOs,
commercial paper, foreign securities, and others. There are no
maturity restrictions on securities purchased by the fund, but
the fund's dollar-weighted average maturity is generally
expected to be between 4 and 15 years.
SUMMARY OF PROGRAMS
Share
price Expected
Credit fluctuation average
Fund quality Yield (NAV) maturity
______________________________________________________________
Prime Reserve 2 highest Lowest Maintain $1.00 No more
possible (not guaranteed) than 90
days
______________________________________________________________
Short-Term Bond 4 highest Moderate Moderate Not greater
than
3 years
______________________________________________________________
GNMA Highest Moderate Moderate Varies,
possible 3-10 years
______________________________________________________________
New Income 4 highest High High No
restriction
______________________________________________________________
International primarily 4 High High Intermediate
Bond highest to long
(up to 20% below
4 highest)
______________________________________________________________
PAGE 46
High Yield BB or lower Highest Highest Normally
8-12 years
______________________________________________________________
Table 8
Spectrum Growth Fund
Each of the underlying funds in the Spectrum Growth Fund seeks
long-term growth of capital as its primary objective.
o T. Rowe Price Growth & Income Fund's objective is to provide
long-term capital growth, a reasonable level of current
income, and increasing future income through investments
primarily in dividend-paying stocks. The fund can focus on
companies whose earnings are expected by T. Rowe Price to grow
at an above-average rate and can support a growing dividend
payment as well as stocks that do not pay dividends currently
but offer prospects of appreciation and future income.
o T. Rowe Price New Era Fund's objective is to provide long-
term capital appreciation by investing primarily in common
stocks of companies that own or develop natural resources and
other basic commodities, and in the stocks of selected
nonresource growth companies. The fund's primary focus will be
on the common stocks of companies whose earnings and tangible
assets are expected to grow faster than inflation. The fund
will also invest in selected nonresource growth companies with
strong potential for earnings growth.
o T. Rowe Price New Horizons Fund's objective is to provide
long-term growth of capital by investing primarily in common
stocks of small, rapidly growing companies. The fund will
invest primarily in a diversified group of small, emerging
growth companies. It will seek to invest early in the
corporate life cycle, before a company becomes widely
recognized by the investment community. The fund may also
invest in companies that offer the possibility of accelerating
earnings growth because of rejuvenated management, new
products, or structural changes in the economy.
o T. Rowe Price Growth Stock Fund's objective is to provide
long-term growth of capital and, secondarily, increasing
dividend income by investing primarily in common stocks of
well-established growth companies. The fund will invest
primarily (at least 65% of total assets) in the common stocks
of a diversified group of growth companies. Though it is not
required, the companies in which the fund invests normally pay
dividends, which are generally expected to rise in future
years as earnings increase.
PAGE 47
Spectrum International Fund
Each of the underlying stock funds in the Spectrum
International Fund seeks long-term growth of capital.
o T. Rowe Price International Discovery Fund's objective is
long-term growth of capital through investments primarily in
common stocks of rapidly growing, small to medium-sized non-
U.S. companies. Such companies may be found in both developed
and emerging markets. Traditionally, they are more dynamic and
offer greater growth potential than larger companies, but they
are often overlooked or undervalued by investors. Smaller
companies are generally riskier than their larger counterparts
because they may have limited product lines, capital, and
managerial resources. Their securities may trade less
frequently and with greater price swings.
o T. Rowe Price European Stock Fund's objective is long-term
growth of capital through investments primarily in common
stocks of both large and small European companies. Current
income is a secondary objective. The fund seeks to take
advantage of opportunities arising from such trends as
privatization, the reduction of trade barriers, and the
potential growth of the emerging economies of Eastern Europe.
Normally, at least five countries will be represented in the
portfolio, and investments may be made in any of the countries
listed below, as well as others as their markets develop.
Primary Emphasis: France, Germany, Netherlands, Italy,
Spain, Sweden, Switzerland, United Kingdom.
Others: Austria, Belgium, Denmark, Finland, Ireland,
Luxembourg, Norway, Portugal, Czech Republic, Greece, Hungary,
Poland, Slovakia, Turkey, Russia.
o T. Rowe Price New Asia Fund's objective is long-term growth
of capital through investment in large and small companies
domiciled or with primary operations in Asia, excluding Japan.
The fund may also invest in Pacific Rim countries such as
Australia and New Zealand.
Countries in which the fund may invest include those in the
following list as well as others in the region, such as China
and Pakistan, as their markets become more accessible.
Investments will represent a minimum of five countries:
Australia, Hong Kong, Indonesia, India, Malaysia, New Zealand,
Philippines, Singapore, South Korea, Taiwan,and Thailand.
Economic growth in the Southeast Asian economies has
outstripped that in both Europe and Japan in recent years, and
PAGE 48
the region's rising prosperity has been reflected in periods
of strong investment returns.
o T. Rowe Price Japan Fund's objective is long-term growth of
capital through investments in common stocks of large and
small companies domiciled or with primary operations in Japan.
Assets will normally be invested across a wide range of
industries and companies (both small and large). While a
single-country fund may normally be considered more risky than
a multi-country fund, Japan has a highly developed and diverse
economy which accounts for approximately 17% of the world's
output.
Investors should be aware that the U.S. dollar has fallen in
value against the Japanese yen for many years, increasing
returns on Japanese investments for U.S. investors. There is
no assurance this currency trend will continue, and its
reversal would adversely affect the fund's total return.
o T. Rowe Price Emerging Markets Stock Fund's objective is
long-term growth of capital through investment primarily in
common stocks of large and small companies domiciled, or with
primary operations, in emerging markets. An emerging market
includes any country defined as emerging or developing by the
International Bank for Reconstruction and Development (World
Bank), International Finance Corporation, or the United
Nations. The fund's investments are expected to be diversified
geographically across emerging markets in Latin America, Asia,
Europe, Africa, and Mid East.
Countries in which the fund may invest are listed below and
others will be added as opportunities develop.
Asia: China, Hong Kong, Indonesia, India, Korea, Malaysia,
Mauritius, Pakistan, Philippines, Singapore, Sri Lanka,
Taiwan, Thailand.
