<PAGE>
Registration Nos. 033-10992/811-4998
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Post-Effective Amendment No. 13 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 17 /X/
Fiscal Year Ended December 31, 1997
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T. ROWE PRICE SPECTRUM FUND, INC.
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Exact Name of Registrant as Specified in Charter
100 East Pratt Street, Baltimore, Maryland 21202
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Address of Principal Executive Offices Zip Code
410-345-2000
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Registrant's Telephone Number, Including Area Code
Henry H. Hopkins
100 East Pratt Street, Baltimore, Maryland 21202
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Name and Address of Agent for Service
Approximate Date of Proposed Public Offering May 1, 1998
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It is proposed that this filing will become effective (check appropriate
box):
/ / immediately upon filing pursuant to paragraph (b)
/X/ on May 1, 1998, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
TITLE OF SECURITIES BEING REGISTERED: COMMON STOCK
SUBJECT TO COMPLETION
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted prior to the time
the Registration Statement becomes effective. This Prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such offer,
solicitation, or sale would be unlawful prior to registration or qualification
under the securities laws of any such state.
The Registration Statement of the T. Rowe Price Spectrum Fund, Inc. (the
"REGISTRANT") on Form N-1A (File No. 811-4998) is hereby amended under the
Securities Act of 1933 to update the Registrant's financial statements, make
other changes in the Registrant's Prospectus and Statement of Additional
Information, and to satisfy the annual amendment requirements of Rule 8b-16
under the Investment Company Act of 1940.
This Amendment consists of the following:
Cross Reference Sheet
Part A of Form N-1A, Revised Prospectus
Part B of Form N-1A, Statement of Additional Information
Part C of Form N-1A, Other Information
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
<S> <C> <C>
PART A
Item 1. Cover Page Cover Page
Item 2. Synopsis Transaction and Fund Expenses
Item 3. Condensed Financial Financial Highlights
Information
Item 4. General Description of Transaction and Fund Expenses; Fund,
Registrant Market, and Risk Characteristics: What
to Expect; Understanding Fund
Performance; Organization and
Management; Investment Policies and
Practices; Types of Management
Practices
Item 5. Management of the Fund Transaction and Fund Expenses;
Organization and Management
Item 6. Capital Stock and Other Useful Information on Distributions and
Securities Taxes; Organization and Management
Item 7. Purchase of Securities Being Pricing Shares and Receiving Sale
Offered Proceeds; Transaction Procedures and
Special Requirements; Account
Requirements and Transaction
Information; Shareholder Services
Item 8. Redemption or Repurchase Pricing Shares and Receiving Sale
Proceeds; Transaction Procedures and
Special Requirements; Exchanging and
Redeeming Shares; Shareholder Services
Item 9. Pending Legal Proceedings +
PART B
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and +
History
Item 13. Investment Objectives and Investment Objectives and Policies;
Policies Risk Factors; Investment Program;
Investment Restrictions; Investment
Program
Item 14. Management of the Registrant Management of Funds
Item 15. Control Persons and Principal Holders of Securities
Principal Holders of
Securities
Item 16. Investment Advisory and Investment Management Services;
Other Services Custodian; Independent Accountants;
Legal Counsel
Item 17. Brokerage Allocation Portfolio Transactions; Code of Ethics
Item 18. Capital Stock and Other Dividends and Distributions; Capital
Securities Stock
Item 19. Purchase, Redemption and Pricing of Securities; Net Asset Value
Pricing of Securities Being Per Share; Redemptions in Kind; Federal
Offered Registration of Shares
Item 20. Tax Status Tax Status
Item 21. Underwriters Distributor for the Fund
Item 22. Calculation of Yield +
Quotations of Money Market
Funds
Item 23. Financial Statements Incorporated by Reference from Annual
Report
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement
___________________________________
+ Not applicable or negative answer
<PAGE>
<PAGE>
PROSPECTUS
May 1, 1998
Spectrum Funds
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.
T. Rowe Price
RAM LOGO<PAGE>
FACTS AT A GLANCE
Spectrum Funds
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 for the various
economies and financial markets.
Spectrum Income Fund invests primarily in domestic bond funds and also in two
foreign bond funds, but it 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 funds and,
to a lesser extent, international bond funds.
Risk/Reward
Spectrum Income Fund offers the potential for investors to achieve high current
income with modest share price appreciation through diversification of assets.
Spectrum Growth Fund offers investors the potential to achieve long-term
capital appreciation and growth of income through diversification. Investors in
the Spectrum International Fund have the potential 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 conditions, Spectrum Income Fund is
expected to experience the least volatility and Spectrum International Fund the
most of the three funds. Before investing, you should carefully consider the
risks explained in more detail in Fund, Market, and Risk Characteristics.
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 are
willing to accept the special risks of international investing.
The funds are 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 among T. Rowe Price
funds.
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 $124 billion for over six million individual and
institutional investor accounts as of December 31, 1997.
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. As of December 31, 1997, Price-Fleming managed
$30 billion in foreign stocks and bonds through its offices in Baltimore,
London, Tokyo, Singapore, Hong Kong, and Buenos Aires.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
T. Rowe Price Spectrum Fund,Inc.
Prospectus
May 1, 1998
<TABLE>
CONTENTS
<CAPTION>
<S> <C> <C> <C>
1 ABOUT THE FUNDS
Transaction and Fund Expenses 3
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Financial Highlights 4
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Fund, Market, and Risk Characteristics 6
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2 ABOUT YOUR ACCOUNT
Pricing Shares and Receiving Sale Proceeds 13
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Distributions and Taxes 14
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Transaction Procedures and Special 18
Requirements
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3 MORE ABOUT THE FUNDS
Organization and Management 21
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Understanding Performance Information 25
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Special Risks and Considerations 26
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Description of Underlying Funds 28
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Investment Policies of the Spectrum Funds 29
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Investment Policies and Practices of 32
theUnderlying Funds
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4 INVESTING WITH T. ROWE PRICE
Account Requirements and Transaction 34
Information
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Opening a New Account 34
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Purchasing Additional Shares 36
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Exchanging and Redeeming 37
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Rights Reserved by the Funds 38
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Shareholder Services 39
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Discount Brokerage 42
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Investment Information 43
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</TABLE>
This prospectus contains information you should know before investing. Please
keep it for future reference. A Statement of Additional Information about the
funds, dated May 1, 1998, has been filed with the Securities and Exchange
Commission and is incorporated by reference in this prospectus. To obtain a free
copy, call 1-800-638-5660.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any
depository institution. Shares are not insured by the FDIC, Federal Reserve, or
any other agency, and are subject to investment risks, including possible loss
of the principal amount invested.
<PAGE>
ABOUT THE FUNDS 1
TRANSACTION AND FUND EXPENSES
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o 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. While the Spectrum Funds
themselves impose no fees or charges, they will indirectly bear their
pro-rata share of the expenses of the underlying funds in which they invest.
Since each Spectrum Fund's returns are net of these expenses, the end result
to the shareholder is very much the same as if the fund had an explicit
expense ratio.
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 provides the range of average weighted expense ratios for each
Spectrum Fund. A range is given instead of a single number because the
pro-rata share of expenses fluctuates along with changes in the average
assets invested in each of the underlying funds. For further information on
expense ratios and management fees of the underlying funds, please refer to
the Statement of Additional Information.
<TABLE>
Table 1 Range of Average Weighted Expense Ratios as of
December 31, 1997
<CAPTION>
<S> <C> <C>
Spectrum Income Spectrum Growth Spectrum International
0.66% to 0.84% 0.71% to 0.92% 0.76% to 1.28%
- ----------------------------------------------------------------------------
</TABLE>
. 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:
<TABLE>
Table 2 Hypothetical Fund Expenses
<CAPTION>
Fund 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Spectrum Income $ 8 $24 $42 $ 93
Spectrum Growth 8 26 45 101
Spectrum International 10 32 56 125
</TABLE>
o Table 2 is just an example; actual expenses can be higher or lower than
those shown.
<PAGE>
FINANCIAL HIGHLIGHTS
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Table 3, which provides information about each fund's financial history, is
based on a single share outstanding throughout each fiscal year. Each fund's
section of the table is part of the financial statements, which are included
in its annual report and are incorporated by reference into the Statement of
Additional Information (available upon request). The financial statements in
each fund's annual report were audited by Price Waterhouse LLP, the funds'
independent accountants.
<TABLE>
Table 3 Financial Highlights
<CAPTION>
Income From Investment Activities Less Distributions Net Asset Value
Period Net Asset Net Net Realized Total From Net Net Net Asset
Ended Value, Investment & Unrealized Investment Investment Realized Total Value,
Beginning Income Gain (Loss) on Activities Income Gain Distributions End of Period
of Period Investments
Income Fund
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <S>
1990/a/ $10.00 $0.44 $(0.18) $ 0.26 $(0.44) $(0.05) $(0.49) $ 9.77
- ------------------------------------------------------------------------------------------------------------------
1991 9.77 0.82 1.03 1.85 (0.83) (0.06) (0.89) 10.73
- ------------------------------------------------------------------------------------------------------------------
1992 10.73 0.76 0.05 0.81 (0.76) (0.08) (0.84) 10.70
- ------------------------------------------------------------------------------------------------------------------
1993 10.70 0.69 0.60 1.29 (0.69) (0.19) (0.88) 11.11
- ------------------------------------------------------------------------------------------------------------------
1994 11.11 0.69 (0.90) (0.21) (0.69) (0.10) (0.79) 10.11
- ------------------------------------------------------------------------------------------------------------------
1995 10.11 0.72 1.16 1.88 (0.72) (0.03) (0.75) 11.24
- ------------------------------------------------------------------------------------------------------------------
1996 11.24 0.71 0.11 0.82 (0.71) (0.15) (0.86) 11.20
- ------------------------------------------------------------------------------------------------------------------
1997 11.20 0.71 0.61 1.32 (0.71) (0.15) (0.86) 11.66
Growth Fund
1990/a/ $10.00 $0.20 $(1.21) $(1.01) $(0.19) $(0.28) $(0.47) $ 8.52
- ------------------------------------------------------------------------------------------------------------------
1991 8.52 0.21 2.33 2.54 (0.21) (0.32) (0.53) 10.53
- ------------------------------------------------------------------------------------------------------------------
1992 10.53 0.20 0.56 0.76 (0.20) (0.55) (0.75) 10.54
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1993 10.54 0.16 2.05 2.21 (0.16) (0.72) (0.88) 11.87
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1994 11.87 0.17 (0.01) 0.16 (0.17) (0.73) (0.90) 11.13
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1995 11.13 0.21 3.12 3.33 (0.21) (0.76) (0.97) 13.49
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1996 13.49 0.20 2.57 2.77 (0.20) (0.93) (1.13) 15.13
- -----------------------------------------------------------------------------------------------------------------------
1997 15.13 0.20 2.40 2.60 (0.20) (1.60) (1.80) 15.93
International Fund
1997 $10.00 $0.15 $ 0.09/e/ $ 0.24 $(0.15) $(0.35) $(0.50) $ 9.74
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</TABLE>
Footnotes appear on next page. (continued on next page)
<PAGE>
<TABLE>
Table 3 Financial Highlights (continued)
<CAPTION>
Returns, Ratios, and Supplemental Data
Period Total Return Ratio of Ratio of Net
Ended (Includes Net Assets Expenses to Investment Portfolio
Reinvested ($ Thousands) Average Net Income to Turnover
Distributions) Assets Average Net Rate
Assets
Income Fund
<S> <C> <C> <C> <C> <C> <S>
1990/a/ 2.70% $ 40,082 0.00 %/b/ 9.58%/b/ 36.9%/b/
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1991 19.64 147,859 0.00 8.03 18.8
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1992 7.84 376,435 0.00 7.10 14.2
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1993 12.36 587,931 0.00 6.19 14.4
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1994 (1.94) 624,940 0.00 6.48 23.1
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1995 19.41 986,701 0.00 6.43 20.2
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1996 7.64 1,355,970 0.00// 6.46 17.6
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1997 12.18 2,022,227 0.00///c/ 6.21 14.1
Growth Fund
1990/a/ (10.10)% $ 35,387 0.00 %/b/ 4.50%/b/ 33.4%/b/
- ------------------------------------------------------------------------------
1991 29.87 148,661 0.00 2.77 14.6
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1992 7.24 355,134 0.00 2.15 7.9
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1993 20.98 584,876 0.00 1.57 7.0
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1994 1.40 879,366 0.00 1.60 20.7
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1995 29.96 1,358,344 0.00 1.81 7.4
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1996 20.53 2,104,094 0.00 1.58 2.9
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1997 17.40 2,605,265 0.00/d/ 1.26 20.4
International Fund
1997 2.42% $ 51,050 0.00 %/f/ 2.23% 20.0%
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</TABLE>
/a/For the period June 29, 1990 (commencement of operations) to December 31,
1990.
/b/Annualized.
/c/The annualized weighted average expense ratio of the underlying funds was
0.75% for the year ended December 31, 1997.
/d/The annualized weighted average expense ratio of the underlying funds was
0.81% for the year ended December 31, 1997.
/e/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.
/f/The annualized weighted average expense ratio of the underlying funds was
1.01% for the year ended December 31, 1997.
<PAGE>
FUND, MARKET, AND RISK CHARACTERISTICS: WHAT TO EXPECT
----------------------------------------------------------
To help you decide whether these funds are appropriate for you, this section
takes a closer look at their investment objectives and approaches.
o The fund or funds you select should not represent your complete investment
program nor be used for short-term trading purposes.
What are the Spectrum Funds' objectives?
. The objective of Spectrum Income Fund is a high level of current income 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's objective is long-term capital appreciation.
What are the Spectrum Funds' investment programs?
. Spectrum Income Fund will allocate its assets among a diversified group of
underlying T. Rowe Price funds that invest primarily in fixed income
securities, but may invest up to 25% in an income-oriented stock fund.
. Spectrum Growth Fund will allocate its assets among a diversified group of
eight underlying T. Rowe Price domestic stock funds and one international
stock fund.
. Spectrum International Fund allocates its assets among a group of underlying
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 economies, financial markets, and
relative market valuations of each underlying fund and, in the case of
Spectrum International Fund, additional factors inherent in international
investing.
The underlying funds in which each Spectrum Fund may invest and the
percentage of total assets they may allocate to each fund are shown in Table
4.
o For details about the funds' investment programs and practices, please see
Investment Policies and Practices and the Statement of Additional
Information.
<PAGE>
<TABLE>
Table 4 Asset Allocation Ranges for Underlying Funds
<CAPTION>
<S> <C> <S> <C>
Spectrum Investment Spectrum Investment
Income Fund Range Growth Fund Range
Emerging Markets Bond 0-10% Mid-Cap Value 0-15%
Short-Term Bond 0-15 New Era 0-15
U.S. Treasury Long-Term 0-15 Blue Chip Growth 5-20
GNMA 5-20 Growth Stock 5-20
International Bond 5-20 Summit Cash Reserves 0-25
Summit Cash Reserves 0-25 Equity Income 7.5-22.5
Equity Income 10-25 Growth & Income 7.5-22.5
High Yield 10-25 International Stock 10-25
New Income 15-30 New Horizons 10-25
<CAPTION>
<S> <C>
Spectrum Investment Range
International Fund
Emerging Markets Bond 0-15%
Latin America 0-15
Emerging Markets Stock 0-20
International Bond 0-20
International Discovery 0-20
New Asia 0-20
Summit Cash Reserves 0-25
European Stock 0-30
Japan 0-30
International Stock 35-65
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</TABLE>
What are some of the 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.
o For Spectrum Income, a rise in U.S. interest rates is an important source
of risk even if foreign rates behave differently.
Spectrum Income Fund: The risks are generally the same as with many income
funds:
. Interest rate or market risk The fund's share price will generally move in
the opposite direction of interest rates. For example, as interest rates
rise, share price will likely decline. Rising rates provide the opportunity
for the fund's income to increase, but it is unlikely that the higher income
by itself will entirely offset the fall in price.
The maturity and type of securities in the underlying funds' portfolios
determine just how much the share price rises or falls when rates change.
Generally, when rates fall, long-term securities rise more in price than
short-term securities, and vice versa.
. 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.
. Risks of high-yield investing 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. Spectrum Income can invest as much as 25% of its assets in the High
Yield Fund.
. 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-backed
securities that were originally purchased at a price above par. Also, because
of prepayments, mortgage-backed securities would not be expected to rise as
much in price as Treasury or corporate bonds.
. Risks of foreign investing To the extent its underlying funds invest in
foreign securities, the Spectrum Income Fund will be subject to the unique
risks of international investing. See Spectrum International for an
explanation of these risks.
Also, Spectrum Income Fund's maximum 25% exposure to the Equity Income Fund
subjects that portion of assets to the risks associated with stocks
(discussed next).
o For Spectrum Growth, a decline in U.S. stock prices is an important source
of risk even if foreign stocks behave differently.
Spectrum Growth Fund: The major risks are the same as in all stock funds:
. Stock market risk Economic growth has been punctuated by periods of
stagnation and recession. Share prices of all companies, even the best
managed and most profitable, can fall for any number of reasons, ranging from
lower-than-expected earnings to changes in investor psychology. Significant
trading by large institutional investors also can lead to price declines.
Since 1950, the U.S. stock market has experienced 10 negative years, as well
as steep drops of shorter duration. Its worst calendar quarter return in
recent years was -22.5% in 1987's fourth quarter.
. Small-company investing Since Spectrum Growth can invest up to 25% of its
assets in the New Horizons Fund, it is subject to the risks of small-company
investing. 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.
. Risks of foreign investing To the extent its underlying funds invest in
foreign securities, the Spectrum Growth Fund will be subject to the unique
risks of international investing. See Spectrum International for an
explanation of these risks.
o For Spectrum International, volatility of foreign currency markets is an
additional source of risk.
Spectrum International Fund: In addition to the risks associated with stock
and bond investing, the fund is subject to the unique risks of international
investing:
. 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 U.S. 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. The fund's total return will be affected by currency
fluctuations. The exact amount of the impact depends on the currencies
represented in the portfolio and how each one appreciates or depreciates in
relationship to the U.S. dollar.
. Increased costs It is more expensive for U.S. investors to trade in foreign
markets than in the U.S. Mutual funds offer an efficient way for individuals
to invest abroad, but the overall expense ratios of international funds are
usually higher than those of typical domestic funds.
. 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.
Many countries have legacies and the risk of hyperinflation and currency
devaluations versus the dollar (which adversely affects returns to U.S.
investors), and may be overly dependent on foreign capital (a risk that is
exacerbated by big currency movements). Invest-
ments in countries that have recently begun moving away from central planning
and state-owned industries toward free markets should be regarded as
speculative.
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 capital controls, 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.
. 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 in U.S. markets, resulting in less
liquidity and more volatility than experienced in the U.S.
. Pricing Portfolio securities of the underlying funds may be listed on
foreign exchanges that are open on days when prices are not computed for the
underlying funds. As a result, the net asset value of the underlying funds,
and consequently of Spectrum International, may be significantly affected by
trading on days when shareholders cannot make transactions.
The risks discussed can be significantly magnified for investments in
emerging markets. Additionally, to the extent the fund invests in the
International Bond Fund and Emerging Markets Bond Fund, it will be subject to
risks associated with international fixed income investing. See Spectrum
Income Fund for information on the risks associated with fixed income
investing.
o Each fund's share price will fluctuate; when you sell your shares, you may
lose money.
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. Because they invest in a variety of
underlying funds, each Spectrum Fund's performance could benefit from
diversification.
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.
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.
Spectrum Growth Fund invests in funds holding domestic and foreign stocks,
small- and large-cap stocks, and growth and value stocks.
Spectrum International Fund invests in stock and, to a lesser degree, bond
funds, which, in turn, have holdings in many different foreign countries,
industrialized as well as emerging markets, and in both large and small
companies.
What are the characteristics of the underlying Price funds?
For details, please see Description of Underlying Funds in Section 3.
How can I decide which fund is most appropriate 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, the funds offer
investment programs that seek to combine attractive returns with the benefits
of broad diversification.
Is there other information I need to review before making a decision?
Be sure to read 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.
<PAGE>
ABOUT YOUR ACCOUNT 2
PRICING SHARES AND RECEIVING SALE PROCEEDS
----------------------------------------------------------
Here are some procedures you should know when investing in a T. Rowe Price
equity fund.
How and when shares are priced
The share price (also called "net asset value" or NAV per share) for a 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.
o The various ways you can buy, sell, and exchange shares are explained at
the end of this prospectus and on the New Account Form. These procedures
and the information you receive about them may differ for institutional and
employer-sponsored retirement accounts.
How your purchase, sale, or exchange price is determined
If we receive your request in correct form by 4 p.m. ET, your transaction
will be priced at that day's NAV. If we receive it after 4 p.m., it will be
priced at the next business day's NAV.
We cannot accept orders that request a particular day or price for your
transaction or any other special conditions.
Fund shares may be purchased through various third-party intermediaries,
including banks, brokers, and investment advisers. Where authorized by a
fund, orders will be priced at the NAV next computed after receipt by the
intermediary. Consult your intermediary to determine when your orders will be
priced. The intermediary may charge a fee for its services.
Note: The time at which transactions and shares are priced and the time until
which orders are accepted may be changed in case of an emergency or if the
New York Stock Exchange closes at a time other than 4 p.m. ET.
How you can receive the proceeds from a sale
o When filling out the New Account Form, you may wish to give yourself the
widest range of options for receiving proceeds from a sale.
<PAGE>
If your request is received by 4 p.m. ET in correct form, proceeds are
usually sent on the next business day. Proceeds can be sent to you by mail or
to your bank account by Automated Clearing House (ACH) transfer or bank wire.
Proceeds sent by ACH transfer should be credited the second day after the
sale. ACH is an automated method of initiating payments from, and receiving
payments in, your financial institution account. The ACH system is supported
by over 20,000 banks, savings banks, and credit unions. Proceeds sent by bank
wire should be credited to your account the next business day.
. Exception: Under certain circumstances and when deemed to be in the fund's
best interests, your proceeds may not be sent for up to five business days
after we receive your sale or exchange request. If you were exchanging into a
bond or money fund, your new investment would not begin to earn dividends
until the sixth business day.
o If for some reason we cannot accept your request to sell shares, we will
contact you.
USEFUL INFORMATION ON DISTRIBUTIONS AND TAXES
----------------------------------------------------------
o All net investment income and realized capital gains are distributed to
shareholders.
Dividends and Other Distributions
Dividend and capital gain distributions are reinvested in additional fund
shares in your account unless you select another option on your New Account
Form. The advantage of reinvesting distributions arises from compounding;
that is, you receive income dividends and capital gain distributions on a
rising number of shares.
Distributions not reinvested are paid by check or transmitted to your bank
account via ACH. If the Post Office cannot deliver your check, or if your
check remains uncashed for six months, the fund reserves the right to
reinvest your distribution check in your account at the NAV on the business
day of the reinvestment and to reinvest all subsequent distributions in
shares of the fund. No interest will accrue on amounts represented by
uncashed distribution or redemption checks.
<PAGE>
Income dividends
Spectrum Income Fund dividends
. 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.
. The fund pays dividends on the first business day of each month.
. 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.
. A portion of the fund's dividends may be eligible for the 70% deduction for
dividends received by corporations.
Spectrum Growth Fund dividends
. The fund declares and pays dividends (if any) annually.
. A portion of the fund's dividends may be eligible for the 70% deduction for
dividends received by corporations.
Spectrum International Fund dividends
. The fund declares and pays dividends (if any) annually.
. 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)
. A capital gain or loss is the difference between the purchase and sale price
of a security.
. If a fund has net capital gains for the year (after subtracting any capital
losses), they are usually declared and paid in December to shareholders of
record on a specified date that month.
Tax Information
o You will be sent timely information for your tax filing needs.
You need to be aware of the possible tax consequences when:
. You sell fund shares, including an exchange from one fund to another.
. The fund makes a distribution to your account.
<PAGE>
Taxes on fund redemptions
When you sell shares in any fund, you may realize a gain or loss. An exchange
from one fund to another is still a sale for tax purposes.
In January, you will be sent Form 1099-B indicating the date and amount of
each sale you made in the fund during the prior year. This information will
also be reported to the IRS. For new accounts or those opened by exchange in
1983 or later, we will provide the gain or loss on the shares you sold during
the year, based on the "average cost," single category method. This
information is not reported to the IRS, and you do not have to use it. You
may calculate the cost basis using other methods acceptable to the IRS, such
as "specific identification."
To help you maintain accurate records, we send you a confirmation immediately
following each transaction you make (except for systematic purchases and
redemptions) and a year-end statement detailing all your transactions in each
fund account during the year.
Taxes on fund distributions
o The following summary does not apply to retirement accounts, such as IRAs,
which are tax-deferred until you withdraw money from them.
In January, you will be sent Form 1099-DIV indicating the tax status of any
dividend and capital gain distributions made to you. This information will
also be reported to the IRS. Distributions made by a fund are generally
taxable to you for the year in which they were paid. You will be sent any
additional information you need to determine your taxes on fund
distributions, such as the portion of your dividend, if any, that may be
exempt from state income taxes.
The tax treatment of a capital gain distribution is determined by how long
the fund held the portfolio securities, not how long you held shares in the
fund. Short-term (one year or less) capital gain distributions are taxable at
the same rate as ordinary income. Reflecting recent changes in the tax code,
gains on securities held more than 12 months but not more than 18 months are
taxed at a maximum rate of 28%, and gains on securities held for more than 18
months are taxed at a maximum rate of 20%. 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 net capital gain
distribution received.
You will not be able to claim a credit or deduction for any foreign taxes
paid by the underlying funds.
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 a fund's ordinary income dividend. Net foreign currency losses
may result in a fund's dividend being classified as a return of capital.
If a 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 deduction on
your tax return for your portion of foreign taxes paid by a fund.
o Distributions are taxable whether reinvested in additional shares or
received in cash.
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 a portion of the money you just invested in the form of a taxable
distribution. Therefore, you may wish to find out a fund's record date before
investing. Of course, a fund's share price may, at any time, reflect
undistributed capital gains or income and unrealized appreciation, which may
result in future distributions.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
----------------------------------------------------------
o Following these procedures helps assure timely and accurate transactions.
Purchase Conditions
Nonpayment
If your payment is not received or you pay with a check or ACH transfer that
does not clear, your purchase will be canceled. You will be responsible for
any losses or expenses incurred by the fund or transfer agent, and the fund
can redeem shares you own in this or another identically registered T. Rowe
Price fund as reimbursement. The fund and its agents have the right to reject
or cancel any purchase, exchange, or redemption due to nonpayment.
U.S. dollars
All purchases must be paid for in U.S. dollars; checks must be drawn on U.S.
banks.
Sale (Redemption) Conditions
10-day hold
If you sell shares that you just purchased and paid for by check or ACH
transfer, the fund will process your redemption but will generally delay
sending you the proceeds for up to 10 calendar days to allow the check or
transfer to clear. If your redemption request was sent by mail or mailgram,
proceeds will be mailed no later than the seventh calendar day following
receipt unless the check or ACH transfer has not cleared. (The 10-day hold
does not apply to the following: pur-
chases paid for by bank wire; cashier's, certified, or treasurer's checks; or
automatic purchases through your paycheck.)
Telephone, Tele*Access/(R)/, and personal computer transactions
Exchange and redemption services through telephone and Tele*Access are
established automatically when you sign the New Account Form unless you check
the box that states you do not want these services. Personal computer
transactions must be authorized separately. T. Rowe Price funds and their
agents use reasonable procedures (including shareholder identity
verification) to confirm that instructions given by telephone are genuine and
are not liable for acting on these instructions. If these procedures are not
followed, it is the opinion of certain regulatory agencies that the funds and
their agents may be liable for any losses that may result from acting on the
instructions given. A confirmation is sent promptly after a transaction. All
telephone conversations are recorded.
Redemptions over $250,000
Large sales can adversely affect a portfolio manager's ability to implement a
fund's investment strategy by causing the premature sale of securities that
would otherwise be held. If, in any 90-day period, you redeem (sell) more
than $250,000, or your sale amounts to more than 1% of fund net assets, the
fund has the right to pay the difference between the redemption amount and
the lesser of the two previously mentioned figures with securities from the
fund.
Excessive Trading
o T. Rowe Price may bar excessive traders from purchasing shares.
Frequent trades, involving either substantial fund assets or a substantial
portion of your account or accounts controlled by you, can disrupt management
of the fund and raise its expenses.
. Trades placed directly with T. Rowe Price If you trade directly with T. Rowe
Price, you can make one purchase and sale involving the same fund within any
120-day period. For example, if you are in fund A, you can move substantial
assets from fund A to fund B and, within the next 120 days, sell your shares
in fund B to return to fund A or move to fund C. If you exceed this limit,
you are in violation of our excessive trading policy.
Two types of transactions are exempt from this policy: 1) trades solely in
money market funds (exchanges between a money fund and a non-money fund are
not exempt); and 2) systematic purchases or redemptions (see Shareholder
Services).
. Trades placed through intermediaries If you purchase fund shares through an
intermediary including a broker, bank, investment adviser, or other third
party and hold them for less than 60 calendar days, you are in violation of
our excessive trading policy.
<PAGE>
. If you violate our excessive trading policy, you may be barred indefinitely
and without further notice from further purchases of T. Rowe Price funds.
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
o A signature guarantee is designed to protect you and the T. Rowe Price
funds from fraud by verifying your signature.
You may need to have your signature guaranteed in certain situations, such
as:
. Written requests 1) to redeem over $100,000, or 2) to wire redemption
proceeds.
. Remitting redemption proceeds to any person, address, or bank account not on
record.
. Transferring redemption proceeds to a T. Rowe Price fund account with a
different registration (name or ownership) from yours.
. Establishing certain services after the account is opened.
You can obtain a signature guarantee from most banks, savings institutions,
broker-dealers, and other guarantors acceptable to T. Rowe Price. We cannot
accept guarantees from notaries public or organizations that do not provide
reimbursement in the case of fraud.
MORE ABOUT THE FUNDS 3
ORGANIZATION AND MANAGEMENT
----------------------------------------------------------
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
Income and Spectrum Growth Funds were established in 1990, and the Spectrum
International Fund was established in 1996.
o Shareholders benefit from T. Rowe Price's 61 years of investment management
experience.
What is meant by "shares"?
As with all mutual funds, investors purchase shares when they put money in a
fund. These shares are part of a fund's authorized capital stock, but share
certificates are not issued.
Each share and fractional share entitles the shareholder to:
. Receive a proportional interest in a fund's income and capital gain
distributions.
. Cast one vote per share on certain fund matters, including the election of
fund directors, changes in fundamental policies, or approval of changes in
the fund's management contract.
Do T. Rowe Price funds have annual shareholder meetings?
The funds are not required to hold annual meetings and, to avoid unnecessary
costs to fund shareholders, do not intend to do so except when certain
matters, such as a change in a fund's fundamental policies, must be decided.
In addition, shareholders representing at least 10% of all eligible votes may
call a special meeting, if they wish, for the purpose of voting on the
removal of any fund direc-
tor 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?
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 are 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 diverge, 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 action for a Spectrum Fund
could be adverse to the interests of an underlying fund, or the reverse. 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.
Portfolio Management: Spectrum Income and Spectrum Growth Funds
Spectrum Income and Spectrum Growth Funds have an Investment Advisory
Committee with the following members: Peter Van Dyke, Chairman, Stephen W.
Boesel, John H. Laporte, Edmund M. Notzon III, William T. Reynolds, Brian C.
Rogers, 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.
Portfolio Management: Spectrum International Fund
Spectrum International has an Investment Advisory Committee with 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 Price-Fleming in 1982 and has 18
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
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% by a subsidiary of Flemings, and 25% by a subsidiary of
Jardine Fleming Group Limited (Jardine Fleming). (Half of Jardine Fleming is
owned by Flemings and half by Jardine Matheson Holdings Limited.) T. Rowe
Price has the right to elect a majority of the Board of Directors of
Price-Fleming, and Flemings has the right to elect the remaining directors,
one of whom will be nominated by Jardine Fleming.
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 each
fund's transfer and dividend disbursing agent and provides shareholder and
administrative services. Services for certain types of retirement plans are
provided by T. Rowe Price Retirement Plan Services, Inc., also a wholly owned
subsidiary. The address for each is 100 East Pratt St., Baltimore, MD 21202.
How are fund expenses determined?
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 next) as well as
certain undertakings made by T. Rowe Price and 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.
o Here is some information regarding the Special Servicing Agreements.
The Special Servicing Agreements provide that each underlying fund in which a
Spectrum Fund invests will bear a proportionate share of the expenses of that
Spectrum Fund if, and to the extent that, the underlying fund's savings from
the operation of Spectrum Fund exceed these expenses.
Such savings are expected to result primarily from the elimination of
numerous separate shareholder accounts which are or would have been invested
directly in the underlying Price Funds and the resulting reduction in
shareholder servicing costs. Although such cost savings are not certain, the
estimated savings to the underlying Price Funds generated by the operation of
Spectrum Fund are expected to be sufficient to offset most, if not all, of
the expenses incurred by Spectrum Fund.
Under the Investment Management Agreements with the Spectrum Fund, and the
Special Servicing Agreements, T. Rowe Price has agreed to bear any expenses
of the Spectrum Growth and Spectrum Income Funds and Price-Fleming has agreed
to bear any expenses of the Spectrum International Fund which exceed the
estimated savings to each of the underlying funds. Thus, the Spectrum Funds
will operate at a zero expense ratio. Of course, shareholders of the Spectrum
Funds will still indirectly bear their fair and proportionate share of the
cost of operating the underlying funds owned by each Spectrum Fund.
The Management Fee
T. Rowe Price is the investment manager for the Spectrum Income Fund and the
Spectrum Growth Fund, and Price-Fleming is 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. See the underlying funds'
Statements of Additional Information for specific fees.
T. Rowe Price will determine how Spectrum Income Fund's and Spectrum Growth
Fund's assets are invested and Price-Fleming will determine how the Spectrum
International Fund's assets will be invested consistent with the investment
objectives and policies of each fund described 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 and the basis upon which such allocations were made or
maintained.
<PAGE>
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
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. Therefore, total return
numbers include the effect of compounding.
Advertisements for a fund may include cumulative or average annual compound
total return figures, which may be compared with various indices, other
performance measures, or other mutual funds.
o Total return is the most widely used performance measure. Detailed
performance information is included in each fund's annual and semiannual
shareholder reports and in the quarterly Performance Update, which are all
available without charge.
Cumulative Total Return
This is the actual return of an investment for a specified period. A
cumulative return does not indicate how much the value of the investment may
have fluctuated during the period. For example, a fund could have a 10-year
positive cumulative return despite experiencing three negative years during
that time.
Average Annual Total Return
This is always hypothetical and should not be confused with actual
year-by-year results. It smooths out all the variations in annual performance
to tell you what constant year-by-year return would have produced the
investment's actual cumulative return. This gives you an idea of an
investment's annual contribution to your portfolio, provided you held it for
the entire period.
Yield (Spectrum Income Fund)
o 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 fund's net
asset value.
<PAGE>
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:
. 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.
. 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 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.
. For Spectrum International Fund, each underlying fund's portfolio securities
usually are valued on the basis of the most recent closing market prices at 4
p.m. ET when each fund calculates its NAV. Most of the securities in which
the underlying funds invest, however, are traded in markets that close before
that time. For securities primarily traded in the Far East, for example, the
most recent closing prices may be as much as 15 hours old at 4 p.m. Normally,
developments that could affect the values of portfolio securities that occur
between the close of the foreign market and 4 p.m. ET will not be reflected
in the funds' NAVs. However, if a fund determines that such developments are
so significant that they will clearly and materially affect the value of the
fund's securities, the fund may adjust the previous closing prices to reflect
fair value or use the next available opening market prices to value its
portfolio securities.
. The officers, interested directors, and investment managers of 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.
DESCRIPTION OF UNDERLYING FUNDS
----------------------------------------------------------
Table 5 gives a brief description of the principal investment programs of the
underlying funds. Additional investment practices are described under Special
Risks and Considerations, in the Statement of Additional Information, and in
the prospectuses for each of the underlying funds.
o For more information about an underlying fund, call: 1-800-638-5660
1-410-547-2308
The major characteristics of the underlying T. Rowe Price funds are as
follows:
<TABLE>
Table 5 Description of Underlying Funds
<CAPTION>
<S> <C>
Fixed Income Funds Objective/Program
- ----------------------------------------------------------------------------
Summit Cash Reserves Stable share price and liquidity while
generating current income. Invests at least 95%
of its total assets in prime money market
securities receiving the highest credit rating.
- ---------------------------------------------------------------------------
Short-Term Bond High income with limited share price
fluctuation. Normally invests at least 65% of
assets in short-term bonds, primarily short- and
intermediate-term corporate, government, and
mortgage debt securities. Securities purchased
will be rated within the four highest credit
categories.The fund's dollar-weighted average
effective maturity will not exceed three years.
- --------------------------------------------------------------------------
GNMA High income consistent with maximum credit
protection and moderate share price fluctuation.
Invests exclusively in securities backed by the
full faith and credit of the U.S. government and
instruments involving these securities (this
guarantee does not apply to the fund's share
price, which will fluctuate). Average maturity
generally expected to be between 3 and 12 years.
- ---------------------------------------------------------------------------
New Income High income with moderate share price
fluctuation. Invests at least 80% of total
assets in investment-grade instruments,
principally in U.S. government and agency
obligations, mortgage-backed securities, and
corporate debt securities. Average maturity
expected to be between 4 and 15 years.
- ---------------------------------------------------------------------------
U.S. Treasury Long-Term High level of income from investments in U.S.
government-backed securities, primarily
long-term U.S. Treasuries.
- ----------------------------------------------------------------------------
High Yield High income and capital appreciation through
investments in high-yield ("junk") bonds.
Average maturity expected to be in the 8- to
12-year range.
- ---------------------------------------------------------------------------
Equity Funds Objective/Program
- ---------------------------------------------------------------------------
Equity Income Substantial dividend income and capital
appreciation through investments primarily in
the common stocks of established companies
paying above-average dividends.
- -----------------------------------------------------------------------------
Growth & Income Capital appreciation and reasonable dividend
income through investments in growth stocks.
Invests principally in large-cap U.S.-based
companies.
- ---------------------------------------------------------------------------
Growth Stock Capital appreciation and increasing income
through investments in growth stocks. Invests
principally in large-cap U.S.-based companies.
- -----------------------------------------------------------------------------
New Era Capital appreciation through investments in U.S.
and foreign natural resource stocks whose
earnings are expected to grow faster than
inflation.
- ---------------------------------------------------------------------------
Blue Chip Growth Capital appreciation through investments in the
common stocks of large and medium-sized blue
chip companies with potential for above-average
earnings growth.
- -------------------------------------------------------------------------------
Mid-Cap Value Capital appreciation through investments in
midsize companies whose stocks appear
undervalued.
- -------------------------------------------------------------------------------
New Horizons Aggressive capital appreciation through
investments in small-company stocks. Invests
primarily in emerging growth companies, early in
their corporate life cycles.
- ------------------------------------------------------------------------------
International Funds Objective/Program
- -------------------------------------------------------------------------------
International Bond High income and capital appreciation through
investments primarily in high-quality foreign
bonds. May invest up to 20% of assets in
below-investment-grade, high-risk bonds,
including bonds in default or those with the
lowest rating. The fund has no maturity
restrictions on the overall portfolio or on
individual securities, but expects to maintain
an intermediate to long weighted average
maturity. The fund is normally heavily exposed
to fluctuations in foreign currencies.
- ----------------------------------------------------------------------------
International Stock Capital appreciation through investments in
stocks of established foreign companies.
- -------------------------------------------------------------------------------
International Discovery Capital appreciation through investments in
small and medium-sized non-U.S. companies.
- -------------------------------------------------------------------------------
European Stock Capital appreciation through investments
primarily in companies domiciled in Europe.
- -----------------------------------------------------------------------------
Japan Capital appreciation through investments in
companies operating in Japan.
- --------------------------------------------------------------------------------
New Asia Capital appreciation through investments in
companies operating in Asia, excluding Japan.
- -------------------------------------------------------------------------------
Emerging Markets Stock Capital appreciation through investments in
companies in emerging markets.
- -------------------------------------------------------------------------------
Latin America Capital appreciation through investments
primarily in companies located in Latin America.
- -------------------------------------------------------------------------------
Emerging Markets Bond High current income and capital appreciation
through investments primarily in high-yielding
and high-risk government and corporate debt
securities of less-developed countries.
- -----------------------------------------------------------------------------
</TABLE>
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.
Reserve Position
While the Spectrum Income Fund will remain primarily invested in bonds, 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
Summit Cash Reserves
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 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 T. Rowe Price International Bond Fund,
Emerging Markets Bond Fund, and Latin America Fund). 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.
Operating policies Each Spectrum Fund cannot (i) change the selection of the
underlying funds in which they can invest; or (ii) change the percentage
ranges which may be allocated to the underlying funds unless authorized to do
so by the Board of Directors. 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; or (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.
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; and (ii) maintain or modify the allocation of
each fund's assets among the underlying funds within the percentage limits
described earlier. The Spectrum Income Fund's and Spectrum Growth Fund's
portfolio turnover
rates for the previous three fiscal periods, and Spectrum International
Fund's portfolio turnover rate for the previous period, are shown in Table 6.
<TABLE>
Table 6 Portfolio Turnover Rates
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
Spectrum Income Fund 14.1% 17.6% 20.2%
Spectrum Growth Fund 20.4 2.9 7.4
Spectrum International Fund 20.0 /a/ /a/
- -------------------------------------------------------------------------
</TABLE>
/a/ Prior to the commencement of operations.
Year 2000 Processing Issue
Many computer programs employed throughout the world use two digits rather
than four to identify the year. These programs, if not adapted, will not
correctly handle the change from "99" to "00" on January 1, 2000, and will
not be able to perform necessary functions. The Year 2000 issue affects
virtually all companies and organizations.
T. Rowe Price has implemented steps intended to assure that its major
computer systems and processes are capable of Year 2000 processing. We are
working with third parties to assess the adequacy of their compliance efforts
and are developing contingency plans intended to assure that third-party
noncompliance will not materially affect T. Rowe Price's operations.
Companies or governmental entities in which T. Rowe Price funds invest could
be affected by the Year 2000 issue, but at this time the funds cannot predict
the degree of impact. To the extent the impact on a portfolio holding is
negative, a fund's returns could be adversely affected.
INVESTMENT POLICIES AND PRACTICES OF UNDERLYING FUNDS
----------------------------------------------------------
In pursuing their investment objectives and programs, each of the underlying
funds is permitted to engage in a wide range of investment practices. Certain
of these practices 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 practices in direct proportion to the amount of
assets each fund allocates to the underlying funds pursuing such practices.
o Fund managers have considerable leeway in choosing investment strategies
and selecting securities they believe will help each fund achieve its
objective.
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.
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. If an underlying fund were to engage in
foreign currency transactions, they would be used primarily to protect the
fund's foreign securities from adverse currency movements relative to the
dollar. Such transactions involve the risk that anticipated currency
movements will not occur, and a fund's total return could be reduced.
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 (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 (where the investor
purchases the option), or the obligation (where the investor writes (sells)
the option), 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 and 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. In many foreign countries, futures and
options markets do not exist or are not sufficiently developed to be
effectively used by the funds.
INVESTING WITH T. ROWE PRICE 4
ACCOUNT REQUIREMENTS AND TRANSACTION INFORMATION
----------------------------------------------------------
Tax Identification Number
We must have your correct Social Security or corporate tax identification number
on a signed New Account Form or W-9 Form. Otherwise, federal law requires the
funds to withhold a percentage (currently 31%) of your dividends, capital gain
distributions, and redemptions, and may subject you to an IRS fine. If this
information is not received within 60 days after your account is established,
your account may be redeemed, priced at the NAV on the date of redemption.
Always verify your transactions by carefully reviewing the confirmation we send
you. Please report any discrepancies to Shareholder Services promptly.
Employer-Sponsored Retirement Plans and Institutional Accounts T. Rowe Price
Trust Company 1-800-492-7670 1-410-625-6585
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.
<PAGE>
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.)
By Mail
Please make your check payable to T. Rowe Price Funds (otherwise it will be
returned) and send your check, together with the New Account Form, to the
appropriate address in the next paragraph. We do not accept third-party checks
to open new accounts, except for IRA Rollover checks that are properly endorsed.
