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T ROWE PRICE LOGO
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T. ROWE PRICE ASSOCIATES, INC., 100 EAST PRATT STREET, BALTIMORE, MD 21202
James S. Riepe
Managing Director
Dear Shareholder:
All of the T. Rowe Price mutual funds will hold shareholder meetings in
1994 to elect directors, ratify the selection of independent accountants, and
approve amendments to a number of investment policies.
The T. Rowe Price funds are not required to hold annual meetings each year
if the only items of business are to elect directors or ratify accountants. In
order to save fund expenses, most of the funds have not held annual meetings
for a number of years. There are, however, conditions under which the funds
must ask shareholders to elect directors, and one is to comply with a
requirement that a minimum number have been elected by shareholders, not
appointed by the funds' boards. Since the last annual meetings of the T. Rowe
Price funds, several directors have retired and new directors have been added.
In addition, a number of directors will be retiring in the near future.
Given this situation, we believed it appropriate to hold annual meetings
for all the T. Rowe Price funds in 1994. At the same time, we reviewed the
investment policies of all of the funds for consistency and to assure the
portfolio managers have the flexibility they need to manage your money in
today's fast changing financial markets. The changes being recommended, which
are explained in detail in the enclosed proxy material, DO NOT ALTER THE
FUNDS' INVESTMENT OBJECTIVES OR BASIC INVESTMENT PROGRAMS.
In many cases the proposals are common to several funds, so we have
combined certain proxy statements to save on fund expenses. For those of you
who own more than one of these funds, the combined proxy may also save you the
time of reading more than one document before you vote and mail your ballots.
The proposals which are specific to an individual fund are easily identifiable
on the Notice and in the proxy statement discussion. If you own more than one
fund, please note that EACH FUND HAS A SEPARATE CARD. YOU SHOULD VOTE AND SIGN
EACH ONE, then return all of them to us in the enclosed postage-paid envelope.
Your early response will be appreciated and could save your fund the
substantial costs associated with a follow-up mailing. We know we are asking
you to review a rather formidable proxy statement, but this approach
represents the most efficient one for your fund as well as for the other
funds. Thank you for your cooperation. If you have any questions, please call
us at 1-800-225-5132.
Sincerely,
SIGNATURE
James S. Riepe
Director, Mutual Funds Division
CUSIP#779549104/fund#070
CUSIP#77957T107/fund#066
CUSIP#77957T206/fund#067
CUSIP#77957T305/fund#053
<PAGE>
T. ROWE PRICE GNMA 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
NOTICE OF MEETING OF SHAREHOLDERS
JUNE 8, 1994
The Annual Meeting of Shareholders of the T. Rowe Price GNMA Fund ("GNMA
Fund"), a Massachusetts business trust, and U.S. Treasury Intermediate Fund
("Intermediate Fund"), U.S. Treasury Long-Term Fund ("Long-Term Fund") and
U.S. Treasury Money Fund ("Money Fund"), (each a "Fund" and collectively the
"Funds"), will be held jointly on Wednesday, June 8, 1994, at 10:30 o'clock
a.m., Eastern time, at the offices of the Funds, 100 East Pratt Street,
Baltimore, Maryland 21202. The Intermediate, Long-Term and Money Funds are
individual portfolios of the T. Rowe Price U.S. Treasury Funds, Inc., a
Maryland corporation (the "Corporation"). The following matters will be acted
upon at that time:
1. FOR THE SHAREHOLDERS OF EACH FUND: To elect directors for the Fund in
which you invest to serve until the next annual meeting, if any, or
until their successors shall have been duly elected and qualified;
2. FOR THE SHAREHOLDERS OF EACH FUND:
A. To amend each Fund's fundamental policies to increase its ability
to engage in borrowing transactions;
B. To amend each Fund's fundamental policies on industry
concentration;
C. To amend each Fund's fundamental policies to increase its ability
to engage in lending transactions;
D. To amend each Fund's fundamental policies to increase the
percentage of Fund assets which may be invested in the securities
of any single issuer;
E. To amend each Fund's fundamental policies to permit the Fund to
purchase more than 10% of an issuer's voting securities;
F. To amend each Fund's fundamental policies concerning real estate;
G. To amend each Fund's fundamental policies on the issuance of senior
securities;
H. To change from a fundamental to an operating policy each Fund's
policy on purchasing securities on margin;
I. To change from a fundamental to an operating policy each Fund's
policy on pledging assets;
J. To change from a fundamental to an operating policy each Fund's
policy on short sales;
CUSIP#779549104/fund#070
CUSIP#77957T107/fund#066
CUSIP#77957T206/fund#067
CUSIP#77957T305/fund#053
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FOR THE SHAREHOLDERS OF THE GNMA, INTERMEDIATE AND LONG-TERM FUNDS:
K. To amend each Fund's fundamental policies on investing in
commodities and futures contracts to permit greater flexibility in
futures trading;
FOR THE SHAREHOLDERS OF THE GNMA AND MONEY FUNDS:
L. To change from a fundamental to an operating policy each Fund's
policy on investing in options;
M. To change from a fundamental to an operating policy each Fund's
policy on purchasing illiquid securities;
N. To change from a fundamental to an operating policy each Fund's
policy on unseasoned issuers;
FOR THE SHAREHOLDERS OF THE MONEY FUND:
O. To change from a fundamental to an operating policy the Fund's
policy on control of portfolio companies;
P. To change from a fundamental to an operating policy the Fund's
policy on investing in equity securities;
Q. To change from a fundamental to an operating policy the Fund's
policy on investing in other investment companies;
R. To change from a fundamental to an operating policy the Fund's
policy on investing in oil and gas programs;
S. To change from a fundamental to an operating policy the Fund's
policy on ownership of portfolio securities by officers and
directors;
3. FOR THE SHAREHOLDERS OF EACH FUND: To ratify or reject the selection of
the firms of Coopers & Lybrand as the independent accountants for the
Intermediate and Long-Term Funds, and Price Waterhouse as the
independent accountants for the GNMA Fund and the Money Fund, for the
three-month fiscal year ending May 31, 1994 and for fiscal year ending
May 31, 1995;
4. FOR THE SHAREHOLDERS OF THE INTERMEDIATE, LONG-TERM AND MONEY FUNDS: To
amend the Articles of Incorporation to delete the requirement that
stock certificates be issued to shareholders; and
5. To transact such other business as may properly come before the meeting
and any adjournments thereof.
LENORA V. HORNUNG
Secretary
April 22, 1994
100 East Pratt Street
Baltimore, Maryland 21202
YOUR VOTE IS IMPORTANT
SHAREHOLDERS ARE URGED TO DESIGNATE THEIR CHOICES ON EACH OF THE MATTERS TO BE
ACTED UPON AND TO DATE, SIGN, AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE
PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. YOUR
PROMPT RETURN OF THE PROXY WILL HELP ASSURE A QUORUM AT THE MEETING AND AVOID
THE ADDITIONAL FUND EXPENSE OF FURTHER SOLICITATION.
<PAGE>
T. ROWE PRICE GNMA 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
MEETING OF SHAREHOLDERS--JUNE 8, 1994
PROXY STATEMENT
This statement is furnished in connection with the solicitation of proxies
by the T. Rowe Price GNMA Fund ("GNMA Fund"), a Massachusetts business trust,
and U.S. Treasury Intermediate Fund ("Intermediate Fund"), U.S. Treasury
Long-Term Fund ("Long-Term Fund") and U.S. Treasury Money Fund ("Money Fund"),
(each a "Fund" and collectively the "Funds"), for use at the Annual Meeting of
Shareholders of each Fund to be held jointly on June 8, 1994, and at any
adjournments thereof. The Intermediate, Long-Term and Money Funds are
individual portfolios of the T. Rowe Price U.S. Treasury Funds, Inc., a
Maryland corporation (the "Corporation").
Shareholders may vote only on matters which concern the Fund or Funds in
which they hold shares. Shareholders are entitled to one vote for each full
share, and a proportionate vote for each fractional share, of the Fund held as
of the record date. Shares owned by two or more persons (whether as joint
tenants, co-fiduciaries, or otherwise) will be voted as follows, unless a
written instrument or court order providing to the contrary has been filed
with the Fund: (1) if only one votes, that vote will bind all; (2) if more
than one votes, the vote of the majority will bind all; and (3) if more than
one votes and the vote is evenly divided, the vote will be cast
proportionately.
In order to hold the meeting, a majority of each Fund's shares entitled to
be voted must have been received by proxy or be present at the meeting. In the
event that a quorum is present but sufficient votes in favor of one or more of
the Proposals are not received by the time scheduled for the meeting, the
persons named as proxies may propose one or more adjournments of the meeting
to permit further solicitation of proxies. Any such adjournment will require
the affirmative vote of a majority of the shares present in person or by proxy
at the session of the meeting adjourned. The persons named as proxies will
vote in favor of such adjournment if they determine that such adjournment and
additional solicitation is reasonable and in the interests of each Fund's
shareholders. The shareholders of each Fund vote separately with respect to
each Proposal.
The individuals named as proxies (or their substitutes) in the enclosed
proxy card (or cards if you own shares of more than one Fund or have multiple
accounts) will vote in accordance with your directions as indicated thereon if
your proxy is received properly executed. You may direct the proxy holders to
vote your shares on a Proposal by checking the appropriate box "For" or
"Against," or instruct them not to vote those shares on the Proposal by
checking the "Abstain" box. Alternatively, you may simply sign, date and
return your proxy card(s) with no specific instructions as to the Proposals.
If you properly execute your proxy card and give no voting instructions with
respect to a Proposal, your shares will be voted for the Proposal. Any proxy
may be revoked at any time prior to its exercise by filing with the Fund a
written notice of revocation, by delivering a duly executed proxy bearing a
later date, or by attending the meeting and voting in person.
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Abstentions and "broker non-votes" (as defined below) are counted for
purposes of determining whether a quorum is present for purposes of convening
the meeting. "Broker non-votes" are shares held by a broker or nominee for
which an executed proxy is received by the Fund, but are not voted as to one
or more Proposals because instructions have not been received from the
beneficial owners or persons entitled to vote and the broker or nominee does
not have discretionary voting power. If a Proposal must be approved by a
percentage of votes cast on the Proposal, abstentions and broker non-votes
will not be counted as "votes cast" on the Proposal and will have no effect on
the result of the vote. If the Proposal must be approved by a percentage of
voting securities present at the meeting, abstentions will be considered to be
voting securities that are present and will have the effect of being counted
as votes against the proposal. Broker non-votes will not be counted for any
purpose in connection with calculating the vote on such a Proposal.
VOTE REQUIRED--GNMA FUND: A PLURALITY OF ALL VOTES CAST AT THE MEETING IS
SUFFICIENT TO APPROVE PROPOSAL 1. A MAJORITY OF THE VOTES CAST IS SUFFICIENT
TO APPROVE PROPOSAL 3. APPROVAL OF ALL REMAINING PROPOSALS OF THE FUND
REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF THE LESSER OF (A) 67% OF THE
SHARES PRESENT AT THE MEETING IN PERSON OR BY PROXY (IF THE HOLDERS OF 50% OR
MORE OF THE OUTSTANDING VOTING SECURITIES ARE PRESENT OR REPRESENTED BY
PROXY), OR (B) A MAJORITY OF THE FUND'S OUTSTANDING SHARES.
VOTE REQUIRED--INTERMEDIATE, LONG-TERM AND MONEY FUNDS: FOR PROPOSAL 1,
ELECTION OF DIRECTORS, ALL FUNDS VOTE TOGETHER AND A PLURALITY OF THE COMBINED
VOTES CAST AT THE MEETING BY THE SHAREHOLDERS OF ALL FUNDS IS SUFFICIENT TO
APPROVE PROPOSAL 1. FOR PROPOSAL 3, RATIFICATION OF AUDITORS, EACH FUND VOTES
SEPARATELY AND FOR EACH FUND A MAJORITY OF THE VOTES CAST IS SUFFICIENT TO
APPROVE PROPOSAL 3. FOR PROPOSAL 4, RELATING TO STOCK CERTIFICATES, ALL FUNDS
VOTE TOGETHER AND A MAJORITY OF THE OUTSTANDING SHARES OF THE CORPORATION IS
NECESSARY TO APPROVE PROPOSAL 4. FOR ALL OF THE REMAINING PROPOSALS, THE FUNDS
VOTE SEPARATELY AND APPROVAL OF EACH PROPOSAL FOR EACH FUND REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF THE LESSER OF (A) 67% OF THE SHARES PRESENT
AT THE MEETING IN PERSON OR BY PROXY (IF THE HOLDERS OF 50% OR MORE OF THE
OUTSTANDING VOTING SECURITIES ARE PRESENT OR REPRESENTED BY PROXY), OR (B) A
MAJORITY OF EACH FUND'S OUTSTANDING SHARES.
If the proposed amendments to each Fund's fundamental investment policies
are approved, they will become effective on or about July 1, 1994. If a
proposed amendment to a Fund's fundamental investment policies is not
approved, that policy will remain unchanged. If the proposed amendment to the
Corporation's Articles of Incorporation is approved, it will become effective
on or about July 1, 1994. If the proposed amendment to the Articles of
Incorporation is not approved, the Articles will remain unchanged.
<PAGE>
Each Fund will pay a portion of the costs of the meeting, including the
solicitation of proxies, allocated on the basis of the number of shareholder
accounts of each Fund. Persons holding shares as nominees will be reimbursed,
upon request, for their reasonable expenses in sending solicitation materials
to the principals of the accounts. In addition to the solicitation of proxies
by mail, directors, officers, and/or employees of each Fund or of its
investment manager, T. Rowe Price Associates, Inc. ("T. Rowe Price"), may
solicit proxies in person or by telephone.
The approximate date on which this Proxy Statement and form of proxy is
first being mailed to shareholders of each Fund is April 22, 1994.
1. ELECTION OF DIRECTORS/TRUSTEES
The following table sets forth information concerning each of the nominees
for trustee, with respect to the GNMA Fund, and director, with respect to the
Corporation, indicating the particular Board(s) on which the nominee has been
asked to serve. Throughout this discussion on "Election of
Directors/Trustees," "director" is intended to refer to "director" and/or
"trustee." Each nominee has agreed to hold office until the next annual
meeting (if any) or his/her successor is duly elected and qualified. With the
exception of Ms. Whittemore and Messrs. Black and Burnett, each of the
nominees is a member of the present Board of Directors of the GNMA Fund and
the Corporation and has served in that capacity since originally elected by
shareholders. Messrs. Black and Burnett were elected directors of the GNMA
Fund and the Corporation by their respective Board of Directors on April 23,
1993 and January 19, 1993, respectively. A shareholder using the enclosed
proxy form can vote for all or any of the nominees of the Board of Directors
or withhold his or her vote from all or any of such nominees. IF THE PROXY
CARD IS PROPERLY EXECUTED BUT UNMARKED, IT WILL BE VOTED FOR ALL OF THE
NOMINEES. Should any nominee become unable or unwilling to accept nomination
or election, the persons named in the proxy will exercise their voting power
in favor of such other person or persons as the Board of Directors of the GNMA
Fund and the Corporation may recommend. There are no family relationships
among these nominees.
The membership of the two Boards will not be identical following election
at the meeting. Specifically, certain individuals who are interested persons
of T. Rowe Price are being elected to only one of the Funds. Shareholders are
being asked to elect the Board of Directors of their respective Fund only.
<TABLE>
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<CAPTION>
Fund All Other Price
Shares Beneficially Funds' Shares
Name, Address, Date of Owned, Directly or Beneficially Owned
Birth of Nominee and Indirectly, as of Directly as of
Position with Fund Principal Occupations/(1)/ 2/28/94/(2)/ 2/28/94
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<S> <C> <C> <C>
Robert P. Black Retired; formerly President, GNMA Fund: -- 3,223
10 Dahlgren Road Federal Reserve Bank of Richmond; Intermediate Fund: --
Richmond, VA 23233 Director of all other T. Rowe Long-Term Fund: --
12/21/27 Price taxable income Funds Money Fund: --
[bullet]GNMA Fund: Trustee
since 1993
[bullet]U.S. Treasury
Funds: Director since 1993
Calvin W. Burnett, PH.D. President, Coppin State College; GNMA Fund: -- 5,054
2500 West North Avenue Director, Maryland Chamber of Intermediate Fund: --
Baltimore, MD 21216 Commerce and Provident Bank of Long-Term Fund: --
3/16/32 Maryland; President, Baltimore Money Fund: --
[bullet]GNMA Fund: Trustee Area Council Boy Scouts of
since 1993 America; Vice President, Board of
[bullet]U.S. Treasury Directors, The Walters Art
Funds: Director since 1993 Gallery; and a Director/Trustee
of the 14 other T. Rowe Price
Income Funds/Trusts
*George J. Collins President, Managing Director and GNMA Fund: 558 360,975
100 East Pratt Street Chief Executive Officer, T. Rowe Intermediate Fund:
Baltimore, MD 21202 Price Associates, Inc.; Director, 4,168
7/31/40 Rowe Price-Fleming International, Long-Term Fund: 2,184
[bullet]GNMA Fund: Inc., T. Rowe Price Trust Money Fund: 147,725
Chairman of the Board and Company, and T. Rowe Price
member of Executive Retirement Plan Services, Inc.;
Committee since 1985 Chairman of the Board of 12 other
[bullet]U.S. Treasury T. Rowe Price Funds/ Trusts; Vice
Funds: President and President and/or Director of four
member of Executive other T. Rowe Price Funds
Committee since 1982
Anthony W. Deering Director, President and Chief GNMA Fund: 91 88,475
10275 Little Patuxent Operating Officer, The Rouse Intermediate Fund: --
Parkway Company, real estate developers, Long-Term Fund: --
Columbia, MD 21044 Columbia, Maryland; Advisory Money Fund: 954
1/28/45 Director, Kleinwort, Benson
[bullet]GNMA Fund: Trustee (North America) Corporation, a
since 1985 registered broker-dealer, and a
[bullet]U.S. Treasury Director/Trustee of the 14 other
Funds: Director since 1982 T. Rowe Price Income
Funds/Trusts, Institutional
International Funds, Inc. and T.
Rowe Price International Funds,
Inc.
