<PAGE>
Registration Nos. 033-29697/811-5833
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Post-Effective Amendment No. 9 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 12 /X/
Fiscal Year Ended October 31, 1997
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INSTITUTIONAL INTERNATIONAL FUNDS, INC.
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Exact Name of Registrant as Specified in Charter
100 East Pratt Street, Baltimore, Maryland 21202
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Address of Principal Executive Offices Zip Code
410-345-2000
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Registrant's Telephone Number, Including Area Code
Henry H. Hopkins
100 East Pratt Street, Baltimore, Maryland 21202
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Name and Address of Agent for Service
Approximate Date of Proposed Public Offering March 1, 1998
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It is proposed that this filing will become effective (check appropriate
box):
/ / immediately upon filing pursuant to paragraph (b)
/X/ on March 1, 1998, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
TITLE OF SECURITIES BEING REGISTERED: COMMON STOCK
SUBJECT TO COMPLETION
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted prior to the time
the Registration Statement becomes effective. This Prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such offer,
solicitation, or sale would be unlawful prior to registration or qualification
under the securities laws of any such state.
The Registration Statement of the Institutional International Funds, Inc.
(the "Registrant") on Form N-1A (File No. 811-5833) is hereby amended under the
Securities Act of 1933 to update the Registrant's financial statements, make
other changes in the Registrant's Prospectus and Statement of Additional
Information, and to satisfy the annual amendment requirements of Rule 8b-16
under the Investment Company Act of 1940.
This Amendment consists of the following:
Cross Reference Sheet
Part A of Form N-1A, Revised Prospectus
Part B of Form N-1A, Statement of Additional Information
Part C of Form N-1A, Other Information
<TABLE>
<CAPTION>
Cross Reference Sheet
N-1A Item No. Location
<S> <C> <C>
PART A
Item 1. Cover Page Cover Page
Item 2. Synopsis Transaction and Fund Expenses
Item 3. Condensed Financial +
Information
Item 4. General Description of About the Fund; Fund, Market, and Risk
Registrant Characteristics: What to Expect;
Understanding Fund Performance;
Investment Policies and Practices
Item 5. Management of the Fund Transaction and Fund Expenses;
Organization and Management
Item 6. Capital Stock and Other Useful Information on Distributions and
Securities Taxes; Organization and Management
Item 7. Purchase of Securities Being Pricing Shares and Receiving Sale
Offered Proceeds; Transaction Procedures and
Special Requirements; Account
Requirements and Transaction
Information; Shareholder Services
Item 8. Redemption or Repurchase Pricing Shares and Receiving Sale
Proceeds; Transaction Procedures and
Special Requirements; Shareholder
Services
Item 9. Pending Legal Proceedings +
PART B
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and +
History
Item 13. Investment Objectives and Investment Objectives and Policies;
Policies Risk Factors; Investment Program;
Investment Restrictions; Investment
Performance
Item 14. Management of the Registrant Management of Fund
Item 15. Control Persons and Principal Holders of Securities
Principal Holders of
Securities
Item 16. Investment Advisory and Investment Management Services;
Other Services Custodian; Independent Accountants;
Legal Counsel
Item 17. Brokerage Allocation Portfolio Transactions; Code of Ethics
Item 18. Capital Stock and Other Dividends and Distributions; Capital
Securities Stock
Item 19. Purchase, Redemption and Pricing of Securities; Net Asset Value
Pricing of Securities Being Per Share; Redemptions in Kind; Federal
Offered Registration of Shares
Item 20. Tax Status Tax Status
Item 21. Underwriters Distributor for the Fund
Item 22. Calculation of Yield +
Quotations of Money Market
Funds
Item 23. Financial Statements +
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement
___________________________________
+ Not applicable or negative answer
<PAGE>
PROSPECTUS
March 1, 1998
Foreign Equity Fund
An international stock fund for investors seeking capital growth by
diversifying beyond U.S. borders.
FACTS AT A GLANCE
Foreign Equity Fund
Investment Goal
Capital appreciation through investment primarily in established companies
based outside the United States.
Strategy
Invests worldwide primarily in well-established, non-U.S. companies.
Risk/Reward
The fund's share price will fluctuate with changes in market, economic, and
foreign currency exchange conditions. High potential risk and reward.
Investor Profile
Institutional investors seeking higher appreciation potential over time and
greater diversification for their equity investments who can accept the
volatility associated with investing in stocks as well as the special risks
that accompany international investing.
Fees and Charges
100% no load. No sales charges; free telephone exchange; no 12b-1 marketing
fees.
Investment Manager
Rowe Price-Fleming International, Inc. ("Price-Fleming") was founded in 1979 as
a joint venture between T. Rowe Price Associates, Inc. and Robert Fleming
Holdings, Ltd. As of December 31, 1997, Price-Fleming managed $30 billion in
foreign stocks and bonds through its offices in Baltimore, London, Tokyo,
Singapore, Hong Kong, and Buenos Aires.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This prospectus contains information you should know before investing. Please
keep it for future reference. A Statement of Additional Information about the
fund, dated March 1, 1998, has been filed with the Securities and Exchange
Commission and is incorporated by reference in this prospectus. To obtain a free
copy, call 1-800-638-5660.
Institutional International Funds, Inc.
Prospectus
March 1, 1998
<TABLE>
CONTENTS
<CAPTION>
<S> <C> <C> <C>
1 ABOUT THE FUND
Transaction and Fund Expenses 2
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Financial Highlights 3
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Fund, Market, and Risk Characteristics 4
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2 ABOUT YOUR ACCOUNT
Pricing Shares and Receiving 9
Sale Proceeds
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Distributions and Taxes 10
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Transaction Procedures and 13
Special Requirements
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3 MORE ABOUT THE FUND
Organization and Management 16
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Understanding Performance Information 19
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Investment Policies and Practices 20
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4 INVESTING IN THE FUND
Account Requirements and 25
Transaction Information
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Opening a New Account 25
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Purchasing Additional Shares 26
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Exchanging and Redeeming 26
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Rights Reserved by the Fund 27
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Financial Institution Services 28
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</TABLE>
ABOUT THE FUND 1
TRANSACTION AND FUND EXPENSES
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These tables should help you understand the kinds of expenses you will bear
directly or indirectly as a fund shareholder.
Shareholder Transaction Expenses in Table 1 shows that you pay no sales
charges. All the money you invest in the fund goes to work for you, subject
to the fees explained below. Annual Fund Expenses provides an estimate of how
much it will cost to operate the fund for a year, based on 1997 fiscal year
expenses. These are costs you pay indirectly because they are deducted from
the fund's total assets before the daily share price is calculated and before
dividends and other distributions are made. In other words, you will not see
these expenses on your account statement.
<TABLE>
Table 1
<CAPTION>
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Percentage of Fiscal 1997
Expenses Annual Fund Expenses Average Net Assets
Sales charge "load" on purchases None Management fee 0.70%
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Sales charge "load" on reinvested None Marketing fees (12b-1) None
distributions
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Redemption fees None Total other (shareholder servicing, 0.05%
custodial, auditing, etc.)
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Exchange fees None Total fund expenses 0.75%
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</TABLE>
Note: A $5 fee is charged for wire redemptions under $5,000, subject to change
without notice.
The main types of expenses, which all mutual funds may charge against fund
assets, are:
. A management fee The percent of fund assets paid to the fund's investment
. "Other" administrative expenses Charges primarily for the servicing of
shareholder accounts, such as providing statements and reports, disbursing
. Marketing or distribution fees An annual charge ("12b-1") to existing
shareholders to defray the cost of selling shares to new shareholders. T.
For further details on fund expenses, please see Organization and Management.
. Hypothetical example Assume you invest $1,000, the fund returns 5% annually,
expense ratios remain as listed previously, and you close your account at the
end of the time periods shown. Your expenses would be:
<TABLE>
Table 2
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Hypothetical Fund Expenses
1 year 3 years 5 years 10 years
$7 $22 $39 $87
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</TABLE>
o Table 2 is just an example; actual expenses can be higher or lower than
those shown.
FINANCIAL HIGHLIGHTS
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Table 3, which provides information about the fund's financial history, is
based on a single share outstanding throughout each fiscal year. The table is
part of the fund's financial statements, which are included in its annual
report and are incorporated by reference into the Statement of Additional
Information (available upon request). The financial statements in the annual
report were audited by Price Waterhouse LLP, the fund's independent
accountants.
<TABLE>
Table 3 Financial Highlights
<CAPTION>
Income From Investment Activities Less Distributions
Period Net Asset Net Net Realized Total From Net Net
Ended Value, Investment & Unrealized Investment Investment Realized Total
Beginning Income Gain (Loss) on Activities Income Gain Distributions
of Period Investments
<S> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989/a/ $10.00 $0.05/b/ $0.61 $ 0.66 $(0.04) - $(0.04)
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1990 10.62 0.23/bc/ .10) (0.87) (0.21) - (0.21)
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1991 9.54 0.18/c/ .28 1.46 (0.18) $(0.09) (0.27)
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1992 10.73 0.17 .57) (0.40) (0.18) (0.10) (0.28)
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1993/e/ 10.05 0.13 3.14 3.27 - - -
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1994 13.32 0.09 1.48 1.57 (0.09) (0.21) (0.30)
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1995 14.59 0.18 (0.14 )/f/ 0.04 (0.12) (0.52) (0.64)
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1996 13.99 0.21 1.78 1.99 (0.18) (0.18) (0.36)
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1997 15.62 0.21 1.07 1.28 (0.22) (0.17) (0.39)
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Net Asset Value
Net Asset
Value,
End of Period
<S> <C> <C>
1989/a/ $10.62
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1990 9.54
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1991 10.73
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1992 10.05
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1993/e/ 13.32
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1994 14.59
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1995 13.99
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1996 15.62
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1997 16.51
- ----------------------
</TABLE>
Footnotes appear on next page. (continued on next page)
<TABLE>
Table 3 Financial Highlights (continued)
<CAPTION>
Returns, Ratios, and Supplemental Data
Period Total Return Ratio of Ratio of Net
Ended (Includes Net Assets Expenses to Investment Portfolio Average
Reinvested ($ Thousands) Average Net Income to Turnover Commission
Distributions) Assets Average Net Rate Rate Paid
Assets
<S> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989/a/ 6.60%/b/ $ 50,252 1.10%/bd/ 1.43%/bd/ 13.8%/d/ -
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1990 (8.20)/bc/ 83,645 1.01/bc/ 2.23/bc/ 44.6 -
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1991 15.40/c/ 143,822 1.00/c/ 1.64/c/ 46.7 -
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1992 (3.74) 238,979 0.99 1.49 35.1 -
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1993/e/ 32.54 489,389 0.86/d/ 1.65/d/ 27.4/d/ -
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1994 11.96 1,058,478 0.82 1.26 22.0 -
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1995 0.64 1,559,619 0.80 1.69 18.8 -
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1996 14.48 2,322,469 0.76 1.67 13.8 $0.0017
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1997 8.30 3,159,855 0.75 1.40 15.9 0.0017
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</TABLE>
/a/From September 7, 1989 (commencement of operations) to December 31, 1989.
/b/Excludes expenses in excess of a 1.10% voluntary expense limitation in effect
through February 28, 1990.
/c/Excludes expenses in excess of a 1.00% voluntary expense limitation in effect
from March 1, 1990, through December 31, 1991.
/d/Annualized.
/e/For the 10 months ended October 31, 1993. Fiscal year-end changed from
December 31 to October 31.
/f/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 the fund's shares in
relation to fluctuating market values for the investment portfolio.
FUND, MARKET, AND RISK CHARACTERISTICS: WHAT TO EXPECT
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To help you decide whether this fund is appropriate for you, this section
takes a closer look at its investment objective and approach.
What are some of the potential advantages and disadvantages of investing beyond
U.S. borders?
Since U.S. stocks represent less than half of the world's stock market
capitalization, investing abroad increases the opportunities available to
you. Foreign investments also provide effective diversification for an
all-U.S. portfolio, since historically their returns have not moved in sync
with U.S. stocks over longer periods.
Investing in foreign stocks entails many of the same risks as investing in
U.S. stocks and others as well, such as currency risk. Also, foreign stocks
may not always move counter to U.S. stocks, particularly in the short run.
o The fund should not represent your complete investment program nor be used
for short-term trading purposes.
What is the fund's objective and investment program?
The fund's objective is long-term growth of capital through investments
primarily in common stocks of established, non-U.S. companies. The fund
expects to invest substantially all of its assets outside the U.S. and to
diversify broadly among countries throughout the world - developed and
emerging.
What securities can the fund invest in other than common stocks?
The fund expects to invest substantially all of its assets in common stocks.
However, the fund may also invest in a variety of other equity-related
securities, such as preferred stocks, warrants and convertible securities, as
well as corporate and governmental debt securities, when considered
consistent with the fund's investment objective and program. The fund may
also engage in a variety of investment management practices, such as buying
and selling futures and options. Under normal market conditions, the fund's
investment in securities other than common stocks is limited to no more than
35% of total assets. However, for temporary defensive purposes, the fund may
invest all or a significant portion of its assets in U.S. government and
corporate debt obligations. The fund will not purchase any debt security
which at the time of purchase is rated below investment grade. This would not
prevent the fund from retaining a security downgraded to below investment
grade after purchase.
How does the portfolio manager select stocks?
Price-Fleming blends a bottom-up approach to individual stock selection based
on fundamental research with an awareness of the economic overview of the
countries in our opportunity set. Stock selection is the focal point of
decision-making, however. Fund managers weigh a company's prospects for
achieving and sustaining above-average, long-term earnings growth and also
look at valuation factors such as price/earnings, price/cash flow, and
price/book value ratios.
What are the major risks associated with international investing and this fund?
Stock prices of foreign and U.S. companies are subject to many of the same
influences, such as general economic conditions, company and industry
earnings prospects, and investor psychology. However, investing in foreign
securities also involves additional risks that can increase the potential for
losses in the fund. Normally, these risks are significantly greater for
investments in emerging markets.
. Currency fluctuations Transactions in foreign securities are conducted in
local currencies, so dollars must often be exchanged for another currency
when a stock is bought or sold or a dividend is paid. Likewise, share price
quotations and total return information reflect conversion into dollars.
Fluctuations in foreign exchange rates can significantly increase or decrease
the dollar value of a foreign investment, boosting or offsetting its local
market return. For example, if a French stock rose 10% in price during a
year, but the U.S. dollar gained 5%
against the French franc during that time, the U.S. investor's return would
be reduced to 5%. This is because the franc would "buy" fewer dollars at the
end of the year than at the beginning, or, conversely, a dollar would buy
more francs. The fund's total return will be affected by currency
fluctuations. The exact amount of the impact depends on the currencies
represented in the portfolio and how each one appreciates or depreciates in
relation to the U.S. dollar.
o Exchange rate movements can be large, unpredictable, and last for extended
periods.
. Increased costs It is more expensive for U.S. investors to trade in foreign
markets than in the U.S. Mutual funds offer an efficient way for individuals
to invest abroad, but the overall expense ratios of international funds are
usually higher than those of typical domestic stock funds.
. Political and economic factors The economies, markets, and political
structures of a number of the countries in which the fund can invest do not
compare favorably with the U.S. and other mature economies in terms of wealth
and stability. Therefore, investments in these countries will be riskier and
more subject to erratic and abrupt price movements. This is especially true
for emerging markets. However, even investments in countries with highly
developed economies are subject to risk. For example, the Japanese stock
market historically has experienced wide swings in value.
Some economies are less well developed, overly reliant on particular
industries, and more vulnerable to the ebb and flow of international trade,
trade barriers, and other protectionist or retaliatory measures. This makes
investment in such markets significantly riskier than in other countries.
Some countries have legacies and the risk of hyperinflation and currency
devaluations versus the dollar (which adversely affects returns to U.S.
investors) and may be overly dependent on foreign capital (a risk that is
exacerbated by big currency movements). Investments in countries that have
recently begun moving away from central planning and state-owned industries
toward free markets should be regarded as speculative.
o While certain countries have made progress in economic growth,
liberalization, fiscal discipline, and political and social stability,
there is no assurance these trends will continue.
Certain countries have histories of instability and upheaval with respect to
their internal politics that could cause their governments to act in a
detrimental or hostile manner toward private enterprise or foreign
investment. Actions such as capital controls, nationalizing a company or
industry, expropriating assets, or imposing punitive taxes could have a
severe effect on security prices and impair a fund's ability to repatriate
capital or income. Significant external risks, including
war, currently affect some countries. Governments in many emerging market
countries participate to a significant degree in their economies and
securities markets.
. Legal, regulatory, and operational Certain countries lack uniform
accounting, auditing, and financial reporting standards, have less
governmental supervision of financial markets than in the U.S., do not honor
legal rights enjoyed in the U.S., and have settlement practices, such as
delays, which could subject a fund to risks of loss not customary in the U.S.
In addition, securities markets in these countries have substantially lower
trading volumes than U.S. markets, resulting in less liquidity and more
volatility than experienced in the U.S.
. Pricing Portfolio securities may be listed on foreign exchanges that are
open on days (such as Saturdays) when the fund does not compute its price. As
a result, the fund's net asset value may be significantly affected by trading
on days when shareholders cannot make transactions.
o For more details on potential risks of foreign investments, please see
Investment Policies and Practices and the Statement of Additional
Information.
What can I expect in terms of price volatility?
Like U.S. stock investments, common stocks of foreign companies offer
investors a way to build capital over time. Nevertheless, the long-term rise
of foreign stock prices as a group has been punctuated by declines. Share
prices of all companies, even the best managed, most profitable, whether U.S.
or foreign, are subject to market risk, which means they can fluctuate
widely.
In less well-developed stock markets, such as those found in Latin America,
Eastern Europe, Africa, and Asia, volatility may be heightened by actions of
a few major investors. For example, substantial increases or decreases in
cash flows of mutual funds investing in these markets could significantly
affect local stock prices and, therefore, fund share prices.
o The fund's share price will fluctuate; when you sell your shares, you may
lose money.
How does the portfolio manager try to reduce risk?
The principal tools are intensive research and diversification; currency
hedging techniques are used from time to time.
. In addition to conducting on-site research in portfolio countries and
companies, Price-Fleming has close ties with investment analysts based
throughout the world.
. Diversification significantly reduces, but does not eliminate, risk. The
impact on a fund's share price from a drop in the price of a particular stock
is reduced substantially by investing in a portfolio with dozens of different
companies. Likewise, the impact of unfavorable developments in a particular
country is reduced when investments are spread among many countries.
Portfolio managers keep close watch on individual investments as well as on
political and economic trends in each country and region. Holdings are
adjusted according to the manager's analysis and outlook.
. Under normal conditions, the fund does not engage in extensive currency
hedging programs. However, when foreign exchange rates are expected to be
unfavorable for U.S. investors, fund managers can hedge the risk through the
use of currency forwards and options. In a general sense, these tools allow a
manager to exchange currencies in the future at a rate specified in the
present. (For more details, please see Foreign Currency Transactions under
Investment Policies and Practices.) If the manager's forecast is wrong, the
hedge may cause a loss. Also, it may be difficult or not practical to hedge
currency risk in many emerging countries.
How can I decide if the fund is appropriate for me?
First, be sure that your investment objective is the same as the fund's:
capital appreciation over time. If you will need the money you plan to invest
in the near future, the fund is not suitable.
Second, your decision should take into account whether you have any other
foreign stock investments.
Third, consider your risk tolerance and the risk profile of the fund.
Is there other information I need to review before making a decision?
Be sure to read Investment Policies and Practices in Section 3, which
discusses the principal types of portfolio securities that the fund may
purchase as well as the types of management practices that the fund may use.
ABOUT YOUR ACCOUNT 2
PRICING SHARES AND RECEIVING SALE PROCEEDS
----------------------------------------------------------
Here are some procedures you should know when investing in the fund.
How and when shares are priced
The share price (also called "net asset value" or NAV per share) for the fund
is calculated at 4 p.m. ET each day the New York Stock Exchange is open for
business. To calculate the NAV, the fund's assets are valued and totaled,
liabilities are subtracted, and the balance, called net assets, is divided by
the number of shares outstanding.
The fund's portfolio securities usually are valued on the basis of the most
recent closing market prices at 4 p.m. ET when the fund calculates its NAV.
Most of the securities in which the fund invests, however, are traded in
markets that close before that time. For securities primarily traded in the
Far East, for example, the most recent closing prices may be as much as 15
hours old at 4 p.m. Normally, developments that could affect the values of
portfolio securities that occur between the close of the foreign market and 4
p.m. ET will not be reflected in the fund's NAV. However, if the fund
determines that such developments are so significant that they will clearly
and materially affect the value of the fund's securities, the fund may adjust
the previous closing prices to reflect fair value or use the next available
o The various ways you can buy, sell, and exchange shares are explained at
the end of this prospectus and on the New Account Form. These procedures
If we receive your request in correct form by 4 p.m. ET, your transaction
will be priced at that day's NAV. If we receive it after 4 p.m., it will be
We cannot accept orders that request a particular day or price for your
Fund shares may be purchased through various third parties, including banks,
brokers, investment advisers, and recordkeepers (intermediaries). Where
authorized by a fund, orders will be priced at the NAV next computed after
receipt by the intermediary. Consult with your intermediary to determine when
Note: The time at which transactions and shares are priced and the time until
which orders are accepted may be changed in case of an emergency or if the
New York Stock Exchange closes at a time other than 4 p.m. ET.
How you can receive the proceeds from a sale
o When filling out the New Account Form, you may wish to give yourself the
widest range of options for receiving proceeds from a sale.
If your request is received by 4 p.m. ET in correct form, proceeds are
usually sent on the next business day. Proceeds can be sent to you by mail or
to your bank account by Automated Clearing House (ACH) transfer or bank wire.
Proceeds sent by ACH transfer should be credited the second day after the
sale. ACH is an automated method of initiating payments from, and receiving
payments in, your financial institution account. ACH is a payment system
supported by over 20,000 banks, savings banks, and credit unions, which
electronically exchanges the transactions primarily through the Federal
Reserve Banks. Proceeds sent by bank wire should be credited to your account
the next business day.
. Exception: Under certain circumstances and when deemed to be in the fund's
best interests, your proceeds may not be sent for up to five business days
after we receive your sale or exchange request. If you were exchanging into a
bond or money fund, your new investment would not begin to earn dividends
until the sixth business day.
o If for some reason we cannot accept your request to sell shares, we will
contact you.
USEFUL INFORMATION ON DISTRIBUTIONS AND TAXES
----------------------------------------------------------
o All net investment income and realized capital gains are distributed to
shareholders.
Dividends and Other Distributions
Dividend and capital gain distributions are reinvested in additional fund
shares in your account unless you select another option on your New Account
Form. The advantage of reinvesting distributions arises from compounding;
that is, you receive income dividends and capital gain distributions on a
rising number of shares.
Distributions not reinvested are paid by check or transmitted to your bank
account via ACH. If the Post Office cannot deliver your check, or if your
check remains uncashed for six months, the fund reserves the right to
reinvest your distribution check in your account at the NAV on the business
day of the reinvestment and to reinvest all subsequent distributions in
shares of the fund. No interest will accrue on amounts represented by
uncashed distribution or redemption checks.
<PAGE>
Income dividends
. The fund declares and pays dividends (if any) annually.
. The dividends of the fund will not be eligible for the 70% deduction for
dividends received by corporations, if, as expected, none of the fund's
income consists of dividends paid by U.S. corporations.
Capital gains
. A capital gain or loss is the difference between the purchase and sale price
of a security.
. If a fund has net capital gains for the year (after subtracting any capital
losses), they are usually declared and paid in December to shareholders of
record on a specified date that month.
Tax Information
o You will be sent timely information for your tax filing needs.
You need to be aware of the possible tax consequences when:
. You sell fund shares, including an exchange from one fund to another.
. The fund makes a distribution to your account.
Taxes on fund redemptions
When you sell shares in any fund, you may realize a gain or loss. An exchange
from one fund to another is still a sale for tax purposes.
In January, you will be sent Form 1099-B, indicating the date and amount of
each sale you made in the fund during the prior year. This information will
also be reported to the IRS. For new accounts or those opened by exchange in
1983 or later, we will provide you with the gain or loss of the shares you
sold during the year, based on the "average cost," single category method.
This information is not reported to the IRS, and you do not have to use it.
You may calculate the cost basis using other methods acceptable to the IRS,
such as "specific identification."
To help you maintain accurate records, we send you a confirmation immediately
following each transaction you make (except for systematic purchases and
redemptions) and a year-end statement detailing all your transactions in each
fund account during the year.
Taxes on fund distributions
o The following summary does not apply to retirement accounts, such as IRAs,
which are tax-deferred until you withdraw money from them.
In January, you will be sent Form 1099-DIV, indicating the tax status of any
dividend and capital gain distribution made to you. This information will
also be reported to the IRS. All distributions made by a fund are taxable to
you for the year in which they were paid. The only exception is that
distributions declared during the last three months of a calendar year and
paid in January are taxed as though they were paid by December 31. You will
be sent any additional information you need to determine your taxes on fund
distributions, such as the portion of your dividend, if any, that may be
exempt from state income taxes.
The tax treatment of a capital gain distribution is determined by how long
the fund held the portfolio securities, not how long you held shares in the
fund. Short-term (one year or less) capital gain distributions are taxable at
the same rate as ordinary income. Recent changes in the tax code revised
capital gain holding periods for long-term gains. Gains on securities held
more than 12 months but not more than 18 months are taxed at a maximum rate
of 28%, and gains on securities held for more than 18 months are taxed at a
maximum rate of 20%. If you realize a loss on the sale or exchange of fund
shares held six months or less, your short-term loss recognized is
reclassified to long term to the extent of any net capital gain distribution
received.
Distributions resulting from the sale of certain foreign currencies and debt
securities, to the extent of foreign exchange gains, are taxed as ordinary
income or loss. If the fund pays nonrefundable taxes to foreign governments
during the year, the taxes will reduce the fund's dividends but will still be
included in your taxable income. However, you may be able to claim an
offsetting credit or deduction on your tax return for your portion of foreign
taxes paid by the fund.
o Distributions are taxable whether reinvested in additional shares or
received in cash.
Tax effect of buying shares before a capital gain distribution
If you buy shares shortly before or on the "record date" - the date that
establishes you as the person to receive the upcoming distribution - you will
receive a portion of the money you just invested in the form of a taxable
distribution. Therefore, you may also wish to find out a fund's record date
before investing. Of course, a fund's share price may, at any time, reflect
undistributed capital gains or income and unrealized appreciation. When these
amounts are eventually distributed, they are taxable.
Note: For information on the tax consequences of hedging, please see
Investment Policies and Practices.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
----------------------------------------------------------
o Following these procedures helps assure timely and accurate transactions.
Purchase Conditions
Nonpayment
If your payment is not received or you pay with a check or ACH transfer that
does not clear, your purchase will be canceled. You will be responsible for
any losses or expenses incurred by the fund or transfer agent, and the fund
can redeem shares you own in this or another identically registered T. Rowe
Price fund as reimbursement. The fund and its agents have the right to reject
or cancel any purchase, exchange, or redemption due to nonpayment.
U.S. dollars
All purchases must be paid for in U.S. dollars; checks must be drawn on U.S.
banks.
Sale (Redemption) Conditions
10-day hold
If you sell shares that you just purchased and paid for by check or ACH
transfer, the fund will process your redemption but will generally delay
sending you the proceeds for up to 10 calendar days to allow the check or
transfer to clear. If your redemption request was sent by mail or mailgram,
proceeds will be mailed no later than the seventh calendar day following
receipt unless the check or ACH transfer has not cleared. (The 10-day hold
does not apply to the following: purchases paid for by bank wire; cashier's,
certified, or treasurer's checks; or automatic purchases through your
paycheck.)
Telephone, Tele*Access/(R)/, and personal computer transactions
Exchange and redemption services through telephone and Tele*Access are
established automatically when you sign the New Account Form unless you check
the box that states that you do not want these services. Personal computer
transactions must be authorized separately. T. Rowe Price funds use
reasonable procedures (including shareholder identity verification) to
confirm that instructions given by telephone are genuine and are not liable
for acting on these instructions. If these procedures are not followed, it is
the opinion of certain regulatory agencies that the funds may be liable for
any losses that may result from acting on the instructions given. A
confirmation is sent promptly after a transaction. All telephone
conversations are recorded.
<PAGE>
Redemptions over $250,000
Large sales can adversely affect a portfolio manager's ability to implement a
fund's investment strategy by causing the premature sale of securities that
would otherwise be held. If, in any 90-day period, you redeem (sell) more
than $250,000, or your sale amounts to more than 1% of fund net assets, the
fund has the right to pay the difference between the redemption amount and
the lesser of the two previously mentioned figures with securities from the
fund.
Excessive Trading
o T. Rowe Price may bar excessive traders from purchasing shares.
Frequent trades, involving either substantial fund assets or a substantial
portion of your account or accounts controlled by you, can disrupt management
of the fund and raise its expenses. We define "excessive trading" as
exceeding one purchase and sale involving the same fund within any 120-day
period.
For example, you are in fund A. You can move substantial assets from fund A
to fund B and, within the next 120 days, sell your shares in fund B to return
to fund A or move to fund C.
If you exceed the number of trades just described, you may be barred
indefinitely from further purchases of T. Rowe Price funds.
Three types of transactions are exempt from excessive trading guidelines: 1)
trades solely between money market funds; 2) redemptions that are not part of
exchanges; and 3) systematic purchases or redemptions (see Shareholder
Services).
Keeping Your Account Open
Due to the relatively high cost to a fund of maintaining small accounts, we
ask you to maintain an account balance of at least $1,000,000. If your
balance is below $1,000,000 for three months or longer, we have the right to
close your account after giving you 60 days in which to increase your
balance.
Signature Guarantees
o A signature guarantee is designed to protect you and the T. Rowe Price
funds from fraud by verifying your signature.
You may need to have your signature guaranteed in certain situations, such
as:
. Written requests 1) to redeem over $100,000, or 2) to wire redemption
proceeds.
. Remitting redemption proceeds to any person, address, or bank account not on
record.
. Transferring redemption proceeds to a T. Rowe Price fund account with a
different registration (name or ownership) from yours.
. Establishing certain services after the account is opened.
You can obtain a signature guarantee from most banks, savings institutions,
broker-dealers, and other guarantors acceptable to T. Rowe Price. We cannot
accept guarantees from notaries public or organizations that do not provide
reimbursement in the case of fraud.
MORE ABOUT THE FUND 3
ORGANIZATION AND MANAGEMENT
----------------------------------------------------------
How is the fund organized?
The Institutional International Funds, Inc. (the "Corporation") was
incorporated in Maryland in 1989 and is a "diversified, open-end investment
company," or mutual fund. Mutual funds pool money received from shareholders
The Corporation currently consists of one series, the Foreign Equity Fund
As with all mutual funds, investors purchase shares when they put money in a
fund. These shares are part of a fund's authorized capital stock, but share
. Cast one vote per share on certain fund matters, including the election of
fund directors, changes in fundamental policies, or approval of changes in
The fund is not required to hold annual meetings and, in order to avoid
unnecessary costs to fund shareholders, does not intend to do so except when
certain matters, such as a change in its fundamental policies, are to be
decided. In addition, shareholders representing at least 10% of all eligible
votes may call a special meeting, if they wish, for the purpose of voting on
the removal of any fund director or trustee. If a meeting is held and you
cannot attend, you can vote by proxy. Before the meeting, the fund will send
you proxy materials that explain the issues to be decided and include a
The Corporation is governed by a Board of Directors that meets regularly to
review fund investments, performance, expenses, and other business affairs.
The Board elects the Corporation's officers. The policy of the Corporation is
o All decisions regarding the purchase and sale of fund investments are made
by Price-Fleming - specifically by the fund's Investment Advisory Group.
Investment Manager
Price-Fleming is responsible for selection and management of the fund's
portfolio investments. Price-Fleming's U.S. office is located at 100 East
Pratt Street, Baltimore, Maryland 21202. Price-Fleming also has offices in
London, Tokyo, Singapore, Hong Kong, and Buenos Aires. Price-Fleming was
incorporated in Maryland in 1979 as a joint venture between T. Rowe Price and
Robert Fleming Holdings Limited (Flemings).
T. Rowe Price, Flemings, and Jardine Fleming are owners of Price-Fleming. The
common stock of Price-Fleming is 50% owned by a wholly owned subsidiary of T.
Rowe Price, 25% by a subsidiary of Flemings, and 25% by a subsidiary of
Jardine Fleming Group Limited (Jardine Fleming). (Half of Jardine Fleming is
owned by Flemings and half by Jardine Matheson Holdings Limited.) T. Rowe
Price has the right to elect a majority of the Board of Directors of
Price-Fleming, and Flemings has the right to elect the remaining directors,
one of whom will be nominated by Jardine Fleming.
o Flemings is a diversified investment organization which participates in a
global network of regional investment offices in New York, London, Zurich,
Geneva, Tokyo, Hong Kong, Manila, Kuala Lumpur, Seoul, Taipei, Bombay,
Jakarta, Singapore, Bangkok, and Johannesburg.
Portfolio Management
The fund has an Investment Advisory Group that has day-to-day responsibility
for managing the portfolio and developing and executing the fund's investment
program. The members of the advisory group are: Martin G. Wade, John R. Ford,
James B. M. Seddon, Mark C. J. Bickford-Smith, Robert W. Smith, and David J.
L. Warren.
Martin Wade joined Price-Fleming in 1979 and has 29 years of experience with
the Fleming Group in research, client service, and investment management.
(Fleming Group includes Robert Fleming and/or Jardine Fleming.) John Ford
joined Price-Fleming in 1982 and has 18 years of experience with the Fleming
Group in research and portfolio management. James Seddon joined Price-Fleming
in 1987 and has 11 years of portfolio management experience. Mark
Bickford-Smith joined Price-Fleming in 1995 and has 13 years of experience in
equity research and portfolio management. Robert Smith joined Price-Fleming
in 1996, has been with T. Rowe Price since 1992, and has 11 years of
experience in financial analysis. David Warren joined Price-Fleming in 1983
and has 17 years of experience in equity research, fixed income research, and
portfolio management.
Portfolio Transactions
Decisions with respect to the purchase and sale of the fund's portfolio
securities on behalf of the fund are made by Price-Fleming. The Corporation's
Board of Directors has authorized Price-Fleming to utilize affiliates of
Flemings and
Jardine Fleming in the capacity of broker in connection with the execution of
a fund's portfolio transactions if Price-Fleming believes that doing so would
result in an economic advantage (in the form of lower execution costs or
otherwise) being obtained by the fund.
Marketing
T. Rowe Price Investment Services, Inc., a wholly owned subsidiary of T. Rowe
Price, distributes (sells) shares of this and all other T. Rowe Price funds.
Shareholder Services
T. Rowe Price Services, Inc., another wholly owned subsidiary, acts as the
fund's transfer and dividend disbursing agent and provides shareholder and
administrative services. Services for certain types of retirement plans are
provided by T. Rowe Price Retirement Plan Services, Inc., also a wholly owned
subsidiary. The address for each is 100 East Pratt St., Baltimore, MD 21202.
How are fund expenses determined?
The management agreement spells out the expenses to be paid by the fund. In
addition to the management fee, the fund pays for the following: shareholder
service expenses; custodial, accounting, legal, and audit fees; costs of
preparing and printing prospectuses and reports sent to shareholders;
registration fees and expenses; proxy and annual meeting expenses (if any);
and director/trustee fees and expenses.
o For the fiscal year ended October 31, 1997, fees paid to various T. Rowe
Price service companies by the fund included the following: $28,000 to T.
Rowe Price Services, Inc., for transfer and dividend disbursing functions
and shareholder services and $105,000 to T. Rowe Price for accounting
services.
The Management Fee
The fund pays the fund manager an annual investment management fee of 0.70%
of the average daily net asset value of the fund. The fund calculates and
accrues the fee daily. (See Transaction and Fund Expenses.)
Research and Administration
Certain administrative support is provided by T. Rowe Price, which receives
from Price-Fleming a fee of 0.15% of the market value of all assets in equity
accounts, 0.15% of the market value of all assets in active fixed income
accounts, and 0.035% of the market value of all assets in passive fixed
income accounts under Price-Fleming's management. Additional investment
research and administrative support for equity investments is provided to
Price-Fleming by Fleming Investment Management Limited (FIM) and Jardine
Fleming International Holdings Limited (JFIH), for which each receives from
Price-Fleming a fee of 0.075% of the market value of all assets in equity
accounts under Price-Fleming's management. Fleming International Fixed
Interest Management
Limited (FIFIM) and JFIH provide research and administration support for
fixed income accounts for which each receive a fee of 0.075% of the market
value of all assets in active fixed income accounts and 0.175% of such market
value in passive fixed income accounts under Price-Fleming's management. FIM
and FIFIM are wholly owned subsidiaries of Flemings. JFIH is a wholly owned
subsidiary of Jardine Fleming.
UNDERSTANDING PERFORMANCE INFORMATION
----------------------------------------------------------
This section should help you understand the terms used to describe fund
performance. You will come across them in shareholder reports you receive
from us; in our newsletter, The Price Report; in Insights articles; in T.
Rowe Price advertisements; and in the media.
Total Return
This tells you how much an investment in a fund has changed in value over a
given time period. It reflects any net increase or decrease in the share
price and assumes that all dividends and capital gains (if any) paid during
the period were reinvested in additional shares. Reinvested distributions are
included, which means that total return numbers include the effect of
compounding, i.e., you receive income and capital gain distributions on a
rising number of shares.
Advertisements for a fund may include cumulative or compound average annual
total return figures, which may be compared with various indices, other
performance measures, or other mutual funds.
o Total return is the most widely used performance measure. Detailed
performance information is included in the fund's annual and semiannual
shareholder reports and in the quarterly Performance Update, which are all
available without charge.
Cumulative Total Return
This is the actual rate of return on an investment for a specified period. A
cumulative return does not indicate how much the value of the investment may
have fluctuated between the beginning and end of the period specified.
Average Annual Total Return
This is always hypothetical. Working backward from the actual cumulative
return, it tells you what constant year-by-year return would have produced
the actual cumulative return. By smoothing out all the variations in annual
performance, it gives you an idea of the investment's annual contribution to
your portfolio, provided you held it for the entire period in question.
INVESTMENT POLICIES AND PRACTICES
----------------------------------------------------------
This section takes a detailed look at some of the types of securities the
fund may hold in its portfolio and the various kinds of investment practices
that may be used in day-to-day portfolio management. The fund's investment
program is subject to further restrictions and risks described in the
Statement of Additional Information.
Shareholder approval is required to substantively change the fund's
objectives and certain investment restrictions noted in the following section
as "fundamental policies." The managers also follow certain "operating
policies," which can be changed without shareholder approval. However,
significant changes are discussed with shareholders in fund reports. The fund
adheres to applicable investment restrictions and policies at the time it
makes an investment. A later change in circumstances will not require the
sale of an investment if it was proper at the time it was made.
The fund's holdings of certain kinds of investments cannot exceed maximum
percentages of total assets, which are set forth in this prospectus. For
instance, the fund is not permitted to invest more than 10% of total assets
in hybrid instruments. While these restrictions provide a useful level of
detail about the fund's investment program, investors should not view them as
an accurate gauge of the potential risk of such investments. For example, in
a given period, a 5% investment in hybrid instruments could have
significantly more of an impact on the fund's share price than its weighting
in the portfolio. The net effect of a particular investment depends on its
volatility and the size of its overall return in relation to the performance
of all the fund's other investments.
Changes in the fund's holdings, performance, and the contribution of various
investments are discussed in the shareholder reports sent to you.
o Fund managers have considerable leeway in choosing investment strategies
and selecting securities they believe will help the fund achieve its
objective.
Types of Portfolio Securities
In seeking to meet its investment objective, the fund may invest in any type
of security or instrument (including certain potentially high-risk
derivatives described in this section) whose investment characteristics are
consistent with the fund's investment program. The following pages describe
the principal types of portfolio securities and investment management
practices of the fund.
Fundamental policy The fund will not purchase a security if, as a result,
with respect to 75% of its total assets, more than 5% of its total assets
would be invested in securities of a single issuer, or if more than 10% of
the voting securities of the issuer would be held by the fund.
Common and Preferred Stocks
Stocks represent shares of ownership in a company. Generally, preferred stock
has a specified dividend and ranks after bonds and before common stocks in
its claim on income for dividend payments and on assets should the company be
liquidated. After other claims are satisfied, common stockholders participate
in company profits on a pro-rata basis; profits may be paid out in dividends
or reinvested in the company to help it grow. Increases and decreases in
earnings are usually reflected in a company's stock price, so common stocks
generally have the greatest appreciation and depreciation potential of all
corporate securities. While most preferred stocks pay a dividend, the fund
may purchase preferred stock where the issuer has omitted, or is in danger of
omitting, payment of its dividend. Such investments would be made primarily
for their capital appreciation potential.
Convertible Securities and Warrants
The fund may invest in debt or preferred equity securities convertible into,
or exchangeable for, equity securities. Traditionally, convertible securities
have paid dividends or interest at rates higher than common stocks but lower
than nonconvertible securities. They generally participate in the
appreciation or depreciation of the underlying stock into which they are
convertible, but to a lesser degree. In recent years, convertibles have been
developed which combine higher or lower current income with options and other
features. Warrants are options to buy a stated number of shares of common
stock at a specified price anytime during the life of the warrants
(generally, two or more years).
Fixed Income Securities
The fund may invest in any type of investment-grade security. Such securities
would be purchased in companies that meet the investment criteria for the
fund. The price of a bond fluctuates with changes in interest rates, rising
when interest rates fall and falling when interest rates rise.
Hybrid Instruments
These instruments (a type of potentially high-risk derivative) can combine
the characteristics of securities, futures, and options. For example, the
principal amount, redemption, or conversion terms of a security could be
related to the market price of some commodity, currency, or securities index.
Such securities may bear interest or pay dividends at below-market or even
relatively nominal rates. Under certain conditions, the redemption value of
such an investment could be zero.
o Hybrids can have volatile prices and limited liquidity, and their use by
the fund may not be successful.
Operating policy The fund may invest up to 10% of its total assets in hybrid
instruments.
<PAGE>
Passive Foreign Investment Companies
The fund may purchase the securities of certain foreign investment funds or
trusts called passive foreign investment companies. Such trusts have been the
only or primary way to invest in certain countries. In addition to bearing
their proportionate share of the trust's expenses (management fees and
operating expenses), shareholders will also indirectly bear similar expenses
of such trusts. Capital gains on the sale of such holdings are considered
ordinary income regardless of how long the fund held its investment. In
addition, the fund may be subject to corporate income tax and an interest
charge on certain dividends and capital gains earned from these investments,
regardless of whether such income and gains are distributed to shareholders.
To avoid such tax and interest, the fund intends to treat these securities as
sold on the last day of its fiscal year and recognize any gains for tax
purposes at that time; deductions for losses are allowable only to the extent
of any gains resulting from these deemed sales for prior taxable years. Such
gains and losses will be treated as ordinary income. The fund will be
required to distribute any resulting income even though it has not sold the
security.
Private Placements
These securities are sold directly to a small number of investors, usually
institutions. Unlike public offerings, such securities are not registered
with the SEC. Although certain of these securities may be readily sold, for
example, under Rule 144A, others may be illiquid, and their sale may involve
substantial delays and additional costs.
Operating policy The fund will not invest more than 15% of its net assets in
illiquid securities.
Types of Management Practices
Reserve Position
The fund will hold a certain portion of its assets in money market reserves.
The fund's reserve position can consist of shares of one or more T. Rowe
Price internal money market funds as well as short-term, high-quality U.S.
and foreign dollar-denominated money market securities, including repurchase
agreements. For temporary, defensive purposes, the fund may invest without
limitation in money market reserves. The reserve position provides
flexibility in meeting redemptions, expenses, and the timing of new
investments and can serve as a short-term defense during periods of unusual
market volatility.
Borrowing Money and Transferring Assets
The fund can borrow money from banks as a temporary measure for emergency
purposes, to facilitate redemption requests, or for other purposes consistent
with the fund's investment objective and program. Such borrowings may be
collateralized with fund assets, subject to restrictions.
Fundamental policy Borrowings may not exceed 33 1/3% of total fund
assets.
Operating policies The fund may not transfer as collateral any portfolio
securities except as necessary in connection with permissible borrowings or
investments, and then such transfers may not exceed 33 1/3% of the
fund's total assets. The fund may not purchase additional securities when
borrowings exceed 5% of total assets.
Foreign Currency Transactions
The fund will normally conduct its foreign currency exchange transactions
either on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market, or through entering into forward contracts
to purchase or sell foreign currencies. The fund will generally not enter
into a forward contract with a term greater than one year.
The fund will generally enter into forward foreign currency exchange
contracts only under two circumstances. First, when the fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
Second, when Price-Fleming believes that the currency of a particular foreign
country may suffer or enjoy a substantial movement against another currency,
it may enter into a forward contract to sell or buy the former foreign
currency (or another currency which acts as a proxy for that currency),
approximating the value of some or all of the fund's portfolio securities
denominated in such foreign currency. Under certain circumstances, the fund
may commit a substantial portion or the entire value of its portfolio to the
consummation of these contracts. Price-Fleming will consider the effect such
a commitment of its portfolio to forward contracts would have on the
investment program of the fund and the flexibility of the fund to purchase
additional securities. Although forward contracts will be used primarily to
protect the fund from adverse currency movements, they also involve the risk
that anticipated currency movements will not be accurately predicted, and the
fund's total return could be adversely affected as a result.
There are certain markets where it is not possible to engage in effective
foreign currency hedging. This may be true, for example, for the currencies
of various emerging markets where the foreign exchange markets are not
sufficiently developed to permit hedging activity to take place.
Futures and Options
Futures (a type of potentially high-risk derivative) are often used to manage
or hedge risk because they enable the investor to buy or sell an asset in the
future at an agreed-upon price. Options (another type of potentially
high-risk derivative) give the investor the right, but not the obligation, to
buy or sell an asset at a predetermined price in the future. The fund may buy
and sell futures and options contracts for a number of reasons, including: to
manage its exposure to
changes in securities prices and foreign currencies; as an efficient means of
adjusting overall exposure to certain markets; in an effort to enhance
income; and to protect the value of portfolio securities. The fund may
purchase, sell, or write call and put options on securities, financial
indices, and foreign currencies.
Futures contracts and options may not always be successful hedges; their
prices can be highly volatile. Using them could lower the fund's total
return, and the potential loss from the use of futures can exceed the fund's
initial investment in such contracts. In many foreign countries, futures and
options markets do not exist or are not sufficiently developed to be
effectively used by the fund.
Operating policies Futures: Initial margin deposits and premiums on options
used for non-hedging purposes will not equal more than 5% of the fund's net
asset value. Options on securities: The total market value of securities
against which the fund writes call or put options may not exceed 25% of its
total assets. The fund will not commit more than 5% of its total assets to
premiums when purchasing call or put options.
Tax Consequences of Hedging
Under applicable tax law, the fund may be required to limit its gains from
hedging in foreign currency forwards, futures, and options. Although the fund
is expected to comply with such limits, the extent to which these limits
apply is subject to tax regulations as yet unissued. Hedging may also result
in the application of the mark-to-market and straddle provisions of the
Internal Revenue Code. These provisions could result in an increase (or
decrease) in the amount of taxable dividends paid by the fund and could
affect whether dividends paid by the fund are classified as capital gains or
ordinary income.
Portfolio Turnover
The fund will not generally trade in securities for short-term profits, but,
when circumstances warrant, securities may be purchased and sold without
regard to the length of time held. A high turnover rate may increase
transaction costs and result in additional taxable gains. The fund's
portfolio turnover rates for the fiscal years ending October 31, 1997, 1996,
and 1995, were 15.9%, 13.8%, and 18.8%, respectively.
INVESTING IN THE FUND 4
ACCOUNT REQUIREMENTS AND TRANSACTION INFORMATION
----------------------------------------------------------
Tax Identification Number
We must have your correct Social Security or corporate tax identification number
on a signed New Account Form or W-9 Form. Otherwise, federal law requires the
funds to withhold a percentage (currently 31%) of your dividends, capital gain
distributions, and redemptions, and may subject you to an IRS fine. If this
information is not received within 60 days after your account is established,
your account may be redeemed, priced at the NAV on the date of redemption.
Always verify your transactions by carefully reviewing the confirmation we send
you. Please report any discrepancies to Financial Institution Services promptly.
OPENING A NEW ACCOUNT
----------------------------------------------------------
All initial and subsequent investments must be made by bank wire. (See
Redemptions in Kind in the fund's Statement of Additional Information for
further information on the issuance of fund shares for securities or assets
Call Financial Institution Services at 1-800-638-8797 for an account number and
assignment to a dedicated service representative, and give the following wire
PNC Bank, N.A. (Pittsburgh) ABA# 043000096 T. Rowe Price [fund name] Account#
Complete a New Account Form and mail it to one of the appropriate addresses
listed on the next page.
Note: No services will be established and IRS penalty withholding may occur
until a signed New Account Form is received. Also, retirement plans cannot be
opened by wire.
Regular Mail
T. Rowe Price Financial Institution Services P.O. Box 17302 Baltimore, MD
21298-9355
Mailgram, Express, Registered, or Certified Mail
T. Rowe Price Financial Institution Services 10090 Red Run Boulevard Owings
Mills, MD 21117
PURCHASING ADDITIONAL SHARES
----------------------------------------------------------
$100,000 minimum purchase
By Wire
Call Financial Institution Services or use the wire address in Opening a New
Account.
EXCHANGING AND REDEEMING SHARES
----------------------------------------------------------
By Phone
Call Financial Institution Services at 1-800-638-8797
If you find our phones busy during unusually volatile markets, please consider
placing your order by your personal computer, Tele*Access (if you have
previously authorized telephone services), mailgram, or express mail. For
exchange policies, please see Transaction Procedures and Special Requirements -
Excessive Trading.
Redemption proceeds can be mailed to your account address, sent by ACH transfer,
or wired to your bank (provided your bank information is already on file). For
charges, see Electronic Transfers - By Wire under Financial Institution
Services.
<PAGE>
By Mail
For each account involved, provide the account name, number, fund name, and
exchange or redemption amount. For exchanges, be sure to indicate any fund you
are exchanging out of and the fund or funds you are exchanging into. Please mail
to the appropriate address below. T. Rowe Price requires the signatures of all
owners exactly as registered, and possibly a signature guarantee (see
Transaction Procedures and Special Requirements - Signature Guarantees).
Regular Mail
T. Rowe Price Financial Institution Services P.O. Box 17302 Baltimore, MD
21298-9355
Mailgram, Express, Registered, or Certified Mail
T. Rowe Price Financial Institution Services 10090 Red Run Boulevard Owings
Mills, MD 21117
RIGHTS RESERVED BY THE FUND
----------------------------------------------------------
The fund and its agents reserve the right to waive or lower investment minimums;
to accept initial purchases by telephone or mailgram; to refuse any purchase
order; to cancel or rescind any purchase or exchange (for excessive trading or
fraud) upon notice to the shareholder within five business days of the trade or
if the written confirmation has not been received by the shareholder, whichever
is sooner; to freeze any account and suspend account services when notice has
been received of a dispute between the registered or beneficial account owners
or there is reason to believe a fraudulent transaction may occur; to otherwise
modify the conditions of purchase and any services at any time; or to act on
instructions believed to be genuine.
FINANCIAL INSTITUTION SERVICES
----------------------------------------------------------
Financial Institution Services 1-800-638-8797
Many services are available to you as a fund shareholder; some you receive
automatically, and others you must authorize on the New Account Form. By signing
up for services on the New Account Form rather than later on, you avoid having
to complete a separate form and obtain a signature guarantee. This section
reviews some of the principal services currently offered. Our Services Guide
contains detailed descriptions of these and other services.
Note: Corporate and other institutional accounts require an original or
certified resolution to establish services and to redeem by mail. For more
information, call Financial Institution Services.
Retirement Plans
We offer a wide range of plans for individuals, institutions, and large and
small businesses: IRAs, SIMPLE IRAs, SEP-IRAs, Keoghs (profit sharing, money
purchase pension), 401(k), and 403(b)(7). For information on IRAs, call
Financial Institution Services. For information on all other retirement plans,
including our no-load variable annuity, please call our Trust Company at
1-800-492-7670.
Exchange Service
You can move money from one account to an existing identically registered
account or open a new identically registered account. Remember, exchanges are
purchases and sales for tax purposes. (Exchanges into a state tax-free fund are
limited to investors living in states where the fund is registered.) Some of the
T. Rowe Price funds may impose a redemption fee of 0.5% to 2% on shares held for
less than six months or one year, as specified in the prospectus. The fee is
paid to the fund.
Automated Services Tele*Access 1-800-638-2587 24 hours, 7 days
Tele*Access
24-hour service via toll-free number enables you to (1) access information on
fund yields, prices, distributions, account balances, and your latest
transaction; (2) request checks, prospectuses, services forms, duplicate
statements, and tax forms; and (3) initiate purchase, redemption, and exchange
transactions in your accounts (see Electronic Transfers below).
T. Rowe Price OnLine
24-hour service via dial-up modem provides the same services as Tele*Access but
on a personal computer. Please call Financial Institution Services for an
information guide.
After obtaining proper authorization, account transactions may also be conducted
on the Internet.
Subaccounting Services
An institution may arrange for subaccounting services. Such services provide a
master account record which links together individual accounts and provides the
following information: account number, trade date, transaction, previous share
balance, dollar amount of the current transaction, share price, number of shares
purchased, new share balance, and the current market value of your group. The
subaccounting agent reserves the right to charge a fee for such services or
other shareholder services.
Telephone Services
Buy, sell, or exchange shares by calling one of our service representatives.
Electronic Transfers
By Wire
Electronic transfers can be conducted via bank wire. There is currently a $5 fee
for wire redemptions under $5,000, and your bank may charge for incoming or
outgoing wire transfers regardless of size.
For information
Financial Institutions Division
1-800-638-8797 toll free,
1-410-581-7290 in Baltimore
F78-040 3/1/98
<PAGE>
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
INTERNATIONAL STOCK FUND
INTERNATIONAL DISCOVERY FUND
EUROPEAN STOCK FUND
JAPAN FUND
NEW ASIA FUND
LATIN AMERICA FUND
EMERGING MARKETS STOCK FUND
GLOBAL STOCK FUND
and
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
FOREIGN EQUITY FUND
(collectively the "Funds" and individually the "Fund")
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the appropriate Fund prospectus dated March 1, 1998,
which may be obtained from T. Rowe Price Investment Services, Inc., 100 East
Pratt Street, Baltimore, Maryland 21202.
If you would like a prospectus for a Fund of which you are not a shareholder,
please call 1-800-638-5660. A prospectus with more complete information,
including management fees and expenses, will be sent to you. Please read it
carefully.
The date of this Statement of Additional Information is March 1, 1998.
C01-043 3/1/98
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page Page
---- ----
<S> <C> <C> <C> <C>
Capital Stock 40 Investment Restrictions 20
- -------------------------------------- ------------------------------------
Code of Ethics 29 Legal Counsel 41
- -------------------------------------- ------------------------------------
Custodian 28 Management of Funds 22
- -------------------------------------- ------------------------------------
Distributor for Fund 28 Net Asset Value Per Share 36
- -------------------------------------- ------------------------------------
Dividends and Distributions 36 Portfolio Management 8
Practices
- -------------------------------------- ------------------------------------
Federal Registration of Shares 41 Portfolio Transactions 29
- -------------------------------------- ------------------------------------
Independent Accountants 41 Pricing of Securities 35
- -------------------------------------- ------------------------------------
Investment Management Services 26 Principal Holders of 25
Securities
- -------------------------------------- ------------------------------------
Investment Objectives and 2 Risk Factors 2
Policies
- -------------------------------------- ------------------------------------
Investment Performance 38 Shareholder Services 29
- -------------------------------------- ------------------------------------
Investment Program 6 Tax Status 36
- -------------------------------------- ------------------------------------
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
-------------------------------------------------------------------------------
The following information supplements the discussion of each Fund's
investment objectives and policies discussed in each Fund's prospectus.
The Funds will not make a material change in their investment objectives
without obtaining shareholder approval. Unless otherwise specified, the
investment programs and restrictions of the Funds are not fundamental
policies. Each Fund's operating policies are subject to change by each Board
of Directors without shareholder approval. However, shareholders will be
notified of a material change in an operating policy. Each Fund's fundamental
policies may not be changed without the approval of at least a majority of
the outstanding shares of the Fund or, if it is less, 67% of the shares
represented at a meeting of shareholders at which the holders of 50% or more
of the shares are represented.
Throughout this Statement of Additional Information, "the Fund" is intended
to refer to each Fund listed on the cover page, unless otherwise indicated.
RISK FACTORS
-------------------------------------------------------------------------------
All Funds
The Funds' investment manager, Rowe Price-Fleming International, Inc. ("Price
Fleming"), one of America's largest managers of no-load international mutual
fund assets, regularly analyzes a broad range of international equity and
fixed income markets in order to assess the degree or risk and level of
return that can be expected from each market. Of course, there can be no
assurance that Price-Fleming's forecasts of expected return will be reflected
in the actual returns achieved by the Funds.
Each Fund's share price will fluctuate with market, economic and foreign
exchange conditions, and your investment may be worth more or less when
redeemed than when purchased. The Funds should not be relied upon as a
complete investment program, nor used to play short-term swings in the stock
or foreign exchange markets. The Funds are subject to risks unique to
international investing. See discussion under "Risk Factors of Foreign
Investing" below. Further, there is no assurance that the favorable trends
discussed below will continue, and the Funds cannot guarantee they will
achieve their objectives.
<PAGE>
Risk Factors of Foreign Investing There are special risks in foreign
investing. Certain of these risks are inherent in any international mutual
fund while others relate more to the countries in which the Funds will
invest. Many of the risks are more pronounced for investments in developing
or emerging countries, such as many of the countries of Asia, Latin America,
Eastern Europe, Russia, Africa and the Middle East. Although there is no
universally accepted definition, a developing country is generally considered
to be a country which is in the initial stages of its industrialization cycle
with a per capita gross national product of less than $8,000.
. General Investors should understand that all investments have a risk factor.
There can be no guarantee against loss resulting from an investment in the
Funds, and there can be no assurance that the Funds' investment policies will
be successful, or that its investment objectives will be attained. The Funds
are designed for individual and institutional investors seeking to diversify
beyond the United States in actively researched and managed portfolios, and
are intended for long-term investors who can accept the risks entailed when
investing in foreign securities.
