- --------------------------------------------------------------------------------
T. Rowe Price
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SemiAnnual Report
Spectrum Funds
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June 30, 1997
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Report Highlights
================================================================================
Spectrum Funds
* The U.S. stock market extended its gains in the first half; high-quality
U.S. bonds rallied in the second quarter when interest rates declined; and
international stocks posted solid gains.
* Spectrum Growth's strong six-month return did not exceed its Lipper peer
group, reflecting exposure to some lagging groups-small- and mid-cap U.S.
stocks, and some foreign stocks.
* Spectrum Income's six-month return exceeded its Lipper peer group, aided by
commitments to strongly performing high-yield bonds and U.S. stocks.
* Spectrum International provided a strong return that slightly trailed its
Lipper group, due primarily to weaker results from some Asian holdings and
foreign bonds.
* Our near-term as well as long-term outlooks are optimistic, but the
Spectrum Funds' broad diversification should serve shareholders well in the
event of setbacks in individual markets or market sectors.
<PAGE>
Fellow Shareholders
================================================================================
After a dull first quarter in which U.S. stocks eked out a positive return and
most bonds declined, both rallied in the second quarter. Stocks were
particularly strong, returning 20.61% for the first half, as measured by the
Standard & Poor's 500 Stock Index. International stock markets also performed
well, while bonds of established foreign markets trailed their U.S.
counterparts. The three Spectrum funds provided strong absolute returns during
the first half. Spectrum Income outperformed its peer group, while Spectrum
Growth and the new Spectrum International trailed their benchmarks.
MARKET ENVIRONMENT
================================================================================
Market sentiment was dampened in the first quarter by signs of extremely
strong economic growth, rising interest rates, and anticipation of a tightening
by the Federal Reserve. Indeed, in late March the Fed raised the federal funds
rate for the first time in two years. In March and April, the market suffered
its worst correction in six years, with the S&P 500 declining nearly 10%. As the
second quarter progressed, however, investor confidence recovered and soared.
The economy appeared to be slowing, no signs of rising inflation emerged, and
there was an increasing conviction that the Fed would not tighten again soon.
Nevertheless, performance among the various stock market sectors was uneven,
with some sharp though brief declines. For the six-month period, large-cap
stocks maintained their lead over mid- and small-cap stocks despite a surge by
the latter in the second half.
[A 3-line chart showing interest rates on the 30-year Treasury bond, 5-year
Treasury note, and 90-day Treasury bill from 6/30/96 through 6/30/97]
On the whole, foreign stock markets performed well, although behind the
U.S. market. Emerging markets led the way, especially Latin America (up over 40%
for the six months); Europe was strong; and Japan rebounded, helped by a
strengthening of the yen versus the dollar. For the first half, however, the
dollar's generally strong showing dampened returns on foreign stocks and bonds
for U.S. investors.
The U.S. bond market faltered early in the period after the Fed tightened
monetary policy, but staged a comeback as the economy slowed and inflation
remained moderate. The Lehman Aggregate Bond Index of investment-grade bonds
produced a decent half-year return of 3.09%. High-yield bonds, which are usually
more sensitive to the direction of the economy and the stock market than to
interest rates, again outperformed their investment-grade counterparts. The
First Boston High Yield Index returned 5.85% for the half. Corporate and
mortgage-backed bonds outperformed Treasuries.
The best performance for foreign bonds again came from emerging countries,
with the J.P. Morgan Emerging Markets Debt Index posting a robust half-year gain
of 11.54%. The bonds of established foreign countries, unable to overcome
earlier strength in the dollar, ended in negative territory. The J.P. Morgan
Non-U.S. Dollar Government Bond Index returned -3.41% for the six months.
<PAGE>
SPECTRUM GROWTH FUND
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Performance Comparison
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Periods Ended 6/30/97 6 Months 12 Months
- --------------------------------------------------------------------------------
Spectrum Growth Fund 11.10% 21.98%
Lipper Growth & Income
Fund Index 15.93 29.00
================================================================================
The fund provided strong absolute returns for both the 6- and 12-month
periods ended June 30. However, performance relative to our peer group was
disappointing in both periods due to our greater exposure to foreign stocks and
small companies. While foreign stocks produced solid gains, they lagged the
surging U.S. market. Small-cap stocks generated good returns, but our exposure
to the market via the New Horizons Fund did not fare as well.
Over the last six months, the fund benefited from the leadership of
large-cap stocks through its positions in the Equity Income, Growth & Income,
Growth Stock, and New Era Funds, which posted returns ranging between 10% and
15%. Since foreign stocks were not quite as strong as U.S. stocks, relative
performance was hampered somewhat by our 30% exposure abroad, including a
maximum 20% allocation to the International Stock Fund. However, the principal
reason for relative underperformance was our 16% position in small-cap growth
stocks, as they were hit especially hard earlier in the year and corrected more
severely than small-cap value stocks.
[A pie chart showing Spectrum Growth's Security Diversification as of
6/30/97Domestic stocks 62%, International stocks 30%, Bonds 1%, Money markets
8%.]
As usual, we made only minor adjustments in allocations to the underlying
funds. As the economy showed signs of slowing, we trimmed exposure to small-cap
stocks and redirected the proceeds to larger companies by increasing our
investment in the Equity Income Fund from 14.0% to 14.5%. (Allocations to the
underlying funds are shown in the table following this letter.) We continued to
maintain a substantial commitment to foreign stocks because, in our opinion,
they represent better value right now than their domestic counterparts and are
also a potential offset to volatility in the domestic stock market.