Latin America: Argentina, Belize, Brazil, Chile, Colombia,
Mexico, Peru, Venezuela.
Europe: Austria, Czech Republic, Estonia, Greece, Hungary,
Latvia, Lithuania, Poland, Portugal, Russia, Slovakia, Turkey,
Africa.
The Middle East:Botswana, Egypt, Israel, Jordan, Morocco,
Nigeria, South Africa, Tunisia, Zimbabwe.
Many emerging countries are experiencing substantial economic
and political restructurings, and their developing financial
markets offer the potential for significant capital
PAGE 49
appreciation. Many of these countries are moving from one-
party rule to a multi-party democracy; from agrarian to
industrialized economies; and from nationalized to free
market, privatized industries. These transitions are
proceeding smoothly in some markets but not in others. There
is no guarantee favorable trends will continue. Companies in
emerging markets that successfully navigate these changes
offer investors the prospect for earnings growth more rapid
than that typically generated by companies in more mature,
developed markets. Investors in this fund, however, should be
comfortable with the risks of international investing and be
prepared for substantial share price volatility.
o T. Rowe Price Latin America Fund's objective is long-term
growth of capital through investment primarily in common
stocks of companies domiciled, or with primary operations, in
Latin America. Initially the fund will focus on Mexico,
Brazil, Chile, Argentina, and Venezuela, and the portfolio is
normally expected to invest in at least four countries. Other
countries will be added as opportunities arise and conditions
permit.
The Latin America Fund is registered as "non-diversified."
This means it may invest a greater portion of assets in a
single company and own more of the company's voting securities
than is permissible for a "diversified" fund.
The fund expects to make substantial investments (at times
more than 25% of total assets) in the telephone companies of
various Latin American countries. These utilities play a
critical role in a country's economic development, but their
stocks could be adversely affected if trends favoring
development were to be reversed.
The Latin American countries in general have less developed
economies than other regions in which Price-Fleming invests
and may continue to be subject to the effects of unpredictable
political and economic conditions. A number of countries have
legacies of political instability, hyperinflation, and
currency devaluations versus the dollar (which would adversely
affect returns to U.S. investors).
o T. Rowe Price Emerging Markets Bond Fund's objective is to
provide high income and capital appreciation. The fund invests
at least 65% (and potentially all) of its total assets in the
government and corporate debt securities of emerging nations.
Since these countries are less developed and their bonds carry
a greater risk of default, such bonds are typically below-
investment-grade and are considered junk bonds in the U.S.
PAGE 50
The fund may invest in the lowest-rated bonds, including those
in default. While these investments may offer significantly
greater total returns than higher-quality bonds of developed
foreign markets, they entail a higher degree of risk and are
subject to sharp price declines.
There are no maturity restrictions on the fund. Its weighted
average maturity normally ranges between 5 and 10 years, but
may vary substantially because of market conditions. Under
normal circumstances, most of the fund's total assets are
expected to be denominated in U.S. dollars, and the fund will
not usually hedge foreign currency holdings back to U.S.
dollar. Currency fluctuations can have a significant impact on
the value of the fund's holdings.
Note: The International Discovery, Emerging Markets Stock, and
Latin America Funds each impose a redemption fee of 2% on all
redemptions (including exchanges) of shares held in the funds
for less than one year. The redemption fee is paid to the
fund. Spectrum International Fund is subject to this fee if it
redeems shares held in one of these funds for less than one
year.
Investment Policies of the Spectrum Funds
Each Spectrum fund's investment policies and practices are
subject to further restrictions and risks which are described
in the Statement of Additional Information. The funds will not
make a material change in their investment objectives or their
fundamental policies without obtaining shareholder approval.
Shareholders will be notified of any material change in such
investment programs.
Cash Position.
Cash reserves provide flexibility and serve as a short-term
defense during periods of unusual market volatility.
While the Spectrum Income Fund will remain primarily invested
in bonds, and the Spectrum Growth Fund in stocks, and the
Spectrum International Fund in international stocks, each fund
can hold a certain portion of its assets in U.S. and foreign
dollar-denominated money market securities, including
repurchase agreements in the two highest rating categories,
maturing in one year or less. For temporary, defensive
purposes, a fund may invest without limitation in such
securities. Each fund may invest its cash reserves in the
Prime Reserve Fund. A reserve position provides flexibility in
meeting redemptions, expenses, and the timing of new
investments, and serves as a short-term defense during periods
PAGE 51
of unusual volatility.
Diversification. Spectrum Fund is a "nondiversified"
investment company for purposes of the 1940 Act because it
invests in the securities of a limited number of mutual funds.
However, the underlying funds themselves are diversified
investment companies (with the exception of the International
Bond, Emerging Markets, and Latin America Funds). Spectrum
Fund intends to qualify as a diversified investment company
for the purposes of Subchapter M of the Internal Revenue Code.
Fundamental Investment Policies. As a matter of fundamental
policy, each Spectrum fund will not: (i) invest more than 25%
of its respective total assets in any one industry, except for
investment companies which are members of the T. Rowe Price
family of funds; (ii) borrow money except temporarily to
facilitate redemption requests in amounts not exceeding 30% of
each fund's total assets valued at market; (iii) in any manner
transfer as collateral for indebtedness any securities owned
by each fund except in connection with permissible borrowings,
which in no event will exceed 30% of each fund's total assets
valued at market; additionally, as a fundamental policy,
Spectrum Income and Spectrum Growth Funds cannot (iv) change
the selection of the underlying funds in which they can
invest; or (v) change the percentage ranges which may be
allocated to the underlying funds. These last two restrictions
are operating policies for Spectrum International Fund and may
be changed by the Board of Directors. However, shareholders
will be informed of any such changes.
Other Investment Restrictions. As a matter of operating
policy, each Spectrum fund will not, among other things: (i)
purchase additional securities when money borrowed exceeds 5%
of the fund's total assets; (ii) invest more than 10% of its
net assets in illiquid securities, provided that each fund
will not invest more than 5% of its net assets in restricted
securities (other than securities eligible for resale under
Rule 144A of the Securities Act of 1933); and (iii) redeem
securities from any underlying fund at a rate in excess of 1%
of the underlying fund's assets in any period of less than 15
days, except where necessary to meet shareholder redemption
requests. This last limitation does not apply to Spectrum
International Fund.