. Political and Economic Factors Individual foreign economies of certain
countries differ favorably or unfavorably from the United States' economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position. The
internal politics of certain foreign countries are not as stable as in the
United States. For example, in 1991, the existing government in Thailand was
overthrown in a military coup. In 1992, there were two military coup attempts
in Venezuela and in 1992 the President of Brazil was impeached. In 1994-1995,
the Mexican peso plunged in value setting off a severe crisis in the Mexican
economy. Asia is still coming to terms with its own crisis and recession any
conditions sparked off by widespread currency weakness in late 1997. In
addition, significant external political risks currently affect some foreign
countries. Both Taiwan and China still claim sovereignty of one another and
there is a demilitarized border and hostile relations between North and South
Korea.
Governments in certain foreign countries continue to participate to a
significant degree, through ownership interest or regulation, in their
respective economies. Action by these governments could have a significant
effect on market prices of securities and payment of dividends. The economies
of many foreign countries are heavily dependent upon international trade and
are accordingly affected by protective trade barriers and economic conditions
of their trading partners. The enactment by these trading partners of
protectionist trade legislation could have a significant adverse effect upon
the securities markets of such countries.
. Currency Fluctuations The Fund invests in securities denominated in various
currencies. Accordingly, a change in the value of any such currency against
the U.S. dollar will result in a corresponding change in the U. S. dollar
value of the Fund's assets denominated in that currency. Such changes will
also affect the Fund's income. Generally, when a given currency appreciates
against the dollar (the dollar weakens) the value of the Fund's securities
denominated in that currency will rise. When a given currency depreciates
against the dollar (the dollar strengthens) the value of the Fund's
securities denominated in that currency would be expected to decline.
. Investment and Repatriation of Restrictions Foreign investment in the
securities markets of certain foreign countries is restricted or controlled
in varying degrees. These restrictions limit at times and preclude investment
in certain of such countries and increase the cost and expenses of the Funds.
Investments by foreign investors are subject to a variety of restrictions in
many developing countries. These restrictions may take the form of prior
governmental approval, limits on the amount or type of securities held by
foreigners, and limits on the types of companies in which foreigners may
invest. Additional or different restrictions may be imposed at any time by
these or other countries in which the Funds invest. In addition, the
repatriation of both investment income and capital from several foreign
countries is restricted and controlled under certain regulations, including
in some cases the need for certain government consents. For example, capital
invested in Chile normally cannot be repatriated for one year.
. Market Characteristics It is contemplated that most foreign securities will
be purchased in over-the-counter markets or on stock exchanges located in the
countries in which the respective principal offices of the issuers of the
various securities are located, if that is the best available market.
Investments in certain markets may be made through ADRs traded in the United
States. Foreign stock markets are generally not as developed or efficient as,
and more volatile than, those in the United States. While growing in volume,
they usually have substantially less volume than U.S. markets and the Funds'
portfolio securities may be less liquid and subject
<PAGE>
to more rapid and erratic price movements than securities of comparable U.S.
companies. Equity securities may trade at price/earnings multiples higher
than comparable United States securities and such levels may not be
sustainable. Commissions on foreign stocks are generally higher than
commissions on United States exchanges, and while there is an increasing
number of overseas stock markets that have adopted a system of negotiated
rates, a number are still subject to an established schedule of minimum
commission rates. There is generally less government supervision and
regulation of foreign stock exchanges, brokers, and listed companies than in
the United States. Moreover, settlement practices for transactions in foreign
markets may differ from those in United States markets. Such differences
include delays beyond periods customary in the United States and practices,
such as delivery of securities prior to receipt of payment, which increase
the likelihood of a "failed settlement." Failed settlements can result in
losses to a Fund.
. Investment Funds The Fund may invest in investment funds which have been
authorized by the governments of certain countries specifically to permit
foreign investment in securities of companies listed and traded on the stock
exchanges in these respective countries. The Funds' investment in these funds
is subject to the provisions of the 1940 Act. If the Fund invests in such
investment funds, the Fund's shareholders will bear not only their
proportionate share of the expenses of the Fund (including operating expenses
and the fees of the investment manager), but also will bear indirectly
similar expenses of the underlying investment funds. In addition, the
securities of these investment funds may trade at a premium over their net
asset value.
. Information and Supervision There is generally less publicly available
information about foreign companies comparable to reports and ratings that
are published about companies in the United States. Foreign companies are
also generally not subject to uniform accounting, auditing and financial
reporting standards, practices, and requirements comparable to those
applicable to United States companies. It also is often more difficult to
keep currently informed of corporate actions which affect the prices of
portfolio securities.
. Taxes The dividends and interest payable on certain of the Fund's foreign
portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount of income available for distribution to the Fund's
shareholders.
. Other With respect to certain foreign countries, especially developing and
emerging ones, there is the possibility of adverse changes in investment or
exchange control regulations, expropriation or confiscatory taxation,
limitations on the removal of funds or other assets of the Funds, political
or social instability, or diplomatic developments which could affect
investments by U.S. persons in those countries.
. Eastern Europe and Russia Changes occurring in Eastern Europe and Russia
today could have long-term potential consequences. As restrictions fall, this
could result in rising standards of living, lower manufacturing costs,
growing consumer spending, and substantial economic growth. However,
investment in the countries of Eastern Europe and Russia is highly
speculative at this time. Political and economic reforms are too recent to
establish a definite trend away from centrally-planned economies and
state-owned industries. In many of the countries of Eastern Europe and
Russia, there is no stock exchange or formal market for securities. Such
countries may also have government exchange controls, currencies with no
recognizable market value relative to the established currencies of western
market economies, little or no experience in trading in securities, no
financial reporting standards, a lack of a banking and securities
infrastructure to handle such trading, and a legal tradition which does not
recognize rights in private property. In addition, these countries may have
national policies which restrict investments in companies deemed sensitive to
the country's national interest. Further, the governments in such countries
may require governmental or quasi-governmental authorities to act as
custodian of the Fund's assets invested in such countries, and these
authorities may not qualify as a foreign custodian under the Investment
Company Act of 1940 and exemptive relief from such Act may be required. All
of these considerations are among the factors which could cause significant
risks and uncertainties to investment in Eastern Europe and Russia. Each Fund
will only invest in a company located in, or a government of, Eastern Europe
and Russia, if it believes the potential return justifies the risk.
. Latin America
Inflation Most Latin American countries have experienced, at one time or
another, severe and persistent levels of inflation, including, in some cases,
hyperinflation. This has, in turn, led to high interest rates, extreme
<PAGE>
measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth. Although inflation in many countries
has lessened, there is no guarantee it will remain at lower levels.
Political Instability The political history of certain Latin American
countries has been characterized by political uncertainty, intervention by
the military in civilian and economic spheres, and political corruption. Such
developments, if they were to reoccur, could reverse favorable trends toward
market and economic reform, privatization, and removal of trade barriers, and
result in significant disruption in securities markets.
Foreign Currency Certain Latin American countries may have managed currencies
which are maintained at artificial levels to the U. S. dollar rather than at
levels determined by the market. This type of system can lead to sudden and
large adjustments in the currency which, in turn, can have a disruptive and
negative effect on foreign investors. For example, in late 1994 the value of
the Mexican peso lost more than one-third of its value relative to the
dollar. Certain Latin American countries also restrict the free conversion of
their currency into foreign currencies, including the U.S. dollar. There is
no significant foreign exchange market for many currencies and it would, as a
result, be difficult for the Fund to engage in foreign currency transactions
designed to protect the value of the Fund's interests in securities
denominated in such currencies.
Sovereign Debt A number of Latin American countries are among the largest
debtors of developing countries. There have been moratoria on, and
reschedulings of, repayment with respect to these debts. Such events can
restrict the flexibility of these debtor nations in the international markets
and result in the imposition of onerous conditions on their economies.
. Japan
The Japan Fund's concentration of its investments in Japan means the Fund
will be more dependent on the investment considerations discussed above and
may be more volatile than a fund which is broadly diversified geographically.
To the extent any of the other funds also invests in Japan, such investments
will be subject to these same factors. Additional factors relating to Japan
include the following:
Japan has experienced earthquakes and tidal waves of varying degrees of
severity, and the risks of such phenomena, and damage resulting therefrom,
continue to exist. Japan also has one of the world's highest population
densities. A significant percentage of the total population of Japan is
concentrated in the metropolitan areas of Tokyo, Osaka and Nagoya.
Energy Japan has historically depended on oil for most of its energy
requirements. Almost all of its oil is imported, the majority from the Middle
East. In the past, oil prices have had a major impact on the domestic
economy, but more recently Japan has worked to reduce its dependence on oil
by encouraging energy conservation and use of alternative fuels. In addition,
a restructuring of industry, with emphasis shifting from basis industries to
processing and assembly type industries, has contributed to the reduction of
oil consumption. However, there is no guarantee this favorable trend will
continue.
Foreign Trade Overseas trade is important to Japan's economy. Japan has few
natural resources and must export to pay for its imports of these basic
requirements. Because of the concentration of Japanese exports in highly
visible products such as automobiles, machine tools and semiconductors and
the large trade surpluses ensuing therefrom, Japan has had difficult
relations with its trading partners, particularly the U.S. It is possible
that trade sanctions or other protectionist measures could impact Japan
adversely in both the short- and long-term.
. Costs Investors should understand that the expense ratios of the Funds can
be expected to be higher than investment companies investing in domestic
securities since the cost of maintaining the custody of foreign securities
and the rate of advisory fees paid by the Funds are higher.
. Small Companies Small companies may have less experienced management and
fewer management resources than larger firms. A smaller company may have
greater difficulty obtaining access to capital markets, and may pay more for
the capital it obtains. In addition, smaller companies are more likely to be
involved in fewer market segments, making them more vulnerable to any
downturn in a given segment. Some of these factors may also apply, to a
lesser extent, to medium size companies. Some of the smaller companies in
which the Funds will invest may be in major foreign markets; others may be
leading companies in emerging countries outside the major foreign markets.
Securities analysts generally do not follow such securities, which are
<PAGE>
seldom held outside of their respective countries and which may have
prospects for long-term investment returns superior to the securities of
well-established and well-known companies. Direct investment in such
securities may be difficult for United States investors because, among other
things, information relating to such securities is often not readily
available. Of course, there are also risks associated with such investments,
and there is no assurance that such prospects will be realized.
Asia (ex-Japan)
Political Instability The political history of certain Asia countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such developments,
if they continue to occur, could reverse favorable trends toward market and
economic reform, privatization and removal of trade barriers and result in
significant disruption in securities markets.
Foreign Currency Certain Asian countries may have managed currencies which
are maintained at artificial levels to the U.S. dollar rather than at levels
determined by the market. This type of system can lead to sudden and large
adjustments in the currency which, in turn can have a disruptive and negative
effect on foreign investors. For example in 1997 the Thai baht lost 46.75% of
its value against the U.S. dollar. Certain Asian countries also may restrict
the free conversion of their currency into foreign currencies, including the
U.S. dollar. There is no significant foreign exchange market for certain
currencies and it would, as a result, be difficult for the Fund to engage in
foreign currency transactions designed to protect the value of the Fund's
interests in securities denominated in such currencies.
Debt A number of Asian companies are highly dependent on foreign loans for
their operation. In 1997, several Asian countries were forced to negotiate
loans from the IMF and others with impose strict repayment term schedules and
require significant economic and financial restructuring.
INVESTMENT PROGRAM
-------------------------------------------------------------------------------
Types of Securities
Set forth below is additional information about certain of the investments
described in the Fund's prospectus.
Hybrid Instruments
Hybrid Instruments (a type of potentially high-risk derivative) have been
developed and combine the elements of futures contracts or options with those
of debt, preferred equity, or a depository instrument (hereinafter "Hybrid
Instruments"). Generally, a Hybrid Instrument will be a debt security,
preferred stock, depository share, trust certificate, certificate of deposit,
or other evidence of indebtedness on which a portion of or all interest
payments, and/or the principal or stated amount payable at maturity,
redemption, or retirement, is determined by reference to prices, changes in
prices, or differences between prices, of securities, currencies,
intangibles, goods, articles, or commodities (collectively "Underlying
Assets") or by another objective index, economic factor, or other measure,
such as interest rates, currency exchange rates, commodity indices, and
securities indices (collectively "Benchmarks"). Thus, Hybrid Instruments may
take a variety of forms, including, but not limited to, debt instruments with
interest or principal payments or redemption terms determined by reference to
the value of a currency or commodity or securities index at a future point in
time, preferred stock with dividend rates determined by reference to the
value of a currency, or convertible securities with the conversion terms
related to a particular commodity.
Hybrid Instruments can be an efficient means of creating exposure to a
particular market, or segment of a market, with the objective of enhancing
total return. For example, a Fund may wish to take advantage of expected
declines in interest rates in several European countries, but avoid the
transactions costs associated with buying and currency-hedging the foreign
bond positions. One solution would be to purchase a U.S. dollar-denominated
Hybrid Instrument whose redemption price is linked to the average three-year
interest rate in a designated group of countries. The redemption price
formula would provide for payoffs of greater than par if the average interest
rate was lower than a specified level, and payoffs of less than par if rates
were above the specified level. Furthermore, the Fund could limit the
downside risk of the security by establishing a minimum redemption price so
that the principal paid at maturity could not be below a predetermined
<PAGE>
minimum level if interest rates were to rise significantly. The purpose of
this arrangement, known as a structured security with an embedded put option,
would be to give the Fund the desired European bond exposure while avoiding
currency risk, limiting downside market risk, and lowering transactions
costs. Of course, there is no guarantee that the strategy will be successful,
and the Fund could lose money if, for example, interest rates do not move as
anticipated or credit problems develop with the issuer of the Hybrid.
The risks of investing in Hybrid Instruments reflect a combination of the
risks of investing in securities, options, futures and currencies. Thus, an
investment in a Hybrid Instrument may entail significant risks that are not
associated with a similar investment in a traditional debt instrument that
has a fixed principal amount, is denominated in U.S. dollars, or bears
interest either at a fixed rate or a floating rate determined by reference to
a common, nationally published Benchmark. The risks of a particular Hybrid
Instrument will, of course, depend upon the terms of the instrument, but may
include, without limitation, the possibility of significant changes in the
Benchmarks or the prices of Underlying Assets to which the instrument is
linked. Such risks generally depend upon factors which are unrelated to the
operations or credit quality of the issuer of the Hybrid Instrument and which
may not be readily foreseen by the purchaser, such as economic and political
events, the supply and demand for the Underlying Assets, and interest rate
movements. In recent years, various Benchmarks and prices for Underlying
Assets have been highly volatile, and such volatility may be expected in the
future. Reference is also made to the discussion of futures, options, and
forward contracts herein for a discussion of the risks associated with such
investments.
Hybrid Instruments are potentially more volatile and carry greater market
risks than traditional debt instruments. Depending on the structure of the
particular Hybrid Instrument, changes in a Benchmark may be magnified by the
terms of the Hybrid Instrument and have an even more dramatic and substantial
effect upon the value of the Hybrid Instrument. Also, the prices of the
Hybrid Instrument and the Benchmark or Underlying Asset may not move in the
same direction or at the same time.
Hybrid Instruments may bear interest or pay preferred dividends at below
market (or even relatively nominal) rates. Alternatively, Hybrid Instruments
may bear interest at above market rates but bear an increased risk of
principal loss (or gain). The latter scenario may result if "leverage" is
used to structure the Hybrid Instrument. Leverage risk occurs when the Hybrid
Instrument is structured so that a given change in a Benchmark or Underlying
Asset is multiplied to produce a greater value change in the Hybrid
Instrument, thereby magnifying the risk of loss as well as the potential for
gain.
Hybrid Instruments may also carry liquidity risk since the instruments are
often "customized" to meet the portfolio needs of a particular investor, and
therefore, the number of investors that are willing and able to buy such
instruments in the secondary market may be smaller than that for more
traditional debt securities. In addition, because the purchase and sale of
Hybrid Instruments could take place in an over-the-counter market without the
guarantee of a central clearing organization or in a transaction between the
Fund and the issuer of the Hybrid Instrument, the creditworthiness of the
counter party of issuer of the Hybrid Instrument would be an additional risk
factor which the Fund would have to consider and monitor. Hybrid Instruments
also may not be subject to regulation of the Commodities Futures Trading
Commission ("CFTC"), which generally regulates the trading of commodity
futures by U.S. persons, the SEC, which regulates the offer and sale of
securities by and to U.S. persons, or any other governmental regulatory
authority.
Illiquid or Restricted Securities
Restricted securities may be sold only in privately negotiated transactions
or in a public offering with respect to which a registration statement is in
effect under the Securities Act of 1933 (the "1933 Act"). Where registration
is required, the Fund may be obligated to pay all or part of the registration
expenses, and a considerable period may elapse between the time of the
decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable
price than prevailed when it decided to sell. Restricted securities will be
priced at fair value as determined in accordance with procedures prescribed
by the Fund's Board of Directors. If through the appreciation of illiquid
securities or the depreciation of liquid securities, the Fund should be in a
position where more than 15% of the value of its net assets is invested in
illiquid assets, including restricted securities, the Fund will take
appropriate steps to protect liquidity.
<PAGE>
Notwithstanding the above, the Fund may purchase securities which, while
privately placed, are eligible for purchase and sale under Rule 144A under
the 1933 Act. This rule permits certain qualified institutional buyers, such
as the Fund, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. Price-Fleming under the
supervision of the Fund's Board of Directors, will consider whether
securities purchased under Rule 144A are illiquid and thus subject to the
Fund's restriction of investing no more than 15% of its net assets in
illiquid securities. A determination of whether a Rule 144A security is
liquid or not is a question of fact. In making this determination,
Price-Fleming will consider the trading markets for the specific security
taking into account the unregistered nature of a Rule 144A security. In
addition, Price-Fleming could consider the (1) frequency of trades and
quotes, (2) number of dealers and potential purchases, (3) dealer
undertakings to make a market, and (4) the nature of the security and of
marketplace trades (e.g., the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of transfer). The liquidity of
Rule 144A securities would be monitored, and if as a result of changed
conditions it is determined that a Rule 144A security is no longer liquid,
the Fund's holdings of illiquid securities would be reviewed to determine
what, if any, steps are required to assure that the Fund does not invest more
than 15% of its net assets in illiquid securities. Investing in Rule 144A
securities could have the effect of increasing the amount of the Fund's
assets invested in illiquid securities if qualified institutional buyers are
unwilling to purchase such securities.
Warrants
The Fund may acquire warrants. Warrants are pure speculation in that they
have no voting rights, pay no dividends, and have no rights with respect to
the assets of the corporation issuing them. Warrants basically are options to
purchase equity securities at a specific price valid for a specific period of
time. They do not represent ownership of the securities, but only the right
to buy them. Warrants differ from call options in that warrants are issued by
the issuer of the security which may be purchased on their exercise, whereas
call options may be written or issued by anyone. The prices of warrants do
not necessarily move parallel to the prices of the underlying securities.
There are, of course, other types of securities that are, or may become
available, which are similar to the foregoing and the Funds may invest in
these securities.
PORTFOLIO MANAGEMENT PRACTICES
-------------------------------------------------------------------------------
All Funds except Foreign Equity Fund
Lending of Portfolio Securities
Securities loans are made to broker-dealers or institutional investors or
other persons, pursuant to agreements requiring that the loans be
continuously secured by collateral at least equal at all times to the value
of the securities lent marked to market on a daily basis. The collateral
received will consist of cash, U.S. government securities, letters of credit
or such other collateral as may be permitted under its investment program.
While the securities are being lent, the Fund will continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities,
as well as interest on the investment of the collateral or a fee from the
borrower. The Fund has a right to call each loan and obtain the securities on
five business days' notice or, in connection with securities trading on
foreign markets, within such longer period of time which coincides with the
normal settlement period for purchases and sales of such securities in such
foreign markets. The Fund will not have the right to vote on securities while
they are being lent, but it will call a loan in anticipation of any important
vote. The risk in lending portfolio securities, as with other extensions of
secured credit, consist of possible delay in receiving additional collateral
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. Loans will only be made to
firms deemed by Price-Fleming to be of good standing and will not be made
unless, in the judgment of Price-Fleming, the consideration to be earned from
such loans would justify the risk.
<PAGE>
All Funds
Other Lending/Borrowing
Subject to approval by the Securities and Exchange Commission and certain
state regulatory agencies, the Fund may make loans to, or borrow funds from,
other mutual funds sponsored or advised by T. Rowe Price or Rowe
Price-Fleming International, Inc. ("Price-Fleming"), (collectively, "Price
Funds"). The Fund has no current intention of engaging in these practices at
this time.
Repurchase Agreements
The Fund may enter into a repurchase agreement through which an investor
(such as the Fund) purchases a security (known as the "underlying security")
from a well-established securities dealer or a bank that is a member of the
Federal Reserve System. Any such dealer or bank will be on T. Rowe Price's
approved list and have a credit rating with respect to its short-term debt of
at least A1 by Standard & Poor's Corporation, P1 by Moody's Investors
Services, Inc., or the equivalent rating by T. Rowe Price. At that time, the
bank or securities dealer agrees to repurchase the underlying security at the
same price, plus specified interest. Repurchase agreements are generally for
a short period of time, often less than a week. Repurchase agreements which
do not provide for payment within seven days will be treated as illiquid
securities. The Fund will only enter into repurchase agreements where (i) the
underlying securities are of the type (excluding maturity limitations) which
the Fund's investment guidelines would allow it to purchase directly, (ii)
the market value of the underlying security, including interest accrued, will
be at all times equal to or exceed the value of the repurchase agreement, and
(iii) payment for the underlying security is made only upon physical delivery
or evidence of book-entry transfer to the account of the custodian or a bank
acting as agent. In the event of a bankruptcy or other default of a seller of
a repurchase agreement, the Fund could experience both delays in liquidating
the underlying security and losses, including: (a) possible decline in the
value of the underlying security during the period while the Fund seeks to
enforce its rights thereto; (b) possible subnormal levels of income and lack
of access to income during this period; and (c) expenses of enforcing its
rights.
Money Market Reserves
It is expected that the Funds will invest their cash reserves primarily in
one or more money market funds established for the exclusive use of the T.
Rowe Price family of mutual funds and other clients of T. Rowe Price and
Price-Fleming. Currently, two such money market funds are in
operation-Reserve Investment Fund ("RIF") and Government Reserve Investment
Fund ("GRF"), each a series of the Reserve Investment Funds, Inc. Additional
series may be created in the future. These funds were created and operate
under an Exemptive Order issued by the Securities and Exchange Commission
(Investment Company Act Release No. IC-22770, July 29, 1997).
Both funds must comply with the requirements of Rule 2a-7 under the
Investment Company Act of 1940 governing money market funds. The RIF invests
at least 95% of its total assets in prime money market instruments receiving
the highest credit rating. The GRF invests primarily in a portfolio of U.S.
government-backed securities, primarily U.S. Treasuries, and repurchase
agreements thereon.
The RIF and GRF provide a very efficient means of managing the cash reserves
of the Funds. While neither RIF or GRF pay an advisory fee to the Investment
Manager, they will incur other expenses. However, the RIF and GRF are
expected by T. Rowe Price to operate at very low expense ratios. The Funds
will only invest in RIF or GRF to the extent it is consistent with each
Fund's objective and program.
Neither fund is insured or guaranteed by the U.S. government, and there is no
assurance they will maintain a stable net asset value of $1.00 per share.
Options
Options are a type of potentially high-risk derivative.
Writing Covered Call Options
The Fund may write (sell) American or European style "covered" call options
and purchase options to close out options previously written by the Fund. In
writing covered call options, the Fund expects to generate additional premium
income which should serve to enhance the Fund's total return and reduce the
effect of
<PAGE>
any price decline of the security or currency involved in the option. Covered
call options will generally be written on securities or currencies which, in
Price-Fleming's opinion, are not expected to have any major price increases
or moves in the near future but which, over the long term, are deemed to be
attractive investments for the Fund.
A call option gives the holder (buyer) the "right to purchase" a security or
currency at a specified price (the exercise price) at expiration of the
option (European style) or at any time until a certain date (the expiration
date) (American style). So long as the obligation of the writer of a call
option continues, he may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring him to deliver the underlying
security or currency against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at
which the writer effects a closing purchase transaction by repurchasing an
option identical to that previously sold. To secure his obligation to deliver
the underlying security or currency in the case of a call option, a writer is
required to deposit in escrow the underlying security or currency or other
assets in accordance with the rules of a clearing corporation.
The Fund will write only covered call options. This means that the Fund will
own the security or currency subject to the option or an option to purchase
the same underlying security or currency, having an exercise price equal to
or less than the exercise price of the "covered" option, or will establish
and maintain with its custodian for the term of the option, an account
consisting of cash, U.S. government securities or other liquid high-grade
debt obligations having a value equal to the fluctuating market value of the
optioned securities or currencies.
Portfolio securities or currencies on which call options may be written will
be purchased solely on the basis of investment considerations consistent with
the Fund's investment objective. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk
(in contrast to the writing of naked or uncovered options, which the Fund
will not do), but capable of enhancing the Fund's total return. When writing
a covered call option, a Fund, in return for the premium, gives up the
opportunity for profit from a price increase in the underlying security or
currency above the exercise price, but conversely retains the risk of loss
should the price of the security or currency decline. Unlike one who owns
securities or currencies not subject to an option, the Fund has no control
over when it may be required to sell the underlying securities or currencies,
since it may be assigned an exercise notice at any time prior to the
expiration of its obligation as a writer. If a call option which the Fund has
written expires, the Fund will realize a gain in the amount of the premium;
however, such gain may be offset by a decline in the market value of the
underlying security or currency during the option period. If the call option
is exercised, the Fund will realize a gain or loss from the sale of the
underlying security or currency. The Fund does not consider a security or
currency covered by a call to be "pledged" as that term is used in the Fund's
policy which limits the pledging or mortgaging of its assets.
The premium received is the market value of an option. The premium the Fund
will receive from writing a call option will reflect, among other things, the
current market price of the underlying security or currency, the relationship
of the exercise price to such market price, the historical price volatility
of the underlying security or currency, and the length of the option period.
Once the decision to write a call option has been made, Price-Fleming, in
determining whether a particular call option should be written on a
particular security or currency, will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will
exist for those options. The premium received by the Fund for writing covered
call options will be recorded as a liability of the Fund. This liability will
be adjusted daily to the option's current market value, which will be the
latest sale price at the time at which the net asset value per share of the
Fund is computed (close of the New York Stock Exchange), or, in the absence
of such sale, the latest asked price. The option will be terminated upon
expiration of the option, the purchase of an identical option in a closing
transaction, or delivery of the underlying security or currency upon the
exercise of the option.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or, to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price or expiration date or both. If the Fund desires to
sell a particular security or currency from its portfolio on which it has
written a call option, or
<PAGE>
purchased a put option, it will seek to effect a closing transaction prior
to, or concurrently with, the sale of the security or currency. There is, of
course, no assurance that the Fund will be able to effect such closing
transactions at favorable prices. If the Fund cannot enter into such a
transaction, it may be required to hold a security or currency that it might
otherwise have sold. When the Fund writes a covered call option, it runs the
risk of not being able to participate in the appreciation of the underlying
securities or currencies above the exercise price, as well as the risk of
being required to hold on to securities or currencies that are depreciating
in value. This could result in higher transaction costs. The Fund will pay
transaction costs in connection with the writing of options to close out
previously written options. Such transaction costs are normally higher than
those applicable to purchases and sales of portfolio securities.
Call options written by the Fund will normally have expiration dates of less
than nine months from the date written. The exercise price of the options may
be below, equal to, or above the current market values of the underlying
securities or currencies at the time the options are written. From time to
time, the Fund may purchase an underlying security or currency for delivery
in accordance with an exercise notice of a call option assigned to it, rather
than delivering such security or currency from its portfolio. In such cases,
additional costs may be incurred.
The Fund will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more than the premium received from
the writing of the option. Because increases in the market price of a call
option will generally reflect increases in the market price of the underlying
security or currency, any loss resulting from the repurchase of a call option
is likely to be offset in whole or in part by appreciation of the underlying
security or currency owned by the Fund.
The Fund will not write a covered call option if, as a result, the aggregate
market value of all portfolio securities or currencies covering written call
or put options exceeds 25% of the market value of the Fund's net assets. In
calculating the 25% limit, the Fund will offset, against the value of assets
covering written calls and puts, the value of purchased calls and puts on
identical securities or currencies with identical maturity dates.
Writing Covered Put Options
The Fund may write American or European style covered put options and
purchase options to close out options previously written by the Fund. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) has the obligation to buy, the underlying security or currency at
the exercise price during the option period (American style) or at the
expiration of the option (European style). So long as the obligation of the
writer continues, he may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring him to make payment to the
exercise price against delivery of the underlying security or currency. The
operation of put options in other respects, including their related risks and
rewards, is substantially identical to that of call options.
The Fund would write put options only on a covered basis, which means that
the Fund would maintain in a segregated account cash, U.S. government
securities or other liquid high-grade debt obligations in an amount not less
than the exercise price or the Fund will own an option to sell the underlying
security or currency subject to the option having an exercise price equal to
or greater than the exercise price of the "covered" option at all times while
the put option is outstanding. (The rules of a clearing corporation
currently require that such assets be deposited in escrow to secure payment
of the exercise price.)
The Fund would generally write covered put options in circumstances where
Price-Fleming wishes to purchase the underlying security or currency for the
Fund's portfolio at a price lower than the current market price of the
security or currency. In such event the Fund would write a put option at an
exercise price which, reduced by the premium received on the option, reflects
the lower price it is willing to pay. Since the Fund would also receive
interest on debt securities or currencies maintained to cover the exercise
price of the option, this technique could be used to enhance current return
during periods of market uncertainty. The risk in such a transaction would be
that the market price of the underlying security or currency would decline
below the exercise price less the premiums received. Such a decline could be
substantial and result in a significant loss to the Fund. In addition, the
Fund, because it does not own the specific securities or currencies which it
may be required to purchase in exercise of the put, cannot benefit from
appreciation, if any, with respect to such specific securities or currencies.
<PAGE>
The Fund will not write a covered put option if, as a result, the aggregate
market value of all portfolio securities or currencies covering put or call
options exceeds 25% of the market value of the Fund's net assets. In
calculating the 25% limit, the Fund will offset, against the value of assets
covering written puts and calls, the value of purchased puts and calls on
identical securities or currencies with identical maturity dates.
Purchasing Put Options
The Fund may purchase American or European style put options. As the holder
of a put option, the Fund has the right to sell the underlying security or
currency at the exercise price at any time during the option period (American
style) or at the expiration of the option (European style). The Fund may
enter into closing sale transactions with respect to such options, exercise
them or permit them to expire. The Fund may purchase put options for
defensive purposes in order to protect against an anticipated decline in the
value of its securities or currencies. An example of such use of put options
is provided below.
The Fund may purchase a put option on an underlying security or currency (a
"protective put") owned by the Fund as a defensive technique in order to
protect against an anticipated decline in the value of the security or
currency. Such hedge protection is provided only during the life of the put
option when the Fund, as the holder of the put option, is able to sell the
underlying security or currency at the put exercise price regardless of any
decline in the underlying security's market price or currency's exchange
value. For example, a put option may be purchased in order to protect
unrealized appreciation of a security or currency where T. Rowe Price deems
it desirable to continue to hold the security or currency because of tax
considerations. The premium paid for the put option and any transaction costs
would reduce any capital gain otherwise available for distribution when the
security or currency is eventually sold.
The Fund may also purchase put options at a time when the Fund does not own
the underlying security or currency. By purchasing put options on a security
or currency it does not own, the Fund seeks to benefit from a decline in the
market price of the underlying security or currency. If the put option is not
sold when it has remaining value, and if the market price of the underlying
security or currency remains equal to or greater than the exercise price
during the life of the put option, the Fund will lose its entire investment
in the put option. In order for the purchase of a put option to be
profitable, the market price of the underlying security or currency must
decline sufficiently below the exercise price to cover the premium and
transaction costs, unless the put option is sold in a closing sale
transaction.
The Fund will not commit more than 5% of its assets to premiums when
purchasing put and call options. The premium paid by the Fund when purchasing
a put option will be recorded as an asset of the Fund. This asset will be
adjusted daily to the option's current market value, which will be the latest
sale price at the time at which the net asset value per share of the Fund is
computed (close of New York Stock Exchange), or, in the absence of such sale,
the latest bid price. This asset will be terminated upon expiration of the
option, the selling (writing) of an identical option in a closing
transaction, or the delivery of the underlying security or currency upon the
exercise of the option.
Purchasing Call Options
The Fund may purchase American or European style call options. As the holder
of a call option, the Fund has the right to purchase the underlying security
or currency at the exercise price at any time during the option period
(American style) or at the expiration of the option (European style). The
Fund may enter into closing sale transactions with respect to such options,
exercise them or permit them to expire. The Fund may purchase call options
for the purpose of increasing its current return or avoiding tax consequences
which could reduce its current return. The Fund may also purchase call
options in order to acquire the underlying securities or currencies. Examples
of such uses of call options are provided below.
Call options may be purchased by the Fund for the purpose of acquiring the
underlying securities or currencies for its portfolio. Utilized in this
fashion, the purchase of call options enables the Fund to acquire the
securities or currencies at the exercise price of the call option plus the
premium paid. At times the net cost of acquiring securities or currencies in
this manner may be less than the cost of acquiring the securities or
currencies directly. This technique may also be useful to the Fund in
purchasing a large block of securities or currencies that would be more
difficult to acquire by direct market purchases. So long as it holds such a
call option rather than the underlying security or currency itself, the Fund
is partially protected from any
<PAGE>
unexpected decline in the market price of the underlying security or currency
and in such event could allow the call option to expire, incurring a loss
only to the extent of the premium paid for the option.
The Fund will not commit more than 5% of its assets to premiums when
purchasing call and put options. The Fund may also purchase call options on
underlying securities or currencies it owns in order to protect unrealized
gains on call options previously written by it. A call option would be
purchased for this purpose where tax considerations make it inadvisable to
realize such gains through a closing purchase transaction. Call options may
also be purchased at times to avoid realizing losses.
Dealer (Over-the-Counter) Options
The Fund may engage in transactions involving dealer options. Certain risks
are specific to dealer options. While the Fund would look to a clearing
corporation to exercise exchange-traded options, if the Fund were to purchase
a dealer option, it would rely on the dealer from whom it purchased the
option to perform if the option were exercised. Failure by the dealer to do
so would result in the loss of the premium paid by the Fund as well as loss
of the expected benefit of the transaction.
Exchange-traded options generally have a continuous liquid market while
dealer options have none. Consequently, the Fund will generally be able to
realize the value of a dealer option it has purchased only by exercising it
or reselling it to the dealer who issued it. Similarly, when the Fund writes
a dealer option, it generally will be able to close out the option prior to
its expiration only by entering into a closing purchase transaction with the
dealer to which the Fund originally wrote the option. While the Fund will
seek to enter into dealer options only with dealers who will agree to and
which are expected to be capable of entering into closing transactions with
the Fund, there can be no assurance that the Fund will be able to liquidate a
dealer option at a favorable price at any time prior to expiration. Until the
Fund, as a covered dealer call option writer, is able to effect a closing
purchase transaction, it will not be able to liquidate securities (or other
assets) or currencies used as cover until the option expires or is exercised.
In the event of insolvency of the contra party, the Fund may be unable to
liquidate a dealer option. With respect to options written by the Fund, the
inability to enter into a closing transaction may result in material losses
to the Fund. For example, since the Fund must maintain a secured position
with respect to any call option on a security it writes, the Fund may not
sell the assets which it has segregated to secure the position while it is
obligated under the option. This requirement may impair a Fund's ability to
sell portfolio securities or currencies at a time when such sale might be
advantageous.
The Staff of the SEC has taken the position that purchased dealer options and
the assets used to secure the written dealer options are illiquid securities.
The Fund may treat the cover used for written OTC options as liquid if the
dealer agrees that the Fund may repurchase the OTC option it has written for
a maximum price to be calculated by a predetermined formula. In such cases,
the OTC option would be considered illiquid only to the extent the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
Futures Contracts
Futures contracts are a type of potentially high-risk derivative.
. Transactions in Futures
The Fund may enter into futures contracts including interest rate and
currency futures ("futures" or "futures contracts").
Stock index futures contracts may be used to provide a hedge for a portion of
the Fund's portfolio, as a cash management tool, or as an efficient way for
Price-Fleming to implement either an increase or decrease in portfolio market
exposure in response to changing market conditions. The Fund may purchase or
sell futures contracts with respect to any stock index. Nevertheless, to
hedge the Fund's portfolio successfully, the Fund must sell futures contacts
with respect to indices or subindices whose movements will have a significant
correlation with movements in the prices of the Fund's portfolio securities.
Interest rate or currency futures contracts may be used as a hedge against
changes in prevailing levels of interest rates or currency exchange rates in
order to establish more definitely the effective return on securities or
currencies held or intended to be acquired by the Fund. In this regard, the
Fund could sell interest rate or currency futures as an offset against the
effect of expected increases in interest rates or currency exchange
<PAGE>
rates and purchase such futures as an offset against the effect of expected
declines in interest rates or currency exchange rates.
The Fund will enter into futures contracts which are traded on national or
foreign futures exchanges, and are standardized as to maturity date and
underlying financial instrument. Futures exchanges and trading in the United
States are regulated under the Commodity Exchange Act by the CFTC. Futures
are traded in London, at the London International Financial Futures Exchange,
in Paris, at the MATIF, and in Tokyo, at the Tokyo Stock Exchange. Although
techniques other than the sale and purchase of futures contracts could be
used for the above-referenced purposes, futures contracts offer an effective
and relatively low cost means of implementing the Fund's objectives in these
areas.
Regulatory Limitations
The Fund will engage in futures contracts and options thereon only for bona
fide hedging, yield enhancement, and risk management purposes, in each case
in accordance with rules and regulations of the CFTC.
The Fund may not purchase or sell futures contracts or related options if,
with respect to positions which do not qualify as bona fide hedging under
applicable CFTC rules, the sum of the amounts of initial margin deposits and
premium paid on those positions would exceed 5% of the net asset value of the
Fund after taking into account unrealized profits and unrealized losses on
any such contracts it has entered into; provided, however, that in the case
of an option that is in-the-money at the time of purchase, the in-the-money
amount may be excluded in calculating the 5% limitation. For purposes of this
policy, options on futures contracts and foreign currency options traded on a
commodities exchange will be considered "related options." This policy may be
modified by the Board of Directors without a shareholder vote and does not
limit the percentage of the Fund's assets at risk to 5%.
In instances involving the purchase of futures contracts or the writing of
call or put options thereon by the Fund, an amount of cash, U.S. government
securities or other liquid, high-grade debt obligations, equal to the market
value of the futures contracts and options thereon (less any related margin
deposits), will be identified in an account with the Fund's custodian to
cover the position, or alternative cover (such as owning an offsetting
position) will be employed. Assets used as cover or held in an identified
account cannot be sold while the position in the corresponding option or
future is open, unless they are replaced with similar assets. As a result,
the commitment of a large portion of a Fund's assets to cover or identified
accounts could impede portfolio management or the fund's ability to meet
redemption requests or other current obligations.
If the CFTC or other regulatory authorities adopt different (including less
stringent) or additional restrictions, the Fund would comply with such new
restrictions.
Trading in Futures Contracts
A futures contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument (e.g.,
units of a stock index) for a specified price, date, time and place
designated at the time the contract is made. Brokerage fees are incurred when
a futures contract is bought or sold and margin deposits must be maintained.
Entering into a contract to buy is commonly referred to as buying or
purchasing a contract or holding a long position. Entering into a contract to
sell is commonly referred to as selling a contract or holding a short
position.
Unlike when the Fund purchases or sells a security, no price would be paid or
received by the Fund upon the purchase or sale of a futures contract. Upon
entering into a futures contract, and to maintain the Fund's open positions
in futures contracts, the Fund would be required to deposit with its
custodian in a segregated account in the name of the futures broker an amount
of cash, U.S. government securities, suitable money market instruments, or
liquid, high-grade debt securities, known as "initial margin." The margin
required for a particular futures contract is set by the exchange on which
the contract is traded, and may be significantly modified from time to time
by the exchange during the term of the contract. Futures contracts are
customarily purchased and sold on margins that may range upward from less
than 5% of the value of the contract being traded.
If the price of an open futures contract changes (by increase in the case of
a sale or by decrease in the case of a purchase) so that the loss on the
futures contract reaches a point at which the margin on deposit does not
<PAGE>
satisfy margin requirements, the broker will require an increase in the
margin. However, if the value of a position increases because of favorable
price changes in the futures contract so that the margin deposit exceeds the
required margin, the broker will pay the excess to the Fund.
These subsequent payments, called "variation margin," to and from the futures
broker, are made on a daily basis as the price of the underlying assets
fluctuate, making the long and short positions in the futures contract more
or less valuable, a process known as "marking to the market." The Fund
expects to earn interest income on its margin deposits.
Although certain futures contracts, by their terms, require actual future
delivery of and payment for the underlying instruments, in practice most
futures contracts are usually closed out before the delivery date. Closing
out an open futures contract purchase or sale is effected by entering into an
offsetting futures contract sale or purchase, respectively, for the same
aggregate amount of the identical securities and the same delivery date. If
the offsetting purchase price is less than the original sale price, the Fund
realizes a gain; if it is more, the Fund realizes a loss. Conversely, if the
offsetting sale price is more than the original purchase price, the Fund
realizes a gain; if it is less, the Fund realizes a loss. The transaction
costs must also be included in these calculations. There can be no assurance,
however, that the Fund will be able to enter into an offsetting transaction
with respect to a particular futures contract at a particular time. If the
Fund is not able to enter into an offsetting transaction, the Fund will
continue to be required to maintain the margin deposits on the futures
contract.
For example, one contract in the Financial Times Stock Exchange 100 Index
future is a contract to buy 25 pounds sterling multiplied by the level of the
UK Financial Times 100 Share Index on a given future date. Settlement of a
stock index futures contract may or may not be in the underlying security. If
not in the underlying security, then settlement will be made in cash,
equivalent over time to the difference between the contract price and the
actual price of the underlying asset at the time the stock index futures
contract expires.
Special Risks of Transactions in Futures Contracts
. Volatility and Leverage The prices of futures contracts are volatile and are
influenced, among other things, by actual and anticipated changes in the
market and interest rates, which in turn are affected by fiscal and monetary
policies and national and international political and economic events.
Most United States futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. The daily
limit establishes the maximum amount that the price of a futures contract may
vary either up or down from the previous day's settlement price at the end of
a trading session. Once the daily limit has been reached in a particular type
of futures contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a particular
trading day and therefore does not limit potential losses, because the limit
may prevent the liquidation of unfavorable positions. Futures contract prices
have occasionally moved to the daily limit for several consecutive trading
days with little or no trading, thereby preventing prompt liquidation of
futures positions and subjecting some futures traders to substantial losses.
Margin deposits required on futures trading are low. As a result, a
relatively small price movement in a futures contract may result in immediate
and substantial loss, as well as gain, to the investor. For example, if at
the time of purchase, 10% of the value of the futures contract is deposited
as margin, a subsequent 10% decrease in the value of the futures contract
would result in a total loss of the margin deposit, before any deduction for
the transaction costs, if the account were then closed out. A 15% decrease
would result in a loss equal to 150% of the original margin deposit, if the
contract were closed out. Thus, a purchase or sale of a futures contract may
result in losses in excess of the amount invested in the futures contract.
However, the Fund would presumably have sustained comparable losses if,
instead of the futures contract, it had invested in the underlying financial
instrument and sold it after decline. Furthermore, in the case of a futures
contract purchase, in order to be certain that the Fund has sufficient assets
to satisfy its obligations under a futures contract, the Fund earmarks to the
futures contract money market instruments equal in value to the current value
of the underlying instrument less the margin deposit.
. Liquidity The Fund may elect to close some or all of its futures positions
at any time prior to their expiration. The Fund would do so to reduce
exposure represented by long futures positions or short futures positions.
<PAGE>
The Fund may close its positions by taking opposite positions which would
operate to terminate the Fund's position in the futures contracts. Final
determinations of variation margin would then be made, additional cash would
be required to be paid by or released to the Fund, and the Fund would realize
a loss or a gain.
Futures contracts may be closed out only on the exchange or board of trade
where the contracts were initially traded. Although the Fund intends to
purchase or sell futures contracts only on exchanges or boards of trade where
there appears to be an active market, there is no assurance that a liquid
market on an exchange or board of trade will exist for any particular
contract at any particular time. In such event, it might not be possible to
close a futures contract, and in the event of adverse price movements, the
Fund would continue to be required to make daily cash payments of variation
margin. However, in the event futures contracts have been used to hedge the
underlying instruments, the Fund would continue to hold the underlying
instruments subject to the hedge until the futures contracts could be
terminated. In such circumstances, an increase in the price of underlying
instruments, if any, might partially or completely offset losses on the
futures contract. However, as described below, there is no guarantee that the
price of the underlying instruments will, in fact, correlate with the price
movements in the futures contract and thus provide an offset to losses on a
futures contract.
. Hedging Risk A decision of whether, when, and how to hedge involves skill
and judgment, and even a well-conceived hedge may be unsuccessful to some
degree because of unexpected market behavior, market or interest rate trends.
There are several risks in connection with the use by the Fund of futures
contracts as a hedging device. One risk arises because of the imperfect
correlation between movements in the prices of the futures contracts and
movements in the prices of the underlying instruments which are the subject
of the hedge. Price-Fleming will, however, attempt to reduce this risk by
entering into futures contracts whose movements, in its judgment, will have a
significant correlation with movements in the prices of the Fund's underlying
instruments sought to be hedged.
Successful use of futures contracts by the Fund for hedging purposes is also
subject to Price-Fleming's ability to correctly predict movements in the
direction of the market. It is possible that, when the Fund has sold futures
to hedge its portfolio against a decline in the market, the index, indices,
or instruments underlying futures might advance and the value of the
underlying instruments held in the Fund's portfolio might decline. If this
were to occur, the Fund would lose money on the futures and also would
experience a decline in value in its underlying instruments. However, while
this might occur to a certain degree, Price-Fleming believes that over time
the value of the Fund's portfolio will tend to move in the same direction as
the market indices used to hedge the portfolio. It is also possible that if
the Fund were to hedge against the possibility of a decline in the market
(adversely affecting the underlying instruments held in its portfolio) and
prices instead increased, the Fund would lose part or all of the benefit of
increased value of those underlying instruments that it has hedged, because
it would have offsetting losses in its futures positions. In addition, in
such situations, if the Fund had insufficient cash, it might have to sell
underlying instruments to meet daily variation margin requirements. Such
sales of underlying instruments might be, but would not necessarily be, at
increased prices (which would reflect the rising market). The Fund might have
to sell underlying instruments at a time when it would be disadvantageous to
do so.
In addition to the possibility that there might be an imperfect correlation,
or no correlation at all, between price movements in the futures contracts
and the portion of the portfolio being hedged, the price movements of futures
contracts might not correlate perfectly with price movements in the
underlying instruments due to certain market distortions. First, all
participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors might close futures contracts through offsetting
transactions, which could distort the normal relationship between the
underlying instruments and futures markets. Second, the margin requirements
in the futures market are less onerous than margin requirements in the
securities markets and, as a result, the futures market might attract more
speculators than the securities markets do. Increased participation by
speculators in the futures market might also cause temporary price
distortions. Due to the possibility of price distortion in the futures market
and also because of imperfect correlation between price movements in the
underlying instruments and movements in the prices of futures contracts, even
a correct forecast of general market trends by Price-Fleming might not result
in a successful hedging transaction over a very short time period.
<PAGE>
Options on Futures Contracts
The Fund may purchase and sell options on the same types of futures in which
it may invest.
Options (another type of potentially high-risk derivative) on futures are
similar to options on underlying instruments except that options on futures
give the purchaser the right, in return for the premium paid, to assume a
position in a futures contract (a long position if the option is a call and a
short position if the option is a put), rather than to purchase or sell the
futures contract, at a specified exercise price at any time during the period
of the option. Upon exercise of the option, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by the delivery of the accumulated balance in the writer's
futures margin account which represents the amount by which the market price
of the futures contract, at exercise, exceeds (in the case of a call) or is
less than (in the case of a put) the exercise price of the option on the
futures contract. Purchasers of options who fail to exercise their options
prior to the exercise date suffer a loss of the premium paid.
As an alternative to writing or purchasing call and put options on stock
index futures, the Fund may write or purchase call and put options on stock
indices. Such options would be used in a manner similar to the use of options
on futures contracts. From time to time, a single order to purchase or sell
futures contracts (or options thereon) may be made on behalf of the Fund and
other T. Rowe Price Funds. Such aggregated orders would be allocated among
the Funds and the other T. Rowe Price Funds in a fair and non-discriminatory
manner.
Special Risks of Transactions in Options on Futures Contracts
The risks described under "Special Risks in Transactions on Futures
Contracts" are substantially the same as the risks of using options on
futures. In addition, where the Fund seeks to close out an option position by
writing or buying an offsetting option covering the same index, underlying
instrument or contract and having the same exercise price and expiration
date, its ability to establish and close out positions on such options will
be subject to the maintenance of a liquid secondary market. Reasons for the
absence of a liquid secondary market on an exchange include the following:
(i) there may be insufficient trading interest in certain options; (ii)
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; (iii) trading halts, suspensions or other restrictions
may be imposed with respect to particular classes or series of options, or
underlying instruments; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange
or a clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which
event the secondary market on that exchange (or in the class or series of
options) would cease to exist, although outstanding options on the exchange
that had been issued by a clearing corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain of the facilities of
any of the clearing corporations inadequate, and thereby result in the
institution by an exchange of special procedures which may interfere with the
timely execution of customers' orders.
Additional Futures and Options Contracts
Although the Fund has no current intention of engaging in futures or options
transactions other than those described above, it reserves the right to do
so. Such futures and options trading might involve risks which differ from
those involved in the futures and options described above.
Foreign Futures and Options
Participation in foreign futures and foreign options transactions involves
the execution and clearing of trades on or subject to the rules of a foreign
board of trade. Neither the National Futures Association nor any domestic
exchange regulates activities of any foreign boards of trade, including the
execution, delivery and clearing of transactions, or has the power to compel
enforcement of the rules of a foreign board of trade or any applicable
foreign law. This is true even if the exchange is formally linked to a
domestic market so that a position taken on the market may be liquidated by a
transaction on another market. Moreover, such laws or regulations will vary
depending on the foreign country in which the foreign futures or foreign
options
<PAGE>
transaction occurs. For these reasons, when the Fund trades foreign futures
or foreign options contracts, it may not be afforded certain of the
protective measures provided by the Commodity Exchange Act, the CFTC's
regulations and the rules of the National Futures Association and any
domestic exchange, including the right to use reparations proceedings before
the CFTC and arbitration proceedings provided by the National Futures
Association or any domestic futures exchange. In particular, funds received
from the Fund for foreign futures or foreign options transactions may not be
provided the same protections as funds received in respect of transactions on
United States futures exchanges. In addition, the price of any foreign
futures or foreign options contract and, therefore, the potential profit and
loss thereon may be affected by any variance in the foreign exchange rate
between the time the Fund's order is placed and the time it is liquidated,
offset or exercised.
Foreign Currency Transactions
A forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are principally traded
in the interbank market conducted directly between currency traders (usually
large, commercial banks) and their customers. A forward contract generally
has no deposit requirement, and no commissions are charged at any stage for
trades.
The Fund may enter into forward contracts for a variety of purposes in
connection with the management of the foreign securities portion of its
portfolio. The Fund's use of such contracts would include, but not be limited
to, the following:
First, when the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may desire to "lock in" the
U.S. dollar price of the security. By entering into a forward contract for
the purchase or sale, for a fixed amount of dollars, of the amount of foreign
currency involved in the underlying security transactions, the Fund will be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date the security is purchased or sold
and the date on which payment is made or received.
Second, when Price-Fleming believes that one currency may experience a
substantial movement against another currency, including the U.S. dollar, it
may enter into a forward contract to sell or buy the amount of the former
foreign currency, approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. Alternatively,
where appropriate, the Fund may hedge all or part of its foreign currency
exposure through the use of a basket of currencies or a proxy currency where
such currency or currencies act as an effective proxy for other currencies.
In such a case, the Fund may enter into a forward contract where the amount
of the foreign currency to be sold exceeds the value of the securities
denominated in such currency. The use of this basket hedging technique may be
more efficient and economical than entering into separate forward contracts
for each currency held in the Fund. The precise matching of the forward
contract amounts and the value of the securities involved will not generally
be possible since the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of those
securities between the date the forward contract is entered into and the date
it matures. The projection of short-term currency market movement is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. Under normal circumstances, consideration of
the prospect for currency parties will be incorporated into the longer term
investment decisions made with regard to overall diversification strategies.
However, Price-Fleming believes that it is important to have the flexibility
to enter into such forward contracts when it determines that the best
interests of the Fund will be served.
The Fund may enter into forward contacts for any other purpose consistent
with the Fund's investment objective and program. However, the Fund will not
enter into a forward contract, or maintain exposure to any such contract(s),
if the amount of foreign currency required to be delivered thereunder would
exceed the Fund's holdings of liquid, high-grade debt securities, and
currency available for cover of the forward contract(s) or other suitable
cover. In determining the amount to be delivered under a contract, the Fund
may net offsetting positions.
<PAGE>
At the maturity of a forward contract, the Fund may sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and either extend the maturity of the forward contract (by "rolling"
that contract forward) or may initiate a new forward contract.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If the Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward prices decline
during the period between the Fund's entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting contract
for the purchase of the foreign currency, the Fund will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase. Should forward prices increase, the
Fund will suffer a loss to the extent of the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
The Fund's dealing in forward foreign currency exchange contracts will
generally be limited to the transactions described above. However, the Fund
reserves the right to enter into forward foreign currency contracts for
different purposes and under different circumstances. Of course, the Fund is
not required to enter into forward contracts with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate
by Price-Fleming. It also should be realized that this method of hedging
against a decline in the value of a currency does not eliminate fluctuations
in the underlying prices of the securities. It simply establishes a rate of
exchange at a future date. Additionally, although such contracts tend to
minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time, they tend to limit any potential gain which might
result from an increase in the value of that currency.
Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on
a daily basis. It will do so from time to time, and investors should be aware
of the costs of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to
the Fund at one rate, while offering a lesser rate of exchange should the
Fund desire to resell that currency to the dealer.
Federal Tax Treatment of Options, Futures Contracts, and Forward Foreign
Exchange Contracts
The Fund may enter into certain options, futures, and forward foreign
exchange contracts, including options and futures on currencies, which will
be treated as Section 1256 contracts or straddles.
Transactions that are considered Section 1256 contracts will be considered to
have been closed at the end of the Fund's fiscal year and any gains or losses
will be recognized for tax purposes at that time. Such gains or losses from
the normal closing or settlement of such transactions will be characterized
as 60% long-term capital gain (taxable at a maximum rate of 20%) or loss and
40% short-term capital gain or loss regardless of the holding period of the
instrument. The Fund will be required to distribute net gains on such
transactions to shareholders even though it may not have closed the
transaction and received cash to pay such distributions.
Options, futures and forward foreign exchange contracts, including options
and futures on currencies, which offset a foreign dollar denominated bond or
currency position may be considered straddles for tax purposes, in which case
a loss on any position in a straddle will be subject to deferral to the
extent of unrealized gain in an offsetting position. The holding period of
the securities or currencies comprising the straddle will be deemed not to
begin until the straddle is terminated.
For securities offsetting a purchased put, this adjustment of the holding
period may increase the gain from sales of securities held less than three
months. The holding period of the security offsetting an "in-the-money
qualified covered call" option on an equity security will not include the
period of time the option is outstanding.
Losses on written covered calls and purchased puts on securities, excluding
certain "qualified covered call" options on equity securities, may be
long-term capital losses if the security covering the option was held for
more than 12 months prior to the writing of the option.
<PAGE>
In order for the Fund to continue to qualify for federal income tax treatment
as a regulated investment company, at least 90% of its gross income for a
taxable year must be derived from qualifying income, i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities or currencies. Pending tax regulations could limit the extent that
net gain realized from option, futures or foreign forward exchange contracts
on currencies is qualifying income for purposes of the 90% requirement. In
addition, gains realized on the sale or other disposition of securities,
including option, futures or foreign forward exchange contracts on securities
or securities indexes and, in some cases, currencies, held for less than
three months, must be limited to less than 30% of the Fund's annual gross
income. In order to avoid realizing excessive gains on securities or
currencies held less than three months, the Fund may be required to defer the
closing out of option, futures or foreign forward exchange contracts) beyond
the time when it would otherwise be advantageous to do so. It is anticipated
that unrealized gains on Section 1256 option, futures and foreign forward
exchange contracts, which have been open for less than three months as of the
end of the Fund's fiscal year and which are recognized for tax purposes, will
not be considered gains on securities or currencies held less than three
months for purposes of the 30% test. Note that this 30% test will no longer
apply to funds with tax years beginning after August 5, 1997.
As a result of the "Taypayer Relief Act of 1997," entering into certain
options, futures contracts, or forward contracts may result in the
"constructive sale" of offsetting stocks or debt securities of the Fund.
INVESTMENT RESTRICTIONS
-------------------------------------------------------------------------------
Fundamental policies may not be changed without the approval of the lesser of
(1) 67% of the Fund's shares present at a meeting of shareholders if the
holders of more than 50% of the outstanding shares are present in person or
by proxy or (2) more than 50% of a Fund's outstanding shares. Other
restrictions in the form of operating policies are subject to change by the
Fund's Board of Directors without shareholder approval. Any investment
restriction which involves a maximum percentage of securities or assets shall
not be considered to be violated unless an excess over the percentage occurs
immediately after, and is caused by, an acquisition of securities or assets
of, or borrowings by, the Fund. Calculation of the Fund's total assets for
compliance with any of the following fundamental or operating policies or any
other investment restrictions set forth in the Fund's prospectus or Statement
of Additional Information will not include cash collateral held in connection
with securities lending activities.
