-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CZsiW2Pzi1P4LAI3LpGkD/wY9VZiNl5Y/sQEIvwPAGpszlhhY4P4ih9u9DnXkx+i pLqLfFKDLz1Ibs5j37XITw== 0000313212-01-500007.txt : 20010502 0000313212-01-500007.hdr.sgml : 20010502 ACCESSION NUMBER: 0000313212-01-500007 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20010501 EFFECTIVENESS DATE: 20010501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE INTERNATIONAL FUNDS INC CENTRAL INDEX KEY: 0000313212 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 521175211 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 002-65539 FILM NUMBER: 1617646 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-02958 FILM NUMBER: 1617647 BUSINESS ADDRESS: STREET 1: 100 E PRATT ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 3015472000 FORMER COMPANY: FORMER CONFORMED NAME: PRICE T ROWE INTERNATIONAL TRUST DATE OF NAME CHANGE: 19900301 FORMER COMPANY: FORMER CONFORMED NAME: PRICE T ROWE INTERNATIONAL FUND INC DATE OF NAME CHANGE: 19890914 485BPOS 1 intfi81.txt Registration Nos. 002-65539/811-2958 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/ Post-Effective Amendment No. 81 /X/ AND/OR REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/ Amendment No. 64 /X/ T. ROWE PRICE INTERNATIONAL FUNDS, INC. --------------------------------------- Exact Name of Registrant as Specified in Charter 100 East Pratt Street, Baltimore, Maryland 21202 ------------------------------------------------ Address of Principal Executive Offices 410-345-2000 ------------ Registrant's Telephone Number, Including Area Code Henry H. Hopkins 100 East Pratt Street, Baltimore, Maryland 21202 ------------------------------------------------ Name and Address of Agent for Service Approximate Date of Proposed Public Offering May 1, 2001 ----------- It is proposed that this filing will become effective (check appropriate box): / / Immediately upon filing pursuant to paragraph (b) /X/ On May 1, 2001, pursuant to paragraph (b) / / 60 days after filing pursuant to paragraph (a)(1) / / On (date), pursuant to paragraph (a)(1) / / 75 days after filing pursuant to paragraph (a)(2) / / On (date) pursuant to paragraph (a)(2) of Rule 485 If appropriate, check the following box: / / This post-effective amendment designates a new effective date for a previously filed post-effective amendment. PROSPECTUS May 1, 2001 T. ROWE PRICE International Funds--Foreign Bond Funds Two international income funds seeking high current income and capital appreciation from foreign fixed-income securities. The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. LOGO T. Rowe Price International Funds, Inc. T. Rowe Price International Bond Fund T. Rowe Price Emerging Markets Bond Fund Prospectus May 1, 2001
ABOUT THE FUNDS 1 Objective, Strategy, Risks, and Expenses 1 ----------------------------------------------- Other Information About the Funds 6 ----------------------------------------------- T. ROWE PRICE ACCOUNT 2 INFORMATION Pricing Shares and Receiving 8 Sale Proceeds ----------------------------------------------- Useful Information on Distributions 11 and Taxes ----------------------------------------------- Transaction Procedures and 15 Special Requirements ----------------------------------------------- MORE ABOUT THE FUNDS 3 Organization and Management 18 ----------------------------------------------- Understanding Performance Information 20 ----------------------------------------------- Investment Policies and Practices 21 ----------------------------------------------- Financial Highlights 31 ----------------------------------------------- INVESTING WITH T. ROWE PRICE 4 Account Requirements 34 and Transaction Information ----------------------------------------------- Opening a New Account 34 ----------------------------------------------- Purchasing Additional Shares 36 ----------------------------------------------- Exchanging and Redeeming 36 Shares ----------------------------------------------- Rights Reserved by the Funds 38 ----------------------------------------------- Information About Your 39 Services ----------------------------------------------- T. Rowe Price 41 Brokerage ----------------------------------------------- Investment Information 42 -----------------------------------------------
T. Rowe Price International, Inc., the investment manager, is the successor to Rowe Price-Fleming International, Inc. ("Price-Fleming"), a joint venture with Robert Fleming Holdings, Ltd. ("Flemings") founded in 1979. In 2000, Price-Fleming became wholly-owned by T. Rowe Price Associates, Inc. As of December 31, 2000, T. Rowe Price International managed $32.7 billion in foreign stocks and bonds through its offices in Baltimore, London, Tokyo, Singapore, Hong Kong, Buenos Aires, and Paris. Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve, or any other government agency, and are subject to investment risks, including possible loss of the principal amount invested. ABOUT THE FUNDS OBJECTIVE, STRATEGY, RISKS, AND EXPENSES ---------------------------------------------------------- What are each fund's objectives and principal investment strategies? International Bond Fund Objective: The fund seeks to provide high current income and capital appreciation by investing primarily in high-quality, nondollar-denominated bonds outside the U.S. Strategy: The fund will normally invest at least 65% of its total assets in high-quality (AA or better) foreign bonds but may invest up to 20% of assets in below investment-grade, high-risk bonds, including those in default or with the lowest rating. Up to 20% of assets may be invested in dollar-denominated foreign bonds such as Brady and other emerging market bonds. Although we expect to maintain an intermediate to long weighted average maturity, there are no maturity restrictions on the overall portfolio or on individual securities. The fund has wide flexibility to purchase and sell currencies and engage in hedging transactions. However, we normally do not attempt to cushion the impact of foreign currency fluctuations on the dollar. Therefore, the fund is likely to be heavily exposed to foreign currencies. Investment decisions are based on fundamental market factors, such as yield and credit quality differences among bonds as well as demand and supply trends and currency values. The fund generally invests in countries where the combination of fixed-income returns and currency exchange rates appears attractive, or, if the currency trend is unfavorable, where we believe the currency risk can be minimized through hedging. The fund sells holdings for a variety of reasons, such as to adjust its average maturity or quality, to shift assets into higher-yielding securities, or to alter geographic or currency exposure. Emerging Markets Bond Fund Objective: The fund seeks to provide high income and capital appreciation. Strategy: The fund will normally invest at least 65% (and potentially all) of its total assets in the government or corporate debt securities of emerging nations. Fund holdings may include the lowest-rated bonds, including those in default. There are no maturity restrictions, and the fund's weighted average maturity normally ranges between five and 10 years but may vary substantially because of market conditions. Under normal circumstances, most of the fund's total assets are expected to be denominated in U.S. dollars, and the fund will not usually attempt to cushion the impact of foreign currency fluctuations on the dollar. Security selection relies heavily on research, which analyzes political and eco- T. ROWE PRICE 2 nomic trends as well as creditworthiness. The fund tends to favor bonds it expects will be upgraded. The fund sells holdings for a variety of reasons, such as to adjust its average maturity or quality, to shift assets into higher-yielding securities, or to alter geographic or currency exposure. o For details about each fund's investment program, please see the Investment Policies and Practices section. Table 1 International Funds Comparison Guide
Expected r isk r elative Geographic Quality of Normal currency to Fund focus securities exposure one another International Bond Outside U.S. Primarily high High High quality --------------------------------------------------------------- Emerging Markets Bond Outside U.S. Primarily lower Varies Highest quality --------------------------------------------------------------------------------------------
o Both of these funds are considered "nondiversified" for purposes of the Investment Company Act of 1940. What are the main risks of investing in the funds? The risk profiles of the funds vary with the types of bonds they purchase, their degree of currency exposure, and whether they invest in developed markets, emerging markets, or both. Of the two funds, Emerging Markets Bond is more risky, with higher potential for sharp price declines. . Interest rate risk This risk refers to the decline in bond prices that accompanies a rise in the overall level of interest rates. (Bond prices and interest rates move in opposite directions.) Because prices of long-term bonds are more sensitive to interest rate changes than prices of short-term bonds, the funds have greater interest rate risk than short-term bond funds. . Credit risk This is the chance that a fund's holding will have its credit downgraded or will default (the failure of an issuer to make timely payments of interest or principal), potentially reducing the fund's share price and income level. Of the two funds, Emerging Markets Bond has higher credit risk because the average credit quality of its holdings is lower. (See emerging market risk discussion.) . Nondiversified risk Because they are nondiversified, each fund can invest more of its assets in a smaller number of issuers than diversified funds. This could result in greater potential losses than funds investing in a broader variety of issues. . Currency risk This is the risk of a decline in the value of a foreign currency versus the U.S. dollar, which reduces the dollar value of securities denominated in that currency. The overall impact on each fund's holdings can be significant and long-- 3 lasting, depending on the currencies represented in the portfolio, how each one appreciates or depreciates in relation to the U.S. dollar, and whether currency positions are hedged. The International Bond Fund is normally heavily exposed to foreign currencies, so that changes in currency exchange rates are likely to play a significant role in fund performance. Bonds held in the Emerging Markets Bond Fund are often denominated in U.S. dollars to improve their marketability, but this does not protect them from substantial price declines in the face of political and economic turmoil. In addition, many emerging market currencies cannot be effectively hedged. Currency trends are unpredictable, and to the extent each fund purchases and sells currencies, it will also be subject to the risk that its trading strategies, including efforts at hedging, will not succeed. Furthermore, hedging costs can be significant and reduce fund net asset value. . Emerging market risk The funds' investments in emerging markets are subject to abrupt and severe price declines. The economic and political structures of developing nations, in most cases, do not compare favorably with the U.S. or other developed countries in terms of wealth and stability, and their financial markets often lack liquidity. These economies are less well developed and can be overly reliant on particular industries and more vulnerable to the ebb and flow of international trade and capital, trade barriers, and other protectionist or retaliatory measures. Some countries have legacies of hyperinflation and currency devaluations versus the dollar (which adversely affects returns to U.S. investors). Significant devaluations have occurred in recent years in Russia, Brazil, and other Asian and Latin American nations. Governments of some emerging market countries have defaulted on their bonds and investors in this sector must be prepared for similar events in the future. . Other risks of foreign investing Other risks result from the varying stages of economic and political development of foreign countries, the differing regulatory environments, trading days, and accounting standards of non-U.S. markets, and higher transaction costs. Government interference in capital markets, such as capital or currency controls, nationalization of companies or industries, expropriation of assets, or imposition of punitive taxes would also hurt the funds. . Derivatives risk To the extent the funds use these instruments, they may be exposed to additional volatility and potential losses. As with any mutual fund, there can be no guarantee the funds will achieve their objectives. o Each fund's share price may decline, so when you sell your shares, you may lose money. T. ROWE PRICE 4 How can I tell which fund is most appropriate for me? Consider your investment goals, your time horizon for achieving them, and your tolerance for risk. Neither fund is suitable for near-term financial goals. Your decision should take into account whether you have any other foreign bond investments. If not, you may wish to invest in the International Bond Fund to gain broad exposure to opportunities abroad. The Emerging Markets Bond Fund may be an appropriate part of your portfolio if you are supplementing existing holdings that are primarily in developed foreign markets and can accept the potentially greater volatility of emerging markets. Each fund can be used in both regular and tax-deferred accounts, such as IRAs. o The fund or funds you select should not represent your complete investment program or be used for short-term trading purposes. How has each fund performed in the past? The bar charts showing calendar year returns and the average annual total return table indicate risk by illustrating how much returns can differ from one year to the next and over time. Fund past performance is no guarantee of future returns. The funds can also experience short-term performance swings, as shown by the best and worst calendar quarter returns during the years depicted in the charts.
Calendar Year Total Returns Fund "91" "92" "93" "94" "95" "96" "97" "98" "99" "00" ------------------------------------------------------------------------------------------- International Bond 17.75 2.40 20.00 -1.84 20.30 7.13 -3.17 15.03 -7.86 -3.13 Emerging -- -- -- -- 25.81 36.77 16.83 -23.09 22.97 15.20 Markets Bond -------------------------------------------------------------------------------------------
International Bond Quarter ended Total return Best quarter 3/31/95 12.51% Worst quarter 3/31/97 -5.59% Emerging Markets Bond Quarter ended Total return Best quarter 6/30/95 17.56% Worst quarter 9/30/98 -30.20% 5 Table 2 Average Annual Total Returns
Periods ended December 31, 2000 Shorter of 10 years 1 year 5 years or since inception Inception date ------------------------ International Bond Fund -3.13% 1.27% 6.17% 9/10/86 J.P. Morgan Non-U.S. Dollar Government Bond Index Plus -2.47 1.86 6.51 Lipper International Income Funds Average 1.46 3.33 4.93 Emerging Markets Bond Fund 15.20% 11.73% 13.95% 12/30/94 J.P. Morgan Emerging Markets Bond Index Plus 15.66 14.46 16.43 Lipper Emerging Markets Debt Funds 10.09 11.30 12.93 Average ------------------------------------------------------------------------------
These figures include changes in principal value, reinvested dividends, and capital gain distributions, if any. What fees or expenses will I pay? The funds is 100% no load. There are no fees or charges to buy or sell fund shares, reinvest dividends, or exchange into other T. Rowe Price funds. There are no 12b-1 fees. Table 3 Fees and Expenses of the Funds*
Annual fund operating expenses (expenses that are deducted from fund assets) Total annual Fee waiver/ Fund Management Other fund operating expense Net ------------------------ fee expenses expenses reimbursement expenses ----- International Bond 0.67% 0.24% 0.91% -- 0.91% --------------------------------------------------------------- Emerging Markets 0.77 0.39 1.16 0.05% 1.21 Bond/a/ --------------------------------------------------------------------------------------------
* Redemption proceeds of less than $5,000 sent by wire are subject to a $5 fee paid to the fund. Accounts with less than a $2,000 balance (with certain exceptions) are subject to a $10 fee. See Transaction Procedures and Special Requirements - Account Maintenance and Small Account Fees. /a/Effective January 1, 1999, T. Rowe Price International contractually obligated itself to waive its fees and bear any expenses through December 31, 2000, to the extent such fees or expenses would cause the fund's ratio of expenses to average net assets to exceed 1.25%. Fees waived or expenses paid or assumed under this agreement are subject to reimbursement to T. Rowe Price International by the fund whenever the fund's expense ratio is below 1.25%; however, no reimbursement will be made after December 31, 2002, or if it would result in the expense ratio exceeding 1.25%. Any amounts reimbursed will have the effect of increasing fees otherwise paid by the fund. Example. The following table gives you a rough idea of how expense ratios may translate into dollars and helps you to compare the cost of investing in these funds with that of other mutual funds. Although your actual costs may be higher T. ROWE PRICE 6 or lower, the table shows how much you would pay if operating expenses remain the same, you invest $10,000, earn a 5% annual return, and hold the investment for the following periods and then redeem:
Fund 1 year 3 years 5 years 10 years -------------------------------------------------------------------- International Bond $ 93 $290 $504 $1,120 --------------------------------------- Emerging Markets Bond 123 384 665 1,466 --------------------------------------------------------------------
OTHER INFORMATION ABOUT THE FUNDS ---------------------------------------------------------- Why invest in an international fund? Interest rates vary from country to country depending on local economic conditions and monetary and fiscal policies. By investing in foreign fixed income markets, U.S. investors can benefit from potentially higher yields than their own markets provide. Also, foreign bond markets often move independently of one another and the U.S. markets. Therefore, diversifying internationally across various countries can help reduce portfolio volatility and smooth out returns. What are some of the advantages of investing in international fixed income markets through mutual funds? Buying foreign bonds can be difficult and costly for the individual investor, and gaining access to many foreign markets can be complicated. Few investors have the time, the expertise, or the resources to evaluate foreign markets effectively on their own. Therefore, the professional management, broad diversification, and relative simplicity of mutual funds make them an attractive, low-cost vehicle for this type of investing. o For more details on potential risks of foreign investments, please see Investment Policies and Practices and the Statement of Additional Information. How does the portfolio manager try to reduce risk? Consistent with each fund's objective, the portfolio manager uses various tools to try to reduce risk and increase total return, including: . Diversification of assets to reduce the impact of a single holding or sector on a fund's net asset value. . Thorough credit research by our own analysts. . Adjustment of fund duration to try to reduce the drop in price when interest rates rise or to benefit from the rise in price when rates fall. Duration is a measure of a fund's sensitivity to interest rate changes. 7 . Management of the impact of foreign currency changes on the fund's portfolio to the degree discussed previously under "currency risk." Is there other information I can review before making a decision? Investment Policies and Practices in Section 3 discusses various types of portfolio securities the funds may purchase as well as types of management practices the funds may use. T. ROWE PRICE ACCOUNT INFORMATION Here are some procedures you should know when investing in the T. Rowe Price family of taxable stock, bond, and money market funds. PRICING SHARES AND RECEIVING SALE PROCEEDS ---------------------------------------------------------- How and when shares are priced The share price (also called "net asset value" or NAV per share) for all funds except the Japan Fund is calculated at the close of the New York Stock Exchange, normally 4 p.m. ET, each day that the exchange is open for business. (See the following section for information on the Japan Fund.) To calculate the NAV, a fund's assets are valued and totaled, liabilities are subtracted, and the balance, called net assets, is divided by the number of shares outstanding. Current market values are used to price stocks and bonds. Amortized cost is used to price money market securities. The securities of funds investing in foreign markets are usually valued on the basis of the most recent closing market prices at 4 p.m. ET. Most foreign markets close before that time. For securities primarily traded in the Far East, for example, the most recent closing prices may be as much as 15 hours old at 4 p.m. Normally, developments that could affect the values of portfolio securities that occur between the close of the foreign market and 4 p.m. ET will not be reflected in a fund NAV. However, if a fund determines that such developments are so significant that they will, in its judgment, clearly and materially affect the value of the fund's securities, the fund may adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of 4 p.m. ET. A fund may fair value securities in other situations, for example, when a particular foreign market is closed but the fund is open. o The various ways you can buy, sell, and exchange shares are explained at the end of this prospectus and on the New Account Form. These procedures may differ for institutional and employer-sponsored retirement accounts. How your purchase, sale, or exchange price is determined If we receive your request in correct form by 4 p.m. ET, your transaction will be priced at that day's NAV. If we receive it after 4 p.m., it will be priced at the next business day's NAV. We cannot accept orders that request a particular day or price for your transaction or any other special conditions. 9 Fund shares may be purchased through various third-party intermediaries including banks, brokers, and investment advisers. Where authorized by a fund, orders will be priced at the NAV next computed after receipt by the intermediary. Consult your intermediary to determine when your orders will be priced. The intermediary may charge a fee for its services. Note: The time at which transactions and shares are priced and the time until which orders are accepted may be changed in case of an emergency or if the New York Stock Exchange closes at a time other than 4 p.m. ET. Japan Fund: Pricing and Transactions The Japan Fund's share price is calculated at the close of the New York Stock Exchange, normally 4 p.m. ET, when both it and the Tokyo Stock Exchange are open. The fund will not price shares or process orders on any day when either the New York or Tokyo Stock Exchange is closed. Orders received on such days will be processed the next day the fund computes an NAV. As such, you may experience a delay in purchasing or redeeming fund shares. Exchanges: If you wish to exchange into the Japan Fund on a day the New York Stock Exchange is open but the Tokyo Stock Exchange is closed, the exchange out of the other T. Rowe Price fund will be processed on that day, but Japan Fund shares will not be purchased until the day the Japan Fund reopens. If you wish to exchange out of the Japan Fund on a day when the New York Stock Exchange is open but the Tokyo Stock Exchange is closed, the exchange will be delayed until the Japan Fund reopens. The Tokyo Stock Exchange is scheduled to be closed on the following weekdays: In 2001 -January 1, 2, 3, and 8; February 12; March 20; April 30; May 3 and 4; July 20; September 24; October 8; November 23; and December 24 and 31. In 2002 -January 1, 2, 3, and 14; February 11; March 21; April 29; May 3 and 6; September 16 and 23; October 14; November 4; and December 23 and 31. If the Tokyo Stock Exchange closes on dates not listed, the fund will not be priced on those dates. How you can receive the proceeds from a sale o When filling out the New Account Form, you may wish to give yourself the widest range of options for receiving proceeds from a sale. If your request is received by 4 p.m. ET in correct form, proceeds are usually sent on the next business day. Proceeds can be sent to you by mail or to your bank account by Automated Clearing House (ACH) transfer or bank wire. ACH is an automated method of initiating payments from, and receiving payments in, your financial institution account. Proceeds sent by ACH transfer should be credited the second business day after the sale. Proceeds sent by bank wire should be credited to your account the first business day after the sale. T. ROWE PRICE 10 . Exception: Under certain circumstances and when deemed to be in a fund's best interest, your proceeds may not be sent for up to seven calendar days after we receive your redemption request. o If for some reason we cannot accept your request to sell shares, we will contact you. Contingent Redemption Fee Short-term "market timers" who engage in frequent purchases and redemptions can disrupt a fund's investment program and create additional transaction costs. For these reasons, certain T. Rowe Price funds, listed below, assess a fee on redemptions (including exchanges) of fund shares held for less than the time period shown:
Fund Holding period Redemption fee Diversified Small-Cap Growth 6 months 1% -------------------------------- Developing Technologies 1 year 1% -------------------------------- Emerging Europe & Mediterranean 1 year 2% -------------------------------- Emerging Markets Stock 1 year 2% -------------------------------- Equity Index 500 6 months .50% -------------------------------- Extended Equity Market Index 6 months .50% -------------------------------- High Yield 1 year 1% -------------------------------- International Discovery 1 year 2% -------------------------------- International Equity Index 6 months 1% -------------------------------- Latin America 1 year 2% -------------------------------- Real Estate 6 months 1% -------------------------------- Small-Cap Value 1 year 1% -------------------------------- Tax-Efficient Balanced 1 year 1% -------------------------------- Tax-Efficient Growth 2 years 1% -------------------------------- Tax-Efficient Multi-Cap Growth 2 years 1% -------------------------------- Total Equity Market Index 6 months .50% -------------------------------- U.S. Bond Index 6 months .50% -----------------------------------------------------------------------
Redemption fees are paid to a fund to help offset transaction costs and to protect its long-term shareholders. The "first-in, first-out" (FIFO) method is used to determine the holding period. Under this method, the date of the redemption or exchange will be compared with the earliest purchase date of shares held in the account. If this holding period is less than the designated holding period, the fee will be charged. 11 In determining a holding period, the fund will use the anniversary date of a transaction. Thus, for a one-year period, shares purchased on January 1 will be subject to the fee if they are redeemed on or prior to the following December 31. If they are redeemed on or after January 1 of the following year, they will not be subject to the fee. The fee does not apply to any shares purchased through reinvested distributions (dividends and capital gains), shares held in retirement plans, such as 401(k), 403(b), 457, Keogh, profit sharing, SIMPLE IRA, SEP-IRA, and money purchase pension accounts, or to shares redeemed through designated systematic withdrawal plans. The fee may apply to shares in retirement plans held in broker omnibus accounts. USEFUL INFORMATION ON DISTRIBUTIONS AND TAXES ---------------------------------------------------------- o All net investment income and realized capital gains are distributed to shareholders. Dividends and Other Distributions Dividend and capital gain distributions are reinvested in additional fund shares in your account unless you select another option on your New Account Form. Reinvesting distributions results in compounding, that is, receiving income dividends and capital gain distributions on a rising number of shares. Distributions not reinvested are paid by check or transmitted to your bank account via ACH. If the Post Office cannot deliver your check, or if your check remains uncashed for six months, the fund reserves the right to reinvest your distribution check in your account at the NAV on the day of the reinvestment and to reinvest all subsequent distributions in shares of the fund. No interest will accrue on amounts represented by uncashed distribution or redemption checks. The following chart provides details on dividend payments. Table 4 Dividend Payment Schedule
Fund Dividends Money market funds . Declared daily to shareholders of record as of 12 noon ET on that day. Other purchases receive the dividend on the next business day after payment has been received. .Paid on the first business day of each month. ---------------------------------------------------------------------------------- Bond funds . Declared daily to shareholders of record as of 4 p.m. ET the previous business day. Other purchases receive the dividend on the next business day after payment has been received. .Paid on the first business day of each month. --------------------------------------------------------------------------------------- These stock funds only:/1/ . .Balanced Declared quarterly, if any, in March, June, September, and December. . Dividend Growth .Must be a shareholder of record as of 4 . Equity Income p.m. ET on the record date. . Equity Index 500 . Growth & Income . Personal Strategy Balanced . Personal Strategy Income . Real Estate ---------------------------------------------------------------------------------- All other stock funds/1/ .Declared annually, if any, generally in December. .Must be a shareholder of record as of 4 p.m. ET on the record date. ---------------------------------------------------------------------------------- Tax-Efficient Balanced/1/ Municipal Portion .Declared daily, paid on the last business day of March, June, September, and December. Equity Portion .Declared annually, if any, usually in December. .Must be a shareholder of record as of 4 p.m. ET on the record date. ---------------------------------------------------------------------------------------
T. ROWE PRICE 12 /1/Mutual fund dividends are eligible for the 70% deduction for dividends received by corporations to the extent the fund's income consists of dividends paid by U.S. corporations. Fund shares will earn dividends through the date of redemption; also, shares redeemed on a Friday or prior to a holiday (other than wire redemptions for money funds received before 12 noon ET) will continue to earn dividends until the next business day. Generally, if you redeem all of your bond or money fund shares at any time during the month, you will also receive all dividends earned through the date of redemption in the same check. When you redeem only a portion of your bond or money fund shares, all dividends accrued on those shares will be reinvested, or paid in cash, on the next dividend payment date. Capital gain payments If a fund has net capital gains for the year (after subtracting any capital losses), they are usually declared and paid in December to shareholders of record on a specified date that month. If a second distribution is necessary, it is paid the following year. 13 Capital gain payments are not expected in money market funds, which are managed to maintain a constant share price. o A capital gain or loss is the difference between the purchase and sale price of a security. Tax Information o You will be sent timely information for your tax filing needs. You need to be aware of the possible tax consequences when: . You sell fund shares, including an exchange from one fund to another. . A fund makes a distribution to your account. Taxes on fund redemptions When you sell shares in any fund, you may realize a gain or loss. An exchange from one fund to another is also a sale for tax purposes. In January, you will be sent Form 1099-B indicating the date and amount of each sale you made in the fund during the prior year. This information will also be reported to the IRS. For most new accounts or those opened by exchange in 1984 or later, we will provide the gain or loss on the shares you sold during the year based on the "average cost" single category method. This information is not reported to the IRS, and you do not have to use it. You may calculate the cost basis using other methods acceptable to the IRS, such as "specific identification." To help you maintain accurate records, we send you a confirmation promptly following each transaction you make (except for systematic purchases and redemptions) and a year-end statement detailing all your transactions in each fund account during the year. Taxes on fund distributions In January, you will be sent Form 1099-DIV indicating the tax status of any dividend and capital gain distributions made to you. This information will also be reported to the IRS. Distributions are generally taxable to you for the year in which they were paid. You will be sent any additional information you need to determine your taxes on fund distributions, such as the portion of your dividends, if any, that may be exempt from state income taxes. The tax treatment of a capital gain distribution is determined by how long the fund held the portfolio securities, not how long you held shares in the fund. Short-term (one year or less) capital gain distributions are taxable at the same rate as ordinary income and long-term gains on securities held more than 12 months are taxed at a maximum rate of 20%. If you realized a loss on the sale or T. ROWE PRICE 14 exchange of fund shares that you held six months or less, your short-term loss must be reclassified to a long-term loss to the extent of any long-term capital gain distribution received during the period you held the shares. If the fund qualifies and elects to pass through nonrefundable foreign taxes paid to foreign governments during the year, your portion of such taxes will be reported to you as taxable income. However, you may be able to claim an offsetting credit or deduction on your tax return for those amounts. There can be no assurance that a fund will be able to meet the requirements to pass through foreign income taxes paid. Tax consequences of hedging For funds investing in foreign securities, distributions resulting from the sale of certain foreign currencies, currency contracts, and debt securities are taxed as ordinary income. Net foreign currency losses may cause monthly or quarterly dividends to be reclassified as a return of capital. Entering into certain options, futures, and forward foreign exchange contracts and transactions may result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. These provisions could result in the fund being required to distribute gains on such transactions even though it did not close the contracts during the year or receive cash to pay such distributions. The fund may not be able to reduce its distributions for losses on such transactions to the extent of unrealized gains in offsetting positions. o Distributions are taxable whether reinvested in additional shares or received in cash. Tax effect of buying shares before a capital gain distribution If you buy shares shortly before or on the "record date" - the date that establishes you as the person to receive the upcoming distribution - you receive a portion of the money you just invested in the form of a taxable distribution. Therefore, you may wish to find out a fund's record date before investing. Of course, a fund's share price may, at any time, reflect undistributed capital gains and unrealized appreciation, which may result in future taxable distributions. Such distributions can occur even in a year when the fund has a negative return. o The preceding tax information summary does not apply to retirement accounts, such as IRAs, which are not subject to current tax. 15 TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS ---------------------------------------------------------- o Following these procedures helps assure timely and accurate transactions. Purchase Conditions Nonpayment If you pay with a check or ACH transfer that does not clear or if your payment is not timely received, your purchase will be canceled. You will be responsible for any losses or expenses incurred by the fund or transfer agent, and the fund can redeem shares you own in this or another identically registered T. Rowe Price account as reimbursement. The fund and its agents have the right to reject or cancel any purchase, exchange, or redemption due to nonpayment. U.S. dollars; type of check All purchases must be paid for in U.S. dollars; checks must be drawn on U.S. banks. Sale (Redemption) Conditions Holds on immediate redemptions: 10-day hold If you sell shares that you just purchased and paid for by check or ACH transfer, the fund will process your redemption but will generally delay sending you the proceeds for up to 10 calendar days to allow the check or transfer to clear. If, during the clearing period, we receive a check drawn against your bond or money market account, it will be returned marked "uncollected." (The 10-day hold does not apply to purchases paid for by bank wire or automatic purchases through your paycheck.) Telephone, Tele*Access/(R)/, and online account access Exchange and redemption services through telephone, Tele*Access, and online account access are authorized when you sign the New Account Form unless you check the boxes that state you do not want them. Personal computer transactions must be authorized separately. T. Rowe Price funds and their agents use reasonable procedures to verify the identity of the shareholder. If these procedures are followed, the funds and their agents are not liable for any losses that may occur from acting on unauthorized instructions. A confirmation is sent promptly after a transaction. Please review it carefully and contact T. Rowe Price immediately about any transaction you believe to be unauthorized. All telephone conversations are recorded. Redemptions over $250,000 Large sales can adversely affect a portfolio manager's ability to implement a fund's investment strategy by causing the premature sale of securities that would otherwise be held. If, in any 90-day period, you redeem (sell) more than T. ROWE PRICE 16 $250,000, or your sale amounts to more than 1% of fund net assets, the fund has the right to pay the difference between the redemption amount and the lesser of the two previously mentioned figures with securities from the fund. Excessive Trading o T. Rowe Price may bar excessive traders from purchasing shares. Frequent trades in your account or accounts controlled by you can disrupt management of a fund and raise its expenses. To deter such activity, each fund has adopted an excessive trading policy. If you violate this policy, you may be barred indefinitely and without further notice from further purchases of T. Rowe Price funds. . Trades placed directly with T. Rowe Price If you trade directly with T. Rowe Price, you can make one purchase and one sale or one sale and one purchase involving the same fund within any 120-day period. If you exceed this limit, or if your trade activity involves market timing, you are in violation of our excessive trading policy. Two types of transactions are exempt from this policy: 1) trades solely in money market funds (exchanges between a money fund and a nonmoney fund are not exempt); and 2) systematic purchases and redemptions (see Information About Your Services). . Trades placed through intermediaries If you purchase fund shares through an intermediary including a broker, bank, investment adviser, or other third party, you can make one purchase and one sale or one sale and one purchase involving the same fund within any 120-day period. If you exceed this limit or if you hold fund shares for less than 60 calendar days, you are in violation of our excessive trading policy. Systematic purchases and redemptions are exempt from this policy. Keeping Your Account Open Due to the relatively high cost to a fund of maintaining small accounts, we ask you to maintain an account balance of at least $1,000 ($10,000 for Summit Funds). If your balance is below this amount for three months or longer, we have the right to close your account after giving you 60 days to increase your balance. Account Maintenance and Small Account Fees Small Account Fee (all funds except Index Funds) Because of the disproportionately high costs of servicing accounts with low balances, a $10 fee, paid to T. Rowe Price Services, the funds' transfer agent, will automatically be deducted from nonretirement accounts with balances falling below a minimum. The valuation of accounts and the deduction are expected to 17 take place during the last five business days of September. The fee will be deducted from accounts with balances below $2,000, except for UGMA/UTMA accounts, for which the minimum is $500. The fee will be waived for any investor whose T. Rowe Price mutual fund accounts total $25,000 or more. Accounts employing automatic investing (e.g., payroll deduction, automatic purchase from a bank account, etc.) are also exempt from the charge. The fee does not apply to IRAs and other retirement plan accounts, but a separate custodial fee may apply to such accounts. Account Maintenance Fee (Index Funds only) The account maintenance fee is charged on a quarterly basis usually during the last week of a calendar quarter. On the day of the assessment, accounts with balances below $10,000 will be charged the fee. Please note that the fee will be charged to accounts that fall below $10,000 due to market fluctuations, redemptions, or exchanges. When an account with less than $10,000 is closed either through redemption or exchange, the fee will be charged and deducted from the proceeds. The fee will apply to IRA accounts. The fee does not apply to retirement plans directly registered with T. Rowe Price Services, or accounts maintained by intermediaries through NSCC/(R)/Networking. Signature Guarantees o A signature guarantee is designed to protect you and the T. Rowe Price funds from fraud by verifying your signature. You may need to have your signature guaranteed in certain situations, such as: . Written requests 1) to redeem over $100,000 or 2) to wire redemption proceeds. . Remitting redemption proceeds to any person, address, or bank account not on record. . Transferring redemption proceeds to a T. Rowe Price fund account with a different registration (name or ownership) from yours. . Establishing certain services after the account is opened. You can obtain a signature guarantee from most banks, savings institutions, broker-dealers, and other guarantors acceptable to T. Rowe Price. We cannot accept guarantees from notaries public or organizations that do not provide reimbursement in the case of fraud. MORE ABOUT THE FUNDS ORGANIZATION AND MANAGEMENT ---------------------------------------------------------- How are the funds organized? T. Rowe Price International Funds, Inc., a Maryland corporation (the "corporation"), currently consists of 12 series, each having different objectives and investment policies. The 12 series and the years in which each was established are as follows: International Stock Fund, 1980; International Bond Fund, 1986; International Discovery Fund, 1988; European Stock Fund, New Asia Fund, 1990; Japan Fund, 1991; Latin America Fund, 1993; Emerging Markets Bond Fund, 1994; Emerging Markets Stock Fund, Global Stock Fund, 1995; International Growth & Income Fund, 1998; and Emerging Europe & Mediterranean Fund, 2000. (The equity funds are described in a separate prospectus.) What is meant by "shares"? As with all mutual funds, investors purchase shares when they put money in a fund. These shares are part of a fund's authorized capital stock, but share certificates are not issued. Each share and fractional share entitles the shareholder to: . Receive a proportional interest in a fund's income and capital gain distributions. . Cast one vote per share on certain fund matters, including the election of fund directors, changes in fundamental policies, or approval of changes in the fund's management contract. Do T. Rowe Price funds have annual shareholder meetings? The funds are not required to hold annual meetings and, to avoid unnecessary costs to fund shareholders, do not do so except when certain matters, such as a change in fundamental policies, must be decided. In addition, shareholders representing at least 10% of all eligible votes may call a special meeting, if they wish, for the purpose of voting on the removal of any fund director or trustee. If a meeting is held and you cannot attend, you can vote by proxy. Before the meeting, the fund will send you proxy materials that explain the issues to be decided and include instructions on voting by mail or telephone, or on the Internet. 19 Who runs the funds? General Oversight The corporation is governed by a Board of Directors that meets regularly to review the funds' investments, performance, expenses, and other business affairs. The Board elects the corporation's officers. The policy of the corporation is that the majority of Board members are independent of T. Rowe Price International. o All decisions regarding the purchase and sale of fund investments are made by T. Rowe Price International - specifically by each fund's Investment Advisory Group. Investment Manager T. Rowe Price International is responsible for the selection and management of each fund's portfolio investments. The company, a wholly owned subsidiary of T. Rowe Price Associates, is the successor to Rowe Price-Fleming International ("Price-Fleming"), a joint venture established in 1979 between T. Rowe Price Associates and Robert Fleming Holdings ("Flemings"). In 2000, T. Rowe Price became the sole owner of Price-Fleming and renamed the company T. Rowe Price International. The U.S. office of T. Rowe Price International is located at 100 East Pratt Street, Baltimore, Maryland 21202. Offices are also located in London, Tokyo, Singapore, Hong Kong, Buenos Aires, and Paris. Portfolio Management The International Bond Fund has an Investment Advisory Committee with the following members: Ian Kelson, Chairman, Michael Conelius, Greg Fisher, and Christopher Rothery. The committee chairman has day-to-day responsibility for managing the fund and works with the committee in developing and executing the fund's investment program. Mr. Kelson joined T. Rowe Price International in 2000 as the head of international fixed income investments. Prior to joining T. Rowe Price International, he spent 10 years as Chief Investment Officer, Fixed Income at Morgan Grenfell/Deutsche Asset Management. The Emerging Markets Bond Fund has an Investment Advisory Committee with the following members: Michael Conelius, Chairman, Julio Delgado, Greg Fisher, Ian Kelson, and Christopher Rothery. The committee chairman has day-to-day responsibility for managing the fund and works with the committee in developing and executing the fund's investment program. Mr. Conelius joined T. Rowe Price International in 1995 and has been responsible for portfolio management and analysis of emerging markets debt since that time. He joined T. Rowe Price in 1988 as a financial analyst. The Management Fee This fee has two parts - an "individual fund fee," which reflects a fund's particular characteristics, and a "group fee." The group fee, which is designed to reflect the benefits of the shared resources of the T. Rowe Price investment manage- T. ROWE PRICE 20 ment complex, is calculated daily based on the combined net assets of all T. Rowe Price funds (except the Spectrum Funds, and any institutional, index, or private label mutual funds). The group fee schedule (shown below) is graduated, declining as the asset total rises, so shareholders benefit from the overall growth in mutual fund assets. Group Fee Schedule
0.334%/a/ First $50 billion 0.305% Next $30 billion 0.300% Next $40 billion 0.295% Thereafter -------------------------------------