The Spectrum Growth and Income Funds may not purchase
shares of any underlying fund if, as a result of such
purchase, they would own more than 30% of the outstanding
voting securities of the underlying fund. This is an operating
policy and may be changed by the Board of Directors. The 30%
restriction does not apply to the Spectrum International Fund
PAGE 52
which can own an unlimited amount of each underlying fund in
which it invests. The ability of the Spectrum Funds to invest
these amounts in the underlying funds could subject the funds
to greater risk due to the resulting concentration. However,
each of the underlying funds invests in a broad portfolio,
which would tend to mitigate this risk to some degree.
If a Spectrum fund reaches a percentage investment limit with
any underlying fund, the Directors will have to determine
whether to increase the limit, stop sales of shares of that
fund, or take other suitable steps.
Portfolio Turnover. Each Spectrum fund's portfolio turnover is
expected to be low. The Spectrum funds will purchase or sell
securities to: (i) accommodate purchases and sales of each
fund's shares; (ii) change the percentages of each fund's
assets invested in each of the underlying funds in response to
market conditions; and (iii) maintain or modify the allocation
of each fund's assets among the underlying funds within the
percentage limits described earlier. During the Spectrum
International Fund's initial period of operations, its
portfolio turnover rate is not expected to exceed 50%. The
following chart sets forth the Spectrum Income and Spectrum
Growth Funds' portfolio turnover rates for the the period
ended June 30, 1996, and for the years ended December 31,
1995, December 31, 1994, December 31, 1993.
______________________________________________________________
1996 1995 1994 1993
Spectrum Income Fund21.0% 20.2% 23.1% 14.4%
Spectrum Growth Fund 1.7 7.4 20.7 7.0
______________________________________________________________
Table 8
Investment Policies and Practices of Underlying Funds
Fund managers have considerable leeway in choosing investment
strategies and selecting securities they believe will help the
funds achieve their objectives.
In pursuing their investment objectives and programs, each of
the underlying funds is permitted to engage in a wide range of
investment policies. Certain of these policies are described
in the following paragraphs and further information about the
underlying funds is contained in the Statement of Additional
Information as well as in the prospectuses of such funds.
Because each fund invests in the underlying funds,
shareholders of each fund will be affected by these investment
policies in direct proportion to the amount of assets each
PAGE 53
fund allocates to the underlying funds pursuing such policies.
Lending of Portfolio Securities. Like other mutual funds, the
underlying funds may lend securities to broker-dealers, other
institutions, or other persons to earn additional income. The
principal risk is the potential insolvency of the broker-
dealer or other borrower. In this event, the underlying funds
could experience delays in recovering securities and possibly
capital losses.
Foreign Securities. (See also, "Fund, Market, and Risk
Characteristics" in Section 1 of this prospectus.) The
Spectrum funds will each invest in certain underlying funds
that invest all or a portion of their assets in foreign
securities. These investments in foreign securities include
nondollar-denominated securities traded outside of the U.S.
and dollar-denominated securities of foreign issuers. Such
investments increase a portfolio's diversification and may
enhance return, but they also involve some special risks such
as exposure to potentially adverse local, political, and
economic developments; nationalization and exchange controls;
potentially lower liquidity and high volatility; possible
problems arising from accounting, disclosure, settlement, and
regulatory practices that differ from U.S. standards; and the
chance that fluctuations in foreign exchange rates will
decrease the investment's value (favorable changes can
increase its value). To the extent the underlying funds invest
in developing countries, these risks are increased.
Managing Foreign Currency Risk. Foreign securities in which
the underlying funds invest are subject to currency risk, that
is, the risk that the U.S. dollar value of these securities
may be affected favorably or unfavorably by changes in foreign
currency exchange rates and exchange control regulations.
Investors in foreign securities may "hedge" their exposure to
potentially unfavorable currency changes by purchasing a
contract to exchange one currency for another on some future
date at a specified exchange rate. In certain circumstances,
a "proxy currency" may be substituted for the currency in
which the investment is denominated, a strategy known as
"proxy hedging." An underlying fund may also use these
contracts to create a synthetic bond--issued by a U.S.
company, for example, but with the dollar component
transformed into a foreign currency. Although the underlying
funds will engage in foreign currency transactions primarily
to protect the fund's foreign securities from adverse currency
movements relative to the dollar, they involve the risk that
anticipated currency movements will not occur and a fund's
total return could be reduced.
PAGE 54
There are certain markets where it is not possible to engage
in effective foreign currency hedging. This may be true, for
example for the currencies of various Latin American countries
and other emerging markets where the foreign exchange markets
are not sufficiently developed to permit hedging activity to
take place.
Futures and Options.
Futures are used to manage risk; options give the investor the
option to buy or sell an asset at a predetermined price in the
future.
Futures (a type of potentially high-risk derivative) are often
used to manage or hedge risk, because they enable the investor
to buy or sell an asset in the future at an agreed upon price.
Options (another type of potentially high-risk derivative)
give the investor the right, but not the obligation, to buy or
sell an asset at a predetermined price in the future. The
underlying funds may buy and sell futures and options
contracts for a number of reasons, including: to manage their
exposure to changes in interest rates, securities prices, and
foreign currencies; to efficiently adjust their overall
exposure to certain markets; to attempt to enhance income; to
protect the value of portfolio securities; and to adjust the
portfolios' duration.
The underlying funds may purchase, sell, or write call and put
options on securities, financial indices, and foreign
currencies.
Futures contracts and options may not always be successful
hedges; their prices can be highly volatile; using them could
lower the funds' total return; and the potential loss from the
use of futures can exceed the funds' initial investment in
such contracts.
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 promptly.
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
PAGE 55
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.
T. Rowe Price Trust Company
1-800-492-7670
1-410-625-6585
Employer-Sponsored Retirement Plans and Institutional Accounts
Transaction procedures in the following sections may not apply
to employer-sponsored retirement plans and institutional
accounts. For procedures regarding employer-sponsored
retirement plans, please call T. Rowe Price Trust Company or
consult your plan administrator. For institutional account
procedures, please call your designated account manager or
service representative.