Fundamental Policies
As a matter of fundamental policy, the Fund may not:
(1) Borrowing Borrow money except that the Fund may (i) borrow for
non-leveraging, temporary or emergency purposes; and (ii) engage in
reverse repurchase agreements and make other investments or engage in
other transactions, which may involve a borrowing, in a manner consistent
with the Fund's investment objective and program, provided that the
combination of (i) and (ii) shall not exceed 33/1//\\/3/\\% of the value
of the Fund's total assets (including the amount borrowed) less
liabilities (other than borrowings) or such other percentage permitted by
law. Any borrowings which come to exceed this amount will be reduced in
accordance with applicable law;
(2) Commodities Purchase or sell physical commodities; except that it may
enter into futures contracts and options thereon;
(3) Industry Concentration Purchase the securities of any issuer if, as a
result, more than 25% of the value of the Fund's total assets would be
invested in the securities of issuers having their principal business
activities in the same industry;
All Funds except Foreign Equity Fund
(4) Loans Make loans, although the Fund may (i) lend portfolio securities and
participate in an interfund lending program with other Price Funds
provided that no such loan may be made if, as a result, the aggregate of
such loans would exceed 33/1//\\/3/\\% of the value of the Fund's total
assets; (ii) purchase money
<PAGE>
market securities and enter into repurchase agreements; and (iii) acquire
publicly distributed or privately placed debt securities and purchase
debt;
Loans (Foreign Equity Fund) Make loans, although the Fund may (i)
participate in an interfund lending program with other Price Funds
provided that no such loan may be made if, as a result, the aggregate of
such loans would exceed 33/1//\\/3/\\% of the value of the Fund's total
assets; (ii) purchase money market securities and enter into repurchase
agreements; and (iii) acquire publicly distributed or privately placed
debt securities and purchase debt;
All Funds except Latin America Fund
(5) Percent Limit on Assets Invested in Any One Issuer Purchase a security
if, as a result, with respect to 75% of the value of its total assets,
more than 5% of the value of the Fund's total assets would be invested in
the securities of a single issuer, except securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities;
(6) Percent Limit on Share Ownership of Any One Issuer Purchase a security
if, as a result, with respect to 75% of the value of a Fund's total
assets, more than 10% of the outstanding voting securities of any issuer
would be held by the Fund (other than obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities);
All Funds
(7) Real Estate Purchase or sell real estate or limited partnership interests
thereon, unless acquired as a result of ownership of securities or other
instruments (but this shall not prevent the Fund from investing in
securities or other instruments backed by real estate or in securities of
companies engaged in the real estate business);
(8) Senior Securities Issue senior securities except in compliance with the
Investment Company Act of 1940; or
(9) Underwriting Underwrite securities issued by other persons, except to the
extent that the Fund may be deemed to be an underwriter within the
meaning of the Securities Act of 1933 in connection with the purchase and
sale of its portfolio securities in the ordinary course of pursuing its
investment program.
NOTES
The following notes should be read in connection with the above-described
fundamental policies. The notes are not fundamental policies.
With respect to investment restrictions (1) and (4), the Fund will not
borrow from or lend to any other Price Fund (defined as any other mutual
fund managed by or for which T. Rowe Price or Price-Fleming acts as
adviser) unless each Fund applies for and receives an exemptive order
from the SEC or the SEC issues rules permitting such transactions. The
Fund has no current intention of engaging in any such activity and there
is no assurance the SEC would grant any order requested by the Fund or
promulgate any rules allowing the transactions.
With respect to investment restriction (2), the Fund does not consider
currency contracts or hybrid investments to be commodities.
For purposes of investment restriction (3), U.S., state or local
governments, or related agencies or instrumentalities, are not considered
an industry. Industries are determined by reference to the
classifications of industries set forth in the Fund's semiannual and
annual reports.
For purposes of investment restriction (4), the Fund will consider the
acquisition of a debt security to include the execution of a note or
other evidence of an extension of credit with a term of more than nine
months.
Operating Policies
As a matter of operating policy, the Fund may not:
(1) Borrowing Purchase additional securities when money borrowed exceeds 5%
of its total assets;
<PAGE>
(2) Control of Portfolio Companies Invest in companies for the purpose of
exercising management or control;
(3) Futures Contracts Purchase a futures contract or an option thereon, if,
with respect to positions in futures or options on futures which do not
represent bona fide hedging, the aggregate initial margin and premiums on
such options would exceed 5% of the Fund's net asset value;
(4) Illiquid Securities Purchase illiquid securities if, as a result, more
than 15% of its net assets would be invested in such securities;
(5) Investment Companies Purchase securities of open-end or closed-end
investment companies except (i) in compliance with the Investment Company
Act of 1940; or (ii) securities of the Reserve Investment or Government
Reserve Investment Funds;
(6) Margin Purchase securities on margin, except (i) for use of short-term
credit necessary for clearance of purchases of portfolio securities and
(ii) it may make margin deposits in connection with futures contracts or
other permissible investments;
(7) Mortgaging Mortgage, pledge, hypothecate or, in any manner, transfer any
security owned by the Fund as security for indebtedness except as may be
necessary in connection with permissible borrowings or investments and
then such mortgaging, pledging or hypothecating may not exceed
33/1//\\/3/\\% of the Fund's total assets at the time of borrowing or
investment;
(8) Oil and Gas Programs Purchase participations or other direct interests
in, or enter into leases with respect to, oil, gas, or other mineral
exploration or development programs if, as a result thereof, more than 5%
of the value of the total assets of the Fund would be invested in such
programs;
(9) Options, etc. Invest in puts, calls, straddles, spreads, or any
combination thereof, except to the extent permitted by the prospectus and
Statement of Additional Information;
(10) Short Sales Effect short sales of securities; or
(11) Warrants Invest in warrants if, as a result thereof, more than 10% of
the value of the net assets of the Fund would be invested in warrants.
In addition to the restrictions described above, some foreign countries
limit, or prohibit, all direct foreign investment in the securities of their
companies. However, the governments of some countries have authorized the
organization of investment funds to permit indirect foreign investment in
such securities. For tax purposes, these funds may be known as Passive
Foreign Investment Companies. Each Fund is subject to certain percentage
limitations under the 1940 Act and certain states relating to the purchase of
securities of investment companies, and may be subject to the limitation that
no more than 10% of the value of the Fund's total assets may be invested in
such securities.
MANAGEMENT OF FUNDS
-------------------------------------------------------------------------------
The officers and directors of the Fund are listed below. Unless otherwise
noted, the address of each is 100 East Pratt Street, Baltimore, Maryland
21202. Except as indicated, each has been an employee of T. Rowe Price for
more than five years. In the list below, the Fund's directors who are
considered "interested persons" of T. Rowe Price as defined under Section
2(a)(19) of the Investment Company Act of 1940 are noted with an asterisk
(*). These directors are referred to as inside directors by virtue of their
officership, directorship, and/ or employment with T. Rowe Price.
Independent Directors
ANTHONY W. DEERING, Director, President and Chief Executive Officer, The
Rouse Company, real estate developers, Columbia, Maryland; Advisory Director,
Kleinwort, Benson (North America) Corporation, a registered broker-dealer;
Address: 10275 Little Patuxent Parkway, Columbia, Maryland 21044
<PAGE>
DONALD W. DICK, JR., Principal, EuroCapital Advisors, LLC, an acquisition and
management advisory firm; formerly (5/89-6/95) Principal, Overseas Partners,
Inc., a financial investment firm; (6/65-3/89) Director and Vice President;
Consumer Products Division, McCormick & Company, Inc., international food
processors; Director, Waverly, Inc., Baltimore, Maryland; Address: P.O. Box
491, Chilmark, MA 02535-0491
PAUL M. WYTHES, Founding General Partner, Sutter Hill Ventures, a venture
capital limited partnership, providing equity capital to young high
technology companies throughout the United States; Director, Teltone
Corporation, Interventional Technologies Inc. and Stuart Medical, Inc.;
Address: 755 Page Mill Road, Suite A200, Palo Alto, California 94304
Officers
* M. DAVID TESTA, Chairman of the Board -Chairman of the Board,
Price-Fleming; Vice Chairman of the Board, Chief Investment Officer, and
Managing Director, T. Rowe Price; Vice President and Director, T. Rowe Price
Trust Company; Chartered Financial Analyst
* MARTIN G. WADE, Director and President -President and Director
Price-Fleming; Director, Robert Fleming Holdings Limited; Director, Robert
Fleming Asset Management; Address: 25 Copthall Avenue, London, EC2R 7DR,
England
/a/ PETER B. ASKEW, Executive Vice President -Executive Vice President,
Price-Fleming
/ab/ EDWARD A. WIESE, Executive Vice President -Vice President, T. Rowe Price,
Price-Fleming, and T. Rowe Price Trust Company
CHRISTOPHER D. ALDERSON, Vice President -Vice President, Price-Fleming
/a/ ROBERT P. CAMPBELL, Vice President -Vice President, T. Rowe Price and
Price-Fleming
/a/ FRANCES DYDASCO, Vice President -Vice President and portfolio manager of
Price-Fleming (Singapore); formerly an Investment Manager at LGT Asset
Management Ltd. (Hong Kong)
/a/ MARK J.T. EDWARDS, Vice President -Vice President, Price-Fleming
JOHN R. FORD, Vice President -Vice President, Price-Fleming
HENRY H. HOPKINS, Vice President-Vice President, Price-Fleming and T. Rowe
Price Retirement Plan Services, Inc.; Director and Managing Director, T. Rowe
Price; Vice President and Director, T. Rowe Price Investment Services, Inc.,
T. Rowe Price Services, Inc. and T. Rowe Price Trust Company
/a/ STEPHEN ILOTT, Vice President -Vice President, Price-Fleming; formerly
(1988-1991) portfolio management, Fixed Income Portfolios Group, Robert
Fleming Holdings Limited, London
GEORGE A. MURNAGHAN, Vice President -Vice President, T. Rowe Price,
Price-Fleming, T. Rowe Price Trust Company and T. Rowe Price Investment
Services, Inc.
/a/ NICHOLA PEASE, Vice President -Vice President and portfolio manager of
Price-Fleming; formerly a Director of Smith New Court PLC
JAMES S. RIEPE, Vice President -Vice Chairman of the Board and Managing
Director, T. Rowe Price; Chairman of the Board, T. Rowe Price Investment
Services, Inc., T. Rowe Price Services, Inc., T. Rowe Price Retirement Plan
Services, Inc., and T. Rowe Price Trust Company; Director, Price-Fleming and
Rhone-Poulenc Rorer, Inc.
/a/ CHRISTOPHER ROTHERY, Vice President -Employee, Price-Fleming; formerly
(1987-1989) employee of Robert Fleming Holdings Limited, London
/b/ R. TODD RUPPERT, Vice President -Vice President, T. Rowe Price, T. Rowe
Price Trust Company and T. Rowe Retirement Plan Services, Inc.
JAMES B.M. SEDDON, Vice President -Vice President, Price-Fleming
/a/ MARK C.J. BICKFORD-SMITH, Vice President -Vice President and portfolio
manager of Price-Fleming; formerly a Director and portfolio manager of
Jardine Fleming Investment Management
<PAGE>
/a/ CHARLES P. SMITH, Vice President -Managing Director, T. Rowe Price; Vice
President, Price-Fleming
/a/ BENEDICT R.F. THOMAS, Vice President -Vice President, Price-Fleming
/a/ PETER VAN DYKE, Vice President -Managing Director, T. Rowe Price; Vice
President, Price-Fleming
DAVID J. L. WARREN, Vice President -Vice President, Price-Fleming
WILLIAM F. WENDLER II, Vice President -Vice President, T. Rowe Price,
Price-Fleming, and T. Rowe Price Investment Services, Inc.
/ab/ EDWARD A. WIESE, Vice President -Vice President, T. Rowe Price,
Price-Fleming, and T. Rowe Price Trust Company
LENORA V. HORNUNG, Secretary-Vice President, T. Rowe Price
CARMEN F. DEYESU, Treasurer-Vice President, T. Rowe Price, T. Rowe Price
Services, Inc., and T. Rowe Price Trust Company
DAVID S. MIDDLETON, Controller-Vice President, T. Rowe Price, T. Rowe Price
Services, Inc., and T. Rowe Price Trust Company
/a/ ANN B. CRANMER, Assistant Vice President-Vice President, Price-Fleming
ROGER L. FIERY III, Assistant Vice President-Vice President, Price-Fleming
and T. Rowe Price
/a/ LEAH P. HOLMES, Assistant Vice President-Vice President, Price-Fleming;
Assistant Vice President, T. Rowe Price
INGRID I. VORDEMBERGE, Assistant Vice President-Employee, T. Rowe Price
PATRICIA S. BUTCHER, Assistant Secretary-Assistant Vice President, T. Rowe
Price and T. Rowe Price Investment Services, Inc.
(a) Mr. Askew is an Executive Vice President of the International Funds
only. Messrs. Campbell, Dydasco, Edwards, Ilott, Pease, Rothery,
Bickford-Smith, Smith, Thomas, Van Dyke, and Wiese are Vice Presidents of
the International Funds only. Mmes. Cranmer and Holmes are Assistant Vice
Presidents of the International Funds only.
(b) Mr. Wiese is an Executive Vice President, and Mr. Ruppert is a Vice
President of the Foreign Equity Fund.
COMPENSATION TABLE
-------------------------------------------------------------------------------
The Funds do not pay pension or retirement benefits to its officers or
directors. Also, any director of a Fund who is an officer or employee of T.
Rowe Price or Price-Fleming does not receive any remuneration from the Fund.
<TABLE>
<CAPTION>
Name of Person, Aggregate Compensation from Fund(a) Total Compensation from Fund and
Position ------- Fund Complex Paid to Directors(b)
- ------------------------------------------- ---------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------------
<S> <C> <C> <C>
International Stock Fund
$ $
Anthony W. Deering, Director 8,531 81,000
Donald W. Dick, Director 7,388
Paul M. Wythes, Director 7,388
--------------------------------------------------------------------------------------------------------------------------
International Discovery Fund
$ $
Anthony W. Deering, Director 1,903 81,000
Donald W. Dick, Director 1,851
Paul M. Wythes, Director 1,851
--------------------------------------------------------------------------------------------------------------------------
European Stock Fund
$ $
Anthony W. Deering, Director 2,309 81,000
Donald W. Dick, Director 2,166
Paul M. Wythes, Director 2,166
--------------------------------------------------------------------------------------------------------------------------
Japan Fund
$ $
Anthony W. Deering, Director 1,797 81,000
Donald W. Dick, Director 1,767
Paul M. Wythes, Director 1,767
--------------------------------------------------------------------------------------------------------------------------
New Asia Fund
$ $
Anthony W. Deering, Director 3,129 81,000
Donald W. Dick, Director 2,802
Paul M. Wythes, Director 2,802
--------------------------------------------------------------------------------------------------------------------------
Latin America Fund
$ $
Anthony W. Deering, Director 1,925 81,000
Donald W. Dick, Director 1,866
Paul M. Wythes, Director 1,866
--------------------------------------------------------------------------------------------------------------------------
Emerging Markets Stock Fund
$ $
Anthony W. Deering, Director 1,750 81,000
Donald W. Dick, Director 1,732
Paul M. Wythes, Director 1,732
- -------------------------------------------------------------------------------------------------------------------------------
Global Stock Fund
$ $
Anthony W. Deering, Director 1,717 81,000
Donald W. Dick, Director 1,705
Paul M. Wythes, Director 1,705
--------------------------------------------------------------------------------------------------------------------------
Foreign Equity Fund
$ $
Anthony W. Deering, Director 3,770 81,000
Donald W. Dick, Director 3,294
Paul M. Wythes, Director 3,294
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(a) Amounts in this column are based on accrued compensation from November
1, 1996 to October 31, 1997.
(b) Amounts in this column are based on compensation received from January 1,
1997 to December 31, 1997. The T. Rowe Price complex included 80 funds as of
December 31, 1997.
The Fund's Executive Committee, consisting of the Fund's interested
directors, has been authorized by its respective Board of Directors to
exercise all powers of the Board to manage the Funds in the intervals between
meetings of the Board, except the powers prohibited by statute from being
delegated.
PRINCIPAL HOLDERS OF SECURITIES
-------------------------------------------------------------------------------
As of the date of the prospectus, the officers and directors of the Fund, as
a group, owned less than 1% of the outstanding shares of the Fund.
As of February 1, 1998, the following shareholders beneficially owned more
than 5% of the outstanding shares of:
<PAGE>
International Stock, New Asia, Japan and European Stock Funds, respectively:
Charles Schwab & Co. Inc., Reinvestment Account, Attn.: Mutual Fund Dept.,
101 West Montgomery Street, San Francisco, California 94104-4122. Each of the
following shareholders beneficially owned more than 5% of the outstanding
shares of the Foreign Equity Fund: PACO, c/o Mutual Funds Unit #38615, P.O.
Box 3577, Los Angeles, California 90051-1577.
INVESTMENT MANAGEMENT SERVICES
-------------------------------------------------------------------------------
Services
Under the Management Agreement, Price-Fleming provides the Fund with
discretionary investment services. Specifically, Price-Fleming is responsible
for supervising and directing the investments of the Fund in accordance with
the Fund's investment objectives, program, and restrictions as provided in
its prospectus and this Statement of Additional Information. Price-Fleming is
also responsible for effecting all security transactions on behalf of the
Fund, including the negotiation of commissions and the allocation of
principal business and portfolio brokerage. In addition to these services,
Price-Fleming provides the Fund with certain corporate administrative
services, including: maintaining the Fund's corporate existence and corporate
records; registering and qualifying Fund shares under federal laws;
monitoring the financial, accounting, and administrative functions of the
Fund; maintaining liaison with the agents employed by the Fund such as the
Fund's custodian and transfer agent; assisting the Fund in the coordination
of such agents' activities; and permitting Price-Fleming's employees to serve
as officers, directors, and committee members of the Fund without cost to the
Fund.
The Management Agreement also provides that Price-Fleming, its directors,
officers, employees, and certain other persons performing specific functions
for the Fund will only be liable to the Fund for losses resulting from
willful misfeasance, bad faith, gross negligence, or reckless disregard of
duty.
Under the Management Agreement, Price-Fleming is permitted to utilize the
services or facilities of others to provide it or the Funds with statistical
and other factual information, advice regarding economic factors and trends,
advice as to occasional transactions in specific securities, and such other
information, advice or assistance as Price-Fleming may deem necessary,
appropriate, or convenient for the discharge of its obligations under the
Management Agreement or otherwise helpful to the Funds.
Certain administrative support is provided by T. Rowe Price, which receives
from Price-Fleming a fee of 0.15% of the market value of all assets in equity
accounts, 0.15% of the market value of all assets in active fixed income
accounts, and 0.035% of the market value of all assets in passive fixed
income accounts under Price-Fleming's management. Additional investment
research and administrative support for equity investments is provided to
Price-Fleming by Fleming Investment Management Limited (FIM) and Jardine
Fleming International Holdings Limited (JFIH), for which each receives from
Price-Fleming a fee of 0.075% of the market value of all assets in equity
accounts under Price-Fleming's management. Fleming International Fixed
Interest Management Limited (FIFIM) and JFIH provide research and
administration support for fixed income accounts for which each receive a fee
of 0.075% of the market value of all assets in active fixed income accounts
and 0.175% of such market value in passive fixed income accounts under
Price-Fleming's management. FIM and FIFIM are wholly owned subsidiaries of
Flemings. JFIH is a wholly owned subsidiary of Jardine Fleming.
All Funds except Foreign Equity Fund
Management Fee
The Fund pays Price-Fleming a fee ("Fee") which consists of two components: a
Group Management Fee ("Group Fee") and an Individual Fund Fee ("Fund Fee").
The Fee is paid monthly to Price-Fleming on the first business day of the
next succeeding calendar month and is calculated as described below.
The monthly Group Fee ("Monthly Group Fee") is the sum of the daily Group Fee
accruals ("Daily Group Fee Accruals") for each month. The Daily Group Fee
Accrual for any particular day is computed by multiplying the Price Funds'
group fee accrual as determined below ("Daily Price Funds' Group Fee
<PAGE>
Accrual") by the ratio of the Fund's net assets for that day to the sum of
the aggregate net assets of the Price Funds for that day. The Daily Price
Funds' Group Fee Accrual for any particular day is calculated by multiplying
the fraction of one (1) over the number of calendar days in the year by the
annualized Daily Price Funds' Group Fee Accrual for that day as determined in
accordance with the following schedule:
<TABLE>
Price Funds' Annual Group Base Fee Rate for Each Level of
Assets
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
0.480% First $1 billion 0.360% Next $2 billion 0.310% Next $16 billion
------------------------------------------------------------------------------
0.450% Next $1 billion 0.350% Next $2 billion 0.305% Next $30 billion
------------------------------------------------------------------------------
0.420% Next $1 billion 0.340% Next $5 billion 0.300% Thereafter
------------------------------------------------------------------------------
0.390% Next $1 billion 0.330% Next $10 billion
------------------------------------------------------------------------------
0.370% Next $1 billion 0.320% Next $10 billion
</TABLE>
For the purpose of calculating the Group Fee, the Price Funds include all the
mutual funds distributed by T. Rowe Price Investment Services, Inc.,
(excluding the T. Rowe Price Spectrum Funds, and any institutional, index, or
private label mutual funds). For the purpose of calculating the Daily Price
Funds' Group Fee Accrual for any particular day, the net assets of each Price
Fund are determined in accordance with the Funds' prospectus as of the close
of business on the previous business day on which the Fund was open for
business.
The monthly Fund Fee ("Monthly Fund Fee") is the sum of the daily Fund Fee
accruals ("Daily Fund Fee Accruals") for each month. The Daily Fund Fee
Accrual for any particular day is computed by multiplying the fraction of one
(1) over the number of calendar days in the year by the individual Fund Fee
Rate and multiplying this product by the net assets of the Fund for that day,
as determined in accordance with the Fund's prospectus as of the close of
business on the previous business day on which the Fund was open for
business. The individual fund fees for each Fund are listed in the chart
below:
<TABLE>
<CAPTION>
<S> <C>
Global Stock Fund 0.35%
International Stock Fund 0.35
European Stock Fund 0.50
Japan Fund 0.50
New Asia Fund 0.50
International Discovery Fund 0.75
Latin America Fund 0.75
Emerging Markets Stock Fund 0.75
</TABLE>
The following chart sets forth the total management fees if any, paid to
Price-Fleming by the Funds, during the last three years:
<TABLE>
<CAPTION>
Fund 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C>
International Stock $67,678,000 $52,565,000 $41,829,000
International Discovery 3,313,000 3,538,000 4,381,000
Japan 1,444,000 1,730,000 1,523,000
European Stock 7,315,000 5,007,000 3,547,000
New Asia 15,273,000 17,871,000 16,864,000
Latin America 3,989,000 2,096,000 1,765,000
Emerging Markets Stock 1,402,000 349,000 --
Global Stock 5,000 -- (a)
- -------------------------------------------------------------------------
</TABLE>
(a) Prior to commencement of operations.
Limitation on Fund Expenses
The Management Agreement between each Fund and Price-Fleming provides that
each Fund will bear all expenses of its operations not specifically assumed
by Price-Fleming. Set forth in the prospectus are details of various expense
limitations agreed to by Price-Fleming and the Funds.
<PAGE>
T. Rowe Price Spectrum Fund, Inc.
The Funds are parties to Special Servicing Agreements ("Agreement") between
and among T. Rowe Price Spectrum Fund, Inc. ("Spectrum Fund"), T. Rowe Price,
Price-Fleming, T. Rowe Price Services, Inc. and various other T. Rowe Price
funds which, along with the Funds, are funds in which Spectrum Fund invests
(collectively all such funds "Underlying Price funds").
The Agreement provide that, if the Board of Directors of any Underlying Price
Fund determines that such Underlying Fund's share of the aggregate expenses
of Spectrum Fund is less than the estimated savings to the Underlying Price
Fund from the operation of Spectrum Fund, the Underlying Price Fund will bear
those expenses in proportion to the average daily value of its shares owned
by Spectrum Fund, provided further than no Underlying Price Fund will bear
such expenses in excess of the estimated savings to it. Such savings are
expected to result primarily from the elimination of numerous separate
shareholder accounts which are or would have been invested directly in the
Underlying Price Funds and the resulting reduction in shareholder servicing
costs. Although such cost savings are not certain, the estimated savings to
the Underlying Price Funds generated by the operation of Spectrum Fund are
expected to be sufficient to offset most, if not all, of the expenses
incurred by Spectrum Fund.
Foreign Equity Fund
For its services to the Fund under the Management Agreement, Price-Fleming is
paid an annual fee, in monthly installments, based on the Fund's average
daily net assets at the rate of 0.70%. For the years 1997, 1996, and 1995,
Price-Fleming received from the Fund management fees totaling $20,250,000,
$13,871,000, and $8,673,000, respectively.
DISTRIBUTOR FOR FUND
-------------------------------------------------------------------------------
T. Rowe Price Investment Services, Inc. ("Investment Services"), a Maryland
corporation formed in 1980 as a wholly owned subsidiary of T. Rowe Price,
serves as the Fund's distributor. Investment Services is registered as a
broker-dealer under the Securities Exchange Act of 1934 and is a member of
the National Association of Securities Dealers, Inc. The offering of the
Fund's shares is continuous.
Investment Services is located at the same address as the Fund and T. Rowe
Price-100 East Pratt Street, Baltimore, Maryland 21202.
Investment Services serves as distributor to the Fund pursuant to an
Underwriting Agreement ("Underwriting Agreement"), which provides that the
Fund will pay all fees and expenses in connection with: necessary state
filings; preparing, setting in type, printing, and mailing its prospectuses
and reports to shareholders; and issuing its shares, including expenses of
confirming purchase orders.
The Underwriting Agreement provides that Investment Services will pay all
fees and expenses in connection with: printing and distributing prospectuses
and reports for use in offering and selling Fund shares; preparing, setting
in type, printing, and mailing all sales literature and advertising;
Investment Services' federal and state registrations as a broker-dealer; and
offering and selling Fund shares, except for those fees and expenses
specifically assumed by the Fund. Investment Services' expenses are paid by
T. Rowe Price.
Investment Services acts as the agent of the Fund in connection with the sale
of its shares in the various states in which Investment Services is qualified
as a broker-dealer. Under the Underwriting Agreement, Investment Services
accepts orders for Fund shares at net asset value. No sales charges are paid
by investors or the Fund.
CUSTODIAN
-------------------------------------------------------------------------------
The Fund has entered into a Custodian Agreement with The Chase Manhattan
Bank, N.A., London, pursuant to which portfolio securities which are
purchased outside the United States are maintained in the custody of various
foreign branches of The Chase Manhattan Bank and such other custodians,
including foreign banks and foreign securities depositories as are approved
in accordance with regulations under the Investment
<PAGE>
Company Act of 1940. State Street Bank's main office is at 225 Franklin
Street, Boston, Massachusetts 02110. The address for The Chase Manhattan
Bank, N.A., London is Woolgate House, Coleman Street, London, EC2P 2HD,
England.
State Street Bank and Trust Company is the custodian for the Fund's U.S.
securities and cash, but it does not participate in the Fund's investment
decisions. Portfolio securities purchased in the U.S. are maintained in the
custody of the Bank and may be entered into the Federal Reserve Book Entry
System, or the security depository system of the Depository Trust
Corporation.
SHAREHOLDER SERVICES
-------------------------------------------------------------------------------
The Fund from time to time may enter into agreements with outside parties
through which shareholders hold Fund shares. The shares would be held by such
parties in omnibus accounts. The agreements would provide for payments by the
Fund to the outside party for shareholder services provided to shareholders
in the omnibus accounts.
CODE OF ETHICS
-------------------------------------------------------------------------------
The Fund's investment adviser (Price-Fleming) has a written Code of Ethics
which requires all employees to obtain prior clearance before engaging in
personal securities transactions. In addition, all employees must report
their personal securities transactions within 10 days of their execution.
Employees will not be permitted to effect transactions in a security: if
there are pending client orders in the security; the security has been
purchased or sold by a client within seven calendar days; the security is
being considered for purchase for a client; the security is subject to
internal trading restrictions. In addition, employees are prohibited from
profiting from short-term trading (e.g., purchases and sales involving the
same security within 60 days). Any material violation of the Code of Ethics
is reported to the Board of the Fund. The Board also reviews the
administration of the Code of Ethics on an annual basis.
PORTFOLIO TRANSACTIONS
-------------------------------------------------------------------------------
Investment or Brokerage Discretion
Decisions with respect to the purchase and sale of portfolio securities on
behalf of the Fund are made by Price-Fleming. Price-Fleming is also
responsible for implementing these decisions, including the negotiation of
commissions and the allocation of portfolio brokerage and principal business.
How Brokers and Dealers Are Selected
Equity Securities
In purchasing and selling the Fund's portfolio securities, it is
Price-Fleming's policy to obtain quality execution at the most favorable
prices through responsible brokers and dealers and, in the case of agency
transactions, at competitive commission rates. However, under certain
conditions, the Fund may pay higher brokerage commissions in return for
brokerage and research services. As a general practice, over-the-counter
orders are executed with market-makers. In selecting among market-makers,
Price-Fleming generally seeks to select those it believes to be actively and
effectively trading the security being purchased or sold. In selecting
broker-dealers to execute the Fund's portfolio transactions, consideration is
given to such factors as the price of the security, the rate of the
commission, the size and difficulty of the order, the reliability, integrity,
financial condition, general execution and operational capabilities of
competing brokers and dealers, and brokerage and research services provided
by them. It is not the policy of Price-Fleming to seek the lowest available
commission rate where it is believed that a broker or dealer charging a
higher commission rate would offer greater reliability or provide better
price or execution.
<PAGE>
Transactions on stock exchanges involve the payment of brokerage commissions.
In transactions on stock exchanges in the United States, these commissions
are negotiated. Traditionally, commission rates have generally not been
negotiated on stock markets outside the United States. In recent years,
however, an increasing number of overseas stock markets have adopted a system
of negotiated rates, although a number of markets continue to be subject to
an established schedule of minimum commission rates. It is expected that
equity securities will ordinarily be purchased in the primary markets,
whether over-the-counter or listed, and that listed securities may be
purchased in the over-the-counter market if such market is deemed the primary
market. In the case of securities traded on the over-the-counter markets,
there is generally no stated commission, but the price usually includes an
undisclosed commission or markup. In underwritten offerings, the price
includes a disclosed, fixed commission or discount.
Fixed Income Securities
For fixed income securities, it is expected that purchases and sales will
ordinarily be transacted with the issuer, the issuer's underwriter, or with a
primary market maker acting as principal on a net basis, with no brokerage
commission being paid by the fund. However, the price of the securities
generally includes compensation which is not disclosed separately.
Transactions placed through dealers who are serving as primary market makers
reflect the spread between the bid and asked prices.
With respect to equity and fixed income securities, Price-Fleming may effect
principal transactions on behalf of the funds with a broker or dealer who
furnishes brokerage and/or research services, designate any such broker or
dealer to receive selling concessions, discounts or other allowances, or
otherwise deal with any such broker or dealer in connection with the
acquisition of securities in underwritings. The prices the fund pays to
underwriters of newly-issued securities usually include a concession paid by
the issuer to the underwriter. Price-Fleming may receive research services in
connection with brokerage transactions, including designations in fixed price
offerings.
Price-Fleming may cause a fund to pay a broker-dealer who furnishes brokerage
and/or research services a commission for executing a transaction that is in
excess of the commission another broker-dealer would have received for
executing the transaction if it is determined that such commission is
reasonable in relation to the value of the brokerage and/or research services
which have been provided. In some cases, research services are generated by
third parties but are provided to Price-Fleming by or through broker-dealers.
Descriptions of Research Services Received From Brokers and Dealers
Price-Fleming receives a wide range of research services from brokers and
dealers covering investment opportunities throughout the world, including
information on the economies, industries, groups of securities, individual
companies, statistics, political developments, technical market action,
pricing and appraisal services, and performance analyses of all the countries
in which a Fund's portfolio is likely to be invested. Price-Fleming cannot
readily determine the extent to which commissions charged by brokers reflect
the value of their research services, but brokers occasionally suggest a
level of business they would like to receive in return for the brokerage and
research services they provide. To the extent that research services of value
are provided by brokers, Price-Fleming may be relieved of expenses which it
might otherwise bear. In some cases, research services are generated by third
parties but are provided to Price-Fleming by or through brokers.
Commissions to Brokers Who Furnish Research Services
Certain brokers-dealers that provide quality execution services also furnish
research services to Price-Fleming. Price-Fleming has adopted a brokerage
allocation policy embodying the concepts of Section 28(e) of the Securities
Exchange Act of 1934, which permits an investment adviser to cause its
clients to pay a broker which furnishes brokerage or research services a
higher commission than that which might be charged by another broker which
does not furnish brokerage or research services, or which furnishes brokerage
or research services deemed to be of lesser value, if such commission is
deemed reasonable in relation to the brokerage and research services provided
by the broker, viewed in terms of either that particular transaction or the
overall responsibilities of the adviser with respect to the accounts as to
which it exercises investment discretion. Accordingly, Price-Fleming may
assess the reasonableness of commissions in light of the total brokerage and
research services provided by each particular broker.
<PAGE>
Miscellaneous
Research services furnished by brokers through which Price-Fleming effects
securities transactions may be used in servicing all accounts managed by
Price-Fleming. Conversely, research services received from brokers which
execute transactions for a particular Fund will not necessarily be used by
Price-Fleming exclusively in connection with the management of that Fund.
Some of Price-Fleming's other clients have investment objectives and programs
similar to those of the Fund. Price-Fleming may occasionally make
recommendations to other clients which result in their purchasing or selling
securities simultaneously with the Fund. As a result, the demand for
securities being purchased or the supply of securities being sold may
increase, and this could have an adverse effect on the price of those
securities. It is Price-Fleming's policy not to favor one client over another
in making recommendations or in placing orders. Price-Fleming frequently
follows the practice of grouping orders of various clients for execution
which generally results in lower commission rates being attained. In certain
cases, where the aggregate order is executed in a series of transactions at
various prices on a given day, each participating client's proportionate
share of such order reflects the average price paid or received with respect
to the total order. Price-Fleming has established a general investment policy
that it will ordinarily not make additional purchases of a common stock of a
company for its clients (including the T. Rowe Price Funds) if, as a result
of such purchases, 10% or more of the outstanding common stock of such
company would be held by its clients in the aggregate.
None of the Funds allocates business to any broker-dealer on the basis of its
sales of the Fund's shares. However, this does not mean that broker-dealers
who purchase Fund shares for their clients will not receive business from the
Fund.
Transactions with Related Brokers and Dealers
As provided in the Investment Management Agreement between the Fund and
Price-Fleming, Price-Fleming is responsible not only for making decisions
with respect to the purchase and sale of the Fund's portfolio securities, but
also for implementing these decisions, including the negotiation of
commissions and the allocation of portfolio brokerage and principal business.
It is expected that Price-Fleming will often place orders for the Fund's
portfolio transactions with broker-dealers through the trading desks of
certain affiliates of Robert Fleming Holdings Limited ("Robert Fleming"), an
affiliate of Price-Fleming. Robert Fleming, through Copthall Overseas
Limited, a wholly owned subsidiary, owns 25% of the common stock of
Price-Fleming. Fifty percent of the common stock of Price-Fleming is owned by
TRP Finance, Inc., a wholly owned subsidiary of T. Rowe Price, and the
remaining 25% is owned by Jardine Fleming Holdings Limited, a subsidiary of
Jardine Fleming Group Limited ("JFG"). JFG is 50% owned by Robert Fleming and
50% owned by Jardine Matheson Holdings Limited. The affiliates through whose
trading desks such orders may be placed include Fleming Investment Management
Limited ("FIM"), Fleming International Fixed Interest Management Limited
("FIFIM"), and Robert Fleming & Co. Limited ("RF&Co."). FIM, FIFIM, and
RF&Co. are wholly owned subsidiaries of Robert Fleming. These trading desks
will operate under strict instructions from the Fund's portfolio manager with
respect to the terms of such transactions. Neither Robert Fleming, JFG, nor
their affiliates will receive any commission, fee, or other remuneration for
the use of their trading desks, although orders for a Fund's portfolio
transactions may be placed with affiliates of Robert Fleming and JFG who may
receive a commission.
The Board of Directors of the Funds has authorized Price-Fleming to utilize
certain affiliates of Robert Fleming and JFG in the capacity of broker in
connection with the execution of each Fund's portfolio transactions, provided
that Price-Fleming believes that doing so will result in an economic
advantage (in the form of lower execution costs or otherwise) being obtained
for each Fund. These affiliates include Jardine Fleming Securities Limited
("JFS"), RF&Co., Robert Fleming, Inc. (a New York brokerage firm), Ord
Minnett, Stockbrokers Botswana Ltd, and Fleming Martin.
The above-referenced authorization was made in accordance with Section 17(e)
of the Investment Company Act of 1940 (the "1940 Act") and Rule 17e-1
thereunder which require the Funds' independent directors to approve the
procedures under which brokerage allocation to affiliates is to be made and
to monitor such allocations on a continuing basis. Except with respect to
tender offers, it is not expected that any portion of the commissions, fees,
brokerage, or similar payments received by the affiliates of Robert Fleming
in such
<PAGE>
transactions will be recaptured by the Funds. The directors have reviewed and
from time to time may continue to review whether other recapture
opportunities are legally permissible and available and, if they appear to
be, determine whether it would be advisable for a Fund to seek to take
advantage of them.
The tables below present information on affiliated brokers. Column 1
represents the total dollar amount of brokerage commissions paid to the
broker. The dollar amount of brokerage commissions paid for the two previous
fiscal year ends are also listed as marked. The second column represents the
percentage that the commissions paid to the affiliated broker representing
the aggregate brokerage commission paid by the Fund. The third column shows
the percentage that the dollar amount of transaction involving the payment of
commissions effected through the affiliated broker represents the aggregate
dollar amount of brokerage transactions.
The following amounts and percentages were paid to JFS during the year 1997:
<TABLE>
<CAPTION>
Fund Total Brokerage Aggregate Brokerage Aggregate Dollar
---- --------------- ------------------- ----------------
Commissions Commissions Amount
----------- ----------- ------
<S> <C> <C> <C>
International Stock $ 228,000 3% 2%
International
Discovery 180,995 12 10
European Stock -- -- --
Japan 127,117 29 25
New Asia 1,051,831 13 12
Foreign Equity 70,010 2 1
Latin America -- -- --
Emerging Markets Stock 69,648 9 8
Global Stock 206 1 1
</TABLE>
The following brokerage commision amounts were paid to JFS during the years
1996 and 1995:
<TABLE>
<CAPTION>
Fund 1996 1995
---- ---- ----
<S> <C> <C>
International Stock $ 295,800 $ 6,029,012
International Discovery 204,812 1,548,256
European Stock -- --
Japan 141,333 781,356
New Asia 1,342,379 10,230,880
Foreign Equity 93,205 2,077,591
Latin America -- 293,894
Emerging Markets Stock 7,924 25,786
Global Stock 710 --
</TABLE>
<PAGE>
The following amounts and percentages were paid to RF&Co during the year
1997:
<TABLE>
<CAPTION>
Fund Total Brokerage % of Aggregate % of Aggregate
---- --------------- -------------- --------------
Commissions Brokerage Commissions Dollar Amount
----------- --------------------- -------------
<S> <C> <C> <C>
International Stock $317,208 3% 4%
International
Discovery 22,867 2 2
European Stock 51,846 5 6
Japan 6,478 1 1
New Asia -- -- --
Foreign Equity 96,488 3 3
Latin America 95,295 10 9
Emerging Markets Stock 27,548 4 4
Global Stock 402 1 1
</TABLE>
The following brokerage commission amounts were paid to RF&Co during the
years 1996 and 1995:
<TABLE>
<CAPTION>
Fund 1996 1995
---- ---- ----
<S> <C> <C>
International Stock $439,567 $236,915
International Discovery 35,075 30,702
European Stock 34,646 28,980
Japan 733 59,539
New Asia -- --
Foreign Equity 86,928 46,833
Latin America 28,793 10,135
Emerging Markets Stock 7,519 4,869
Global Stock 731 --
</TABLE>
The following amounts and percentages were paid to Ord Minnett during the
year 1997:
<TABLE>
<CAPTION>
Fund Total Brokerage Aggregate Brokerage Aggregate Dollar
---- --------------- ------------------- ----------------
Commissions Commissions Amount
----------- ----------- ------
<S> <C> <C> <C>
International Stock $43,327 1% 1%
International
Discovery 17,775 1 1
European Stock 358 1 1
Japan -- -- --
New Asia -- -- --
Foreign Equity 14,063 1 1
Latin America -- -- --
Emerging Markets Stock -- -- --
Global Stock 131 1 1
</TABLE>
<PAGE>
The following brokerage commission amounts were paid to Ord Minnett during
the years 1996 and 1995:
<TABLE>
<CAPTION>
Fund 1996 1995
---- ---- ----
<S> <C> <C>
International Stock $60,141 $174,136
International Discovery 11,317 30,612
European Stock -- --
Japan -- --
New Asia 6,202 336,088
Foreign Equity 20,544 49,051
Latin America -- --
Emerging Markets Stock -- --
Global Stock 32 --
</TABLE>
The following amounts and percentages were paid to Fleming Martin during the
year 1997:
<TABLE>
<CAPTION>
Fund Total Brokerage Aggregate Brokerage Aggregate Dollar
---- --------------- ------------------- ----------------
Commissions Commissions Amount
----------- ----------- ------
<S> <C> <C> <C>
International Stock -- -- --
International
Discovery $34,413 2% 2%
European Stock -- -- --
Japan -- -- --
New Asia -- -- --
Foreign Equity -- -- --
Latin America -- -- --
Emerging Markets Stock 5,339 1 1
Global Stock -- -- --
</TABLE>
In accordance with the written procedures adopted pursuant to Rule 17e-1, the
independent directors of each Fund reviewed the 1997 transactions with
affiliated brokers and determined that such transactions resulted in an
economic advantage to the Funds either in the form of lower execution costs
or otherwise.
Other
The amounts shown below involved trades with brokers acting as agents or
underwriters, in which such brokers received total commissions, including
discounts received in connection with underwritings for the fiscal years
ended 1997, 1996, and 1995:
<TABLE>
<CAPTION>
Fund 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C>
International Stock $9,102,292 $7,100,046 $6,029,012
International Discovery 1,526,634 1,278,239 1,548,256
European Stock 1,016,985 595,811 290,226
Japan 440,701 474,365 781,356
New Asia 7,978,905 5,383,653 10,230,880
Foreign Equity 3,506,559 2,052,024 2,077,591
Latin America 927,301 362,820 293,894
Emerging Markets Stock 780,941 382,407 72,181
Global Stock 61,979 50,058 --
</TABLE>
<PAGE>
The percentage of total portfolio transactions, placed with firms which
provided research, statistical, or other services to T. Rowe Price in
connection with the management of the Funds, or in some cases, to the Funds
for the fiscal year ended 1997, 1996, and 1995, are shown below:
<TABLE>
<CAPTION>
Fund 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C>
International Stock 94% 89% 85%
International Discovery 83 80 73
European Stock 95 94 90
Japan 70 70 69
New Asia 87 75 75
Foreign Equity 95 92 86
Latin America 90 92 97
Emerging Markets Stock 87 75 58
Global Stock 99 97 --
</TABLE>
The portfolio turnover rate for each Fund for the fiscal years ended 1997,
1996, and 1995, was as follows:
<TABLE>
<CAPTION>
Fund 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C>
International Stock 15.8% 11.6% 17.8%
International Discovery 72.7 52.0 43.5
European Stock 17.5 14.1 17.2
Japan 32.3 29.8 62.4
New Asia 41.8 42.0 63.7
Foreign Equity 15.9 13.8 18.8
Latin America 32.7 22.0 18.9
Emerging Markets Stock 84.3 41.7 28.8(b)
Global Stock 41.8 50.0(a) --
- -------------------------------------------------------------------------
</TABLE>
(a) From the commencement of operations December 29, 1995, to October 31,
1996.
(b) From the commencement of operations March 31, 1995, to October 31,
1995.
PRICING OF SECURITIES
-------------------------------------------------------------------------------
Equity securities listed or regularly traded on a securities exchange are
valued at the last quoted sales price at the time the valuations are made. A
security that is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for such
security. Listed securities not traded on a particular day and securities
regularly traded in the over-the-counter market are valued at the mean of the
latest bid and asked prices. Other equity securities are valued at a price
within the limits of the latest bid and asked prices deemed by the Board of
Directors, or by persons delegated by the Board, best to reflect fair value.
Investment in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
Debt securities are generally traded in the over-the-counter market and are
valued at a price deemed best to reflect fair value as quoted by dealers who
make markets in these securities or by an independent pricing service.
Short-term debt securities are valued at their amortized cost in local
currency which, when combined with accrued interest, approximates fair value.
For the purposes of determining the Fund's net asset value per share, the
U.S. dollar value of all assets and liabilities initially expressed in
foreign currencies is determined by using the mean of the bid and offer
prices of such currencies against U.S. dollars quoted by a major bank.
<PAGE>
Assets and liabilities 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.
Trading in the portfolio securities of each Fund may take place in various
foreign markets on certain days (such as Saturday) when the Funds are not
open for business and do not calculate their net asset values. In addition,
trading in a Fund's portfolio securities may not occur on days when the Fund
is open.
NET ASSET VALUE PER SHARE
-------------------------------------------------------------------------------
The purchase and redemption price of the Fund's shares is equal to the Fund's
net asset value per share or share price. The Fund determines its net asset
value per share by subtracting its liabilities (including accrued expenses
and dividends payable) from its total assets (the market value of the
securities the Fund holds plus cash and other assets, including income
accrued but not yet received) and dividing the result by the total number of
shares outstanding. The net asset value per share of the Fund, other than the
Japan Fund, is calculated as of the close of trading on the New York Stock
Exchange ("NYSE") every day the NYSE is open for trading. The net asset value
per share of the Japan Fund is calculated as of the close of trading on the
NYSE each day the NYSE and the Tokyo Stock Exchange ("TSE") are both open.
The NYSE is closed on the following days: New Year's Day, Dr. Martin Luther
King, Jr. Holiday, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day. The TSE is scheduled to
be closed on the following week days in 1998: January 1, 2, 15; February 11;
April 29; May 4,5; July 20; September 15, 23; November 3, 23; and December
23, 31, as well as the following weekdays in 1999: January 1, 15; February
11; March 22; April 29; May 3, 4, 5; July 20; September 15, 23; October 11;
November 3, 23; and December 23. If the TSE closes on any additional or
different dates, the Japan Fund will be closed on such dates.
Determination of net asset value (and the offering, sale redemption and
repurchase of shares) for the Fund may be suspended at times (a) during which
the NYSE is closed, other than customary weekend and holiday closings, or in
the case of the Japan Fund, either the NYSE or TSE is closed, (b) during
which trading on the NYSE is restricted, (c) during which an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or (d) during which a
governmental body having jurisdiction over the Fund may by order permit such
a suspension for the protection of the Fund's shareholders; provided that
applicable rules and regulations of the Securities and Exchange Commission
(or any succeeding governmental authority) shall govern as to whether the
conditions prescribed in (b), (c), or (d) exist.
DIVIDENDS AND DISTRIBUTIONS
-------------------------------------------------------------------------------
Unless you elect otherwise, dividends and capital gain distributions, if any,
will be reinvested on the reinvestment date using the NAV per share of that
date. The reinvestment date normally precedes the payment date by about 10
days, although the exact timing is subject to change.
TAX STATUS
-------------------------------------------------------------------------------
The Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended ("Code").
Dividends and distributions paid by the Funds (other than Global Stock Fund)
are not eligible for the dividends-received deduction for corporate
shareholders, if as expected, none of the Fund's income consists of dividends
paid by United States corporations. Income dividends paid by the Global Stock
Fund are eligible for the dividends-received deduction for corporate
shareholders, only to the extent the Global Stock Fund's
<PAGE>
income consists of dividends paid by United States Corporations. Capital gain
distributions paid from these Funds are never eligible for this deduction.
For tax purposes, it does not make any difference whether dividends and
capital gain distributions are paid in cash or in additional shares. Each
Fund must declare dividends by December 31 of each year equal to at least 98%
of ordinary income (as of December 31) and capital gains (as of October 31)
in order to avoid a federal excise tax and distribute within 12 months 100%
of ordinary income and capital gains as of December 31 to avoid federal
income tax.
Foreign currency gains and losses, including the portion of gain or loss on
the sale of debt securities attributable to foreign exchange rate
fluctuation, are taxable as ordinary income. If the net effect of these
transactions is a gain, the ordinary income dividend paid by the fund will be
increased. If the result is a loss, the income dividend paid by the Fund will
be decreased, or to the extent such dividend has already been paid a portion
may be classified as a return of capital. Adjustments, to reflect these gains
and losses will be made at the end of each Fund's taxable year.
At the time of your purchase, each Fund's net asset value may reflect
undistributed income, capital gains or net unrealized appreciation of
securities held by each Fund. A subsequent distribution to you of such
amounts, although constituting a return of your investment, would be taxable
either as dividends or capital gain distributions. For federal income tax
purposes, each Fund is permitted to carry forward its net realized capital
losses, if any, for eight years and realize net capital gains up to the
amount of such losses without being required to pay taxes on, or distribute
such gains.
Income received by each Fund from sources within various foreign countries
may be subject to foreign income taxes withheld at the source. Under the
Code, if more than 50% of the value of a Fund's total assets at the close of
its taxable year comprise securities issued by foreign corporations or
governments, the Fund may file an election with the Internal Revenue Service
to "pass through" to the Fund's shareholders the amount of any foreign income
taxes paid by the Fund. Pursuant to this election, shareholders will be
required to: (i) include in gross income, even though not actually received,
their respective pro rata share of foreign taxes paid by the Fund; (ii) treat
their pro rata share of foreign taxes as paid by them; and (iii) either
deduct their pro rata share of foreign taxes in computing their taxable
income, or use it as a foreign tax credit against U.S. income taxes (but not
both). No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions.
Each Fund intends to meet the requirements of the Code to "pass through" to
its shareholders foreign income taxes paid, but there can be no assurance
that a Fund will be able to do so. Each shareholder will be notified within
60 days after the close of each taxable year of a Fund, if that Fund will
"pass through" foreign taxes paid for that year, and, if so, the amount of
each shareholder's pro rata share (by country) of (i) the foreign taxes paid,
and (ii) the Fund's gross income from foreign sources. Of course,
shareholders who are not liable for federal income taxes, such as retirement
plans qualified under Section 401 of the Code, will not be affected by any
such "pass through" of foreign tax credits.
If, in any taxable year, a Fund should not qualify as a regulated investment
company under the Code: (i) the Fund would be taxed at normal corporate rates
on the entire amount of its taxable income without deduction for dividends or
other distributions to shareholders; (ii) the Fund's distributions to the
extent made out of the Fund's current or accumulated earnings and profits
would be taxable to shareholders as ordinary dividends (regardless of whether
they would otherwise have been considered capital gain dividends), and the
Funds may qualify for the 70% deduction for dividends received by
corporations; and (iii) foreign tax credits would not "pass through" to
shareholders.
Taxation of Foreign Shareholders
The Code provides that dividends from net income (which are deemed to include
for this purpose each shareholder's pro rata share of foreign taxes paid by
each Fund-see discussion of "pass through" of the foreign tax credit to U.S.
shareholders), will be subject to U.S. tax. For shareholders who are not
engaged in a business in the U.S., this tax would be imposed at the rate of
30% upon the gross amount of the dividends in the absence of a Tax Treaty
providing for a reduced rate or exemption from U.S. taxation. Distributions
of net long-term capital gains realized by each Fund are not subject to tax
unless the foreign shareholder is a
<PAGE>
nonresident alien individual who was physically present in the U.S. during
the tax year for more than 182 days.
Passive Foreign Investment Companies
Each fund may purchase the securities of certain foreign investment funds or
trusts called passive foreign investment companies. Such trusts have been the
only or primary way to invest in certain countries. In addition to bearing
their proportionate share of the trust's expenses (management fees and
operating expenses), shareholders will also indirectly bear similar expenses
of such trusts. Capital gains on the sale of such holdings are considered
ordinary income regardless of how long the fund held its investment. In
addition, the fund may be subject to corporate income tax and an interest
charge on certain dividends and capital gains earned from these investments,
regardless of whether such income and gains are distributed to shareholders.
To avoid such tax and interest, each fund intends to treat these securities
as sold on the last day of its fiscal year and recognize any gains for tax
purposes at that time; deductions for losses are allowable only to the extent
of any gains resulting from these deemed sales for prior taxable years. Such
gains and losses will be treated as ordinary income. The fund will be
required to distribute any resulting income even though it has not sold the
security.
INVESTMENT PERFORMANCE
-------------------------------------------------------------------------------
Total Return Performance
The Fund's calculation of total return performance includes the reinvestment
of all capital gain distributions and income dividends for the period or
periods indicated, without regard to tax consequences to a shareholder in the
Fund. Total return is calculated as the percentage change between the
beginning value of a static account in the Fund and the ending value of that
account measured by the then current net asset value, including all shares
acquired through reinvestment of income and capital gain dividends. The
results shown are historical and should not be considered indicative of the
future performance of the Fund. Each average annual compound rate of return
is derived from the cumulative performance of the Fund over the time period
specified. The annual compound rate of return for the Fund over any other
period of time will vary from the average.
<TABLE>
<CAPTION>
Cumulative Performance Percentage Change
1 Yr. Ended 5 Yrs. Ended 10 Yrs. Ended % Since Inception Date
----------- ------------ ------------- ------- --------------
- -------------------------------------- 10/31/97 10/31/97 10/31/97 Inception
-------- -------- -------- ---------
------------------------------------------ 10/31/97
--------
-------------------------------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 32.11 147.48 389.01 -- --
Dow Jones Industrial Average 25.82 161.29 406.78 -- --
CPI 2.08 13.96 40.16 -- --
Lipper International Funds 10.39 82.99 158.84 -- --
International Stock Fund 7.90 86.69 193.51 923.25 05/09/80
International Discovery Fund 1.69 48.23 -- 87.84 12/30/88
European Stock Fund 20.30 132.83 -- 124.41 02/28/90
Japan Fund -11.64 9.05 -- -6.43 12/30/91
Latin America Fund 19.94 -- -- -1.52 12/29/93
New Asia Fund -30.61 6.44 -- 47.48 09/28/90
Emerging Markets Stock Fund -1.60 -- -- 14.15 03/31/95
Global Stock Fund 16.98 -- -- 32.77 12/29/95
Foreign Equity Fund 8.30 87.67 -- 101.32 09/07/89
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Average Annual Compound Rates of Return
1 Yr. Ended 5 Yrs. Ended 10 Yrs. Ended % Since Inception Date
----------- ------------ ------------- ------- --------------
- -------------------------------------- 10/31/97 10/31/97 10/31/97 Inception
-------- -------- -------- ---------
------------------------------------------ 10/31/97
--------
-------------------------------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 32.11 19.87 17.20 -- --
Dow Jones Industrial Average 25.82 21.18 17.62 -- --
CPI 2.08 2.65 3.43 -- --
Lipper International Funds 10.39 12.67 9.68 -- --
International Stock Fund 7.90 13.30 11.37 14.23 05/09/80
International Discovery Fund 1.69 8.19 -- 7.40 12/30/88
European Stock Fund 20.30 18.42 -- 11.11 02/28/90
Japan Fund -11.64 1.75 -- -1.13 12/30/91
Latin America Fund 19.94 -- -- -0.40 12/29/93
New Asia Fund -30.61 1.26 -- 5.63 09/28/90
Emerging Markets Stock Fund -1.60 -- -- 5.25 03/31/95
Global Stock Fund 16.98 -- -- 16.67 12/29/95
Foreign Equity Fund 8.30 13.42 -- 8.97 09/07/89
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Outside Sources of Information
From time to time, in reports and promotional literature: (1) the Fund's
total return performance, ranking, or any other measure of the Fund's
performance may be compared to any one or combination of the following: (i) a
broad based index; (ii) other groups of mutual funds, including T. Rowe Price
Funds, tracked by independent research firms ranking entities, or financial
publications; (iii) indices of stocks comparable to those in which the Fund
invests; (2) the Consumer Price Index (or any other measure for inflation,
government statistics, such as GNP may be used to illustrate investment
attributes of the Fund or the general economic, business, investment, or
financial environment in which the Fund operates; (3) various financial,
economic and market statistics developed by brokers, dealers and other
persons may be used to illustrate aspects of the Fund's performance; (4) the
effect of tax-deferred compounding on the Fund's investment returns, or on
returns in general in both qualified and non-qualified retirement plans or
any other tax advantage product, may be illustrated by graphs, charts, etc.;
and (5) the sectors or industries in which the Find invests may be compared
to relevant indices or surveys in order to evaluate the Fund's historical
performance or current or potential value with respect to the particular
industry or sector.
Other Publications
From time to time, in newsletters and other publications issued by T. Rowe
Price Investment Services, Inc., T. Rowe Price mutual fund portfolio managers
may discuss economic, financial and political developments in the U.S. and
abroad and how these conditions have affected or may affect securities prices
or the Fund; individual securities within the Fund's portfolio; and their
philosophy regarding the selection of individual stocks, including why
specific stocks have been added, removed or excluded from the Fund's
portfolio.
Other Features and Benefits
The Fund is a member of the T. Rowe Price family of Funds and may help
investors achieve various long-term investment goals, which include, but are
not limited to, investing money for retirement, saving for a down payment on
a home, or paying college costs. To explain how the Fund could be used to
assist investors in planning for these goals and to illustrate basic
principles of investing, various worksheets and guides prepared by T. Rowe
Price Associates, Inc. and/or T. Rowe Price Investment Services, Inc. may be
made available.
No-Load Versus Load and 12b-1 Funds
Unlike the T. Rowe Price funds, may mutual funds charge sales fees to
investors or use fund assets to finance distribution activities. These fees
are in addition to the normal advisory fees and expenses charged by all
<PAGE>
mutual funds. There are several types of fees charged which vary in magnitude
and which may often be used in combination. A sales charge (or "load") can be
charged at the time the fund is purchased (front-end load) or at the time of
redemption (back-end load). Front-end loads are charged on the total amount
invested. Back-end loads or "redemption fees" are charged either on the
amount originally invested or on the amount redeemed. 12b-1 plans allow for
the payment of marketing and sales expenses from fund assets. These expenses
are usually computed daily as a fixed percentage of assets.
The Fund is a no-load fund which imposes no sales charges or 12b-1 fees.
No-load funds are generally sold directly to the public without the use of
commissioned sales representatives. This means that 100% of your purchase is
invested for you.
Redemptions in Kind
In the unlikely event a shareholder were to receive an in kind redemption of
portfolio securities of the Fund, brokerage fees could be incurred by the
shareholder in a subsequent sale of such securities.
Issuance of Fund Shares for Securities
Transactions involving issuance of Fund shares for securities or assets other
than cash will be limited to (1) bona fide reorganizations; (2) statutory
mergers; or (3) other acquisitions of portfolio securities that: (a) meet the
investment objective and policies of the Fund; (b) are acquired for
investment and not for resale except in accordance with applicable law; (c)
have a value that is readily ascertainable via listing on or trading in a
recognized United States or international exchange or market; and (d) are not
illiquid.