Regular Mail
T. Rowe Price Account Services P.O. Box 17300 Baltimore, MD 21298-9353
Mailgram, Express, Registered, or Certified Mail
T. Rowe Price Account Services 10090 Red Run Blvd. Owings Mills, MD 21117
By Wire
Call Investor Services for an account number and give the following wire
information to your bank:
PNC Bank, N.A. (Pittsburgh) ABA# 043000096 T. Rowe Price [fund name] Account#
1004397951 name of owner(s) and account number
Complete a New Account Form and mail it to one of the appropriate addresses
listed previously.
Note: No services will be established and IRS penalty withholding may occur
until a signed New Account Form is received. Also, retirement plans cannot be
opened by wire.
By Exchange
Call Shareholder Services or use Tele*Access or your personal computer (see
Automated Services under Shareholder Services). The new account will have the
same registration as the account from which you are
exchanging. Services for the new account may be carried over by telephone
request if preauthorized on the existing account. For limitations on exchanging,
see explanation of Excessive Trading under Transaction Procedures and Special
Requirements.
In Person
Drop off your New Account Form at any location listed on the cover and obtain a
receipt.
PURCHASING ADDITIONAL SHARES
----------------------------------------------------------
$100 minimum purchase; $50 minimum for retirement plans, Automatic Asset
Builder, and gifts or transfers to minors (UGMA/UTMA) accounts
By ACH Transfer
Use Tele*Access or your personal computer or call Investor Services if you have
established electronic transfers using the ACH network.
By Wire
Call Shareholder Services or use the wire address in Opening a New Account.
By Mail
1. Make your check payable to T. Rowe Price Funds (otherwise it may be
returned).
2. Mail the check to us at the following address with either a fund reinvestment
slip or a note indicating the fund you want to buy and your fund account
number.
3. Remember to provide your account number and the fund name on the memo line of
your check.
Regular Mail
T. Rowe Price Funds Account Services P.O. Box 89000 Baltimore, MD 21289-1500
/(For mailgrams, express, registered, or certified mail, see previous /
/section.)/
By Automatic Asset Builder
Fill out the Automatic Asset Builder section on the New Account or Shareholder
Services Form.
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.
By Mail
For each account involved, provide the account name, number, fund name, and
exchange or redemption amount. For exchanges, be sure to indicate any fund you
are exchanging out of and the fund or funds you are exchanging into. Please mail
to the appropriate address below. T. Rowe Price requires the signatures of all
owners exactly as registered, and possibly a signature guarantee (see
Transaction Procedures and Special Requirements - Signature Guarantees).
Regular Mail
For nonretirement and IRA accounts
T. Rowe Price Account Services P.O. Box 89000 Baltimore, MD 21289-0220
For employer-sponsored retirement accounts
T. Rowe Price Trust Company P.O. Box 89000 Baltimore, MD 21289-0300
/(For mailgrams, express, registered, or certified mail, see Opening a / /New
Account.)/
Redemptions from employer-sponsored retirement accounts must be in writing;
please call T. Rowe Price Trust Company or your plan administrator for
instructions. IRA distributions may be requested in writing or by telephone;
please call Shareholder Services to obtain an IRA Distribution Form or an IRA
Shareholder Services Form to authorize the telephone redemption service.
RIGHTS RESERVED BY THE 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, for 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
----------------------------------------------------------
Shareholder Services 1-800-225-5132 1-410-625-6500 Investor Services
1-800-638-5660 1-410-547-2308
Many services are available to you as a T. Rowe Price shareholder; some you
receive automatically, and others you must authorize on the New Account Form. By
signing up for services on the New Account Form rather than later on, you avoid
having to complete a separate form and obtain a signature guarantee. This
section reviews some of the principal services currently offered. Our Services
Guide, which is automatically mailed to all new shareholders, contains detailed
descriptions of these and other services.
<PAGE>
Note: Corporate and other institutional accounts require an original or
certified resolution to establish services and to redeem by mail. For more
information, call Investor Services.
Retirement Plans
We offer a wide range of plans for individuals, institutions, and large and
small businesses: Traditional IRAs, Roth IRAs, SIMPLE IRAs, SEP-IRAs, Keoghs
(profit sharing, money purchase pension), 401(k), and 403(b)(7). For information
on IRAs, call Investor Services. For information on all other retirement plans,
including our no-load variable annuity, please call our Trust Company at
1-800-492-7670.
Exchange Service
You can move money from one account to an existing identically registered
account or open a new identically registered account. Remember, exchanges are
purchases and sales for tax purposes. (Exchanges into a state tax-free fund are
limited to investors living in states where the fund is registered.) Some of the
T. Rowe Price funds may impose a redemption fee of 0.5% to 2% on shares held for
less than six months or one year, as specified in the prospectus. The fee is
paid to the fund.
Automated Services Tele*Access 1-800-638-2587 24 hours, 7 days
Tele*Access
24-hour service via toll-free number enables you to (1) access information on
fund yields, prices, distributions, account balances, and your latest
transaction; (2) request checks, prospectuses, services forms, duplicate
statements, and tax forms; and (3) initiate purchase, redemption, and exchange
transactions in your accounts (see Electronic Transfers below).
T. Rowe Price OnLine
24-hour service via dial-up modem provides the same services as Tele*Access but
on a personal computer. Please call Investor Services for an information guide.
After obtaining proper authorization, account transactions may also be conducted
on the Internet.
Plan Account Line 1-800-401-3279
Plan Account Line
This 24-hour service is similar to Tele*Access but is designed specifically to
meet the needs of retirement plan investors.
Telephone and Walk-In Services
Buy, sell, or exchange shares by calling one of our service representatives or
by visiting one of our investor center locations whose addresses are listed on
the cover.
Electronic Transfers
By ACH
With no charges to pay, you can initiate a purchase or redemption for as little
as $100 or as much as $100,000 between your bank account and fund account using
the ACH network. Enter instructions via Tele*Access or your personal computer,
or call Shareholder Services.
By Wire
Electronic transfers can be conducted via bank wire. There is currently a $5 fee
for wire redemptions under $5,000, and your bank may charge for incoming or
outgoing wire transfers regardless of size.
Checkwriting
(Not available for equity funds, or the High Yield or Emerging Markets Bond
Funds) You may write an unlimited number of free checks on any money market
fund, and most bond funds, with a minimum of $500 per check. Keep in mind,
however, that a check results in a redemption; a check written on a bond fund
will create a taxable event which you and we must report to the IRS.
Automatic Investing
($50 minimum) You can invest automatically in several different ways, including:
Automatic Asset Builder
You instruct us to move $50 or more from your bank account, or you can instruct
your employer to send all or a portion of your paycheck to the fund or funds you
designate.
Automatic Exchange
You can set up systematic investments from one fund account into another, such
as from a money fund into a stock fund.
DISCOUNT BROKERAGE
----------------------------------------------------------
To open an account 1-800-638-5660 For existing discount brokerage investors
1-800-225-7720
This service gives you the opportunity to consolidate all of your investments
with one company. Through our discount brokerage, you can buy and sell stocks,
options, bonds, non-T. Rowe Price mutual funds, and more - at commission savings
over full-service brokers. We also provide a wide range of services, including:
Automated telephone and computer services
You can enter stock and option trades, access quotes, and review account
information around the clock by phone with Tele-Trader or via the Internet with
Internet-Trader. Any trades executed through Tele-Trader save you an additional
10% on commissions. Plus, you will save 20% on commissions for equity trades
when you trade through Internet-Trader.
Note: Subject to a $35 minimum commission for all trades except equity trades
placed through Internet-Trader, which are subject to a $29.95 minimum
commission.
Investor information
A variety of informative reports, such as our Brokerage Insights series, S&P
Market Month newsletter, and select stock reports can help you better evaluate
economic trends and investment opportunities.
Dividend Reinvestment Service
Virtually all stocks held in customer accounts are eligible for this service -
free of charge.
/Discount Brokerage is a division of //T. Rowe Price// Investment Services, /
/Inc., Member NASD/SIPC./
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, Maryland 21202.
The T. Rowe Price Report
A quarterly investment newsletter discussing markets and financial strategies.
Performance Update
A quarterly review of all T. Rowe Price fund results.
Insights
Educational reports on investment strategies and financial markets.
Investment Guides
Asset Mix Worksheet, College Planning Kit, Diversifying Overseas: A T. Rowe
Price Guide to International Investing, How to Choose a Bond Fund, Personal
Strategy Planner, Retirees Financial Guide, Retirement Planning Kit, and Tax
Considerations for Investors.
To help you achieve your financial goals, T. Rowe Price offers a wide range of
stock, bond, and money market investments, as well as convenient services and
timely, informative reports.
To Open a Mutual Fund Account
Investor Services
1-800-638-5660
1-410-547-2308
For Existing Accounts
Shareholder Services
1-800-225-5132
1-410-625-6500
For Yields, Prices, Account Information, or to Conduct Transactions
Tele*Access/(R)/
1-800-638-2587 24 hours, 7 days
To Open a Discount Brokerage Account
1-800-638-5660
Plan Account Line
1-800-401-3279
For retirement plan
investors
Investor Centers
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
Internet Address
www.troweprice.com
Invest With Confidence
T. Rowe Price Ram Logo
C08-040 5/1/98
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
T. ROWE PRICE SPECTRUM FUND, INC. ("Spectrum Fund")
SPECTRUM INCOME FUND ("Income Fund")
SPECTRUM GROWTH FUND ("Growth Fund")
SPECTRUM INTERNATIONAL FUND ("International Fund")
(collectively the "Funds" and individually the "Fund")
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the appropriate Fund prospectus dated May 1, 1998,
which may be obtained from T. Rowe Price Investment Services, Inc., 100 East
Pratt Street, Baltimore, Maryland 21202.
If you would like a prospectus for a Fund of which you are not a shareholder,
please call 1-800-638-5660. A prospectus with more complete information,
including management fees and expenses, will be sent to you. Please read it
carefully.
The date of this Statement of Additional Information is May 1, 1998.
C08-043 5/1/98
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page Page
---- ----
<S> <C> <C> <C> <C>
Capital Stock 29 Investment Restrictions 17
- ----------------------------------- ---------------------------------------
Code of Ethics 25 Legal Counsel 30
- ----------------------------------- ---------------------------------------
Custodian 24 Management of Funds 19
- ----------------------------------- ---------------------------------------
Distributor for Fund 24 Net Asset Value Per Share 26
- ----------------------------------- ---------------------------------------
Dividends and Distributions 26 Pricing of Securities 25
- ----------------------------------- ---------------------------------------
Federal Registration of 30 Principal Holders of Securities 21
Shares
- ----------------------------------- ---------------------------------------
Independent Accountants 30 Shareholder Services 25
- ----------------------------------- ---------------------------------------
Investment Management 21 Special Considerations 16
Services
- ----------------------------------- ---------------------------------------
Investment Objectives and 2 Tax Status 26
Policies
- ----------------------------------- ---------------------------------------
Investment Performance 27 Yield Information 27
- ----------------------------------- ---------------------------------------
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
-------------------------------------------------------------------------------
The following information supplements the discussion of each Fund's
investment objectives and policies discussed in the Fund's' prospectus.
The Funds will not make a material change in their investment objectives
without obtaining shareholder approval. Unless otherwise specified, the
investment programs and restrictions of the Funds are not fundamental
policies. Each Fund's operating policies are subject to change by each Board
of Directors without shareholder approval. However, shareholders will be
notified of a material change in an operating policy. Each Fund's fundamental
policies may not be changed without the approval of at least a majority of
the outstanding shares of the Fund or, if it is less, 67% of the shares
represented at a meeting of shareholders at which the holders of 50% or more
of the shares are represented.
Throughout this Statement of Additional Information, "the Fund" is intended
to refer to each Fund listed on the cover page, unless otherwise indicated.
Spectrum Fund
The proliferation of mutual funds has left many investors in search of a
means of diversifying among a number of mutual funds while obtaining
professional management in determining which Funds to select, how much of
their assets to commit to each Fund, and when to make the selections. In
response to this need, the Spectrum Fund has been created as a means of
providing a simple and effective means of structuring a comprehensive mutual
fund investment program. By selecting the Spectrum Growth Fund, Spectrum
Income Fund or Spectrum International Fund, or a combination of any of these,
investors may choose the investment objective appropriate for their long-term
investment goals. The Spectrum Funds will attempt to achieve these goals by
diversification in a selected group of other T. Rowe Price Funds. Although
the Spectrum Funds are not asset allocation or market timing funds, each,
over time, will adjust the amount of its assets invested in the various other
T. Rowe Price Funds as economic, market and financial conditions warrant.
<PAGE>
Spectrum Income Fund
T. Rowe Price Short-Term Bond Fund, Inc.
The fund's objective is a high level of income consistent with minimal
fluctuation in principal value and liquidity.
The fund will invest in a diversified portfolio of short- and
intermediate-term corporate, government, and mortgage-backed securities. The
fund may also invest in other types of securities such as bank obligations,
collateralized mortgage obligations (CMOs), foreign securities, hybrids, and
futures and options. 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, and the fund will not
purchase any security whose effective maturity, average life, or tender date,
measured from the date of settlement, exceeds seven years.
Securities purchased by the fund must be rated within the four highest credit
categories (AAA, AA, A, BBB) by a national rating agency (or, if unrated, the
T. Rowe Price equivalent). The investment-grade designation includes a range
of securities from the highest rated to medium quality. Securities in the BBB
category may be more susceptible to adverse economic conditions or changing
circumstances and securities at the lower end of the BBB category have
certain speculative characteristics.
T. Rowe Price GNMA Fund
The fund's objective is a high level of current income consistent with
maximum credit 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 will seek to fulfill its objective by investing primarily in
mortgage-backed securities issued by the Government National Mortgage
Association (GNMA), an agency of the Department of Housing and Urban
Development (HUD). These securities represent pools of mortgage loans that
are either insured by the Federal Housing Administration or guaranteed by the
Veterans Administration. GNMA, in turn, guarantees the timely payment of
interest and principal on its securities, a guarantee backed by the U.S.
Treasury. The GNMA guarantee does not apply in any way to the price of GNMA
securities or the fund's share price, both of which will fluctuate with
market conditions.
The fund can also purchase bills, notes, and bonds issued by the U.S.
Treasury as well as related futures, other agency securities backed by the
full faith and credit of the U.S. government, shares of an internal money
fund, and securities involving GNMAs, such as collateralized mortgage
obligations (CMOs) and stripped certificates (securities that receive only
the interest or principal portion of the underlying mortgage payments).
. Mortgage-Backed Securities Mortgage-backed securities are securities
representing an interest in a pool of mortgages. Mortgage lenders pool
individual home mortgages to back a certificate or bond, which is then sold
to investors. The mortgages may be of a variety of types, including
adjustable rate, conventional 30-year and 15-year fixed rate and graduated
payment. Principal and interest payments generated by the underlying
mortgages are passed through to the investors. This is in contrast to
traditional bonds where principal is normally paid back at maturity in a lump
sum. Unscheduled prepayments of principal shorten the securities' weighted
average life and may lower their total return. (When a mortgage in the
underlying mortgage pool is prepaid, an unscheduled principal prepayment is
passed through to the Fund. This principal is returned to the Fund at par. As
a result, if a mortgage security were trading at a premium, its total return
would be lowered by prepayments, and if a mortgage security were trading at a
discount, its total return would be increased by prepayments.) The value of
these securities also may change because of changes in the market's
perception of the creditworthiness of the federal agency that issued them. In
addition, the mortgage securities market in general may be adversely affected
by changes in governmental regulation or tax policies.
T. Rowe Price New Income Fund, Inc.
The fund's objective is to provide the highest level of income consistent
with the preservation of capital over time through investment primarily in
marketable debt securities.
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At least 80% of the fund's 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, collateralized
mortgage 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 four and 15 years.
Securities purchased by the fund must be rated within the four highest credit
categories (AAA, AA, A, BBB) by at least one established public rating agency
(or, if unrated, must have a T. Rowe Price equivalent). The fund will not
purchase any security rated below investment grade (i.e., below BBB) by
Standard & Poor's, Moody's, or Fitch Investor Services, except that with
respect to 15% of its total assets the fund may invest in "split-rated
securities," which are securities that are rated within the four highest
credit categories by at least one rating agency and below investment grade by
another rating agency.
Investment-grade securities include a range from the highest rated to medium
quality. Securities in the BBB category may be more susceptible to adverse
economic conditions or changing circumstances, and securities at the lower
end of the BBB category have certain speculative characteristics.
U.S. Treasury Long-Term Fund
The fund's investment objective is the highest level of current income
consistent with maximum credit protection. It will invest at least 85% of
total assets in U.S. Treasury securities and investments involving these
securities. The remaining assets will be invested in other securities backed
by the full faith and credit of the U.S. government and investments involving
these securities. The fund's dollar-weighted average maturity is expected to
vary between 15 and 20 years, but may range from 10 to 30 years.
T. Rowe Price High Yield Fund, Inc.
The fund's objective is high current income and, secondarily, capital
appreciation.
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 may also invest in a variety of other securities, including
foreign securities, pay-in-kind bonds, private placements, bank loans, hybrid
instruments, futures and options.
The fund's longer dollar-weighted 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. However, as explained earlier,
interest rates are not the only, or necessarily the dominant, influence on
the fund's price.
Special Risks of Investing in Junk Bonds The following special considerations
are additional risk factors associated with the Fund's investments in
lower-rated debt securities.
. Youth and Growth of the Lower-Rated Debt Securities Market The market for
lower-rated debt securities is relatively new and its growth has paralleled a
long economic expansion. Past experience may not, therefore, provide an
accurate indication of future performance of this market, particularly during
periods of economic recession. An economic downturn or increase in interest
rates is likely to have a greater negative effect on this market, the value
of lower-rated debt securities in the Fund's portfolio, the Fund's net asset
value and the ability of the bonds' issuers to repay principal and interest,
meet projected business goals and obtain additional financing than on
higher-rated securities. These circumstances also may result in a higher
incidence of defaults than with respect to higher-rated securities. An
investment in this Fund is more speculative than investment in shares of a
fund which invests only in higher-rated debt securities.
. Sensitivity to Interest Rate and Economic Changes Prices of lower-rated debt
securities may be more sensitive to adverse economic changes or corporate
developments than higher-rated investments. Debt securities with longer
maturities, which may have higher yields, may increase or decrease in value
more than debt securities with shorter maturities. Market prices of
lower-rated debt securities structured as zero coupon or pay-in-kind
securities are affected to a greater extent by interest rate changes and may
be more volatile than securities which pay interest periodically and in cash.
Where it deems it appropriate and in the best interests of Fund
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shareholders, the Fund may incur additional expenses to seek recovery on a
debt security on which the issuer has defaulted and to pursue litigation to
protect the interests of security holders of its portfolio companies.
. Liquidity and Valuation Because the market for lower-rated securities may be
thinner and less active than for higher-rated securities, there may be market
price volatility for these securities and limited liquidity in the resale
market. Nonrated securities are usually not as attractive to as many buyers
as rated securities are, a factor which may make nonrated securities less
marketable. These factors may have the effect of limiting the availability of
the securities for purchase by the Fund and may also limit the ability of the
Fund to sell such securities at their fair value either to meet redemption
requests or in response to changes in the economy or the financial markets.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of lower-rated
debt securities, especially in a thinly traded market. To the extent the Fund
owns or may acquire illiquid or restricted lower-rated securities, these
securities may involve special registration responsibilities, liabilities and
costs, and liquidity and valuation difficulties. Changes in values of debt
securities which the Fund owns will affect its net asset value per share. If
market quotations are not readily available for the Fund's lower-rated or
nonrated securities, these securities will be valued by a method that the
Fund's Board of Directors believes accurately reflects fair value. Judgment
plays a greater role in valuing lower-rated debt securities than with respect
to securities for which more external sources of quotations and last sale
information are available.
. Congressional Action New and proposed laws may have an impact on the market
for lower-rated debt securities. T. Rowe Price is unable at this time to
predict what effect, if any, any such legislation may have on the market for
lower-rated debt securities.
. Taxation Special tax considerations are associated with investing in
lower-rated debt securities structured as zero coupon or pay-in-kind
securities. The Fund accrues income on these securities prior to the receipt
of cash payments. The Fund must distribute substantially all of its income to
its shareholders to qualify for pass-through treatment under the tax laws and
may, therefore, have to dispose of its portfolio securities to satisfy
distribution requirements.
Spectrum Growth Fund
T. Rowe Price Growth & Income Fund, Inc.
The 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 focuses on companies whose earnings are expected by T. Rowe Price to
grow and support a growing dividend payment, as well as stocks that do not
pay dividends currently but offer prospects of appreciation and future
income.
Most of the assets will be invested in U.S. common stocks. However, the fund
may also purchase other types of securities, for example, foreign securities,
convertible stocks and bonds, and warrants, when considered consistent with
the fund's investment objective and program. The portfolio manager may also
engage in a variety of investment management practices, such as buying and
selling futures and options.
T. Rowe Price New Era Fund, Inc.
The fund's objective is long-term capital appreciation primarily through the
common stocks of companies that own or develop natural resources and other
basic commodities, and also through the stocks of selected nonresource growth
companies.
The fund's primary focus will be on the common stocks of natural resource
companies whose earnings and tangible assets could benefit from accelerating
inflation. The fund will also invest in selected nonresource growth companies
with strong potential for earnings growth. T. Rowe Price believes that
natural resource companies with the flexibility to adjust prices or control
operating costs offer attractive opportunities for capital growth when
inflation is rising. Income is not a consideration in the selection of
securities.
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At least half of fund assets will be invested in U.S. securities, principally
common stocks, and the fund may also invest up to 50% of its assets in
foreign securities. In addition to common stocks, the fund may purchase other
types of securities, for example, convertible stocks and bonds, and warrants,
when considered consistent with the fund's investment objective. The fund may
also engage in a variety of investment management practices, such as buying
and selling futures and options.
The rate of earnings growth and stock prices of natural resource companies
may follow irregular patterns since they are influenced strongly by the
forces of nature, economic cycles, and international politics. For example,
stock prices of mining and energy companies can be unpredictable and can fall
steeply and rapidly. Companies owning or developing real estate could also be
subject to earnings fluctuations related to the availability of money, the
level of interest rates, and other factors.
Although the fund's foreign investments carry exposure to currency risk (the
chance that a strong dollar will decrease returns for U.S. investors), many
commodity markets are dollar-based, which cushions this risk. The fund's
investments in companies located in emerging markets are exposed to the risk
of political and economic instability, prevalent in such countries.
T. Rowe Price Growth Stock Fund, Inc.
The fund's objective is 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 at least 65% of total assets in the common stocks of a
diversified group of growth companies. The companies in which the fund
invests normally (but not always) pay dividends that are generally expected
to rise in future years as earnings increase.
Most of the assets will be invested in U.S. common stocks. However, the fund
may also purchase other types of securities, for example, foreign securities,
convertible stocks and bonds, and warrants, when considered consistent with
the fund's investment objective and program. The portfolio manager may also
engage in a variety of investment management practices, such as buying and
selling futures and options.
T. Rowe Price New Horizons Fund, Inc.
The fund's investment objective is 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. Total return will consist primarily of
capital appreciation or depreciation.
Most of the assets will be invested in U.S. common stocks. However, the fund
may also purchase other types of securities, for example, foreign securities,
convertible stocks and bonds, and warrants, when considered consistent with
the fund's investment objective and program. The portfolio manager may also
engage in a variety of investment management practices, such as buying and
selling futures and options.
T. Rowe Price Mid-Cap Value Fund, Inc.
The fund's objective is to provide long-term capital appreciation by
investing primarily in mid-size companies that appear to be undervalued.
Reflecting a "value approach" to investing, the fund will seek companies
whose current stock prices do not appear to T. Rowe Price to reflect their
underlying value as measured by assets, earnings, cash flow, or business
franchises. The fund will invest at least 65% of its assets in companies
whose market capitalization (stock price multiplied by shares outstanding)
falls between $300 million and $5 billion.
Most of the assets will be invested in U.S. common stocks. However, the fund
may also purchase other types of securities, for example, foreign stocks,
convertible securities, and warrants, when considered consistent with
<PAGE>
the fund's investment objective and program. The fund may also engage in a
variety of investment management practices, such as buying and selling
futures and options.
T. Rowe Price Blue Chip Growth Fund, Inc.
The fund's primary objective is long-term growth of capital. Current income
is a secondary objective, and many of the stocks in the fund's portfolio are
expected to pay dividends.
The fund will invest at least 65% of total assets in the common stocks of
large and medium-sized blue chip companies, as defined by T. Rowe Price.
These companies will be well established in their industries and have the
potential for above-average growth in earnings.
Most of the assets will be invested in U.S. common stocks. However, the fund
may also purchase other types of securities, for example, foreign securities,
convertible stocks and bonds, and warrants, when considered consistent with
the fund's investment objective and program. The portfolio manager may also
engage in a variety of investment management practices, such as buying and
selling futures and options. Investments in convertible securities, preferred
stocks, and debt securities are limited to 25% of total assets.
Spectrum International Fund
T. Rowe Price International Discovery Fund
The fund's objective is long-term growth of capital through investments
primarily in common stocks of rapidly growing, small to medium-sized non-U.S.
companies. Such companies may be found in developed and emerging markets.
Traditionally, they are more dynamic and offer greater growth potential than
larger companies, but they are generally riskier because they may have
limited product lines, capital, and managerial resources. Their securities
may trade less frequently and with greater price swings. Depending on
conditions, the fund's portfolio should be composed of at least 10 countries
and 100 different companies.
T. Rowe Price European Stock Fund
The fund's objective is long-term growth of capital through investments
primarily in common stocks of both large and small European companies.
Current income is a secondary objective. The fund seeks to take advantage of
opportunities arising from such trends as privatization, the reduction of
trade barriers, and the potential growth of the emerging economies of Eastern
Europe. Normally, at least five countries will be represented in the
portfolio, and investments may be made in any of the countries listed below,
as well as others as their markets develop.
Primary Emphasis France, Germany, Netherlands, Italy, Spain, Sweden,
Switzerland, and United Kingdom.
Others Austria, Belgium, Czech Republic, Denmark, Estonia, Finland,
Greece, Hungary, Ireland, Israel, Latvia, Lithuania, Luxembourg,
Norway, Poland, Portugal, Russia, Slovakia, and Turkey.
T. Rowe Price New Asia Fund
The fund's objective is long-term growth of capital through investment in
large and small companies domiciled or with primary operations in Asia,
excluding Japan. The fund may also invest in Pacific Rim countries such as
Australia and New Zealand.
Countries in which the fund may invest include those in the following list as
well as others in the region, such as China, Pakistan, and Vietnam, as their
markets become more accessible. Investments will represent a minimum of five
countries.
Primary Emphasis Hong Kong, Indonesia, India, Malaysia, Philippines,
Singapore, South Korea, Taiwan, Thailand.
<PAGE>
T. Rowe Price Japan Fund
The fund's objective is long-term growth of capital through investments in
common stocks of large and small companies domiciled or with primary
operations in Japan. Assets will normally be invested across a wide range of
industries and companies (both small and large). Investors in a
single-country fund are fully exposed to that country's economic, stock
market, and currency cycles, which could increase both its risks and its
potential rewards compared with a fund invested in several countries or
regions.
T. Rowe Price Emerging Markets Stock Fund
The fund's objective is long-term growth of capital through investment
primarily in common stocks of large and small companies domiciled, or with
primary operations, in emerging markets. An emerging market includes any
country defined as emerging or developing by the International Bank for
Reconstruction and Development (World Bank), the International Finance
Corporation, or the United Nations. The fund's investments are expected to be
diversified geographically across emerging markets in Latin America, Asia,
Europe, Africa, and the Middle East.
Countries in which the fund may invest are listed below and others will be
added as opportunities develop:
Asia China, Hong Kong, Indonesia, India, Korea, Malaysia, Pakistan,
Philippines, Singapore, Sri Lanka, Taiwan, Thailand, and Vietnam.
Latin America Argentina, Belize, Brazil, Chile, Colombia, Mexico,
Panama, Peru, and Venezuela.
Europe Austria, Croatia, Czech Republic, Estonia, Greece, Hungary,
Latvia, Lithuania, Poland, Portugal, Romania, Russia, Slovakia, and
Turkey.
Africa and the Middle East Botswana, Egypt, Israel, Jordan,
Mauritius, Morocco, Nigeria, South Africa, Tunisia, and Zimbabwe.
Emerging market investments rank high on the potential risk and reward
spectrum because a developing country, much like an emerging-growth company,
often advances in fits and starts toward developed status, and may or may not
successfully achieve that status.
T. Rowe Price Latin America Fund
The fund's objective is long-term growth of capital through investment
primarily in common stocks of companies domiciled, or with primary
operations, in Latin America. The fund expects to invest primarily in Mexico,
Brazil, Chile, Argentina, Venezuela, Peru, and other markets as opportunities
arise and conditions permit, including, but not limited to Belize, Colombia,
Ecuador, and Guatemala. The portfolio is normally expected to invest in at
least four countries.
The fund expects to make substantial investments (at times more than 25% of
total assets) in the telephone companies of various Latin American countries.
These utilities play a critical role in a country's economic development, but
their stocks could be adversely affected if trends favoring development were
to be reversed.
Because Latin America includes many less-developed countries with legacies of
political instability.
Stock prices of foreign and U.S. companies are subject to many of the same
influences, such as general economic conditions, company and industry
earnings prospects, and investor psychology. However, investing in foreign
securities also involves additional risks that can increase the potential for
losses in the fund. Normally, these risks are significantly greater for
investments in emerging markets.
. Currency fluctuations Transactions in foreign securities are conducted in
local currencies, so dollars must often be exchanged for another currency
when a stock is bought or sold or a dividend is paid. Likewise, share price
quotations and total return information reflect conversion into dollars.
Fluctuations in foreign exchange rates can significantly increase or decrease
the dollar value of a foreign investment, boosting or offsetting its local
market return. For example, if a French stock rose 10% in price during a
year, but the U.S. dollar gained 5% against the French franc during that
time, the U.S. investor's return would be reduced to 5%. This is because
<PAGE>
the franc would "buy" fewer dollars at the end of the year than at the
beginning, or, conversely, a dollar would buy more francs. The fund's total
return will be affected by currency fluctuations. The exact amount of the
impact depends on the currencies represented in the portfolio and how each
one appreciates or depreciates in relation to the U.S. dollar.
. Increased costs It is more expensive for U.S. investors to trade in foreign
markets than in the U.S. Mutual funds offer an efficient way for individuals
to invest abroad, but the overall expense ratios of international funds are
usually higher than those of typical domestic funds.
. Political and economic factors The economies, markets, and political
structures of a number of the countries in which the fund can invest do not
compare favorably with the U.S. and other mature economies in terms of wealth
and stability. Therefore, investments in these countries will be riskier and
more subject to erratic and abrupt price movements. This is especially true
for emerging markets. However, even investments in countries with highly
developed economies are subject to risk. For example, Japanese securities
markets historically have experienced wide swings in value.
Some economies are less well developed, overly reliant on particular
industries, and more vulnerable to the ebb and flow of international trade,
trade barriers, and other protectionist or retaliatory measures. This makes
investment in such markets significantly riskier than in other countries.
Many countries have legacies and the risk of hyperinflation and currency
devaluations versus the dollar (which adversely affects returns to U.S.
investors) and may be overly dependent on foreign capital (a risk that is
exacerbated by big currency movements). Investments in countries that have
recently begun moving away from central planning and state-owned industries
toward free markets should be regarded as speculative.
Certain countries have histories of instability and political upheaval that
could cause their governments to act in a detrimental or hostile manner
toward private enterprise or foreign investment. Actions such as capital
controls, nationalizing a company or industry, expropriating assets, or
imposing punitive taxes could have a severe effect on security prices and
impair a fund's ability to repatriate capital or income. Significant external
risks, including war, currently affect some countries. Governments in many
emerging market countries participate to a significant degree in their
economies and securities markets.
. Legal, regulatory, and operational Certain countries lack uniform
accounting, auditing, and financial reporting standards, have less
governmental supervision of financial markets than in the U.S., do not honor
legal rights enjoyed in the U.S., and have settlement practices, such as
delays, which could subject a fund to risks of loss not customary in the U.S.
In addition, securities markets in these countries have substantially lower
trading volumes than U.S. markets, resulting in less liquidity and more
volatility than experienced in the U.S.
. Pricing Portfolio securities may be listed on foreign exchanges that are
open on days (such as Saturdays) when the fund does not compute its price. As
a result, the fund's net asset value may be significantly affected by trading
on days when shareholders cannot make transactions.
Spectrum Income, Growth, and International Funds
T. Rowe Price Summit Cash Reserves Fund
The fund's objectives are preservation of capital, liquidity, and, consistent
with these, the highest possible current income. The fund invests in a
diversified portfolio of U.S. dollar-denominated money market securities
issued in the U.S. and abroad, and generally will not invest more than 5% of
its total assets in securities of any one issuer. The fund's yield will
fluctuate in response to changes in interest rates, but the share price is
managed to remain stable at $1.00. Unlike most bank accounts or certificates
of deposit, the fund is not insured or guaranteed by the U.S. government.
The fund invests at least 95% of its total assets in securities receiving the
highest short-term credit rating assigned by at least two established rating
agencies, by one rating agency if the security is rated by only one, or, if
unrated, the equivalent rating as established by T. Rowe Price. The fund's
dollar-weighted average maturity will not exceed 90 days. It will purchase
securities with maturities of 13 months or less.
<PAGE>
Income and International Funds
T. Rowe Price International Bond Fund
The 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. Up to 20%
of the fund's assets may be invested in foreign bonds denominated in dollars,
such as Brady and other emerging market bonds.
Rowe Price-Fleming International, Inc. ("Price-Fleming"), the Fund's
investment manager, bases its investment decisions on fundamental market
factors, currency trends, and credit quality. The Fund generally invests in
countries where the combination of fixed income returns and currency exchange
rates appears is attractive, or, if the currency trend is unfavorable, where
the currency risk can be minimized through hedging.
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. Such changes
provide greater opportunities for capital gains and greater risks of capital
loss. Price-Fleming attempts to reduce these risks through diversification
among foreign securities and active management of maturities and currency
exposures.
T. Rowe Price Emerging Markets Bond Fund
The 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 would be considered junk
bonds in the U.S.
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 five 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.
Income and Growth Funds
T. Rowe Price Equity Income Fund
The 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, as determined by T. Rowe Price.
Most of the assets will be invested in U.S. common stocks. However, the fund
may also purchase other types of securities, for example, foreign securities,
convertible stocks and bonds, and warrants, when considered consistent with
the fund's investment objective and program. The portfolio manager may also
engage in a variety of investment management practices, such as buying and
selling futures and options.
<PAGE>
Spectrum Growth and International Funds
T. Rowe Price International Stock Fund
The fund's objective is long-term growth of capital through investments
primarily in common stocks of established, non-U.S. companies. The fund
expects to invest substantially all of its assets outside the U.S. and to
diversify broadly among countries throughout the world - developed and
emerging.
The fund expects to invest substantially all of its assets in common stocks.
However, the fund may also invest in a variety of other equity-related
securities, such as preferred stocks, warrants and convertible securities, as
well as corporate and governmental debt securities, when considered
consistent with the fund's investment objective and program. The fund may
also engage in a variety of investment management practices, such as buying
and selling futures and options. Under normal market conditions, the fund's
investment in securities other than common stocks is limited to no more than
35% of total assets. However, for temporary defensive purposes, the fund may
invest all or a significant portion of its assets in U.S. government and
corporate debt obligations. The fund will not purchase any debt security
which at the time of purchase is rated below investment grade. This would not
prevent the fund from retaining a security downgraded to below investment
grade after purchase.
Risk Factors of Foreign Investing There are special risks in foreign
investing. Certain of these risks are inherent in any international mutual
fund while others relate more to the countries in which the Fund will invest.
Many of the risks are more pronounced for investments in developing or
emerging countries, such as many of the countries of Asia, Latin America,
Eastern Europe, Russia, Africa and the Middle East. Although there is no
universally accepted definition, a developing country is generally considered
to be a country which is in the initial stages of its industrialization cycle
with a per capita gross national product of less than $8,000.
. Political and Economic Factors Individual foreign economies of certain
countries differ favorably or unfavorably from the United States' economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position. The
internal politics of certain foreign countries are not as stable as in the
United States. For example, in 1991, the existing government in Thailand was
overthrown in a military coup. In 1992, there were two military coup attempts
in Venezuela and in 1992 the President of Brazil was impeached. In 1994-1995,
the Mexican peso plunged in value setting off a severe crisis in the Mexican
economy. Asia is still coming to terms with its own crisis and recessionary
conditions sparked off by widespread currency weakness in late 1997. In
addition, significant external political risks currently affect some foreign
countries. Both Taiwan and China still claim sovereignty of one another and
there is a demilitarized border and hostile relations between North and South
Korea.
Governments in certain foreign countries continue to participate to a
significant degree, through ownership interest or regulation, in their
respective economies. Action by these governments could have a significant
effect on market prices of securities and payment of dividends. The economies
of many foreign countries are heavily dependent upon international trade and
are accordingly affected by protective trade barriers and economic conditions
of their trading partners. The enactment by these trading partners of
protectionist trade legislation could have a significant adverse effect upon
the securities markets of such countries.
. Currency Fluctuations The international funds invest in securities
denominated in various currencies. Accordingly, a change in the value of any
such currency against the U.S. dollar will result in a corresponding change
in the U. S. dollar value of the Fund's assets denominated in that currency.
Such changes will also affect the Fund's income. Generally, when a given
currency appreciates against the dollar (the dollar weakens) the value of the
Fund's securities denominated in that currency will rise. When a given
currency depreciates against the dollar (the dollar strengthens) the value of
the Fund's securities denominated in that currency would be expected to
decline.
. Investment and Repatriation of Restrictions Foreign investment in the
securities markets of certain foreign countries is restricted or controlled
in varying degrees. These restrictions limit at times and preclude investment
in certain of such countries and increase the cost and expenses of the
international funds. Investments by foreign investors are subject to a
variety of restrictions in many developing countries. These restrictions may
take the form of prior governmental approval, limits on the amount or type of
securities held
<PAGE>
by foreigners, and limits on the types of companies in which foreigners may
invest. Additional or different restrictions may be imposed at any time by
these or other countries in which the international funds invest. In
addition, the repatriation of both investment income and capital from several
foreign countries is restricted and controlled under certain regulations,
including in some cases the need for certain government consents. For
example, capital invested in Chile normally cannot be repatriated for one
year.
. Market Characteristics It is contemplated that most foreign securities will
be purchased in over-the-counter markets or on stock exchanges located in the
countries in which the respective principal offices of the issuers of the
various securities are located, if that is the best available market.
Investments in certain markets may be made through ADRs traded in the United
States. Foreign stock markets are generally not as developed or efficient as,
and more volatile than, those in the United States. While growing in volume,
they usually have substantially less volume than U.S. markets and the Fund's
portfolio securities may be less liquid and subject to more rapid and erratic
price movements than securities of comparable U.S. companies. Equity
securities may trade at price/earnings multiples higher than comparable
United States securities and such levels may not be sustainable. Commissions
on foreign stocks are generally higher than commissions on United States
exchanges, and while there is an increasing number of overseas stock markets
that have adopted a system of negotiated rates, a number are still subject to
an established schedule of minimum commission rates. There is generally less
government supervision and regulation of foreign stock exchanges, brokers,
and listed companies than in the United States. Moreover, settlement
practices for transactions in foreign markets may differ from those in United
States markets. Such differences include delays beyond periods customary in
the United States and practices, such as delivery of securities prior to
receipt of payment, which increase the likelihood of a "failed settlement."
Failed settlements can result in losses to the Fund.
. Investment Funds The international funds may invest in investment funds
which have been authorized by the governments of certain countries
specifically to permit foreign investment in securities of companies listed
and traded on the stock exchanges in these respective countries. The
international funds' investment in these funds is subject to the provisions
of the 1940 Act. If the international funds invest in such investment funds,
the Fund's shareholders will bear not only their proportionate share of the
expenses of the Fund (including operating expenses and the fees of the
investment manager), but also will bear indirectly similar expenses of the
underlying investment funds. In addition, the securities of these investment
funds may trade at a premium over their net asset value.
. Information and Supervision There is generally less publicly available
information about foreign companies comparable to reports and ratings that
are published about companies in the United States. Foreign companies are
also generally not subject to uniform accounting, auditing and financial
reporting standards, practices, and requirements comparable to those
applicable to United States companies. It also is often more difficult to
keep currently informed of corporate actions which affect the prices of
portfolio securities.
. Taxes The dividends and interest payable on certain of the international
funds' foreign portfolio securities may be subject to foreign withholding
taxes, thus reducing the net amount of income available for distribution to
the Fund's shareholders.
. Other With respect to certain foreign countries, especially developing and
emerging ones, there is the possibility of adverse changes in investment or
exchange control regulations, expropriation or confiscatory taxation,
limitations on the removal of Funds or other assets of the Funds, political
or social instability, or diplomatic developments which could affect
investments by U.S. persons in those countries.
International Stock, International Discovery, European Stock, Emerging
Markets Stock, International Bond, and Emerging Markets Bond Funds
. Eastern Europe and Russia Changes occurring in Eastern Europe and Russia
today could have long-term potential consequences. As restrictions fall, this
could result in rising standards of living, lower manufacturing costs,
growing consumer spending, and substantial economic growth. However,
investment in the countries of Eastern Europe and Russia is highly
speculative at this time. Political and economic reforms are too recent to
establish a definite trend away from centrally planned economies and
state-owned industries. In many of the countries of Eastern Europe and
Russia, there is no stock exchange or formal market for securities. Such
<PAGE>
countries may also have government exchange controls, currencies with no
recognizable market value relative to the established currencies of western
market economies, little or no experience in trading in securities, no
financial reporting standards, a lack of a banking and securities
infrastructure to handle such trading, and a legal tradition which does not
recognize rights in private property. In addition, these countries may have
national policies which restrict investments in companies deemed sensitive to
the country's national interest. Further, the governments in such countries
may require governmental or quasi-governmental authorities to act as
custodian of the Fund's assets invested in such countries, and these
authorities may not qualify as a foreign custodian under the Investment
Company Act of 1940 and exemptive relief from such Act may be required. All
of these considerations are among the factors which could cause significant
risks and uncertainties to investment in Eastern Europe and Russia. The Fund
will only invest in a company located in, or a government of, Eastern Europe
and Russia, if it believes the potential return justifies the risk.
. Latin America
Inflation Most Latin American countries have experienced, at one time or
another, severe and persistent levels of inflation, including, in some cases,
hyperinflation. This has, in turn, led to high interest rates, extreme
measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth. Although inflation in many countries
has lessened, there is no guarantee it will remain at lower levels.
Political Instability The political history of certain Latin American
countries has been characterized by political uncertainty, intervention by
the military in civilian and economic spheres, and political corruption. Such
developments, if they were to reoccur, could reverse favorable trends toward
market and economic reform, privatization, and removal of trade barriers, and
result in significant disruption in securities markets.
Foreign Currency Certain Latin American countries may have managed currencies
which are maintained at artificial levels to the U. S. dollar rather than at
levels determined by the market. This type of system can lead to sudden and
large adjustments in the currency which, in turn, can have a disruptive and
negative effect on foreign investors. For example, in late 1994 the value of
the Mexican peso lost more than one-third of its value relative to the
dollar. Certain Latin American countries also restrict the free conversion of
their currency into foreign currencies, including the U.S. dollar. There is
no significant foreign exchange market for many currencies and it would, as a
result, be difficult for the Fund to engage in foreign currency transactions
designed to protect the value of the Fund's interests in securities
denominated in such currencies.
Sovereign Debt A number of Latin American countries are among the largest
debtors of developing countries. There have been moratoria on, and
reschedulings of, repayment with respect to these debts. Such events can
restrict the flexibility of these debtor nations in the international markets
and result in the imposition of onerous conditions on their economies.
. Japan
The Japan Fund's concentration of its investments in Japan means the Fund
will be more dependent on the investment considerations discussed above and
may be more volatile than a fund which is broadly diversified geographically.
To the extent any of the other funds also invests in Japan, such investments
will be subject to these same factors. Additional factors relating to Japan
include the following:
Japan has experienced earthquakes and tidal waves of varying degrees of
severity, and the risks of such phenomena, and damage resulting therefrom,
continue to exist. Japan also has one of the world's highest population
densities. A significant percentage of the total population of Japan is
concentrated in the metropolitan areas of Tokyo, Osaka and Nagoya.
Energy Japan has historically depended on oil for most of its energy
requirements. Almost all of its oil is imported, the majority from the Middle
East. In the past, oil prices have had a major impact on the domestic
economy, but more recently Japan has worked to reduce its dependence on oil
by encouraging energy conservation and use of alternative fuels. In addition,
a restructuring of industry, with emphasis shifting from basic industries to
processing and assembly type industries, has contributed to the reduction of
oil consumption. However, there is no guarantee this favorable trend will
continue.