Opening a New Account: $2,500 minimum initial investment;
$1,000 for retirement plans or gifts or transfers to minors
(UGMA/UTMA) accounts
Account Registration
If you own other T. Rowe Price funds, be sure to register any
new account just like your existing accounts so you can
exchange among them easily. (The name and account type would
have to be identical.)
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, except for IRA Rollover checks that
PAGE 56
are properly endorsed, 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 on the previous page.
Note: No services will be established and IRS penalty
withholding may occur until a signed New Account Form is
received. Also, retirement plans cannot be opened by wire.
By Exchange
Call Shareholder Services or use Tele*Access or your personal
computer (see "Automated Services" under "Shareholder
Services"). The new account will have the same registration as
the account from which you are exchanging. Services for the
new account may be carried over by telephone request if
preauthorized on the existing account. (See explanation of
"Excessive Trading" under "Transaction Procedures.")
In Person
Drop off your New Account Form at any location listed on the
cover and obtain a receipt.
Purchasing Additional Shares: $100 minimum purchase; $50
minimum for retirement plans, Automatic Asset Builder and
gifts of transfers to minors(UGMA/UTMA) accounts
By ACH Transfer
Use Tele*Access, your personal computer, or call Investor
Services if you have established electronic transfers using
the ACH network.
By Wire
Call Shareholder Services or use the wire address in "Opening
a New Account."
Regular Mail
T. Rowe Price Funds
Account Services
P.O. Box 89000
Baltimore, MD
PAGE 57
21289-1500
(For mailgrams,
express, registered,
or certified mail,
see previous section.)
By Mail
o Make your check payable to T. Rowe Price Funds (otherwise it
may be returned).
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.
o Remember to provide your account number and the fund name on
your check.
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 your personal computer, Tele*Access (if you have previously
authorized telephone services), mailgram or express mail. For
exchange policies, please see "Transaction Procedures and
Special Requirements--Excessive Trading."
Redemption proceeds can be mailed to your account address,
sent by ACH transfer, or wired to your bank (provided your
bank information is already on file). For charges, see
"Electronic Transfers--By Wire" under "Shareholder Services".
For Mailgram,
Express, Registered,
or Certified mail,
see addresses under
"Opening a New Account."
By Mail
For each account involved, provide the account name, number,
fund name, and exchange or redemption amount. For exchanges,
be sure to indicate any fund you are exchanging out of and the
fund or funds you are exchanging into. Please mail to the
appropriate address below or as indicated at left. T. Rowe
Price requires the signatures of all owners exactly as
PAGE 58
registered, and possibly a signature guarantee (see
"Transaction Procedures and Special Requirements--Signature
Guarantees").
Regular Mail
For nonretirement For employer-sponsored
and IRA accounts: retirement accounts:
T. Rowe Price T. Rowe Price Trust
Account Services Company
P.O. Box 89000 P.O. Box 89000
Baltimore, MD Baltimore, MD
21289-0220 21289-0300
Redemptions from employer-sponsored retirement accounts must
be in writing; please call T. Rowe Price Trust Company or your
plan administrator for instructions. IRA distributions may be
requested in writing or by telephone; please call Shareholder
Services to obtain an IRA Distribution Form or an IRA
Shareholder Services Form to authorize the telephone
redemption service.
Rights Reserved by the Fund
The fund and its agents reserve the right to waive or lower
investment minimums; to accept initial purchases by telephone
or mailgram; to refuse any purchase order; to cancel or
rescind any purchase or exchange (for example, if an account
has been restricted due to excessive trading or fraud) upon
notice to the shareholder within five business days of the
trade or if the written confirmation has not been received by
the shareholder, whichever is sooner; to freeze any account
and suspend account services when notice has been received of
a dispute between the registered or beneficial account owners
or there is reason to believe a fraudulent transaction may
occur; to otherwise modify the conditions of purchase and any
services at any time; or to act on instructions believed to be
genuine.
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, you avoid
having to complete a separate form and obtain a signature
guarantee. This section reviews some of the principal services
PAGE 59
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.
Investor Services
1-800-638-5660
1-410-547-2308
Note: Corporate and other entity 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 and 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.
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 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
1-800-638-2587
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, and checks, and to initiate purchase, redemption
and exchange orders in your accounts (see "Electronic
Transfers" below).
Personal Computer. 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
PAGE 60
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 or your personal
computer 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 Fund or Emerging Markets Bond Fund)
You may write an unlimited number of free checks on any money
market fund, and most bond funds, with a minimum of $500 per
check. Keep in mind, however that a check results in a
redemption; a check written on a bond fund will create a
taxable event which you and we must report to the IRS.
Automatic Investing ($50 minimum)
You can invest automatically in several different ways,
including:
Automatic Asset Builder. You instruct us to move $50 or more
from your bank account, or you can instruct your employer to
send all or a portion of your paycheck to the fund or funds
you designate.
Note: If you are moving money from your bank account, and if
the date you select for your transactions falls on a Sunday
or a Monday which is a holiday, your order will be priced on
the second business day following this date.
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
Discount Brokerage is a division of T. Rowe Price Investment
Services, Inc., Member NASD/SIPC.
PAGE 61
This additional service gives you the opportunity to easily
consolidate all your investments with one company. Through
our discount brokerage, you can buy and sell individual
securities--stocks, bonds, options, and others--at
considerable commission savings. We also provide a wide range
of services, including:
Automated telephone and on-line services - You can enter
trades, access quotes, and review account information 24
hours a day, seven days a week. Any trades executed through
these programs save you an additional 10% on commissions.
Note: Discount applies to our current commission schedule,
subject to our $35 minimum commission.
To open an account:
1-800-638-5660
For existing discount brokerage investors:
1-800-225-7720
Investor Information - A variety of informative reports,
such as our Brokerage Insights series, S&P Market Month
Newsletter, and optional Stock Reports can help you better
evaluate economic trends and investment opportunities.
Dividend Reinvestment Service - Virtually all stock held in
customer accounts are eligible for this service--free of
charge.
Investment Information
To help shareholders monitor their current investments and
make decisions that accurately reflect their financial goals,
T. Rowe Price offers a wide variety of information in addition
to account statements.
Shareholder Reports. Fund managers' reviews of their
strategies and results. If several members of a household own
the same fund, only one fund report is mailed to that address.