CAPITAL STOCK
-------------------------------------------------------------------------------
The T. Rowe Price International Funds, Inc. (the "International Corporation")
is a Maryland corporation. The Institutional International Funds, Inc. (the
"Institutional Corporation") was organized in 1989, as a Maryland
corporation. Each Corporation is registered with the Securities and Exchange
Commission under the 1940 Act as a diversified, open-end investment company,
commonly known as a "mutual fund."
Currently, the International Corporation consists of the following 11 series,
each of which represents a separate class of the Corporation's shares and has
different objectives and investment policies. The International Bond Fund,
International Stock, International Discovery, European Stock, New Asia,
Global Government Bond, Japan, Latin America, Emerging Markets Bond, Emerging
Markets Stock, and Global Stock Funds. The Global Government Bond,
International Bond, and Emerging Markets Bond Funds are described in a
separate Statement of Additional Information. Currently, the Institutional
Corporation consists of one series, the Foreign Equity Fund. Each Charter
also provides that the Board of Directors may issue additional series of
shares.
The Fund's Charter authorizes the Board of Directors to classify and
reclassify any and all shares which are then unissued, including unissued
shares of capital stock into any number of classes or series, each class or
series consisting of such number of shares and having such designations, such
powers, preferences, rights, qualifications, limitations, and restrictions,
as shall be determined by the Board subject to the Investment Company Act and
other applicable law. The shares of any such additional classes or series
might therefore differ from the shares of the present class and series of
capital stock and from each other as to preferences, conversions or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption, subject to applicable
law, and might thus be superior or inferior to the capital stock or to other
classes or series in various characteristics. The Board of Directors may
increase or decrease the aggregate number of shares of stock or the number of
shares of stock of any class or series that the Fund has authorized to issue
without shareholder approval.
Each share of each series has equal voting rights with every other share of
every other series, and all shares of all series vote as a single group
except where a separate vote of any class or series is required by the 1940
Act, the laws of the State of Maryland, the Corporation's Articles of
Incorporation, the By-Laws of the Corporation, or as the Board of Directors
may determine in its sole discretion. Where a separate vote is required with
respect to one or more classes or series, then the shares of all other
classes or series vote as a single class or
<PAGE>
series, provided that, as to any matter which does not affect the interest of
a particular class or series, only the holders of shares of the one or more
affected classes or series is entitled to vote. The preferences, rights, and
other characteristics attaching to any series of shares, including the
present series of capital stock, might be altered or eliminated, or the
series might be combined with another series, by action approved by the vote
of the holders of a majority of all the shares of all series entitled to be
voted on the proposal, without any additional right to vote as a series by
the holders of the capital stock or of another affected series.
Shareholders are entitled to one vote for each full share held (and
fractional votes for fractional shares held) and will vote in the election of
or removal of directors (to the extent hereinafter provided) and on other
matters submitted to the vote of shareholders. There will normally be no
meetings of shareholders for the purpose of electing directors unless and
until such time as less than a majority of the directors holding office have
been elected by shareholders, at which time the directors then in office will
call a shareholders' meeting for the election of directors. Except as set
forth above, the directors shall continue to hold office and may appoint
successor directors. Voting rights are not cumulative, so that the holders of
more than 50% of the shares voting in the election of directors can, if they
choose to do so, elect all the directors of the Fund, in which event the
holders of the remaining shares will be unable to elect any person as a
director. As set forth in the By-Laws of the Fund, a special meeting of
shareholders of the Fund shall be called by the Secretary of the Fund on the
written request of shareholders entitled to cast at least 10% of all the
votes of the Fund entitled to be cast at such meeting. Shareholders
requesting such a meeting must pay to the Fund the reasonably estimated costs
of preparing and mailing the notice of the meeting. The Fund, however, will
otherwise assist the shareholders seeking to hold the special meeting in
communicating to the other shareholders of the Fund to the extent required by
Section 16(c) of the Investment Company Act of 1940.
FEDERAL REGISTRATION OF SHARES
-------------------------------------------------------------------------------
The Fund's shares are registered for sale under the Securities Act of 1933.
Registration of the Fund's shares is not required under any state law, but
the Fund is required to make certain filings with and pay fees to the states
in order to sell its shares in the states.
LEGAL COUNSEL
-------------------------------------------------------------------------------
Shereff, Friedman, Hoffman, & Goodman LLP, whose address is 919 Third Avenue,
New York, New York 10022, is legal counsel to the Fund.
INDEPENDENT ACCOUNTANTS
-------------------------------------------------------------------------------
All Funds
Price Waterhouse LLP, 1306 Concourse Drive, Suite 100, Baltimore, Maryland
21090-1020, are independent accountants to the Fund.
The financial statements of the Funds for the year ended October 31, 1997,
and the report of independent accountants are included in each Fund's Annual
Report for the year ended October 31, 1997. A copy of each Annual Report
accompanies this Statement of Additional Information. The following financial
statements and the report of independent accountants appearing in each Annual
Report for the year ended October 31, 1997, are incorporated into this
Statement of Additional Information by reference:
<PAGE>
<TABLE>
<CAPTION>
ANNUAL REPORT REFERENCES:
INTERNATIONAL INTERNATIONAL EUROPEAN
STOCK DISCOVERY STOCK
----- --------- -----
<S> <C> <C> <C> <C>
Report of Independent
Accountants 35 27 25
Statement of Net Assets,
October 31, 1997 13-28 10-20 9-18
Statement of Operations, year
ended October 31, 1997 29 21 19
Statement of Changes in Net
Assets, years ended
and October 31, 1996 30 22 20
Notes to Financial
Statements, October 31, 1997 31-34 23-26 21-24
Financial Highlights 12 9 8
</TABLE>
<TABLE>
<CAPTION>
LATIN NEW ASIA JAPAN FOREIGN
AMERICA -------- ----- EQUITY
------- ------
<S> <C> <C> <C> <C> <C>
Report of Independent Accountants 21 20 19 22
Statement of Net Assets, October
31, 1997 11-14 9-13 9-12 10-17
Statement of Operations, year
ended October 31, 1997 15 14 13 18
Statement of Changes in Net
Assets, years ended
and October 31, 1996 16 15 14 19
Notes to Financial Statements,
October 31, 1997 17-20 16-19 15-18 20-21
Financial Highlights 10 8 8 9
</TABLE>
<TABLE>
<CAPTION>
EMERGING
MARKETS STOCK
-------------
<S> <C> <C>
Report of Independent Accountants 26
Statement of Net Assets, October 31, 1997 11-19
Statement of Operations, year ended October 31, 1997 20
Statement of Changes in Net Assets, years ended October
31, 1997 and October 31, 1996 21
Notes to Financial Statements, October 31, 1997 22-25
Financial Highlights 10
</TABLE>
<TABLE>
<CAPTION>
GLOBAL STOCK
------------
<S> <C> <C>
Report of Independent Accountants 37
Statement of Net Assets, October 31, 1997 13-30
Statement of Operations, year ended October 31, 1997 31
Statement of Changes in Net Assets, from year ended
October 31, 1997and December 29, 1995 (commencement of
operations) to October 31, 1996 32
Notes to Financial Statements, October 31, 1997 33-36
Financial Highlights 12
</TABLE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements. Condensed Financial Information (Financial Highlights
table) is included in Part A of the Registration Statement.
Statement of Net Assets, Statement of Operations, and Statement of Changes
in Net Assets are included in the Annual Report to Shareholders, the pertinent
portions of which are incorporated by reference in Part B of the Registration
Statement.
(b) Exhibits.
(1) Articles of Incorporation, dated June 23, 1989 (electronically
filed with Amendment No. 8 dated February 28, 1994)
(2) By-Laws of Registrant, as amended September 30, 1993
(electronically filed with Amendment No. 8 dated February 28, 1994)
(3) Inapplicable
(4) Inapplicable
(5) Investment Management Agreement between Registrant and Rowe
Price-Fleming International, Inc., dated May 1, 1990
(electronically filed with Amendment No. 8 dated February 28, 1994)
(6) Underwriting Agreement between Registrant and T. Rowe Price
Investment Services, Inc., dated July 19, 1989 (electronically
filed with Amendment No. 8 dated February 28, 1994)
(7) Inapplicable
(8) Custody Agreements.
(8)(a) Custodian Agreement between T. Rowe Price Funds and State Street
Bank and Trust Company, dated January 28, 1998
(8)(b) Global Custody Agreement between The Chase Manhattan Bank, N.A.,
and T. Rowe Price Funds, dated January 3, 1994, as amended April
18, 1994, August 15, 1994, November 28, 1994, May 31, 1995,
November 1, 1995, July 31, 1996, July 23, 1997, September 3, 1997,
and October 29, 1997
(9) Other Agreements.
(9)(a) Transfer Agency and Service Agreement between T. Rowe Price
Services, Inc. and T. Rowe Price Funds, dated January 1, 1998, as
amended January 21, 1998
(9)(b) Agreement between T. Rowe Price Associates, Inc. and T. Rowe Price
Funds for Fund Accounting Services, dated January 1, 1998, as
amended January 21, 1998
(9)(c) Agreement between T. Rowe Price Retirement Plan Services, Inc. and
the Taxable Funds, dated January 1, 1998, as amended January 21,
1998
(10) Opinion of Counsel
(11) Consent of Independent Accountants
(12) Inapplicable
(13) Inapplicable
(14) Inapplicable
(15) Inapplicable
(16) Total Return Performance Methodology
(17) Financial Data Schedule
(18) Inapplicable
(19) Other Exhibits
(a)Power of Attorney
Item 25. Persons Controlled by or Under Common Control With Registrant.
None.
Item 26. Number of Holders of Securities
As of January 31, 1998, the Registrant had 687 shareholders.
Item 27. Indemnification
The Registrant maintains comprehensive Errors and Omissions and Officers
and Directors insurance policies written by the Evanston Insurance Company, The
Chubb Group and ICI Mutual. These policies provide coverage for the named
insureds, which include T. Rowe Price Associates, Inc. ("Manager"), Rowe
Price-Fleming International, Inc. ("Price-Fleming"), T. Rowe Price Investment
Services, Inc., T. Rowe Price Services, Inc., T. Rowe Price Trust Company, T.
Rowe Price Stable Asset Management, Inc., RPF International Bond Fund and fifty
other investment companies, including, T. Rowe Price Growth Stock Fund, Inc., T.
Rowe Price New Horizons Fund, Inc., T. Rowe Price New Era Fund, Inc., T. Rowe
Price New Income Fund, Inc., T. Rowe Price Prime Reserve Fund, Inc., T. Rowe
Price Tax-Free Income Fund, Inc., T. Rowe Price Tax-Exempt Money Fund, Inc., T.
Rowe Price International Funds, Inc., T. Rowe Price Growth & Income Fund, Inc.,
T. Rowe Price Tax-Free Short-Intermediate Fund, Inc., T. Rowe Price Short-Term
Bond Fund, Inc., T. Rowe Price High Yield Fund, Inc., T. Rowe Price Tax-Free
High Yield Fund, Inc., T. Rowe Price New America Growth Fund, T. Rowe Price
Equity Income Fund, T. Rowe Price GNMA Fund, T. Rowe Price Capital Appreciation
Fund, T. Rowe Price California Tax-Free Income Trust, T. Rowe Price State
Tax-Free Income Trust, T. Rowe Price Science & Technology Fund, Inc., T. Rowe
Price Small-Cap Value Fund, Inc., Institutional International Funds, Inc., T.
Rowe Price U.S. Treasury Funds, Inc., T. Rowe Price Index Trust, Inc., T. Rowe
Price Spectrum Fund, Inc., T. Rowe Price Balanced Fund, Inc., T. Rowe Price
Short-Term U.S. Government Fund, Inc., TT. Rowe Price Mid-Cap Growth Fund, Inc.,
T. Rowe Price Small-Cap Stock Fund, Inc., T. Rowe Price Tax-Free Insured
Intermediate Bond Fund, Inc., T. Rowe Price Dividend Growth Fund, Inc., T. Rowe
Price Blue Chip Growth Fund, Inc., T. Rowe Price Summit Funds, Inc., T. Rowe
Price Summit Municipal Funds, Inc., T. Rowe Price Equity Series, Inc., T. Rowe
Price International Series, Inc., T. Rowe Price Fixed Income Series, Inc., T.
Rowe Price Personal Strategy Funds, Inc., T. Rowe Price Value Fund, Inc., T.
Rowe Price Capital Opportunity Fund, Inc., T. Rowe Price Corporate Income Fund,
Inc., T. Rowe Price Health Sciences Fund, Inc., T. Rowe Price Mid-Cap Value
Fund, Inc., Institutional Equity Funds, Inc., T. Rowe Price Financial Services
Fund, Inc., T. Rowe Price Diversified Small-Cap Growth Fund, Inc., T. Rowe Price
Tax-Efficient Balanced Fund, Inc., Reserve Investment Funds, Inc., T. Rowe Price
Media & Telecommunications Fund, Inc., and T. Rowe Price Real Estate Fund, Inc.
The Registrant and the fifty investment companies listed above, with the
exception of Institutional International Funds, Inc., and Institutional Equity
Funds, Inc., will be collectively referred to as the Price Funds. The investment
manager for Institutional Equity Funds, Inc., and the Price Funds, excluding T.
Rowe Price International Funds, Inc. and T. Rowe Price International Series,
Inc., is the Manager. Price-Fleming is the manager to T. Rowe Price
International
Funds, Inc., T. Rowe Price International Series, Inc. and Institutional
International Funds, Inc. and is 50% owned by TRP Finance, Inc., a subsidiary of
the Manager, 25% owned by Copthall Overseas Limited, a subsidiary of Robert
Fleming Holdings Limited, and 25% owned by Jardine Fleming International
Holdings Limited. In addition to the corporate insureds, the policies also cover
the officers, directors, and employees of each of the named insureds. The
premium is allocated among the named corporate insureds in accordance with the
provisions of Rule 17d-1(d)(7) under the Investment Company Act of 1940.
General. The Charter of the Corporation provides that to the fullest extent
permitted by Maryland or federal law, no director or officer of the Corporation
shall be personally liable to the Corporation or the holders of Shares for money
damages and each director and officer shall be indemnified by the Corporation;
provided, however, that nothing herein shall be deemed to protect any director
or officer of the Corporation against any liability to the Corporation of the
holders of Shares to which such director or officer would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office.
Article X, Section 10.01 of the Registrant's By-Laws provides as follows:
Section 10.01. Indemnification and Payment of Expenses in Advance. The
Corporation shall indemnify any individual ("Indemnitee") who is a present or
former director, officer, employee, or agent of the Corporation, or who is or
has been serving at the request of the Corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise, who, by reason of his position was, is, or is threatened to be
made, a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative
(hereinafter collectively referred to as a "Proceeding") against any judgments,
penalties, fines, settlements, and reasonable expenses (including attorneys'
fees) incurred by such Indemnitee in connection with any Proceeding, to the
fullest extent that such indemnification may be lawful under applicable Maryland
law, as from time to time amended. The Corporation shall pay any reasonable
expenses so incurred by such Indemnitee in defending a Proceeding in advance of
the final disposition thereof to the fullest extent that such advance payment
may be lawful under applicable Maryland Law, as from time to time amended.
Subject to any applicable limitations and requirements set forth in the
Corporation's Articles of Incorporation and in these By-Laws, any payment of
indemnification or advance of expenses shall be made in accordance with the
procedures set forth in applicable Maryland law, as from time to time amended.
Notwithstanding the foregoing, nothing herein shall protect or purport to
protect any Indemnitee against any liability to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office ("Disabling Conduct").
Anything in this Article X to the contrary notwithstanding, no
indemnification shall be made by the Corporation to any Indemnitee unless:
(a) there is a final decision on the merits by a court or other body
before whom the Proceeding was brought that the Indemnitee was not
liable by reason of Disabling Conduct; or
(b) in the absence of such a decision, there is a reasonable
determination, based upon a review of the facts, that the
Indemnitee was not liable by reason of Disabling Conduct, which
determination shall be made by:
(i) the vote of a majority of a quorum of directors who are neither
"interested persons" of the Corporation, as defined in Section
2(a)(19) of the Investment Company Act of 1940, nor parties to the
Proceeding; or
(ii) an independent legal counsel in a written opinion.
Anything in this Article X to the contrary notwithstanding, any advance of
expenses by the Corporation to any Indemnitee shall be made only upon the
undertaking by such Indemnitee to repay the advance unless it is ultimately
determined that such Indemnitee is entitled to indemnification as above
provided, and only if one of the following conditions is met:
(a) the Indemnitee provides a security for his undertaking; or
(b) the Corporation shall be insured against losses arising by reason
of any lawful advances; or
(c) there is a determination, based on a review of readily available
facts, that there is reason to believe that the Indemnitee will
ultimately be found entitled to indemnification, which
determination shall be made by:
(i) a majority of a quorum of directors who are neither "interested
persons" of the Corporation as defined in Section 2(a)(19) of the
Investment Company Act of 1940, nor parties to the Proceeding; or
(ii) an independent legal counsel in a written opinion.
Section 10.02 of the Registrant's By-Laws provides as follows:
Section 10.02. Insurance of Officers, Directors, Employees, and Agents. To
the fullest extent permitted by applicable Maryland law and by Section 17(h) of
the Investment Company Act of 1940, as from time to time amended, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee, or agent of the Corporation, or who is or
was serving at the request of the Corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or other
enterprise, against any liability asserted against him and incurred by him in or
arising out of his position, whether or not the Corporation would have the power
to indemnify him against such liability.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 28. Business and Other Connections of Investment Manager
M. David Testa, who is Chairman of the Board of the Manager, is also a
Vice-Chairman of the Board, Chief Investment Officer, Director, and Managing
Director of T. Rowe Price.
George J. Collins is a Director of the Manager and is also a Director of T. Rowe
Price.
D. William J. Garrett, a Director of the Manager, is Chairman of Robert Fleming
Securities Limited, a Director of Robert Fleming Holdings Limited ("Robert
Fleming Holdings"), a parent of the Manager which is a United Kingdom holding
company duly organized and existing under the laws of the United Kingdom, Robert
Fleming Management Services Limited, Robert Fleming & Co. Limited, and Fleming
Investments Limited. Mr. Garrett also serves as Director
and/or officer of other companies related to or affiliated with the above-listed
companies.
P. John Manser, a Director of the Manager, is Chief Executive of Robert Fleming
Holdings, Chairman of Robert Fleming & Co. Limited, Director of Jardine Fleming
Group Limited, Robert Fleming Management Services Limited, Fleming Investment
Management Limited, Robert Fleming Asset Management Limited, Jardine Fleming
Holdings Limited, and Robert Fleming Asset Management Limited and also serves as
a director of the U.K. Securities and Investments Board. Mr. Manser also serves
as Director and/or officer of other companies related to or affiliated with the
above-listed companies.
James S. Riepe, who is a Director of the Manager, is also a Vice-Chairman of the
Board, Director, and Managing Director of T. Rowe Price, and a Director of
Rhone-Poulenc Rorer, Inc.
George A. Roche, who is a Director and Vice President of the Manager, is also
Chairman of the Board, President, a Director, and Managing Director of T. Rowe
Price.
Henry C. T. Strutt, a Director of the Manager, is Managing Director and General
Manager of Jardine Fleming Holdings Ltd. and Director of Robert Fleming Holdings
Ltd.
Alvin M. Younger, Jr., who is Secretary and Treasurer of the Manager, is also
the Chief Financial Officer, Managing Director, Secretary, and Treasurer of T.
Rowe Price.
Martin G. Wade, Director and President of the Manager; Director, Robert Fleming
Holdings Limited and Robert Fleming Asset Management.
With the exception of Christopher D. Alderson, Peter B. Askew, Mark
Bickford-Smith, Ann B. Cranmer, Mark J. T. Edwards, Carol A. Eve, John R. Ford,
Sally Patterson, Nichola Pease, Christopher Rothery, James B. M. Seddon,
Benedict R. F. Thomas, Christine To, David J. L. Warren, and Martin G. Wade, all
officers of the Manager are officers and/or employees of Price Associates and
may also be officers and/or directors of one or more subsidiaries of Price
Associates and/or one or more of the registered investment companies which Price
Associates or the Manager serves as investment adviser. Mr. Ilott is an employee
of Fleming Investment Management Limited, an investment adviser registered under
the Investment Advisers Act of 1940. Ms. Cranmer is an employee of Fleming
Investment Management Limited. Mr. Wade, who is Director and President of the
Manager, is also a Non-Executive Director of Robert Fleming Holdings.
RPFI International Partners, L.P., is a Delaware limited partnership organized
in 1985 for the purpose of investing in a diversified group of small and
medium-sized non-U.S. companies. The Manager is the general partner of this
partnership, and
certain institutional investors, including advisory clients of the Manager, are
its limited partners.
See also "Management of Fund," in the Registrant's Statement of Additional
Information.
Item 29. Principal Underwriters.
(a) The principal underwriter for the Registrant is Investment
Services. Investment Services acts as the principal underwriter for
eighty-two Price Funds. Investment Services is a wholly owned
subsidiary of the Manager, is registered as a broker-dealer under
the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. Investment Services has
been formed for the limited purpose of distributing the shares of
the Price Funds and will not engage in the general securities
business. Since the Price Funds are sold on a no-load basis,
Investment Services will not receive any commissions or other
compensation for acting as principal underwriter.
(b) The address of each of the directors and officers of Investment
Services listed below is 100 East Pratt Street, Baltimore, Maryland
21202.
<TABLE>
<CAPTION>
Positions and Positions and
Offices With Offices With
Name Underwriter Registrant
<S> <C> <C>
James S. Riepe Chairman of the Board and Vice President
Director
Edward C. Bernard President and Director None
Henry H. Hopkins Vice President and Director Vice President
Charles E. Vieth Vice President and Director None
Patricia M. Archer Vice President None
Joseph C. Bonasorte Vice President None
Darrell N. Braman Vice President None
Ronae M. Brock Vice President None
Meredith C. Callanan Vice President None
Christine M. Carolan Vice President None
Joseph A. Carrier Vice President None
Laura H. Chasney Vice President None
Renee M. Christoff Vice President None
Victoria C. Collins Vice President None
Christopher W. Dyer Vice President None
Christine S. Fahlund Vice President None
Forrest R. Foss Vice President None
Andrea G. Griffin Vice President None
Douglas E. Harrison Vice President None
David J. Healy Vice President None
Joseph P. Healy Vice President None
Walter J. Helmlinger Vice President None
Eric G. Knauss Vice President None
Sharon R. Krieger Vice President None
Keith W. Lewis Vice President None
Sarah McCafferty Vice President None
Maurice A. Minerbi Vice President None
Nancy M. Morris Vice President None
George A. Murnaghan Vice President None
Steven E. Norwitz Vice President None
Kathleen M. O'Brien Vice President None
David Oestricher Vice President None
Pamela D. Preston Vice President None
Lucy B. Robins Vice President None
John R. Rockwell Vice President None
Christopher S. Ross Vice President None
Kenneth J. Rutherford Vice President None
Kristin E. Seeberger Vice President None
William F. Wendler II Vice President None
Jane F. White Vice President None
Thomas R. Woolley Vice President None
Alvin M. Younger, Jr. Secretary and Treasurer None
Mark S. Finn Controller & Vice President None
Richard J. Barna Assistant Vice President None
Catherine L.Berkenkemper Assistant Vice President None
Robin C. B. Binkley Assistant Vice President None
Patricia S. Butcher Assistant Vice President Assistant
Secretary
Cheryl L. Emory Assistant Vice President None
John A. Galateria Assistant Vice President None
Edward F. Giltenan Assistant Vice President None
Janelyn A. Healey Assistant Vice President None
Kathleen Hussey Assistant Vice President None
Sandra J. Kiefler Assistant Vice President None
Valerie King-Calloway Assistant Vice President None
Steven A. Larson Assistant Vice President None
Jeanette M. LeBlanc Assistant Vice President None
C. Lillian Matthews Assistant Vice President None
Janice D. McCrory Assistant Vice President None
Danielle N. Nicholson Assistant Vice President None
Barbara A. O'Connor Assistant Vice President None
JeanneMarie B. Patella Assistant Vice President None
Carin C. Quinn Assistant Vice President None
David A. Roscum Assistant Vice President None
Arthur J. Silber Assistant Vice President None
Jerome Tuccille Assistant Vice President None
Linda C. Wright Assistant Vice President None
Nolan L. North Assistant Treasurer None
Barbara A. Van Horn Assistant Secretary None
</TABLE>
(c) Not applicable. Investment Services will not receive any
compensation with respect to its activities as underwriter for the
Price Funds since the Price Funds are sold on a no-load basis.
Item 30. Location of Accounts and Records.
All accounts, books, and other documents required to be maintained by
Institutional International Funds, Inc. under Section 31(a) of the Investment
Company Act of 1940 and the rules thereunder will be maintained by Institutional
International Funds, Inc. at its offices at 100 East Pratt Street, Baltimore,
Maryland 21202. Transfer, dividend disbursing, and shareholder service
activities are performed T. Rowe Price Services, Inc., at 100 East Pratt Street,
Baltimore, Maryland 21202. Custodian activities for Institutional International
Funds, Inc. are performed at State Street Bank and Trust Company's Service
Center (State Street South), 1776 Heritage Drive, Quincy, Massachusetts 02171.
Custody of Registrant's portfolio securities which are purchased outside
the United States is maintained by The Chase Manhattan Bank, N.A., London, in
its foreign branches or with other U.S. banks. The Chase Manhattan Bank, N.A.,
London, is located at Woolgate House, Coleman Street, London EC2P 2HD England.
Item 31. Management Services.
Registrant is not a party to any management-related service contract, other
than as set forth in the Prospectus.
Item 32. Undertakings.
(a) Each series of the Registrant agrees to furnish, upon request and
without charge, a copy of its latest Annual Report to each person
to whom a prospectus is delivered.
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Baltimore, State of Maryland, this
February 20, 1998.
Institutional International Funds, Inc.
/s/M. David Testa
By: M. David Testa
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/M. David Testa Chairman of the Board February 20, 1998
M. David Testa (Chief Executive Officer)
/s/Carmen F. Deyesu Treasurer February 20, 1998
Carmen F. Deyesu (Chief Financial Officer)
/s/Martin G. Wade President and February 20, 1998
Martin G. Wade Director
* Director February 20, 1998
Anthony W. Deering
* Director February 20, 1998
Donald W. Dick, Jr.
* Director February 20, 1998
Paul M. Wythes
/s/Henry H. Hopkins Attorney-In-Fact February 20, 1998
Henry H. Hopkins
The Custodian Agreement dated January 28, 1998, between State Street Bank
and Trust Company and T. Rowe Price Funds.
Custodian Agreement
This Agreement is made as of January 28, 1998 by and between
each entity set forth on Appendix A hereto (as such Appendix A
may be amended from time to time) which executes a copy of this
Agreement (each referred to herein as the "Fund"), and State
Street Bank and Trust Company, a Massachusetts trust company with
its principal place of business at 225 Franklin Street, Boston,
Massachusetts 02110 (the "Custodian").
Witnesseth:
Whereas, each Fund desires to retain the Custodian to act as
custodian of certain of the assets of the Fund, and the Custodian
is willing to provide such services to each Fund, upon the terms
and conditions hereinafter set forth; and
Whereas, except as otherwise set forth herein, this Agreement
is intended to supersede that certain custodian contract among
the parties hereto dated September 28, 1987, as amended; and
Whereas, the Funds have retained Chase Manhattan Bank, N.A. to
act as the Funds' custodian with respect to the assets of each
such Fund to be held outside of the United States of America
(except as otherwise set forth in this Agreement) pursuant to a
written custodian agreement (the "Foreign Custodian Agreement"),
Now, Therefore, in consideration of the mutual covenants and
agreements hereinafter contained, each of the parties hereto
agrees as follows:
Section 1. Employment of Custodian and Property to be Held by It.
Each Fund hereby employs the Custodian as the custodian of
certain of its assets, including those securities it desires to
be held within the United States of America ("domestic
securities") and those securities it desires to be held outside
the United States of America (the "United States") which are (i)
not held on the Funds' behalf by Chase Manhattan Bank, N.A. pursuant
to the Foreign Custodian Agreement and (ii) described with
greater particularity in Section 3 hereof (such securities shall
be referred to herein as "foreign securities"). Each Fund agrees
to deliver to the Custodian all domestic securities, foreign
securities and cash owned by it from time to time, and all
payments of income, payments of principal or capital
distributions received by it with respect to securities held by
it hereunder, and the cash consideration received by it for such
new or treasury shares of capital stock of each Fund as may be
issued or sold from time to time ("Shares"). The Custodian shall
not be responsible for any property of any Fund held or received
by such Fund (i) not delivered to the Custodian, or (ii) held in
the custody of Chase Manhattan Bank N.A.
The Custodian is authorized to employ one or more
sub-custodians located within the United States, provided that
the Custodian shall have obtained the written acknowledgment of
the Fund with respect to such employment. The Custodian is
authorized to employ sub-custodians located outside the United
States as noted on Schedule A attached hereto (as such Schedule A
may be amended from time to time). The Custodian shall have no
more or less responsibility or liability to any Fund on account
of any actions or omissions of any sub-custodian so employed than
any such sub-custodian has to the Custodian and shall not release
any sub-custodian from any responsibility or liability unless so
agreed in writing by the Custodian and the applicable Fund. With
the exception of State Street Bank and Trust Company (London
branch), the Custodian shall not be liable for losses arising
from the bankruptcy, insolvency or receivership of any
sub-custodian located outside the United States.
Section 2. Duties of the Custodian with Respect to Property of the Funds
Held By the Custodian in the United States.
Section 2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of each Fund all non-cash
property to be held by it in the United States, including all
domestic securities owned by the Fund other than (a) securities
which are maintained pursuant to Section 2.9 in a clearing agency
which acts as a securities depository or in a book-entry system
authorized by the United States Department of the Treasury and
certain federal agencies (each, a "U.S. Securities System") and
(b) commercial paper of an issuer for which the Custodian acts as
issuing and paying agent ("Direct Paper") which is deposited
and/or maintained in the Direct Paper system of the Custodian
(the "Direct Paper System") pursuant to Section 2.10.
Section 2.2 Delivery of Investments. The Custodian shall
release and deliver domestic investments owned by a Fund held by
the Custodian or in a U.S. Securities System account of the
Custodian or in the Custodian's Direct Paper System account
("Direct Paper System Account") only upon receipt of Proper
Instructions, which may be continuing instructions when agreed to
by the parties, and only in the following cases:
1) Upon sale of such investments for the account of the
Fund and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such investments
entered into by the Fund;
3) In the case of a sale effected through a U.S.
Securities System, in accordance with the provisions
of Section 2.9 hereof;
4) To the depository agent in connection with tender or
other similar offers for portfolio investments of
the Fund;
5) To the issuer thereof or its agent when such
investments are called, redeemed, retired or
otherwise become payable; provided that, in any such
case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Fund or into the name of any
nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed pursuant
to Section 2.8 or into the name or nominee name of
any sub-custodian appointed pursuant to Section 1;
or for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided
that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such investments for the account of
the Fund, to the broker or its clearing agent,
against a receipt, for examination in accordance
with usual "street delivery" custom; provided that
in any such case the Custodian shall have no
responsibility or liability for any loss arising
from the delivery of such investments prior to
receiving payment for such investments except as may
arise from the Custodian's own negligence or willful
misconduct;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the investments of
the issuer of such investments, or pursuant to
provisions for conversion contained in such
investments, or pursuant to any deposit agreement;
provided that, in any such case, the new investments
and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar
investments, the surrender thereof in the exercise
of such warrants, rights or similar investments or
the surrender of interim receipts or temporary
investments for definitive investments; provided
that, in any such case, the new investments and
cash, if any, are to be delivered to the Custodian
or against a receipt;
10) For delivery in connection with any loans of
investments made on behalf of the Fund, but only
against receipt of adequate collateral as agreed
upon from time to time by the Fund or its duly-
appointed agent (which may be in the form of cash or
obligations issued by the United States government,
its agencies or instrumentalities, or such other
property as the Fund may agree), except that in
connection with any loans for which collateral is to
be credited to the Custodian's account in the
book-entry system authorized by the U.S. Department
of the Treasury, the Custodian will not be held
liable or responsible for the delivery of
investments owned by the Fund prior to the receipt
of such collateral in the absence of the Custodian's
negligence or willful misconduct;
11) For delivery as security in connection with any
borrowing by the Fund requiring a pledge of assets
by the Fund, but only against receipt of amounts
borrowed, except where additional collateral is
required to secure a borrowing already made, subject
to Proper Instructions, further securities may be
released and delivered for that purpose;
12) For delivery in accordance with the provisions of
any agreement among the Fund, the Custodian and a
broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a
member of The National Association of Securities
Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation, the
rules of any registered national securities exchange
or of any similar organization or organizations, or
under the Investment Company Act of 1940, as amended
from time to time (the "1940 Act"), regarding escrow
or other arrangements in connection with
transactions by the Fund;
13) For delivery in accordance with the provisions of
any agreement among the Fund, the Custodian, and a
Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with
the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any
similar organization or organizations, or under the
1940 Act, regarding account deposits in connection
with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent
for the Fund (the "Transfer Agent"), for delivery to
such Transfer Agent or to the holders of shares in
connection with distributions in kind, as may be
described from time to time in the Fund's currently
effective prospectus, statement of additional
information or other offering documents (all, as
amended, supplemented or revised from time to time,
the "Prospectus"), in satisfaction of requests by
holders of Shares for repurchase or redemption; and
15) For any other purpose, but only upon receipt of
Proper Instructions specifying (a) the investments
to be delivered, (b) setting forth the purpose for
which such delivery is to be made, and (c) naming
the person or persons to whom delivery of such
investments shall be made.
Section 2.3 Registration of Investments. Domestic investments
held by the Custodian (other than bearer securities) shall be
registered in the name of the Fund or in the name of any nominee
of the Fund or of any nominee of the Custodian which nominee
shall be assigned exclusively to the Fund, unless the Fund has
authorized in writing the appointment of a nominee to be used in
common with other registered investment companies having the same
investment adviser as the Fund, or in the name or nominee name of
any agent appointed pursuant to Section 2.8 or in the name or
nominee name of any sub-custodian appointed pursuant to Section
1. All securities accepted by the Custodian on behalf of the
Fund under the terms of this Agreement shall be in good
deliverable form. If, however, the Fund directs the Custodian to
maintain securities in "street name", the Custodian shall utilize
its best efforts only to timely collect income due the Fund on
such securities and to notify the Fund of relevant corporate
actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
Section 2.4 Bank Accounts. The Custodian shall open and
maintain a separate bank account or accounts in the United States
in the name of the Fund, subject only to draft or order by the
Custodian acting pursuant to the terms of this Agreement, and
shall hold in such account or accounts, subject to the provisions
hereof, all cash received by it from or for the account of the
Fund, other than cash maintained by the Fund in a bank account
established and used in accordance with Rule 17f-3 under the 1940
Act. Monies held by the Custodian for the Fund may be deposited
by the Custodian to its credit as custodian in the banking
department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable
in the performance of its duties hereunder; provided, however,
that every such bank or trust company shall be qualified to act
as a custodian under the 1940 Act, and that each such bank or
trust company and the funds to be deposited with each such bank
or trust company shall be approved by vote of a majority of the
board of directors or the board of trustees of the applicable
Fund (as appropriate and in each case, the "Board"). Such funds
shall be deposited by the Custodian in its capacity as custodian
and shall be withdrawable by the Custodian only in that capacity.
Section 2.5 Collection of Income. Subject to the provisions
of Section 2.3, the Custodian shall collect on a timely basis all
income and other payments with respect to United States
registered investments held hereunder to which the Fund shall be
entitled either by law or pursuant to custom in the investments
business, and shall collect on a timely basis all income and
other payments with respect to United States bearer investments
if, on the date of payment by the issuer, such investments are
held by the Custodian or its agent thereof and shall credit such
income, as collected, to the Fund's custodian account. Without
limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items
requiring presentation as and when they become due, collect
interest when due on investments held hereunder, and receive and
collect all stock dividends, rights and other items of like
nature as and when they become due and payable. With respect to
income due the Fund on United States investments of the Fund
loaned (pursuant to the provisions of Section 2.2 (10)) in
accordance with a separate agreement between the Fund and the
Custodian in its capacity as lending agent, collection thereof
shall be in accordance with the terms of such agreement. Except
as otherwise set forth in the immediately preceding sentence,
income due the Fund on United States investments of the Fund
loaned pursuant to the provisions of Section 2.2 (10) shall be
the responsibility of the Fund; the Custodian will have no duty
or responsibility in connection therewith other than to provide
the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the
Custodian of the income to which the Fund is properly entitled.
Section 2.6 Payment of Fund Monies. Upon receipt of Proper
Instructions, which may be continuing instructions when agreed to
by the parties, the Custodian shall, from monies of the Fund held
by the Custodian, pay out such monies in the following cases
only:
1) Upon the purchase of domestic investments, options,
futures contracts or options on futures contracts
for the account of the Fund but only (a) against the
delivery of such investments, or evidence of title
to such options, futures contracts or options on
futures contracts, to the Custodian (or any bank,
banking firm or trust company doing business in the
United States or abroad which is qualified under the
1940 Act to act as a custodian and has been
designated by the Custodian as its agent for this
purpose in accordance with Section 2.8) registered
in the name of the Fund or in the name of a nominee
of the Custodian referred to in Section 2.3 hereof
or in proper form for transfer; (b) in the case of a
purchase effected through a U.S. Securities System,
in accordance with the conditions set forth in
Section 2.9 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance
with the conditions set forth in Section 2.10
hereof; or (d) for transfer to a time deposit
account of the Fund in any bank, whether domestic or
foreign, such transfer may be effected prior to
receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions;
2) In connection with conversion, exchange or surrender
of investments owned by the Fund as set forth in
Section 2.2 hereof;
3) For the redemption or repurchase of Shares as set
forth in Section 4 hereof;
4) For the payment of any expense or liability incurred
by the Fund, including but not limited to the
following payments for the account of the Fund:
interest, taxes, management fees, accounting fees,
transfer agent fees, legal fees, and operating
expenses of the Fund (whether or not such expenses
are to be in whole or part capitalized or treated as
deferred expenses);
5) For the payment of any dividends declared by the
Board;
6) For payment of the amount of dividends received in
respect of investments sold short;
7) For repayment of a loan upon redelivery of pledged
securities and upon surrender of the note(s), if
any, evidencing the loan; or
8) In connection with any repurchase agreement entered
into by the Fund with respect to which the
collateral is held by the Custodian, the Custodian
shall act as the Fund s "securities intermediary"(
as that term is defined in Part 5 of Article 8 of
the Massachusetts Uniform Commercial Code, as
amended), and, as securities intermediary, the
Custodian shall take the following steps on behalf
of the Fund: (a) provide the Fund with notification
of the receipt of the purchased securities, and (b),
by book-entry identify on the books of the Custodian
as belonging to the Fund uncertificated securities
registered in the name of the Fund and held in the
Custodian s account at the Federal Reserve Bank. In
connection with any repurchase agreement entered
into by the Fund with respect to which the
collateral is not held by the Custodian, the
Custodian shall (a) provide the Fund with such
notification as it may receive with respect to such
collateral, and (b), by book-entry or otherwise,
identify as belonging to the Fund securities as
shown in the Custodian s account on the books of the
entity appointed by the Fund to hold such
collateral.
9) For any other purpose, but only upon receipt of
Proper Instructions specifying (a) the amount of
such payment, (b) setting forth the purpose for
which such payment is to be made, and (c) naming the
person or persons to whom such payment is to be
made.
Section 2.7 Liability for Payment in Advance of Receipt of
Securities Purchased. In any and every case where payment for
purchase of domestic securities for the account of the Fund is
made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from
the Fund to so pay in advance, the Custodian shall be absolutely
liable to the Fund for such securities to the same extent as if
the securities had been received by the Custodian.
Section 2.8 Appointment of Agents. The Custodian may at any
time or times in its discretion appoint (and may at any time
remove) any other bank or trust company, which is itself
qualified under the 1940 Act to act as a custodian, as its agent
to carry out such of the provisions of this Section 2 as the
Custodian may from time to time direct; provided, however, that
the appointment of any such agent shall not relieve the Custodian
of its responsibilities or liabilities hereunder.
Section 2.9 Deposit of Investments in U.S. Securities Systems.
The Custodian may deposit and/or maintain domestic investments
owned by the Fund in a U.S. Securities System in accordance with
applicable Federal Reserve Board and United States Securities and
Exchange Commission ("SEC") rules and regulations, if any,
subject to the following provisions:
1) The Custodian may keep domestic investments of the
Fund in a U.S. Securities System provided that such
investments are represented in an account of the
Custodian in the U.S. Securities System ("Account")
which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of the Custodian with respect to
domestic investments of the Fund which are
maintained in a U.S. Securities System shall
identify by book-entry those investments belonging
to the Fund;
3) The Custodian shall pay for domestic investments
purchased for the account of the Fund upon (i)
receipt of advice from the U.S. Securities System
that such investments have been transferred to the
Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian
shall transfer domestic investments sold for the
account of the Fund upon (i) receipt of advice from
the U.S. Securities System that payment for such
investments has been transferred to the Account, and
(ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for
the account of the Fund. Copies of all advices from
the U.S. Securities System of transfers of domestic
investments for the account of the Fund shall
identify the Fund, be maintained for the Fund by the
Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish
the Fund confirmation of each transfer to or from
the account of the Fund in the form of a written
advice or notice and shall furnish to the Fund
copies of daily transaction sheets reflecting each
day's transactions in the U.S. Securities System for
the account of the Fund;
4) The Custodian shall provide the Fund with any report
obtained by the Custodian on the U.S. Securities
System's accounting system, internal accounting
control and procedures for safeguarding domestic
investments deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund the
initial or annual certificate, as the case may be,
described in Section 10 hereof; and
6) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to
the Fund for any loss or damage to the Fund
resulting from use of the U.S. Securities System by
reason of any negligence, misfeasance or misconduct
of the Custodian or any of its agents or of any of
its or their employees, or from failure of the
Custodian or any such agent to enforce effectively
such rights as it may have against the U.S.
Securities System. At the election of the Fund, the
Fund shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim
against the U.S. Securities System or any other
person which the Custodian may have as a consequence
of any such loss, expense or damage if and to the
extent that the Fund has not been made whole for any
such loss, expense or damage.
Section 2.10 Fund Assets Held in the Direct Paper System. The
Custodian may deposit and/or maintain investments owned by the
Fund in the Direct Paper System subject to the following
provisions:
1) No transaction relating to investments in the Direct
Paper System will be effected in the absence of
Proper Instructions;
2) The Custodian may keep investments of the Fund in
the Direct Paper System only if such investments are
represented in the Direct Paper System Account,
which account shall not include any assets of the
Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
3) The records of the Custodian with respect to
investments of the Fund which are maintained in the
Direct Paper System shall identify by book-entry
those investments belonging to the Fund;
4) The Custodian shall pay for investments purchased
for the account of the Fund upon the making of an
entry on the records of the Custodian to reflect
such payment and transfer of investments to the
account of the Fund. The Custodian shall transfer
investments sold for the account of the Fund upon
the making of an entry on the records of the
Custodian to reflect such transfer and receipt of
payment for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation of
each transfer to or from the account of the Fund, in
the form of a written advice or notice, of Direct
Paper on the next business day following such
transfer and shall furnish to the Fund copies of
daily transaction sheets reflecting each day's
transaction in the Direct Paper System for the
account of the Fund; and
6) The Custodian shall provide the Fund with any report
on its system of internal accounting control as the
Fund may reasonably request from time to time.
Section 2.11 Segregated Account. The Custodian shall, upon
receipt of Proper Instructions, establish and maintain a
segregated account or accounts for and on behalf of the Fund,
into which account or accounts may be transferred cash and/or
investments, including investments maintained in an account by
the Custodian pursuant to Section 2.10 hereof, (i) in accordance
with the provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the Exchange Act
and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange (or the Commodity
Futures Trading Commission or any registered contract market), or
of any similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the Fund,
(ii) for purposes of segregating cash or government investments
in connection with options purchased, sold or written by the Fund
or commodity futures contracts or options thereon purchased or
sold by the Fund, (iii) for the purposes of compliance by the
Fund with the procedures required by 1940 Act Release No. 10666,
or any other procedures subsequently required under the 1940 Act
relating to the maintenance of segregated accounts by registered
investment companies, and (iv) for other purposes, but only, in
the case of clause (iv) upon receipt of Proper Instructions
specifying (a) the investments to be delivered, (b) setting forth
the purpose for which such delivery is to be made, and (c) naming
the person or persons to whom delivery of such investments shall
be made.
Section 2.12 Ownership Certificates for Tax Purposes. The
Custodian shall execute ownership and other certificates and
affidavits for all United States federal and state tax purposes
in connection with receipt of income or other payments with
respect to domestic investments of the Fund held by it hereunder
and in connection with transfers of such investments.
Section 2.13 Proxies. The Custodian shall, with respect to
the domestic investments held hereunder, cause to be promptly
executed by the registered holder of such investments, if the
investments are registered otherwise than in the name of the Fund
or a nominee of the Fund, all proxies without indication of the
manner in which such proxies are to be voted, and shall promptly
deliver to the Fund such proxies, all proxy soliciting materials
received by the Custodian and all notices received relating to
such investments.
Section 2.14 Communications Relating to Fund Investments. Subject
to the provisions of Section 2.3, the Custodian shall transmit
promptly to the Fund all written information (including, without
limitation, pendency of calls and maturities of domestic
investments and expirations of rights in connection therewith and
notices of exercise of call and put options written by the Fund
and the maturity of futures contracts purchased or sold by the
Fund) received by the Custodian in connection with the domestic
investments being held for the Fund pursuant to this Agreement.
With respect to tender or exchange offers, the Custodian shall
transmit to the Fund all written information received by the
Custodian, any agent appointed pursuant to Section 2.8 hereof, or
any sub-custodian appointed pursuant to Section 1 hereof, from
issuers of the domestic investments whose tender or exchange is
sought and from the party (or his agents) making the tender or
exchange offer. If the Fund desires to take action with respect
to any tender offer, exchange offer or any other similar
transaction, the Fund shall notify the Custodian at least two (2)
New York Stock Exchange business days prior to the time such
action must be taken under the terms of the tender, exchange
offer or other similar transaction, and it will be the
responsibility of the Custodian to timely transmit to the
appropriate person(s) such notice. Where the Fund provides the
Custodian with less than two (2) New York Stock Exchange business
days notice of its desired action, the Custodian shall use its
best efforts to timely transmit the Fund's notice to the
appropriate person. It is expressly noted that the parties may
agree to alternative procedures with respect to such two (2) New
York Stock Exchange business days notice period on a selective
and individual basis.
Section 2.15 Reports to Fund by Independent Public Accountants. The
Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public
accountants on the accounting system, internal accounting control
and procedures for safeguarding investments, futures contracts
and options on futures contracts, including domestic investments
deposited and/or maintained in a U.S. Securities System, relating
to the services provided by the Custodian under this Agreement.
Such reports shall be of sufficient scope and detail, as may
reasonably be required by the Fund, to provide reasonable
assurance that any material inadequacies would be disclosed by
such examination, and if there are no such inadequacies the
reports shall so state.
Section 3. Duties of the Custodian with Respect to Certain Property of
the Funds Held Outside of the United States
Section 3.1 Definitions. The following capitalized terms
shall have the respective following meanings:
"Foreign Securities System" means a clearing agency or a
securities depository listed on Schedule A hereto.
"Foreign Sub-Custodian" means a foreign banking institution set
forth on Schedule A hereto.
Section 3.2 Holding Securities. The Custodian shall identify
on its books as belonging to the Funds the foreign securities
held by each Foreign Sub-Custodian or Foreign Securities System.
The Custodian may hold foreign securities for all of its
customers, including the Funds, with any Foreign Sub-Custodian in
an account that is identified as belonging to the Custodian for
the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to foreign securities of
the Funds which are maintained in such account shall identify
those securities as belonging to the Funds and (ii) the Custodian
shall require that securities so held by the Foreign Sub-
Custodian be held separately from any assets of such Foreign Sub-
Custodian or of other customers of such Foreign Sub-Custodian.
Section 3.3 Foreign Securities Systems. Foreign securities
shall be maintained in a Foreign Securities System in a
designated country only through arrangements implemented by the
Foreign Sub-Custodian in such country pursuant to the terms of
this Agreement.
Section 3.4 Transactions in Foreign Custody Account.
3.4.1. Delivery of Foreign Securities. The Custodian or a
Foreign Sub-Custodian shall release and deliver foreign
securities of the Funds held by such Foreign Sub-Custodian, or in
a Foreign Securities System account, only upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
(i) upon the sale of such foreign securities for the
Funds in accordance with reasonable market practice
in the country where such foreign securities are
held or traded, including, without limitation: (A)
delivery against expectation of receiving later
payment; or (B) in the case of a sale effected
through a Foreign Securities System in accordance
with the rules governing the operation of the
Foreign Securities System;
(ii) in connection with any repurchase agreement related
to foreign securities;
(iii) to the depository agent in connection with tender or
other similar offers for foreign securities of the
Funds;
(iv) to the issuer thereof or its agent when such foreign
securities are called, redeemed, retired or
otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer
into the name of the Custodian (or the name of the
respective Foreign Sub-Custodian or of any nominee
of the Custodian or such Foreign Sub-Custodian) or
for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units;
(vi) to brokers, clearing banks or other clearing agents
for examination or trade execution in accordance
with market custom; provided that in any such case
the Foreign Sub-Custodian shall have no
responsibility or liability for any loss arising
from the delivery of such securities prior to
receiving payment for such securities except as may
arise from the Foreign Sub-Custodian's own
negligence or willful misconduct;
(vii) for exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign
securities, the surrender thereof in the exercise of
such warrants, rights or similar securities or the
surrender of interim receipts or temporary
securities for definitive securities;
(ix) or delivery as security in connection with any
borrowing by the Funds requiring a pledge of assets
by the Funds;
(x) in connection with trading in options and futures
contracts, including delivery as original margin and
variation margin;
(xi) in connection with the lending of foreign
securities; and
(xii) for any other proper purpose, but only upon receipt
of Proper Instructions specifying the foreign
securities to be delivered, setting forth the
purpose for which such delivery is to be made,
declaring such purpose to be a proper Fund purpose,
and naming the person or persons to whom delivery of
such securities shall be made.
3.4.2. Payment of Fund Monies. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, the Custodian shall pay out, or
direct the respective Foreign Sub-Custodian or the respective
Foreign Securities System to pay out, monies of a Fund in the
following cases only:
(i) upon the purchase of foreign securities for the
Fund, unless otherwise directed by Proper
Instructions, by (A) delivering money to the seller
thereof or to a dealer therefor (or an agent for
such seller or dealer) against expectation of
receiving later delivery of such foreign securities;
or (B) in the case of a purchase effected through a
Foreign Securities System, in accordance with the
rules governing the operation of such Foreign
Securities System;
(ii) in connection with the conversion, exchange or
surrender of foreign securities of the Fund;
(iii) for the payment of any expense or liability of the
Fund, including but not limited to the following
payments: interest, taxes, investment advisory
fees, transfer agency fees, fees under this
Agreement, legal fees, accounting fees, and other
operating expenses;
(iv) for the purchase or sale of foreign exchange or
foreign exchange contracts for the Fund, including
transactions executed with or through the Custodian
or its Foreign Sub-Custodians;
(v) in connection with trading in options and futures
contracts, including delivery as original margin and
variation margin;
(vii) in connection with the borrowing or lending of
foreign securities; and
(viii) for any other proper Fund purpose, but only upon
receipt of Proper Instructions specifying the amount
of such payment, setting forth the purpose for which
such payment is to be made, declaring such purpose
to be a proper Fund purpose, and naming the person
or persons to whom such payment is to be made.
3.4.3. Market Conditions. Notwithstanding any provision of
this Agreement to the contrary, settlement and payment for
foreign securities received for the account of the Funds and
delivery of foreign securities maintained for the account of the
Funds may be effected in accordance with the customary
established securities trading or processing practices and
procedures in the country or market in which the transaction
occurs, including, without limitation, delivering foreign
securities to the purchaser thereof or to a dealer therefor (or
an agent for such purchaser or dealer) with the expectation of
receiving later payment for such foreign securities from such
purchaser or dealer.
Section 3.5 Registration of Foreign Securities. The foreign
securities maintained in the custody of a Foreign Custodian
(other than bearer securities) shall be registered in the name of
the applicable Fund or in the name of the Custodian or in the
name of any Foreign Sub-Custodian or in the name of any nominee
of the foregoing, and the Fund agrees to hold any such nominee
harmless from any liability as a holder of record of such foreign
securities. The Custodian or a Foreign Sub-Custodian shall not
be obligated to accept securities on behalf of a Fund under the
terms of this Agreement unless the form of such securities and
the manner in which they are delivered are in accordance with
reasonable market practice.
Section 3.6 Bank Accounts. A bank account or bank accounts
opened and maintained outside the United States on behalf of a
Fund with a Foreign Sub-Custodian shall be subject only to draft
or order by the Custodian or such Foreign Sub-Custodian, acting
pursuant to the terms of this Agreement to hold cash received by
or from or for the account of the Fund.
Section 3.7 Collection of Income. The Custodian shall use
reasonable commercial efforts to collect all income and other
payments with respect to the foreign securities held hereunder to
which the Funds shall be entitled and shall credit such income,
as collected, to the applicable Fund. In the event that
extraordinary measures are required to collect such income, the
Fund and the Custodian shall consult as to such measures and as
to the compensation and expenses of the Custodian relating to
such measures.
Section 3.8 Proxies. With respect to the foreign
securities held under this Section 3, the Custodian will use
reasonable commercial efforts to facilitate the exercise of
voting and other shareholder proxy rights, subject always to the
laws, regulations and practical constraints that may exist in the
country where such securities are issued. The Fund acknowledges
that local conditions, including lack of regulation, onerous
procedural obligations, lack of notice and other factors may have
the effect of severely limiting the ability of the Fund to
exercise shareholder rights.
Section 3.9 Communications Relating to Foreign Securities. The
Custodian shall transmit promptly to the Fund written information
(including, without limitation, pendency of calls and maturities
of foreign securities and expirations of rights in connection
therewith) received by the Custodian in connection with the
foreign securities being held for the account of the Fund. With
respect to tender or exchange offers, the Custodian shall
transmit promptly to the Fund written information so received by
the Custodian in connection with the foreign securities whose
tender or exchange is sought or from the party (or its agents)
making the tender or exchange offer.
Section 3.10 Liability of Foreign Sub-Custodians and Foreign
Securities Systems. Each agreement pursuant to which the Custodian
employs as a Foreign Sub-Custodian shall, to the extent possible,
require the Foreign Sub-Custodian to exercise reasonable care in
the performance of its duties and, to the extent possible, to
indemnify, and hold harmless, the Custodian from and against any
loss, damage, cost, expense, liability or claim arising out of or
in connection with the Foreign Sub-Custodian's performance of
such obligations. At the Fund's election, the Funds shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claims against a Foreign Sub-Custodian as a
consequence of any such loss, damage, cost, expense, liability or
claim if and to the extent that the Funds have not been made
whole for any such loss, damage, cost, expense, liability or
claim.
Section 3.11 Tax Law. The Custodian shall have no
responsibility or liability for any obligations now or hereafter
imposed on the Fund or the Custodian as custodian of the Funds by
the tax law of the United States or of any state or political
subdivision thereof. It shall be the responsibility of the Fund
to notify the Custodian of the obligations imposed on the Fund or
the Custodian as custodian of the Funds by the tax law of
countries set forth on Schedule A hereto, including
responsibility for withholding and other taxes, assessments or
other governmental charges, certifications and governmental
reporting. The sole responsibility of the Custodian with regard
to such tax law shall be to use reasonable efforts to assist the
Fund with respect to any claim for exemption or refund under the
tax law of countries for which the Fund has provided such
information.
Section 4. Payments for Repurchases or Redemptions and Sales of Shares.
From such funds as may be available for the purpose, the
Custodian shall, upon receipt of instructions from the Transfer
Agent, make funds available for payment to holders of Shares
which have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the
redemption or repurchase of Shares, the Custodian is authorized
upon receipt of, and in accordance with, instructions from the
Transfer Agent to wire funds to or through a commercial bank
designated by the redeeming shareholders. In connection with the
redemption or repurchase of Shares, the Custodian shall honor
checks drawn on the Custodian by a holder of Shares, which checks
have been furnished by the Fund to the holder of Shares, when
presented to the Custodian in accordance with such written
procedures and controls as may be mutually agreed upon from time
to time between the Fund and the Custodian.
The Custodian shall receive from the distributor for the
Shares or from the Transfer Agent and deposit to the account of
the Fund such payments as are received by the distributor or the
Transfer Agent, as the case may be, for Shares issued or sold
from time to time. The Custodian will notify the Fund and the
Transfer Agent of any payments for Shares received by it from
time to time.
Section 5. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board to
keep the books of account of the Fund and/or compute the net
asset value per Share of the outstanding Shares or, if directed
in writing to do so by the Fund, shall itself keep such books of
account and/or compute such net asset value per Share. If so
directed, the Custodian shall also (i) calculate daily the net
income of the Fund as described in the Prospectus and shall
advise the Fund and the Transfer Agent daily of the total amounts
of such net income, and/or (ii) advise the Transfer Agent
periodically of the division of such net income among its various
components. The calculations of the net asset value per share
and the daily income of the Fund shall be made at the time or
times described from time to time in the Prospectus.
Section 6. Proper Instructions.
"Proper Instructions," as such term is used throughout this
Agreement, means either (i) a writing, including a facsimile
transmission, signed by one or more persons as set forth on, and
in accordance with, an "Authorized Persons List," as such term is
defined herein (each such instruction a "Written Proper
Instruction"), (ii) a "Client Originated Electronic Financial
Instruction," as such term is defined in the Data Access Services
Addendum hereto, given in accordance with the terms of such
Addendum, or (iii) instructions received by the Custodian from a
third party in accordance with any three-party agreement which
requires a segregated asset account in accordance with Section
2.11.
