PRICE T ROWE SPECTRUM FUND INC
N-30D, 2000-02-29
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<PAGE>
================================================================================
                                  T. Rowe Price
- --------------------------------------------------------------------------------
                                  Annual Report
                                 Spectrum Funds
- --------------------------------------------------------------------------------
                                December 31, 1999
- --------------------------------------------------------------------------------
REPORT HIGHLIGHTS
================================================================================
SPECTRUM FUNDS
- --------------

*    U.S.  stocks soared to new records in 1999 and most  international  markets
     fared even better. Bonds were weak, however, with the exception of emerging
     market bonds.
*    Spectrum  Growth posted strong returns of 11.07% and 21.20%,  respectively,
     for the 6- and  12-month  periods  ended  December 31,  exceeding  both its
     benchmarks.
*    Spectrum Income  struggled with rising interest rates and a declining euro.
     Results were mixed versus its benchmarks.
*    Spectrum International's  outstanding gains of 30.36% and 39.49% for the 6-
     and  12-month  periods  were on a par with its peer group  average and well
     ahead of its combined index benchmark.
*    The fundamental  backdrop for both stocks and bonds remains favorable,  and
     we  believe  the  Spectrum   Funds'   diversified   approach  will  benefit
     shareholders.

================================================================================
UPDATES AVAILABLE
- -----------------
     For  updates  on T. Rowe Price  funds  following  the end of each  calendar
quarter, please see our Web site at www.troweprice.com.

================================================================================
FELLOW SHAREHOLDERS
- -------------------

     Stocks around the world capped the decade with another  outstanding year in
1999,  and most major U.S.  averages  closed at record  highs.  Foreign  markets
outpaced  the U.S.  for the first time since 1994,  rebounding  with a vengeance
from the global crises of 1997-98.  Good news for the world economy was bad news
for high-quality bonds, which endured their most difficult year in the past six.
High-yield bonds managed positive returns,  while both emerging market bonds and
stocks surged.

YEAR-END DISTRIBUTIONS
- ----------------------

     The Spectrum Funds' directors  declared year-end  distributions as follows:
Spectrum  Growth had a year-end income dividend of $0.17 per share, a short-term
capital  gain of $0.22 per  share,  and a  long-term  capital  gain of $1.69 per
share.  Spectrum  Income had a long-term  capital  gain  distribution  of $0.11.
Spectrum  International had a year-end dividend of $0.13 per share, a short-term
capital  gain  of  $0.10,  and  a  long-term   capital  gain  of  $0.87.   These
distributions were paid on December 16 to shareholders of record on December 14.
You should already have received your check or statement reflecting them as well
as our Form 1099-DIV summarizing this information for 1999 tax purposes.


<PAGE>

MARKET ENVIRONMENT
- ------------------

     Small-cap  and  international  stocks  -- both in  developed  and  emerging
markets -- joined the party in 1999 and even  surpassed  the returns of the once
invincible S&P 500 Stock Index, as shown in the chart. As evidence of the global
economic recovery mounted, investor appetite for risk also grew: Asian stocks, e
merging  market stocks and bonds,  and tech and telecom shares  everywhere  were
"in"; U.S.  Treasuries and even many classic  consumer growth stocks were "out."
Though  value-oriented  stocks -- including  high-dividend  and natural resource
shares -- did well in the first half, they lagged again in the second half.

     Japanese  stocks snapped out of their  decade-long  funk,  soaring  61.77%,
aided by a strong yen. (All foreign market returns are cited in U.S. dollars and
based on Morgan Stanley Capital International indices.) Corporate restructuring,
unexpectedly strong economic data, and the government's financial sector reforms
spurred  foreign  investors  to  reallocate  capital  back to a market  they had
shunned for years. The All Countries Far East Free Ex-Japan Index gained 62.11%,
aided by  government  and corporate  reforms  (though  still  incomplete)  and a
faster-than-expected  recovery  from the Asian  economic  crisis.  Strong global
demand for exports,  particularly technology components,  helped the Pacific Rim
bounce back. Latin American markets surged 58.89%, shrugging off the devaluation
of the  Brazilian  real last  January.  European  shares,  by  contrast,  rose a
comparatively  modest 16.23% for the year,  weighed down by a tepid U.K.  market
and a decline in the new common currency, the euro.

     By midyear,  the U.S.  Federal  Reserve had begun a consistent  campaign to
tighten  monetary policy,  slow the domestic  economy,  and dampen  inflationary
pressures. High-quality bonds, particularly U.S. Treasuries, paid the price. The
markets  --  and  the  Fed  --  grew  increasingly   concerned  about  potential
inflationary pressures,  especially from a tight U.S. labor market. The yield on
the  30-year  Treasury  bond rose from about 5% in January to nearly 6.5% at the
end of the year, as shown the chart,  producing  negative total returns for most
high-quality  bonds.  High-yield  bonds delivered  modest gains,  while emerging
market bonds rose strongly.  Both of the latter  instruments  are  comparatively
less sensitive to interest rate movements  than  investment-grade  bonds and are
more tied to prospects  for economic  growth and the  creditworthiness  of their
issuers. Among high-quality bonds,  mortgage-backed  securities held their value
better than others, as rising interest rates reduced mortgage prepayments (which
occur when  homeowners  refinance at lower rates).  High-quality  bonds overseas
were also hurt by rising rates,  and those  denominated  in the  declining  euro
fared even worse.  Emerging market bonds,  however,  posted excellent returns as
confidence  rose in the  ability  of  borrowers  to  repay  their  debts  and as
currencies in emerging markets stabilized.

SPECTRUM GROWTH FUND
- --------------------

================================================================================
    PERFORMANCE COMPARISON
    ----------------------
    Periods Ended 12/31/99        6 Months      12 Months
    ----------------------        --------      ---------
    Spectrum Growth Fund           11.07%         21.20%
    -----------------------------------------------------
    Lipper Multi-Cap
    Core Fund Index                 9.18          20.79
    -----------------------------------------------------
    S&P 500 Stock Index             7.71          21.04
    -----------------------------------------------------
================================================================================
<PAGE>

     Performance was strong over the 6- and 12-month  periods ended December 31,
1999.  The Spectrum  Growth  Fund's gains of 11.07% over the past six months and
21.20% for the year exceeded both benchmarks,  as shown in the table.  With this
report,  we are introducing the fund's new Lipper category.  Previously,  Lipper
Inc.  assigned a fund to a category  based on its  objective  as outlined in its
prospectus.  The new categories are based on the major  characteristics  of each
fund's actual portfolio holdings, such as market capitalization,  price/earnings
ratios  and other  valuation  measures,  earnings  growth  rates,  and so on. At
present, this change does not affect the other two Spectrum Funds.

     For the first time since 1994, the fund's strategy of remaining diversified
with  investments in both U.S. and foreign stocks,  and in large-caps as well as
small-caps,  boosted performance  relative to the unmanaged S&P 500 Stock Index,
primarily a large-cap, domestic benchmark. Both the International Stock Fund and
the New  Horizons  Fund (which  gives us exposure to  small-cap  growth  stocks)
delivered  outstanding  full-year  gains. In our view, this validates our thesis
for  diversification:  One never knows which sector or investment style is going
to  perform  best in any given  year,  but  diversification  can  provide  solid
long-term returns with reduced  volatility.  A corollary,  however, is that some
portions of a diversified portfolio will lag the leaders each year. In 1999, the
fund's exposure to value stocks through the Equity Income,  Growth & Income, and
Mid-Cap Value funds restrained returns.

     The  International  Stock Fund provided our strongest returns for the year,
powered by its excellent second-half  performance.  Similarly,  the New Horizons
Fund's outstanding yearly gain was largely driven by its extraordinary  surge in
the fourth  quarter.  Steadier  performance  came from the Blue Chip  Growth and
Growth  Stock  funds,  and the  performance  of all four  funds  was  driven  by
technology  and telecom  holdings.  (The Growth Stock Fund also has  significant
foreign stock holdings.) While the Growth & Income,  Equity Income,  and New Era
funds provided our best  performance in the first half,  their returns were flat
to  negative  over the past six  months.  New Era's  results  still  aided  fund
performance  over the full year,  thanks to the  strength  of  natural  resource
stocks in the first  half.  The Mid-Cap  Value Fund also  declined in the second
half and provided only a modest return for the year.