F. Pierce Linaweaver President, F. Pierce Linaweaver & GNMA Fund: -- 56,274
The Legg Mason Tower Associates, Inc.; formerly Intermediate Fund: --
Suite 2700 (1987-1991) Executive Vice Long-Term Fund: --
111 South Calvert Street President, EA Engineering, Money Fund: --
Baltimore, MD 21202 Science, and Technology, Inc. and
8/22/34 (1987-1990) President, EA
[bullet]GNMA Fund: Trustee Engineering, Inc.;
since 1985 Director/Trustee of the 14 other
[bullet]U.S. Treasury T. Rowe Price Income Funds/Trusts
Funds: Director since 1982
*James S. Riepe Managing Director, T. Rowe Price GNMA Fund: 408 471,499
100 East Pratt Street Associates, Inc.; President and Intermediate Fund:
Baltimore, MD 21202 Director, T. Rowe Price 3,196
6/25/43 Investment Services, Inc.; Long-Term Fund: 1,674
[bullet]GNMA Fund: Vice Chairman of the Board, T. Rowe Money Fund: 113,237
President and member of Price Services, Inc., T. Rowe
Executive Committee since Price Trust Company, T. Rowe
1985 Price Retirement Plan Services,
[bullet]U.S. Treasury Inc., and four T. Rowe Price
Funds: Vice President and Funds; Vice President and
member of Executive Director/ Trustee of 28 other T.
Committee since 1982 Rowe Price Funds/ Trusts;
Director, Rhone-Poulenc Rorer,
Inc.
John G. Schreiber President, Schreiber Investments, GNMA Fund: 11,933 307,786
1115 East Illinois Road a real estate investment company; Intermediate Fund:
Lake Forest, IL 60045 Director and formerly 22,100
10/21/46 (1/80-12/90) Executive Vice Long-Term Fund:
[bullet]GNMA Fund: Trustee President, JMB Realty 11,799
since 1992 Corporation, a national real Money Fund: 105,434
[bullet]U.S. Treasury estate investment manager and
Funds: Director since 1992 developer; Director/Trustee of
the 14 other T. Rowe Price Income
Funds/Trusts
*Charles P. Smith Managing Director; T. Rowe Price Intermediate Fund: 99,148
100 East Pratt Street Associates, Inc.; Vice President, 361
Baltimore, MD 21202 Rowe Price-Fleming International, Long-Term Fund: 167
12/4/43 Inc.; President and Director, T. Money Fund: 14,812
[bullet]U.S. Treasury Rowe Price New Income Fund, Inc.;
Funds: Executive Vice Vice President of six other T.
President and member of Rowe Price Funds/Trusts
Executive Committee since
1989
*Peter VanDyke Managing Director; T. Rowe Price Intermediate Fund: 105,280
100 East Pratt Street Associates, Inc.; Vice President, 403
Baltimore, MD 21202 Rowe Price-Fleming International, Long-Term Fund: 211
11/29/38 Inc. and T. Rowe Price Trust Money Fund: 14,770
[bullet]U.S. Treasury Company; President, T. Rowe Price
Funds: Executive Vice GNMA Fund and T. Rowe Price
President and member of Spectrum Fund, Inc.; Executive
Executive Committee since Vice President, T. Rowe Price
1989 Summit Funds, Inc.; Vice
President of three other T. Rowe
Price Funds
Anne Marie Whittemore Partner, law firm of McGuire, GNMA Fund: -- 475
One James Center Woods, Battle & Boothe; formerly, Intermediate Fund: --
901 East Cary Street Chairman and Director, Federal Long-Term Fund: --
Richmond, VA 23219-4030 Reserve Bank of Richmond; Money Fund: --
3/19/46 Director, Owens & Minor, Inc.,
[bullet]GNMA Fund: Initial USF&G Corporation, Old Dominion
election University, and nominated to the
[bullet]U.S. Treasury Board of James River Corporation;
Funds: Initial election Member, Richmond Bar Association
and American Bar Association
<FN>
* Nominees considered "interested persons" of T. Rowe Price.
(1) Except as otherwise noted, each individual has held the office indicated,
or other offices in the same company, for the last five years.
(2) In addition to the shares owned beneficially and of record by each of the
nominees, the amounts shown reflect the proportionate interests of Messrs.
Collins and Riepe in 940 shares of the GNMA Fund and Messrs. Collins,
Riepe, Smith and VanDyke in 8,128 and 4,236 shares of the Intermediate and
Long-Term Funds, respectively, which are owned by a wholly-owned
subsidiary of the Funds' investment manager, T. Rowe Price, and also the
proportionate interests of Messrs. Collins, Riepe, Smith and VanDyke in
290,477 shares of the Money Fund owned by T. Rowe Price.
</TABLE>
<PAGE>
John Sagan, a trustee of the GNMA Fund and a director of the Corporation,
on behalf of the U.S. Treasury Funds, since 1986, has retired from the Board
of each Fund and will not be standing for reelection. As of February 28, 1994,
Mr. Sagan beneficially owned, directly or indirectly 16,099 and 2,882 shares
of the GNMA and Long-Term Funds, respectively.
The directors of the GNMA Fund and the Corporation who are officers or
employees of T. Rowe Price receive no remuneration from the Funds. For the
fiscal year ended February 28, 1994, Messrs. Black, Burnett, Deering,
Linaweaver, Sagan, and Schreiber, received from the GNMA Fund and the
Corporation directors' fees aggregating $19,000 and $29,000, including
expenses, respectively. The fee paid to each such director is calculated in
accordance with the following fee schedule: a fee of $25,000 per year as the
initial fee for the first T. Rowe Price Fund/Trust on which a director serves;
a fee of $5,000 for each of the second, third, and fourth T. Rowe Price
Funds/Trusts on which a director serves; a fee of $2,500 for each of the fifth
and sixth T. Rowe Price Funds/Trusts on which a director serves; and a fee of
$1,000 for each of the seventh and any additional T. Rowe Price Funds/Trusts
on which a director serves. Those nominees indicated by an asterisk (*) are
persons who, for purposes of Section 2(a)(19) of the Investment Company Act of
1940 are considered "interested persons" of T. Rowe Price. Each such nominee
is deemed to be an "interested person" by virtue of his officership,
directorship, and/or employment with T. Rowe Price. Messrs. Black, Burnett,
Deering, Linaweaver, Sagan, and Schreiber are the current independent
directors.
The T. Rowe Price Funds have established a Joint Audit Committee, which is
comprised of at least one independent director representing each of the Funds.
Mr. Deering, a director of the GNMA Fund and the Corporation, is a member of
the Committee. The other members are Leo C. Bailey, Donald W. Dick, Jr., and
Hubert D. Vos. These directors also receive a fee of $500 for each Committee
meeting attended. The Audit Committee holds two regular meetings during each
fiscal year, at which time it meets with the independent accountants of the T.
Rowe Price Funds to review: (1) the services provided; (2) the findings of the
most recent audit; (3) management's response to the findings of the most
recent audit; (4) the scope of the audit to be performed; (5) the accountants'
fees; and (6) any accounting questions relating to particular areas of the T.
Rowe Price Funds' operations or the operations of parties dealing with the T.
Rowe Price Funds, as circumstances indicate.
The Board of Directors of the GNMA Fund and the Corporation has an
Executive Committee which is authorized to assume all the powers of the Board
to manage the GNMA Fund and the Corporation, in the intervals between meetings
of the Board, except the powers prohibited by statute from being delegated.
<PAGE>
The Board of Directors of the GNMA Fund and the Corporation has a
Nominating Committee, which is comprised of all the T. Rowe Price Fund's
independent directors. The Nominating Committee, which functions only in an
advisory capacity, is responsible for reviewing and recommending to the full
Board candidates for election as independent directors to fill vacancies on
the Board of Directors. The Nominating Committee will consider written
recommendations from shareholders for possible nominees. Shareholders should
submit their recommendations to the Secretary of the Fund. Members of the
Nominating Committee met informally during the last full fiscal year, but the
Committee as such held no formal meetings.
The Board of Directors of the GNMA Fund and the Corporation each held
seven meetings during the last full fiscal year. Each director standing for
reelection attended 75% or more of the aggregate of (i) the total number of
meetings of the Board of Directors (held during the period for which he was a
director), and (ii) the total number of meetings held by all committees of the
Board on which he served.
EACH FUND
2. APPROVAL OR DISAPPROVAL OF CHANGES TO THE FUNDS' FUNDAMENTAL INVESTMENT
POLICIES
The Investment Company Act of 1940 (the "1940 Act") requires investment
companies such as the Funds to adopt certain specific investment policies that
can be changed only by shareholder vote. An investment company may also elect
to designate other policies that may be changed only by shareholder vote. Both
types of policies are often referred to as "fundamental policies." Certain of
the Funds' fundamental policies have been adopted in the past to reflect
regulatory, business or industry conditions that are no longer in effect.
Accordingly, each Fund's Board of Directors has approved, and has authorized
the submission to each Fund's shareholders for their approval, the amendment
and/or reclassification of certain of the fundamental policies applicable to
each Fund.
The proposed amendments would (i) conform the fundamental policies of each
Fund to ones which are expected to become standard for all T. Rowe Price
Funds, (ii) simplify and modernize the limitations that are required to be
fundamental by the 1940 Act and (iii) eliminate as fundamental any limitations
that are not required to be fundamental by that Act. The Board believes that
standardized policies will assist the Funds and T. Rowe Price in monitoring
compliance with the various investment restrictions to which the T. Rowe Price
Funds are subject. By reducing to a minimum those limitations that can be
changed only by shareholder vote, the Funds would be able to minimize the
costs and delay associated with holding frequent annual shareholders'
meetings. Finally, the Board also believes that T. Rowe Price's ability to
manage the Funds' assets in a changing investment environment will be enhanced
and that investment management opportunities will be increased by these
changes.
In the following discussion, "the Fund" is intended to refer to each Fund.
Any reference to the Board of Trustees of the GNMA Fund or the Board of
Directors of the Corporation, on behalf of the Intermediate, Long-Term or
Money Funds, will hereinafter be referred to as the "Board."
<PAGE>
A. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY TO INCREASE ITS
ABILITY TO ENGAGE IN BORROWING TRANSACTIONS
GNMA, INTERMEDIATE AND LONG-TERM FUNDS
Because the Fund may occasionally need to borrow money to meet substantial
shareholder redemption or exchange requests when available cash is not
sufficient to satisfy these needs, the Board has proposed an amendment to the
Fund's fundamental policy which would permit the Fund greater flexibility to
engage in borrowing transactions. The current restriction is not required by
applicable law. The new restriction would also conform the Fund's policy on
borrowing to one which is expected to become standard for all T. Rowe Price
Funds. The Board believes that standardized policies will assist the Fund and
T. Rowe Price in monitoring compliance with the various investment
restrictions to which the T. Rowe Price Funds are subject. The Board has
directed that such proposals be submitted to shareholders for approval or
disapproval.
MONEY FUND
The Board has proposed amendments to the Fund's Fundamental Investment
Policy on borrowing to conform such policy to one which is expected to become
standard for all T. Rowe Price Funds. The Board believes that standardized
policies will assist the Fund and T. Rowe Price in monitoring compliance with
the various investment restrictions to which the T. Rowe Price Funds are
subject. Although the proposal would provide the Fund greater flexibility to
engage in borrowing transactions, as a practical matter, the Fund does not
expect the amendments will result in any changes to its investment program.
The Fund has no current intention of engaging in any borrowing. The current
restriction is not required by applicable law. The Board has directed that
such proposals be submitted to shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of borrowing is as
follows:
GNMA FUND
"[As a matter of fundamental policy, the Fund may not:] Borrow money,
except the Fund may borrow from banks as a temporary measure for
extraordinary or emergency purposes, and then only from banks in amounts
not exceeding 15% of its total assets valued at market. The Fund will not
borrow in order to increase income (leveraging), but only to facilitate
redemption requests which might otherwise require untimely disposition of
portfolio securities. Interest paid on any such borrowings will reduce net
investment income. The Fund will not purchase additional securities when
money borrowed exceed 5% of total assets. The Fund may enter into futures
contracts as set forth in [its fundamental policy on futures];"
INTERMEDIATE AND LONG-TERM FUNDS
"[As a matter of fundamental policy, the Fund may not:] Borrow money,
except the Fund may borrow from banks as a temporary measure for
extraordinary or emergency purposes, and then only in amounts not
exceeding 30% of the Fund's total assets valued at market. The Fund will
not borrow in order to increase income (leveraging), but only to
facilitate redemption requests which might otherwise require untimely
disposition of portfolio securities. Interest paid on any such borrowings
will reduce net investment income. The Fund may enter into interest rate
futures contracts or options thereon as set forth in [its fundamental
policy on futures];"
<PAGE>
MONEY FUND
"[As a matter of fundamental policy, the Fund may not:] Borrow money,
except the Fund may borrow from banks as a temporary measure for
extraordinary or emergency purposes, and then only in amounts not
exceeding 15% of the Fund's total assets valued at market. The Fund will
not borrow in order to increase income (leveraging), but only to
facilitate redemption requests which might otherwise require untimely
disposition of portfolio securities. Interest paid on any such borrowings
will reduce net investment income;"
As amended, the Fund's fundamental policy on borrowing would be as
follows:
"[As a matter of fundamental policy, the Fund may not:] 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. The Fund may
borrow from banks, other Price Funds or other persons to the extent
permitted by applicable law;"
If approved, the primary effect of the proposals would be to allow the
Fund to: (1) borrow up to 33 1/3% (or such higher amount permitted by law) of
its total assets (including the amount borrowed) less liabilities (other than
borrowings) as opposed to the current lesser limitation; (2) borrow from other
mutual funds advised by T. Rowe Price or Rowe Price-Fleming International,
Inc. ("T. Rowe Price Funds") and other persons; and (3) enter into reverse
repurchase agreements and other investments consistent with the Fund's
investment objective and program. In addition, each Fund intends to adopt as
an operating policy a limitation on purchasing additional securities when
money borrowed exceeds 5%. Currently, the GNMA Fund has adopted this as a
fundamental policy. The operating policy would be as follows:
"[As a matter of operating policy, the Fund will not:] Purchase additional
securities when money borrowed exceeds 5% of the Fund's total assets;"
33 1/3% LIMITATION
The increase in the amount of money which the Fund could borrow is
primarily designed to allow the Fund greater flexibility to meet shareholder
redemption requests should the need arise. As is the case under its current
policy, the Fund would not borrow to increase income through leveraging. It is
possible the Fund's ability to borrow a larger percentage of its assets could
adversely affect the Fund if the Fund were unable to liquidate sufficient
securities, or the Fund were forced to liquidate securities at unfavorable
prices, to pay back the borrowed sums. However, the Board believes the risks
of such possibilities are outweighed by the greater flexibility the Fund would
have in borrowing. The increased ability to borrow should permit the Fund, if
it were faced with substantial shareholder redemptions, to avoid liquidating
securities at unfavorable prices or times to a greater degree than would be
the case under the current policy.
<PAGE>
BORROWING FROM OTHER PRICE FUNDS
Current law prohibits the Fund from borrowing from other T. Rowe Price
Funds. However, if the proposed amendments to the Fund's fundamental
investment policy on borrowing are approved by shareholders, the Fund may
apply to the Securities and Exchange Commission ("SEC") for an exemption from
this prohibition. There is, of course, no assurance that the SEC would act
favorably on such a request. If the SEC did grant such an order, the Fund
could be allowed to borrow from other T. Rowe Price Funds. T. Rowe Price
believes that the ability to engage in borrowing transactions with the
participating T. Rowe Price Funds as part of a program, referred to as the
"interfund lending program," may allow the Fund to obtain lower interest rates
on money borrowed for temporary or emergency purposes. Any existing T. Rowe
Price Fund participating in the interfund lending program would only do so
upon approval of its shareholders.
As noted above, when the Fund is required to borrow money, it currently
may do so only from banks. When the Fund borrows money from banks, it
typically pays interest on those borrowings at a rate that is higher than
rates available contemporaneously from investments in repurchase agreements.
If the proposed amendment is approved (and an SEC exemptive order were
granted), eligible T. Rowe Price Funds would be permitted to participate in an
interfund lending program to allow various of the T. Rowe Price Funds, through
a master loan agreement, to lend available cash to and borrow from other T.
Rowe Price Funds. Each lending fund could lend available cash to another T.
Rowe Price Fund only when the interfund rate was higher than repurchase
agreement rates or rates on other comparable short-term investments. Each
borrowing fund could borrow through the interfund lending program only when
the interfund loan rate was lower than available bank loan rates.
In determining to recommend the proposed amendment to shareholders for
approval, T. Rowe Price and the Board considered the possible risks to the
Fund from participation in the interfund lending program. T. Rowe Price does
not view the difference in rates available on bank borrowings and repurchase
agreements or other short-term investments as reflecting a material difference
in the quality of the risk of the transactions, but rather as an indication of
the ability of banks to earn a higher rate of interest on loans than they pay
on repurchase agreements or other short-term investments. There is a risk that
a lending fund could experience a delay in obtaining prompt repayment of a
loan and, unlike repurchase agreements, the lending fund would not necessarily
have received collateral for its loan, although it could require that
collateral be provided as a condition for making a loan. A delay in obtaining
prompt payment could cause a lending fund to miss an investment opportunity or
to incur costs to borrow money to replace the delayed payment. There is also a
risk that a borrowing fund could have a loan recalled on one day's notice. In
these circumstances, the borrowing fund might have to borrow from a bank at a
higher interest cost if money to lend were not available from another T. Rowe
Price Fund. The Board considers that the benefits to the Fund of participating
in the program outweigh the possible risks to the Fund from such
participation.
<PAGE>
In order to permit the Fund to engage in interfund lending transactions,
regulatory approval of the SEC is required because, among other reasons, the
transactions may be considered to be among affiliated parties. If the proposed
amendment is approved by shareholders, the proposed interfund lending program
would be implemented only to the extent permitted by rule or by order of the
SEC and to the extent that the transactions were otherwise consistent with the
investment objectives and limitations of each participating T. Rowe Price
Fund. If exemptive relief from the SEC is not granted, the Fund, as previously
noted, will not be able to engage in the interfund lending program even though
shareholders have approved the proposal. As noted, no prediction can be made
as to whether the SEC would grant such relief.
Shareholders are being asked to approve an amendment to the Fund's
fundamental policy on borrowing in this proposal. Shareholders are also being
asked to vote separately on an amendment to the Fund's fundamental policy on
lending (see pages 14-16). If both amendments are adopted, the Fund, subject
to its investment objective and policies, will be able to participate in the
interfund lending program as both a lender and a borrower. If only one of the
two proposals is adopted, then the Fund's participation in the interfund
lending program will be confined to either lending or borrowing, depending on
which amendment is approved.
The Board believes the proposed amendment may benefit the Fund by
facilitating its flexibility to explore cost-effective alternatives to satisfy
its borrowing requirements and by borrowing money from other T. Rowe Price
Funds. Implementation of interfund borrowing would be accomplished consistent
with applicable regulatory requirements, including the provisions of any order
the SEC might issue to the Fund and to other T. Rowe Price Funds.