Each Written Proper Instruction shall set forth a brief
description of the type of transaction involved (choosing from
among the types of transactions set forth on the Authorized
Persons List), including a specific statement of the purpose for
which such action is requested, and any modification to a Written
Proper Instruction must itself be a Written Proper Instruction
and subject to all the provisions herein relating to Written
Proper Instructions. The Fund will provide the Custodian with an
"Authorized Persons List," which list shall set forth (a) the
names of the individuals (each an "Authorized Person") who are
authorized by the Board to give Written Proper Instructions with
respect to the transactions described therein, and (b) the number
of Authorized Persons whose signature or approval, as the case
may be, is necessary for the Custodian to be able to act in
accordance with such Written Proper Instructions with respect to
a particular type of transaction. The Custodian may accept oral
instructions or instructions delivered via electronic mail as
Proper Instructions if the Custodian reasonably believes such
instructions to have been given by an Authorized Person or
Persons (as appropriate to the type of transaction); provided,
however, that in no event will instructions delivered orally or
via electronic mail be considered Proper Instructions with
respect to transactions involving the movement of cash,
securities or other assets of a Fund. The Custodian shall be
entitled to rely upon instructions given in accordance with an
Authorized Persons List until it actually receives written notice
from the Board of the applicable Fund to the contrary.
Section 7. Evidence of Authority.
Subject to Section 9 hereof, the Custodian shall be
protected in acting upon any instructions, notice, request,
consent, certificate or other instrument or paper reasonably and
in good faith believed by it to be genuine and to have been
properly executed by or on behalf of the Fund. The Custodian may
receive and accept a copy of a vote of the Board, certified by
the secretary or an assistant secretary of the applicable Fund,
as conclusive evidence (a) of the authority of any person to act
in accordance with such vote or (b) of any determination or of
any action by the Board described in such vote, and such vote may
be considered as in full force and effect until receipt by the
Custodian of written notice to the contrary.
Section 8. Actions Permitted without Express Authority.
The Custodian may in its discretion and without express
authority from the Fund:
1) make payments to itself or others for minor expenses of
handling investments or other similar items relating to
its duties under this Agreement, provided that all such
payments shall be accounted for to the Fund;
2) surrender investments in temporary form for investments
in definitive form;
3) endorse for collection, in the name of the Fund,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the
investments and property of the Fund except as
otherwise directed by the Board.
Section 9. Responsibility of Custodian.
The Custodian shall not be responsible for the title,
validity or genuineness of any property or evidence of title
thereto received by it or delivered by it pursuant to this
Agreement and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party
or parties, including any futures commission merchant acting
pursuant to the terms of a three-party futures or options
agreement. Notwithstanding anything to the contrary herein, the
Custodian shall be held to the exercise of reasonable care in
carrying out the provisions of this Agreement, and it shall be
kept indemnified by and shall be without liability to the Fund
for any action taken or omitted by it in good faith without
negligence. In order for the indemnification provision contained
in this Section to apply, it is understood that if in any case
the Fund may be asked by the Custodian to indemnify or hold the
Custodian harmless, the Fund shall be fully and promptly advised
of all pertinent facts concerning the situation in question, and
it is further understood that the Custodian will use reasonable
care to identify, and notify the Fund promptly concerning, any
situation which presents or appears likely to present the
probability of such a claim for indemnification. The Fund shall
have the option to defend the Custodian against any claim which
may be the subject of a claim for indemnification hereunder, and
in the event that the Fund so elects, it will notify the
Custodian thereof and, thereupon, (i) the Fund shall take over
complete defense of the claim and (ii) the Custodian shall
initiate no further legal or other expenses with respect to such
claim. The Custodian shall in no case confess any claim or make
any compromise with respect to any claim for which it will seek
indemnity from the Fund except with the Fund's prior written
consent. Nothing herein shall be construed to limit any right or
cause of action on the part of the Custodian under this Agreement
which is independent of any right or cause of action on the part
of the Fund. The Custodian shall be entitled to rely on and may
act upon advice of counsel (who may be counsel for the Fund or
other such counsel as agreed to by the parties) on all matters,
and shall be without liability for any action reasonably taken or
omitted pursuant to such advice. The Custodian shall be entitled
to rely upon, and shall have no duty of inquiry with respect to,
the accuracy of any representation or warranty given to it by the
Fund or any duly-authorized employee or agent thereof, and shall
be without liability for any action reasonably taken or omitted
by it in reliance thereon. Regardless of whether assets held
pursuant to this Agreement are maintained in the custody of a
foreign banking institution, a foreign securities depository, or
a branch or affiliate of a U.S. bank, the Custodian shall not be
liable for any loss, damage, cost, expense, liability or claim
resulting from, or caused by, the direction of or authorization
by the Fund to maintain custody of any securities or cash or
other property of the Fund in a foreign country including, but
not limited to, losses resulting from the nationalization or
expropriation of assets, the imposition of currency controls or
restrictions, acts of war or terrorism or civil unrest, riots,
revolutions, work stoppages, natural disasters or other similar
events or acts.
Except as may arise from the Custodian's own negligence or
willful misconduct or the negligence or willful misconduct of a
sub-custodian or agent, the Custodian shall be without liability
to the Fund for any loss, liability, claim or expense resulting
from or caused by: (i) events or circumstances beyond the
reasonable control of the Custodian or any sub-custodian or
Securities System or any agent or nominee of any of the
foregoing, including, without limitation, the interruption,
suspension or restriction of trading on or the closure of any
securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications
disruptions; (ii) errors by the Fund or its duly-appointed
investment advisor in their instructions to the Custodian
provided such instructions have been given in accordance with
this Agreement; (iii) the insolvency of or acts or omissions by a
Securities System; (iv) any delay or failure of any broker, agent
or intermediary, central bank or other commercially prevalent
payment or clearing system to deliver to the Custodian's sub-
custodian or agent securities purchased or in the remittance or
payment made in connection with securities sold; (v) any delay or
failure of any company, corporation or other body in charge of
registering or transferring securities in the name of the
Custodian, the Fund, the Custodian's sub-custodians, nominees or
agents, or any consequential losses arising out of such delay or
failure to transfer such securities, including non-receipt of
bonus, dividends and rights and other accretions or benefits;
(vi) delays or inability to perform its duties due to any
disorder in market infrastructure with respect to any particular
security or Securities System; and (vii) changes to any provision
of any present or future law or regulation or order of the United
States, or any state thereof, or of any other country or
political subdivision thereof, or any order of any court of
competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a
foreign banking institution acting as a sub-custodian hereunder
to the same extent as set forth with respect to sub-custodians
generally in this Agreement.
If the Fund requires the Custodian to take any action with
respect to investments, which action involves the payment of
money or which action may, in the reasonable opinion of the
Custodian, result in the Custodian or its nominee assigned to the
Fund being liable for the payment of money or incurring liability
of some other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
If the Custodian, or any of its affiliates, subsidiaries or
agents, advances cash or investments to the Fund for any purpose
(including but not limited to securities settlements, foreign
exchange contracts and assumed settlement), or in the event that
the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as
may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at
any time held for the account of the Fund shall be security
therefor, and should the Fund fail to repay the Custodian
promptly the Custodian shall be entitled to utilize available
cash and to dispose of the Fund assets to the extent necessary to
obtain reimbursement, provided that the Custodian gives the Fund
reasonable notice to repay such cash or securities advanced, and
provided further that such notice requirement shall not preclude
the Custodian's right to assert and execute on such lien.
Except as may arise from the Custodian's own negligence or
willful misconduct, or the negligence or willful misconduct of a
subcustodian or agent appointed by the Custodian, the Fund agrees
to indemnify and hold the Custodian harmless from and against any
and all costs, expenses, losses, damages, charges, reasonable
counsel fees, payments and liabilities which may be asserted
against the Custodian (i) acting in accordance with any Proper
Instruction, or (ii) for any acts or omissions of Chase Manhattan
Bank N.A.
Notwithstanding any provision herein to the contrary, to the
extent the Custodian is found to be liable hereunder for any
loss, liability, claim, expense or damage, the Custodian shall be
liable only for such loss, liability, claim, expense or damage
which was reasonably foreseeable.
Section 10. Effective Period, Termination and Amendment.
This Agreement shall become effective as of the date of its
execution, shall continue in full force and effect until
terminated as hereinafter provided, may be amended at any time by
mutual agreement of the parties hereto, and may be terminated by
either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take
effect not sooner than thirty (30) days after the date of such
delivery or mailing in the case of a termination by the Fund, and
not sooner than one hundred eighty (180) days after the date of
such delivery or mailing in the case of termination by the
Custodian; provided, however that the Custodian shall not act
under Section 2.9 hereof in the absence of receipt of an initial
certificate of a Fund's secretary, or an assistant secretary
thereof, that the Board has approved the initial use of a
particular U.S. Securities System, as required by the 1940 Act or
any applicable Rule thereunder, and that the Custodian shall not
act under Section 2.10 hereof in the absence of receipt of an
initial certificate of a Fund's secretary, or an assistant
secretary thereof, that the Board has approved the initial use of
the Direct Paper System; provided further, however, that the Fund
shall not amend or terminate this Agreement in contravention of
any applicable federal or state regulations, or any provision of
the Fund's articles of incorporation, agreement of trust, by-laws
and/or registration statement (as applicable, the "Governing
Documents"); and further provided that the Fund may at any time
by action of its Board (i) substitute another bank or trust
company for the Custodian by giving notice as described above to
the Custodian, or (ii) immediately terminate this Agreement in
the event of the appointment of a conservator or receiver for the
Custodian by the United States Comptroller of the Currency or
upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Agreement, the Fund shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its
reasonable costs, expenses and disbursements, provided that the
Custodian shall not incur any costs, expenses or disbursements
specifically in connection with such termination unless it has
received prior approval from the Fund, such approval not to be
unreasonably withheld.
Section 11. Successor Custodian.
If a successor custodian shall be appointed by the Board,
the Custodian shall, upon termination, deliver to such successor
custodian at the offices of the Custodian, duly endorsed and in
the form for transfer, all investments and other properties then
held by it hereunder, and shall transfer to an account of the
successor custodian all of the Fund's investments held in a
Securities System. If no such successor custodian shall be
appointed, the Custodian shall, in like manner, upon receipt of a
copy of a vote of the Board, certified by the secretary or an
assistant secretary of the applicable Fund, deliver at the
offices of the Custodian and transfer such investments, funds and
other properties in accordance with such vote. In the event that
no written order designating a successor custodian or certified
copy of a vote of the Board shall have been delivered to the
Custodian on or before the date when such termination shall
become effective, then the Custodian shall have the right to
deliver to a bank or trust company, which is a "bank" as defined
in the 1940 Act, doing business in Boston, Massachusetts, or New
York, New York, of its own selection and having an aggregate
capital, surplus, and undivided profits, as shown by its last
published report, of not less than $100,000,000, all property
held by the Custodian under this Agreement and to transfer to an
account of such successor custodian all of the Fund's investments
held in any Securities System; thereafter, such bank or trust
company shall be the successor of the Custodian under this
Agreement.
In the event that any property held pursuant to this
Agreement remains in the possession of the Custodian after the
date of termination hereof owing to failure of the Fund to
procure the certified copy of the vote referred to or of the
Board to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period
as the Custodian retains possession of such property, and the
provisions of this Agreement relating to the duties and
obligations of the Custodian shall remain in full force and
effect.
Section 12. General.
Section 12.1 Compensation of Custodian. The Custodian shall
be entitled to compensation for its services and reimbursement of
its expenses as Custodian as agreed upon from time to time
between the Fund and the Custodian.
Section 12.2 Massachusetts Law to Apply. This Agreement shall
be construed and the provisions thereof interpreted under and in
accordance with laws of The Commonwealth of Massachusetts.
Section 12.3 Records. The Custodian shall create and
maintain all records relating to its activities and obligations
under this Agreement in such manner as will meet the obligations
of the Fund under the 1940 Act, with particular attention to
Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All
such records shall be the property of the Fund and shall at all
times during the regular business hours of the Custodian be open
for inspection by duly authorized officers, employees or agents
of the Fund and employees and agents of the SEC. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation
of investments owned by the Fund and held by the Custodian
hereunder, and shall, when requested to do so by an officer of
the Fund, and for such compensation as shall be agreed upon
between the Fund and the Custodian, include certificate numbers
in such tabulations.
Section 12.4 Opinion of Fund's Independent Accountant. The
Custodian shall take all reasonable action as the Fund may from
time to time request to obtain from year to year favorable
opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of
the Fund's Form N-1A, the preparation of the Fund's Form N-SAR,
the preparation of any other annual reports to the SEC with
respect to the Fund, and with respect to any other requirements
of the SEC.
Section 12.5 Interpretive and Additional Provisions. In
connection with the operation of this Agreement, the Custodian
and the Fund may from time to time agree on such provisions
interpretive of or in addition to the provisions of this
Agreement as may in their joint opinion be consistent with the
general tenor of this Agreement. Any such interpretive or
additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Governing Documents. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be
an amendment of this Agreement.
Section 12.6 Bond. The Custodian shall at all times
maintain a bond in such form and amount as is acceptable to the
Fund, which shall be issued by a reputable fidelity insurance
company authorized to do business in the place where such bond is
issued, against larceny and embezzlement, covering each officer
and employee of the Custodian who may, singly or jointly with
others, have access to securities or funds of the Fund, either
directly or through authority to receive and carry out any
certificate instruction, order request, note or other instrument
required or permitted by this Agreement. The Custodian agrees
that it shall not cancel, terminate or modify such bond insofar
as it adversely affects the Fund except after written notice
given to the Fund not less than 10 days prior to the effective
date of such cancellation, termination or modification. The
Custodian shall, upon request, furnish to the Fund a copy of each
such bond and each amendment thereto.
Section 12.7 Confidentiality. The Custodian agrees to treat
all records and other information relative to the Fund and its
prior, present or future shareholders as confidential, and the
Custodian, on behalf of itself and its employees, agrees to keep
confidential all such information except, after prior
notification to and approval in writing by the Fund, which
approval shall not be unreasonably withheld and may not be
withheld where the Custodian may be exposed to civil or criminal
contempt proceedings for failure to comply when requested to
divulge such information by duly constituted authorities, or when
so requested by the Fund.
Section 12.8 Exemption from Lien. Except as set forth in
Section 9 hereof, the securities and other assets held by the
Custodian hereunder shall not be subject to lien or charge of any
kind in favor of the Custodian or any person claiming through the
Custodian. Nothing herein shall be deemed to deprive the
Custodian of its right to invoke any and all remedies available
at law or equity to collect amounts due it under this Agreement.
Section 12.9 Assignment. This Agreement may not be
assigned by either party without the written consent of the
other, except that either party may assign its rights and
obligations hereunder to a party controlling, controlled by, or
under common control with such party.
Section 12.10 Prior Agreements. Without derogating the rights
established thereunder prior to the date of this Agreement, this
Agreement supersedes and terminates, as of the date hereof, all
prior agreements between the Fund and the Custodian relating to
the custody of Fund assets.
Section 12.11 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original, and all such counterparts taken together shall
constitute but one and the same Agreement.
Section 12.12 Notices. Any notice, instruction or other
instrument required to be given hereunder may be delivered in
person to the offices of the parties as set forth herein during
normal business hours or delivered prepaid registered mail or by
telex, cable or telecopy to the parties at the following
addresses or such other addresses as may be notified by any party
from time to time.
To any Fund: c/o T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Carmen Deyesu
Telephone: 410-345-6658
Telecopy: 410-685-8827/8830
To the Custodian: State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171, U.S.A.
Attention: Carol C. Ayotte
Telephone: 617-985-6894
Telecopy: 617-537-6321
Such notice, instruction or other instrument shall be deemed
to have been served in the case of a registered letter at the
expiration of five business days after posting, in the case of
cable twenty-four hours after dispatch and, in the case of telex,
immediately on dispatch and if delivered outside normal business
hours it shall be deemed to have been received at the next time
after delivery when normal business hours commence and in the
case of cable, telex or telecopy on the business day after the
receipt thereof. Evidence that the notice was properly
addressed, stamped and put into the post shall be conclusive
evidence of posting.
Section 12.13 Entire Agreement. This Agreement (including all
schedules, appendices, exhibits and attachments hereto)
constitutes the entire Agreement between the parties with respect
to the subject matter hereof.
Section 12.14 Headings Not Controlling. Headings used in this
Agreement are for reference purposes only and shall not be deemed
a part of this Agreement.
Section 12.15 Survival. All provisions regarding
indemnification, confidentiality, warranty, liability and limits
thereon shall survive following the expiration or termination of
this Agreement.
Section 12.16 Severability. In the event any provision of this
Agreement is held illegal, void or unenforceable, the balance
shall remain in effect.
Section 12.17 The Parties. All references herein to the "Fund"
are to each of the funds listed on Appendix A hereto
individually, as if this Agreement were between such individual
Fund and the Custodian. In the case of a series fund or trust,
all references to the "Fund" are to the individual series or
portfolio of such fund or trust, or to such fund or trust on
behalf of the individual series or portfolio, as appropriate.
Any reference in this Agreement to "the parties" shall mean the
Custodian and such other individual Fund as to which the matter
pertains. Each Fund hereby represents and warranties that (i) it
has the requisite power and authority under applicable laws and
its Governing Documents to enter into and perform this Agreement,
(ii) all requisite proceedings have been taken to authorize it to
enter into and perform this Agreement, and (iii) its entrance
into this Agreement shall not cause a material breach or be in
material conflict with any other agreement or obligation of the
Fund or any law or regulation applicable to it.
Section 12.18 Directors and Trustees. It is understood and is
expressly stipulated that neither the holders of Shares nor any
member of the Board be personally liable hereunder. Whenever
reference is made herein to an action required to be taken by the
Board, such action may also be taken by the Board's executive
committee.
Section 12.19 Massachusetts Business Trust. With respect to any
Fund which is a party to this Agreement and which is organized as
a Massachusetts business trust, the term "Fund" means and refers
to the trustees from time to time serving under the applicable
trust agreement of such trust, as the same may be amended from
time to time (the "Declaration of Trust"). It is expressly
agreed that the obligations of any such Fund hereunder shall not
be binding upon any of the trustees, shareholders, nominees,
officers, agents or employees of the Fund personally, but bind
only the trust property of the Fund as set forth in the
applicable Declaration of Trust. In the case of each Fund which
is a Massachusetts business trust (in each case, a "Trust"), the
execution and delivery of this Agreement on behalf of the Trust
has been authorized by the trustees, and signed by an authorized
officer, of the Trust, in each case acting in such capacity and
not individually, and neither such authorization by the trustees
nor such execution and delivery by such officer shall be deemed
to have been made by any of them individually, but shall bind
only the trust property of the Trust as provided in its
Declaration of Trust.
Section 12.20 Reproduction of Documents. This Agreement and all
schedules, exhibits, attachments and amendments hereto may be
reproduced by any photographic, photostatic, microfilm, micro-
card, miniature photographic or other similar process. The
parties hereto all/each agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a
party in the regular course of business, and that any
enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
Section 12.21 Shareholder Communications Election. SEC Rule 14b-2
requires banks which hold securities for the account of customers
to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that
issuer held by the bank unless the beneficial owner has expressly
objected to disclosure of this information. In order to comply
with the rule, the Custodian needs the Fund to indicate whether
it authorizes the Custodian to provide the Fund's name, address,
and share position to requesting companies whose securities the
Fund owns. If the Fund tells the Custodian "no", the Custodian
will not provide this information to requesting companies. If
the Fund tells the Custodian "yes" or does not check either "yes"
or "no" below, the Custodian is required by the rule to treat the
Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established
by the Fund. For the Fund's protection, the Rule prohibits the
requesting company from using the Fund's name and address for any
purpose other than corporate communications. Please indicate
below whether the Fund consents or objects by checking one of the
alternatives below.
YES [ ] The Custodian is authorized to release the Fund's
name, address, and share positions.
NO [X] The Custodian is not authorized to release the
Fund's name, address, and share positions.
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
Addendum to the Custodian Agreement (as defined below)
between each fund listed on Appendix A to the Custodian
Agreement, as such Appendix A is amended from time to time (each
such fund listed on Appendix A shall be individually referred to
herein as the "Fund"), and State Street Bank and Trust Company
("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of
certain assets of the Fund pursuant to a certain Custodian
Agreement (the "Custodian Agreement") dated as of January 28,
1998, and amended thereafter from time to time;
WHEREAS, State Street has developed and utilizes proprietary
accounting and other systems, including State Street's
proprietary Multicurrency HORIZON (registered trademark)
Accounting System, in its role as custodian of the Fund, and
maintains certain Fund-related data ("Fund Data") in databases
under the control and ownership of State Street (the "Data Access
Services"); and
WHEREAS, State Street makes available to the Fund (and
certain of the Fund' agents as set forth herein) certain Data
Access Services solely for the benefit of the Fund, and intends
to provide additional services, consistent with the terms and
conditions of this Addendum.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and for other good and valuable
consideration, the parties agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a. System. Subject to the terms and conditions of this
Addendum and solely for the purpose of providing access to Fund
Data as set forth herein, State Street hereby agrees to provide
the Fund, or certain third parties approved by State Street that
serve as the Fund's investment advisors, investment managers or
fund accountants (the "Fund Accountants") or as the Fund's
independent auditors (the "Auditor"), with access to State
Street's Multicurrency HORIZON (registered trademark) Accounting
System and the other information systems described in Attachment
A (collectively, the "System") on a remote basis solely on the
computer hardware, system software and telecommunication links
described in Attachment B (the "Designated Configuration") or on
any designated substitute or back-up equipment configuration
consented to in writing by State Street, such consent not to be
unreasonably withheld.
b. Data Access Services. State Street agrees to make
available to the Fund the Data Access Services subject to the
terms and conditions of this Addendum and such data access
operating standards and procedures as may be issued by State
Street from time to time. The Fund shall be able to access the
System to (i) originate electronic instructions to State Street
in order to (a) effect the transfer or movement of cash or
securities held under custody by State Street or (b) transmit
accounting or other information (the transactions described in
(i)(a) and (i)(b) above are referred to herein as "Client
Originated Electronic Financial Instructions"), and (ii) access
data for the purpose of reporting and analysis, which shall all
be deemed to be Data Access Services for purposes of this
Addendum.
c. Additional Services. State Street may from time to
time agree to make available to the Fund additional Systems that
are not described in the attachments to this Addendum. In the
absence of any other written agreement concerning such additional
systems, the term "System" shall include, and this Addendum shall
govern, the Fund's access to and use of any additional System
made available by State Street and/or accessed by the Fund.
2. NO USE OF THIRD PARTY SYSTEMS-LEVEL SOFTWARE
State Street and the Fund acknowledge that in connection
with the Data Access Services provided under this Addendum, the
Fund will have access, through the Data Access Services, to Fund
Data and to functions of State Street's proprietary systems;
provided, however that in no event will the Fund have direct
access to any third party systems-level software that retrieves
data for, stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a. Designated Equipment; Designated Locations. The System
and the Data Access Services shall be used and accessed solely on
and through the Designated Configuration at the offices of the
Fund or the Fund Accountants in Baltimore, Maryland or Owings
Mills, Maryland ("Designated Locations").
b. Designated Configuration; Trained Personnel. State
Street and the Fund shall be responsible for supplying,
installing and maintaining the Designated Configuration at the
Designated Locations. State Street and the Fund agree that each
will engage or retain the services of trained personnel to enable
both parties to perform their respective obligations under this
Addendum. State Street agrees to use commercially reasonable
efforts to maintain the System so that it remains serviceable,
provided, however, that State Street does not guarantee or assure
uninterrupted remote access use of the System.
c. Scope of Use. The Fund will use the System and the
Data Access Services only for the processing of securities
transactions, the keeping of books of account for the Fund and
accessing data for purposes of reporting and analysis. The Fund
shall not, and shall cause its employees and agents not to (i)
permit any unauthorized third party to use the System or the Data
Access Services, (ii) sell, rent, license or otherwise use the
System or the Data Access Services in the operation of a service
bureau or for any purpose other than as expressly authorized
under this Addendum, (iii) use the System or the Data Access
Services for any fund, trust or other investment vehicle), other
than as set forth herein, without the prior written consent of
State Street, (iv) allow access to the System or the Data Access
Services through terminals or any other computer or
telecommunications facilities located outside the Designated
Locations, (v) allow or cause any information (other than
portfolio holdings, valuations of portfolio holdings, and other
information reasonably necessary for the management or
distribution of the assets of the Fund) transmitted from State
Street's databases, including data from third party sources,
available through use of the System or the Data Access Services
to be redistributed or retransmitted to another computer,
terminal or other device for other than use for or on behalf of
the Fund or (vi) modify the System in any way, including without
limitation developing any software for or attaching any devices
or computer programs to any equipment, system, software or
database which forms a part of or is resident on the Designated
Configuration.
d. Other Locations. Except in the event of an emergency
or of a planned System shutdown, the Fund's access to services
performed by the System or to Data Access Services at the
Designated Locations may be transferred to a different location
only upon the prior written consent of State Street. In the
event of an emergency or System shutdown, the Fund may use any
back-up site included in the Designated Configuration or any
other back-up site agreed to by State Street, which agreement
will not be unreasonably withheld. The Fund may secure from
State Street the right to access the System or the Data Access
Services through computer and telecommunications facilities or
devices complying with the Designated Configuration at additional
locations only upon the prior written consent of State Street and
on terms to be mutually agreed upon by the parties.
e. Title. Title and all ownership and proprietary rights
to the System, including any enhancements or modifications
thereto, whether or not made by State Street, are and shall
remain with State Street.
f. No Modification. Without the prior written consent of
State Street, the Fund shall not modify, enhance or otherwise
create derivative works based upon the System, nor shall the Fund
reverse engineer, decompile or otherwise attempt to secure the
source code for all or any part of the System.
g. Security Procedures. The Fund shall comply with data
access operating standards and procedures and with user
identification or other password control requirements and other
security procedures as may be issued from time to time by State
Street for use of the System on a remote basis and to access the
Data Access Services. The Fund shall have access only to the
Fund Data and authorized transactions agreed upon from time to
time by State Street and, upon notice from State Street, the Fund
shall discontinue remote use of the System and access to Data
Access Services for any security reasons cited by State Street;
provided, that, in such event, State Street shall, for a period
not less than 180 days (or such other shorter period specified by
the Fund) after such discontinuance, assume responsibility to
provide accounting services under the terms of the Custodian
Agreement.
h. Inspections. State Street shall have the right to
inspect the use of the System and the Data Access Services by the
Fund, the Fund Accountants and the Auditor to ensure compliance
with this Addendum. The on-site inspections shall be upon prior
written notice to Fund, the Fund Accountants and the Auditor and
at reasonably convenient times and frequencies so as not to
result in an unreasonable disruption of the Fund's or the Fund
Accountants' or the Auditor respective businesses.
4. PROPRIETARY INFORMATION
a. Proprietary Information. The Fund acknowledges and
State Street represents that the System and the databases,
computer programs, screen formats, report formats, interactive
design techniques, documentation and other information made
available to the Fund by State Street as part of the Data Access
Services and through the use of the System constitute
copyrighted, trade secret, or other proprietary information of
substantial value to State Street. Any and all such information
provided by State Street to the Fund shall be deemed proprietary
and confidential information of State Street (hereinafter
"Proprietary Information"). The Fund agrees that it will hold
such Proprietary Information in the strictest confidence and
secure and protect it in a manner consistent with its own
procedures for the protection of its own confidential information
and to take appropriate action by instruction or agreement with
its employees or agents who are permitted access to the
Proprietary Information to satisfy its obligations hereunder.
The Fund further acknowledges that State Street shall not be
required to provide the Fund Accountants or the Auditor with
access to the System unless it has first received from the Fund
Accountants and the Auditor an undertaking with respect to State
Street's Proprietary Information in the form of Attachment C
and/or Attachment C-1 to this Addendum. The Fund shall use all
commercially reasonable efforts to assist State Street in
identifying and preventing any unauthorized use, copying or
disclosure of the Proprietary Information or any portions thereof
or any of the logic, formats or designs contained therein.
b. Cooperation. Without limitation of the foregoing, the
Fund shall advise State Street immediately in the event the Fund
learns or has reason to believe that any person to whom the Fund
has given access to the Proprietary Information, or any portion
thereof, has violated or intends to violate the terms of this
Addendum, and the Fund will, at its reasonable expense, cooperate
with State Street in seeking injunctive or other equitable relief
in the name of the Fund or State Street against any such person.
c. Injunctive Relief. The Fund acknowledges that the
disclosure of any Proprietary Information, or of any information
which at law or equity ought to remain confidential, will
immediately give rise to continuing irreparable injury to State
Street inadequately compensable in damages at law. In addition,
State Street shall be entitled to obtain immediate injunctive
relief against the breach or threatened breach of any of the
foregoing undertakings, in addition to any other legal remedies
which may be available.
d. Survival. The provisions of this Section 4 shall
survive the termination of this Addendum.
5. LIMITATION ON LIABILITY
a. Standard of Care and Limitation on Amount and Time for
Bringing Action. State Street shall be held to a standard of
reasonable care with respect to all of its duties and obligations
under this Addendum. The Fund agrees that any liability of State
Street to the Fund or any third party arising with respect to the
System or State Street's provision of Data Access Services under
this Data Access Services Addendum shall be limited to the amount
paid by the Fund for the preceding 24 months for such services.
The foregoing limitation shall relate solely to State Street's
provision of the Data Access Services pursuant to this Addendum
and is not intended to limit State Street's responsibility to
perform in accordance with the Custodian Agreement, including its
duty to act in accordance with Proper Instructions. In no event
shall State Street be liable to the Fund or any other party
pursuant to this Addendum for any special, indirect, punitive or
consequential damages even if advised of the possibility of such
damages. No action, regardless of form, arising out of the terms
of this Addendum may be brought by the Fund more than two years
after the Fund has knowledge that the cause of action has arisen.
b. Limited Warranties. NO OTHER WARRANTIES, WHETHER
EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, ARE MADE BY STATE STREET.
c. Third-Party Data. Organizations from which State
Street may obtain certain data included in the System or the Data
Access Services are solely responsible for the contents of such
data, and State Street shall have no liability for claims arising
out of the contents of such third-party data, including, but not
limited to, the accuracy thereof.
d. Regulatory Requirements. As between State Street and
the Fund, the Fund shall be solely responsible for the accuracy
of any accounting statements or reports produced using the Data
Access Services and the System and the conformity thereof with
any requirements of law.
e. Force Majeure. Neither party shall be liable for any
costs or damages due to delay or nonperformance under this Data
Access Services Addendum arising out of any cause or event beyond
such party's control, including, without limitation, cessation of
services hereunder or any damages resulting therefrom to the
other party as a result of work stoppage, power or other
mechanical failure, computer virus, natural disaster,
governmental action, or communication disruption.
6. INDEMNIFICATION
The Fund agrees to indemnify and hold State Street harmless
from any loss, damage or expense including reasonable attorney's
fees, (a "loss") suffered by State Street arising from (i) the
negligence or willful misconduct in the use by the Fund of the
Data Access Services or the System, including any loss incurred
by State Street resulting from a security breach at the
Designated Locations or committed by the Fund's employees or
agents or the Fund Accountants or the and Auditor, and (ii) any
loss resulting from incorrect Client Originated Electronic
Financial Instructions. State Street shall be entitled to rely
on the validity and authenticity of Client Originated Electronic
Financial Instructions without undertaking any further inquiry as
long as such instruction is undertaken in conformity with
security procedures established by State Street from time to
time.
7. FEES
Fees and charges for the use of the System and the Data
Access Services and related payment terms shall be as set forth
in the custody fee schedule in effect from time to time between
the parties (the "Fee Schedule"). Any tariffs, duties or taxes
imposed or levied by any government or governmental agency by
reason of the transactions contemplated by this Addendum,
including, without limitation, federal, state and local taxes,
use, value added and personal property taxes (other than income,
franchise or similar taxes which may be imposed or assessed
against State Street) shall be borne by the Fund. Any claimed
exemption from such tariffs, duties or taxes shall be supported
by proper documentary evidence delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide training, at
a designated State Street training facility or at the Designated
Locations, to the Fund's personnel in connection with the use of
the System on the Designated Configuration. The Fund agrees that
it will set aside, during regular business hours or at other
times agreed upon by both parties, sufficient time to enable all
operators of the System and the Data Access Services, designated
by the Fund, to receive the training offered by State Street
pursuant to this Addendum.
b. Installation and Conversion. State Street and the Fund
shall be responsible for the technical installation and
conversion ("Installation and Conversion") of the Designated
Configuration. The Fund shall have the following
responsibilities in connection with Installation and Conversion
of the System:
(i) The Fund shall be solely responsible for the timely
acquisition and maintenance of the hardware and
software that attach to the Designated Configuration
in order to use the Data Access Services at the
Designated Locations, and
(ii) State Street and the Fund each agree that they will
assign qualified personnel to actively participate
during the Installation and Conversion phase of the
System implementation to enable both parties to perform
their respective obligations under this Addendum.
9. SUPPORT
During the term of this Addendum, State Street agrees to
provide the support services set out in Attachment D to this
Addendum.
10. TERM
a. Term. This Addendum shall become effective on the date
of its execution by State Street and shall remain in full force
and effect until terminated as herein provided.
b. Termination. Either party may terminate this Addendum
(i) for any reason by giving the other party at least one-
hundred and eighty (180) days' prior written notice in the case
of notice of termination by State Street to the Fund or thirty
(30) days' notice in the case of notice from the Fund to State
Street of termination; or (ii) immediately for failure of the
other party to comply with any material term and condition of the
Addendum by giving the other party written notice of termination.
In the event the Fund shall cease doing business, shall become
subject to proceedings under the bankruptcy laws (other than a
petition for reorganization or similar proceeding) or shall be
adjudicated bankrupt, this Addendum and the rights granted
hereunder shall, at the option of State Street, immediately
terminate with notice to the Fund. This Addendum shall in any
event terminate as to any Fund within ninety (90) days after the
termination of the Custodian Agreement.
c. Termination of the Right to Use. Upon termination of
this Addendum for any reason, any right to use the System and
access to the Data Access Services shall terminate and the Fund
shall immediately cease use of the System and the Data Access
Services. Immediately upon termination of this Addendum for any
reason, the Fund shall return to State Street all copies of
documentation and other Proprietary Information in its
possession; provided, however, that in the event that either
party terminates this Addendum or the Custodian Agreement for any
reason other than the Fund's breach, State Street shall provide
the Data Access Services for a period of time and at a price to
be agreed upon in writing by the parties.
11. MISCELLANEOUS
a. Year 2000. State Street will take all steps necessary
to ensure that its products (and those of its third-party
suppliers) reflect the available state of the art technology to
offer products that are Year 2000 compliant, including, but not
limited to, century recognition of dates, calculations that
correctly compute same century and multi-century formulas and
date values, and interface values that reflect the date issues
arising between now and the next one-hundred years. If any
changes are required, State Street will make the changes to its
products at no cost to the Fund and in a commercially reasonable
time frame and will require third-party suppliers to do likewise.
b. Assignment; Successors. This Addendum and the rights
and obligations of the Fund and State Street hereunder shall not
be assigned by either party without the prior written consent of
the other party, except that State Street may assign this
Addendum to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by, or under
common control with State Street.
c. Survival. All provisions regarding indemnification,
warranty, liability and limits thereon, and confidentiality
and/or protection of proprietary rights and trade secrets shall
survive the termination of this Addendum.
d. Entire Agreement. This Addendum and the attachments
hereto constitute the entire understanding of the parties hereto
with respect to the Data Access Services and the use of the
System and supersedes any and all prior or contemporaneous
representations or agreements, whether oral or written, between
the parties as such may relate to the Data Access Services or the
System, and cannot be modified or altered except in a writing
duly executed by the parties. This Addendum is not intended to
supersede or modify the duties and liabilities of the parties
hereto under the Custodian Agreement or any other agreement
between the parties hereto except to the extent that any such
agreement specifically refers to the Data Access Services or the
System. No single waiver or any right hereunder shall be deemed
to be a continuing waiver.
e. Severability. If any provision or provisions of this
Addendum shall be held to be invalid, unlawful, or unenforceable,
the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired.
f. Governing Law. This Addendum shall be interpreted and
construed in accordance with the internal laws of The
Commonwealth of Massachusetts without regard to the conflict of
laws provisions thereof.
ATTACHMENT A
Multicurrency HORIZON (registered trademark) Accounting System
System Product Description
I. The Multicurrency HORIZON (registered trademark)
Accounting System is designed to provide lot level portfolio and
general ledger accounting for SEC and ERISA type requirements and
includes the following services: 1) recording of general ledger
entries; 2) calculation of daily income and expense; 3)
reconciliation of daily activity with the trial balance, and 4)
appropriate automated feeding mechanisms to (i) domestic and
international settlement systems, (ii) daily, weekly and monthly
evaluation services, (iii) portfolio performance and analytic
services, (iv) customer's internal computing systems and (v)
various State Street provided information services products.
II. GlobalQuest (registered trademark) GlobalQuest
(registered trademark) is designed to provide customer access to
the following information maintained on The Multicurrency
HORIZON (registered trademark) Accounting System: 1) cash
transactions and balances; 2) purchases and sales; 3) income
receivables; 4) tax refund; 5) daily priced positions; 6) open
trades; 7) settlement status; 8) foreign exchange transactions;
9) trade history; and 10) daily, weekly and monthly evaluation
services.
III. HORIZON (registered trademark) Gateway. HORIZON
(registered trademark) Gateway provides customers with the
ability to (i) generate reports using information maintained on
the Multicurrency HORIZON (registered trademark) Accounting
System which may be viewed or printed at the customer's location;
(ii) extract and download data from the Multicurrency HORIZON
(registered trademark) Accounting System; and (iii) access
previous day and historical data. The following information
which may be accessed for these purposes: 1) holdings; 2)
holdings pricing; 3) transactions, 4) open trades; 5) income;
6) general ledger and 7) cash.
IV. State Street Interchange. State Street Interchange is an
open information delivery architecture wherein proprietary
communication products, data formats and workstation tools are
replaced by industry standards and is designed to enable the
connection of State Street's network to customer networks,
thereby facilitating the sharing of information.
ATTACHMENT C
Undertaking
(Fund Accountants)
The undersigned understands that in the course of its
employment as Fund Accountant to each fund listed on Appendix A
(as amended from time to time) to that certain Custodian
Agreement dated as of January 28, 1998 (the "Fund"), it will have
access to State Street Bank and Trust Company's Multicurrency
HORIZON Accounting System and other information systems
(collectively, the "System").
The undersigned acknowledges that the System and the
databases, computer programs, screen formats, report formats,
interactive design techniques, documentation, and other
information made available to the Undersigned by State Street
Bank and Trust Company ("State Street") as part of the Data
Access Services provided to the Fund and through the use of the
System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all
such information provided by State Street to the Undersigned
shall be deemed proprietary and confidential information of State
Street (hereinafter "Proprietary Information"). The undersigned
agrees that it will hold such Proprietary Information in
confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or
agreement with its employees who are permitted access to the
Proprietary Information to satisfy its obligations hereunder.
The undersigned will not attempt to intercept data, gain
access to data in transmission, or attempt entry into any system
or files for which it is not authorized. It will not
intentionally adversely affect the integrity of the System
through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use
the System and access to the Data Access Services shall terminate
and the Undersigned shall immediately cease use of the System and
the Data Access Services. Immediately upon notice by State
Street for any reason, the undersigned shall return to State
Street all copies of documentation and other Proprietary
Information in its possession.
[The Fund Accountants]
By: ______________________________
Title: ______________________________
Date: ______________________________
ATTACHMENT C-1
Undertaking
(Auditor)
The undersigned understands that in the course of its
employment as Auditor to each fund listed on Appendix A (as
amended from time to time) to that certain Custodian Agreement
dated as of January 28, 1998 (the "Fund") it will have access to
State Street Bank and Trust Company's Multicurrency HORIZON
Accounting System and other information systems (collectively,
the "System").
The undersigned acknowledges that the System and the
databases, computer programs, screen formats, report formats,
interactive design techniques, documentation, and other
information made available to the Undersigned by State Street
Bank and Trust Company ("State Street") as part of the Data
Access Services provided to the Fund and through the use of the
System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all
such information provided by State Street to the Undersigned
shall be deemed proprietary and confidential information of State
Street (hereinafter "Proprietary Information"). The undersigned
agrees that it will hold such Proprietary Information in
confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or
agreement with its employees who are permitted access to the
Proprietary Information to satisfy its obligations hereunder.
The undersigned will not attempt to intercept data, gain
access to data in transmission, or attempt entry into any system
or files for which it is not authorized. It will not
intentionally adversely affect the integrity of the System
through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use
the System and access to the Data Access Services shall terminate
and the Undersigned shall immediately cease use of the System and
the Data Access Services. Immediately upon notice by State
Street for any reason, the undersigned shall return to State
Street all copies of documentation and other Proprietary
Information in its possession.
[The Auditor]
By: ______________________________
Title: ______________________________
Date: ______________________________
ATTACHMENT D
Support
During the term of this Addendum, State Street agrees to
provide the following on-going support services:
a. Telephone Support. The Fund Designated Persons may
contact State Street's HORIZON (registered trademark) Help Desk
and Fund Assistance Center between the hours of 8 a.m. and 6 p.m.
(Eastern time) on all business days for the purpose of obtaining
answers to questions about the use of the System, or to report
apparent problems with the System. From time to time, the Fund
shall provide to State Street a list of persons who shall be
permitted to contact State Street for assistance (such persons
being referred to as the "Fund Designated Persons").
b. Technical Support. State Street will provide technical
support to assist the Fund in using the System and the Data
Access Services. The total amount of technical support provided
by State Street shall not exceed 10 resource days per year.
State Street shall provide such additional technical support as
is expressly set forth in the fee schedule in effect from time to
time between the parties (the "Fee Schedule"). Technical
support, including during installation and testing, is subject to
the fees and other terms set forth in the Fee Schedule.
c. Maintenance Support. State Street shall use
commercially reasonable efforts to correct system functions that
do not work according to the System Product Description as set
forth on Attachment A in priority order in the next scheduled
delivery release or otherwise as soon as is practicable.
d. System Enhancements. State Street will provide to the
Fund any enhancements to the System developed by State Street and
made a part of the System; provided that State Street offer the
Fund reasonable training on the enhancement. Charges for system
enhancements shall be as provided in the Fee Schedule. State
Street retains the right to charge for related systems or
products that may be developed and separately made available for
use other than through the System.
e. Custom Modifications. In the event the Fund desires
custom modifications in connection with its use of the System,
the Fund shall make a written request to State Street providing
specifications for the desired modification. Any custom
modifications may be undertaken by State Street in its sole
discretion in accordance with the Fee Schedule.
f. Limitation on Support. State Street shall have no
obligation to support the Fund's use of the System: (1) for use
on any computer equipment or telecommunication facilities which
does not conform to the Designated Configuration or (ii) in the
event the Fund has modified the System in breach of this
Addendum.
In Witness Whereof, each of the parties has caused this
instrument to be executed in its name and on its behalf by its
duly authorized representative as of the date and year first
written above.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Prime Reserve Fund, Inc.
T. Rowe Price International Funds, Inc.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Tax-Free Income Fund, Inc.
T. Rowe Price Tax-Exempt Money Fund, Inc.
T. Rowe Price Tax-Free Short-Intermediate Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Tax-Free High Yield Fund, Inc.
T. Rowe Price New America Growth Fund
T. Rowe Price Equity Income Fund
T. Rowe Price GNMA Fund
T. Rowe Price Capital Appreciation Fund
T. Rowe Price State Tax-Free Income Trust
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. Rowe Price California Tax-Free Income Trust
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
Institutional International Funds, Inc.
Foreign Equity Fund
T. Rowe Price U.S. Treasury Funds, Inc.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. Rowe Price Index Trust, Inc.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
T. Rowe Price Spectrum Fund, Inc.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price Tax-Free Insured Intermediate Bond Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Summit Funds, Inc.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. Rowe Price Summit Municipal Funds, Inc.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio
T. Rowe Price Fixed Income Series, Inc.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. Rowe Price Personal Strategy Funds, Inc.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Value Fund, Inc.
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price Health Sciences Fund, Inc.
T. Rowe Price Mid-Cap Value Fund, Inc.
Institutional Domestic Equity Funds, Inc.
Mid-Cap Equity Growth Fund
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
T. Rowe Price Financial Services Fund, Inc.
T. Rowe Price Real Estate Fund, Inc.
T. Rowe Price Small Cap Stock Fund, Inc.
T. Rowe Price Small Cap Stock Fund
T. Rowe Price Media & Telecommunications Fund, Inc.
T. Rowe Price Tax Efficient Balanced Fund, Inc.
Reserve Investment Funds, Inc.
Government Reserve Investment Fund
Reserve Investment Fund
Signature attested to: Executed on Behalf of each Fund:
/s/Suzanne E. Fraunhoffer /s/Carmen Deyesu
By: _____________________ By: _____________________
Name: Suzanne E. Fraunhoffer Name: Carmen Deyesu
Title: Legal Assistant Title: Treasurer for each of
the foregoing
Signature Attested to: State Street Bank and Trust
Company
/s/Glenn Ciotti /s/Ronald E. Logue
By: ____________________ By: _____________________
Name: Glenn Ciotti Name: Ronald E. Logue
Title: VP & Assoc. Counsel Title: Executive Vice
President
Schedule A
Country Subcustodian Central Depository
United Kingdom State Street Bank None;
and Trust Company The Bank of England,
The Central Gilts Office (CGO);
The Central Moneymarkets
Office (CMO)
Euroclear (The Euroclear System)/ State Street London Limited
Appendix A
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Prime Reserve Fund, Inc.
T. Rowe Price International Funds, Inc.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Tax-Free Income Fund, Inc.
T. Rowe Price Tax-Exempt Money Fund, Inc.
T. Rowe Price Tax-Free Short-Intermediate Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Tax-Free High Yield Fund, Inc.
T. Rowe Price New America Growth Fund
T. Rowe Price Equity Income Fund
T. Rowe Price GNMA Fund
T. Rowe Price Capital Appreciation Fund
T. Rowe Price State Tax-Free Income Trust
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. Rowe Price California Tax-Free Income Trust
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
Institutional International Funds, Inc.
Foreign Equity Fund
T. Rowe Price U.S. Treasury Funds, Inc.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. Rowe Price Index Trust, Inc.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
T. Rowe Price Spectrum Fund, Inc.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price Tax-Free Insured Intermediate Bond Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Summit Funds, Inc.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. Rowe Price Summit Municipal Funds, Inc.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio
T. Rowe Price Fixed Income Series, Inc.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. Rowe Price Personal Strategy Funds, Inc.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Value Fund, Inc.
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price Health Sciences Fund, Inc.
T. Rowe Price Mid-Cap Value Fund, Inc.
Institutional Domestic Equity Funds, Inc.
Mid-Cap Equity Growth Fund
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
T. Rowe Price Financial Services Fund, Inc.
T. Rowe Price Real Estate Fund, Inc.
T. Rowe Price Small Cap Stock Fund, Inc.
T. Rowe Price Small Cap Stock Fund
T. Rowe Price Media & Telecommunications Fund, Inc.
T. Rowe Price Tax Efficient Balanced Fund, Inc.
Reserve Investment Funds, Inc.
Government Reserve Investment Fund
Reserve Investment Fund
The Global Custody Agreement dated January 3, 1994, as amended, between
The Chase Manhattan Bank, N.A. and T. Rowe Price Funds.
PAGE 1
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective January 3, 1994, and is between
THE CHASE MANHATTAN BANK, N.A. (the "Bank") and EACH OF THE
ENTITIES LISTED ON SCHEDULE A HERETO, Individually and Separately
(each individually, the "Customer").
1. Customer Accounts.
The Bank agrees to establish and maintain the following
accounts ("Accounts"):
(a) A custody account in the name of the Customer
("Custody Account") for any and all stocks, shares, bonds,
debentures, notes, mortgages or other obligations for the payment
of money, bullion, coin and any certificates, receipts, warrants
or other instruments representing rights to receive, purchase or
subscribe for the same or evidencing or representing any other
rights or interests therein and other similar property whether
certificated or uncertificated as may be received by the Bank or
its Subcustodian (as defined in Section 3) for the account of the
Customer ("Securities"); and
(b) A deposit account in the name of the Customer ("Deposit
Account") for any and all cash in any currency received by the
Bank or its Subcustodian for the account of the Customer, which
cash shall not be subject to withdrawal by draft or check.
The Customer warrants its authority to: 1) deposit the cash
and Securities ("Assets") received in the Accounts and 2) give
Instructions (as defined in Section 11) concerning the Accounts.
The Bank may deliver securities of the same class in place of
those deposited in the Custody Account.
Upon written agreement between the Bank and the Customer,
additional Accounts may be established and separately accounted
for as additional Accounts under the terms of this Agreement.
2. Maintenance of Securities and Cash at Bank and Subcustodian
Locations.
Unless Instructions specifically require another location
acceptable to the Bank:
(a) Securities will be held in the country or other
jurisdiction in which the principal trading market for such
Securities is located, where such Securities are to be presented
for payment or where such Securities are acquired; and
PAGE 2
(b) Cash will be credited to an account in a country or
other jurisdiction in which such cash may be legally deposited or
is the legal currency for the payment of public or private debts.
Cash may be held pursuant to Instructions in either interest
or non-interest bearing accounts as may be available for the
particular currency. To the extent Instructions are issued and
the Bank can comply with such Instructions, the Bank is
authorized to maintain cash balances on deposit for the Customer
with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in
non-interest bearing accounts as the Customer may direct, if
acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the
custody of an institution other than the established
Subcustodians as defined in Section 3 (or their securities
depositories), such arrangement must be authorized by a written
agreement, signed by the Bank and the Customer.
3. Subcustodians and Securities Depositories.
The Bank may act under this Agreement through the
subcustodians listed in Schedule B of this Agreement with which
the Bank has entered into subcustodial agreements
("Subcustodians"). The Customer authorizes the Bank to hold
Assets in the Accounts in accounts which the Bank has established
with one or more of its branches or Subcustodians. The Bank and
Subcustodians are authorized to hold any of the Securities in
their account with any securities depository in which they
participate.
The Bank reserves the right to add new, replace or remove
Subcustodians. The Customer will be given reasonable notice by
the Bank of any amendment to Schedule B. Upon request by the
Customer, the Bank will identify the name, address and principal
place of business of any Subcustodian of the Customer's Assets
and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such
Subcustodian.
4. Use of Subcustodian.
(a) The Bank will identify such Assets on its books as
belonging to the Customer.
(b) A Subcustodian will hold such Assets together with
assets belonging to other customers of the Bank in accounts
identified on such Subcustodian's books as special custody
accounts for the exclusive benefit of customers of the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will
be subject only to the instructions of the Bank or its agent.
PAGE 3
Any Securities held in a securities depository for the account of
a Subcustodian will be subject only to the instructions of such
Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian
for holding its customer's assets shall provide that such assets
will not be subject to any right, charge, security interest, lien
or claim of any kind in favor of such Subcustodian or its
creditors except for a claim for payment for safe custody or
administration, and that the beneficial ownership of such assets
will be freely transferable without the payment of money or value
other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or
arrangement made by the Customer with any particular
Subcustodian.
5. Deposit Account Transactions.
(a) The Bank or its Subcustodians will make payments from
the Deposit Account upon receipt of Instructions which include
all information required by the Bank.
(b) In the event that any payment to be made under this
Section 5 exceeds the funds available in the Deposit Account, the
Bank, in its discretion, may advance the Customer such excess
amount which shall be deemed a loan payable on demand, bearing
interest at the rate customarily charged by the Bank on similar
loans.
(c) If the Bank credits the Deposit Account on a payable
date, or at any time prior to actual collection and
reconciliation to the Deposit Account, with interest, dividends,
redemptions or any other amount due, the Customer will promptly
return any such amount upon oral or written notification: (i)
that such amount has not been received in the ordinary course of
business or (ii) that such amount was incorrectly credited. If
the Customer does not promptly return any amount upon such
notification, the Bank shall be entitled, upon oral or written
notification to the Customer, to reverse such credit by debiting
the Deposit Account for the amount previously credited. The Bank
or its Subcustodian shall have no duty or obligation to institute
legal proceedings, file a claim or a proof of claim in any
insolvency proceeding or take any other action with respect to
the collection of such amount, but may act for the Customer upon
Instructions after consultation with the Customer.
6. Custody Account Transactions.
(a) Securities will be transferred, exchanged or delivered
by the Bank or its Subcustodian upon receipt by the Bank of
Instructions which include all information required by the Bank.
Settlement and payment for Securities received for, and delivery
of Securities out of, the Custody Account may be made in
PAGE 4
accordance with the customary or established securities trading
or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs,
including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery.
Delivery of Securities out of the Custody Account may also be
made in any manner specifically required by Instructions
acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the
Accounts on a contractual settlement date with cash or Securities
with respect to any sale, exchange or purchase of Securities.
Otherwise, such transactions will be credited or debited to the
Accounts on the date cash or Securities are actually received by
the Bank and reconciled to the Account.
(i) The Bank may reverse credits or debits made to the
Accounts in its discretion if the related transaction
fails to settle within a reasonable period, determined
by the Bank in its discretion, after the contractual
settlement date for the related transaction.
(ii) If any Securities delivered pursuant to this
Section 6 are returned by the recipient thereof, the
Bank may reverse the credits and debits of the
particular transaction at any time.
7. Actions of the Bank.
The Bank shall follow Instructions received regarding assets
held in the Accounts. However, until it receives Instructions to
the contrary, the Bank will:
(a) Present for payment any Securities which are called,
redeemed or retired or otherwise become payable and all coupons
and other income items which call for payment upon presentation,
to the extent that the Bank or Subcustodian is actually aware of
such opportunities.
(b) Execute in the name of the Customer such ownership and
other certificates as may be required to obtain payments in
respect of Securities.
(c) Exchange interim receipts or temporary Securities for
definitive Securities.
(d) Appoint brokers and agents for any transaction
involving the Securities, including, without limitation,
affiliates of the Bank or any Subcustodian.
(e) Issue statements to the Customer, at times mutually
agreed upon, identifying the Assets in the Accounts.
PAGE 5
The Bank will send the Customer an advice or notification of
any transfers of Assets to or from the Accounts. Such
statements, advices or notifications shall indicate the identity
of the entity having custody of the Assets. Unless the Customer
sends the Bank a written exception or objection to any Bank
statement within ninety (90) days of receipt, the Customer shall
be deemed to have approved such statement. The Bank shall, to
the extent permitted by law, be released, relieved and discharged
with respect to all matters set forth in such statement or
reasonably implied therefrom as though it had been settled by the
decree of a court of competent jurisdiction in an action where
the Customer and all persons having or claiming an interest in
the Customer or the Customer's Accounts were parties if: (a) the
Customer has failed to provide a written exception or objection
to any Bank statement within ninety (90) days of receipt and
where the Customer's failure to so provide a written exception or
objection within such ninety (90) day period has limited the
Bank's (i) access to the records, materials and other information
required to investigate the Customer's exception or objection,
and (ii) ability to recover from third parties any amounts for
which the Bank may become liable in connection with such
exception or objection, or (b) where the Customer has otherwise
explicitly approved any such statement.
All collections of funds or other property paid or
distributed in respect of Securities in the Custody Account shall
be made at the risk of the Customer. The Bank shall have no
liability for any loss occasioned by delay in the actual receipt
of notice by the Bank or by its Subcustodians of any payment,
redemption or other transaction regarding Securities in the
Custody Account in respect of which the Bank has agreed to take
any action under this Agreement.
8. Corporate Actions; Proxies.
Whenever the Bank receives information concerning the
Securities which requires discretionary action by the beneficial
owner of the Securities (other than a proxy), such as
subscription rights, bonus issues, stock repurchase plans and
rights offerings, or legal notices or other material intended to
be transmitted to securities holders ("Corporate Actions"), the
Bank will give the Customer notice of such Corporate Actions to
the extent that the Bank's central corporate actions department
has actual knowledge of a Corporate Action in time to notify its
customers.
When a rights entitlement or a fractional interest resulting
from a rights issue, stock dividend, stock split or similar
Corporate Action is received which bears an expiration date, the
Bank will endeavor to obtain Instructions from the Customer or
its Authorized Person, but if Instructions are not received in
time for the Bank to take timely action, or actual notice of such
Corporate Action was received too late to seek Instructions, the
PAGE 6
Bank is authorized to sell such rights entitlement or fractional
interest and to credit the Deposit Account with the proceeds or
take any other action it deems, in good faith, to be appropriate
in which case it shall be held harmless for any such action.
The Bank will deliver proxies to the Customer or its
designated agent pursuant to special arrangements which may have
been agreed to in writing. Such proxies shall be executed in the
appropriate nominee name relating to Securities in the Custody
Account registered in the name of such nominee but without
indicating the manner in which such proxies are to be voted; and
where bearer Securities are involved, proxies will be delivered
in accordance with Instructions.
9. Nominees.
Securities which are ordinarily held in registered form may
be registered in a nominee name of the Bank, Subcustodian or
securities depository, as the case may be. The Bank may without
notice to the Customer cause any such Securities to cease to be
registered in the name of any such nominee and to be registered
in the name of the Customer. In the event that any Securities
registered in a nominee name are called for partial redemption by
the issuer, the Bank may allot the called portion to the
respective beneficial holders of such class of security pro rata
or in any other manner that is fair, equitable and practicable.
The Customer agrees to hold the Bank, Subcustodians, and their
respective nominees harmless from any liability arising directly
or indirectly from their status as a mere record holder of
Securities in the Custody Account.
10. Authorized Persons.
As used in this Agreement, the term "Authorized Person"
means employees or agents including investment managers as have
been designated by written notice from the Customer or its
designated agent to act on behalf of the Customer under this
Agreement. Such persons shall continue to be Authorized Persons
until such time as the Bank receives Instructions from the
Customer or its designated agent that any such employee or agent
is no longer an Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized
Person received by the Bank, via telephone, telex, TWX, facsimile
transmission, bank wire or other teleprocess or electronic
instruction or trade information system acceptable to the Bank
which the Bank believes in good faith to have been given by
Authorized Persons or which are transmitted with proper testing
or authentication pursuant to terms and conditions which the Bank
may specify. Unless otherwise expressly provided, all
PAGE 7
Instructions shall continue in full force and effect until
canceled or superseded.
Any Instructions delivered to the Bank by telephone shall
promptly thereafter be confirmed in writing by an Authorized
Person (which confirmation may bear the facsimile signature of
such Person), but the Customer will hold the Bank harmless for
the failure of an Authorized Person to send such confirmation in
writing, the failure of such confirmation to conform to the
telephone instructions received or the Bank's failure to produce
such confirmation at any subsequent time. The Bank may
electronically record any Instructions given by telephone, and
any other telephone discussions with respect to the Custody
Account. The Customer shall be responsible for safeguarding any
testkeys, identification codes or other security devices which
the Bank shall make available to the Customer or its Authorized
Persons.