SPECTRUM INCOME FUND
================================================================================
<PAGE>
================================================================================
Performance Comparison
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Periods Ended 6/30/97 6 Months 12 Months
- --------------------------------------------------------------------------------
Spectrum Income Fund 5.03% 11.91%
Lipper General Bond
Funds Average 4.08 10.77
================================================================================
Your fund was again helped by its exposure to high-yield bonds and to large
U.S. stocks through our investment in the Equity Income Fund. As a result,
Spectrum Income posted solid returns for the 6- and 12-month periods ended June
30, outperforming its peer group in both periods, as shown above.
Over the last six months, we slightly increased our exposure to high-yield
bonds to 18% of net assets (as shown in the pie chart), primarily through our
position in the High Yield Fund. This proved beneficial as this fund was the
best performer for the six months-up 6.64%-among Spectrum's underlying bond
funds. We maintained a maximum exposure to the GNMA Fund, since mortgage-backed
securities have been doing well while mortgage prepayments remained relatively
low. And, of course, our exposure to the domestic stocks provided the biggest
boost as the Equity Income Fund gained 14.7%.
While we are pleased with the performance of U.S. stocks, we remind
investors that Spectrum Income does not attempt to aggressively time markets or
chase hot-performing sectors. Our goal is to provide a broadly diversified
portfolio in the belief that it will provide superior returns over the long haul
with reduced risk. The primary purpose of our position in the Equity Income Fund
is to provide diversification in an otherwise fixed income portfolio; it is not
a bet on the stock market. We adjust the portfolio mix gradually and in small
increments, keeping an eye on longer-term trends rather than on short-term
developments. For instance, our exposure to stocks has remained steady over the
past year at around 14% of net assets.
[A pie chart showing Security Diversification by security as of 6/30/97.
High-Grade Bonds 50%, High-Yield Bonds18%, International Bonds 7%, Stocks 14%,
Money Markets 11%.]
We adjusted the portfolio mix minimally over the last six months. Earlier
in the year, we moved about 1.5% of assets out of the Short-Term Bond Fund
because of the increased risk of rising short-term interest rates. This proved
timely, as these rates rose in anticipation of a Fed tightening, which arrived
in March. We redeployed the assets into high-yield and foreign bonds. While our
high-yield holdings helped fund performance, our position in international bonds
hampered results as the dollar gained against most foreign currencies, leading
to negative returns on these securities.
<PAGE>
SPECTRUM INTERNATIONAL FUND
================================================================================
We would like to welcome all shareholders to this new member of the
Spectrum family. The fund was launched at the beginning of 1997 and got off to a
great start, posting a double-digit return for its first six months. However,
the fund underperformed its peer group due mainly to the poor showing of its
Asian holdings outside of Japan and to weakness in high-quality foreign bonds.
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Period Ended 6/30/97 6 Months
- --------------------------------------------------------------------------------
Spectrum International Fund 11.20%
Lipper International Funds Average 12.53
================================================================================
The fund's asset allocation did not change during its first six months of
operation; overall, we had about 90% in foreign stock funds and the balance in
foreign bond funds. Performance was enhanced by our 11% exposure to the strongly
performing Latin American markets, particularly Brazil (5% of the fund's net
assets). Our major focus was Europe, with a 52% commitment of net assets. This
was the best-performing region after Latin America. Our European position
reflects our investments in the International and European Stock Funds. The fund
benefited from our exposure to Japanese stocks (20% of net assets), as that
market rebounded from its recent woes, partly on the strength of the yen versus
the dollar. Our holdings in less-developed markets, achieved primarily through
investments in the Latin America, Emerging Markets Stock, and European Stock
Funds, were also positive contributors as stocks in
many of these markets performed well.
A pie chart showing Geographical Diversification as of 6/30/97 (Japan 20%,
Far East 10%, Latin America 11%, Europe 52%, Other and reserves 7%.)
Relative performance would have been enhanced by a larger exposure to Latin
America. The markets of Southeast Asia continued to disappoint, as illustrated
by the New Asia Fund's slightly negative return. Our modest commitment to bonds
was something of a wash, since high-quality bonds, represented by the
International Bond Fund, were weak, while lower-quality (emerging markets) were
strong.
As with the other Spectrum Funds, the purpose of Spectrum International is
not to chase current stock performance around the world but to invest across a
wide range of international securities, including bonds, in the belief that
broad diversification will provide superior returns with less risk over the long
term. Consequently, the fund will always remain well diversified, with gradual
allocation adjustments that reflect our assessment of longer-term trends rather
than short-term market developments.
<PAGE>
OUTLOOK
================================================================================
Because it is hard to point to anything in the near term that might
undermine the almost-perfect investing environment in the U.S., we believe
stocks will make further progress. History suggests, however, that these
consistently high returns are unlikely to be sustained. Bonds should also
provide solid returns as long as inflation does not pick up, thereby causing the
Fed to clamp down. Overseas, we expect attractive overall stock returns but
perhaps not as strong as in the first half. Foreign bond returns should be
positive, but will reflect the dollar's volatility and whether rates decline
further in Europe.