To receive additional copies, please call Shareholder Services
or write to us at 100 East Pratt Street, Baltimore, MD 21202.
The T. Rowe Price Report. A quarterly investment newsletter
discussing markets and financial strategies.
Performance Update. Quarterly review of all T. Rowe Price
fund results.
Insights. Educational reports on investment strategies and
PAGE 62
financial markets.
Investment Guides. Asset Mix Worksheet, College Planning Kit,
Personal Strategy Planner, Retirees Financial Guide, and
Retirement Planning Kit.
PAGE 63
To Open an Account
Investor Services
1-800-638-5660
1-410-547-2308
For Existing Accounts
Shareholder Services
1-800-225-5132
1-410-625-6500
For Yields and Prices
Tele*AccessR
1-800-638-2587
24 hours, 7 days
To Open a Discount Brokerage Account
1-800-638-5660
1-410-547-2308
Investor Centers
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
Internet Address
http://www.troweprice.com
To help you achieve your financial goals, T. Rowe Price offers
a wide range of stock, bond, and money market investments, as
well as convenient services and timely, informative reports.
Prospectus
PAGE 64
T. Rowe Price Spectrum Funds
T. Rowe Price
Spectrum Fund, Inc.
December __, 1996
Three broadly diversified funds composed of other T. Rowe
Price funds, one investing primarily in fixed income
securities, one in stocks, and one in international
securities.
Invest With ConfidenceR
PAGE 65
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements: Spectrum Income Fund and Spectrum
Growth Fund.
The Condensed Financial Information (Financial Highlights
Table) is included in Part A of the Registration Statement.
Statement of Net Assets, Statement of Operations, and
Statement of Changes in Net Assets are included in the
Annual Report to Shareholders, the pertinent portions of
which are incorporated by reference in Part B of the
Registration Statement.
Financial Statements: Spectrum International Fund
Inapplicable.
(b) Exhibits.
(1)(a) Amended Articles of Incorporation of Registrant,
dated July 24, 1987, as amended October 16, 1987
(electronically filed with Amendment No. 11 dated
April 14, 1994)
(1)(b) Articles of Amendment of Registrant, dated July 1,
1991 (electronically filed with Amendment No. 11
dated April 14, 1994)
(1)(c) Articles Supplementary of Registrant, dated July 7,
1993 (electronically filed with Amendment No. 11
dated April 14, 1994)
(1)(d) Articles Supplementary of Registrant, dated November
12, 1996 (electronically filed with Amendment No. 14
dated November 15, 1996)
(2) By-Laws of Registrant, as amended July 1, 1991
(electronically filed with Amendment No. 11 dated
April 14, 1994)
(3) Inapplicable
(4) Specimen Stock Certificate (filed with Amendment No.
5)
(5)(a) Investment ManagementAgreement betweenthe Registrant
PAGE 66
on behalf of the Spectrum Income Fund and T. Rowe
Price Associates, Inc., dated July 1, 1991
(electronically filed with Amendment No. 11 dated
April 14, 1994)
(5)(b) Investment Management Agreement between the
Registrant on behalf of the Spectrum Growth Fund and
T. Rowe Price Associates, Inc., dated July 1, 1991
(electronically filed with Amendment No. 11 dated
April 14, 1994)
(5)(c) Investment Management Agreement between the
Registrant on behalf of the Spectrum International
Fund and Rowe Price-Fleming International, Inc.,
dated November 12, 1996 (electronically filed with
Amendment No. 14 dated November 15, 1996)
(6) Underwriting Agreement between the Registrant and T.
Rowe Price Investment Services, Inc., dated June 12,
1990 (electronically filed with Amendment No. 11
dated April 14, 1994)
(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, and September 16, 1993,
November 3, 1993, March 1, 1994, April 21, 1994,
July 27, 1994, September 21, 1994, November 1, 1994,
November 2, 1994, January 25, 1995, September 20,
1995, October 11, 1995, November 1, 1995, December
11, 1995, April 24, 1996, August 2, 1996, and
November 12, 1996 (electronically filed with
Amendment No. 14 dated November 15, 1996)
(9)(a) Transfer Agency and Service Agreement between T.
Rowe Price Services, Inc. and T. Rowe Price Funds,
dated January 1, 1996, as amended April 24, 1996,
August 2, 1996, and November 12, 1996
(electronically filed with Amendment No. 14 dated
November 15, 1996)
(9)(b) Special Servicing Agreement between T. Rowe Price
PAGE 67
Funds, T. Rowe Price Services, Inc. and Registrant,
dated June 12, 1990 (filed with Amendment No. 11)
(9)(c) Agreement between T. Rowe Price Associates, Inc. and
T. Rowe Price Funds for Fund Accounting Services,
dated January 1, 1996, as amended April 24, 1996,
August 2, 1996, and November 12, 1996
(electronically filed with Amendment No. 14 dated
November 15, 1996)
(9)(d) Agreement between T. Rowe Price Retirement Plan
Services, Inc. and the Taxable Funds, dated January
1,1996, as amended April 24, 1996, August 2, 1996,
and November 12, 1996 (electronically filed with
Amendment No. 14 dated November 15, 1996)
(9)(e) Special Servicing Agreement between T. Rowe Price
Funds, Rowe Price-Fleming International, Inc., T.
Rowe Price Associates, Inc. and Registrant, dated
November 12, 1996 (electronically filed with
Amendment No. 14 dated November 15, 1996)
(10) Inapplicable
(11) Consent of Independent Accountants
(12) Inapplicable
(13) Inapplicable
(14) Inapplicable
(15) Inapplicable
(16) Inapplicable
(17) Financial Data Schedule for T. Rowe Price Spectrum
Fund, Inc. as of June 30, 1996
(18) Inapplicable
(19) Power of Attorney for T. Rowe Price Spectrum Fund,
Inc.
Item 25. Persons Controlled by or Under Common Control with
Registrant
None.
Item 26. Number of Holders of Securities
As of November 30, 1996, there were 48,299 shareholders in
the Spectrum Income Fund.
PAGE 68
As of November 30, 1996, there were 91,480 shareholders in
the Spectrum Growth Fund.