12. Standard of Care; Liabilities.
(a) The Bank shall be responsible for the performance of
only such duties as are set forth in this Agreement or expressly
contained in Instructions which are consistent with the
provisions of this Agreement. Notwithstanding anything to the
contrary in this Agreement:
(i) The Bank will use reasonable care with respect to
its obligations under this Agreement and the
safekeeping of Assets. The Bank shall be liable to the
Customer for any loss which shall occur as the result
of the failure of a Subcustodian to exercise reasonable
care with respect to the safekeeping of such Assets to
the same extent that the Bank would be liable to the
Customer if the Bank were holding such Assets in New
York. In the event of any loss to the Customer by
reason of the failure of the Bank or its Subcustodian
to utilize reasonable care, the Bank shall be liable to
the Customer only to the extent of the Customer's
direct damages, and shall in no event be liable for any
special or consequential damages.
(ii) The Bank will not be responsible for any act,
omission, default or for the solvency of any broker or
agent which it or a Subcustodian appoints unless such
appointment was made negligently or in bad faith or for
any loss due to the negligent act of such broker or
agent except to the extent that such broker or agent
(other than a Subcustodian) performs in a negligent
manner which is the cause of the loss to the Customer
and the Bank failed to exercise reasonable care in
monitoring such broker's or agent's performance where
Customer has requested and Bank has agreed to accept
such monitoring responsibility.
PAGE 8
(iii) The Bank shall be indemnified by, and
without liability to the Customer for any action taken
or omitted by the Bank whether pursuant to Instructions
or otherwise within the scope of this Agreement if such
act or omission was in good faith, without negligence.
In performing its obligations under this Agreement, the
Bank may rely on the genuineness of any document which
it believes in good faith to have been validly
executed.
(iv) The Customer agrees to pay for and hold the Bank
harmless from any liability or loss resulting from the
imposition or assessment of any taxes or other
governmental charges, and any related expenses with
respect to income from or Assets in the Accounts,
except to the extent that the Bank has failed to
exercise reasonable care in performing any obligations
which the Bank may have agreed to assume (in addition
to those stated in this Agreement) with respect to
taxes and such failure by the Bank is the direct cause
of such imposition or assessment of such taxes, charges
or expenses.
(v) The Bank shall be entitled to rely, and may act,
upon the advice of counsel (who may be counsel for the
Customer) on all legal matters and shall be without
liability for any action reasonably taken or omitted
pursuant to such advice; provided, that the Bank gives
(to the extent practicable) prior notice to Customer of
Bank's intention to so seek advice of counsel and an
opportunity for consultation with Customer on the
proposed contact with counsel.
(vi) The Bank represents and warrants that it currently
maintain a banker's blanket bond which provides
standard fidelity and non-negligent loss coverage with
respect to the Securities and Cash which may be held by
Subcustodians pursuant to this Agreement. The Bank
agrees that if at any time it for any reason
discontinues such coverage, it shall immediately give
sixty (60) days' prior written notice to the Customer.
The Bank need not maintain any insurance for the
benefit of the Customer.
(vii) Without limiting the foregoing, the Bank
shall not be liable for any loss which results from:
(1) the general risk of investing, or (2) investing or
holding Assets in a particular country including, but
not limited to, losses resulting from nationalization,
expropriation or other governmental actions; regulation
of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market
PAGE 9
conditions which prevent the orderly execution of securities
transactions or affect the value of Assets.
(viii) Neither party shall be liable to the other
for any loss due to forces beyond their control
including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection,
revolution, nuclear fusion, fission or radiation, or
acts of God.
(b) Consistent with and without limiting the first
paragraph of this Section 12, it is specifically acknowledged
that the Bank shall have no duty or responsibility to:
(i) question Instructions or make any suggestions to
the Customer or an Authorized Person regarding such
Instructions;
(ii) supervise or make recommendations with respect to
investments or the retention of Securities;
(iii) advise the Customer or an Authorized Person
regarding any default in the payment of principal or
income of any security other than as provided in
Section 5(c) of this Agreement;
(iv) evaluate or report to the Customer or an
Authorized Person regarding the financial condition of
any broker, agent (other than a Subcustodian) or other
party to which Securities are delivered or payments are
made pursuant to this Agreement;
(v) review or reconcile trade confirmations received
from brokers. The Customer or its Authorized Persons
(as defined in Section 10) issuing Instructions shall
bear any responsibility to review such confirmations
against Instructions issued to and statements issued by
the Bank.
(c) The Customer authorizes the Bank to act under this
Agreement notwithstanding that the Bank or any of its divisions
or affiliates may have a material interest in a transaction, or
circumstances are such that the Bank may have a potential
conflict of duty or interest including the fact that the Bank or
any of its affiliates may provide brokerage services to other
customers, act as financial advisor to the issuer of Securities,
act as a lender to the issuer of Securities, act in the same
transaction as agent for more than one customer, have a material
interest in the issue of Securities, or earn profits from any of
the activities listed herein.
13. Fees and Expenses.
PAGE 10
The Customer agrees to pay the Bank for its services under
this Agreement such amount as may be agreed upon in writing,
together with the Bank's reasonable out-of-pocket or incidental
expenses, including, but not limited to, reasonable legal fees.
The Bank shall have a lien on and is authorized to charge any
Accounts of the Customer for any amount owing to the Bank under
any provision of this Agreement upon notice to the Customer.
14. Miscellaneous.
(a) Foreign Exchange Transactions. Pursuant to
Instructions, which may be standing Instructions, to facilitate
the administration of the Customer's trading and investment
activity, the Bank is authorized to enter into spot or forward
foreign exchange contracts with the Customer or an Authorized
Person for the Customer and may also provide foreign exchange
through its subsidiaries or Subcustodians. The Bank may
establish rules or limitations concerning any foreign exchange
facility made available. In all cases where the Bank, its
subsidiaries, affiliates or Subcustodians enter into a foreign
exchange contract related to Accounts, the terms and conditions
of the then current foreign exchange contract of the Bank, its
subsidiary, affiliate or Subcustodian and, to the extent not
inconsistent, this Agreement shall apply to such transaction.
(b) Certification of Residency, etc. The Customer
certifies that it is a resident of the United States and agrees
to notify the Bank of any changes in residency. The Bank may
rely upon this certification or the certification of such other
facts as may be required to administer the Bank's obligations
under this Agreement. The Customer will indemnify the Bank
against all losses, liability, claims or demands arising directly
or indirectly from any such certifications.
(c) Access to Records. The Bank shall allow the Customer's
independent public accountants, officers and advisers reasonable
access to the records of the Bank relating to the Assets as is
required in connection with their examination of books and
records pertaining to the Customer's affairs. Subject to
restrictions under applicable law, the Bank shall also obtain an
undertaking to permit the Customer's independent public
accountants reasonable access to the records of any Subcustodian
which has physical possession of any Assets as may be required in
connection with the examination of the Customer's books and
records.
(d) Governing Law; Successors and Assigns. This Agreement
shall be governed by the laws of the State of New York and shall
not be assignable by either party, but shall bind the successors
in interest of the Customer and the Bank.
PAGE 11
(e) Entire Agreement; Applicable Riders. Customer
represents that the Assets deposited in the Accounts are (Check
one):
X Employee Benefit Plan or other assets subject to the
Employee Retirement Income Security Act of 1974, as amended
("ERISA");
X Mutual Fund assets subject to certain Securities and
Exchange Commission ("SEC") rules and regulations;
X Neither of the above.
With respect to each Customer, this Agreement consists
exclusively of this document together with Schedules A, B,
Exhibits I - _______ and the following Rider(s) to the
extent indicated on Schedule A hereto opposite the name of
the Customer under the column headed "Applicable Riders to
Agreement":
X ERISA
X MUTUAL FUND
SPECIAL TERMS AND CONDITIONS
There are no other provisions of this Agreement and this
Agreement supersedes any other agreements, whether written or
oral, between the parties. Any amendment to this Agreement must
be in writing, executed by both parties.
(f) Severability. In the event that one or more provisions
of this Agreement are held invalid, illegal or enforceable in any
respect on the basis of any particular circumstances or in any
jurisdiction, the validity, legality and enforceability of such
provision or provisions under other circumstances or in other
jurisdictions and of the remaining provisions will not in any way
be affected or impaired.
PAGE 12
(g) Waiver. Except as otherwise provided in this
Agreement, no failure or delay on the part of either party in
exercising any power or right under this Agreement operates as a
waiver, nor does any single or partial exercise of any power or
right preclude any other or further exercise, or the exercise of
any other power or right. No waiver by a party of any provision
of this Agreement, or waiver of any breach or default, is
effective unless in writing and signed by the party against whom
the waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be
effective when actually received. Any notices or other
communications which may be required under this Agreement are to
be sent to the parties at the following addresses or such other
addresses as may subsequently be given to the other party in
writing:
Bank: The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Investor Services
Telephone: (718) 242-3455
Facsimile: (718) 242-1374
Copy to: The Chase Manhattan Bank, N.A.
Woolgate House
Coleman Street
London EC2P 2HD England
Attention: Global Investor Services
Telephone: 44-71-962-5000
Facsimile: 44-71-962-5377
Telex: 8954681CMBG
Customer: Name of Customer from Schedule A
c/o T. Rowe Price
100 East Pratt Street
Baltimore, MD 21202
Attention: Treasurer
Telephone: (410) 625-6658
Facsimile: (410) 547-0180
(i) Termination. This Agreement may be terminated by the
Customer or the Bank by giving ninety (90) days written notice to
the other, provided that such notice to the Bank shall specify
the names of the persons to whom the Bank shall deliver the
Assets in the Accounts. If notice of termination is given by the
Bank, the Customer shall, within ninety (90) days following
receipt of the notice, deliver to the Bank Instructions
specifying the names of the persons to whom the Bank shall
deliver the Assets. In either case the Bank will deliver the
Assets to the persons so specified, after deducting any amounts
which the Bank determines in good faith to be owed to it under
PAGE 13
Section 13. If within ninety (90) days following receipt of a
notice of termination by the Bank, the Bank does not receive
Instructions from the Customer specifying the names of the
persons to whom the Bank shall deliver the Assets, the Bank, at
its election, may deliver the Assets to a bank or trust company
doing business in the State of New York to be held and disposed
of pursuant to the provisions of this Agreement, or to Authorized
Persons, or may continue to hold the Assets until Instructions
are provided to the Bank.
(j) Entire Agreement. This Agreement, including the
Schedules and Riders hereto, embodies the entire agreement and
understanding of the parties in respect of the subject matter
contained in this Agreement. This Agreement supersedes all other
custody or other agreements between the parties with respect to
such subject matter, which prior agreements are hereby terminated
effective as of the date hereof and shall have no further force
or effect.
EACH OF THE CUSTOMERS, INDIVIDUALLY
AND SEPARATELY LISTED ON SECTION I OF
SCHEDULE A HERETO
/s/Carmen F. Deyesu
By:________________________________
Carmen F. Deyesu
Treasurer & Vice President
EACH OF THE CUSTOMERS, INDIVIDUALLY
AND SEPARATELY LISTED ON SECTION II OF
SCHEDULE A HERETO
/s/Alvin M. Younger
By:____________________________________
Alvin M. Younger
Treasurer
EACH OF THE CUSTOMERS, INDIVIDUALLY
AND SEPARATELY LISTED ON SECTION III OF
SCHEDULE A HERETO
/s/Alvin M. Younger
By:___________________________________
Alvin M. Younger
Treasurer
<PAGE>
PAGE 14
THE CHASE MANHATTAN BANK, N.A.
/s/Alan Naughton
By:_________________________________
Alan Naughton
Vice President
STATE OF )
: ss.
COUNTY OF )
On this day of , 19 , before me
personally came , to me known, who
being by me duly sworn, did depose and say that he/she resides in
at ;
that he/she is of
, the entity
described in and which executed the foregoing instrument; that
he/she knows the seal of said entity, that the seal affixed to
said instrument is such seal, that it was so affixed by order of
said entity, and that he/she signed his/her name thereto by like
order.
__________________________________
Sworn to before me this
day of , 19 .
________________________________
Notary
<PAGE>
PAGE 15
STATE OF )
: ss.
COUNTY OF )
On this day of
,19 , before me personally came , to
me known, who being by me duly sworn, did depose and say that
he/she resides in
at ; that
he/she is a Vice President of THE CHASE MANHATTAN BANK, (National
Association), the corporation described in and which executed the
foregoing instrument; that he/she knows the seal of said
corporation, that the seal affixed to said instrument is such
corporate seal, that it was so affixed by order of the Board of
Directors of said corporation, and that he/she signed his/her
name thereto by like order.
___________________________________
Sworn to before me this
day of , 19 .
___________________________________
Notary
<PAGE>
PAGE 16
Schedule A
Page 1 of 2
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1994
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is
REGISTERED UNDER THE INVESTMENT applicable to all
COMPANY ACT OF 1940 Customers listed under
Section I of this Schedule A.
Equity Funds
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small Cap Value Fund, Inc.
CUNA Mutual Funds, Inc. on behalf of:
CUNA Mutual Cornerstone Fund
<PAGE>
PAGE 17
Schedule A
Page 2 of 2
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
Income Funds
T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Government Bond Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is
applicable to all
T. Rowe Price Trust Company, as Customers under Section
Trustee for the Johnson Matthey II of this Schedule A.
Salaried Employee Savings Plan
Common Trust Funds
T. Rowe Price Trust Company, as Trustee
for the International Common Trust Fund
on behalf of the Underlying Trusts:
Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust
New York City International Common Trust Fund
III. OTHER No Riders are applicable
to the Customer listed
RPFI International Partners, L.P. under Section III of
this Schedule A.
<PAGE>
PAGE 18
ERISA Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
Each of the Entities Listed on Schedule A Hereto
effective January 3, 1994
Customer represents that the Assets being placed in the
Bank's custody are subject to ERISA. It is understood that in
connection therewith the Bank is a service provider and not a
fiduciary of the plan and trust to which the assets are related.
The Bank shall not be considered a party to the underlying plan
and trust and the Customer hereby assumes all responsibility to
assure that Instructions issued under this Agreement are in
compliance with such plan and trust and ERISA.
This Agreement will be interpreted as being in compliance
with the Department of Labor Regulations Section 2550.404b-1
concerning the maintenance of indicia of ownership of plan assets
outside of the jurisdiction of the district courts of the United
States.
The following modifications are made to the Agreement:
Section 3. Subcustodians and Securities Depositories.
Add the following language to the end of Section 3:
As used in this Agreement, the term Subcustodian and the
term securities depositories include a branch of the Bank,
a branch of a qualified U.S. bank, an eligible foreign
custodian, or an eligible foreign securities depository,
where such terms shall mean:
(a) "qualified U.S. bank" shall mean a U.S. bank as
described in paragraph (a)(2)(ii)(A)(1) of the
Department of Labor Regulations Section 2550.404b-1;
(b) "eligible foreign custodian" shall mean a banking
institution incorporated or organized under the laws
of a country other than the United States which is
supervised or regulated by that country's government
or an agency thereof or other regulatory authority in
the foreign jurisdiction having authority over banks;
and
(c) "eligible foreign securities depository" shall mean a
securities depository or clearing agency,
incorporated or organized under the laws of a country
other than the United States, which is supervised or
regulated by that country's government or an agency
thereof or other regulatory authority in the foreign
jurisdiction having authority over such depositories
or clearing agencies and which is described in
paragraph (c)(2) of the Department of Labor
Regulations Section 2550.404b-1.
Section 4. Use of Subcustodian.
PAGE 19
Subsection (d) of this section is modified by deleting the
last sentence.
Section 5. Deposit Account Payments.
Subsection (b) is amended to read as follows:
(b) In the event that any payment made under this Section
5 exceeds the funds available in the Deposit Account, such
discretionary advance shall be deemed a service provided
by the Bank under this Agreement for which it is entitled
to recover its costs as may be determined by the Bank in
good faith.
Section 10. Authorized Persons.
Add the following paragraph at the end of Section 10:
Customer represents that: a) Instructions will only be issued
by or for a fiduciary pursuant to Department of Labor
Regulation Section 404b-1 (a)(2)(i) and b) if Instructions
are to be issued by an investment manager, such entity will
meet the requirements of Section 3(38) of ERISA and will have
been designated by the Customer to manage assets held in the
Customer Accounts ("Investment Manager"). An Investment
Manager may designate certain of its employees to act as
Authorized Persons under this Agreement.
Section 14(a). Foreign Exchange Transactions.
Add the following paragraph at the end of Subsection 14(a):
Instructions to execute foreign exchange transactions with
the Bank, its subsidiaries, affiliates or Subcustodians will
include (1) the time period in which the transaction must be
completed; (2) the location i.e., Chase New York, Chase
London, etc. or the Subcustodian with whom the contract is to
be executed and (3) such additional information and
guidelines as may be deemed necessary; and, if the
Instruction is a standing Instruction, a provision allowing
such Instruction to be overridden by specific contrary
Instructions.
<PAGE>
PAGE 20
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
Each of the Entities Listed on Schedule A Hereto
effective January 3, 1994
Customer represents that the Assets being placed in the
Bank's custody are subject to the Investment Company Act of 1940
(the Act), as the same may be amended from time to time.
Except to the extent that the Bank has specifically agreed to
comply with a condition of a rule, regulation, interpretation
promulgated by or under the authority of the SEC or the Exemptive
Order applicable to accounts of this nature issued to the Bank
(Investment Company Act of 1940, Release No. 12053, November 20,
1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall be solely responsible to assure that
the maintenance of Assets under this Agreement complies with such
rules, regulations, interpretations or exemptive order
promulgated by or under the authority of the Securities Exchange
Commission.
The following modifications are made to the Agreement:
Section 3. Subcustodians and Securities Depositories.
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used in
this Agreement shall mean a branch of a qualified U.S. bank,
an eligible foreign custodian or an eligible foreign
securities depository, which are further defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank
as defined in Rule 17f-5 under the Investment Company Act of
1940;
(b) "eligible foreign custodian" shall mean (i) a banking
institution or trust company incorporated or organized under
the laws of a country other than the United States that is
regulated as such by that country's government or an agency
thereof and that has shareholders' equity in excess of $200
million in U.S. currency (or a foreign currency equivalent
thereof), (ii) a majority owned direct or indirect subsidiary
of a qualified U.S. bank or bank holding company that is
incorporated or organized under the laws of a country other
than the United States and that has shareholders' equity in
excess of $100 million in U.S. currency (or a foreign
currency equivalent thereof)(iii) a banking institution or
trust company incorporated or organized under the laws of a
country other than the United States or a majority owned
direct or indirect subsidiary of a qualified U.S. bank or
bank holding company that is incorporated or organized under
the laws of a country other than the United States which has
such other qualifications as shall be specified in
Instructions and approved by the Bank; or (iv) any other
PAGE 21
entity that shall have been so qualified by exemptive order,
rule or other appropriate action of the SEC; and
(c) "eligible foreign securities depository" shall mean a
securities depository or clearing agency, incorporated or
organized under the laws of a country other than the United
States, which operates (i) the central system for handling
securities or equivalent book-entries in that country, or
(ii) a transnational system for the central handling of
securities or equivalent book-entries.
The Customer represents that its Board of Directors has
approved each of the Subcustodians listed in Schedule B to this
Agreement and the terms of the subcustody agreements between the
Bank and each Subcustodian, which are attached as Exhibits I
through of Schedule B, and further represents that its
Board has determined that the use of each Subcustodian and the
terms of each subcustody agreement are consistent with the best
interests of the Fund(s) and its (their) shareholders. The Bank
will supply the Customer with any amendment to Schedule B for
approval. As requested by the Bank, the Customer will supply the
Bank with certified copies of its Board of Directors
resolution(s) with respect to the foregoing prior to placing
Assets with any Subcustodian so approved.
Section 11. Instructions.
Add the following language to the end of Section 11:
Deposit Account Payments and Custody Account Transactions
made pursuant to Section 5 and 6 of this Agreement may be
made only for the purposes listed below. Instructions must
specify the purpose for which any transaction is to be made
and Customer shall be solely responsible to assure that
Instructions are in accord with any limitations or
restrictions applicable to the Customer by law or as may be
set forth in its prospectus.
(a) In connection with the purchase or sale of Securities at
prices as confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or
otherwise become payable;
(c) In exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan or
merger, consolidation, reorganization, recapitalization or
readjustment;
(d) Upon conversion of Securities pursuant to their terms
into other securities;
(e) Upon exercise of subscription, purchase or other similar
rights represented by Securities;
(f) For the payment of interest, taxes, management or
supervisory fees, distributions or operating expenses;
PAGE 22
(g) In connection with any borrowings by the Customer
requiring a pledge of Securities, but only against receipt of
amounts borrowed;
(h) In connection with any loans, but only against receipt
of adequate collateral as specified in Instructions which
shall reflect any restrictions applicable to the Customer;
(i) For the purpose of redeeming shares of the capital stock
of the Customer and the delivery to, or the crediting to the
account of, the Bank, its Subcustodian or the Customer's
transfer agent, such shares to be purchased or redeemed;
(j) For the purpose of redeeming in kind shares of the
Customer against delivery to the Bank, its Subcustodian or
the Customer's transfer agent of such shares to be so
redeemed;
(k) For delivery in accordance with the provisions of any
agreement among the Customer, the Bank and a broker-dealer
registered under the Securities Exchange Act of 1934 (the
"Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance
with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Customer;
(l) For release of Securities to designated brokers under
covered call options, provided, however, that such Securities
shall be released only upon payment to the Bank of monies for
the premium due and a receipt for the Securities which are to
be held in escrow. Upon exercise of the option, or at
expiration, the Bank will receive from brokers the Securities
previously deposited. The Bank will act strictly in
accordance with Instructions in the delivery of Securities to
be held in escrow and will have no responsibility or
liability for any such Securities which are not returned
promptly when due other than to make proper request for such
return;
(m) For spot or forward foreign exchange transactions to
facilitate security trading, receipt of income from
Securities or related transactions;
(n) For other proper purposes as may be specified in
Instructions issued by an officer of the Customer which shall
include a statement of the purpose for which the delivery or
payment is to be made, the amount of the payment or specific
Securities to be delivered, the name of the person or persons
to whom delivery or payment is to be made, and a
certification that the purpose is a proper purpose under the
instruments governing the Customer; and
(o) Upon the termination of this Agreement as set forth in
Section 14(i).
PAGE 23
Section 12. Standard of Care; Liabilities.
Add the following subsection (c) to Section 12:
(c) The Bank hereby warrants to the Customer that in its
opinion, after due inquiry, the established procedures to be
followed by each of its branches, each branch of a qualified
U.S. bank, each eligible foreign custodian and each eligible
foreign securities depository holding the Customer's
Securities pursuant to this Agreement afford protection for
such Securities at least equal to that afforded by the Bank's
established procedures with respect to similar securities
held by the Bank and its securities depositories in New York.
Section 14. Access to Records.
Add the following language to the end of Section 14(c):
Upon reasonable request from the Customer, the Bank shall
furnish the Customer such reports (or portions thereof) of
the Bank's system of internal accounting controls applicable
to the Bank's duties under this Agreement. The Bank shall
endeavor to obtain and furnish the Customer with such similar
reports as it may reasonably request with respect to each
Subcustodian and securities depository holding the Customer's
assets.
GLOBAL CUSTODY AGREEMENT
WITH
DATE
SPECIAL TERMS AND CONDITIONS RIDER
<PAGE>
PAGE 24
January, 1994 Schedule B
SUB-CUSTODIANS EMPLOYED BY
THE CHASE MANHATTAN BANK, N.A. LONDON, GLOBAL CUSTODY
COUNTRY
SUB-CUSTODIAN
CORRESPONDENT BANK
ARGENTINA
The Chase Manhattan Bank,
N.A.
Main Branch
25 De Mayo 130/140
Buenos Aires
ARGENTINA
The Chase
Manhattan Bank,
N.A. Buenos Aires<PAGE>
AUSTRALIA
The Chase Manhattan Bank,
Australia Limited
36th Floor
World Trade Centre
Jamison Street
Sydney
New South Wales 2000
AUSTRALIA
The Chase
Manhattan Bank
Australia Limited
Sydney
AUSTRIA
Creditanstalt - Bankvereln
Schottengasse 6
A - 1011, Vienna
AUSTRIA
Credit Lyonnais
Vienna
BANGLADESH<PAGE>
Standard Chartered Bank
18-20 Motijheel C.A.
Box 536,
Dhaka-1000
BANGLADESH<PAGE>
Standard Chartered
Bank Dhaka<PAGE>
BELGIUM<PAGE>
Generale Bank
3 Montagne Du Parc
1000 Bruxelles
BELGIUM<PAGE>
Credit Lyonnais
Bank Brussels<PAGE>
BOTSWANA<PAGE>
Standard Chartered Bank
Botswana Ltd.
4th Floor Commerce House
The Mall
Gaborone
BOTSWANA<PAGE>
Standard Chartered
Bank Botswana Ltd.
Gaborone<PAGE>
<PAGE>
BRAZIL Banco Chase Manhattan, S.A.
Chase Manhattan Center
Rua Verbo Divino, 1400
Sao Paulo, SP 04719-002
BRAZIL<PAGE>
Banco Chase Manhattan S.A.
Sao Paulo
PAGE 25
CANADA<PAGE>
The Royal Bank of Canada
Royal Bank Plaza
Toronto
Ontario M5J 2J5
CANADA
Canada Trust
Canada Trust Tower
BCE Place
161 Bay at Front
Toronto
Ontario M5J 2T2
CANADA<PAGE>
Toronto Dominion
Bank
Toronto
Toronto Dominion
Bank
Toronto<PAGE>
CHILE<PAGE>
The Chase Manhattan Bank,
N.A.
Agustinas 1235
Casilla 9192
Santiago
CHILE<PAGE>
The Chase
Manhattan Bank,
N.A.
Santiago<PAGE>
COLOMBIA<PAGE>
Cititrust Colombia S.A.
Sociedad Fiduciaria
Av. Jimenez No 8-89
Santafe de Bogota, DC
COLOMBIA<PAGE>
Cititrust Colombia
S.A. Sociedad
Fiduciaria
Santafe de Bogota<PAGE>
CZECH
REPUBLC<PAGE>
Ceskoslovenska Obchodni
Banka, A.S.
Na Prikoope 14
115 20 Praha 1
CZECH REPUBLIC<PAGE>
Ceskoslovenska
Obchodni Banka,
A.S.
Praha<PAGE>
DENMARK<PAGE>
Den Danske Bank
2 Holmens Kanala DK 1091
Copenhagen
DENMARK<PAGE>
Den Danske Bak
Copenhagen<PAGE>
EUROBONDS<PAGE>
Cedel S.A.
67 Boulevard Grande Duchesse
Charlotte
LUXEMBOURG
A/c The Chase Manhattan
Bank, N.A.
London
A/c No. 17817<PAGE>
ECU:Lloyds Bank
PLC
International
Banking Dividion
London
For all other
currencies: see
relevant country<PAGE>
<PAGE>
EURO CDS First Chicago Clearing Centre
27 Leadenhall Street
London EC3A 1AA
UNITED KINGDOM<PAGE>
ECU:Lloyds Bank PLC
Banking Division London
For all other currencies: see relevant country
PAGE 26
FINLAND<PAGE>
Kansallis-Osake-Pankki
Aleksanterinkatu 42
00100 Helsinki 10
FINLAND<PAGE>
Kanasallis-Osake-
Pankki<PAGE>
FRANCE<PAGE>
Banque Paribas
Ref 256
BP 141
3, Rue D'Antin
75078 Paris
Cedex 02
FRANCE<PAGE>
Societe Generale
Paris<PAGE>
GERMANY<PAGE>
Chase Bank A.G.
Alexanderstrasse 59
Postfach 90 01 09
60441 Frankfurt/Main
GERMANY<PAGE>
Chase Bank A.G.
Frankfurt<PAGE>
GREECE<PAGE>
National Bank of Greece S.A.
38 Stadiou Street
Athens
GREECE<PAGE>
National Bank of
Greece S.A. Athens
A/c Chase
Manhattan Bank,
N.A., London
A/c No.
040/7/921578-68<PAGE>
HONG KONG<PAGE>
The Chase Manhattan Bank,
N.A.
40/F One Exchange Square
8, Connaught Place
Central, Hong Kong
HONG KONG<PAGE>
The Chase
Manhattan Bank,
N.A.
Hong Kong<PAGE>
HUNGARY<PAGE>
Citibank Budapest Rt.
Vaci Utca 19-21
1052 Budapest V
HUNGARY<PAGE>
Citibank Budapest
Rt.
Budapest<PAGE>
INDIA<PAGE>
The Hongkong and Shanghai
Banking Corporation Limited
52/60 Mahatma Gandhi Road
Bombay 400 001
INDIA<PAGE>
The Hongkong and
Shanghai
Banking
Corporation
Limited
Bombay<PAGE>
<PAGE>
INDONESIA The Hongkong and Shanghai
Banking Corporation Limited
World Trade Center
J1. Jend Sudirman Kav. 29-31
Jakarta 10023
INDONESIA<PAGE>
The Chase Manhattan Bank, N.A.
Jakarta
PAGE 27
IRELAND<PAGE>
Bank of Ireland
International Financial
Services Centre
1 Hargourmaster Place
Dublin 1
IRELAND<PAGE>
Allied Irish Bank
Dublin<PAGE>
ISRAEL<PAGE>
Bank Leumi Le-Israel B.M.
19 Herzi Street
65136 Tel Aviv
ISRAEL<PAGE>
Bank Leumi Le-
Israel B.M.
Tel Aviv<PAGE>
ITALY<PAGE>
The Chase Manhattan Bank,
N.A.
Piazza Meda 1
20121 Milan
ITALY<PAGE>
The Chase
Manhattan Bank,
N.A.
Milan<PAGE>
JAPAN<PAGE>
The Chase Manhattan Bank,
N.A.
1-3 Marunouchi 1-Chome
Chiyoda-Ku
Tokyo 100
JAPAN<PAGE>
The Chase
Manhattan Bank,
N.A.
Tokyo<PAGE>
JORDAN<PAGE>
Arab Bank Limited
P.O. Box 950544-5
Amman
Shmeisani
JORDAN<PAGE>
Arab Bank Limited
Amman<PAGE>
LUXEMBOURG<PAGE>
Banque Generale du
Luxembourg S.A.
27 Avenue Monterey
LUXEMBOURG<PAGE>
Banque Generale du
Luxembourg S.A.
Luxembourg<PAGE>
MALAYSIA<PAGE>
The Chase Manhattan Bank,
N.A.
Pernas International
Jalan Sultan Ismail
50250, Kuala Lumpur
MALAYSIA<PAGE>
The Chase
Manhattan Bank,
N.A.
Kuala Lumpur<PAGE>
<PAGE>
MEXICO
(Equities)<PAGE>
The Chase Manhattan Bank, N.A.
Hamburgo 213, Piso 7
06660 Mexico D.F.
MEXICO<PAGE>
No correspondent Bank
(Government
Bonds)<PAGE>
Banco Nacional de Mexico,
Avenida Juarez No. 104 - 11
Piso
06040 Mexico D.F.
MEXICO<PAGE>
Banque Commerciale
du Maroc
Casablanca<PAGE>
<PAGE>
PAGE 28
NETHERLANDS<PAGE>
ABN AMRO N.V.
Securities Centre
P.O. Box 3200
4800 De Breda
NETHERLANDS<PAGE>
Credit Lyonnais
Bank Nederland
N.V.
Rotterdam<PAGE>
NEW ZEALAND<PAGE>
National Nominees Limited
Level 2 BNZ Tower
125 Queen Street
Auckland
NEW ZEALAND<PAGE>
National Bank of
New Zealand
Wellington<PAGE>
NORWAY<PAGE>
Den Norske Bank
Kirkegaten 21
Oslo 1
NORWAY<PAGE>
Den Norske Bank
Oslo<PAGE>
PAKISTAN<PAGE>
Citibank N.A.
State Life Building No.1
I.I. Chundrigar Road
Karachi
PAKISTAN<PAGE>
Citibank N.A.
Karachi<PAGE>
PERU<PAGE>
Citibank, N.A.
Camino Real 457
CC Torre Real - 5th Floor
San Isidro, Lima 27
PERU<PAGE>
Citibank N.A.
Lima<PAGE>
PHILIPPINES<PAGE>
The Hongkong and Shanghai
Banking Corporation Limited
Hong Kong Bank Centre 3/F
San Miguel Avenue
Ortigas Commercial Centre
Pasig Metro Manila
PHILIPPINES<PAGE>
The Hongkong and
Shaghai Banking
Corporation
Limited
Manila<PAGE>
POLAND<PAGE>
Bank Polska Kasa Opieki S.A.
6/12 Nowy Swiat Str
00-920 Warsaw
POLAND<PAGE>
Bank Potska Kasa
Opieki S.A.
Warsaw<PAGE>
<PAGE>
PORTUGAL Banco Espirito Santo & Comercial de Lisboa
Servico de Gestaode Titulos
R. Mouzinho da Silvelra, 36 r/c
1200 Lisbon
PORTUGAL<PAGE>
Banco Pinto & Sotto Mayor Avenida Fontes Pereira de Melo
1000 Lisbon
<PAGE>
PAGE 29
SHANGHAI
(CHINA)<PAGE>
The Hongkong and Shanghai
Banking Corporation Limited
Shanghai Branch
Corporate Banking Centre
Unit 504, 5/F Shanghai
Centre
1376 Hanjing Xi Lu
Shanghai
THE PEOPLE'S REPUBLIC OF
CHINA<PAGE>
The Chase
Manhattan Bank,
N.A.
Hong Kong<PAGE>
SCHENZHEN
(CHINA)<PAGE>
The Hongkong and Shanghai
Banking Corporation Limited
1st Floor
Central Plaza Hotel
No. 1 Chun Feng Lu
Shenzhen
THE PEOPLE'S REPUBLIC OF
CHINA<PAGE>
The Chase
Manhattan Bank,
N.A.
Hong Kong<PAGE>
SINGAPORE<PAGE>
The Chase Manhattan Bank,
N.A.
Shell Tower
50 Raffles Place
Singapore 0104
SINGAPORE<PAGE>
The Chase
Manhattan Bank,
N.A.
Singapore<PAGE>
SOUTH KOREA<PAGE>
The Hongkong & Shanghai
Banking Corporation Limited
6/F Kyobo Building
#1 Chongro, 1-ka Chongro-Ku,
Seoul
SOUGH KOREA<PAGE>
The Hongkong &
Shanghai Banking
Corporation
Limited
Seoul<PAGE>
SPAIN<PAGE>
The Chase Manhattan Bank,
N.A.
Calle Peonias 2
7th Floor
La Piovera
28042 Madrid
SPAIN<PAGE>
Banco Zaragozano,
S.A.
Madrid<PAGE>
URUGUAY<PAGE>
The First National Bank of
Boston
Zabala 1463
Montevideo
URUGUAY<PAGE>
The First National
Bank of Boston
Montevideo<PAGE>
<PAGE>
U.S.A The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
New York
NY 10081
U.S.A.<PAGE>
The Chase Manhattan Bank, N.A.
New York
PAGE 30
VENEZUELA<PAGE>
Citibank N.A.
Carmelitas a Altagracia
Edificio Citibank
Caracas 1010
VENEZUELA<PAGE>
Citibank N.A.
Caracas<PAGE>
<PAGE>
PAGE 31
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT, dated as of April 18, 1994 (the
"Amendment Agreement") to the Global Custody Agreement, effective
January 3, 1994 (the "Custody Agreement") by and between each of
the Entities listed in Attachment A hereto, separately and
individually (each such entity referred to hereinafter as the
"Customer") and THE CHASE MANHATTAN BANK, N.A. (the "Bank").
Terms defined in the Custody Agreement are used herein as therein
defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its
global custodian and the bank wishes to accept such appointment
pursuant to the terms of the Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Section I of Schedule A of the Custody
Agreement ("Schedule A") shall be amended to add each
Customer listed in Attachment A hereto. The revised
Schedule A incorporating these changes in the form
attached hereto as Attachment B shall supersede the
existing Schedule A in its entirety.
2. Agreement. The Customer agrees to be bound in all
respects by all the terms and conditions of the Custody
Agreement and shall be fully liable thereunder as a
"Customer" as defined in the Custody Agreement.
3. Confirmation of Agreement. Except as amended hereby, the
Custody Agreement is in full force and effect and as so
amended is hereby ratified, approved and confirmed by the
Customer and the Bank in all respects.
4. Governing Law. This Amendment Agreement shall be
construed in accordance with and governed by the law of
the State of New York without regard to its conflict of
law principles.
<PAGE>
PAGE 32
IN WITNESS WHEREOF, the parties have executed this Amendment
Agreement as of the day and year first above written.
THE CHASE MANHATTAN BANK, N.A.
/s/Alan P. Naughton
By:________________________________
Alan P. Naughton
Vice President
EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEPARATELY AND
INDIVIDUALLY
/s/Carmen F. Deyesu
By: ______________________________
Carmen F. Deyesu
Treasurer<PAGE>
PAGE 33
Attachment A
LIST OF CUSTOMERS
T. Rowe Price International Series, Inc. on behalf of the
T. Rowe Price International Stock Portfolio
T. Rowe Price Equity Series, Inc. on behalf of the
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price New America Growth Fund, Inc.
T. Rowe Price Income Series, Inc. on behalf of
T. Rowe Price Limited-Term Bond Portfolio
<PAGE>
PAGE 34
Attachment B
Schedule A
Page 1 of 2
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1993
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
I. INVESTMENT The Mutual Fund Rider is
COMPANIES/PORTFOLIOS applicable to all Customers
REGISTERED UNDER THE listed under Section I
INVESTMENT COMPANY ACT OF 1940 of this Schedule A.
<PAGE>
PAGE 35
Equity Funds
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
CUNA Mutual Funds, Inc. on behalf of:
CUNA Mutual Cornerstone Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price New America Growth Fund, Inc.
Income Funds
T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Government Income Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is
applicable to all Customers
T. Rowe Price Trust Company, under Section II of this
as Trustee for the Johnson Schedule A.
Matthey Salaried Employee
Savings Plan
<PAGE>
PAGE 36
Common Trust Funds
T. Rowe Price Trust company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:
Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust
New York City International Common Trust Fund
III. OTHER No Riders are applicable to
the Customer listed under
RPFI International Section III of this
Partners, L.P. Schedule A.
<PAGE>
PAGE 37
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT, dated as of August 15, 1994 (the
"Amendment Agreement") to the Global Custody Agreement, effective
January 3, 1994, as amended (the "Custody Agreement") by and
between each of the Entities listed in Attachment A hereto,
separately and individually (each such entity referred to
hereinafter as the "Customer") and THE CHASE MANHATTAN BANK, N.A.
(the "Bank"). Terms defined in the Custody Agreement are used
herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its
global custodian and the Bank wishes to accept such appointment
pursuant to the terms of the Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Section I of Schedule A of the Custody
Agreement ("Schedule A") shall be amended to add each Customer
listed in Attachment A hereto. The revised Schedule A
incorporating these changes in the form attached hereto as
Attachment B shall supersede the existing Schedule A in its
entirety.
2. Agreement. The Customer agrees to be bound in all
respects by all the terms and conditions of the Custody Agreement
and shall be fully liable thereunder as a "Customer" as defined
in the Custody Agreement.
3. Confirmation of Agreement. Except as amended hereby,
the Custody Agreement is in full force and effect and as so
amended is hereby ratified, approved and confirmed by the
Customer and the Bank in all respects.
4. Governing Law. This Amendment Agreement shall be
construed in accordance with and governed by the law of the State
of New York without regard to its conflict of law principles.
<PAGE>
PAGE 38
IN WITNESS WHEREOF, the parties have executed this Amendment
Agreement as of the day and year first above written.
THE CHASE MANHATTAN BANK, N.A.
/s/Alan P. Naughton
By:_________________________________
Alan P. Naughton
Vice President
EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEPARATELY AND
INDIVIDUALLY
/s/Carmen F. Deyesu
By:_________________________________
Carmen F. Deyesu
Treasurer
<PAGE>
PAGE 39
Attachment A
LIST OF CUSTOMERS
T. Rowe Price Equity Series, Inc. on behalf of the
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Personal Strategy Funds, Inc. on behalf of
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
<PAGE>
PAGE 40
Attachment B
Schedule A
Page 1 of 2
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1993
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
I. INVESTMENT The Mutual Fund Rider is
COMPANIES/PORTFOLIOS applicable to all Customers
REGISTERED UNDER THE listed under Section I
INVESTMENT COMPANY ACT OF 1940 of this Schedule A.
Equity Funds
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
CUNA Mutual Funds, Inc. on behalf of:
CUNA Mutual Cornerstone Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price New America Growth Fund, Inc.
<PAGE>
PAGE 41
Income Funds
T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Government Income Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is
applicable to all Customers
T. Rowe Price Trust Company, under Section II of this
as Trustee for the Johnson Schedule A.
Matthey Salaried Employee
Savings Plan
Common Trust Funds
T. Rowe Price Trust company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:
Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust
New York City International Common Trust Fund
III. OTHER No Riders are applicable to
the Customer listed under
RPFI International Section III of this
Partners, L.P. Schedule A.
<PAGE>
PAGE 42
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT, dated as of November 28, 1994 (the
"Amendment Agreement") to the Global Custody Agreement, effective
January 3, 1994, as amended (the "Custody Agreement") by and
between each of the Entities listed in Attachment A hereto,
separately and individually (each such entity referred to
hereinafter as the "Customer") and THE CHASE MANHATTAN BANK, N.A.
(the "Bank"). Terms defined in the Custody Agreement are used
herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its
global custodian and the Bank wishes to accept such appointment
pursuant to the terms of the Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Section I of Schedule A of the Custody
Agreement ("Schedule A") shall be amended to add each Customer
listed in Attachment A hereto. The revised Schedule A
incorporating these changes in the form attached hereto as
Attachment B shall supersede the existing Schedule A in its
entirety.
2. Agreement. The Customer agrees to be bound in all
respects by all the terms and conditions of the Custody Agreement
and shall be fully liable thereunder as a "Customer" as defined
in the Custody Agreement.
3. Confirmation of Agreement. Except as amended hereby,
the Custody Agreement is in full force and effect and as so
amended is hereby ratified, approved and confirmed by the
Customer and the Bank in all respects.
4. Governing Law. This Amendment Agreement shall be
construed in accordance with and governed by the law of the State
of New York without regard to its conflict of law principles.
<PAGE>
PAGE 43
IN WITNESS WHEREOF, the parties have executed this Amendment
Agreement as of the day and year first above written.
THE CHASE MANHATTAN BANK, N.A.
/s/Alan P. Naughton
By:_________________________________
Alan P. Naughton
Vice President
EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEPARATELY AND
INDIVIDUALLY
/s/Carmen F. Deyesu
By:_________________________________
Carmen F. Deyesu
Treasurer
<PAGE>
PAGE 44
Attachment A
LIST OF CUSTOMERS
T. Rowe Price Value Fund, Inc.
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund
<PAGE>
PAGE 45
Attachment B
Schedule A
Page 1 of 2
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1993
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
I. INVESTMENT The Mutual Fund Rider is
COMPANIES/PORTFOLIOS applicable to all Customers
REGISTERED UNDER THE listed under Section I
INVESTMENT COMPANY ACT OF 1940 of this Schedule A.
Equity Funds
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
CUNA Mutual Funds, Inc. on behalf of:
CUNA Mutual Cornerstone Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price New America Growth Fund, Inc.
T. Rowe Price Value Fund, Inc.<PAGE>
PAGE 46
Income Funds
T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Government Income Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is
applicable to all Customers
T. Rowe Price Trust Company, under Section II of this
as Trustee for the Johnson Schedule A.
Matthey Salaried Employee
Savings Plan
Common Trust Funds
T. Rowe Price Trust company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:
Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust
New York City International Common Trust Fund
III. OTHER No Riders are applicable to
the Customer listed under
RPFI International Section III of this
Partners, L.P. Schedule A.
<PAGE>
PAGE 47
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT, dated as of May 31, 1995 (the
"Amendment Agreement") to the Global Custody Agreement, effective
January 3, 1994, as amended (the "Custody Agreement") by and
between each of the Entities listed in Attachment A hereto,
separately and individually (each such entity referred to
hereinafter as the "Customer") and THE CHASE MANHATTAN BANK, N.A.
(the "Bank"). Terms defined in the Custody Agreement are used
herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its
global custodian and the Bank wishes to accept such appointment
pursuant to the terms of the Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Section I of Schedule A of the Custody
Agreement ("Schedule A") shall be amended to add and delete
certain Customers as specified in Attachment A hereto. The
revised Schedule A incorporating these changes in the form
attached hereto as Attachment B shall supersede the existing
Schedule A in its entirety.
2. Agreement. The Customer agrees to be bound in all
respects by all the terms and conditions of the Custody Agreement
and shall be fully liable thereunder as a "Customer" as defined
in the Custody Agreement.
3. Confirmation of Agreement. Except as amended hereby,
the Custody Agreement is in full force and effect and as so
amended is hereby ratified, approved and confirmed by the
Customer and the Bank in all respects.
4. Governing Law. This Amendment Agreement shall be
construed in accordance with and governed by the law of the State
of New York without regard to its conflict of law principles.
<PAGE>
PAGE 48
IN WITNESS WHEREOF, the parties have executed this Amendment
Agreement as of the day and year first above written.
THE CHASE MANHATTAN BANK, N.A.
/s/Alan P. Naughton
By:_________________________________
Alan P. Naughton
Vice President
EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEPARATELY AND
INDIVIDUALLY
/s/Carmen F. Deyesu
By:_________________________________
Carmen F. Deyesu
Treasurer
<PAGE>
PAGE 49
Attachment A
LIST OF CUSTOMERS
Add the following Fund:
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Stock Fund
Delete the following Fund:
CUNA Mutual Funds, Inc. on behalf of:
CUNA Mutual Cornerstone Fund
<PAGE>
PAGE 50
Attachment B
Schedule A
Page 1 of 2
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1993
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
I. INVESTMENT The Mutual Fund Rider is
COMPANIES/PORTFOLIOS applicable to all Customers
REGISTERED UNDER THE listed under Section I
INVESTMENT COMPANY ACT OF 1940 of this Schedule A.
Equity Funds
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price New America Growth Fund, Inc.
T. Rowe Price Value Fund, Inc.<PAGE>
PAGE 51
Income Funds
T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Government Income Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is
applicable to all Customers
T. Rowe Price Trust Company, under Section II of this
as Trustee for the Johnson Schedule A.
Matthey Salaried Employee
Savings Plan
Common Trust Funds
T. Rowe Price Trust company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:
Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust
New York City International Common Trust Fund
III. OTHER No Riders are applicable to
the Customer listed under
RPFI International Section III of this
Partners, L.P. Schedule A.
<PAGE>
PAGE 52
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT, dated as of November 1, 1995 (the
"Amendment Agreement") to the Global Custody Agreement, effective
January 3, 1994, as amended (the "Custody Agreement") by and
between each of the Entities listed in Attachment A hereto,
separately and individually (each such entity referred to
hereinafter as the "Customer") and THE CHASE MANHATTAN BANK, N.A.
(the "Bank"). Terms defined in the Custody Agreement are used
herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its
global custodian and the Bank wishes to accept such appointment
pursuant to the terms of the Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Section I of Schedule A of the Custody
Agreement ("Schedule A") shall be amended to add and delete
certain Customers as specified in Attachment A hereto. The
revised Schedule A incorporating these changes in the form
attached hereto as Attachment B shall supersede the existing
Schedule A in its entirety.
2. Agreement. The Customer agrees to be bound in all
respects by all the terms and conditions of the Custody Agreement
and shall be fully liable thereunder as a "Customer" as defined
in the Custody Agreement.
3. Confirmation of Agreement. Except as amended hereby,
the Custody Agreement is in full force and effect and as so
amended is hereby ratified, approved and confirmed by the
Customer and the Bank in all respects.
4. Governing Law. This Amendment Agreement shall be
construed in accordance with and governed by the law of the State
of New York without regard to its conflict of law principles.
<PAGE>
PAGE 53
IN WITNESS WHEREOF, the parties have executed this Amendment
Agreement as of the day and year first above written.
THE CHASE MANHATTAN BANK, N.A.
/s/Alan R. Naughton
By:_________________________________
Alan R. Naughton
Vice President
EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEPARATELY AND
INDIVIDUALLY
/s/Carmen F. Deyesu
By:_________________________________
Carmen F. Deyesu
Treasurer
<PAGE>
PAGE 54
Attachment A
LIST OF CUSTOMERS
Add the following Funds:
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Stock Fund
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price Health & Life Sciences Fund, Inc.
<PAGE>
PAGE 55
Attachment B
Schedule A
Page 1 of 2
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1993
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
I. INVESTMENT The Mutual Fund Rider is
COMPANIES/PORTFOLIOS applicable to all Customers
REGISTERED UNDER THE listed under Section I
INVESTMENT COMPANY ACT OF 1940 of this Schedule A.
Equity Funds
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price New America Growth Fund, Inc.
T. Rowe Price Value Fund, Inc.
T. Rowe Price Health & Life Sciences Fund, Inc.<PAGE>
PAGE 56
Income Funds
T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Government Income Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Corporate Income Fund, Inc.
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is
applicable to all Customers
T. Rowe Price Trust Company, under Section II of this
as Trustee for the Johnson Schedule A.
Matthey Salaried Employee
Savings Plan
Common Trust Funds
T. Rowe Price Trust Company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:
Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust
New York City International Common Trust Fund
III. OTHER No Riders are applicable to
the Customer listed under
RPFI International Section III of this
Partners, L.P. Schedule A.<PAGE>
PAGE 57
AMENDMENT AGREEMENT
The Global Custody Agreement of January 3, 1994, as amended
April 18, 1994, August 15, 1994, November 28, 1994, May 31, 1995,
and November 1, 1995 (the "Custody Agreement"), by and between
each of the Entities listed in Attachment A hereto, separately
and individually (each such entity referred to hereinafter as the
"Customer") and The Chase Manhattan Bank, N.A., which contracts
have been assumed by operation of law by THE CHASE MANHATTAN BANK
(the "Bank") is hereby further amended, as of July 31, 1996 (the
"Amendment Agreement"). Terms defined in the Custody Agreement
are used herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its
global custodian and the Bank wishes to accept such appointment
pursuant to the terms of the Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Section I of Schedule A of the Custody
Agreement ("Schedule A") shall be amended to add and delete
certain Customers as specified in Attachment A hereto. The
revised Schedule A incorporating these changes in the form
attached hereto as Attachment B shall supersede the existing
Schedule A in its entirety.
2. Agreement. The Customer agrees to be bound in all
respects by all the terms and conditions of the Custody Agreement
and shall be fully liable thereunder as a "Customer" as defined
in the Custody Agreement.
3. Confirmation of Agreement. Except as amended hereby,
the Custody Agreement is in full force and effect and as so
amended is hereby ratified, approved and confirmed by the
Customer and the Bank in all respects.
4. Governing Law. This Amendment Agreement shall be
construed in accordance with and governed by the law of the State
of New York without regard to its conflict of law principles.
<PAGE>
PAGE 58
IN WITNESS WHEREOF, the parties have executed this Amendment
Agreement as of the day and year first above written.
THE CHASE MANHATTAN BANK
/s/Caroline Willson
By:_________________________________
Caroline Willson
Vice President
EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEPARATELY AND
INDIVIDUALLY
/s/Carmen F. Deyesu
By:_________________________________
Carmen F. Deyesu
Treasurer
<PAGE>
PAGE 59
Attachment A
LIST OF CUSTOMERS
Add the following Funds:
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price Financial Services Fund, Inc.
Institutional Equity Funds, Inc. on behalf of:
Mid-Cap Equity Growth Fund
T. Rowe Price Mid-Cap Value Fund, Inc.
T. Rowe Price Trust Company, as Trustee for the
International Common Trust Fund on behalf of:
Emerging Markets Equity Trust<PAGE>
PAGE 60
Attachment B
Schedule A
Page 1 of 2
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1994
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
I. INVESTMENT The Mutual Fund Rider is
COMPANIES/PORTFOLIOS applicable to all Customers
REGISTERED UNDER THE listed under Section I
INVESTMENT COMPANY ACT OF 1940 of this Schedule A.
Equity Funds
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Financial Services Fund, Inc.
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price Health Sciences Fund, Inc.
Institutional Equity Funds, Inc. on behalf of:
Mid-Cap Equity Growth Fund
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price Mid-Cap Value Fund, Inc.
T. Rowe Price New America Growth Fund
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
PAGE 61
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Value Fund, Inc.
Income Funds
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is
applicable to all Customers
T. Rowe Price Trust Company, under Section II of this
as Trustee for the Johnson Schedule A.
Matthey Salaried Employee
Savings Plan
Common Trust Funds
T. Rowe Price Trust Company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:
Emerging Markets Equity Trust
European Discovery Trust
Foreign Discovery Trust
Foreign Discovery Trust-Augment
Japan Discovery Trust
Latin America Discovery Trust
Pacific Discovery Trust
New York City International Common Trust Fund
III. OTHER No Riders are applicable to
the Customer listed under
RPFI International Section III of this
Partners, L.P. Schedule A.<PAGE>
PAGE 62
AMENDMENT, dated July 17, 1997 to the January 3, 1994
Custody Agreement ("Agreement"), as amended July 31, 1996
("Amendment Agreement"), by and between each of the Entities
listed in Attachment B of the Amendment Agreement, separately and
individually (each such entity hereinafter referred to as the
"Customer"), and The Chase Manhattan Bank, N.A. whose obligations
have since been adopted by The Chase Manhattan Bank ("Bank"),
having a place of business at One Chase Manhattan Plaza, New
York, N.Y. 10081
It is hereby agreed as follows:
Section 1. Except as modified hereby, the Agreement is
confirmed in all respects. Capitalized terms used herein without
definition shall have the meanings ascribed to them in the
Agreement.
Section 2. The Agreement is amended as follows by adding
the following as new Section 15:
(a) "CMBI" shall mean Chase Manhattan Bank
International, an indirect wholly-owned subsidiary of Bank,
located in Moscow, Russia, and any nominee companies appointed by
it.
(b) "International Financial Institution" shall
mean any bank in the top 1,000 (together with their affiliated
companies) as measured by "Tier 1" capital or any broker/dealer
in the top 100 as measured by capital.
(c) "Negligence" shall mean the failure to exercise
"Reasonable Care".
(d) "No-Action Letter" shall mean the response of
the Securities and Exchange Commission's Office of Chief Counsel
of Investment Management, dated April 18, 1995, in respect of the
Templeton Russia Fund, Inc. (SEC Ref. No. 95-151-CC, File No.
811-8788) providing "no-action" relief under Section 17(f) of the
Investment Company Act of 1940, as amended, and SEC Rule 17-f5
thereunder, in connection with custody of such Templeton Russia
Fund, Inc.'s investments in Russian Securities.
(e) "Reasonable Care" shall mean the use of
reasonable custodial practices under the applicable circumstances
as measured by the custodial practices then prevailing in Russia
of International Financial Institutions acting as custodians for
their institutional investor clients in Russia.
(f) "Registrar Company" shall mean any entity
providing share registration services to an issuer of Russian
Securities.
(g) "Registrar Contact" shall mean a contract
between CMBI and a Registrar Company (and as the same may be
amended from time to time) containing, inter alia, the
contractual provisions described at paragraphs (a)-(e) on pps. 5-
6 of the No-Action Letter.
PAGE 63
(h) "Russian Security" shall mean a Security issued
by a Russian issuer.
(i) "Share Extract" shall mean: (i) an extract of
its share registration books issued by a Registrar Company
indicating an investor's ownership of a security; and (ii) a form
prepared by CMBI or its agent in those cases where a Registrar
Company in unwilling to issue a Share Extract.
Section 3. Section 6(a) of the Agreement is amended by
adding the following at the end thereof: "With respect to Russia,
payment for Russian Securities shall not be made prior to the
issuance of the Share Extract relating to such Russian Security.
Delivery of Russian Securities may be made in accordance with the
customary or established securities trading or securities
processing practices and procedures in Russia. Delivery of
Russian Securities may also be made in any manner specifically
required by Instructions acceptable to the Bank. Customer shall
promptly supply such transaction and settlement information as
may be requested by Bank or CMBI in connection with particular
transactions."
Section 4. Section 8 of the Agreement is amended by
adding a new paragraph to the end thereof as follows: "It is
understood and agreed that Bank need only use its reasonable
efforts with respect to performing the functions described in
this Section 8 with respect to Russian Securities."
Section 5. Section 12(a)(i) of the Agreement is amended
with respect to Russian custody by deleting the phrase
"reasonable care" wherever it appears and substituting, in lieu
thereof, the phrase "Reasonable Care."
Section 6. Section 12(a)(i) of the Agreement is further
amended with respect to Russian custody by inserting the
following at the end of the first sentence thereof: "provided
that, with respect to Russian Securities, Bank's responsibilities
shall be limited to safekeeping of relevant Share Extracts."
Section 7. Section 12(a)(i) of the Agreement is further
amended with respect to Russian custody by inserting the
following after the second sentence thereof: "In connection with
the foregoing, neither Bank nor CMBI shall assume responsibility
for, and neither shall be liable for, any action or inaction of
any Registrar Company and no Registrar Company shall be, or shall
be deemed to be, Bank, CMBI, a Subcustodian, a securities
depository or the employee, agent or personnel of any of the
foregoing. To the extent that CMBI employs agents to perform any
of the functions to be performed by Bank or CMBI with respect to
Russian Securities, neither Bank nor CMBI shall be responsible
for any act, omission, default or for the solvency of any such
agent unless the appointment of such agent was made with
Negligence or in bad faith, or for any loss due to the negligent
act of such agent except to the extent that such agent performs
in a negligent manner which is the cause of the loss to the
Customer and the Bank or CMBI failed to exercise reasonable care
in monitoring such agent's performance where Customer has
PAGE 64
requested and Bank has agreed to accept such monitoring
responsibility and except that where Bank or CMBI uses (i) an
affiliated nominee or (ii) an agent to perform the share
registration or share confirmation functions described in
paragraphs (a)-(e) on pps. 5-6 of the No-Action Letter, and, to
the extent applicable to CMBI, the share registration functions
described on pps. 2-3 of the No-Action Letter, Bank and CMBI
shall be liable to Customer as if CMBI were responsible for
performing such services itself."
Section 8. Section 12(a)(ii) is amended with respect to
Russian custody by deleting the word "negligently" and
substituting, in lieu thereof, the word "Negligently."
Section 9. Section 12(a)(iii) is amended with respect to
Russian custody by deleting the word "negligence" and
substituting, in lieu thereof, the word "Negligence."
Section 10. Add a new Section 16 to the Agreement as
follows:
(a) Bank will advise Customer (and will update such
advice from time to time as changes occur) of those Registrar
Companies with which CMBI has entered into a Registrar Contract.