/a/ Represents a blended group fee rate containing various break points. Each fund's portion of the group fee is determined by the ratio of its daily net assets to the daily net assets of all the T. Rowe Price funds described previously. Based on combined T. Rowe Price fund assets of $110 billion at December 31, 2000, the group fee was 0.32%. The individual fund fees are as follows: International Bond Fund, 0.35%; and Emerging Markets Bond Fund, 0.45%. UNDERSTANDING PERFORMANCE INFORMATION ---------------------------------------------------------- This section should help you understand the terms used to describe fund performance. You will come across them in shareholder reports you receive from us; in our education and informational materials; in T. Rowe Price advertisements; and in the media. Total Return This tells you how much an investment has changed in value over a given time period. It reflects any net increase or decrease in the share price and assumes that all dividends and capital gains (if any) paid during the period were reinvested in additional shares. Therefore, total return numbers include the effect of compounding. Advertisements may include cumulative or average annual total return figures, which may be compared with various indices, other performance measures, or other mutual funds. 21 Cumulative Total Return This is the actual return of an investment for a specified period. A cumulative return does not indicate how much the value of the investment may have fluctuated during the period. For example, an investment could have a 10-year positive cumulative return despite experiencing some negative years during that time. Average Annual Total Return This is always hypothetical and should not be confused with actual year-by-year results. It smooths out all the variations in annual performance to tell you what constant year-by-year return would have produced the investment's actual cumulative return. This gives you an idea of an investment's annual contribution to your portfolio, provided you held it for the entire period. Yield The current or "dividend" yield on a fund or any investment tells you the relationship between the investment's current level of annual income and its price on a particular day. The dividend yield reflects the actual income paid to shareholders for a given period, annualized, and divided by the price at the end of the period. For example, a fund providing $5 of annual income per share and a price of $50 has a current yield of 10%. Yields can be calculated for any time period. The advertised or SEC yield is found by determining the net income per share (as defined by the Securities and Exchange Commission) earned by a fund during a 30-day base period and dividing this amount by the per share price on the last day of the base period. The SEC yield-also called the standardized yield-may differ from the dividend yield. INVESTMENT POLICIES AND PRACTICES ---------------------------------------------------------- This section takes a detailed look at some of the types of fund securities and the various kinds of investment practices that may be used in day-to-day portfolio management. Fund investments are subject to further restrictions and risks described in the Statement of Additional Information. Shareholder approval is required to substantively change fund objectives and certain investment restrictions noted in the following section as "fundamental policies." The managers also follow certain "operating policies," which can be changed without shareholder approval. However, significant changes are discussed with shareholders in fund reports. Fund investment restrictions and T. ROWE PRICE 22 policies are adhered to at the time of investment. A later change in circumstances will not require the sale of an investment if it was proper at the time it was made. Fund holdings of certain kinds of investments cannot exceed maximum percentages of total assets, which are set forth in this prospectus. For instance, fund investments in hybrid instruments are limited to 10% of total assets. While these restrictions provide a useful level of detail about fund investments, investors should not view them as an accurate gauge of the potential risk of such investments. For example, in a given period, a 5% investment in hybrid instruments could have significantly more of an impact on a fund's share price than its weighting in the portfolio. The net effect of a particular investment depends on its volatility and the size of its overall return in relation to the performance of all other fund investments. Changes in fund holdings, fund performance, and the contribution of various investments are discussed in the shareholder reports sent to you. o Fund managers have considerable leeway in choosing investment strategies and selecting securities they believe will help achieve fund objectives. Types of Portfolio Securities In seeking to meet their investment objectives, the funds may invest in any type of security or instrument (including certain potentially high-risk derivatives described in this section) whose investment characteristics are consistent with their investment programs. The following pages describe various types of fund securities and investment management practices. Fixed-Income Securities The funds' investments may include but shall not be limited to: (1) Debt obligations issued or guaranteed by: (a) a foreign sovereign government or one of its agencies, authorities, instrumentalities, or political subdivisions, including a foreign state, province or municipality, and (b) supranational organizations such as the World Bank, Asian Development Bank, European Investment Bank, and European Economic Community; (2) Debt obligations: (a) of foreign banks and bank holding companies, and (b) of domestic banks and corporations issued in foreign currencies; and (3) Foreign corporate debt securities and commercial paper. Such securities may take a variety of forms including those issued in the local currency of the issuer, Brady bonds, Euro bonds, and bonds denominated in the Euro. Normally, the International Bond Fund will only purchase bonds denominated in foreign currencies (other than Brady and other emerging market bonds). The Emerging Markets Bond Fund may also invest in: such dollar-denominated fixed income securities as (1) Debt obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities; (2) Domestic corporate 23 debt securities; (3) Domestic commercial paper, including commercial paper indexed to certain specific foreign currency exchange rates; (4) Debt obligations of domestic banks and bank holding companies; and (5) Collateralized mortgage obligations or asset-backed bonds. The funds may from time to time purchase securities on a when-issued basis, invest in repurchase agreements, and purchase bonds convertible into equities. Nondiversified Investment Company The funds are able to invest more than 5% of their assets in the fixed income securities of individual foreign governments. Each fund generally will not invest more than 5% of its assets in any individual corporate issuer, provided that (1) a fund may place assets in bank deposits or other short-term bank instruments with a maturity of up to 30 days provided that (i) the bank has a short-term credit rating of A1+ (or, if unrated, the equivalent as determined by T. Rowe Price International) and (ii) the fund will not maintain more than 10% of its total assets with any single bank; and (2) the fund may maintain more than 5% of its total assets, including cash and currencies, in custodial accounts or deposits of the funds' custodian or sub-custodians. In addition, each fund intends to qualify as a regulated investment company for purposes of the Internal Revenue Code. This requires each fund to limit its investments so that, at the end of each calendar quarter, with respect to at least 50% of its total assets, not more than 5% of such assets are invested in the securities of a single issuer, and with respect to the remaining 50%, no more than 25% is invested in a single issuer. Since, as a nondiversified investment company, each fund is permitted to invest a greater proportion of its assets in the securities of a smaller number of issuers, the funds may be subject to greater credit risk with respect to their portfolio securities than an investment company that is more broadly diversified. Hybrid Instruments These instruments (a type of potentially high-risk derivative) can combine the characteristics of securities, futures, and options. For example, the principal amount or interest rate of a hybrid could be tied (positively or negatively) to the price of some commodity, currency, or securities index or another interest rate (each a "benchmark"). Hybrids can be used as an efficient means of pursuing a variety of investment goals, including currency hedging, duration management, and increased total return. Hybrids may or may not bear interest or pay dividends. The value of a hybrid or its interest rate may be a multiple of a benchmark and, as a result, may be leveraged and move (up or down) more steeply and rapidly than the benchmark. These benchmarks may be sensitive to economic and political events, such as commodity shortages and currency devaluations, which cannot be readily foreseen by the purchaser of a hybrid. Under certain conditions, the redemption value of a hybrid could be zero. Thus, an investment in a T. ROWE PRICE 24 hybrid may entail significant market risks that are not associated with a similar investment in a traditional, U.S. dollar-denominated bond that has a fixed principal amount and pays a fixed rate or floating rate of interest. The purchase of hybrids also exposes the funds to the credit risk of the issuer of the hybrid. These risks may cause significant fluctuations in the net asset values of the funds. o Hybrids can have volatile prices and limited liquidity, and their use may not be successful. Operating policy Fund investments in hybrid instruments are limited to 10% of total assets. Private Placements These securities are sold directly to a small number of investors, usually institutions. Unlike public offerings, such securities are not registered with the SEC. Although certain of these securities may be readily sold, for example, under Rule 144A, others may be illiquid, and their sale may involve substantial delays and additional costs. Operating policy Fund investments in illiquid securities are limited to 15% of net assets. Loan Participations and Assignments Large loans to corporations or governments, including governments of less-developed countries (LDCs), may be shared or syndicated among several lenders, usually banks. Each fund could participate in such syndicates, or could buy part of a loan, becoming a direct lender. Participations and assignments involve special types of risk, including limited marketability and the risks of being a lender. If a fund purchases a participation, it may only be able to enforce its rights through the lender, and it may assume the credit risk of the lender in addition to the borrower. In assignments, the funds' rights against the borrower may be more limited than those held by the original lender. Operating policy The International Bond Fund may not invest more than 5% and Emerging Markets Bond Fund not more than 20% of total assets in loan participations and assignments. High-Yield, High-Risk Bonds While investments in high-yield, lower-quality securities offer the opportunity for substantial income and capital appreciation, there are significant risks associated with such investments, including: Greater credit risk Companies and governments issuing lower-rated bonds are not as strong financially as those with higher credit ratings, and their bonds are often viewed as speculative investments. Such issuers are more vulnerable to real or perceived business setbacks and to changes in the economy, such as a reces- 25 sion, that might impair their ability to make timely interest and principal payments. Certain less-developed governments have in the past defaulted on payment of interest and principal on debt they have issued. As a result, your fund manager relies heavily on proprietary T. Rowe Price International research when selecting these investments. Reduced market liquidity High-yielding emerging market bonds are generally less "liquid" than higher-quality bonds issued by companies and governments in developed countries. Consequently, large purchases or sales of certain high-yield, emerging market debt issues may cause significant changes in their prices. Because many of these bonds do not trade frequently, when they do trade, their price may be substantially higher or lower than had been expected. A lack of liquidity also means that judgment may play a bigger role when seeking to establish the fair value of the securities. Other factors The major factor influencing prices of high-quality bonds is changes in interest rate levels; but this is only one of several factors affecting prices of lower-quality bonds. Because the credit quality of the issuer is lower, such bonds are more sensitive to developments affecting the issuer's underlying fundamentals, such as changes in financial condition, or a given country's economy in general. In addition, the entire bond market in an emerging market can experience sudden and sharp price swings due to a variety of factors, including changes in economic forecasts, stock market activity, large or sustained sales by institutional investors, a high-profile default, a political upheaval of some kind, or just a change in the market's psychology. This type of volatility is usually associated more with stocks than bonds, but investors in lower-quality bonds should also anticipate it. Since mutual funds can be a major source of demand in certain markets, substantial cash flows into and out of these funds can affect high-yield bond prices. If, for example, a significant number of funds were to sell bonds to meet shareholder redemptions, both bond prices and a fund's share price could fall more than underlying fundamentals might justify. o Defaulted bonds are acquired only if the fund manager foresees the potential for significant capital appreciation. Brady Bonds Brady bonds, named after former U.S. Secretary of the Treasury Nicholas Brady, are used as a means of restructuring the external debt burden of a government in certain emerging markets. A Brady bond is created when an outstanding commercial bank loan to a government or private entity is exchanged for a new bond in connection with a debt restructuring plan. Brady bonds may be collateralized or uncollateralized and issued in various currencies (although typically in the U.S. dollar). They are often fully collateralized as to principal in U.S. Treasury zero coupon bonds. However, even with this collateralization fea- T. ROWE PRICE 26 ture, Brady bonds are often considered speculative, below investment-grade investments because the timely payment of interest is the responsibility of the issuing party (for example, a Latin American country) and the value of the bonds can fluctuate significantly based on the issuer's ability or perceived ability to make these payments. Finally, some Brady bonds may be structured with floating rate or low fixed rate coupons. Operating policy The International Bond Fund may invest up to 20% of total assets in below investment-grade ("junk") bonds. The Emerging Markets Bond Fund may invest substantially all of its assets in such bonds. Emerging Markets Bond Fund Convertible Bonds Convertible bonds are debt instruments convertible into equity of the issuing company at certain times in the future and according to a certain exchange ratio. Typically, convertible bonds are callable by the company, which may, in effect, force conversion before the holder would otherwise choose. While the fund intends to invest primarily in debt securities, it may invest in convertible bonds or equity securities. While some countries or companies may be regarded as favorable investments, pure fixed income opportunities may be unattractive or limited due to insufficient supply, or legal or technical restrictions. In such cases, the fund may consider equity securities or convertible bonds to gain exposure to such markets. Operating policy The fund may invest up to 10% of its total assets in convertible bonds and equity securities. Concentration of Investments From time to time, the fund may invest more than 25% of its total assets in the securities of foreign governmental and corporate entities located in the same country. However, the fund will not invest more than 25% of its total assets in any single foreign governmental issuer or in two or more such issuers subject to a common, explicit guarantee. International Bond Fund Concentration in Banking Industry When the fund's position in issues maturing in one year or less equals 35% or more of the fund's total assets, the fund will, as a matter of fundamental policy, normally have 25% or more of its assets concentrated in securities in the banking industry. Investments in the banking industry may be affected by general economic conditions and exposure to credit losses arising from possible financial difficulties of borrowers. The profitability of the banking industry is largely dependent on the availability and cost of funds for the purpose of financing lending operations under prevailing money market conditions. 27 Types of Investment Management Practices Foreign Currency Transactions Each fund may engage in foreign currency transactions either on a spot (cash) basis at the rate prevailing in the currency exchange market at the time or through forward currency contracts ("forwards") with terms generally of less than one year. Forwards will be used primarily to adjust the foreign exchange exposure of each fund with a view to protecting the portfolio from adverse currency movements, based on T. Rowe Price International's outlook, and the funds might be expected to enter into such contracts under the following circumstances: Lock In When management desires to lock in the U.S. dollar price on the purchase or sale of a security denominated in a foreign currency. Cross Hedge If a particular currency is expected to decrease against another currency, a fund may sell the currency expected to decrease and purchase a currency which is expected to increase against the currency sold in an amount approximately equal to some or all of a fund's portfolio holdings denominated in the currency sold. Operating policy The International Bond Fund does not normally involve more than 50% of its assets in cross-hedging. Direct Hedge If T. Rowe Price International sought to eliminate substantially all of the risk of owning a particular currency, or if T. Rowe Price International believed the portfolio could benefit from price appreciation in a given country's bonds but did not want to hold the currency, it could employ a direct hedge back into the U.S. dollar. In either case, a fund would enter into a forward contract to sell the currency in which a portfolio security is denominated and purchase U.S. dollars at an exchange rate established at the time it initiated the contract. The cost of the direct hedge transaction may offset most, if not all, of the yield advantage offered by the foreign security, but a fund would hope to benefit from an increase (if any) in value of the bond. Normally, the International Bond Fund does not engage in direct hedges back to the U.S. dollar. o It is often not possible to effectively hedge the currency risk associated with emerging market bonds because their currency markets are not sufficiently developed. Proxy Hedge T. Rowe Price International might choose to use a proxy hedge, which is less costly than a direct hedge. In this case, a fund, having purchased a bond, will sell a currency whose value is believed to be closely linked to the currency in which the bond is denominated. This type of hedging entails greater risk T. ROWE PRICE 28 than a direct hedge because it is dependent on a stable relationship between the two currencies paired as proxies, and because the relationships can be very unstable at times. Forward contracts involve other risks, including, but not limited to, significant volatility in currency markets. In addition, currency moves may not occur exactly as T. Rowe Price International expected, so use of forward contracts could adversely affect a fund's total return. Costs of Hedging When a fund purchases a foreign bond with a higher interest rate than is available on U.S. bonds of a similar maturity, the additional yield on the foreign bond could be substantially lessened if the fund were to enter into a direct hedge by selling the foreign currency and purchasing the U.S. dollar. This is what is known as the "cost" of hedging. Proxy hedging attempts to reduce this cost through an indirect hedge back to the U.S. dollar. It is important to note that hedging costs are treated as capital transactions and are not, therefore, deducted from a fund's dividend distribution and are not reflected in its yield. Instead, such costs will, over time, be reflected in a fund's net asset value per share. Hedging may result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. These provisions could result in an increase (or decrease) in the amount of taxable dividends paid by the funds and could affect whether dividends paid by the funds are classified as capital gains or ordinary income. Reserve Position A certain portion of fund assets will be held in money market reserves. Fund reserve positions are expected to consist primarily of shares of one or more T. Rowe Price internal money market funds. Short-term, high-quality U.S. and foreign dollar-denominated money market securities, including repurchase agreements, may also be held. For temporary, defensive purposes, there is no limit on fund investments in money market reserves. The effect of taking such a position is that the funds may not achieve their investment objectives. The reserve position provides flexibility in meeting redemptions, paying expenses, and in the timing of new investments and can serve as a short-term defense during periods of unusual market volatility. Borrowing Money and Transferring Assets Fund borrowings may be made from banks and other T. Rowe Price funds for temporary emergency purposes to facilitate redemption requests, or for other purposes consistent with fund policies as set forth in this prospectus. Such borrowings may be collateralized with fund assets, subject to restrictions. Fundamental policy Borrowings may not exceed 33/1//\\/3/\\% of total fund assets. 29 Operating policy Fund transfers of portfolio securities as collateral will not be made except as necessary in connection with permissible borrowings or investments, and then such transfers may not exceed 33/1//\\/3/\\% of fund total assets. Fund purchases of additional securities will not be made when borrowings exceed 5% of total assets. Futures and Options Futures (a type of potentially high-risk derivative) are often used to manage risk because they enable the investor to buy or sell an asset in the future at an agreed-upon price. Options (another type of potentially high-risk derivative) give the investor the right (where the investor purchases the option), or the obligation (where the investor writes (sells) the option), to buy or sell an asset at a predetermined price in the future. Futures and options contracts may be bought or sold for a number of reasons including: to manage fund exposure to changes in interest rates, securities prices, and foreign currencies; as an efficient means of adjusting fund overall exposure to certain markets; in an effort to enhance income; to protect the value of portfolio securities; as a cash management tool; and to adjust the portfolios' duration. Call and put options may be purchased or sold on securities, financial indices, and foreign currencies. Futures contracts and options may not always be successful hedges; their prices can be highly volatile; using them could lower fund total return; and the potential loss from the use of futures can exceed a fund's initial investment in such contracts. Operating policies Futures: Initial margin deposits and premiums on options used for nonhedging purposes will not exceed 5% of fund net asset value. Options on securities: The total market value of securities against which call or put options are written may not exceed 25% of fund total assets. No more than 5% of fund total assets will be committed to premiums when purchasing call or put options. Lending of Portfolio Securities Fund securities may be lent to broker-dealers, other institutions, or other persons to earn additional income. The principal risk is the potential insolvency of the broker-dealer or other borrower. In this event, a fund could experience delays in recovering its securities and capital losses. Fundamental policy The value of loaned securities may not exceed 33/1//\\/3/\\% of total fund assets. When-Issued Securities and Forward Commitment Contracts The funds may purchase securities on a when-issued or delayed delivery basis or may purchase or sell securities on a forward commitment basis. There is no limit on fund investments in these securities. The price of these securities is fixed at the time of the commitment to buy, but delivery and payment can take place a T. ROWE PRICE 30 month or more later. During the interim period, the market value of the securities can fluctuate, and no interest accrues to the purchaser. At the time of delivery, the value of the securities may be more or less than the purchase or sale price. To the extent the funds remain fully or almost fully invested (in securities with a remaining maturity of more than one year) at the same time they purchase these securities, there will be greater fluctuations in the fund net asset values than if the funds did not purchase them. Portfolio Turnover Turnover is an indication of trading frequency. The funds may purchase and sell securities without regard to the length of time they are held. A high turnover rate may increase transaction costs, result in additional capital gain distributions, and reduce the funds' performance. The funds' portfolio turnover rates are shown in the Financial Highlights tables. Location of Company The funds ordinarily invest in the securities of at least three countries; however, they may invest in the securities of one country, including the U.S., for temporary defensive purposes. Emerging Markets Bond Fund In determining the domicile or nationality of a company, the fund would primarily consider the following factors: whether the company is organized under the laws of a particular country; or, whether the company derives a significant proportion (at least 50%) of its revenues or profits from goods produced or sold, investments made, or services performed in the country or has at least 50% of its assets situated in that country. The fund will invest at least 65% of its total assets in the securities of emerging market governments or companies located (as defined above) in emerging market countries. Bond Ratings and High-Yield Bonds Larger bond issues are evaluated by rating agencies such as Moody's and Standard & Poor's on the basis of the issuer's ability to meet all required interest and principal payments. The highest ratings are assigned to issuers perceived to be the best credit risks. T. Rowe Price International research analysts also evaluate all portfolio holdings, including those rated by an outside agency. Other things being equal, lower-rated bonds have higher yields due to greater risk. High-yield bonds, also called "junk" bonds, are those rated below BBB. Table 5 shows the rating scale used by several major rating agencies. T. Rowe Price International considers publicly available ratings but emphasizes its own credit analysis when selecting investments. 31 Table 5 Ratings of Corporate Debt Securities
Moody's Standard Investors & Poor's Fitch Service, Inc. Corporation IBCA, Inc. Definition -------------------------------------------------------------------------------------- Long Term Aaa AAA AAA Highest quality -------------------------------------------------------------------------------------- Aa AA AA High quality -------------------------------------------------------------------------------------- A A A Upper medium grade -------------------------------------------------------------------------------------- Baa BBB BBB Medium grade -------------------------------------------------------------------------------------- Ba BB BB Speculative -------------------------------------------------------------------------------------- B B B Highly speculative -------------------------------------------------------------------------------------- Caa CCC, CC CCC, CC Vulnerable to default -------------------------------------------------------------------------------------- Ca C C Default is imminent -------------------------------------------------------------------------------------- C D DDD, DD, D Probably in default Moody's S&P Fitch Commercial P-1 Superior quality A-1+ Extremely strong quality F-1+ Exceptionall Paper A-1 Strong quality F-1 strong quality Very strong quality -------------------------------------------------------------------------------------- P-2 Strong quality A-2 Satisfactory quality F-2 Good credit quality -------------------------------------------------------------------------------------- P-3 Acceptable quality A-3 Adequate quality F-3 Fair credit B Speculative quality F-5 quality C Doubtful quality Weak credit quality -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS ---------------------------------------------------------- Table 6, which provides information about each fund's financial history, is based on a single share outstanding throughout the periods shown. Each fund's section of the table is part of the fund's financial statements, which are included in its annual report and are incorporated by reference into the Statement of Additional Information (available upon request). The total returns in the tables represent the rate that an investor would have earned or lost on an investment in each fund (assuming reinvestment of all dividends and distributions and no payment of account or (if applicable) redemption fees). The financial statements in the annual report were audited by the funds' independent accountants, PricewaterhouseCoopers LLP. T. ROWE PRICE 32 Table 6 Financial Highlights
Year ended December 31 International Bond 1996 1997 1998 1999 2000 ------------------------------------------------------------------------------ Net asset value, beginning of period $10.46 $10.46 $ 9.58 $10.46 $ 9.16 Income From Investment Operations Net investment income 0.60 0.54 0.51 0.37 0.40 ------------------------------------------------- Net gains or losses on securities (both realized and 0.11 (0.87) 0.88 (1.18) (0.70) unrealized) ------------------------------------------------- Total from investment operations 0.71 (0.33) 1.39 (0.81) (0.30) Less Distributions Dividends (from net (0.60) (0.46) (0.51) (0.33) -- investment income) ------------------------------------------------- Distributions (from (0.11) (0.09) -- (0.11) -- capital gains) ------------------------------------------------- Returns of capital -- -- -- (0.05) (0.39) ------------------------------------------------- Total distributions (0.71) (0.55) (0.51) (0.49) (0.39) ------------------------------------------------- Net asset value, $10.46 $ 9.58 $10.46 $ 9.16 $ 8.47 end of period ------------------------------------------------- Total return 7.13% (3.17)% 15.03% (7.86)% (3.13)% Ratios/Supplemental Data Net assets, end of $ 969 $ 826 $ 926 $ 779 $ 753 period (in millions) ------------------------------------------------- Ratio of expenses to 0.87% 0.86% 0.88% 0.90% 0.91% average net assets ------------------------------------------------- Ratio of net income 5.86% 5.38% 5.19% 3.93% 4.76% to average net assets ------------------------------------------------- Portfolio turnover 234.0% 155.9% 128.9% 94.9% 160.5%/a/ rate ------------------------------------------------------------------------------
/a/Excludes the effect of the acquisition of the T. Rowe Price Global Bond Fund's assets. 33 Table 6 Financial Highlights (continued)
Year ended December 31 Emerging Markets Bond 1996 1997 1998 1999 2000 -------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 10.67 $ 12.97 $ 13.71 $ 9.23 $ 10.11 Income From Investment Operations Net investment income 1.00/a/ 1.16/a/ 1.31/a/ 0.97 1.17 ----------------------------------------------------------- Net gains or losses on securities (both realized 2.72 0.97/b/ (4.29) 0.99 0.31 and unrealized) ----------------------------------------------------------- Total from investment operations 3.72 2.13 (2.98) 1.96 1.48 Less Distributions Dividends (from net (1.01) (1.15) (1.31) (0.73) (1.05) investment income) ----------------------------------------------------------- Distributions (from (0.41) (0.24) (0.19) -- -- capital gains) ----------------------------------------------------------- Returns of capital -- -- -- (0.35) -- ----------------------------------------------------------- Total distributions (1.42) (1.39) (1.50) (1.08) (1.05) ----------------------------------------------------------- Net asset value, $ 12.97 $ 13.71 $ 9.23 $ 10.11 $ 10.54 end of period ----------------------------------------------------------- Total return 36.77%/a/ 16.83%/a/ (23.09)%/a/ 22.97% 15.20% Ratios/Supplemental Data Net assets, end of period $39,862 $113,419 $148,111 $173,078 $163,937 (in thousands) ----------------------------------------------------------- Ratio of expenses to 1.25%/a/ 1.25%/a/ 1.25%/a/ 1.25%/a/ 1.21% average net assets ----------------------------------------------------------- Ratio of net income to 8.37%/a/ 8.61%/a/ 11.52%/a/ 10.56% 11.23% average net assets ----------------------------------------------------------- Portfolio turnover rate 168.7% 87.6% 78.4% 54.0% 69.5% --------------------------------------------------------------------------------------------
/a/ Excludes expenses in excess of a 1.25% voluntary expense limitation in effect through December 31, 2000. /b/The amount presented is calculated pursuant to a methodology prescribed by the Securities and Exchange Commission for a share outstanding throughout the period. This amount is inconsistent with the fund's aggregate gains and losses because of the timing of sales and redemptions of fund shares in relation to fluctuating market values for the investment portfolio. INVESTING WITH T. ROWE PRICE ACCOUNT REQUIREMENTS AND TRANSACTION INFORMATION ---------------------------------------------------------- Tax Identification Number We must have your correct Social Security or tax identification number on a signed New Account Form or W-9 Form. Otherwise, federal law requires the funds to withhold a percentage (currently 31%) of your dividends, capital gain distributions, and redemptions, and may subject you to an IRS fine. If this information is not received within 60 days after your account is established, your account may be redeemed, at the fund's current NAV when the shares are redeemed. Always verify your transactions by carefully reviewing the confirmation we send you. Please report any discrepancies to Shareholder Services promptly. Employer-Sponsored Retirement Plans and Institutional Accounts T. Rowe Price Trust Company 1-800-492-7670 Transaction procedures in the following sections may not apply to employer-sponsored retirement plans and institutional accounts. For procedures regarding employer-sponsored retirement plans, please call T. Rowe Price Trust Company or consult your plan administrator. For institutional account procedures, please call your designated account manager or service representative. We do not accept third-party checks, except for IRA Rollover checks that are properly endorsed. In addition, T. Rowe Price does not accept purchases made by credit card check. OPENING A NEW ACCOUNT ---------------------------------------------------------- $2,500 minimum initial investment; $1,000 for retirement plans or gifts or transfers to minors (UGMA/UTMA) accounts ($25,000 minimum initial investment for Summit Funds only) Account Registration If you own other T. Rowe Price funds, be sure to register any new account just like your existing accounts so you can exchange among them easily. (The name and account type would have to be identical.) 35 By Mail Please make your check payable to T. Rowe Price Funds (otherwise it will be returned) and send your check, together with the New Account Form, to the appropriate address in the next paragraph. via U.S. Postal Service T. Rowe Price Account Services P.O. Box 17300 Baltimore, MD 21297-1300 via private carriers/overnight services T. Rowe Price Account Services Mailcode 17300 4515 Painters Mill Road Owings Mills, MD 21117-4903 By Wire Call Investor Services for an account number and give the following wire information to your bank: Receiving Bank: PNC Bank, N.A. (Pittsburgh) Receiving Bank ABA#: 043000096 Beneficiary: T. Rowe Price [fund name] Beneficiary Account: 1004397951 Originator to Beneficiary Information (OBI): name of owner(s) and account number Complete a New Account Form and mail it to one of the appropriate addresses listed previously. Note: No services will be established and IRS penalty withholding may occur until we receive a signed New Account Form. Also, retirement plan accounts and IRAs cannot be opened by wire. By Exchange Call Shareholder Services or use Tele*Access or your personal computer (see Automated Services under Information About Your Services). The new account will have the same registration as the account from which you are exchanging. Services for the new account may be carried over by telephone request if they are preauthorized on the existing account. For limitations on exchanging, see the explanation of Excessive Trading under Transaction Procedures and Special Requirements. In Person Drop off your New Account Form at any location listed on the back cover and obtain a receipt. T. ROWE PRICE 36 PURCHASING ADDITIONAL SHARES ---------------------------------------------------------- $100 minimum purchase ($1,000 minimum purchase for Summit Funds); $50 minimum for retirement plans, Automatic Asset Builder, and gifts or transfers to minors (UGMA/ UTMA) accounts ($100 minimum for Summit Funds) By ACH Transfer Use Tele*Access or your personal computer or call Shareholder Services if you have established electronic transfers using the ACH system. By Wire Call Shareholder Services or use the wire address listed in Opening a New Account. By Mail 1. Make your check payable to T. Rowe Price Funds (otherwise it may be returned). 2. Mail the check to us at the following address with either a fund reinvestment slip or a note indicating the fund you want to buy and your fund account number. 3. Remember to provide your account number and the fund name on the memo line of your check. via U.S. Postal Service T. Rowe Price Account Services P.O. Box 17300 Baltimore, MD 21297-1300 /(For //mail via private carriers and overnight services//, see previous / /section.)/ By Automatic Asset Builder Fill out the Automatic Asset Builder section on the New Account or Shareholder Services Form. EXCHANGING AND REDEEMING SHARES ---------------------------------------------------------- Exchange Service You can move money from one account to an existing identically registered account or open a new identically registered account. Remember, exchanges are purchases and sales for tax purposes. (Exchanges into a state tax-free fund are limited to investors living in states where the fund is registered.) Redemptions Redemption proceeds can be mailed to your account address, sent by ACH transfer to your bank, or wired to your bank (provided your bank information is already 37 on file). For charges, see Electronic Transfers-By Wire under Information About Your Services. Please note that large redemption requests initiated through automated services may be routed to a service representative. If you request to redeem a specific dollar amount, and the market value of your account is less than the amount of your request, we will redeem all shares from your account. Some of the T. Rowe Price funds may impose a redemption fee of 0.5% to 2% on shares held for less than six months, one year, or two years, as specified in the prospectus. The fee is paid to the fund. For redemptions by check or electronic transfer, please see Information About Your Services. By Phone Call Shareholder Services If you find our phones busy during unusually volatile markets, please consider placing your order by your personal computer or Tele*Access (if you have previously authorized these services), mailgram, or express mail. For exchange policies, please see Transaction Procedures and Special Requirements - Excessive Trading. By Mail For each account involved, provide the account name, number, fund name, and exchange or redemption amount. For exchanges, be sure to specify any fund you are exchanging out of and the fund or funds you are exchanging into. T. Rowe Price requires the signatures of all owners exactly as registered, and possibly a signature guarantee (see Transaction Procedures and Special Requirements - Signature Guarantees). Please use the appropriate address below: For nonretirement and IRA accounts: via U.S. Postal Service T. Rowe Price Account Services P.O. Box 17302 Baltimore, MD 21297-1302 T. ROWE PRICE 38 via private carriers/overnight services T. Rowe Price Account Services Mailcode 17302 4515 Painters Mill Road Owings Mills, MD 21117-4903 For employer-sponsored retirement accounts: via U.S. Postal Service T. Rowe Price Trust Company P.O. Box 17479 Baltimore, MD 21297-1479 via private carriers/overnight services T. Rowe Price Trust Company Mailcode 17479 4515 Painters Mill Road Owings Mills, MD 21117-4903 Requests for redemptions from employer-sponsored retirement accounts must be in writing; please call T. Rowe Price Trust Company or your plan administrator for instructions. IRA distributions may be requested in writing or by telephone; please call Shareholder Services to obtain an IRA Distribution Form or an IRA Shareholder Services Form to authorize the telephone redemption service. RIGHTS RESERVED BY THE FUNDS ---------------------------------------------------------- T. Rowe Price funds and their agents reserve the following rights: (1) to waive or lower investment minimums; (2) to accept initial purchases by telephone or mailgram; (3) to refuse any purchase or exchange order; (4) to cancel or rescind any purchase or exchange order (including, but not limited to, orders deemed to result in excessive trading, market timing, fraud, or 5% ownership) upon notice to the shareholder within five business days of the trade or if the written confirmation has not been received by the shareholder, whichever is sooner; (5) to freeze any account and suspend account services when notice has been received of a dispute between the registered or beneficial account owners or there is reason to believe a fraudulent transaction may occur; (6) to otherwise modify the conditions of pur- 39 chase and any services at any time; and (7) to act on instructions believed to be genuine. These actions will be taken when, in the sole discretion of management, they are deemed to be in the best interest of the fund. In an effort to protect T. Rowe Price funds from the possible adverse effects of a substantial redemption in a large account, as a matter of general policy, no shareholder or group of shareholders controlled by the same person or group of persons will knowingly be permitted to purchase in excess of 5% of the outstanding shares of a fund, except upon approval of the fund's management. INFORMATION ABOUT YOUR SERVICES ---------------------------------------------------------- Shareholder Services 1-800-225-5132 Investor Services 1-800-638-5660 Many services are available to you as a shareholder; some you receive automatically, and others you must authorize or request on the New Account Form. By signing up for services on the New Account Form rather than later on, you avoid having to complete a separate form and obtain a signature guarantee. This section discusses some of the services currently offered. Our Services Guide, which we mail to all new shareholders, contains detailed descriptions of these and other services. Note: Corporate and other institutional accounts require an original or certified resolution to establish services and to redeem by mail. Certain other fiduciary accounts (such as trusts or power of attorney arrangements) require documentation, which may include an original or certified copy of the trust or power of attorney to establish services and to redeem by mail. For more information, call Investor Services. Retirement Plans We offer a wide range of plans for individuals, institutions, and large and small businesses: Traditional IRAs, Roth IRAs, SIMPLE IRAs, SEP-IRAs, Keoghs (profit sharing, money purchase pension), 401(k)s, and 403(b)(7)s. For information on IRAs or our no-load variable annuity, call Investor Services. For information on all other retirement plans, please call our Trust Company at 1-800-492-7670. T. ROWE PRICE 40 Automated Services Tele*Access 1-800-638-2587 24 hours, 7 days Tele*Access 24-hour service via a toll-free number enables you to (1) access information on fund performance, prices, distributions, account balances, and your latest transaction; (2) request checks, prospectuses, services forms, duplicate statements, and tax forms; and (3) initiate purchase, redemption, and exchange transactions in your accounts (see Electronic Transfers in this section). Web Address www.troweprice.com Online Account Access You can sign up online to conduct account transactions through our Web site on the Internet. If you subscribe to America Online/(R)/, you can access our Web site via keyword "T. Rowe Price" and conduct transactions in your account. Plan Account Line 1-800-401-3279 This 24-hour service is similar to Tele*Access but is designed specifically to meet the needs of retirement plan investors. Telephone and Walk-In Services Buy, sell, or exchange shares by calling one of our service representatives or by visiting one of our investor center locations whose addresses are listed on the back cover. Electronic Transfers By ACH With no charges to pay, you can initiate a purchase or redemption for as little as $100 or as much as $100,000 between your bank account and fund account using the ACH system. Enter instructions via Tele*Access or your personal computer, or call Shareholder Services. By Wire Electronic transfers can be conducted via bank wire. There is currently a $5 fee for wire redemptions under $5,000, and your bank may charge for incoming or outgoing wire transfers regardless of size. Checkwriting (Not available for equity funds, or the High Yield, Emerging Markets Bond, or U.S. Bond Index Funds) You may write an unlimited number of free checks on any money market fund, and most bond funds, with a minimum of $500 per check. Keep in mind, however, that a check results in a redemption; a check written on a bond fund will create a taxable event which you and we must report to the IRS. 41 Automatic Investing $50 minimum ($100 minimum for Summit Funds) You can invest automatically in several different ways, including: Automatic Asset Builder You can instruct us to move $50 ($100 for Summit Funds) or more from your bank account, or you can instruct your employer to send all or a portion of your paycheck to the fund or funds you designate. Automatic Exchange You can set up systematic investments from one fund account into another, such as from a money fund into a stock fund. T. ROWE PRICE BROKERAGE ---------------------------------------------------------- To Open an Account 1-800-638-5660 For Existing Brokerage Customers 1-800-225-7720 Investments available through our brokerage service include stocks, options, bonds, and others at commission savings over full-service brokers/*/. We also provide a wide range of services, including: Automated Telephone and Computer Services You can enter stock and option orders, access quotes, and review account information around the clock by phone with Tele-Trader or via the Internet with Account Access-Brokerage. Any trades entered through Tele-Trader save you an additional 10% on commissions. For stock trades entered through Account Access-Brokerage, you will pay a commission of $19.95 for up to 1,000 shares plus $.02 for each share over 1,000. Option trades entered through Account Access-Brokerage save you 10% over our standard commission schedule. All trades are subject to a $35 minimum commission except stock trades placed through Account Access-Brokerage. Investor Information A variety of informative reports, such as our Brokerage Insights series and S&P Market Month newsletter, as well as access to online research tools can help you better evaluate economic trends and investment opportunities. T. ROWE PRICE 42 Dividend Reinvestment Service If you elect to participate in this service, the cash dividends from the eligible securities held in your account will automatically be reinvested in additional shares of the same securities free of charge. Most securities listed on national securities exchanges or on Nasdaq are eligible for this service. /*Services //v//ary //b//y //f//irm./ /T. Rowe Price// Brokerage is a division of //T. Rowe Price// Investment / /Services, Inc., Member NASD/SIPC./ INVESTMENT INFORMATION ---------------------------------------------------------- To help shareholders monitor their investments and make decisions that accurately reflect their financial goals, T. Rowe Price offers a wide variety of information in addition to account statements. Most of this information is also available on our Web site at www.troweprice.com. Shareholder Reports Fund managers' review of their strategies and performance. If several members of a household own the same fund, only one fund report is mailed to that address. To receive additional copies, please call Shareholder Services or write to us at P.O. Box 17630, Baltimore, Maryland 21297-1630. The T. Rowe Price Report A quarterly investment newsletter discussing markets and financial strategies and including the Performance Update, a review of all T. Rowe Price fund results. Insights Educational reports on investment strategies and financial markets. Investment Guides Asset Mix Worksheet, College Planning Kit, Diversifying Overseas: A T. Rowe Price Guide to International Investing, Managing Your Retirement Distribution, Personal Strategy Planner, Retirees Financial Guide, Retirement Planning Kit, and Tax Considerations for Investors. NOT PART OF THE PROSPECTUS T. Rowe Price Privacy Policy In the course of doing business with T. Rowe Price, you share personal and financial information with us. We treat this information as confidential and recognize the importance of protecting access to it. You may provide information when communicating or transacting with us in writing, electronically, or by phone. For instance, information may come from applications, requests for forms or literature, and your transactions and account positions with us. On occasion, such information may come from consumer reporting agencies and those providing services to us. We do not sell information about current or former customers to any third parties, and we do not disclose it to third parties unless necessary to process a transaction, service an account, or as otherwise permitted by law. We may share information within the T. Rowe Price family of companies in the course of providing or offering products and services to best meet your investing needs. We may also share that information with companies that perform administrative or marketing services for T. Rowe Price, with a research firm we have hired, or with a business partner, such as a bank or insurance company with whom we are developing or offering investment products. When we enter into such a relationship, our contracts restrict the companies' use of our customer information, prohibiting them from sharing or using it for any purposes other than those for which they were hired. We maintain physical, electronic, and procedural safeguards to protect your personal information. Within T. Rowe Price, access to such information is limited to those who need it to perform their jobs, such as servicing your accounts, resolving problems, or informing you of new products or services. Finally, our Code of Ethics, which applies to all employees, restricts the use of customer information and requires that it be held in strict confidence. This Privacy Policy applies to the following T. Rowe Price family of companies: T. Rowe Price Associates, Inc.; T. Rowe Price Advisory Services, Inc.; T. Rowe Price Investment Services, Inc.; T. Rowe Price Savings Bank; T. Rowe Price Trust Company; and the T. Rowe Price Funds. To help you achieve your financial goals, T. Rowe Price offers a wide range of stock, bond, and money market investments, as well as convenient services and informative reports. A fund Statement of Additional Information has been filed with the Securities and Exchange Commission and is incorporated by reference into this prospectus. Further information about fund investments, including a review of market conditions and the manager's recent strategies and their impact on performance, is available in the annual and semiannual shareholder reports. To obtain free copies of any of these documents, or for shareholder inquiries, call 1-800-638-5660. Fund information and Statements of Additional Information are also available from the Public Reference Room of the Securities and Exchange Commission. Infor- mation on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. Fund reports and other fund information are available on the EDGAR Database on the SEC's Internet site at http://www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at publicinfo@sec.gov, or by writing the Public Reference Room, Washington D.C. 20549-0102. Walk-in Investor Centers For directions, call 1-800-225-5132 or visit our Web site Baltimore Area Downtown 105 East Lombard Street Owings Mills Three Financial Center 4515 Painters Mill Road Boston Area 386 Washington Street Wellesley Colorado Springs 2260 Briargate Parkway Los Angeles Area Warner Center 21800 Oxnard Street Suite 270 Woodland Hills New York Area 51 John F. Kennedy Parkway 1st Floor West Short Hills San Francisco Area 1990 N. California Blvd. Suite 100 Walnut Creek Tampa 4200 West Cypress Street 10th Floor Washington, D.C. 900 17th Street, N.W. Farragut Square For Mutual Fund or T. Rowe Price Brokerage Information Investor Services 1-800-638-5660 TDD 1-800-367-0763 For Existing Accounts Shareholder Services 1-800-225-5132 For Performance, Prices, Account Information, or to Conduct Transactions Tele*Access/(R)/ 24 hours, 7 days 1-800-638-2587 Internet Address www.troweprice.com Plan Account Line For retirement plan investors: The appropriate 800 number appears on your retirement account statement. T. Rowe Price Associates, Inc. 100 East Pratt Street Baltimore, MD 21202 C02-040 5/1/01 1940 Act File No. 811-2958 PROSPECTUS May 1, 2001 T. ROWE PRICE International Bond Fund--Advisor Class A fund seeking high current income and capital appreciation through investments in foreign bonds. This class of shares is sold only through financial intermediaries. The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. LOGO T. Rowe Price International Funds, Inc. T. Rowe Price International Bond Fund--Advisor Class Prospectus May 1, 2001
ABOUT THE FUND 1 Objective, Strategy, Risks, and Expenses 1 ----------------------------------------------- Other Information About the Fund 5 ----------------------------------------------- ABOUT YOUR ACCOUNT 2 Pricing Shares and Receiving 7 Sale Proceeds ----------------------------------------------- Useful Information on Distributions 8 and Taxes ----------------------------------------------- Transaction Procedures and 10 Special Requirements ----------------------------------------------- MORE ABOUT THE FUND 3 Organization and Management 12 ----------------------------------------------- Understanding Performance Information 15 ----------------------------------------------- Investment Policies and Practices 16 ----------------------------------------------- Financial Highlights 24 ----------------------------------------------- INVESTING WITH T. ROWE PRICE 4 Account Requirements 26 and Transaction Information ----------------------------------------------- Opening a New Account ----------------------------------------------- Purchasing Additional Shares ----------------------------------------------- Exchanging and Redeeming Shares ----------------------------------------------- Rights Reserved by the Fund 27 s ----------------------------------------------- Information About Your Services ----------------------------------------------- T. Rowe Price Brokerage ----------------------------------------------- Investment Information -----------------------------------------------