<PAGE>
Foreign Trade Overseas trade is important to Japan's economy. Japan has few
natural resources and must export to pay for its imports of these basic
requirements. Because of the concentration of Japanese exports in highly
visible products such as automobiles, machine tools and semiconductors and
the large trade surpluses ensuing therefrom, Japan has had difficult
relations with its trading partners, particularly the U.S. It is possible
that trade sanctions or other protectionist measures could impact Japan
adversely in both the short- and long-term.
. Costs Investors should understand that the expense ratios of the Fund can be
expected to be higher than investment companies investing in domestic
securities since the cost of maintaining the custody of foreign securities
and the rate of advisory fees paid by the Fund is higher.
. Small Companies Small companies may have less experienced management and
fewer management resources than larger firms. A smaller company may have
greater difficulty obtaining access to capital markets, and may pay more for
the capital it obtains. In addition, smaller companies are more likely to be
involved in fewer market segments, making them more vulnerable to any
downturn in a given segment. Some of these factors may also apply, to a
lesser extent, to medium size companies. Some of the smaller companies in
which the Fund will invest may be in major foreign markets; others may be
leading companies in emerging countries outside the major foreign markets.
Securities analysts generally do not follow such securities, which are seldom
held outside of their respective countries and which may have prospects for
long-term investment returns superior to the securities of well-established
and well-known companies. Direct investment in such securities may be
difficult for United States investors because, among other things,
information relating to such securities is often not readily available. Of
course, there are also risks associated with such investments, and there is
no assurance that such prospects will be realized.
Asia (ex-Japan)
Political Instability The political history of certain Asian countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such developments,
if they continue to occur, could reverse favorable trends toward market and
economic reform, privatization and removal of trade barriers and result in
significant disruption in securities markets.
Foreign Currency Certain Asian countries may have managed currencies which
are maintained at artificial levels to the U.S. dollar rather than at levels
determined by the market. This type of system can lead to sudden and large
adjustments in the currency which, in turn, can have a disruptive and
negative effect on foreign investors. For example, in 1997 the Thai baht lost
46.75% of its value against the U.S. dollar. Certain Asian countries also may
restrict the free conversion of their currency into foreign currencies,
including the U.S. dollar. There is no significant foreign exchange market
for certain currencies and it would, as a result, be difficult for the Fund
to engage in foreign currency transactions designed to protect the value of
the Fund's interests in securities denominated in such currencies.
Debt A number of Asian companies are highly dependent on foreign loans for
their operation. In 1997, several Asian countries were forced to negotiate
loans from the IMF and others that impose strict repayment term schedules and
require significant economic and financial restructuring.
Types of Securities
Set forth below is additional information about certain of the investments
described in the Fund's prospectus.
Repurchase Agreements
The Fund may enter into a repurchase agreement through which an investor
(such as the Fund) purchases a security (known as the "underlying security")
from a well-established securities dealer or a bank that is a member of the
Federal Reserve System. Any such dealer or bank will be on T. Rowe Price's
approved list and have a credit rating with respect to its short-term debt of
at least A1 by Standard & Poor's Corporation, P1 by Moody's Investors
Services, Inc., or the equivalent rating by T. Rowe Price. At that time, the
bank or securities dealer agrees to repurchase the underlying security at the
same price, plus specified interest. Repurchase agreements are generally for
a short period of time, often less than a week. Repurchase agreements which
do not provide for payment within seven days will be treated as illiquid
securities. The Fund will only enter into
<PAGE>
repurchase agreements where (i) the underlying securities are of the type
(excluding maturity limitations) which the Fund's investment guidelines would
allow it to purchase directly, (ii) the market value of the underlying
security, including interest accrued, will be at all times equal to or exceed
the value of the repurchase agreement, and (iii) payment for the underlying
security is made only upon physical delivery or evidence of book-entry
transfer to the account of the custodian or a bank acting as agent. In the
event of a bankruptcy or other default of a seller of a repurchase agreement,
the Fund could experience both delays in liquidating the underlying security
and losses, including: (a) possible decline in the value of the underlying
security during the period while the Fund seeks to enforce its rights
thereto; (b) possible subnormal levels of income and lack of access to income
during this period; and (c) expenses of enforcing its rights.
Hybrid Instruments
Hybrid Instruments (a type of potentially high-risk derivative) have been
developed and combine the elements of futures contracts or options with those
of debt, preferred equity, or a depository instrument (hereinafter "Hybrid
Instruments"). Often these Hybrid Instruments are indexed to the price of a
commodity, particular currency, or a domestic or foreign debt or equity
securities index. Thus, Hybrid Instruments may take a variety of forms,
including, but not limited to, debt instruments with interest or principal
payments or redemption terms determined by reference to the value of a
currency or commodity or securities index at a future point in time,
preferred stock with dividend rates determined by reference to the value of a
currency, or convertible securities with the conversion terms related to a
particular commodity.
The risks of investing in Hybrid Instruments reflect a combination of the
risks of investing in securities, options, futures and currencies, including
volatility and lack of liquidity. Reference is also made to the discussion of
futures, options, and forward contracts herein for a discussion of the risks
associated with such investments. Further, the prices of the Hybrid
Instrument and the related commodity or currency may not move in the same
director or at the same time. Hybrid Instruments may bear interest or pay
preferred dividends at below market (or even relatively nominal) rates.
Alternatively, Hybrid Instruments may bear interest at above market rates but
bear an increased risk of principal loss (or gain). In addition, because the
purchase and sale of Hybrid Instruments could take place in an
over-the-counter market or in a private transaction between the Fund and the
seller of the Hybrid Instrument, the creditworthiness of the contra party to
the transaction would be a risk factor which the Fund would have to consider.
Hybrid Instruments also may not be subject to regulation of the Commodities
Futures Trading Commission ("CFTC"), which generally regulates the trading of
commodity futures by U.S. persons, the SEC, which regulates the offer and
sale of securities by and to U.S. persons, or any other governmental
regulatory authority.
Illiquid or Restricted Securities
Restricted securities may be sold only in privately negotiated transactions
or in a public offering with respect to which a registration statement is in
effect under the Securities Act of 1933 (the "1933 Act"). Where registration
is required, the Fund may be obligated to pay all or part of the registration
expenses, and a considerable period may elapse between the time of the
decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable
price than prevailed when it decided to sell. Restricted securities will be
priced at fair value as determined in accordance with procedures prescribed
by the Fund's Board of Directors. If, through the appreciation of illiquid
securities or the depreciation of liquid securities, the Fund should be in a
position where more than 15% of the value of its net assets is invested in
illiquid assets, including restricted securities, the Fund will take
appropriate steps to protect liquidity.
Notwithstanding the above, the Fund may purchase securities which, while
privately placed, are eligible for purchase and sale under Rule 144A under
the 1933 Act. This rule permits certain qualified institutional buyers, such
as the Fund, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. T. Rowe Price and
Price-Fleming, under the supervision of the Fund's Board of Directors, will
consider whether securities purchased under Rule 144A are illiquid and thus
subject to the Fund's restriction of investing no more than 15% of its net
assets in illiquid securities. A determination of whether a Rule 144A
security is liquid or not is a question of fact. In making this
determination, T. Rowe Price and
<PAGE>
Price-Fleming will consider the trading markets for the specific security
taking into account the unregistered nature of a Rule 144A security. In
addition, Price-Fleming could consider the (1) frequency of trades and
quotes, (2) number of dealers and potential purchases, (3) dealer
undertakings to make a market, and (4) the nature of the security and of
marketplace trades (e.g., the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of transfer). The liquidity of
Rule 144A securities would be monitored and, if as a result of changed
conditions it is determined that a Rule 144A security is no longer liquid,
the Fund's holdings of illiquid securities would be reviewed to determine
what, if any, steps are required to assure that the Fund does not invest more
than 15% of its net assets in illiquid securities. Investing in Rule 144A
securities could have the effect of increasing the amount of the Fund's
assets invested in illiquid securities if qualified institutional buyers are
unwilling to purchase such securities.
Warrants
The Fund may acquire warrants. Warrants are pure speculation in that they
have no voting rights, pay no dividends, and have no rights with respect to
the assets of the corporation issuing them. Warrants basically are options to
purchase equity securities at a specific price valid for a specific period of
time. They do not represent ownership of the securities, but only the right
to buy them. Warrants differ from call options in that warrants are issued by
the issuer of the security which may be purchased on their exercise, whereas
call options may be written or issued by anyone. The prices of warrants do
not necessarily move parallel to the prices of the underlying securities.
There are, of course, other types of securities that are, or may become
available, which are similar to the foregoing and the Funds may invest in
these securities.
InterFund Borrowing and Lending
Subject to approval by the Securities and Exchange Commission, and certain
state regulatory agencies, each Fund may borrow funds from, and certain of
the Underlying Price Funds may make loans to, and borrow funds from, other
Price Funds. These Funds have no current intention of engaging in these
practices at this time.
SPECIAL CONSIDERATIONS
-------------------------------------------------------------------------------
Prospective investors should consider that certain underlying price funds
(the "Price Funds") may engage in the following:
Foreign Currency Transactions Enter into foreign currency transactions. Since
investments in foreign companies will usually involve currencies of foreign
countries, and the International Bond and International Stock Funds, as well
as certain other Price Funds, will hold Funds in bank deposits in foreign
custodians during the completion of investment programs, the value of the
assets of the Price Funds as measured in U.S.dollars may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and these Price Funds may incur costs in
connection with conversions between various currencies. The Price Funds will
generally conduct their foreign currency exchange transactions either on a
spot (i.e., cash) basis at the prevailing rate in the foreign currency
exchange market, or through entering into forward contracts to purchase or
sell foreign currencies. The Price Funds will generally not enter into a
forward contract with a term of greater than one year. Although foreign
currency transactions will be used primarily to protect the Price Funds from
adverse currency movements, they also involve the risk that anticipated
currency movements will not be accurately predicted.
Lending Portfolio Securities Lend portfolio securities for the purpose of
realizing additional income. The Price Funds may lend securities to
broker-dealers or institutional investors. Any such loan will be continuously
secured by collateral at least equal to the value of the security loaned.
Such lending could result in delays in receiving additional collateral or in
the recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially.
<PAGE>
Futures Contracts and Options (types of potentially high-risk derivatives)
Enter into interest rate, stock index or currency futures contracts. Certain
Price Funds may enter into such contracts (or options thereon), or a
combination of such contracts, (1) as a hedge against changes in prevailing
levels of interest rates, price movements or currency exchange rates in the
Price Funds' portfolios in order to establish more definitely the effective
return on securities or currencies held or intended to be acquired by such
Price Funds; (2) as an efficient means of adjusting the Price Funds' exposure
to the markets; or (3) to adjust the duration of the Price Funds' portfolios.
Initial margin deposits and premiums on options used for non-hedging purposes
will not equal more than 5% of each Price Fund's net asset value. Certain
Price Funds may also purchase and sell call and put options on securities,
currencies and financial and stock indices. The aggregate market value of
each Fund's currencies or portfolio securities covering call or put options
will not exceed 25% of a Fund's net assets. Futures contracts and options can
be highly volatile and could result in reduction of a Price Fund's total
return and a Price Fund's attempt to use such investments for hedging
purposes may not be successful.
FOR MORE INFORMATION ABOUT AN UNDERLYING PRICE FUND, CALL 1-800-638-5660
(1-410-345-2308).
INVESTMENT RESTRICTIONS
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Fundamental policies may not be changed without the approval of the lesser of
(1) 67% of the Fund's shares present at a meeting of shareholders if the
holders of more than 50% of the outstanding shares are present in person or
by proxy or (2) more than 50% of a Fund's outstanding shares. Other
restrictions in the form of operating policies are subject to change by the
Fund's Board of Directors without shareholder approval. Any investment
restriction which involves a maximum percentage of securities or assets shall
not be considered to be violated unless an excess over the percentage occurs
immediately after, and is caused by, an acquisition of securities or assets
of, or borrowings by, the Fund. Calculation of the Fund's total assets for
compliance with any of the following fundamental or operating policies or any
other investment restrictions set forth in the Fund's prospectus or Statement
of Additional Information will not include cash collateral held in connection
with securities lending activities.
Fundamental Policies
As a matter of fundamental policy, the Fund may not:
(1) Borrowing Borrow money, except the Fund may borrow from banks or other
Price Funds as a temporary measure for extraordinary or emergency
purposes, and then only in amounts not exceeding 30% of its total assets
valued at market. The Fund will not borrow in order to increase income
(leveraging), but only to facilitate redemption requests which might
otherwise require untimely disposition of portfolio securities (see page
___ of the prospectus). Interest paid on any such borrowings will reduce
net investment income;
(2) Commodities (a) Spectrum Growth and Spectrum Income Funds may not
purchase or sell commodities or commodity or futures contracts;
(b)Spectrum International Fund may not purchase or sell physical
commodities; except that it may enter into futures contracts and options
thereon.
(3) Loans Make loans, although the Funds may purchase money market securities
and enter into repurchase agreements;
(4) Margin Purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases of portfolio securities;
(5) Mortgaging Mortgage, pledge, hypothecate or, in any manner, transfer any
security owned by the Funds as security for indebtedness except as may be
necessary in connection with permissible borrowings, in
<PAGE>
which event such mortgaging, pledging, or hypothecating may not exceed
30% of each Fund's total assets, valued at market;
(6) Real Estate Purchase or sell real estate, including limited partnership
interests therein, unless acquired as a result of ownership of securities
or other instruments (although each Fund may purchase money market
securities secured by real estate or interests therein, or issued by
companies or investment trusts which invest in real estate or interests
therein);
(7) Senior Securities Issue senior securities;
(8) Short Sales Effect short sales of securities; or
(9) Underwriting Underwrite securities issued by other persons, except to the
extent that the Fund may be deemed to be an underwriter within the
meaning of the Securities Act of 1933 in connection with the purchase and
sale of its portfolio securities in the ordinary course of pursuing its
investment program.
Operating Policies
As a matter of operating policy, the Fund may not:
(1) Control of Portfolio Companies Invest in companies for the purpose of
exercising management or control;
(2) Illiquid Securities Purchase illiquid securities if, as a result, more
than 15% of its net assets would be invested in such securities;
(3) Oil and Gas Programs Purchase participations or other direct interests
in, or enter into leases with respect to, oil, gas, or other mineral
exploration or development programs if, as a result thereof, more than 5%
of the value of the total assets of the Fund would be invested in such
programs;
(4) Options Invest in options;
(5) Futures Spectrum Income and Spectrum Growth Funds may not invest in
futures. Spectrum International Fund, though it has no intention at this
time of investing in futures, reserves the right to do so in the future;
(6) Forward Currency Contracts None of the Funds has the intention of
investing in forward currency contracts at this time. However, they all
reserve the right to do so at some point in the future; or
(7) Warrants Invest in warrants.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission (Investment Company Act Release No. IC-21425, October 18, 1995):
(i) there is no limit on the amount the Fund may own of the total outstanding
voting securities of registered investment companies which are members of the
T. Rowe Price family of funds, (ii) each Fund, in accordance with its
prospectus, may invest more than 5% of its assets in any one such investment
company, and (iii) each Fund may invest more than 10% of its assets,
collectively, in registered investment companies which are members of the T.
Rowe Price family of funds.
Because of their investment objectives and policies, the Funds will each
concentrate more than 25% of their assets in the mutual fund industry. In
accordance with the Funds' investment programs set forth in the prospectus,
each of the Funds may invest more than 25% of its assets in certain of the
Underlying Price Funds. However, each of the Underlying Price Funds in which
each Fund will invest (other than New Income, Short-Term Bond, High Yield,
Latin America, and International Bond Funds) will not concentrate more than
25% of its total assets in any one industry. The Latin America Fund expects
to make substantial investments in the telephone companies of various Latin
America countries (at times more than 25% of total assets). The New Income
and Short-Term Bond Funds will, under certain conditions, invest up to 50% of
their assets in any one of the following industries: gas, utility, gas
transmission utility, electric utility, telephone utility and petroleum. The
Short-Term Bond, International Bond, and High Yield Funds will each normally
concentrate 25% or more of their assets in the securities of the banking
industry when their position in issues maturing in one year or less equals
35% or more of their total assets.
<PAGE>
MANAGEMENT OF FUNDS
-------------------------------------------------------------------------------
The management of each Fund's business and affairs is the responsibility of
the Board of Directors for Spectrum Fund. In exercising their
responsibilities, the Board, among other things, will refer to the Special
Servicing Agreement (see pages 21 and 22) and policies and guidelines
included in an Application for an Exemptive Order (and accompanying Notice
and Order issued by the Commission). A majority of Spectrum Fund's directors
will be non-interested persons as defined in Section 2(a)(19) of the 1940
Act. However, the interested directors and the officers of Spectrum Fund, T.
Rowe Price and Rowe Price-Fleming also serve in similar positions with most
of the Underlying Price Funds. Thus, if the interests of a Fund and the
Underlying Price Funds were ever to become divergent, it is possible that a
conflict of interest could arise and affect how this latter group of persons
fulfill their fiduciary duties to that Fund and the Underlying Price Funds.
The directors of Spectrum Fund believe they have structured each Fund to
avoid these concerns. However, conceivably, a situation could occur where
proper action for Spectrum Fund or the Growth Fund, Income Fund or
International Fund separately, could be adverse to the interests of an
Underlying Price Fund, or the reverse could occur. If such a possibility
arises, the directors and officers of the affected Funds and T. Rowe Price
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 Price 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.
The officers and directors of Spectrum Fund are listed below. Unless
otherwise noted, the address of each is 100 East Pratt Street, Baltimore,
Maryland 21202. Except as indicated, each has been an employee of T. Rowe
Price for more than five years. In the list below, Spectrum Fund's directors
who are considered "interested persons" of T. Rowe Price, Rowe Price-Fleming,
or the Fund as defined under Section 2(a)(19) of the Investment Company Act
of 1940 are noted with an asterisk (*). Mr. Riepe is referred to as an inside
director by virtue of his directorship and employment by T. Rowe Price.
JEFFREY H. DONAHUE, Director--Senior Vice President and Chief Financial
Officer of The Rouse Company, a full-service real estate and development
company, Columbia, Maryland; Address: 10275 Little Patuxent Parkway,
Columbia, Maryland 21044
A. MACDONOUGH PLANT, Director--Partner, law firm of Stewart, Plant &
Blumenthal; (formerly until 4/ 91) Partner, law firm of Semmes, Bowen &
Semmes, Baltimore, Maryland; Address: Suite 910, Seven St. Paul Street,
Baltimore, Maryland 21202
* JAMES S. RIEPE, Chairman of the Board -Vice Chairman of the Board and
Managing Director, T. Rowe Price; Chairman of the Board, T. Rowe Price
Investment Services, Inc., T. Rowe Price Services, Inc., T. Rowe Price
Retirement Plan Services, Inc., and T. Rowe Price Trust Company; Director,
Price-Fleming and General Re Corporation
PETER VAN DYKE, President -Managing Director, T. Rowe Price; Vice President,
Price-Fleming and T. Rowe Price Trust Company
EDMUND M. NOTZON, Executive Vice President -Managing Director, T. Rowe Price;
Vice President, T. Rowe Price Trust Company; Chartered Financial Analyst
STEPHEN W. BOESEL, Vice President -Managing Director, T. Rowe Price
JOHN R. FORD, Vice President -Executive Vice President, T. Rowe Price;
Chartered Financial Analyst
HENRY H. HOPKINS, Vice President-Vice President, Price-Fleming and T. Rowe
Price Retirement Plan Services, Inc.; Director and Managing Director, T. Rowe
Price; Vice President and Director, T. Rowe Price Investment Services, Inc.,
T. Rowe Price Services, Inc. and T. Rowe Price Trust Company
GEORGE A. MURNAGHAN, Vice President -Managing Director, T. Rowe Price; Vice
President, Price-Fleming, T. Rowe Price Trust Company, and T. Rowe Price
Investment Services, Inc.
WILLIAM T. REYNOLDS, Vice President -Managing Director, T. Rowe Price;
Chartered Financial Analyst
<PAGE>
BRIAN C. ROGERS, Vice President -Director and Managing Director, T. Rowe
Price; Chartered Financial Analyst
CHARLES P. SMITH, Vice President -Managing Director, T. Rowe Price; Vice
President, Price-Fleming
M. DAVID TESTA, Vice President -Chairman of the Board, Price-Fleming; Vice
Chairman of the Board, Chief Investment Officer, and Managing Director, T.
Rowe Price; Vice President and Director, T. Rowe Price Trust Company;
Chartered Financial Analyst
MARTIN G. WADE, Vice President -President, Director, Chief Investment Officer
Price-Fleming; Director, Robert Fleming Holdings Limited; Director, Robert
Fleming Asset Management; Address: 25 Copthall Avenue, London, EC2R 7DR,
England
JUDITH B. WARD, Vice President -Employee, T. Rowe Price
DAVID J. L. WARREN, Vice President -Executive Vice President, T. Rowe Price
PATRICIA S. BUTCHER, Secretary-Assistant Vice President, T. Rowe Price and T.
Rowe Price Investment Services, Inc.
CARMEN F. DEYESU, Treasurer-Vice President, T. Rowe Price, T. Rowe Price
Services, Inc., and T. Rowe Price Trust Company
DAVID S. MIDDLETON, Controller-Vice President, T. Rowe Price, T. Rowe Price
Services, Inc., and T. Rowe Price Trust Company
JOSEPH A. CRUMBLING, Assistant Vice President -Employee, T. Rowe Price
INGRID I. VORDEMBERGE, Assistant Vice President-Employee, T. Rowe Price
COMPENSATION TABLE
-------------------------------------------------------------------------------
The Funds do not pay pension or retirement benefits to its officers or
directors. Also, any director of a Fund who is an officer or employee of T.
Rowe Price or Price-Fleming does not receive any remuneration from the Fund.
<TABLE>
<CAPTION>
Name of Person, Aggregate Compensation from Fund(a) Total Compensation from Fund and
Position ------- Fund Complex Paid to Directors(b)
- -------------------------------------- ---------------------------------
- ----------------------------------------------------------------------------
---------------------------------------------------------------------------------
<S> <S> <S>
Income Fund
Jeffrey H. Donahue, Director $5,474 $15,000
A. MacDonough Plant, Director 5,474 15,000
- -------------------------------------------------------------------------------------------------------------------------
Growth Fund
Jeffrey H. Donahue, Director $6,966 $15,000
A. MacDonough Plant, Director 6,966 15,000
- -------------------------------------------------------------------------------------------------------------------------
International Fund
Jeffrey H. Donahue, Director $2,560 $15,000
David K. Fagin, Director 2,560 15,000
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Amounts in this column are based on accrued compensation for calendar
year 1997.
(b) Amounts in this column are based on compensation received from January 1,
1997, to December 31, 1997. The T. Rowe Price complex included 84 funds as of
December 31, 1997.
<PAGE>
The Fund's Executive Committee, consisting of the Fund's interested
directors, has been authorized by its respective Board of Directors to
exercise all powers of the Board to manage the Funds in the intervals between
meetings of the Board, except the powers prohibited by statute from being
delegated.
PRINCIPAL HOLDERS OF SECURITIES
-------------------------------------------------------------------------------
As of the date of the prospectus, the officers and directors of the Fund, as
a group, owned less than 1% of the outstanding shares of the Fund.
As of April 1, 1998, no shareholder beneficially owned more than 5% of the
outstanding shares of either the Spectrum International or Spectrum Growth
Funds.
As of April 1, 1998, the following shareholder beneficially owned more than
5% of the outstanding shares of the Spectrum Income Fund: Manulife Financial
USA, 200 Bloor Street East, NT3, Toronto, Ontario, Canada M4W 1E5.
INVESTMENT MANAGEMENT SERVICES
-------------------------------------------------------------------------------
The business of Spectrum Fund will be conducted by its officers, directors,
and investment manager in accordance with policies and guidelines set up by
Spectrum Fund's directors which were included in the Exemptive Order issued
by the Securities and Exchange Commission (Investment Company Act Release No.
IC-21425, October 18, 1995).
Each Fund will operate at a zero expense ratio. To accomplish this, the
payment of each Fund's operational expenses is subject to the Special
Servicing Agreement described below as well as certain undertakings made by
T. Rowe Price, under its Investment Management Agreement with T. Rowe Price.
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.
Special Servicing Agreements One Special Servicing Agreement ("Agreement") is
between and among the Spectrum Fund on behalf of Spectrum Income and Spectrum
Growth Funds, the underlying funds, and T. Rowe Price. A second Special
Servicing Agreement is between and among Spectrum Fund, on behalf of Spectrum
International Fund, the underlying funds, Price-Fleming, and T. Rowe Price.
The Agreement provides that, if the Board of Directors of any Underlying
Price Fund determines that such Underlying Fund's share of the aggregate
expenses of Spectrum Fund is less than the estimated savings to the
Underlying Price Fund from the operation of Spectrum Fund, the Underlying
Price Fund will bear those expenses in proportion to the average daily value
of its shares owned by Spectrum Fund, provided further that no Underlying
Price Fund will bear such expenses in excess of the estimated savings to it.
Such savings are expected to result primarily from the elimination of
numerous separate shareholder accounts which are or would have been invested
directly in the Underlying Price Funds and the resulting reduction in
shareholder servicing costs. Although such cost savings are not certain, the
estimated savings to the Underlying Price Funds generated by the operation of
Spectrum Fund are expected to be sufficient to offset most, if not all, of
the expenses incurred by Spectrum Fund.
The Special Servicing Agreement also gives authority to Spectrum Fund to
utilize the Price name so long as (1) the Special Servicing Agreement is in
effect, and (2) the assets of the Growth Fund and the Income Fund are
invested pursuant to each Fund's objectives and policies in shares of the
various Underlying Price Funds (except for such cash or cash items as the
directors may determine to maintain from time to time to meet current
expenses and redemptions). The Special Servicing Agreement provides that the
Funds will utilize assets deposited with the custodian of each Fund from the
sale of each Fund's shares to promptly purchase
<PAGE>
shares of the specified Underlying Price Funds, and will undertake redemption
or exchange of such shares of the Underlying Price Funds in the manner
provided by the objectives and policies of each Fund.
Under the Investment Management Agreement with the Funds, and the Special
Servicing Agreement, T. Rowe Price has agreed to bear any expenses of
Spectrum Fund which exceed the estimated savings to each of the Underlying
Price Funds. Of course, shareholders of Spectrum Fund will still indirectly
bear their fair and proportionate share of the cost of operating the
Underlying Price Funds in which the Spectrum Fund invests because, Spectrum
Fund, as a shareholder of the Underlying Price Funds, will bear its
proportionate share of any fees and expenses paid by the Underlying Price
Funds. Spectrum Fund, as a shareholder of the selected Underlying Price
Funds, will benefit only from cost-sharing reductions in proportion to its
interest in such Underlying Price Funds.
Services
Under the Management Agreement with each Fund, T. Rowe Price or Price-Fleming
as the case may be, provides the Fund with discretionary investment services.
Specifically, T. Rowe Price and Price-Fleming are responsible for supervising
and directing the investments of the Fund in accordance with the Fund's
investment objectives, program, and restrictions as provided in its
prospectus and this Statement of Additional Information. T. Rowe Price and
Price-Fleming are also responsible for effecting all security transactions on
behalf of the Fund, including the negotiation of commissions and the
allocation of principal business and portfolio brokerage. However, it should
be understood that the Fund will invest its assets almost exclusively in the
shares of the Underlying Price Funds and such investments will be made
without the payment of any commission or other sales charges. In addition to
these services, T. Rowe Price and Price-Fleming provides the Fund with
certain corporate administrative services, including: maintaining the Fund's
corporate existence and corporate records; registering and qualifying Fund
shares under federal laws; monitoring the financial, accounting, and
administrative functions of the Fund; maintaining liaison with the agents
employed by the Fund such as the Fund's custodian and transfer agent;
assisting the Fund in the coordination of such agents' activities; and
permitting T. Rowe Price's and Price-Fleming's employees to serve as
officers, directors, and committee members of the Fund without cost to the
Fund.
T. Rowe Price and Price-Fleming have agreed not to be paid a management fee
for performing their services. However, T. Rowe Price and Price-Fleming will
receive management fees from managing the Underlying Price Funds in which
Spectrum Fund invests.
Each Fund's Management Agreement also provides that T. Rowe Price or
Price-Fleming, its directors, officers, employees, and certain other persons
performing specific functions for the Fund will only be liable to the Fund
for losses resulting from willful misfeasance, bad faith, gross negligence,
or reckless disregard of duty.
Management Fees of Underlying Price Funds
The Underlying Price Fund pays T. Rowe Price or Price-Fleming a fee ("Fee")
which consists of two components: a Group Management Fee ("Group Fee") and an
Individual Fund Fee ("Fund Fee"). The Fee is paid monthly to T. Rowe Price or
Price-Fleming on the first business day of the next succeeding calendar month
and is calculated as described below.
The monthly Group Fee ("Monthly Group Fee") is the sum of the daily Group Fee
accruals ("Daily Group Fee Accruals") for each month. The Daily Group Fee
Accrual for any particular day is computed by multiplying the Price Funds'
group fee accrual as determined below ("Daily Price Funds' Group Fee
Accrual") by the ratio of the Price Fund's net assets for that day to the sum
of the aggregate net assets of the Price Funds for that day. The Daily Price
Funds' Group Fee Accrual for any particular day is calculated by multiplying
the fraction of one (1) over the number of calendar days in the year by the
annualized Daily Price Funds' Group Fee Accrual for that day as determined in
accordance with the following schedule:
<PAGE>
<TABLE>
Price Funds' Annual Group Base Fee Rate for Each Level of
Assets
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
0.480% First $1 billion 0.360% Next $2 billion 0.310% Next $16
billion
---------------------------------------------------------------------------
0.450% Next $1 billion 0.350% Next $2 billion 0.305% Next $30
billion
---------------------------------------------------------------------------
0.420% Next $1 billion 0.340% Next $5 billion 0.300% Thereafter
---------------------------------------------------------------------------
0.390% Next $1 billion 0.330% Next $10 billion
---------------------------------------------------------------------------
0.370% Next $1 billion 0.320% Next $10 billion
</TABLE>
For the purpose of calculating the Group Fee, the Price Funds include all the
mutual funds distributed by T. Rowe Price Investment Services, Inc.,
(excluding T. Rowe Price Spectrum Fund, and any institutional or private
label mutual funds). For the purpose of calculating the Daily Price Funds'
Group Fee Accrual for any particular day, the net assets of each Price Fund
are determined in accordance with the Funds' prospectus as of the close of
business on the previous business day on which the Fund was open for
business.
The monthly Fund Fee ("Monthly Fund Fee") is the sum of the daily Fund Fee
accruals ("Daily Fund Fee Accruals") for each month. The Daily Fund Fee
Accrual for any particular day is computed by multiplying the fraction of one
(1) over the number of calendar days in the year by the individual Fund Fee
Rate and multiplying this product by the net assets of the Fund for that day,
as determined in accordance with the Fund's prospectus as of the close of
business on the previous business day on which the Fund was open for
business. The individual fund fees and total management fees of the
Underlying Price Funds are listed in the chart below:
<TABLE>
<CAPTION>
Fund Individual Fee as a Percentage Total Management Fee Paid
---- ------------------------------ -------------------------
- ----------------------------------------------------- of Fund Net Assets
------------------
-----------------------------------------------------------
<S> <C> <C>
Blue Chip Growth 0.30% 0.62%
Emerging Markets Bond 0.45 0.43a
Emerging Markets Stock 0.75 1.07
Equity Income 0.25 0.57
European Stock 0.50 0.82
GNMA 0.15 0.47
Growth & Income 0.25 0.57
Growth Stock 0.25 0.57
High Yield 0.30 0.62
International Bond 0.35 0.67
International Discovery 0.75 1.07
International Stock 0.35 0.67
Japan 0.50 0.82
Latin America 0.75 1.07
Mid-Cap Value 0.35 0.67b
New Asia 0.50 0.82
New Era 0.25 0.57
New Horizons 0.35 0.67
New Income 0.15 0.47
Short-Term Bond 0.10 0.42
Summit Cash Reserves N/A 0.45
U.S. Treasury Long-Term 0.05 0.37
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
a Had Price-Fleming not agreed to waive a portion of its management fees
and bear certain expenses in accordance with an expense limitation
agreement, Emerging Markets Bond's total management fee paid would
have been 0.60%.
b Price-Fleming agreed to waive management fees and bear certain
expenses in accordance with an expense limitation in effect through
December 31, 1997. The Fund's management fee includes 0.07% of
management fees repaid from prior years pursuant to the expense
limitation. Had Price-Fleming not agreed to waive a portion of its
management fees, Mid-Cap Value Fund's total management fee paid would
have been 0.74%.
Based on combined Price Funds' assets of over $76 billion at December 31,
1997, the Group Fee was 0.32%. The total combined management fee for each of
the Underlying Price Funds would have been an annual rate as shown above.
DISTRIBUTOR FOR FUND
-------------------------------------------------------------------------------
T. Rowe Price Investment Services, Inc. ("Investment Services"), a Maryland
corporation formed in 1980 as a wholly owned subsidiary of T. Rowe Price,
serves as Spectrum Fund's distributor, on behalf of the Income, Growth, and
International 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. The offering of Spectrum Fund's
shares is continuous.
Investment Services is located at the same address as the Spectrum Fund and
T. Rowe Price-100 East Pratt Street, Baltimore, Maryland 21202.
Investment Services serves as distributor to the Spectrum Fund, on behalf of
the Income, Growth, and International Funds, pursuant to an Underwriting
Agreement ("Underwriting Agreement"), which provides that the Fund will pay
all fees and expenses in connection with: necessary state filings; preparing,
setting in type, printing, and mailing its prospectuses and reports to
shareholders; and issuing its shares, including expenses of confirming
purchase orders.
The Underwriting Agreement provides that Investment Services will pay all
fees and expenses in connection with: printing and distributing prospectuses
and reports for use in offering and selling Fund shares; preparing, setting
in type, printing, and mailing all sales literature and advertising;
Investment Services' federal and state registrations as a broker-dealer; and
offering and selling shares for each Fund, except for those fees and expenses
specifically assumed by the Fund. Investment Services' expenses are paid by
T. Rowe Price.
Investment Services acts as the agent of the Spectrum Fund, on behalf of the
Income, Growth, and International Funds, in connection with the sale of the
shares for each Fund in the various states in which Investment Services is
qualified as a broker-dealer. Under the Underwriting Agreement, Investment
Services accepts orders for each Fund's shares at net asset value. No sales
charges are paid by investors or the Fund.
CUSTODIAN
-------------------------------------------------------------------------------
The Underlying Funds of the Spectrum International Fund have entered into a
Custodian Agreement with The Chase Manhattan Bank, N.A., London, pursuant to
which portfolio securities which are purchased outside the United States are
maintained in the custody of various foreign branches of The Chase Manhattan
<PAGE>
Bank and such other custodians, including foreign banks and foreign
securities depositories as are approved in accordance with regulations under
the Investment Company Act of 1940. State Street Bank's main office is at 225
Franklin Street, Boston, Massachusetts 02110. The address for The Chase
Manhattan Bank, N.A., London is Woolgate House, Coleman Street, London, EC2P
2HD, England.
State Street Bank and Trust Company, under an agreement with Spectrum Fund,
on behalf of the Income, Growth, and International Funds, is the custodian
for the Fund's U.S. securities and cash, but it does not participate in the
Funds' investment decisions. The Bank maintains shares of the Spectrum Funds
in the book entry system of such Funds' transfer agent, T. Rowe Price
Services. The domestic Underlying Funds' portfolio securities purchased in
the U.S. are maintained in the custody of the Bank and may be entered into
the Federal Reserve Book Entry System, or the security depository system of
the Depository Trust Corporation.
SHAREHOLDER SERVICES
-------------------------------------------------------------------------------
The Fund from time to time may enter into agreements with outside parties
through which shareholders hold Fund shares. The shares would be held by such
parties in omnibus accounts. The agreements would provide for payments by the
Fund to the outside party for shareholder services provided to shareholders
in the omnibus accounts.
CODE OF ETHICS
-------------------------------------------------------------------------------
The Fund's investment adviser (T. Rowe Price) has a written Code of Ethics
which requires all employees to obtain prior clearance before engaging in
personal securities transactions. In addition, all employees must report
their personal securities transactions within 10 days. Employees will not be
permitted to effect transactions in a security: if there are pending client
orders in the security; the security has been purchased or sold by a client
within seven calendar days; the security is being considered for purchase for
a client; a change has occurred in T. Rowe Price's rating of the security
within seven calendar days prior to the date of the proposed transaction; or
the security is subject to internal trading restrictions. In addition,
employees are prohibited from profiting from short-term trading (e.g.,
purchases and sales involving the same security within 60 days). Any material
violation of the Code of Ethics is reported to the Board of the Fund. The
Board also reviews the administration of the Code of Ethics on an annual
basis.
PRICING OF SECURITIES
-------------------------------------------------------------------------------
The securities of the Underlying Price Funds held by each Fund are valued at
the net asset value of each Underlying Price Fund. For the Growth Fund,
short-term money market investments are valued at cost which, when combined
with accrued interest receivable, approximates market value. For the
International Fund, short-term debt securities are valued at amortized cost,
which approximates fair market value. For the Income Fund, securities with
less than one year to maturity are stated at fair value which is determined
by using a matrix system that establishes a value for each security based on
money market yields. Also, for the International Fund, portfolio securities
of the Underlying Funds may be listed on foreign exchanges that can 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.
<PAGE>
NET ASSET VALUE PER SHARE
-------------------------------------------------------------------------------
The purchase and redemption price of the Fund's shares is equal to the Fund's
net asset value per share or share price. The Fund determines its net asset
value per share by subtracting its liabilities (including accrued expenses
and dividends payable) from its total assets (the market value of the
securities the Fund holds plus cash and other assets, including income
accrued but not yet received) and dividing the result by the total number of
shares outstanding. The net asset value per share of the Fund is normally
calculated as of the close of trading on the New York Stock Exchange ("NYSE")
every day the NYSE is open for trading. The NYSE is closed on the following
days: New Year's Day, Dr. Martin Luther King, Jr. Holiday, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
Determination of net asset value (and the offering, sale redemption and
repurchase of shares) for the Fund may be suspended at times (a) during which
the NYSE is closed, other than customary weekend and holiday closings, (b)
during which trading on the NYSE is restricted, (c) during which an emergency
exists as a result of which disposal by the Fund of securities owned by it is
not reasonably practicable or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or (d) during which a
governmental body having jurisdiction over the Fund may by order permit such
a suspension for the protection of the Fund's shareholders; provided that
applicable rules and regulations of the Securities and Exchange Commission
(or any succeeding governmental authority) shall govern as to whether the
conditions prescribed in (b), (c), or (d) exist.
DIVIDENDS AND DISTRIBUTIONS
-------------------------------------------------------------------------------
Unless you elect otherwise, capital gain distributions, if any, will be
reinvested on the reinvestment date using the NAV per share of that date. The
reinvestment date normally precedes the payment date by about 10 days,
although the exact timing is subject to change.
TAX STATUS
-------------------------------------------------------------------------------
The Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended ("Code").
A portion of the dividends paid by the Growth and Income Funds may be
eligible for the dividends-received deduction for corporate shareholders. The
dividends of the Spectrum International Fund will not be eligible for this
deduction, if, as expected, none of the fund's income consists of dividends
paid by U.S. corporations. Capital gain distributions paid from these Funds
are never eligible for the dividends-received deduction. For tax purposes, it
does not make any difference whether dividends and capital gain distributions
are paid in cash or in additional shares. The Fund must declare dividends by
December 31 of each year equal to at least 98% of ordinary income (as of
December 31) and capital gains (as of October 31) in order to avoid a federal
excise tax and distribute within 12 months 100% of ordinary income and
capital gains as of December 31 to avoid a federal income tax.
At the time of your purchase, the Fund's net asset value may reflect
undistributed income (Growth and International Funds), capital gains or net
unrealized appreciation of securities held by the Fund. A subsequent
distribution to you of such amounts, although constituting a return of your
investment, would be taxable. For federal income tax purposes, the Fund is
permitted to carry forward its net realized capital losses, if any, for eight
years and realize net capital gains up to the amount of such losses without
being required to pay taxes on, or distribute, such gains.
If, in any taxable year, the Fund should not qualify as a regulated
investment company under the code: (i) the Fund would be taxed at normal
corporate rates on the entire amount of its taxable income, if any, without
<PAGE>
deduction for dividends or other distributions to shareholders; and (ii) the
Fund's distributions to the extent made out of the Fund's current or
accumulated earnings and profits would be taxable to shareholders as ordinary
dividends (regardless of whether they would otherwise have been considered
capital gain dividends), and, for Spectrum Income and Spectrum Growth Funds,
would qualify for the 70% deduction for dividends received by corporations.
However, for Spectrum International Fund, the dividends 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.
Taxation of Foreign Shareholders
The Code provides that dividends from net income will be subject to U.S. tax.
For shareholders who are not engaged in a business in the U.S., this tax
would be imposed at the rate of 30% upon the gross amount of the dividends in
the absence of a Tax Treaty providing for a reduced rate or exemption from
U.S. taxation. Distributions of net long-term capital gains realized by the
Fund are not subject to tax unless the foreign shareholder is a nonresident
alien individual who was physically present in the U.S. during the tax year
for more than 182 days.
YIELD INFORMATION
-------------------------------------------------------------------------------
Spectrum Income Fund
An income factor is calculated for each security in the portfolio based upon
the security's market value at the beginning of the period and yield as
determined in conformity with regulations of the Securities and Exchange
Commission. The income factors are then totaled for all securities in the
portfolio. Next, expenses of the Fund for the period, net of expected
reimbursements, are deducted from the income to arrive at net income, which
is then converted to a per share amount by dividing net income by the average
number of shares outstanding during the period. The net income per share is
divided by the net asset value on the last day of the period to produce a
monthly yield which is then annualized. If applicable, a taxable-equivalent
yield is calculated by dividing this yield by one minus the effective federal
income tax rate. Quoted yield factors are for comparison purposes only, and
are not intended to indicate future performance or forecast the dividend per
share of the Fund.
The yield of the Fund calculated under the above-described method for the
month ended December 31, 1997, was 6.05%.
INVESTMENT PERFORMANCE
-------------------------------------------------------------------------------
Total Return Performance
The Fund's calculation of total return performance includes the reinvestment
of all capital gain distributions and income dividends for the period or
periods indicated, without regard to tax consequences to a shareholder in the
Fund. Total return is calculated as the percentage change between the
beginning value of a static account in the Fund and the ending value of that
account measured by the then current net asset value, including all shares
acquired through reinvestment of income and capital gain dividends. The
results shown are historical and should not be considered indicative of the
future performance of the Fund. Each average annual compound rate of return
is derived from the cumulative performance of the Fund over the time period
specified. The annual compound rate of return for the Fund over any other
period of time will vary from the average.
<PAGE>
<TABLE>
<CAPTION>
Cumulative Performance Percentage Change
1 Yr. Ended 5 Yrs. Ended 10 Yrs. Ended % Since Inception
----------- ------------ ------------- ------- ---------
12/31/97 12/31/97 12/31/97 Inception Date
-------- -------- -------- --------- ----
12/31/97
--------
<S> <C> <C> <C> <C> <C>
S & P 500 33.36% 151.63% 425.68%
Dow Jones Industrial
Average 24.94 170.73 451.88
CPI 2.02 14.02 40.21
Spectrum Growth Fund 17.40 125.59 -- 182.48% 06/29/90
Spectrum Income Fund 12.18 58.89 -- 110.44 06/29/90
Spectrum International 2.42 -- -- 2.42 12/31/96
Fund
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Average Annual Compound Rates of Return
1 Yr. Ended 5 Yrs. Ended 10 Yrs. Ended % Since Inception Date
----------- ------------ ------------- ------- --------------
12/31/97 12/31/97 12/31/97 Inception
-------- -------- -------- ---------
12/31/97
--------
<S> <S> <C> <C> <C> <C> <C>
S & P 500 33.36% 20.27% 18.05%
Dow Jones Industrial
Average 24.94 22.04 18.63
CPI 2.02 2.66 3.44
Spectrum Growth Fund 17.40 17.67 -- 14.84% 06/29/90
Spectrum Income Fund 12.18 9.70 -- 10.42 06/29/90
Spectrum International 2.42 -- -- 2.42 12/31/96
Fund
-------------------------------------------------------------------------------------------------
</TABLE>
Outside Sources of Information
From time to time, in reports and promotional literature: (1) the Fund's
total return performance, ranking, or any other measure of the Fund's
performance may be compared to any one or combination of the following: (i) a
broadbased index; (ii) other groups of mutual funds, including T. Rowe Price
Funds, tracked by independent research firms ranking entities, or financial
publications; (iii) indices of stocks comparable to those in which the Fund
invests; (2) the Consumer Price Index (or any other measure for inflation,
government statistics, such as GNP may be used to illustrate investment
attributes of the Fund or the general economic, business, investment, or
financial environment in which the Fund operates; (3) various financial,
economic and market statistics developed by brokers, dealers and other
persons may be used to illustrate aspects of the Fund's performance; (4) the
effect of tax-deferred compounding on the Fund's investment returns, or on
returns in general in both qualified and nonqualified retirement plans or any
other tax advantage product, may be illustrated by graphs, charts, etc.; and
(5) the sectors or industries in which the Fund invests may be compared to
relevant indices or surveys in order to evaluate the Fund's historical
performance or current or potential value with respect to the particular
industry or sector.