     We further  reduced  exposure to the large-cap  growth sector over the past
six months and invested the proceeds primarily in international stocks and, to a
lesser extent, in large-cap value stocks. The fund ended the year at its maximum
allocation  to the  International  Stock  Fund  (25%),  which was  positive  for
performance.  Our  shift  towa rd  large-cap  value,  begun in the  first  half,
initially looked well timed but crimped returns over the past six months and for
the year.  Target  allocations  for the Blue Chip Growth and Growth  Stock funds
were  reduced  to 9.5% and 10%,  respectively,  while  targets  for the Growth &
Income and Equity Income funds were raised to 14% each.  (See table on page 13.)
As shown in the  security  diversification  chart on this page,  the fund is now
evenly split between large-cap domestic stocks on one hand and international and
small-cap stocks on the other.
<PAGE>

     During the past six  months,  our target  allocations  to the New  Horizons
(21%),  Mid-Cap Value (4%), and New Era (2.5%) funds were unchanged.  We believe
our shift  toward  value  stocks  will pay  dividends  because of the  valuation
disparity  between these stocks and the  high-priced New Economy stocks that led
the averages last year. In a market where  valuations are high from a historical
perspective,  many value stocks are available at prices that would be considered
cheap in nearly any market  environment.  Increased global growth should benefit
value sectors, including commodity-related stocks. Small-cap stocks appear to be
rebounding  from a period  of  extreme  undervaluation  relative  to large  caps
(though  this has been led by  technology  and  other  growth  sectors).  We are
comfortable with our maximum exposure to foreign stocks,  because we believe the
investment cycle is at an earlier stage in international  markets. With all that
said, the backdrop for the U.S. market and its leading  large-cap  growth stocks
remains favorable,  characterized by strong earnings growth, low inflation,  and
rising productivity.

SPECTRUM INCOME FUND
- --------------------

================================================================================
    PERFORMANCE COMPARISON
    ----------------------
    Periods Ended 12/31/99        6 Months      12 Months
    ----------------------        --------      ---------
    Spectrum Income Fund            0.01%          0.26%
    -----------------------------------------------------
    Lipper General Bond
    Funds Average                   1.39           0.66
    -----------------------------------------------------
    Salomon Smith Barney Broad
    Investment Grade Index          0.56          -0.83
    -----------------------------------------------------
================================================================================

     As mentioned,  last year was the worst for bond  investors  since 1994, and
this is reflected in the performance  table. The Spectrum Income Fund lagged its
Lipper peer group average and its unmanaged  benchmark over the past six months,
though the fund  outperformed  the Salomon Smith Barney Broad  Investment  Grade
Index  over the  full  year.  The  six-month  result  was  affected  by the poor
performance  of the Equity Income Fund during that period and by our exposure to
the U.S.  Treasury  Long-Term Fund, which was hurt by rising interest rates. For
the year, our exposure to high-dividend stocks aided performance relative to the
Salomon index, but losses in long-term  Treasuries and in the International Bond
Fund detracted from return.  The Salomon index has no exposure to equities or to
international bonds denominated in foreign currencies. It's important to keep an
eye on the longer term during such challenging  times for bond investors.  Since
inception on June 29, 1990,  Spectrum Income has provided an outstanding average
annual return of 8.90% with diminished volatility, aided by its diversification.

     The  Emerging  Markets Bond Fund was our best  performer in 1999,  followed
distantly by the High Yield Fund and the Equity Income Fund.  The  International
Bond Fund and U.S. Treasury Long-Term Fund did the worst. The GNMA Fund provided
a fractionally  positive  result,  while the New Income Fund declined  modestly.
During the past six months,  emerging market bonds led again,  but Equity Income
was the worst performer,  followed by the Treasury fund. The International  Bond
Fund aided results  against both  benchmarks in the second half,  and high-yield
bonds were again beneficial.
<PAGE>

     During the summer,  we upgraded  the quality and  liquidity  of the fund as
concerns about possible  disruption  from the Y2K computer bug affected the bond
market.  We shifted  modestly from high-yield bonds and dividend stocks into the
GNMA and U.S.  Treasury  Long-Term  funds.  Recently,  we began  reversing this,
shifting assets incrementally into the High Yield Fund out of the New Income and
Equity  Income funds.  All in all, our target  allocation to the High Yield Fund
ended the six-month period unchanged at 21% (see table on page 13). The tone and
liquidity  of the  high-yield  market  improved  in recent  months.  Though  the
valuations of the stocks in the Equity Income Fund's universe are attractive, we
felt it  prudent  to  reduce  exposure  (to a target of 11%)  given the  extreme
movements  in the stock  market.  The New Income Fund target was reduced to 27%,
still our  largest  position.  The fund  provides  exposure  to medium-  quality
corporate  bonds and mortgage- and  asset-backed  securities.  All three sectors
offer good value,  in our view. We increased  our target  allocation to the GNMA
Fund to 17%. The fund has been a steady  performer for us, and the  fundamentals
of the  mortgage  market are  excellent,  characterized  by reduced  prepayments
(which  occur  when  homeowners  refinance).  However,  the yield  advantage  of
mortgage-backed  securities  over  Treasuries  moved  closer  to fair  value  by
year-end after having been particularly attractive earlier.

     In 1998,  we  increased  exposure  to the  International  Bond Fund and the
Emerging  Markets Bond Fund.  Since  midyear,  those  allocations  have remained
steady at 12.5% and 3.5%,  respectively.  We are still optimistic about the euro
and the evolving European bond market,  though neither performed well last year.
Emerging  market bonds aided results  throughout the year, and continue to offer
compellingly  high yields,  especially  in an  atmosphere  of  improving  global
growth.

SPECTRUM INTERNATIONAL FUND
- ---------------------------

================================================================================
    PERFORMANCE COMPARISON
    ----------------------
    Periods Ended 12/31/99        6 Months      12 Months
    ----------------------        --------      ---------
    Spectrum International Fund    30.36%         39.49%
    -----------------------------------------------------
    Lipper International
    Funds Average                  30.83          40.80
    -----------------------------------------------------
    Combined Index Benchmark *     20.31          23.58
    -----------------------------------------------------
    *    90% MSCI EAFE/10% J.P. Morgan Non-U.S.
         Dollar Government Bond Index
================================================================================
<PAGE>

     The Spectrum  International  Fund's returns were  exceptional in the second
half and for the full year,  as shown in the table.  Results  were on a par with
the Lipper  International  Funds A verage and well ahead of our passive combined
index benchmark, which, unlike the Lipper category, has exposure to bonds. After
a difficult first two years since inception on December 31, 1996, the third year
proved the charm for your fund.  Markets  beaten down in 1997 and 1998 -- or, in
the case of Japan,  in the 1990s  generally -- roared  back.  Asian and emerging
markets were the strongest;  returns in Europe were more modest. Our decision to
initiate a small  position in the  International  Discovery Fund early this year
was  timely,  as the  small-  and  mid-cap  foreign  stocks  in the fund  posted
triple-digit returns on the year. The Japan Fund also more than doubled,  helped
by some of the same  small-caps that boosted the  International  Discovery Fund.
The  Emerging  Markets  Stock and  Emerging  Markets Bond funds were also strong
performers.  Our  largest  holding,  the  International  Stock  Fund,  delivered
outstanding  -- but more modest -- gains,  driven by a strong  second half.  The
European  Stock Fund turned out to be the  "laggard"  of the group with a nearly
20% return, all of it coming in the second half.

     The fund also benefited from our decision to reduce our International  Bond
Fund allocation to zero in the first half. That fund was hurt by its exposure to
high-quality  bonds  and the  euro.  In the  past six  months,  the  fund's  net
geographic  diversification,  shown in the nearby  chart,  was  little  changed,
although  we made a few  changes to our  target  allocations  to the  underlying
funds. These moves primarily had the effect of rebalancing the portfolio,  as we
took  profits  from the Japan Fund and boosted our  allocation  to the  European
Stock Fund. More significantly,  we reduced net exposure to Latin America,  from
9% six months  ago to 6% on  December  31. We did this by taking  profits in the
Latin  America  Fund,  where we  reduced  the  target  allocation  to zero,  and
directing  the  proceeds to Europe.  The fund's net  exposure to Europe rose one
percentage point. The fund's remaining  exposure to Latin America comes from its
investments  in the other  underlying T. Rowe Price funds.  The table on page 13
lists target allocations for each underlying fund. However,  your fund's overall
geographic  diversification  also reflects the composition of the  International
Stock Fund's portfolio, to which our target allocation is 50%. The International
Stock Fund is the core of your fund, and its emphasis is also on Europe.  In our
view,  Europe  features  the best  combination  of risk and reward in the world,
especially  given the heady 1999 gains in other  regions.  Boosting the Spectrum
International  Fund's  exposure  there while  taking  profits in Japan and Latin
America should help reduce volatility and give the fund a greater opportunity to
profit from an economic upturn in Europe as well as from corporate restructuring
and  consolidation.  European companies will continue to face pressure to remain
competitive and boost shareholder returns.