REVERSE REPURCHASE AGREEMENTS
To facilitate portfolio liquidity, it is possible the Fund could enter
into reverse repurchase agreements. In a repurchase agreement, the Fund would
purchase securities from a bank or broker-dealer (Counterparty) with the
agreement that the Counterparty would repurchase the securities at a later
date. Reverse repurchase agreements are ordinary repurchase agreements in
which a fund is a seller of, rather than the purchaser of, securities and
agrees to repurchase them at an agreed upon time and price. Reverse repurchase
agreements can avoid certain market risks and transaction costs associated
with an outright sale and repurchase. Reverse repurchase agreements, however,
may be viewed as borrowings. To the extent they are, the proposed amendment
would clarify that the Fund's restrictions on borrowing would not prohibit the
Fund from entering into a reverse repurchase agreement.
OTHER CHANGES
The other proposed changes in the Fund's fundamental policy--to allow the
Fund to borrow from persons in addition to banks and other T. Rowe Price Funds
to the extent consistent with applicable law--and to engage in transactions
other than reverse repurchase agreements which may involve a borrowing--are
simply designed to permit the Fund the greatest degree of flexibility
permitted by law in pursuing its investment program. Although not specifically
referred to in the proposed new policy, the Fund (other than the Money Fund)
would continue to be able to enter into interest rate (as well as other)
futures contracts and options thereon. As noted above, the Fund will not use
its increased flexibility to borrow to engage in transactions which could
result in leveraging the Fund. All activities of the Fund are, of course,
subject to the 1940 Act and the rules and regulations thereunder as well as
various state securities laws.
<PAGE>
B. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON INDUSTRY
CONCENTRATION
The Board has proposed amendments to the Fundamental Investment Policy of
the Fund on industry concentration. The amendment would change the limit of
the Fund's total assets which may be invested in the securities of issuers in
the same industry from "25% or more" to "more than 25%." This is merely a
technical change which would conform the Fund's policy in this area to one
which is expected to become a standard policy for all T. Rowe Price Funds. The
Board believes that standardized policies will assist the Fund and T. Rowe
Price in monitoring compliance with the various investment restrictions to
which the T. Rowe Price Funds are subject. The Board has directed that such
amendments be submitted to shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of industry
concentration is as follows:
"[As a matter of fundamental policy, the Fund may not:] Purchase the
securities of any issuer (other than obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) if, as a result,
25% or more 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;"
As amended, the Fund's fundamental policy on industry concentration would
be as follows:
"[As a matter of fundamental policy, the Fund may not:] 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;"
The amended policy does not include any reference to obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities as
exceptions to the general prohibition against industry concentration. This is
because governments are not industries (a position confirmed by the SEC).
Therefore, there is no need to make specific reference to these securities in
the policy.
The Board recommends that shareholders vote FOR the proposal.
C. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING THE
MAKING OF LOANS
The Board has proposed an amendment to the Fundamental Investment Policies
of the Fund in order to: (i) increase the amount of its assets which may be
subject to its lending policy; (ii) authorize the Fund to participate as a
lender in an interfund lending program involving the funds advised by T. Rowe
Price or Rowe Price-Fleming International, Inc. (the "T. Rowe Price Funds");
and (iii) make certain other clarifying changes. The new restriction would
also conform the Fund's policy on lending to one which is expected to become
standard for all T. Rowe Price Funds. The Board believes that standardized
policies will assist the Fund and T. Rowe Price in monitoring compliance with
the various investment restrictions to which the T. Rowe Price Funds are
subject. The Board has directed that such amendment be submitted to
shareholders for approval or disapproval.
<PAGE>
The Fund's current fundamental policy in the area of making loans is as
follows:
GNMA FUND
"[As a matter of fundamental policy, the Fund may not:] Make loans,
although the Fund may (i) purchase money market securities and enter into
repurchase agreements, and (ii) lend portfolio securities provided that no
such loan may be made if, as a result, the aggregate of such loans would
exceed 30% of the value of the Fund's total assets; provided, however,
that the Fund may acquire publicly-distributed bonds, debentures, notes
and other debt securities and may purchase debt securities at private
placement within the limits imposed on the acquisition of restricted
securities;"
INTERMEDIATE, LONG-TERM AND MONEY FUNDS
"[As a matter of fundamental policy, the Fund may not:] Make loans,
although the Fund may (i) purchase money market securities and enter into
repurchase agreements, and (ii) lend portfolio securities provided that no
such loan may be made if, as a result, the aggregate of such loans would
exceed 30% of the value of the Fund's total assets;"
As amended, the Fund's fundamental policy on loans would be as follows:
"[As a matter of fundamental policy, the Fund may not:] 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
market securities and enter into repurchase agreements; and (iii) acquire
publicly-distributed or privately-placed debt securities and purchase
debt;"
33 1/3% RESTRICTION
The Fund's current fundamental policy on lending restricts the Fund to
lending no more than 30% of the value of the Fund's total assets. The new
policy would raise this amount to 33 1/3% of the value of the Fund's total
assets. The purpose of this change is to conform the Fund's policy to one that
is expected to become standard for all T. Rowe Price Funds and to permit the
Fund to lend its assets to the maximum extent permitted under applicable law.
The Board does not view this change as significantly raising the level of risk
to which the Fund would be subject.
INTERFUND LENDING PROGRAM
The proposed amendments to the Fund's fundamental policy would allow the
Fund to participate in an interfund lending program with other T. Rowe Price
Funds. The nature of this program and the risks associated with the Fund's
participation are set forth under "Borrowing from Other Price Funds" beginning
on page 12. Shareholders are being asked to consider, and vote separately, on
the Fund's participation in the interfund lending program as a borrower and as
a lender.
<PAGE>
The Board believes that the interfund lending program: (i) may benefit the
Fund by providing it with greater flexibility to engage in lending
transactions; and (ii) would facilitate the Fund's ability to earn a higher
return on short-term investments by allowing it to lend cash to other T. Rowe
Price Funds. Implementation of interfund lending would be accomplished
consistent with applicable regulatory requirements, including the provisions
of any order the SEC might issue to the Fund and to other T. Rowe Price Funds.
The Fund has not yet applied for such an order and there is no guarantee any
such order would be granted, even if applied for.
OTHER MATTERS
For the three Treasury Funds, the new policy would also provide that the
purchase of publicly-distributed or privately-placed debt were exceptions to
the Fund's general prohibition against making loans. The proposed new policy
would also provide that the purchase of debt was an exception to the general
prohibition against making loans. It should be pointed out that the Fund is
not permitted to purchase any securities other than securities backed by the
full faith and credit of the U.S. government. The proposed policy would not
change this. The purpose of the proposed amendment is to conform the Fund's
policy in this area to one which is expected to become standard for all T.
Rowe Price Funds.
For purposes of the restriction on lending, 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.
Because such transactions by the Fund could be viewed as a loan by the Fund to
the maker of the note, the Board has determined to clarify this matter by
including these transactions as an exception to the Fund's general prohibition
against making loans.
The Board recommends that shareholders vote FOR the proposal.
D. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY TO INCREASE THE
PERCENTAGE OF FUND ASSETS WHICH MAY BE INVESTED IN ANY ONE ISSUER
The Board has proposed an amendment to the Fundamental Investment Policies
of the Fund to conform such policies to Section 5(b)(1) of the 1940 Act and to
conform the Fund's policy in this area to one which is expected to become
standard for all T. Rowe Price Funds. The Board believes that standardized
policies will assist the Fund and T. Rowe Price in monitoring compliance with
the various investment restrictions to which the T. Rowe Price Funds are
subject. Under the amended policy, the Fund would be limited, with respect to
75% of its total assets, to investing no more than 5% of its total assets in
the securities of any one issuer. However, no such limitation would apply with
respect to the remaining 25% of the Fund's assets. Because the Fund invests
only in securities backed by the full faith and credit of the U.S. government
(and other instruments involving these securities) and because U.S. government
securities are not considered issuers under either the current or proposed
restriction, the proposal is not expected to have any effect on the Fund's
investment program. The Board has directed that such amendment be submitted to
shareholders for approval or disapproval.
<PAGE>
The Fund's current fundamental policy in the area of investing in the
securities of a single issuer is as follows:
GNMA FUND
"[As a matter of fundamental policy, the Fund may not:] Purchase a
security of any issuer (other than obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities) if, as a result, more
than 5% of the value of the Fund's total assets would be invested in the
securities of a single issuer (including repurchase agreements with any
one issuer);"
INTERMEDIATE, LONG-TERM AND MONEY FUNDS
"[As a matter of fundamental policy, the Fund may not:] Purchase the
securities of any issuer if, as a result, more than 5% of the value of the
Fund's total assets would be invested in the securities of a single issuer
other than obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities;"
As amended, the Fund's fundamental policy on investing in the securities
of a single issuer would be as follows:
"[As a matter of fundamental policy, the Fund may not:] 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;"
The Board recommends that shareholders vote FOR the proposal.
E. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING
PURCHASING MORE THAN 10% OF AN ISSUER'S VOTING SECURITIES
GNMA AND MONEY FUNDS
The Board has proposed an amendment to the Fundamental Investment Policy
of the Fund to conform such policy to Section 5(b)(1) of the 1940 Act. Because
the Fund invests only in securities backed by the full faith and credit of the
U.S. government (and other instruments involving these securities) and because
U.S. government securities are not considered issuers under either the current
or proposed restriction, the proposal is not expected to have any effect on
the Fund's investment program. However, the proposal if adopted, would conform
the Fund's policy in this area to one which is expected to become standard for
all T. Rowe Price Funds. The Board believes that increased standardization
will help promote efficiencies and facilitate monitoring of compliance with
the Fund's investment restrictions. The Board has directed that such change be
submitted to shareholders for approval or disapproval.
<PAGE>
The Fund's current fundamental policy in the area of purchasing more than 10%
of an issuer's voting securities is as follows:
GNMA FUND
"[As a matter of fundamental policy, the Fund may not:] Purchase a
security of any issuer (other than obligations issued or guaranteed by the
U.S. government, it agencies or instrumentalities) if, as a result, more
than 10% of the outstanding voting securities of any issuer would be held
by the Fund;"
MONEY FUND
"[As a matter of fundamental policy, the Fund may not:] Purchase any
securities which would cause the Fund at the time of such purchase to own
more than 10% of the outstanding securities of any issuer (other than
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities);"
As amended, the Fund's fundamental policy in the area of purchasing more
than 10% of an issuer's voting securities would be as follows:
"[As a matter of fundamental policy, the Fund may not:] Purchase a
security if, as a result, with respect to 75% of the value of the 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);"
The Board recommends that shareholders vote FOR the proposal.
INTERMEDIATE AND LONG-TERM FUNDS
The Board has proposed the adoption of a new Fundamental Investment Policy
of the Fund to conform the Fund's policy in this area to one which is expected
to become standard for all T. Rowe Price Funds. The Board believes that
increased standardization will help promote efficiencies and facilitate
monitoring of compliance with the Fund's investment restrictions. Because the
Fund invests only in securities backed by the full faith and credit of the
U.S. government (and other instruments involving these securities) and because
U.S. government securities are not considered issuers under either the current
or proposed restriction, the proposal is not expected to have any effect on
the Fund's investment program. The Board has directed that such change be
submitted to shareholders for approval or disapproval.
The Fund's current operating policy in the area of purchasing more than
10% of an issuer's voting securities is as follows:
EACH FUND
"[As a matter of operating policy, the Fund may not:] Purchase any
securities which would cause the Fund at the time of such purchase to own
more than 10% of the outstanding securities of any issuer (other than
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities);"
<PAGE>
As amended, the Fund's fundamental policy in the area of purchasing more
than 10% of an issuer's voting securities would be as follows:
"[As a matter of fundamental policy, the Fund may not:] Purchase a
security if, as a result, with respect to 75% of the value of the 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);"
The Board recommends that shareholders vote FOR the proposal.
F. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICIES CONCERNING
REAL ESTATE
The Board has proposed an amendment to the Fundamental Investment Policies
of the Fund to conform the Fund's fundamental policy on investing in real
estate to a policy that is expected to become standard for all T. Rowe Price
Funds. The Board believes that standardized policies will assist the Fund and
T. Rowe Price in monitoring compliance with the various investment
restrictions to which the T. Rowe Price Funds are subject. The proposed
amendment is not expected to affect the investment program of the Fund or
instruments in which the Fund invests. The Board has directed that such
amendments be submitted to shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of investing in real
estate is as follows:
GNMA FUND
"[As a matter of fundamental policy, the Fund may not:] Purchase or sell
real estate (although it may purchase money market securities secured by
real estate or interests therein, or issued by companies which invest in
real estate or interests therein);"
INTERMEDIATE, LONG-TERM AND MONEY FUNDS
"[As a matter of fundamental policy, the Fund may not:] Purchase or sell
real estate, although it may invest in the securities of companies whose
business involves the purchase or sale of real estate;"
As amended, the Fund's fundamental policy on investing in real estate
would be as follows:
"[As a matter of fundamental policy, the Fund may not:] Purchase or sell
real estate 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 securities of
companies engaged in the real estate business);"
The Board recommends that shareholders vote FOR the proposal.
<PAGE>
G. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON THE ISSUANCE
OF SENIOR SECURITIES
The Fund's Board has proposed an amendment to the Fund's Fundamental
Investment Policy on issuing senior securities which would allow the Fund to
issue senior securities to the extent permitted under the 1940 Act. The new
policy, if adopted, would provide the Fund with greater flexibility in
pursuing its investment objective and program and would conform the Fund's
policy in this area to one which is expected to become standard for all T.
Rowe Price Funds. The Board believes that standardized policies will assist
the Fund and T. Rowe Price in monitoring compliance with the various
investment restrictions to which the T. Rowe Price Funds are subject. The
Board has directed that such amendment be submitted to shareholders for
approval or disapproval.
The Fund's current fundamental policy in the area of issuing senior
securities is as follows:
EACH FUND
"[As a matter of fundamental policy, the Fund may not:] Issue any class of
securities senior to any other class of securities;"
As amended, the Fund's fundamental policy on issuing senior securities
would be as follows:
"[As a matter of fundamental policy, the Fund may not:] Issue senior
securities except in compliance with the Investment Company Act of 1940;"
The 1940 Act limits a Fund's ability to issue senior securities or engage
in investment techniques which could be deemed to create a senior security.
Although the definition of a "senior security" involves complex statutory and
regulatory concepts, a senior security is generally thought of as a class of
security preferred over shares of the Fund with respect to the Fund's assets
or earnings. It generally does not include temporary or emergency borrowings
by the Fund (which might occur to meet shareholder redemption requests) in
accordance with federal law and the Fund's investment limitations. Various
investment techniques that obligate the Fund to pay money at a future date
(e.g., the purchase of securities for settlement on a date that is longer than
required under normal settlement practices) occasionally raise questions as to
whether a "senior security" is created. The Fund utilizes such techniques only
in accordance with applicable regulatory requirements under the 1940 Act.
Although the Fund has no current intention of issuing senior securities, the
proposed change will clarify the Fund's authority to issue senior securities
in accordance with the 1940 Act without the need to seek shareholder approval.
The Board recommends that shareholders vote FOR the proposal.
<PAGE>
H. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON
PURCHASING SECURITIES ON MARGIN
GNMA, INTERMEDIATE AND LONG-TERM FUNDS
The Board has proposed that the Fund's Fundamental Investment Policy on
purchasing securities on margin be changed from a fundamental policy to an
operating policy. Fundamental policies may be changed only by shareholder
vote, while operating policies may be changed by the Board without shareholder
approval. The purpose of the proposal is to allow the Fund greater flexibility
in responding to market and regulatory developments by providing the Board
with the authority to make changes in the Fund's policy on margin without
further shareholder approval. The new restriction would also conform the
Fund's policy on margin to one which is expected to become standard for all T.
Rowe Price Funds other than money market funds. The Board believes that
standardized policies will assist the Fund and T. Rowe Price in monitoring
compliance with the various investment restrictions to which the T. Rowe Price
Funds are subject. The Board has directed that such amendment be submitted to
shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of purchasing securities
on margin is as follows:
GNMA FUND
"[As a matter of fundamental policy, the Fund may not:] Purchase
securities on margin, except for use of short-term credit necessary for
clearance of purchases of portfolio securities; except that it may make
margin deposits in connection with futures contracts, subject to [its
fundamental policy on futures];"
INTERMEDIATE AND LONG-TERM FUNDS
"[As a matter of fundamental policy, the Fund may not:] Purchase
securities on margin, except for use of short-term credit necessary for
clearance of purchases of portfolio securities; except that it may make
margin deposits in connection with interest rate futures contracts,
subject to [its fundamental policy on futures];"
As amended, the Fund's operating policy on purchasing securities on margin
would be as follows:
"[As a matter of operating policy, the Fund may not:] 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;"
The Fund's current policy and the proposed operating policy prohibit the
purchase of securities on margin but allow the Fund to use such short-term
credit as is necessary for clearance of purchases of portfolio securities and
make margin deposits in connection with futures contracts (GNMA Fund) and
interest rate futures contracts (Intermediate and Long-Term Funds). Set forth
elsewhere in this proxy is a proposal to allow the Intermediate and Long-Term
Funds to invest in additional types of futures contracts, not just interest
rate futures as set forth in the current policy. The proposed operating policy
also would acknowledge that the Fund is permitted to make margin deposits in
connection with other investments in addition to futures. Such investments
might include, but are not limited to, written options where the Fund could be
required to put up margin with a broker as security for the Fund's obligation
to deliver the security on which the option is written. The Fund is already
permitted to write options and a vote against this proposal would not change
this authority.
The Board recommends that shareholders vote FOR the proposal.
<PAGE>
MONEY FUND
The Board has proposed that the Fund's Fundamental Investment Policy on
purchasing securities on margin be changed from a fundamental policy to an
operating policy. Fundamental policies may be changed only by shareholder
vote, while operating policies may be changed by the Board without shareholder
approval. The only effect of the proposal would be to change the Fund's
fundamental policy on margin to an operating policy. The Fund has no current
intention of purchasing any securities on margin. The Board has directed that
such amendment be submitted to shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of purchasing securities
on margin is as follows:
"[As a matter of fundamental policy, the Fund may not:] Purchase
securities on margin, except for use of short-term credit necessary for
clearance of purchases of portfolio securities;"
As amended, the Fund's operating policy on purchasing securities on margin
would be as follows:
"[As a matter of operating policy, the Fund may not:] Purchase securities
on margin, except for use of short-term credit necessary for clearance of
purchases of portfolio securities;"
The Board of Directors recommends that shareholders vote FOR the proposal.
I. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON PLEDGING
ITS ASSETS
GNMA FUND
The Board has proposed that the Fund's Fundamental Investment Policy on
pledging its assets be eliminated and replaced with an operating policy.
Fundamental policies may be changed by shareholder vote, while operating
policies may be changed by vote of the Board without shareholder approval.
Applicable law does not require the current percentage limitation set forth in
the policy and does not require such policy to be fundamental. The new
operating policy would allow the Fund to pledge, in connection with Fund
indebtedness, 33 1/3% of its total assets (an increase from the current
restriction) and allow the Fund to pledge assets in connection with
permissible investments. The Board believes it is advisable to provide the
Fund with greater flexibility in pursuing its investment objective and program
and responding to regulatory and market developments. The new restriction
would also conform the Fund's policy on pledging its assets to one which is
expected to become standard for all T. Rowe Price Funds. The Board believes
that standardized policies will assist the Fund and T. Rowe Price in
monitoring compliance with the various investment restrictions to which the T.
Rowe Price Funds are subject. The Board has directed that such proposals be
submitted to shareholders for approval or disapproval.
<PAGE>
The Fund's current fundamental policy in the area of pledging its assets
is as follows:
"[As a matter of fundamental policy, the Fund may not:] Mortgage, pledge,
hypothecate or, in any other manner, transfer as security for indebtedness
any security owned by the Fund, except (i) as may be necessary in
connection with permissible borrowings, in which event such mortgaging,
pledging, or hypothecating may not exceed 15% of the Fund's total assets,
valued at cost; provided, however, that as a matter of operating policy,
which may be changed without shareholder approval, the Fund will limit any
such mortgaging, pledging, or hypothecating to 10% of its net assets,
valued at market, in order to comply with certain state investment
restrictions; and (ii) it may enter into interest rate futures contracts;"
The operating policy on pledging of assets, to be adopted by the Fund,
would be as follows:
"[As a matter of operating policy, the Fund may not:] 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 the borrowing or investment;"
The operating policy would allow the Fund to pledge 33 1/3% of its total
assets instead of the current 15% as set forth in the Fund's fundamental
policy and (10% as set forth in the Fund's current operating policy). The new
policy, in addition to allowing pledging in connection with indebtedness would
clarify the Fund's ability to pledge its assets in connection with permissible
investments. Such pledging could arise, for example, when the Fund purchases
certain types of securities on a when-issued or forward basis. As an operating
policy, the Board could modify the proposed policy on pledging in the future
as the need arose, without seeking further shareholder approval.
Pledging assets to other parties is not without risk. Because assets that
have been pledged to other parties may not be readily available to the Fund,
the Fund may have less flexibility in liquidating such assets if needed.
Therefore, the new policy, by allowing the Fund to pledge a greater portion of
its assets, could, to a greater extent than the current policy, impair the
Fund's ability to meet current obligations, or impede portfolio management. On
the other hand, these potential risks should be considered together with the
potential benefits, such as increased flexibility to borrow and the increased
ability of the Fund to pursue its investment program.
The Board recommends that shareholders vote FOR the proposal.
<PAGE>
INTERMEDIATE, LONG-TERM AND MONEY FUNDS
The Board has proposed that the Fund's Fundamental Investment Policy on
pledging its assets be eliminated and replaced with an operating policy.
Fundamental policies may be changed by shareholder vote, while operating
policies may be changed by vote of the Board without shareholder approval.
Applicable law does not require the current percentage limitation set forth in
the policy and does not require such policy to be fundamental. The new
operating policy would allow the Fund to pledge, in connection with Fund
indebtedness, 33 1/3% of its total assets (an increase from the current
restriction) and allow the Fund to pledge assets in connection with
permissible investments. The Fund has no current intention of pledging its
assets. The purpose of the proposal is to conform the Fund's policy on
pledging its assets to one which is expected to become standard for all T.
Rowe Price Funds. The Board believes that standardized policies will assist
the Fund and T. Rowe Price in monitoring compliance with the various
investment restrictions to which the T. Rowe Price Funds are subject. The
Board has directed that such proposals be submitted to shareholders for
approval or disapproval.
The Fund's current fundamental policy in the area of pledging its assets
is as follows:
INTERMEDIATE AND LONG-TERM FUNDS
"[As a matter of fundamental policy, the Fund may not:] Mortgage, pledge,
hypothecate or, in any other manner, transfer as security for indebtedness
any security owned by the Fund, except as may be necessary in connection
with permissible borrowings, in which event such mortgaging, pledging, or
hypothecating may not exceed 30% of the Fund's assets, valued at cost;"
MONEY FUND
"[As a matter of fundamental policy, the Fund may not:] Mortgage, pledge,
hypothecate or, in any other manner, transfer as security for indebtedness
any security owned by the Fund, except as may be necessary in connection
with permissible borrowings, in which event such mortgaging, pledging, or
hypothecating may not exceed 15% of the Fund's assets, valued at cost;
provided, however, that as a matter of operating policy, the Fund will
limit any such mortgaging, pledging, or hypothecating to 10% of its net
assets, valued at market, in order to comply with certain state investment
restrictions;"
The operating policy on pledging of assets, to be adopted by the Fund,
would be as follows:
"[As a matter of operating policy, the Fund may not:] 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 the borrowing or investment;"
The operating policy would allow the Fund to pledge 33 1/3% of its total
assets instead of the current lower amount. The new policy, in addition to
allowing pledging in connection with indebtedness would clarify the Fund's
ability to pledge its assets in connection with permissible investments. It is
not currently contemplated that the Fund would pledge its assets under any
circumstances. As an operating policy, the Board of Directors could modify the
proposed policy on pledging in the future as the need arose, without seeking
further shareholder approval.
<PAGE>
Pledging assets to other parties is not without risk. Because assets that
have been pledged to other parties may not be readily available to the Fund,
the Fund may have less flexibility in liquidating such assets if needed.
Therefore, the new policy, by allowing the Fund to pledge a greater portion of
its assets, could, to a greater extent than the current policy, impair the
Fund's ability to meet current obligations, or impede portfolio management. On
the other hand, these potential risks should be considered together with the
potential benefits, such as increased flexibility to borrow and the increased
ability of the Fund to pursue its investment program.
The Board recommends that shareholders vote FOR the proposal.
J. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON SHORT
SALES
The Fund's Board has proposed that the Fund's Fundamental Investment
Policy on effecting short sales be eliminated and replaced with a
substantially similar operating policy. Fundamental policies may be changed
only by shareholder vote, while operating policies may be changed by the Board
without shareholder approval. The current policy of the Fund is not required
by applicable law to be fundamental. In addition, while there are no
foreseeable circumstances under which the Money Fund would sell securities
short, the proposal, if adopted, would provide the other Funds with greater
flexibility in pursuing their investment objective and program. The Board has
directed that the proposal be submitted to shareholders for approval or
disapproval.
The Fund's current fundamental policy in the area of effecting short sales
of securities is as follows:
EACH FUND
"[As a matter of fundamental policy, the Fund may not:] Effect short sales
of securities . . .;"
The operating policy on short sales, to be adopted by the Fund, would be
as follows:
"[As a matter of operating policy, the Fund may not:] Effect short sales
of securities;"
The current fundamental policy was formerly required by certain states to
be fundamental. This is no longer the case and the replacement of the policy
with an operating policy will adequately protect the Funds while providing
greater flexibility to the non-money market Funds to respond to market or
regulatory developments by allowing the Board the authority to make changes in
this policy without seeking further shareholder approval.
In a short sale, an investor, such as the Fund, sells a borrowed security
and must return the same security to the lender. Although the Board has no
current intention of allowing the Fund to engage in short sales, if the
proposed amendment is adopted, the Board would be able to authorize the Fund
to engage in short sales at any time without further shareholder action. In
such a case, the Fund's prospectus would be amended and a description of short
sales and their risks would be set forth therein. Any such short sales would
be subject to extensive regulation under the 1940 Act designed to ensure the
Fund could not use short sales for leveraging purposes.
<PAGE>
The Board recommends that shareholders vote FOR the proposal.
GNMA, INTERMEDIATE AND LONG-TERM FUNDS
K. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICIES ON INVESTING
IN COMMODITIES AND FUTURES CONTRACTS TO PROVIDE GREATER FLEXIBILITY IN
FUTURES TRADING
GNMA FUND
The Board has proposed amendments to the Fundamental Investment Policies
of the Fund to provide the Fund with greater flexibility in buying and selling
futures contracts. The provisions of the Fund's current fundamental investment
policies in this area are not required by applicable law and the Board
believes the Fund's investment manager, T. Rowe Price, should have greater
flexibility to enter into futures contracts consistent with the Fund's
investment objective and program and as market and regulatory developments
require and permit without the necessity of seeking further shareholder
approval. The new restriction would also conform the Fund's policy on
commodities and futures to one which is expected to become standard for all T.
Rowe Price Funds (other than money market funds). The Board believes that
standardized policies will assist the Fund and T. Rowe Price in monitoring
compliance with the various investment restrictions to which the T. Rowe Price
Funds are subject. The Board has directed that such amendments be submitted to
shareholders for approval or disapproval.
The Fund's current fundamental policies in the area of investing in
commodities and futures are as follows:
COMMODITIES
"[As a matter of fundamental policy, the Fund may not:] Purchase or sell
commodities or commodity contracts; except that it may enter into futures
contracts, and options on futures contracts subject to [its fundamental
policy on futures];"
FUTURES CONTRACTS
"[As a matter of fundamental policy, the Fund may not:] Enter into a
futures contract or options thereon, although the Fund may enter into a
futures contract or an option on a futures contract only if, as a result
thereof, (i) the then current aggregate futures market prices of
securities required to be delivered under open futures contract sales plus
the then current aggregate purchase prices of securities required to be
purchased under open futures contract purchases would not exceed 30% of
the Fund's total assets (taken at market value at the time of entering
into the contract) or (ii) not more than 5% of the Fund's total assets
(taken at market value at the time of entering into the contract) would be
committed to margin or premiums on options on such futures contracts;
provided, however, that in the case of an option which is in-the-money at
the time of purchase, the in-the-money amount as defined under certain
CFTC regulations may be excluded in computing such 5%;"
<PAGE>
As amended, the Fund's fundamental policy on investing in commodities and
futures would be combined and would be as follows:
"[As a matter of fundamental policy, the Fund may not:] Purchase or sell
physical commodities; except that it may enter into futures contracts and
options thereon;"
In addition, the Board intends to adopt the following operating policy,
which may be changed by the Board without further shareholder approval.
"[As a matter of operating policy, the Fund will not:] 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 (the "New Operating Policy");"
If approved, the primary effects of the amendments would be to: (i)
eliminate the restriction that the Fund may not enter into a futures contract
if, as a result, more than 30% of the Fund's total assets would be represented
by such contracts (the "30% Limitation"); and (ii) replace the restriction
that the Fund may not commit more than 5% of its total assets to initial
margin on futures contracts or premiums on options (the "5% Limitation") with
the New Operating Policy. Although not specifically described in the amended
restriction, the Fund would have the ability to invest in instruments which
have the characteristics of futures and securities. Although it has no current
intention of doing so, the new policy would also permit the Fund to enter into
any type of futures contract, not just those described in its current
prospectus. The risks of such futures could differ from the risks of the
Fund's currently permitted futures activity.
THE 30% LIMITATION
In response to a prior position of the SEC, the Fund has limited trading
in futures to having no more than 30% of its assets represented by futures
contracts. The SEC no longer takes this position. Although the Fund has no
current intention of engaging in substantial trading in futures, this
situation could change, and the Board believes the best interest of the Fund
would be served by removing this requirement from the Fund's fundamental
policy on futures. Removal of the 30% Limitation could allow the Fund, subject
to applicable margin requirements, to hedge 100% of the value of its portfolio
and to enter into futures contracts and options thereon to a greater degree
than is currently permitted. All trading in futures by the Fund would be
subject to applicable SEC and Commodity Futures Trading Commission ("CFTC")
rules and applicable state law.
THE 5% LIMITATION
The 5% Limitation was previously required by rules of the CFTC in order
for the Fund to be excluded from status as a commodity pool operator under
applicable CFTC regulations, even if the Fund used futures for hedging
purposes only. The CFTC no longer applies the 5% test to bona fide hedging
activities. Although applicable state law may still require compliance with
similar limitations, the Board believes the best interest of the Fund would be
served by replacing the 5% Limitation with the New Operating Policy. This
would provide the Fund with the flexibility to adapt to changes in CFTC
regulations and any state laws without seeking further shareholder approval.
<PAGE>
The Board recommends that shareholders vote FOR the proposal.
INTERMEDIATE AND LONG-TERM FUNDS
The Board has proposed amendments to the Fundamental Investment Policies
of the Fund to provide the Fund with greater flexibility in buying and selling
futures contracts. The provisions of the Fund's current fundamental investment
policies in this area are not required by applicable law and the Board
believes the Fund's investment manager, T. Rowe Price, should have greater
flexibility to enter into futures contracts consistent with the Fund's
investment objective and program and as market and regulatory developments
require and permit without the necessity of seeking further shareholder
approval. The new restriction would also conform the Fund's policy on
commodities and futures to one which is expected to become standard for all T.
Rowe Price Funds (other than the money market funds). The Board believes that
standardized policies will assist the Fund and T. Rowe Price in monitoring
compliance with the various investment restrictions to which the T. Rowe Price
Funds are subject. The Board has directed that such amendments be submitted to
shareholders for approval or disapproval.
The Fund's current fundamental policies in the area of investing in
commodities and futures are as follows:
EACH FUND
COMMODITIES
"[As a matter of fundamental policy, the Fund may not:] Purchase or sell
commodities or commodity contracts; except the Fund may enter into
interest rate futures contracts or options thereon, subject to [its
fundamental policy on futures];"
EACH FUND
FUTURES CONTRACTS
"[As a matter of fundamental policy, the Fund may not:] Enter into a
futures contract or options thereon, although the Fund may enter into a
futures contract or options on futures contracts if, as a result, no more
than 5% of the Fund's total assets (taken at market value at the time of
entering into the contract) would be committed to initial margin or
premiums on options on such contracts; provided however, that in the case
of an option which is in-the-money at the time of purchase, the
in-the-money amount, as defined under certain CFTC regulations may be
excluded in computing such 5%;"
As amended, the Fund's fundamental policies on investing in commodities
and futures would be combined and would be as follows:
<PAGE>
"[As a matter of fundamental policy, the Fund may not:] Purchase or sell
physical commodities; except that it may enter into futures contracts and
options thereon;"
In addition, the Board intends to adopt the following operating policy,
which may be changed by the Board without further shareholder approval.
"[As a matter of operating policy, the Fund will not:] 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 (the "New Operating Policy");"
If approved, the primary effects of the amendments would be to replace the
restriction that the Fund may not commit more than 5% of its total assets to
initial margin on futures contracts or premiums on options (the "5%
Limitation") with the New Operating Policy. Although not specifically
described in the amended fundamental restriction, the Fund would continue to
have the ability to invest in instruments which have the characteristics of
futures and securities. Although it has no current intention of doing so, the
new policy would also permit the Fund to enter into any type of futures
contract, not just those described in its current prospectus. The risks of
such futures could differ from the risks of the Fund's currently permitted
futures activity.
THE 5% LIMITATION
The 5% Limitation was previously required by rules of the CFTC in order
for the Fund to be excluded from status as a commodity pool operator under
applicable CFTC regulations, even if the Fund used futures for hedging
purposes only. The CFTC no longer applies the 5% test to bona fide hedging
activities. Although applicable state law may still require compliance with
similar limitations, the Board believes the best interest of the Fund would be
served by replacing the 5% Limitation with the New Operating Policy. This
would provide the Fund with the flexibility to adapt to changes in CFTC
regulations and any state laws without seeking further shareholder approval.
The Board recommends that shareholders vote FOR the proposal.
PROPOSALS L-N PERTAIN ONLY TO GNMA AND MONEY FUNDS
L. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON OPTIONS
GNMA FUND
The Fund's Board has proposed that the Fund's Fundamental Investment
Policy on investing in options be eliminated and replaced with a substantially
similar operating policy. Fundamental policies may be changed only by
shareholder vote, while operating policies may be changed by vote of the Board
without shareholder approval. Under the new operating policy, the Fund would
be permitted to purchase and sell options of any type for any purpose
consistent with the Fund's investment program. The purpose of the proposal is
to allow the Fund greater flexibility in responding to market and regulatory
developments by allowing the Board the authority to make changes in the Fund's
policy on options without seeking further shareholder approval. The new
restriction would also conform the Fund's policy on investing in options to
one which is expected to become standard for all T. Rowe Price Funds. The
Board believes that standardized policies will assist the Fund and T. Rowe
Price in monitoring compliance with the various investment restrictions to
which the T. Rowe Price Funds are subject. The Board has directed that such
change be submitted to shareholders for approval or disapproval.
<PAGE>
The Fund's current fundamental policy in the area of investing in options
is as follows:
"[As a matter of fundamental policy, the Fund may not:] Invest in puts,
calls, straddles, spreads, or any combination thereof; although the Fund
may (i) write covered call and put options and purchase covered put
options, and (ii) purchase uncovered put options and uncovered call
options with respect to all of its portfolio securities and enter into
closing transactions with respect to such options in the manner set forth
in the Statement of Additional Information;"
The operating policy on investing in options, to be adopted by the Fund,
would be as follows:
"[As a matter of operating policy, the Fund may not:] Invest in puts,
calls, straddles, spreads, or any combination thereof, except to the
extent permitted by the prospectus and Statement of Additional
Information;"
The Board recommends that shareholders vote FOR the proposal.
MONEY FUND
The Fund's Board has proposed that the Fund's Fundamental Investment
Policy on investing in options be eliminated and replaced with a substantially
similar operating policy. Fundamental policies may be changed only by
shareholder vote, while operating policies may be changed by vote of the Board
without shareholder approval. The new restriction would also conform the
Fund's policy on investing in options to one which is expected to become
standard for all T. Rowe Price Funds. The Board believes that standardized
policies will assist the Fund and T. Rowe Price in monitoring compliance with
the various investment restrictions to which the T. Rowe Price Funds are
subject. The Board has directed that such change be submitted to shareholders
for approval or disapproval.