Bank shall cause CMBI both to monitor each Registrar Company and
to promptly advise Customer when CMBI has actual knowledge of the
occurrence of any one or more of the events described in
paragraphs (i)-(v) on pps. 8-9 of the No-Action Letter with
respect to a Registrar Company that serves in that capacity for
any issuer the shares of which are held by Customer.
(b) Where Customer is considering investing in the
Russian Securities of an issuer as to which CMBI does not have a
Registrar Company, Customer may request that Bank ask that CMBI
both consider whether it would be willing to attempt to enter
into such a Registrar Contract and to advise Customer of its
willingness to do so. Where CMBI has agreed to make such an
attempt, Bank will advise Customer of the occurrence of any one
or more or the events described in paragraphs (i)-(iv) on pps. 8-
9 of the No-Action Letter of which CMBI has actual knowledge.
(c) Where Customer is considering investing in the
Russian Securities of an issuer as to which CMBI has a Registrar
Contract with the issuer's Registrar Company, Customer may advise
Bank of its interest in investing in such issuer and, in such
event, Bank will advise Customer of the occurrence of any one or
more of the events described in paragraphs (i)-(v) on pps. 8-9 of
the No-Action Letter of which CMBI has actual knowledge.
Section 11. Add a new Section 17 to the Agreement as
follows: "Customer shall pay for and hold Bank and CMBI harmless
from any liability or loss resulting from the imposition or
assessment of any taxes (including, but not limited to, state,
stamp and other duties) or other governmental charges, and any
related expenses with respect to income on Russian Securities."
Section 12. Add a new Section 18 to the Agreement as
PAGE 65
follows: "Customer acknowledges and agrees that CMBI may not be
able, in given cases and despite its reasonable efforts, to
obtain a Share Extract from a Registrar Company and CMBI shall
not be liable in any such even including with respect to any
losses resulting from such failure."
Section 13. Add a new Section 19 to the Agreement as
follows: "Customer acknowledges that it has received, reviewed
and understands that Chase market report for Russia, including,
but not limited to, the risks described therein."
Section 14. Add a new Section 20 to the Agreement as
follows: "Subject to the cooperation of a Registrar Company, for
at least the first two years following CMBI's first use of a
Registrar Company, Bank shall cause CMBI to conduct share
confirmations on at least a quarterly basis, although thereafter
confirmations may be conducted on a less frequent basis if
Customer's Board of Directors, in consultation with CMBI,
determines it to be appropriate."
Section 15. Add a new Section 21 to the Agreement as
follows: "Bank shall cause CMBI to prepare for distribution to
Customer's Board of Directors a quarterly report identifying: (i)
any concerns it has regarding the Russian share registration
system that should be brought to the attention of the Board of
Directors; and (ii) the steps CMBI has taken during the reporting
period to ensure that Customer's interests continue to be
appropriately recorded."
Section 16. Add a new Section 22 to the Agreement as
follows: "Except as provided in new Section 16(b), the services to be
provided by Bank hereunder will be provided only in relation to
Russian Securities for which CMBI has entered into a Registrar
Contract with the relevant Registrar Company."
*********************
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first above written.
for EACH CUSTOMER THE CHASE MANHATTAN BANK
separately and individually
/s/Henry H. Hopkins /s/Helen C. Bairsto
Henry H. Hopkins Helen C. Bairsto
Vice President Vice President<PAGE>
PAGE 66
AMENDMENT AGREEMENT
The Global Custody Agreement of January 3, 1994, as amended
April 18, 1994, August 15, 1994, November 28, 1994, May 31, 1995,
November 1, 1995, and July 31, 1996 (the "Custody Agreement"), by
and between each of the Entities listed in Attachment A hereto,
separately and individually (each such entity referred to
hereinafter as the "Customer") and The Chase Manhattan Bank,
N.A., which contracts have been assumed by operation of law by
THE CHASE MANHATTAN BANK (the "Bank") is hereby further amended,
as of July 23, 1997 (the "Amendment Agreement"). Terms defined in
the Custody Agreement are used herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its
global custodian and the Bank wishes to accept such appointment
pursuant to the terms of the Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Section 1 of Schedule A of the Custody
Agreement ("Schedule A") shall be amended to add certain
Customers as specified in Attachment A hereto. The revised
Schedule A incorporating these changes in the form attached
hereto as Attachment B shall supersede the existing Schedule A in
its entirety.
2. Agreement. The Customer agrees to be bound in all
respects by all the terms and conditions of the Custody Agreement
and shall be fully liable thereunder as a "Customer" as defined
in the Custody Agreement.
3. Confirmation of Agreement. Except as amended hereby, the
Custody Agreement is in full force and effect and as so amended
is hereby ratified, approved and confirmed by the Customer and
the Bank in all respects.
4. Governing Law: This Amendment Agreement shall be
construed in accordance with and governed by the law of the State
of New York without regard to its conflict of law principles.
IN WITNESS WHEREOF, the parties have executed this Amendment
Agreement as of the day and year first above written.
THE CHASE MANHATTAN BANK
By:/S/Caroline Willson
Caroline Willson
Vice President
<PAGE>
PAGE 67
EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEPARATELY
AND INDIVIDUALLY
By:/s/Carmen F. Deyesu
Carmen F. Deyesu
Treasurer<PAGE>
PAGE 64
Attachment A
LIST OF CUSTOMERS
Add the following Funds:
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
T. Rowe Price Media & Telecommunications Fund, Inc.
T. Rowe Price Tax-Efficient Balanced Fund, Inc.
Change the name of the following Fund:
T. Rowe Price OTC Fund, Inc., on behalf of:
T. Rowe Price OTC Fund
Effective May 1, 1997, the fund name changed to:
T. Rowe Price Small-Cap Stock Fund, Inc.
Delete the following Fund:
T. Rowe Price International Funds, Inc., on behalf of:
T. Rowe Price Short-Term Global Income Fund<PAGE>
PAGE 68
Attachment B
Schedule A
Page 1 of 3
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK
DATED JANUARY 3, 1994
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is
REGISTERED UNDER THE INVESTMENT applicable to all
COMPANY ACT OF 1940 Customers listed under
Section I of this
Schedule A.
Equity Funds
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Financial Services Fund, Inc.
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price Health Sciences Fund, Inc.
Institutional Equity Funds, Inc. on behalf of:
Mid-Cap Equity Growth Fund
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
<PAGE>
PAGE 69
Attachment B
Schedule A
Page 2 of 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
T. Rowe Price International Series, Inc. on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Media & Telecommunications Fund, Inc.
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price Mid-Cap Value Fund, Inc.
T. Rowe Price New America Growth Fund
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Stock Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Value Fund, Inc.
Income Funds
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price International Bond Fund
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Tax-Efficient Balanced Fund, Inc.
<PAGE>
PAGE 70
Attachment B
Schedule A
Page 3 of 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is
applicable to all
T. Rowe Price Trust Company, Customers under Section
as Trustee for the Johnson II of this Schedule A.
Matthey Salaried Employee
Savings Plan
Common Trust Funds
T. Rowe Price Trust Company, as Trustee for the
International Common Trust Fund on behalf of the Underlying
Trusts:
Emerging Markets Equity Trust
European Discovery Trust
Foreign Discovery Trust
Foreign Discovery Trust - Augment
Japan Discovery Trust
Latin America Discovery Trust
Pacific Discovery Trust
New York City International Common Trust Fund
III. OTHER
RPFI International Partners, L.P. No Riders are
applicable to the
Customer listed under
Section III of this
Schedule A.
<PAGE>
PAGE 71
AMENDMENT, dated July 23, 1997, to the Custody Agreement
("Agreement"), dated January 3, 1994, between The Chase Manhattan
Bank (as successor to The Chase Manhattan Bank, N.A.), having an
office at 270 Park Avenue, New York, NY 10017-2070 and certain T.
Rowe Price funds.
It is agreed as follows:
1. The third line of Section 8 of the Agreement is deleted and the
following is inserted, in lieu thereof:
Bank shall provide proxy voting services in
accordance with the terms of the proxy voting
services rider ("Proxy Rider") annexed hereto
as Exhibit 1. Proxy voting services may be
provided by Bank or, in whole or in part, by
one or more third parties appointed by Bank
(which may be Affiliates of Bank).
2. Except as modified hereby, the Agreement is confirmed in
all respects.
IN WITNESS WHEREOF, the parties have executed this Amendment as
of the date first above written.
EACH OF THE CUSTOMERS, INDIVIDUALLY THE CHASE MANHATTAN
AND SEPARATELY LISTED ON SECTION 1 OF BANK
SCHEDULE A HERETO
By:/s/Henry H. Hopkins By:/s/Helen C. Bairsto
Henry H. Hopkins Helen C. Bairsto
Vice President Vice President
EACH OF THE CUSTOMERS, INDIVIDUALLY AND
SEPARATELY LISTED ON SECTION 2 OF
SCHEDULE A HERETO
By:/s/Nancy M. Morris
Nancy M. Morris
Vice President
<PAGE>
PAGE 72
Exhibit 1
GLOBAL PROXY SERVICE RIDER
To Global Custody Agreement
Between
THE CHASE MANHATTAN BANK
AND
Certain T. ROWE PRICE FUNDS
dated 3rd January, 1994
1. Global Proxy Services ("Proxy Services") shall be provided for
the countries listed in the procedures and guidelines
("Procedures") furnished to the Customer, as the same may be
amended by Bank from time to time on prior notice to Customer.
The Procedures are incorporated by reference herein and form
a part of this Rider.
2. Proxy Services shall consist of those elements as set forth in
the Procedures, and shall include (a) notifications
("Notifications") by Bank to Customer of the dates of pending
shareholder meetings, resolutions to be voted upon and the
return dates as may be received by Bank or provided to Bank by
its Subcustodians or third parties, and (b) voting by Bank of
proxies based on Customer directions. Original proxy materials
or copies thereof shall not be provided. Notifications shall
generally be in English and, where necessary, shall be
summarized and translated from such non-English materials as
have been made available to Bank or its Subcustodian. In this
respect Bank s only obligation is to provide information from
sources it believes to be reliable and/or to provide materials
summarized and/or translated in good faith. Bank reserves the
right to provide Notifications, or parts thereof, in the
language received. Upon reasonable advance request by
Customer, backup information relative to Notifications, such
as annual reports, explanatory material concerning
resolutions, management recommendations or other material
relevant to the exercise of proxy voting rights shall be
provided as available, but without translation.
3. While Bank shall attempt to provide accurate and complete
Notifications, whether or not translated, Bank shall not be
liable for any losses or other consequences that may result
from reliance by Customer upon Notifications where Bank
prepared the same in good faith.
4. Notwithstanding the fact that Bank may act in a fiduciary
capacity with respect to Customer under other agreements or
otherwise under the Agreement, in performing Proxy Services
PAGE 73
Bank shall be acting solely as the agent of Customer, and
shall not exercise any discretion with regard to such Proxy
Services.
5. Proxy voting may be precluded or restricted in a variety of
circumstances, including, without limitation, where the
relevant Securities are: (I) on loan; (ii) at registrar for
registration or reregistration; (iii) the subject of a
conversion or other corporate action; (iv) not held in a name
subject to the control of Bank or its Subcustodian or are
otherwise held in a manner which precludes voting; (v) not
capable of being voted on account of local market regulations
or practices or restrictions by the issuer; or (vi) held in a
margin or collateral account.
6. Customer acknowledges that in certain countries Bank may be
unable to vote individual proxies but shall only be able to
vote proxies on a net basis (e.g., a net yes or no vote given
the voting instructions received from all customers).
7. Customer shall not make any use of the information provided
hereunder, except in connection with the funds or plans
covered hereby, and shall in no event sell, license, give or
otherwise make the information provided hereunder available,
to any third party, and shall not directly or indirectly
compete with Bank or diminish the market for Proxy Services by
provision of such information, in whole or in part, for
compensation or otherwise, to any third party.
8. The names of Authorized Persons for Proxy Services shall be
furnished to Bank in accordance with Section 10 of the Agreement.
Proxy Services fees shall be as separately agreed. <PAGE>
PAGE 74
SCHEDULE A
SECTION 1
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Financial Services Fund, Inc.
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price Health Sciences Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited Term Bond Portfolio
Institutional Equity Funds, Inc. on behalf of:
Mid-Cap Equity Growth Fund
T. Rowe Price Media & Telecommunications Fund, Inc.
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price Mid-Cap Value Fund, Inc.
T. Rowe Price New America Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Small-Cap Stock Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Tax-Efficient Balanced Fund, Inc.
T. Rowe Price Value Fund, Inc.
SECTION 2
NYC International Common Trust Fund<PAGE>
PAGE 75
AMENDMENT, dated October 29, 1997, to the Custody Agreement
("Agreement"), dated January 3, 1994, between The Chase Manhattan
Bank (as successor to The Chase Manhattan Bank, N.A.), having an
office at 270 Park Avenue, New York, NY 10017-2070 and certain T.
Rowe Price funds.
It is agreed as follows:
1. The third line of Section 8 of the Agreement is deleted and the
following is inserted, in lieu thereof:
Bank shall provide proxy voting services in
accordance with the terms of the proxy voting
services rider ("Proxy Rider") annexed hereto
as Exhibit 1. Proxy voting services may be
provided by Bank or, in whole or in part, by
one or more third parties appointed by Bank
(which may be Affiliates of Bank).
2. Except as modified hereby, the Agreement is confirmed in
all respects.
IN WITNESS WHEREOF, the parties have executed this Amendment as
of the date first above written.
EACH OF THE CUSTOMERS, INDIVIDUALLY THE CHASE MANHATTAN
AND SEPARATELY LISTED ON SECTION 1 OF BANK
SCHEDULE A HERETO
By:/s/Henry H. Hopkins By:/s/Helen C. Bairsto
Henry H. Hopkins Helen C. Bairsto
Vice President Vice President
EACH OF THE CUSTOMERS, INDIVIDUALLY AND
SEPARATELY LISTED ON SECTION 2 OF
SCHEDULE A HERETO
By:/s/Nancy M. Morris
Nancy M. Morris
Vice President
<PAGE>
PAGE 76
Exhibit 1
GLOBAL PROXY SERVICE RIDER
To Global Custody Agreement
Between
THE CHASE MANHATTAN BANK
AND
Certain T. ROWE PRICE FUNDS
dated 3rd January, 1994
1. Global Proxy Services ("Proxy Services") shall be provided for
the countries listed in the procedures and guidelines
("Procedures") furnished to the Customer, as the same may be
amended by Bank from time to time on prior notice to Customer.
The Procedures are incorporated by reference herein and form
a part of this Rider.
2. Proxy Services shall consist of those elements as set forth in
the Procedures, and shall include (a) notifications
("Notifications") by Bank to Customer of the dates of pending
shareholder meetings, resolutions to be voted upon and the
return dates as may be received by Bank or provided to Bank by
its Subcustodians or third parties, and (b) voting by Bank of
proxies based on Customer directions. Original proxy materials
or copies thereof shall not be provided. Notifications shall
generally be in English and, where necessary, shall be
summarized and translated from such non-English materials as
have been made available to Bank or its Subcustodian. In this
respect Bank s only obligation is to provide information from
sources it believes to be reliable and/or to provide materials
summarized and/or translated in good faith. Bank reserves the
right to provide Notifications, or parts thereof, in the
language received. Upon reasonable advance request by
Customer, backup information relative to Notifications, such
as annual reports, explanatory material concerning
resolutions, management recommendations or other material
relevant to the exercise of proxy voting rights shall be
provided as available, but without translation.
3. While Bank shall attempt to provide accurate and complete
Notifications, whether or not translated, Bank shall not be
liable for any losses or other consequences that may result
from reliance by Customer upon Notifications where Bank
prepared the same in good faith.
4. Notwithstanding the fact that Bank may act in a fiduciary
capacity with respect to Customer under other agreements or
otherwise under the Agreement, in performing Proxy Services
PAGE 77
Bank shall be acting solely as the agent of Customer, and
shall not exercise any discretion with regard to such Proxy
Services.
5. Proxy voting may be precluded or restricted in a variety of
circumstances, including, without limitation, where the
relevant Securities are: (I) on loan; (ii) at registrar for
registration or reregistration; (iii) the subject of a
conversion or other corporate action; (iv) not held in a name
subject to the control of Bank or its Subcustodian or are
otherwise held in a manner which precludes voting; (v) not
capable of being voted on account of local market regulations
or practices or restrictions by the issuer; or (vi) held in a
margin or collateral account.
6. Customer acknowledges that in certain countries Bank may be
unable to vote individual proxies but shall only be able to
vote proxies on a net basis (e.g., a net yes or no vote given
the voting instructions received from all customers).
7. Customer shall not make any use of the information provided
hereunder, except in connection with the funds or plans
covered hereby, and shall in no event sell, license, give or
otherwise make the information provided hereunder available,
to any third party, and shall not directly or indirectly
compete with Bank or diminish the market for Proxy Services by
provision of such information, in whole or in part, for
compensation or otherwise, to any third party.
8. The names of Authorized Persons for Proxy Services shall be
furnished to Bank in accordance with Section 10 of the Agreement.
Proxy Services fees shall be as separately agreed. <PAGE>
PAGE 78
SCHEDULE A
SECTION 1
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Financial Services Fund, Inc.
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price Health Sciences Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited Term Bond Portfolio
Institutional Equity Funds, Inc. on behalf of:
Mid-Cap Equity Growth Fund
T. Rowe Price Media & Telecommunications Fund, Inc.
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price Mid-Cap Value Fund, Inc.
T. Rowe Price New America Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Real Estate Fund, Inc.
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Small-Cap Stock Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Tax-Efficient Balanced Fund, Inc.
T. Rowe Price Value Fund, Inc.
SECTION 2
NYC International Common Trust Fund<PAGE>
PAGE 79
AMENDMENT AGREEMENT
The Global Custody Agreement of January 3, 1994, as amended April
18, 1994, August 15, 1994, November 28, 1994, May 31, 1995,
November 1, 1995, July 31, 1996, and July 23, 1997 (the "Custody
Agreement"), by and between each of the Entities listed in
Attachment A hereto, separately and individually (each such entity
referred to hereinafter as the "Customer") and The Chase Manhattan
Bank, N.A., which contracts have been assumed by operation of law
by THE CHASE MANHATTAN BANK (the "Bank") is hereby further amended,
as of October 29, 1997 (the "Amendment Agreement"). Terms defined
in the Custody Agreement are used herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its global
custodian and the Bank wishes to accept such appointment pursuant
to the terms of the Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Section 1 of Schedule A of the Custody Agreement
("Schedule A") shall be amended to add certain Customers as
specified in Attachment A hereto. The revised Schedule A
incorporating these changes in the form attached hereto as
Attachment B shall supersede the existing Schedule A in its
entirety.
2. Agreement. The Customer agrees to be bound in all respects by
all the terms and conditions of the Custody Agreement and shall be
fully liable thereunder as a "Customer" as defined in the Custody
Agreement.
3. Confirmation of Agreement. Except as amended hereby, the
Custody Agreement is in full force and effect and as so amended is
hereby ratified, approved and confirmed by the Customer and the
Bank in all respects.
4. Governing Law: This Amendment Agreement shall be construed in
accordance with and governed by the law of the State of New York
without regard to its conflict of law principles.
<PAGE>
PAGE 80
IN WITNESS WHEREOF, the parties have executed this Amendment
Agreement as of the day and year first above written.
THE CHASE MANHATTAN BANK
By:/s/Helen C. Bairsto
Helen C. Bairsto
Vice President
EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEPARATELY
AND INDIVIDUALLY
By:/s/Carmen F. Deyesu
Carmen F. Deyesu
Treasurer
PAGE 81
Attachment A
LIST OF CUSTOMERS
Add the following Fund:
T. Rowe Price Real Estate Fund, Inc.
PAGE 82
Attachment B
Schedule A
Page 1 of 3
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK
DATED JANUARY 3, 1994
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider
REGISTERED UNDER THE INVESTMENT is applicable to
COMPANY ACT OF 1940 all Customers listed
under Section I of
this Schedule A.
Equity Funds
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Financial Services Fund, Inc.
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price Health Sciences Fund, Inc.
Institutional Equity Funds, Inc. on behalf of:
Mid-Cap Equity Growth Fund
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
<PAGE>
PAGE 83
Attachment B
Schedule A
Page 2 of 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
T. Rowe Price International Series, Inc. on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Media & Telecommunications Fund, Inc.
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price Mid-Cap Value Fund, Inc.
T. Rowe Price New America Growth Fund
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price Real Estate Fund, Inc.
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Stock Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Value Fund, Inc.
Income Funds
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price International Bond Fund
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Tax-Efficient Balanced Fund, Inc.
<PAGE>
PAGE 84
Attachment B
Schedule A
Page 3 of 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is
T. Rowe Price Trust Company, applicable to all
as Trustee for the Customers under Section
Johnson Matthey Salaried II of this Schedule A.
Employee Savings Plan
Common Trust Funds
T. Rowe Price Trust Company, as Trustee for the
International Common Trust Fund on behalf of the Underlying
Trusts:
Emerging Markets Equity Trust
European Discovery Trust
Foreign Discovery Trust
Foreign Discovery Trust - Augment
Japan Discovery Trust
Latin America Discovery Trust
Pacific Discovery Trust
New York City International Common Trust Fund
III. OTHER
RPFI International Partners, L.P. No Riders are
applicable to the
Customer listed under
Section III of this
Schedule A.<PAGE>
PAGE 85
AMENDMENT AGREEMENT TO
RUSSIAN RIDER TO THE GLOBAL
CUSTODY AGREEMENT
AMENDMENT to Attachment B of Global Custody Agreement dated
January 3, 1994, as amended July 23, 1997, is hereby further
amended as of September 3, 1997.
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Amend Attachment B to consist of the following
funds when pertaining to the Russian Rider dated July 17, 1997:
Institutional International Funds, Inc., on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price International Series, Inc. on behalf of:
T. Rowe Price International Stock Portfolio
IN WITNESS WHEREOF, the parties have executed this Amendment
Agreement as of the day and year first above written.
THE CHASE MANHATTAN BANK EACH OF THE PARTIES LISTED ABOVE
By: /s/Helen C. Bairsto By:/s/Henry H. Hopkins
Helen C. Bairsto Henry H. Hopkins
Vice President Vice President
The Transfer Agency and Service Agreement between T. Rowe Price Services,
Inc. and T. Rowe Price Funds, dated January 1, 1998, as amended.
TRANSFER AGENCY AND SERVICE AGREEMENT
between
T. ROWE PRICE SERVICES, INC.
and
EACH OF THE PARTIES INDICATED ON APPENDIX A
<PAGE>
TABLE OF CONTENTS
Page
Article A Terms of Appointment . . . . . . . . . . . . . . . . . . . 2
Article B Duties of Price Services . . . . . . . . . . . . . . . . . 3
1. Receipt of Orders/Payments. . . . . . . . . . . . . . 3
2. Redemptions . . . . . . . . . . . . . . . . . . . . . 5
3. Transfers . . . . . . . . . . . . . . . . . . . . . . 7
4. Confirmations . . . . . . . . . . . . . . . . . . . . 7
5. Returned Checks and ACH Debits. . . . . . . . . . . . 7
6. Redemption of Shares under Ten Day Hold . . . . . . . 8
7. Dividends, Distributions and Other
Corporate Actions . . . . . . . . . . . . . . . . . .10
8. Unclaimed Payments and Certificates . . . . . . . . .11
9. Books and Records . . . . . . . . . . . . . . . . . .11
10. Authorized Issued and Outstanding Shares. . . . . . .14
11. Tax Information . . . . . . . . . . . . . . . . . . .14
12. Information to be Furnished to the Fund . . . . . . .14
13. Correspondence. . . . . . . . . . . . . . . . . . . .15
14. Lost or Stolen Securities . . . . . . . . . . . . . .15
15. Telephone Services. . . . . . . . . . . . . . . . . .15
16. Collection of Shareholder Fees. . . . . . . . . . . .16
17. Form N-SAR. . . . . . . . . . . . . . . . . . . . . .16
18. Cooperation With Accountants. . . . . . . . . . . . .16
19. Blue Sky. . . . . . . . . . . . . . . . . . . . . . .16
20. Other Services. . . . . . . . . . . . . . . . . . . .16
21. Fees and Out-of-Pocket Expenses . . . . . . . . . . .17
Article C Representations and Warranties of the Price
Services . . . . . . . . . . . . . . . . . . . . . . . . .19
Article D Representations and Warranties of the Fund . . . . . . . .19
Article E Standard of Care/Indemnification . . . . . . . . . . . . .20
Article F Dual Interests . . . . . . . . . . . . . . . . . . . . . .22
Article G Documentation. . . . . . . . . . . . . . . . . . . . . . .22
Article H References to Price Services . . . . . . . . . . . . . . .24
Article I Compliance with Governmental Rules and
Regulations. . . . . . . . . . . . . . . . . . . . . . . .25
Article J Ownership of Software and Related Material . . . . . . . .25
Article K Quality Service Standards. . . . . . . . . . . . . . . . .25
Article L As of Transactions . . . . . . . . . . . . . . . . . . . .25
Article M Term and Termination of Agreement. . . . . . . . . . . . .29
Article N Notice . . . . . . . . . . . . . . . . . . . . . . . . . .29
Article O Assignment . . . . . . . . . . . . . . . . . . . . . . . .29
Article P Amendment/Interpretive Provisions. . . . . . . . . . . . .30
Article Q Further Assurances . . . . . . . . . . . . . . . . . . . .30
Article R Maryland Law to Apply. . . . . . . . . . . . . . . . . . .30
Article S Merger of Agreement. . . . . . . . . . . . . . . . . . . .30
Article T Counterparts . . . . . . . . . . . . . . . . . . . . . . .30
Article U The Parties. . . . . . . . . . . . . . . . . . . . . . . .30
Article V Directors, Trustees, Shareholders and Massachusetts
Business Trust . . . . . . . . . . . . . . . . . . . . . .31
Article W Captions . . . . . . . . . . . . . . . . . . . . . . . . .31
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the first day of January, 1998, by and
between T. ROWE PRICE SERVICES, INC., a Maryland corporation
having its principal office and place of business at 100 East
Pratt Street, Baltimore, Maryland 21202 ("Price Services"), and
EACH FUND WHICH IS LISTED ON APPENDIX A (as such Appendix may be
amended from time to time) and which evidences its agreement to
be bound hereby by executing a copy of this Agreement (each such
Fund individually hereinafter referred to as "the Fund", whose
definition may be found in Article U);
WHEREAS, the Fund desires to appoint Price Services as its
transfer agent, dividend disbursing agent and agent in connection
with certain other activities, and Price Services desires to
accept such appointment;
WHEREAS, Price Services represents that it is registered
with the Securities and Exchange Commission as a Transfer Agent
under Section 17A of the Securities Exchange Act of 1934 ("'34
Act") and will notify each Fund promptly if such registration is
revoked or if any proceeding is commenced before the Securities
and Exchange Commission which may lead to such revocation;
WHEREAS, Price Services has the capability of providing
shareholder services on behalf of the Funds for the accounts of
shareholders in the Funds, including banks and brokers on behalf
of underlying clients;
WHEREAS, certain of the Funds are named investment options
under various tax-sheltered retirement plans including, but not
limited to, individual retirement accounts, Sep-IRA's, SIMPLE
plans, deferred compensation plans, 403(b) plans, and profit
sharing, thrift, and money purchase pension plans for self-employed
individuals and professional partnerships and
corporations, (collectively referred to as "Retirement Plans");
WHEREAS, Price Services also has the capability of providing
special services, on behalf of the Funds, for the accounts of
shareholders participating in these Retirement Plans ("Retirement
Accounts").
WHEREAS, Price Services may subcontract or jointly contract
with other parties, on behalf of the Funds to perform certain of
the functions and services described herein including services to
Retirement Plans and Retirement Accounts;
WHEREAS, Price Services may also enter into, on behalf of
the Funds, certain banking relationships to perform various
banking services including, but not limited to, check deposits,
check disbursements, automated clearing house transactions
("ACH") and wire transfers.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
A. Terms of Appointment
Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints Price Services to
act, and Price Services agrees to act, as the Fund's transfer
agent, dividend disbursing agent and agent in connection with:
(1) the Fund's authorized and issued shares of its common stock
or shares of beneficial interest (all such stock and shares to be
referred to as "Shares"); (2) any dividend reinvestment or other
services provided to the shareholders of the Fund
("Shareholders"), including, without limitation, any periodic
investment plan or periodic withdrawal program; and (3) certain
Retirement Plan and Retirement Accounts as agreed upon by the
parties.
The parties to the Agreement hereby acknowledge that from
time to time, Price Services and T. Rowe Price Trust Company may
enter into contracts ("Other Contracts") with employee benefit
plans and/or their sponsors for the provision of certain plan
participant services to Retirement Plans and Retirement Accounts.
Compensation paid to Price Services pursuant to this Agreement is
with respect to the services described herein and not with
respect to services provided under Other Contracts.
B. Duties of Price Services
Price Services agrees that it will perform the following
services:
1. Receipt of Orders/Payments
Receive for acceptance, orders/payments for the
purchase of Shares and promptly deliver payment and
appropriate documentation thereof to the authorized
custodian of the Fund (the "Custodian"). Upon receipt of
any check or other instrument drawn or endorsed to it as
agent for, or identified as being for the account of, the
Fund, Price Services will process the order as follows:
o Examine the check to determine if the check conforms to
the Funds' acceptance procedures (including certain
third-party check procedures). If the check conforms,
Price Services will endorse the check and include the
date of receipt, will process the same for payment, and
deposit the net amount to the parties agreed upon
designated bank account prior to such deposit in the
Custodial account, and will notify the Fund and the
Custodian, respectively, of such deposits (such
notification to be given on a daily basis of the total
amount deposited to said accounts during the prior
business day);
o Subject to guidelines mutually agreed upon by the Funds
and Price Services, excess balances, if any, resulting
from deposit in these designated bank accounts will be
invested and the income therefrom will be used to
offset fees which would otherwise be charged to the
Funds under this Agreement;
o Ensure that any documentation received from Shareholder
is in "good order" and all appropriate documentation is
received to establish an account.
o Open a new account, if necessary, and credit the
account of the investor with the number of Shares to be
purchased according to the price of the Fund's Shares
in effect for purchases made on that date, subject to
any instructions which the Fund may have given to Price
Services with respect to acceptance of orders for
Shares;
o Maintain a record of all unpaid purchases and report
such information to the Fund daily;
o Process periodic payment orders, as authorized by
investors, in accordance with the payment procedures
mutually agreed upon by both parties;
o Receive monies from Retirement Plans and determine the
proper allocation of such monies to the Retirement
Accounts based upon instructions received from
Retirement Plan participants or Retirement Plan
administrators ("Administrators");
o Process orders received from recordkeepers and banks
and brokers for omnibus accounts in accordance with
internal policies and procedures established in
executed agency agreements and other agreements
negotiated with banks and brokers; and
o Process telephone orders for purchases of Fund shares
from the Shareholder's bank account (via wire or ACH)
to the Fund in accordance with procedures mutually
agreed upon by both parties.
Upon receipt of funds through the Federal Reserve Wire
System that are designated for purchases in Funds which declare
dividends at 12:00 p.m. (or such time as set forth in the Fund's
current prospectus), Price Services shall promptly notify the
Fund and the Custodian of such deposit.
2. Redemptions
Receive for acceptance redemption requests, including
telephone redemptions and requests received from
Administrators for distributions to participants or their
designated beneficiaries or for payment of fees due the
Administrator or such other person, including Price
Services, and deliver the appropriate documentation thereof
to the Custodian. Price Services shall receive and stamp
with the date of receipt, all requests for redemptions of
Shares (including all certificates delivered to it for
redemption) and shall process said redemption requests as
follows, subject to the provisions of Section 6 hereof:
o Examine the redemption request and, for written
redemptions, the supporting documentation, to determine
that the request is in good order and all requirements
have been met;
o Notify the Fund on the next business day of the total
number of Shares presented and covered by all such
requests;
o For those Funds that impose redemption fees, calculate
the fee owed on the redemption in accordance with the
guidelines established between the Fund and Price
Services;
o As set forth in the prospectus of the Fund, and in any
event, on or prior to the seventh (7th) calendar day
succeeding any such request for redemption, Price
Services shall, from funds available in the accounts
maintained by Price Services as agent for the Funds,
pay the applicable redemption price in accordance with
the current prospectus of the Fund, to the investor,
participant, beneficiary, Administrator or such other
person, as the case may be;
o Instruct custodian to wire redemption proceeds to a
designated bank account of Price Services. Subject to
guidelines mutually agreed upon by the Funds and Price
Services, excess balances, if any, resulting from
deposit in these bank accounts will be invested and the
income therefrom will be used to offset fees which
would otherwise be charged to the Funds under this
Agreement;
o If any request for redemption does not comply with the
Fund's requirements, Price Services shall promptly
notify the investor of such fact, together with the
reason therefore, and shall effect such redemption at
the price in effect at the time of receipt of all
appropriate documents;
o Make such withholdings as may be required under
applicable Federal tax laws;
o In the event redemption proceeds for the payment of
fees are to be wired through the Federal Reserve Wire
System or by bank wire, Price Services shall cause such
proceeds to be wired in Federal funds to the bank
account designated by Shareholder; and
o Process periodic redemption orders as authorized by the
investor in accordance with the periodic withdrawal
procedures for Systematic Withdrawal Plan ("SWP") and
systematic ACH redemptions mutually agreed upon by both
parties.
Procedures and requirements for effecting and accepting
redemption orders from investors by telephone, Tele*Access,
computer, or written instructions shall be established by
mutual agreement between Price Services and the Fund
consistent with the Fund's current prospectus.
3. Transfers
Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions and
documentation and examine such instructions for conformance
with appropriate procedures and requirements. In this
regard, Price Services, upon receipt of a proper request for
transfer, including any transfer involving the surrender of
certificates of Shares, is authorized to transfer, on the
records of the Fund, Shares of the Fund, including
cancellation of surrendered certificates, if any, to credit
a like amount of Shares to the transferee.
4. Confirmations
Mail all confirmations and other enclosures requested
by the Fund to the shareholder, and in the case of
Retirement Accounts, to the Administrators, as may be
required by the Funds or by applicable Federal or state law.
5. Returned Checks and ACH Debits
In order to minimize the risk of loss to the Fund by
reason of any check being returned unpaid, Price Services
will promptly identify and follow-up on any check or ACH
debit returned unpaid. For items returned, Price Services
may telephone the investor and/or redeposit the check or
debit for collection or cancel the purchase, as deemed
appropriate. Price Services and the Funds will establish
procedures for the collection of money owed the Fund from
investors who have caused losses due to these returned
items.
6. Redemption of Shares under Ten Day Hold
o Uncollected Funds
Shares purchased by personal, corporate, or
governmental check, or by ACH will be considered
uncollected until the tenth calendar date following the
trade date of the trade ("Uncollected Funds");
<PAGE>
o Good Funds
Shares purchased by treasurer's, cashier, certified, or
official check, or by wire transfer will be considered
collected immediately ("Good Funds"). Absent
information to the contrary (i.e., notification from
the payee institution), Uncollected Funds will be
considered Good Funds on the tenth calendar day
following trade date.
o Redemption of Uncollected Funds
o Shareholders making telephone requests for
redemption of shares purchased with Uncollected
Funds will be given two options:
1. The Shareholder will be permitted to exchange
to a money market fund to preserve principal until
the payment is deemed Good Funds;
2. The redemption can be processed utilizing the
same procedures for written redemptions described
below.
o If a written redemption request is made for shares
where any portion of the payment for said shares
is in Uncollected Funds, and the request is in
good order, Price Services will promptly obtain
the information relative to the payment necessary
to determine when the payment becomes Good Funds.
The redemption will be processed in accordance
with normal procedures, and the proceeds will be
held until confirmation that the payment is Good
Funds. On the seventh (7th) calendar day after
trade date, and each day thereafter until either
confirmation is received or the tenth (10th)
calendar day, Price Services will call the paying
institution to request confirmation that the check
or ACH in question has been paid. On the tenth
calendar day after trade date, the redemption
proceeds will be released, regardless of whether
confirmation has been received.
o Checkwriting Redemptions.
o Daily, all checkwriting redemptions $10,000 and
over reported as Uncollected Funds or insufficient
funds will be reviewed. An attempt will be made
to contact the shareholder to make good the funds
(through wire, exchange, transfer). Generally by
12:00 p.m. the same day, if the matter has not
been resolved, the redemption request will be
rejected and the check returned to the
Shareholder.
o All checkwriting redemptions under $10,000
reported as Uncollected or insufficient funds will
be rejected and the check returned to the
Shareholder. The Funds and Services may agree to
contact shareholders presenting checks under
$10,000 reported as insufficient to obtain
alternative instructions for payment.
o Confirmations of Available Funds
The Fund expects that situations may develop whereby it
would be beneficial to determine if a person who has
placed an order for Shares has sufficient funds in his
or her checking account to cover the payment for the
Shares purchased. When this situation occurs, Price
Services may call the bank in question and request that
it confirm that sufficient funds to cover the purchase
are currently credited to the account in question.
Price Services will maintain written documentation or a
recording of each telephone call which is made under
the procedures outlined above. None of the above
procedures shall preclude Price Services from inquiring
as to the status of any check received by it in payment
for the Fund's Shares as Price Services may deem
appropriate or necessary to protect both the Fund and
Price Services. If a conflict arises between Section 2
and this Section 6, Section 6 will govern.
7. Dividends, Distributions and Other Corporate Actions
o The Fund will promptly inform Price Services of the
declaration of any dividend, distribution, stock split
or any other distributions of a similar kind on account
of its Capital Stock.
o Price Services shall act as Dividend Disbursing Agent
for the Fund, and as such, shall prepare and make
income and capital gain payments to investors. As
Dividend Disbursing Agent, Price Services will on or
before the payment date of any such dividend or
distribution, notify the Custodian of the estimated
amount required to pay any portion of said dividend or
distribution which is payable in cash, and the Fund
agrees that on or about the payment date of such
distribution, it shall instruct the Custodian to make
available to Price Services sufficient funds for the
cash amount to be paid out. If an investor is entitled
to receive additional Shares by virtue of any such
distribution or dividend, appropriate credits will be
made to his or her account.
8. Unclaimed Payments and Certificates
In accordance with procedures agreed upon by both
parties, report abandoned property to appropriate state and
governmental authorities of the Fund. Price Services shall,
90 days prior to the annual reporting of abandoned property
to each of the states, make reasonable attempts to locate
Shareholders for which (a) checks or share certificates have
been returned; (b) for which accounts have aged outstanding
checks; or (c) accounts with unissued shares that have been
coded with stop mail and meet the dormancy period guidelines
specified in the individual states. Price Services shall
make reasonable attempts to contact shareholders for those
accounts which have significant aged outstanding checks and
those checks meet a specified dollar threshold.
9. Books and Records
Maintain records showing for each Shareholder's
account, Retirement Plan or Retirement Account, as the case
may be, the following:
o Names, address and tax identification number;
o Number of Shares held;
o Certain historical information regarding the
account of each Shareholder, including dividends
and distributions distributed in cash or invested
in Shares;
o Pertinent information regarding the establishment
and maintenance of Retirement Plans and Retirement
Accounts necessary to properly administer each
account;
o Information with respect to the source of
dividends and distributions allocated among income
(taxable and nontaxable income), realized short-term gains
and realized long-term gains;
o Any stop or restraining order placed against a
Shareholder's account;
o Information with respect to withholdings on
domestic and foreign accounts;
o Any instructions from a Shareholder including, all
forms furnished by the Fund and executed by a
Shareholder with respect to (i) dividend or
distribution elections, and (ii) elections with
respect to payment options in connection with the
redemption of Shares;
o Any correspondence relating to the current
maintenance of a Shareholder's account;
o Certificate numbers and denominations for any
Shareholder holding certificates;
o Any information required in order for Price
Services to perform the calculations contemplated
under this Agreement.
Price Services shall maintain files and furnish
statistical and other information as required under this
Agreement and as may be agreed upon from time to time by
both parties or required by applicable law. However, Price
Services reserves the right to delete, change or add any
information to the files maintained; provided such
deletions, changes or additions do not contravene the terms
of this Agreement or applicable law and do not materially
reduce the level of services described in this Agreement.
Price Services shall also use its best efforts to obtain
additional statistical and other information as each Fund
may reasonably request for additional fees as may be agreed
to by both parties.
Any such records maintained pursuant to Rule 31a-1
under the Investment Company Act of 1940 ("the Act") will be
preserved for the periods and maintained in a manner
prescribed in Rule 31a-2 thereunder. Disposition of such
records after such prescribed periods shall be as mutually
agreed upon by the Fund and Price Services. The retention
of such records, which may be inspected by the Fund at
reasonable times, shall be at the expense of the Fund. All
records maintained by Price Services in connection with the
performance of its duties under this Agreement will remain
the property of the Fund and, in the event of termination of
this Agreement, will be delivered to the Fund as of the date
of termination or at such other time as may be mutually
agreed upon.
All books, records, information and data pertaining to
the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of
this Agreement shall remain confidential, and shall not be
voluntarily disclosed to any other person, except after
prior notification to and approval by the other party
hereto, which approval shall not be unreasonably withheld
and may not be withheld where Price Services or the Fund may
be exposed to civil or criminal contempt proceedings for
failure to comply; when requested to divulge such
information by duly constituted governmental authorities; or
after so requested by the other party hereto.
10. Authorized Issued and Outstanding Shares
Record the issuance of Shares of the Fund and maintain,
pursuant to Rule 17Ad-10(e) of the '34 Act, a record of the
total number of Shares of the Fund which are authorized,
issued and outstanding, based upon data provided to it by
the Fund. Price Services shall also provide the Fund on a
regular basis the total number of Shares which are
authorized and issued and outstanding. Price Services shall
have no obligation, when recording the issuance of Shares,
to monitor the issuance of such Shares or to take cognizance
of any laws relating to the issuance or sale of such Shares.
11. Tax Information
Prepare and file with the Internal Revenue Service and
with other appropriate state agencies and, if required, mail
to investors, those returns for reporting dividends and
distributions paid as required to be so filed and mailed,
and shall withhold such sums required to be withheld under
applicable Federal income tax laws, rules, and regulations.
Additionally, Price Services will file and, as applicable,
mail to investors, any appropriate information returns
required to be filed in connection with Retirement Plan
processing, such as 1099R, 5498, as well as any other
appropriate forms that the Fund or Price Services may deem
necessary. The Fund and Price Services shall agree to
procedures to be followed with respect to Price Services'
responsibilities in connection with compliance with back-up
withholding and other tax laws.
12. Information to be Furnished to the Fund
Furnish to the Fund such information as may be agreed
upon between the Fund and Price Services including any
information that the Fund and Price Services agree is
necessary to the daily operations of the business.
13. Correspondence
Promptly and fully answer correspondence from
shareholders and Administrators relating to Shareholder
Accounts, Retirement Accounts, transfer agent procedures,
and such other correspondence as may from time to time be
mutually agreed upon with the Funds. Unless otherwise
instructed, copies of all correspondence will be retained by
Price Services in accordance with applicable law and
procedures.
14. Lost or Stolen Securities
Pursuant to Rule 17f-1 of the '34 Act, report to the
Securities Information Center and/or the FBI or other
appropriate person on Form X-17-F-1A all lost, stolen,
missing or counterfeit securities. Provide any other
services relating to lost, stolen or missing securities as
may be mutually agreed upon by both parties.
15. Telephone Services
Maintain a Telephone Servicing Staff of representatives
("Representatives") sufficient to timely respond to all
telephonic inquiries reasonably foreseeable. The
Representatives will also effect telephone purchases,
redemptions, exchanges, and other transactions mutually
agreed upon by both parties, for those Shareholders who have
authorized telephone services. The Representatives shall
require each Shareholder effecting a telephone transaction
to properly identify himself/herself before the transaction
is effected, in accordance with procedures agreed upon
between by both parties. Procedures for processing
telephone transactions will be mutually agreed upon by both
parties. Price Services will also be responsible for
providing Tele*Access, PC*Access and such other Services as
may be offered by the Funds from time to time. Price
Services will maintain a special Shareholder Servicing staff
to service certain Shareholders with substantial
relationships with the Funds.
16. Collection of Shareholder Fees
Calculate and notify shareholders of any fees owed the
Fund, its affiliates or its agents. Such fees include the
small account fee IRA custodial fee and wire fee.
17. Form N-SAR
Maintain such records, if any, as shall enable the Fund
to fulfill the requirements of Form N-SAR.
18. Cooperation With Accountants
Cooperate with each Fund's independent public
accountants and take all reasonable action in the
performance of its obligations under the Agreement to assure
that the necessary information is made available to such
accountants for the expression of their opinion without any
qualification as to the scope of their examination,
including, but not limited to, their opinion included in
each such Fund's annual report on Form N-SAR and annual
amendment to Form N-1A.
19. Blue Sky
Provide to the Fund or its agent, on a daily, weekly,
monthly and quarterly basis, and for each state in which the
Fund's Shares are sold, sales reports and other materials
for blue sky compliance purposes as shall be agreed upon by
the parties.
20. Other Services
Provide such other services as may be mutually agreed
upon between Price Services and the Fund.
21. Fees and Out-of-Pocket Expenses
Each Fund shall pay to Price Services and/or its agents
for its Transfer Agent Services hereunder, fees computed as
set forth in Schedule A attached. Except as provided below,
Price Services will be responsible for all expenses relating
to the providing of Services. Each Fund, however, will
reimburse Price Services for the following out-of-pocket
expenses and charges incurred in providing Services:
o Postage. The cost of postage and freight for
mailing materials to Shareholders and Retirement
Plan participants, or their agents, including
overnight delivery, UPS and other express mail
services and special courier services required to
transport mail between Price Services locations
and mail processing vendors.
o Proxies. The cost to mail proxy cards and other
material supplied to it by the Fund and costs
related to the receipt, examination and tabulation
of returned proxies and the certification of the
vote to the Fund.
o Communications
o Print. The printed forms used internally and
externally for documentation and processing
Shareholder and Retirement Plan participant,
or their agent's inquiries and requests;
paper and envelope supplies for letters,
notices, and other written communications
sent to Shareholders and Retirement Plan
participants, or their agents.
o Print & Mail House. The cost of internal
and third party printing and mail house
services, including printing of statements
and reports.
o Voice and Data. The cost of equipment
(including associated maintenance), supplies
and services used for communicating to and
from the Shareholders of the Fund and
Retirement Plan participants, or their
agents, the Fund's transfer agent, other Fund
offices, and other agents of either the Fund
or Price Services. These charges shall
include:
o telephone toll charges (both incoming
and outgoing, local, long distance and
mailgrams); and
o data and telephone lines and associated
equipment such as modems, multiplexers,
and facsimile equipment.
o Record Retention. The cost of maintenance
and supplies used to maintain, microfilm,
copy, record, index, display, retrieve, and
store, in microfiche or microfilm form,
documents and records.
o Disaster Recovery. The cost of services,
equipment, facilities and other charges
necessary to provide disaster recovery for
any and all services listed in this
Agreement.
Out-of-pocket costs will be billed at cost to the Funds.
Allocation of monthly costs among the Funds will generally be
made based upon the number of Shareholder and Retirement Accounts
serviced by Price Services each month. Some invoices for these
costs will contain costs for both the Funds and other funds
serviced by Price Services. These costs will be allocated based
on a reasonable allocation methodology. Where possible, such as
in the case of inbound and outbound WATS charges, allocation will
be made on the actual distribution or usage.
C. Representations and Warranties of Price Services
Price Services represents and warrants to the Fund that:
1. It is a corporation duly organized and existing and in
good standing under the laws of Maryland;
2. It is duly qualified to carry on its business in
Maryland, California and Florida;
3. It is empowered under applicable laws and by its
charter and by-laws to enter into and perform this
Agreement;
4. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement;
5. It is registered with the Securities and Exchange
Commission as a Transfer Agent pursuant to Section 17A of
the '34 Act; and
6. It has and will continue to have access to the
necessary facilities, equipment and personnel to perform its
duties and obligations under this Agreement.
D. Representations and Warranties of the Fund
The Fund represents and warrants to Price Services that:
1. It is a corporation or business trust duly organized
and existing and in good standing under the laws of Maryland
or Massachusetts, as the case may be;
2. It is empowered under applicable laws and by its
Articles of Incorporation or Declaration of Trust, as the
case may be, and By-Laws to enter into and perform this
Agreement;
3. All proceedings required by said Articles of
Incorporation or Declaration of Trust, as the case may be,
and By-Laws have been taken to authorize it to enter into
and perform this Agreement;
4. It is an investment company registered under the Act;
and
5. A registration statement under the Securities Act of
1933 ("the '33 Act") is currently effective and will remain
effective, and appropriate state securities law filings have
been made and will continue to be made, with respect to all
Shares of the Fund being offered for sale.
E. Standard of Care/Indemnification
Notwithstanding anything to the contrary in this Agreement:
1. Price Services shall not be liable to any Fund for any
act or failure to act by it or its agents or subcontractors
on behalf of the Fund in carrying or attempting to carry out
the terms and provisions of this Agreement provided Price
Services has acted in good faith and without negligence or
willful misconduct and selected and monitored the
performance of its agents and subcontractors with reasonable
care.
2. The Fund shall indemnify and hold Price Services
harmless from and against all losses, costs, damages,
claims, actions and expenses, including reasonable expenses
for legal counsel, incurred by Price Services resulting
from: (i) any action or omission by Price Services or its
agents or subcontractors in the performance of their duties
hereunder; (ii) Price Services acting upon instructions
believed by it to have been executed by a duly authorized
officer of the Fund; or (iii) Price Services acting upon
information provided by the Fund in form and under policies
agreed to by Price Services and the Fund. Price Services
shall not be entitled to such indemnification in respect of
actions or omissions constituting negligence or willful
misconduct of Price Services or where Price Services has not
exercised reasonable care in selecting or monitoring the
performance of its agents or subcontractors.
3. Except as provided in Article L of this Agreement,
Price Services shall indemnify and hold harmless the Fund
from all losses, costs, damages, claims, actions and
expenses, including reasonable expenses for legal counsel,
incurred by the Fund resulting from the negligence or
willful misconduct of Price Services or which result from
Price Services' failure to exercise reasonable care in
selecting or monitoring the performance of its agents or
subcontractors. The Fund shall not be entitled to such
indemnification in respect of actions or omissions
constituting negligence or willful misconduct of such Fund
or its agents or subcontractors; unless such negligence or
misconduct is attributable to Price Services.
4. In determining Price Services' liability, an isolated
error or omission will normally not be deemed to constitute
negligence when it is determined that:
o Price Services had in place "appropriate procedures;"
o the employee(s) responsible for the error or omission
had been reasonably trained and were being
appropriately monitored; and
o the error or omission did not result from wanton or
reckless conduct on the part of the employee(s).
It is understood that Price Services is not obligated to
have in place separate procedures to prevent each and every
conceivable type of error or omission. The term
"appropriate procedures" shall mean procedures reasonably
designed to prevent and detect errors and omissions. In
determining the reasonableness of such procedures, weight
will be given to such factors as are appropriate, including
the prior occurrence of any similar errors or omissions when
such procedures were in place and transfer agent industry
standards in place at the time of the occurrence.
5. In the event either party is unable to perform its
obligations under the terms of this Agreement because of
acts of God, strikes or other causes reasonably beyond its
control, such party shall not be liable to the other party
for any loss, cost, damage, claim, action or expense
resulting from such failure to perform or otherwise from
such causes.
6. In order that the indemnification provisions contained
in this Article E shall apply, upon the assertion of a claim
for which either party may be required to indemnify the
other, the party seeking indemnification shall promptly
notify the other party of such assertion, and shall keep the
other party advised with respect to all developments
concerning such claim. The party who may be required to
indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim,
or to defend against said claim in its own name or in the
name of the other party. The party seeking indemnification
shall in no case confess any claim or make any compromise in
any case in which the other party may be required to
indemnify it except with the other party's prior written
consent.
7. Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of
this Agreement.
F. Dual Interests
It is understood that some person or persons may be
directors, officers, or shareholders of both the Funds and Price
Services (including Price Services's affiliates), and that the
existence of any such dual interest shall not affect the validity
of this Agreement or of any transactions hereunder except as
otherwise provided by a specific provision of applicable law.
<PAGE>
G. Documentation
o As requested by Price Services, the Fund shall promptly
furnish to Price Services the following:
o A certified copy of the resolution of the
Directors/Trustees of the Fund authorizing the
appointment of Price Services and the execution
and delivery of this Agreement;
o A copy of the Articles of Incorporation or
Declaration of Trust, as the case may be, and By-Laws
of the Fund and all amendments thereto;
o As applicable, specimens of all forms of
outstanding and new stock/share certificates in
the forms approved by the Board of
Directors/Trustees of the Fund with a certificate
of the Secretary of the Fund as to such approval;
o All account application forms and other documents
relating to Shareholders' accounts;
o An opinion of counsel for the Fund with respect to
the validity of the stock, the number of Shares
authorized, the status of redeemed Shares, and the
number of Shares with respect to which a
Registration Statement has been filed and is in
effect; and
o A copy of the Fund's current prospectus.
The delivery of any such document for the purpose of any
other agreement to which the Fund and Price Services are or were
parties shall be deemed to be delivery for the purposes of this
Agreement.
o As requested by Price Services, the Fund will also
furnish from time to time the following documents:
o Each resolution of the Board of Directors/Trustees of
the Fund authorizing the original issue of its Shares;
o Each Registration Statement filed with the Securities
and Exchange Commission and amendments and orders
thereto in effect with respect to the sale of Shares
with respect to the Fund;
o A certified copy of each amendment to the Articles of
Incorporation or Declaration of Trust, and the By-Laws
of the Fund;
o Certified copies of each vote of the Board of
Directors/Trustees authorizing officers to give
instructions to the Transfer Agent;
o Such other documents or opinions which Price Services,
in its discretion, may reasonably deem necessary or
appropriate in the proper performance of its duties;
and
o Copies of new prospectuses issued.
Price Services hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Fund for
safekeeping of stock certificates, check forms and facsimile
signature imprinting devices, if any; and for the preparation or
use, and for keeping account of, such certificates, forms and
devices.
H. References to Price Services
Each Fund agrees not to circulate any printed matter which
contains any reference to Price Services without the prior
approval of Price Services, excepting solely such printed matter
that merely identifies Price Services as agent of the Fund. The
Fund will submit printed matter requiring approval to Price
Services in draft form, allowing sufficient time for review by
Price Services and its legal counsel prior to any deadline for
printing.
I. Compliance With Governmental Rules and Regulations
Except as otherwise provided in the Agreement and except for
the accuracy of information furnished to the Fund by Price
Services, each Fund assumes full responsibility for the
preparation, contents and distribution of its prospectuses and
compliance with all applicable requirements of the Act, the '34
Act, the '33 Act, and any other laws, rules and regulations of
governmental authorities having jurisdiction over the Fund.
Price Services shall be responsible for complying with all laws,
rules and regulations of governmental authorities having
jurisdiction over transfer agents and their activities.
J. Ownership of Software and Related Material
All computer programs, magnetic tapes, written procedures
and similar items purchased and/or developed and used by Price
Services in performance of the Agreement shall be the property of
Price Services and will not become the property of the Fund.
K. Quality Service Standards
Price Services and the Fund may from time to time agree to
certain quality service standards, as well as incentives and
penalties with respect to Price Services' hereunder.
L. As Of Transactions
For purposes of this Article L, the term "Transaction" shall
mean any single or "related transaction" (as defined below)
involving the purchase or redemption of Shares (including
exchanges) that is processed at a time other than the time of the
computation of the Fund's net asset value per Share next computed
after receipt of any such transaction order by Price Services due
to an act or omission of Price Services. "As Of
Processing" refers to the processing of these Transactions. If
more than one Transaction ("Related Transaction") in the Fund is
caused by or occurs as a result of the same act or omission, such
transactions shall be aggregated with other transactions in the
Fund and be considered as one Transaction.
o Reporting
Price Services shall:
1. Utilize a system to identify all Transactions, and
shall compute the net effect of such Transactions upon
the Fund on a daily, monthly and rolling 365 day basis.
The monthly and rolling 365 day periods are hereafter
referred to as "Cumulative".
2. Supply to the Fund, from time to time as mutually
agreed upon, a report summarizing the Transactions and
the daily and Cumulative net effects of such
Transactions both in terms of aggregate dilution and
loss ("Dilution") or gain and negative dilution
("Gain") experienced by the Fund, and the impact such
Gain or Dilution has had upon the Fund's net asset
value per Share.
3. With respect to any Transaction which causes
Dilution to the Fund of $100,000 or more, immediately
provide the Fund: (i) a report identifying the
Transaction and the Dilution resulting therefrom, (ii)
the reason such Transaction was processed as described
above, and (iii) the action that Price Services has or
intends to take to prevent the reoccurrence of such as
of processing ("Report").
o Liability
1. It will be the normal practice of the Funds not to
hold Price Services liable with respect to any
Transaction which causes Dilution to any single Fund of
less than $25,000. Price Services will, however,
closely monitor for each Fund the daily and Cumulative
Gain/Dilution which is caused by Transactions of less
than $25,000. When the Cumulative Dilution to any Fund
exceeds 3/10 of 1% per share, Price Services, in
consultation with counsel to the Fund, will make
appropriate inquiry to determine whether it should take
any remedial action. Price Services will report to the
Board of Directors/Trustees of the Fund ("Board") any
action it has taken.
2. Where a Transaction causes Dilution to a Fund
greater than $25,000 ("Significant Transaction"), but
less than $100,000, Price Services will review with
Counsel to the Fund the circumstances surrounding the
underlying Transaction to determine whether the
Transaction was caused by or occurred as a result of a
negligent act or omission by Price Services. If it is
determined that the Dilution is the result of a
negligent action or omission by Price Services, Price
Services and outside counsel for the Fund will
negotiate settlement. All such Significant
Transactions will be reported to the Audit Committee at
its annual meeting (unless the settlement fully
compensates the Fund for any dilution). Any
significant Transaction, however, causing Dilution in
excess of the lesser of $100,000 or a penny per share
will be PROMPTLY reported to the Board and resolved at
the next scheduled Board Meeting. Settlement for
significant Transactions causing Dilution of $100,000
or more will not be entered into until approved by the
Board. The factors to consider in making any
determination regarding the settlement of a Significant
Transaction would include but not be limited to:
o Procedures and controls adopted by Price Services
to prevent As Of Processing;
o Whether such procedures and controls were being
followed at the time of the Significant
Transaction;
o The absolute and relative volume of all
transactions processed by Price Services on the
day of the Significant Transaction;
o The number of Transactions processed by Price
Services during prior relevant periods, and the
net Dilution/Gain as a result of all such
Transactions to the Fund and to all other Price
Funds;
o The prior response of Price Services to
recommendations made by the Funds regarding
improvement to the Transfer Agent's As Of
Processing procedures.