With their broad diversification across many types of markets around the
world, the Spectrum Funds are well positioned to achieve long-term growth
without the volatility that can accompany funds with narrower investment
programs.
Again, we welcome all shareholders in the new Spectrum International Fund.
We will work hard on behalf of all Spectrum investors to achieve the funds'
objectives.
Respectfully submitted,
/s/
Peter Van Dyke
President and Chairman of the Investment Advisory Committee
July 22, 1997
================================================================================
Changes In The Spectrum Funds
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On July 21, 1997, the Spectrum Funds' Board of Directors voted to implement
some changes to the three Spectrum Funds as of August 18, 1997.
Last April, the shareholders of each fund voted to allow the Board to
change certain policies of the Spectrum Growth and Spectrum Income Funds from
"fundamental" (requiring a shareholder vote to change) to "operating" (requiring
Board approval but no shareholder vote). The vote totals are listed on the
inside back cover of this report. Specifically, these changes related to: 1) the
selection of T. Rowe Price funds in which Spectrum Growth and Spectrum Income
can invest, a nd 2) the minimum and maximum percentages of each Spectrum Fund's
assets that can be invested in each underlying fund.
<PAGE>
The changes give each fund the same degree of flexibility and discretion in
selecting the types and amounts of underlying investments enjoyed by other T.
Rowe Price funds, consistent with their particular goals and programs. Last
year, Congress amended legislation and the Securities and Exchange Commission
liberalized its position regarding funds like Spectrum, so we acted to take
advantage of this additional investment flexibility. Shareholders will be
informed of any changes in the annual prospectus mailing and the shareholder
reports.
Effective August 18, the Spectrum Growth, Income, and International Funds
will replace the Prime Reserve Fund with the Summit Cash Reserves Fund as their
primary money market vehicle. Summit Cash Reserves is managed in the same manner
as Prime Reserve, but its high minimum balance requirement and resulting lower
expense ratio enables it to have a higher yield.
The Spectrum Board also approved further changes. Specifically, Spectrum
Growth Fund will add two T. Rowe Price funds to its roster of underlying funds,
neither of which existed when Spectrum was originally launched:
* Blue Chip Growth, which seeks long-term capital appreciation through
investments in the common stocks of large and medium-sized blue chip
companies with potential for above-average earnings growth; and
* Mid-Cap Value, which seeks long-term appreciation through investments in
mid-size companies whose stocks appear undervalued.
The first will give Spectrum Growth additional exposure to large-cap growth
companies, while the second will give the fund a way to participate directly in
the fast-growing mid-cap market sector. These moves will enhance the
diversification of Spectrum Growth Fund. The Board also amended the allowable
investment limits in most of the underlying funds, as shown in the table on the
next page.
The Board elected to add two funds to Spectrum Income's investment mix:
* U.S. Treasury Long-Term Fund, which seeks a high level of income from
investments in U.S. government-backed securities, primarily long-term U.S.
Treasuries; and
* Emerging Markets Bond Fund, which seeks high current income and
appreciation by investing primarily in high-yielding, high-risk government
and corporate debt securities of less-developed countries.
The long-term Treasury fund gives Spectrum Income greater sensitivity to
U.S. interest rate movements, while emerging market bonds provide a means of
participating in an expanding sector of the global bond market. While these
funds have a high risk/reward profile, they should enhance the fund's
diversification benefits.
The minimum and maximum amounts of Spectrum Income's assets that can be
invested in the new funds are shown in the table, together with the investment
ranges of the current underlying funds, which will not change.
<PAGE>
Minimum-Maximum Allocations
New (effective
Underlying Fund Current 8/18/97)
- --------------- ------- --------------
SPECTRUM GROWTH FUND
Prime Reserve * ........................... 0 - 25% no change
New Era ................................... 10 - 25 0 - 15%
Equity Income ............................. 5 - 20 7.5 - 22.5
Growth & Income ........................... 5 - 20 7.5 - 22.5
Growth Stock .............................. 15 - 30 5 - 20
New Horizons .............................. 10 - 25 no change
International Stock ....................... 5 - 20 10 - 25
Blue Chip Growth .......................... -- 5 - 20
Mid-Cap Value ............................. -- 0 - 15
SPECTRUM INCOME FUND
Prime Reserve * ........................... 5 - 30% 0 - 25%
Short-Term Bond ........................... 0 - 15 no change
GNMA ...................................... 5 - 20 no change
New Income ................................ 15 - 30 no change
High Yield ................................ 10 - 25 no change
International Bond ........................ 5 - 20 no change
Equity Income ............................. 10 - 25 no change
U.S. Treasury Long-Term ................... -- 0 - 15
Emerging Markets Bond ..................... -- 0 - 10
* After 8/18/97, applies to Summit Cash Reserves.
================================================================================
The Board's changes will result in slight alterations to each fund's
expense ratio range. The new ranges are as follows: Spectrum Income 0.70% to
0.86%; Spectrum Growth 0.73% to 0.97%; and Spectrum International 0.76% to
1.30%.
Note: This updates information in the "Fund, Market, and Risk
Characteristics" section of your Spectrum Funds prospectus dated May 1, 1997;
you should file it with your fund records.