As of December 16, 1996, there were 0 shareholders in the
Spectrum International 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 forty-four 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 California
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 Balanced
Fund, Inc., T. Rowe Price Short-Term U.S. Government Fund, Inc.,
T. Rowe Price Mid-Cap Growth Fund, Inc., T. Rowe Price OTC Fund,
Inc., T. Rowe Price Tax-Free Insured Intermediate Bond Fund,
Inc., T. Rowe Price Dividend Growth Fund, Inc., T. Rowe Price
Blue Chip Growth Fund, Inc., T. Rowe Price Summit Funds, Inc., T.
Rowe Price Summit Municipal Funds, Inc., T. Rowe Price Equity
Series, Inc., T. Rowe Price International Series, Inc., T. Rowe
Price Fixed Income Series, Inc., T. Rowe Price Personal Strategy
Funds, Inc., T. Rowe Price Value Fund, Inc., T. Rowe Price
Capital Opportunity Fund, Inc., T. Rowe Price Corporate Income
Fund, Inc., T. Rowe Price Health Sciences Fund, Inc., T. Rowe
Price Mid-Cap Value Fund, Inc., T. Rowe Price Institutional
Equity Funds, Inc., and T. Rowe Price Financial Services Fund,
Inc. The Registrant and the forty-four 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, 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
PAGE 69
Overseas Limited, a wholly-owned subsidiary of Robert Fleming
Holdings Limited, and 25% owned by Jardine Fleming Holdings
Limited. In addition to the corporate insureds, the policies
also cover the officers, directors, and employees of each of the
named insureds. The premium is allocated among the named
corporate insureds in accordance with the provisions of Rule
17d-1(d)(7) under the Investment Company Act of 1940.
Article X, Section 10.01 of the Registrant's By-Laws
provides as follows:
Section 10.01. Indemnification and Payment of Expenses
in Advance: The Corporation shall indemnify any individual
("Indemnitee") who is a present or former director, officer,
employee, or agent of the Corporation, or who is or has been
serving at the request of the Corporation as a director,
officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, who,
by reason of his position was, is, or is threatened to be
made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (hereinafter collectively
referred to as a "Proceeding") against any judgments,
penalties, fines, settlements, and reasonable expenses
(including attorneys' fees) incurred by such Indemnitee in
connection with any Proceeding, to the fullest extent that
such indemnification may be lawful under Maryland law. The
Corporation shall pay any reasonable expenses so incurred by
such Indemnitee in defending a Proceeding in advance of the
final disposition thereof to the fullest extent that such
advance payment may be lawful under Maryland law. Subject
to any applicable limitations and requirements set forth in
the Corporation's Articles of Incorporation and in these By-
Laws, any payment of indemnification or advance of expenses
shall be made in accordance with the procedures set forth in
Maryland law.
Notwithstanding the foregoing, nothing herein shall
protect or purport to protect any Indemnitee against any
liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of
his office ("Disabling Conduct").
Anything in this Article X to the contrary
notwithstanding, no indemnification shall be made by the
Corporation to any Indemnitee unless:
(a) there is a final decision on the merits by a court
or other body before whom the Proceeding was
brought that the Indemnitee was not liable by
reason of Disabling Conduct; or
(b) in the absence of such a decision, there is a
PAGE 70
reasonable determination, based upon a review of
the facts, that the Indemnitee was not liable by
reason of Disabling Conduct, which determination
shall be made by:
(i) the vote of a majority of a quorum of
directors who are neither "interested
persons" of the Corporation as defined in
Section 2(a)(19) of the Investment Company
Act of 1940, nor parties to the Proceeding;
or
(ii) an independent legal counsel in a written
opinion.
Anything in this Article X to the contrary
notwithstanding, any advance of expenses by the Corporation
to any Indemnitee shall be made only upon the undertaking by
such Indemnitee to repay the advance unless it is ultimately
determined that such Indemnitee is entitled to
indemnification as above provided, and only if one of the
following conditions is met:
(a) the Indemnitee provides a security for his
undertaking; or
(b) the Corporation shall be insured against losses
arising by reason of any lawful advances; or
(c) there is a determination, based on a review of
readily available facts, that there is reason to
believe that the Indemnitee will ultimately be
found entitled to indemnification, which
determination shall be made by:
(i) a majority of a quorum of directors who are
neither "interested persons" of the
Corporation as defined in Section 2(a)(19) of
the Investment Company Act of 1940, nor
parties to the Proceeding; or
(ii) an independent legal counsel in a written
opinion.
Section 10.02 of the Registrant's By-Laws provides as
follows:
Section 10.02. Insurance of Officers, Directors,
Employees and Agents: To the fullest extent permitted by
applicable Maryland law and by Section 17(h) of the
Investment Company Act, as from time to time amended, the
Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee, or
agent of the Corporation, or who is or was serving at the
request of the Corporation as a director, officer, employee,
or agent of
PAGE 71
another corporation, partnership, joint venture, trust, or
other enterprise, against any liability asserted against him
and incurred by him in or arising out of his position,
whether or not the Corporation would have the power to
indemnify him against such liability.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant
to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
i n d e m n i f i c a t i o n a g a i n s t s u c h
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection
with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of
such issue.
Item 28. Business and Other Connections of Investment Manager.
Rowe Price-Fleming International, Inc. ("Price-Fleming"), a
Maryland corporation, is a corporate joint venture 50% owned by
TRP Finance, Inc., a wholly-owned subsidiary of the Manager.
Price-Fleming was 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 PAGE 72
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
trustee/custodian for employee benefit plans, individual
retirement accounts and common trust funds and as
trustee/investment agent for two 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, L.P., is a Delaware limited
partnership organized in 1985 for the purpose of investing in a
diversified group of small and medium-sized non-U.S. companies.
Price-Fleming is the general partner of this partnership, and
certain institutional investors, including advisory clients of
Price-Fleming, are its limited partners.
PAGE 73
T. Rowe Price Real Estate Group, Inc. ("Real Estate Group"), is a
Maryland corporation and a wholly-owned subsidiary of the Manager
established in 1986 to provide real estate services.