T. Rowe Price International, Inc., the investment manager, is the successor to Rowe Price-Fleming International, Inc. ("Price-Fleming"), a joint venture with Robert Fleming Holdings, Ltd. ("Flemings") founded in 1979. In 2000, Price-Fleming became wholly-owned by T. Rowe Price Associates, Inc. As of December 31, 2000, T. Rowe Price International managed $32.7 billion in foreign stocks and bonds through its offices in Baltimore, London, Tokyo, Singapore, Hong Kong, Buenos Aires, and Paris. Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve, or any other government agency, and are subject to investment risks, including possible loss of the principal amount invested. ABOUT THE FUND OBJECTIVE, STRATEGY, RISKS, AND EXPENSES ---------------------------------------------------------- A word about the fund's name and structure. The International Bond Fund -Advisor Class is a share class of the T. Rowe Price International Bond Fund. The Advisor Class is not a separate mutual fund. It is sold only through brokers, dealers, banks, insurance companies, and other financial intermediaries that provide various distribution and administrative services. What is the fund's objective? The fund seeks to provide high current income and capital appreciation by investing primarily in high-quality, nondollar-denominated bonds outside the U.S. What is the fund's principal investment strategy? The fund will normally invest at least 65% of its total assets in high-quality (AA or better) foreign bonds but may invest up to 20% of assets in below investment-grade, high-risk bonds, including those in default or with the lowest rating. Up to 20% of assets may be invested in dollar-denominated foreign bonds such as Brady and other emerging market bonds. Although the fund expects to maintain an intermediate to long weighted average maturity, there are no maturity restrictions on the overall portfolio or on individual securities. The fund has wide flexibility to purchase and sell currencies and engage in hedging transactions. However, it normally does not attempt to cushion the impact of foreign currency fluctuations on the dollar. Therefore, the fund is likely to be heavily exposed to foreign currencies. Investment decisions are based on fundamental market factors, such as yield and credit quality differences among bonds as well as demand and supply trends and currency values. The fund generally invests in countries where the combination of fixed-income returns and currency exchange rates appears attractive, or, if the currency trend is unfavorable, where we believe the currency risk can be minimized through hedging. The fund sells holdings for a variety of reasons, such as to adjust its average maturity or quality, to shift assets into higher-yielding securities, or to alter geographic or currency exposure. o For details about the fund's investment program, please see the Investment Policies and Practices section. What are the main risks of investing in the fund? The fund is subject to the usual risks of fixed-income investing as well as the special risks of international investing. T. ROWE PRICE 2 . Interest rate risk This refers to the decline in bond prices that usually accompanies a rise in interest rates. Longer-maturity bonds typically suffer greater declines than those with shorter maturities. . Credit risk This is the chance that any fund holding could have its credit rating downgraded, or that a bond issuer will default (the failure of an issuer to make timely payments of interest or principal), potentially reducing the fund's income level and share price. The risk of default is much greater for the emerging market bonds in the fund's portfolio. . Nondiversified risk Because it is nondiversified, the fund can invest more of its assets in a smaller number of issuers than diversified funds. This could result in greater potential losses than funds investing in a broader variety of issues. . Currency risk This is the risk of a decline in the value of a foreign currency versus the U.S. dollar, which reduces the dollar value of securities denominated in that currency. The overall impact on the fund's holdings can be significant and long-lasting, depending on the currencies represented in the portfolio, how each one appreciates or depreciates in relation to the U.S. dollar, and whether currency positions are hedged. Because the fund is normally heavily exposed to foreign currencies, and does not attempt to hedge the impact of these currencies on the dollar, changes in currency exchange rates are likely to have a significant effect on the fund's performance. Currency trends are unpredictable, and to the extent the fund purchases and sells currencies, it will also be subject to the risk that its trading strategies, including efforts at hedging, will not succeed. Furthermore, hedging costs can be significant and reduce fund net asset value, and many emerging market currencies cannot be effectively hedged. . Emerging market risk The fund's investments in emerging markets are subject to abrupt and severe price declines. The economic and political structures of developing nations, in most cases, do not compare favorably with the U.S. or other developed countries in terms of wealth and stability, and their financial markets often lack liquidity. Some countries have legacies of hyperinflation and currency devaluations versus the dollar (which adversely affects returns to U.S. investors). . Other risks of foreign investing Other risks result from the varying stages of economic and political development of foreign countries, the differing regulatory environments, trading days, and accounting standards of non-U.S. markets, and higher transaction costs. Government interference in capital markets, such as capital or currency controls, nationalization of companies or industries, expropriation of assets, or imposition of punitive taxes would also hurt the fund. . Derivatives risk To the extent the fund uses these instruments, it may be exposed to additional volatility and potential losses. 3 As with any mutual fund, there can be no guarantee the fund will achieve its objective. o The fund's share price may decline, so when you sell your shares, you may lose money. How can I tell if the fund is appropriate for me? Consider your investment goals, your time horizon for achieving them, and your tolerance for risk. If you are investing through an intermediary and are willing to accept the special risks associated with international investing and the general risks of investing in bonds to achieve current income and potential capital growth, this fund could be appropriate for you. The fund can be used in both regular and tax-deferred accounts, such as IRAs. o The fund should not represent your complete investment program or be used for short-term trading purposes. How has the fund performed in the past? International Bond Fund-Advisor Class began operations on March 31, 2000, and did not have a full calendar year of performance history by December 31, 2000. As a point of comparison, however, the following bar chart and table show calendar year returns for the original class of the International Bond Fund./a/ The bar chart showing calendar year returns and the average annual total return table indicate risk by illustrating how much returns can differ from one year to the next and over time. Fund past performance is no guarantee of future returns. The fund can also experience short-term performance swings, as shown by the best and worst calendar quarter returns during the years depicted in the chart. T. ROWE PRICE 4
Calendar Year Total Returns "91" "92" "93" "94" "95" "96" "97" "98" "99" "00" ---------------------------------------------------------------------- 17.75 2.40 20.00 -1.84 20.30 7.13 -3.17 15.03 -7.86 -3.13 ----------------------------------------------------------------------
Quarter ended Total return Best quarter 3/31/95 12.51% Worst quarter 3/31/97 -5.59% Table 1 Average Annual Total Returns
Periods ended December 31, 2000 1 year 5 years 10 years ----------------------------------------------------------------------------- International Bond Fund -3.13% 1.27% 6.17% J.P. Morgan Non-U.S. Dollar Government Bond Index Plus -2.47 1.86 6.51 Lipper International Income Funds 1.46 3.33 4.93 Average -----------------------------------------------------------------------------
/a/Figures in the bar chart and table include changes in principal value, reinvested dividends, and capital gain distributions, if any. Because the International Bond Fund-Advisor Class has higher expenses than the original class of the International Bond Fund, its performance, had it existed over the periods shown, would have been lower. The original class of the International Bond Fund and the International Bond Fund-Advisor Class share the same portfolio. Shares of the original class of the fund are offered in a separate prospectus. What fees or expenses will I pay? The numbers in the next table provide an estimate of how much it will cost to operate the Advisor Class for a year. These are costs you pay indirectly because they are deducted from net assets before the daily share price is calculated. 5 Table 2 Fees and Expenses of the Advisor Class
Annual fund operating expenses (expenses that are deducted from fund assets) ------------------------------------------------------------------------------ Management fee 0.67% Distribution and service (12b-1) fees 0.25% Other expenses 0.42% Total annual fund operating expenses 1.34% Fee waiver/reimbursement 0.19%/a/ Net expenses 1.15%/a/ ------------------------------------------------------------------------------
/a/To limit the class's expenses during its initial period of operations, T. Rowe Price International is contractually obligated to bear any expenses (other than management fees) through December 31, 2001, that would cause the class's ratio of expenses to average net assets to exceed 1.15%. Expenses paid or assumed under this agreement are subject to reimbursement to T. Rowe Price International by the fund whenever the class's expense ratio is below 1.15%; however, no reimbursement will be made after December 31, 2003, or if it would result in the expense ratio exceeding 1.15%. Any amounts reimbursed will have the effect of increasing fees otherwise paid by the class. Example. The following table gives you a rough idea of how expense ratios may translate into dollars and helps you to compare the cost of investing in this class with that of other mutual funds. Although your actual costs may be higher or lower, the table shows how much you would pay if operating expenses remain the same, you invest $10,000, earn a 5% annual return, and hold the investment for the following periods and then redeem:
1 year 3 years 5 years 10 years ---------------------------------------------------- $117 $406 $716 $1,596 ----------------------------------------------------
OTHER INFORMATION ABOUT THE FUND ---------------------------------------------------------- Why invest in an international fund? Interest rates vary from country to country depending on local economic conditions and monetary and fiscal policies. By investing in foreign fixed income markets, U.S. investors can benefit from potentially higher yields than their own markets provide. Also, foreign bond markets often move independently of one another and the U.S. markets. Therefore, diversifying internationally across various countries can help reduce portfolio volatility and smooth out returns. T. ROWE PRICE 6 What are some of the advantages of investing in international fixed income markets through mutual funds? Buying foreign bonds can be difficult and costly for the individual investor, and gaining access to many foreign markets can be complicated. Few investors have the time, the expertise, or the resources to evaluate foreign markets effectively on their own. Therefore, the professional management, broad diversification, and relative simplicity of mutual funds make them an attractive, low-cost vehicle for this type of investing. o For more details on potential risks of foreign investments, please see Investment Policies and Practices and the Statement of Additional Information. How does the portfolio manager try to reduce risk? Consistent with the fund's objective, the portfolio manager uses various tools to try to reduce risk and increase total return, including: . Diversification of assets to reduce the impact of a single holding or sector on the fund's net asset value. . Thorough credit research by our own analysts. . Adjustment of fund duration to try to reduce the drop in price when interest rates rise or to benefit from the rise in price when rates fall. Duration is a measure of a fund's sensitivity to interest rate changes. . Management of the impact of foreign currency changes on the fund's portfolio to the degree discussed previously under "currency risk." Is there other information I can review before making a decision? Investment Policies and Practices in Section 3 discusses various types of portfolio securities the fund may purchase as well as types of management practices the fund may use. ABOUT YOUR ACCOUNT PRICING SHARES AND RECEIVING SALE PROCEEDS ---------------------------------------------------------- Here are some procedures you should know when investing in a T. Rowe Price fund. How and when shares are priced The share price (also called "net asset value" or NAV per share) for each class of shares is calculated at the close of the New York Stock Exchange, normally 4 p.m. ET, each day the New York Stock Exchange is open for business. To calculate the NAV, the fund's assets are valued and totaled, liabilities are subtracted, and each class's proportionate share of the balance, called net assets, is divided by the number of shares outstanding of that class. Current market values are used to price fund shares. How your purchase, sale, or exchange price is determined Advisor Class shares are intended for purchase and may be held only through various third-party intermediaries including brokers, dealers, banks, insurance companies, and others. Consult your intermediary to find out about how to purchase, sell, or exchange your shares, cut-off times, and other applicable procedures for these transactions. The intermediary may charge a fee for its services. The fund may have an agreement with your intermediary that permits the intermediary to accept orders on behalf of the fund up until 4 p.m. ET. In such cases, if your order is received by the intermediary in good form by 4 p.m. ET and transmitted to the fund in accordance with the agreement, it will be priced at the next NAV computed after the intermediary received your order. Note: The time at which transactions and shares are priced and the time until which orders are accepted by the fund or an intermediary may be changed in case of an emergency or if the New York Stock Exchange closes at a time other than 4 p.m. ET. How proceeds are received Normally, the fund transmits proceeds to intermediaries for redemption orders received in good form on either the next or third business day after receipt, depending on the arrangement with the intermediary. Under certain circumstances and when deemed to be in the fund's best interests, proceeds may not be sent for up to seven calendar days after receipt of the redemption order. You must contact your intermediary about procedures for receiving your redemption proceeds. T. ROWE PRICE 8 USEFUL INFORMATION ON DISTRIBUTIONS AND TAXES ---------------------------------------------------------- o All net investment income and realized capital gains are distributed to shareholders. Dividends and Other Distributions Dividend and capital gain distributions can be reinvested in additional fund shares in your account or paid in cash. Contact your intermediary for information. The advantage of reinvesting distributions arises from compounding, that is, you receive income dividends and capital gain distributions on a rising number of shares. No interest will accrue on amounts represented by uncashed distribution or redemption checks. Income dividends . Bond funds declare income dividends daily at 4 p.m. ET to shareholders of record at that time provided payment has been received on the previous business day. . Dividends are ordinarily paid on the first business day of each month. . Fund shares will earn dividends through the date of redemption; also, shares redeemed on a Friday or prior to a holiday will continue to earn dividends until the next business day. Generally, if you redeem all of your shares at any time during the month, you will also receive all dividends earned through the date of redemption in the same check. When you redeem only a portion of your shares, all dividends accrued on those shares will be reinvested, or paid in cash, on the next dividend payment date. Capital gains . A capital gain or loss is the difference between the purchase and sale price of a security. . If a fund has net capital gains for the year (after subtracting any capital losses), they are usually declared and paid in December to shareholders of record on a specified date that month. If a second distribution is necessary, it is usually declared and paid during the first quarter of the following year. Tax Information You should contact your intermediary for the tax information that will be sent to you and reported to the IRS. You need to be aware of the possible tax consequences when: . You sell fund shares, including an exchange from one fund to another. . The fund makes a distribution to your account. 9 Taxes on fund redemptions When you sell shares in any fund, you may realize a gain or loss. An exchange from one fund to another is still a sale for tax purposes. Taxes on fund distributions The tax treatment of a capital gain distribution is determined by how long the fund held the portfolio securities, not how long you held shares in the fund. Short-term (one year or less) capital gain distributions are taxable at the same rate as ordinary income and long-term gains on securities held more than 12 months are taxed at a maximum rate of 20%. If you realized a loss on the sale or exchange of fund shares that you held six months or less, your short-term loss must be reclassified to a long-term loss to the extent of any long-term capital gain distribution received during the period you held the shares. Distributions resulting from the sale of certain foreign currencies and debt securities, to the extent of foreign exchange gains, are taxed as ordinary income or loss. If, as expected, the fund qualifies and elects to pass through nonrefundable taxes paid to foreign governments during the year, your portion of such taxes will be reported to you as taxable income. However, you may be able to claim an offsetting credit or deduction on your tax return for these amounts. o Distributions are taxable whether reinvested in additional shares or received in cash. Tax effect of buying shares before a dividend or capital gain distribution If you buy shares shortly before or on the "record date" - the date that establishes you as the person to receive the upcoming distribution - you will receive a portion of the money you just invested in the form of a taxable distribution. Therefore, you may wish to find out a fund's record date before investing. Of course, a fund's share price may, at any time, reflect undistributed capital gains or income and unrealized appreciation, which may result in future taxable distributions. Such distributions can occur even in a year when the fund has a negative return. Note: For information on the tax consequences of hedging, please see Investment Policies and Practices. o The preceding tax information summary does not apply to retirement accounts, such as IRAs, which are not subject to current tax. T. ROWE PRICE 10 TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS ---------------------------------------------------------- Purchase Conditions for Intermediaries Nonpayment If the fund receives a check or ACH transfer that does not clear or the payment is not timely received, the purchase will be canceled. Any losses or expenses incurred by the fund or transfer agent will be the responsibility of the intermediary, and the fund can redeem shares that the intermediary owns in this or another identically registered T. Rowe Price account as reimbursement. The fund and its agents have the right to reject or cancel any purchase, exchange, or redemption due to nonpayment. U.S. dollars; type of check All purchases must be paid for in U.S. dollars; checks must be drawn on U.S. banks. Sale (Redemption) Conditions Holds on immediate redemptions: 10-day hold If an intermediary sells shares that it just purchased and paid for by check or ACH transfer, the fund will process the redemption but will generally delay sending the proceeds for up to 10 calendar days to allow the check or transfer to clear. (The 10-day hold does not apply to purchases paid for by bank wire.) Redemptions over $250,000 Large sales can adversely affect a portfolio manager's ability to implement a fund's investment strategy by causing the premature sale of securities that would otherwise be held. If, in any 90-day period, you redeem (sell) more than $250,000, or your sale amounts to more than 1% of fund net assets, the fund has the right to pay the difference between the redemption amount and the lesser of the two previously mentioned figures with securities from the fund. Excessive Trading o T. Rowe Price may bar excessive traders from purchasing shares. Frequent trades in your account or accounts controlled by you can disrupt management of the fund and raise its expenses. To deter such activity, the fund has adopted an excessive trading policy. If you violate our excessive trading policy, you may be barred indefinitely and without further notice from further purchases of T. Rowe Price funds. 11 You can make one purchase and one sale or one sale and one purchase involving the same fund within any 120-day period. If you exceed this limit or if you hold fund shares for less than 60 calendar days, you are in violation of our excessive trading policy. Systematic purchases and redemptions are exempt from this policy. Signature Guarantees An intermediary may need to obtain a signature guarantee in certain situations and should consult its T. Rowe Price Financial Institutions representative. A signature guarantee can be obtained from most banks, savings institutions, broker-dealers, and other guarantors acceptable to T. Rowe Price. We cannot accept guarantees from notaries public or organizations that do not provide reimbursement in the case of fraud. MORE ABOUT THE FUND ORGANIZATION AND MANAGEMENT ---------------------------------------------------------- How is the fund organized? The fund is a separate series of the T. Rowe Price International Funds, Inc. (the "corporation"), which currently consists of 12 series, each having different objectives and investment policies. The 12 series and the years in which each was established are as follows: International Stock Fund, 1980; International Bond Fund, 1986; International Discovery Fund, 1988; European Stock Fund, New Asia Fund, 1990; Japan Fund, 1991; Latin America Fund, 1993; Emerging Markets Bond Fund, 1994; Emerging Markets Stock Fund, Global Stock Fund, 1995; International Growth & Income Fund, 1998; and Emerging Europe & Mediterranean Fund, 2000. In 2000, the International Bond Fund issued a separate class of shares known as the Advisor Class. (The other funds are described in separate prospectuses.) The fund pools money received from shareholders of each class into a single portfolio. What is meant by "shares"? As with all mutual funds, investors purchase shares when they put money in a fund. These shares are part of a fund's authorized capital stock, but share certificates are not issued. Each share and fractional share entitles the shareholder to: . Receive a proportional interest in income and capital gain distributions of the class. The income dividends for the International Bond Fund-Advisor Class shares will generally differ from those of the regular International Bond Fund shares to the extent that the expense ratio of the International Bond Fund-Advisor Class shares differs. . Cast one vote per share on certain fund matters, including the election of fund directors, changes in fundamental policies, or approval of changes in the fund's management contract. International Bond Fund-Advisor Class shareholders have exclusive voting rights on matters affecting only the International Bond Fund-Advisor Class shares. Do T. Rowe Price funds have annual shareholder meetings? The funds are not required to hold annual meetings and, to avoid unnecessary costs to fund shareholders, do not do so except when certain matters, such as a change in fundamental policies, must be decided. In addition, shareholders representing at least 10% of all eligible votes may call a special meeting, if they 13 wish, for the purpose of voting on the removal of any fund director or trustee. If a meeting is held and you cannot attend, you can vote by proxy. Before the meeting, the fund will send you proxy materials that explain the issues to be decided and include instructions on voting. Who runs the fund? General Oversight The corporation is governed by a Board of Directors that meets regularly to review the fund investments, performance, expenses, and other business affairs. The Board elects the corporation's officers. The policy of the corporation is that the majority of Board members are independent of T. Rowe Price International. o All decisions regarding the purchase and sale of fund investments are made by T. Rowe Price International - specifically by the fund's Investment Advisory Group. Investment Manager T. Rowe Price International is responsible for the selection and management of the fund's portfolio investments. The company, a wholly owned subsidiary of T. Rowe Price Associates, is the successor to Rowe Price-Fleming International ("Price-Fleming"), a joint venture established in 1979 between T. Rowe Price Associates and Robert Fleming Holdings ("Flemings"). In 2000, T. Rowe Price became the sole owner of Price-Fleming and renamed the company T. Rowe Price International. The U.S. office of T. Rowe Price International is located at 100 East Pratt Street, Baltimore, Maryland 21202. Offices are also located in London, Tokyo, Singapore, Hong Kong, Buenos Aires, and Paris. Portfolio Management The fund has an Investment Advisory Group that has day-to-day responsibility for managing the portfolio and developing and executing the fund's investment program. The advisory group for the fund consists of Michael Conelius, Greg Fisher, Ian Kelson, and Christopher Rothery. Michael Conelius joined T. Rowe Price International in 1995. Prior to that, he had been with T. Rowe Price since 1988. Greg Fisher joined T. Rowe Price International in 2000. Prior to joining T. Rowe Price International, he worked with Morgan Grenfell/Deutsche Asset Management as a senior member of the Global Fixed Income team before becoming Chief Investment Officer. Ian Kelson joined T. Rowe Price International in 2000. Prior to joining T. Rowe Price International, he spent 10 years as Chief Investment Officer Fixed Income at Morgan Grenfell/Deutsche Asset Management. T. ROWE PRICE 14 Christopher Rothery joined T. Rowe Price International in 1994 and has 12 years of experience managing multicurrency fixed income portfolios. Before joining T. Rowe Price International, he had worked with Fleming International Fixed Income Management Limited since 1987. The Management Fee This fee has two parts - an "individual fund fee," which reflects a fund's particular characteristics, and a "group fee." The group fee, which is designed to reflect the benefits of the shared resources of the T. Rowe Price investment management complex, is calculated daily based on the combined net assets of all T. Rowe Price funds (except the Spectrum Funds, and any institutional, index, or private label mutual funds). The group fee schedule (shown below) is graduated, declining as the asset total rises, so shareholders benefit from the overall growth in mutual fund assets. Group Fee Schedule
0.334%/a/ First $50 billion 0.305% Next $30 billion 0.300% Next $40 billion 0.295% Thereafter -------------------------------------
/a/ Represents a blended group fee rate containing various break points. The fund's portion of the group fee is determined by the ratio of its daily net assets to the daily net assets of all the T. Rowe Price funds described previously. Based on combined T. Rowe Price fund assets of $110 billion at December 31, 2000, the group fee was 0.32%. The individual fund fee is 0.35%. Distribution, Shareholder Servicing, and Recordkeeping Fees International Bond Fund-Advisor Class has adopted a 12b-1 plan under which it pays a fee at the rate of up to 0.25% of its net assets per year to various intermediaries for distribution and servicing of its shares. These payments may be more or less than the costs incurred by the intermediaries. Because the fees are paid from the Advisor Class net assets on an ongoing basis, they will increase the cost of your investment and could result in your paying more than with other types of sales charges. The Advisor Class may also separately compensate intermediaries at a rate of up to 0.10% of net assets per year for various recordkeeping and transfer agent services they perform. 15 UNDERSTANDING PERFORMANCE INFORMATION ---------------------------------------------------------- This section should help you understand the terms used to describe fund performance. Total Return This tells you how much an investment has changed in value over a given time period. It reflects any net increase or decrease in the share price and assumes that all dividends and capital gains (if any) paid during the period were reinvested in additional shares. Therefore, total return numbers include the effect of compounding. Advertisements may include cumulative or average annual total return figures, which may be compared with various indices, other performance measures, or other mutual funds. Cumulative Total Return This is the actual return of an investment for a specified period. A cumulative return does not indicate how much the value of the investment may have fluctuated during the period. For example, an investment could have a 10-year positive cumulative return despite experiencing some negative years during that time. Average Annual Total Return This is always hypothetical and should not be confused with actual year-by-year results. It smooths out all the variations in annual performance to tell you what constant year-by-year return would have produced the investment's actual cumulative return. This gives you an idea of an investment's annual contribution to your portfolio, provided you held it for the entire period. Yield The current or "dividend" yield on a fund or any investment tells you the relationship between the investment's current level of annual income and its price on a particular day. The dividend yield reflects the actual income paid to shareholders for a given period, annualized, and divided by the price at the end of the period. For example, a fund providing $5 of annual income per share and a price of $50 has a current yield of 10%. Yields can be calculated for any time period. The advertised or SEC yield is found by determining the net income per share (as defined by the Securities and Exchange Commission) earned by a fund during a 30-day base period and dividing this amount by the per share price on the last day of the base period. The SEC yield-also called the standardized yield-may differ from the dividend yield. T. ROWE PRICE 16 INVESTMENT POLICIES AND PRACTICES ---------------------------------------------------------- This section takes a detailed look at some of the types of fund portfolio securities and the various kinds of investment practices that may be used in day-to-day portfolio management. Fund investments are subject to further restrictions and risks described in the Statement of Additional Information. Shareholder approval is required to substantively change fund objectives and certain investment restrictions noted in the following section as "fundamental policies." The managers also follow certain "operating policies," which can be changed without shareholder approval. However, significant changes are discussed with shareholders in fund reports. Fund investment restrictions and policies are adhered to at the time of investment. A later change in circumstances will not require the sale of an investment if it was proper at the time it was made. Fund holdings of certain kinds of investments cannot exceed maximum percentages of total assets, which are set forth in this prospectus. For instance, fund investments in hybrid instruments are limited to 10% of total assets. While these restrictions provide a useful level of detail about fund investments, investors should not view them as an accurate gauge of the potential risk of such investments. For example, in a given period, a 5% investment in hybrid instruments could have significantly more of an impact on a fund's share price than its weighting in the portfolio. The net effect of a particular investment depends on its volatility and the size of its overall return in relation to the performance of all other fund investments. Changes in fund holdings, fund performance, and the contribution of various investments are discussed in the shareholder reports sent to you. o Fund managers have considerable leeway in choosing investment strategies and selecting securities they believe will help achieve fund objectives. Types of Portfolio Securities In seeking to meet its investment objective, the fund may invest in any type of security or instrument (including certain potentially high-risk derivatives described in this section) whose investment characteristics are consistent with its investment program. The following pages describe various types of fund securities and investment management practices. Fixed-Income Securities The fund's investments may include but shall not be limited to: (1) Debt obligations issued or guaranteed by: (a) a foreign sovereign government or one of its agencies, authorities, instrumentalities, or political subdivisions, including a foreign state, province or municipality, and (b) supranational organizations such as 17 the World Bank, Asian Development Bank, European Investment Bank, and European Economic Community; (2) Debt obligations: (a) of foreign banks and bank holding companies, and (b) of domestic banks and corporations issued in foreign currencies; and (3) Foreign corporate debt securities and commercial paper. Such securities may take a variety of forms including those issued in the local currency of the issuer, Brady bonds, Euro bonds, and bonds denominated in the Euro. Normally, the fund will only purchase bonds denominated in foreign currencies (other than Brady and other emerging market bonds). Nondiversified Investment Company The fund is able to invest more than 5% of its assets in the fixed income securities of individual foreign governments. The fund generally will not invest more than 5% of its assets in any individual corporate issuer, provided that (1) a fund may place assets in bank deposits or other short-term bank instruments with a maturity of up to 30 days provided that (i) the bank has a short-term credit rating of A1+ (or, if unrated, the equivalent as determined by T. Rowe Price International) and (ii) the fund will not maintain more than 10% of its total assets with any single bank; and (2) the fund may maintain more than 5% of its total assets, including cash and currencies, in custodial accounts or deposits of the fund's custodian or sub-custodians. In addition, the fund intends to qualify as a regulated investment company for purposes of the Internal Revenue Code. This requires the fund to limit its investments so that, at the end of each calendar quarter, with respect to at least 50% of its total assets, not more than 5% of such assets are invested in the securities of a single issuer, and with respect to the remaining 50%, no more than 25% is invested in a single issuer. Since, as a nondiversified investment company, the fund is permitted to invest a greater proportion of its assets in the securities of a smaller number of issuers, the fund may be subject to greater credit risk with respect to its portfolio securities than an investment company that is more broadly diversified. Hybrid Instruments These instruments (a type of potentially high-risk derivative) can combine the characteristics of securities, futures, and options. For example, the principal amount or interest rate of a hybrid could be tied (positively or negatively) to the price of some commodity, currency, or securities index or another interest rate (each a "benchmark"). Hybrids can be used as an efficient means of pursuing a variety of investment goals, including currency hedging, duration management, and increased total return. Hybrids may or may not bear interest or pay dividends. The value of a hybrid or its interest rate may be a multiple of a benchmark and, as a result, may be leveraged and move (up or down) more steeply and rapidly than the benchmark. These benchmarks may be sensitive to economic and political events, such as commodity shortages and currency devaluations, which T. ROWE PRICE 18 cannot be readily foreseen by the purchaser of a hybrid. Under certain conditions, the redemption value of a hybrid could be zero. Thus, an investment in a hybrid may entail significant market risks that are not associated with a similar investment in a traditional, U.S. dollar-denominated bond that has a fixed principal amount and pays a fixed rate or floating rate of interest. The purchase of hybrids also exposes the fund to the credit risk of the issuer of the hybrid. These risks may cause significant fluctuations in the net asset values of the fund. o Hybrids can have volatile prices and limited liquidity, and their use may not be successful. Operating policy Fund investments in hybrid instruments are limited to 10% of total assets. Private Placements These securities are sold directly to a small number of investors, usually institutions. Unlike public offerings, such securities are not registered with the SEC. Although certain of these securities may be readily sold, for example, under Rule 144A, others may be illiquid, and their sale may involve substantial delays and additional costs. Operating policy Fund investments in illiquid securities are limited to 15% of net assets. Loan Participations and Assignments Large loans to corporations or governments, including governments of less-developed countries (LDCs), may be shared or syndicated among several lenders, usually banks. The fund could participate in such syndicates, or could buy part of a loan, becoming a direct lender. Participations and assignments involve special types of risk, including limited marketability and the risks of being a lender. If the fund purchases a participation, it may only be able to enforce its rights through the lender, and it may assume the credit risk of the lender in addition to the borrower. In assignments, the fund's rights against the borrower may be more limited than those held by the original lender. Operating policy The fund may not invest more than 5% of total assets in loan participations and assignments. High-Yield, High-Risk Bonds While investments in high-yield, lower-quality securities offer the opportunity for substantial income and capital appreciation, there are significant risks associated with such investments, including: Greater credit risk Companies and governments issuing lower-rated bonds are not as strong financially as those with higher credit ratings, and their bonds are often viewed as speculative investments. Such issuers are more vulnerable to real 19 or perceived business setbacks and to changes in the economy, such as a recession, that might impair their ability to make timely interest and principal payments. Certain less-developed governments have in the past defaulted on payment of interest and principal on debt they have issued. As a result, your fund manager relies heavily on proprietary T. Rowe Price International research when selecting these investments. Reduced market liquidity High-yielding emerging market bonds are generally less "liquid" than higher-quality bonds issued by companies and governments in developed countries. Consequently, large purchases or sales of certain high-yield, emerging market debt issues may cause significant changes in their prices. Because many of these bonds do not trade frequently, when they do trade, their price may be substantially higher or lower than had been expected. A lack of liquidity also means that judgment may play a bigger role when seeking to establish the fair value of the securities. Other factors The major factor influencing prices of high-quality bonds is changes in interest rate levels; but this is only one of several factors affecting prices of lower-quality bonds. Because the credit quality of the issuer is lower, such bonds are more sensitive to developments affecting the issuer's underlying fundamentals, such as changes in financial condition, or a given country's economy in general. In addition, the entire bond market in an emerging market can experience sudden and sharp price swings due to a variety of factors, including changes in economic forecasts, stock market activity, large or sustained sales by institutional investors, a high-profile default, a political upheaval of some kind, or just a change in the market's psychology. This type of volatility is usually associated more with stocks than bonds, but investors in lower-quality bonds should also anticipate it. Since mutual funds can be a major source of demand in certain markets, substantial cash flows into and out of these funds can affect high-yield bond prices. If, for example, a significant number of funds were to sell bonds to meet shareholder redemptions, both bond prices and a fund's share price could fall more than underlying fundamentals might justify. o Defaulted bonds are acquired only if the fund manager foresees the potential for significant capital appreciation. Brady Bonds Brady bonds, named after former U.S. Secretary of the Treasury Nicholas Brady, are used as a means of restructuring the external debt burden of a government in certain emerging markets. A Brady bond is created when an outstanding commercial bank loan to a government or private entity is exchanged for a new bond in connection with a debt restructuring plan. Brady bonds may be collateralized or uncollateralized and issued in various currencies (although typically in the U.S. dollar). They are often fully collateralized as to principal in T. ROWE PRICE 20 U.S. Treasury zero coupon bonds. However, even with this collateralization feature, Brady bonds are often considered speculative, below-investment-grade investments because the timely payment of interest is the responsibility of the issuing party (for example, a Latin American country) and the value of the bonds can fluctuate significantly based on the issuer's ability or perceived ability to make these payments. Finally, some Brady bonds may be structured with floating rate or low fixed rate coupons. Operating policy The fund may invest up to 20% of total assets in below-investment-grade ("junk") bonds. Concentration in Banking Industry When the fund's position in issues maturing in one year or less equals 35% or more of the fund's total assets, the fund will, as a matter of fundamental policy, normally have 25% or more of its assets concentrated in securities in the banking industry. Investments in the banking industry may be affected by general economic conditions and exposure to credit losses arising from possible financial difficulties of borrowers. The profitability of the banking industry is largely dependent on the availability and cost of funds for the purpose of financing lending operations under prevailing money market conditions. Types of Investment Management Practices Foreign Currency Transactions The fund may engage in foreign currency transactions either on a spot (cash) basis at the rate prevailing in the currency exchange market at the time or through forward currency contracts ("forwards") with terms generally of less than one year. Forwards will be used primarily to adjust the foreign exchange exposure of the fund with a view to protecting the portfolio from adverse currency movements, based on T. Rowe Price International's outlook, and the fund might be expected to enter into such contracts under the following circumstances: Lock In When management desires to lock in the U.S. dollar price on the purchase or sale of a security denominated in a foreign currency. Cross Hedge If a particular currency is expected to decrease against another currency, the fund may sell the currency expected to decrease and purchase a currency which is expected to increase against the currency sold in an amount approximately equal to some or all of the fund's portfolio holdings denominated in the currency sold. Operating policy The fund does not normally involve more than 50% of its assets in cross-hedging. 21 Direct Hedge Normally, the fund does not engage in direct hedges back to the U.S. dollar. However, if T. Rowe Price International sought to eliminate substantially all of the risk of owning a particular currency, or if T. Rowe Price International believed the portfolio could benefit from price appreciation in a given country's bonds but did not want to hold the currency, it could employ a direct hedge back into the U.S. dollar. In either case, a fund would enter into a forward contract to sell the currency in which a portfolio security is denominated and purchase U.S. dollars at an exchange rate established at the time it initiated the contract. The cost of the direct hedge transaction may offset most, if not all, of the yield advantage offered by the foreign security, but the fund would hope to benefit from an increase (if any) in value of the bond. o It is often not possible to effectively hedge the currency risk associated with emerging market bonds because their currency markets are not sufficiently developed. Proxy Hedge T. Rowe Price International might choose to use a proxy hedge, which is less costly than a direct hedge. In this case, the fund, having purchased a bond, will sell a currency whose value is believed to be closely linked to the currency in which the bond is denominated. This type of hedging entails greater risk than a direct hedge because it is dependent on a stable relationship between the two currencies paired as proxies, and because the relationships can be very unstable at times. Forward contracts involve other risks, including, but not limited to, significant volatility in currency markets. In addition, currency moves may not occur exactly as T. Rowe Price International expected, so use of forward contracts could adversely affect a fund's total return. Costs of Hedging When the fund purchases a foreign bond with a higher interest rate than is available on U.S. bonds of a similar maturity, the additional yield on the foreign bond could be substantially lessened if the fund were to enter into a direct hedge by selling the foreign currency and purchasing the U.S. dollar. This is what is known as the "cost" of hedging. Proxy hedging attempts to reduce this cost through an indirect hedge back to the U.S. dollar. It is important to note that hedging costs are treated as capital transactions and are not, therefore, deducted from a fund's dividend distribution and are not reflected in its yield. Instead, such costs will, over time, be reflected in a fund's net asset value per share. T. ROWE PRICE 22 Hedging may result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. These provisions could result in an increase (or decrease) in the amount of taxable dividends paid by the fund and could affect whether dividends paid by the fund are classified as capital gains or ordinary income. Reserve Position A certain portion of fund assets will be held in money market reserves. Fund reserve positions are expected to consist primarily of shares of one or more T. Rowe Price internal money market funds. Short-term, high-quality U.S. and foreign dollar-denominated money market securities, including repurchase agreements, may also be held. For temporary, defensive purposes, there is no limit on fund investments in money market reserves. The effect of taking such a position is that the fund may not achieve its investment objective. The reserve position provides flexibility in meeting redemptions, paying expenses, and in the timing of new investments and can serve as a short-term defense during periods of unusual market volatility. Borrowing Money and Transferring Assets Fund borrowings may be made from banks and other T. Rowe Price funds for temporary emergency purposes to facilitate redemption requests, or for other purposes consistent with fund policies as set forth in this prospectus. Such borrowings may be collateralized with fund assets, subject to restrictions. Fundamental policy Borrowings may not exceed 33/1//\\/3/\\% of total fund assets. Operating policy Fund transfers of portfolio securities as collateral will not be made except as necessary in connection with permissible borrowings or investments, and then such transfers may not exceed 33/1//\\/3/\\% of fund total assets. Fund purchases of additional securities will not be made when borrowings exceed 5% of total assets. Futures and Options Futures (a type of potentially high-risk derivative) are often used to manage risk because they enable the investor to buy or sell an asset in the future at an agreed-upon price. Options (another type of potentially high-risk derivative) give the investor the right (where the investor purchases the option), or the obligation (where the investor writes (sells) the option), to buy or sell an asset at a predetermined price in the future. Futures and options contracts may be bought or sold for a number of reasons including: to manage fund exposure to changes in interest rates, securities prices, and foreign currencies; as an efficient means of adjusting fund overall exposure to certain markets; in an effort to enhance income; to protect the value of portfolio securities; as a cash management tool; and to adjust the portfolio's duration. Call and put options may be purchased or sold on securities, financial indices, and foreign currencies. 23 Futures contracts and options may not always be successful hedges; their prices can be highly volatile; using them could lower fund total return; and the potential loss from the use of futures can exceed a fund's initial investment in such contracts. Operating policies Futures: Initial margin deposits and premiums on options used for nonhedging purposes will not exceed 5% of fund net asset value. Options on securities: The total market value of securities against which call or put options are written may not exceed 25% of fund total assets. No more than 5% of fund total assets will be committed to premiums when purchasing call or put options. Lending of Portfolio Securities Fund securities may be lent to broker-dealers, other institutions, or other persons to earn additional income. The principal risk is the potential insolvency of the broker-dealer or other borrower. In this event, a fund could experience delays in recovering its securities and capital losses. Fundamental policy The value of loaned securities may not exceed 33/1//\\/3/\\% of total fund assets. When-Issued Securities and Forward Commitment Contracts The fund may purchase securities on a when-issued or delayed delivery basis or may purchase or sell securities on a forward commitment basis. There is no limit on fund investments in these securities. The price of these securities is fixed at the time of the commitment to buy, but delivery and payment can take place a month or more later. During the interim period, the market value of the securities can fluctuate, and no interest accrues to the purchaser. At the time of delivery, the value of the securities may be more or less than the purchase or sale price. To the extent the fund remains fully or almost fully invested (in securities with a remaining maturity of more than one year) at the same time it purchases these securities, there will be greater fluctuations in the fund net asset value than if the fund did not purchase them. Portfolio Turnover Turnover is an indication of trading frequency. The fund may purchase and sell securities without regard to the length of time they are held. A high turnover rate may increase transaction costs and result in higher capital gain distributions by the fund. The fund's portfolio turnover rate is shown in the Financial Highlights table. Location of Company The fund ordinarily invests in the securities of at least three countries; however, it may invest in the securities of one country, including the U.S., for temporary defensive purposes. T. ROWE PRICE 24 Bond Ratings and High-Yield Bonds Larger bond issues are evaluated by rating agencies such as Moody's and Standard & Poor's on the basis of the issuer's ability to meet all required interest and principal payments. The highest ratings are assigned to issuers perceived to be the best credit risks. T. Rowe Price International research analysts also evaluate all portfolio holdings, including those rated by an outside agency. Other things being equal, lower-rated bonds have higher yields due to greater risk. High-yield bonds, also called "junk" bonds, are those rated below BBB. Table 3 shows the rating scale used by several major rating agencies. T. Rowe Price International considers publicly available ratings but emphasizes its own credit analysis when selecting investments. Table 3 Ratings of Corporate Debt Securities
Moody's Standard Investors & Poor's Fitch Service, Inc. Corporation IBCA, Inc. Definition --------------------------------------------------------------------------------------- Long Term Aaa AAA AAA Highest quality --------------------------------------------------------------------------------------- Aa AA AA High quality --------------------------------------------------------------------------------------- A A A Upper medium grade --------------------------------------------------------------------------------------- Baa BBB BBB Medium grade --------------------------------------------------------------------------------------- Ba BB BB Speculative --------------------------------------------------------------------------------------- B B B Highly speculative --------------------------------------------------------------------------------------- Caa CCC, CC CCC, CC Vulnerable to default --------------------------------------------------------------------------------------- Ca C C Default is imminent --------------------------------------------------------------------------------------- C D DDD, DD, D Probably in default Moody's S&P Fitch Commercial P-1 Superior quality A-1+ Extremely strong quality F-1+ Exceptionally Paper A-1 Strong quality F-1 strong quality Very strong quality --------------------------------------------------------------------------------------- P-2 Strong quality A-2 Satisfactory quality F-2 Good credit quality --------------------------------------------------------------------------------------- P-3 Acceptable quality A-3 Adequate quality F-3 Fair credit B Speculative quality F-5 quality C Doubtful quality Weak credit quality -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS ---------------------------------------------------------- Table 4, which provides information about the International Bond Fund's-Advisor Class financial history, is based on a single share outstanding throughout the period shown. The table is part of the class's financial statements, which are included in its annual report and are incorporated by reference into the Statement of Additional Information (available upon request). The total returns in the table represent the rate that an investor would have earned or lost on an investment in 25 the class (assuming reinvestment of all dividends and distributions and no payment of account or (if applicable) redemption fees). The financial statements in the annual report were audited by the fund's independent accountants, PricewaterhouseCoopers LLP. Table 4 Financial Highlights