     After a stunning year, we feel Japan's stock market may weaken. Performance
in Japan -- as elsewhere -- was led by a narrow group of high-priced  technology
stocks.  The massive  inflow of foreign  capital that  propelled the market last
year is unlikely to recur. In addition,  the strong yen will pressure exporters,
and corporate  restructuring,  while necessary,  will reduce domestic demand and
increase unemployment in the short term. We expect economic recovery to continue
in the Far East  ex-Japan  and in Latin  America and are hopeful that the steady
pace of restructuring and reform will continue in Asia. However, stocks in these
two regions rose  stratospherically  in the fourth quarter, and some retracement
in the short term  would not be  unexpected.  In Latin  America,  opposition  to
fiscal reforms poses a threat in Brazil,  and Mexico's economy,  though healthy,
remains tied to the U.S. We have grown more confident that Mexico's presidential
election in July will not disrupt the markets.
<PAGE>

OUTLOOK
- -------

     With the U.S. economy  powering ahead without any Y2K-related  disruptions,
and the supply of available workers dwindling, a Fed rate hike in February seems
a foregone  conclusion.  Another is likely in March.  However, the good news for
fixed income investors is that these moves are expected.  Bond prices and yields
already  seem to have  anticipated  a federal  funds target rate at least half a
percentage  point higher than its current 5.5% level. We do not expect inflation
or long-term interest rates to rise significan tly from current levels, and U.S.
economic  growth should  moderate  eventually.  The Fed is acting in a proactive
manner,  which we view as positive  for the markets  long term.  Though 2000 has
started out on a negative  note,  we expect it to be a more  favorable  year for
bond investors than 1999.

**********************************

    . . . VALUE STOCKS IN THE
    U.S. APPEAR PARTICULARLY
    ATTRACTIVE . . .

**********************************

     Overall  valuations  in the U.S.  stock  market  are  quite  high,  and the
technology sector, in particular,  could be vulnerable to any bad news. However,
earnings growth continues to be strong at many high-quality  companies.  Outside
the New Economy stocks, more traditional growth stocks are trading at reasonable
prices. In addition,  last year's market advance was so narrow that value stocks
in the U.S. appear particularly attractive at current levels.

     Overseas,  our  outlook  is  tempered  by the fact that the  major  foreign
economies only emerged from recession last year.  Interest rates are expected to
rise from unusually low levels to ranges consistent with economic growth, rather
than recession,  but inflation should remain under control.  Although  investors
have bid up the shares of some  technology  and telecom  companies  to excessive
levels,  we are  enthusiastic  about the growth  potential of  well-managed  New
Economy  companies  with strong  franchises  and  business  models.  Last year's
progress in corporate  restructuring and merger activity,  along with government
reform,  should enhance foreign companies' earnings  potential,  which should be
further boosted by stronger  economic growth.  Therefore,  we remain  optimistic
about international markets in 2000.

Respectfully submitted,

/s/

Edmund M. Notzon III
President and Chairman of the Investment Advisory Committee

January 14, 2000

================================================================================

<PAGE>

T. ROWE PRICE SPECTRUM FUNDS
- ----------------------------
PORTFOLIO HIGHLIGHTS
- --------------------
TEN LARGEST HOLDINGS
- --------------------
                                                          Percent of
(Of the combined underlying funds at 12/31/99)            Net Assets
                                                           12/31/99
SPECTRUM GROWTH FUND
====================
Analog Devices                                                0.6%
- -------------------------------------------------------------------
Nokia                                                         0.5
- -------------------------------------------------------------------
Sony                                                          0.5
- -------------------------------------------------------------------
Kyocera                                                       0.5
- -------------------------------------------------------------------
Mannesmann                                                    0.5
- -------------------------------------------------------------------
Murata Manufacturing                                          0.5
- -------------------------------------------------------------------
National Westminster Bank                                     0.5
- -------------------------------------------------------------------
Omnipoint                                                     0.4
- -------------------------------------------------------------------
Nippon Telegraph & Telephone                                  0.4
- -------------------------------------------------------------------
Xilinx                                                        0.4
- -------------------------------------------------------------------
Total                                                         4.8%

TEN LARGEST HOLDINGS
- --------------------
                                                          Percent of
(Of the combined underlying funds at 12/31/99)            Net Assets
                                                           12/31/99
Spectrum International Fund
============================
Nokia                                                         2.1%
- -------------------------------------------------------------------
Mannesmann                                                    1.9
- -------------------------------------------------------------------
National Westminster Bank                                     1.9
- -------------------------------------------------------------------
Telecom Italia Mobile                                         1.5
- -------------------------------------------------------------------
Sony                                                          1.4
- -------------------------------------------------------------------
Shell Transport & Trading                                     1.3
- -------------------------------------------------------------------
Total Fina                                                    1.3
- -------------------------------------------------------------------
Cable & Wireless                                              1.3
- -------------------------------------------------------------------
Kyocera                                                       1.2
- -------------------------------------------------------------------
INGGroep                                                      1.2
- -------------------------------------------------------------------
Total                                                        15.1%

Note: Table excludes reserves.
================================================================================

<PAGE>

T. ROWE PRICE SPECTRUM FUNDS
- ----------------------------
PORTFOLIO HIGHLIGHTS
- --------------------
KEY STATISTICS
- --------------
                                                 6/30/99          12/31/99
                                                 -------          --------
SPECTRUM INCOME FUND
====================
Price Per Share                                $   11.17        $   10.71
- ----------------------------------------------------------------------------
Capital Gain Distribution Per Share
- ----------------------------------------------------------------------------
     Short-Term                                     -                -
- ----------------------------------------------------------------------------
     Long-Term                                      0.02             0.11
- ----------------------------------------------------------------------------
Dividends Per Share
- ----------------------------------------------------------------------------
     For 6 months                                   0.34             0.35
- ----------------------------------------------------------------------------
     For 12 months                                  0.70             0.69
- ----------------------------------------------------------------------------
Dividend Yield *
- ----------------------------------------------------------------------------
     For 6 months                                   6.27%            6.51%
- ----------------------------------------------------------------------------
     For 12 months                                  6.48             6.62
- ----------------------------------------------------------------------------
30-Day Standardized Yield                           6.31%            6.69%
- ----------------------------------------------------------------------------
Weighted Average Maturity (years) **               10.3             10.0
- ----------------------------------------------------------------------------
Weighted Average Effective Duration (years) **      5.5              5.3
- ----------------------------------------------------------------------------
Weighted Average Quality ***                         A+              AA-
- ----------------------------------------------------------------------------

*    Dividends  earned and reinvested  for the periods  indicated are annualized
     and  divided  by the  fund's  net  asset  value per share at the end of the
     period.
**   Excludes Equity Income Fund.
***  Based on T. Rowe Price research; excludes Equity Income Fund.

================================================================================

<PAGE>

T. ROWE PRICE SPECTRUM FUNDS
- ----------------------------
PORTFOLIO HIGHLIGHTS
- --------------------
TARGET ALLOCATIONS FOR UNDERLYING FUNDS
- ---------------------------------------
TARGET ALLOCATIONS for Underlying funds
                                 Minimum-    Target at     Target at
                                 Maximum      6/30/99      12/31/99
                                 -------      -------      --------
SPECTRUM GROWTH FUND
====================
International Stock               10-25%         22.5%        25.0%
- -------------------------------------------------------------------
New Horizons                      10-25          21.0         21.0
- -------------------------------------------------------------------
Growth & Income                    7.5-22.5      13.5         14.0
- -------------------------------------------------------------------
Equity Income                      7.5-22.5      13.5         14.0
- -------------------------------------------------------------------
Growth Stock                       5-20          11.5         10.0
- -------------------------------------------------------------------
Blue Chip Growth                   5-20          11.5          9.5
- -------------------------------------------------------------------
Mid-Cap Value                      0-15           4.0          4.0
- -------------------------------------------------------------------
New Era                            0-15           2.5          2.5
- -------------------------------------------------------------------
SPECTRUM INCOME FUND
====================
New Income                        15-30          28.0         27.0
- -------------------------------------------------------------------
High Yield                        10-25          21.0         21.0
- -------------------------------------------------------------------
GNMA                               5-20          15.5         17.0
- -------------------------------------------------------------------
International Bond                 5-20          12.5         12.5
- -------------------------------------------------------------------
Equity Income                     10-25          12.0         11.0
- -------------------------------------------------------------------
U.S. Treasury Long-Term            0-15           7.5          8.0
- -------------------------------------------------------------------
Emerging Markets Bond              0-10           3.5          3.5
- -------------------------------------------------------------------
Short-Term Bond                    0-15           0.0          0.0
- -------------------------------------------------------------------
Summit Cash Reserves               0-25           0.0          0.0
- -------------------------------------------------------------------

<PAGE>

SPECTRUM INTERNATIONAL FUND
============================
International Stock               35-65          50.0         50.0
- -------------------------------------------------------------------
European Stock                     0-30          26.5         29.5
- -------------------------------------------------------------------
Japan                              0-30           7.5          6.5
- -------------------------------------------------------------------
Emerging Markets Bond              0-15           5.0          5.0
- -------------------------------------------------------------------
Emerging Markets Stock             0-20           4.3          4.3
- -------------------------------------------------------------------
International Discovery            0-20           3.0          3.0
- -------------------------------------------------------------------
Latin America                      0-15           2.0          0.0
- -------------------------------------------------------------------
New Asia                           0-20           1.7          1.7
- -------------------------------------------------------------------
International Bond                 0-20           0.0          0.0
- -------------------------------------------------------------------
Summit Cash Reserves               0-25           0.0          0.0

================================================================================
T. ROWE PRICE SPECTRUM FUNDS
- ----------------------------
PERFORMANCE COMPARISON
- ----------------------
     These charts show the value of a  hypothetical  $10,000  investment in each
fund over the past 10 fiscal year periods or since  inception (for funds lacking
10-year  records).  The result is compared with benchmarks,  which may include a
broad-based  market index and a peer group average or index.  Market  indexes do
not include  expenses,  which are  deducted  from fund returns as well as mutual
fund averages and indexes.