Other Publications
From time to time, in newsletters and other publications issued by T. Rowe
Price Investment Services, Inc., T. Rowe Price mutual fund portfolio managers
may discuss economic, financial and political developments in the U.S. and
abroad and how these conditions have affected or may affect securities prices
or the Fund; individual securities within the Fund's portfolio; and their
philosophy regarding the selection of individual stocks, including why
specific stocks have been added, removed or excluded from the Fund's
portfolio.
<PAGE>
Other Features and Benefits
The Fund is a member of the T. Rowe Price family of Funds and may help
investors achieve various long-term investment goals, which include, but are
not limited to, investing money for retirement, saving for a down payment on
a home, or paying college costs. To explain how the Fund could be used to
assist investors in planning for these goals and to illustrate basic
principles of investing, various worksheets and guides prepared by T. Rowe
Price Associates, Inc. and/or T. Rowe Price Investment Services, Inc. may be
made available.
No-Load Versus Load and 12b-1 Funds
Unlike the T. Rowe Price funds, many mutual funds charge sales fees to
investors or use fund assets to finance distribution activities. These fees
are in addition to the normal advisory fees and expenses charged by all
mutual funds. There are several types of fees charged which vary in magnitude
and which may often be used in combination. A sales charge (or "load") can be
charged at the time the fund is purchased (front-end load) or at the time of
redemption (back-end load). Front-end loads are charged on the total amount
invested. Back-end loads or "redemption fees" are charged either on the
amount originally invested or on the amount redeemed. 12b-1 plans allow for
the payment of marketing and sales expenses from fund assets. These expenses
are usually computed daily as a fixed percentage of assets.
The Fund is a no-load fund which imposes no sales charges or 12b-1 fees.
No-load funds are generally sold directly to the public without the use of
commissioned sales representatives. This means that 100% of your purchase is
invested for you.
Redemptions in Kind
In the unlikely event a shareholder were to receive an in kind redemption of
portfolio securities of the Fund, brokerage fees could be incurred by the
shareholder in a subsequent sale of such securities.
Issuance of Fund Shares for Securities
Transactions involving issuance of Fund shares for securities or assets other
than cash will be limited to (1) bona fide reorganizations; (2) statutory
mergers; or (3) other acquisitions of portfolio securities that: (a) meet the
investment objective and policies of the Fund; (b) are acquired for
investment and not for resale except in accordance with applicable law; (c)
have a value that is readily ascertainable via listing on or trading in a
recognized United States or international exchange or market; and (d) are not
illiquid.
CAPITAL STOCK
-------------------------------------------------------------------------------
The Articles of Incorporation of Spectrum Fund currently establish three
series (i.e., the Income Fund, the Growth Fund, and the International Fund),
each of which represents a separate class of the Corporation's shares and has
different objectives and investment policies. The Articles of Incorporation
also provide that the Board of Directors may issue additional series of
shares. Each share of each Fund represents an equal proportionate share in
that Fund, with each other share, and is entitled to such dividends and
distributions of income belonging to that Fund as are declared by the
Directors. In the event of the liquidation of a Fund, each share is entitled
to a pro rata share of the net assets of that Fund.
The Fund's Charter authorizes the Board of Directors to classify and
reclassify any and all shares which are then unissued, including unissued
shares of capital stock into any number of classes or series, each class or
series consisting of such number of shares and having such designations, such
powers, preferences, rights, qualifications, limitations, and restrictions,
as shall be determined by the Board subject to the Investment Company Act and
other applicable law. The shares of any such additional classes or series
might therefore differ from the shares of the present class and series of
capital stock and from each other as to preferences, conversions or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption, subject to applicable
law, and might thus be superior or inferior to the capital stock or to other
classes or series in various characteristics. The Board of Directors may
increase or decrease the
<PAGE>
aggregate number of shares of stock or the number of shares of stock of any
class or series that the Fund has authorized to issue without shareholder
approval.
Except to the extent that the Fund's Board of Directors might provide by
resolution that holders of shares of a particular class are entitled to vote
as a class on specified matters presented for a vote of the holders of all
shares entitled to vote on such matters, there would be no right of class
vote unless and to the extent that such a right might be construed to exist
under Maryland law. The Charter contains no provision entitling the holders
of the present class of capital stock to a vote as a class on any matter.
Accordingly, the preferences, rights, and other characteristics attaching to
any class of shares, including the present class of capital stock, might be
altered or eliminated, or the class might be combined with another class or
classes, by action approved by the vote of the holders of a majority of all
the shares of all classes entitled to be voted on the proposal, without any
additional right to vote as a class by the holders of the capital stock or of
another affected class or classes.
Shareholders are entitled to one vote for each full share held (and
fractional votes for fractional shares held) and will vote in the election of
or removal of directors (to the extent hereinafter provided) and on other
matters submitted to the vote of shareholders. There will normally be no
meetings of shareholders for the purpose of electing directors unless and
until such time as less than a majority of the directors holding office have
been elected by shareholders, at which time the directors then in office will
call a shareholders' meeting for the election of directors. Except as set
forth above, the directors shall continue to hold office and may appoint
successor directors. Voting rights are not cumulative, so that the holders of
more than 50% of the shares voting in the election of directors can, if they
choose to do so, elect all the directors of the Fund, in which event the
holders of the remaining shares will be unable to elect any person as a
director. As set forth in the By-Laws of the Fund, a special meeting of
shareholders of the Fund shall be called by the Secretary of the Fund on the
written request of shareholders entitled to cast at least 10% of all the
votes of the Fund entitled to be cast at such meeting. Shareholders
requesting such a meeting must pay to the Fund the reasonably estimated costs
of preparing and mailing the notice of the meeting. The Fund, however, will
otherwise assist the shareholders seeking to hold the special meeting in
communicating to the other shareholders of the Fund to the extent required by
Section 16(c) of the Investment Company Act of 1940.
FEDERAL REGISTRATION OF SHARES
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The Fund's shares are registered for sale under the Securities Act of 1933.
Registration of the Fund's shares is not required under any state law, but
the Fund is required to make certain filings with and pay fees to the states
in order to sell its shares in the states.
LEGAL COUNSEL
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Shereff, Friedman, Hoffman, & Goodman LLP, whose address is 919 Third Avenue,
New York, New York 10022, is legal counsel to the Fund.
INDEPENDENT ACCOUNTANTS
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Price Waterhouse LLP, 1306 Concourse Drive, Suite 100, Linthicum, Maryland
21090-1020, are independent accountants to the Fund.
<PAGE>
The financial statements of the Funds for the year ended December 31, 1997,
and the report of independent accountants are included in each Fund's Annual
Report for the year ended December 31, 1997. A copy of each Annual Report
accompanies this Statement of Additional Information. The following financial
statements and the report of independent accountants appearing in each Annual
Report for the year ended December 31, 1997, are incorporated into this
Statement of Additional Information by reference:
<TABLE>
<CAPTION>
ANNUAL REPORT REFERENCES:
SPECTRUM SPECTRUM
GROWTH INCOME
------ ------
<S> <C> <C> <C>
Report of Independent Accountants 26 26
Statement of Net Assets, December 31, 1997 16 17
Statement of Operations, year ended
December 31, 1997 19 19
Statement of Changes in Net Assets, years ended
December 31, 1997 and December 31, 1996 20 21
Notes to Financial Statements, December 31, 1997 23-25 23-25
Financial Highlights 13 14
</TABLE>
<TABLE>
<CAPTION>
ANNUAL REPORT REFERENCES:
SPECTRUM
INTERNATIONAL
-------------
<S> <C> <C>
Report of Independent Accountants 26
Statement of Net Assets, December 31, 1997 18
Statement of Operations, year ended
December 31, 1997 19
Statement of Changes in Net Assets, years ended
December 31, 1997 22
Notes to Financial Statements, December 31, 1997 23-25
Financial Highlights 15
</TABLE>
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements. Condensed financial information (Financial Highlights
table) is included in Part A of the Registration Statement.
Financial Highlights, 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.
(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 Management Agreement between the Registrant 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)
<PAGE>
(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) Custody Agreements
(8)(a) Custodian Agreement between T. Rowe Price Funds and State Street
Bank and Trust Company, dated January 28, 1998
(9) Other Agreements
(9)(a) Transfer Agency and Service Agreement between T. Rowe Price
Services, Inc. and T. Rowe Price Funds, dated January 1, 1998, as
amended January 21, 1998
(9)(b) Agreement between T. Rowe Price Associates, Inc. and T. Rowe Price
Funds for Fund Accounting Services, dated January 1, 1998, as
amended January 21, 1998
(9)(c) Agreement between T. Rowe Price Retirement Plan Services, Inc. and
the Taxable Funds, dated January 1, 1998, as amended January 21,
1998
(9)(d) Special Servicing Agreement between T. Rowe Price Funds, T. Rowe
Price Services, Inc. and Registrant, dated June 12, 1990 (filed
with Amendment No. 11), as amended August 18, 1997
(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), as amended August 18,
1997
(9)(f) Special Servicing Agreement between T. Rowe Price Funds, T. Rowe
Price Services, Inc., and Registrant, dated January 1, 1998
(9)(g) Special Servicing Agreement between T. Rowe Price Funds, Rowe
Price-Fleming International, Inc., T. Rowe Price Associates, Inc.,
and Registrant, dated January 1, 1998
<PAGE>
(10) Opinion of Counsel
(11) Consent of Independent Accountants
(12) Inapplicable
(13) Inapplicable
(14) Inapplicable
(15) Inapplicable
(17) Financial Data Schedule
(18) Inapplicable
(19) Other Exhibits
(a)Power of Attorney
(b)Certificate of Vice President pursuant to Rule 306 of Regulation
S-T.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of March 31, 1998, there were 65,879 shareholders in the Spectrum Income
Fund, 102,117 shareholders in the Spectrum Growth Fund, and 6,242 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 fifty
other investment companies, including, T. Rowe Price Growth Stock Fund, Inc., T.
Rowe Price New Horizons Fund, Inc., T. Rowe Price New Era Fund, Inc., T. Rowe
Price New Income Fund, Inc., T. Rowe Price Prime Reserve Fund, Inc., T. Rowe
Price Tax-Free Income Fund, Inc., T. Rowe Price Tax-Exempt Money Fund, Inc., T.
Rowe Price International Funds, Inc., T. Rowe Price Growth & Income Fund, Inc.,
T. Rowe Price Tax-Free Short-Intermediate Fund, Inc., T. Rowe Price Short-Term
Bond Fund, Inc., T. Rowe Price High Yield Fund, Inc., T. Rowe Price Tax-
Free High Yield Fund, Inc., T. Rowe Price New America Growth Fund, T. Rowe Price
Equity Income Fund, T. Rowe Price GNMA Fund, T. Rowe Price Capital Appreciation
Fund, T. Rowe Price California Tax-Free Income Trust, T. Rowe Price State
Tax-Free Income Trust, T. Rowe Price Science & Technology Fund, Inc., T. Rowe
Price Small-Cap Value Fund, Inc., Institutional International Funds, Inc., T.
Rowe Price U.S. Treasury Funds, Inc., T. Rowe Price Index Trust, Inc., T. Rowe
Price Spectrum Fund, Inc., T. Rowe Price Balanced Fund, Inc., T. Rowe Price
Short-Term U.S. Government Fund, Inc., T. Rowe Price Mid-Cap Growth Fund, Inc.,
T. Rowe Price Small-Cap Stock Fund, Inc., T. Rowe Price Tax-Free Insured
Intermediate Bond Fund, Inc., T. Rowe Price Dividend Growth Fund, Inc., T. Rowe
Price Blue Chip Growth Fund, Inc., T. Rowe Price Summit Funds, Inc., T. Rowe
Price Summit Municipal Funds, Inc., T. Rowe Price Equity Series, Inc., T. Rowe
Price International Series, Inc., T. Rowe Price Fixed Income Series, Inc., T.
Rowe Price Personal Strategy Funds, Inc., T. Rowe Price Value Fund, Inc., T.
Rowe Price Capital Opportunity Fund, Inc., T. Rowe Price Corporate Income Fund,
Inc., T. Rowe Price Health Sciences Fund, Inc., T. Rowe Price Mid-Cap Value
Fund, Inc., Institutional Equity Funds, Inc., T. Rowe Price Financial Services
Fund, Inc., T. Rowe Price Diversified Small-Cap Growth Fund, Inc., T. Rowe Price
Tax-Efficient Balanced Fund, Inc., Reserve Investment Funds, Inc., T. Rowe Price
Media & Telecommunications Fund, Inc., and T. Rowe Price Real Estate Fund, Inc.
The Registrant and the fifty investment companies listed above, with the
exception of Institutional International Funds, Inc., and Institutional Equity
Funds, Inc., will be collectively referred to as the Price Funds. The investment
manager for Institutional Equity Funds, Inc., and the Price Funds, excluding T.
Rowe Price International Funds, Inc. and T. Rowe Price International Series,
Inc., is the Manager. Price-Fleming is the manager to T. Rowe Price
International Funds, Inc., T. Rowe Price International Series, Inc. and
Institutional International Funds, Inc. and is 50% owned by TRP Finance, Inc., a
subsidiary of the Manager, 25% owned by Copthall Overseas Limited, a subsidiary
of Robert Fleming Holdings Limited, and 25% owned by Jardine Fleming
International Holdings Limited. In addition to the corporate insureds, the
policies also cover the officers, directors, and employees of each of the named
insureds. The premium is allocated among the named corporate insureds in
accordance with the provisions of Rule 17d-1(d)(7) under the Investment Company
Act of 1940.
GENERAL. The Charter of the Corporation provides that to the fullest extent
permitted by Maryland or federal law, no director or officer of the Corporation
shall be personally liable to the Corporation or the holders of Shares for money
damages and each director and officer shall be indemnified by the Corporation;
PROVIDED, HOWEVER, that nothing herein shall be deemed to protect any director
or officer of the Corporation against any liability to the Corporation of the
holders of Shares to which such director or officer would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office.
<PAGE>
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 applicable Maryland
law, as from time to time amended. The Corporation shall pay any reasonable
expenses so incurred by such Indemnitee in defending a Proceeding in advance of
the final disposition thereof to the fullest extent that such advance payment
may be lawful under applicable Maryland Law, as from time to time amended.
Subject to any applicable limitations and requirements set forth in the
Corporation's Articles of Incorporation and in these By-Laws, any payment of
indemnification or advance of expenses shall be made in accordance with the
procedures set forth in applicable Maryland law, as from time to time amended.
Notwithstanding the foregoing, nothing herein shall protect or purport to
protect any Indemnitee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office
("Disabling Conduct").
Anything in this Article X to the contrary notwithstanding, no
indemnification shall be made by the Corporation to any Indemnitee unless:
(a)
there is a final decision on the merits by a court or other body
before whom the Proceeding was brought that the Indemnitee was not
liable by reason of Disabling Conduct; or
(b) in the absence of such a decision, there is a reasonable
determination, based upon a review of the facts, that the
Indemnitee was not liable by reason of Disabling Conduct, which
determination shall be made by:
(i) the vote of a majority of a quorum of
directors who are neither "interested persons" of the Corporation,
as defined in Section 2(a)(19) of the Investment Company Act of
1940, nor parties to the Proceeding; or
(ii) an independent legal counsel in a written opinion.
Anything in this Article X to the contrary notwithstanding, any advance of
expenses by the Corporation to any Indemnitee shall be made only upon the
undertaking by such Indemnitee to repay the advance unless it is ultimately
determined that such Indemnitee is entitled to indemnification as above
provided, and only if one of the following conditions is met:
(a) the Indemnitee provides a security for his undertaking; or
(b) the Corporation shall be insured against losses arising by reason
of any lawful advances; or
(c) there is a determination, based on a review of readily available
facts, that there is reason to believe that the Indemnitee will
ultimately be found entitled to indemnification, which
determination shall be made by:
(i) a majority of a quorum of directors who are neither "interested
persons" of the Corporation as defined in Section 2(a)(19) of the
Investment Company Act of 1940, nor parties to the Proceeding; or
(ii) an independent legal counsel in a written opinion.
Section 10.02 of the Registrant's By-Laws provides as follows:
SECTION 10.02. INSURANCE OF OFFICERS, DIRECTORS, EMPLOYEES, AND AGENTS. To
the fullest extent permitted by applicable Maryland law and by Section 17(h) of
the Investment Company Act of 1940, as from time to time amended, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee, or agent of the Corporation, or who is or
was serving at the request of the Corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or other
enterprise, against any liability asserted against him and incurred by him in or
arising out of his position, whether or not the Corporation would have the power
to indemnify him against such liability.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers,
and controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter 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 incorporated in
Maryland 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, was incorporated in Maryland 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,
was incorporated in Maryland in 1991. It was organized for, and engages in, the
sale of certain investment related products prepared by Investment Services and
T. Rowe Price Retirement Plan Services.
T. Rowe Price Associates Foundation, Inc. (the "Foundation"), was
incorporated in 1981 (and is not a subsidiary of the Manager). The Foundation's
overall objective emphasizes various community needs by giving to a broad range
of educational, civic, cultural, and health-related institutions. The Foundation
has a very generous matching gift program whereby employee gifts
designated to qualifying institutions are matched according to established
guidelines.
T. Rowe Price Services, Inc. ("Price Services"), a wholly owned subsidiary
of the Manager, was incorporated in Maryland 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 one trust.
T. Rowe Price Investment Technologies, Inc. was incorporated in Maryland in
1996. A wholly owned subsidiary of the Manager, it owns the technology rights,
hardware, and software of the Manager and affiliated companies and provides
technology services to them.
TRPH Corporation, a wholly owned subsidiary of the Manager, was organized
in 1997 to acquire an interest in a UK-based corporate finance advisory firm.
T. Rowe Price Threshold Fund Associates, Inc., a wholly owned subsidiary of
the Manager, was incorporated in Maryland 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.
T. Rowe Price Stable Asset Management, Inc. ("Stable Asset Management"),
was incorporated in Maryland in 1988 as a wholly owned subsidiary of the
Manager. Stable Asset Management, is registered as an investment adviser under
the Investment Advisers Act of 1940, and 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 General Partner of T. Rowe Price Recovery Fund, L.P., a Delaware
limited partnership which invests in financially distressed companies.
T. Rowe Price Recovery Fund II Associates, L.L.C., is a Maryland limited
liability company organized in 1996. Wholly owned by the Manager and the Trust
Company, it serves as General Partner of T. Rowe Price Recovery Fund II, L.P., a
Delaware limited partnership which also 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).
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.
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.
TRP Suburban, Inc., is a Maryland corporation organized in 1990 as a wholly
owned subsidiary of the Manager. It entered into agreements with McDonogh School
and CMANE-McDonogh-Rowe Limited Partnership to construct an office building in
Owings Mills, Maryland, which currently 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. and T. Rowe Price Strategic
Partners Fund II, L.P. ("Strategic Partners Funds") are Delaware limited
partnerships organized in 1990 and 1992, respectively, 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 T. Rowe Price
Strategic Partners Fund, L.P. is T. Rowe Price Strategic Partners, L.P., 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. The general partner of T. Rowe Price Strategic
Partners Fund II, L.P. is T. Rowe Price Strategic Partners II, L.P., a Delaware
limited partnership whose general partner is also T. Rowe Price Strategic
Partners Associates, Inc.
Listed below are the directors and executive officers 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.
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 Dean of the
Jepson School of Leadership Studies at the University of Richmond and a director
of: Comdial Corporation, a manufacturer of telephone systems for businesses;
Cone Mills Corporation, a textiles producer; and Providence Journal Company, a
publisher of newspapers and owner of broadcast television stations. Mr.
Rosenblum's address is: University of Richmond, Richmond, Virginia 23173.
ROBERT L. STRICKLAND, Director of the Manager. Mr. Strickland retired as
Chairman of Lowe's Companies, Inc., as of January 31, 1998. He is a Director of
Hannaford Bros., Co., a food retailer. Mr. Strickland's address is 604 Two
Piedmont Plaza Building, Winston-Salem, North Carolina 27104.
PHILIP C. WALSH, Director of the Manager. Mr. Walsh is a Consultant to Cyprus
Amax Minerals Company, Englewood, Colorado
and Director of Piedmont Mining Company, Inc., in Charlotte, North Carolina. Mr.
Walsh's address is: Pleasant Valley, Peapack, New Jersey 07977.
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; the James River Corporation of Virginia; and
Albemarle Corporation. Mrs. Whittemore's address is One James Center, Richmond,
Virginia 23219.
With the exception of Messrs. Halbkat, Menschel, Rosenblum, Strickland, and
Walsh, and Mrs. Whittemore, all of the following directors of the Manager are
employees of the Manager.
JAMES S. RIEPE, who is a Vice-Chairman of the Board, Director, and Managing
Director of the Manager is also Chairman of the Board of T. Rowe Price (Canada),
Inc., T. Rowe Price Investment Services, T. Rowe Price Investment Technologies,
Inc., T. Rowe Price Retirement Plan Services, Inc., T. Rowe Price Services,
Inc., and T. Rowe Price Trust Company; a Director of Price-Fleming, General Re
Corporation, T. Rowe Price Insurance Agency, Inc.; a Director and Vice President
of T. Rowe Price Stable Asset Management, Inc.; a Director and President of TRP
Distribution, Inc. and TRP Suburban Second, Inc.
GEORGE A. ROCHE, who is Chairman of the Board, President, and Managing Director
of the Manager is also Chairman of the Board of TRP Finance, Inc.; a Director of
T. Rowe Price Retirement Plan Services, Inc., T. Rowe Price Strategic Partners,
Inc., and TRP Suburban, Inc.; and a Director and Vice President of
Price-Fleming, T. Rowe Price Threshold Fund, Inc., and TRP Suburban Second, Inc.
M. DAVID TESTA, who is a Vice-Chairman of the Board, Chief Investment Officer,
and Managing Director of the Manager is also Chairman of the Board of
Price-Fleming; President and Director of T. Rowe Price (Canada), Inc.; a
Director and Vice President of T. Rowe Price Trust Company; and a Director of
TRPH Corporation.
HENRY H. HOPKINS, who is a Director and Managing Director of the Manager is also
a Director of T. Rowe Price Insurance Agency, Inc.; a Vice President and
Director of T. Rowe Price Investment Services, Inc., T. Rowe Price Services,
Inc., T. Rowe Price Threshold Fund Associates, Inc., TRP Distribution, Inc., and
TRPH Corporation; and a Vice President of Price-Fleming.
JAMES A. C. KENNEDY III, JOHN H. LAPORTE, JR., WILLIAM T.
REYNOLDS, AND BRIAN C. ROGERS are Directors and Managing Directors of the
Manager. In addition, Mr. Kennedy is also President and Director of T. Rowe
Price Strategic Partners Associates, Inc., and a Director and Vice President of
T. Rowe Price Threshold Fund Associates, Inc.; Mr. Reynolds is Chairman of the
Board of T. Rowe Price Stable Asset Management and a Director of TRP Finance,
Inc.; and Mr. Rogers is a Vice President of T. Rowe Price Trust Company.
CHARLES P. SMITH AND PETER VAN DYKE are Managing Directors of the Manager and
Vice Presidents of Price-Fleming. In addition, Mr. Van Dyke is also a Vice
President of T. Rowe Price (Canada), Inc., T. Rowe Price Stable Asset
Management, and T. Rowe Price Trust Company.
EDWARD C. BERNARD is a Managing Director of the Manager and a Director and
President of T. Rowe Price Insurance Agency and T. Rowe Price Investment
Services, Inc.; a Director of T. Rowe Price Services, Inc., and a Vice President
of TRP Distribution, Inc.
STEPHEN W. BOESEL, EDMUND M. NOTZON, and RICHARD T. WHITNEY are Managing
Directors of the Manager and Vice Presidents of T. Rowe Price Trust Company.
THOMAS H. BROADUS, JR. is a Managing Director of the Manager and a Vice
President of T. Rowe Price (Canada), Inc.
MICHAEL A. GOFF is a Managing Director of the Manager and a Director and the
President of T. Rowe Price Investment Technologies, Inc.
ANDREW C. GORESH is a Managing Director of the Manager and a Director and Vice
President of TRP Suburban, Inc., and TRP Suburban Second, Inc.
GEORGE A. MURNAGHAN is a Managing Director of the Manager; an Executive Vice
President of Price-Fleming; and a Vice President of T. Rowe Price Trust Company.
R. TODD RUPPERT is a Managing Director of the Manager; a Director and the
President of TRPH Corporation; and a Vice President of T. Rowe Price Retirement
Plan Services, Inc., and T. Rowe Price Trust Company.
CHARLES E. VIETH is a Managing Director of the Manager and a Director and
President of T. Rowe Price Retirement Plan Services, Inc.; Director and Vice
President of T. Rowe Price Services, Inc. and T. Rowe Price Investment Services,
Inc.; and Vice President of TRP Distribution, Inc. and T. Rowe Price (Canada),
Inc.
ALVIN M. YOUNGER, JR., who is Chief Financial Officer, Managing
Director, Secretary, and Treasurer of the Manager is also Secretary and
Treasurer for Price-Fleming, T. Rowe Price (Canada), Inc., T. Rowe Price
Insurance Agency, Inc., T. Rowe Price Investment Services, Inc., T. Rowe Price
Investment Technologies, Inc., T. Rowe Price Recovery Fund Associates, Inc., T.
Rowe Price Retirement Plan Services, Inc., T. Rowe Price Services, Inc., T. Rowe
Price Stable Asset Management, Inc., T. Rowe Price Strategic Partners
Associates, Inc., T. Rowe Price Trust Company, TRP Distribution, Inc., and TRPH
Corporation; and Treasurer and Clerk of T. Rowe Price Insurance Agency of
Massachusetts, Inc.; and Director, Vice President, Treasurer, and Secretary of
TRP Suburban, Inc., and TRP Suburban Second, Inc.; and Director of TRP Finance,
Inc.
PRESTON G. ATHEY, BRIAN W.H. BERGHUIS, MARY J. MILLER, AND CHARLES A. MORRIS are
Managing Directors of the Manager.
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
(a) The principal underwriter for the Registrant is Investment
Services. Investment Services acts as the principal underwriter for
eighty-six mutual funds. Investment Services is a wholly owned
subsidiary of the Manager, is registered as a broker-dealer under
the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. Investment Services has
been formed for the limited purpose of distributing the shares of
the Price Funds and will not engage in the general securities
business. Since the Price Funds are sold on a no-load basis,
Investment Services will not receive any commissions or other
compensation for acting as principal underwriter.
(b) The address of each of the directors and officers of Investment
Services listed below is 100 East Pratt Street, Baltimore, Maryland
21202.
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
<S> <C> <C>
James S. Riepe Chairman of the Board Chairman of the
and Director Board
Edward C. Bernard President and Director None
Henry H. Hopkins Vice President and Director Vice President
Charles E. Vieth Vice President and Director None
Patricia M. Archer Vice President None
Joseph C. Bonasorte Vice President None
Darrell N. Braman Vice President None
Ronae M. Brock Vice President None
Meredith C. Callanan Vice President None
Christine M. Carolan Vice President None
Joseph A. Carrier Vice President None
Laura H. Chasney Vice President None
Renee M. Christoff Vice President None
Victoria C. Collins Vice President None
Christopher W. Dyer Vice President None
Christine S. Fahlund Vice President None
Forrest R. Foss Vice President None
Andrea G. Griffin Vice President None
Douglas E. Harrison Vice President None
David J. Healy Vice President None
Joseph P. Healy Vice President None
Walter J. Helmlinger Vice President None
Eric G. Knauss Vice President None
Sharon R. Krieger Vice President None
Keith W. Lewis Vice President None
Sarah McCafferty Vice President None
Maurice A. Minerbi Vice President None
Nancy M. Morris Vice President None
George A. Murnaghan Vice President None
Steven E. Norwitz Vice President None
Kathleen M. O'Brien Vice President None
David Oestricher Vice President None
Pamela D. Preston Vice President None
Lucy B. Robins Vice President None
John R. Rockwell Vice President None
Christopher S. Ross Vice President None
Kenneth J. Rutherford Vice President None
Kristin E. Seeberger Vice President None
William F. Wendler II Vice President None
Jane F. White Vice President None
Thomas R. Woolley Vice President None
Alvin M. Younger, Jr. Secretary and Treasurer None
Mark S. Finn Controller & Vice President None
Richard J. Barna Assistant Vice President None
Catherine L.Berkenkemper Assistant Vice President None
Robin C. B. Binkley Assistant Vice President None
Patricia S. Butcher Assistant Vice President Assistant
Secretary
Cheryl L. Emory Assistant Vice President None
John A. Galateria Assistant Vice President None
Edward F. Giltenan Assistant Vice President None
Janelyn A. Healey Assistant Vice President None
Sandra J. Kiefler Assistant Vice President None
Valerie King-Calloway Assistant Vice President None
Steven A. Larson Assistant Vice President None
Jeanette M. LeBlanc Assistant Vice President None
C. Lillian Matthews Assistant Vice President None
Janice D. McCrory Assistant Vice President None
Danielle N. Nicholson Assistant Vice President None
Barbara A. O'Connor Assistant Vice President None
JeanneMarie B. Patella Assistant Vice President None
Carin C. Quinn Assistant Vice President None
David A. Roscum Assistant Vice President None
Arthur J. Silber Assistant Vice President None
Jerome Tuccille Assistant Vice President None
Linda C. Wright Assistant Vice President None
Nolan L. North Assistant Treasurer None
Barbara A. Van Horn Assistant Secretary None
</TABLE>
(c) Not applicable. Investment Services will not receive any
compensation with respect to its activities as underwriter for the
Price Funds since the Price Funds are sold on a no-load basis.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, and other documents required to be maintained by T.
Rowe Price 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 East 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) 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>
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and 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
April 30, 1998.
T. Rowe Price Spectrum Fund, Inc.
/s/James S. Riepe
By: 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 Chairman of the Board April 30, 1998
James S. Riepe (Chief Executive Officer)
/s/Carmen F. Deyesu Treasurer April 30, 1998
Carmen F. Deyesu (Chief Financial Officer)
*
Jeffrey H. Donahue Director April 30, 1998
*
A. MacDonough Plant Director April 30, 1998
/s/Henry H. Hopkins Attorney-In-Fact April 30, 1998
Henry H. Hopkins
<PAGE>
The Custodian Agreement dated January 28, 1998, between State Street Bank
and Trust Company and T. Rowe Price Funds.
Custodian Agreement
This Agreement is made as of January 28, 1998 by and between
each entity set forth on Appendix A hereto (as such Appendix A
may be amended from time to time) which executes a copy of this
Agreement (each referred to herein as the "Fund"), and State
Street Bank and Trust Company, a Massachusetts trust company with
its principal place of business at 225 Franklin Street, Boston,
Massachusetts 02110 (the "Custodian").
Witnesseth:
Whereas, each Fund desires to retain the Custodian to act as
custodian of certain of the assets of the Fund, and the Custodian
is willing to provide such services to each Fund, upon the terms
and conditions hereinafter set forth; and
Whereas, except as otherwise set forth herein, this Agreement
is intended to supersede that certain custodian contract among
the parties hereto dated September 28, 1987, as amended; and
Whereas, the Funds have retained Chase Manhattan Bank, N.A. to
act as the Funds' custodian with respect to the assets of each
such Fund to be held outside of the United States of America
(except as otherwise set forth in this Agreement) pursuant to a
written custodian agreement (the "Foreign Custodian Agreement"),
Now, Therefore, in consideration of the mutual covenants and
agreements hereinafter contained, each of the parties hereto
agrees as follows:
Section 1. Employment of Custodian and Property to be Held by It.
Each Fund hereby employs the Custodian as the custodian of
certain of its assets, including those securities it desires to
be held within the United States of America ("domestic
securities") and those securities it desires to be held outside
the United States of America (the "United States") which are (i)
not held on the Funds' behalf by Chase Manhattan Bank, N.A. pursuant
to the Foreign Custodian Agreement and (ii) described with
greater particularity in Section 3 hereof (such securities shall
be referred to herein as "foreign securities"). Each Fund agrees
to deliver to the Custodian all domestic securities, foreign
securities and cash owned by it from time to time, and all
payments of income, payments of principal or capital
distributions received by it with respect to securities held by
it hereunder, and the cash consideration received by it for such
new or treasury shares of capital stock of each Fund as may be
issued or sold from time to time ("Shares"). The Custodian shall
not be responsible for any property of any Fund held or received
by such Fund (i) not delivered to the Custodian, or (ii) held in
the custody of Chase Manhattan Bank N.A.
The Custodian is authorized to employ one or more
sub-custodians located within the United States, provided that
the Custodian shall have obtained the written acknowledgment of
the Fund with respect to such employment. The Custodian is
authorized to employ sub-custodians located outside the United
States as noted on Schedule A attached hereto (as such Schedule A
may be amended from time to time). The Custodian shall have no
more or less responsibility or liability to any Fund on account
of any actions or omissions of any sub-custodian so employed than
any such sub-custodian has to the Custodian and shall not release
any sub-custodian from any responsibility or liability unless so
agreed in writing by the Custodian and the applicable Fund. With
the exception of State Street Bank and Trust Company (London
branch), the Custodian shall not be liable for losses arising
from the bankruptcy, insolvency or receivership of any
sub-custodian located outside the United States.
Section 2. Duties of the Custodian with Respect to Property of the Funds
Held By the Custodian in the United States.
Section 2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of each Fund all non-cash
property to be held by it in the United States, including all
domestic securities owned by the Fund other than (a) securities
which are maintained pursuant to Section 2.9 in a clearing agency
which acts as a securities depository or in a book-entry system
authorized by the United States Department of the Treasury and
certain federal agencies (each, a "U.S. Securities System") and
(b) commercial paper of an issuer for which the Custodian acts as
issuing and paying agent ("Direct Paper") which is deposited
and/or maintained in the Direct Paper system of the Custodian
(the "Direct Paper System") pursuant to Section 2.10.
Section 2.2 Delivery of Investments. The Custodian shall
release and deliver domestic investments owned by a Fund held by
the Custodian or in a U.S. Securities System account of the
Custodian or in the Custodian's Direct Paper System account
("Direct Paper System Account") only upon receipt of Proper
Instructions, which may be continuing instructions when agreed to
by the parties, and only in the following cases:
1) Upon sale of such investments for the account of the
Fund and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such investments
entered into by the Fund;
3) In the case of a sale effected through a U.S.
Securities System, in accordance with the provisions
of Section 2.9 hereof;
4) To the depository agent in connection with tender or
other similar offers for portfolio investments of
the Fund;
5) To the issuer thereof or its agent when such
investments are called, redeemed, retired or
otherwise become payable; provided that, in any such
case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Fund or into the name of any
nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed pursuant
to Section 2.8 or into the name or nominee name of
any sub-custodian appointed pursuant to Section 1;
or for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided
that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such investments for the account of
the Fund, to the broker or its clearing agent,
against a receipt, for examination in accordance
with usual "street delivery" custom; provided that
in any such case the Custodian shall have no
responsibility or liability for any loss arising
from the delivery of such investments prior to
receiving payment for such investments except as may
arise from the Custodian's own negligence or willful
misconduct;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the investments of
the issuer of such investments, or pursuant to
provisions for conversion contained in such
investments, or pursuant to any deposit agreement;
provided that, in any such case, the new investments
and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar
investments, the surrender thereof in the exercise
of such warrants, rights or similar investments or
the surrender of interim receipts or temporary
investments for definitive investments; provided
that, in any such case, the new investments and
cash, if any, are to be delivered to the Custodian
or against a receipt;
10) For delivery in connection with any loans of
investments made on behalf of the Fund, but only
against receipt of adequate collateral as agreed
upon from time to time by the Fund or its duly-
appointed agent (which may be in the form of cash or
obligations issued by the United States government,
its agencies or instrumentalities, or such other
property as the Fund may agree), except that in
connection with any loans for which collateral is to
be credited to the Custodian's account in the
book-entry system authorized by the U.S. Department
of the Treasury, the Custodian will not be held
liable or responsible for the delivery of
investments owned by the Fund prior to the receipt
of such collateral in the absence of the Custodian's
negligence or willful misconduct;
11) For delivery as security in connection with any
borrowing by the Fund requiring a pledge of assets
by the Fund, but only against receipt of amounts
borrowed, except where additional collateral is
required to secure a borrowing already made, subject
to Proper Instructions, further securities may be
released and delivered for that purpose;
12) For delivery in accordance with the provisions of
any agreement among the Fund, the Custodian and a
broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a
member of The National Association of Securities
Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation, the
rules of any registered national securities exchange
or of any similar organization or organizations, or
under the Investment Company Act of 1940, as amended
from time to time (the "1940 Act"), regarding escrow
or other arrangements in connection with
transactions by the Fund;
13) For delivery in accordance with the provisions of
any agreement among the Fund, the Custodian, and a
Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with
the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any
similar organization or organizations, or under the
1940 Act, regarding account deposits in connection
with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent
for the Fund (the "Transfer Agent"), for delivery to
such Transfer Agent or to the holders of shares in
connection with distributions in kind, as may be
described from time to time in the Fund's currently
effective prospectus, statement of additional
information or other offering documents (all, as
amended, supplemented or revised from time to time,
the "Prospectus"), in satisfaction of requests by
holders of Shares for repurchase or redemption; and
15) For any other purpose, but only upon receipt of
Proper Instructions specifying (a) the investments
to be delivered, (b) setting forth the purpose for
which such delivery is to be made, and (c) naming
the person or persons to whom delivery of such
investments shall be made.
Section 2.3 Registration of Investments. Domestic investments
held by the Custodian (other than bearer securities) shall be
registered in the name of the Fund or in the name of any nominee
of the Fund or of any nominee of the Custodian which nominee
shall be assigned exclusively to the Fund, unless the Fund has
authorized in writing the appointment of a nominee to be used in
common with other registered investment companies having the same
investment adviser as the Fund, or in the name or nominee name of
any agent appointed pursuant to Section 2.8 or in the name or
nominee name of any sub-custodian appointed pursuant to Section
1. All securities accepted by the Custodian on behalf of the
Fund under the terms of this Agreement shall be in good
deliverable form. If, however, the Fund directs the Custodian to
maintain securities in "street name", the Custodian shall utilize
its best efforts only to timely collect income due the Fund on
such securities and to notify the Fund of relevant corporate
actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
Section 2.4 Bank Accounts. The Custodian shall open and
maintain a separate bank account or accounts in the United States
in the name of the Fund, subject only to draft or order by the
Custodian acting pursuant to the terms of this Agreement, and
shall hold in such account or accounts, subject to the provisions
hereof, all cash received by it from or for the account of the
Fund, other than cash maintained by the Fund in a bank account
established and used in accordance with Rule 17f-3 under the 1940
Act. Monies held by the Custodian for the Fund may be deposited
by the Custodian to its credit as custodian in the banking
department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable
in the performance of its duties hereunder; provided, however,
that every such bank or trust company shall be qualified to act
as a custodian under the 1940 Act, and that each such bank or
trust company and the funds to be deposited with each such bank
or trust company shall be approved by vote of a majority of the
board of directors or the board of trustees of the applicable
Fund (as appropriate and in each case, the "Board"). Such funds
shall be deposited by the Custodian in its capacity as custodian
and shall be withdrawable by the Custodian only in that capacity.
Section 2.5 Collection of Income. Subject to the provisions
of Section 2.3, the Custodian shall collect on a timely basis all
income and other payments with respect to United States
registered investments held hereunder to which the Fund shall be
entitled either by law or pursuant to custom in the investments
business, and shall collect on a timely basis all income and
other payments with respect to United States bearer investments
if, on the date of payment by the issuer, such investments are
held by the Custodian or its agent thereof and shall credit such
income, as collected, to the Fund's custodian account. Without
limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items
requiring presentation as and when they become due, collect
interest when due on investments held hereunder, and receive and
collect all stock dividends, rights and other items of like
nature as and when they become due and payable. With respect to
income due the Fund on United States investments of the Fund
loaned (pursuant to the provisions of Section 2.2 (10)) in
accordance with a separate agreement between the Fund and the
Custodian in its capacity as lending agent, collection thereof
shall be in accordance with the terms of such agreement. Except
as otherwise set forth in the immediately preceding sentence,
income due the Fund on United States investments of the Fund
loaned pursuant to the provisions of Section 2.2 (10) shall be
the responsibility of the Fund; the Custodian will have no duty
or responsibility in connection therewith other than to provide
the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the
Custodian of the income to which the Fund is properly entitled.
Section 2.6 Payment of Fund Monies. Upon receipt of Proper
Instructions, which may be continuing instructions when agreed to
by the parties, the Custodian shall, from monies of the Fund held
by the Custodian, pay out such monies in the following cases
only:
1) Upon the purchase of domestic investments, options,
futures contracts or options on futures contracts
for the account of the Fund but only (a) against the
delivery of such investments, or evidence of title
to such options, futures contracts or options on
futures contracts, to the Custodian (or any bank,
banking firm or trust company doing business in the
United States or abroad which is qualified under the
1940 Act to act as a custodian and has been
designated by the Custodian as its agent for this
purpose in accordance with Section 2.8) registered
in the name of the Fund or in the name of a nominee
of the Custodian referred to in Section 2.3 hereof
or in proper form for transfer; (b) in the case of a
purchase effected through a U.S. Securities System,
in accordance with the conditions set forth in
Section 2.9 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance
with the conditions set forth in Section 2.10
hereof; or (d) for transfer to a time deposit
account of the Fund in any bank, whether domestic or
foreign, such transfer may be effected prior to
receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions;
2) In connection with conversion, exchange or surrender
of investments owned by the Fund as set forth in
Section 2.2 hereof;
3) For the redemption or repurchase of Shares as set
forth in Section 4 hereof;
4) For the payment of any expense or liability incurred
by the Fund, including but not limited to the
following payments for the account of the Fund:
interest, taxes, management fees, accounting fees,
transfer agent fees, legal fees, and operating
expenses of the Fund (whether or not such expenses
are to be in whole or part capitalized or treated as
deferred expenses);
5) For the payment of any dividends declared by the
Board;
6) For payment of the amount of dividends received in
respect of investments sold short;
7) For repayment of a loan upon redelivery of pledged
securities and upon surrender of the note(s), if
any, evidencing the loan; or
8) In connection with any repurchase agreement entered
into by the Fund with respect to which the
collateral is held by the Custodian, the Custodian
shall act as the Fund s "securities intermediary"(
as that term is defined in Part 5 of Article 8 of
the Massachusetts Uniform Commercial Code, as
amended), and, as securities intermediary, the
Custodian shall take the following steps on behalf
of the Fund: (a) provide the Fund with notification
of the receipt of the purchased securities, and (b),
by book-entry identify on the books of the Custodian
as belonging to the Fund uncertificated securities
registered in the name of the Fund and held in the
Custodian s account at the Federal Reserve Bank. In
connection with any repurchase agreement entered
into by the Fund with respect to which the
collateral is not held by the Custodian, the
Custodian shall (a) provide the Fund with such
notification as it may receive with respect to such
collateral, and (b), by book-entry or otherwise,
identify as belonging to the Fund securities as
shown in the Custodian s account on the books of the
entity appointed by the Fund to hold such
collateral.
9) For any other purpose, but only upon receipt of
Proper Instructions specifying (a) the amount of
such payment, (b) setting forth the purpose for
which such payment is to be made, and (c) naming the
person or persons to whom such payment is to be
made.
Section 2.7 Liability for Payment in Advance of Receipt of
Securities Purchased. In any and every case where payment for
purchase of domestic securities for the account of the Fund is
made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from
the Fund to so pay in advance, the Custodian shall be absolutely
liable to the Fund for such securities to the same extent as if
the securities had been received by the Custodian.