The Fund's current fundamental policy in the area of investing in options
is as follows:
"[As a matter of fundamental policy, the Fund may not:] Invest in puts,
calls, straddles, spreads, or any combination thereof;"
The operating policy on investing in options, to be adopted by the Fund,
would be as follows:
"[As a matter of operating policy, the Fund may not:] Invest in puts,
calls, straddles, spreads, or any combination thereof, except to the
extent permitted by the prospectus and Statement of Additional
Information;"
<PAGE>
While the Fund does not normally engage in options transactions, some of
the Fund's investments may include demand or "put" features, which can provide
additional liquidity or protection against loss. In addition, the Fund may
from time to time enter into agreements with option-like features, such as
standby commitments or other instruments conveying the right or obligation to
buy or sell securities at a future date. The Fund can already invest in these
types of options and a vote against the proposal would not change this
authority. However, approval of the proposal would allow T. Rowe Price to
develop and implement additional strategies in the future, without the need to
seek further shareholder approval. Any such strategies must, of course, be in
accordance with applicable federal and state regulation. In addition to review
by the Board, the Fund would not engage in such strategies until they had been
described sufficiently in the Fund's Prospectus and Statement of Additional
Information.
The Board recommends that shareholders vote FOR the proposal.
M. PROPOSAL TO CHANGE THE DESIGNATION OF THE FUND'S FUNDAMENTAL INVESTMENT
POLICY REGARDING THE PURCHASE OF ILLIQUID SECURITIES
GNMA FUND
The Board has proposed that the Fund's Fundamental Investment Policy on
purchasing unmarketable securities be changed from a fundamental policy to an
operating policy. Fundamental policies may be changed only by shareholder
vote, while operating polices may be changed by the Board without shareholder
approval. The purpose of the proposal is to conform the Fund's policy in this
area to one which is expected to become standard for all T. Rowe Price Funds
(other than money market funds). The Board believes that standardized policies
will assist the Fund and T. Rowe Price in monitoring compliance with the
various investment restrictions to which the T. Rowe Price Funds are subject.
If the proposed change is approved by shareholders, the Board of the Fund
intends to adopt an operating policy which would allow the Fund to invest up
to 15% of its net assets in illiquid securities. The Fund's current
fundamental policy in this area is not required by applicable law. The Board
has directed that such change be submitted to shareholders for approval or
disapproval.
The Fund's current fundamental policy in the area of purchasing illiquid
securities is as follows:
"[As a matter of fundamental policy, the Fund may not:] Invest more than
10% of the value of its net assets in repurchase agreements which do not
provide for payment within more than seven days, restricted securities and
other securities that are not readily marketable;"
As changed, the operating policy on investing in illiquid securities, to
be adopted by the Fund, would be as follows:
"[As a matter of operating policy, the Fund may not:] Purchase illiquid
securities if, as a result, more than 15% of its net assets would be
invested in such securities;"
<PAGE>
ILLIQUID SECURITIES
As an open-end investment company, the Fund may not hold a significant amount
of illiquid securities because such securities may present problems of
accurate valuation and it is possible the Fund could have difficulty
satisfying redemptions within seven days as required under the 1940 Act. In
general, the SEC defines an illiquid security as one which cannot be sold in
the ordinary course of business within seven days at approximately the value
at which the Fund has valued the security. Illiquid securities have included
those enumerated in the Fund's fundamental restriction on restricted
securities and repurchase agreements of a duration of more than seven days.
The securities markets, however, are evolving and new types of instruments
have developed. In light of these developments, the Fund's fundamental
investment restriction, by essentially assuming restricted securities are
unmarketable, may be overbroad and unnecessarily restrictive. For example, the
markets for various types of securities--repurchase agreements, commercial
paper, and some corporate bonds and notes--are almost exclusively
institutional. These instruments are often either exempt from registration or
sold in transactions not requiring registration. Although these securities may
be legally classified as "restricted," institutional investors will often
justifiably rely either on the issuer's ability to honor a demand for
repayment in less than seven days or on an efficient institutional market in
which the unregistered security can be readily resold. The fact that the
securities may be restricted because of legal or contractual restrictions on
resale to the general public will, therefore, not be dispositive of the
liquidity of such investments.
In recognition of the increased size and liquidity of the institutional
markets for unregistered securities and the importance of institutional
investors in the capital formation process, the SEC has adopted rules,
including Rule 144A under the Securities Act of 1933, designed to further
facilitate efficient trading among institutional investors. These rules permit
a broader institutional trading market for securities subject to restriction
on resale to the general public. If institutional markets develop which trade
in these securities, the Fund could be constrained by its current investment
restrictions. Accordingly, T. Rowe Price recommends that the Fund eliminate
its fundamental limitations in this area so that restricted securities that
are nonetheless liquid may be purchased without regard to the Fund's limit on
investing in illiquid securities. Of course, the Fund would modify its
operating policy to comply with future regulatory and market developments.
If this proposal is approved by shareholders, the specific types of
securities that may be deemed to be illiquid will be determined from time to
time by T. Rowe Price under the supervision of the Fund's Board, with
reference to legal, regulatory and market developments. By making the Fund's
policy on illiquid securities non-fundamental, the Fund will be able to
respond more quickly to such developments because no shareholder vote will be
required to redefine what types of securities may be deemed illiquid.
PERCENTAGE LIMITATIONS
The Fund's fundamental policy limits it to investing no more than 10% of
the value of its total assets in restricted and unmarketable securities. The
new operating policy to be adopted by the Board, if shareholders approve
elimination of the fundamental policy, would allow the Fund to invest up to
15% of its net assets in illiquid securities. The 15% limitation represents a
higher percentage than the Fund was previously allowed to invest in illiquid
securities and is the result of a 1992 liberalization by the SEC in this area.
If the fundamental policy is changed to an operating policy, the Fund will,
without the necessity of any further shareholder vote, be able to take
advantage of any future changes in SEC policy in this area.
The Board recommends that shareholders vote FOR the proposal.
<PAGE>
MONEY FUND
The Board has proposed that the Fund's Fundamental Investment Policy on
purchasing unmarketable securities be changed from a fundamental policy to an
operating policy. Fundamental policies may be changed only by shareholder
vote, while operating polices may be changed by the Board without shareholder
approval. If the proposed change is approved by shareholders, the Board of the
Fund intends to adopt an operating policy which would conform the Fund's
operating policy in this area to one which is expected to become standard for
all T. Rowe Price Funds (except that the percentage limitation on investing in
illiquid securities for the other T. Rowe Price Funds, which are not money
market funds, is 15% instead of 10%). The Fund's current fundamental policy in
this area is not required by applicable law. Because the Fund invests only in
securities backed by the full faith and credit of the U.S. government and
because such securities are highly liquid, the proposal is not expected to
change the Fund's investment program or the securities in which it invests, it
would provide the Fund with greater flexibility in responding to market and
regulatory developments should the need arise. The Board has directed that
such change be submitted to shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of purchasing illiquid
securities is as follows:
"[As a matter of fundamental policy, the Fund may not:] Purchase
securities with legal or contractual restrictions on resale (restricted
securities); purchase illiquid securities; purchase securities without
readily available market quotations; or invest more than 10% of its net
assets in repurchase agreements maturing in more than seven (7) days;"
As changed, the operating policy on investing in illiquid securities, to
be adopted by the Fund, would be as follows:
"[As a matter of operating policy, the Fund may not:] Purchase illiquid
securities if, as a result, more than 10% of its net assets would be
invested in such securities;"
The Board recommends that shareholders vote FOR the proposal.
N. PROPOSAL TO CHANGE THE DESIGNATION OF THE FUND'S FUNDAMENTAL INVESTMENT
POLICY ON INVESTING IN UNSEASONED ISSUERS
GNMA AND MONEY FUNDS
The Board has proposed that the Fund's Fundamental Investment Policy on
investing in the securities of unseasoned issuers be eliminated and replaced
by a substantially similar operating policy. Fundamental policies may only be
changed with shareholder approval, while operating policies may be changed by
vote of the Board without shareholder approval. Because the Fund invests only
in securities backed by the full faith and credit of the U.S. government (and
other instruments involving these securities) and because U.S. government
securities are not considered issuers under either the current or proposed
restriction, the proposal is not expected to have any effect on the Fund's
investment program. The new restriction would also conform the Fund's policy
on investing in unseasoned issuers to one which is expected to become standard
for all T. Rowe Price Funds. The Board believes that standardized policies
will assist the Fund and T. Rowe Price in monitoring compliance with the
various investment restrictions to which the T. Rowe Price Funds are subject.
The Board has directed that such change be submitted to shareholders for
approval or disapproval.
<PAGE>
The Fund's current fundamental policy in the area of investing in
unseasoned issuers is as follows:
EACH FUND
"[As a matter of fundamental policy, the Fund may not:] Purchase the
securities of any issuer (other than obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities) if, as a result,
more than 5% of the value of the Fund's total assets would be invested in
the securities of issuers which at the time of purchase had been in
operation for less than three years, including predecessors and
unconditional guarantors;"
The operating policy on investing in unseasoned issuers, to be adopted by
the Fund, would be as follows:
"[As a matter of operating policy, the Fund may not:] Purchase a security
(other than obligations issued or guaranteed by the U.S., any foreign,
state or local government, their agencies or instrumentalities) if, as a
result, more than 5% of the value of the Fund's total assets would be
invested in the securities of issuers which at the time of purchase had
been in operation for less than three years (for this purpose, the period
of operation of any issuer shall include the period of operation of any
predecessor or unconditional guarantor of such issuer). This restriction
does not apply to securities of pooled investment vehicles or mortgage or
asset-backed securities;"
The Board recommends that shareholders vote FOR the proposal.
PROPOSALS O-S PERTAIN ONLY TO MONEY FUND
O. PROPOSAL TO CHANGE THE DESIGNATION OF THE FUND'S FUNDAMENTAL INVESTMENT
POLICY ON INVESTING FOR CONTROL OF PORTFOLIO COMPANIES
The Fund's Board has proposed that the Fund's Fundamental Investment
Policy on investing for control of portfolio companies be changed from a
fundamental policy to an identical operating policy. Fundamental policies may
only be changed with shareholder approval, while operating policies may be
changed by vote of the Board without shareholder approval. The Fund has no
current intention of investing in companies for the purpose of obtaining or
exercising control. The policy is not required to be fundamental under the
1940 Act. The purpose of the proposal is to conform the Fund's policy in this
area to one which is expected to become standard for all T. Rowe Price Funds.
The Board believes that standardized policies will assist the Fund and T. Rowe
Price in monitoring compliance with the various investment restrictions to
which the T. Rowe Price Funds are subject. The Board has directed that such
change be submitted to shareholders for approval or disapproval.
<PAGE>
The Fund's current fundamental policy in the area of investing for control
of portfolio companies is as follows:
"[As a matter of fundamental policy, the Fund may not:] Invest in
companies for the purpose of exercising management or control;"
As changed, the Fund's operating policy on investing for control of
portfolio companies would be as follows:
"[As a matter of operating policy, the Fund may not:] Invest in companies
for the purpose of exercising management or control;"
The Board recommends that shareholders vote FOR the proposal.
P. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON
PURCHASING EQUITY SECURITIES
The Fund's Board has proposed that the Fund's Fundamental Investment
Policy on purchasing equity securities be eliminated and replaced with a more
permissive operating policy. Fundamental policies may be changed only by
shareholder vote, while operating policies may be changed by the Board without
shareholder approval. The current policy of the Fund is not required by
applicable law to be fundamental. The purpose of the proposal is to conform
the Fund's policy on purchasing equity securities to one which is expected to
become standard for all T. Rowe Price taxable income funds (other than the T.
Rowe Price High Yield and New Income Funds). The Board believes that
standardized policies will assist the Fund and T. Rowe Price in monitoring
compliance with the various investment restrictions to which the T. Rowe Price
Funds are subject. Under the proposed policy, the Fund would be prohibited
from purchasing equity securities, other than the securities of other
investment companies. Because the Fund has only purchased securities backed by
the full faith and credit of the United States government, it is unlikely the
proposal would have any significant effect on the Fund's investment program.
However, the proposal would allow the Fund, subject to further Board action
authorizing such investments, to purchase the securities of other open-end
investment companies which invested in securities backed by the full faith and
credit of the United States government. Further information regarding such
purchases may be found on pages 36-37 of this proxy statement. The Board has
directed that the proposal be submitted to shareholders for approval or
disapproval.
The Fund's current fundamental policy in the area of purchasing equity
securities is as follows:
"[As a matter of fundamental policy, the Fund may not:] Purchase any
common stocks or other equity securities, or securities convertible into
equity securities;"
<PAGE>
The operating policy on purchasing equity securities, to be adopted by the
Fund, would be as follows:
"[As a matter of operating policy, the Fund may not:] Purchase any common
stocks or other equity securities, or securities convertible into equity
securities except as set forth in its operating policy on investment
companies;"
The Board recommends that shareholders vote FOR the proposal.
Q. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON
INVESTING IN THE SECURITIES OF OTHER INVESTMENT COMPANIES
The Board has proposed that the Fund's Fundamental Investment Policy on
investing in the securities of other investment companies be eliminated and
replaced with a more permissive operating policy. Fundamental policies may be
changed only by shareholder vote, while operating policies may be changed by
vote of the Board without shareholder approval. The current policy of the Fund
is not required by applicable law to be fundamental. Under the new operating
policy, and provided a proposal to permit the Fund to invest in equity
securities set forth elsewhere in this proxy is also approved, the Fund could
invest in the securities of other investment companies in a manner consistent
with the Fund's investment program. Because the Fund has only purchased
securities backed by the full faith and credit of the United States
government, it is unlikely the proposal would have any significant effect on
the Fund's investment program. However, the proposal would allow the Fund,
subject to further Board action authorizing such investments, to purchase the
securities of other investment companies to the extent they are open-end money
market funds which invest in securities backed by the full faith and credit of
the U.S. government. These securities may, at times, provide attractive
investment opportunities for the Fund. In addition the proposed change is
intended to conform the Fund's policy in this area to one which is expected to
become standard for all T. Rowe Price Funds. The Board believes that
standardized policies will assist the Fund and T. Rowe Price in monitoring
compliance with the various investment restrictions to which the T. Rowe Price
Funds are subject. Because the Fund would incur duplicate management fees when
making such investments, it would only invest in other investment companies
when, after taking account of such additional fees, the investment would be
beneficial to the Fund. The Board has directed that such change be submitted
to shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of investing in the
securities of other investment companies is as follows:
"[As a matter of fundamental policy, the Fund may not:] Purchase
securities of open-end or closed-end investment companies, except in
connection with a merger, consolidation, acquisition, or reorganization.
Duplicate fees may result from such purchases;"
<PAGE>
The operating policy on investing in the securities of other investment
companies, to be adopted by the Fund, would be as follows:
"[As a matter of operating policy, the Fund may not:] Purchase securities
of open-end or closed-end investment companies except in compliance with
the Investment Company Act of 1940 and applicable state law provided that
the Fund may only purchase the securities of other open-end money market
funds;"
The proposed change would permit the Fund to invest in the securities of
other investment companies to the maximum extent permitted under the 1940 Act
and applicable state law, as described below, without further shareholder
approval. However, the Fund would only purchase such securities in a manner
consistent with its investment objective and program. Under the 1940 Act, the
Fund is subject to various restrictions in purchasing the securities of
closed-end and open-end investment companies. The 1940 Act limits the Fund,
immediately after a purchase, (1) to investing no more than 10% of its total
assets in the securities of other investment companies; (2) to owning no more
than 3% of the total outstanding voting stock of any other investment company;
and (3) to having no more than 5% of its total assets invested in securities
of another investment company. Certain states impose further limitations on
the purchase by the Fund of the securities of other investment companies. It
is possible the requirements of the 1940 Act or the states regarding the
Fund's investment in the securities of open-end investment companies could
change, or that the Fund could obtain a waiver of their application. The Board
believes the Fund should have the ability to respond to potential changes in
these areas without the necessity of holding a further meeting of
shareholders.
The Board recommends that shareholders vote FOR the proposal.
R. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON INVESTING IN OIL
AND GAS PROGRAMS
The Fund's Board has proposed that the Fund's Fundamental Investment
Policy on investing in oil and gas programs be eliminated and replaced with a
substantially similar operating policy. Fundamental policies may be changed
only by shareholder vote, while operating policies may be changed by the Board
without shareholder approval. The current policy of the Fund is not required
by applicable law to be fundamental. The purpose of the proposal is to conform
the Fund's policy on investing in oil and gas programs to one which is
expected to become standard for all T. Rowe Price Funds. The Board believes
that standardized policies will assist the Fund and T. Rowe Price in
monitoring compliance with the various investment restrictions to which the T.
Rowe Price Funds are subject. The Board has directed that the proposal be
submitted to shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of investing in oil and
gas programs is as follows:
"[As a matter of fundamental policy, the Fund may not:] Purchase
participations or other direct interests or enter into leases with respect
to oil, gas, other mineral exploration or development programs;"
<PAGE>
The operating policy on investing in oil and gas programs, to be adopted
by the Fund, would be as follows:
"[As a matter of operating policy, the Fund may not:] Purchase
participations or other direct interests or enter into leases with respect
to, oil, gas or other mineral exploration or development programs;"
The Board recommends that shareholders vote FOR the proposal.
S. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON
OWNERSHIP OF PORTFOLIO SECURITIES BY OFFICERS AND DIRECTORS
The Fund's Board has proposed that the Fund's Fundamental Investment
Policy on the ownership of portfolio securities by officers and directors of
the Fund and T. Rowe Price be eliminated and replaced with a substantially
similar operating policy. Fundamental policies may be changed only by
shareholder vote, while operating policies may be changed by vote of the Board
without shareholder approval. The current fundamental policy was formerly
required by certain states to be fundamental, but this is no longer the case.
The Board has directed that the proposal be submitted to shareholders for
approval or disapproval.
The Fund's current fundamental policy in the area of ownership of
portfolio securities by officers and directors is as follows:
"[As a matter of fundamental policy, the Fund may not:] Purchase or retain
the securities of any issuer if, to the knowledge of the Fund's
management, those officers and directors of the Fund, and of its
investment adviser, who each owns beneficially more than .5% of the
outstanding securities of such issuer, together own beneficially more than
5% of such securities;"
As changed, the Fund's operating policy in the area of ownership of
portfolio securities by officers and directors would be as follows:
"[As a matter of operating policy, the Fund may not:] Purchase or retain
the securities of any issuer if, to the knowledge of the Fund's
management, those officers and directors of the Fund, and of its
investment manager, who each own beneficially more than .5% of the
outstanding securities of such issuer, together own beneficially more than
5% of such securities;"
The Board recommends that shareholders vote FOR the proposal.
<PAGE>
EACH FUND
3. RATIFICATION OR REJECTION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The selection by the Board of the Corporation, on behalf of the
Intermediate and Long-Term Funds, of the firm of Coopers & Lybrand as the
independent accountants for the three-month fiscal year ending May 31, 1994
and for fiscal year ending May 31, 1995 is to be submitted for ratification or
rejection by the shareholders at the Shareholders Meeting. The firm of Coopers
& Lybrand has served the Corporation as independent accountants since each
such Fund's inception. The selection by the Board of the GNMA Fund and of the
Corporation, on behalf of the Money Fund, of the firm of Price Waterhouse as
the independent accountants for the three-month fiscal year ending May 31,
1994 and for fiscal year ending May 31, 1995 is to be submitted for
ratification or rejection by the shareholders at the Shareholders Meeting. The
firm of Price Waterhouse has served the GNMA Fund and the Corporation as
independent accountants since each such Fund's inception.