3. In determining Price Services' liability with respect
to a Significant Transaction, an isolated error or
omission will normally not be deemed to constitute
negligence when it is determined that:
o Price Services had in place "appropriate
procedures".
o the employee(s) responsible for the error or
omission had been reasonably trained and were
being appropriately monitored; and
o the error or omission did not result from wanton
or reckless conduct on the part of the
employee(s).
It is understood that Price Services is not obligated
to have in place separate procedures to prevent each
and every conceivable type of error or omission. The
term "appropriate procedures" shall mean procedures
reasonably designed to prevent and detect errors and
omissions. In determining the reasonableness of such
procedures, weight will be given to such factors as are
appropriate, including the prior occurrence of any
similar errors or omissions when such procedures were
in place and transfer agent industry standards in place
at the time of the occurrence.
M. Term and Termination of Agreement
o This Agreement shall run for a period of one (1) year from
the date first written above and will be renewed from year
to year thereafter unless terminated by either party as
provided hereunder.
o This Agreement may be terminated by the Fund upon one
hundred twenty (120) days' written notice to Price Services;
and by Price Services, upon three hundred sixty-five (365)
days' writing notice to the Fund.
o Upon termination hereof, the Fund shall pay to Price
Services such compensation as may be due as of the date of
such termination, and shall likewise reimburse for out-of-pocket
expenses related to its services hereunder.
N. Notice
Any notice as required by this Agreement shall be
sufficiently given (i) when sent to an authorized person of the
other party at the address of such party set forth above or at
such other address as such party may from time to time specify in
writing to the other party; or (ii) as otherwise agreed upon by
appropriate officers of the parties hereto.
O. Assignment
Neither this Agreement nor any rights or obligations
hereunder may be assigned either voluntarily or involuntarily, by
operation of law or otherwise, by either party without the prior
written consent of the other party, provided this shall not
preclude Price Services from employing such agents and
subcontractors as it deems appropriate to carry out its
obligations set forth hereunder.
P. Amendment/Interpretive Provisions
The parties by mutual written agreement may amend this
Agreement at any time. In addition, in connection with the
operation of this Agreement, Price Services and the Fund may
agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their
joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions are to
be signed by all parties and annexed hereto, but no such
provision shall contravene any applicable Federal or state law or
regulation and no such interpretive or additional provision shall
be deemed to be an amendment of this Agreement.
Q. Further Assurances
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the
purposes hereof.
R. Maryland Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of Maryland.
S. Merger of Agreement
This Agreement, including the attached Appendices and
Schedules supersedes any prior agreement with respect to the
subject hereof, whether oral or written.
T. Counterparts
This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same
instruments.
U. The Parties
All references herein to "the Fund" are to each of the Funds
listed on Appendix A individually, as if this Agreement were
between such individual Fund and Price Services. In the case of
a series Fund or trust, all references to "the Fund" are to the
individual series or portfolio of such Fund or trust, or to such
Fund or trust on behalf of the individual series or portfolio, as
appropriate. The "Fund" also includes any T. Rowe Price Funds
which may be established after the execution of this Agreement.
Any reference in this Agreement to "the parties" shall mean Price
Services and such other individual Fund as to which the matter
pertains.
V. Directors, Trustees and Shareholders and Massachusetts
Business Trust
It is understood and is expressly stipulated that neither
the holders of Shares in the Fund nor any Directors or Trustees
of the Fund shall be personally liable hereunder.
With respect to any Fund which is a party to this Agreement
and which is organized as a Massachusetts business trust, the
term "Fund" means and refers to the trustees from time to time
serving under the applicable trust agreement (Declaration of
Trust) of such Trust as the same may be amended from time to
time. It is expressly agreed that the obligations of any such
Trust hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the
Trust, personally, but bind only the trust property of the Trust,
as provided in the Declaration of Trust of the Trust. The
execution and delivery of this Agreement has been authorized by
the trustees and signed by an authorized officer of the Trust,
acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officer shall be deemed
to have been made by any of them, but shall bind only the trust
property of the Trust as provided in its Declaration of Trust.
W. Captions
The captions in the Agreement are included for convenience
of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or
effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf under
their seals by and through their duly authorized officers.
T. ROWE PRICE SERVICES, INC. T. ROWE PRICE FUNDS
/s/James S. Riepe /s/Carmen F. Deyesu
BY: __________________________ BY: ________________________
James S. Riepe Carmen F. Deyesu
DATED: ________________________ DATED: _______________________
<PAGE>
APPENDIX A
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT BALANCED FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC. on behalf of the:
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
on behalf of the:
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
<PAGE>
AMENDMENT NO. 1
TRANSFER AGENCY AND SERVICE AGREEMENT
Between
T. ROWE PRICE SERVICES, INC.
And
THE T. ROWE PRICE FUNDS
The Transfer Agency and Service Agreement of January 1,
1998, between T. Rowe Price Services, Inc., and each of the
Parties listed on Appendix A thereto is hereby amended, as of
January 21, 1998, by adding thereto T. Rowe Price Index Trust,
Inc., on behalf of T. Rowe Price Extended Market Index Fund and
T. Rowe Price Total Market Index Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
<PAGE>
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT BALANCED FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC. on behalf of the:
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
on behalf of the:
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
Attest:
/s/Patricia S. Butcher /s/Carmen F. Deyesu
______________________ ______________________________
Patricia S. Butcher, By: Carmen F. Deyesu
Assistant Secretary Treasurer
Attest: T. ROWE PRICE SERVICES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
______________________ ______________________________
Barbara A. Van Horn, By: Henry H. Hopkins,
Assistant Secretary Vice President
The Agreement between T. Rowe Price Associates, Inc. and T. Rowe Price
Funds for Fund Accounting Services, dated January 1, 1998, as amended.
AGREEMENT
between
T. ROWE PRICE ASSOCIATES, INC.
and
THE T. ROWE PRICE FUNDS
for
FUND ACCOUNTING SERVICES
<PAGE>
TABLE OF CONTENTS
Page
Article A Terms of Appointment/Duties of Price Associates. . . . . . .1
Article B Fees and Out-of-Pocket Expenses. . . . . . . . . . . . . . .3
Article C Representations and Warranties of Price Associates . . . . .3
Article D Representations and Warranties of the Fund . . . . . . . . .4
Article E Ownership of Software and Related Material . . . . . . . . .4
Article F Quality Service Standards. . . . . . . . . . . . . . . . . .4
Article G Standard of Care/Indemnification . . . . . . . . . . . . . .4
Article H Dual Interests . . . . . . . . . . . . . . . . . . . . . . .7
Article I Documentation. . . . . . . . . . . . . . . . . . . . . . . .7
Article J Recordkeeping/Confidentiality. . . . . . . . . . . . . . . .7
Article K Compliance with Governmental Rules and Regulations . . . . .8
Article L Terms and Termination of Agreement . . . . . . . . . . . . .8
Article M Notice . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Article N Assignment . . . . . . . . . . . . . . . . . . . . . . . . .9
Article O Amendment/Interpretive Provisions. . . . . . . . . . . . . .9
Article P Further Assurances . . . . . . . . . . . . . . . . . . . . 10
Article Q Maryland Law to Apply. . . . . . . . . . . . . . . . . . . 10
Article R Merger of Agreement. . . . . . . . . . . . . . . . . . . . 10
Article S Counterparts . . . . . . . . . . . . . . . . . . . . . . . 10
Article T The Parties. . . . . . . . . . . . . . . . . . . . . . . . 10
Article U Directors, Trustee and Shareholders and
Massachusetts Business Trust . . . . . . . . . . . . . . . 10
Article V Captions . . . . . . . . . . . . . . . . . . . . . . . . . 11
<PAGE>
AGREEMENT made as of the first day of January, 1998, by and
between T. ROWE PRICE ASSOCIATES, INC., a Maryland corporation
having its principal office and place of business at 100 East
Pratt Street, Baltimore, Maryland 21202 ("Price Associates"), and
each Fund which is listed on Appendix A (as such Appendix may be
amended from time to time) and which evidences its agreement to
be bound hereby by executing a copy of this Agreement (each such
Fund individually hereinafter referred to as "the Fund", whose
definition may be found in Article T);
WHEREAS, Price Associates has the capability of providing
the Funds with certain accounting services ("Accounting
Services");
WHEREAS, the Fund desires to appoint Price Associates to
provide these Accounting Services and Price Associates desires to
accept such appointment;
WHEREAS, the Board of Directors of the Fund has authorized
the Fund to utilize various pricing services for the purpose of
providing to Price Associates securities prices for the
calculation of the Fund's net asset value.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
A. Terms of Appointment/Duties of Price Associates
Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints Price Associates
to provide, and Price Associates agrees to provide, the following
Accounting Services:
a. Maintain for each Fund a daily trial balance, a general
ledger, subsidiary records and capital stock accounts;
b. Maintain for each Fund an investment ledger, including
amortized bond and foreign dollar denominated costs
where applicable;
c. Maintain for each Fund all records relating to the
Fund's income and expenses;
d. Provide for the daily valuation of each Fund's
portfolio securities and the computation of each Fund's
daily net asset value per share. Such daily valuations
shall be made in accordance with the valuation policies
established by each of the Fund's Board of Directors
including, but not limited to, the utilization of such
pricing valuation sources and/or pricing services as
determined by the Boards. Price Associates shall have
no liability for any losses or damages incurred by the
Fund as a result of erroneous portfolio security
evaluations provided by such designated sources and/or
pricing services; provided that, Price Associates
reasonably believes the prices are accurate, has
adhered to its normal verification control procedures,
and has otherwise met the standard of care as set forth
in Article G of this Agreement;
e. Provide daily cash flow and transaction status
information to each Fund's adviser;
f. Authorize the payment of Fund expenses, either through
instruction of custodial bank or utilization of
custodian's automated transfer system;
g. Prepare for each Fund such financial information that
is reasonably necessary for shareholder reports,
reports to the Board of Directors and to the officers
of the Fund, and reports to the Securities and Exchange
Commission, the Internal Revenue Service and other
Federal and state regulatory agencies;
h. Provide each Fund with such advice that may be
reasonably necessary to properly account for all
financial transactions and to maintain the Fund's
accounting procedures and records so as to insure
compliance with generally accepted accounting and tax
practices and rules;
i. Maintain for each Fund all records that may be
reasonably required in connection with the audit
performed by each Fund's independent accountant, the
Securities and Exchange Commission, the Internal
Revenue Service or such other Federal or state
regulatory agencies; and
j. Cooperate with each Fund's independent public
accountants and take all reasonable action in the
performance of its obligations under the Agreement to
assure that the necessary information is made available
to such accountants for the expression of their opinion
without any qualification as to the scope of their
examination including, but not limited to, their
opinion included in each such Fund's annual report on
Form N-SAR and annual amendment to Form N-1A.
B. Fees and Out-of-Pocket Expenses
Each Fund shall pay to Price Associates for its Accounting
Services hereunder, fees as set forth in the Schedule attached
hereto. In addition, each Fund will reimburse Price Associates
for out-of-pocket expenses such as postage, printed forms, voice
and data transmissions, record retention, disaster recovery,
third party vendors, equipment leases and other similar items as
may be agreed upon between Price Associates and the Fund. Some
invoices will contain costs for both the Funds and other funds
serviced by Price Associates. In these cases, a reasonable
allocation methodology will be used to allocate these costs to
the Funds.
C. Representations and Warrantees of Price Associates
Price Associates represents and warrants to the Fund that:
1. It is a corporation duly organized and existing in good
standing under the laws of Maryland.
2. It is duly qualified to carry on its business in
Maryland.
3. It is empowered under applicable laws and by its
charter and By-Laws to enter into and perform this Agreement.
4. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
5. It has, and will continue to have, access to the
necessary facilities, equipment and personnel to perform its
duties and obligations under this Agreement.
D. Representations and Warrantees of the Fund
The Fund represents and warrants to Price Associates that:
1. It is a corporation or business trust, as the case may
be, duly organized and existing and in good standing under the
laws of Maryland or Massachusetts, as the case may be.
2. It is empowered under applicable laws and by its
Articles of Incorporation or Declaration of Trust, as the case
may be, and By-Laws have been taken to authorize it to enter into
and perform this Agreement.
3. All proceedings required by said Articles of
Incorporation or Declaration of Trust, as the case may be, and
By-Laws have been taken to authorize it to enter into and perform
this Agreement.
E. Ownership of Software and Related Material
All computer programs, magnetic tapes, written procedures,
and similar items purchased and/or developed and used by Price
Associates in performance of the Agreement shall be the property
of Price Associates and will not become the property of the
Funds.
<PAGE>
F. Quality Service Standards
Price Associates and the Fund may, from time to time, agree
to certain quality service standards, with respect to Price
Associates' services hereunder.
G. Standard of Care/Indemnification
Notwithstanding anything to the contrary in this Agreement:
1. Where a Pricing Error results in loss or dilution to a
Fund of less than $10,000, the determination of liability for the
error will be made by Price Associates. Where a Pricing Error
results in loss or dilution to a Fund of $10,000 or more but less
than $100,000, liability for the error will be resolved through
negotiations between Fund Counsel and Price Associates. Where a
Pricing Error results in loss or dilution to a Fund of the lesser
of 1/2 of 1% of NAV or $100,000 or more, the error will be
promptly reported to the Board of Directors of the Fund (unless
the Fund is fully compensated for the loss or dilution), provided
that final settlement with respect to such errors will not be
made until approved by the Board of Directors of the Fund. A
summary of all Pricing Errors and their effect on the Funds will
be reported to the Funds' Audit Committee on an annual basis. In
determining the liability of Price Associates for a Pricing
Error, an error or omission will not be deemed to constitute
negligence when it is determined that:
o Price Associates had in place "appropriate procedures
and an adequate system of internal controls;"
o the employee responsible for the error or omission had
been reasonably trained and was being appropriately
monitored; and
o the error or omission did not result from wanton or
reckless conduct on the part of the employee.
It is understood that Price Associates is not obligated to
have in place separate procedures to prevent each and every
conceivable type of error or omission. The term "appropriate
procedures and adequate system of internal controls" shall
mean procedures and controls reasonably designed to prevent
and detect errors and omissions. In determining the
reasonableness of such procedures and controls, weight will
be given to such factors as are appropriate, including the
prior occurrence of any similar errors or omissions, when
such procedures and controls were in place and fund
accounting industry standards in place at the time of the
error.
2. The Fund shall indemnify and hold Price Associates
harmless from and against all losses, costs, damages, claims,
actions, and expenses, including reasonable expenses for legal
counsel, incurred by Price Associates resulting from: (i) any
action or omission by Price Associates or its agents or
subcontractors in the performance of their duties hereunder; (ii)
Price Associates acting upon instructions believed by it to have
been executed by a duly authorized officer of the Fund; or (iii)
Price Associates acting upon information provided by the Fund in
form and under policies agreed to by Price Associates and the
Fund. Price Associates shall not be entitled to such
indemnification in respect of actions or omissions constituting
negligence or willful misconduct of Price Associates or where
Price Associates has not exercised reasonable care in selecting
or monitoring the performance of its agents or subcontractors.
3. Price Associates shall indemnify and hold harmless the
Fund from all losses, costs, damages, claims, actions and
expenses, including reasonable expenses for legal counsel,
incurred by the Fund resulting from the negligence or willful
misconduct of Price Associates or which result from Price
Associates' failure to exercise reasonable care in selecting or
monitoring the performance of its agents or subcontractors. The
Fund shall not be entitled to such indemnification with respect
to actions or omissions constituting negligence or willful
misconduct of such Fund or its agents or subcontractors; unless
such negligence or misconduct is attributable to Price
Associates.
4. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of
God, strikes or other causes reasonably beyond its control, such
party shall not be liable to the other party for any loss, cost,
damage, claim, action or expense resulting from such failure to
perform or otherwise from such causes.
5. In order that the indemnification provisions contained
in this Article G shall apply, upon the assertion of a claim for
which either party may be required to indemnify the other, the
party seeking indemnification shall promptly notify the other
party of such assertion, and shall keep the other party advised
with respect to all developments concerning such claim. The
party who may be required to indemnify shall have the option to
participate with the party seeking indemnification in the defense
of such claim, or to defend against said claim in its own name or
in the name of the other party. The party seeking
indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required
to indemnify it except with the other party's prior written
consent.
6. Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this
Agreement.
H. Dual Interests
It is understood that some person or persons may be
directors, officers, or shareholders of both the Fund and Price
Associates (including Price Associates' affiliates), and that the
existence of any such dual interest shall not affect the validity
of this Agreement or of any transactions hereunder except as
otherwise provided by a specific provision of applicable law.
I. Documentation
As requested by Price Associates, the Fund shall promptly
furnish to Price Associates such documents as it may reasonably
request and as are necessary for Price Associates to carry out
its responsibilities hereunder.
J. Recordkeeping/Confidentiality
1. Price Associates shall keep records relating to the
services to be performed hereunder, in the form and manner as it
may deem advisable, provided that Price Associates shall keep all
records in such form and in such manner as required by applicable
law, including the Investment Company Act of 1940 ("the Act") and
the Securities Exchange Act of 1934 ("the '34 Act").
2. Price Associates and the Fund agree that all books,
records, information and data pertaining to the business of the
other party which are exchanged or received pursuant to the
negotiation or the carrying out of this Agreement shall remain
confidential, and shall not be voluntarily disclosed to any other
person, except: (a) after prior notification to and approval in
writing by the other party hereto, which approval shall not be
unreasonably withheld and may not be withheld where Price
Associates or Fund may be exposed to civil or criminal contempt
proceedings for failure to comply; (b) when requested to divulge
such information by duly constituted governmental authorities; or
(c) after so requested by the other party hereto.
K. Compliance With Governmental Rules and Regulations
Except as otherwise provided in the Agreement and except for
the accuracy of information furnished to the Funds by Price
Associates, each Fund assumes full responsibility for the
preparation, contents and distribution of its prospectuses, and
for complying with all applicable requirements of the Act, the
'34 Act, the Securities Act of 1933 (the "33 Act"), and any laws,
rules and regulations of governmental authorities having
jurisdiction over the Funds.
L. Term and Termination of Agreement
1. This Agreement shall run for a period of one (1) year
from the date first written above and will be renewed from year
to year thereafter unless terminated by either party as provided
hereunder.
2. This Agreement may be terminated by the Fund upon sixty
(60) days' written notice to Price Associates; and by Price
Associates, upon three hundred sixty-five (365) days' writing
notice to the Fund.
3. Upon termination hereof, the Fund shall pay to Price
Associates such compensation as may be due as of the date of such
termination, and shall likewise reimburse for out-of-pocket
expenses related to its services hereunder.
M. Notice
Any notice as required by this Agreement shall be
sufficiently given (i) when sent to an authorized person of the
other party at the address of such party set forth above or at
such other address as such party may from time to time specify in
writing to the other party; or (ii) as otherwise agreed upon by
appropriate officers of the parties hereto.
N. Assignment
Neither this Agreement nor any rights or obligations
hereunder may be assigned either voluntarily or involuntarily, by
operation of law or otherwise, by either party without the prior
written consent of the other party, provided this shall not
preclude Price Associates from employing such agents and
subcontractors as it deems appropriate to carry out its
obligations set forth hereunder.
O. Amendment/Interpretive Provisions
The parties by mutual written agreement may amend this
Agreement at any time. In addition, in connection with the
operation of this Agreement, Price Associates and the Fund may
agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their
joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions are to
be signed by all parties and annexed hereto, but no such
provision shall contravene any applicable Federal or state law or
regulation and no such interpretive or additional provision shall
be deemed to be an amendment of this Agreement.
P. Further Assurances
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the
purposes hereof.
Q. Maryland Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of Maryland.
<PAGE>
R. Merger of Agreement
This Agreement, including the attached Appendix and Schedule
supersedes any prior agreement with respect to the subject
hereof, whether oral or written.
S. Counterparts
This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same
instruments.
T. The Parties
All references herein to "the Fund" are to each of the Funds
listed on Appendix A individually, as if this Agreement were
between such individual Fund and Price Associates. In the case
of a series Fund or trust, all references to "the Fund" are to
the individual series or portfolio of such Fund or trust, or to
such Fund or trust on behalf of the individual series or
portfolio, as appropriate. The "Fund" also includes any T. Rowe
Price Funds which may be established after the execution of this
Agreement. Any reference in this Agreement to "the parties"
shall mean Price Associates and such other individual Fund as to
which the matter pertains.
U. Directors, Trustees and Shareholders and Massachusetts
Business Trust
It is understood and is expressly stipulated that neither
the holders of shares in the Fund nor any Directors or Trustees
of the Fund shall be personally liable hereunder.
With respect to any Fund which is a party to this Agreement
and which is organized as a Massachusetts business trust, the
term "Fund" means and refers to the trustees from time to time
serving under the applicable trust agreement (Declaration of
Trust) of such Trust as the same may be amended from time to
time. It is expressly agreed that the obligations of any such
Trust hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the
Trust, personally, but bind only the trust property of the Trust,
as provided in the Declaration of Trust of the Trust. The
execution and delivery of this Agreement has been authorized by
the trustees and signed by an authorized officer of the Trust,
acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officer shall be deemed
to have been made by any of them, but shall bind only the trust
property of the Trust as provided in its Declaration of Trust.
<PAGE>
V. Captions
The captions in the Agreement are included for convenience
of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or
effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf under
their seals by and through their duly authorized officers.
T. ROWE PRICE ASSOCIATES, INC. T. ROWE PRICE FUNDS
/s/Alvin Younger, Jr. /s/Carmen F. Deyesu
BY: ____________________ BY: _____________________
Alvin Younger, Jr. Carmen F. Deyesu
DATED: __________________ DATED: _______________________
<PAGE>
APPENDIX A
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT BALANCED FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
<PAGE>
AMENDMENT NO. 1
AGREEMENT
between
T. ROWE PRICE ASSOCIATES, INC.
and
THE T. ROWE PRICE FUNDS
for
FUND ACCOUNTING SERVICES
The Agreement for Fund Accounting Services of January 1,
1998, between T. Rowe Price Associates, Inc. and each of the
Parties listed on Appendix A thereto is hereby amended, as of
January 21, 1998, by adding thereto T. Rowe Price Index Trust,
Inc., on behalf of T. Rowe Price Extended Market Index Fund and
T. Rowe Price Total Market Index Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. Rowe Price Extended Market Index Fund
T. Rowe Price Total Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
<PAGE>
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT BALANCED FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
<PAGE>
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
Attest:
/s/Patricia S. Butcher /s/Carmen F. Deyesu
________________________ ___________________________________
Patricia S. Butcher, By: Carmen F. Deyesu
Assistant Secretary Treasurer
Attest: T. ROWE PRICE ASSOCIATES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
________________________ ___________________________________
Barbara A. Van Horn, By: Henry H. Hopkins,
Assistant Secretary Managing Director
The Agreement between T. Rowe Price Retirement Plan Services, Inc. and
the Taxable Funds, dated January 1, 1998, as amended.
AGREEMENT
between
T. ROWE PRICE RETIREMENT PLAN SERVICES, INC.
and
EACH OF THE PARTIES INDICATED ON APPENDIX A
<PAGE>
TABLE OF CONTENTS
Page
Article A Terms of Appointment . . . . . . . . . . . . . . . . . . . .2
Article B Duties of RPS. . . . . . . . . . . . . . . . . . . . . . . .2
1. Contributions - Retirement Plans and
Retirement Accounts. . . . . . . . . . . . . . . . . . . . . . . . .2
2. Retirement Plans - Redemptions to
Cover Distributions. . . . . . . . . . . . . . . . . . . . . . . . .3
3. Other Provisions . . . . . . . . . . . . . . . . . . . . . .4
4. Exchanges. . . . . . . . . . . . . . . . . . . . . . . . . .5
5. Books and Records. . . . . . . . . . . . . . . . . . . . . .5
6. Tax Information. . . . . . . . . . . . . . . . . . . . . . .6
7. Other Information to be Furnished to the
Funds. . . . . . 6
8. Telephone. . . . . . . . . . . . . . . . . . . . . . . . . .6
9. Correspondence . . . . . . . . . . . . . . . . . . . . . . .6
10. Prospectuses/Confirmation Statements . . . . . . . . . . . .7
11. Proxies. . . . . 7
12. Form N-SAR . . . . . . . . . . . . . . . . . . . . . . . . .7
13. Withholding. . . . . . . . . . . . . . . . . . . . . . . . .7
Article C Fee and Out-of-Pocket Expenses . . . . . . . . . . . . . . .7
1. Postage. . . . . 8
2. Proxies. . . . . 8
3. Communications . . . . . . . . . . . . . . . . . . . . . . .8
4. Record Retention . . . . . . . . . . . . . . . . . . . . . .9
5. Disaster Recovery. . . . . . . . . . . . . . . . . . . . . .9
Article D Representations and Warranties of RPS. . . . . . . . . . . .9
Article E Representations and Warranties of the Fund . . . . . . . . .9
Article F Standard of Care/Indemnification . . . . . . . . . . . . . 10
Article G Dual Interests . . . . . . . . . . . . . . . . . . . . . . 12
Article H Documentation. . . . . . . . . . . . . . . . . . . . . . . 13
Article I Recordkeeping/Confidentiality. . . . . . . . . . . . . . . 14
Article J Ownership of Software and Related Material . . . . . . . . 15
Article K As of Transactions . . . . . . . . . . . . . . . . . . . . 15
1. Reporting. . . . . . . . . . . . . . . . . . . . . . . . . 15
2. Liability. . . . . . . . . . . . . . . . . . . . . . . . . 16
Article L Term and Termination of Agreement. . . . . . . . . . . . . 18
Article M Notice . . . . . . . . . . . . . . . . . . . . . . . . . 19
Article N Assignment . . . . . . . . . . . . . . . . . . . . . . . . 19
Article O Amendment/Interpretive Provisions. . . . . . . . . . . . . 19
Article P Further Assurances . . . . . . . . . . . . . . . . . . . . 19
Article Q Maryland Law to Apply. . . . . . . . . . . . . . . . . . . 19
Article R Merger of Agreement. . . . . . . . . . . . . . . . . . . . 20
Article S Counterparts . . . . . . . . . . . . . . . . . . . . . . . 20
Article T The Parties. . . . . . . . . . . . . . . . . . . . . . . . 20
Article U Directors, Trustees and Shareholders and
Massachusetts Business Trust . . . . . . . . . . . . . . . 20
Article V Captions . . . . . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
AGREEMENT, made as of the first day of January, 1998, by and
between T. ROWE PRICE RETIREMENT PLAN SERVICES, INC., a Maryland
corporation having its principal office and place of business at
100 East Pratt Street, Baltimore, Maryland 21202 ("RPS"), and
EACH FUND WHICH IS LISTED ON APPENDIX A (as such Appendix may be
amended from time to time) and which evidences its agreement to
be bound hereby by executing a copy of this Agreement (each Fund
hereinafter referred to as "the Fund") whose definition may be
found in Article T;
WHEREAS, the Funds are named investment options under
various tax-sheltered plans, including, but not limited to, state
and local government deferred compensation plans, 403(b) plans,
and profit sharing, thrift, 401(k) and money purchase pension
plans for self-employed individuals, professional partnerships
and corporations (collectively referred to as "Retirement
Plans"); and the Fund has determined that such investments of
Retirement Plans in the Funds are in the best long-term interest
of the Funds;
WHEREAS, RPS has the capability of providing special
services, on behalf of the Fund, for the accounts of individuals
("Participants") participating in these Retirement Plans
("Retirement Accounts");
WHEREAS, RPS represents that it is registered with the
Securities and Exchange Commission as a Transfer Agent under
Section 17A of the Securities Exchange Act of 1934 ("the '34
Act");
WHEREAS, RPS may subcontract or jointly contract with other
parties on behalf of the Funds to perform certain of the
functions described herein, RPS may also enter into, on behalf of
the Funds, certain banking relationships to perform various
banking services, including, but not limited to, check deposits,
disbursements, automatic clearing house transactions ("ACH") and
wire transfers. Subject to guidelines mutually agreed upon by
the Funds and RPS, excess balances, if any, resulting from these
banking relationships will be invested and the income therefrom
will be used to offset fees which would otherwise be charged to
the Funds under this Agreement;
WHEREAS, the Fund desires to contract with RPS to provide
the functions and services described herein in connection with
the Retirement Plans and Retirement Accounts;
NOW THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
A. Terms of Appointment
Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints RPS to perform
the services and functions described herein in connection with
certain Retirement Plan and Retirement Accounts as agreed upon by
the parties.
B. Duties of RPS
RPS agrees that it will perform the following services:
1. Contributions - Retirement Plans and Retirement
Accounts
After RPS has received monies from Retirement Plans and
has determined the proper allocation of such monies to the
Retirement Accounts of Participants based upon instructions
received from Participants, Retirement Plans or their
designees, or Retirement Plan Administrator(s)
("Administrator(s)"), RPS will, as a responsibility under
the Agreement:
a. In the case of a new Participant, establish and
maintain a Retirement Account for such
Participant;
b. Compute the number of shares of each Fund to which
the Participant is entitled in accordance with
the price per share of such Fund as calculated and
provided by the Fund for orders received at that
time and date, and purchase the appropriate shares
in each such Retirement Account;
c. Calculate the aggregate of all purchases in the
Retirement Accounts and transmit the net purchase
order to T. Rowe Price Services, Inc. ("Services")
or directly to the Fund, as the case may be, for
purchase into an omnibus account established in
each Fund registered in RPS' or its affiliates'
name as agent for Retirement Plans or in the
individual Retirement Plan's name ("Omnibus
Account"); and
d. Transmit to Services, by wire, at a time mutually
agreed upon by both parties, the aggregate money
allocated to coincide with the purchase order.
2. Retirement Plans - Redemptions to Cover Distributions.
After RPS has received instructions from the
Administrator regarding distributions to be made to
Participants or their designated beneficiaries from Funds
designated as investment options under the Retirement Plan,
RPS will, as a responsibility under the Agreement:
a. Compute the number of shares to be redeemed from
each such Retirement Account for such
distributions in accordance with the price per
share of such Fund as calculated and provided by
the Fund for orders received in good order at that
time and date.
b. After such computation, calculate the aggregate
amount of all redemptions in the Retirement
Accounts.
c. Transmit any net redemption order to Services or
directly to the Fund, as the case may be, for the
Omnibus Account of each Fund. Services will wire
proceeds to RPS to coincide with the redemption
order for each Omnibus Account. RPS will
Distribute to Participants or their designated
beneficiaries the amount to be disbursed.
d. After RPS has received instructions from the
Administrator regarding disbursements to be made
regarding the payment of fees due the
Administrator, or other persons including RPS, RPS
will, as a responsibility under this Agreement:
i. Compute the number of shares to be redeemed
from each Retirement Account to pay for such
disbursements and the total number of all
shares to be redeemed in accordance with the
price per share for order received in good
order at that time and date, of such Fund as
calculated and provided by the Fund;
ii. Inform Services, or the Funds directly, as
the case may be, of the necessary Shares to
be redeemed from the Omnibus Account of the
Funds to cover such disbursements; and
iii. Mail or wire to the Administrator or such
other person as designated by the
Administrator the amount to be disbursed.
3. Other Provisions
a. If any instruction tendered by an Administrator to
purchase or redeem shares in a Retirement Account
is not satisfactory to RPS, RPS shall promptly
notify the Administrator of such fact together
with the reason therefor;
b. The authority of RPS to perform its
responsibilities under Paragraph B(2) with respect
to each Fund shall be suspended upon RPS's receipt
of notification from such Fund of the suspension
of the determination of the Fund's net asset value
per share and shall remain suspended until RPS
receives proper notification from the Fund; and
c. The Fund will promptly inform RPS of the
declaration of any dividend or distribution on
account of the capital stock of any Fund so that
RPS may properly credit income and capital gain
payments to each Retirement Account.
4. Exchanges
Effect exchanges of shares of the Funds in the
Retirement Accounts upon receipt of appropriate instructions
from the Administrator and/or Participant in accordance with
the price per share of the Funds as calculated and provided
by the Fund for orders received in good order at that time
and date. Calculate and transmit a net purchase and
redemption order to Services or the Fund, as the case may
be, for the Omnibus Account of each Fund. RPS will transmit
by wire the aggregate monies allocated to each Fund to
Services to coincide with any net purchase order or instruct
Services to wire to it monies from each Fund's Omnibus
Account to coincide with any net redemption order.
5. Books and Records
RPS shall maintain records showing for each Retirement
Plan or Retirement Account, the following:
a. Names, addresses and tax identification numbers,
when provided;
b. Number of shares held of each Fund;
c. Historical information regarding the account of
each Participant and/or Retirement Plan, including
dividends and capital gain distributions invested
in shares;
d. Any instructions from a Participant or
Administrator, including all forms executed by a
Participant with respect to elections with respect
to payment options in connection with the
redemption of shares or distribution elections, if
applicable; and
e. Any information required in order for RPS to
perform the calculations contemplated under this
Agreement.
Any such records maintained pursuant to Rule 31a-1
under the Investment Company Act of 1940 ("the Act") will be
preserved for the periods prescribed in Rule 31a-2
thereunder. Disposition of such records after such
prescribed periods shall be as mutually agreed upon from
time to time by RPS and the Funds. The retention of such
records, which may be inspected by the Fund at reasonable
times, shall be at the expense of the Funds. All records
maintained by RPS in connection with the performance of its
duties under this Agreement will remain the property of the
Funds and, in the event of termination of this Agreement,
will be delivered to the Fund as of the date of termination
of this agreement or at such other time as may be mutually
agreed upon.
6. Tax Information
RPS shall also prepare and file with appropriate
federal and state agencies, such information returns and
reports as required by applicable Federal statutes relating
to redemptions effected in Retirement Accounts which
constitute reportable distributions. RPS will also prepare
and submit to Participants, such reports containing
information as is required by applicable Federal law.
7. Other Information to be Furnished to the Funds
RPS will furnish to the Fund, such information,
including Participant lists and statistical information as
may be agreed upon from time to time between RPS and the
Fund. Permission of the Administrator may also be required.
8. Telephone
RPS will promptly respond to any telephone calls from
Administrators and/or Participants relating to the
Retirement Accounts and/or questions pertaining to the
Funds.
9. Correspondence
RPS will promptly and fully answer correspondence from
Administrators and Participants relating to Retirement
Accounts and transfer agent procedures, and such other
correspondence as may from time to time be mutually agreed
upon with the Funds. Copies of all correspondence will be
retained by RPS in accordance with applicable law.
10. Prospectuses/Confirmation Statements
RPS will be responsible for mailing all confirmations
and statements of transactions, prospectuses, semi-annual
and annual reports of the Funds and other enclosures and
mailings, as may be requested by the Funds or required by
applicable Federal law.
11. Proxies
As requested by the Funds, RPS shall assist in the
mailing of proxy cards and other material required to be
mailed by the Fund in connection with shareholder meetings
of the Fund and shall assist in the receipt, examination and
tabulation of returned proxies and the certification of the
vote to the Fund.
12. Form N-SAR
RPS shall maintain such records, if any, as shall
enable the Fund to fulfill the requirements of Form N-SAR.
13. Withholding
The Fund and RPS shall agree to procedures to be
followed with respect to RPS's responsibilities in
connection with compliance for federal withholding on
distributions to Participants from Retirement Accounts.
C. Fees and Out-of-Pocket Expenses
Each Fund shall pay to RPS for its services hereunder fees
computed as set forth in the Schedule attached hereto. Except as
provided below, RPS will be responsible for all expenses relating
to the providing of services. Each Fund, however, will reimburse
RPS for the following out-of-pocket expenses and charges incurred
in providing services:
1. Postage. The cost of postage and freight for mailing
materials, including confirmations and statements as
well as Fund prospectuses and Fund shareholder reports,
to Participants, or their agents, including overnight
delivery, UPS and other express mail services and
special courier services required to transport mail
between RPS locations and mail processing vendors.
2. Proxies. The cost to mail proxy cards and other
material supplied to it by the Fund and costs related
to the receipt, examination and tabulation of returned
proxies and the certification of the vote to the Fund.
3. Communications
a. Print. The printed forms used internally and
externally for documentation and processing
Participant, or their agent's, inquiries and
requests; paper and envelope supplies for letters,
notices, and other written communications sent to
Administrators and Participants, or their agents.
b. Print & Mail House. The cost of internal and
third party printing and mail house services,
including printing of statements and reports.
c. Voice and Data. The cost of equipment (including
associated maintenance), supplies and services
used for communicating with the Participants or
their Administrator, the Fund's transfer agent,
other Fund offices, and other agents of either the
Fund or RPS. These charges shall include:
o telephone toll charges (both incoming and
outgoing, local, long distance and
mailgrams); and
o data and telephone lines and associated
equipment such as modems, multiplexers, and
facsimile equipment.
4. Record Retention. The cost of maintenance and supplies
used to maintain, microfilm, copy, record, index,
display, retrieve, and store, in microfiche or
microfilm form, documents and records.
5. Disaster Recovery. The cost of services, equipment,
facilities and other charges necessary to provide
disaster recovery for any and all services listed in
this Agreement.
D. Representations and Warranties of RPS
RPS represents and warrants to the Fund that:
1. It is a corporation duly organized and existing and in
good standing under the laws of Maryland.
2. It is duly qualified to carry on its business in
Maryland.
3. It is empowered under applicable laws and by its
charter and by-laws to enter into and perform this
Agreement.
4. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
5. It has and will continue to have access to the
necessary facilities, equipment and personnel to perform its
duties and obligations under this Agreement.
6. It is registered with the Securities and Exchange
Commission as a Transfer Agent pursuant to Section 17A of
the '34 Act.
E. Representations and Warranties of the Fund
The Fund represents and warrants to RPS that:
1. It is a corporation or business trust duly organized
and existing and in good standing under the laws of
Maryland, or Massachusetts, as the case may be.
2. It is empowered under applicable laws and by its
Articles of Incorporation or Declaration of Trust, as the
case may be, and By-Laws to enter into and perform this
Agreement.
3. All proceedings required by said Articles of
Incorporation or Declaration of Trust, as the case may be,
and By-Laws have been taken to authorize it to enter into
and perform this Agreement.
4. It is an investment company registered under the Act.
5. A registration statement under the Securities Act of
1933 ("the '33 Act") is currently effective and will remain
effective, and appropriate state securities law filing have
been made and will continue to be made, with respect to all
shares of the Fund being offered for sale.
F. Standard of Care/Indemnification
Notwithstanding anything to the contrary in this Agreement:
1. RPS shall not be liable to the Fund for any act or
failure to act by it or its agents or subcontractors on
behalf of the Fund in carrying or attempting to carry out
the terms and provisions of this Agreement provided RPS has
acted in good faith and without negligence or willful
misconduct and selected and monitored the performance of its
agents and subcontractors with reasonable care.
2. The Fund shall indemnify and hold RPS harmless from and
against all losses, costs, damages, claims, actions and
expenses, including reasonable expenses for legal counsel,
incurred by RPS resulting from: (i) any action or omission
by RPS or its agents or subcontractors in the performance of
their duties hereunder; (ii) RPS acting upon instructions
reasonably believed by it to have been executed by a duly
authorized officer of the Fund; or (iii) RPS acting upon
information provided by the Fund in form and under policies
agreed to by RPS and the Fund. RPS shall not be entitled to
such indemnification in respect of actions or omissions
constituting negligence or willful misconduct of RPS or
where RPS has not exercised reasonable care in selecting or
monitoring the performance of its agents or subcontractors.
3. Except as provided in Article K of this Agreement, RPS
shall indemnify and hold harmless the Fund from all losses,
costs, damages, claims, actions and expenses, including
reasonable expenses for legal counsel, incurred by the Fund
resulting from negligence or willful misconduct of RPS or
which result from RPS' failure to exercise reasonable care
in selecting or monitoring the performance of its agents or
subcontractors. The Fund shall not be entitled to such
indemnification in respect of actions or omissions
constituting negligence or willful misconduct of such Fund
or its agents or subcontractors; unless such negligence or
misconduct is attributable to RPS.
4. In determining RPS' liability, an isolated error or
omission will normally not be deemed to constitute
negligence when it is determined that:
o RPS had in place "appropriate procedures".
o the employees responsible for the error or omission had
been reasonably trained and were being appropriately
monitored; and
o the error or omission did not result from wanton or
reckless conduct on the part of the employees.
It is understood that RPS is not obligated to have in place
separate procedures to prevent each and every conceivable
type of error or omission. The term "appropriate
procedures" shall mean procedures reasonably designed to
prevent and detect errors and omissions. In determining the
reasonableness of such procedures, weight will be given to
such factors as are appropriate, including the prior
occurrence of any similar errors or omissions when such
procedures were in place and transfer agent industry
standards in place at the time of the occurrence.
5. In the event either party is unable to perform its
obligations under the terms of this Agreement because of
acts of God, strikes or other causes reasonably beyond its
control, such party shall not be liable to the other party
for any loss, cost, damage, claims, actions or expense
resulting from such failure to perform or otherwise from
such causes.
6. In order that the indemnification provisions contained
in this Article F shall apply, upon the assertion of a claim
for which either party may be required to indemnify the
other, the party seeking indemnification shall promptly
notify the other party of such assertion, and shall keep the
other party advised with respect to all developments
concerning such claim. The party who may be required to
indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim,
or to defend against said claim in its own name or in the
name of the other party. The party seeking indemnification
shall in no case confess any claim or make any compromise in
any case in which the other party may be required to
indemnify it except with the other party's prior written
consent.
7. Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of
this Agreement.
G. Dual Interests
It is understood that some person or persons may be
directors, officers, or shareholders of both RPS and the Fund and
that the existence of any such dual interest shall not affect the
validity of this Agreement or of any transactions hereunder
except as otherwise provided by a specific provision of
applicable law.
H. Documentation
1. As requested by RPS, the Fund shall promptly furnish to
RPS the following:
a. A certified copy of the resolution of the
Directors/Trustees of the Fund authorizing the
appointment of RPS and the execution and delivery
of this Agreement;
b. A copy of the Articles of Incorporation or
Declaration of Trust, as the case may be, and By-Laws
of the Fund and all amendments thereto;
c. An opinion of counsel for the Fund with respect to
the validity of the stock, the number of Shares
authorized, the status of redeemed Shares, and the
number of Shares with respect to which a
Registration Statement has been filed and is in
effect; and
d. A copy of the Fund's current and new prospectuses
and shareholder reports issued by the Fund.
The delivery of any such document to either party hereto for
the purpose of any other agreement to which the Fund and RPS are
or were parties shall be deemed to be delivery for the purposes
of this Agreement.
2. As requested by RPS, the Fund will also furnish to RPS
from time to time the following documents:
a. Each resolution of the Board of Directors/Trustees
of the Fund authorizing the original issue of its
shares;
b. Each Registration Statement filed with the
Securities and Exchange Commission and amendments
and orders thereto in effect with respect to the
sale of shares with respect to the Fund;
c. A certified copy of each amendment to the Articles
of Incorporation or Declaration of Trust, and the
By-Laws of the Fund;
d. Certified copies of each vote of the Board of
Directors/Trustees authorizing officers to give
instructions to the Fund; and
e. Such other documents or opinions which RPS, in its
discretion, may reasonably deem necessary or
appropriate in the proper performance of its
duties under this Agreement.
3. RPS hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for
safekeeping of check forms and facsimile signature
imprinting devices, if any, and for the preparation or use,
and for keeping account of, such forms and devices.
I. Recordkeeping/Confidentiality
1. RPS shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem
advisable, provided that RPS shall keep all records in such
form and in such manner as required by applicable law,
including the Act and the '34 Act.
2. RPS and the Fund agree that all books, records,
information and data pertaining to the business of the other
party which are exchanged or received pursuant to the
negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed
to any other person, except: (a) after prior notification
to and approval in writing by the other party hereto, which
approval shall not be unreasonably withheld and may not be
withheld where RPS or the Fund may be exposed to civil or
criminal contempt proceedings for failure to comply; (b)
when requested to divulge such information by duly
constituted governmental authorities; (c) after so requested
by the other party hereto; or (d) by the Administrator. The
permission of the Administrator may be required before
disclosure is made to the Funds.
J. Ownership of Software and Related Material
All computer programs, magnetic tapes, written procedures
and similar items purchased and/or developed and used by RPS in
performance of the Agreement shall be the property of RPS and
will not become the property of the Fund.
K. As Of Transactions
For purposes of this Article K, the term "Transaction" shall
mean any single or "related transaction" (as defined below)
involving the purchase or redemption of shares (including
exchanges) processed at a time other than the time of the
computation of the Fund's net asset value per share next computed
after receipt of any such transaction order by RPS due to an act
or omission of RPS. "As Of Processing" refers to the processing
of these Transactions. If more than one Transaction ("Related
Transaction") in the Fund is caused by or occurs as a result of
the same act or omission, such transactions shall be aggregated
with other transactions in the Fund and be considered as one
Transaction.
1. Reporting
RPS shall:
a. Utilize a system to identify all Transactions, and
shall compute the net effect of such Transactions
upon the Fund on a daily, monthly and rolling 365
day basis. The Monthly and rolling 365 day
periods are hereinafter referred to as
"Cumulative."
b. Supply to the Fund, from time to time as mutually
agreed upon, a report summarizing the Transactions
and the daily and Cumulative net effects of such
Transactions both in terms of aggregate dilution
and loss ("Dilution") or gain and negative
dilution ("Gain") experienced by the Fund, and
the impact such Gain or Dilution has had upon the
Fund's net asset value per share.
c. With respect to any Transaction which causes
Dilution to the Fund of $100,000 or more,
immediately provide the Fund: (i) a report
identifying the Transaction and the Dilution
resulting therefrom, (ii) the reason such
Transaction was processed as described above, and
(iii) the action that RPS has or intends to take
to prevent the reoccurrence of such as of
processing ("Report").
2. Liability
a. It will be the normal practice of the Fund not to
hold RPS liable with respect to any Transaction
which causes Dilution to any single Fund of less
than $25,000. RPS will, however, closely monitor
for each Fund the daily and Cumulative
Gain/Dilution which is caused by Transactions of
less than $25,000. When the Cumulative Dilution
to any Fund exceeds 3/10 of 1% per share, RPS, in
consultation with counsel to the Fund, will make
appropriate inquiry to determine whether it should
take any remedial action. RPS will report to the
Board of Directors/Trustees of the Fund ("Board"),
as appropriate, any action it has taken.
b. Where a Transaction causes Dilution to a Fund
greater than $25,000 ("Significant Transaction")
but less than $100,000, RPS will review with
Counsel to the Fund the circumstances surrounding
the underlying Significant Transaction to
determine whether the Significant Transaction was
caused by or occurred as a result of a negligent
act or omission by RPS. If it is determined that
the Dilution is the result of a negligent action
or omission by RPS, RPS and outside counsel for
the Fund will negotiate settlement. All such
Significant Transactions will be reported to the
Audit Committee at its annual meeting (unless the
settlement fully compensates the Fund for any
Dilution). Any Significant Transaction, however,
causing Dilution in excess of the lesser of
$100,000 or a penny per share will be PROMPTLY
reported to the Board and resolved at the next
scheduled Board Meeting. Settlement for
Significant Transactions causing Dilution of
$100,000 or more will not be entered into until
approved by the Board. The factors to consider in
making any determination regarding the settlement
of a Significant Transaction would include but not
be limited to:
i. Procedures and controls adopted by RPS to
prevent As Of Processing;
ii. Whether such procedures and controls were
being followed at the time of the
Significant Transaction;
iii. The absolute and relative volume of all
transactions processed by RPS on the day of
the Significant Transaction;
iv. The number of Transactions processed by RPS
during prior relevant periods, and the net
Dilution/Gain as a result of all such
Significant Transactions to the Fund and to
all other Funds; and
v. The prior response of RPS to recommendations
made by the Funds regarding improvement to
RPS's As Of Processing procedures.
c. In determining RPS' liability with respect to
Significant Transaction, an isolated error or omission will
normally not be deemed to constitute negligence when it is
determined that:
o RPS had in place "appropriate procedures".
o the employees responsible for the error or
omission had been reasonably trained and were
being appropriately monitored; and
o the error or omission did not result from wanton
or reckless conduct on the part of the employees.
It is understood that RPS is not obligated to have in
place separate procedures to prevent each and every
conceivable type of error or omission. The term
"appropriate procedures" shall mean procedures
reasonably designed to prevent and detect errors and
omissions. In determining the reasonableness of such
procedures, weight will be given to such factors as are
appropriate, including the prior occurrence of any
similar errors or omissions when such procedures were
in place and transfer agent industry standards in place
at the time of the occurrence.
L. Term and Termination of Agreement
1. This Agreement shall run for a period of one (1) year
from the date first written above and will be renewed from
year to year thereafter unless terminated by either party as
provided hereunder.
2. This Agreement may be terminated by the Funds upon one
hundred twenty (120) days' prior written notice to RPS; and
by RPS, upon three hundred sixty-five (365) days' prior
written notice to the Fund.
3. Upon termination hereof, the Fund shall pay to RPS such
compensation as may be due as of the date of such
termination, and shall likewise reimburse for out-of-pocket
expenses related to its services hereunder.
M. Notice
Any notice as required by this Agreement shall be
sufficiently given (i) when sent to an authorized person of the
other party at the address of such party set forth above or at
such other address as such party may from time to time specify in
writing to the other party; or (ii) as otherwise agreed upon by
appropriate officers of the parties hereto.
N. Assignment
Neither this Agreement nor any rights or obligations
hereunder may be assigned either voluntarily or involuntarily, by
operation of law or otherwise, by either party without the prior
written consent of the other party.
<PAGE>
O. Amendment/Interpretive Provisions
The parties by mutual written agreement may amend this
Agreement at any time. In addition, in connection with the
operation of this Agreement, RPS and the Fund may agree from time
to time on such provisions interpretive of or in addition to the
provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions are to be signed by all
parties and annexed hereto, but no such provision shall
contravene any applicable federal or state law or regulation and
no such interpretive or additional provision shall be deemed to
be an amendment of this Agreement.
P. Further Assurances
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the
purposes hereof.
Q. Maryland Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of Maryland.
R. Merger of Agreement
This Agreement, including the attached Schedule supersede
any prior agreement with respect to the subject hereof, whether
oral or written.
S. Counterparts
This Agreement may be executed by the parties hereto in any
number of counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same
instrument.
T. The Parties
All references herein to "the Fund" are to each of the Funds
listed on Appendix A individually, as if this Agreement were
between such individual Fund and RPS. In the case of a series
Fund or trust, all references to "the Fund" are to the individual
series or portfolio of such Fund or trust, or to such Fund or
trust on behalf of the individual series or portfolio, as
appropriate. Any reference in this Agreement to "the parties"
shall mean RPS and such other individual Fund as to which the
matter pertains. The "Fund" also includes any T. Rowe Price Fund
which may be established after the date of this Agreement.
Any reference in this Agreement to "the parties" shall mean
the Funds and RPS.
U. Directors, Trustees and Shareholders and Massachusetts
Business Trust
It is understood and is expressly stipulated that neither
the holders of shares in the Fund nor any Directors or Trustees
of the Fund shall be personally liable hereunder. With respect
to any Fund which is a party to this Agreement and which is
organized as a Massachusetts business trust, the term "Fund"
means and refers to the trustees from time to time serving under
the applicable trust agreement (Declaration of Trust) of such
Trust as the same may be amended from time to time. It is
expressly agreed that the obligations of any such Trust hereunder
shall not be binding upon any of the trustees, shareholders,
nominees, officers, agents or employees of the Trust, personally,
but bind only the trust property of the Trust, as provided in the
Declaration of Trust of the Trust. The execution and delivery of
this Agreement has been authorized by the Trustees and signed by
an authorized officer of the Trust, acting as such, and neither
such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any
of them, but shall bind only the trust property of the Trust as
provided in its Declaration of Trust.
V. Captions
The captions in the Agreement are included for convenience
of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or
effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf under
their seals by and through their duly authorized officers.
T. ROWE PRICE RETIREMENT PLAN T. ROWE PRICE FUNDS
SERVICES, INC.
/s/Charles E. Vieth /s/Carmen F. Deyesu
BY: ____________________ BY: ___________________
Charles E. Vieth Carmen F. Deyesu
DATED: ____________________ DATED: ___________________
<PAGE>
APPENDIX A
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
<PAGE>
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC. on behalf of:
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE VALUE FUND, INC.
<PAGE>
AMENDMENT NO. 1
AGREEMENT
between
T. ROWE PRICE RETIREMENT PLAN SERVICES, INC.
and
EACH OF THE PARTIES INDICATED ON APPENDIX A
The Retirement Plan Services Contract of January 1, 1998,
between T. Rowe Price Retirement Plan Services, Inc. and each of
the Parties listed on Appendix A thereto is hereby amended, as of
January 21, 1998, by adding thereto T. Rowe Price Index Trust,
Inc., on behalf of T. Rowe Price Extended Market Index Fund and
T. Rowe Price Total Market Index Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC. on behalf of:
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE VALUE FUND, INC.
Attest:
/s/Patricia S. Butcher /s/Carmen F. Deyesu
_____________________ _________________________
Patricia S. Butcher, By: Carmen F. Deyesu
Assistant Secretary Treasurer
Attest: T. ROWE PRICE RETIREMENT PLAN SERVICES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
_____________________ ________________________
Barbara A. Van Horn, By: Henry H. Hopkins,
Assistant Secretary Vice President
February 19, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Institutional International Funds, Inc. (the Registrant)
File Nos.: 033-29697/811-5833
Commissioners:
We are counsel to the above-referenced Registrant which proposes to file,
pursuant to paragraph (b) of Rule 485 (the "Rule"), Post-Effective Amendment No.
9 (the "Amendment") to its Registration Statement under the Securities Act of
1933, as amended.
Pursuant to paragraph (b)(4) of the Rule, we represent that the Amendment
does not contain disclosures which would render it ineligible to become
effective pursuant to paragraph (b) of the Rule.
Sincerely,
/s/Shereff, Friedman, Hoffman & Goodman LLP
Shereff, Friedman, Hoffman & Goodman LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of the
Institutional International Funds, Inc.
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 9 to the Registration Statement on Form N-1A (the "Registration
Statement") of our report dated November 19, 1997, relating to the financial
statements and selected per share data and ratios appearing in the October 31,
1997 Annual Report to Shareholders of the Institutional International Funds,
Inc., which is also incorporated by reference into the Registration Statement.
We also consent to the references to us under the heading "Financial Highlights"
in the Prospectus and under the heading "Independent Accountants" in the
Statement of Additional Information.
/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP
Baltimore, Maryland
February 19, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000852254
<NAME> INSTITUTIONAL INTERNATIONAL FUNDS, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 2,819,644
<INVESTMENTS-AT-VALUE> 3,147,463
<RECEIVABLES> 25,846
<ASSETS-OTHER> 212
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,173,521
<PAYABLE-FOR-SECURITIES> 4,539
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,127
<TOTAL-LIABILITIES> 13,666
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,711,052
<SHARES-COMMON-STOCK> 191,375
<SHARES-COMMON-PRIOR> 189,730
<ACCUMULATED-NII-CURRENT> 39,528
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 81,393
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 327,882
<NET-ASSETS> 3,159,855
<DIVIDEND-INCOME> 54,915
<INTEREST-INCOME> 7,272
<OTHER-INCOME> 0
<EXPENSES-NET> 21,608
<NET-INVESTMENT-INCOME> 40,579
<REALIZED-GAINS-CURRENT> 87,538
<APPREC-INCREASE-CURRENT> 53,367
<NET-CHANGE-FROM-OPS> 181,484
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (33,766)
<DISTRIBUTIONS-OF-GAINS> (26,079)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 60,358
<NUMBER-OF-SHARES-REDEEMED> (20,421)
<SHARES-REINVESTED> 2,750
<NET-CHANGE-IN-ASSETS> 837,386
<ACCUMULATED-NII-PRIOR> 32,715
<ACCUMULATED-GAINS-PRIOR> 19,934
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 20,250
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21,608
<AVERAGE-NET-ASSETS> 2,896,243
<PER-SHARE-NAV-BEGIN> 15.62
<PER-SHARE-NII> 0.21
<PER-SHARE-GAIN-APPREC> 1.07
<PER-SHARE-DIVIDEND> (0.22)
<PER-SHARE-DISTRIBUTIONS> (0.17)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.51
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
POWER OF ATTORNEY
RESOLVED, that the Corporation and each of its directors do hereby
constitute and authorize, M. David Testa, Joel H. Goldberg, and Henry H.
Hopkins, and each of them individually, their true and lawful attorneys and
agents to take any and all action and execute any and all instruments which said
attorneys and agents may deem necessary or advisable to enable the Corporation
to comply with the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, and any rules, regulations, orders or other
requirements of the United States Securities and Exchange Commission thereunder,
in connection with the registration under the Securities Act of 1933, as
amended, of shares of the Corporation, to be offered by the Corporation, and the
registration of the Corporation under the Investment Company Act of 1940, as
amended, including specifically, but without limitation of the foregoing, power
and authority to sign the name of the Corporation on its behalf, and to sign the
names of each of such directors and officers on his behalf as such director or
officer to any amendment or supplement (including Post-Effective Amendments) to
the Registration Statement on Form N-1A of the Corporation filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
and the Registration Statement on Form N-1A of the Corporation under the
Investment Company Act of 1940, as amended, and to any instruments or documents
filed or to be filed as a part of or in connection with such Registration
Statement.
IN WITNESS WHEREOF, the Corporation has caused these presents to be signed
by its Chairman of the Board and the same attested by its Secretary, each
thereunto duly authorized by its Board of Directors, and each of the undersigned
has hereunto set his hand and seal as of the day set opposite his name.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
/s/M. David Testa
By_______________________________
M. David Testa, Chairman of the Board
April 24, 1997
Attest:
/s/Lenora V. Hornung
_________________________
Lenora V. Hornung, Secretary
/s/M. David Testa Chairman of the Board April 24, 1997
__________________ (Principal Executive Officer)
M. David Testa
/s/Carmen F. Deyesu Treasurer April 24, 1997
__________________ (Principal Financial Officer)
Carmen F. Deyesu
/s/Martin G. Wade
__________________ President and Director April 24, 1997
Martin G. Wade
/s/Anthony W. Deering
___________________ Director April 24, 1997
Anthony W. Deering
/s/Donald W. Dick, Jr.
___________________ Director April 24, 1997
Donald W. Dick, Jr.
/s/Paul M. Wythes
___________________ Director April 24, 1997
Paul M. Wythes