Section 2.8 Appointment of Agents. The Custodian may at any
time or times in its discretion appoint (and may at any time
remove) any other bank or trust company, which is itself
qualified under the 1940 Act to act as a custodian, as its agent
to carry out such of the provisions of this Section 2 as the
Custodian may from time to time direct; provided, however, that
the appointment of any such agent shall not relieve the Custodian
of its responsibilities or liabilities hereunder.
Section 2.9 Deposit of Investments in U.S. Securities Systems.
The Custodian may deposit and/or maintain domestic investments
owned by the Fund in a U.S. Securities System in accordance with
applicable Federal Reserve Board and United States Securities and
Exchange Commission ("SEC") rules and regulations, if any,
subject to the following provisions:
1) The Custodian may keep domestic investments of the
Fund in a U.S. Securities System provided that such
investments are represented in an account of the
Custodian in the U.S. Securities System ("Account")
which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of the Custodian with respect to
domestic investments of the Fund which are
maintained in a U.S. Securities System shall
identify by book-entry those investments belonging
to the Fund;
3) The Custodian shall pay for domestic investments
purchased for the account of the Fund upon (i)
receipt of advice from the U.S. Securities System
that such investments have been transferred to the
Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian
shall transfer domestic investments sold for the
account of the Fund upon (i) receipt of advice from
the U.S. Securities System that payment for such
investments has been transferred to the Account, and
(ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for
the account of the Fund. Copies of all advices from
the U.S. Securities System of transfers of domestic
investments for the account of the Fund shall
identify the Fund, be maintained for the Fund by the
Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish
the Fund confirmation of each transfer to or from
the account of the Fund in the form of a written
advice or notice and shall furnish to the Fund
copies of daily transaction sheets reflecting each
day's transactions in the U.S. Securities System for
the account of the Fund;
4) The Custodian shall provide the Fund with any report
obtained by the Custodian on the U.S. Securities
System's accounting system, internal accounting
control and procedures for safeguarding domestic
investments deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund the
initial or annual certificate, as the case may be,
described in Section 10 hereof; and
6) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to
the Fund for any loss or damage to the Fund
resulting from use of the U.S. Securities System by
reason of any negligence, misfeasance or misconduct
of the Custodian or any of its agents or of any of
its or their employees, or from failure of the
Custodian or any such agent to enforce effectively
such rights as it may have against the U.S.
Securities System. At the election of the Fund, the
Fund shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim
against the U.S. Securities System or any other
person which the Custodian may have as a consequence
of any such loss, expense or damage if and to the
extent that the Fund has not been made whole for any
such loss, expense or damage.
Section 2.10 Fund Assets Held in the Direct Paper System. The
Custodian may deposit and/or maintain investments owned by the
Fund in the Direct Paper System subject to the following
provisions:
1) No transaction relating to investments in the Direct
Paper System will be effected in the absence of
Proper Instructions;
2) The Custodian may keep investments of the Fund in
the Direct Paper System only if such investments are
represented in the Direct Paper System Account,
which account shall not include any assets of the
Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
3) The records of the Custodian with respect to
investments of the Fund which are maintained in the
Direct Paper System shall identify by book-entry
those investments belonging to the Fund;
4) The Custodian shall pay for investments purchased
for the account of the Fund upon the making of an
entry on the records of the Custodian to reflect
such payment and transfer of investments to the
account of the Fund. The Custodian shall transfer
investments sold for the account of the Fund upon
the making of an entry on the records of the
Custodian to reflect such transfer and receipt of
payment for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation of
each transfer to or from the account of the Fund, in
the form of a written advice or notice, of Direct
Paper on the next business day following such
transfer and shall furnish to the Fund copies of
daily transaction sheets reflecting each day's
transaction in the Direct Paper System for the
account of the Fund; and
6) The Custodian shall provide the Fund with any report
on its system of internal accounting control as the
Fund may reasonably request from time to time.
Section 2.11 Segregated Account. The Custodian shall, upon
receipt of Proper Instructions, establish and maintain a
segregated account or accounts for and on behalf of the Fund,
into which account or accounts may be transferred cash and/or
investments, including investments maintained in an account by
the Custodian pursuant to Section 2.10 hereof, (i) in accordance
with the provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the Exchange Act
and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange (or the Commodity
Futures Trading Commission or any registered contract market), or
of any similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the Fund,
(ii) for purposes of segregating cash or government investments
in connection with options purchased, sold or written by the Fund
or commodity futures contracts or options thereon purchased or
sold by the Fund, (iii) for the purposes of compliance by the
Fund with the procedures required by 1940 Act Release No. 10666,
or any other procedures subsequently required under the 1940 Act
relating to the maintenance of segregated accounts by registered
investment companies, and (iv) for other purposes, but only, in
the case of clause (iv) upon receipt of Proper Instructions
specifying (a) the investments to be delivered, (b) setting forth
the purpose for which such delivery is to be made, and (c) naming
the person or persons to whom delivery of such investments shall
be made.
Section 2.12 Ownership Certificates for Tax Purposes. The
Custodian shall execute ownership and other certificates and
affidavits for all United States federal and state tax purposes
in connection with receipt of income or other payments with
respect to domestic investments of the Fund held by it hereunder
and in connection with transfers of such investments.
Section 2.13 Proxies. The Custodian shall, with respect to
the domestic investments held hereunder, cause to be promptly
executed by the registered holder of such investments, if the
investments are registered otherwise than in the name of the Fund
or a nominee of the Fund, all proxies without indication of the
manner in which such proxies are to be voted, and shall promptly
deliver to the Fund such proxies, all proxy soliciting materials
received by the Custodian and all notices received relating to
such investments.
Section 2.14 Communications Relating to Fund Investments. Subject
to the provisions of Section 2.3, the Custodian shall transmit
promptly to the Fund all written information (including, without
limitation, pendency of calls and maturities of domestic
investments and expirations of rights in connection therewith and
notices of exercise of call and put options written by the Fund
and the maturity of futures contracts purchased or sold by the
Fund) received by the Custodian in connection with the domestic
investments being held for the Fund pursuant to this Agreement.
With respect to tender or exchange offers, the Custodian shall
transmit to the Fund all written information received by the
Custodian, any agent appointed pursuant to Section 2.8 hereof, or
any sub-custodian appointed pursuant to Section 1 hereof, from
issuers of the domestic investments whose tender or exchange is
sought and from the party (or his agents) making the tender or
exchange offer. If the Fund desires to take action with respect
to any tender offer, exchange offer or any other similar
transaction, the Fund shall notify the Custodian at least two (2)
New York Stock Exchange business days prior to the time such
action must be taken under the terms of the tender, exchange
offer or other similar transaction, and it will be the
responsibility of the Custodian to timely transmit to the
appropriate person(s) such notice. Where the Fund provides the
Custodian with less than two (2) New York Stock Exchange business
days notice of its desired action, the Custodian shall use its
best efforts to timely transmit the Fund's notice to the
appropriate person. It is expressly noted that the parties may
agree to alternative procedures with respect to such two (2) New
York Stock Exchange business days notice period on a selective
and individual basis.
Section 2.15 Reports to Fund by Independent Public Accountants. The
Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public
accountants on the accounting system, internal accounting control
and procedures for safeguarding investments, futures contracts
and options on futures contracts, including domestic investments
deposited and/or maintained in a U.S. Securities System, relating
to the services provided by the Custodian under this Agreement.
Such reports shall be of sufficient scope and detail, as may
reasonably be required by the Fund, to provide reasonable
assurance that any material inadequacies would be disclosed by
such examination, and if there are no such inadequacies the
reports shall so state.
Section 3. Duties of the Custodian with Respect to Certain Property of
the Funds Held Outside of the United States
Section 3.1 Definitions. The following capitalized terms
shall have the respective following meanings:
"Foreign Securities System" means a clearing agency or a
securities depository listed on Schedule A hereto.
"Foreign Sub-Custodian" means a foreign banking institution set
forth on Schedule A hereto.
Section 3.2 Holding Securities. The Custodian shall identify
on its books as belonging to the Funds the foreign securities
held by each Foreign Sub-Custodian or Foreign Securities System.
The Custodian may hold foreign securities for all of its
customers, including the Funds, with any Foreign Sub-Custodian in
an account that is identified as belonging to the Custodian for
the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to foreign securities of
the Funds which are maintained in such account shall identify
those securities as belonging to the Funds and (ii) the Custodian
shall require that securities so held by the Foreign Sub-
Custodian be held separately from any assets of such Foreign Sub-
Custodian or of other customers of such Foreign Sub-Custodian.
Section 3.3 Foreign Securities Systems. Foreign securities
shall be maintained in a Foreign Securities System in a
designated country only through arrangements implemented by the
Foreign Sub-Custodian in such country pursuant to the terms of
this Agreement.
Section 3.4 Transactions in Foreign Custody Account.
3.4.1. Delivery of Foreign Securities. The Custodian or a
Foreign Sub-Custodian shall release and deliver foreign
securities of the Funds held by such Foreign Sub-Custodian, or in
a Foreign Securities System account, only upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
(i) upon the sale of such foreign securities for the
Funds in accordance with reasonable market practice
in the country where such foreign securities are
held or traded, including, without limitation: (A)
delivery against expectation of receiving later
payment; or (B) in the case of a sale effected
through a Foreign Securities System in accordance
with the rules governing the operation of the
Foreign Securities System;
(ii) in connection with any repurchase agreement related
to foreign securities;
(iii) to the depository agent in connection with tender or
other similar offers for foreign securities of the
Funds;
(iv) to the issuer thereof or its agent when such foreign
securities are called, redeemed, retired or
otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer
into the name of the Custodian (or the name of the
respective Foreign Sub-Custodian or of any nominee
of the Custodian or such Foreign Sub-Custodian) or
for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units;
(vi) to brokers, clearing banks or other clearing agents
for examination or trade execution in accordance
with market custom; provided that in any such case
the Foreign Sub-Custodian shall have no
responsibility or liability for any loss arising
from the delivery of such securities prior to
receiving payment for such securities except as may
arise from the Foreign Sub-Custodian's own
negligence or willful misconduct;
(vii) for exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign
securities, the surrender thereof in the exercise of
such warrants, rights or similar securities or the
surrender of interim receipts or temporary
securities for definitive securities;
(ix) or delivery as security in connection with any
borrowing by the Funds requiring a pledge of assets
by the Funds;
(x) in connection with trading in options and futures
contracts, including delivery as original margin and
variation margin;
(xi) in connection with the lending of foreign
securities; and
(xii) for any other proper purpose, but only upon receipt
of Proper Instructions specifying the foreign
securities to be delivered, setting forth the
purpose for which such delivery is to be made,
declaring such purpose to be a proper Fund purpose,
and naming the person or persons to whom delivery of
such securities shall be made.
3.4.2. Payment of Fund Monies. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, the Custodian shall pay out, or
direct the respective Foreign Sub-Custodian or the respective
Foreign Securities System to pay out, monies of a Fund in the
following cases only:
(i) upon the purchase of foreign securities for the
Fund, unless otherwise directed by Proper
Instructions, by (A) delivering money to the seller
thereof or to a dealer therefor (or an agent for
such seller or dealer) against expectation of
receiving later delivery of such foreign securities;
or (B) in the case of a purchase effected through a
Foreign Securities System, in accordance with the
rules governing the operation of such Foreign
Securities System;
(ii) in connection with the conversion, exchange or
surrender of foreign securities of the Fund;
(iii) for the payment of any expense or liability of the
Fund, including but not limited to the following
payments: interest, taxes, investment advisory
fees, transfer agency fees, fees under this
Agreement, legal fees, accounting fees, and other
operating expenses;
(iv) for the purchase or sale of foreign exchange or
foreign exchange contracts for the Fund, including
transactions executed with or through the Custodian
or its Foreign Sub-Custodians;
(v) in connection with trading in options and futures
contracts, including delivery as original margin and
variation margin;
(vii) in connection with the borrowing or lending of
foreign securities; and
(viii) for any other proper Fund purpose, but only upon
receipt of Proper Instructions specifying the amount
of such payment, setting forth the purpose for which
such payment is to be made, declaring such purpose
to be a proper Fund purpose, and naming the person
or persons to whom such payment is to be made.
3.4.3. Market Conditions. Notwithstanding any provision of
this Agreement to the contrary, settlement and payment for
foreign securities received for the account of the Funds and
delivery of foreign securities maintained for the account of the
Funds may be effected in accordance with the customary
established securities trading or processing practices and
procedures in the country or market in which the transaction
occurs, including, without limitation, delivering foreign
securities to the purchaser thereof or to a dealer therefor (or
an agent for such purchaser or dealer) with the expectation of
receiving later payment for such foreign securities from such
purchaser or dealer.
Section 3.5 Registration of Foreign Securities. The foreign
securities maintained in the custody of a Foreign Custodian
(other than bearer securities) shall be registered in the name of
the applicable Fund or in the name of the Custodian or in the
name of any Foreign Sub-Custodian or in the name of any nominee
of the foregoing, and the Fund agrees to hold any such nominee
harmless from any liability as a holder of record of such foreign
securities. The Custodian or a Foreign Sub-Custodian shall not
be obligated to accept securities on behalf of a Fund under the
terms of this Agreement unless the form of such securities and
the manner in which they are delivered are in accordance with
reasonable market practice.
Section 3.6 Bank Accounts. A bank account or bank accounts
opened and maintained outside the United States on behalf of a
Fund with a Foreign Sub-Custodian shall be subject only to draft
or order by the Custodian or such Foreign Sub-Custodian, acting
pursuant to the terms of this Agreement to hold cash received by
or from or for the account of the Fund.
Section 3.7 Collection of Income. The Custodian shall use
reasonable commercial efforts to collect all income and other
payments with respect to the foreign securities held hereunder to
which the Funds shall be entitled and shall credit such income,
as collected, to the applicable Fund. In the event that
extraordinary measures are required to collect such income, the
Fund and the Custodian shall consult as to such measures and as
to the compensation and expenses of the Custodian relating to
such measures.
Section 3.8 Proxies. With respect to the foreign
securities held under this Section 3, the Custodian will use
reasonable commercial efforts to facilitate the exercise of
voting and other shareholder proxy rights, subject always to the
laws, regulations and practical constraints that may exist in the
country where such securities are issued. The Fund acknowledges
that local conditions, including lack of regulation, onerous
procedural obligations, lack of notice and other factors may have
the effect of severely limiting the ability of the Fund to
exercise shareholder rights.
Section 3.9 Communications Relating to Foreign Securities. The
Custodian shall transmit promptly to the Fund written information
(including, without limitation, pendency of calls and maturities
of foreign securities and expirations of rights in connection
therewith) received by the Custodian in connection with the
foreign securities being held for the account of the Fund. With
respect to tender or exchange offers, the Custodian shall
transmit promptly to the Fund written information so received by
the Custodian in connection with the foreign securities whose
tender or exchange is sought or from the party (or its agents)
making the tender or exchange offer.
Section 3.10 Liability of Foreign Sub-Custodians and Foreign
Securities Systems. Each agreement pursuant to which the Custodian
employs as a Foreign Sub-Custodian shall, to the extent possible,
require the Foreign Sub-Custodian to exercise reasonable care in
the performance of its duties and, to the extent possible, to
indemnify, and hold harmless, the Custodian from and against any
loss, damage, cost, expense, liability or claim arising out of or
in connection with the Foreign Sub-Custodian's performance of
such obligations. At the Fund's election, the Funds shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claims against a Foreign Sub-Custodian as a
consequence of any such loss, damage, cost, expense, liability or
claim if and to the extent that the Funds have not been made
whole for any such loss, damage, cost, expense, liability or
claim.
Section 3.11 Tax Law. The Custodian shall have no
responsibility or liability for any obligations now or hereafter
imposed on the Fund or the Custodian as custodian of the Funds by
the tax law of the United States or of any state or political
subdivision thereof. It shall be the responsibility of the Fund
to notify the Custodian of the obligations imposed on the Fund or
the Custodian as custodian of the Funds by the tax law of
countries set forth on Schedule A hereto, including
responsibility for withholding and other taxes, assessments or
other governmental charges, certifications and governmental
reporting. The sole responsibility of the Custodian with regard
to such tax law shall be to use reasonable efforts to assist the
Fund with respect to any claim for exemption or refund under the
tax law of countries for which the Fund has provided such
information.
Section 4. Payments for Repurchases or Redemptions and Sales of Shares.
From such funds as may be available for the purpose, the
Custodian shall, upon receipt of instructions from the Transfer
Agent, make funds available for payment to holders of Shares
which have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the
redemption or repurchase of Shares, the Custodian is authorized
upon receipt of, and in accordance with, instructions from the
Transfer Agent to wire funds to or through a commercial bank
designated by the redeeming shareholders. In connection with the
redemption or repurchase of Shares, the Custodian shall honor
checks drawn on the Custodian by a holder of Shares, which checks
have been furnished by the Fund to the holder of Shares, when
presented to the Custodian in accordance with such written
procedures and controls as may be mutually agreed upon from time
to time between the Fund and the Custodian.
The Custodian shall receive from the distributor for the
Shares or from the Transfer Agent and deposit to the account of
the Fund such payments as are received by the distributor or the
Transfer Agent, as the case may be, for Shares issued or sold
from time to time. The Custodian will notify the Fund and the
Transfer Agent of any payments for Shares received by it from
time to time.
Section 5. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board to
keep the books of account of the Fund and/or compute the net
asset value per Share of the outstanding Shares or, if directed
in writing to do so by the Fund, shall itself keep such books of
account and/or compute such net asset value per Share. If so
directed, the Custodian shall also (i) calculate daily the net
income of the Fund as described in the Prospectus and shall
advise the Fund and the Transfer Agent daily of the total amounts
of such net income, and/or (ii) advise the Transfer Agent
periodically of the division of such net income among its various
components. The calculations of the net asset value per share
and the daily income of the Fund shall be made at the time or
times described from time to time in the Prospectus.
Section 6. Proper Instructions.
"Proper Instructions," as such term is used throughout this
Agreement, means either (i) a writing, including a facsimile
transmission, signed by one or more persons as set forth on, and
in accordance with, an "Authorized Persons List," as such term is
defined herein (each such instruction a "Written Proper
Instruction"), (ii) a "Client Originated Electronic Financial
Instruction," as such term is defined in the Data Access Services
Addendum hereto, given in accordance with the terms of such
Addendum, or (iii) instructions received by the Custodian from a
third party in accordance with any three-party agreement which
requires a segregated asset account in accordance with Section
2.11.
Each Written Proper Instruction shall set forth a brief
description of the type of transaction involved (choosing from
among the types of transactions set forth on the Authorized
Persons List), including a specific statement of the purpose for
which such action is requested, and any modification to a Written
Proper Instruction must itself be a Written Proper Instruction
and subject to all the provisions herein relating to Written
Proper Instructions. The Fund will provide the Custodian with an
"Authorized Persons List," which list shall set forth (a) the
names of the individuals (each an "Authorized Person") who are
authorized by the Board to give Written Proper Instructions with
respect to the transactions described therein, and (b) the number
of Authorized Persons whose signature or approval, as the case
may be, is necessary for the Custodian to be able to act in
accordance with such Written Proper Instructions with respect to
a particular type of transaction. The Custodian may accept oral
instructions or instructions delivered via electronic mail as
Proper Instructions if the Custodian reasonably believes such
instructions to have been given by an Authorized Person or
Persons (as appropriate to the type of transaction); provided,
however, that in no event will instructions delivered orally or
via electronic mail be considered Proper Instructions with
respect to transactions involving the movement of cash,
securities or other assets of a Fund. The Custodian shall be
entitled to rely upon instructions given in accordance with an
Authorized Persons List until it actually receives written notice
from the Board of the applicable Fund to the contrary.
Section 7. Evidence of Authority.
Subject to Section 9 hereof, the Custodian shall be
protected in acting upon any instructions, notice, request,
consent, certificate or other instrument or paper reasonably and
in good faith believed by it to be genuine and to have been
properly executed by or on behalf of the Fund. The Custodian may
receive and accept a copy of a vote of the Board, certified by
the secretary or an assistant secretary of the applicable Fund,
as conclusive evidence (a) of the authority of any person to act
in accordance with such vote or (b) of any determination or of
any action by the Board described in such vote, and such vote may
be considered as in full force and effect until receipt by the
Custodian of written notice to the contrary.
Section 8. Actions Permitted without Express Authority.
The Custodian may in its discretion and without express
authority from the Fund:
1) make payments to itself or others for minor expenses of
handling investments or other similar items relating to
its duties under this Agreement, provided that all such
payments shall be accounted for to the Fund;
2) surrender investments in temporary form for investments
in definitive form;
3) endorse for collection, in the name of the Fund,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the
investments and property of the Fund except as
otherwise directed by the Board.
Section 9. Responsibility of Custodian.
The Custodian shall not be responsible for the title,
validity or genuineness of any property or evidence of title
thereto received by it or delivered by it pursuant to this
Agreement and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party
or parties, including any futures commission merchant acting
pursuant to the terms of a three-party futures or options
agreement. Notwithstanding anything to the contrary herein, the
Custodian shall be held to the exercise of reasonable care in
carrying out the provisions of this Agreement, and it shall be
kept indemnified by and shall be without liability to the Fund
for any action taken or omitted by it in good faith without
negligence. In order for the indemnification provision contained
in this Section to apply, it is understood that if in any case
the Fund may be asked by the Custodian to indemnify or hold the
Custodian harmless, the Fund shall be fully and promptly advised
of all pertinent facts concerning the situation in question, and
it is further understood that the Custodian will use reasonable
care to identify, and notify the Fund promptly concerning, any
situation which presents or appears likely to present the
probability of such a claim for indemnification. The Fund shall
have the option to defend the Custodian against any claim which
may be the subject of a claim for indemnification hereunder, and
in the event that the Fund so elects, it will notify the
Custodian thereof and, thereupon, (i) the Fund shall take over
complete defense of the claim and (ii) the Custodian shall
initiate no further legal or other expenses with respect to such
claim. The Custodian shall in no case confess any claim or make
any compromise with respect to any claim for which it will seek
indemnity from the Fund except with the Fund's prior written
consent. Nothing herein shall be construed to limit any right or
cause of action on the part of the Custodian under this Agreement
which is independent of any right or cause of action on the part
of the Fund. The Custodian shall be entitled to rely on and may
act upon advice of counsel (who may be counsel for the Fund or
other such counsel as agreed to by the parties) on all matters,
and shall be without liability for any action reasonably taken or
omitted pursuant to such advice. The Custodian shall be entitled
to rely upon, and shall have no duty of inquiry with respect to,
the accuracy of any representation or warranty given to it by the
Fund or any duly-authorized employee or agent thereof, and shall
be without liability for any action reasonably taken or omitted
by it in reliance thereon. Regardless of whether assets held
pursuant to this Agreement are maintained in the custody of a
foreign banking institution, a foreign securities depository, or
a branch or affiliate of a U.S. bank, the Custodian shall not be
liable for any loss, damage, cost, expense, liability or claim
resulting from, or caused by, the direction of or authorization
by the Fund to maintain custody of any securities or cash or
other property of the Fund in a foreign country including, but
not limited to, losses resulting from the nationalization or
expropriation of assets, the imposition of currency controls or
restrictions, acts of war or terrorism or civil unrest, riots,
revolutions, work stoppages, natural disasters or other similar
events or acts.
Except as may arise from the Custodian's own negligence or
willful misconduct or the negligence or willful misconduct of a
sub-custodian or agent, the Custodian shall be without liability
to the Fund for any loss, liability, claim or expense resulting
from or caused by: (i) events or circumstances beyond the
reasonable control of the Custodian or any sub-custodian or
Securities System or any agent or nominee of any of the
foregoing, including, without limitation, the interruption,
suspension or restriction of trading on or the closure of any
securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications
disruptions; (ii) errors by the Fund or its duly-appointed
investment advisor in their instructions to the Custodian
provided such instructions have been given in accordance with
this Agreement; (iii) the insolvency of or acts or omissions by a
Securities System; (iv) any delay or failure of any broker, agent
or intermediary, central bank or other commercially prevalent
payment or clearing system to deliver to the Custodian's sub-
custodian or agent securities purchased or in the remittance or
payment made in connection with securities sold; (v) any delay or
failure of any company, corporation or other body in charge of
registering or transferring securities in the name of the
Custodian, the Fund, the Custodian's sub-custodians, nominees or
agents, or any consequential losses arising out of such delay or
failure to transfer such securities, including non-receipt of
bonus, dividends and rights and other accretions or benefits;
(vi) delays or inability to perform its duties due to any
disorder in market infrastructure with respect to any particular
security or Securities System; and (vii) changes to any provision
of any present or future law or regulation or order of the United
States, or any state thereof, or of any other country or
political subdivision thereof, or any order of any court of
competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a
foreign banking institution acting as a sub-custodian hereunder
to the same extent as set forth with respect to sub-custodians
generally in this Agreement.
If the Fund requires the Custodian to take any action with
respect to investments, which action involves the payment of
money or which action may, in the reasonable opinion of the
Custodian, result in the Custodian or its nominee assigned to the
Fund being liable for the payment of money or incurring liability
of some other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
If the Custodian, or any of its affiliates, subsidiaries or
agents, advances cash or investments to the Fund for any purpose
(including but not limited to securities settlements, foreign
exchange contracts and assumed settlement), or in the event that
the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as
may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at
any time held for the account of the Fund shall be security
therefor, and should the Fund fail to repay the Custodian
promptly the Custodian shall be entitled to utilize available
cash and to dispose of the Fund assets to the extent necessary to
obtain reimbursement, provided that the Custodian gives the Fund
reasonable notice to repay such cash or securities advanced, and
provided further that such notice requirement shall not preclude
the Custodian's right to assert and execute on such lien.
Except as may arise from the Custodian's own negligence or
willful misconduct, or the negligence or willful misconduct of a
subcustodian or agent appointed by the Custodian, the Fund agrees
to indemnify and hold the Custodian harmless from and against any
and all costs, expenses, losses, damages, charges, reasonable
counsel fees, payments and liabilities which may be asserted
against the Custodian (i) acting in accordance with any Proper
Instruction, or (ii) for any acts or omissions of Chase Manhattan
Bank N.A.
Notwithstanding any provision herein to the contrary, to the
extent the Custodian is found to be liable hereunder for any
loss, liability, claim, expense or damage, the Custodian shall be
liable only for such loss, liability, claim, expense or damage
which was reasonably foreseeable.
Section 10. Effective Period, Termination and Amendment.
This Agreement shall become effective as of the date of its
execution, shall continue in full force and effect until
terminated as hereinafter provided, may be amended at any time by
mutual agreement of the parties hereto, and may be terminated by
either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take
effect not sooner than thirty (30) days after the date of such
delivery or mailing in the case of a termination by the Fund, and
not sooner than one hundred eighty (180) days after the date of
such delivery or mailing in the case of termination by the
Custodian; provided, however that the Custodian shall not act
under Section 2.9 hereof in the absence of receipt of an initial
certificate of a Fund's secretary, or an assistant secretary
thereof, that the Board has approved the initial use of a
particular U.S. Securities System, as required by the 1940 Act or
any applicable Rule thereunder, and that the Custodian shall not
act under Section 2.10 hereof in the absence of receipt of an
initial certificate of a Fund's secretary, or an assistant
secretary thereof, that the Board has approved the initial use of
the Direct Paper System; provided further, however, that the Fund
shall not amend or terminate this Agreement in contravention of
any applicable federal or state regulations, or any provision of
the Fund's articles of incorporation, agreement of trust, by-laws
and/or registration statement (as applicable, the "Governing
Documents"); and further provided that the Fund may at any time
by action of its Board (i) substitute another bank or trust
company for the Custodian by giving notice as described above to
the Custodian, or (ii) immediately terminate this Agreement in
the event of the appointment of a conservator or receiver for the
Custodian by the United States Comptroller of the Currency or
upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Agreement, the Fund shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its
reasonable costs, expenses and disbursements, provided that the
Custodian shall not incur any costs, expenses or disbursements
specifically in connection with such termination unless it has
received prior approval from the Fund, such approval not to be
unreasonably withheld.
Section 11. Successor Custodian.
If a successor custodian shall be appointed by the Board,
the Custodian shall, upon termination, deliver to such successor
custodian at the offices of the Custodian, duly endorsed and in
the form for transfer, all investments and other properties then
held by it hereunder, and shall transfer to an account of the
successor custodian all of the Fund's investments held in a
Securities System. If no such successor custodian shall be
appointed, the Custodian shall, in like manner, upon receipt of a
copy of a vote of the Board, certified by the secretary or an
assistant secretary of the applicable Fund, deliver at the
offices of the Custodian and transfer such investments, funds and
other properties in accordance with such vote. In the event that
no written order designating a successor custodian or certified
copy of a vote of the Board shall have been delivered to the
Custodian on or before the date when such termination shall
become effective, then the Custodian shall have the right to
deliver to a bank or trust company, which is a "bank" as defined
in the 1940 Act, doing business in Boston, Massachusetts, or New
York, New York, of its own selection and having an aggregate
capital, surplus, and undivided profits, as shown by its last
published report, of not less than $100,000,000, all property
held by the Custodian under this Agreement and to transfer to an
account of such successor custodian all of the Fund's investments
held in any Securities System; thereafter, such bank or trust
company shall be the successor of the Custodian under this
Agreement.
In the event that any property held pursuant to this
Agreement remains in the possession of the Custodian after the
date of termination hereof owing to failure of the Fund to
procure the certified copy of the vote referred to or of the
Board to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period
as the Custodian retains possession of such property, and the
provisions of this Agreement relating to the duties and
obligations of the Custodian shall remain in full force and
effect.
Section 12. General.
Section 12.1 Compensation of Custodian. The Custodian shall
be entitled to compensation for its services and reimbursement of
its expenses as Custodian as agreed upon from time to time
between the Fund and the Custodian.
Section 12.2 Massachusetts Law to Apply. This Agreement shall
be construed and the provisions thereof interpreted under and in
accordance with laws of The Commonwealth of Massachusetts.
Section 12.3 Records. The Custodian shall create and
maintain all records relating to its activities and obligations
under this Agreement in such manner as will meet the obligations
of the Fund under the 1940 Act, with particular attention to
Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All
such records shall be the property of the Fund and shall at all
times during the regular business hours of the Custodian be open
for inspection by duly authorized officers, employees or agents
of the Fund and employees and agents of the SEC. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation
of investments owned by the Fund and held by the Custodian
hereunder, and shall, when requested to do so by an officer of
the Fund, and for such compensation as shall be agreed upon
between the Fund and the Custodian, include certificate numbers
in such tabulations.
Section 12.4 Opinion of Fund's Independent Accountant. The
Custodian shall take all reasonable action as the Fund may from
time to time request to obtain from year to year favorable
opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of
the Fund's Form N-1A, the preparation of the Fund's Form N-SAR,
the preparation of any other annual reports to the SEC with
respect to the Fund, and with respect to any other requirements
of the SEC.
Section 12.5 Interpretive and Additional Provisions. In
connection with the operation of this Agreement, the Custodian
and the Fund may from time to time agree on such provisions
interpretive of or in addition to the provisions of this
Agreement as may in their joint opinion be consistent with the
general tenor of this Agreement. Any such interpretive or
additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Governing Documents. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be
an amendment of this Agreement.
Section 12.6 Bond. The Custodian shall at all times
maintain a bond in such form and amount as is acceptable to the
Fund, which shall be issued by a reputable fidelity insurance
company authorized to do business in the place where such bond is
issued, against larceny and embezzlement, covering each officer
and employee of the Custodian who may, singly or jointly with
others, have access to securities or funds of the Fund, either
directly or through authority to receive and carry out any
certificate instruction, order request, note or other instrument
required or permitted by this Agreement. The Custodian agrees
that it shall not cancel, terminate or modify such bond insofar
as it adversely affects the Fund except after written notice
given to the Fund not less than 10 days prior to the effective
date of such cancellation, termination or modification. The
Custodian shall, upon request, furnish to the Fund a copy of each
such bond and each amendment thereto.
Section 12.7 Confidentiality. The Custodian agrees to treat
all records and other information relative to the Fund and its
prior, present or future shareholders as confidential, and the
Custodian, on behalf of itself and its employees, agrees to keep
confidential all such information except, after prior
notification to and approval in writing by the Fund, which
approval shall not be unreasonably withheld and may not be
withheld where the Custodian may be exposed to civil or criminal
contempt proceedings for failure to comply when requested to
divulge such information by duly constituted authorities, or when
so requested by the Fund.
Section 12.8 Exemption from Lien. Except as set forth in
Section 9 hereof, the securities and other assets held by the
Custodian hereunder shall not be subject to lien or charge of any
kind in favor of the Custodian or any person claiming through the
Custodian. Nothing herein shall be deemed to deprive the
Custodian of its right to invoke any and all remedies available
at law or equity to collect amounts due it under this Agreement.
Section 12.9 Assignment. This Agreement may not be
assigned by either party without the written consent of the
other, except that either party may assign its rights and
obligations hereunder to a party controlling, controlled by, or
under common control with such party.
Section 12.10 Prior Agreements. Without derogating the rights
established thereunder prior to the date of this Agreement, this
Agreement supersedes and terminates, as of the date hereof, all
prior agreements between the Fund and the Custodian relating to
the custody of Fund assets.
Section 12.11 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original, and all such counterparts taken together shall
constitute but one and the same Agreement.
Section 12.12 Notices. Any notice, instruction or other
instrument required to be given hereunder may be delivered in
person to the offices of the parties as set forth herein during
normal business hours or delivered prepaid registered mail or by
telex, cable or telecopy to the parties at the following
addresses or such other addresses as may be notified by any party
from time to time.
To any Fund: c/o T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Carmen Deyesu
Telephone: 410-345-6658
Telecopy: 410-685-8827/8830
To the Custodian: State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171, U.S.A.
Attention: Carol C. Ayotte
Telephone: 617-985-6894
Telecopy: 617-537-6321
Such notice, instruction or other instrument shall be deemed
to have been served in the case of a registered letter at the
expiration of five business days after posting, in the case of
cable twenty-four hours after dispatch and, in the case of telex,
immediately on dispatch and if delivered outside normal business
hours it shall be deemed to have been received at the next time
after delivery when normal business hours commence and in the
case of cable, telex or telecopy on the business day after the
receipt thereof. Evidence that the notice was properly
addressed, stamped and put into the post shall be conclusive
evidence of posting.
Section 12.13 Entire Agreement. This Agreement (including all
schedules, appendices, exhibits and attachments hereto)
constitutes the entire Agreement between the parties with respect
to the subject matter hereof.
Section 12.14 Headings Not Controlling. Headings used in this
Agreement are for reference purposes only and shall not be deemed
a part of this Agreement.
Section 12.15 Survival. All provisions regarding
indemnification, confidentiality, warranty, liability and limits
thereon shall survive following the expiration or termination of
this Agreement.
Section 12.16 Severability. In the event any provision of this
Agreement is held illegal, void or unenforceable, the balance
shall remain in effect.
Section 12.17 The Parties. All references herein to the "Fund"
are to each of the funds listed on Appendix A hereto
individually, as if this Agreement were between such individual
Fund and the Custodian. In the case of a series fund or trust,
all references to the "Fund" are to the individual series or
portfolio of such fund or trust, or to such fund or trust on
behalf of the individual series or portfolio, as appropriate.
Any reference in this Agreement to "the parties" shall mean the
Custodian and such other individual Fund as to which the matter
pertains. Each Fund hereby represents and warranties that (i) it
has the requisite power and authority under applicable laws and
its Governing Documents to enter into and perform this Agreement,
(ii) all requisite proceedings have been taken to authorize it to
enter into and perform this Agreement, and (iii) its entrance
into this Agreement shall not cause a material breach or be in
material conflict with any other agreement or obligation of the
Fund or any law or regulation applicable to it.
Section 12.18 Directors and Trustees. It is understood and is
expressly stipulated that neither the holders of Shares nor any
member of the Board be personally liable hereunder. Whenever
reference is made herein to an action required to be taken by the
Board, such action may also be taken by the Board's executive
committee.
Section 12.19 Massachusetts Business Trust. With respect to any
Fund which is a party to this Agreement and which is organized as
a Massachusetts business trust, the term "Fund" means and refers
to the trustees from time to time serving under the applicable
trust agreement of such trust, as the same may be amended from
time to time (the "Declaration of Trust"). It is expressly
agreed that the obligations of any such Fund hereunder shall not
be binding upon any of the trustees, shareholders, nominees,
officers, agents or employees of the Fund personally, but bind
only the trust property of the Fund as set forth in the
applicable Declaration of Trust. In the case of each Fund which
is a Massachusetts business trust (in each case, a "Trust"), the
execution and delivery of this Agreement on behalf of the Trust
has been authorized by the trustees, and signed by an authorized
officer, of the Trust, in each case acting in such capacity and
not individually, and neither such authorization by the trustees
nor such execution and delivery by such officer shall be deemed
to have been made by any of them individually, but shall bind
only the trust property of the Trust as provided in its
Declaration of Trust.
Section 12.20 Reproduction of Documents. This Agreement and all
schedules, exhibits, attachments and amendments hereto may be
reproduced by any photographic, photostatic, microfilm, micro-
card, miniature photographic or other similar process. The
parties hereto all/each agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a
party in the regular course of business, and that any
enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
Section 12.21 Shareholder Communications Election. SEC Rule 14b-2
requires banks which hold securities for the account of customers
to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that
issuer held by the bank unless the beneficial owner has expressly
objected to disclosure of this information. In order to comply
with the rule, the Custodian needs the Fund to indicate whether
it authorizes the Custodian to provide the Fund's name, address,
and share position to requesting companies whose securities the
Fund owns. If the Fund tells the Custodian "no", the Custodian
will not provide this information to requesting companies. If
the Fund tells the Custodian "yes" or does not check either "yes"
or "no" below, the Custodian is required by the rule to treat the
Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established
by the Fund. For the Fund's protection, the Rule prohibits the
requesting company from using the Fund's name and address for any
purpose other than corporate communications. Please indicate
below whether the Fund consents or objects by checking one of the
alternatives below.
YES [ ] The Custodian is authorized to release the Fund's
name, address, and share positions.
NO [X] The Custodian is not authorized to release the
Fund's name, address, and share positions.
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
Addendum to the Custodian Agreement (as defined below)
between each fund listed on Appendix A to the Custodian
Agreement, as such Appendix A is amended from time to time (each
such fund listed on Appendix A shall be individually referred to
herein as the "Fund"), and State Street Bank and Trust Company
("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of
certain assets of the Fund pursuant to a certain Custodian
Agreement (the "Custodian Agreement") dated as of January 28,
1998, and amended thereafter from time to time;
WHEREAS, State Street has developed and utilizes proprietary
accounting and other systems, including State Street's
proprietary Multicurrency HORIZON (registered trademark)
Accounting System, in its role as custodian of the Fund, and
maintains certain Fund-related data ("Fund Data") in databases
under the control and ownership of State Street (the "Data Access
Services"); and
WHEREAS, State Street makes available to the Fund (and
certain of the Fund' agents as set forth herein) certain Data
Access Services solely for the benefit of the Fund, and intends
to provide additional services, consistent with the terms and
conditions of this Addendum.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and for other good and valuable
consideration, the parties agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a. System. Subject to the terms and conditions of this
Addendum and solely for the purpose of providing access to Fund
Data as set forth herein, State Street hereby agrees to provide
the Fund, or certain third parties approved by State Street that
serve as the Fund's investment advisors, investment managers or
fund accountants (the "Fund Accountants") or as the Fund's
independent auditors (the "Auditor"), with access to State
Street's Multicurrency HORIZON (registered trademark) Accounting
System and the other information systems described in Attachment
A (collectively, the "System") on a remote basis solely on the
computer hardware, system software and telecommunication links
described in Attachment B (the "Designated Configuration") or on
any designated substitute or back-up equipment configuration
consented to in writing by State Street, such consent not to be
unreasonably withheld.
b. Data Access Services. State Street agrees to make
available to the Fund the Data Access Services subject to the
terms and conditions of this Addendum and such data access
operating standards and procedures as may be issued by State
Street from time to time. The Fund shall be able to access the
System to (i) originate electronic instructions to State Street
in order to (a) effect the transfer or movement of cash or
securities held under custody by State Street or (b) transmit
accounting or other information (the transactions described in
(i)(a) and (i)(b) above are referred to herein as "Client
Originated Electronic Financial Instructions"), and (ii) access
data for the purpose of reporting and analysis, which shall all
be deemed to be Data Access Services for purposes of this
Addendum.
c. Additional Services. State Street may from time to
time agree to make available to the Fund additional Systems that
are not described in the attachments to this Addendum. In the
absence of any other written agreement concerning such additional
systems, the term "System" shall include, and this Addendum shall
govern, the Fund's access to and use of any additional System
made available by State Street and/or accessed by the Fund.
2. NO USE OF THIRD PARTY SYSTEMS-LEVEL SOFTWARE
State Street and the Fund acknowledge that in connection
with the Data Access Services provided under this Addendum, the
Fund will have access, through the Data Access Services, to Fund
Data and to functions of State Street's proprietary systems;
provided, however that in no event will the Fund have direct
access to any third party systems-level software that retrieves
data for, stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a. Designated Equipment; Designated Locations. The System
and the Data Access Services shall be used and accessed solely on
and through the Designated Configuration at the offices of the
Fund or the Fund Accountants in Baltimore, Maryland or Owings
Mills, Maryland ("Designated Locations").
b. Designated Configuration; Trained Personnel. State
Street and the Fund shall be responsible for supplying,
installing and maintaining the Designated Configuration at the
Designated Locations. State Street and the Fund agree that each
will engage or retain the services of trained personnel to enable
both parties to perform their respective obligations under this
Addendum. State Street agrees to use commercially reasonable
efforts to maintain the System so that it remains serviceable,
provided, however, that State Street does not guarantee or assure
uninterrupted remote access use of the System.
c. Scope of Use. The Fund will use the System and the
Data Access Services only for the processing of securities
transactions, the keeping of books of account for the Fund and
accessing data for purposes of reporting and analysis. The Fund
shall not, and shall cause its employees and agents not to (i)
permit any unauthorized third party to use the System or the Data
Access Services, (ii) sell, rent, license or otherwise use the
System or the Data Access Services in the operation of a service
bureau or for any purpose other than as expressly authorized
under this Addendum, (iii) use the System or the Data Access
Services for any fund, trust or other investment vehicle), other
than as set forth herein, without the prior written consent of
State Street, (iv) allow access to the System or the Data Access
Services through terminals or any other computer or
telecommunications facilities located outside the Designated
Locations, (v) allow or cause any information (other than
portfolio holdings, valuations of portfolio holdings, and other
information reasonably necessary for the management or
distribution of the assets of the Fund) transmitted from State
Street's databases, including data from third party sources,
available through use of the System or the Data Access Services
to be redistributed or retransmitted to another computer,
terminal or other device for other than use for or on behalf of
the Fund or (vi) modify the System in any way, including without
limitation developing any software for or attaching any devices
or computer programs to any equipment, system, software or
database which forms a part of or is resident on the Designated
Configuration.
d. Other Locations. Except in the event of an emergency
or of a planned System shutdown, the Fund's access to services
performed by the System or to Data Access Services at the
Designated Locations may be transferred to a different location
only upon the prior written consent of State Street. In the
event of an emergency or System shutdown, the Fund may use any
back-up site included in the Designated Configuration or any
other back-up site agreed to by State Street, which agreement
will not be unreasonably withheld. The Fund may secure from
State Street the right to access the System or the Data Access
Services through computer and telecommunications facilities or
devices complying with the Designated Configuration at additional
locations only upon the prior written consent of State Street and
on terms to be mutually agreed upon by the parties.
e. Title. Title and all ownership and proprietary rights
to the System, including any enhancements or modifications
thereto, whether or not made by State Street, are and shall
remain with State Street.
f. No Modification. Without the prior written consent of
State Street, the Fund shall not modify, enhance or otherwise
create derivative works based upon the System, nor shall the Fund
reverse engineer, decompile or otherwise attempt to secure the
source code for all or any part of the System.
g. Security Procedures. The Fund shall comply with data
access operating standards and procedures and with user
identification or other password control requirements and other
security procedures as may be issued from time to time by State
Street for use of the System on a remote basis and to access the
Data Access Services. The Fund shall have access only to the
Fund Data and authorized transactions agreed upon from time to
time by State Street and, upon notice from State Street, the Fund
shall discontinue remote use of the System and access to Data
Access Services for any security reasons cited by State Street;
provided, that, in such event, State Street shall, for a period
not less than 180 days (or such other shorter period specified by
the Fund) after such discontinuance, assume responsibility to
provide accounting services under the terms of the Custodian
Agreement.
h. Inspections. State Street shall have the right to
inspect the use of the System and the Data Access Services by the
Fund, the Fund Accountants and the Auditor to ensure compliance
with this Addendum. The on-site inspections shall be upon prior
written notice to Fund, the Fund Accountants and the Auditor and
at reasonably convenient times and frequencies so as not to
result in an unreasonable disruption of the Fund's or the Fund
Accountants' or the Auditor respective businesses.