*********************************************************************
               SEC Chart for Spectrum  Growth Fund
               showing:   Spectrum   Growth   Fund
               $38,901;   S&P  500   Stock   Index
               $51,680 and Lipper  Multi-Cap  Core
               Fund Index $42,971
*********************************************************************
               SEC Chart for Spectrum  Income Fund
               showing;   Spectrum   Income   Fund
               $22,485; Salomon Smith Barney Broad
               Investment   Grade  Index  $20,522;
               Lipper  General Bond Funds  Average
               $21,305
*********************************************************************
               SEC     Chart     for      Spectrum
               International     Fund     showing;
               Spectrum     International     Fund
               $16,041;   90%MSCI   EAFE/10%  J.P.
               Morgan Non-U.S.  Dollar  Government
               Bond    Index    $15,114;    Lipper
               International Funds Average $16,756
*********************************************************************


<PAGE>

AVERAGE ANNUAL COMPOUND TOTAL RETURN
- ------------------------------------

     This table shows how each fund would have performed each year if its actual
(or  cumulative)  returns  for the  periods  shown had been earned at a constant
rate.
                                                             Since   Inception
Periods Ended 12/31/99       1 Year   3 Years   5 Years  Inception        Date
- ----------------------       ------   -------   -------  ---------        ----
Spectrum Growth Fund          21.20%   17.37%    20.42%    15.36%      6/29/90
- --------------------------------------------------------------------------------
Spectrum Income Fund          0.26      6.23      9.03      8.90       6/29/90
- --------------------------------------------------------------------------------
Spectrum International Fund  39.49     17.06       --      17.06       12/31/96
- --------------------------------------------------------------------------------

     Investment  return represents past performance and will vary. Shares of the
bond funds may be worth more or less at redemption than at original purchase.

================================================================================
T. ROWE PRICE SPECTRUM GROWTH FUND
- --------------------------------- For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
- --------------------
                                Year
                               Ended
                           12/31/99   12/31/98   12/31/97   12/31/96   12/31/95
NET ASSET VALUE
Beginning of period       $   16.45  $   15.93  $  15.13  $   13.49  $  11.13
- ------------------------------------------------------------------------------
Investment activities
  Net investment income        0.15       0.19      0.20       0.20      0.21
  Net realized and
  unrealized gain (loss)       3.19       1.88      2.40       2.57      3.12
- ------------------------------------------------------------------------------
  Total from
  investment activities        3.34       2.07      2.60       2.77      3.33
- ------------------------------------------------------------------------------
Distributions
  Net investment income       (0.17)     (0.18)    (0.20)     (0.20)    (0.21)
  Net realized gain           (1.91)     (1.37)    (1.60)     (0.93)    (0.76)
- ------------------------------------------------------------------------------
  Total distributions         (2.08)     (1.55)    (1.80)     (1.13)    (0.97)
- ------------------------------------------------------------------------------

<PAGE>

NET ASSET VALUE
End of period             $   17.71  $   16.45  $  15.93  $   15.13  $  13.49

Ratios/Supplemental=Data======================================================
Total return**                21.20%    13.62%     17.40%     20.53%    29.96%
- ------------------------------------------------------------------------------
Ratio of total expenses to
average net assets             0.00%*    0.00%      0.00%      0.00%     0.00%
- ------------------------------------------------------------------------------
Ratio of net investment
income to average
net assets                     0.85%     1.09%      1.26%      1.58%     1.81%
- ------------------------------------------------------------------------------
Portfolio turnover rate       20.3%     17.9%      20.4%       2.9%      7.4%
- ------------------------------------------------------------------------------
Net assets, end of period
(in millions)             $  3,031   $   2,768  $  2,605  $   2,104  $  1,358
- ------------------------------------------------------------------------------
**   Total  return  reflects  the rate that an investor  would have earned on an
     investment  in the fund during each period,  assuming  reinvestment  of all
     distributions.
*    See Note 3. The annualized weighted average expense ratio of the underlying
     funds was 0.83% for the year ended December 31, 1999.

The accompanying notes are an integral part of these financial statements.
================================================================================
T. ROWE PRICE SPECTRUM INCOME FUND
- --------------------------------- For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
- --------------------
                                Year
                               Ended
                           12/31/99   12/31/98   12/31/97   12/31/96   12/31/95
                           --------   --------   --------   --------   --------
NET ASSET VALUE
Beginning of period       $   11.50  $   11.66  $   11.20  $   11.24  $   10.11
- --------------------------------------------------------------------------------
Investment activities
  Net investment income        0.67       0.72       0.71       0.71       0.72
  Net realized and
  unrealized gain (loss)      (0.64)      0.02       0.61       0.11       1.16
- --------------------------------------------------------------------------------
  Total from
  investment activities        0.03       0.74       1.32       0.82       1.88
- --------------------------------------------------------------------------------
Distributions
  Net investment income       (0.69)     (0.72)     (0.71)     (0.71)     (0.72)
  Net realized gain           (0.13)     (0.18)     (0.15)     (0.15)     (0.03)
- --------------------------------------------------------------------------------
  Total distributions         (0.82)     (0.90)     (0.86)     (0.86)     (0.75)
- --------------------------------------------------------------------------------

<PAGE>

NET ASSET VALUE
End of period             $   10.71  $   11.50  $   11.66  $   11.20  $   11.24

Ratios/Supplemental=Data========================================================
Total return**                 0.26%     6.57%     12.18%      7.64%    19.41%
- --------------------------------------------------------------------------------
Ratio of total expenses to
average net assets             0.00%*    0.00%      0.00%      0.00%     0.00%
- --------------------------------------------------------------------------------
Ratio of net investment
income to average
net assets                     5.95%     6.22%      6.21%      6.46%     6.43%
- --------------------------------------------------------------------------------
Portfolio turnover rate       18.6%     12.8%      14.1%      17.6%      20.2%
- --------------------------------------------------------------------------------
Net assets, end of period
(in millions)             $   2,548  $   2,574  $   2,022  $   1,356  $     987
- --------------------------------------------------------------------------------
**   Total  return  reflects  the rate that an investor  would have earned on an
     investment  in the fund during each period,  assuming  reinvestment  of all
     distributions.
*    See Note 3. The annualized weighted average expense ratio of the underlying
     funds was 0.77% for the year ended December 31, 1999.

The accompanying notes are an integral part of these financial statements.

================================================================================
T. ROWE PRICE SPECTRUM INTERNATIONAL FUND
- -----------------------------------------
                                  For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
- --------------------
                                         Year              12/31/96
                                        Ended               Through
                                    12/31/99    12/31/98   12/31/97
NET ASSET VALUE
Beginning of period                $   10.56   $    9.74  $   10.00
- ----------------------------------------------------------------------
Investment activities
  Net investment income                 0.12        0.21       0.15
  Net realized and
  unrealized gain (loss)                3.95        0.97       0.09#
- ----------------------------------------------------------------------
  Total from investment activities      4.07        1.18       0.24
- ----------------------------------------------------------------------
Distributions
  Net investment income                (0.13)      (0.21)     (0.15)
  Net realized gain                    (0.97)      (0.15)     (0.35)
- ----------------------------------------------------------------------
  Total distributions                  (1.10)      (0.36)     (0.50)
- ----------------------------------------------------------------------

<PAGE>

NET ASSET VALUE
End of period                      $   13.53   $   10.56  $    9.74

Ratios/Supplemental=Data==============================================
Total return**                          39.49%      12.28%      2.42%
- ----------------------------------------------------------------------
Ratio of total expenses to
average net assets                       0.00%*      0.00%      0.00%
- ----------------------------------------------------------------------
Ratio of net investment income
to average net assets                    1.14%       1.94%      2.23%
- ----------------------------------------------------------------------
Portfolio turnover rate                 20.1%       31.7%      20.0%
- ----------------------------------------------------------------------
Net assets, end of period
(in thousands)                     $  82,846   $  54,752  $   51,050
- ----------------------------------------------------------------------

**   Total  return  reflects  the rate that an investor  would have earned on an
     investment  in the fund during each period,  assuming  reinvestment  of all
     distributions.

*    See Note 3. The annualized weighted average expense ratio of the underlying
     funds was 0.89% for the year ended December 31, 1999.

#    The amount presented is calculated pursuant to a methodology  prescribed by
     the Securities and Exchange  Commission for a share outstanding  throughout
     the period. This amount is inconsistent with the Fund's aggregate gains and
     losses  because of the timing of sales and  redemptions  of Fund  shares in
     relation to fluctuating market values for the investment portfolio.

The accompanying notes are an integral part of these financial statements.