Subsidiaries of Real Estate Group are: T. Rowe Price Realty
Income Fund I Management, Inc., a Maryland corporation (General
Partner of T. Rowe Price Realty Income Fund I, A No-Load Limited
Partnership), T. Rowe Price Realty Income Fund II Management,
Inc., a Maryland corporation (General Partner of T. Rowe Price
Realty Income Fund II, America's Sales-Commission-Free Real
Estate Limited Partnership), T. Rowe Price Realty Income Fund III
Management, Inc., a Maryland corporation (General Partner of T.
Rowe Price Realty Income Fund III, America's
Sales-Commission-Free Real Estate Limited Partnership, and T.
Rowe Price Realty Income Fund IV Management, Inc., a Maryland
corporation (General Partner of T. Rowe Price Realty Income Fund
IV, America's Sales-Commission-Free Real Estate Limited
Partnership). Real Estate Group serves as investment manager to
T. Rowe Price Renaissance Fund, Ltd., A Sales-Commission-Free
Real Estate Investment, established in 1989 as a Maryland
corporation which qualifies as a REIT.
T. Rowe Price Stable Asset Management, Inc. ("Stable Asset
Management") 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.
T. Rowe Price Insurance Agency, Inc., is a wholly-owned
subsidiary of T. Rowe Price Associates, Inc. organized in
Maryland in 1994 and licensed to do business in several states to
act primarily as an insurance agency in connection with the sale
of the Price Funds' variable annuity products.
TRP Management, Inc., is a Maryland corporation wholly-owned by
T. Rowe Price Associates, Inc. which was originally organized in
1990
PAGE 74
as T. Rowe Price Industrial Advantage Fund I Management, Inc. In
1993, the name was changed to TRP Management, Inc. The
subsidiary, in conjunction with CUNA Mutual Insurance Society and
CUNA Service Group, Inc., established a Maryland limited
liability company known as CMC--T. Rowe Price Management LLC.
This company sponsored a family of no-load mutual funds available
to members of credit unions in the United States ("CUNA Funds").
The CUNA Funds have filed an application with the SEC to withdraw
registration under the Investment Company Act of 1940.
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 Suburban Second, Inc., a wholly-owned Maryland subsidiary of
T. Rowe Price Associates, Inc., was incorporated in 1995 to
primarily engage in the development and ownership of real
property located in Owings Mills, Maryland.
TRP Finance, Inc., a wholly-owned subsidiary of the Manager, is a
Delaware corporation organized in 1990 to manage certain passive
corporate investments and other intangible assets.
T. Rowe Price Strategic Partners Fund, 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.,
("Strategic Partners"), a Delaware limited partnership whose
general partner is T. Rowe Price Strategic Partners Associates,
Inc., a Maryland corporation which is a wholly-owned subsidiary
of the Manager. Strategic Partners also serves as the general
partner of T. Rowe Price Strategic Partners Fund II, L.P., a
Delaware limited partnership established in 1992.
PAGE 75
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.
PAGE 129
RICHARD L. MENSCHEL, Director of the Manager. Mr. Menschel is a
limited partner of The Goldman Sachs Group, L.P. Mr. Menschel's
address is 85 Broad Street, 2nd Floor, New York, New York 10004.
JOHN W. ROSENBLUM, Director of the Manager. Mr. Rosenblum is the
Tayloe Murphy Professor, The Darden Graduate School of Business
Administration, 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.
Mr. Walsh's address is: 200 East 66th Street, Apt. A-1005, New
York, New York 10021.
ANNE MARIE WHITTEMORE, Director of the Manager. Mrs. Whittemore
is a partner of the law firm of McGuire, Woods, Battle & Boothe
and is a director of Owens & Minor, Inc.; USF&G Corporation; and
the James River Corporation. Mrs. Whittemore's address is One
James Center, Richmond, Virginia 23219.
With the exception of Messrs. Halbkat, Menschel, Rosenblum,
Strickland, Walsh, and Mrs. Whittemore, 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.
PAGE 76
Carter O. Hoffman, who is a Managing Director of the Manager, is
also a Director of TRP Finance, Inc.
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,
Robert W. Smith, 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.
R. Aran Gordon, an employee 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.
Todd J. Henry, an employee of the Manager, is an Assistant Vice
President of Price-Fleming.
Kathleen G. Polk, an employee of the Manager, is an Assistant
Vice President 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.
Item 29. Principal Underwriters.
PAGE 77
(a) The principal underwriter for T. Rowe Price Spectrum
Funds, Inc. is Investment Services. Investment
Services acts as the principal underwriter for the
other seventy-three 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 commission or
other compensation for acting as principal
underwriter.
(b) The address of each of the directors and officers of
Investment Services listed below is 100 East Pratt
Street, Baltimore, Maryland 21202.
Positions and
Name and Principal Positions and Offices Offices With
Business Address With Underwriter Registrant
__________________ ______________________ ______________
James Sellers Riepe Chairman of the Board Vice President
and President and Director
Edward C. Bernard President None
Henry Holt Hopkins Vice President and Vice President
Director
Charles E. Vieth Vice President and None
Director
Patricia M. Archer 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
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
James Link Vice President None
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
PAGE 78
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
Kenneth J. Rutherford Vice President None
Monica R. Tucker Vice President None
William F. Wendler, II Vice President None
Jane F. White Vice President None
Thomas R. Woolley Vice President None
Alvin M. Younger, Jr. Secretary and 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
Patricia S. Butcher Assistant Vice Assistant
President Secretary
Renee M. Christoff Assistant Vice
President None
Cheryl L. Emory Assistant Vice
President None
John A. Galateria Assistant Vice
President None
Douglas E. Harrison Assistant Vice
President None
Janelyn A. Healey Assistant Vice
President None
Kathleen Hussey Assistant Vice
President None
Sandra J. Kiefler Assistant Vice
President None
C. Lillian Matthews Assistant Vice
President None
Janice D. McCrory 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.
PAGE 79
All accounts, books, and other documents required to be
maintained by T. Rowe Price Spectrum Fund, Inc. under
Section 31(a) of the Investment Company Act of 1940 and the
rules thereunder will be maintained by T. Rowe Price
Spectrum Fund, Inc. at its offices at 100 East Pratt Street,
Baltimore, Maryland 21202. Transfer, dividend disbursing,
and shareholder service activities are performed by T. Rowe
Price Services, Inc. at 100 Each Pratt Street, Baltimore,
Maryland 21202.