4. PROPRIETARY INFORMATION
a. Proprietary Information. The Fund acknowledges and
State Street represents that the System and the databases,
computer programs, screen formats, report formats, interactive
design techniques, documentation and other information made
available to the Fund by State Street as part of the Data Access
Services and through the use of the System constitute
copyrighted, trade secret, or other proprietary information of
substantial value to State Street. Any and all such information
provided by State Street to the Fund shall be deemed proprietary
and confidential information of State Street (hereinafter
"Proprietary Information"). The Fund agrees that it will hold
such Proprietary Information in the strictest confidence and
secure and protect it in a manner consistent with its own
procedures for the protection of its own confidential information
and to take appropriate action by instruction or agreement with
its employees or agents who are permitted access to the
Proprietary Information to satisfy its obligations hereunder.
The Fund further acknowledges that State Street shall not be
required to provide the Fund Accountants or the Auditor with
access to the System unless it has first received from the Fund
Accountants and the Auditor an undertaking with respect to State
Street's Proprietary Information in the form of Attachment C
and/or Attachment C-1 to this Addendum. The Fund shall use all
commercially reasonable efforts to assist State Street in
identifying and preventing any unauthorized use, copying or
disclosure of the Proprietary Information or any portions thereof
or any of the logic, formats or designs contained therein.
b. Cooperation. Without limitation of the foregoing, the
Fund shall advise State Street immediately in the event the Fund
learns or has reason to believe that any person to whom the Fund
has given access to the Proprietary Information, or any portion
thereof, has violated or intends to violate the terms of this
Addendum, and the Fund will, at its reasonable expense, cooperate
with State Street in seeking injunctive or other equitable relief
in the name of the Fund or State Street against any such person.
c. Injunctive Relief. The Fund acknowledges that the
disclosure of any Proprietary Information, or of any information
which at law or equity ought to remain confidential, will
immediately give rise to continuing irreparable injury to State
Street inadequately compensable in damages at law. In addition,
State Street shall be entitled to obtain immediate injunctive
relief against the breach or threatened breach of any of the
foregoing undertakings, in addition to any other legal remedies
which may be available.
d. Survival. The provisions of this Section 4 shall
survive the termination of this Addendum.
5. LIMITATION ON LIABILITY
a. Standard of Care and Limitation on Amount and Time for
Bringing Action. State Street shall be held to a standard of
reasonable care with respect to all of its duties and obligations
under this Addendum. The Fund agrees that any liability of State
Street to the Fund or any third party arising with respect to the
System or State Street's provision of Data Access Services under
this Data Access Services Addendum shall be limited to the amount
paid by the Fund for the preceding 24 months for such services.
The foregoing limitation shall relate solely to State Street's
provision of the Data Access Services pursuant to this Addendum
and is not intended to limit State Street's responsibility to
perform in accordance with the Custodian Agreement, including its
duty to act in accordance with Proper Instructions. In no event
shall State Street be liable to the Fund or any other party
pursuant to this Addendum for any special, indirect, punitive or
consequential damages even if advised of the possibility of such
damages. No action, regardless of form, arising out of the terms
of this Addendum may be brought by the Fund more than two years
after the Fund has knowledge that the cause of action has arisen.
b. Limited Warranties. NO OTHER WARRANTIES, WHETHER
EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, ARE MADE BY STATE STREET.
c. Third-Party Data. Organizations from which State
Street may obtain certain data included in the System or the Data
Access Services are solely responsible for the contents of such
data, and State Street shall have no liability for claims arising
out of the contents of such third-party data, including, but not
limited to, the accuracy thereof.
d. Regulatory Requirements. As between State Street and
the Fund, the Fund shall be solely responsible for the accuracy
of any accounting statements or reports produced using the Data
Access Services and the System and the conformity thereof with
any requirements of law.
e. Force Majeure. Neither party shall be liable for any
costs or damages due to delay or nonperformance under this Data
Access Services Addendum arising out of any cause or event beyond
such party's control, including, without limitation, cessation of
services hereunder or any damages resulting therefrom to the
other party as a result of work stoppage, power or other
mechanical failure, computer virus, natural disaster,
governmental action, or communication disruption.
6. INDEMNIFICATION
The Fund agrees to indemnify and hold State Street harmless
from any loss, damage or expense including reasonable attorney's
fees, (a "loss") suffered by State Street arising from (i) the
negligence or willful misconduct in the use by the Fund of the
Data Access Services or the System, including any loss incurred
by State Street resulting from a security breach at the
Designated Locations or committed by the Fund's employees or
agents or the Fund Accountants or the and Auditor, and (ii) any
loss resulting from incorrect Client Originated Electronic
Financial Instructions. State Street shall be entitled to rely
on the validity and authenticity of Client Originated Electronic
Financial Instructions without undertaking any further inquiry as
long as such instruction is undertaken in conformity with
security procedures established by State Street from time to
time.
7. FEES
Fees and charges for the use of the System and the Data
Access Services and related payment terms shall be as set forth
in the custody fee schedule in effect from time to time between
the parties (the "Fee Schedule"). Any tariffs, duties or taxes
imposed or levied by any government or governmental agency by
reason of the transactions contemplated by this Addendum,
including, without limitation, federal, state and local taxes,
use, value added and personal property taxes (other than income,
franchise or similar taxes which may be imposed or assessed
against State Street) shall be borne by the Fund. Any claimed
exemption from such tariffs, duties or taxes shall be supported
by proper documentary evidence delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide training, at
a designated State Street training facility or at the Designated
Locations, to the Fund's personnel in connection with the use of
the System on the Designated Configuration. The Fund agrees that
it will set aside, during regular business hours or at other
times agreed upon by both parties, sufficient time to enable all
operators of the System and the Data Access Services, designated
by the Fund, to receive the training offered by State Street
pursuant to this Addendum.
b. Installation and Conversion. State Street and the Fund
shall be responsible for the technical installation and
conversion ("Installation and Conversion") of the Designated
Configuration. The Fund shall have the following
responsibilities in connection with Installation and Conversion
of the System:
(i) The Fund shall be solely responsible for the timely
acquisition and maintenance of the hardware and
software that attach to the Designated Configuration
in order to use the Data Access Services at the
Designated Locations, and
(ii) State Street and the Fund each agree that they will
assign qualified personnel to actively participate
during the Installation and Conversion phase of the
System implementation to enable both parties to perform
their respective obligations under this Addendum.
9. SUPPORT
During the term of this Addendum, State Street agrees to
provide the support services set out in Attachment D to this
Addendum.
10. TERM
a. Term. This Addendum shall become effective on the date
of its execution by State Street and shall remain in full force
and effect until terminated as herein provided.
b. Termination. Either party may terminate this Addendum
(i) for any reason by giving the other party at least one-
hundred and eighty (180) days' prior written notice in the case
of notice of termination by State Street to the Fund or thirty
(30) days' notice in the case of notice from the Fund to State
Street of termination; or (ii) immediately for failure of the
other party to comply with any material term and condition of the
Addendum by giving the other party written notice of termination.
In the event the Fund shall cease doing business, shall become
subject to proceedings under the bankruptcy laws (other than a
petition for reorganization or similar proceeding) or shall be
adjudicated bankrupt, this Addendum and the rights granted
hereunder shall, at the option of State Street, immediately
terminate with notice to the Fund. This Addendum shall in any
event terminate as to any Fund within ninety (90) days after the
termination of the Custodian Agreement.
c. Termination of the Right to Use. Upon termination of
this Addendum for any reason, any right to use the System and
access to the Data Access Services shall terminate and the Fund
shall immediately cease use of the System and the Data Access
Services. Immediately upon termination of this Addendum for any
reason, the Fund shall return to State Street all copies of
documentation and other Proprietary Information in its
possession; provided, however, that in the event that either
party terminates this Addendum or the Custodian Agreement for any
reason other than the Fund's breach, State Street shall provide
the Data Access Services for a period of time and at a price to
be agreed upon in writing by the parties.
11. MISCELLANEOUS
a. Year 2000. State Street will take all steps necessary
to ensure that its products (and those of its third-party
suppliers) reflect the available state of the art technology to
offer products that are Year 2000 compliant, including, but not
limited to, century recognition of dates, calculations that
correctly compute same century and multi-century formulas and
date values, and interface values that reflect the date issues
arising between now and the next one-hundred years. If any
changes are required, State Street will make the changes to its
products at no cost to the Fund and in a commercially reasonable
time frame and will require third-party suppliers to do likewise.
b. Assignment; Successors. This Addendum and the rights
and obligations of the Fund and State Street hereunder shall not
be assigned by either party without the prior written consent of
the other party, except that State Street may assign this
Addendum to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by, or under
common control with State Street.
c. Survival. All provisions regarding indemnification,
warranty, liability and limits thereon, and confidentiality
and/or protection of proprietary rights and trade secrets shall
survive the termination of this Addendum.
d. Entire Agreement. This Addendum and the attachments
hereto constitute the entire understanding of the parties hereto
with respect to the Data Access Services and the use of the
System and supersedes any and all prior or contemporaneous
representations or agreements, whether oral or written, between
the parties as such may relate to the Data Access Services or the
System, and cannot be modified or altered except in a writing
duly executed by the parties. This Addendum is not intended to
supersede or modify the duties and liabilities of the parties
hereto under the Custodian Agreement or any other agreement
between the parties hereto except to the extent that any such
agreement specifically refers to the Data Access Services or the
System. No single waiver or any right hereunder shall be deemed
to be a continuing waiver.
e. Severability. If any provision or provisions of this
Addendum shall be held to be invalid, unlawful, or unenforceable,
the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired.
f. Governing Law. This Addendum shall be interpreted and
construed in accordance with the internal laws of The
Commonwealth of Massachusetts without regard to the conflict of
laws provisions thereof.
ATTACHMENT A
Multicurrency HORIZON (registered trademark) Accounting System
System Product Description
I. The Multicurrency HORIZON (registered trademark)
Accounting System is designed to provide lot level portfolio and
general ledger accounting for SEC and ERISA type requirements and
includes the following services: 1) recording of general ledger
entries; 2) calculation of daily income and expense; 3)
reconciliation of daily activity with the trial balance, and 4)
appropriate automated feeding mechanisms to (i) domestic and
international settlement systems, (ii) daily, weekly and monthly
evaluation services, (iii) portfolio performance and analytic
services, (iv) customer's internal computing systems and (v)
various State Street provided information services products.
II. GlobalQuest (registered trademark) GlobalQuest
(registered trademark) is designed to provide customer access to
the following information maintained on The Multicurrency
HORIZON (registered trademark) Accounting System: 1) cash
transactions and balances; 2) purchases and sales; 3) income
receivables; 4) tax refund; 5) daily priced positions; 6) open
trades; 7) settlement status; 8) foreign exchange transactions;
9) trade history; and 10) daily, weekly and monthly evaluation
services.
III. HORIZON (registered trademark) Gateway. HORIZON
(registered trademark) Gateway provides customers with the
ability to (i) generate reports using information maintained on
the Multicurrency HORIZON (registered trademark) Accounting
System which may be viewed or printed at the customer's location;
(ii) extract and download data from the Multicurrency HORIZON
(registered trademark) Accounting System; and (iii) access
previous day and historical data. The following information
which may be accessed for these purposes: 1) holdings; 2)
holdings pricing; 3) transactions, 4) open trades; 5) income;
6) general ledger and 7) cash.
IV. State Street Interchange. State Street Interchange is an
open information delivery architecture wherein proprietary
communication products, data formats and workstation tools are
replaced by industry standards and is designed to enable the
connection of State Street's network to customer networks,
thereby facilitating the sharing of information.
ATTACHMENT C
Undertaking
(Fund Accountants)
The undersigned understands that in the course of its
employment as Fund Accountant to each fund listed on Appendix A
(as amended from time to time) to that certain Custodian
Agreement dated as of January 28, 1998 (the "Fund"), it will have
access to State Street Bank and Trust Company's Multicurrency
HORIZON Accounting System and other information systems
(collectively, the "System").
The undersigned acknowledges that the System and the
databases, computer programs, screen formats, report formats,
interactive design techniques, documentation, and other
information made available to the Undersigned by State Street
Bank and Trust Company ("State Street") as part of the Data
Access Services provided to the Fund and through the use of the
System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all
such information provided by State Street to the Undersigned
shall be deemed proprietary and confidential information of State
Street (hereinafter "Proprietary Information"). The undersigned
agrees that it will hold such Proprietary Information in
confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or
agreement with its employees who are permitted access to the
Proprietary Information to satisfy its obligations hereunder.
The undersigned will not attempt to intercept data, gain
access to data in transmission, or attempt entry into any system
or files for which it is not authorized. It will not
intentionally adversely affect the integrity of the System
through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use
the System and access to the Data Access Services shall terminate
and the Undersigned shall immediately cease use of the System and
the Data Access Services. Immediately upon notice by State
Street for any reason, the undersigned shall return to State
Street all copies of documentation and other Proprietary
Information in its possession.
[The Fund Accountants]
By: ______________________________
Title: ______________________________
Date: ______________________________
ATTACHMENT C-1
Undertaking
(Auditor)
The undersigned understands that in the course of its
employment as Auditor to each fund listed on Appendix A (as
amended from time to time) to that certain Custodian Agreement
dated as of January 28, 1998 (the "Fund") it will have access to
State Street Bank and Trust Company's Multicurrency HORIZON
Accounting System and other information systems (collectively,
the "System").
The undersigned acknowledges that the System and the
databases, computer programs, screen formats, report formats,
interactive design techniques, documentation, and other
information made available to the Undersigned by State Street
Bank and Trust Company ("State Street") as part of the Data
Access Services provided to the Fund and through the use of the
System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all
such information provided by State Street to the Undersigned
shall be deemed proprietary and confidential information of State
Street (hereinafter "Proprietary Information"). The undersigned
agrees that it will hold such Proprietary Information in
confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or
agreement with its employees who are permitted access to the
Proprietary Information to satisfy its obligations hereunder.
The undersigned will not attempt to intercept data, gain
access to data in transmission, or attempt entry into any system
or files for which it is not authorized. It will not
intentionally adversely affect the integrity of the System
through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use
the System and access to the Data Access Services shall terminate
and the Undersigned shall immediately cease use of the System and
the Data Access Services. Immediately upon notice by State
Street for any reason, the undersigned shall return to State
Street all copies of documentation and other Proprietary
Information in its possession.
[The Auditor]
By: ______________________________
Title: ______________________________
Date: ______________________________
ATTACHMENT D
Support
During the term of this Addendum, State Street agrees to
provide the following on-going support services:
a. Telephone Support. The Fund Designated Persons may
contact State Street's HORIZON (registered trademark) Help Desk
and Fund Assistance Center between the hours of 8 a.m. and 6 p.m.
(Eastern time) on all business days for the purpose of obtaining
answers to questions about the use of the System, or to report
apparent problems with the System. From time to time, the Fund
shall provide to State Street a list of persons who shall be
permitted to contact State Street for assistance (such persons
being referred to as the "Fund Designated Persons").
b. Technical Support. State Street will provide technical
support to assist the Fund in using the System and the Data
Access Services. The total amount of technical support provided
by State Street shall not exceed 10 resource days per year.
State Street shall provide such additional technical support as
is expressly set forth in the fee schedule in effect from time to
time between the parties (the "Fee Schedule"). Technical
support, including during installation and testing, is subject to
the fees and other terms set forth in the Fee Schedule.
c. Maintenance Support. State Street shall use
commercially reasonable efforts to correct system functions that
do not work according to the System Product Description as set
forth on Attachment A in priority order in the next scheduled
delivery release or otherwise as soon as is practicable.
d. System Enhancements. State Street will provide to the
Fund any enhancements to the System developed by State Street and
made a part of the System; provided that State Street offer the
Fund reasonable training on the enhancement. Charges for system
enhancements shall be as provided in the Fee Schedule. State
Street retains the right to charge for related systems or
products that may be developed and separately made available for
use other than through the System.
e. Custom Modifications. In the event the Fund desires
custom modifications in connection with its use of the System,
the Fund shall make a written request to State Street providing
specifications for the desired modification. Any custom
modifications may be undertaken by State Street in its sole
discretion in accordance with the Fee Schedule.
f. Limitation on Support. State Street shall have no
obligation to support the Fund's use of the System: (1) for use
on any computer equipment or telecommunication facilities which
does not conform to the Designated Configuration or (ii) in the
event the Fund has modified the System in breach of this
Addendum.
In Witness Whereof, each of the parties has caused this
instrument to be executed in its name and on its behalf by its
duly authorized representative as of the date and year first
written above.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Prime Reserve Fund, Inc.
T. Rowe Price International Funds, Inc.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Tax-Free Income Fund, Inc.
T. Rowe Price Tax-Exempt Money Fund, Inc.
T. Rowe Price Tax-Free Short-Intermediate Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Tax-Free High Yield Fund, Inc.
T. Rowe Price New America Growth Fund
T. Rowe Price Equity Income Fund
T. Rowe Price GNMA Fund
T. Rowe Price Capital Appreciation Fund
T. Rowe Price State Tax-Free Income Trust
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. Rowe Price California Tax-Free Income Trust
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
Institutional International Funds, Inc.
Foreign Equity Fund
T. Rowe Price U.S. Treasury Funds, Inc.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. Rowe Price Index Trust, Inc.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
T. Rowe Price Spectrum Fund, Inc.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price Tax-Free Insured Intermediate Bond Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Summit Funds, Inc.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. Rowe Price Summit Municipal Funds, Inc.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio
T. Rowe Price Fixed Income Series, Inc.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. Rowe Price Personal Strategy Funds, Inc.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Value Fund, Inc.
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price Health Sciences Fund, Inc.
T. Rowe Price Mid-Cap Value Fund, Inc.
Institutional Domestic Equity Funds, Inc.
Mid-Cap Equity Growth Fund
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
T. Rowe Price Financial Services Fund, Inc.
T. Rowe Price Real Estate Fund, Inc.
T. Rowe Price Small Cap Stock Fund, Inc.
T. Rowe Price Small Cap Stock Fund
T. Rowe Price Media & Telecommunications Fund, Inc.
T. Rowe Price Tax Efficient Balanced Fund, Inc.
Reserve Investment Funds, Inc.
Government Reserve Investment Fund
Reserve Investment Fund
Signature attested to: Executed on Behalf of each Fund:
/s/Suzanne E. Fraunhoffer /s/Carmen Deyesu
By: _____________________ By: _____________________
Name: Suzanne E. Fraunhoffer Name: Carmen Deyesu
Title: Legal Assistant Title: Treasurer for each of
the foregoing
Signature Attested to: State Street Bank and Trust
Company
/s/Glenn Ciotti /s/Ronald E. Logue
By: ____________________ By: _____________________
Name: Glenn Ciotti Name: Ronald E. Logue
Title: VP & Assoc. Counsel Title: Executive Vice
President
Schedule A
Country Subcustodian Central Depository
United Kingdom State Street Bank None;
and Trust Company The Bank of England,
The Central Gilts Office (CGO);
The Central Moneymarkets
Office (CMO)
Euroclear (The Euroclear System)/ State Street London Limited
Appendix A
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Prime Reserve Fund, Inc.
T. Rowe Price International Funds, Inc.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Tax-Free Income Fund, Inc.
T. Rowe Price Tax-Exempt Money Fund, Inc.
T. Rowe Price Tax-Free Short-Intermediate Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Tax-Free High Yield Fund, Inc.
T. Rowe Price New America Growth Fund
T. Rowe Price Equity Income Fund
T. Rowe Price GNMA Fund
T. Rowe Price Capital Appreciation Fund
T. Rowe Price State Tax-Free Income Trust
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. Rowe Price California Tax-Free Income Trust
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
Institutional International Funds, Inc.
Foreign Equity Fund
T. Rowe Price U.S. Treasury Funds, Inc.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. Rowe Price Index Trust, Inc.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
T. Rowe Price Spectrum Fund, Inc.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price Tax-Free Insured Intermediate Bond Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Summit Funds, Inc.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. Rowe Price Summit Municipal Funds, Inc.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio
T. Rowe Price Fixed Income Series, Inc.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. Rowe Price Personal Strategy Funds, Inc.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Value Fund, Inc.
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price Health Sciences Fund, Inc.
T. Rowe Price Mid-Cap Value Fund, Inc.
Institutional Domestic Equity Funds, Inc.
Mid-Cap Equity Growth Fund
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
T. Rowe Price Financial Services Fund, Inc.
T. Rowe Price Real Estate Fund, Inc.
T. Rowe Price Small Cap Stock Fund, Inc.
T. Rowe Price Small Cap Stock Fund
T. Rowe Price Media & Telecommunications Fund, Inc.
T. Rowe Price Tax Efficient Balanced Fund, Inc.
Reserve Investment Funds, Inc.
Government Reserve Investment Fund
Reserve Investment Fund
The Transfer Agency and Service Agreement between T. Rowe Price Services,
Inc. and T. Rowe Price Funds, dated January 1, 1998, as amended.
TRANSFER AGENCY AND SERVICE AGREEMENT
between
T. ROWE PRICE SERVICES, INC.
and
EACH OF THE PARTIES INDICATED ON APPENDIX A
<PAGE>
TABLE OF CONTENTS
Page
Article A Terms of Appointment . . . . . . . . . . . . . . . . . . . 2
Article B Duties of Price Services . . . . . . . . . . . . . . . . . 3
1. Receipt of Orders/Payments. . . . . . . . . . . . . . 3
2. Redemptions . . . . . . . . . . . . . . . . . . . . . 5
3. Transfers . . . . . . . . . . . . . . . . . . . . . . 7
4. Confirmations . . . . . . . . . . . . . . . . . . . . 7
5. Returned Checks and ACH Debits. . . . . . . . . . . . 7
6. Redemption of Shares under Ten Day Hold . . . . . . . 8
7. Dividends, Distributions and Other
Corporate Actions . . . . . . . . . . . . . . . . . .10
8. Unclaimed Payments and Certificates . . . . . . . . .11
9. Books and Records . . . . . . . . . . . . . . . . . .11
10. Authorized Issued and Outstanding Shares. . . . . . .14
11. Tax Information . . . . . . . . . . . . . . . . . . .14
12. Information to be Furnished to the Fund . . . . . . .14
13. Correspondence. . . . . . . . . . . . . . . . . . . .15
14. Lost or Stolen Securities . . . . . . . . . . . . . .15
15. Telephone Services. . . . . . . . . . . . . . . . . .15
16. Collection of Shareholder Fees. . . . . . . . . . . .16
17. Form N-SAR. . . . . . . . . . . . . . . . . . . . . .16
18. Cooperation With Accountants. . . . . . . . . . . . .16
19. Blue Sky. . . . . . . . . . . . . . . . . . . . . . .16
20. Other Services. . . . . . . . . . . . . . . . . . . .16
21. Fees and Out-of-Pocket Expenses . . . . . . . . . . .17
Article C Representations and Warranties of the Price
Services . . . . . . . . . . . . . . . . . . . . . . . . .19
Article D Representations and Warranties of the Fund . . . . . . . .19
Article E Standard of Care/Indemnification . . . . . . . . . . . . .20
Article F Dual Interests . . . . . . . . . . . . . . . . . . . . . .22
Article G Documentation. . . . . . . . . . . . . . . . . . . . . . .22
Article H References to Price Services . . . . . . . . . . . . . . .24
Article I Compliance with Governmental Rules and
Regulations. . . . . . . . . . . . . . . . . . . . . . . .25
Article J Ownership of Software and Related Material . . . . . . . .25
Article K Quality Service Standards. . . . . . . . . . . . . . . . .25
Article L As of Transactions . . . . . . . . . . . . . . . . . . . .25
Article M Term and Termination of Agreement. . . . . . . . . . . . .29
Article N Notice . . . . . . . . . . . . . . . . . . . . . . . . . .29
Article O Assignment . . . . . . . . . . . . . . . . . . . . . . . .29
Article P Amendment/Interpretive Provisions. . . . . . . . . . . . .30
Article Q Further Assurances . . . . . . . . . . . . . . . . . . . .30
Article R Maryland Law to Apply. . . . . . . . . . . . . . . . . . .30
Article S Merger of Agreement. . . . . . . . . . . . . . . . . . . .30
Article T Counterparts . . . . . . . . . . . . . . . . . . . . . . .30
Article U The Parties. . . . . . . . . . . . . . . . . . . . . . . .30
Article V Directors, Trustees, Shareholders and Massachusetts
Business Trust . . . . . . . . . . . . . . . . . . . . . .31
Article W Captions . . . . . . . . . . . . . . . . . . . . . . . . .31
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the first day of January, 1998, by and
between T. ROWE PRICE SERVICES, INC., a Maryland corporation
having its principal office and place of business at 100 East
Pratt Street, Baltimore, Maryland 21202 ("Price Services"), and
EACH FUND WHICH IS LISTED ON APPENDIX A (as such Appendix may be
amended from time to time) and which evidences its agreement to
be bound hereby by executing a copy of this Agreement (each such
Fund individually hereinafter referred to as "the Fund", whose
definition may be found in Article U);
WHEREAS, the Fund desires to appoint Price Services as its
transfer agent, dividend disbursing agent and agent in connection
with certain other activities, and Price Services desires to
accept such appointment;
WHEREAS, Price Services represents that it is registered
with the Securities and Exchange Commission as a Transfer Agent
under Section 17A of the Securities Exchange Act of 1934 ("'34
Act") and will notify each Fund promptly if such registration is
revoked or if any proceeding is commenced before the Securities
and Exchange Commission which may lead to such revocation;
WHEREAS, Price Services has the capability of providing
shareholder services on behalf of the Funds for the accounts of
shareholders in the Funds, including banks and brokers on behalf
of underlying clients;
WHEREAS, certain of the Funds are named investment options
under various tax-sheltered retirement plans including, but not
limited to, individual retirement accounts, Sep-IRA's, SIMPLE
plans, deferred compensation plans, 403(b) plans, and profit
sharing, thrift, and money purchase pension plans for self-employed
individuals and professional partnerships and
corporations, (collectively referred to as "Retirement Plans");
WHEREAS, Price Services also has the capability of providing
special services, on behalf of the Funds, for the accounts of
shareholders participating in these Retirement Plans ("Retirement
Accounts").
WHEREAS, Price Services may subcontract or jointly contract
with other parties, on behalf of the Funds to perform certain of
the functions and services described herein including services to
Retirement Plans and Retirement Accounts;
WHEREAS, Price Services may also enter into, on behalf of
the Funds, certain banking relationships to perform various
banking services including, but not limited to, check deposits,
check disbursements, automated clearing house transactions
("ACH") and wire transfers.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
A. Terms of Appointment
Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints Price Services to
act, and Price Services agrees to act, as the Fund's transfer
agent, dividend disbursing agent and agent in connection with:
(1) the Fund's authorized and issued shares of its common stock
or shares of beneficial interest (all such stock and shares to be
referred to as "Shares"); (2) any dividend reinvestment or other
services provided to the shareholders of the Fund
("Shareholders"), including, without limitation, any periodic
investment plan or periodic withdrawal program; and (3) certain
Retirement Plan and Retirement Accounts as agreed upon by the
parties.
The parties to the Agreement hereby acknowledge that from
time to time, Price Services and T. Rowe Price Trust Company may
enter into contracts ("Other Contracts") with employee benefit
plans and/or their sponsors for the provision of certain plan
participant services to Retirement Plans and Retirement Accounts.
Compensation paid to Price Services pursuant to this Agreement is
with respect to the services described herein and not with
respect to services provided under Other Contracts.
B. Duties of Price Services
Price Services agrees that it will perform the following
services:
1. Receipt of Orders/Payments
Receive for acceptance, orders/payments for the
purchase of Shares and promptly deliver payment and
appropriate documentation thereof to the authorized
custodian of the Fund (the "Custodian"). Upon receipt of
any check or other instrument drawn or endorsed to it as
agent for, or identified as being for the account of, the
Fund, Price Services will process the order as follows:
o Examine the check to determine if the check conforms to
the Funds' acceptance procedures (including certain
third-party check procedures). If the check conforms,
Price Services will endorse the check and include the
date of receipt, will process the same for payment, and
deposit the net amount to the parties agreed upon
designated bank account prior to such deposit in the
Custodial account, and will notify the Fund and the
Custodian, respectively, of such deposits (such
notification to be given on a daily basis of the total
amount deposited to said accounts during the prior
business day);
o Subject to guidelines mutually agreed upon by the Funds
and Price Services, excess balances, if any, resulting
from deposit in these designated bank accounts will be
invested and the income therefrom will be used to
offset fees which would otherwise be charged to the
Funds under this Agreement;
o Ensure that any documentation received from Shareholder
is in "good order" and all appropriate documentation is
received to establish an account.
o Open a new account, if necessary, and credit the
account of the investor with the number of Shares to be
purchased according to the price of the Fund's Shares
in effect for purchases made on that date, subject to
any instructions which the Fund may have given to Price
Services with respect to acceptance of orders for
Shares;
o Maintain a record of all unpaid purchases and report
such information to the Fund daily;
o Process periodic payment orders, as authorized by
investors, in accordance with the payment procedures
mutually agreed upon by both parties;
o Receive monies from Retirement Plans and determine the
proper allocation of such monies to the Retirement
Accounts based upon instructions received from
Retirement Plan participants or Retirement Plan
administrators ("Administrators");
o Process orders received from recordkeepers and banks
and brokers for omnibus accounts in accordance with
internal policies and procedures established in
executed agency agreements and other agreements
negotiated with banks and brokers; and
o Process telephone orders for purchases of Fund shares
from the Shareholder's bank account (via wire or ACH)
to the Fund in accordance with procedures mutually
agreed upon by both parties.
Upon receipt of funds through the Federal Reserve Wire
System that are designated for purchases in Funds which declare
dividends at 12:00 p.m. (or such time as set forth in the Fund's
current prospectus), Price Services shall promptly notify the
Fund and the Custodian of such deposit.
2. Redemptions
Receive for acceptance redemption requests, including
telephone redemptions and requests received from
Administrators for distributions to participants or their
designated beneficiaries or for payment of fees due the
Administrator or such other person, including Price
Services, and deliver the appropriate documentation thereof
to the Custodian. Price Services shall receive and stamp
with the date of receipt, all requests for redemptions of
Shares (including all certificates delivered to it for
redemption) and shall process said redemption requests as
follows, subject to the provisions of Section 6 hereof:
o Examine the redemption request and, for written
redemptions, the supporting documentation, to determine
that the request is in good order and all requirements
have been met;
o Notify the Fund on the next business day of the total
number of Shares presented and covered by all such
requests;
o For those Funds that impose redemption fees, calculate
the fee owed on the redemption in accordance with the
guidelines established between the Fund and Price
Services;
o As set forth in the prospectus of the Fund, and in any
event, on or prior to the seventh (7th) calendar day
succeeding any such request for redemption, Price
Services shall, from funds available in the accounts
maintained by Price Services as agent for the Funds,
pay the applicable redemption price in accordance with
the current prospectus of the Fund, to the investor,
participant, beneficiary, Administrator or such other
person, as the case may be;
o Instruct custodian to wire redemption proceeds to a
designated bank account of Price Services. Subject to
guidelines mutually agreed upon by the Funds and Price
Services, excess balances, if any, resulting from
deposit in these bank accounts will be invested and the
income therefrom will be used to offset fees which
would otherwise be charged to the Funds under this
Agreement;
o If any request for redemption does not comply with the
Fund's requirements, Price Services shall promptly
notify the investor of such fact, together with the
reason therefore, and shall effect such redemption at
the price in effect at the time of receipt of all
appropriate documents;
o Make such withholdings as may be required under
applicable Federal tax laws;
o In the event redemption proceeds for the payment of
fees are to be wired through the Federal Reserve Wire
System or by bank wire, Price Services shall cause such
proceeds to be wired in Federal funds to the bank
account designated by Shareholder; and
o Process periodic redemption orders as authorized by the
investor in accordance with the periodic withdrawal
procedures for Systematic Withdrawal Plan ("SWP") and
systematic ACH redemptions mutually agreed upon by both
parties.
Procedures and requirements for effecting and accepting
redemption orders from investors by telephone, Tele*Access,
computer, or written instructions shall be established by
mutual agreement between Price Services and the Fund
consistent with the Fund's current prospectus.
3. Transfers
Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions and
documentation and examine such instructions for conformance
with appropriate procedures and requirements. In this
regard, Price Services, upon receipt of a proper request for
transfer, including any transfer involving the surrender of
certificates of Shares, is authorized to transfer, on the
records of the Fund, Shares of the Fund, including
cancellation of surrendered certificates, if any, to credit
a like amount of Shares to the transferee.
4. Confirmations
Mail all confirmations and other enclosures requested
by the Fund to the shareholder, and in the case of
Retirement Accounts, to the Administrators, as may be
required by the Funds or by applicable Federal or state law.
5. Returned Checks and ACH Debits
In order to minimize the risk of loss to the Fund by
reason of any check being returned unpaid, Price Services
will promptly identify and follow-up on any check or ACH
debit returned unpaid. For items returned, Price Services
may telephone the investor and/or redeposit the check or
debit for collection or cancel the purchase, as deemed
appropriate. Price Services and the Funds will establish
procedures for the collection of money owed the Fund from
investors who have caused losses due to these returned
items.
6. Redemption of Shares under Ten Day Hold
o Uncollected Funds
Shares purchased by personal, corporate, or
governmental check, or by ACH will be considered
uncollected until the tenth calendar date following the
trade date of the trade ("Uncollected Funds");
<PAGE>
o Good Funds
Shares purchased by treasurer's, cashier, certified, or
official check, or by wire transfer will be considered
collected immediately ("Good Funds"). Absent
information to the contrary (i.e., notification from
the payee institution), Uncollected Funds will be
considered Good Funds on the tenth calendar day
following trade date.
o Redemption of Uncollected Funds
o Shareholders making telephone requests for
redemption of shares purchased with Uncollected
Funds will be given two options:
1. The Shareholder will be permitted to exchange
to a money market fund to preserve principal until
the payment is deemed Good Funds;
2. The redemption can be processed utilizing the
same procedures for written redemptions described
below.
o If a written redemption request is made for shares
where any portion of the payment for said shares
is in Uncollected Funds, and the request is in
good order, Price Services will promptly obtain
the information relative to the payment necessary
to determine when the payment becomes Good Funds.
The redemption will be processed in accordance
with normal procedures, and the proceeds will be
held until confirmation that the payment is Good
Funds. On the seventh (7th) calendar day after
trade date, and each day thereafter until either
confirmation is received or the tenth (10th)
calendar day, Price Services will call the paying
institution to request confirmation that the check
or ACH in question has been paid. On the tenth
calendar day after trade date, the redemption
proceeds will be released, regardless of whether
confirmation has been received.
o Checkwriting Redemptions.
o Daily, all checkwriting redemptions $10,000 and
over reported as Uncollected Funds or insufficient
funds will be reviewed. An attempt will be made
to contact the shareholder to make good the funds
(through wire, exchange, transfer). Generally by
12:00 p.m. the same day, if the matter has not
been resolved, the redemption request will be
rejected and the check returned to the
Shareholder.
o All checkwriting redemptions under $10,000
reported as Uncollected or insufficient funds will
be rejected and the check returned to the
Shareholder. The Funds and Services may agree to
contact shareholders presenting checks under
$10,000 reported as insufficient to obtain
alternative instructions for payment.
o Confirmations of Available Funds
The Fund expects that situations may develop whereby it
would be beneficial to determine if a person who has
placed an order for Shares has sufficient funds in his
or her checking account to cover the payment for the
Shares purchased. When this situation occurs, Price
Services may call the bank in question and request that
it confirm that sufficient funds to cover the purchase
are currently credited to the account in question.
Price Services will maintain written documentation or a
recording of each telephone call which is made under
the procedures outlined above. None of the above
procedures shall preclude Price Services from inquiring
as to the status of any check received by it in payment
for the Fund's Shares as Price Services may deem
appropriate or necessary to protect both the Fund and
Price Services. If a conflict arises between Section 2
and this Section 6, Section 6 will govern.
7. Dividends, Distributions and Other Corporate Actions
o The Fund will promptly inform Price Services of the
declaration of any dividend, distribution, stock split
or any other distributions of a similar kind on account
of its Capital Stock.
o Price Services shall act as Dividend Disbursing Agent
for the Fund, and as such, shall prepare and make
income and capital gain payments to investors. As
Dividend Disbursing Agent, Price Services will on or
before the payment date of any such dividend or
distribution, notify the Custodian of the estimated
amount required to pay any portion of said dividend or
distribution which is payable in cash, and the Fund
agrees that on or about the payment date of such
distribution, it shall instruct the Custodian to make
available to Price Services sufficient funds for the
cash amount to be paid out. If an investor is entitled
to receive additional Shares by virtue of any such
distribution or dividend, appropriate credits will be
made to his or her account.
8. Unclaimed Payments and Certificates
In accordance with procedures agreed upon by both
parties, report abandoned property to appropriate state and
governmental authorities of the Fund. Price Services shall,
90 days prior to the annual reporting of abandoned property
to each of the states, make reasonable attempts to locate
Shareholders for which (a) checks or share certificates have
been returned; (b) for which accounts have aged outstanding
checks; or (c) accounts with unissued shares that have been
coded with stop mail and meet the dormancy period guidelines
specified in the individual states. Price Services shall
make reasonable attempts to contact shareholders for those
accounts which have significant aged outstanding checks and
those checks meet a specified dollar threshold.
9. Books and Records
Maintain records showing for each Shareholder's
account, Retirement Plan or Retirement Account, as the case
may be, the following:
o Names, address and tax identification number;
o Number of Shares held;
o Certain historical information regarding the
account of each Shareholder, including dividends
and distributions distributed in cash or invested
in Shares;
o Pertinent information regarding the establishment
and maintenance of Retirement Plans and Retirement
Accounts necessary to properly administer each
account;
o Information with respect to the source of
dividends and distributions allocated among income
(taxable and nontaxable income), realized short-term gains
and realized long-term gains;
o Any stop or restraining order placed against a
Shareholder's account;
o Information with respect to withholdings on
domestic and foreign accounts;
o Any instructions from a Shareholder including, all
forms furnished by the Fund and executed by a
Shareholder with respect to (i) dividend or
distribution elections, and (ii) elections with
respect to payment options in connection with the
redemption of Shares;
o Any correspondence relating to the current
maintenance of a Shareholder's account;
o Certificate numbers and denominations for any
Shareholder holding certificates;
o Any information required in order for Price
Services to perform the calculations contemplated
under this Agreement.
Price Services shall maintain files and furnish
statistical and other information as required under this
Agreement and as may be agreed upon from time to time by
both parties or required by applicable law. However, Price
Services reserves the right to delete, change or add any
information to the files maintained; provided such
deletions, changes or additions do not contravene the terms
of this Agreement or applicable law and do not materially
reduce the level of services described in this Agreement.
Price Services shall also use its best efforts to obtain
additional statistical and other information as each Fund
may reasonably request for additional fees as may be agreed
to by both parties.
Any such records maintained pursuant to Rule 31a-1
under the Investment Company Act of 1940 ("the Act") will be
preserved for the periods and maintained in a manner
prescribed in Rule 31a-2 thereunder. Disposition of such
records after such prescribed periods shall be as mutually
agreed upon by the Fund and Price Services. The retention
of such records, which may be inspected by the Fund at
reasonable times, shall be at the expense of the Fund. All
records maintained by Price Services in connection with the
performance of its duties under this Agreement will remain
the property of the Fund and, in the event of termination of
this Agreement, will be delivered to the Fund as of the date
of termination or at such other time as may be mutually
agreed upon.
All books, records, information and data pertaining to
the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of
this Agreement shall remain confidential, and shall not be
voluntarily disclosed to any other person, except after
prior notification to and approval by the other party
hereto, which approval shall not be unreasonably withheld
and may not be withheld where Price Services or the Fund may
be exposed to civil or criminal contempt proceedings for
failure to comply; when requested to divulge such
information by duly constituted governmental authorities; or
after so requested by the other party hereto.
10. Authorized Issued and Outstanding Shares
Record the issuance of Shares of the Fund and maintain,
pursuant to Rule 17Ad-10(e) of the '34 Act, a record of the
total number of Shares of the Fund which are authorized,
issued and outstanding, based upon data provided to it by
the Fund. Price Services shall also provide the Fund on a
regular basis the total number of Shares which are
authorized and issued and outstanding. Price Services shall
have no obligation, when recording the issuance of Shares,
to monitor the issuance of such Shares or to take cognizance
of any laws relating to the issuance or sale of such Shares.
11. Tax Information
Prepare and file with the Internal Revenue Service and
with other appropriate state agencies and, if required, mail
to investors, those returns for reporting dividends and
distributions paid as required to be so filed and mailed,
and shall withhold such sums required to be withheld under
applicable Federal income tax laws, rules, and regulations.
Additionally, Price Services will file and, as applicable,
mail to investors, any appropriate information returns
required to be filed in connection with Retirement Plan
processing, such as 1099R, 5498, as well as any other
appropriate forms that the Fund or Price Services may deem
necessary. The Fund and Price Services shall agree to
procedures to be followed with respect to Price Services'
responsibilities in connection with compliance with back-up
withholding and other tax laws.
12. Information to be Furnished to the Fund
Furnish to the Fund such information as may be agreed
upon between the Fund and Price Services including any
information that the Fund and Price Services agree is
necessary to the daily operations of the business.
13. Correspondence
Promptly and fully answer correspondence from
shareholders and Administrators relating to Shareholder
Accounts, Retirement Accounts, transfer agent procedures,
and such other correspondence as may from time to time be
mutually agreed upon with the Funds. Unless otherwise
instructed, copies of all correspondence will be retained by
Price Services in accordance with applicable law and
procedures.
14. Lost or Stolen Securities
Pursuant to Rule 17f-1 of the '34 Act, report to the
Securities Information Center and/or the FBI or other
appropriate person on Form X-17-F-1A all lost, stolen,
missing or counterfeit securities. Provide any other
services relating to lost, stolen or missing securities as
may be mutually agreed upon by both parties.
15. Telephone Services
Maintain a Telephone Servicing Staff of representatives
("Representatives") sufficient to timely respond to all
telephonic inquiries reasonably foreseeable. The
Representatives will also effect telephone purchases,
redemptions, exchanges, and other transactions mutually
agreed upon by both parties, for those Shareholders who have
authorized telephone services. The Representatives shall
require each Shareholder effecting a telephone transaction
to properly identify himself/herself before the transaction
is effected, in accordance with procedures agreed upon
between by both parties. Procedures for processing
telephone transactions will be mutually agreed upon by both
parties. Price Services will also be responsible for
providing Tele*Access, PC*Access and such other Services as
may be offered by the Funds from time to time. Price
Services will maintain a special Shareholder Servicing staff
to service certain Shareholders with substantial
relationships with the Funds.
16. Collection of Shareholder Fees
Calculate and notify shareholders of any fees owed the
Fund, its affiliates or its agents. Such fees include the
small account fee IRA custodial fee and wire fee.
17. Form N-SAR
Maintain such records, if any, as shall enable the Fund
to fulfill the requirements of Form N-SAR.
18. Cooperation With Accountants
Cooperate with each Fund's independent public
accountants and take all reasonable action in the
performance of its obligations under the Agreement to assure
that the necessary information is made available to such
accountants for the expression of their opinion without any
qualification as to the scope of their examination,
including, but not limited to, their opinion included in
each such Fund's annual report on Form N-SAR and annual
amendment to Form N-1A.
19. Blue Sky
Provide to the Fund or its agent, on a daily, weekly,
monthly and quarterly basis, and for each state in which the
Fund's Shares are sold, sales reports and other materials
for blue sky compliance purposes as shall be agreed upon by
the parties.
20. Other Services
Provide such other services as may be mutually agreed
upon between Price Services and the Fund.