================================================================================

<PAGE>

T. ROWE PRICE SPECTRUM GROWTH FUND
- ----------------------------------                            December 31, 1999
                                     Percent of
                                     Net Assets      Shares         Value
                                     ----------      ------         -----
STATEMENT OF NET ASSETS
- -----------------------                                        In thousands

T. Rowe Price International Stock Fund    25.2%    40,131,983   $  763,712
- ---------------------------------------------------------------------------
T. Rowe Price New Horizons Fund           22.2     24,446,259      673,005
- ---------------------------------------------------------------------------
T. Rowe Price Equity Income Fund          13.9     16,931,472      420,070
- ---------------------------------------------------------------------------
T. Rowe Price Growth & Income Fund        13.2     16,334,982      399,227
- ---------------------------------------------------------------------------
T. Rowe Price Growth Stock Fund           10.0      9,139,821      304,082
- ---------------------------------------------------------------------------
T. Rowe Price Blue Chip Growth Fund        9.5      7,914,950      287,629
- ---------------------------------------------------------------------------
T. Rowe Price Mid-Cap Value Fund           3.7      8,440,322      112,847
- ---------------------------------------------------------------------------
T. Rowe Price New Era Fund                 2.3      3,221,676       70,233

Total=Investments==========================================================
100.0% of Net Assets (Cost $2,217,044)                          $3,030,805
Other Assets Less Liabilities                                          145

NET ASSETS                                                      $3,030,950
Net Assets Consist of:
Accumulated net investment income -
   net of distributions                                         $     (667)
Accumulated net realized gain/loss -
   net of distributions                                             12,478
Net unrealized gain (loss)                                         813,761
Paid-in-capital applicable to 171,148,671
   shares of $0.01 par value capital stock
   outstanding; 1,000,000,000 shares of
   the Corporation authorized                                    2,205,378

NET ASSETS                                                      $3,030,950
NET ASSET VALUE PER SHARE                                       $    17.71

The accompanying notes are an integral part of these financial statements.

================================================================================

<PAGE>

T. ROWE PRICE SPECTRUM INCOME FUND
- ----------------------------------                            December 31, 1999
                                     Percent of
                                     Net Assets      Shares         Value
                                     ----------      ------         -----
STATEMENT OF NET ASSETS
- -----------------------                                        In thousands

T. Rowe Price New Income Fund               26.9%  84,023,193   $  685,629
- ---------------------------------------------------------------------------
T. Rowe Price High Yield Fund               20.9   67,157,379      533,229
- ---------------------------------------------------------------------------
T. Rowe Price GNMA Fund                     16.9   47,781,315      429,554
- ---------------------------------------------------------------------------
T. Rowe Price International Bond Fund       12.3   34,297,050      314,161
- ---------------------------------------------------------------------------
T. Rowe Price Equity Income Fund            11.1   11,412,154      283,136
- ---------------------------------------------------------------------------
T. Rowe Price U.S. Treasury Long-Term Fund   7.6   18,852,337      192,671
- ---------------------------------------------------------------------------
T. Rowe Price Emerging Markets Bond Fund     3.8    9,599,223       97,048

Total=Investments==========================================================
99.5% of Net Assets (Cost $2,641,141)                           $2,535,428
Other Assets Less Liabilities                                       13,007

NET ASSETS                                                      $2,548,435
Net Assets Consist of:
Accumulated net investment income -
   net of distributions                                         $       62
Accumulated net realized gain/loss -
   net of distributions                                             (3,645)
Net unrealized gain (loss)                                        (105,713)
Paid-in-capital applicable to 237,938,418
   shares of $0.01 par value capital stock
   outstanding; 1,000,000,000 shares of
   the Corporation authorized                                    2,657,731

NET ASSETS                                                      $2,548,435
NET ASSET VALUE PER SHARE                                       $    10.71

The accompanying notes are an integral part of these financial statements.
================================================================================

<PAGE>

T. ROWE PRICE SPECTRUM INTERNATIONAL FUND
- -----------------------------------------                     December 31, 1999
                                     Percent of
                                     Net Assets      Shares         Value
                                     ----------      ------         -----
STATEMENT OF NET ASSETS
- -----------------------                                        In thousands

T. Rowe Price International Stock Fund      49.8%   2,168,193   $   41,261
- ---------------------------------------------------------------------------
T. Rowe Price European Stock Fund           29.3    1,014,498       24,206
- ---------------------------------------------------------------------------
T. Rowe Price Japan Fund                     6.5      338,998        5,407
- ---------------------------------------------------------------------------
T. Rowe Price Emerging Markets Bond Fund     4.8      393,849        3,982
- ---------------------------------------------------------------------------
T. Rowe Price Emerging Markets Stock Fund    4.6      245,036        3,803
- ---------------------------------------------------------------------------
T. Rowe Price International Discovery Fund   3.2       71,892        2,643
- ---------------------------------------------------------------------------
T. Rowe Price New Asia Fund                  1.8      150,731        1,503

Total=Investments==========================================================
100.0% of Net Assets (Cost $65,588)                             $   82,805

Other Assets Less Liabilities                                           41

NET ASSETS                                                      $   82,846
Net Assets Consist of:
Accumulated net investment income -
   net of distributions                                         $       (8)
Accumulated net realized gain/loss -
   net of distributions                                                194
Net unrealized gain (loss)                                          17,217
Paid-in-capital applicable to 6,124,007
   shares of $0.01 par value capital stock
   outstanding; 1,000,000,000 shares of
   the Corporation authorized                                       65,443

NET ASSETS                                                      $   82,846
NET ASSET VALUE PER SHARE                                       $    13.53

  The accompanying notes are an integral part of these financial statements.

================================================================================

<PAGE>

T. ROWE PRICE SPECTRUM FUNDS
- ----------------------------
STATEMENT OF OPERATIONS
- -----------------------
In thousands
                                          GROWTH       INCOME     INTERNATIONAL
                                           FUND         FUND           FUND
                                          ------       ------     -------------
                                             Year         Year           Year
                                            Ended        Ended          Ended
                                         12/31/99     12/31/99       12/31/99
                                         --------     --------       --------
Investment Income
Income distributions from
        underlying funds               $   23,136   $  153,382      $     681
- -----------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
  Sale of underlying funds                 71,766          256          1,459
  Capital gain distributions
  from underlying funds                   220,510       27,655          3,782
- -----------------------------------------------------------------------------
  Net realized gain (loss)                292,276       27,911          5,241
Change in net unrealized gain or loss     227,805     (174,105)        16,447
- -----------------------------------------------------------------------------
Net realized and unrealized gain (loss)   520,081     (146,194)        21,688
- -----------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS                 $  543,217   $    7,188      $  22,369

The accompanying notes are an integral part of these financial statements.

================================================================================
T. ROWE PRICE SPECTRUM GROWTH FUND
- ----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------
In thousands
                                                         Year
                                                        Ended
                                                     12/31/99       12/31/98
Increase (Decrease) in Net Assets
Operations
 Investment income                                 $   23,136    $    29,372
 Net realized gain (loss)                             292,276        219,345
 Change in net unrealized gain or loss                227,805         89,469
- -----------------------------------------------------------------------------
 Increase (decrease) in net assets from operations    543,217        338,186
- -----------------------------------------------------------------------------
Distributions to shareholders
 Investment income                                    (26,073)       (27,938)
 Net realized gain                                   (293,035)      (212,530)
- -----------------------------------------------------------------------------
 Decrease in net assets from distributions           (319,108)      (240,468)
- -----------------------------------------------------------------------------
Capital share transactions *
 Shares sold                                          398,895        527,058
 Distributions reinvested                             310,958        236,644
 Shares redeemed                                     (671,253)      (698,444)
- -----------------------------------------------------------------------------
 Increase (decrease) in net assets from capital
 share transactions                                    38,600         65,258
- -----------------------------------------------------------------------------

<PAGE>

Net Assets
Increase (decrease) during period                     262,709        162,976
Beginning of period                                 2,768,241      2,605,265
- -----------------------------------------------------------------------------
End of period                                      $3,030,950    $ 2,768,241
=============================================================================

*Share information
 Shares sold                                           23,383         31,506
 Distributions reinvested                              18,800         15,317
 Shares redeemed                                      (39,287)       (42,158)
- -----------------------------------------------------------------------------
 Increase (decrease) in shares outstanding              2,896          4,665

The accompanying notes are an integral part of these financial statements.

================================================================================
T. ROWE PRICE SPECTRUM INCOME FUND
- ----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------
In thousands
                                                         Year
                                                        Ended
                                                     12/31/99       12/31/98
Increase (Decrease) in Net Assets
Operations
 Investment income                                 $  153,382    $   147,637
 Net realized gain (loss)                              27,911         42,031
 Change in net unrealized gain or loss               (174,105)       (41,478)
- -----------------------------------------------------------------------------
 Increase (decrease) in net assets from operations      7,188        148,190
- -----------------------------------------------------------------------------
Distributions to shareholders
 Investment income                                   (158,379)      (147,637)
 Net realized gain                                    (30,463)       (39,203)
- -----------------------------------------------------------------------------
 Decrease in net assets from distributions           (188,842)      (186,840)
- -----------------------------------------------------------------------------
Capital share transactions *
 Shares sold                                          793,286      1,082,811
 Distributions reinvested                             175,415        173,901
 Shares redeemed                                     (812,665)      (666,236)
- -----------------------------------------------------------------------------
 Increase (decrease) in net assets from capital
 share transactions                                   156,036        590,476
- -----------------------------------------------------------------------------
Net Assets
Increase (decrease) during period                     (25,618)       551,826
Beginning of period                                 2,574,053      2,022,227
- -----------------------------------------------------------------------------
End of period                                      $2,548,435    $ 2,574,053
=============================================================================

*Share information
 Shares sold                                           71,118         92,606
 Distributions reinvested                              15,876         14,979
 Shares redeemed                                      (72,904)       (57,176)
- -----------------------------------------------------------------------------
 Increase (decrease) in shares outstanding             14,090         50,409

The accompanying notes are an integral part of these financial statements.