03/31/00/*/ through 12/31/00 ----------------------- ----------------------------------------------- ----- Net asset value, beginning of period $ 8.88 Income From Investment Operations Net investment income 0.30/b/ ----------------------- Net gains or losses on securities (both realized (0.42) and unrealized) ----------------------- Total from investment operations (0.12) Less Distributions Dividends (from net -- investment income) ----------------------- Distributions (from -- capital gains) ----------------------- Returns of capital (0.29) ----------------------- Total distributions (0.29) ----------------------- Redemption fees added -- to paid in capital ----------------------- Net asset value, $ 8.47 end of period ----------------------- Total return (1.29)%/b/ Ratios/Supplemental Data Net assets, end of period $ 120 (in thousands) ----------------------- Ratio of expenses to 1.15%/a//b/ average net assets ----------------------- Ratio of net income to 4.60%/a//b/ average net assets ----------------------- Portfolio turnover rate 160.5%/c/ ---------------------------------------------------------------------------
/*/ Inception date. /a/ Annualized. /b/ Excludes expenses in excess of a 1.15% voluntary expense limitation in effect through December 31, 2001. /c/Excludes the effect of the acquisition of the T. Rowe Price Global Bond Fund's assets. INVESTING WITH T. ROWE PRICE ACCOUNT REQUIREMENTS AND TRANSACTION INFORMATION ---------------------------------------------------------- Tax Identification Number The intermediary must provide us with its certified Social Security or tax identification number (TIN). Otherwise, federal law requires the funds to withhold a percentage (currently 31%) of dividends, capital gain distributions, and redemptions, and may subject the intermediary or account holder to an IRS fine. If this information is not received within 60 days after the account is established, the account may be redeemed, priced at the NAV on the date of redemption. The information in this section is for use by intermediaries only. Shareholders of the Advisor Class should contact their intermediary for information regarding the intermediary's policies on purchasing, exchanging, and redeeming fund shares as well as initial and subsequent investment minimums. All initial and subsequent investments by intermediaries must be made by bank wire. Opening a New Account Intermediaries should call Financial Institutional Services for an account number and assignment to a dedicated service representative and give the following wire information to their bank: Receiving Bank: PNC Bank, N.A. (Pittsburgh) Receiving Bank ABA#: 043000096 Beneficiary: T. Rowe Price [fund name] Beneficiary Account: 1004397951 Originator to Beneficiary Information (OBI): name of owner(s) and account number Complete a New Account Form and mail it to one of the appropriate addresses listed below. The intermediaries must also enter into a separate agreement with the fund or its agent. via United States Postal Service T. Rowe Price Financial Institution Services P.O. Box 17603 Baltimore, MD 21297-1603 via private carriers/overnight services T. Rowe Price Financial Institution Services Four Financial Center 4515 Painters Mill Road Owings Mills, MD 21117-4842 27 Purchasing Additional Shares By Wire Intermediaries should call Financial Institution Services or use the wire address listed in Opening a New Account. Exchange Service You can move money from one account to an existing identically registered account or open a new identically registered account. Intermediaries should call their Financial Institution Services representative. Redemptions Unless otherwise indicated, redemption proceeds will be wired to the intermediary-designated bank. Intermediaries should contact their Financial Institution Services representative. RIGHTS RESERVED BY THE FUNDS ---------------------------------------------------------- T. Rowe Price funds and their agents reserve the following rights: (1) to refuse any purchase or exchange order; (2) to cancel or rescind any purchase or exchange order (including, but not limited to, orders deemed to result in excessive trading, market timing, fraud, or 5% ownership) upon notice to the shareholder within five business days of the trade or if the written confirmation has not been received by the shareholder, whichever is sooner; (3) to freeze any account and suspend account services when notice has been received of a dispute between the registered or beneficial account owners or there is reason to believe a fraudulent transaction may occur; (4) to otherwise modify the conditions of purchase and any services at any time; and (5) to act on instructions believed to be genuine. These actions will be taken when, in the sole discretion of management, they are deemed to be in the best interest of the fund. In an effort to protect T. Rowe Price funds from the possible adverse effects of a substantial redemption in a large account, as a matter of general policy, no shareholder or group of shareholders controlled by the same person or group of persons will knowingly be permitted to purchase in excess of 5% of the outstanding shares of the fund, except upon approval of the fund's management. T. Rowe Price Associates, Inc. 100 East Pratt Street Baltimore, MD 21202 A fund Statement of Additional Information has been filed with the Securities and Exchange Commission and is incorporated by reference into this prospectus. Further information about fund investments, including a review of market conditions and the manager's recent strategies and their impact on performance, is available in the annual and semiannual shareholder reports. To obtain free copies of any of these documents, call your intermediary. Fund information and Statements of Additional Information are also available from the Public Reference Room of the Securities and Exchange Commission. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. Fund reports and other fund information are available on the EDGAR Database on the SEC's Internet site at http://www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at publicinfo@sec.gov, or by writing the Public Reference Room, Washington D.C. 20549-0102. 1940 Act File No. 811-2958 E276-040 5/1/01 STATEMENT OF ADDITIONAL INFORMATION The date of this Statement of Additional Information is May 1, 2001. T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. Rowe Price International Bond Fund/(R)/ T. Rowe Price International Bond Fund-Advisor Class T. Rowe Price Emerging Markets Bond Fund ------------------------------------------------------------------------------- Mailing Address: T. Rowe Price Investment Services, Inc. 100 East Pratt Street Baltimore, Maryland 21202 1-800-638-5660 This Statement of Additional Information is not a prospectus but should be read in conjunction with the appropriate fund prospectus dated May 1, 2001, which may be obtained from T. Rowe Price Investment Services, Inc. ("Investment Services"). Each fund's financial statements for the year ended December 31, 2000, and the report of independent accountants are included in each fund's Annual Report and incorporated by reference into this Statement of Additional Information. If you would like a prospectus or an annual or semiannual shareholder report for a fund of which you are not a shareholder, please call 1-800-638-5660. A prospectus with more complete information, including management fees and expenses, will be sent to you. Please read it carefully. C02-043 5/1/01
TABLE OF CONTENTS ----------------- Page Page ---- ---- Capital Stock 41 Legal Counsel 42 - ------------------------------------ -------------------------------------- Code of Ethics 33 Management of the Funds 25 - ------------------------------------ -------------------------------------- Custodian 33 Net Asset Value Per Share 36 - ------------------------------------ -------------------------------------- Distributor for the Funds 32 Portfolio Management Practices 11 - ------------------------------------ -------------------------------------- Dividends and Distributions 37 Portfolio Transactions 34 - ------------------------------------ -------------------------------------- Federal Registration of 42 Pricing of Securities 36 Shares - ------------------------------------ -------------------------------------- Independent Accountants 42 Principal Holders of 28 Securities - ------------------------------------ -------------------------------------- Investment Management 28 Ratings of Corporate Debt 43 Services Securities - ------------------------------------ -------------------------------------- Investment Objectives and 2 Risk Factors 2 Policies - ------------------------------------ -------------------------------------- Investment Performance 39 Services by Outside Parties 31 - ------------------------------------ -------------------------------------- Investment Program 8 Tax Status 37 - ------------------------------------ -------------------------------------- Investment Restrictions 23 Yield Information 40 - ------------------------------------ --------------------------------------
INVESTMENT OBJECTIVES AND POLICIES ------------------------------------------------------------------------------- The following information supplements the discussion of each fund's investment objectives and policies discussed in each fund's prospectus. Shareholder approval is required to substantively change fund objectives. Unless otherwise specified, the investment programs and restrictions of the funds are not fundamental policies. Each fund's operating policies are subject to change by each Board of Directors without shareholder approval. However, shareholders will be notified of a material change in an operating policy. Each fund's fundamental policies may not be changed without the approval of at least a majority of the outstanding shares of the fund or, if it is less, 67% of the shares represented at a meeting of shareholders at which the holders of 50% or more of the shares are represented. References to the following are as indicated: Investment Company Act of 1940 ("1940 Act") Securities and Exchange Commission ("SEC") T. Rowe Price Associates, Inc. ("T. Rowe Price") Moody's Investors Service, Inc. ("Moody's") Standard & Poor's Corporation ("S&P") Internal Revenue Code of 1986 ("Code") T. Rowe Price International, Inc. ("T. Rowe Price International") Throughout this Statement of Additional Information, "the fund" is intended to refer to each fund listed on the cover page, unless otherwise indicated. RISK FACTORS ------------------------------------------------------------------------------- Reference is also made to the sections entitled "Types of Securities" and "Portfolio Management Practices" for discussions of the risks associated with the investments and practices described therein as they apply to the fund. 2 The fund's investment manager, T. Rowe Price International, one of America's largest managers of no-load international mutual fund assets, regularly analyzes a broad range of international equity and fixed income markets in order to assess the degree or risk and level of return that can be expected from each market. Based upon its current assessment, T. Rowe Price International believes long-term growth of capital may be achieved by investing in marketable securities of non-United States companies which have the potential for growth of capital. Of course, there can be no assurance that T. Rowe Price International's forecasts of expected return will be reflected in the actual returns achieved by the funds. Each fund's share price will fluctuate with market, economic and foreign exchange conditions, and your investment may be worth more or less when redeemed than when purchased. The funds should not be relied upon as a complete investment program, nor used to play short-term swings in the stock or foreign exchange markets. The funds are subject to risks unique to international investing. See discussion under "Risk Factors of Foreign Investing" below. Further, there is no assurance that the favorable trends discussed below will continue, and the funds cannot guarantee they will achieve their objectives. Risk Factors of Foreign Investing There are special risks in foreign investing. Certain of these risks are inherent in any international mutual fund while others relate more to the countries in which the fund will invest. Many of the risks are more pronounced for investments in developing or emerging market countries, such as many of the countries of Asia, Latin America, Eastern Europe, Russia, Africa, and the Middle East. Although there is no universally accepted definition, a developing country is generally considered to be a country which is in the initial stages of its industrialization cycle with a per capita gross national product of less than $8,000. . Political and Economic Factors Individual foreign economies of some countries differ favorably or unfavorably from the United States' economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency, and balance of payments position. The internal politics of some foreign countries are not as stable as in the United States. For example, in 1991, the existing government in Thailand was overthrown in a military coup. In 1994-1995, the Mexican peso plunged in value, setting off a severe crisis in the Mexican economy. Asia is still coming to terms with its own crisis and recessionary conditions sparked by widespread currency weakness in late 1997. In 1998, there was substantial turmoil in markets throughout the world. In 1999, the democratically elected government of Pakistan was overthrown by a military coup. The Russian government also defaulted on all its domestic debt. In addition, significant external political risks currently affect some foreign countries. Both Taiwan and China still claim sovereignty of one another and there is a demilitarized border and hostile relations between North and South Korea. Governments in certain foreign countries continue to participate to a significant degree, through ownership interest or regulation, in their respective economies. Action by these governments could have a significant effect on market prices of securities and payment of dividends. The economies of many foreign countries are heavily dependent upon international trade and are accordingly affected by protective trade barriers and economic conditions of their trading partners. The enactment by these trading partners of protectionist trade legislation could have a significant adverse effect upon the securities markets of such countries. . Currency Fluctuations The fund invests in securities denominated in various currencies. Accordingly, a change in the value of any such currency against the U.S. dollar will result in a corresponding change in the U.S. dollar value of the fund's assets denominated in that currency. Such changes will also affect the fund's income. Generally, when a given currency appreciates against the dollar (the dollar weakens), the value of the fund's securities denominated in that currency will rise. When a given currency depreciates against the dollar (the dollar strengthens), the value of the fund's securities denominated in that currency would be expected to decline. . Investment and Repatriation Restrictions Foreign investment in the securities markets of certain foreign countries is restricted or controlled in varying degrees. These restrictions limit at times and preclude investment in certain of such countries and increase the cost and expenses of the fund. Investments by foreign investors are subject to a variety of restrictions in many developing countries. These restrictions may take the form of prior governmental approval, limits on the amount or type of securities held by foreigners, and limits on the types of companies in which foreigners may invest. Additional or different restrictions may be imposed at any time by these or other countries in which the fund invests. In addition, the repatriation of both 3 investment income and capital from several foreign countries is restricted and controlled under certain regulations, including in some cases the need for certain government consents. For example, capital invested in Chile normally cannot be repatriated for one year. In 1998, the government of Malaysia imposed currency controls which effectively made it impossible for foreign investors to convert Malaysian ringgits to foreign currencies. . Market Characteristics It is contemplated that most foreign securities will be purchased in over-the-counter markets or on securities exchanges located in the countries in which the respective principal offices of the issuers of the various securities are located, if that is the best available market. Investments in certain markets may be made through American Depository Receipts ("ADRs") and Global Depository Receipts ("GDRs") traded in the United States or on foreign exchanges. Foreign securities markets are generally not as developed or efficient as, and more volatile than, those in the United States. While growing in volume, they usually have substantially less volume than U.S. markets and the fund's portfolio securities may be less liquid and subject to more rapid and erratic price movements than securities of comparable U.S. companies. Securities may trade at price/earnings multiples higher than comparable United States securities and such levels may not be sustainable. Commissions on foreign securities trades are generally higher than commissions on United States exchanges, and while there are an increasing number of overseas securities markets that have adopted a system of negotiated rates, a number are still subject to an established schedule of minimum commission rates. There is generally less government supervision and regulation of foreign securities exchanges, brokers, and listed companies than in the United States. Moreover, settlement practices for transactions in foreign markets may differ from those in United States markets. Such differences include delays beyond periods customary in the United States and practices, such as delivery of securities prior to receipt of payment, which increase the likelihood of a "failed settlement." Failed settlements can result in losses to the fund. . Investment Funds The fund may invest in investment funds which have been authorized by the governments of certain countries specifically to permit foreign investment in securities of companies listed and traded on the stock exchanges in these respective countries. The fund's investment in these funds is subject to the provisions of the 1940 Act. If the fund invests in such investment funds, the fund's shareholders will bear not only their proportionate share of the expenses of the fund (including operating expenses and the fees of the investment manager), but also will bear indirectly similar expenses of the underlying investment funds. In addition, the securities of these investment funds may trade at a premium over their net asset value. . Information and Supervision There is generally less publicly available information about foreign companies comparable to reports and ratings that are published about companies in the United States. Foreign companies are also generally not subject to uniform accounting, auditing and financial reporting standards, practices, and requirements comparable to those applicable to United States companies. It also is often more difficult to keep currently informed of corporate actions which affect the prices of portfolio securities. . Taxes The dividends and interest payable on certain of the fund's foreign portfolio securities may be subject to foreign withholding taxes, thus reducing the net amount of income available for distribution to the fund's shareholders. . Costs Investors should understand that the expense ratios of the fund can be expected to be higher than investment companies investing in domestic securities since the cost of maintaining the custody of foreign securities and the rate of advisory fees paid by the fund is higher. . Other With respect to certain foreign countries, especially developing and emerging ones, there is the possibility of adverse changes in investment or exchange control regulations, expropriation or confiscatory taxation, limitations on the removal of funds or other assets of the fund, political or social instability, or diplomatic developments which could affect investments by U.S. persons in those countries. . Small Companies Small companies may have less experienced management and fewer management resources than larger firms. A smaller company may have greater difficulty obtaining access to capital markets, and may pay more for the capital it obtains. In addition, smaller companies are more likely to be involved in fewer market segments, making them more vulnerable to any downturn in a given segment. Some of these factors may also apply, to a lesser extent, to medium size companies. 4 Emerging Market Investing . Eastern Europe and Russia Changes occurring in Eastern Europe and Russia today could have long-term potential consequences. As restrictions fall, this could result in rising standards of living, lower manufacturing costs, growing consumer spending, and substantial economic growth. However, investment in most countries of Eastern Europe and Russia is highly speculative at this time. Political and economic reforms are too recent to establish a definite trend away from centrally planned economies and state-owned industries. The collapse of the ruble from its crawling peg exchange rate against the U.S. dollar has set back the path of reform for several years. In many of the countries of Eastern Europe and Russia, there is no stock exchange or formal market for securities. Such countries may also have government exchange controls, currencies with no recognizable market value relative to the established currencies of western market economies, little or no experience in trading in securities, no financial reporting standards, a lack of a banking and securities infrastructure to handle such trading, and a legal tradition which does not recognize rights in private property. In addition, these countries may have national policies which restrict investments in companies deemed sensitive to the country's national interest. Further, the governments in such countries may require governmental or quasi-governmental authorities to act as custodian of the fund's assets invested in such countries, and these authorities may not qualify as a foreign custodian under the 1940 Act and exemptive relief from such Act may be required. All of these considerations are among the factors which cause significant risks and uncertainties to investment in Eastern Europe and Russia. . Latin America Inflation Most Latin American countries have experienced, at one time or another, severe and persistent levels of inflation, including, in some cases, hyperinflation. This has, in turn, led to high interest rates, extreme measures by governments to keep inflation in check, and a generally debilitating effect on economic growth. Although inflation in many countries has lessened, there is no guarantee it will remain at lower levels. Political Instability The political history of certain Latin American countries has been characterized by political uncertainty, intervention by the military in civilian and economic spheres, and political corruption. Such developments, if they were to reoccur, could reverse favorable trends toward market and economic reform, privatization, and removal of trade barriers, and result in significant disruption in securities markets. Foreign Currency Certain Latin American countries may experience sudden and large adjustments in their currency which, in turn, can have a disruptive and negative effect on foreign investors. For example, in late 1994 the value of the Mexican peso lost more than one-third of its value relative to the dollar. In 1999, the Brazilian real lost 30% of its value against the U.S. dollar. Certain Latin American countries may impose restrictions on the free conversion of their currency into foreign currencies, including the U.S. dollar. There is no significant foreign exchange market for many currencies and it would, as a result, be difficult for the fund to engage in foreign currency transactions designed to protect the value of the fund's interests in securities denominated in such currencies. Sovereign Debt A number of Latin American countries are among the largest debtors of developing countries. There have been moratoria on, and reschedulings of, repayment with respect to these debts. Such events can restrict the flexibility of these debtor nations in the international markets and result in the imposition of onerous conditions on their economies. . Japan Japan has experienced earthquakes and tidal waves of varying degrees of severity, and the risks of such phenomena, and damage resulting therefrom, continue to exist. Japan also has one of the world's highest population densities. A significant percentage of the total population of Japan is concentrated in the metropolitan areas of Tokyo, Osaka, and Nagoya. Economy The Japanese economy languished for much of the last decade. Lack of effective governmental action in the areas of tax reform to reduce high tax rates, banking regulation to address enormous amounts of bad debt, and economic reforms to attempt to stimulate spending are among the factors cited as possible causes of Japan's economic problems. The yen has had a history of unpredictable and volatile movements against the 5 dollar; a weakening yen hurts U.S. investors holding yen-denominated securities. Finally, the Japanese stock market has experienced wild swings in value and has often been considered significantly overvalued. Energy Japan has historically depended on oil for most of its energy requirements. Almost all of its oil is imported, the majority from the Middle East. In the past, oil prices have had a major impact on the domestic economy, but more recently Japan has worked to reduce its dependence on oil by encouraging energy conservation and use of alternative fuels. In addition, a restructuring of industry, with emphasis shifting from basic industries to processing and assembly type industries, has contributed to the reduction of oil consumption. However, there is no guarantee this favorable trend will continue. Foreign Trade Overseas trade is important to Japan's economy. Japan has few natural resources and must export to pay for its imports of these basic requirements. Because of the concentration of Japanese exports in highly visible products such as automobiles, machine tools and semiconductors and the large trade surpluses ensuing therefrom, Japan has had difficult relations with its trading partners, particularly the U.S. It is possible that trade sanctions or other protectionist measures could impact Japan adversely in both the short term and long term. . Asia (ex-Japan) Political Instability The political history of some Asian countries has been characterized by political uncertainty, intervention by the military in civilian and economic spheres, and political corruption. Such developments, if they continue to occur, could reverse favorable trends toward market and economic reform, privatization, and removal of trade barriers and result in significant disruption in securities markets. Foreign Currency Certain Asian countries may have managed currencies which are maintained at artificial levels to the U.S. dollar rather than at levels determined by the market. This type of system can lead to sudden and large adjustments in the currency which, in turn, can have a disruptive and negative effect on foreign investors. For example, in 1997 the Thai baht lost 46.75% of its value against the U.S. dollar. Certain Asian countries also may restrict the free conversion of their currency into foreign currencies, including the U.S. dollar. There is no significant foreign exchange market for certain currencies and it would, as a result, be difficult for the fund to engage in foreign currency transactions designed to protect the value of the fund's interests in securities denominated in such currencies. Debt A number of Asian companies are highly dependent on foreign loans for their operation. In 1997, several Asian countries were forced to negotiate loans from the International Monetary Fund ("IMF") and others that impose strict repayment term schedules and require significant economic and financial restructuring. Risk Factors of Investing in Debt Obligations Because of its investment policy, the fund may or may not be suitable or appropriate for all investors. The fund is not a money market fund and is not an appropriate investment for those whose primary objective is principal stability. There is risk in all investment. The value of the portfolio securities of the fund will fluctuate based upon market, economic and foreign exchange conditions. Although the fund seeks to reduce risk by investing in a diversified portfolio, such diversification does not eliminate all risk. There can, of course, be no assurance that the fund will achieve these results. Yields on short-, intermediate-, and long-term securities are dependent on a variety of factors, including the general conditions of the money, bond and foreign exchange markets, the size of a particular offering, the maturity of the obligation, and the rating of the issue. Debt securities with longer maturities tend to produce higher yields and are generally subject to potentially greater capital appreciation and depreciation than obligations with shorter maturities and lower yields. The market prices of debt securities usually vary, depending upon available yields. An increase in interest rates will generally reduce the value of portfolio investments, and a decline in interest rates will generally increase the value of portfolio investments. The ability of the fund to achieve its investment objective is also dependent on the continuing ability of the issuers of the debt securities in which the fund invests to meet their obligations for the payment of interest and principal when due. 6 After purchase by a fund, a security may cease to be rated or its rating may be reduced below the minimum required for purchase by the fund. Neither event will require a sale of such security by a fund. However, T. Rowe Price International will consider such event in its determination of whether a fund should continue to hold the security. To the extent that the ratings given by Moody's and S&P may change as a result of changes in such organizations or their rating systems, the fund will attempt to use comparable ratings as standards for investments in accordance with the investment policies contained in the prospectus. Special Risks of Investing in Junk Bonds The following special considerations are additional risk factors associated with the fund's investments in lower-rated debt securities. . Youth and Growth of the Lower-Rated Debt Securities Market The market for lower-rated debt securities is relatively new and its growth has paralleled a long economic expansion. Past experience may not, therefore, provide an accurate indication of future performance of this market, particularly during periods of economic recession. An economic downturn or increase in interest rates is likely to have a greater negative effect on this market, the value of lower-rated debt securities in the fund's portfolio, the fund's net asset value and the ability of the bonds' issuers to repay principal and interest, meet projected business goals, and obtain additional financing than on higher-rated securities. These circumstances also may result in a higher incidence of defaults than with respect to higher-rated securities. An investment in the fund is more speculative than investment in shares of a fund which invests only in higher-rated debt securities. . Sensitivity to Interest Rate and Economic Changes Prices of lower-rated debt securities may be more sensitive to adverse economic changes or corporate developments than higher-rated investments. Debt securities with longer maturities, which may have higher yields, may increase or decrease in value more than debt securities with shorter maturities. Market prices of lower-rated debt securities structured as zero coupon or pay-in-kind securities are affected to a greater extent by interest rate changes and may be more volatile than securities which pay interest periodically and in cash. Where it deems it appropriate and in the best interests of fund shareholders, the fund may incur additional expenses to seek recovery on a debt security on which the issuer has defaulted and to pursue litigation to protect the interests of security holders of its portfolio companies. . Liquidity and Valuation Because the market for lower-rated securities may be thinner and less active than for higher-rated securities, there may be market price volatility for these securities and limited liquidity in the resale market. Nonrated securities are usually not as attractive to as many buyers as rated securities are, a factor which may make nonrated securities less marketable. These factors may have the effect of limiting the availability of the securities for purchase by the fund and may also limit the ability of the fund to sell such securities at their fair value either to meet redemption requests or in response to changes in the economy or the financial markets. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of lower-rated debt securities, especially in a thinly traded market. To the extent the fund owns or may acquire illiquid or restricted lower-rated securities, these securities may involve special registration responsibilities, liabilities and costs, and liquidity and valuation difficulties. Changes in values of debt securities which the fund owns will affect its net asset value per share. If market quotations are not readily available for the fund's lower-rated or nonrated securities, these securities will be valued by a method that the fund's Board of Directors believes accurately reflects fair value. Judgment plays a greater role in valuing lower-rated debt securities than with respect to securities for which more external sources of quotations and last sale information are available. . Taxation Special tax considerations are associated with investing in lower-rated debt securities structured as zero coupon or pay-in-kind securities. The fund accrues income on these securities prior to the receipt of cash payments. The fund must distribute substantially all of its income to its shareholders to qualify for pass-through treatment under the tax laws and may, therefore, have to dispose of its portfolio securities to satisfy distribution requirements. 7 INVESTMENT PROGRAM ------------------------------------------------------------------------------- Types of Securities Set forth below is additional information about certain of the investments described in the fund's prospectus. Hybrid Instruments Hybrid instruments (a type of potentially high-risk derivative) have been developed and combine the elements of futures contracts or options with those of debt, preferred equity, or a depository instrument (hereinafter "hybrid instruments"). Generally, a hybrid instrument will be a debt security, preferred stock, depository share, trust certificate, certificate of deposit, or other evidence of indebtedness on which a portion of or all interest payments, and/or the principal or stated amount payable at maturity, redemption, or retirement, is determined by reference to prices, changes in prices, or differences between prices of securities, currencies, intangibles, goods, articles, or commodities (collectively "underlying assets") or by another objective index, economic factor, or other measure, such as interest rates, currency exchange rates, commodity indices, and securities indices (collectively "benchmarks"). Thus, hybrid instruments may take a variety of forms, including, but not limited to, debt instruments with interest or principal payments or redemption terms determined by reference to the value of a currency or commodity or securities index at a future point in time, preferred stock with dividend rates determined by reference to the value of a currency, or convertible securities with the conversion terms related to a particular commodity. Hybrid instruments can be an efficient means of creating exposure to a particular market, or segment of a market, with the objective of enhancing total return. For example, a fund may wish to take advantage of expected declines in interest rates in several European countries, but avoid the transaction costs associated with buying and currency-hedging the foreign bond positions. One solution would be to purchase a U.S. dollar-denominated hybrid instrument whose redemption price is linked to the average three-year interest rate in a designated group of countries. The redemption price formula would provide for payoffs of greater than par if the average interest rate was lower than a specified level, and payoffs of less than par if rates were above the specified level. Furthermore, the fund could limit the downside risk of the security by establishing a minimum redemption price so that the principal paid at maturity could not be below a predetermined minimum level if interest rates were to rise significantly. The purpose of this arrangement, known as a structured security with an embedded put option, would be to give the fund the desired European bond exposure while avoiding currency risk, limiting downside market risk, and lowering transactions costs. Of course, there is no guarantee that the strategy will be successful, and the fund could lose money if, for example, interest rates do not move as anticipated or credit problems develop with the issuer of the hybrid instruments. The risks of investing in hybrid instruments reflect a combination of the risks of investing in securities, options, futures, and currencies. Thus, an investment in a hybrid instrument may entail significant risks that are not associated with a similar investment in a traditional debt instrument that has a fixed principal amount, is denominated in U.S. dollars, or bears interest either at a fixed rate or a floating rate determined by reference to a common, nationally published benchmark. The risks of a particular hybrid instrument will, of course, depend upon the terms of the instrument, but may include, without limitation, the possibility of significant changes in the benchmarks or the prices of underlying assets to which the instrument is linked. Such risks generally depend upon factors which are unrelated to the operations or credit quality of the issuer of the hybrid instrument and which may not be readily foreseen by the purchaser, such as economic and political events, the supply and demand for the underlying assets, and interest rate movements. In recent years, various benchmarks and prices for underlying assets have been highly volatile, and such volatility may be expected in the future. Reference is also made to the discussion of futures, options, and forward contracts herein for a discussion of the risks associated with such investments. Hybrid instruments are potentially more volatile and carry greater market risks than traditional debt instruments. Depending on the structure of the particular hybrid instrument, changes in a benchmark may be magnified by the terms of the hybrid instrument and have an even more dramatic and substantial effect upon 8 the value of the hybrid instrument. Also, the prices of the hybrid instrument and the benchmark or underlying asset may not move in the same direction or at the same time. Hybrid instruments may bear interest or pay preferred dividends at below market (or even relatively nominal) rates. Alternatively, hybrid instruments may bear interest at above market rates but bear an increased risk of principal loss (or gain). The latter scenario may result if "leverage" is used to structure the hybrid instrument. Leverage risk occurs when the hybrid instrument is structured so that a given change in a benchmark or underlying asset is multiplied to produce a greater value change in the hybrid instrument, thereby magnifying the risk of loss as well as the potential for gain. Hybrid instruments may also carry liquidity risk since the instruments are often "customized" to meet the portfolio needs of a particular investor, and therefore, the number of investors that are willing and able to buy such instruments in the secondary market may be smaller than that for more traditional debt securities. In addition, because the purchase and sale of hybrid instruments could take place in an over-the-counter market without the guarantee of a central clearing organization or in a transaction between the fund and the issuer of the hybrid instrument, the creditworthiness of the counterparty or issuer of the hybrid instrument would be an additional risk factor which the fund would have to consider and monitor. Hybrid instruments also may not be subject to regulation of the Commodities Futures Trading Commission ("CFTC"), which generally regulates the trading of commodity futures by U.S. persons, the SEC, which regulates the offer and sale of securities by and to U.S. persons, or any other governmental regulatory authority. Illiquid or Restricted Securities Restricted securities may be sold only in privately negotiated transactions or in a public offering with respect to which a registration statement is in effect under the Securities Act of 1933 (the "1933 Act"). Where registration is required, the fund may be obligated to pay all or part of the registration expenses, and a considerable period may elapse between the time of the decision to sell and the time the fund may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the fund might obtain a less favorable price than prevailed when it decided to sell. Restricted securities will be priced at fair value as determined in accordance with procedures prescribed by the fund's Board of Directors. If, through the appreciation of illiquid securities or the depreciation of liquid securities, the fund should be in a position where more than 15% of the value of its net assets is invested in illiquid assets, including restricted securities, the fund will take appropriate steps to protect liquidity. Notwithstanding the above, the fund may purchase securities which, while privately placed, are eligible for purchase and sale under Rule 144A under the 1933 Act. This rule permits certain qualified institutional buyers, such as the fund, to trade in privately placed securities even though such securities are not registered under the 1933 Act. T. Rowe Price International, under the supervision of the fund's Board of Directors, will consider whether securities purchased under Rule 144A are illiquid and thus subject to the fund's restriction of investing no more than 15% of its net assets in illiquid securities. A determination of whether a Rule 144A security is liquid or not is a question of fact. In making this determination, T. Rowe Price International will consider the trading markets for the specific security taking into account the unregistered nature of a Rule 144A security. In addition, T. Rowe Price International could consider the following: (1) frequency of trades and quotes; (2) number of dealers and potential purchases; (3) dealer undertakings to make a market; and (4) the nature of the security and of marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers, and the mechanics of transfer). The liquidity of Rule 144A securities would be monitored and, if as a result of changed conditions it is determined that a Rule 144A security is no longer liquid, the fund's holdings of illiquid securities would be reviewed to determine what, if any, steps are required to assure that the fund does not invest more than 15% of its net assets in illiquid securities. Investing in Rule 144A securities could have the effect of increasing the amount of the fund's assets invested in illiquid securities if qualified institutional buyers are unwilling to purchase such securities. 9 Emerging Markets Bond Fund The securities of U.S. issuers in which the fund may invest include, but are not limited to, the following: . U.S. Government Obligations Debt securities issued by the U.S. Treasury. These are direct obligations of the U.S. Government and differ mainly in the length of their maturities. . U.S. Government Agency Securities Issued or guaranteed by U.S. government-sponsored enterprises and federal agencies. These include securities issued by the Federal National Mortgage Association, Government National Mortgage Association, Federal Home Loan Bank, Federal Land Banks, Farmers Home Administration, Banks for Cooperatives, Federal Intermediate Credit Banks, Federal Financing Bank, Farm Credit Banks, the Small Business Association, and the Tennessee Valley Authority. Some of these securities are supported by the full faith and credit of the U.S. Treasury; the remainder are supported only by the credit of the instrumentality, which may or may not include the right of the issuer to borrow from the Treasury. . Bank Obligations Certificates of deposit, bankers' acceptances, and other short-term debt obligations. Certificates of deposit are short-term obligations of commercial banks. A bankers' acceptance is a time draft drawn on a commercial bank by a borrower, usually in connection with international commercial transactions. Certificates of deposit may have fixed or variable rates. The fund may invest in U.S. banks, foreign branches of U.S. banks, U.S. branches of foreign banks, and foreign branches of foreign banks. . Savings and Loan Obligations Negotiable certificates of deposit and other short-term debt obligations of savings and loan associations. . Supranational Agencies Securities of certain supranational entities, such as the International Development Bank. . Collateralized Mortgage Obligations (CMOs) CMOs are bonds that are collateralized by whole loan mortgages or mortgage pass-through securities. The bonds issued in a CMO deal are divided into groups, and each group of bonds is referred to as a "tranche." Under the traditional CMO structure, the cash flows generated by the mortgages or mortgage pass-through securities in the collateral pool are used to first pay interest and then pay principal to the CMO bondholders. The bonds issued under such CMO structure are retired sequentially as opposed to the pro-rata return of principal found in traditional pass-through obligations. Subject to the various provisions of individual CMO issues, the cash flow generated by the underlying collateral (to the extent it exceeds the amount required to pay the stated interest) is used to retire the bonds. Under the CMO structure, the repayment of principal among the different tranches is prioritized in accordance with the terms of the particular CMO issuance. The "fastest-pay" tranche of bonds, as specified in the prospectus for the issuance, would initially receive all principal payments. When that tranche of bonds is retired, the next tranche, or tranches, in the sequence, as specified in the prospectus, receive all of the principal payments until they are retired. The sequential retirement of bond groups continues until the last tranche, or group of bonds, is retired. Accordingly, the CMO structure allows the issuer to use cash flows of long maturity, monthly-pay collateral to formulate securities with short, intermediate and long final maturities and expected average lives. . Asset Backed Receivables The asset-backed securities that may be purchased include, but are not limited to, Certificates for Automobile Receivables (CARS/SM/) and Credit Card Receivable Securities. CARS/SM/ represent undivided fractional interests in a trust whose assets consists of a pool of motor vehicle retail installment sales contracts and security interests in the vehicles securing these contracts. In addition to the general risks pertaining to all asset-backed securities, CARS/SM/ are subject to the risks of delayed payments or losses if the full amounts due on underlying sales contracts are not realized by the trust due to unanticipated legal or administrative costs of enforcing the contracts or due to depreciation, damage or loss of the vehicles securing the contracts. Credit Card Receivable Securities are backed by receivables from revolving credit card accounts. Since balances on revolving credit card accounts are generally paid down more rapidly than CARS/SM/, issuers often lengthen the maturity of these securities by providing for a fixed period during which interest payments are passed through and principal payments are used to fund the transfer of additional receivables to the underlying pool. The failure of the underlying receivables to generate principal payments may therefore shorten the maturity of these securities. In addition, unlike most other asset-backed securities, Credit Card Receivable Securities are backed by obligations that are not secured by an interest in personal or real property. 10 There are, of course, other types of securities that are, or may become available, which are similar to the foregoing and the fund may invest in these securities. PORTFOLIO MANAGEMENT PRACTICES ------------------------------------------------------------------------------- Lending of Portfolio Securities Securities loans are made to broker-dealers, institutional investors, or other persons, pursuant to agreements requiring that the loans be continuously secured by collateral at least equal at all times to the value of the securities lent, marked to market on a daily basis. The collateral received will consist of cash, U.S. government securities, letters of credit, or such other collateral as may be permitted under its investment program. While the securities are being lent, the fund will continue to receive the equivalent of the interest or dividends paid by the issuer on the securities, as well as interest on the investment of the collateral or a fee from the borrower. The fund has a right to call each loan and obtain the securities, within such period of time which coincides with the normal settlement period for purchases and sales of such securities in the respective markets. The fund will not have the right to vote on securities while they are being lent, but it will call a loan in anticipation of any important vote. The risks in lending portfolio securities, as with other extensions of secured credit, consist of possible delay in receiving additional collateral or in the recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. Loans will only be made to firms deemed by T. Rowe Price International to be of good standing and will not be made unless, in the judgment of T. Rowe Price International, the consideration to be earned from such loans would justify the risk. Interfund Borrowing and Lending The fund is a party to an exemptive order received from the SEC on December 8, 1998, amended on November 23, 1999, that permits it to borrow money from and/or lend money to other funds in the T. Rowe Price complex ("Price Funds"). All loans are set at an interest rate between the rates charged on overnight repurchase agreements and short-term bank loans. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds. The program is subject to the oversight and periodic review of the Boards of Directors of the Price Funds. Repurchase Agreements The fund may enter into a repurchase agreement through which an investor (such as the fund) purchases a security (known as the "underlying security") from a well-established securities dealer or a bank that is a member of the Federal Reserve System. Any such dealer or bank will be on T. Rowe Price's approved list and have a credit rating with respect to its short-term debt of at least A1 by S&P, P1 by Moody's, or the equivalent rating by T. Rowe Price. At that time, the bank or securities dealer agrees to repurchase the underlying security at the same price, plus specified interest. Repurchase agreements are generally for a short period of time, often less than a week. Repurchase agreements which do not provide for payment within seven days will be treated as illiquid securities. The fund will only enter into repurchase agreements where (1) the underlying securities are of the type (excluding maturity limitations) which the fund's investment guidelines would allow it to purchase directly, (2) the market value of the underlying security, including interest accrued, will be at all times equal to or exceed the value of the repurchase agreement, and (3) payment for the underlying security is made only upon physical delivery or evidence of book-entry transfer to the account of the custodian or a bank acting as agent. In the event of a bankruptcy or other default of a seller of a repurchase agreement, the fund could experience both delays in liquidating the underlying security and losses, including: (a) possible decline in the value of the underlying security during the period while the fund seeks to enforce its rights thereto; (b) possible subnormal levels of income and lack of access to income during this period; and (c) expenses of enforcing its rights. Money Market Reserves It is expected that the fund will invest its cash reserves primarily in one or more money market funds established for the exclusive use of the T. Rowe Price family of mutual funds and other clients of T. Rowe Price. Currently, two such money market funds are in operation-T. Rowe Price Reserve Investment Fund ("RIF") and T. Rowe Price Government Reserve Investment Fund ("GRF"), each a series of the T. Rowe Price Reserve Investment Funds, Inc. Additional series may be created in the future. These funds were created and operate under an Exemptive Order issued by the SEC (Investment Company Act Release No. IC-22770, July 29, 1997). 