Each Fund has been advised by its independent accountants that they have
no direct or material indirect financial interest in the Fund. Representatives
of the firm of Coopers & Lybrand and Price Waterhouse are expected to be
present at the Shareholders Meeting and will be available to make a statement,
if they desire to do so, and to respond to appropriate questions which the
shareholders may wish to address to them.
INTERMEDIATE, LONG-TERM AND MONEY FUNDS
4. PROPOSAL TO AMEND THE CORPORATION'S ARTICLES OF INCORPORATION TO REMOVE
THE REQUIREMENT THAT STOCK CERTIFICATES BE ISSUED TO FUND SHAREHOLDERS
Under the Corporation's Articles of Incorporation, the Corporation is
required to issue stock certificates for each of the Funds (other than the
Money Fund) to any shareholder who makes a written request for them in
accordance with established procedures. In the absence of a proper request,
the Corporation is not required to issue such certificates. After careful
consideration of this provision, the Board of Directors has determined that it
would be advantageous to the Corporation and its shareholders to amend the
Articles of Incorporation so as to remove this requirement in order to save
the Corporation the cost of issuing stock certificates for all series of the
Corporation, not just the Money Fund. The reasons for the proposed amendment
to the Articles of Incorporation are described below in more detail.
<PAGE>
REASONS FOR THE PROPOSAL
Several years ago, Maryland law was amended to eliminate the requirement
that a corporation issue stock certificates for its shares. The law was
adopted in recognition of a growing trend away from the issuance of stock
certificates to the issuance of book entry shares. Very few shareholders
request stock certificates. Nevertheless, because of the few shareholders that
do, the Corporation is required to maintain an inventory of stock certificates
for issuance to such shareholders. This results in printing, operational,
security, and transportation expenses to the Corporation, which are borne by
all shareholders. Further, holding securities in certificate form has certain
disadvantages for shareholders. First, a shareholder who wishes to redeem,
exchange or transfer shares represented by lost certificates must provide
notarized documents attesting to the loss and a check payable in an amount
equal to 2% of the value of the shares represented by such certificates in
order to purchase a surety bond to protect the Corporation against fraudulent
presentment. Only after these procedural steps have been taken can a new
certificate be issued or shares represented by the lost certificate
transferred, redeemed or exchanged. Second, shareholders who hold certificates
may not make telephone requests for redemption or exchange of their shares,
but must request such transactions in writing. The proposal if adopted, would
not affect shareholders wishing to collateralize their shares in connection
with loans. Such shareholders would still be able to accomplish this by
setting up a pledge registration through the Corporation's book entry share
system. The majority of the T. Rowe Price Funds do not issue stock
certificates. The elimination of certificates in the other T. Rowe Price Funds
has not proven to be disruptive and has not imposed undue hardships on
shareholders. Thus, the Directors do not believe it would be disruptive for
the Corporation.
It is the current intention of the Board of Directors not to eliminate
outstanding certificates. Thus, outstanding certificates would not be recalled
and only shares purchased after the effective date of the proposal, currently
contemplated as July 1, 1994, would be affected. However, at some time in the
future, the Board of Directors might determine to recall outstanding
certificates and replace them with book entry shares.
The Board of Directors of the Corporation has determined that the proposed
amendment to the Articles of Incorporation is advisable and have recommended
that the amendment be approved by shareholders.
The Board of Directors recommends that shareholders vote FOR the proposal.
INVESTMENT MANAGER
The Fund's investment manager is T. Rowe Price, a Maryland corporation,
100 East Pratt Street, Baltimore, Maryland 21202. The principal executive
officer of T. Rowe Price is George J. Collins, who together with Mr. Riepe,
Thomas H. Broadus, Jr., James E. Halbkat, Jr., Carter O. Hoffman, Henry H.
Hopkins, George A. Roche, John W. Rosenblum, Robert L. Strickland, M. David
Testa, and Philip C. Walsh, constitute its Board of Directors. The address of
each of these persons, with the exception of Messrs. Halbkat, Rosenblum,
Strickland and Walsh, is 100 East Pratt Street, Baltimore, Maryland 21202,
and, with the exception of Messrs. Halbkat, Rosenblum, Strickland, and Walsh,
all are employed by T. Rowe Price. Mr. Halbkat is President of U.S. Monitor
Corporation, a provider of public response systems, P.O. Box 23109, Hilton
Head Island, South Carolina 29925. Mr. Rosenblum, whose address is P.O. Box
6550, Charlottesville, Virginia 22906, is the Tayloe Murphy Professor at the
University of Virginia, and a director of: Chesapeake Corporation, a
manufacturer of paper products; Cadmus Communications Corp., a provider of
printing and communication services; Comdial Corporation, a manufacturer of
telephone systems for businesses; and Cone Mills Corporation, a textiles
producer. Mr. Strickland is Chairman of Lowe's Companies, Inc., a retailer of
specialty home supplies, 604 Two Piedmont Plaza Building, Winston-Salem, North
Carolina 27104. Mr. Walsh, whose address is Blue Mill Road, Morristown, New
Jersey 07960, is a consultant to Cyprus Amax Minerals Company, Englewood,
Colorado, and a director of Piedmont Mining Company, Charlotte, North
Carolina.
<PAGE>
The officers of the Funds (other than the nominees for reelection as
directors) and their positions with T. Rowe Price are as follows:
- - - ------------------------------------------------------------------------------
Officer Position with Fund Position with Manager
- - - ------------------------------------------------------------------------------
Paul W. Boltz* Vice President Vice President
Robert P. Campbell Vice President Vice President
Henry H. Hopkins Vice President Managing Director
Veena A. Kutler Vice President Vice President
Heather R. Landon Vice President Vice President
James M. McDonald Vice President Vice President
Edmund M. Notzon** Vice President Vice President
Joan R. Potee* Vice President Vice President
Edward A. Wiese* Executive Vice President Vice President
Lenora V. Hornung Secretary Vice President
Carmen F. Deyesu Treasurer Vice President
David S. Middleton Controller Vice President
Roger L. Fiery Assistant Vice President Vice President
Edward T. Schneider Assistant Vice President Assistant Vice President
Ingrid I. Vordemberge Assistant Vice President Employee
* Mr. Wiese is an Executive Vice President and Ms. Potee and Mr. Boltz are
Vice Presidents of the Corporation only. Mr. Wiese's date of birth is
April 12, 1959, and he has been employed by T. Rowe Price since June 25,
1984.
** Mr. Notzon is a Vice President of the GNMA Fund only.
The Funds have an Underwriting Agreement with T. Rowe Price Investment
Services, Inc. ("Investment Services"), a Transfer Agency Agreement with T.
Rowe Price Services, Inc. ("Price Services"), and an Agreement with T. Rowe
Price Retirement Plan Services, Inc. ("Retirement Services"), which are
wholly-owned subsidiaries of T. Rowe Price. In addition, the Funds have an
Agreement with T. Rowe Price to perform fund accounting services. James S.
Riepe, a Vice President and Trustee of the GNMA Fund and a Director and Vice
President of the Corporation, is Chairman of the Board of Price Services and
Retirement Services and President and Director of Investment Services. Henry
H. Hopkins, a Vice President of the GNMA Fund and the Corporation, is a Vice
President and Director of both Investment Services and Price Services and a
Vice President of Retirement Services. Edward T. Schneider, an Assistant Vice
President of the GNMA Fund and the Corporation, is a Vice President of Price
Services. Certain officers of the Funds own shares of the common stock of T.
Rowe Price, its only class of securities.
The following information pertains to transactions involving common stock
of T. Rowe Price, par value $.20 per share ("Stock"), during the period March
1, 1993 through February 28, 1994. There were no transactions during the
period by any director or officer of the Fund, or any director or officer of
T. Rowe Price which involved more than 1% of the outstanding Stock of T. Rowe
Price. These transactions did not involve, and should not be mistaken for,
transactions in the stock of the Fund.
During the period, the holders of certain options purchased a total of
371,535 shares of common stock at varying prices from $0.67 to $18.75 per
share. Pursuant to the terms of T. Rowe Price's Employee Stock Purchase Plan,
eligible employees of T. Rowe Price and its subsidiaries purchased an
aggregate of 95,380 shares at fair market value. Such shares were purchased in
the open market during this period for employees' accounts.
<PAGE>
The Company's Board of Directors has approved the purchase of up to
2,200,000 shares of its common stock in the open market. During the period,
the Company purchased 110,000 common shares under this plan, leaving 1,402,000
shares authorized for future repurchase at February 28, 1994.
During the period, T. Rowe Price issued 1,154,000 common stock options
with an exercise price of $28.13 per share to certain employees under terms of
the 1990 and 1993 Stock Incentive Plans.
An audited consolidated balance sheet of T. Rowe Price as of December 31,
1993, is included in this Proxy Statement.
INVESTMENT MANAGEMENT AGREEMENT
T. Rowe Price serves as investment manager to the Funds pursuant to their
respective Investment Management Agreements (each the "Management Agreement"
and collectively the "Management Agreements"). The date of each Fund's
Management Agreement and the date it was approved by the respective Fund's
shareholders is as follows:
Date of Shareholder
Management Approval
Fund Agreement Date
--------------------- --------------------- ---------------------
GNMA July 1, 1987 June 10, 1987
Intermediate July 1, 1990 June 14, 1990
Long-Term July 1, 1990 June 14, 1990
Money July 1, 1991 June 13, 1991
By their terms, the Management Agreements will continue in effect from year to
year as long as they are approved annually by the GNMA Fund's Board of
Trustees and by the Corporation's Board of Directors, on behalf of each Fund
(at a meeting called for that purpose) or by vote of a majority of each Fund's
outstanding shares. In either case, renewal of the Management Agreements must
be approved by a majority of the GNMA Fund's independent trustees and the
Corporation's independent directors. On March 1, 1994, the trustees of the
GNMA Fund and the directors of the Corporation, on behalf of each Fund,
including all of the independent directors/trustees, voted to extend the
Management Agreements for an additional period of one year, commencing May 1,
1994, and terminating April 30, 1995. Each Management Agreement is subject to
termination by either party without penalty on 60 days' written notice to the
other and will terminate automatically in the event of assignment.
Under each Management Agreement, T. Rowe Price provides each Fund with
discretionary investment services. Specifically, T. Rowe Price is responsible
for supervising and directing the investments of each Fund in accordance with
the Funds' investment objectives, programs, and restrictions as provided in
their prospectuses and Statements of Additional Information. T. Rowe Price is
also responsible for effecting all securities transactions on behalf of the
Funds, including the negotiation of commissions and the allocation of
principal business and portfolio brokerage. In addition to these services, T.
Rowe Price provides the Funds with certain corporate administrative services,
including: maintaining each Fund's corporate existence, corporate records, and
registering and qualifying Fund shares under federal and state laws;
monitoring the financial, accounting, and administrative functions of the
Funds; maintaining liaison with the agents employed by the Funds, such as each
Fund's custodian and transfer agent; assisting the Funds in the coordination
of such agents' activities; and permitting T. Rowe Price's employees to serve
as officers, directors, and committee members of the Funds without cost to the
Fund.
<PAGE>
Each Fund's Management Agreement also provides that T. Rowe Price, 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.
The Management Agreement provides that each Fund will bear all expenses of
its operations not specifically assumed by T. Rowe Price. However, in
compliance with certain state regulations, T. Rowe Price will reimburse the
Funds for any expenses (excluding interest, taxes, brokerage, other
expenditures which are capitalized in accordance with generally accepted
accounting principles, and extraordinary expenses) which in any year exceed
the limits prescribed by any state in which the Funds' shares are qualified
for sale. Presently, the most restrictive expense ratio limitation imposed by
any state is 2.5% of the first $30 million of the Fund's average daily net
assets, 2% of the next $70 million of such assets, and 1.5% of net assets in
excess of $100 million. For the purpose of determining whether a Fund is
entitled to reimbursement, the expenses of the Fund are calculated on a
monthly basis. If the Fund is entitled to reimbursement, that month's
management fee will be reduced or postponed, with any adjustment made after
the end of the year.
For its services to each Fund under the Management Agreement, T. Rowe
Price is paid a management fee ("Management Fee") consisting of two elements:
a "group" fee ("Group Fee") and an "individual" fund fee ("Individual Fund
Fee"). The Group Fee varies and is based on the combined net assets of all of
the T. Rowe Price Funds distributed by T. Rowe Price Investment Services,
Inc., other than institutional or "private label" products. For this purpose,
the T. Rowe Price Funds include all Funds managed and sponsored by T. Rowe
Price as well as those Funds managed and sponsored by Rowe Price-Fleming
International, Inc. Each Fund pays, as its portion of the Group Fee, an amount
equal to the ratio of its daily net assets to the daily net assets of all the
T. Rowe Price Funds. At February 28, 1994, the Group Fee was 0.34% based on
combined T. Rowe Price Funds' assets of approximately $36.1 billion. In
addition, each Fund, except the Money Fund, pays a flat Individual Fund Fee
based on the net assets of each Fund. The following table lists each Fund's
individual fee, combined fee, net assets and management fee paid to T. Rowe
Price, at February 28, 1994.
Individual Combined Net Management
Fund Fee Fee Assets Fee
- - - ------------ ---------- -------- ------------ ------------
GNMA 0.15% 0.49% $883,391,000 $4,626,000
Intermediate 0.05% 0.39% 175,953,000 755,000
Long-Term 0.05% 0.39% 56,632,000 180,000
Money -- 0.34% 613,583,000 2,084,000
The following chart shows the ratio of operating expenses to average net
assets of the GNMA and Money Funds for the fiscal years ended February 28,
1994, February 28, 1993 and February 29, 1992.
Fund 1994 1993 1992
- - - ----- ----- ----- -----
GNMA 0.77% 0.79% 0.86%
Money 0.64% 0.65% 0.68%
<PAGE>
INTERMEDIATE AND LONG-TERM FUNDS
The following chart sets forth expense ratio limitations and the periods
for which they are effective. For each, T. Rowe Price has agreed to bear any
Fund expenses which would cause the Fund's ratio of expenses to average net
assets to exceed the indicated percentage limitations. The expenses borne by
T. Rowe Price are subject to reimbursement by the Fund through the indicated
reimbursement date, provided no reimbursement will be made if it would result
in the Fund's expense ratio exceeding its applicable limitation.
Expense
Ratio Reimbursement
Fund Limitation Period Limitation Date
- - - ------------- ------------------------------- ----------- -----------------
[S] [C] [C] [C]
Intermediate* March 1, 1993-February 28, 1995 0.80% February 28, 1997
Long-Term* March 1, 1993-February 28, 1995 0.80% February 28, 1997
* The Intermediate and Long-Term Funds previously operated under a 0.80%
limitation that expired February 28, 1993. The reimbursement period for this
limitation extends through February 28, 1995.
Pursuant to the present expense limitation, $61,000 of management fees
were not accrued for the Long-Term Fund for the year ended February 28, 1994.
Additionally, $303,000 of unaccrued fees from the prior period for the
Long-Term Fund are subject to reimbursement through February 28, 1995.
Pursuant to the present expense limitation, $77,000 of unaccrued 1993 fees for
the Intermediate Fund, representing the entire unaccrued balance, were
reimbursed to T. Rowe Price during the year ended February 28, 1994.
Each Fund's Management Agreement also provides that one or more additional
expense limitation periods (of the same or different time periods) may be
implemented after the expiration of the current expense limitation, and that
with respect to any such additional limitation period, the Fund may reimburse
T. Rowe Price, provided the reimbursement does not result in the Fund's
aggregate expenses exceeding the additional expense limitation.
PORTFOLIO TRANSACTIONS
In the following discussion "the Fund" is intended to refer to each Fund.
INVESTMENT OR BROKERAGE DISCRETION
Decisions with respect to the purchase and sale of portfolio securities on
behalf of the Fund are made by T. Rowe Price. T. Rowe Price is also
responsible for implementing these decisions, including the negotiation of
commissions and the allocation of portfolio brokerage and principal business.
The Fund's purchases and sales of portfolio securities are normally done on a
principal basis and do not involve the payment of a commission although they
may involve the designation of selling concessions. That part of the
discussion below relating solely to brokerage commissions would not normally
apply to the Fund. However, it is included because T. Rowe Price does manage a
significant number of common stock portfolios which do engage in agency
transactions and pay commissions and because some research and services
resulting from the payment of such commissions may benefit the Fund.
<PAGE>
HOW BROKERS AND DEALERS ARE SELECTED
FIXED INCOME SECURITIES
Fixed income securities are generally purchased from the issuer or a
primary market-maker acting as principal for the securities on a net basis,
with no brokerage commission being paid by the client, although the price
usually includes an undisclosed compensation. Transactions placed through
dealers serving as primary market-makers reflect the spread between the bid
and asked prices. Securities may also be purchased from underwriters at prices
which include underwriting fees.
T. Rowe Price may effect principal transactions on behalf of the Fund 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. T. Rowe Price may receive
brokerage and research services in connection with such designations in fixed
priced underwritings.
In purchasing and selling the Fund's portfolio securities, it is T. Rowe
Price's policy to obtain quality execution at the most favorable prices
through responsible brokers and dealers and, in the case of agency
transactions (in which the Fund does not generally engage), at competitive
commission rates. However, under certain conditions, the Fund may pay higher
brokerage commissions in return for brokerage and research services. 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 T. Rowe Price 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.
HOW EVALUATIONS ARE MADE OF THE OVERALL REASONABLENESS OF BROKERAGE
COMMISSIONS PAID
On a continuing basis, T. Rowe Price seeks to determine what levels of
commission rates are reasonable in the marketplace for transactions executed
on behalf of the Fund. In evaluating the reasonableness of commission rates,
T. Rowe Price considers: (a) historical commission rates, both before and
since rates have been fully negotiable; (b) rates which other institutional
investors are paying, based on available public information; (c) rates quoted
by brokers and dealers; (d) the size of a particular transaction, in terms of
the number of shares, dollar amount, and number of clients involved; (e) the
complexity of a particular transaction in terms of both execution and
settlement; (f) the level and type of business done with a particular firm
over a period of time; and (g) the extent to which the broker or dealer has
capital at risk in the transaction.