================================================================================

<PAGE>

T. ROWE PRICE SPECTRUM INTERNATIONAL FUND
- -----------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------
In thousands
                                                           Year
                                                          Ended
                                                       12/31/99       12/31/98
  Increase (Decrease) in Net Assets
  Operations
   Investment income                                 $      681    $     1,051
   Net realized gain (loss)                               5,241            861
   Change in net unrealized gain or loss                 16,447          4,039
- --------------------------------------------------------------------------------
   Increase (decrease) in net assets from operations     22,369          5,951
- --------------------------------------------------------------------------------
  Distributions to shareholders
   Investment income                                       (718)        (1,055)
   Net realized gain                                     (5,358)          (753)
- --------------------------------------------------------------------------------
   Decrease in net assets from distributions             (6,076)        (1,808)
- --------------------------------------------------------------------------------
  Capital share transactions *
   Shares sold                                           20,507         21,074
   Distributions reinvested                               5,761          1,740
   Shares redeemed                                      (14,467)       (23,255)
- --------------------------------------------------------------------------------
   Increase (decrease) in net assets from capital
   share transactions                                    11,801           (441)
- --------------------------------------------------------------------------------
  Net Assets
  Increase (decrease) during period                      28,094          3,702
  Beginning of period                                    54,752         51,050
- --------------------------------------------------------------------------------
  End of period                                      $   82,846    $    54,752
================================================================================

*Share information
   Shares sold                                            1,754          2,025
   Distributions reinvested                                 465            172
   Shares redeemed                                       (1,280)        (2,255)
- --------------------------------------------------------------------------------
   Increase (decrease) in shares outstanding                939            (58)

The accompanying notes are an integral part of these financial statements.

================================================================================
T. ROWE PRICE SPECTRUM FUNDS
- ----------------------------                                   December 31, 1999
NOTES TO FINANCIAL STATEMENTS
- -----------------------------

     T. Rowe Price Spectrum Funds,  Inc. (the  corporation) is registered  under
the  Investment  Company  Act of 1940  (the Act) as a  nondiversified,  open-end
management  investment company.  Spectrum Growth Fund, Spectrum Income Fund, and
Spectrum  International Fund  (collectively,  the Spectrum Funds), are the three
portfolios established by the corporation. Operations commenced on June 29, 1990
for Spectrum  Growth and  Spectrum  Income  Funds,  and on December 31, 1996 for
Spectrum International Fund.
<PAGE>

     Each Spectrum Fund  diversifies its assets within set limits among specific
underlying  T.  Rowe  Price  funds  (underlying  funds).  Spectrum  Growth  Fund
principally  seeks  long-term  capital  appreciation  and  growth  of  income by
allocating  its assets to  underlying  funds that  invest  primarily  in stocks.
Spectrum  Income  Fund  strives to provide a high level of current  income  with
moderate share price  fluctuation,  by investing in underlying funds that invest
primarily in fixed income  securities.  The objective of Spectrum  International
Fund  is to  provide  long-term  capital  appreciation  through  allocations  to
underlying funds that invest primarily in international  stocks and, to a lesser
degree, international bonds.

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------

     Basis of  Preparation  The financial  statements are prepared in accordance
with  generally  accepted  accounting  principles  for  the  investment  company
industry, which may require the use of estimates by fund management.

     Valuation Investments in the underlying funds are valued at the closing net
asset value per share of each underlying fund on the day of valuation.

     Assets for which the above valuation  procedures are  inappropriate  or are
deemed not to reflect fair value are stated at fair value as  determined in good
faith by or under the  supervision of the officers of the fund, as authorized by
the Board of Directors.

     Distributions  Income and capital gain  distributions  from the  underlying
funds and distributions to the Spectrum Funds'  shareholders are recorded on the
ex-dividend date.

     Income and capital gain  distributions to the Spectrum Funds'  shareholders
are  determined in accordance  with federal  income tax  regulations,  which may
differ from generally accepted accounting principles.  Accordingly, for the year
ended December 31, 1999,  Spectrum  Income Fund's  undistributed  net investment
income was  increased by  $4,948,000  and  undistributed  net realized  gain was
decreased  by  $4,948,000,   in  order  for  the  fund's  capital  accounts  and
distributions   to   shareholders  to  reflect  the  tax  character  of  certain
transactions. Such reclassification had no effect on results of operation or net
assets.

     Federal  Income  Taxes No  provision  for federal  income taxes is required
since each fund intends to continue to qualify as a regulated investment company
and distribute all of its taxable income.

     Other Income is recorded on the accrual  basis.  Purchases and sales of the
underlying funds are accounted for on the trade date.  Realized gains and losses
are reported on the identified cost basis.

NOTE 2 - INVESTMENTS IN UNDERLYING FUNDS
- ----------------------------------------

     Purchases and sales of the underlying funds for the year ended December 31,
1999 were as follows:
<PAGE>

********************************************************************************

                                   GROWTH            INCOME       INTERNATIONAL
                                     FUND              FUND                FUND
                                   ------            ------       -------------
Purchases                   $ 561,482,000     $ 615,458,000      $  22,486,000
Sales                         605,822,000       479,847,000         12,217,000

********************************************************************************

     At December 31, 1999, the net unrealized  gain (loss) on investments in the
underlying  funds for both federal income tax and financial  reporting  purposes
were as follows:

********************************************************************************

                                   GROWTH            INCOME       INTERNATIONAL
                                     FUND              FUND                FUND
                                   ------            ------       -------------
Appreciated investments     $ 818,688,000     $  49,706,000      $  17,522,000
Depreciated investments        (4,927,000)     (155,419,000)          (305,000)
Net unrealized gain (loss)  $ 813,761,000     $(105,713,000)     $  17,217,000

********************************************************************************


NOTE 3 - RELATED PARTIES
- ------------------------

     T. Rowe Price  Associates,  Inc. (T. Rowe Price) is the investment  manager
for Spectrum  Growth and Spectrum  Income Funds,  and also serves as manager for
the  domestic   underlying  funds.  Rowe   Price-Fleming   International,   Inc.
(Price-Fleming) is the investment manager for Spectrum  International  Fund, and
also serves as manager for the international underlying funds. T. Rowe Price and
its wholly-owned  subsidiaries  provide transfer and dividend  disbursing agent,
accounting, shareholder,  administrative,  marketing, and certain other services
to the Spectrum Funds.  Certain officers and directors of the Spectrum Funds are
also officers and directors of T. Rowe Price, Price-Fleming,  and the underlying
funds.

     The  Spectrum  Funds pay no  management  fees;  however,  T. Rowe Price and
Price-Fleming  receive  management  fees from managing the underlying  funds. In
addition, expenses associated with the operation of the Spectrum Funds are borne
by each  underlying  fund in proportion to the average daily value of its shares
owned by the Spectrum Funds,  pursuant to special servicing  agreements  between
and among the corporation, the underlying funds, T. Rowe Price, and, in the case
of Spectrum  International,  Rowe-Price Fleming.  Therefore,  the Spectrum Funds
each operate at a zero expense ratio,  although the valuations of the underlying
funds reflect  management  fees and other  expenses  incurred by the  underlying
funds.

     The Spectrum Funds do not invest in the underlying funds for the purpose of
exercising  management or control;  however,  investments by Spectrum within the
set limits may  represent  a  significant  portion of an  underlying  fund's net
assets. At December 31, 1999,  Spectrum  International held less than 25% of the
outstanding  shares of any underlying fund;  Spectrum Growth held  approximately
53.3% of the  outstanding  shares of the T. Rowe  Price  Mid-Cap  Value Fund and
Spectrum Income Fund held  approximately  59.4% of the outstanding shares of the
T. Rowe Price U.S. Treasury  Long-Term Fund, 56.1% of the T. Rowe Price Emerging
Markets Bond Fund, 40.3% of the T. Rowe Price  International Bond Fund, 39.4% of
the T. Rowe  Price GNMA Fund,  38.4% of the T. Rowe Price New Income  Fund,  and
32.0% of the T. Rowe Price High Yield Fund.