11 return. When writing a covered call option, a fund, in return for the premium, gives up the opportunity for profit from a price increase in the underlying security or currency above the exercise price, but conversely retains the risk of loss should the price of the security or currency decline. Unlike one who owns securities or currencies not subject to an option, the fund has no control over when it may be required to sell the underlying securities or currencies, since it may be assigned an exercise notice at any time prior to the expiration of its obligation as a writer. If a call option which the fund has written expires, the fund will realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of the underlying security or currency during the option period. If the call option is exercised, the fund will realize a gain or loss from the sale of the underlying security or currency. The fund does not consider a security or currency covered by a call to be "pledged" as that term is used in the fund's policy which limits the pledging or mortgaging of its assets. If the fund writes an uncovered option as described above, it will bear the risk of having to purchase the security subject to the option at a price higher than the exercise price of the option. As the price of a security could appreciate substantially, the fund's loss could be significant. 12 return. When writing a covered call option, a fund, in return for the premium, gives up the opportunity for profit from a price increase in the underlying security or currency above the exercise price, but conversely retains the risk of loss should the price of the security or currency decline. Unlike one who owns securities or currencies not subject to an option, the fund has no control over when it may be required to sell the underlying securities or currencies, since it may be assigned an exercise notice at any time prior to the expiration of its obligation as a writer. If a call option which the fund has written expires, the fund will realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of the underlying security or currency during the option period. If the call option is exercised, the fund will realize a gain or loss from the sale of the underlying security or currency. The fund does not consider a security or currency covered by a call to be "pledged" as that term is used in the fund's policy which limits the pledging or mortgaging of its assets. If the fund writes an uncovered option as described above, it will bear the risk of having to purchase the security subject to the option at a price higher than the exercise price of the option. As the price of a security could appreciate substantially, the fund's loss could be significant. The premium received is the market value of an option. The premium the fund will receive from writing a call option will reflect, among other things, the current market price of the underlying security or currency, the relationship of the exercise price to such market price, the historical price volatility of the underlying security or currency, and the length of the option period. Once the decision to write a call option has been made, T. Rowe Price International, in determining whether a particular call option should be written on a particular security or currency, will consider the reasonableness of the anticipated premium and the likelihood that a liquid secondary market will exist for those options. The premium received by the fund for writing covered call options will be recorded as a liability of the fund in the portfolio of investments. This liability will be adjusted daily to the option's current market value, which will be the latest sale price at the time at which the net asset value per share of the fund is computed (close of the New York Stock Exchange), or, in the absence of such sale, the mean of the latest bid and asked prices. The option will be terminated upon expiration of the option, the purchase of an identical option in a closing transaction, or delivery of the underlying security or currency upon the exercise of the option. Closing transactions will be effected in order to realize a profit on an outstanding call option, to prevent an underlying security or currency from being called, or to permit the sale of the underlying security or currency. Furthermore, effecting a closing transaction will permit the fund to write another call option on the underlying security or currency with either a different exercise price or expiration date or both. If the fund desires to sell a particular security or currency from its portfolio on which it has written a call option, or purchased a put option, it will seek to effect a closing transaction prior to, or concurrently with, the sale of the security or currency. There is, of course, no assurance that the fund will be able to effect such closing transactions at favorable prices. If the fund cannot enter into such a transaction, it may be required to hold a security or currency that it might otherwise have sold. When the fund writes a covered call option, it runs the risk of not being able to participate in the appreciation of the underlying securities or currencies above the exercise price, as well as the risk of being required to hold on to securities or currencies that are depreciating in value. This could result in higher transaction costs. The fund will pay transaction costs in connection with the writing of options to close out previously written options. Such transaction costs are normally higher than those applicable to purchases and sales of portfolio securities. Call options written by the fund will normally have expiration dates of less than nine months from the date written. The exercise price of the options may be below, equal to, or above the current market values of the underlying securities or currencies at the time the options are written. From time to time, the fund may purchase an underlying security or currency for delivery in accordance with an exercise notice of a call option assigned to it, rather than delivering such security or currency from its portfolio. In such cases, additional costs may be incurred. The fund will realize a profit or loss from a closing purchase transaction if the cost of the transaction is less or more than the premium received from the writing of the option. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security or currency, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by appreciation of the underlying security or currency owned by the fund. 13 The fund will not write a covered call option if, as a result, the aggregate market value of all portfolio securities or currencies covering written call or put options exceeds 25% of the market value of the fund's total assets. In calculating the 25% limit, the fund will offset the value of securities underlying purchased calls and puts on identical securities or currencies with identical maturity dates. Writing Covered Put Options The fund may write American or European style covered put options and purchase options to close out options previously written by the fund. A put option gives the purchaser of the option the right to sell, and the writer (seller) has the obligation to buy, the underlying security or currency at the exercise price during the option period (American style) or at the expiration of the option (European style). So long as the obligation of the writer continues, he may be assigned an exercise notice by the broker-dealer through whom such option was sold, requiring him to make payment to the exercise price against delivery of the underlying security or currency. The operation of put options in other respects, including their related risks and rewards, is substantially identical to that of call options. The fund would write put options only on a covered basis, which means that the fund would maintain in a segregated account cash, U.S. government securities, other liquid high-grade debt obligations, or other suitable cover as determined by the SEC, in an amount not less than the exercise price or the fund will own an option to sell the underlying security or currency subject to the option having an exercise price equal to or greater than the exercise price of the "covered" option at all times while the put option is outstanding. (The rules of a clearing corporation currently require that such assets be deposited in escrow to secure payment of the exercise price.) The fund would generally write covered put options in circumstances where T. Rowe Price International wishes to purchase the underlying security or currency for the fund's portfolio at a price lower than the current market price of the security or currency. In such event the fund would write a put option at an exercise price which, reduced by the premium received on the option, reflects the lower price it is willing to pay. Since the fund would also receive interest on debt securities or currencies maintained to cover the exercise price of the option, this technique could be used to enhance current return during periods of market uncertainty. The risk in such a transaction would be that the market price of the underlying security or currency would decline below the exercise price less the premiums received. Such a decline could be substantial and result in a significant loss to the fund. In addition, the fund, because it does not own the specific securities or currencies which it may be required to purchase in exercise of the put, cannot benefit from appreciation, if any, with respect to such specific securities or currencies. The fund will not write a covered put option if, as a result, the aggregate market value of all portfolio securities or currencies covering put or call options exceeds 25% of the market value of the fund's total assets. In calculating the 25% limit, the fund will offset the value of securities underlying purchased puts and calls on identical securities or currencies with identical maturity dates. Purchasing Put Options The fund may purchase American or European style put options. As the holder of a put option, the fund has the right to sell the underlying security or currency at the exercise price at any time during the option period (American style) or at the expiration of the option (European style). The fund may enter into closing sale transactions with respect to such options, exercise them or permit them to expire. The fund may purchase put options for defensive purposes in order to protect against an anticipated decline in the value of its securities or currencies. An example of such use of put options is provided next. The fund may purchase a put option on an underlying security or currency (a "protective put") owned by the fund as a defensive technique in order to protect against an anticipated decline in the value of the security or currency. Such hedge protection is provided only during the life of the put option when the fund, as the holder of the put option, is able to sell the underlying security or currency at the put exercise price regardless of any decline in the underlying security's market price or currency's exchange value. For example, a put option may be purchased in order to protect unrealized appreciation of a security or currency where T. Rowe Price deems it desirable to continue to hold the security or currency because of tax considerations. The 14 premium paid for the put option and any transaction costs would reduce any capital gain otherwise available for distribution when the security or currency is eventually sold. The fund may also purchase put options at a time when the fund does not own the underlying security or currency. By purchasing put options on a security or currency it does not own, the fund seeks to benefit from a decline in the market price of the underlying security or currency. If the put option is not sold when it has remaining value, and if the market price of the underlying security or currency remains equal to or greater than the exercise price during the life of the put option, the fund will lose its entire investment in the put option. In order for the purchase of a put option to be profitable, the market price of the underlying security or currency must decline sufficiently below the exercise price to cover the premium and transaction costs, unless the put option is sold in a closing sale transaction. The fund will not commit more than 5% of its assets to premiums when purchasing put and call options. The premium paid by the fund when purchasing a put option will be recorded as an asset of the fund in the portfolio of investments. This asset will be adjusted daily to the option's current market value, which will be the latest sale price at the time at which the net asset value per share of the fund is computed (close of New York Stock Exchange), or, in the absence of such sale, the mean of the latest bid and asked price. This asset will be terminated upon expiration of the option, the selling (writing) of an identical option in a closing transaction, or the delivery of the underlying security or currency upon the exercise of the option. Purchasing Call Options The fund may purchase American or European style call options. As the holder of a call option, the fund has the right to purchase the underlying security or currency at the exercise price at any time during the option period (American style) or at the expiration of the option (European style). The fund may enter into closing sale transactions with respect to such options, exercise them, or permit them to expire. The fund may purchase call options for the purpose of increasing its current return or avoiding tax consequences which could reduce its current return. The fund may also purchase call options in order to acquire the underlying securities or currencies. Examples of such uses of call options are provided next. Call options may be purchased by the fund for the purpose of acquiring the underlying securities or currencies for its portfolio. Utilized in this fashion, the purchase of call options enables the fund to acquire the securities or currencies at the exercise price of the call option plus the premium paid. At times the net cost of acquiring securities or currencies in this manner may be less than the cost of acquiring the securities or currencies directly. This technique may also be useful to the fund in purchasing a large block of securities or currencies that would be more difficult to acquire by direct market purchases. So long as it holds such a call option rather than the underlying security or currency itself, the fund is partially protected from any unexpected decline in the market price of the underlying security or currency and in such event could allow the call option to expire, incurring a loss only to the extent of the premium paid for the option. The fund will not commit more than 5% of its assets to premiums when purchasing call and put options. The fund may also purchase call options on underlying securities or currencies it owns in order to protect unrealized gains on call options previously written by it. A call option would be purchased for this purpose where tax considerations make it inadvisable to realize such gains through a closing purchase transaction. Call options may also be purchased at times to avoid realizing losses. Dealer (Over-the-Counter) Options The fund may engage in transactions involving dealer options. Certain risks are specific to dealer options. While the fund would look to a clearing corporation to exercise exchange-traded options, if the fund were to purchase a dealer option, it would rely on the dealer from whom it purchased the option to perform if the option were exercised. Failure by the dealer to do so would result in the loss of the premium paid by the fund as well as loss of the expected benefit of the transaction. Exchange-traded options generally have a continuous liquid market while dealer options have none. Consequently, the fund will generally be able to realize the value of a dealer option it has purchased only by exercising it or reselling it to the dealer who issued it. Similarly, when the fund writes a dealer option, it 15 generally will be able to close out the option prior to its expiration only by entering into a closing purchase transaction with the dealer to which the fund originally wrote the option. While the fund will seek to enter into dealer options only with dealers who will agree to and which are expected to be capable of entering into closing transactions with the fund, there can be no assurance that the fund will be able to liquidate a dealer option at a favorable price at any time prior to expiration. Until the fund, as a covered dealer call option writer, is able to effect a closing purchase transaction, it will not be able to liquidate securities (or other assets) or currencies used as cover until the option expires or is exercised. In the event of insolvency of the contra party, the fund may be unable to liquidate a dealer option. With respect to options written by the fund, the inability to enter into a closing transaction may result in material losses to the fund. For example, since the fund must maintain a secured position with respect to any call option on a security it writes, the fund may not sell the assets which it has segregated to secure the position while it is obligated under the option. This requirement may impair a fund's ability to sell portfolio securities or currencies at a time when such sale might be advantageous. The Staff of the SEC has taken the position that purchased dealer options and the assets used to secure the written dealer options are illiquid securities. The fund may treat the cover used for written Over-the-Counter ("OTC") options as liquid if the dealer agrees that the fund may repurchase the OTC option it has written for a maximum price to be calculated by a predetermined formula. In such cases, the OTC option would be considered illiquid only to the extent the maximum repurchase price under the formula exceeds the intrinsic value of the option. Futures Contracts Futures contracts are a type of potentially high-risk derivative. Transactions in Futures The fund may enter into financial futures contracts including stock index, interest rate, and currency futures ("futures" or "futures contracts"); however, the fund has no current intention of entering into stock index futures. The fund, however, reserves the right to trade in financial futures of any kind. Stock index futures contracts may be used to provide a hedge for a portion of the fund's portfolio, as a cash management tool, or as an efficient way for T. Rowe Price International to implement either an increase or decrease in portfolio market exposure in response to changing market conditions. The fund may purchase or sell futures contracts with respect to any stock index. Nevertheless, to hedge the fund's portfolio successfully, the fund must sell futures contacts with respect to indices or subindices whose movements will have a significant correlation with movements in the prices of the fund's portfolio securities. Interest rate or currency futures contracts may be used as a hedge against changes in prevailing levels of interest rates or currency exchange rates in order to establish more definitely the effective return on securities or currencies held or intended to be acquired by the fund. In this regard, the fund could sell interest rate or currency futures as an offset against the effect of expected increases in interest rates or currency exchange rates and purchase such futures as an offset against the effect of expected declines in interest rates or currency exchange rates. The fund will enter into futures contracts which are traded on national or foreign futures exchanges, and are standardized as to maturity date and underlying financial instrument. Futures exchanges and trading in the United States are regulated under the Commodity Exchange Act by the CFTC. Although techniques other than the sale and purchase of futures contracts could be used for the above-referenced purposes, futures contracts offer an effective and relatively low cost means of implementing the fund's objectives in these areas. Although techniques other than the sale and purchase of futures contracts could be used for the above-referenced purposes, futures contracts offer an effective and relatively low cost means of implementing the fund's objectives in these areas. Regulatory Limitations If the fund purchases or sells futures contracts or related options which do not qualify as bona fide hedging under applicable CFTC rules, the aggregate initial margin deposits and premium required to establish those 16 positions cannot exceed 5% of the liquidation value of the fund after taking into account unrealized profits and unrealized losses on any such contracts it has entered into; provided, however, that in the case of an option that is in-the-money at the time of purchase, the in-the-money amount may be excluded in calculating the 5% limitation. For purposes of this policy, options on futures contracts and foreign currency options traded on a commodities exchange will be considered "related options." This policy may be modified by the Board of Directors without a shareholder vote and does not limit the percentage of the fund's assets at risk to 5%. In instances involving the purchase of futures contracts or the writing of call or put options thereon by the fund, an amount of cash, liquid assets, or other suitable cover as permitted by the SEC, equal to the market value of the futures contracts and options thereon (less any related margin deposits), will be identified by the fund to cover the position, or alternative cover (such as owning an offsetting position) will be employed. Assets used as cover or held in an identified account cannot be sold while the position in the corresponding option or future is open, unless they are replaced with similar assets. As a result, the commitment of a large portion of a fund's assets to cover or identified accounts could impede portfolio management or the fund's ability to meet redemption requests or other current obligations. If the CFTC or other regulatory authorities adopt different (including less stringent) or additional restrictions, the fund would comply with such new restrictions. Trading in Futures Contracts A futures contract provides for the future sale by one party and purchase by another party of a specified amount of a specific financial instrument (e.g., units of a stock index) for a specified price, date, time, and place designated at the time the contract is made. Brokerage fees are incurred when a futures contract is bought or sold and margin deposits must be maintained. Entering into a contract to buy is commonly referred to as buying or purchasing a contract or holding a long position. Entering into a contract to sell is commonly referred to as selling a contract or holding a short position. Unlike when the fund purchases or sells a security, no price would be paid or received by the fund upon the purchase or sale of a futures contract. Upon entering into a futures contract, and to maintain the fund's open positions in futures contracts, the fund would be required to deposit with its custodian in a segregated account in the name of the futures broker an amount of cash, or liquid assets known as "initial margin." The margin required for a particular futures contract is set by the exchange on which the contract is traded, and may be significantly modified from time to time by the exchange during the term of the contract. Futures contracts are customarily purchased and sold on margins that may range upward from less than 5% of the value of the contract being traded. If the price of an open futures contract changes (by increase in the case of a sale or by decrease in the case of a purchase) so that the loss on the futures contract reaches a point at which the margin on deposit does not satisfy margin requirements, the broker will require an increase in the margin. However, if the value of a position increases because of favorable price changes in the futures contract so that the margin deposit exceeds the required margin, the broker will pay the excess to the fund. These subsequent payments, called "variation margin," to and from the futures broker, are made on a daily basis as the price of the underlying assets fluctuate, making the long and short positions in the futures contract more or less valuable, a process known as "marking to market." Although certain futures contracts, by their terms, require actual future delivery of and payment for the underlying instruments, in practice most futures contracts are usually closed out before the delivery date. Closing out an open futures contract purchase or sale is effected by entering into an offsetting futures contract sale or purchase, respectively, for the same aggregate amount of the identical securities and the same delivery date. If the offsetting purchase price is less than the original sale price, the fund realizes a gain; if it is more, the fund realizes a loss. Conversely, if the offsetting sale price is more than the original purchase price, the fund realizes a gain; if it is less, the fund realizes a loss. The transaction costs must also be included in these calculations. There can be no assurance, however, that the fund will be able to enter into an offsetting transaction with respect to a particular futures contract at a particular time. If the fund is not able to enter into 17 an offsetting transaction, the fund will continue to be required to maintain the margin deposits on the futures contract. As an example of an offsetting transaction in which the underlying instrument is not delivered, the contractual obligations arising from the sale of one contract of September Treasury bills on an exchange may be fulfilled at any time before delivery of the contract is required (i.e., on a specified date in September, the "delivery month") by the purchase of one contract of September Treasury bills on the same exchange. In such instance, the difference between the price at which the futures contract was sold and the price paid for the offsetting purchase, after allowance for transaction costs, represents the profit or loss to the fund. Special Risks of Transactions in Futures Contracts . Volatility and Leverage The prices of futures contracts are volatile and are influenced, among other things, by actual and anticipated changes in the market and interest rates, which in turn are affected by fiscal and monetary policies and national and international political and economic events. Most United States futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of futures contract, no trades may be made on that day at a price beyond that limit. The daily limit governs only price movement during a particular trading day and therefore does not limit potential losses, because the limit may prevent the liquidation of unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions and subjecting some futures traders to substantial losses. Margin deposits required on futures trading are low. As a result, a relatively small price movement in a futures contract may result in immediate and substantial loss, as well as gain, to the investor. For example, if at the time of purchase, 10% of the value of the futures contract is deposited as margin, a subsequent 10% decrease in the value of the futures contract would result in a total loss of the margin deposit, before any deduction for the transaction costs, if the account were then closed out. A 15% decrease would result in a loss equal to 150% of the original margin deposit, if the contract were closed out. Thus, a purchase or sale of a futures contract may result in losses in excess of the amount invested in the futures contract. . Liquidity The fund may elect to close some or all of its futures positions at any time prior to their expiration. The fund would do so to reduce exposure represented by long futures positions or short futures positions. The fund may close its positions by taking opposite positions which would operate to terminate the fund's position in the futures contracts. Final determinations of variation margin would then be made, additional cash would be required to be paid by or released to the fund, and the fund would realize a loss or a gain. Futures contracts may be closed out only on the exchange or board of trade where the contracts were initially traded. Although the fund intends to purchase or sell futures contracts only on exchanges or boards of trade where there appears to be an active market, there is no assurance that a liquid market on an exchange or board of trade will exist for any particular contract at any particular time. In such event, it might not be possible to close a futures contract, and in the event of adverse price movements, the fund would continue to be required to make daily cash payments of variation margin. However, in the event futures contracts have been used to hedge the underlying instruments, the fund would continue to hold the underlying instruments subject to the hedge until the futures contracts could be terminated. In such circumstances, an increase in the price of underlying instruments, if any, might partially or completely offset losses on the futures contract. However, as described next, there is no guarantee that the price of the underlying instruments will, in fact, correlate with the price movements in the futures contract and thus provide an offset to losses on a futures contract. . Hedging Risk A decision of whether, when, and how to hedge involves skill and judgment, and even a well-conceived hedge may be unsuccessful to some degree because of unexpected market behavior, market or interest rate trends. There are several risks in connection with the use by the fund of futures contracts as a hedging device. One risk arises because of the imperfect correlation between movements in the prices of the 18 futures contracts and movements in the prices of the underlying instruments which are the subject of the hedge. T. Rowe Price International will, however, attempt to reduce this risk by entering into futures contracts whose movements, in its judgment, will have a significant correlation with movements in the prices of the fund's underlying instruments sought to be hedged. Successful use of futures contracts by the fund for hedging purposes is also subject to T. Rowe Price International's ability to correctly predict movements in the direction of the market. It is possible that, when the fund has sold futures to hedge its portfolio against a decline in the market, the index, indices, or instruments underlying futures might advance and the value of the underlying instruments held in the fund's portfolio might decline. If this were to occur, the fund would lose money on the futures and also would experience a decline in value in its underlying instruments. However, while this might occur to a certain degree, T. Rowe Price International believes that over time the value of the fund's portfolio will tend to move in the same direction as the market indices used to hedge the portfolio. It is also possible that, if the fund were to hedge against the possibility of a decline in the market (adversely affecting the underlying instruments held in its portfolio) and prices instead increased, the fund would lose part or all of the benefit of increased value of those underlying instruments that it has hedged, because it would have offsetting losses in its futures positions. In addition, in such situations, if the fund had insufficient cash, it might have to sell underlying instruments to meet daily variation margin requirements. Such sales of underlying instruments might be, but would not necessarily be, at increased prices (which would reflect the rising market). The fund might have to sell underlying instruments at a time when it would be disadvantageous to do so. In addition to the possibility that there might be an imperfect correlation, or no correlation at all, between price movements in the futures contracts and the portion of the portfolio being hedged, the price movements of futures contracts might not correlate perfectly with price movements in the underlying instruments due to certain market distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors might close futures contracts through offsetting transactions, which could distort the normal relationship between the underlying instruments and futures markets. Second, the margin requirements in the futures market are less onerous than margin requirements in the securities markets and, as a result, the futures market might attract more speculators than the securities markets. Increased participation by speculators in the futures market might also cause temporary price distortions. Due to the possibility of price distortion in the futures market and also because of imperfect correlation between price movements in the underlying instruments and movements in the prices of futures contracts, even a correct forecast of general market trends by T. Rowe Price International might not result in a successful hedging transaction over a very short time period. Options on Futures Contracts The fund may purchase and sell options on the same types of futures in which it may invest. Options (another type of potentially high-risk derivative) on futures are similar to options on underlying instruments except that options on futures give the purchaser the right, in return for the premium paid, to assume a position in a futures contract (a long position if the option is a call and a short position if the option is a put), rather than to purchase or sell the futures contract, at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by the delivery of the accumulated balance in the writer's futures margin account which represents the amount by which the market price of the futures contract, at exercise, exceeds (in the case of a call) or is less than (in the case of a put) the exercise price of the option on the futures contract. Purchasers of options who fail to exercise their options prior to the exercise date suffer a loss of the premium paid. As an alternative to writing or purchasing call and put options on stock index futures, the fund may write or purchase call and put options on financial indices. Such options would be used in a manner similar to the use of options on futures contracts. From time to time, a single order to purchase or sell futures contracts (or options thereon) may be made on behalf of the fund and other T. Rowe Price funds. Such aggregated orders would be allocated among the funds and the other T. Rowe Price funds in a fair and nondiscriminatory manner. 19 Special Risks of Transactions in Options on Futures Contracts The risks described under "Special Risks in Transactions on Futures Contracts" are substantially the same as the risks of using options on futures. If the fund were to write an option on a futures contract, it would be required to deposit and maintain initial and variation margin in the same manner as a regular futures contract. In addition, where the fund seeks to close out an option position by writing or buying an offsetting option covering the same index, underlying instrument or contract and having the same exercise price and expiration date, its ability to establish and close out positions on such options will be subject to the maintenance of a liquid secondary market. Reasons for the absence of a liquid secondary market on an exchange include the following: (1) there may be insufficient trading interest in certain options; (2) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (3) trading halts, suspensions, or other restrictions may be imposed with respect to particular classes or series of options, or underlying instruments; (4) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (5) the facilities of an exchange or a clearing corporation may not at all times be adequate to handle current trading volume; or (6) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in the class or series of options) would cease to exist, although outstanding options on the exchange that had been issued by a clearing corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms. There is no assurance that higher than anticipated trading activity or other unforeseen events might not, at times, render certain of the facilities of any of the clearing corporations inadequate, and thereby result in the institution by an exchange of special procedures which may interfere with the timely execution of customers' orders. Additional Futures and Options Contracts Although the fund has no current intention of engaging in futures or options transactions other than those described above, it reserves the right to do so. Such futures and options trading might involve risks which differ from those involved in the futures and options described above. Foreign Futures and Options Participation in foreign futures and foreign options transactions involves the execution and clearing of trades on or subject to the rules of a foreign board of trade. Neither the National Futures Association nor any domestic exchange regulates activities of any foreign boards of trade, including the execution, delivery and clearing of transactions, or has the power to compel enforcement of the rules of a foreign board of trade or any applicable foreign law. This is true even if the exchange is formally linked to a domestic market so that a position taken on the market may be liquidated by a transaction on another market. Moreover, such laws or regulations will vary depending on the foreign country in which the foreign futures or foreign options transaction occurs. For these reasons, when the fund trades foreign futures or foreign options contracts, it may not be afforded certain of the protective measures provided by the Commodity Exchange Act, the CFTC's regulations and the rules of the National Futures Association and any domestic exchange, including the right to use reparations proceedings before the CFTC and arbitration proceedings provided by the National Futures Association or any domestic futures exchange. In particular, funds received from the fund for foreign futures or foreign options transactions may not be provided the same protections as funds received in respect of transactions on United States futures exchanges. In addition, the price of any foreign futures or foreign options contract and, therefore, the potential profit and loss thereon may be affected by any variance in the foreign exchange rate between the time the fund's order is placed and the time it is liquidated, offset or exercised. Foreign Currency Transactions A forward foreign currency exchange contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are principally traded in the interbank market conducted directly between currency traders (usually large, commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades. 20 The fund may enter into forward contracts for a variety of purposes in connection with the management of the foreign securities portion of its portfolio. The fund's use of such contracts would include, but not be limited to, the following: First, when the fund enters into a contract for the purchase or sale of a security denominated in a foreign currency, it may desire to "lock in" the U.S. dollar price of the security. By entering into a forward contract for the purchase or sale, for a fixed amount of dollars, of the amount of foreign currency involved in the underlying security transactions, the fund will be able to protect itself against a possible loss resulting from an adverse change in the relationship between the U.S. dollar and the subject foreign currency during the period between the date the security is purchased or sold and the date on which payment is made or received. Second, when T. Rowe Price International believes that one currency may experience a substantial movement against another currency, including the U.S. dollar, it may enter into a forward contract to sell or buy the amount of the former foreign currency, approximating the value of some or all of the fund's portfolio securities denominated in such foreign currency. Alternatively, where appropriate, the fund may hedge all or part of its foreign currency exposure through the use of a basket of currencies or a proxy currency where such currency or currencies act as an effective proxy for other currencies. In such a case, the fund may enter into a forward contract where the amount of the foreign currency to be sold exceeds the value of the securities denominated in such currency. The use of this basket hedging technique may be more efficient and economical than entering into separate forward contracts for each currency held in the fund. The precise matching of the forward contract amounts and the value of the securities involved will not generally be possible since the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date the forward contract is entered into and the date it matures. The projection of short-term currency market movement is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain. Under normal circumstances, consideration of the prospect for relative currency values will be incorporated into the longer-term investment decisions made with regard to overall diversification strategies. However, T. Rowe Price International believes that it is important to have the flexibility to enter into such forward contracts when it determines that the best interest of the fund will be served. The fund may enter into forward contacts for any other purpose consistent with the fund's investment objective and program. However, the fund will not enter into a forward contract, or maintain exposure to any such contract(s), if the amount of foreign currency required to be delivered thereunder would exceed the fund's holdings of liquid, high-grade debt securities, currency available for cover of the forward contract(s), or other suitable cover as permitted by the SEC. In determining the amount to be delivered under a contract, the fund may net offsetting positions. At the maturity of a forward contract, the fund may sell the portfolio security and make delivery of the foreign currency, or it may retain the security and either extend the maturity of the forward contract (by "rolling" that contract forward) or may initiate a new forward contract. If the fund retains the portfolio security and engages in an offsetting transaction, the fund will incur a gain or a loss (as described below) to the extent that there has been movement in forward contract prices. If the fund engages in an offsetting transaction, it may subsequently enter into a new forward contract to sell the foreign currency. Should forward prices decline during the period between the fund's entering into a forward contract for the sale of a foreign currency and the date it enters into an offsetting contract for the purchase of the foreign currency, the fund will realize a gain to the extent the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to purchase. Should forward prices increase, the fund will suffer a loss to the extent of the price of the currency it has agreed to purchase exceeds the price of the currency it has agreed to sell. The fund's dealing in forward foreign currency exchange contracts will generally be limited to the transactions described above. However, the fund reserves the right to enter into forward foreign currency contracts for different purposes and under different circumstances. Of course, the fund is not required to enter into forward contracts with regard to its foreign currency-denominated securities and will not do so unless deemed appropriate by T. Rowe Price International. It also should be realized that this method of hedging against a 21 decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange at a future date. Additionally, although such contracts tend to minimize the risk of loss due to a decline in the value of the hedged currency, at the same time, they tend to limit any potential gain which might result from an increase in the value of that currency. Although the fund values its assets daily in terms of U.S. dollars, it does not intend to convert its holdings of foreign currencies into U.S. dollars on a daily basis. It will do so from time to time, and there are costs associated with currency conversion. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (the "spread") between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the fund at one rate, while offering a lesser rate of exchange should the fund desire to resell that currency to the dealer. Under certain circumstances, the Emerging Markets Bond Fund may commit a substantial portion or the entire value of its assets to the consummation of these contracts. T. Rowe Price International will consider the effect a substantial commitment of its assets to forward contracts would have on the investment program of the fund and the flexibility of the fund to purchase additional securities. Federal Tax Treatment of Options, Futures Contracts, and Forward Foreign Exchange Contracts The fund may enter into certain options, futures, and forward foreign exchange contracts, including options and futures on currencies, which will be treated as Section 1256 contracts or straddles. Transactions that are considered Section 1256 contracts will be considered to have been closed at the end of the fund's fiscal year and any gains or losses will be recognized for tax purposes at that time. Such gains or losses from the normal closing or settlement of such transactions will be characterized as 60% long-term capital gain (taxable at a maximum rate of 20%) or loss and 40% short-term capital gain or loss regardless of the holding period of the instrument (ordinary income or loss for foreign exchange contracts). The fund will be required to distribute net gains on such transactions to shareholders even though it may not have closed the transaction and received cash to pay such distributions. Options, futures, and forward foreign exchange contracts, including options and futures on currencies which offset a foreign dollar-denominated bond or currency position, may be considered straddles for tax purposes, in which case a loss on any position in a straddle will be subject to deferral to the extent of unrealized gain in an offsetting position. The holding period of the securities or currencies comprising the straddle will be deemed not to begin until the straddle is terminated. The holding period of the security offsetting an "in-the-money qualified covered call" option on an equity security will not include the period of time the option is outstanding. Losses on written covered calls and purchased puts on securities, excluding certain "qualified covered call" options on equity securities, may be long-term capital losses, if the security covering the option was held for more than 12 months prior to the writing of the option. In order for the fund to continue to qualify for federal income tax treatment as a regulated investment company, at least 90% of its gross income for a taxable year must be derived from qualifying income, i.e., dividends, interest, income derived from loans of securities, and gains from the sale of securities or currencies. Tax regulations could be issued limiting the extent that net gain realized from options, futures, or foreign forward exchange contracts on currencies is qualifying income for purposes of the 90% requirement. As a result of the "Taxpayer Relief Act of 1997," entering into certain options, futures contracts, or foreign forward contracts may result in the "constructive sale" of offsetting stocks or debt securities of the fund. When-Issued Securities and Forward Commitment Contracts The price of such securities, which may be expressed in yield terms, is fixed at the time the commitment to purchase is made, but delivery and payment take place at a later date. Normally, the settlement date occurs within 90 days of the purchase for When-Issueds, but may be substantially longer for Forwards. During the period between purchase and settlement, no payment is made by the fund to the issuer and no interest accrues to the fund. The purchase of these securities will result in a loss if their values decline prior to the settlement 22 date. This could occur, for example, if interest rates increase prior to settlement. The longer the period between purchase and settlement, the greater the risks are. At the time the fund makes the commitment to purchase these securities, it will record the transaction and reflect the value of the security in determining its net asset value. The fund will cover these securities by maintaining cash, liquid, high-grade debt securities, or other suitable cover as permitted by the SEC with its custodian bank equal in value to commitments for them during the time between the purchase and the settlement. Therefore, the longer this period, the longer the period during which alternative investment options are not available to the fund (to the extent of the securities used for cover). Such securities either will mature or, if necessary, be sold on or before the settlement date. To the extent the fund remains fully or almost fully invested (in securities with a remaining maturity of more than one year) at the same time it purchases these securities, there will be greater fluctuations in the fund's net asset value than if the fund did not purchase them. INVESTMENT RESTRICTIONS ------------------------------------------------------------------------------- Fundamental policies may not be changed without the approval of the lesser of (1) 67% of the fund's shares present at a meeting of shareholders if the holders of more than 50% of the outstanding shares are present in person or by proxy or (2) more than 50% of a fund's outstanding shares. Other restrictions in the form of operating policies are subject to change by the fund's Board of Directors without shareholder approval. Any investment restriction which involves a maximum percentage of securities or assets shall not be considered to be violated unless an excess over the percentage occurs immediately after, and is caused by, an acquisition of securities or assets of, or borrowings by, the fund. Calculation of the fund's total assets for compliance with any of the following fundamental or operating policies or any other investment restrictions set forth in the fund's prospectus or Statement of Additional Information will not include cash collateral held in connection with securities lending activities. Fundamental Policies As a matter of fundamental policy, the fund may not: (1) Borrowing Borrow money except that the fund may (i) borrow for non-leveraging, temporary, or emergency purposes; and (ii) engage in reverse repurchase agreements and make other investments or engage in other transactions, which may involve a borrowing, in a manner consistent with the fund's investment objective and program, provided that the combination of (i) and (ii) shall not exceed 33/1//\\/3/\\% of the value of the fund's total assets (including the amount borrowed) less liabilities (other than borrowings) or such other percentage permitted by law. Any borrowings which come to exceed this amount will be reduced in accordance with applicable law. The fund may borrow from banks, other Price Funds, or other persons to the extent permitted by applicable law; (2) Commodities Purchase or sell physical commodities; except that it may enter into futures contracts and options thereon; (3) Industry Concentration (Emerging Markets Bond Fund) 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; Industry Concentration (International Bond Fund) 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; provided, however, that the fund will normally concentrate 25% or more of its assets in securities of the banking industry when the fund's position in issues maturing in one year or less equals 35% or more of the fund's total assets; (4) Loans Make loans, although the fund may (i) lend portfolio securities and participate in an interfund lending program with other Price Funds provided that no such loan may be made if, as a result, the aggregate of such loans would exceed 33/1//\\/3/\\% of the value of the fund's total assets; (ii) purchase money 23 market securities and enter into repurchase agreements; and (iii) acquire publicly distributed or privately placed debt securities and purchase debt; (5) Real Estate Purchase or sell real estate, including limited partnership interests therein, 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); (6) Senior Securities Issue senior securities except in compliance with the 1940 Act; or (7) Underwriting Underwrite securities issued by other persons, except to the extent that the fund may be deemed to be an underwriter within the meaning of the 1933 Act in connection with the purchase and sale of its portfolio securities in the ordinary course of pursuing its investment program. NOTES The following Notes should be read in connection with the above-described fundamental policies. The Notes are not fundamental policies. With respect to investment restriction (2), the fund does not consider currency contracts or hybrid investments to be commodities. For purposes of investment restriction (3), U.S., state, or local governments, or related agencies or instrumentalities, are not considered an industry. Industries are determined by reference to the classifications of industries set forth in the fund's semiannual and annual reports. It is the position of the Staff of the SEC that foreign governments are industries for purposes of this restriction. For as long as this staff position is in effect, the fund will not invest more than 25% of its total assets in the securities of any single foreign governmental issuer. For purposes of this restriction, governmental entities are considered