<PAGE>
T. Rowe Price Spectrum Funds
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
Key statistics
12/31/96 6/30/97
Spectrum Income Fund
Price Per Share $ .................................... 11.20 $ 11.40
Dividends Per Share
For 6 months ..................................... 0.36 0.35
For 12 months .................................... 0.71 0.71
Dividend Yield *
For 6 months ..................................... 6.47% 6.46%
For 12 months .................................... 6.59 6.57
Weighted Average Maturity (years) ** ................. 8.0 8.1
Weighted Average Effective Duration (years) ** ....... 4.2 4.0
Weighted Average Quality *** ......................... AA- AA-
* Dividends earned and reinvested for the periods indicated are annualized
and divided by the average daily net asset values per share for the same
period.
** Excludes Equity Income Fund.
*** Based on T. Rowe Price research; excludes Equity Income Fund.
================================================================================
<PAGE>
T. Rowe Price Spectrum Funds
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
Percent of
(Of the combined underlying funds at 6/30/97) Net Assets
6/30/97
Spectrum Growth Fund
- --------------------------------------------------------------------------------
Royal Dutch Petroleum ....................................... 1.2%
GE .......................................................... 0.7
Corning ..................................................... 0.7
Atlantic Richfield .......................................... 0.6
Texaco ...................................................... 0.5
Cooper Cameron .............................................. 0.5
Mobil ....................................................... 0.5
Novartis .................................................... 0.5
Newmont Mining .............................................. 0.4
Pfizer ...................................................... 0.4
- --------------------------------------------------------------------------------
Total ....................................................... 6.0%
Spectrum International Fund
- --------------------------------------------------------------------------------
Telecomunicacoes Brasileiras ................................ 4.8%
Sankyo ...................................................... 1.8
Royal Dutch Petroleum ....................................... 1.7
Novartis .................................................... 1.4
SmithKline Beecham .......................................... 1.4
Wolters Kluwer .............................................. 1.3
NEC ......................................................... 1.2
National Westminster Bank ................................... 1.2
Kyocera 1.1
Sony ........................................................ 1.1
- --------------------------------------------------------------------------------
Total ....................................................... 17.0%
================================================================================
<PAGE>
T. Rowe Price Spectrum Funds
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
TARGET ALLOCATIONS for Underlying funds
Minimum- Target at
Maximum 6/30/97
Spectrum Growth Fund
- --------------------------------------------------------------------------------
Prime Reserve .................................. 0-25% 0.0%
Equity Income .................................. 5-20 14.5
Growth & Income 5-20 ........................... 14.5
Growth Stock ................................... 15-30 23.0
New Era 10-25 .................................. 12.0
International Stock 5-20 ....................... 20.0
New Horizons ................................... 10-25 16.0
Spectrum Income Fund
- --------------------------------------------------------------------------------
Prime Reserve .................................. 5-30 5.0
Short-Term Bond 0-15 ........................... 2.0
GNMA ........................................... 5-20 20.0
New Income ..................................... 15-30 30.0
High Yield ..................................... 10-25 20.0
International Bond ............................. 5-20 8.0
Equity Income .................................. 10-25 15.0
Spectrum International Fund
- --------------------------------------------------------------------------------
International Stock 35-65 ...................... 50.0
European Stock ................................. 0-30 20.0
Japan .......................................... 0-30 8.0
New Asia ....................................... 0-20 6.0
Latin America .................................. 0-15 3.0
Emerging Markets Stock ......................... 0-20 3.0
International Bond ............................. 0-20 5.0
Emerging Markets Bond .......................... 0-15 5.0
===============================================================================
<PAGE>
T. Rowe Price Spectrum Funds
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
These charts show the value of a hypothetical $10,000 investment in each
fund over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
[Spectrum Growth Fund SEC chart shown here]
[SPectrum Income Fund SEC chart shown here]
[Spectrum International Fund SEC chart shown here]
================================================================================
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
This table shows how each fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
================================================================================
Since Inception
Periods Ended 6/30/97 1 Year 5 Years Inception Date
- --------------------------------------------------------------------------------
Spectrum Growth Fund 21.98% 18.45% 15.08% 6/29/90
Spectrum Income Fund 11.91 9.03 10.17 6/29/90
Spectrum International Fund - - 11.20* 12/31/96
* Unannualized return.
Investment return represent past performance and will vary. Shares of the
funds may be worth more or less at redemption than at original purchase.
================================================================================
<PAGE>
<TABLE>
T. Rowe Price Spectrum Growth Fund
===================================================================================================================================
Unaudited For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
6 Months Year
Ended Ended
6/30/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
NET ASSET VALUE
Beginning of period ............... $ 15.13 $ 13.49 $ 11.13 $ 11.87 $ 10.54 $ 10.53
Investment activities
Investment income ............. 0.05 0.20 0.21 0.17 0.16 0.20
Net realized and
unrealized gain (loss) ........ 1.63 2.57 3.12 (0.01) 2.05 0.56
Total from
investment activities ......... 1.68 2.77 3.33 0.16 2.21 0.76
Distributions
Investment income ............. -- (0.20) (0.21) (0.17) (0.16) (0.20)
Net realized gain ............. -- (0.93) (0.76) (0.73) (0.72) (0.55)
Total distributions ........... -- (1.13) (0.97) (0.90) (0.88) (0.75)
NET ASSET VALUE
End of period ..................... $ 16.81 $ 15.13 $ 13.49 $ 11.13 $ 11.87 $ 10.54
Ratios/Supplemental Data
Total return ...................... 11.10% 20.53% 29.96% 1.40% 20.98% 7.24%
Ratio of expenses to
average net assets ................ 0.00%* 0.00% 0.00% 0.00% 0.00% 0.00%
Ratio of net investment
income to average
net assets ........................ 0.70%+ 1.58% 1.81% 1.60% 1.57% 2.15%
Portfolio turnover rate ........... 2.8%+ 2.9% 7.4% 20.7% 7.0% 7.9%
Net assets, end of period
(in millions) ..................... $ 2,433 $ 2,104 $ 1,358 $ 879 $ 585 $ 355
====================================================================================================================================
<FN>
+ Annualized.