21. Fees and Out-of-Pocket Expenses
Each Fund shall pay to Price Services and/or its agents
for its Transfer Agent Services hereunder, fees computed as
set forth in Schedule A attached. Except as provided below,
Price Services will be responsible for all expenses relating
to the providing of Services. Each Fund, however, will
reimburse Price Services for the following out-of-pocket
expenses and charges incurred in providing Services:
o Postage. The cost of postage and freight for
mailing materials to Shareholders and Retirement
Plan participants, or their agents, including
overnight delivery, UPS and other express mail
services and special courier services required to
transport mail between Price Services locations
and mail processing vendors.
o Proxies. The cost to mail proxy cards and other
material supplied to it by the Fund and costs
related to the receipt, examination and tabulation
of returned proxies and the certification of the
vote to the Fund.
o Communications
o Print. The printed forms used internally and
externally for documentation and processing
Shareholder and Retirement Plan participant,
or their agent's inquiries and requests;
paper and envelope supplies for letters,
notices, and other written communications
sent to Shareholders and Retirement Plan
participants, or their agents.
o Print & Mail House. The cost of internal
and third party printing and mail house
services, including printing of statements
and reports.
o Voice and Data. The cost of equipment
(including associated maintenance), supplies
and services used for communicating to and
from the Shareholders of the Fund and
Retirement Plan participants, or their
agents, the Fund's transfer agent, other Fund
offices, and other agents of either the Fund
or Price Services. These charges shall
include:
o telephone toll charges (both incoming
and outgoing, local, long distance and
mailgrams); and
o data and telephone lines and associated
equipment such as modems, multiplexers,
and facsimile equipment.
o Record Retention. The cost of maintenance
and supplies used to maintain, microfilm,
copy, record, index, display, retrieve, and
store, in microfiche or microfilm form,
documents and records.
o Disaster Recovery. The cost of services,
equipment, facilities and other charges
necessary to provide disaster recovery for
any and all services listed in this
Agreement.
Out-of-pocket costs will be billed at cost to the Funds.
Allocation of monthly costs among the Funds will generally be
made based upon the number of Shareholder and Retirement Accounts
serviced by Price Services each month. Some invoices for these
costs will contain costs for both the Funds and other funds
serviced by Price Services. These costs will be allocated based
on a reasonable allocation methodology. Where possible, such as
in the case of inbound and outbound WATS charges, allocation will
be made on the actual distribution or usage.
C. Representations and Warranties of Price Services
Price Services represents and warrants to the Fund that:
1. It is a corporation duly organized and existing and in
good standing under the laws of Maryland;
2. It is duly qualified to carry on its business in
Maryland, California and Florida;
3. It is empowered under applicable laws and by its
charter and by-laws to enter into and perform this
Agreement;
4. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement;
5. It is registered with the Securities and Exchange
Commission as a Transfer Agent pursuant to Section 17A of
the '34 Act; and
6. It has and will continue to have access to the
necessary facilities, equipment and personnel to perform its
duties and obligations under this Agreement.
D. Representations and Warranties of the Fund
The Fund represents and warrants to Price Services that:
1. It is a corporation or business trust duly organized
and existing and in good standing under the laws of Maryland
or Massachusetts, as the case may be;
2. It is empowered under applicable laws and by its
Articles of Incorporation or Declaration of Trust, as the
case may be, and By-Laws to enter into and perform this
Agreement;
3. All proceedings required by said Articles of
Incorporation or Declaration of Trust, as the case may be,
and By-Laws have been taken to authorize it to enter into
and perform this Agreement;
4. It is an investment company registered under the Act;
and
5. A registration statement under the Securities Act of
1933 ("the '33 Act") is currently effective and will remain
effective, and appropriate state securities law filings have
been made and will continue to be made, with respect to all
Shares of the Fund being offered for sale.
E. Standard of Care/Indemnification
Notwithstanding anything to the contrary in this Agreement:
1. Price Services shall not be liable to any Fund for any
act or failure to act by it or its agents or subcontractors
on behalf of the Fund in carrying or attempting to carry out
the terms and provisions of this Agreement provided Price
Services has acted in good faith and without negligence or
willful misconduct and selected and monitored the
performance of its agents and subcontractors with reasonable
care.
2. The Fund shall indemnify and hold Price Services
harmless from and against all losses, costs, damages,
claims, actions and expenses, including reasonable expenses
for legal counsel, incurred by Price Services resulting
from: (i) any action or omission by Price Services or its
agents or subcontractors in the performance of their duties
hereunder; (ii) Price Services acting upon instructions
believed by it to have been executed by a duly authorized
officer of the Fund; or (iii) Price Services acting upon
information provided by the Fund in form and under policies
agreed to by Price Services and the Fund. Price Services
shall not be entitled to such indemnification in respect of
actions or omissions constituting negligence or willful
misconduct of Price Services or where Price Services has not
exercised reasonable care in selecting or monitoring the
performance of its agents or subcontractors.
3. Except as provided in Article L of this Agreement,
Price Services shall indemnify and hold harmless the Fund
from all losses, costs, damages, claims, actions and
expenses, including reasonable expenses for legal counsel,
incurred by the Fund resulting from the negligence or
willful misconduct of Price Services or which result from
Price Services' failure to exercise reasonable care in
selecting or monitoring the performance of its agents or
subcontractors. The Fund shall not be entitled to such
indemnification in respect of actions or omissions
constituting negligence or willful misconduct of such Fund
or its agents or subcontractors; unless such negligence or
misconduct is attributable to Price Services.
4. In determining Price Services' liability, an isolated
error or omission will normally not be deemed to constitute
negligence when it is determined that:
o Price Services had in place "appropriate procedures;"
o the employee(s) responsible for the error or omission
had been reasonably trained and were being
appropriately monitored; and
o the error or omission did not result from wanton or
reckless conduct on the part of the employee(s).
It is understood that Price Services is not obligated to
have in place separate procedures to prevent each and every
conceivable type of error or omission. The term
"appropriate procedures" shall mean procedures reasonably
designed to prevent and detect errors and omissions. In
determining the reasonableness of such procedures, weight
will be given to such factors as are appropriate, including
the prior occurrence of any similar errors or omissions when
such procedures were in place and transfer agent industry
standards in place at the time of the occurrence.
5. In the event either party is unable to perform its
obligations under the terms of this Agreement because of
acts of God, strikes or other causes reasonably beyond its
control, such party shall not be liable to the other party
for any loss, cost, damage, claim, action or expense
resulting from such failure to perform or otherwise from
such causes.
6. In order that the indemnification provisions contained
in this Article E shall apply, upon the assertion of a claim
for which either party may be required to indemnify the
other, the party seeking indemnification shall promptly
notify the other party of such assertion, and shall keep the
other party advised with respect to all developments
concerning such claim. The party who may be required to
indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim,
or to defend against said claim in its own name or in the
name of the other party. The party seeking indemnification
shall in no case confess any claim or make any compromise in
any case in which the other party may be required to
indemnify it except with the other party's prior written
consent.
7. Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of
this Agreement.
F. Dual Interests
It is understood that some person or persons may be
directors, officers, or shareholders of both the Funds and Price
Services (including Price Services's affiliates), and that the
existence of any such dual interest shall not affect the validity
of this Agreement or of any transactions hereunder except as
otherwise provided by a specific provision of applicable law.
<PAGE>
G. Documentation
o As requested by Price Services, the Fund shall promptly
furnish to Price Services the following:
o A certified copy of the resolution of the
Directors/Trustees of the Fund authorizing the
appointment of Price Services and the execution
and delivery of this Agreement;
o A copy of the Articles of Incorporation or
Declaration of Trust, as the case may be, and By-Laws
of the Fund and all amendments thereto;
o As applicable, specimens of all forms of
outstanding and new stock/share certificates in
the forms approved by the Board of
Directors/Trustees of the Fund with a certificate
of the Secretary of the Fund as to such approval;
o All account application forms and other documents
relating to Shareholders' accounts;
o An opinion of counsel for the Fund with respect to
the validity of the stock, the number of Shares
authorized, the status of redeemed Shares, and the
number of Shares with respect to which a
Registration Statement has been filed and is in
effect; and
o A copy of the Fund's current prospectus.
The delivery of any such document for the purpose of any
other agreement to which the Fund and Price Services are or were
parties shall be deemed to be delivery for the purposes of this
Agreement.
o As requested by Price Services, the Fund will also
furnish from time to time the following documents:
o Each resolution of the Board of Directors/Trustees of
the Fund authorizing the original issue of its Shares;
o Each Registration Statement filed with the Securities
and Exchange Commission and amendments and orders
thereto in effect with respect to the sale of Shares
with respect to the Fund;
o A certified copy of each amendment to the Articles of
Incorporation or Declaration of Trust, and the By-Laws
of the Fund;
o Certified copies of each vote of the Board of
Directors/Trustees authorizing officers to give
instructions to the Transfer Agent;
o Such other documents or opinions which Price Services,
in its discretion, may reasonably deem necessary or
appropriate in the proper performance of its duties;
and
o Copies of new prospectuses issued.
Price Services hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Fund for
safekeeping of stock certificates, check forms and facsimile
signature imprinting devices, if any; and for the preparation or
use, and for keeping account of, such certificates, forms and
devices.
H. References to Price Services
Each Fund agrees not to circulate any printed matter which
contains any reference to Price Services without the prior
approval of Price Services, excepting solely such printed matter
that merely identifies Price Services as agent of the Fund. The
Fund will submit printed matter requiring approval to Price
Services in draft form, allowing sufficient time for review by
Price Services and its legal counsel prior to any deadline for
printing.
I. Compliance With Governmental Rules and Regulations
Except as otherwise provided in the Agreement and except for
the accuracy of information furnished to the Fund by Price
Services, each Fund assumes full responsibility for the
preparation, contents and distribution of its prospectuses and
compliance with all applicable requirements of the Act, the '34
Act, the '33 Act, and any other laws, rules and regulations of
governmental authorities having jurisdiction over the Fund.
Price Services shall be responsible for complying with all laws,
rules and regulations of governmental authorities having
jurisdiction over transfer agents and their activities.
J. Ownership of Software and Related Material
All computer programs, magnetic tapes, written procedures
and similar items purchased and/or developed and used by Price
Services in performance of the Agreement shall be the property of
Price Services and will not become the property of the Fund.
K. Quality Service Standards
Price Services and the Fund may from time to time agree to
certain quality service standards, as well as incentives and
penalties with respect to Price Services' hereunder.
L. As Of Transactions
For purposes of this Article L, the term "Transaction" shall
mean any single or "related transaction" (as defined below)
involving the purchase or redemption of Shares (including
exchanges) that is processed at a time other than the time of the
computation of the Fund's net asset value per Share next computed
after receipt of any such transaction order by Price Services due
to an act or omission of Price Services. "As Of
Processing" refers to the processing of these Transactions. If
more than one Transaction ("Related Transaction") in the Fund is
caused by or occurs as a result of the same act or omission, such
transactions shall be aggregated with other transactions in the
Fund and be considered as one Transaction.
o Reporting
Price Services shall:
1. Utilize a system to identify all Transactions, and
shall compute the net effect of such Transactions upon
the Fund on a daily, monthly and rolling 365 day basis.
The monthly and rolling 365 day periods are hereafter
referred to as "Cumulative".
2. Supply to the Fund, from time to time as mutually
agreed upon, a report summarizing the Transactions and
the daily and Cumulative net effects of such
Transactions both in terms of aggregate dilution and
loss ("Dilution") or gain and negative dilution
("Gain") experienced by the Fund, and the impact such
Gain or Dilution has had upon the Fund's net asset
value per Share.
3. With respect to any Transaction which causes
Dilution to the Fund of $100,000 or more, immediately
provide the Fund: (i) a report identifying the
Transaction and the Dilution resulting therefrom, (ii)
the reason such Transaction was processed as described
above, and (iii) the action that Price Services has or
intends to take to prevent the reoccurrence of such as
of processing ("Report").
o Liability
1. It will be the normal practice of the Funds not to
hold Price Services liable with respect to any
Transaction which causes Dilution to any single Fund of
less than $25,000. Price Services will, however,
closely monitor for each Fund the daily and Cumulative
Gain/Dilution which is caused by Transactions of less
than $25,000. When the Cumulative Dilution to any Fund
exceeds 3/10 of 1% per share, Price Services, in
consultation with counsel to the Fund, will make
appropriate inquiry to determine whether it should take
any remedial action. Price Services will report to the
Board of Directors/Trustees of the Fund ("Board") any
action it has taken.
2. Where a Transaction causes Dilution to a Fund
greater than $25,000 ("Significant Transaction"), but
less than $100,000, Price Services will review with
Counsel to the Fund the circumstances surrounding the
underlying Transaction to determine whether the
Transaction was caused by or occurred as a result of a
negligent act or omission by Price Services. If it is
determined that the Dilution is the result of a
negligent action or omission by Price Services, Price
Services and outside counsel for the Fund will
negotiate settlement. All such Significant
Transactions will be reported to the Audit Committee at
its annual meeting (unless the settlement fully
compensates the Fund for any dilution). Any
significant Transaction, however, causing Dilution in
excess of the lesser of $100,000 or a penny per share
will be PROMPTLY reported to the Board and resolved at
the next scheduled Board Meeting. Settlement for
significant Transactions causing Dilution of $100,000
or more will not be entered into until approved by the
Board. The factors to consider in making any
determination regarding the settlement of a Significant
Transaction would include but not be limited to:
o Procedures and controls adopted by Price Services
to prevent As Of Processing;
o Whether such procedures and controls were being
followed at the time of the Significant
Transaction;
o The absolute and relative volume of all
transactions processed by Price Services on the
day of the Significant Transaction;
o The number of Transactions processed by Price
Services during prior relevant periods, and the
net Dilution/Gain as a result of all such
Transactions to the Fund and to all other Price
Funds;
o The prior response of Price Services to
recommendations made by the Funds regarding
improvement to the Transfer Agent's As Of
Processing procedures.
3. In determining Price Services' liability with respect
to a Significant Transaction, an isolated error or
omission will normally not be deemed to constitute
negligence when it is determined that:
o Price Services had in place "appropriate
procedures".
o the employee(s) responsible for the error or
omission had been reasonably trained and were
being appropriately monitored; and
o the error or omission did not result from wanton
or reckless conduct on the part of the
employee(s).
It is understood that Price Services is not obligated
to have in place separate procedures to prevent each
and every conceivable type of error or omission. The
term "appropriate procedures" shall mean procedures
reasonably designed to prevent and detect errors and
omissions. In determining the reasonableness of such
procedures, weight will be given to such factors as are
appropriate, including the prior occurrence of any
similar errors or omissions when such procedures were
in place and transfer agent industry standards in place
at the time of the occurrence.
M. Term and Termination of Agreement
o This Agreement shall run for a period of one (1) year from
the date first written above and will be renewed from year
to year thereafter unless terminated by either party as
provided hereunder.
o This Agreement may be terminated by the Fund upon one
hundred twenty (120) days' written notice to Price Services;
and by Price Services, upon three hundred sixty-five (365)
days' writing notice to the Fund.
o Upon termination hereof, the Fund shall pay to Price
Services such compensation as may be due as of the date of
such termination, and shall likewise reimburse for out-of-pocket
expenses related to its services hereunder.
N. Notice
Any notice as required by this Agreement shall be
sufficiently given (i) when sent to an authorized person of the
other party at the address of such party set forth above or at
such other address as such party may from time to time specify in
writing to the other party; or (ii) as otherwise agreed upon by
appropriate officers of the parties hereto.
O. Assignment
Neither this Agreement nor any rights or obligations
hereunder may be assigned either voluntarily or involuntarily, by
operation of law or otherwise, by either party without the prior
written consent of the other party, provided this shall not
preclude Price Services from employing such agents and
subcontractors as it deems appropriate to carry out its
obligations set forth hereunder.
P. Amendment/Interpretive Provisions
The parties by mutual written agreement may amend this
Agreement at any time. In addition, in connection with the
operation of this Agreement, Price Services and the Fund may
agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their
joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions are to
be signed by all parties and annexed hereto, but no such
provision shall contravene any applicable Federal or state law or
regulation and no such interpretive or additional provision shall
be deemed to be an amendment of this Agreement.
Q. Further Assurances
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the
purposes hereof.
R. Maryland Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of Maryland.
S. Merger of Agreement
This Agreement, including the attached Appendices and
Schedules supersedes any prior agreement with respect to the
subject hereof, whether oral or written.
T. Counterparts
This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same
instruments.
U. The Parties
All references herein to "the Fund" are to each of the Funds
listed on Appendix A individually, as if this Agreement were
between such individual Fund and Price Services. In the case of
a series Fund or trust, all references to "the Fund" are to the
individual series or portfolio of such Fund or trust, or to such
Fund or trust on behalf of the individual series or portfolio, as
appropriate. The "Fund" also includes any T. Rowe Price Funds
which may be established after the execution of this Agreement.
Any reference in this Agreement to "the parties" shall mean Price
Services and such other individual Fund as to which the matter
pertains.
V. Directors, Trustees and Shareholders and Massachusetts
Business Trust
It is understood and is expressly stipulated that neither
the holders of Shares in the Fund nor any Directors or Trustees
of the Fund shall be personally liable hereunder.
With respect to any Fund which is a party to this Agreement
and which is organized as a Massachusetts business trust, the
term "Fund" means and refers to the trustees from time to time
serving under the applicable trust agreement (Declaration of
Trust) of such Trust as the same may be amended from time to
time. It is expressly agreed that the obligations of any such
Trust hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the
Trust, personally, but bind only the trust property of the Trust,
as provided in the Declaration of Trust of the Trust. The
execution and delivery of this Agreement has been authorized by
the trustees and signed by an authorized officer of the Trust,
acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officer shall be deemed
to have been made by any of them, but shall bind only the trust
property of the Trust as provided in its Declaration of Trust.
W. Captions
The captions in the Agreement are included for convenience
of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or
effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf under
their seals by and through their duly authorized officers.
T. ROWE PRICE SERVICES, INC. T. ROWE PRICE FUNDS
/s/James S. Riepe /s/Carmen F. Deyesu
BY: __________________________ BY: ________________________
James S. Riepe Carmen F. Deyesu
DATED: ________________________ DATED: _______________________
<PAGE>
APPENDIX A
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT BALANCED FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC. on behalf of the:
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
on behalf of the:
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
<PAGE>
AMENDMENT NO. 1
TRANSFER AGENCY AND SERVICE AGREEMENT
Between
T. ROWE PRICE SERVICES, INC.
And
THE T. ROWE PRICE FUNDS
The Transfer Agency and Service Agreement of January 1,
1998, between T. Rowe Price Services, Inc., and each of the
Parties listed on Appendix A thereto is hereby amended, as of
January 21, 1998, by adding thereto T. Rowe Price Index Trust,
Inc., on behalf of T. Rowe Price Extended Market Index Fund and
T. Rowe Price Total Market Index Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
<PAGE>
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT BALANCED FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC. on behalf of the:
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
on behalf of the:
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
Attest:
/s/Patricia S. Butcher /s/Carmen F. Deyesu
______________________ ______________________________
Patricia S. Butcher, By: Carmen F. Deyesu
Assistant Secretary Treasurer
Attest: T. ROWE PRICE SERVICES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
______________________ ______________________________
Barbara A. Van Horn, By: Henry H. Hopkins,
Assistant Secretary Vice President
The Agreement between T. Rowe Price Associates, Inc. and T. Rowe Price
Funds for Fund Accounting Services, dated January 1, 1998, as amended.
AGREEMENT
between
T. ROWE PRICE ASSOCIATES, INC.
and
THE T. ROWE PRICE FUNDS
for
FUND ACCOUNTING SERVICES
<PAGE>
TABLE OF CONTENTS
Page
Article A Terms of Appointment/Duties of Price Associates. . . . . . .1
Article B Fees and Out-of-Pocket Expenses. . . . . . . . . . . . . . .3
Article C Representations and Warranties of Price Associates . . . . .3
Article D Representations and Warranties of the Fund . . . . . . . . .4
Article E Ownership of Software and Related Material . . . . . . . . .4
Article F Quality Service Standards. . . . . . . . . . . . . . . . . .4
Article G Standard of Care/Indemnification . . . . . . . . . . . . . .4
Article H Dual Interests . . . . . . . . . . . . . . . . . . . . . . .7
Article I Documentation. . . . . . . . . . . . . . . . . . . . . . . .7
Article J Recordkeeping/Confidentiality. . . . . . . . . . . . . . . .7
Article K Compliance with Governmental Rules and Regulations . . . . .8
Article L Terms and Termination of Agreement . . . . . . . . . . . . .8
Article M Notice . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Article N Assignment . . . . . . . . . . . . . . . . . . . . . . . . .9
Article O Amendment/Interpretive Provisions. . . . . . . . . . . . . .9
Article P Further Assurances . . . . . . . . . . . . . . . . . . . . 10
Article Q Maryland Law to Apply. . . . . . . . . . . . . . . . . . . 10
Article R Merger of Agreement. . . . . . . . . . . . . . . . . . . . 10
Article S Counterparts . . . . . . . . . . . . . . . . . . . . . . . 10
Article T The Parties. . . . . . . . . . . . . . . . . . . . . . . . 10
Article U Directors, Trustee and Shareholders and
Massachusetts Business Trust . . . . . . . . . . . . . . . 10
Article V Captions . . . . . . . . . . . . . . . . . . . . . . . . . 11
<PAGE>
AGREEMENT made as of the first day of January, 1998, by and
between T. ROWE PRICE ASSOCIATES, INC., a Maryland corporation
having its principal office and place of business at 100 East
Pratt Street, Baltimore, Maryland 21202 ("Price Associates"), and
each Fund which is listed on Appendix A (as such Appendix may be
amended from time to time) and which evidences its agreement to
be bound hereby by executing a copy of this Agreement (each such
Fund individually hereinafter referred to as "the Fund", whose
definition may be found in Article T);
WHEREAS, Price Associates has the capability of providing
the Funds with certain accounting services ("Accounting
Services");
WHEREAS, the Fund desires to appoint Price Associates to
provide these Accounting Services and Price Associates desires to
accept such appointment;
WHEREAS, the Board of Directors of the Fund has authorized
the Fund to utilize various pricing services for the purpose of
providing to Price Associates securities prices for the
calculation of the Fund's net asset value.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
A. Terms of Appointment/Duties of Price Associates
Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints Price Associates
to provide, and Price Associates agrees to provide, the following
Accounting Services:
a. Maintain for each Fund a daily trial balance, a general
ledger, subsidiary records and capital stock accounts;
b. Maintain for each Fund an investment ledger, including
amortized bond and foreign dollar denominated costs
where applicable;
c. Maintain for each Fund all records relating to the
Fund's income and expenses;
d. Provide for the daily valuation of each Fund's
portfolio securities and the computation of each Fund's
daily net asset value per share. Such daily valuations
shall be made in accordance with the valuation policies
established by each of the Fund's Board of Directors
including, but not limited to, the utilization of such
pricing valuation sources and/or pricing services as
determined by the Boards. Price Associates shall have
no liability for any losses or damages incurred by the
Fund as a result of erroneous portfolio security
evaluations provided by such designated sources and/or
pricing services; provided that, Price Associates
reasonably believes the prices are accurate, has
adhered to its normal verification control procedures,
and has otherwise met the standard of care as set forth
in Article G of this Agreement;
e. Provide daily cash flow and transaction status
information to each Fund's adviser;
f. Authorize the payment of Fund expenses, either through
instruction of custodial bank or utilization of
custodian's automated transfer system;
g. Prepare for each Fund such financial information that
is reasonably necessary for shareholder reports,
reports to the Board of Directors and to the officers
of the Fund, and reports to the Securities and Exchange
Commission, the Internal Revenue Service and other
Federal and state regulatory agencies;
h. Provide each Fund with such advice that may be
reasonably necessary to properly account for all
financial transactions and to maintain the Fund's
accounting procedures and records so as to insure
compliance with generally accepted accounting and tax
practices and rules;
i. Maintain for each Fund all records that may be
reasonably required in connection with the audit
performed by each Fund's independent accountant, the
Securities and Exchange Commission, the Internal
Revenue Service or such other Federal or state
regulatory agencies; and
j. Cooperate with each Fund's independent public
accountants and take all reasonable action in the
performance of its obligations under the Agreement to
assure that the necessary information is made available
to such accountants for the expression of their opinion
without any qualification as to the scope of their
examination including, but not limited to, their
opinion included in each such Fund's annual report on
Form N-SAR and annual amendment to Form N-1A.
B. Fees and Out-of-Pocket Expenses
Each Fund shall pay to Price Associates for its Accounting
Services hereunder, fees as set forth in the Schedule attached
hereto. In addition, each Fund will reimburse Price Associates
for out-of-pocket expenses such as postage, printed forms, voice
and data transmissions, record retention, disaster recovery,
third party vendors, equipment leases and other similar items as
may be agreed upon between Price Associates and the Fund. Some
invoices will contain costs for both the Funds and other funds
serviced by Price Associates. In these cases, a reasonable
allocation methodology will be used to allocate these costs to
the Funds.
C. Representations and Warrantees of Price Associates
Price Associates represents and warrants to the Fund that:
1. It is a corporation duly organized and existing in good
standing under the laws of Maryland.
2. It is duly qualified to carry on its business in
Maryland.
3. It is empowered under applicable laws and by its
charter and By-Laws to enter into and perform this Agreement.
4. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
5. It has, and will continue to have, access to the
necessary facilities, equipment and personnel to perform its
duties and obligations under this Agreement.
D. Representations and Warrantees of the Fund
The Fund represents and warrants to Price Associates that:
1. It is a corporation or business trust, as the case may
be, duly organized and existing and in good standing under the
laws of Maryland or Massachusetts, as the case may be.
2. It is empowered under applicable laws and by its
Articles of Incorporation or Declaration of Trust, as the case
may be, and By-Laws have been taken to authorize it to enter into
and perform this Agreement.
3. All proceedings required by said Articles of
Incorporation or Declaration of Trust, as the case may be, and
By-Laws have been taken to authorize it to enter into and perform
this Agreement.
E. Ownership of Software and Related Material
All computer programs, magnetic tapes, written procedures,
and similar items purchased and/or developed and used by Price
Associates in performance of the Agreement shall be the property
of Price Associates and will not become the property of the
Funds.
<PAGE>
F. Quality Service Standards
Price Associates and the Fund may, from time to time, agree
to certain quality service standards, with respect to Price
Associates' services hereunder.
G. Standard of Care/Indemnification
Notwithstanding anything to the contrary in this Agreement:
1. Where a Pricing Error results in loss or dilution to a
Fund of less than $10,000, the determination of liability for the
error will be made by Price Associates. Where a Pricing Error
results in loss or dilution to a Fund of $10,000 or more but less
than $100,000, liability for the error will be resolved through
negotiations between Fund Counsel and Price Associates. Where a
Pricing Error results in loss or dilution to a Fund of the lesser
of 1/2 of 1% of NAV or $100,000 or more, the error will be
promptly reported to the Board of Directors of the Fund (unless
the Fund is fully compensated for the loss or dilution), provided
that final settlement with respect to such errors will not be
made until approved by the Board of Directors of the Fund. A
summary of all Pricing Errors and their effect on the Funds will
be reported to the Funds' Audit Committee on an annual basis. In
determining the liability of Price Associates for a Pricing
Error, an error or omission will not be deemed to constitute
negligence when it is determined that:
o Price Associates had in place "appropriate procedures
and an adequate system of internal controls;"
o the employee responsible for the error or omission had
been reasonably trained and was being appropriately
monitored; and
o the error or omission did not result from wanton or
reckless conduct on the part of the employee.
It is understood that Price Associates is not obligated to
have in place separate procedures to prevent each and every
conceivable type of error or omission. The term "appropriate
procedures and adequate system of internal controls" shall
mean procedures and controls reasonably designed to prevent
and detect errors and omissions. In determining the
reasonableness of such procedures and controls, weight will
be given to such factors as are appropriate, including the
prior occurrence of any similar errors or omissions, when
such procedures and controls were in place and fund
accounting industry standards in place at the time of the
error.
2. The Fund shall indemnify and hold Price Associates
harmless from and against all losses, costs, damages, claims,
actions, and expenses, including reasonable expenses for legal
counsel, incurred by Price Associates resulting from: (i) any
action or omission by Price Associates or its agents or
subcontractors in the performance of their duties hereunder; (ii)
Price Associates acting upon instructions believed by it to have
been executed by a duly authorized officer of the Fund; or (iii)
Price Associates acting upon information provided by the Fund in
form and under policies agreed to by Price Associates and the
Fund. Price Associates shall not be entitled to such
indemnification in respect of actions or omissions constituting
negligence or willful misconduct of Price Associates or where
Price Associates has not exercised reasonable care in selecting
or monitoring the performance of its agents or subcontractors.
3. Price Associates shall indemnify and hold harmless the
Fund from all losses, costs, damages, claims, actions and
expenses, including reasonable expenses for legal counsel,
incurred by the Fund resulting from the negligence or willful
misconduct of Price Associates or which result from Price
Associates' failure to exercise reasonable care in selecting or
monitoring the performance of its agents or subcontractors. The
Fund shall not be entitled to such indemnification with respect
to actions or omissions constituting negligence or willful
misconduct of such Fund or its agents or subcontractors; unless
such negligence or misconduct is attributable to Price
Associates.
4. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of
God, strikes or other causes reasonably beyond its control, such
party shall not be liable to the other party for any loss, cost,
damage, claim, action or expense resulting from such failure to
perform or otherwise from such causes.
5. In order that the indemnification provisions contained
in this Article G shall apply, upon the assertion of a claim for
which either party may be required to indemnify the other, the
party seeking indemnification shall promptly notify the other
party of such assertion, and shall keep the other party advised
with respect to all developments concerning such claim. The
party who may be required to indemnify shall have the option to
participate with the party seeking indemnification in the defense
of such claim, or to defend against said claim in its own name or
in the name of the other party. The party seeking
indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required
to indemnify it except with the other party's prior written
consent.
6. Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this
Agreement.
H. Dual Interests
It is understood that some person or persons may be
directors, officers, or shareholders of both the Fund and Price
Associates (including Price Associates' affiliates), and that the
existence of any such dual interest shall not affect the validity
of this Agreement or of any transactions hereunder except as
otherwise provided by a specific provision of applicable law.
I. Documentation
As requested by Price Associates, the Fund shall promptly
furnish to Price Associates such documents as it may reasonably
request and as are necessary for Price Associates to carry out
its responsibilities hereunder.
J. Recordkeeping/Confidentiality
1. Price Associates shall keep records relating to the
services to be performed hereunder, in the form and manner as it
may deem advisable, provided that Price Associates shall keep all
records in such form and in such manner as required by applicable
law, including the Investment Company Act of 1940 ("the Act") and
the Securities Exchange Act of 1934 ("the '34 Act").
2. Price Associates and the Fund agree that all books,
records, information and data pertaining to the business of the
other party which are exchanged or received pursuant to the
negotiation or the carrying out of this Agreement shall remain
confidential, and shall not be voluntarily disclosed to any other
person, except: (a) after prior notification to and approval in
writing by the other party hereto, which approval shall not be
unreasonably withheld and may not be withheld where Price
Associates or Fund may be exposed to civil or criminal contempt
proceedings for failure to comply; (b) when requested to divulge
such information by duly constituted governmental authorities; or
(c) after so requested by the other party hereto.
K. Compliance With Governmental Rules and Regulations
Except as otherwise provided in the Agreement and except for
the accuracy of information furnished to the Funds by Price
Associates, each Fund assumes full responsibility for the
preparation, contents and distribution of its prospectuses, and
for complying with all applicable requirements of the Act, the
'34 Act, the Securities Act of 1933 (the "33 Act"), and any laws,
rules and regulations of governmental authorities having
jurisdiction over the Funds.
L. Term and Termination of Agreement
1. This Agreement shall run for a period of one (1) year
from the date first written above and will be renewed from year
to year thereafter unless terminated by either party as provided
hereunder.
2. This Agreement may be terminated by the Fund upon sixty
(60) days' written notice to Price Associates; and by Price
Associates, upon three hundred sixty-five (365) days' writing
notice to the Fund.
3. Upon termination hereof, the Fund shall pay to Price
Associates such compensation as may be due as of the date of such
termination, and shall likewise reimburse for out-of-pocket
expenses related to its services hereunder.
M. Notice
Any notice as required by this Agreement shall be
sufficiently given (i) when sent to an authorized person of the
other party at the address of such party set forth above or at
such other address as such party may from time to time specify in
writing to the other party; or (ii) as otherwise agreed upon by
appropriate officers of the parties hereto.
N. Assignment
Neither this Agreement nor any rights or obligations
hereunder may be assigned either voluntarily or involuntarily, by
operation of law or otherwise, by either party without the prior
written consent of the other party, provided this shall not
preclude Price Associates from employing such agents and
subcontractors as it deems appropriate to carry out its
obligations set forth hereunder.
O. Amendment/Interpretive Provisions
The parties by mutual written agreement may amend this
Agreement at any time. In addition, in connection with the
operation of this Agreement, Price Associates and the Fund may
agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their
joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions are to
be signed by all parties and annexed hereto, but no such
provision shall contravene any applicable Federal or state law or
regulation and no such interpretive or additional provision shall
be deemed to be an amendment of this Agreement.
P. Further Assurances
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the
purposes hereof.
Q. Maryland Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of Maryland.
<PAGE>
R. Merger of Agreement
This Agreement, including the attached Appendix and Schedule
supersedes any prior agreement with respect to the subject
hereof, whether oral or written.
S. Counterparts
This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same
instruments.
T. The Parties
All references herein to "the Fund" are to each of the Funds
listed on Appendix A individually, as if this Agreement were
between such individual Fund and Price Associates. In the case
of a series Fund or trust, all references to "the Fund" are to
the individual series or portfolio of such Fund or trust, or to
such Fund or trust on behalf of the individual series or
portfolio, as appropriate. The "Fund" also includes any T. Rowe
Price Funds which may be established after the execution of this
Agreement. Any reference in this Agreement to "the parties"
shall mean Price Associates and such other individual Fund as to
which the matter pertains.
U. Directors, Trustees and Shareholders and Massachusetts
Business Trust
It is understood and is expressly stipulated that neither
the holders of shares in the Fund nor any Directors or Trustees
of the Fund shall be personally liable hereunder.
With respect to any Fund which is a party to this Agreement
and which is organized as a Massachusetts business trust, the
term "Fund" means and refers to the trustees from time to time
serving under the applicable trust agreement (Declaration of
Trust) of such Trust as the same may be amended from time to
time. It is expressly agreed that the obligations of any such
Trust hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the
Trust, personally, but bind only the trust property of the Trust,
as provided in the Declaration of Trust of the Trust. The
execution and delivery of this Agreement has been authorized by
the trustees and signed by an authorized officer of the Trust,
acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officer shall be deemed
to have been made by any of them, but shall bind only the trust
property of the Trust as provided in its Declaration of Trust.
<PAGE>
V. Captions
The captions in the Agreement are included for convenience
of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or
effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf under
their seals by and through their duly authorized officers.
T. ROWE PRICE ASSOCIATES, INC. T. ROWE PRICE FUNDS
/s/Alvin Younger, Jr. /s/Carmen F. Deyesu
BY: ____________________ BY: _____________________
Alvin Younger, Jr. Carmen F. Deyesu
DATED: __________________ DATED: _______________________
<PAGE>
APPENDIX A
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT BALANCED FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
<PAGE>
AMENDMENT NO. 1
AGREEMENT
between
T. ROWE PRICE ASSOCIATES, INC.
and
THE T. ROWE PRICE FUNDS
for
FUND ACCOUNTING SERVICES
The Agreement for Fund Accounting Services of January 1,
1998, between T. Rowe Price Associates, Inc. and each of the
Parties listed on Appendix A thereto is hereby amended, as of
January 21, 1998, by adding thereto T. Rowe Price Index Trust,
Inc., on behalf of T. Rowe Price Extended Market Index Fund and
T. Rowe Price Total Market Index Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. Rowe Price Extended Market Index Fund
T. Rowe Price Total Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
<PAGE>
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT BALANCED FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
<PAGE>
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
Attest:
/s/Patricia S. Butcher /s/Carmen F. Deyesu
________________________ ___________________________________
Patricia S. Butcher, By: Carmen F. Deyesu
Assistant Secretary Treasurer
Attest: T. ROWE PRICE ASSOCIATES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
________________________ ___________________________________
Barbara A. Van Horn, By: Henry H. Hopkins,
Assistant Secretary Managing Director
The Agreement between T. Rowe Price Retirement Plan Services, Inc. and
the Taxable Funds, dated January 1, 1998, as amended.
AGREEMENT
between
T. ROWE PRICE RETIREMENT PLAN SERVICES, INC.
and
EACH OF THE PARTIES INDICATED ON APPENDIX A
<PAGE>
TABLE OF CONTENTS
Page
Article A Terms of Appointment . . . . . . . . . . . . . . . . . . . .2
Article B Duties of RPS. . . . . . . . . . . . . . . . . . . . . . . .2
1. Contributions - Retirement Plans and
Retirement Accounts. . . . . . . . . . . . . . . . . . . . . . . . .2
2. Retirement Plans - Redemptions to
Cover Distributions. . . . . . . . . . . . . . . . . . . . . . . . .3
3. Other Provisions . . . . . . . . . . . . . . . . . . . . . .4
4. Exchanges. . . . . . . . . . . . . . . . . . . . . . . . . .5
5. Books and Records. . . . . . . . . . . . . . . . . . . . . .5
6. Tax Information. . . . . . . . . . . . . . . . . . . . . . .6
7. Other Information to be Furnished to the
Funds. . . . . . 6
8. Telephone. . . . . . . . . . . . . . . . . . . . . . . . . .6
9. Correspondence . . . . . . . . . . . . . . . . . . . . . . .6
10. Prospectuses/Confirmation Statements . . . . . . . . . . . .7
11. Proxies. . . . . 7
12. Form N-SAR . . . . . . . . . . . . . . . . . . . . . . . . .7
13. Withholding. . . . . . . . . . . . . . . . . . . . . . . . .7
Article C Fee and Out-of-Pocket Expenses . . . . . . . . . . . . . . .7
1. Postage. . . . . 8
2. Proxies. . . . . 8
3. Communications . . . . . . . . . . . . . . . . . . . . . . .8
4. Record Retention . . . . . . . . . . . . . . . . . . . . . .9
5. Disaster Recovery. . . . . . . . . . . . . . . . . . . . . .9
Article D Representations and Warranties of RPS. . . . . . . . . . . .9
Article E Representations and Warranties of the Fund . . . . . . . . .9
Article F Standard of Care/Indemnification . . . . . . . . . . . . . 10
Article G Dual Interests . . . . . . . . . . . . . . . . . . . . . . 12
Article H Documentation. . . . . . . . . . . . . . . . . . . . . . . 13
Article I Recordkeeping/Confidentiality. . . . . . . . . . . . . . . 14
Article J Ownership of Software and Related Material . . . . . . . . 15
Article K As of Transactions . . . . . . . . . . . . . . . . . . . . 15
1. Reporting. . . . . . . . . . . . . . . . . . . . . . . . . 15
2. Liability. . . . . . . . . . . . . . . . . . . . . . . . . 16
Article L Term and Termination of Agreement. . . . . . . . . . . . . 18
Article M Notice . . . . . . . . . . . . . . . . . . . . . . . . . 19
Article N Assignment . . . . . . . . . . . . . . . . . . . . . . . . 19
Article O Amendment/Interpretive Provisions. . . . . . . . . . . . . 19
Article P Further Assurances . . . . . . . . . . . . . . . . . . . . 19
Article Q Maryland Law to Apply. . . . . . . . . . . . . . . . . . . 19
Article R Merger of Agreement. . . . . . . . . . . . . . . . . . . . 20
Article S Counterparts . . . . . . . . . . . . . . . . . . . . . . . 20
Article T The Parties. . . . . . . . . . . . . . . . . . . . . . . . 20
Article U Directors, Trustees and Shareholders and
Massachusetts Business Trust . . . . . . . . . . . . . . . 20
Article V Captions . . . . . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
AGREEMENT, made as of the first day of January, 1998, by and
between T. ROWE PRICE RETIREMENT PLAN SERVICES, INC., a Maryland
corporation having its principal office and place of business at
100 East Pratt Street, Baltimore, Maryland 21202 ("RPS"), and
EACH FUND WHICH IS LISTED ON APPENDIX A (as such Appendix may be
amended from time to time) and which evidences its agreement to
be bound hereby by executing a copy of this Agreement (each Fund
hereinafter referred to as "the Fund") whose definition may be
found in Article T;
WHEREAS, the Funds are named investment options under
various tax-sheltered plans, including, but not limited to, state
and local government deferred compensation plans, 403(b) plans,
and profit sharing, thrift, 401(k) and money purchase pension
plans for self-employed individuals, professional partnerships
and corporations (collectively referred to as "Retirement
Plans"); and the Fund has determined that such investments of
Retirement Plans in the Funds are in the best long-term interest
of the Funds;
WHEREAS, RPS has the capability of providing special
services, on behalf of the Fund, for the accounts of individuals
("Participants") participating in these Retirement Plans
("Retirement Accounts");
WHEREAS, RPS represents that it is registered with the
Securities and Exchange Commission as a Transfer Agent under
Section 17A of the Securities Exchange Act of 1934 ("the '34
Act");
WHEREAS, RPS may subcontract or jointly contract with other
parties on behalf of the Funds to perform certain of the
functions described herein, RPS may also enter into, on behalf of
the Funds, certain banking relationships to perform various
banking services, including, but not limited to, check deposits,
disbursements, automatic clearing house transactions ("ACH") and
wire transfers. Subject to guidelines mutually agreed upon by
the Funds and RPS, excess balances, if any, resulting from these
banking relationships will be invested and the income therefrom
will be used to offset fees which would otherwise be charged to
the Funds under this Agreement;
WHEREAS, the Fund desires to contract with RPS to provide
the functions and services described herein in connection with
the Retirement Plans and Retirement Accounts;
NOW THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
A. Terms of Appointment
Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints RPS to perform
the services and functions described herein in connection with
certain Retirement Plan and Retirement Accounts as agreed upon by
the parties.
B. Duties of RPS
RPS agrees that it will perform the following services:
1. Contributions - Retirement Plans and Retirement
Accounts
After RPS has received monies from Retirement Plans and
has determined the proper allocation of such monies to the
Retirement Accounts of Participants based upon instructions
received from Participants, Retirement Plans or their
designees, or Retirement Plan Administrator(s)
("Administrator(s)"), RPS will, as a responsibility under
the Agreement:
a. In the case of a new Participant, establish and
maintain a Retirement Account for such
Participant;
b. Compute the number of shares of each Fund to which
the Participant is entitled in accordance with
the price per share of such Fund as calculated and
provided by the Fund for orders received at that
time and date, and purchase the appropriate shares
in each such Retirement Account;
c. Calculate the aggregate of all purchases in the
Retirement Accounts and transmit the net purchase
order to T. Rowe Price Services, Inc. ("Services")
or directly to the Fund, as the case may be, for
purchase into an omnibus account established in
each Fund registered in RPS' or its affiliates'
name as agent for Retirement Plans or in the
individual Retirement Plan's name ("Omnibus
Account"); and
d. Transmit to Services, by wire, at a time mutually
agreed upon by both parties, the aggregate money
allocated to coincide with the purchase order.
2. Retirement Plans - Redemptions to Cover Distributions.
After RPS has received instructions from the
Administrator regarding distributions to be made to
Participants or their designated beneficiaries from Funds
designated as investment options under the Retirement Plan,
RPS will, as a responsibility under the Agreement:
a. Compute the number of shares to be redeemed from
each such Retirement Account for such
distributions in accordance with the price per
share of such Fund as calculated and provided by
the Fund for orders received in good order at that
time and date.
b. After such computation, calculate the aggregate
amount of all redemptions in the Retirement
Accounts.
c. Transmit any net redemption order to Services or
directly to the Fund, as the case may be, for the
Omnibus Account of each Fund. Services will wire
proceeds to RPS to coincide with the redemption
order for each Omnibus Account. RPS will
Distribute to Participants or their designated
beneficiaries the amount to be disbursed.
d. After RPS has received instructions from the
Administrator regarding disbursements to be made
regarding the payment of fees due the
Administrator, or other persons including RPS, RPS
will, as a responsibility under this Agreement:
i. Compute the number of shares to be redeemed
from each Retirement Account to pay for such
disbursements and the total number of all
shares to be redeemed in accordance with the
price per share for order received in good
order at that time and date, of such Fund as
calculated and provided by the Fund;
ii. Inform Services, or the Funds directly, as
the case may be, of the necessary Shares to
be redeemed from the Omnibus Account of the
Funds to cover such disbursements; and
iii. Mail or wire to the Administrator or such
other person as designated by the
Administrator the amount to be disbursed.
3. Other Provisions
a. If any instruction tendered by an Administrator to
purchase or redeem shares in a Retirement Account
is not satisfactory to RPS, RPS shall promptly
notify the Administrator of such fact together
with the reason therefor;
b. The authority of RPS to perform its
responsibilities under Paragraph B(2) with respect
to each Fund shall be suspended upon RPS's receipt
of notification from such Fund of the suspension
of the determination of the Fund's net asset value
per share and shall remain suspended until RPS
receives proper notification from the Fund; and
c. The Fund will promptly inform RPS of the
declaration of any dividend or distribution on
account of the capital stock of any Fund so that
RPS may properly credit income and capital gain
payments to each Retirement Account.