separate issuers. For purposes of investment restriction (4), the fund will consider the acquisition of a debt security to include the execution of a note or other evidence of an extension of credit with a term of more than nine months. Operating Policies As a matter of operating policy, the fund may not: (1) Borrowing Purchase additional securities when money borrowed exceeds 5% of its total assets; (2) Control of Portfolio Companies Invest in companies for the purpose of exercising management or control; (3) Futures Contracts Purchase a futures contract or an option thereon, if, with respect to positions in futures or options on futures which do not represent bona fide hedging, the aggregate initial margin and premiums on such options would exceed 5% of the fund's net asset value; (4) Illiquid Securities Purchase illiquid securities if, as a result, more than 15% of its net assets would be invested in such securities; (5) Investment Companies Purchase securities of open-end or closed-end investment companies except (i) in compliance with the 1940 Act; or (ii) securities of the T. Rowe Price Reserve Investment or Government Reserve Investment Funds; (6) Margin Purchase securities on margin, except (i) for use of short-term credit necessary for clearance of purchases of portfolio securities and (ii) it may make margin deposits in connection with futures contracts or other permissible investments; (7) Mortgaging Mortgage, pledge, hypothecate or, in any manner, transfer any security owned by the fund as security for indebtedness except as may be necessary in connection with permissible borrowings or 24 investments and then such mortgaging, pledging, or hypothecating may not exceed 33/1//\\/3/\\% of the fund's total assets at the time of borrowing or investment; (8) Oil and Gas Programs Purchase participations or other direct interests in, or enter into leases with respect to oil, gas, or other mineral exploration or development programs if, as a result thereof, more than 5% of the value of the total assets of the fund would be invested in such programs; (9) Options, etc. Invest in puts, calls, straddles, spreads, or any combination thereof, except to the extent permitted by the prospectus and Statement of Additional Information; (10) Short Sales Effect short sales of securities; or (11) Warrants Invest in warrants if, as a result thereof, more than 10% of the value of the net assets of the fund would be invested in warrants. In addition to the restrictions described above, some foreign countries limit, or prohibit, all direct foreign investment in the securities of their companies. However, the governments of some countries have authorized the organization of investment funds to permit indirect foreign investment in such securities. For tax purposes, these funds may be known as Passive Foreign Investment Companies. Each fund is subject to certain percentage limitations under the 1940 Act and certain states relating to the purchase of securities of investment companies, and may be subject to the limitation that no more than 10% of the value of the fund's total assets may be invested in such securities. MANAGEMENT OF THE FUNDS ------------------------------------------------------------------------------- The officers and directors of the fund are listed below. Unless otherwise noted, the address of each is 100 East Pratt Street, Baltimore, Maryland 21202. Except as indicated, each has been an employee of T. Rowe Price for more than five years. In the list below, the fund's directors who are considered "interested persons" of T. Rowe Price as defined under Section 2(a)(19) of the 1940 Act are noted with an asterisk (*). These directors are referred to as inside directors by virtue of their officership, directorship, and/or employment with T. Rowe Price. Independent Directors/(a)/ ANTHONY W. DEERING, 1/28/45, Director, Chairman of the Board, President, and Chief Executive Officer, The Rouse Company, real estate developers, Columbia, Maryland; Address: 10275 Little Patuxent Parkway, Columbia, Maryland 21044 DONALD W. DICK, JR., 1/27/43, Principal, EuroCapital Advisors, LLC, an acquisition and management advisory firm; formerly (5/89-6/95) Principal, Overseas Partners, Inc., a financial investment firm; formerly (6/65-3/89) Director and Vice President, Consumer Products Division, McCormick & Company, Inc., international food processors; Director, Waverly, Inc., Baltimore, Maryland; Address: EuroCapital Advisors, LLC, Southern Isle-14, 3001 SE Island Point Lane, Stuart, Florida 34996 PAUL M. WYTHES, 6/23/33, Founding Partner of Sutter Hill Ventures, a venture capital limited partnership, providing equity capital to young high technology companies throughout the United States; Director, Teltone Corporation and InterVentional Technologies Inc.; Address: 755 Page Mill Road, Suite A200, Palo Alto, California 94304-1005 (a) Unless otherwise indicated, the Independent Directors have been at their respective companies for at least five years. Inside Directors/Officers * M. DAVID TESTA, 4/22/44, Director and Vice President-Vice Chairman of the Board, Chief Investment Officer, Director, and Managing Director, T. Rowe Price; Vice Chairman of the Board, Chief Investment Officer, Managing Director, and Director, T. Rowe Price Group, Inc.; Vice President and Director, T. Rowe Price Trust Company; Director, T. Rowe Price International; Chartered Financial Analyst 25 * MARTIN G. WADE, 2/16/43, Chairman of the Board and Director-Chairman of the Board and Director, T. Rowe Price International; Managing Director, T. Rowe Price; Managing Director and Director, T. Rowe Price Group, Inc.; Address: T. Rowe Price International, Inc., 60 Queen Victoria Street, London EC4N 4TZ, England JOHN R. FORD, 11/25/57, President-Managing Director, T. Rowe Price; Managing Director, T. Rowe Price Group, Inc.; Chief Investment Officer and Director, T. Rowe Price International; Chartered Financial Analyst; Address: T. Rowe Price International, Inc., 60 Queen Victoria Street, London EC4N 4TZ, England DAVID J.L. WARREN, 4/14/57, Executive Vice President-Managing Director, T. Rowe Price; Managing Director, T. Rowe Price Group, Inc.; Chief Executive Officer, President, and Director, T. Rowe Price International; Address: T. Rowe Price International, Inc., 60 Queen Victoria Street, London EC4N 4TZ, England CHRISTOPHER D. ALDERSON, 3/29/62, Vice President-Managing Director, T. Rowe Price; Managing Director, T. Rowe Price Group, Inc.; Vice President, T. Rowe Price International; Address: T. Rowe Price International, Inc., 60 Queen Victoria Street, London EC4N 4TZ, England MARK C.J. BICKFORD-SMITH, 4/30/62, Vice President-Vice President, T. Rowe Price Group, Inc.; Vice President, T. Rowe Price International; formerly a Director and Portfolio Manager of Jardine Fleming Investment Management; Address: T. Rowe Price International, Inc., 60 Queen Victoria Street, London EC4N 4TZ, England ROBERT P. CAMPBELL, 1/31/56, Vice President-Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company MICHAEL J. CONELIUS, 6/16/64, Vice President-Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price International FRANCES DYDASCO, 5/8/66, Vice President-Vice President, T. Rowe Price Group, Inc.; Vice President and portfolio manager of T. Rowe Price International (Singapore); formerly (1994-1996) an Investment Manager at LGT Asset Management Ltd. (Hong Kong); and (1993-1994) with East Asia Hamon Asset (Hong Kong); Address: T. Rowe Price International, Inc., No. 290 Orchard Road, #14-04 Paragon, Singapore 238859 MARK J.T. EDWARDS, 10/27/57, Vice President-Vice President, T. Rowe Price Group, Inc.; Vice President, T. Rowe Price International; Address: T. Rowe Price International, Inc., 45th Floor, Jardine House, 1 Connaught Road, Central, Hong Kong HENRY H. HOPKINS, 12/23/42, Vice President-Managing Director, T. Rowe Price; Director and Managing Director, T. Rowe Price Group, Inc.; Vice President and Director, T. Rowe Price Investment Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price Trust Company; Vice President, T. Rowe Price International and T. Rowe Price Retirement Plan Services, Inc. IAN J. MACDONALD, 1/7/62, Vice President-Vice President, T. Rowe Price Group, Inc.; Vice President, T. Rowe Price International; formerly (1992-1997) Senior Fund Manager at Mercury Asset Management (Japan); Address: T. Rowe Price International, Inc., Yamato Seimei Building - 12th Floor, 1-7, Uchisaiwai- cho 1 - chome, Chiyoda-ku, Tokyo 100-0011 Japan GEORGE A. MURNAGHAN, 5/1/56, Vice President-Managing Director, T. Rowe Price and T. Rowe Price Group, Inc.; Vice President, T. Rowe Price Trust Company and T. Rowe Price Investment Services, Inc. GONZALO PANGARO, 11/27/68, Vice President-Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International; Address: T. Rowe Price International, Inc., 60 Queen Victoria Street, London EC4N 4TZ, England D. JAMES PREY III, 11/26/59, Vice President-Vice President, T. Rowe Price and T. Rowe Price Group, Inc. ROBERT A. REVEL-CHION, 3/9/65, Vice President-Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International; formerly (1994-1997) portfolio manager, Jardine Fleming (Hong Kong), and (1987-1993) Assistant Investment Manager, Nestle Rewntree Pension Trust; Address: T. Rowe Price International, Inc., 60 Queen Victoria Street, London EC4N 4TZ, England 26 JAMES S. RIEPE, 6/25/43, Vice President-Director and Managing Director, T. Rowe Price; Vice Chairman of the Board and Managing Director, T. Rowe Price Price Group, Inc.; Chairman of the Board and Director, T. Rowe Price Investment Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and T. Rowe Price Services, Inc.; Chairman of the Board, President, Director, and Trust Officer, T. Rowe Price Trust Company; and Director, T. Rowe Price International CHRISTOPHER ROTHERY, 5/26/63, Vice President-Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International; Address: T. Rowe Price International, Inc., 60 Queen Victoria Street, London EC4N 4TZ, England JAMES B.M. SEDDON, 6/17/64, Vice President-Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International; Address: T. Rowe Price International, Inc., 60 Queen Victoria Street, London EC4N 4TZ, England ROBERT W. SMITH, 4/11/61, Vice President-Managing Director, T. Rowe Price and T. Rowe Price Group, Inc.; Vice President, T. Rowe Price International BENEDICT R.F. THOMAS, 8/27/64, Vice President-Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International; Chartered Financial Analyst; Address: T. Rowe Price International, Inc., Carlos Pellegrini 1149, piso 12, (1009) Buenos Aires, Argentina JUSTIN THOMSON, 1/14/68, Vice President-Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International; (1998 to present) Small Cap Co-Ordinator, T. Rowe Price International; formerly (1991-1998) Portfolio Manager, G. T. Capital/Invesco; Address: T. Rowe Price International, Inc., 60 Queen Victoria Street, London EC4N 4TZ, England WILLIAM F. WENDLER II, 3/14/62, Vice President-Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price International RICHARD T. WHITNEY, 5/7/58, Vice President-Managing Director, T. Rowe Price and T. Rowe Price Group, Inc.; Vice President, T. Rowe Price International and T. Rowe Price Trust Company; Chartered Financial Analyst EDWARD A. WIESE, 4/12/59, Vice President-Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; Chartered Financial Analyst PATRICIA B. LIPPERT, 1/12/53, Secretary-Assistant Vice President, T. Rowe Price and T. Rowe Price Investment Services, Inc. JOSEPH A. CARRIER, 12/30/60, Treasurer-Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Investment Services, Inc. DAVID S. MIDDLETON, 1/18/56, Controller-Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company ANN B. CRANMER, 3/23/47, Assistant Vice President-Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International; Address: T. Rowe Price International, Inc., 60 Queen Victoria Street, London EC4N 4TZ, England ROGER L. FIERY III, 2/10/59, Assistant Vice President-Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price International Compensation Table The fund does not pay pension or retirement benefits to its independent officers or directors. Also, any director of a fund who is an officer or employee of T. Rowe Price or T. Rowe Price International does not receive any remuneration from the fund. 27
Name of Person, Aggregate Compensation from Total Compensation from Fund and Position Fund(a) Fund Complex Paid to Directors(b) - -------------------------------------- -------------------------------------------- --------------------------------- - -------------------------------------------------------------------------------------------------------------------------- International Bond Fund Anthony W. Deering, Director $2,026 $80,000 Donald W. Dick, Director 2,026 80,000 Paul M. Wythes, Director 2,077 82,000 - -------------------------------------------------------------------------------------------------------------------------- Emerging Markets Bond Fund Anthony W. Deering, Director $1,751 $80,000 Donald W. Dick, Director 1,751 80,000 Paul M. Wythes, Director 1,795 82,000 - --------------------------------------------------------------------------------------------------------------------------
(a) Amounts in this column are based on accrued compensation for fiscal year 2000. (b) Amounts in this column are based on compensation received for the calendar year 2000. The T. Rowe Price complex included 95 funds as of December 31, 2000. All Funds The fund's Executive Committee, consisting of the fund's interested directors, has been authorized by its respective Board of Directors to exercise all powers of the Board to manage the fund in the intervals between meetings of the Board, except the powers prohibited by statute from being delegated. PRINCIPAL HOLDERS OF SECURITIES ------------------------------------------------------------------------------- As of March 30, 2001, the officers and directors of the fund, as a group, owned less than 1% of the outstanding shares of the fund. As of March 30, 2001, the following shareholders of record owned more than 5% of the outstanding shares of the fund: International Bond Fund: Charles Schwab & Co. Inc., Reinvest Account, Attn.: Mutual Fund Department, 101 Montgomery Street, San Francisco, California 94104-4122; and Yachtcrew & Co., T. Rowe Price Associates, Attn.: Fund Accounting Department, 100 East Pratt Street, Baltimore, Maryland 21202-1009. Emerging Markets Bond Fund: Yachtcrew & Co., T. Rowe Price Associates, Attn.: Fund Accounting Department, 100 East Pratt Street, Baltimore, Maryland 21202-1009 INVESTMENT MANAGEMENT SERVICES ------------------------------------------------------------------------------- Control of Investment Advisor T. Rowe Price Group, Inc., ("Group") owns 100% of the stock of T. Rowe Price Associates, Inc., which in turn owns 100% of T. Rowe Price International, Inc. Group was formed in 2000 as a holding company for the T. Rowe Price affiliated companies. Services Under the Management Agreement, T. Rowe Price International provides the fund with discretionary investment services. Specifically, T. Rowe Price International is responsible for supervising and directing the investments of the fund in accordance with the fund's investment objectives, program, and restrictions as provided in its prospectus and this Statement of Additional Information. T. Rowe Price International is also responsible for effecting all security transactions on behalf of the fund, including the negotiation of commissions and the allocation of principal business and portfolio brokerage. In addition to these services, 28 T. Rowe Price International provides the fund with certain corporate administrative services, including: maintaining the fund's corporate existence and corporate records; registering and qualifying fund shares under federal laws; monitoring the financial, accounting, and administrative functions of the fund; maintaining liaison with the agents employed by the fund such as the fund's custodian and transfer agent; assisting the fund in the coordination of such agents' activities; and permitting T. Rowe Price International's employees to serve as officers, directors, and committee members of the fund without cost to the fund. The Management Agreement also provides that T. Rowe Price International, its directors, officers, employees, and certain other persons performing specific functions for the fund will only be liable to the fund for losses resulting from willful misfeasance, bad faith, gross negligence, or reckless disregard of duty. Under the Management Agreement, T. Rowe Price International is permitted to utilize the services or facilities of others to provide it or the fund with statistical and other factual information, advice regarding economic factors and trends, advice as to occasional transactions in specific securities, and such other information, advice or assistance as T. Rowe Price International may deem necessary, appropriate, or convenient for the discharge of its obligations under the Management Agreement or otherwise helpful to the fund. Management Fee The fund pays T. Rowe Price International a fee ("Fee") which consists of two components: a Group Management Fee ("Group Fee") and an Individual Fund Fee ("Fund Fee"). The Fee is paid monthly to T. Rowe Price International on the first business day of the next succeeding calendar month and is calculated as described next. The monthly Group Fee ("Monthly Group Fee") is the sum of the daily Group Fee accruals ("Daily Group Fee Accruals") for each month. The Daily Group Fee Accrual for any particular day is computed by multiplying the Price Funds' group fee accrual as determined below ("Daily Price Funds' Group Fee Accrual") by the ratio of the Price Fund's net assets for that day to the sum of the aggregate net assets of the Price Funds for that day. The Daily Price Funds' Group Fee Accrual for any particular day is calculated by multiplying the fraction of one (1) over the number of calendar days in the year by the annualized Daily Price Funds' Group Fee Accrual for that day as determined in accordance with the following schedule:
0.480% First $1 billion 0.360% Next $2 billion 0.310% Next $16 billion ------------------------------------------------------------------------------ 0.450% Next $1 billion 0.350% Next $2 billion 0.305% Next $30 billion ------------------------------------------------------------------------------ 0.420% Next $1 billion 0.340% Next $5 billion 0. Thereafter 295 % ------------------------------------------------------------------------------ 0.390% Next $1 billion 0.330% Next $10 billion ---------------------------------------------------- 0.370% Next $1 billion 0.320% Next $10 billion
For the purpose of calculating the Group Fee, the Price Funds include all the mutual funds distributed by Investment Services, (excluding the T. Rowe Price Spectrum Funds, and any institutional, index, or private label mutual funds). For the purpose of calculating the Daily Price Funds' Group Fee Accrual for any particular day, the net assets of each Price Fund are determined in accordance with the fund's prospectus as of the close of business on the previous business day on which the fund was open for business. The monthly Fund Fee ("Monthly Fund Fee") is the sum of the daily Fund Fee accruals ("Daily Fund Fee Accruals") for each month. The Daily Fund Fee Accrual for any particular day is computed by multiplying the fraction of one (1) over the number of calendar days in the year by the individual Fund Fee Rate and multiplying this product by the net assets of the fund for that day, as determined in accordance with the fund's prospectus as of the close of business on the previous business day on which the fund was open for business. The individual fund fees of each fund are listed in the following chart:
International Bond Fund 0.35% Emerging Markets Bond Fund 0.45
29 The following chart sets forth the total management fees, if any, paid to T. Rowe Price International by the funds during the last three years:
Fund 2000 1999 1998 ---- ---- ---- ---- International Bond* $4,686,000 $5,822,000 $5,663,000 Emerging Markets Bond 1,408,000 1,329,000 943,000
* The fund has two classes of shares. The management fee is allocated to each class based on relative net assets. Limitation on Fund Expenses The Management Agreement between each fund and T. Rowe Price International provides that each fund will bear all expenses of its operations not specifically assumed by T. Rowe Price International other than interest, taxes, brokerage and other expenditures which are capitalized in accordance with generally accepted accounting principles and extraordinary expenses. The following chart sets forth expense ratio limitations and the periods for which they are effective. For each, T. Rowe Price International 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 International 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 Reimbursement Fund Limitation Period ------- ------------- ---- ----------------- Ratio Date - ------------------------------------------------ ----- ---- Limitation ---------- ------------------------------- 1. January 1, 1999 - 2 Emerging Markets Bond December 31, 2000 5% December 31, 2002 International Bond March 31, 2000 - 1. Fund-Advisor Class December 31, 2001 15 December 31, 2003 % - -------------------------------------------------------------------------------
Each of the above-referenced fund's Management Agreement also provides that one or more additional expense limitations 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 International, provided the reimbursement does not result in the fund's aggregate expenses exceeding the additional expense limitation. Emerging Markets Bond Fund Pursuant to the expense limitation agreement, $92,000 of previously unaccrued management fees were accrued as expenses of the fund during the year ended December 31, 2000. International Bond Fund-Advisor Class Pursuant to the expense limitation agreement, $81 of International Bond Fund-Advisor Class' expenses were borne by the manager during the period ended December 31, 2000. T. Rowe Price Spectrum Fund, Inc. The International Bond and Emerging Markets Bond Funds are parties to Special Servicing Agreements ("Agreement") between and among T. Rowe Price Spectrum Fund, Inc. ("Spectrum Fund"), T. Rowe Price, T. Rowe Price International, and various other T. Rowe Price funds which, along with such funds, are funds in which Spectrum Fund invests (collectively all such funds "Underlying Price Funds"). The Agreement provides that, if the Board of Directors of any Underlying Price Fund determines that such Underlying Fund's share of the aggregate expenses of Spectrum Fund is less than the estimated savings to the Underlying Price Fund from the operation of Spectrum Fund, the Underlying Price Fund will bear those expenses in proportion to the average daily value of its shares owned by Spectrum Fund, provided further that 30 no Underlying Price Fund will bear such expenses in excess of the estimated savings to it. Such savings are expected to result primarily from the elimination of numerous separate shareholder accounts which are or would have been invested directly in the Underlying Price Funds and the resulting reduction in shareholder servicing costs. Although such cost savings are not certain, the estimated savings to the Underlying Price Funds generated by the operation of Spectrum Fund are expected to be sufficient to offset most, if not all, of the expenses incurred by Spectrum Fund. Management Related Services As noted above, the Management Agreement spells out the expenses to be paid by the fund. In addition to the Management Fee, the fund pays for the following: shareholder service expenses; custodial, accounting, legal, and audit fees; costs of preparing and printing prospectuses and reports sent to shareholders; registration fees and expenses; proxy and annual meeting expenses (if any); and director fees and expenses. T. Rowe Price Services, Inc., a wholly owned subsidiary of T. Rowe Price, acts as the fund's transfer and dividend disbursing agent and provides shareholder and administrative services. Services for certain types of retirement plans are provided by T. Rowe Price Retirement Plan Services, Inc., also a wholly owned subsidiary. The address for each is 100 East Pratt St., Baltimore, MD 21202. Additionally, T. Rowe Price, under a separate agreement with the funds, provides accounting services to the funds. The funds paid the expenses shown in the following table for the fiscal year ended December 31, 2000, to T. Rowe Price and its affiliates.
Transfer Agent and Retirement Accounting Fund Shareholder Services Subaccounting Services ---- -------------------- Services -------- -------- International Bond $1,153,000 $2,000 $116,000 International Bond Fund-Advisor Class -- -- -- Emerging Markets Bond 372,000 1,000 104,000
SERVICES BY OUTSIDE PARTIES ------------------------------------------------------------------------------- The shares of some fund shareholders are held in omnibus accounts maintained by various third parties, including retirement plan sponsors, insurance companies, banks and broker-dealers. The fund has adopted an administrative fee payment ("AFP") program that authorizes the fund to make payments to these third parties. The payments are made for transfer agent, recordkeeping, and other administrative services provided by, or on behalf of, the third parties with respect to such shareholders and the omnibus accounts. Under the AFP program, the funds paid the amounts set forth below to various third parties in calendar year 2000.
International Bond Fund $1,026 Emerging Markets Bond Fund 0
The Advisor Class has adopted an Advisor Class administrative fee payment program ("Advisor Class AFP") under which various intermediaries, including intermediaries receiving 12b-1 payments, may receive payments from the Advisor Class in addition to 12b-1 fees for providing various recordkeeping and transfer agent type services to the Advisor classes and/or shareholders thereof. These services include, but are not limited to: transmission of net purchase and redemption orders; maintenance of separate records for shareholders reflecting purchases, redemptions, and share balances; mailing of shareholder confirmations and periodic statements; and telephone services in connection with the above. 31
International Bond Fund-Advisor Class $64
DISTRIBUTOR FOR THE FUNDS ------------------------------------------------------------------------------- Investment Services, a Maryland corporation formed in 1980 as a wholly owned subsidiary of T. Rowe Price, serves as the fund's distributor. Investment Services is registered as a broker-dealer under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc. The offering of the fund's shares is continuous. Investment Services is located at the same address as the fund and T. Rowe Price-100 East Pratt Street, Baltimore, Maryland 21202. Investment Services serves as distributor to the fund pursuant to an Underwriting Agreement ("Underwriting Agreement"), which provides that the fund will pay all fees and expenses in connection with: necessary state filings; preparing, setting in type, printing, and mailing its prospectuses and reports to shareholders; and issuing its shares, including expenses of confirming purchase orders. The Underwriting Agreement provides that Investment Services will pay all fees and expenses in connection with: printing and distributing prospectuses and reports for use in offering and selling fund shares; preparing, setting in type, printing, and mailing all sales literature and advertising; Investment Services' federal and state registrations as a broker-dealer; and offering and selling shares, except for those fees and expenses specifically assumed by the fund. Investment Services' expenses are paid by T. Rowe Price. Investment Services acts as the agent of the fund in connection with the sale of its shares in the various states in which Investment Services is qualified as a broker-dealer. Under the Underwriting Agreement, Investment Services accepts orders for fund shares at net asset value. No sales charges are paid by investors or the fund. International Bond Fund-Advisor Class Distribution and Shareholder Services Plan The fund Directors adopted a Plan pursuant to Rule 12b-1 on February 9, 2000 with respect to each Advisor Class. Each Plan provides that the Advisor Class may compensate Investment Services or such other persons as the fund or Investment Services designates, to finance any or all of the distribution, shareholder servicing, maintenance of shareholder accounts, and/or other administrative services with respect to Advisor Class shares. It is expected that most, if not all, payments under the Plan will be made (either directly, or indirectly through Investment Services) to brokers, dealers, banks, insurance companies, and intermediaries other than Investment Services. Under the Plan, each Advisor Class pays a fee at the annual rate of up to 0.25% of that class's average daily net assets. Normally, the full amount of the fee is paid to the intermediary on shares sold through that intermediary. However, a lesser amount may be paid based on the level of services provided. Intermediaries may use the payments for, among other purposes, compensating employees engaged in sales and/or shareholder servicing of the Advisor Class, as well as for a wide variety of other purposes associated with supporting, distributing, and servicing the Advisor Class shares. The amount of fees paid by an Advisor Class during any year may be more or less than the cost of distribution and other services provided to the Advisor Class and its investors. NASD rules limit the amount of annual distribution and service fees that may be paid by a mutual fund and impose a ceiling on the cumulative distribution fees paid. The Plan complies with these rules. The Plan requires that Investment Services provide, or cause to be provided, to the fund Directors for their review a quarterly written report identifying the amounts expended by each Advisor Class and the purposes for which such expenditures were made. Prior to approving the Plan, the fund considered various factors relating to the implementation of the Plan and determined that there is a reasonable likelihood that the Plan will benefit each fund, its Advisor Class and the Advisor Class's shareholders. The fund Directors noted that to the extent the Plan allows a fund to sell Advisor 32 Class shares in markets to which it would not otherwise have access, the Plan may result in additional sales of fund shares. This may enable a fund to achieve economies of scale that could reduce expenses. In addition, certain ongoing shareholder services may be provided more effectively by intermediaries with which shareholders have an existing relationship. The Plan continued until March 31, 2001. The Plan is renewable thereafter from year to year with respect to each fund, so long as its continuance is approved at least annually (1) by the vote of a majority of the fund Directors and (2) by a vote of the majority of the Rule 12b-1 Directors, cast in person at a meeting called for the purpose of voting on such approval. The Plan may not be amended to increase materially the amount of fees paid by any Advisor Class thereunder unless such amendment is approved by a majority vote of the outstanding shares of such Advisor Class and by the fund Directors in the manner prescribed by Rule 12b-1 under the 1940 Act. The Plan is terminable with respect to an Advisor Class at any time by a vote of a majority of the Rule 12b-1 Directors or by a majority vote of the outstanding shares in the Advisor Class. There were no 12b-1 fees for the fiscal year ending December 31, 2000. CUSTODIAN ------------------------------------------------------------------------------- State Street Bank and Trust Company is the custodian for the fund's U.S. securities and cash, but it does not participate in the fund's investment decisions. Portfolio securities purchased in the U.S. are maintained in the custody of the Bank and may be entered into the Federal Reserve Book Entry System, or the security depository system of the Depository Trust Corporation. State Street Bank's main office is at 225 Franklin Street, Boston, Massachusetts 02110. The fund has entered into a Custodian Agreement with The Chase Manhattan Bank, London, pursuant to which portfolio securities which are purchased outside the United States are maintained in the custody of various foreign branches of The Chase Manhattan Bank and such other custodians, including foreign banks and foreign securities depositories as are approved in accordance with regulations under the 1940 Act. The address for The Chase Manhattan Bank, London is Woolgate House, Coleman Street, London, EC2P 2HD, England. CODE OF ETHICS ------------------------------------------------------------------------------- The fund, its investment adviser (T. Rowe Price International), and its principal underwriter (T. Rowe Price Investment Services) have a written Code of Ethics which requires persons with access to investment information ("Access Persons") to obtain prior clearance before engaging in personal securities transactions. Transactions must be executed within three business days of their clearance. In addition, all employees must report their personal securities transactions within 10 days after the end of the calendar quarter. Access Persons will not be permitted to effect transactions in a security if: there are pending client orders in the security; the security has been purchased or sold by a client within seven calendar days; the security is being considered for purchase for a client; or the security is subject to internal trading restrictions. In addition, Access Persons are prohibited from profiting from short-term trading (e.g., purchases and sales involving the same security within 60 days). Any person becoming an Access Person must file a statement of personal securities holdings within 10 days of this date. All Access Persons are required to file an annual statement with respect to their personal securities holdings. Any material violation of the Code of Ethics is reported to the Board of the fund. The Board also reviews the administration of the Code of Ethics on an annual basis. 33 PORTFOLIO TRANSACTIONS ------------------------------------------------------------------------------- Investment or Brokerage Discretion Decisions with respect to the purchase and sale of portfolio securities on behalf of the fund are made by T. Rowe Price International. T. Rowe Price International 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 International 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. How Brokers and Dealers Are Selected Equity Securities In purchasing and selling equity securities, it is T. Rowe Price International's policy to obtain quality execution at the most favorable prices through responsible brokers and dealers and at competitive commission rates where such rates are negotiable. However, under certain conditions, the fund may pay higher brokerage commissions in return for brokerage and research services. As a general practice, over-the-counter orders are executed with market-makers. In selecting among market-makers, T. Rowe Price International generally seeks to select those it believes to be actively and effectively trading the security being purchased or sold. In selecting broker-dealers to execute the fund's portfolio transactions, consideration is given to such factors as the price of the security, the rate of the commission, the size and difficulty of the order, the reliability, integrity, financial condition, general execution and operational capabilities of competing brokers and dealers, their expertise in particular markets and brokerage and research services provided by them. It is not the policy of T. Rowe Price International 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. Transactions on stock exchanges involve the payment of brokerage commissions. In transactions on stock exchanges in the United States, these commissions are negotiated. Traditionally, commission rates have generally not been negotiated on stock markets outside the United States. However, an increasing number of overseas stock markets have adopted a system of negotiated rates, although a number of markets continue to be subject to an established schedule of minimum commission rates. It is expected that equity securities will ordinarily be purchased in the primary markets, whether over-the-counter or listed, and that listed securities may be purchased in the over-the-counter market if such market is deemed the primary market. In the case of securities traded on the over-the-counter markets, there is generally no stated commission, but the price usually includes an undisclosed commission or markup. In underwritten offerings, the price includes a disclosed, fixed commission or discount. Fixed-Income Securities For fixed-income securities, it is expected that purchases and sales will ordinarily be transacted with the issuer, the issuer's underwriter, or with a primary market maker acting as principal on a net basis, with no brokerage commission being paid by the fund. However, the price of the securities generally includes compensation which is not disclosed separately. Transactions placed through dealers who are serving as primary market makers reflect the spread between the bid and asked prices. With respect to equity and fixed-income securities, T. Rowe Price International may effect principal transactions on behalf of the fund with a broker or dealer who furnishes brokerage and/or research services benefitting such clients, 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 International may receive research services in connection with brokerage transactions, including designations in fixed price offerings. T. Rowe Price International may cause a fund to pay a broker-dealer who furnishes brokerage and/or research services a commission for executing a transaction that is in excess of the commission another broker-dealer 34 would have received for executing the transaction if it is determined that such commission is reasonable in relation to the value of the brokerage and/or research services which have been provided. In some cases, research services are generated by third parties but are provided to T. Rowe Price International by or through broker-dealers. Descriptions of Research Services Received From Brokers and Dealers T. Rowe Price International receives a wide range of research services from brokers and dealers covering investment opportunities throughout the world, including information on the economies, industries, groups of securities, individual companies, statistics, political developments, technical market action, pricing and appraisal services, and performance analyses of all the countries in which a fund's portfolio is likely to be invested. T. Rowe Price International cannot readily determine the extent to which commissions charged by brokers reflect the value of their research services, but brokers occasionally suggest a level of business they would like to receive in return for the brokerage and research services they provide. To the extent that research services of value are provided by brokers, T. Rowe Price International is relieved of expenses which it might otherwise bear. In some cases, research services are generated by third parties but are provided to T. Rowe Price International by or through brokers. Commissions to Brokers Who Furnish Research Services Certain brokers-dealers that provide quality execution services also furnish research services to T. Rowe Price International. T. Rowe Price International has adopted a brokerage allocation policy embodying the concepts of Section 28(e) of the Securities Exchange Act of 1934, which permits an investment adviser to cause its clients to pay a broker which furnishes brokerage or research services a higher commission than that which might be charged by another broker which does not furnish brokerage or research services, or which furnishes brokerage or research services deemed to be of lesser value, if such commission is deemed reasonable in relation to the brokerage and research services provided by the broker, viewed in terms of either that particular transaction or the overall responsibilities of the adviser with respect to the accounts as to which it exercises investment discretion. Accordingly, T. Rowe Price International may assess the reasonableness of commissions in light of the total brokerage and research services provided by each particular broker. Miscellaneous Research services furnished by brokers through which T. Rowe Price International effects securities transactions may be used in servicing all accounts managed by T. Rowe Price International. Conversely, research services received from brokers which execute transactions for a particular fund will not necessarily be used by T. Rowe Price International exclusively in connection with the management of that fund. Some of T. Rowe Price International's other clients have investment objectives and programs similar to those of the fund. T. Rowe Price International may 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 International's policy not to favor one client over another in making recommendations or in placing orders. T. Rowe Price International may follow 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 International 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. 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. 35 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. Other The funds engaged in portfolio transactions involving broker-dealers in the following amounts for the fiscal years ended December 31, 2000, 1999, and 1998:
Fund 2000 1999 1998 ---- ---- ---- ---- International Bond $2,078,891,866 $1,576,621,000 $2,088,214,000 Emerging Markets Bond 233,754,184 163,038,000 273,162,000
The entire amount (in the table above) for each year represented principal transactions as to which the fund has no knowledge of the profits or losses realized by the respective broker-dealers. Of all such portfolio transactions, 0% were placed with firms which provided research, statistical, or other services to T. Rowe Price International in connection with the management of the funds, or in some cases, to the funds. The portfolio turnover rates for the fund (if applicable) for the fiscal years ended December 31, 2000, 1999, and 1998 were:
Fund 2000 1999 1998 ---- ---- ---- ---- International Bond 160.5% 94.9% 128.9% Emerging Markets Bond 69.5 54.0 78.4
PRICING OF SECURITIES ------------------------------------------------------------------------------- Debt securities are generally traded in the over-the-counter market and are valued at a price deemed best to reflect fair value as quoted by dealers who make markets in these securities or by an independent pricing service. Short-term debt securities are valued at their amortized cost in local currency which, when combined with accrued interest, approximates fair value. Investments in mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. In the absence of a last sale price, purchased and written options are valued at the mean of the latest bid and asked prices, respectively. For the purposes of determining the fund's net asset value per share, the U.S. dollar value of all assets and liabilities initially expressed in foreign currencies is determined by using the mean of the bid and offer prices of such currencies against U.S. dollars quoted by a major bank. Assets and liabilities for which the above valuation procedures are inappropriate or are deemed not to reflect fair value, are stated at fair value as determined in good faith by or under the supervision of the officers of the fund, as authorized by the Board of Directors. Trading in the portfolio securities of the fund may take place in various foreign markets on certain days (such as Saturday) when the fund is not open for business and does not calculate its net asset value. In addition, trading in a fund's portfolio securities may not occur on days when the fund is open. NET ASSET VALUE PER SHARE ------------------------------------------------------------------------------- The purchase and redemption price of the fund's shares is equal to the fund's net asset value per share or share price. The fund determines its net asset value per share by subtracting its liabilities (including accrued expenses and dividends payable) from its total assets (the market value of the securities the fund holds plus 36 cash and other assets, including income accrued but not yet received) and dividing the result by the total number of shares outstanding. The net asset value per share of the fund is normally calculated as of the close of trading on the New York Stock Exchange ("NYSE") every day the NYSE is open for trading. The NYSE is closed on the following days: New Year's Day, Dr. Martin Luther King, Jr. Holiday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Determination of net asset value (and the offering, sale, redemption, and repurchase of shares) for the fund may be suspended at times (a) during which the NYSE is closed, other than customary weekend and holiday closings, (b) during which trading on the NYSE is restricted, (c) during which an emergency exists as a result of which disposal by the fund of securities owned by it is not reasonably practicable or it is not reasonably practicable for the fund fairly to determine the value of its net assets, or (d) during which a governmental body having jurisdiction over the fund may by order permit such a suspension for the protection of the fund's shareholders; provided that applicable rules and regulations of the SEC (or any succeeding governmental authority) shall govern as to whether the conditions prescribed in (b), (c), or (d) exist. DIVIDENDS AND DISTRIBUTIONS ------------------------------------------------------------------------------- Unless you elect otherwise, dividends and capital gain distributions, if any, will be reinvested on the reinvestment date using the NAV per share of that date. The reinvestment date normally precedes the payment date by one day, although the exact timing is subject to change and can be as great as 10 days. TAX STATUS ------------------------------------------------------------------------------- The fund intends to qualify as a "regulated investment company" under Subchapter M of the Code. Dividends and distributions paid by the fund are not eligible for the dividends-received deduction for corporate shareholders, if as expected, none of the fund's income consists of dividends paid by United States corporations. Long-term capital gain distributions paid from the fund are never eligible for this deduction. For tax purposes, it does not make any difference whether dividends and capital gain distributions are paid in cash or in additional shares. The fund must declare dividends by December 31 of each year equal to at least 98% of ordinary income (as of December 31) and capital gains (as of October 31) in order to avoid a federal excise tax and distribute within 12 months 100% of ordinary income and capital gains as of December 31 to avoid federal income tax. At the time of your purchase, the fund's net asset value may reflect undistributed income, capital gains or net unrealized appreciation of securities held by the fund. A subsequent distribution to you of such amounts, although constituting a return of your investment, would be taxable either as dividends or capital gain distributions. For federal income tax purposes, the fund is permitted to carry forward its net realized capital losses, if any, for eight years and realize net capital gains up to the amount of such losses without being required to pay taxes on, or distribute such gains. Income received by the fund from sources within various foreign countries may be subject to foreign income taxes withheld at the source. Under the Code, if more than 50% of the value of the fund's total assets at the close of its taxable year comprise securities issued by foreign corporations or governments, the fund may file an election with the Internal Revenue Service to "pass through" to the fund's shareholders the amount of any foreign income taxes paid by the fund. Pursuant to this election, shareholders will be required to: (1) include in gross income, even though not actually received, their respective pro rata share of foreign taxes paid by the fund; (2) treat their pro rata share of foreign taxes as paid by them; and (3) either deduct their pro rata share of foreign taxes in computing their taxable income, or use it as a foreign tax credit against U.S. income taxes (but not both). No deduction for foreign taxes may be claimed by a shareholder who does not itemize deductions. 37 The fund intends to meet the requirements of the Code which permit it to elect to "pass through" to its shareholders foreign income taxes paid, but there can be no assurance that a fund will be able to do so. Each shareholder will be notified within 60 days after the close of each taxable year of the fund, if the fund will "pass through" foreign taxes paid for that year, and, if so, the amount of each shareholder's pro rata share (by country) of (1) the foreign taxes paid, and (2) the fund's gross income from foreign sources. Of course, shareholders who are not liable for federal income taxes, such as retirement plans qualified under Section 401 of the Code, will not be affected by any such "pass through" of foreign tax credits. If, in any taxable year, the fund should not qualify as a regulated investment company under the Code: (1) the fund would be taxed at normal corporate rates on the entire amount of its taxable income, if any, without deduction for dividends or other distributions to shareholders; (2) the fund's distributions to the extent made out of the fund's current or accumulated earnings and profits would be taxable to shareholders as ordinary dividends (regardless of whether they would otherwise have been considered capital gain dividends), and the fund may qualify for the 70% deduction for dividends received by corporations; and (3) foreign tax credits would not "pass through" to shareholders. Taxation of Foreign Shareholders The Code provides that dividends from net income (which are deemed to include for this purpose each shareholder's pro rata share of foreign taxes paid by the fund--see discussion of "pass through" of the foreign tax credit to U.S. shareholders), will be subject to U.S. tax. For shareholders who are not engaged in a business in the U.S., this tax would be imposed at the rate of 30% upon the gross amount of the dividends in the absence of a Tax Treaty providing for a reduced rate or exemption from U.S. taxation. Distributions of net long-term capital gains realized by the fund are not subject to tax unless the foreign shareholder is a nonresident alien individual who was physically present in the U.S. during the tax year for more than 182 days. Passive Foreign Investment Companies The fund may purchase the securities of certain foreign investment funds or trusts called passive foreign investment companies. Such trusts have been the only or primary way to invest in certain countries. In addition to bearing their proportionate share of the trust's expenses (management fees and operating expenses), shareholders will also indirectly bear similar expenses of such trusts. Capital gains on the sale of such holdings are considered ordinary income regardless of how long the fund held its investment. In addition, the fund may be subject to corporate income tax and an interest charge on certain dividends and capital gains earned from these investments, regardless of whether such income and gains are distributed to shareholders. To avoid such tax and interest, the fund intends to treat these securities as sold on the last day of its fiscal year and recognize any gains for tax purposes at that time; deductions for losses are allowable only to the extent of any gains resulting from these deemed sales for prior taxable years. Such gains and losses will be treated as ordinary income. The fund will be required to distribute any resulting income even though it has not sold the security and received cash to pay such distributions. Foreign Currency Gains and Losses Foreign currency gains and losses, including the portion of gain or loss on the sale of debt securities attributable to foreign exchange rate fluctuations, are taxable as ordinary income. If the net effect of these transactions is a gain, the ordinary income dividend paid by the fund will be increased. If the result is a loss, the income dividend paid by the fund will be decreased, or to the extent such dividend has already been paid, it may be classified as a return of capital. Adjustments to reflect these gains and losses will be made at the end of the fund's taxable year. 38 INVESTMENT PERFORMANCE ------------------------------------------------------------------------------- Total Return Performance The fund's calculation of total return performance includes the reinvestment of all capital gain distributions and income dividends for the period or periods indicated, without regard to tax consequences to a shareholder in the fund. Total return is calculated as the percentage change between the beginning value of a static account in the fund and the ending value of that account measured by the then current net asset value, including all shares acquired through reinvestment of income and capital gain dividends. The results shown are historical and should not be considered indicative of the future performance of the fund. Each average annual compound rate of return is derived from the cumulative performance of the fund over the time period specified. The annual compound rate of return for the fund over any other period of time will vary from the average.