* See Note 3. The annualized weighted average expense ratio of the underlying funds was 0.81% for the six months ended June 30,
1997.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
T. Rowe Price Spectrum Income Fund
====================================================================================================================================
Unaudited For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
6 Months Year
Ended Ended
6/30/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
NET ASSET VALUE
Beginning of period ............... $ 11.20 $ 11.24 $ 10.11 $ 11.11 $ 10.70 $ 10.73
Investment activities
Investment income ............. 0.35 0.71 0.72 0.69 0.69 0.76
Net realized and
unrealized gain (loss) ........ 0.20 0.11 1.16 (0.90) 0.60 0.05
Total from
investment activities ......... 0.55 0.82 1.88 (0.21) 1.29 0.81
Distributions
Investment income ............. (0.35) (0.71) (0.72) (0.69) (0.69) (0.76)
Net realized gain ............. -- (0.15) (0.03) (0.10) (0.19) (0.08)
Total distributions ........... (0.35) (0.86) (0.75) (0.79) (0.88) (0.84)
NET ASSET VALUE
End of period ..................... $ 11.40 $ 11.20 $ 11.24 $ 10.11 $ 11.11 $ 10.70
Ratios/Supplemental Data
Total return ...................... 5.03% 7.64% 19.41% (1.94)% 12.36% 7.84%
Ratio of expenses to
average net assets ................ 0.00%* 0.00% 0.00% 0.00% 0.00% 0.00%
Ratio of net investment
income to average
net assets ........................ 6.36%+ 6.46% 6.43% 6.48% 6.19% 7.10%
Portfolio turnover rate ........... 6.0%+ 17.6% 20.2% 23.1% 14.4% 14.2%
Net assets, end of period
(in millions) ..................... $ 1,616 $ 1,356 $ 987 $ 625 $ 588 $ 376
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
+ Annualized.
* See Note 3. The annualized weighted average expense ratio of the underlying funds was 0.78% for the six months ended June 30,
1997.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Spectrum International Fund
================================================================================
Unaudited For a share outstanding throughout the period
================================================================================
Financial Highlights
- --------------------------------------------------------------------------------
12/31/96
Through
6/30/97
NET ASSET VALUE
Beginning of period .................................... $ 10.00
Investment activities
Investment income .................................. 0.02
Net realized and
unrealized gain (loss) ............................. 1.10~
Total from
investment activities .............................. 1.12
NET ASSET VALUE
End of period .......................................... $ 11.12
Ratios/Supplemental Data
Total return ........................................... 11.20%
Ratio of expenses to
average net assets ..................................... 0.00%*
Ratio of net investment
income to average
net assets ............................................. 0.66%+
Portfolio turnover rate ................................ 1.3%+
Net assets, end of period
(in thousands) ......................................... $ 49,155
- --------------------------------------------------------------------------------
+ Annualized.
* See Note 3. The annualized weighted average expense ratio of the underlying
funds was 1.01% for the six months ended June 30, 1997.
~ The amount presented is calculated pursuant to a methodology prescribed by
the Securities and Exchange Commission for a share outstanding throughout
the period. This amount is inconsistent with the Fund's aggregate gains and
losses because of the timing of sales and redemptions of Fund shares in
relation to fluctuating market values for the investment portfolio.