================================================================================

<PAGE>

T. ROWE PRICE SPECTRUM FUNDS
- ----------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------------------------------

TO THE BOARD OF DIRECTORS OF T. ROWE PRICE SPECTRUM FUNDS, INC. AND
SHAREHOLDERS OF SPECTRUM GROWTH FUND, SPECTRUM INCOME FUND
AND SPECTRUM INTERNATIONAL FUND

     In our opinion,  the accompanying  statements of net assets and the related
statements  of  operations  and of  changes  in net  assets  and  the  financial
highlights present fairly, in all material  respects,  the financial position of
Spectrum  Growth  Fund,  Spectrum  Income Fund and Spectrum  International  Fund
(comprising T. Rowe Price Spectrum  Funds,  Inc.,  hereafter  referred to as the
"Funds") at December 31, 1999, and the results of each of their operations,  the
changes in each of their net assets and the financial highlights for each of the
fiscal periods  presented,  in conformity with accounting  principles  generally
accepted  in  the  United  States.  These  financial  statements  and  financial
highlights   (hereafter   referred  to  as  "financial   statements")   are  the
responsibility  of the Funds'  management;  our  responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  financial  statements  in accordance  with  auditing  standards
generally accepted in the United States,  which require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe that our audits,  which included  confirmation of securities at December
31, 1999 by correspondence  with the transfer agent,  provide a reasonable basis
for the opinion expressed above.

PricewaterhouseCoopers LLP

Baltimore, Maryland
January 20, 2000

================================================================================
T. ROWE PRICE SPECTRUM FUNDS
- ----------------------------
TAX INFORMATION (UNAUDITED) FOR THE TAX YEAR ENDED 12/31/99
- -----------------------------------------------------------
     We are providing this information as required by the Internal Revenue Code.
The amounts  shown may differ  from those  elsewhere  in this report  because of
differences  between  tax  and  financial  reporting  requirements.  The  fund's
distributions include capital gains amount as follows:

                                   GROWTH          INCOME       INTERNATIONAL
                                     FUND            FUND                FUND
                                   ------          ------       -------------
* Short-term gains          $   33,753,000   $         -         $   552,000
* Long-term 20% rate gains     259,282,000     30,463,000          4,806,000

     For corporate  shareholders,  $9,503,000 of the Spectrum  Growth Fund's and
$32,904,000  of the Spectrum  Income Fund's  distributed  income and  short-term
capital gains qualified for the dividends-received deduction.

================================================================================

<PAGE>

T. ROWE PRICE SHAREHOLDER SERVICES
- ----------------------------------

     INVESTMENT SERVICES AND INFORMATION
     -----------------------------------

     KNOWLEDGEABLE SERVICE REPRESENTATIVES

          BY PHONE Shareholder service representatives are available from 8 a.m.
          to 10 p.m. ET Monday through Friday and from 8:30 a.m. to 5 p.m. ET on
          weekends.  Call 1-800-225-5132 to speak directly with a representative
          who will be able to assist you with your accounts.

          IN PERSON  Visit one of our investor  center  locations to meet with a
          representative who will be able to assist you with your accounts.  You
          can also  drop off  applications  or  obtain  prospectuses  and  other
          literature at these centers.

     AUTOMATED 24-HOUR SERVICES

          TELE*ACCESS   (Registration   Mark)  Call   1-800-638-2587  to  obtain
          information  such as  account  balance,  date and  amount of your last
          transaction,   latest  dividend  payment,  fund  prices,  and  yields.
          Additionally,   you  have  the   ability  to   request   prospectuses,
          statements,  and  account  and tax forms;  to reorder  checks;  and to
          initiate  purchase,  redemption,  and exchange  orders for identically
          registered accounts.

          INTERNET.  T.  ROWE  PRICE  WEB  SITE:   WWW.TROWEPRICE.COM   All  the
          information and services available on Tele*Access are available on our
          Web site,  including  transactions in your fund and brokerage accounts
          (with preauthorized access).

     ACCOUNT SERVICES

          CHECKING  Write  checks for $500 or more on any money  market and most
          bond fund  accounts  (except the High Yield and Emerging  Markets Bond
          Funds).

          AUTOMATIC INVESTING Build your account over time by investing directly
          from your bank  account or  paycheck  with  Automatic  Asset  Builder.
          Additionally,  Automatic  Exchange  enables  you to set up  systematic
          investments  from one fund account into another,  such as from a money
          fund into a stock fund. A $50 minimum makes it easy to get started.

          AUTOMATIC  WITHDRAWAL  If you need money  from your fund  account on a
          regular basis, you can establish scheduled, automatic redemptions.

          DIVIDEND AND CAPITAL  GAINS  PAYMENT  OPTIONS  Reinvest all or some of
          your  distributions,  or  take  them in  cash.  We  give  you  maximum
          flexibility and convenience.


     BROKERAGE SERVICES*

          INVESTMENTS AVAILABLE You can trade stocks,  bonds, options,  precious
          metals, and other securities at a savings over full-service commission
          rates.**

          TO OPEN AN ACCOUNT Call a shareholder service  representative for more
          information.


<PAGE>

     INVESTMENT INFORMATION

          COMBINED  STATEMENT  A  comprehensive  overview  of your T. Rowe Price
          accounts  is  provided.  The  summary  page gives you  earnings by tax
          category,  provides total portfolio  value, and lists your investments
          by type. Detail pages itemize account transactions.

          SHAREHOLDER  REPORTS Portfolio  managers review the performance of the
          funds in plain language and discuss T. Rowe Price's economic outlook.

          T. ROWE PRICE  REPORT This is a  quarterly  newsletter  with  relevant
          articles on market trends,  personal financial  planning,  and T. Rowe
          Price's economic perspective.

          PERFORMANCE   UPDATE  This  quarterly  report  reviews  recent  market
          developments and provides  comprehensive  performance  information for
          every T. Rowe Price fund.

          INSIGHTS  These are  reports  on mutual  fund tax  issues,  investment
          strategies, investment fundamentals, and financial markets.

          DETAILED  INVESTMENT GUIDES Our Asset Mix Worksheet,  College Planning
          Kit,  Diversifying  Overseas:  A  Guide  to  International  Investing,
          Retirees Financial Guide, and Retirement  Planning Kit (also available
          on disk or CD-ROM  for PC use) can help you  determine  and reach your
          investment goals.

          *    T. Rowe Price Brokerage is a division of T. Rowe Price Investment
               Services, Inc., Member NASD/SIPC.

          **   Based on a  September  1999  survey  for  representative-assisted
               stock trades.  Services vary by firm,  and  commissions  may vary
               depending on size of order.

================================================================================
T. Rowe Price Mutual Funds
- --------------------------
STOCK FUNDS
- -----------
DOMESTIC
- --------
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media &  Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value
Spectrum Growth
Tax-Efficient Growth
Total Equity Market Index
Value


<PAGE>

INTERNATIONAL/GLOBAL
- --------------------
Emerging Markets Stock
European Stock
Global  Stock
International  Discovery
International  Growth  &  Income
International  Stock
Japan
Latin America
New Asia
Spectrum International

BOND FUNDS
- ----------
DOMESTIC TAXABLE
- ----------------
Corporate  Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury  Intermediate
U.S.  Treasury  Long-Term

DOMESTIC TAX-FREE
- -----------------
California  Tax-Free Bond
Florida  Intermediate  Tax-Free
Georgia Tax-Free Bond
Maryland  Short-Term  Tax-Free Bond
Maryland  Tax-Free Bond
New Jersey  Tax-Free Bond
New  York  Tax-Free  Bond
Summit   Municipal   Income
Summit   Municipal Intermediate
Tax-Free High Yield
Tax-Free  Income
Tax-Free  Intermediate  Bond
Tax-Free  Short-Intermediate
Virginia Short-Term Tax-Free Bond
Virginia Tax-Free Bond

INTERNATIONAL/GLOBAL
- --------------------
Emerging Markets Bond
Global Bond
International Bond

MONEY MARKET FUNDS
- ------------------
TAXABLE
- -------
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money


<PAGE>

TAX-FREE
- --------
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money

BLENDED ASSET FUNDS
- -------------------
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced

T. ROWE PRICE NO-LOAD
VARIABLE ANNUITY
- ---------------------
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio

* Closed to new investors.

     Investments  in the funds are not insured or  guaranteed by the FDIC or any
other government  agency.  Although the funds seek to preserve the value of your
investment at $1.00 per share,  it is possible to lose money by investing in the
funds.

     Please call for a prospectus. Read it carefully before investing.

     The T. Rowe Price No-Load  Variable  Annuity [#V6021] is issued by SECURITY
BENEFIT LIFE INSURANCE COMPANY.  In New York, it  [#FSB201(11-96)]  is issued by
FIRST SECURITY BENEFIT LIFE INSURANCE COMPANY of New York, White Plains,  NY. T.
Rowe Price  refers to the  underlying  portfolios'  investment  managers and the
distributors,  T. Rowe Price Investment Services,  Inc.; T. Rowe Price Insurance
Agency,  Inc.; and T. Rowe Price  Insurance  Agency of Texas,  Inc. The Security
Benefit Group of Companies and the T. Rowe Price  companies are not  affiliated.
The  variable  annuity may not be  available  in all states.  The  contract  has
limitations.  Call a  representative  for  costs  and  complete  details  of the
coverage.