<PAGE>
DESCRIPTION OF RESEARCH SERVICES RECEIVED FROM BROKERS AND DEALERS
T. Rowe Price receives a wide range of research services from brokers and
dealers. These services include information on the economy, industries, groups
of securities, individual companies, statistical information, accounting and
tax law interpretations, political developments, legal developments affecting
portfolio securities, technical market action, pricing and appraisal services,
credit analysis, risk measurement analysis, performance analysis and analysis
of corporate responsibility issues. These services provide both domestic and
international perspective. Research services are received primarily in the
form of written reports, computer generated services, telephone contacts and
personal meetings with security analysts. In addition, such services may be
provided in the form of meetings arranged with corporate and industry
spokespersons, economists, academicians and government representatives. In
some cases, research services are generated by third parties but are provided
to T. Rowe Price by or through broker-dealers.
Research services received from brokers and dealers are supplemental to T.
Rowe Price's own research effort and, when utilized, are subject to internal
analysis before being incorporated by T. Rowe Price into its investment
process. As a practical matter, it would not be possible for T. Rowe Price to
generate all of the information presently provided by brokers and dealers. T.
Rowe Price pays cash for certain research services received from external
sources. T. Rowe Price also allocates brokerage for research services which
are available for cash. While receipt of research services from brokerage
firms has not reduced T. Rowe Price's normal research activities, the expenses
of T. Rowe Price could be materially increased if it attempted to generate
such additional information through its own staff. To the extent that research
services of value are provided by brokers or dealers, T. Rowe Price may be
relieved of expenses which it might otherwise bear.
T. Rowe Price has a policy of not allocating brokerage business in return
for products or services other than brokerage or research services. In
accordance with the provisions of Section 28(e) of the Securities Exchange Act
of 1934, T. Rowe Price may from time to time receive services and products
which serve both research and non-research functions. In such event, T. Rowe
Price makes a good faith determination of the anticipated research and
non-research use of the product or service and allocates brokerage only with
respect to the research component.
COMMISSIONS TO BROKERS WHO FURNISH RESEARCH SERVICES
With regard to the payment of brokerage commissions, T. Rowe Price 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 an account to pay commission rates in excess of those another broker or
dealer would have charged for effecting the same transaction, if the adviser
determines in good faith that the commission paid is reasonable in relation to
the value of the brokerage and research services provided. The determination
may be viewed in terms of either the particular transaction involved or the
overall responsibilities of the adviser with respect to the accounts over
which it exercises investment discretion. Accordingly, while T. Rowe Price
cannot readily determine the extent to which commission rates charged by
broker-dealers reflect the value of their research services, T. Rowe Price
would expect to assess the reasonableness of commissions in light of the total
brokerage and research services provided by each particular broker.
<PAGE>
INTERNAL ALLOCATION PROCEDURES
T. Rowe Price has a policy of not precommitting a specific amount of
business to any broker or dealer over any specific time period. Historically,
the majority of brokerage placement has been determined by the needs of a
specific transaction such as market-making, availability of a buyer or seller
of a particular security, or specialized execution skills. However, T. Rowe
Price does have an internal brokerage allocation procedure for that portion of
its discretionary client brokerage or selling concessions business where
special needs do not exist, or where the business may be allocated among
several brokers or dealers which are able to meet the needs of the
transaction.
Each year, T. Rowe Price assesses the contribution of the brokerage and
research services provided by brokers and dealers, and attempts to allocate a
portion of its brokerage and selling concession business in response to these
assessments. Research analysts, counselors, various investment committees, and
the Trading Department each seek to evaluate the brokerage and research
services they receive from brokers and dealers and make judgments as to the
level of business which would recognize such services. In addition, brokers
and dealers sometimes suggest a level of business they would like to receive
in return for the various brokerage and research services they provide. Actual
business received by any firm may be less than the suggested allocations but
can, and often does, exceed the suggestions, because the total business is
allocated on the basis of all the considerations described above. In no case
is a broker or dealer excluded from receiving business from T. Rowe Price
because it has not been identified as providing research services.
MISCELLANEOUS
T. Rowe Price's brokerage allocation policy is consistently applied to all
its fully discretionary accounts, which represent a substantial majority of
all assets under management. Research services furnished by brokers through
which T. Rowe Price effects securities transactions may be used in servicing
all accounts (including non-Fund accounts) managed by T. Rowe Price.
Conversely, research services received from brokers which execute transactions
for the Fund are not necessarily used by T. Rowe Price exclusively in
connection with the management of the Fund.
From time to time, orders for clients may be placed through a computerized
transaction network.
The Fund does not allocate 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.
Some of T. Rowe Price's other clients have investment objectives and
programs similar to those of the Fund. T. Rowe Price 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 T. Rowe Price's policy not to favor one client over another
in making recommendations or in placing orders. T. Rowe Price 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. T. Rowe Price 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.
<PAGE>
To the extent possible, T. Rowe Price intends to recapture solicitation
fees paid in connection with tender offers through T. Rowe Price Investment
Services, Inc., the Fund's distributor. At the present time, T. Rowe Price
does not recapture commissions or underwriting discounts or selling group
concessions in connection with taxable securities acquired in underwritten
offerings. T. Rowe Price does, however, attempt to negotiate elimination of
all or a portion of the selling-group concession or underwriting discount when
purchasing tax-exempt municipal securities on behalf of its clients in
underwritten offerings.
OTHER
The Funds engaged in portfolio transactions involving broker-dealers in
the following amounts for the fiscal years ended February 28, 1994, February
28, 1993 and February 29, 1992:
Fund 1994 1993 1992
- - - ----------------------- ---------------- ---------------- ------------------
GNMA $2,306,951,000 $1,528,454,000 $ 1,438,762,000
Intermediate 81,970,000 91,923,000 218,317,000
Long-Term 142,513,000 192,941,000 192,774,000
Money 3,457,951,000 2,804,196,000 23,290,378,000
The entire amount for each Fund for each of these years represented
principal transactions as to which the Funds have no knowledge of the profits
or losses realized by the respective broker-dealers.
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 each Fund, or in some cases, to each Fund,
for the fiscal years ended February 28, 1994, February 28, 1993 and February
29, 1992, are shown below.
Fund 1994 1993 1992
- - - ---------------------- ---------------- ---------------- ------------------
GNMA 91% 91% 99%
Intermediate 85% 98% 100%
Long-Term 98% 99% 100%
Money 66% 75% 60%
The portfolio turnover rates of the following Funds for the fiscal years
ended February 28, 1994, February 28, 1993 and February 29, 1992, are as
follows:
Fund 1994 1993 1992
- - - ---------------------- ---------------- ---------------- ------------------
GNMA 92.5% 94.2% 66.0%
Intermediate 20.2% 22.8% 91.4%
Long-Term 59.4% 165.4% 162.4%
OTHER BUSINESS
The management of each Fund knows of no other business which may come
before the meeting. However, if any additional matters are properly presented
at the meeting, it is intended that the persons named in the enclosed proxy,
or their substitutes, will vote such proxy in accordance with their judgment
on such matters.
<PAGE>
GENERAL INFORMATION
The number of outstanding shares, the number of shares registered to the
T. Rowe Price Trust Company, and the percentage of those shares registered to
the T. Rowe Price Trust Company as Trustee for participants in the T. Rowe
Price Funds Retirement Plan for Self-Employed (Keogh), as Trustee for
participants in T. Rowe Price Funds 401(k) plans, as Custodian for
participants in the T. Rowe Price Funds Individual Retirement Account (IRA),
as Custodian for participants in various 403(b)(7) plans, and as Custodian for
various Profit Sharing and Money Purchase plans for each Fund, as of February
28, 1994, are shown below.
Shares Percent
Registered Representing
Shares to T. Rowe Price Outstanding
Fund Outstanding Trust Company Shares
- - - ---------------- ------------------ ----------------------- ------------------
GNMA 91,980,000 28,425,680 30.9
Intermediate 33,100,000 9,379,621 28.3
Long-Term 5,413,000 1,790,884 33.1
Money 613,968,000 136,417,338 22.2
The T. Rowe Price Trust Company has no beneficial interest in such accounts,
nor in any other account for which it may serve as trustee or custodian.
As of February 28, 1994, a wholly-owned subsidiary of T. Rowe Price owned
directly 17,720, 138,935 and 72,789 shares of the outstanding stock of the
GNMA, Intermediate and Long-Term Funds, respectively, representing 0.02%,
0.42% and 1.34%, respectively. In addition, as of February 28, 1994, T. Rowe
Price owned 4,923,332 shares of the outstanding stock of the Money Fund
representing approximately 0.80%. As of February 28, 1994, Yachtcrew & Co.,
FBO Spectrum Income Account, State Street Bank & Trust Co., 1776 Heritage
Drive-4W, North Quincy, MA 02171-2101 and T. Rowe Price Trust Co. Inc., Attn:
Installation Team for Conversion Assets, New England Electric Plan, 25
Research Drive, Westborough, MA 01582 owned beneficially 9,672,314 and
49,696,762 shares of the GNMA and Money Funds, respectively, representing
approximately 10.5% and 8.0%, respectively.
The following chart indicates the number of shares beneficially owned,
directly or indirectly, by the officers and trustees of the GNMA Fund and by
the officers and directors of the Corporation, on behalf of each Fund, and the
percentage this ownership represents of each Fund's outstanding shares.
Shares
Beneficially % Ownership of
Owned Directly Outstanding
Fund or Indirectly Shares
- - - -------------------------- -------------------------- ---------------------
GNMA 22,389 0.02
Intermediate 47,395 0.14
Long-Term 23,210 0.43
Money 530,570 0.09
The ownership of the officers and directors reflects their proportionate
interests, if any, in 1,401, 23,385, and 5,873 shares of the GNMA,
Intermediate, and Long-Term Funds, respectively, which are owned by a
wholly-owned subsidiary of T. Rowe Price, their proportionate interests in
401,252 shares of the Money Fund owned by T. Rowe Price and their interests in
7,464, 1,910 and 4,138 shares, respectively, owned by the T. Rowe Price
Associates, Inc. Profit Sharing Trust.
<PAGE>
A copy of the Annual Report of each Fund for the year ended February 28,
1994, including financial statements, has been mailed to shareholders of
record at the close of business on that date and to persons who became
shareholders of record between that time and the close of business on April 8,
1994, the record date for the determination of the shareholders who are
entitled to be notified of and to vote at the meeting.
ANNUAL MEETINGS (INTERMEDIATE, LONG-TERM AND MONEY FUNDS)
Under Maryland General Corporation Law, any corporation registered under
the 1940 Act is not required to hold an annual meeting in any year in which
the 1940 Act does not require action by shareholders on the election of
directors. The Board of Directors of the Corporation, on behalf of the Funds,
has determined that in order to avoid the significant expense associated with
holding annual meetings, including legal, accounting, printing and mailing
fees incurred in preparing proxy materials, each Fund will take advantage of
these Maryland law provisions. Accordingly, no annual meetings shall be held
in any year in which a meeting is not otherwise required to be held by the
1940 Act for the election of Directors unless the Board of Directors otherwise
determines that there should be an annual meeting. However, special meetings
will be held in accordance with applicable law or when otherwise determined by
the Board of Directors. The Corporation's By-Laws reflect this policy.
SHAREHOLDER PROPOSALS
If a shareholder wishes to present a proposal to be included in the Proxy
Statement for the next Annual Meeting, and if such Annual Meeting is held in
June, 1995, such proposal must be submitted in writing and received by the
Corporation's Secretary at its Baltimore office prior to December 23, 1994.
FINANCIAL STATEMENT OF INVESTMENT MANAGER
The audited consolidated balance sheet of T. Rowe Price which follows is
required by the 1940 Act, and should not be confused with, or mistaken for,
the financial statements of T. Rowe Price GNMA Fund and the T. Rowe Price U.S.
Treasury Funds, Inc., on behalf of U.S. Treasury Intermediate Fund, U.S.
Treasury Long-Term Fund and U.S. Treasury Money Fund, which are set forth in
the Annual Report for each Fund.
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
(in thousands)
ASSETS
Cash and cash equivalents ................................... $ 46,218
Accounts receivable ......................................... 43,102
Investments in sponsored mutual funds
Short-term bond and money market mutual funds held
as trading securities ................................... 27,647
Other funds held as available-for-sale securities ......... 69,423
Partnership and other investments ........................... 19,606
Property and equipment ...................................... 39,828
Goodwill and deferred expenses .............................. 9,773
Other assets ................................................ 7,803
-------------
$263,400
-------------
-------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses ..................... $ 15,111
Accrued retirement and other compensation costs ........... 19,844
Income taxes payable ...................................... 5,097
Dividends payable ......................................... 3,784
Debt ...................................................... 12,915
Deferred revenues ......................................... 1,548
Minority interests in consolidated subsidiaries ........... 9,148
-------------
Total liabilities ..................................... 67,447
-------------
Commitments and contingent liabilities
Stockholders' equity
Common stock, $.20 par value--authorized 48,000,000 shares;
issued and outstanding 29,095,039 shares ................ 5,819
Capital in excess of par value ............................ 1,197
Unrealized security holding gains ......................... 5,345
Retained earnings ......................................... 183,592
-------------
Total stockholders' equity ............................ 195,953
-------------
$263,400
-------------
-------------
The accompanying notes are an integral part of the consolidated balance sheet.
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Associates, Inc. and its consolidated subsidiaries (the
"Company") provide investment advisory and administrative services to
sponsored mutual funds and investment products, and to private accounts of
other institutional and individual investors.
BASIS OF PREPARATION
The Company's financial statements are prepared in accordance with generally
accepted accounting principles.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of all majority
owned subsidiaries and, by virtue of the Company's controlling interest, its
50%-owned subsidiary, Rowe Price-Fleming International, Inc. ("RPFI"). All
material intercompany accounts are eliminated in consolidation.
CASH EQUIVALENTS
For purposes of financial statement disclosure, cash equivalents consist of
all short-term, highly liquid investments including certain money market
mutual funds and all overnight commercial paper investments. The cost of these
investments is equivalent to fair value.
INVESTMENTS IN SPONSORED MUTUAL FUNDS
On December 31, 1993, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," which requires the Company to state its mutual fund
investments at fair value and to classify these holdings as either trading
(held for only a short period of time) or available-for-sale securities.
Unrealized holding gains on available-for-sale securities at December 31, 1993
are reported net of income tax effects in a separate component of
stockholders' equity.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially expose the Company to concentrations
of credit risk as defined by SFAS No. 105 consist primarily of investments in
sponsored money market and bond mutual funds and accounts receivable. Credit
risk is believed to be minimal in that counterparties to these financial
instruments have substantial assets including the diversified portfolios under
management by the Company which aggregate $54.4 billion at December 31, 1993.
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PARTNERSHIP AND OTHER INVESTMENTS
The Company invests in various partnerships and ventures including those
sponsored by the Company. These investments which hold equity securities,
venture capital investments, debt securities and real estate are stated at
cost adjusted for the Company's share of the earnings or losses of the
investees subsequent to the date of investment. Because the majority of these
entities carry their investments at fair value and include unrealized gains
and losses in their reported earnings, the Company's carrying value for these
investments approximates fair value.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost net of accumulated depreciation and
amortization computed using the straight-line method. Provisions for
depreciation and amortization are based on the following estimated useful
lives: computer and communications equipment and furniture and other
equipment, 3 to 7 years; building, 40 years; leased land, the 50-year lease
term; and leasehold improvements, the shorter of their useful lives or the
remainder of the lease term.
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET
NOTE 1--INVESTMENTS IN SPONSORED MUTUAL FUNDS
Investments in sponsored money market mutual funds, which are classified as
cash equivalents in the accompanying consolidated financial statements,
aggregate $45,272,000 at December 31, 1993.
The Company's investments in sponsored mutual funds held as
available-for-sale at December 31, 1993 (in thousands) includes:
Gross
unrealized Aggregate
Aggregate holding fair
cost gains value
-------------- ---------------- ----------------
Stock funds .............. $34,990 $7,025 $42,015
Bond funds ............... 26,190 1,218 27,408
-------------- ---------------- ----------------
Total .................. $61,180 $8,243 $69,423
-------------- ---------------- ----------------
-------------- ---------------- ----------------
The Company provides investment advisory and administrative services to
the T. Rowe Price family of mutual funds which had aggregate assets under
management at December 31, 1993 of $34.7 billion. All services rendered by the
Company are provided under contracts that set forth the services to be
provided and the fees to be charged. These contracts are subject to periodic
review and approval by each of the funds' boards of directors and, with
respect to investment advisory contracts, also by the funds' shareholders.
Services rendered to the funds accounted for 71% of 1993 revenues.
Accounts receivable from the sponsored mutual funds aggregated $21,741,000
at December 31, 1993.
NOTE 2--PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1993 (in thousands) consists of:
Computer and communications equipment .......... $31,431
Building and leased land ....................... 19,756
Furniture and other equipment .................. 13,889
Leasehold improvements ......................... 4,691
---------------------
69,767
Accumulated depreciation and amortization ...... (29,939)
---------------------
$39,828
---------------------
---------------------
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (CONTINUED)
NOTE 3--GOODWILL AND DEFERRED EXPENSES
On September 2, 1992, the Company acquired an investment management subsidiary
of USF&G Corporation and combined six USF&G mutual funds with aggregate net
assets of $.5 billion into the T. Rowe Price family of funds. The total
transaction cost which has been recognized using the purchase method of
accounting was approximately $11,024,000, including goodwill of $8,139,000
which is being amortized over 11 years using the straight-line method. Prepaid
non-compete and transition services agreements totaling $2,500,000 are being
amortized over their three-year life. Accumulated amortization at December 31,
1993 aggregates $2,216,000.
Goodwill of $1,980,000 from an earlier corporate acquisition is being
amortized over 40 years using the straight-line method. Accumulated
amortization was $1,039,000 at December 31, 1993.
NOTE 4--DEBT
In June 1991, the Company completed the long-term financing arrangements for
its administrative services facility. Terms of the $13,500,000 secured
promissory note with Confederation Life Insurance Company include an interest
rate of 9.77%, monthly principal and interest payments totaling $128,000 for
10 years, and a final principal payment of $9,845,000 in 2001. A prepayment
option is available under the terms of the note; however, the payment of a
substantial premium would have been required to retire the debt at December
31, 1993. Related debt issuance costs of $436,000 are included in deferred
expenses and are being amortized over the life of the loan to produce an
effective annual interest rate of 10.14%.
The outstanding principal balance for this note was $12,904,000 at
December 31, 1993. A fair value of $16,030,000 was estimated based on the cost
of risk-free assets that could be acquired to extinguish the obligation at
December 31, 1993.
A maximum of $20,000,000 is available to the Company under unused bank
lines of credit at December 31, 1993.