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Spectrum Growth Fund
================================================================================
Unaudited June 30, 1997
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
Percent of
Net Assets Shares Value
- --------------------------------------------------------------------------------
In thousands
T. Rowe Price Growth Stock Fund ............. 23.3% 18,820,156 $565,734
T. Rowe Price International Stock Fund ...... 19.9 31,363,689 484,255
T. Rowe Price New Horizons Fund ............. 16.1 17,786,377 391,656
T. Rowe Price Growth & Income Fund .......... 14.4 13,875,129 350,486
T. Rowe Price Equity Income Fund ............ 14.3 13,879,694 348,519
T. Rowe Price New Era Fund .................. 11.8 10,049,363 288,115
T. Rowe Price Prime Reserve Fund ............ 0.2 5,002,908 5,003
Total Investments
100.0% of Net Assets (Cost $1,817,557) ...... $ 2,433,768
Other Assets Less Liabilities ............... (1,087)
NET ASSETS .................................. $ 2,432,681
Net Assets Consist of:
Accumulated net investment income -
net of distributions ........................ $ 7,716
Accumulated net realized gain/loss -
net of distributions ........................ 6,384
Net unrealized gain (loss) .................. 616,211
Paid-in-capital applicable to 144,708,860
shares of $0.01 par value capital stock
outstanding; 1,000,000,000 shares of the
corporation authorized ...................... 1,802,370
NET ASSETS $ 2,432,681
NET ASSET VALUE PER SHARE $ 16.81
================================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Spectrum Income Fund
================================================================================
Unaudited June 30, 1997
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
Percent of
Net Assets Shares Value
- --------------------------------------------------------------------------------
In thousands
T. Rowe Price New Income Fund ............... 29.8% 54,454,669 $480,835
T. Rowe Price High Yield Fund ............... 20.0 37,956,515 323,010
T. Rowe Price GNMA Fund ..................... 19.8 34,217,505 320,618
T. Rowe Price Equity Income Fund ............ 15.3 9,800,862 246,100
T. Rowe Price International Bond Fund ....... 7.9 12,913,779 127,975
T. Rowe Price Prime Reserve Fund ............ 5.3 86,125,619 86,126
T. Rowe Price Short-Term Bond Fund .......... 2.0 6,976,382 32,510
Total Investments
100.1% of Net Assets (Cost $1,546,976) ...... $ 1,617,174
Other Assets Less Liabilities ............... (1,297)
NET ASSETS .................................. $ 1,615,877
Net Assets Consist of:
Accumulated net investment income -
net of distributions ........................ $ (266)
Accumulated net realized gain/loss -
net of distributions ........................ 3,847
Net unrealized gain (loss) .................. 70,198
Paid-in-capital applicable to 141,742,691
shares of $0.01 par value capital stock
outstanding; 1,000,000,000 shares of the
corporation authorized ..................... 1,542,098
NET ASSETS .................................. $ 1,615,877
NET ASSET VALUE PER SHARE ................... $ 11.40
================================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Spectrum International Fund
================================================================================
Unaudited June 30, 1997
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
Percent of
Net Assets Shares Value
- --------------------------------------------------------------------------------
In thousands
T. Rowe Price International Stock Fund ........ 50.4% 1,605,357 $24,787
T. Rowe Price European Stock Fund ............. 19.9 500,301 9,796
T. Rowe Price Japan Fund ...................... 8.5 425,394 4,169
T. Rowe Price New Asia Fund ................... 5.5 292,419 2,702
T. Rowe Price Emerging Markets Bond Fund ...... 4.9 169,783 2,413
T. Rowe Price International Bond Fund ......... 4.7 231,889 2,298
T. Rowe Price Latin America Fund .............. 3.3 137,431 1,597
T. Rowe Price Emerging Markets Stock Fund ..... 2.9 104,942 1,433
Total Investments
100.1% of Net Assets (Cost $45,167) ........... $ 49,195
Other Assets Less Liabilities ................. (40)
NET ASSETS .................................... $ 49,155
Net Assets Consist of:
Accumulated net investment income -
net of distributions .......................... $ 82
Accumulated net realized gain/loss -
net of distributions .......................... 1
Net unrealized gain (loss) .................... 4,028
Paid-in-capital applicable to 4,419,630
shares of $0.01 par value capital stock
outstanding;1,000,000,000 shares of the
corporation authorized ........................ 45,044
NET ASSETS .................................... $ 49,155
NET ASSET VALUE PER SHARE ..................... $ 11.12
================================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Spectrum Funds
================================================================================
Unaudited
================================================================================
Statement of Operations
- --------------------------------------------------------------------------------
In thousands Inter-
Growth Income national
Fund Fund Fund
- --------------------------------------------------------------------------------
6 Months 6 Months 12/31/96
Ended Ended Through
6/30/97 6/30/97 6/30/97
Investment Income
Income distributions from underlying funds .... $ 7,716 $46,346 $ 82
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Sale of underlying funds .................. 960 158 1
Capital gain distributions
from underlying funds ..................... 5,424 3,689 --
Net realized gain (loss) .................. 6,384 3,847 1
Change in net unrealized gain or loss ......... 226,774 23,720 4,028
Net realized and unrealized gain (loss) ....... 233,158 27,567 4,029
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS ........................ $240,874 $73,913 $4,111
================================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Spectrum Growth Fund
================================================================================
Unaudited
================================================================================
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
6/30/97 12/31/96
Increase (Decrease) in Net Assets
Operations
Investment income ............................ $ 7,716 $ 25,566
Net realized gain (loss) ..................... 6,384 117,652
Change in net unrealized
gain or loss ................................. 226,774 185,985
Increase (decrease) in net
assets from operations ....................... 240,874 329,203
Distributions to shareholders
Investment income ............................ -- (25,866)
Net realized gain ............................ -- (120,141)
Decrease in net assets from
distributions ................................ -- (146,007)
Capital share transactions *
Shares sold .................................. 330,586 698,161
Distributions reinvested ..................... -- 144,024
Shares redeemed .............................. (242,873) (279,631)
Increase (decrease) in net
assets from capital
share transactions ........................... 87,713 562,554
Net Assets
Increase (decrease) during period ................ 328,587 745,750
Beginning of period .............................. 2,104,094 1,358,344
End of period .................................... $ 2,432,681 $ 2,104,094
*Share information
Shares sold .................................. 21,443 47,726
Distributions reinvested ..................... -- 9,513
Shares redeemed .............................. (15,761) (18,899)
Increase (decrease) in shares outstanding .... 5,682 38,340
================================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Spectrum Income Fund