================================================================================

<PAGE>

T. ROWE PRICE ADVISORY SERVICES AND RETIREMENT RESOURCES
- --------------------------------------------------------

        ADVISORY SERVICES,RETIREMENT RESOURCES
        --------------------------------------

            T. Rowe Price is your full-service  retirement specialist.
            We have developed  unique advisory  services that can help
            you meet the most  difficult  retirement  challenges.  Our
            broad  array  of   retirement   plans  is   suitable   for
            individuals,   the   self-employed,    small   businesses,
            corporations, and nonprofit organizations. We also provide
            recordkeeping,  communications,  and investment management
            services,   and  our  educational   materials,   self-help
            planning  guides,  and software  tools are  recognized  as
            among the industry's  best. For  information or to request
            literature,  call us at  1-800-638-5660,  or visit our Web
            site at WWW.TROWEPRICE.COM.

        ADVISORY SERVICES
        -----------------

            T.  ROWE  PRICE  RETIREMENT   INCOME  MANAGER  [SM]  helps
            retirees or those within two years of retirement determine
            how much income they can take in  retirement.  The program
            uses  extensive  statistical  analysis  and the  input  of
            financial planning professionals to suggest an income plan
            that best meets your objectives.

            T. ROWE PRICE  ROLLOVER  INVESTMENT  SERVICE  offers asset
            allocation  advice  to those  planning  a major  change in
            their  qualified   retirement  plans,  such  as  a  401(k)
            rollover from a previous employer or an IRA transfer.


        RETIREMENT RESOURCES AT T. ROWE PRICE
        -------------------------------------
          Traditional, Roth, and Rollover IRAs
          SEP-IRA and SIMPLE IRA
          Profit Sharing
          Money Purchase Pension
          "Paired" Plans (Money Purchase
              Pension and Profit Sharing Plans)
          401(k) and 403(b)
          457 Deferred Compensation

        PLANNING AND INFORMATIONAL GUIDES
        ---------------------------------
          Minimum Required Distributions Guide
          Retirement Planning Kit
          Retirees Financial Guide
          Tax Considerations for Investors

        INSIGHTS REPORTS
        ----------------
          The Challenge of Preparing for Retirement
          Financial Planning After Retirement
          The Roth IRA: A Review


<PAGE>

        SOFTWARE PACKAGES
        -----------------

          T. Rowe Price Retirement Planning
            AnalyzerTM CD-ROM or diskette $19.95.
            To order, please call
            1-800-541-5760. Also available
            on the Internet for $9.95.

          T. Rowe Price Variable Annuity AnalyzerTM
            CD-ROM or diskette, free. To order,
            please call 1-800-469-5304.

        T. ROWE PRICE IMMEDIATE VARIABLE ANNUITY (INCOME ACCOUNT)

        INVESTMENT KITS
        ---------------
            We will be  happy  to send  you one of our  easy-to-follow
            investment  kits  when you are  ready to  invest in any T.
            Rowe Price retirement vehicle,  including IRAs,  qualified
            plans,  small-business  plans,  or  our  no-load  variable
            annuities.



================================================================================
T. ROWE PRICE INSIGHTS REPORTS
- ------------------------------

     THE FUNDAMENTALS OF INVESTING
     -----------------------------

          Whether you are unsure how to get started or are saving for a specific
          goal, such as retirement or college, the T. Rowe Price Insights series
          can  help you  make  informed  investment  decisions.  These  reports,
          written in plain English about fundamental  investment  topics, can be
          useful at every stage of your investment  journey.  They cover a range
          of topics,  from the basic, such as getting started with mutual funds,
          to the more advanced, such as managing risk through diversification or
          buying individual  securities through a broker. To request one or more
          Insights, call us at 1-800-638-5660.

          INSIGHTS REPORTS
          ----------------
          GENERAL INFORMATION

          The ABCs of Giving
          Back to Basics: The ABCs of Investing
          The Challenge of Preparing for Retirement
          Financial Planning After Retirement
          Getting Started: Investing With Mutual Funds
          The Roth IRA: A Review
          Tax Information for Mutual Fund Investors


<PAGE>

          INVESTMENT STRATEGIES
          ---------------------

          Conservative Stock Investing
          Dollar Cost Averaging
          Equity Index Investing
          Growth Stock Investing
          Investing for Higher Yield
          Managing Risk Through Diversification
          The Power of Compounding
          Value Investing

          TYPES OF SECURITIES
          -------------------

          The Basics of International  Stock Investing
          The Basics of Tax-Free  Investing
          The Fundamentals of Fixed Income Investing
          Global Bond Investing
          Investing in Common  Stocks
          Investing in Emerging  Growth  Stocks
          Investing in Financial Services  Stocks
          Investing in Health Care  Stocks
          Investing in High-Yield Municipal   Bonds
          Investing in Money Market Securities
          Investing in Mortgage-Backed Securities
          Investing in Natural Resource Stocks
          Investing in Science and Technology Stocks
          Investing in Small-Company  Stocks
          Understanding Derivatives
          Understanding High-Yield "Junk" Bonds

          BROKERAGE INSIGHTS
          ------------------

          Combining Individual Securities With Mutual Funds
          Getting Started: An Introduction to Individual Securities
          What You Should Know About Bonds
          What You Should Know About Margin and Short-Selling
          What You Should Know About Options
          What You Should Know About Stocks

          T. Rowe Price  Insights are also  available for reading or downloading
          on the Internet at WWW.TROWEPRICE.COM.


================================================================================
T. ROWE PRICE BROKERAGE
- -----------------------

     BROKERAGE SERVICES
     ------------------

          T. ROWE  PRICE  BROKERAGE  IS A DIVISION  OF T. ROWE PRICE  INVESTMENT
          SERVICES, INC., MEMBER NASD/SIPC.

          T. Rowe Price Brokerage provides  high-quality  services and financial
          tools  you  can  use  to  manage  your  investments   effectively  and
          conveniently.  We  also  offer  significant  commission  savings  over
          full-service  brokerages on a wide range of individual  securities and
          other investments.*


<PAGE>

               INTERNET  AND  AUTOMATED  SERVICES You can enter  trades,  access
               quotes, and review account information 24 hours a day, seven days
               a week, by telephone or computer. We offer a flat-rate commission
               of $24.95 on stock  trades  placed  through  our  Internet-Trader
               service.**

               RESEARCH SERVICES To help you make informed investment decisions,
               we offer access to several sources of data. You can research your
               investments using our Online Research & News Service, provided by
               Thomson  Investors  Network,  which  includes  company  profiles,
               intra-day  and  12-month  interactive  charting,   and  analysts'
               ratings  and  earnings  estimates.  Using  our  Research  On Call
               service,   you  can  request  reports  from  Standard  &  Poor's,
               Vicker's,  Lipper, and other well-known  research providers to be
               delivered by fax or by mail.

               DIVIDEND  REINVESTMENT  SERVICE This  service  helps keep more of
               your money  working for you.  Cash  dividends (of $10 or greater)
               from your eligible  securities will be invested  automatically in
               additional  shares  of the same  company,  free of  charge.  Most
               stocks  listed on  national  securities  exchanges  or Nasdaq are
               eligible for this service.

               *    Based on a September 1999 survey for representative-assisted
                    stock trades.  Services vary by firm,  and  commissions  may
                    vary depending on size of order.
               **   $24.95 per trade for up to 1,000  shares plus an  additional
                    $.02 for each share over  1,000  shares.  Visit our Web site
                    for a  complete  commission  schedule  or call for  rates on
                    representative-assisted and other non-Internet trades.

================================================================================

FOR FUND AND ACCOUNT INFORMATION
OR TO CONDUCT TRANSACTIONS,
24 HOURS, 7 DAYS A WEEK
By touch-tone telephone
TELE*ACCESS 1-800-638-2587
By Account Access on the Internet
WWW.TROWEPRICE.COM/ACCESS

FOR ASSISTANCE
WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132

TO OPEN A BROKERAGE ACCOUNT
OR OBTAIN INFORMATION, CALL:
1-800-638-5660

INTERNET ADDRESS:
www.troweprice.com

PLAN ACCOUNT LINES FOR RETIREMENT
PLAN PARTICIPANTS:
The appropriate 800 number appears on
your retirement account statement.

T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland  21202
<PAGE>

This report is authorized for
distribution  only to shareholders
and to others who have received
a copy of the prospectus appropriate
to the fund or funds covered in this
report.

WALK-IN INVESTOR CENTERS:
For directions, call 1-800-225-5132
or visit our Web site

BALTIMORE AREA
DOWNTOWN
101 East Lombard Street
OWINGS MILLS
Three Financial Center
4515 Painters Mill Road

BOSTON AREA
386 Washington Street
Wellesley

COLORADO SPRINGS
4410 ArrowsWest Drive

LOS ANGELES AREA
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills

TAMPA
4200 West Cypress Street
10th  Floor

WASHINGTON, D.C.
900 17th Street N.W.
Farragut Square

T. Rowe Price Investment Services, Inc., Distributor.         C08-050  12/31/99


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