Custodian activities for T. Rowe Price Spectrum Fund, Inc. are
performed at State Street Bank and Trust Company's Service Center
(State Street South), 1776 Heritage Drive, Quincy, Massachusetts
02171.
Item 31. Management Services.
Registrant is not a party to any management-related service
contract, other than as set forth in the Prospectus.
Item 32. Undertakings.
(a) Inapplicable
(b) The Spectrum International Fund will file, within four
to six months from the effective date of its
registration statement, a post-effective amendment
using financial statements which need not be certified.
(c) If requested to do so by the holders of at least 10% of
all votes entitled to be cast, the Registrant will call
a meeting of shareholders for the purpose of voting on
the question of removal of a director or directors and
will assist in communications with other shareholders
to the extent required by Section 16(c).
(d) 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 a prospectus is
delivered.
PAGE 80
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
16th day of December, 1996.
T. ROWE PRICE SPECTRUM FUND, INC.
/s/James S. Riepe
James S. Riepe
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/James S. Riepe
James S. Riepe Chairman of the Board, December 16, 1996
(Chief Executive Officer)
/s/Carmen F. Deyesu
Carmen F. Deyesu Treasurer December 16, 1996
(Chief Financial Officer)
*
Jeffrey H. Donahue Director December 16, 1996
*
A. MacDonough Plant Director December 16, 1996
*/s/Henry H. Hopkins, Attorney-In-Fact
Henry H. Hopkins, Attorney-In-Fact
PAGE 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus constituting part of this Post-Effective Amendment No.
11 to the Registration Statement on Form N-1A (the "Registration
Statement") of our report dated January 18, 1996, relating to the
financial statements and financial highlights appearing in the
December 31, 1995 Annual Report to Shareholders of T. Rowe Price
Spectrum Fund, Inc. (comprised of Spectrum Growth Fund and
Spectrum Income Fund). We also consent to the reference to us
under the heading "Financial Highlights" in the Prospectus.
/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP
Baltimore, Maryland
December 16, 1996
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<NAME> T. ROWE PRICE SPECTRUM FUND, INC.
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<REALIZED-GAINS-CURRENT> 4902
<APPREC-INCREASE-CURRENT> 133320
<NET-CHANGE-FROM-OPS> 144173
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<NET-CHANGE-IN-ASSETS> 445421
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<PER-SHARE-NAV-BEGIN> 13.49
<PER-SHARE-NII> .05
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<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
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<NAME> T. ROWE PRICE SPECTRUM FUND, INC.
<SERIES>
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<NAME> SPECTRUM INCOME FUND
<MULTIPLIER> 1000
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<PERIOD-TYPE> 6-MOS
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<PERIOD-END> JUN-30-1996
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<INVESTMENTS-AT-VALUE> 1201745
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<TOTAL-ASSETS> 1209102
<PAYABLE-FOR-SECURITIES> 5493
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<OTHER-ITEMS-LIABILITIES> 8474
<TOTAL-LIABILITIES> 13967
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<PAID-IN-CAPITAL-COMMON> 1171844
<SHARES-COMMON-STOCK> 108718
<SHARES-COMMON-PRIOR> 87615
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<NET-INVESTMENT-INCOME> 36773
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<APPREC-INCREASE-CURRENT> (26792)
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<DISTRIBUTIONS-OF-GAINS> 993
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<SHARES-REINVESTED> 3117
<NET-CHANGE-IN-ASSETS> 208434
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<ACCUMULATED-GAINS-PRIOR> 48227
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<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 1155225
<PER-SHARE-NAV-BEGIN> 11.24
<PER-SHARE-NII> .35
<PER-SHARE-GAIN-APPREC> (.24)
<PER-SHARE-DIVIDEND> .35
<PER-SHARE-DISTRIBUTIONS> .01
<RETURNS-OF-CAPITAL> 0
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PAGE 1 T. ROWE PRICE SPECTRUM FUND, INC.
POWER OF ATTORNEY
RESOLVED, that the Corporation and each of its directors do
hereby constitute and authorize, James S. Riepe, Joel H.
Goldberg, and Henry H. Hopkins, and each of them individually,
their true and lawful attorneys and agents to take any and all
action and execute any and all instruments which said attorneys
and agents may deem necessary or advisable to enable the
Corporation to comply with the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, and
any rules, regulations, orders or other requirements of the
United States Securities and Exchange Commission thereunder, in
connection with the registration under the Securities Act of
1933, as amended, of shares of the Corporation, to be offered by
the Corporation, and the registration of the Corporation under
the Investment Company Act of 1940, as amended, including
specifically, but without limitation of the foregoing, power and
authority to sign the name of the Corporation on its behalf, and
to sign the names of each of such directors and officers on his
behalf as such director or officer to any amendment or supplement
(including Post-Effective Amendments) to the Registration
Statement on Form N-1A of the Corporation filed with the
Securities and Exchange Commission under the Securities Act of
1933, as amended, and the Registration Statement on Form N-1A of
the Corporation under the Investment Company Act of 1940, as
amended, and to any instruments or documents filed or to be filed
as a part of or in connection with such Registration Statement.
IN WITNESS WHEREOF, the Corporation has caused these
presents to be signed by its Chairman of the Board and the same
attested by its Secretary, each thereunto duly authorized by its
Board of Directors, and each of the undersigned has hereunto set
his hand and seal as of the day set opposite his name.
T. ROWE PRICE SPECTRUM FUND, INC.
By /s/James S. Riepe
James S. Riepe, Chairman of the Board
April 30, 1996
Attest:
/s/Lenora V. Hornung, Secretary
Lenora V. Hornung, Secretary
PAGE 2
(Signatures Continued)
/s/James S. Riepe Chairman of the Board
James S. Riepe (Principal Executive Officer) April 30, 1996
/s/Carmen F. Deyesu Treasurer (Principal
Carmen F. Deyesu Financial Officer) April 30, 1996
/s/Jeffrey H. Donahue
Jeffrey H. Donahue Director April 30, 1996
/s/A. MacDonough Plant
A. MacDonough Plant Director April 30, 1996