================================================================================
Unaudited
================================================================================
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
6/30/97 12/31/96
Increase (Decrease) in Net Assets
Operations
Investment income ............................ $ 46,346 $ 78,017
Net realized gain (loss) ..................... 3,847 16,311
Change in net unrealized
gain or loss ................................. 23,720 (1,749)
Increase (decrease) in net
assets from operations ....................... 73,913 92,579
Distributions to shareholders
Investment income ............................ (46,346) (78,017)
Net realized gain ............................ -- (17,756)
Decrease in net assets from
distributions ................................ (46,346) (95,773)
Capital share transactions *
Shares sold .................................. 379,228 651,254
Distributions reinvested ..................... 42,388 88,084
Shares redeemed .............................. (189,276) (366,875)
Increase (decrease) in net
assets from capital
share transactions ........................... 232,340 372,463
Net Assets
Increase (decrease) during period ................ 259,907 369,269
Beginning of period .............................. 1,355,970 986,701
End of period .................................... $ 1,615,877 $ 1,355,970
*Share information
Shares sold .................................. 33,820 58,403
Distributions reinvested ..................... 3,780 7,910
Shares redeemed .............................. (16,904) (33,027)
Increase (decrease) in shares outstanding .... 20,696 33,286
================================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Spectrum International Fund
================================================================================
Unaudited
================================================================================
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
12/31/96
Through
6/30/97
Increase (Decrease) in Net Assets
Operations
Investment income ......................................... $ 82
Net realized gain (loss) .................................. 1
Change in net unrealized gain or loss ..................... 4,028
Increase (decrease) in net
assets from operations .................................... 4,111
Capital share transactions *
Shares sold ............................................... 48,859
Shares redeemed ........................................... (3,815)
Increase (decrease) in net
assets from capital
share transactions ........................................ 45,044
Net Assets
Increase (decrease) during period ............................. 49,155
Beginning of period ........................................... --
End of period ................................................. $ 49,155
*Share information
Shares sold ............................................... 4,792
Shares redeemed ........................................... (372)
Increase (decrease) in shares outstanding ................. 4,420
================================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Spectrum Funds
================================================================================
Unaudited June 30, 1997
================================================================================
Notes to Financial Statements
- --------------------------------------------------------------------------------
T. Rowe Price Spectrum Fund, Inc. (the corporation) is registered under the
Investment Company Act of 1940 (the Act) as a nondiversified, open-end
management investment company. Spectrum Growth Fund, Spectrum Income Fund, and
Spectrum International Fund (collectively, the Spectrum Funds), are the three
portfolios established by the corporation. Operations commenced on June 29, 1990
for Spectrum Growth and Spectrum Income Funds, and on December 31, 1996 for
Spectrum International Fund.
Each Spectrum Fund diversifies its assets within set limits among specific
underlying T. Rowe Price funds (underlying funds). Spectrum Growth Fund
principally seeks long-term capital appreciation and growth of income by
allocating its assets to underlying funds that invest primarily in stocks.
Spectrum Income Fund strives to provide a high level of current income with
moderate share price fluctuation, by investing in underlying funds that invest
primarily in fixed income securities. The objective of Spectrum International
Fund is to provide long-term capital appreciation through allocations to
underlying funds that invest primarily in international stocks and, to a lesser
degree, international bonds.
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
================================================================================
BASIS OF PREPARATION The financial statements are prepared in accordance
with generally accepted accounting principles for the investment company
industry, which may require the use of estimates by fund management.
VALUATION Investments in the underlying funds are valued at the closing net
asset value per share of each underlying fund on the day of valuation.
Assets for which the above valuation procedures are inappropriate or are
deemed not to reflect fair value are stated at fair value as determined in good
faith by or under the supervision of the officers of the fund, as authorized by
the Board of Directors.
DISTRIBUTIONS Income and capital gain distributions from the underlying
funds and distributions to the Spectrum Funds' shareholders are recorded on the
ex-dividend date.
Income and capital gain distributions to the Spectrum Funds' shareholders
are determined in accordance with federal income tax regulations, which may
differ from generally accepted accounting principles.
<PAGE>
FEDERAL INCOME TAXES No provision for federal income taxes is required
since each fund intends to continue to qualify as a regulated investment company
and distribute all of its taxable income.
OTHER Income is recorded on the accrual basis. Purchases and sales of the
underlying funds are accounted for on the trade date. Realized gains and losses
are reported on the identified cost basis.
NOTE 2 - INVESTMENTS IN UNDERLYING FUNDS
================================================================================
Purchases and sales of the underlying funds for the six months ended June
30, 1997, were as follows:
================================================================================
Growth Income International
Fund Fund Fund
- --------------------------------------------------------------------------------
Purchases $129,902,000 $279,554,000 $45,235,000
Sales 31,311,000 44,341,000 169,000
================================================================================
At June 30, 1997, the net unrealized gain (loss) on investments in the
underlying funds for both federal income tax and financial reporting purposes
was as follows:
================================================================================
Growth Income International
Fund Fund Fund
- --------------------------------------------------------------------------------
Appreciated investments $616,211,000 $78,008,000 $4,031,000
Depreciated investments - (7,810,000) (3,000)
Net unrealized gain (loss) $616,211,000 $70,198,000 $4,028,000
================================================================================
NOTE 3 - RELATED PARTIES
================================================================================
T. Rowe Price Associates, Inc. (T. Rowe Price) is the investment manager
for Spectrum Growth and Spectrum Income Funds, and also serves as manager for
the domestic underlying funds. Rowe Price-Fleming International, Inc.