Cumulative Performance Percentage Change 1 Yr. 5 Yrs. 10 Yrs. % Since Inception Fund ----- ------ ------- ------- --------- ---- Ended Ended Ended Inception Date ----- ----- ----- --------- ---- 12/31/00 12/31/00 12/31/00 12/31/00 -------- -------- -------- -------- International Bond -3.13% 6.51% 81.97% 165.15% 09/10/86 International Bond Fund-Advisor Class -- -- -- -1.29 03/31/00 Emerging Markets Bond 15.20 74.09 -- 119.02 12/30/94 - -------------------------------------------------------------------------------
Average Annual Compound Rates of Return 1 Yr. 5 Yrs. 10 Yrs. % Since Inception Fund ----- ------ ------- ------- --------- ---- Ended Ended Ended Inception Date ----- ----- ----- --------- ---- 12/31/00 12/31/00 12/31/00 12/31/00 -------- -------- -------- -------- International Bond -3.13% 1.27% 6.17% 7.05% 09/10/86 International Bond Fund-Advisor Class -- -- -- -1.29 03/31/00 Emerging Markets Bond 15.20 11.73 -- 13.95 12/30/94 - -------------------------------------------------------------------------------
Outside Sources of Information From time to time, in reports and promotional literature: (1) the fund's total return performance, ranking, or any other measure of the fund's performance may be compared to any one or combination of the following: (a) a broad-based index, (b) other groups of mutual funds, including T. Rowe Price funds, tracked by independent research firm's ranking entities, or financial publications; (c) indices of securities comparable to those in which the fund invests; (2) the Consumer Price Index (or any other measure for inflation), government statistics, such as GNP may be used to illustrate investment attributes of the fund or the general economic, business, investment, or financial environment in which the fund operates; (3) various financial, economic, and market statistics developed by brokers, dealers, and other persons may be used to illustrate aspects of the fund's performance; (4) the effect of tax-deferred compounding on the fund's investment returns, or on returns in general in both qualified and nonqualified retirement plans or any other tax advantage product, may be illustrated by graphs, charts, etc.; and (5) the sectors or industries in which the fund invests may be compared to relevant indices or surveys in order to evaluate the fund's historical performance or current or potential value with respect to the particular industry or sector. Other Publications From time to time, in newsletters and other publications issued by Investment Services, T. Rowe Price mutual fund portfolio managers may discuss economic, financial, and political developments in the U.S. and abroad 39 and how these conditions have affected or may affect securities prices or the fund; individual securities within the fund's portfolio; and their philosophy regarding the selection of individual stocks, including why specific stocks have been added, removed, or excluded from the fund's portfolio. Other Features and Benefits The fund is a member of the T. Rowe Price family of funds and may help investors achieve various long-term investment goals, which include, but are not limited to, investing money for retirement, saving for a down payment on a home, or paying college costs. To explain how the fund could be used to assist investors in planning for these goals and to illustrate basic principles of investing, various worksheets and guides prepared by T. Rowe Price and/or Investment Services may be made available. No-Load Versus Load and 12b-1 Funds Many mutual funds charge sales fees to investors or use fund assets to finance distribution activities. These fees are in addition to the normal advisory fees and expenses charged by all mutual funds. There are several types of fees charged which vary in magnitude and which may often be used in combination. A sales charge (or "load") can be charged at the time the fund is purchased (front-end load) or at the time of redemption (back-end load). Front-end loads are charged on the total amount invested. Back-end loads are charged either on the amount originally invested or on the amount redeemed. 12b-1 plans allow for the payment of marketing and sales expenses from fund assets. These expenses are usually computed daily as a fixed percentage of assets. The T. Rowe Price funds, including the Advisor Classes, are considered to be "no-load" funds. They impose no front-end or back-end sales loads. However, the Advisor Classes do charge 12b-1 fees. Under applicable National Association of Securities Dealers Regulation, Inc. ("NASDR") regulations, mutual funds that have no front-end or deferred sales charges and whose total asset-based charges for sales-related expenses and/or service fees (as defined by NASDR) do not exceed 0.25% of average net assets per year may be referred to as no-load funds. Redemptions in Kind The fund has filed a notice of election under Rule 18f-1 of the 1940 Act. This permits the fund to effect redemptions in kind and in cash as set forth in its prospectus. In the unlikely event a shareholder were to receive an in kind redemption of portfolio securities of the fund, it would be the responsibility of the shareholder to dispose of the securities. The shareholder would be at risk that the value of the securities would decline prior to their sale, that it would be difficult to sell the securities and that brokerage fees could be incurred. Issuance of Fund Shares for Securities Transactions involving issuance of fund shares for securities or assets other than cash will be limited to (1) bona fide reorganizations; (2) statutory mergers; or (3) other acquisitions of portfolio securities that: (a) meet the investment objective and policies of the fund; (b) are acquired for investment and not for resale except in accordance with applicable law; (c) have a value that is readily ascertainable via listing on or trading in a recognized United States or international exchange or market; and (d) are not illiquid. YIELD INFORMATION ------------------------------------------------------------------------------- In conformity with regulations of the SEC, an income factor is calculated for each security in the portfolio, based upon the security's market value at the beginning of the period and expected yield-to-maturity. The income factors are then totaled for all securities in the portfolio. Next, expenses of the fund for the period, net of expected reimbursements, are deducted from the income to arrive at net income, which is then converted to a per-share amount by dividing net income by the average number of shares outstanding during the period. The net income per share is divided by the net asset value on the last day of the period to produce a monthly yield which is then annualized. Quoted yield factors are for comparison purposes only, and are not intended to indicate future performance or forecast the dividend per share of the fund. 40 International Bond Fund The fund's yield calculated as set forth above for the month ended December 31, 2000, was 4.71%. International Bond Fund-Advisor Class The fund's yield calculated as set forth above for the month ended December 31, 2000, was 4.37%. Emerging Markets Bond Fund The fund's yield calculated as set forth above for the month ended December 31, 2000, was 10.30%. CAPITAL STOCK ------------------------------------------------------------------------------- The T. Rowe Price International Funds, Inc. (the "corporation") is a Maryland corporation. The corporation is registered with the SEC under the 1940 Act as a diversified, open-end investment company, commonly known as a "mutual fund." Currently, the corporation consists of the following 12 series, each representing a separate class of shares and having different objectives and investment policies. The 12 series are as follows: International Stock Fund, International Bond Fund, International Discovery Fund, European Stock Fund, New Asia Fund, Japan Fund, Latin America Fund, Emerging Markets Bond Fund, Emerging Markets Stock Fund, Global Stock Fund, International Growth & Income Fund, and Emerging Europe & Mediterranean Fund. In 2000, the assets of the Global Bond Fund, a former series of the International Corporation, were acquired by the International Bond Fund in exchange for shares of the Global Bond Fund. (The equity funds are described in a separate Statement of Additional Information.) The Charter also provides that the Board of Directors may issue additional series of shares. The fund's Charter authorizes the Board of Directors to classify and reclassify any and all shares which are then unissued, including unissued shares of capital stock into any number of classes or series, each class or series consisting of such number of shares and having such designations, such powers, preferences, rights, qualifications, limitations, and restrictions, as shall be determined by the Board subject to the 1940 Act and other applicable law. The shares of any such additional classes or series might therefore differ from the shares of the present class and series of capital stock and from each other as to preferences, conversions or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption, subject to applicable law, and might thus be superior or inferior to the capital stock or to other classes or series in various characteristics. The Board of Directors may increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that the fund has authorized to issue without shareholder approval. Each share of each series has equal voting rights with every other share of every other series, and all shares of all series vote as a single group except where a separate vote of any class or series is required by the 1940 Act, the laws of the State of Maryland, the corporation's Articles of Incorporation, the By-Laws of the corporation, or as the Board of Directors may determine in its sole discretion. Where a separate vote is required with respect to one or more classes or series, then the shares of all other classes or series vote as a single class or series, provided that, as to any matter which does not affect the interest of a particular class or series, only the holders of shares of the one or more affected classes or series is entitled to vote. The preferences, rights, and other characteristics attaching to any series of shares, including the present series of capital stock, might be altered or eliminated, or the series might be combined with another series, by action approved by the vote of the holders of a majority of all the shares of all series entitled to be voted on the proposal, without any additional right to vote as a series by the holders of the capital stock or of another affected series. Shareholders are entitled to one vote for each full share held (and fractional votes for fractional shares held) and will vote in the election of or removal of directors (to the extent hereinafter provided) and on other matters submitted to the vote of shareholders. There will normally be no meetings of shareholders for the purpose of electing directors unless and until such time as less than a majority of the directors holding office 41 have been elected by shareholders, at which time the directors then in office will call a shareholders' meeting for the election of directors. Except as set forth above, the directors shall continue to hold office and may appoint successor directors. Voting rights are not cumulative, so that the holders of more than 50% of the shares voting in the election of directors can, if they choose to do so, elect all the directors of the fund, in which event the holders of the remaining shares will be unable to elect any person as a director. As set forth in the By-Laws of the fund, a special meeting of shareholders of the fund shall be called by the Secretary of the fund on the written request of shareholders entitled to cast at least 10% of all the votes of the fund entitled to be cast at such meeting. Shareholders requesting such a meeting must pay to the fund the reasonably estimated costs of preparing and mailing the notice of the meeting. The fund, however, will otherwise assist the shareholders seeking to hold the special meeting in communicating to the other shareholders of the fund to the extent required by Section 16(c) of the 1940 Act. FEDERAL REGISTRATION OF SHARES ------------------------------------------------------------------------------- The fund's shares are registered for sale under the 1933 Act. Registration of the fund's shares is not required under any state law, but the fund is required to make certain filings with and pay fees to the states in order to sell its shares in the states. LEGAL COUNSEL ------------------------------------------------------------------------------- Swidler Berlin Shereff Friedman, LLP, whose address is The Chrysler Building, 405 Lexington Avenue, New York, New York 10174, is legal counsel to the fund. INDEPENDENT ACCOUNTANTS ------------------------------------------------------------------------------- PricewaterhouseCoopers LLP, 250 West Pratt Street, 21st Floor, Baltimore, Maryland 21201, are the independent accountants to the fund. All Funds The financial statements of the funds listed below for the period ended December 31, 2000, and the report of independent accountants are included in each fund's Annual Report for the period ended December 31, 2000. A copy of each Annual Report accompanies this Statement of Additional Information. The following financial statements and the report of independent accountants appearing in each Annual Report for the period ended December 31, 2000, are incorporated into this Statement of Additional Information by reference: 42
ANNUAL REPORT REFERENCES: INTERNATIONAL BOND EMERGING MARKETS BOND ------------------ --------------------- Financial Highlights 10 11 Portfolio of Investments, 1 December 31, 2000 2-18 20-25 Statement of Assets and Liabilities, December 31, 2000 19 26 Statement of Operations, year ended December 31, 2000 27 28 Statement of Changes in Net Assets, years ended December 31, 2000 and December 31, 1999 29-30 31 Notes to Financial Statements, December 31, 2000 32-38 32-38 Report of Independent Accountants 39 39
INTERNATIONAL BOND FUND-ADVISOR CLASS ------------------ Financial Highlights 7 Portfolio of Investments, December 31, 2000 8-14 Statement of Assets and Liabilities, December 31, 2000 15 Statement of Operations, year ended December 31, 2000 16 Statement of Changes in Net Assets, years ended December 31, 2000 and December 31, 1999 17-18 Notes to Financial Statements, December 31, 2000 19-24 Report of Independent Accountants 25
RATINGS OF CORPORATE DEBT SECURITIES ------------------------------------------------------------------------------- Moody's Investors Service, Inc. Aaa-Bonds rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Aa-Bonds rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally know as high-grade bonds. A-Bonds rated A possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Baa-Bonds rated Baa are considered as medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba-Bonds rated Ba are judged to have speculative elements: their futures cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. 43 B-Bonds rated B generally lack the characteristics of a desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa-Bonds rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to repayment of principal or payment of interest. Ca-Bonds rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C-Bonds rated C represent the lowest rated, and have extremely poor prospects of attaining investment standing. Standard & Poor's Corporation AAA-This is the highest rating assigned by Standard & Poor's to a debt obligation and indicates an extremely strong capacity to pay principal and interest. AA-Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay principal and interest is very strong. A-Bonds rated A have a strong capacity to pay principal and interest, although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions. BBB-Bonds rated BBB are regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in the A category. BB, B, CCC, CC, C-Bonds rated BB, B, CCC, CC, and C are regarded on balance as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. BB indicates the lowest degree of speculation and C the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. D-In default. Fitch IBCA, Inc. AAA-High grade, broadly marketable, suitable for investment by trustees and fiduciary institutions, and liable to slight market fluctuation other than through changes in the money rate. The prime feature of a "AAA" bond is the showing of earnings several times or many times interest requirements for such stability of applicable interest that safety is beyond reasonable question whenever changes occur in conditions. Other features may enter, such as wide margin of protection through collateral, security or direct lien on specific property. Sinking funds or voluntary reduction of debt by call or purchase are often factors, while guarantee or assumption by parties other than the original debtor may influence their rating. AA-Of safety virtually beyond question and readily salable. Their merits are not greatly unlike those of "AAA" class but a bond so rated may be junior though of strong lien, or the margin of safety is less strikingly broad. The issue may be the obligation of a small company, strongly secured, but influenced as to rating by the lesser financial power of the enterprise and more local type of market. A-Bonds rated A are considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. BBB-Bonds rated BBB are considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore 44 impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings. BB, B, CCC, CC, and C-Bonds rated BB, B, CCC, CC, and C are regarded on balance as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligation for bond issues not in default. BB indicates the lowest degree of speculation and C the highest degree of speculation. The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer, and the current and prospective financial condition and operating performance of the issuer. 45 PART C OTHER INFORMATION ITEM 23. EXHIBITS (a)(1) Articles of Amendment and Restatement of T. Rowe Price International Funds, Inc., dated February 16, 1990 (electronically filed with Amendment No. 42 dated February 28, 1994) (a)(2) Articles Supplementary of T. Rowe Price International Funds, Inc., dated March 4, 1991 (electronically filed with Post-Effective Amendment No. 1 to Form N-14 dated September 10, 1996) (a)(3) Articles of Amendment of T. Rowe Price International Funds, Inc., dated May 1, 1991 (electronically filed with Amendment No. 62 dated April 28, 2000) (a)(4) Articles Supplementary of T. Rowe Price International Funds, Inc., dated October 18, 1991 (electronically filed with Post-Effective Amendment No. 1 to Form N-14 dated September 10, 1996) (a)(5) Articles Supplementary of T. Rowe Price International Funds, Inc., dated May 4, 1992 (electronically filed with Amendment No. 44 dated December 22, 1994) (a)(6) Articles Supplementary of T. Rowe Price International Funds, Inc., dated November 4, 1993 (electronically filed with Amendment No. 41 dated December 16, 1993) (a)(7) Articles Supplementary of T. Rowe Price International Funds, Inc., dated February 18, 1994 (electronically filed with Amendment No. 42 dated February 28, 1994) (a)(8) Articles Supplementary of T. Rowe Price International Funds, Inc., dated November 2, 1994 (electronically filed with Amendment No. 44 dated December 22, 1994) (a)(9) Articles Supplementary of T. Rowe Price International Funds, Inc., dated January 25, 1995 (electronically filed with Amendment No. 49 dated March 22, 1995) (a)(10) Articles Supplementary of T. Rowe Price International Funds, Inc., dated October 11, 1995 (electronically filed with Amendment No. 50 dated October 12, 1995) (a)(11) Articles Supplementary of T. Rowe Price International Funds, Inc. deleting T. Rowe Price Short-Term Global Income Fund, dated March 31, 1997 (electronically filed with Amendment No. 54 dated April 23, 1997) (a)(12) Articles Supplementary of T. Rowe Price International Funds, Inc., on behalf of T. Rowe Price International Growth & Income Fund, dated December 1, 1998 (electronically filed with Amendment No. 57 dated December 16, 1998) (a)(13) Articles Supplementary of T. Rowe Price International Funds, Inc., on behalf of T. Rowe Price International Bond Fund-Advisor Class and T. Rowe Price International Stock Fund-Advisor Class, dated March 14, 2000 (electronically filed with Amendment No. 60 dated March 27, 2000) (a)(14) Articles Supplementary of T. Rowe Price International Funds, Inc., on behalf of T. Rowe Price Emerging Europe & Mediterranean Fund, dated April 28, 2000 (electronically filed with Amendment No. 62 dated April 28, 2000) (b) By-Laws of Registrant, as amended July 21, 1999 (electronically filed with Amendment No. 60 dated February 18, 2000) (c)(1) Specimen Stock Certificate for T. Rowe Price International Bond Fund (filed with Amendment No. 10) (c)(2) Specimen Stock Certificate for T. Rowe Price International Stock Fund (filed with Amendment No. 10) (c)(3) Specimen Stock Certificate for T. Rowe Price International Discovery Fund (filed with Amendment No. 14) (c)(4) Specimen Stock Certificate for T. Rowe Price European Stock Fund (filed with Amendment No. 18) (c)(5) Specimen Stock Certificate for T. Rowe Price New Asia Fund (filed with Amendment No. 21) (c)(6) Specimen Stock Certificate for T. Rowe Price Global Government Bond Fund (filed with Amendment No. 24) (c)(7) T. Rowe Price Japan, T. Rowe Price Short-Term Global Income, T. Rowe Price Latin America, T. Rowe Price Emerging Markets Bond, T. Rowe Price Emerging Markets Bond, T. Rowe Price Global Stock, and T. Rowe Price International Growth & Income Funds. See Article FIFTH, Capital Stock, Paragraphs (A)-(E) of the Articles of Amendment and Restatement electronically filed with Amendment No. 19, Article II, Shareholders, Sections 2.01-2.11 and Article VIII, Capital Stock, Sections 8.01-8.06 of the Bylaws (filed with Amendment No. 19) (d)(1) Investment Management Agreement between Registrant and Rowe Price-Fleming International, Inc., on behalf of T. Rowe Price International Bond Fund, dated May 1, 1990 (electronically filed with Amendment No. 42 dated February 28, 1994) (d)(2) Investment Management Agreement between Registrant and Rowe Price-Fleming International, Inc., on behalf of T. Rowe Price International Stock Fund, dated May 1, 1990 (electronically filed with Amendment No. 42 dated February 28, 1994) (d)(3) Investment Management Agreement between Registrant and Rowe Price-Fleming International, Inc., on behalf of T. Rowe Price International Discovery Fund, dated May 1, 1991 (electronically filed with Amendment No. 42 dated February 28, 1994) (d)(4) Investment Management Agreement between Registrant and Rowe Price-Fleming International, Inc., on behalf of T. Rowe Price European Stock Fund, dated May 1, 1990 (electronically filed with Amendment No. 42 dated February 28, 1994) (d)(5) Investment Management Agreement between Registrant and Rowe Price-Fleming International, Inc., on behalf of T. Rowe Price New Asia Fund, dated May 1, 1991 (electronically filed with Amendment No. 42 dated February 28, 1994) (d)(6) Investment Management Agreement between Registrant and Rowe Price-Fleming International, Inc., on behalf of T. Rowe Price Global Government Bond Fund, dated November 7, 1990 (electronically filed with Amendment No. 42 dated February 28, 1994) (d)(7) Investment Management Agreement between Registrant and Rowe Price-Fleming International, Inc., on behalf of T. Rowe Price Japan Fund, dated November 6, 1991 (electronically filed with Amendment No. 42 dated February 28, 1994) (d)(8) Investment Management Agreement between Registrant and Rowe Price-Fleming International, Inc., on behalf of T. Rowe Price Short-Term Global Income Fund, dated April 23, 1992 (electronically filed with Amendment No. 42 dated February 28, 1994) (d)(9) Investment Management Agreement between Registrant and Rowe Price-Fleming International, Inc., on behalf of T. Rowe Price Latin America Fund, dated November 3, 1993 (electronically filed with Amendment No. 41 dated December 16, 1993) (d)(10) Investment Management Agreement between Registrant and Rowe Price-Fleming International, Inc., on behalf of T. Rowe Price Emerging Markets Bond Fund, dated November 2, 1994 (electronically filed with Amendment No. 44 dated December 22, 1994) (d)(11) Investment Management Agreement between Registrant and Rowe Price-Fleming International, Inc., on behalf of T. Rowe Price Emerging Markets Stock Fund, dated January 25, 1995 (electronically filed with Amendment No. 49 dated March 22, 1995) (d)(12) Investment Management Agreement between Registrant and Rowe Price-Fleming International, Inc., on behalf of T. Rowe Price Global Stock Fund, dated November 1, 1995 (electronically filed with Amendment No. 51 dated December 20, 1995) (d)(13) Investment Management Agreement between Registrant and Rowe Price-Fleming International, Inc., on behalf of T. Rowe Price International Growth & Income Fund, dated November 4, 1998 (electronically filed with Amendment No. 56 dated November 19, 1998) (d)(14) Investment Management Agreement between Registrant and Rowe Price-Fleming International, Inc., on behalf of T. Rowe Price Emerging Europe & Mediterranean Fund, dated April 19, 2000 (electronically filed with Amendment No. 62 dated April 28, 2000) (e) Underwriting Agreement between Registrant and T. Rowe Price Investment Services, Inc., dated March 31, 2000 (electronically filed with Amendment No. 60 dated March 27, 2000) (f) Inapplicable (g) Custody Agreements (g)(i) Custodian Agreement between T. Rowe Price Funds and State Street Bank and Trust Company, dated January 28, 1998, as amended November 4, 1998, April 21, 1999, February 9, 2000, April 19, 2000, July 18, 2000, October 25, 2000, and February 7, 2001 (g)(ii) Global Custody Agreement between The Chase Manhattan Bank and T. Rowe Price Funds, dated January 3, 1994, as amended April 18, 1994, August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, July 31, 1996, July 23, 1997, September 3, 1997, October 29, 1997, December 15, 1998, October 6, 1999, February 9, 2000, April 19, 2000, July 18, 2000, and October 25, 2000 (h) Other Agreements (h)(i) Transfer Agency and Service Agreement between T. Rowe Price Services, Inc. and T. Rowe Price Funds, dated January 1, 2001, as amended February 7, 2001 (h)(ii) Agreement between T. Rowe Price Associates, Inc. and T. Rowe Price Funds for Fund Accounting Services, dated January 1, 2001, as amended February 7, 2001 (h)(iii) Agreement between T. Rowe Price Retirement Plan Services, Inc. and the Taxable Funds, dated January 1, 2001 i) Legal Opinion (j) Other Opinions (j)(i) Consent of Independent Accountants (j)(ii) Inapplicable (j)(iii) Power of Attorney (j)(iv) Form of Selling Agreement to be used by T. Rowe Price Investment Services, Inc. (electronically filed with Amendment No. 19 dated March 27, 2000) k) Inapplicable (l) Inapplicable (m)(i) Rule 12b-1 Plan for T. Rowe Price International Stock Fund dated February 9, 2000 (electronically filed with Amendment No. 60 dated March 27, 2000) (m)(ii) Rule 12b-1 Plan for T. Rowe Price International Bond Fund dated February 9, 2000 (electronically filed with Amendment No. 60 dated March 27, 2000) (n)(i) Rule 18f-3 Plan for T. Rowe Price International Stock Fund dated February 9, 2000 (electronically filed with Amendment No. 60 dated March 27, 2000) (n)(ii) Rule 18f-3 Plan for T. Rowe Price International Bond Fund dated February 9, 2000 (electronically filed with Amendment No. 60 dated March 27, 2000) (p) Code of Ethics, dated August, 2000 CUSTODIAN AGREEMENT THIS AGREEMENT is made as of January 28, 1998 by and between each entity set forth on Appendix A hereto (as such Appendix A may be amended from time to time) which executes a copy of this Agreement (each referred to herein as the "FUND"), and State Street Bank and Trust Company, a Massachusetts trust company with its principal place of business at 225 Franklin Street, Boston, Massachusetts 02110 (the "CUSTODIAN"). WITNESSETH: WHEREAS, each Fund desires to retain the Custodian to act as custodian of certain of the assets of the Fund, and the Custodian is willing to provide such services to each Fund, upon the terms and conditions hereinafter set forth; and WHEREAS, except as otherwise set forth herein, this Agreement is intended to supersede that certain custodian contract among the parties hereto dated September 28, 1987, as amended; and WHEREAS, the Funds have retained CHASE MANHATTAN BANK, N.A. to act as the Funds' custodian with respect to the assets of each such Fund to be held outside of the United States of America (except as otherwise set forth in this Agreement) pursuant to a written custodian agreement (the "FOREIGN CUSTODIAN AGREEMENT"), NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, each of the parties hereto agrees as follows: SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT. Each Fund hereby employs the Custodian as the custodian of certain of its assets, including those securities it desires to be held within the United States of America ("DOMESTIC SECURITIES") and those securities it desires to be held outside the United States of America (the "UNITED STATES") which are (i) not held on the Funds' behalf by CHASE MANHATTAN BANK, N.A. pursuant to the Foreign Custodian Agreement and (ii) described with greater particularity in Section 3 hereof (such securities shall be referred to herein as "FOREIGN SECURITIES"). Each Fund agrees to deliver to the Custodian all domestic securities, foreign securities and cash owned by it from time to time, and all payments of income, payments of principal or capital distributions received by it with respect to securities held by it hereunder, and the cash consideration received by it for such new or treasury shares of capital stock of each Fund as may be issued or sold from time to time ("SHARES"). The Custodian shall not be responsible for any property of any Fund held or received by such Fund (i) not delivered to the Custodian, or (ii) held in the custody of CHASE MANHATTAN BANK N.A. The Custodian is authorized to employ one or more sub-custodians located within the United States, provided that the Custodian shall have obtained the written acknowledgment of the Fund with respect to such employment. The Custodian is authorized to employ sub-custodians located outside the United States as noted on Schedule A attached hereto (as such Schedule A may be amended from time to time). The Custodian shall have no more or less responsibility or liability to any Fund on account of any actions or omissions of any sub-custodian so employed than any such sub-custodian has to the Custodian and shall not release any sub-custodian from any responsibility or liability unless so agreed in writing by the Custodian and the applicable Fund. With the exception of State Street Bank and Trust Company (London branch), the Custodian shall not be liable for losses arising from the bankruptcy, insolvency or receivership of any sub-custodian located outside the United States. SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUNDS HELD BY THE CUSTODIAN IN THE UNITED STATES. SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate for the account of each Fund all non-cash property to be held by it in the United States, including all domestic securities owned by the Fund other than (a) securities which are maintained pursuant to Section 2.9 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the United States Department of the Treasury and certain federal agencies (each, a "U.S. SECURITIES SYSTEM") and (b) commercial paper of an issuer for which the Custodian acts as issuing and paying agent ("DIRECT PAPER") which is deposited and/or maintained in the Direct Paper system of the Custodian (the "DIRECT PAPER SYSTEM") pursuant to Section 2.10. SECTION 2.2 DELIVERY OF INVESTMENTS. The Custodian shall release and deliver domestic investments owned by a Fund held by the Custodian or in a U.S. Securities System account of the Custodian or in the Custodian's Direct Paper System account ("DIRECT PAPER SYSTEM ACCOUNT") only upon receipt of Proper Instructions, which may be continuing instructions when agreed to by the parties, and only in the following cases: 1)Upon sale of such investments for the account of the Fund and receipt of payment therefor; 2)Upon the receipt of payment in connection with any repurchase agreement related to such investments entered into by the Fund; 3) In the case of a sale effected through a U.S. Securities System, in accordance with the provisions of Section 2.9 hereof; 4) To the depository agent in connection with tender or other similar offers for portfolio investments of the Fund; 5) To the issuer thereof or its agent when such investments are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian; 6) To the issuer thereof, or its agent, for transfer into the name of the Fund or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.8 or into the name or nominee name of any sub-custodian appointed pursuant to Section 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian; 7) Upon the sale of such investments for the account of the Fund, to the broker or its clearing agent, against a receipt, for examination in accordance with usual "street delivery" custom; provided that in any such case the Custodian shall have no responsibility or liability for any loss arising from the delivery of such investments prior to receiving payment for such investments except as may arise from the Custodian's own negligence or willful misconduct; 8)For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the investments of the issuer of such investments, or pursuant to provisions for conversion contained in such investments, or pursuant to any deposit agreement; provided that, in any such case, the new investments and cash, if any, are to be delivered to the Custodian; 9)In the case of warrants, rights or similar investments, the surrender thereof in the exercise of such warrants, rights or similar investments or the surrender of interim receipts or temporary investments for definitive investments; provided that, in any such case, the new investments and cash, if any, are to be delivered to the Custodian or against a receipt; 10) For delivery in connection with any loans of investments made on behalf of the Fund, but only against receipt of adequate collateral as agreed upon from time to time by the Fund or its duly-appointed agent (which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities, or such other property as the Fund may agree), except that in connection with any loans for which collateral is to be credited to the Custodian's account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of investments owned by the Fund prior to the receipt of such collateral in the absence of the Custodian's negligence or willful misconduct; 11) For delivery as security in connection with any borrowing by the Fund requiring a pledge of assets by the Fund, but only against receipt of amounts borrowed, except where additional collateral is required to secure a borrowing already made, subject to Proper Instructions, further securities may be released and delivered for that purpose; 12) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the "EXCHANGE ACT") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation, the rules of any registered national securities exchange or of any similar organization or organizations, or under the Investment Company Act of 1940, as amended from time to time (the "1940 ACT"), regarding escrow or other arrangements in connection with transactions by the Fund; 13) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian, and a Futures Commission Merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any Contract Market, or any similar organization or organizations, or under the 1940 Act, regarding account deposits in connection with transactions by the Fund; 14) Upon receipt of instructions from the transfer agent for the Fund (the "TRANSFER AGENT"), for delivery to such Transfer Agent or to the holders of shares in connection with distributions in kind, as may be described from time to time in the Fund's currently effective prospectus, statement of additional information or other offering documents (all, as amended, supplemented or revised from time to time, the "PROSPECTUS"), in satisfaction of requests by holders of Shares for repurchase or redemption; and 15) For any other purpose, but only upon receipt of Proper Instructions specifying (a) the investments to be delivered, (b) setting forth the purpose for which such delivery is to be made, and (c) naming the person or persons to whom delivery of such investments shall be made. SECTION 2.3 REGISTRATION OF INVESTMENTS. Domestic investments held by the Custodian (other than bearer securities) shall be registered in the name of the Fund or in the name of any nominee of the Fund or of any nominee of the Custodian which nominee shall be assigned exclusively to the Fund, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Fund, or in the name or nominee name of any agent appointed pursuant to Section 2.8 or in the name or nominee name of any sub-custodian appointed pursuant to Section 1. All securities accepted by the Custodian on behalf of the Fund under the terms of this Agreement shall be in good deliverable form. If, however, the Fund directs the Custodian to maintain securities in "street name", the Custodian shall utilize its best efforts only to timely collect income due the Fund on such securities and to notify the Fund of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers. SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of the Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Agreement, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Fund, other than cash maintained by the Fund in a bank account established and used in accordance with Rule 17f-3 under the 1940 Act. Monies held by the Custodian for the Fund may be deposited by the Custodian to its credit as custodian in the banking department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable in the performance of its duties hereunder; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the 1940 Act, and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall be approved by vote of a majority of the board of directors or the board of trustees of the applicable Fund (as appropriate and in each case, the "BOARD"). Such funds shall be deposited by the Custodian in its capacity as custodian and shall be withdrawable by the Custodian only in that capacity. SECTION 2.5 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to United States registered investments held hereunder to which the Fund shall be entitled either by law or pursuant to custom in the investments business, and shall collect on a timely basis all income and other payments with respect to United States bearer investments if, on the date of payment by the issuer, such investments are held by the Custodian or its agent thereof and shall credit such income, as collected, to the Fund's custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due, collect interest when due on investments held hereunder, and receive and collect all stock dividends, rights and other items of like nature as and when they become due and payable. With respect to income due the Fund on United States investments of the Fund loaned (pursuant to the provisions of Section 2.2 (10)) in accordance with a separate agreement between the Fund and the Custodian in its capacity as lending agent, collection thereof shall be in accordance with the terms of such agreement. Except as otherwise set forth in the immediately preceding sentence, income due the Fund on United States investments of the Fund loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the Fund; the Custodian will have no duty or responsibility in connection therewith other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Fund is properly entitled. SECTION 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions, which may be continuing instructions when agreed to by the parties, the Custodian shall, from monies of the Fund held by the Custodian, pay out such monies in the following cases only: 1)Upon the purchase of domestic investments, options, futures contracts or options on futures contracts for the account of the Fund but only (a) against the delivery of such investments, or evidence of title to such options, futures contracts or options on futures contracts, to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the 1940 Act to act as a custodian and has been designated by the Custodian as its agent for this purpose in accordance with Section 2.8) registered in the name of the Fund or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a U.S. Securities System, in accordance with the conditions set forth in Section 2.9 hereof; (c) in the case of a purchase involving the Direct Paper System, in accordance with the conditions set forth in Section 2.10 hereof; or (d) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign, such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions; 2) In connection with conversion, exchange or surrender of investments owned by the Fund as set forth in Section 2.2 hereof; 3) For the redemption or repurchase of Shares as set forth in Section 4 hereof; 4) For the payment of any expense or liability incurred by the Fund, including but not limited to the following payments for the account of the Fund: interest, taxes, management fees, accounting fees, transfer agent fees, legal fees, and operating expenses of the Fund (whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses); 5) For the payment of any dividends declared by the Board; 6)For payment of the amount of dividends received in respect of investments sold short; 7) For repayment of a loan upon redelivery of pledged securities and upon surrender of the note(s), if any, evidencing the loan; or 8) In connection with any repurchase agreement entered into by the Fund with respect to which the collateral is held by the Custodian, the Custodian shall act as the Fund's "securities intermediary"( as that term is defined in Part 5 of Article 8 of the Massachusetts Uniform Commercial Code, as amended), and, as securities intermediary, the Custodian shall take the following steps on behalf of the Fund: (a) provide the Fund with notification of the receipt of the purchased securities, and (b), by book-entry identify on the books of the Custodian as belonging to the Fund uncertificated securities registered in the name of the Fund and held in the Custodian's account at the Federal Reserve Bank. In connection with any repurchase agreement entered into by the Fund with respect to which the collateral is not held by the Custodian, the Custodian shall (a) provide the Fund with such notification as it may receive with respect to such collateral, and (b), by book-entry or otherwise, identify as belonging to the Fund securities as shown in the Custodian's account on the books of the entity appointed by the Fund to hold such collateral. 9) For any other purpose, but only upon receipt of Proper Instructions specifying (a) the amount of such payment, (b) setting forth the purpose for which such payment is to be made, and (c) naming the person or persons to whom such payment is to be made. SECTION 2.7 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. In any and every case where payment for purchase of domestic securities for the account of the Fund is made by the Custodian in advance of receipt of the securities purchased in the absence of specific written instructions from the Fund to so pay in advance, the Custodian shall be absolutely liable to the Fund for such securities to the same extent as if the securities had been received by the Custodian. SECTION 2.8 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company, which is itself qualified under the 1940 Act to act as a custodian, as its agent to carry out such of the provisions of this Section 2 as the Custodian may from time to time direct; provided, however, that the appointment of any such agent shall not relieve the Custodian of its responsibilities or liabilities hereunder. SECTION 2.9 DEPOSIT OF INVESTMENTS IN U.S. SECURITIES SYSTEMS. The Custodian may deposit and/or maintain domestic investments owned by the Fund in a U.S. Securities System in accordance with applicable Federal Reserve Board and United States Securities and Exchange Commission ("SEC") rules and regulations, if any, subject to the following provisions: 1) The Custodian may keep domestic investments of the Fund in a U.S. Securities System provided that such investments are represented in an account of the Custodian in the U.S. Securities System ("ACCOUNT") which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 2) The records of the Custodian with respect to domestic investments of the Fund which are maintained in a U.S. Securities System shall identify by book-entry those investments belonging to the Fund; 3) The Custodian shall pay for domestic investments purchased for the account of the Fund upon (i) receipt of advice from the U.S. Securities System that such investments have been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Fund. The Custodian shall transfer domestic investments sold for the account of the Fund upon (i) receipt of advice from the U.S. Securities System that payment for such investments has been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Fund. Copies of all advices from the U.S. Securities System of transfers of domestic investments for the account of the Fund shall identify the Fund, be maintained for the Fund by the Custodian and be provided to the Fund at its request. Upon request, the Custodian shall furnish the Fund confirmation of each transfer to or from the account of the Fund in the form of a written advice or notice and shall furnish to the Fund copies of daily transaction sheets reflecting each day's transactions in the U.S. Securities System for the account of the Fund; 4) The Custodian shall provide the Fund with any report obtained by the Custodian on the U.S. Securities System's accounting system, internal accounting control and procedures for safeguarding domestic investments deposited in the U.S. Securities System; 5) The Custodian shall have received from the Fund the initial or annual certificate, as the case may be, described in Section 10 hereof; and 6) Anything to the contrary in this Agreement notwithstanding, the Custodian shall be liable to the Fund for any loss or damage to the Fund resulting from use of the U.S. Securities System by reason of any negligence, misfeasance or misconduct of the Custodian or any of its agents or of any of its or their employees, or from failure of the Custodian or any such agent to enforce effectively such rights as it may have against the U.S. Securities System. At the election of the Fund, the Fund shall be entitled to be subrogated to the rights of the Custodian with respect to any claim against the U.S. Securities System or any other person which the Custodian may have as a consequence of any such loss, expense or damage if and to the extent that the Fund has not been made whole for any such loss, expense or damage. SECTION 2.10 FUND ASSETS HELD IN THE DIRECT PAPER SYSTEM. The Custodian may deposit and/or maintain investments owned by the Fund in the Direct Paper System subject to the following provisions: 1) No transaction relating to investments in the Direct Paper System will be effected in the absence of Proper Instructions; 2) The Custodian may keep investments of the Fund in the Direct Paper System only if such investments are represented in the Direct Paper System Account, which account shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 3) The records of the Custodian with respect to investments of the Fund which are maintained in the Direct Paper System shall identify by book-entry those investments belonging to the Fund; 4) The Custodian shall pay for investments purchased for the account of the Fund upon the making of an entry on the records of the Custodian to reflect such payment and transfer of investments to the account of the Fund. The Custodian shall transfer investments sold for the account of the Fund upon the making of an entry on the records of the Custodian to reflect such transfer and receipt of payment for the account of the Fund; 5) The Custodian shall furnish the Fund confirmation of each transfer to or from the account of the Fund, in the form of a written advice or notice, of Direct Paper on the next business day following such transfer and shall furnish to the Fund copies of daily transaction sheets reflecting each day's transaction in the Direct Paper System for the account of the Fund; and 6) The Custodian shall provide the Fund with any report on its system of internal accounting control as the Fund may reasonably request from time to time. SECTION 2.11 SEGREGATED ACCOUNT. The Custodian shall, upon receipt of Proper Instructions, establish and maintain a segregated account or accounts for and on behalf of the Fund, into which account or accounts may be transferred cash and/or investments, including investments maintained in an account by the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund, (ii) for purposes of segregating cash or government investments in connection with options purchased, sold or written by the Fund or commodity futures contracts or options thereon purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund with the procedures required by 1940 Act Release No. 10666, or any other procedures subsequently required under the 1940 Act relating to the maintenance of segregated accounts by registered investment companies, and (iv) for other purposes, but only, in the case of clause (iv) upon receipt of Proper Instructions specifying (a) the investments to be delivered, (b) setting forth the purpose for which such delivery is to be made, and (c) naming the person or persons to whom delivery of such investments shall be made. SECTION 2.12 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute ownership and other certificates and affidavits for all United States federal and state tax purposes in connection with receipt of income or other payments with respect to domestic investments of the Fund held by it hereunder and in connection with transfers of such investments. SECTION 2.13 PROXIES. The Custodian shall, with respect to the domestic investments held hereunder, cause to be promptly executed by the registered holder of such investments, if the investments are registered otherwise than in the name of the Fund or a nominee of the Fund, all proxies without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Fund such proxies, all proxy soliciting materials received by the Custodian and all notices received relating to such investments. SECTION 2.14 COMMUNICATIONS RELATING TO FUND INVESTMENTS. Subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the Fund all written information (including, without limitation, pendency of calls and maturities of domestic investments and expirations of rights in connection therewith and notices of exercise of call and put options written by the Fund and the maturity of futures contracts purchased or sold by the Fund) received by the Custodian in connection with the domestic investments being held for the Fund pursuant to this Agreement. With respect to tender or exchange offers, the Custodian shall transmit to the Fund all written information received by the Custodian, any agent appointed pursuant to Section 2.8 hereof, or any sub-custodian appointed pursuant to Section 1 hereof, from issuers of the domestic investments whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. If the Fund desires to take action with respect to any tender offer, exchange offer or any other similar transaction, the Fund shall notify the Custodian at least two (2) New York Stock Exchange business days prior to the time such action must be taken under the terms of the tender, exchange offer or other similar transaction, and it will be the responsibility of the Custodian to timely transmit to the appropriate person(s) such notice. Where the Fund provides the Custodian with less than two (2) New York Stock Exchange business days notice of its desired action, the Custodian shall use its best efforts to timely transmit the Fund's notice to the appropriate person. It is expressly noted that the parties may agree to alternative procedures with respect to such two (2) New York Stock Exchange business days notice period on a selective and individual basis. SECTION 2.15 REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS. The Custodian shall provide the Fund, at such times as the Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding investments, futures contracts and options on futures contracts, including domestic investments deposited and/or maintained in a U.S. Securities System, relating to the services provided by the Custodian under this Agreement. Such reports shall be of sufficient scope and detail, as may reasonably be required by the Fund, to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and if there are no such inadequacies the reports shall so state. SECTION 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO CERTAIN PROPERTY OF THE FUNDS HELD OUTSIDE OF THE UNITED STATES SECTION 3.1 DEFINITIONS. The following capitalized terms shall have the respective following meanings: "FOREIGN SECURITIES SYSTEM" means a clearing agency or a securities depository listed on Schedule A hereto. "FOREIGN SUB-CUSTODIAN" means a foreign banking institution set forth on Schedule A hereto. SECTION 3.2 HOLDING SECURITIES. The Custodian shall identify on its books as belonging to the Funds the foreign securities held by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities for all of its customers, including the Funds, with any Foreign Sub-Custodian in an account that is identified as belonging to the Custodian for the benefit of its customers, provided however, that (i) the records of the Custodian with respect to foreign securities of the Funds which are maintained in such account shall identify those securities as belonging to the Funds and (ii) the Custodian shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian. SECTION 3.3 FOREIGN SECURITIES SYSTEMS. Foreign securities shall be maintained in a Foreign Securities System in a designated country only through arrangements implemented by the Foreign Sub-Custodian in such country pursuant to the terms of this Agreement. SECTION 3.4 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. 