4. Exchanges
Effect exchanges of shares of the Funds in the
Retirement Accounts upon receipt of appropriate instructions
from the Administrator and/or Participant in accordance with
the price per share of the Funds as calculated and provided
by the Fund for orders received in good order at that time
and date. Calculate and transmit a net purchase and
redemption order to Services or the Fund, as the case may
be, for the Omnibus Account of each Fund. RPS will transmit
by wire the aggregate monies allocated to each Fund to
Services to coincide with any net purchase order or instruct
Services to wire to it monies from each Fund's Omnibus
Account to coincide with any net redemption order.
5. Books and Records
RPS shall maintain records showing for each Retirement
Plan or Retirement Account, the following:
a. Names, addresses and tax identification numbers,
when provided;
b. Number of shares held of each Fund;
c. Historical information regarding the account of
each Participant and/or Retirement Plan, including
dividends and capital gain distributions invested
in shares;
d. Any instructions from a Participant or
Administrator, including all forms executed by a
Participant with respect to elections with respect
to payment options in connection with the
redemption of shares or distribution elections, if
applicable; and
e. Any information required in order for RPS to
perform the calculations contemplated under this
Agreement.
Any such records maintained pursuant to Rule 31a-1
under the Investment Company Act of 1940 ("the Act") will be
preserved for the periods prescribed in Rule 31a-2
thereunder. Disposition of such records after such
prescribed periods shall be as mutually agreed upon from
time to time by RPS and the Funds. The retention of such
records, which may be inspected by the Fund at reasonable
times, shall be at the expense of the Funds. All records
maintained by RPS in connection with the performance of its
duties under this Agreement will remain the property of the
Funds and, in the event of termination of this Agreement,
will be delivered to the Fund as of the date of termination
of this agreement or at such other time as may be mutually
agreed upon.
6. Tax Information
RPS shall also prepare and file with appropriate
federal and state agencies, such information returns and
reports as required by applicable Federal statutes relating
to redemptions effected in Retirement Accounts which
constitute reportable distributions. RPS will also prepare
and submit to Participants, such reports containing
information as is required by applicable Federal law.
7. Other Information to be Furnished to the Funds
RPS will furnish to the Fund, such information,
including Participant lists and statistical information as
may be agreed upon from time to time between RPS and the
Fund. Permission of the Administrator may also be required.
8. Telephone
RPS will promptly respond to any telephone calls from
Administrators and/or Participants relating to the
Retirement Accounts and/or questions pertaining to the
Funds.
9. Correspondence
RPS will promptly and fully answer correspondence from
Administrators and Participants relating to Retirement
Accounts and transfer agent procedures, and such other
correspondence as may from time to time be mutually agreed
upon with the Funds. Copies of all correspondence will be
retained by RPS in accordance with applicable law.
10. Prospectuses/Confirmation Statements
RPS will be responsible for mailing all confirmations
and statements of transactions, prospectuses, semi-annual
and annual reports of the Funds and other enclosures and
mailings, as may be requested by the Funds or required by
applicable Federal law.
11. Proxies
As requested by the Funds, RPS shall assist in the
mailing of proxy cards and other material required to be
mailed by the Fund in connection with shareholder meetings
of the Fund and shall assist in the receipt, examination and
tabulation of returned proxies and the certification of the
vote to the Fund.
12. Form N-SAR
RPS shall maintain such records, if any, as shall
enable the Fund to fulfill the requirements of Form N-SAR.
13. Withholding
The Fund and RPS shall agree to procedures to be
followed with respect to RPS's responsibilities in
connection with compliance for federal withholding on
distributions to Participants from Retirement Accounts.
C. Fees and Out-of-Pocket Expenses
Each Fund shall pay to RPS for its services hereunder fees
computed as set forth in the Schedule attached hereto. Except as
provided below, RPS will be responsible for all expenses relating
to the providing of services. Each Fund, however, will reimburse
RPS for the following out-of-pocket expenses and charges incurred
in providing services:
1. Postage. The cost of postage and freight for mailing
materials, including confirmations and statements as
well as Fund prospectuses and Fund shareholder reports,
to Participants, or their agents, including overnight
delivery, UPS and other express mail services and
special courier services required to transport mail
between RPS locations and mail processing vendors.
2. Proxies. The cost to mail proxy cards and other
material supplied to it by the Fund and costs related
to the receipt, examination and tabulation of returned
proxies and the certification of the vote to the Fund.
3. Communications
a. Print. The printed forms used internally and
externally for documentation and processing
Participant, or their agent's, inquiries and
requests; paper and envelope supplies for letters,
notices, and other written communications sent to
Administrators and Participants, or their agents.
b. Print & Mail House. The cost of internal and
third party printing and mail house services,
including printing of statements and reports.
c. Voice and Data. The cost of equipment (including
associated maintenance), supplies and services
used for communicating with the Participants or
their Administrator, the Fund's transfer agent,
other Fund offices, and other agents of either the
Fund or RPS. These charges shall include:
o telephone toll charges (both incoming and
outgoing, local, long distance and
mailgrams); and
o data and telephone lines and associated
equipment such as modems, multiplexers, and
facsimile equipment.
4. Record Retention. The cost of maintenance and supplies
used to maintain, microfilm, copy, record, index,
display, retrieve, and store, in microfiche or
microfilm form, documents and records.
5. Disaster Recovery. The cost of services, equipment,
facilities and other charges necessary to provide
disaster recovery for any and all services listed in
this Agreement.
D. Representations and Warranties of RPS
RPS represents and warrants to the Fund that:
1. It is a corporation duly organized and existing and in
good standing under the laws of Maryland.
2. It is duly qualified to carry on its business in
Maryland.
3. It is empowered under applicable laws and by its
charter and by-laws to enter into and perform this
Agreement.
4. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
5. It has and will continue to have access to the
necessary facilities, equipment and personnel to perform its
duties and obligations under this Agreement.
6. It is registered with the Securities and Exchange
Commission as a Transfer Agent pursuant to Section 17A of
the '34 Act.
E. Representations and Warranties of the Fund
The Fund represents and warrants to RPS that:
1. It is a corporation or business trust duly organized
and existing and in good standing under the laws of
Maryland, or Massachusetts, as the case may be.
2. It is empowered under applicable laws and by its
Articles of Incorporation or Declaration of Trust, as the
case may be, and By-Laws to enter into and perform this
Agreement.
3. All proceedings required by said Articles of
Incorporation or Declaration of Trust, as the case may be,
and By-Laws have been taken to authorize it to enter into
and perform this Agreement.
4. It is an investment company registered under the Act.
5. A registration statement under the Securities Act of
1933 ("the '33 Act") is currently effective and will remain
effective, and appropriate state securities law filing have
been made and will continue to be made, with respect to all
shares of the Fund being offered for sale.
F. Standard of Care/Indemnification
Notwithstanding anything to the contrary in this Agreement:
1. RPS shall not be liable to the Fund for any act or
failure to act by it or its agents or subcontractors on
behalf of the Fund in carrying or attempting to carry out
the terms and provisions of this Agreement provided RPS has
acted in good faith and without negligence or willful
misconduct and selected and monitored the performance of its
agents and subcontractors with reasonable care.
2. The Fund shall indemnify and hold RPS harmless from and
against all losses, costs, damages, claims, actions and
expenses, including reasonable expenses for legal counsel,
incurred by RPS resulting from: (i) any action or omission
by RPS or its agents or subcontractors in the performance of
their duties hereunder; (ii) RPS acting upon instructions
reasonably believed by it to have been executed by a duly
authorized officer of the Fund; or (iii) RPS acting upon
information provided by the Fund in form and under policies
agreed to by RPS and the Fund. RPS shall not be entitled to
such indemnification in respect of actions or omissions
constituting negligence or willful misconduct of RPS or
where RPS has not exercised reasonable care in selecting or
monitoring the performance of its agents or subcontractors.
3. Except as provided in Article K of this Agreement, RPS
shall indemnify and hold harmless the Fund from all losses,
costs, damages, claims, actions and expenses, including
reasonable expenses for legal counsel, incurred by the Fund
resulting from negligence or willful misconduct of RPS or
which result from RPS' failure to exercise reasonable care
in selecting or monitoring the performance of its agents or
subcontractors. The Fund shall not be entitled to such
indemnification in respect of actions or omissions
constituting negligence or willful misconduct of such Fund
or its agents or subcontractors; unless such negligence or
misconduct is attributable to RPS.
4. In determining RPS' liability, an isolated error or
omission will normally not be deemed to constitute
negligence when it is determined that:
o RPS had in place "appropriate procedures".
o the employees responsible for the error or omission had
been reasonably trained and were being appropriately
monitored; and
o the error or omission did not result from wanton or
reckless conduct on the part of the employees.
It is understood that RPS is not obligated to have in place
separate procedures to prevent each and every conceivable
type of error or omission. The term "appropriate
procedures" shall mean procedures reasonably designed to
prevent and detect errors and omissions. In determining the
reasonableness of such procedures, weight will be given to
such factors as are appropriate, including the prior
occurrence of any similar errors or omissions when such
procedures were in place and transfer agent industry
standards in place at the time of the occurrence.
5. In the event either party is unable to perform its
obligations under the terms of this Agreement because of
acts of God, strikes or other causes reasonably beyond its
control, such party shall not be liable to the other party
for any loss, cost, damage, claims, actions or expense
resulting from such failure to perform or otherwise from
such causes.
6. In order that the indemnification provisions contained
in this Article F shall apply, upon the assertion of a claim
for which either party may be required to indemnify the
other, the party seeking indemnification shall promptly
notify the other party of such assertion, and shall keep the
other party advised with respect to all developments
concerning such claim. The party who may be required to
indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim,
or to defend against said claim in its own name or in the
name of the other party. The party seeking indemnification
shall in no case confess any claim or make any compromise in
any case in which the other party may be required to
indemnify it except with the other party's prior written
consent.
7. Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of
this Agreement.
G. Dual Interests
It is understood that some person or persons may be
directors, officers, or shareholders of both RPS and the Fund and
that the existence of any such dual interest shall not affect the
validity of this Agreement or of any transactions hereunder
except as otherwise provided by a specific provision of
applicable law.
H. Documentation
1. As requested by RPS, the Fund shall promptly furnish to
RPS the following:
a. A certified copy of the resolution of the
Directors/Trustees of the Fund authorizing the
appointment of RPS and the execution and delivery
of this Agreement;
b. A copy of the Articles of Incorporation or
Declaration of Trust, as the case may be, and By-Laws
of the Fund and all amendments thereto;
c. An opinion of counsel for the Fund with respect to
the validity of the stock, the number of Shares
authorized, the status of redeemed Shares, and the
number of Shares with respect to which a
Registration Statement has been filed and is in
effect; and
d. A copy of the Fund's current and new prospectuses
and shareholder reports issued by the Fund.
The delivery of any such document to either party hereto for
the purpose of any other agreement to which the Fund and RPS are
or were parties shall be deemed to be delivery for the purposes
of this Agreement.
2. As requested by RPS, the Fund will also furnish to RPS
from time to time the following documents:
a. Each resolution of the Board of Directors/Trustees
of the Fund authorizing the original issue of its
shares;
b. Each Registration Statement filed with the
Securities and Exchange Commission and amendments
and orders thereto in effect with respect to the
sale of shares with respect to the Fund;
c. A certified copy of each amendment to the Articles
of Incorporation or Declaration of Trust, and the
By-Laws of the Fund;
d. Certified copies of each vote of the Board of
Directors/Trustees authorizing officers to give
instructions to the Fund; and
e. Such other documents or opinions which RPS, in its
discretion, may reasonably deem necessary or
appropriate in the proper performance of its
duties under this Agreement.
3. RPS hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for
safekeeping of check forms and facsimile signature
imprinting devices, if any, and for the preparation or use,
and for keeping account of, such forms and devices.
I. Recordkeeping/Confidentiality
1. RPS shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem
advisable, provided that RPS shall keep all records in such
form and in such manner as required by applicable law,
including the Act and the '34 Act.
2. RPS and the Fund agree that all books, records,
information and data pertaining to the business of the other
party which are exchanged or received pursuant to the
negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed
to any other person, except: (a) after prior notification
to and approval in writing by the other party hereto, which
approval shall not be unreasonably withheld and may not be
withheld where RPS or the Fund may be exposed to civil or
criminal contempt proceedings for failure to comply; (b)
when requested to divulge such information by duly
constituted governmental authorities; (c) after so requested
by the other party hereto; or (d) by the Administrator. The
permission of the Administrator may be required before
disclosure is made to the Funds.
J. Ownership of Software and Related Material
All computer programs, magnetic tapes, written procedures
and similar items purchased and/or developed and used by RPS in
performance of the Agreement shall be the property of RPS and
will not become the property of the Fund.
K. As Of Transactions
For purposes of this Article K, the term "Transaction" shall
mean any single or "related transaction" (as defined below)
involving the purchase or redemption of shares (including
exchanges) processed at a time other than the time of the
computation of the Fund's net asset value per share next computed
after receipt of any such transaction order by RPS due to an act
or omission of RPS. "As Of Processing" refers to the processing
of these Transactions. If more than one Transaction ("Related
Transaction") in the Fund is caused by or occurs as a result of
the same act or omission, such transactions shall be aggregated
with other transactions in the Fund and be considered as one
Transaction.
1. Reporting
RPS shall:
a. Utilize a system to identify all Transactions, and
shall compute the net effect of such Transactions
upon the Fund on a daily, monthly and rolling 365
day basis. The Monthly and rolling 365 day
periods are hereinafter referred to as
"Cumulative."
b. Supply to the Fund, from time to time as mutually
agreed upon, a report summarizing the Transactions
and the daily and Cumulative net effects of such
Transactions both in terms of aggregate dilution
and loss ("Dilution") or gain and negative
dilution ("Gain") experienced by the Fund, and
the impact such Gain or Dilution has had upon the
Fund's net asset value per share.
c. With respect to any Transaction which causes
Dilution to the Fund of $100,000 or more,
immediately provide the Fund: (i) a report
identifying the Transaction and the Dilution
resulting therefrom, (ii) the reason such
Transaction was processed as described above, and
(iii) the action that RPS has or intends to take
to prevent the reoccurrence of such as of
processing ("Report").
2. Liability
a. It will be the normal practice of the Fund not to
hold RPS liable with respect to any Transaction
which causes Dilution to any single Fund of less
than $25,000. RPS will, however, closely monitor
for each Fund the daily and Cumulative
Gain/Dilution which is caused by Transactions of
less than $25,000. When the Cumulative Dilution
to any Fund exceeds 3/10 of 1% per share, RPS, in
consultation with counsel to the Fund, will make
appropriate inquiry to determine whether it should
take any remedial action. RPS will report to the
Board of Directors/Trustees of the Fund ("Board"),
as appropriate, any action it has taken.
b. Where a Transaction causes Dilution to a Fund
greater than $25,000 ("Significant Transaction")
but less than $100,000, RPS will review with
Counsel to the Fund the circumstances surrounding
the underlying Significant Transaction to
determine whether the Significant Transaction was
caused by or occurred as a result of a negligent
act or omission by RPS. If it is determined that
the Dilution is the result of a negligent action
or omission by RPS, RPS and outside counsel for
the Fund will negotiate settlement. All such
Significant Transactions will be reported to the
Audit Committee at its annual meeting (unless the
settlement fully compensates the Fund for any
Dilution). Any Significant Transaction, however,
causing Dilution in excess of the lesser of
$100,000 or a penny per share will be PROMPTLY
reported to the Board and resolved at the next
scheduled Board Meeting. Settlement for
Significant Transactions causing Dilution of
$100,000 or more will not be entered into until
approved by the Board. The factors to consider in
making any determination regarding the settlement
of a Significant Transaction would include but not
be limited to:
i. Procedures and controls adopted by RPS to
prevent As Of Processing;
ii. Whether such procedures and controls were
being followed at the time of the
Significant Transaction;
iii. The absolute and relative volume of all
transactions processed by RPS on the day of
the Significant Transaction;
iv. The number of Transactions processed by RPS
during prior relevant periods, and the net
Dilution/Gain as a result of all such
Significant Transactions to the Fund and to
all other Funds; and
v. The prior response of RPS to recommendations
made by the Funds regarding improvement to
RPS's As Of Processing procedures.
c. In determining RPS' liability with respect to
Significant Transaction, an isolated error or omission will
normally not be deemed to constitute negligence when it is
determined that:
o RPS had in place "appropriate procedures".
o the employees responsible for the error or
omission had been reasonably trained and were
being appropriately monitored; and
o the error or omission did not result from wanton
or reckless conduct on the part of the employees.
It is understood that RPS is not obligated to have in
place separate procedures to prevent each and every
conceivable type of error or omission. The term
"appropriate procedures" shall mean procedures
reasonably designed to prevent and detect errors and
omissions. In determining the reasonableness of such
procedures, weight will be given to such factors as are
appropriate, including the prior occurrence of any
similar errors or omissions when such procedures were
in place and transfer agent industry standards in place
at the time of the occurrence.
L. Term and Termination of Agreement
1. This Agreement shall run for a period of one (1) year
from the date first written above and will be renewed from
year to year thereafter unless terminated by either party as
provided hereunder.
2. This Agreement may be terminated by the Funds upon one
hundred twenty (120) days' prior written notice to RPS; and
by RPS, upon three hundred sixty-five (365) days' prior
written notice to the Fund.
3. Upon termination hereof, the Fund shall pay to RPS such
compensation as may be due as of the date of such
termination, and shall likewise reimburse for out-of-pocket
expenses related to its services hereunder.
M. Notice
Any notice as required by this Agreement shall be
sufficiently given (i) when sent to an authorized person of the
other party at the address of such party set forth above or at
such other address as such party may from time to time specify in
writing to the other party; or (ii) as otherwise agreed upon by
appropriate officers of the parties hereto.
N. Assignment
Neither this Agreement nor any rights or obligations
hereunder may be assigned either voluntarily or involuntarily, by
operation of law or otherwise, by either party without the prior
written consent of the other party.
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O. Amendment/Interpretive Provisions
The parties by mutual written agreement may amend this
Agreement at any time. In addition, in connection with the
operation of this Agreement, RPS and the Fund may agree from time
to time on such provisions interpretive of or in addition to the
provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions are to be signed by all
parties and annexed hereto, but no such provision shall
contravene any applicable federal or state law or regulation and
no such interpretive or additional provision shall be deemed to
be an amendment of this Agreement.
P. Further Assurances
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the
purposes hereof.
Q. Maryland Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of Maryland.
R. Merger of Agreement
This Agreement, including the attached Schedule supersede
any prior agreement with respect to the subject hereof, whether
oral or written.
S. Counterparts
This Agreement may be executed by the parties hereto in any
number of counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same
instrument.
T. The Parties
All references herein to "the Fund" are to each of the Funds
listed on Appendix A individually, as if this Agreement were
between such individual Fund and RPS. In the case of a series
Fund or trust, all references to "the Fund" are to the individual
series or portfolio of such Fund or trust, or to such Fund or
trust on behalf of the individual series or portfolio, as
appropriate. Any reference in this Agreement to "the parties"
shall mean RPS and such other individual Fund as to which the
matter pertains. The "Fund" also includes any T. Rowe Price Fund
which may be established after the date of this Agreement.
Any reference in this Agreement to "the parties" shall mean
the Funds and RPS.
U. Directors, Trustees and Shareholders and Massachusetts
Business Trust
It is understood and is expressly stipulated that neither
the holders of shares in the Fund nor any Directors or Trustees
of the Fund shall be personally liable hereunder. With respect
to any Fund which is a party to this Agreement and which is
organized as a Massachusetts business trust, the term "Fund"
means and refers to the trustees from time to time serving under
the applicable trust agreement (Declaration of Trust) of such
Trust as the same may be amended from time to time. It is
expressly agreed that the obligations of any such Trust hereunder
shall not be binding upon any of the trustees, shareholders,
nominees, officers, agents or employees of the Trust, personally,
but bind only the trust property of the Trust, as provided in the
Declaration of Trust of the Trust. The execution and delivery of
this Agreement has been authorized by the Trustees and signed by
an authorized officer of the Trust, acting as such, and neither
such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any
of them, but shall bind only the trust property of the Trust as
provided in its Declaration of Trust.
V. Captions
The captions in the Agreement are included for convenience
of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or
effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf under
their seals by and through their duly authorized officers.
T. ROWE PRICE RETIREMENT PLAN T. ROWE PRICE FUNDS
SERVICES, INC.
/s/Charles E. Vieth /s/Carmen F. Deyesu
BY: ____________________ BY: ___________________
Charles E. Vieth Carmen F. Deyesu
DATED: ____________________ DATED: ___________________
<PAGE>
APPENDIX A
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
<PAGE>
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC. on behalf of:
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE VALUE FUND, INC.
<PAGE>
AMENDMENT NO. 1
AGREEMENT
between
T. ROWE PRICE RETIREMENT PLAN SERVICES, INC.
and
EACH OF THE PARTIES INDICATED ON APPENDIX A
The Retirement Plan Services Contract of January 1, 1998,
between T. Rowe Price Retirement Plan Services, Inc. and each of
the Parties listed on Appendix A thereto is hereby amended, as of
January 21, 1998, by adding thereto T. Rowe Price Index Trust,
Inc., on behalf of T. Rowe Price Extended Market Index Fund and
T. Rowe Price Total Market Index Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC. on behalf of:
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE VALUE FUND, INC.
Attest:
/s/Patricia S. Butcher /s/Carmen F. Deyesu
_____________________ _________________________
Patricia S. Butcher, By: Carmen F. Deyesu
Assistant Secretary Treasurer
Attest: T. ROWE PRICE RETIREMENT PLAN SERVICES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
_____________________ ________________________
Barbara A. Van Horn, By: Henry H. Hopkins,
Assistant Secretary Vice President
<PAGE>
SPECIAL SERVICING AGREEMENT
THIS SPECIAL SERVICING AGREEMENT ("Agreement"), made as of the 1st day of
January, 1998, by and between T. ROWE PRICE SPECTRUM FUND, INC., on behalf of
two of its separate series, T. ROWE PRICE SPECTRUM INCOME FUND and T. ROWE PRICE
SPECTRUM GROWTH FUND (collectively hereafter referred to as the "Spectrum
Funds"), EACH FUND LISTED ON APPENDIX A attached hereto (as such Appendix A may
be amended from time to time) and which evidences its agreement to be bound
separately and individually hereby by executing a copy of this Agreement (such
funds hereinafter called the "Underlying Funds"), and T. ROWE PRICE ASSOCIATES,
INC. ("Price Associates").
W I T N E S S E T H:
WHEREAS, the Spectrum Funds and each of the Underlying Funds are registered
as open-end, management investment companies under the Investment Company Act of
1940, as amended ("the Act").
WHEREAS, the Spectrum Funds, the Underlying Funds, and certain other funds
(the "Other Funds") sponsored and advised by Price Associates or Rowe
Price-Fleming ("Price Fleming") have entered into an agreement ("Transfer Agency
Agreement") dated January 1, 1998, with T. Rowe Price Services, Inc. ("Price
Services") for the provision of various transfer agency services in return for
such compensation as is set forth therein;
WHEREAS, the Spectrum Funds, the Underlying Funds, and the Other Funds have
entered into an agreement ("RPS Agreement") dated January 1, 1998, with T. Rowe
Price Retirement Plan Services, Inc. ("Retirement Plan Services"), under which
Retirement Plan Services is to furnish or contract to furnish to the Spectrum
Funds, the Underlying Funds, and the Other Funds various participant account,
recordkeeping, and services for retirement plans in return for such compensation
as is set forth therein;
WHEREAS, the Spectrum Funds, the Underlying Funds, and the Other Funds have
entered into an agreement ("Fund Accounting Agreement") dated January 1, 1998,
with Price Associates for the provision of various accounting services in return
for such compensation as is set forth therein;
WHEREAS, the Spectrum Funds, the Underlying Funds, and the Other Funds have
entered into an agreement ("Custodian Agreement") dated September 28, 1987, as
amended, with State Street Bank and Trust Company ("State Street") under which
State Street is to furnish to the Spectrum Funds, the Underlying Funds
<PAGE>
and the Other Funds various custodial services in return for such compensation
as is set forth in the Custodian Agreement;
WHEREAS, the Spectrum Funds have entered into an Investment Management
Agreement with Price Associates dated June 12, 1990, for the provision of
investment management services, and under such Agreement, Price Associates will
be responsible for the payment of various the Spectrum Funds expenses, including
expenses of the Spectrum Funds' organization, operations, and business not paid
for by the Underlying Funds pursuant to this Agreement;
WHEREAS, the Spectrum Funds will provide a means by which the Underlying
Funds can consolidate shareholder accounts in the Underlying Funds;
WHEREAS, such shareholder account consolidation can reduce the fees of the
Underlying Funds due Price Services and Retirement Plan Services under the
Transfer Agency Agreement and RPS Agreement, respectively (such reduction in
expenses hereinafter referred to as "Savings");
WHEREAS, the Spectrum Funds will invest their assets exclusively in the
Underlying Funds, except for cash needed for expenses, redemptions, or temporary
defensive purposes; and
WHEREAS, the Board of Directors/Trustees of each of the Underlying Funds
has determined it is reasonable to expect the aggregate expenses as described
below of the Spectrum Funds to be less than the estimated Savings to each of the
Underlying Funds from the operation of the Spectrum Funds; and such
determination by the Board of Directors/Trustees is reviewed annually prior to
renewing this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants
spelled out herein, it is agreed between and among the parties hereto as
follows:
1. SPECTRUM FUND EXPENSES
In accordance with the Fund Accounting Agreement, Price Associates will
calculate the amounts of the Spectrum Funds expenses, as set forth in the
Spectrum Funds' Investment Management Agreement ("Expenses"), due itself, State
Street, and other persons under the Transfer Agency, RPS, Fund Accounting,
Custodian, and Investment Management Agreements referred to above, as well as
any other amounts due other persons as a result of the Spectrum Funds
operations. However, under unusual circumstances, the parties may agree to
exclude certain amounts from Expenses.
2. UNDERLYING FUNDS' PAYMENT OF EXPENSES
Subject to Paragraph 3, each of the Underlying Funds will bear such Expenses in
proportion to the average daily value of its shares owned by the Spectrum Funds,
provided further that
<PAGE>
no Underlying Fund will bear such Expenses in excess of the estimated Savings to
it ("Excess Expense").
3. PAYMENT BY PRICE ASSOCIATES
In accordance with the Spectrum Funds' Investment Management Agreement, Price
Associates agrees that it will bear any Excess Expense described in Paragraph 2.
Payment by Price Associates of any such Excess Expense will be made to the
appropriate Underlying Fund no later than 30 days after the close of the
Underlying Fund's fiscal year.
4. USE OF PRICE NAME
The Spectrum Funds may utilize the "T. Rowe Price" name so long as this
Agreement remains in effect and the assets of the Spectrum Funds are invested
solely in shares of the Underlying Funds (except for such cash or cash items as
may be maintained from time to time to meet current expenses and redemptions).
5. SPECTRUM FUNDS' INVESTMENT IN UNDERLYING FUNDS
The Spectrum Funds will utilize assets deposited with the custodian of the
Spectrum Funds, State Street, from the sale of the Spectrum Funds' shares, to
promptly purchase shares of the Underlying Funds, and will undertake redemption
or exchange of such shares of the Underlying Funds in the manner provided by the
objectives and policies of the Spectrum Funds.
6. OPINION OF COUNSEL
At any time any of the parties hereto may consult legal counsel in respect of
any matter arising in connection with this Agreement, and no such party shall be
liable for any action taken or omitted by it in good faith in accordance with
such instructions or with the advice or opinion of such legal counsel.
7. LIABILITIES
No party hereto shall be liable to any other party hereto for any action taken
or thing done by it or its agents or contractors in carrying out the terms and
provisions of this Agreement provided such party has acted in good faith and
without negligence or willful misconduct and selected its agents and contractors
with reasonable care.
8. TERM OF AGREEMENT; AMENDMENT; RENEWAL
The term of this Agreement shall begin on January 1, 1998, and unless sooner
terminated as herein provided, the Agreement shall remain in effect through
December 31, 1998. Thereafter, this Agreement shall continue from year to year
if such continuation is specifically approved at least annually by the Board of
Directors/Trustees of each Underlying Fund and the Spectrum Funds, including a
majority of the independent Directors/ Trustees of each such Fund. In
determining whether to renew this Agreement, the Directors/Trustees of the
Underlying Funds may request, and Price Associates will furnish, such
information relevant to determining the past and future relationship between the
Savings and Expenses. The Agreement may be modified or amended
<PAGE>
from time to time by mutual agreement between the parties hereto. Upon
termination hereof, each party hereto will make appropriate arrangements to
satisfy its obligations hereunder. This Agreement may be amended in the future
to include as additional Fund parties to the Agreement other investment
companies for which Price-Fleming or Price Associates serves as investment
manager.
9. ASSIGNMENT
This Agreement shall not be assigned or transferred, either voluntarily or
involuntarily, by operation of law or otherwise, without the prior written
consent of the Underlying Funds and the Spectrum Funds. The Agreement shall
automatically and immediately terminate in the event of its assignment without
the prior written consent of such Funds.
10. NOTICE
Any notice under this Agreement shall be in writing, addressed and delivered or
sent by registered or certified mail, postage prepaid, to the other party at
such address as such other party may designate for the receipt of such notices.
Until further notice to the other parties, it is agreed that for this purpose
the address of all parties to this Agreement is 100 East Pratt Street,
Baltimore, Maryland 21202, Attention: Secretary.
11. INTERPRETATIVE PROVISIONS
In connection with the operation of this Agreement, the parties may agree from
time to time on such provisions interpretative of or in addition to the
provisions of this Agreement as may in their joint opinion be consistent with
the general tenor of this Agreement. Any such interpretative or additional
provisions are to be signed by all parties and annexed hereto, but no such
provisions shall contravene any applicable Federal or state law or regulation
and no such interpretative or additional provision shall be deemed to be an
amendment of the Agreement.
12. STATE LAW
This Agreement shall be construed and enforced in accordance with and governed
by the laws of the State of Maryland.
13. CAPTIONS
The captions in the Agreement are included for convenience of reference only and
in no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
14. UNDERLYING FUNDS
Each of the Funds listed in Appendix A agree to be bound, separately and
individually, to the terms and conditions of this Agreement. Under no
circumstances will any Underlying Fund be liable for any obligation of any other
Underlying Fund.
IN WITNESS WHEREOF, the parties have caused the Agreement to be executed as
of the day and year first above written.
<PAGE>
ATTEST:
T. ROWE PRICE SPECTRUM FUND, INC.,
on behalf of T. ROWE PRICE SPECTRUM INCOME FUND
and T. ROWE PRICE SPECTRUM GROWTH FUND
/s/Patricia S. Butcher By: /s/Peter Van Dyke
Patricia S. Butcher, Peter Van Dyke, President
Assistant Secretary
T. ROWE PRICE ASSOCIATES, INC.
/s/Barbara A. Van Horn By: /s/Henry H. Hopkins
Barbara A. Van Horn, Henry H. Hopkins, Managing Director
Assistant Secretary
EACH OF THE FUNDS LISTED IN APPENDIX A HERETO,
SEPARATELY AND INDIVIDUALLY
/s/Patricia S. Butcher By: /s/Henry H. Hopkins
Patricia S. Butcher, Henry H. Hopkins, Vice President
Assistant Secretary
APPENDIX A
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price GNMA Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price International Funds, Inc., on behalf of the
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price International Bond Fund and
T. Rowe Price International Stock Fund
T. Rowe Price Mid-Cap Value Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Summit Funds, Inc., on behalf of the
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price U.S. Treasury Funds, Inc., on behalf of the
T. Rowe Price U.S. Treasury Long-Term Fund
<PAGE>
SPECIAL SERVICING AGREEMENT
THIS SPECIAL SERVICING AGREEMENT ("Agreement"), made as of the 1st day of
January, 1998, by and between T. ROWE PRICE SPECTRUM FUND, INC. ("Spectrum
Fund"), on behalf of its separate series, T. ROWE PRICE SPECTRUM INTERNATIONAL
FUND ("Spectrum International"), EACH FUND LISTED ON APPENDIX A attached hereto
(as such Appendix A may be amended from time to time) and which evidences its
agreement to be bound separately and individually hereby by executing a copy of
this Agreement (such funds hereinafter called the "Underlying Funds"), T. ROWE
PRICE ASSOCIATES, INC. ("Price Associates") and ROWE PRICE-FLEMING
INTERNATIONAL, INC. ("Price-Fleming").
W I T N E S S E T H:
WHEREAS, Spectrum International and each of the Underlying Funds are
registered as open-end, management investment companies under the Investment
Company Act of 1940, as amended ("the Act").
WHEREAS, Spectrum International, the Underlying Funds, and certain other
funds (the "Other Funds") sponsored and advised by Price-Fleming or Price
Associates have entered into an agreement ("Transfer Agency Agreement") dated
January 1, 1998, with T. Rowe Price Services, Inc. ("Price Services") for the
provision of various transfer agency services in return for such compensation as
is set forth therein;
WHEREAS, Spectrum International, the Underlying Funds, and the Other Funds
have entered into an agreement ("RPS Agreement") dated January 1, 1998, with T.
Rowe Price Retirement Plan Services, Inc. ("Retirement Plan Services") under
which Retirement Plan Services is to furnish or contract to furnish to Spectrum
International, the Underlying Funds, and the Other Funds various participant
account, record keeping, and services for retirement plans in return for such
compensation as is set forth therein;
WHEREAS, Spectrum International, the Underlying Funds, and the Other Funds
have entered into an agreement ("Fund Accounting Agreement") dated January 1,
1998, with Price Associates for the provision of various accounting services in
return for such compensation as is set forth therein;
WHEREAS, Spectrum International, the Underlying Funds, and the Other Funds
have entered into an agreement ("Custodian Agreement") dated September 28, 1987,
as amended, with State Street Bank and Trust Company ("State Street") under
which State
<PAGE>
Street is to furnish to Spectrum International, the Underlying Funds and the
Other Funds various custodial services in return for such compensation as is set
forth in the Custodian Agreement;
WHEREAS, Spectrum International has entered into an Investment Management
Agreement with Price-Fleming dated November 12, 1996, for the provision of
investment management services, and under such Agreement, Price-Fleming will be
responsible for the payment of various Spectrum International expenses,
including expenses of Spectrum International's organization, operations, and
business not paid for by the Underlying Funds pursuant to this Agreement;
WHEREAS, Spectrum International will provide a means by which the
Underlying Funds can consolidate shareholder accounts in the Underlying Funds;
WHEREAS, such shareholder account consolidation can reduce the fees of the
Underlying Funds due Price Services and Retirement Plan Services under the
Transfer Agency Agreement and RPS Agreement, respectively (such reduction in
expenses hereinafter referred to as "Savings");
WHEREAS, Spectrum International will invest its assets exclusively in the
Underlying Funds, except for cash needed for expenses, redemptions, or temporary
defensive purposes; and
WHEREAS, the Board of Directors of each of the Underlying Funds has
determined it is reasonable to expect the aggregate expenses as described below
of Spectrum International to be less than the estimated Savings to each of the
Underlying Funds from the operation of Spectrum International; and such
determination by the Board of Directors is reviewed annually prior to renewing
this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants
spelled out herein, it is agreed between and among the parties hereto as
follows:
1. SPECTRUM INTERNATIONAL EXPENSES
In accordance with the Fund Accounting Agreement, Price Associates will
calculate the amounts of Spectrum International expenses, as set forth in
Spectrum International's Investment Management Agreement ("Expenses"), due
itself, State Street, and other persons under the Transfer Agency, RPS, Fund
Accounting, Custodian, and Investment Management Agreements referred to above,
as well as any other amounts due other persons as a result of Spectrum
International operations. However, under unusual circumstances, the parties may
agree to exclude certain amounts from Expenses.
2. UNDERLYING FUNDS' PAYMENT OF EXPENSES
Subject to Paragraph 3, each of the Underlying Funds will bear such Expenses in
proportion to the average daily value
<PAGE>
of its shares owned by Spectrum International, provided further that no
Underlying Fund will bear such Expenses in excess of the estimated Savings to it
("Excess Expense").
3. PAYMENT BY PRICE-FLEMING
In accordance with Spectrum International's Investment Management Agreement,
Price-Fleming agrees that it will bear any Excess Expense described in Paragraph
2. Payment by Price-Fleming of any such Excess Expense will be made to the
appropriate Underlying Fund no later than 30 days after the close of the
Underlying Fund's fiscal year.
4. USE OF PRICE NAME
Spectrum International may utilize the "T. Rowe Price" name so long as this
Agreement remains in effect and the assets of Spectrum International are
invested solely in shares of the Underlying Funds (except for such cash or cash
items as may be maintained from time to time to meet current expenses and
redemptions).
5. SPECTRUM INTERNATIONAL INVESTMENT IN UNDERLYING FUNDS
Spectrum International will utilize assets deposited with the custodian of
Spectrum International, State Street, from the sale of Spectrum International
shares, to promptly purchase shares of the Underlying Funds, and will undertake
redemption or exchange of such shares of the Underlying Funds in the manner
provided by the objectives and policies of Spectrum International.
6. OPINION OF COUNSEL
At any time any of the parties hereto may consult legal counsel in respect of
any matter arising in connection with this Agreement, and no such party shall be
liable for any action taken or omitted by it in good faith in accordance with
such instructions or with the advice or opinion of such legal counsel.
7. LIABILITIES
No party hereto shall be liable to any other party hereto for any action taken
or thing done by it or its agents or contractors in carrying out the terms and
provisions of this Agreement provided such party has acted in good faith and
without negligence or willful misconduct and selected its agents and contractors
with reasonable care.
8. TERM OF AGREEMENT; AMENDMENT; RENEWAL
The term of this Agreement shall begin on January 1, 1998, and unless sooner
terminated as herein provided, the Agreement shall remain in effect through
December 31, 1998. Thereafter, this Agreement shall continue from year to year
if such continuation is specifically approved at least annually by the Board of
Directors of each Underlying Fund and Spectrum International, including a
majority of the independent Directors of each such Fund. In determining whether
to renew this Agreement, the Directors of the Underlying Funds may request, and
Price Associates will furnish, such information relevant to determining
<PAGE>
the past and future relationship between the Savings and Expenses. The Agreement
may be modified or amended from time to time by mutual agreement between the
parties hereto. Upon termination hereof, each party hereto will make appropriate
arrangements to satisfy its obligations hereunder. This Agreement may be amended
in the future to include as additional Fund parties to the Agreement other
investment companies for which Price-Fleming or Price Associates serves as
investment manager.
9. ASSIGNMENT
This Agreement shall not be assigned or transferred, either voluntarily or
involuntarily, by operation of law or otherwise, without the prior written
consent of the Underlying Funds and Spectrum International. The Agreement shall
automatically and immediately terminate in the event of its assignment without
the prior written consent of such Funds.
10. NOTICE
Any notice under this Agreement shall be in writing, addressed and delivered or
sent by registered or certified mail, postage prepaid, to the other party at
such address as such other party may designate for the receipt of such notices.
Until further notice to the other parties, it is agreed that for this purpose
the address of all parties to this Agreement is 100 East Pratt Street,
Baltimore, Maryland 21202, Attention: Secretary.
11. INTERPRETATIVE PROVISIONS
In connection with the operation of this Agreement, the parties may agree from
time to time on such provisions interpretative of or in addition to the
provisions of this Agreement as may in their joint opinion be consistent with
the general tenor of this Agreement. Any such interpretative or additional
provisions are to be signed by all parties and annexed hereto, but no such
provisions shall contravene any applicable Federal or state law or regulation
and no such interpretative or additional provision shall be deemed to be an
amendment of the Agreement.
12. STATE LAW
This Agreement shall be construed and enforced in accordance with and governed
by the laws of the State of Maryland.
13. CAPTIONS
The captions in the Agreement are included for convenience of reference only and
in no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
14. UNDERLYING FUNDS
Each of the Funds listed in Appendix A agree to be bound, separately and
individually, to the terms and conditions of this Agreement. Under no
circumstances will any Underlying Fund be liable for any obligation of any other
Underlying Fund.
<PAGE>
IN WITNESS WHEREOF, the parties have caused the Agreement to be executed as
of the day and year first above written.
ATTEST:
T. ROWE PRICE ASSOCIATES, INC.
/s/Barbara Van Horn By: /s/Henry H. Hopkins
Barbara Van Horn, Henry H. Hopkins, Managing Director
Assistant Secretary
EACH OF THE FUNDS LISTED IN
APPENDIX A HERETO, SEPARATELY
AND INDIVIDUALLY
/s/Patricia S. Butcher By: /s/Henry H. Hopkins
Patricia S. Butcher, Henry H. Hopkins, Vice President
Assistant Secretary
T. ROWE PRICE SPECTRUM FUND, INC.,
on behalf of T. ROWE PRICE SPECTRUM
INTERNATIONAL FUND
/s/Patricia S. Butcher By: /s/James S. Riepe
Patricia S. Butcher, James S. Riepe, Chairman of the
Assistant Secretary Board
ROWE PRICE-FLEMING INTERNATIONAL, INC.
/s/Barbara Van Horn By: /s/M. David Testa
Barbara Van Horn, M. David Testa, Chairman of the
Assistant Secretary Board
APPENDIX A
T. ROWE PRICE INTERNATIONAL FUNDS, INC., on behalf of the
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. ROWE PRICE SUMMIT FUNDS, INC., on behalf of the
T. Rowe Price Summit Cash Reserves Fund
<PAGE>
April 16, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: T. Rowe Price Spectrum Fund, Inc. (the Registrant)
File Nos.: 033-10992/811-4998
Commissioners:
We are counsel to the above-referenced Registrant which proposes to file,
pursuant to paragraph (b) of Rule 485 (the "Rule"), Post-Effective Amendment No.
13 (the "Amendment") to its registration statement under the Securities Act of
1933, as amended.
Pursuant to paragraph (b)(4) of the Rule, we represent that the Amendment
does not contain disclosures which would render it ineligible to become
effective pursuant to paragraph (b) of the Rule.
Very truly yours,
/s/Shereff, Friedman, Hoffman & Goodman LLP
Shereff, Friedman, Hoffman & Goodman LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 13 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated January 21, 1998 relating to the financial
statements and financial highlights appearing in the December 31, 1997 Annual
Report to Shareholders of the Spectrum Growth Fund, Spectrum Income Fund, and
Spectrum International Fund (three Funds constituting T. Rowe Price Spectrum
Fund, Inc.), which are also incorporated by reference into the Registration
Statement. We also consent to the references to us under the heading "Financial
Highlights" in the Prospectus and under the heading "Independent Accountants" in
the Statement of Additional Information.
/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP
Baltimore, Maryland
April 22, 1998
<PAGE>
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<PAGE>
T. ROWE PRICE SPECTRUM FUND, INC.
(on behalf of Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund)
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
and the same attested by their 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.
/s/James S. Riepe
By:____________________________________
James S. Riepe, Chairman of the Board
April 29, 1998
Attest:
/s/Patricia S. Butcher
______________________________
Patricia S. Butcher, Secretary
/s/James S. Riepe
____________________________ Chairman of the Board April 29, 1998
James S. Riepe (Principal Executive Officer)
/s/Carmen F. Deyesu
____________________________ Treasurer April 29, 1998
Carmen F. Deyesu (Principal Financial Officer)
/s/Jeffrey H. Donahue
____________________________ Director April 29, 1998
Jeffrey H. Donahue
/s/A. MacDonough Plant
____________________________ Director April 29, 1998
A. MacDonough Plant
<PAGE>
CERTIFICATE OF VICE PRESIDENT
T. ROWE PRICE SPECTRUM FUND, INC.
Pursuant to Rule 306 of Regulation S-T
I, the undersigned, Henry H. Hopkins, Vice President of T. Rowe Price
Spectrum Fund, Inc. (the "Fund"), do hereby certify that the prospectus for the
Fund has been translated into the Spanish language. The Spanish version of the
prospectus constitutes a full and complete representation of the English version
which has been filed as a part of this Registration Statement. A copy of the
Spanish version will be available for inspection upon request.
WITNESS my hand and the seal of the Fund this April 30, 1998.
T. Rowe Price Spectrum Fund, Inc.
(Seal) /s/Henry H. Hopkins
Henry H. Hopkins, Vice President
<PAGE>