NOTE 5--INCOME TAXES
Deferred income taxes arise from differences between taxable income for
financial statement and income tax return purposes and are calculated using
the liability method prescribed by SFAS No. 109, "Accounting for Income
Taxes."
The net deferred tax liability of $2,596,000 included in income taxes
payable at December 31, 1993 consists of total deferred tax liabilities of
$5,609,000 and total deferred tax assets of $3,013,000. Deferred tax
liabilities include $2,898,000 arising from unrealized holding gains on
available-for-sale securities, $1,353,000 arising from unrealized capital
gains allocated from the Company's partnership investments, and $677,000 from
differences in the recognition of depreciation expense. Deferred tax assets
include $1,100,000 from differences in the recognition of the costs of the
defined benefit retirement plan and postretirement benefits.
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (CONTINUED)
NOTE 6--COMMON STOCK AND EMPLOYEE STOCK INCENTIVE PLANS
SHARES AUTHORIZED
At December 31, 1993, the Company had reserved 8,151,315 shares of its
unissued common stock for issuance upon the exercise of stock options and
420,000 shares for issuance under an employee stock purchase plan.
SHARE REPURCHASES
The Company's board of directors has authorized the future repurchase of up to
1,432,000 common shares at December 31, 1993.
EXECUTIVE STOCK
At December 31, 1993, there were outstanding 1,226,540 shares of common stock
("Executive Stock") which were sold to certain officers of the Company in 1982
at a discount. These shares are subject to restrictions which require payment
of the discount of $.32 per share to the Company at the earlier of the sale of
such stock or termination of employment.
STOCK INCENTIVE PLANS
The following table summarizes the status of noncompensatory stock options
granted at market value to certain officers and directors of the Company.
<TABLE>
<CAPTION>
OPTIONS OPTIONS
UNEXERCISED OPTIONS GRANTED UNEXERCISED EXERCISABLE
YEAR OPTIONS AT EXERCISED (CANCELED) OPTIONS AT AT
OF DECEMBER 31, DURING DURING DECEMBER 31, DECEMBER 31, EXERCISE
GRANT 1992 1993 1993 1993 1993 PRICE
- - - ------ ------------- --------- ----------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1983-4 53,000 (30,600) -- 22,400 22,400 $.67 & $.75
1987 309,410 (68,064) -- 241,346 241,346 $5.38 & $9.38
1988 359,000 (66,586) -- 292,414 292,414 $7.94
1989 632,280 (46,288) (5,600) 580,392 312,404 $11.38
1990 681,500 (83,387) (11,800) 586,313 141,313 $7.19 & $8.50
1991 811,450 (37,000) (14,000) 760,450 283,450 $17.00
1992 926,000 (11,600) (27,400) 887,000 168,600 $18.75
1993 -- -- 1,154,000 1,154,000 -- $28.13
--------- ------- --------- --------- ---------
3,772,640 (343,525) 1,095,200 4,524,315 1,461,927
--------- -------- --------- --------- ---------
--------- -------- --------- --------- ---------
</TABLE>
The right to exercise stock options generally vests over the five-year period
following the grant. After the tenth year following the grant, the right to
exercise the related stock options lapses and the options are canceled.
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (CONTINUED)
NOTE 7--EMPLOYEE RETIREMENT PLANS
The Company sponsors two defined contribution retirement plans: a
profit-sharing plan based on participant compensation and a 401(k) plan.
The Company also has a defined benefit plan covering those employees whose
annual base salaries do not exceed a specified salary limit. Participant
benefits are based on the final month's base pay and years of service
subsequent to January 1, 1987. The Company's funding policy is to contribute
annually the maximum amount that can be deducted for federal income tax
purposes. The following table sets forth the plan's funded status and the
amounts recognized in the Company's consolidated balance sheet (in thousands)
at December 31, 1993.
Actuarial present value of
Accumulated benefit obligation for service rendered
Vested .................................................. $ 780
Non-vested .............................................. 1,362
-----
Total ................................................... 2,142
Obligation attributable to estimated future
compensation increases .................................. 2,594
------
Projected benefit obligation .............................. 4,736
Plan assets held in sponsored mutual funds, at fair value ... 2,594
------
Projected benefit obligation in excess of plan assets ....... 2,142
Unrecognized loss from decreases in discount rate ........... 407
------
Accrued retirement costs .................................... $1,735
------
------
Discount rate used in determining actuarial present values .. 6.40%
------
------
NOTE 8--COMMITMENTS AND CONTINGENT LIABILITIES
The Company is a minority partner in the joint venture which owns the land and
building in which the Company leases its corporate offices. Future minimum
rental payments under the Company's lease agreement are $3,110,000 in 1994 and
1995, $3,220,000 in 1996, $3,769,000 in 1997 and 1998, and $33,755,000 in 1999
through 2006.
The Company leases office facilities and equipment under other
noncancelable operating leases. Future minimum rental payments under these
leases aggregate $4,621,000 in 1994, $4,123,000 in 1995, $1,776,000 in 1996,
$1,259,000 in 1997, $696,000 in 1998, and $4,806,000 in later years.
At December 31, 1993, the Company had outstanding commitments to invest an
additional $6,757,000 in various investment partnerships and ventures.
The Company has contingent obligations at December 31, 1993 under a
$500,000 direct pay letter of credit expiring not later than 1999 and a
$780,000 standby letter of credit which is renewable annually.
<PAGE>
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (CONTINUED)
NOTE 8--COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Consolidated stockholders' equity at December 31, 1993 includes
$32,635,000 which is restricted as to use under various regulations and
agreements to which the Company and its subsidiaries are subject in the
ordinary course of business.
From time to time, the Company is a party to various employment-related
claims, including claims of discrimination, before federal, state and local
administrative agencies and courts. The Company vigorously defends itself
against these claims. In the opinion of management, after consultation with
counsel, it is unlikely that any adverse determination in one or more pending
employment-related claims would have a material adverse effect on the
Company's financial position.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
of T. Rowe Price Associates, Inc.
In our opinion, the accompanying consolidated balance sheet presents fairly,
in all material respects, the financial position of T. Rowe Price Associates,
Inc. and its subsidiaries at December 31, 1993 in conformity with generally
accepted accounting principles. This financial statement is the responsibility
of the Company's management; our responsibility is to express an opinion on
this financial statement based on our audit. We conducted our audit in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE
Baltimore, Maryland
January 25, 1994
<PAGE>
T. ROWE PRICE LOGO PROXY
- - - ------------------------------------------------------------------------------
INSTRUCTIONS:
1. Cast your vote by checking the appropriate boxes on the reverse side. If
you do not check a box, your vote will be cast FOR that proposal.
2. Sign and date the card below.
3. Please return the signed card promptly using the enclosed postage paid
envelope, even if you will be attending the meeting.
4. Please do not enclose checks or any other correspondence.
Please fold and detach card at perforation before mailing.
- - - ------------------------------------------------------------------------------
U.S. TREASURY LONG-TERM FUND MEETING: 10:30 A.M. EASTERN TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints George J. Collins and James S. Riepe, as
proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all shares of stock of the
Fund, which the undersigned is entitled to vote at the Annual Meeting of
Shareholders to be held on Wednesday, June 8, 1994, at the time indicated
above, at the offices of the Fund, 100 East Pratt Street, Baltimore, Maryland
21202, and at any and all adjournments thereof, with respect to the matters
set forth below and described in the Notice of Annual Meeting and Proxy
Statement dated April 22, 1994, receipt of which is hereby acknowledged.
Please sign exactly as name appears.
Only authorized officers should sign for
corporations. For information as to the
voting of stock registered in more than
one name, see page 3 of the Notice of
Annual Meeting and Proxy Statement.
Dated: -------------------------- , 1994
----------------------------------------
----------------------------------------
Signature(s)
CUSIP#77957T206/fund#067
<PAGE>
T. ROWE PRICE LOGO WE NEED YOUR PROXY VOTE BEFORE JUNE 8, 1994
- - - ------------------------------------------------------------------------------
Please refer to the Proxy Statement discussion of each of these matters.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL
PROPOSALS.
Please fold and detach card at perforation before mailing.
- - - ------------------------------------------------------------------------------
1. Election of directors. FOR all nominees WITHHOLD AUTHORITY 1.
listed below (except to vote for all nominees
as marked to the listed below
contrary)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Robert P. Black Calvin W. Burnett George J. Collins Anthony W. Deering
F. Pierce Linaweaver James S. Riepe John G. Schreiber Charles P. Smith
Peter VanDyke Anne Marie Whittemore
2. Approve changes to the FOR EACH POLICY AGAINST ABSTAIN 2.
Fund's fundamental LISTED BELOW (except ALL ALL
policies. as marked to the
contrary)
IF YOU DO NOT WISH TO APPROVE A POLICY CHANGE, PLEASE CHECK THE APPROPRIATE
BOX BELOW:
(A) Borrowing (D) Single Issuer (G) Senior (J) Short Sales
Securities
(B) Industry (E) Voting (H) Purchasing on (K) Commodities
Concentration Securities Margin and Futures
(C) Lending (F) Real Estate (I) Pledging Assets
3. Ratify the selection of Coopers & Lybrand as independent accountants.
FOR AGAINST ABSTAIN 3.
4. Amend Articles of Incorporation to delete requirement that stock
certificates be issued to shareholders. FOR AGAINST ABSTAIN 4.
I authorize the Proxies, in their discretion, to vote upon such other business
as may properly come before the meeting.
CUSIP#77957T206/fund#067
<PAGE>
T. ROWE PRICE LOGO PROXY
- - - ------------------------------------------------------------------------------
INSTRUCTIONS:
1. Cast your vote by checking the appropriate boxes on the reverse side. If
you do not check a box, your vote will be cast FOR that proposal.
2. Sign and date the card below.
3. Please return the signed card promptly using the enclosed postage paid
envelope, even if you will be attending the meeting.
4. Please do not enclose checks or any other correspondence.
Please fold and detach card at perforation before mailing.
- - - ------------------------------------------------------------------------------
U.S. TREASURY INTERMEDIATE FUND MEETING: 10:30 A.M. EASTERN TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints George J. Collins and James S. Riepe, as
proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all shares of stock of the
Fund, which the undersigned is entitled to vote at the Annual Meeting of
Shareholders to be held on Wednesday, June 8, 1994, at the time indicated
above, at the offices of the Fund, 100 East Pratt Street, Baltimore, Maryland
21202, and at any and all adjournments thereof, with respect to the matters
set forth below and described in the Notice of Annual Meeting and Proxy
Statement dated April 22, 1994, receipt of which is hereby acknowledged.
Please sign exactly as name appears.
Only authorized officers should sign for
corporations. For information as to the
voting of stock registered in more than
one name, see page 3 of the Notice of
Annual Meeting and Proxy Statement.
Dated: -------------------------- , 1994
----------------------------------------
----------------------------------------
Signature(s)
CUSIP#77957T107/fund#066
<PAGE>
T. ROWE PRICE LOGO WE NEED YOUR PROXY VOTE BEFORE JUNE 8, 1994
- - - ------------------------------------------------------------------------------
Please refer to the Proxy Statement discussion of each of these matters.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL
PROPOSALS.
Please fold and detach card at perforation before mailing.
- - - ------------------------------------------------------------------------------
1. Election of directors. FOR all nominees WITHHOLD AUTHORITY 1.
listed below (except to vote for all nominees
as marked to the listed below
contrary)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Robert P. Black Calvin W. Burnett George J. Collins Anthony W. Deering
F. Pierce Linaweaver James S. Riepe John G. Schreiber Charles P. Smith
Peter VanDyke Anne Marie Whittemore
2. Approve changes to the FOR EACH POLICY AGAINST ABSTAIN 2.
Fund's fundamental LISTED BELOW (except ALL ALL
policies. as marked to the
contrary)
IF YOU DO NOT WISH TO APPROVE A POLICY CHANGE, PLEASE CHECK THE APPROPRIATE
BOX BELOW:
(A) Borrowing (D) Single Issuer (G) Senior (J) Short Sales
Securities
(B) Industry (E) Voting (H) Purchasing on (K) Commodities
Concentration Securities Margin and Futures
(C) Lending (F) Real Estate (I) Pledging Assets
3. Ratify the selection of Coopers & Lybrand as independent accountants.
FOR AGAINST ABSTAIN 3.
4. Amend Articles of Incorporation to delete requirement that stock
certificates be issued to shareholders. FOR AGAINST ABSTAIN 4.
I authorize the Proxies, in their discretion, to vote upon such other business
as may properly come before the meeting.
CUSIP#77957T107/fund#066
<PAGE>
T. ROWE PRICE LOGO PROXY
- - - ------------------------------------------------------------------------------
INSTRUCTIONS:
1. Cast your vote by checking the appropriate boxes on the reverse side. If
you do not check a box, your vote will be cast FOR that proposal.
2. Sign and date the card below.
3. Please return the signed card promptly using the enclosed postage paid
envelope, even if you will be attending the meeting.
4. Please do not enclose checks or any other correspondence.
Please fold and detach card at perforation before mailing.
- - - ------------------------------------------------------------------------------
U.S. TREASURY MONEY FUND MEETING: 10:30 A.M. EASTERN TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints George J. Collins and James S. Riepe, as
proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all shares of stock of the
Fund, which the undersigned is entitled to vote at the Annual Meeting of
Shareholders to be held on Wednesday, June 8, 1994, at the time indicated
above, at the offices of the Fund, 100 East Pratt Street, Baltimore, Maryland
21202, and at any and all adjournments thereof, with respect to the matters
set forth below and described in the Notice of Annual Meeting and Proxy
Statement dated April 22, 1994, receipt of which is hereby acknowledged.
Please sign exactly as name appears.
Only authorized officers should sign for
corporations. For information as to the
voting of stock registered in more than
one name, see page 3 of the Notice of
Annual Meeting and Proxy Statement.
Dated: -------------------------- , 1994
----------------------------------------
----------------------------------------
Signature(s)
CUSIP#77957T305fund#053
<PAGE>
T. ROWE PRICE LOGO WE NEED YOUR PROXY VOTE BEFORE JUNE 8, 1994
- - - ------------------------------------------------------------------------------
Please refer to the Proxy Statement discussion of each of these matters.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL
PROPOSALS.
Please fold and detach card at perforation before mailing.
- - - ------------------------------------------------------------------------------
1. Election of directors. FOR all nominees WITHHOLD AUTHORITY 1.
listed below (except to vote for all nominees
as marked to the listed below
contrary)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Robert P. Black Calvin W. Burnett George J. Collins Anthony W. Deering
F. Pierce Linaweaver James S. Riepe John G. Schreiber Charles P. Smith
Peter VanDyke Anne Marie Whittemore
2. Approve changes to the FOR EACH POLICY AGAINST ABSTAIN 2.
Fund's fundamental LISTED BELOW (except ALL ALL
policies. as marked to the
contrary)
IF YOU DO NOT WISH TO APPROVE A POLICY CHANGE, PLEASE CHECK THE APPROPRIATE
BOX BELOW:
(A) Borrowing (F) Real Estate (L) Options (Q) Investment
Companies
(B) Industry (G) Senior (M) Illiquid (R) Oil and Gas
Concentration Securities Securities
(C) Lending (H) Purchasing on (N) Unseasoned (S) Ownership of
Margin Issuers Securities
(D) Single Issuer (I) Pledging Assets (O) Control
(E) Voting (J) Short Sales (P) Equity
Securities Securities
3. Ratify the selection of Price Waterhouse as independent accountants.
FOR AGAINST ABSTAIN 3.
4. Amend Articles of Incorporation to delete requirement that stock
certificates be issued to shareholders. FOR AGAINST ABSTAIN 4.
I authorize the Proxies, in their discretion, to vote upon such other business
as may properly come before the meeting.
CUSIP#77957T305/fund#053
<PAGE>
T. ROWE PRICE LOGO PROXY
- - - ------------------------------------------------------------------------------
INSTRUCTIONS:
1. Cast your vote by checking the appropriate boxes on the reverse side. If
you do not check a box, your vote will be cast FOR that proposal.
2. Sign and date the card below.
3. Please return the signed card promptly using the enclosed postage paid
envelope, even if you will be attending the meeting.
4. Please do not enclose checks or any other correspondence.
Please fold and detach card at perforation before mailing.
- - - ------------------------------------------------------------------------------
T. ROWE PRICE GNMA FUND MEETING: 10:30 A.M. EASTERN TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints George J. Collins and James S. Riepe, as
proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all shares of stock of the
Fund, which the undersigned is entitled to vote at the Annual Meeting of
Shareholders to be held on Wednesday, June 8, 1994, at the time indicated
above, at the offices of the Fund, 100 East Pratt Street, Baltimore, Maryland
21202, and at any and all adjournments thereof, with respect to the matters
set forth below and described in the Notice of Annual Meeting and Proxy
Statement dated April 22, 1994, receipt of which is hereby acknowledged.
Please sign exactly as name appears.
Only authorized officers should sign for
corporations. For information as to the
voting of stock registered in more than
one name, see page 3 of the Notice of
Annual Meeting and Proxy Statement.
Dated: -------------------------- , 1994
----------------------------------------
----------------------------------------
Signature(s)
CUSIP#779549104/fund#070
<PAGE>
T. ROWE PRICE LOGO WE NEED YOUR PROXY VOTE BEFORE JUNE 8, 1994
- - - ------------------------------------------------------------------------------
Please refer to the Proxy Statement discussion of each of these matters.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL
PROPOSALS.
Please fold and detach card at perforation before mailing.
- - - ------------------------------------------------------------------------------
1. Election of trustees. FOR all nominees WITHHOLD AUTHORITY 1.
listed below (except to vote for all nominees
as marked to the listed below
contrary)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Robert P. Black Calvin W. Burnett George J. Collins Anthony W. Deering
F. Pierce Linaweaver James S. Riepe John G. Schreiber Anne Marie Whittemore
2. Approve changes to the FOR EACH POLICY AGAINST ABSTAIN 2.
Fund's fundamental LISTED BELOW (except ALL ALL
policies. as marked to the
contrary)
IF YOU DO NOT WISH TO APPROVE A POLICY CHANGE, PLEASE CHECK THE APPROPRIATE
BOX BELOW:
(A) Borrowing (E) Voting (I) Pledging Assets (M) Illiquid
Securities Securities
(B) Industry (F) Real Estate (J) Short Sales (N) Unseasoned
Concentration Issuers
(C) Lending (G) Senior (K) Commodities and
Securities Futures
(D) Single Issuer (H) Purchasing on (L) Options
Margin
3. Ratify the selection of Price Waterhouse as independent accountants.
FOR AGAINST ABSTAIN 3.
I authorize the Proxies, in their discretion, to vote upon such other business
as may properly come before the meeting.
CUSIP#779549104/fund#070