(Price-Fleming) is the investment manager for Spectrum International Fund, and
also serves as manager for the international underlying funds. T. Rowe Price and
its wholly-owned subsidiaries provide transfer and dividend disbursing agent,
accounting, shareholder, administrative, marketing, and certain other services
to the Spectrum Funds. Certain officers and directors of the Spectrum Funds are
also officers and directors of T. Rowe Price, Price-Fleming, and the underlying
funds.
<PAGE>
The Spectrum Funds pay no management fees; however, T. Rowe Price and
Price-Fleming receive management fees from managing the underlying funds. In
addition, expenses associated with the operation of the Spectrum Funds are borne
by each underlying fund in proportion to the average daily value of its shares
owned by the Spectrum Funds, pursuant to special servicing agreements between
and among the corporation, the underlying funds, T. Rowe Price, and, in the case
of Spectrum International, Rowe-Price Fleming. Therefore, the Spectrum Funds
each operate at a zero expense ratio, although the valuations of the underlying
funds reflect management fees and other expenses incurred by the underlying
funds.
The Spectrum Funds do not invest in the underlying funds for the purpose of
exercising management or control; however, investments by Spectrum within the
set limits may represent a significant portion of an underlying fund's net
assets. At June 30, 1997, Spectrum Growth and Spectrum International Funds each
held less than 25% of the outstanding shares of any underlying fund and Spectrum
Income Fund held approximately 33% of the outstanding shares of the T. Rowe
Price GNMA Fund and 28% of the T. Rowe Price New Income Fund.
T.Rowe Price Shareholder Services
================================================================================
Investment Services And Information
- --------------------------------------------------------------------------------
KNOWLEDGEABLE SERVICE REPRESENTATIVES
BY PHONE 1-800-225-5132 Available Monday through Friday from 8 a.m. to 10
p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
IN PERSON Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
CHECKING Available on most fixed income funds ($500 minimum).
AUTOMATIC INVESTING From your bank account or paycheck.
AUTOMATIC WITHDRAWAL Scheduled, automatic redemptions.
DISTRIBUTION OPTIONS Reinvest all, some, or none of your distributions.
AUTOMATED 24-HOUR SERVICES Including Tele*Access [Registration Mark] and T.
Rowe Price OnLine.
DISCOUNT BROKERAGE*
INDIVIDUAL INVESTMENTS Stocks, bonds, options, precious metals, and other
securities at a savings over regular commission rates.
<PAGE>
INVESTMENT INFORMATION
COMBINED STATEMENT Overview of your T. Rowe Price accounts.
SHAREHOLDER REPORTS Fund managers' reviews of their strategies and results.
T. ROWE PRICE REPORT 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 financial
markets.
INVESTMENT GUIDES Asset Mix Worksheet, College Planning Kit, Diversifying
Overseas: A Guide to International Investing, Personal Strategy Planner,
Retirees Financial Guide, and Retirement Planning Kit.
* A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
T. Rowe Price Mutual Funds
================================================================================
STOCK FUNDS
- --------------------------------------------------------------------------------
DOMESTIC
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Science & Technology
Small-Cap Stock**
Small-Cap Value*
Spectrum Growth
Value
<PAGE>
INTERNATIONAL/GLOBAL
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
Spectrum International
BOND FUNDS
- --------------------------------------------------------------------------------
DOMESTIC TAXABLE
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
DOMESTIC TAX-FREE
California Tax-Free Bond
Florida Insured Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Insured Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond
Virginia Tax-Free Bond
INTERNATIONAL/GLOBAL
Global Government Bond
Emerging Markets Bond
International Bond
<PAGE>
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
TAXABLE
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
TAX-FREE
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
- --------------------------------------------------------------------------------
Balanced
Personal Strategy Income
Personal Strategy Balanced
Personal Strategy Growth
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD VARIABLE ANNUITY
- --------------------------------------------------------------------------------
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Closed to new investors.
** Formerly the OTC Fund.
Please call for a prospectus. Read it carefully before you invest or send money.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
<PAGE>
T. Rowe Price Spectrum Funds
================================================================================
Special Meeting Results
- --------------------------------------------------------------------------------
The Spectrum Funds held a special meeting on April 16, 1997, to vote on
changes to the corporation's fundamental policies.
The results of the voting were as follows (by number of shares):
* To change each fund's policy on the selection of underlying Price funds in
which the fund can invest from "fundamental" to "operating."
Spectrum Income
In favor: 68,430,211.338
Withheld: 2,619,296.628
Opposed: 9,735,242.200
Spectrum Growth
In Favor: 78,724,962.406
Withheld: 2,780,119.003
Opposed: 3,639,052.951
* To change each fund's policy on the minimum and maximum percentages of
assets that can be invested in each underlying fund from "fundamental" to
"operating."
Spectrum Income
In favor: 68,242,088.820
Withheld: 2,728,566.613
Opposed: 9,814,094.733
Spectrum Growth
In Favor: 78,563,215.562
Withheld: 2,811,936.789
Opposed: 3,768,982.009
================================================================================
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access [Registration Mark]:
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
<PAGE>
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price Spectrum Funds.
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
T. Rowe Price Investment Services, Inc., Distributor. C08-051 6/30/97