3.4.1. Delivery of Foreign Securities. The Custodian or a Foreign Sub-Custodian shall - -------- -- ------- ----------- release and deliver foreign securities of the Funds held by such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: (i) upon the sale of such foreign securities for the Funds in accordance with reasonable market practice in the country where such foreign securities are held or traded, including, without limitation: (A) delivery against expectation of receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System in accordance with the rules governing the operation of the Foreign Securities System; (ii) in connection with any repurchase agreement related to foreign securities; (iii) to the depository agent in connection with tender or other similar offers for foreign securities of the Funds; (iv) to the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable; (v) to the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee of the Custodian or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; (vi) to brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; provided that in any such case the Foreign Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Foreign Sub-Custodian's own negligence or willful misconduct; (vii)for exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; (viii) in the case of warrants, rights or similar foreign securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; (ix) or delivery as security in connection with any borrowing by the Funds requiring a pledge of assets by the Funds; (x)in connection with trading in options and futures contracts, including delivery as original margin and variation margin; (xi) in connection with the lending of foreign securities; and (xii) for any other proper purpose, but only upon receipt of Proper Instructions specifying the foreign securities to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper Fund purpose, and naming the person or persons to whom delivery of such securities shall be made. 3.4.2. Payment of Fund Monies. Upon receipt of Proper Instructions, which may be - ------- -- ---- ------- continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of a Fund in the following cases only: (i)upon the purchase of foreign securities for the Fund, unless otherwise directed by Proper Instructions, by (A) delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System; (ii) in connection with the conversion, exchange or surrender of foreign securities of the Fund; (iii) for the payment of any expense or liability of the Fund, including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees under this Agreement, legal fees, accounting fees, and other operating expenses; (iv) for the purchase or sale of foreign exchange or foreign exchange contracts for the Fund, including transactions executed with or through the Custodian or its Foreign Sub-Custodians; (v)in connection with trading in options and futures contracts, including delivery as original margin and variation margin; (vii) in connection with the borrowing or lending of foreign securities; and (viii) for any other proper Fund purpose, but only upon receipt of Proper Instructions specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper Fund purpose, and naming the person or persons to whom such payment is to be made. 3.4.3. Market Conditions. Notwithstanding any provision of this Agreement to the - ------ ----------- contrary, settlement and payment for foreign securities received for the account of the Funds and delivery of foreign securities maintained for the account of the Funds may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs, including, without limitation, delivering foreign securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) with the expectation of receiving later payment for such foreign securities from such purchaser or dealer. SECTION 3.5 REGISTRATION OF FOREIGN SECURITIES. The foreign securities maintained in the custody of a Foreign Custodian (other than bearer securities) shall be registered in the name of the applicable Fund or in the name of the Custodian or in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing, and the Fund agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a Fund under the terms of this Agreement unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice. SECTION 3.6 BANK ACCOUNTS. A bank account or bank accounts opened and maintained outside the United States on behalf of a Fund with a Foreign Sub-Custodian shall be subject only to draft or order by the Custodian or such Foreign Sub-Custodian, acting pursuant to the terms of this Agreement to hold cash received by or from or for the account of the Fund. SECTION 3.7 COLLECTION OF INCOME. The Custodian shall use reasonable commercial efforts to collect all income and other payments with respect to the foreign securities held hereunder to which the Funds shall be entitled and shall credit such income, as collected, to the applicable Fund. In the event that extraordinary measures are required to collect such income, the Fund and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures. SECTION 3.8 PROXIES. With respect to the foreign securities held under this Section 3, the Custodian will use reasonable commercial efforts to facilitate the exercise of voting and other shareholder proxy rights, subject always to the laws, regulations and practical constraints that may exist in the country where such securities are issued. The Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of the Fund to exercise shareholder rights. SECTION 3.9 COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian shall transmit promptly to the Fund written information (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in connection therewith) received by the Custodian in connection with the foreign securities being held for the account of the Fund. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund written information so received by the Custodian in connection with the foreign securities whose tender or exchange is sought or from the party (or its agents) making the tender or exchange offer. SECTION 3.10 LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES SYSTEMS. Each agreement pursuant to which the Custodian employs as a Foreign Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties and, to the extent possible, to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Foreign Sub-Custodian's performance of such obligations. At the Fund's election, the Funds shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Funds have not been made whole for any such loss, damage, cost, expense, liability or claim. SECTION 3.11 TAX LAW. The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Fund or the Custodian as custodian of the Funds by the tax law of the United States or of any state or political subdivision thereof. It shall be the responsibility of the Fund to notify the Custodian of the obligations imposed on the Fund or the Custodian as custodian of the Funds by the tax law of countries set forth on Schedule A hereto, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts to assist the Fund with respect to any claim for exemption or refund under the tax law of countries for which the Fund has provided such information. SECTION 4. PAYMENTS FOR REPURCHASES OR REDEMPTIONS AND SALES OF SHARES. From such funds as may be available for the purpose, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares which have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares, the Custodian is authorized upon receipt of, and in accordance with, instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection with the redemption or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by the Fund to the holder of Shares, when presented to the Custodian in accordance with such written procedures and controls as may be mutually agreed upon from time to time between the Fund and the Custodian. The Custodian shall receive from the distributor for the Shares or from the Transfer Agent and deposit to the account of the Fund such payments as are received by the distributor or the Transfer Agent, as the case may be, for Shares issued or sold from time to time. The Custodian will notify the Fund and the Transfer Agent of any payments for Shares received by it from time to time. SECTION 5. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION OF NET ASSET VALUE AND NET INCOME. The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Board to keep the books of account of the Fund and/or compute the net asset value per Share of the outstanding Shares or, if directed in writing to do so by the Fund, shall itself keep such books of account and/ or compute such net asset value per Share. If so directed, the Custodian shall also (i) calculate daily the net income of the Fund as described in the Prospectus and shall advise the Fund and the Transfer Agent daily of the total amounts of such net income, and/ or (ii) advise the Transfer Agent periodically of the division of such net income among its various components. The calculations of the net asset value per share and the daily income of the Fund shall be made at the time or times described from time to time in the Prospectus. SECTION 6. PROPER INSTRUCTIONS. "Proper Instructions," as such term is used throughout this Agreement, means either (i) a writing, including a facsimile transmission, signed by one or more persons as set forth on, and in accordance with, an "Authorized Persons List," as such term is defined herein (each such instruction a "Written Proper Instruction"), (ii) a "Client Originated Electronic Financial Instruction," as such term is defined in the Data Access Services Addendum hereto, given in accordance with the terms of such Addendum, or (iii) instructions received by the Custodian from a third party in accordance with any three-party agreement which requires a segregated asset account in accordance with Section 2.11. Each Written Proper Instruction shall set forth a brief description of the type of transaction involved (choosing from among the types of transactions set forth on the Authorized Persons List), including a specific statement of the purpose for which such action is requested, and any modification to a Written Proper Instruction must itself be a Written Proper Instruction and subject to all the provisions herein relating to Written Proper Instructions. The Fund will provide the Custodian with an "Authorized Persons List," which list shall set forth (a) the names of the individuals (each an "Authorized Person") who are authorized by the Board to give Written Proper Instructions with respect to the transactions described therein, and (b) the number of Authorized Persons whose signature or approval, as the case may be, is necessary for the Custodian to be able to act in accordance with such Written Proper Instructions with respect to a particular type of transaction. The Custodian may accept oral instructions or instructions delivered via electronic mail as Proper Instructions if the Custodian reasonably believes such instructions to have been given by an Authorized Person or Persons (as appropriate to the type of transaction); provided, however, that in no event will instructions delivered orally or via electronic mail be considered Proper Instructions with respect to transactions involving the movement of cash, securities or other assets of a Fund. The Custodian shall be entitled to rely upon instructions given in accordance with an Authorized Persons List until it actually receives written notice from the Board of the applicable Fund to the contrary. SECTION 7. EVIDENCE OF AUTHORITY. Subject to Section 9 hereof, the Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper reasonably and in good faith believed by it to be genuine and to have been properly executed by or on behalf of the Fund. The Custodian may receive and accept a copy of a vote of the Board, certified by the secretary or an assistant secretary of the applicable Fund, as conclusive evidence (a) of the authority of any person to act in accordance with such vote or (b) of any determination or of any action by the Board described in such vote, and such vote may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary. SECTION 8. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. The Custodian may in its discretion and without express authority from the Fund: 1) make payments to itself or others for minor expenses of handling investments or other similar items relating to its duties under this Agreement, provided that all such payments shall be accounted for to the Fund; 2) surrender investments in temporary form for investments in definitive form; 3) endorse for collection, in the name of the Fund, checks, drafts and other negotiable instruments; and 4) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the investments and property of the Fund except as otherwise directed by the Board. SECTION 9. RESPONSIBILITY OF CUSTODIAN. The Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. Notwithstanding anything to the contrary herein, the Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Agreement, and it shall be kept indemnified by and shall be without liability to the Fund for any action taken or omitted by it in good faith without negligence. In order for the indemnification provision contained in this Section to apply, it is understood that if in any case the Fund may be asked by the Custodian to indemnify or hold the Custodian harmless, the Fund shall be fully and promptly advised of all pertinent facts concerning the situation in question, and it is further understood that the Custodian will use reasonable care to identify, and notify the Fund promptly concerning, any situation which presents or appears likely to present the probability of such a claim for indemnification. The Fund shall have the option to defend the Custodian against any claim which may be the subject of a claim for indemnification hereunder, and in the event that the Fund so elects, it will notify the Custodian thereof and, thereupon, (i) the Fund shall take over complete defense of the claim and (ii) the Custodian shall initiate no further legal or other expenses with respect to such claim. The Custodian shall in no case confess any claim or make any compromise with respect to any claim for which it will seek indemnity from the Fund except with the Fund's prior written consent. Nothing herein shall be construed to limit any right or cause of action on the part of the Custodian under this Agreement which is independent of any right or cause of action on the part of the Fund. The Custodian shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund or other such counsel as agreed to by the parties) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. The Custodian shall be entitled to rely upon, and shall have no duty of inquiry with respect to, the accuracy of any representation or warranty given to it by the Fund or any duly-authorized employee or agent thereof, and shall be without liability for any action reasonably taken or omitted by it in reliance thereon. Regardless of whether assets held pursuant to this Agreement are maintained in the custody of a foreign banking institution, a foreign securities depository, or a branch or affiliate of a U.S. bank, the Custodian shall not be liable for any loss, damage, cost, expense, liability The Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. Notwithstanding anything to the contrary herein, the Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Agreement, and it shall be kept indemnified by and shall be without liability to the Fund for any action taken or omitted by it in good faith without negligence. In order for the indemnification provision contained in this Section to apply, it is understood that if in any case the Fund may be asked by the Custodian to indemnify or hold the Custodian harmless, the Fund shall be fully and promptly advised of all pertinent facts concerning the situation in question, and it is further understood that the Custodian will use reasonable care to identify, and notify the Fund promptly concerning, any situation which presents or appears likely to present the probability of such a claim for indemnification. The Fund shall have the option to defend the Custodian against any claim which may be the subject of a claim for indemnification hereunder, and in the event that the Fund so elects, it will notify the Custodian thereof and, thereupon, (i) the Fund shall take over complete defense of the claim and (ii) the Custodian shall initiate no further legal or other expenses with respect to such claim. The Custodian shall in no case confess any claim or make any compromise with respect to any claim for which it will seek indemnity from the Fund except with the Fund's prior written consent. Nothing herein shall be construed to limit any right or cause of action on the part of the Custodian under this Agreement which is independent of any right or cause of action on the part of the Fund. The Custodian shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund or other such counsel as agreed to by the parties) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. The Custodian shall be entitled to rely upon, and shall have no duty of inquiry with respect to, the accuracy of any representation or warranty given to it by the Fund or any duly-authorized employee or agent thereof, and shall be without liability for any action reasonably taken or omitted by it in reliance thereon. Regardless of whether assets held pursuant to this Agreement are maintained in the custody of a foreign banking institution, a foreign securities depository, or a branch or affiliate of a U.S. bank, the Custodian shall not be liable for any loss, damage, cost, expense, liability If the Fund requires the Custodian to take any action with respect to investments, which action involves the payment of money or which action may, in the reasonable opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund being liable for the payment of money or incurring liability of some other form, the Fund, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it. If the Custodian, or any of its affiliates, subsidiaries or agents, advances cash or investments to the Fund for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement), or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the Fund shall be security therefor, and should the Fund fail to repay the Custodian promptly the Custodian shall be entitled to utilize available cash and to dispose of the Fund assets to the extent necessary to obtain reimbursement, provided that the Custodian gives the Fund reasonable notice to repay such cash or securities advanced, and provided further that such notice requirement shall not preclude the Custodian's right to assert and execute on such lien. Except as may arise from the Custodian's own negligence or willful misconduct, or the negligence or willful misconduct of a subcustodian or agent appointed by the Custodian, the Fund agrees to indemnify and hold the Custodian harmless from and against any and all costs, expenses, losses, damages, charges, reasonable counsel fees, payments and liabilities which may be asserted against the Custodian (i) acting in accordance with any Proper Instruction, or (ii) for any acts or omissions of CHASE MANHATTAN BANK N.A. Notwithstanding any provision herein to the contrary, to the extent the Custodian is found to be liable hereunder for any loss, liability, claim, expense or damage, the Custodian shall be liable only for such loss, liability, claim, expense or damage which was reasonably foreseeable. SECTION 10. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT. This Agreement shall become effective as of the date of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto, and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than thirty (30) days after the date of such delivery or mailing in the case of a termination by the Fund, and not sooner than one hundred eighty (180) days after the date of such delivery or mailing in the case of termination by the Custodian; provided, however that the Custodian shall not act under Section 2.9 hereof in the absence of receipt of an initial certificate of a Fund's secretary, or an assistant secretary thereof, that the Board has approved the initial use of a particular U.S. Securities System, as required by the 1940 Act or any applicable Rule thereunder, and that the Custodian shall not act under Section 2.10 hereof in the absence of receipt of an initial certificate of a Fund's secretary, or an assistant secretary thereof, that the Board has approved the initial use of the Direct Paper System; provided further, however, that the Fund shall not amend or terminate this Agreement in contravention of any applicable federal or state regulations, or any provision of the Fund's articles of incorporation, agreement of trust, by-laws and/or registration statement (as applicable, the "GOVERNING DOCUMENTS"); and further provided that the Fund may at any time by action of its Board (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Agreement in the event of the appointment of a conservator or receiver for the Custodian by the United States Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Upon termination of the Agreement, the Fund shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its reasonable costs, expenses and disbursements, provided that the Custodian shall not incur any costs, expenses or disbursements specifically in connection with such termination unless it has received prior approval from the Fund, such approval not to be unreasonably withheld. SECTION 11. SUCCESSOR CUSTODIAN. If a successor custodian shall be appointed by the Board, the Custodian shall, upon termination, deliver to such successor custodian at the offices of the Custodian, duly endorsed and in the form for transfer, all investments and other properties then held by it hereunder, and shall transfer to an account of the successor custodian all of the Fund's investments held in a Securities System. If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a copy of a vote of the Board, certified by the secretary or an assistant secretary of the applicable Fund, deliver at the offices of the Custodian and transfer such investments, funds and other properties in accordance with such vote. In the event that no written order designating a successor custodian or certified copy of a vote of the Board shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the 1940 Act, doing business in Boston, Massachusetts, or New York, New York, of its own selection and having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $100,000,000, all property held by the Custodian under this Agreement and to transfer to an account of such successor custodian all of the Fund's investments held in any Securities System; thereafter, such bank or trust company shall be the successor of the Custodian under this Agreement. In the event that any property held pursuant to this Agreement remains in the possession of the Custodian after the date of termination hereof owing to failure of the Fund to procure the certified copy of the vote referred to or of the Board to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such property, and the provisions of this Agreement relating to the duties and obligations of the Custodian shall remain in full force and effect. SECTION 12. GENERAL. SECTION 12.1 COMPENSATION OF CUSTODIAN. The Custodian shall be entitled to compensation for its services and reimbursement of its expenses as Custodian as agreed upon from time to time between the Fund and the Custodian. SECTION 12.2 MASSACHUSETTS LAW TO APPLY. This Agreement shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts. SECTION 12.3 RECORDS. The Custodian shall create and maintain all records relating to its activities and obligations under this Agreement in such manner as will meet the obligations of the Fund under the 1940 Act, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Fund and employees and agents of the SEC. The Custodian shall, at the Fund's request, supply the Fund with a tabulation of investments owned by the Fund and held by the Custodian hereunder, and shall, when requested to do so by an officer of the Fund, and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations. SECTION 12.4 OPINION OF FUND'S INDEPENDENT ACCOUNTANT. The Custodian shall take all reasonable action as the Fund may from time to time request to obtain from year to year favorable opinions from the Fund's independent accountants with respect to its activities hereunder in connection with the preparation of the Fund's Form N-1A, the preparation of the Fund's Form N-SAR, the preparation of any other annual reports to the SEC with respect to the Fund, and with respect to any other requirements of the SEC. SECTION 12.5 INTERPRETIVE AND ADDITIONAL PROVISIONS. In connection with the operation of this Agreement, the Custodian and the Fund may from time to time agree on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the Governing Documents. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement. SECTION 12.6 BOND. The Custodian shall at all times maintain a bond in such form and amount as is acceptable to the Fund, which shall be issued by a reputable fidelity insurance company authorized to do business in the place where such bond is issued, against larceny and embezzlement, covering each officer and employee of the Custodian who may, singly or jointly with others, have access to securities or funds of the Fund, either directly or through authority to receive and carry out any certificate instruction, order request, note or other instrument required or permitted by this Agreement. The Custodian agrees that it shall not cancel, terminate or modify such bond insofar as it adversely affects the Fund except after written notice given to the Fund not less than 10 days prior to the effective date of such cancellation, termination or modification. The Custodian shall, upon request, furnish to the Fund a copy of each such bond and each amendment thereto. SECTION 12.7 CONFIDENTIALITY. The Custodian agrees to treat all records and other information relative to the Fund and its prior, present or future shareholders as confidential, and the Custodian, on behalf of itself and its employees, agrees to keep confidential all such information except, after prior notification to and approval in writing by the Fund, which approval shall not be unreasonably withheld and may not be withheld where the Custodian may be exposed to civil or criminal contempt proceedings for failure to comply when requested to divulge such information by duly constituted authorities, or when so requested by the Fund. SECTION 12.8 EXEMPTION FROM LIEN. Except as set forth in Section 9 hereof, the securities and other assets held by the Custodian hereunder shall not be subject to lien or charge of any kind in favor of the Custodian or any person claiming through the Custodian. Nothing herein shall be deemed to deprive the Custodian of its right to invoke any and all remedies available at law or equity to collect amounts due it under this Agreement. SECTION 12.9 ASSIGNMENT. This Agreement may not be assigned by either party without the written consent of the other, except that either party may assign its rights and obligations hereunder to a party controlling, controlled by, or under common control with such party. SECTION 12.10 PRIOR AGREEMENTS. Without derogating the rights established thereunder prior to the date of this Agreement, this Agreement supersedes and terminates, as of the date hereof, all prior agreements between the Fund and the Custodian relating to the custody of Fund assets. SECTION 12.11 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all such counterparts taken together shall constitute but one and the same Agreement. SECTION 12.12 NOTICES. Any notice, instruction or other instrument required to be given hereunder may be delivered in person to the offices of the parties as set forth herein during normal business hours or delivered prepaid registered mail or by telex, cable or telecopy to the parties at the following addresses or such other addresses as may be notified by any party from time to time. To any Fund: c/o T. ROWE PRICE ASSOCIATES, INC. 100 East Pratt Street Baltimore, Maryland 21202 Attention: Carmen Deyesu Telephone: 410-345-6658 Telecopy: 410-685-8827/8830 To the Custodian: STATE STREET BANK AND TRUST COMPANY 1776 Heritage Drive North Quincy, Massachusetts 02171, U.S.A. Attention: Carol C. Ayotte Telephone: 617-985-6894 Telecopy: 617-537-6321 Such notice, instruction or other instrument shall be deemed to have been served in the case of a registered letter at the expiration of five business days after posting, in the case of cable twenty-four hours after dispatch and, in the case of telex, immediately on dispatch and if delivered outside normal business hours it shall be deemed to have been received at the next time after delivery when normal business hours commence and in the case of cable, telex or telecopy on the business day after the receipt thereof. Evidence that the notice was properly addressed, stamped and put into the post shall be conclusive evidence of posting. SECTION 12.13 ENTIRE AGREEMENT. This Agreement (including all schedules, appendices, exhibits and attachments hereto) constitutes the entire Agreement between the parties with respect to the subject matter hereof. SECTION 12.14 HEADINGS NOT CONTROLLING. Headings used in this Agreement are for reference purposes only and shall not be deemed a part of this Agreement. SECTION 12.15 SURVIVAL. All provisions regarding indemnification, confidentiality, warranty, liability and limits thereon shall survive following the expiration or termination of this Agreement. SECTION 12.16 SEVERABILITY. In the event any provision of this Agreement is held illegal, void or unenforceable, the balance shall remain in effect. SECTION 12.17 THE PARTIES. All references herein to the "Fund" are to each of the funds listed on Appendix A hereto individually, as if this Agreement were between such individual Fund and the Custodian. In the case of a series fund or trust, all references to the "Fund" are to the individual series or portfolio of such fund or trust, or to such fund or trust on behalf of the individual series or portfolio, as appropriate. Any reference in this Agreement to "the parties" shall mean the Custodian and such other individual Fund as to which the matter pertains. Each Fund hereby represents and warranties that (i) it has the requisite power and authority under applicable laws and its Governing Documents to enter into and perform this Agreement, (ii) all requisite proceedings have been taken to authorize it to enter into and perform this Agreement, and (iii) its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Fund or any law or regulation applicable to it. SECTION 12.18 DIRECTORS AND TRUSTEES. It is understood and is expressly stipulated that neither the holders of Shares nor any member of the Board be personally liable hereunder. Whenever reference is made herein to an action required to be taken by the Board, such action may also be taken by the Board's executive committee. SECTION 12.19 MASSACHUSETTS BUSINESS TRUST. With respect to any Fund which is a party to this Agreement and which is organized as a Massachusetts business trust, the term "Fund" means and refers to the trustees from time to time serving under the applicable trust agreement of such trust, as the same may be amended from time to time (the "DECLARATION OF TRUST"). It is expressly agreed that the obligations of any such Fund hereunder shall not be binding upon any of the trustees, shareholders, nominees, officers, agents or employees of the Fund personally, but bind only the trust property of the Fund as set forth in the applicable Declaration of Trust. In the case of each Fund which is a Massachusetts business trust (in each case, a "TRUST"), the execution and delivery of this Agreement on behalf of the Trust has been authorized by the trustees, and signed by an authorized officer, of the Trust, in each case acting in such capacity and not individually, and neither such authorization by the trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually, but shall bind only the trust property of the Trust as provided in its Declaration of Trust. SECTION 12.20 REPRODUCTION OF DOCUMENTS. This Agreement and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. SECTION 12.21 SHAREHOLDER COMMUNICATIONS ELECTION. SEC Rule 14b-2 requires banks which hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs the Fund to indicate whether it authorizes the Custodian to provide the Fund's name, address, and share position to requesting companies whose securities the Fund owns. If the Fund tells the Custodian "no", the Custodian will not provide this information to requesting companies. If the Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the Custodian is required by the rule to treat the Fund as consenting to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. For the Fund's protection, the Rule prohibits the requesting company from using the Fund's name and address for any purpose other than corporate communications. Please indicate below whether the Fund consents or objects by checking one of the alternatives below. YES [ ] The Custodian is authorized to release the Fund's name, address, and share positions. NO [X] The Custodian is not authorized to release the Fund's name, address, and share positions. DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT Addendum to the Custodian Agreement (as defined below) between each fund listed on Appendix A to the Custodian Agreement, as such Appendix A is amended from time to time (each such fund listed on Appendix A shall be individually referred to herein as the "FUND"), and State Street Bank and Trust Company ("STATE STREET"). PREAMBLE WHEREAS, State Street has been appointed as custodian of certain assets of the Fund pursuant to a certain Custodian Agreement (the "CUSTODIAN AGREEMENT") dated as of January 28, 1998, and amended thereafter from time to time; WHEREAS, State Street has developed and utilizes proprietary accounting and other systems, including State Street's proprietary Multicurrency HORIZON/R/ Accounting System, in its role as custodian of the Fund, and maintains certain Fund-related data ("FUND DATA") in databases under the control and ownership of State Street (the "DATA ACCESS SERVICES"); and WHEREAS, State Street makes available to the Fund (and certain of the Fund's agents as set forth herein) certain Data Access Services solely for the benefit of the Fund, and intends to provide additional services, consistent with the terms and conditions of this Addendum. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the parties agree as follows: 1. SYSTEM AND DATA ACCESS SERVICES a. System. Subject to the terms and conditions of this Addendum and solely for the - ------ purpose of providing access to Fund Data as set forth herein, State Street hereby agrees to provide the Fund, or certain third parties approved by State Street that serve as the Fund's investment advisors, investment managers or fund accountants (the "FUND ACCOUNTANTS") or as the Fund's independent auditors (the "AUDITOR"), with access to State Street's Multicurrency HORIZON/R/ Accounting System and the other information systems described in Attachment A (collectively, the "SYSTEM") on a remote basis solely on the computer hardware, system software and telecommunication links described in Attachment B (the "DESIGNATED CONFIGURATION") or on any designated substitute or back-up equipment configuration consented to in writing by State Street, such consent not to be unreasonably withheld. b. Data Access Services. State Street agrees to make available to the Fund the - ---- ------ -------- Data Access Services subject to the terms and conditions of this Addendum and such data access operating standards and procedures as may be issued by State Street from time to time. The Fund shall be able to access the System to (i) originate electronic instructions to State Street in order to (a) effect the transfer or movement of cash or securities held under custody by State Street or (b) transmit accounting or other information (the transactions described in (i)(a) and (i)(b) above are referred to herein as "CLIENT ORIGINATED ELECTRONIC FINANCIAL INSTRUCTIONS"), and (ii) access data for the purpose of reporting and analysis, which shall all be deemed to be Data Access Services for purposes of this Addendum. c. Additional Services. State Street may from time to time agree to make available - ---------- -------- to the Fund additional Systems that are not described in the attachments to this Addendum. In the absence of any other written agreement concerning such additional systems, the term "SYSTEM" shall include, and this Addendum shall govern, the Fund's access to and use of any additional System made available by State Street and/or accessed by the Fund. 2. NO USE OF THIRD PARTY SYSTEMS-LEVEL SOFTWARE State Street and the Fund acknowledge that in connection with the Data Access Services provided under this Addendum, the Fund will have access, through the Data Access Services, to Fund Data and to functions of State Street's proprietary systems; provided, however that in no event will the Fund have direct access to any third party systems-level software that retrieves data for, stores data from, or otherwise supports the System. 3. LIMITATION ON SCOPE OF USE a. Designated Equipment; Designated Locations. The System and the Data Access - ---------- ---------- ---------- --------- Services shall be used and accessed solely on and through the Designated Configuration at the offices of the Fund or the Fund Accountants in Baltimore, Maryland or Owings Mills, Maryland ("DESIGNATED LOCATIONS"). b. Designated Configuration; Trained Personnel. State Street and the Fund shall - ---------- -------------- ------- --------- be responsible for supplying, installing and maintaining the Designated Configuration at the Designated Locations. State Street and the Fund agree that each will engage or retain the services of trained personnel to enable both parties to perform their respective obligations under this Addendum. State Street agrees to use commercially reasonable efforts to maintain the System so that it remains serviceable, provided, however, that State Street does not guarantee or assure uninterrupted remote access use of the System. c. Scope of Use. The Fund will use the System and the Data Access Services only - ----- -- --- for the processing of securities transactions, the keeping of books of account for the Fund and accessing data for purposes of reporting and analysis. The Fund shall not, and shall cause its employees and agents not to (i) permit any unauthorized third party to use the System or the Data Access Services, (ii) sell, rent, license or otherwise use the System or the Data Access Services in the operation of a service bureau or for any purpose other than as expressly authorized under this Addendum, (iii) use the System or the Data Access Services for any fund, trust or other investment vehicle), other than as set forth herein, without the prior written consent of State Street, (iv) allow access to the System or the Data Access Services through terminals or any other computer or telecommunications facilities located outside the Designated Locations, (v) allow or cause any information (other than portfolio holdings, valuations of portfolio holdings, and other information reasonably necessary for the management or distribution of the assets of the Fund) transmitted from State Street's databases, including data from third party sources, available through use of the System or the Data Access Services to be redistributed or retransmitted to another computer, terminal or other device for other than use for or on behalf of the Fund or (vi) modify the System in any way, including without limitation developing any software for or attaching any devices or computer programs to any equipment, system, software or database which forms a part of or is resident on the Designated Configuration. d. Other Locations. Except in the event of an emergency or of a planned System - ----- --------- shutdown, the Fund's access to services performed by the System or to Data Access Services at the Designated Locations may be transferred to a different location only upon the prior written consent of State Street. In the event of an emergency or System shutdown, the Fund may use any back-up site included in the Designated Configuration or any other back-up site agreed to by State Street, which agreement will not be unreasonably withheld. The Fund may secure from State Street the right to access the System or the Data Access Services through computer and telecommunications facilities or devices complying with the Designated Configuration at additional locations only upon the prior written consent of State Street and on terms to be mutually agreed upon by the parties. e. Title. Title and all ownership and proprietary rights to the System, including - ----- any enhancements or modifications thereto, whether or not made by State Street, are and shall remain with State Street. f. No Modification. Without the prior written consent of State Street, the Fund - -- ------------ shall not modify, enhance or otherwise create derivative works based upon the System, nor shall the Fund reverse engineer, decompile or otherwise attempt to secure the source code for all or any part of the System. g. Security Procedures. The Fund shall comply with data access operating standards - -------- ---------- and procedures and with user identification or other password control requirements and other security procedures as may be issued from time to time by State Street for use of the System on a remote basis and to access the Data Access Services. The Fund shall have access only to the Fund Data and authorized transactions agreed upon from time to time by State Street and, upon notice from State Street, the Fund shall discontinue remote use of the System and access to Data Access Services for any security reasons cited by State Street; provided, that, in such event, State Street shall, for a period not less than 180 days (or such other shorter period specified by the Fund) after such discontinuance, assume responsibility to provide accounting services under the terms of the Custodian Agreement. h. Inspections. State Street shall have the right to inspect the use of the System - ----------- and the Data Access Services by the Fund, the Fund Accountants and the Auditor to ensure compliance with this Addendum. The on-site inspections shall be upon prior written notice to Fund, the Fund Accountants and the Auditor and at reasonably convenient times and frequencies so as not to result in an unreasonable disruption of the Fund's or the Fund Accountants' or the Auditor respective businesses. 4. PROPRIETARY INFORMATION a. Proprietary Information. The Fund acknowledges and State Street represents that - ----------- ----------- the System and the databases, computer programs, screen formats, report formats, interactive design techniques, documentation and other information made available to the Fund by State Street as part of the Data Access Services and through the use of the System constitute copyrighted, trade secret, or other proprietary information of substantial value to State Street. Any and all such information provided by State Street to the Fund shall be deemed proprietary and confidential information of State Street (hereinafter "PROPRIETARY INFORMATION"). The Fund agrees that it will hold such Proprietary Information in the strictest confidence and secure and protect it in a manner consistent with its own procedures for the protection of its own confidential information and to take appropriate action by instruction or agreement with its employees or agents who are permitted access to the Proprietary Information to satisfy its obligations hereunder. The Fund further acknowledges that State Street shall not be required to provide the Fund Accountants or the Auditor with access to the System unless it has first received from the Fund Accountants and the Auditor an undertaking with respect to State Street's Proprietary Information in the form of Attachment C and/or Attachment C-1 to this Addendum. The Fund shall use all commercially reasonable efforts to assist State Street in identifying and preventing any unauthorized use, copying or disclosure of the Proprietary Information or any portions thereof or any of the logic, formats or designs contained therein. b. Cooperation. Without limitation of the foregoing, the Fund shall advise State - ----------- Street immediately in the event the Fund learns or has reason to believe that any person to whom the Fund has given access to the Proprietary Information, or any portion thereof, has violated or intends to violate the terms of this Addendum, and the Fund will, at its reasonable expense, cooperate with State Street in seeking injunctive or other equitable relief in the name of the Fund or State Street against any such person. c. Injunctive Relief. The Fund acknowledges that the disclosure of any Proprietary - ---------- ------ Information, or of any information which at law or equity ought to remain confidential, will immediately give rise to continuing irreparable injury to State Street inadequately compensable in damages at law. In addition, State Street shall be entitled to obtain immediate injunctive relief against the breach or threatened breach of any of the foregoing undertakings, in addition to any other legal remedies which may be available. d. Survival. The provisions of this Section 4 shall survive the termination of - -------- this Addendum. 5. LIMITATION ON LIABILITY a. Standard of Care and Limitation on Amount and Time for Bringing Action. State - -------- -- ---- --- ---------- -- ------ --- ---- --- -------- ------ Street shall be held to a standard of reasonable care with respect to all of its duties and obligations under this Addendum. The Fund agrees that any liability of State Street to the Fund or any third party arising with respect to the System or State Street's provision of Data Access Services under this Data Access Services Addendum shall be limited to the amount paid by the Fund for the preceding 24 months for such services. The foregoing limitation shall relate solely to State Street's provision of the Data Access Services pursuant to this Addendum and is not intended to limit State Street's responsibility to perform in accordance with the Custodian Agreement, including its duty to act in accordance with Proper Instructions. In no event shall State Street be liable to the Fund or any other party pursuant to this Addendum for any special, indirect, punitive or consequential damages even if advised of the possibility of such damages. No action, regardless of form, arising out of the terms of this Addendum may be brought by the Fund more than two years after the Fund has knowledge that the cause of action has arisen. b. Limited Warranties. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, - ------- ---------- WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE MADE BY STATE STREET. c. Third-Party Data. Organizations from which State Street may obtain certain data - ----------- ---- included in the System or the Data Access Services are solely responsible for the contents of such data, and State Street shall have no liability for claims arising out of the contents of such third-party data, including, but not limited to, the accuracy thereof. d. Regulatory Requirements. As between State Street and the Fund, the Fund shall - ---------- ------------ be solely responsible for the accuracy of any accounting statements or reports produced using the Data Access Services and the System and the conformity thereof with any requirements of law. e. Force Majeure. Neither party shall be liable for any costs or damages due to - ----- ------- delay or nonperformance under this Data Access Services Addendum arising out of any cause or event beyond such party's control, including, without limitation, cessation of services hereunder or any damages resulting therefrom to the other party as a result of work stoppage, power or other mechanical failure, computer virus, natural disaster, governmental action, or communication disruption. 6. INDEMNIFICATION The Fund agrees to indemnify and hold State Street harmless from any loss, damage or expense including reasonable attorney's fees, (a "loss") suffered by State Street arising from (i) the negligence or willful misconduct in the use by the Fund of the Data Access Services or the System, including any loss incurred by State Street resulting from a security breach at the Designated Locations or committed by the Fund's employees or agents or the Fund Accountants or the and Auditor, and (ii) any loss resulting from incorrect Client Originated Electronic Financial Instructions. State Street shall be entitled to rely on the validity and authenticity of Client Originated Electronic Financial Instructions without undertaking any further inquiry as long as such instruction is undertaken in conformity with security procedures established by State Street from time to time. 7. FEES Fees and charges for the use of the System and the Data Access Services and related payment terms shall be as set forth in the custody fee schedule in effect from time to time between the parties (the "FEE SCHEDULE"). Any tariffs, duties or taxes imposed or levied by any government or governmental agency by reason of the transactions contemplated by this Addendum, including, without limitation, federal, state and local taxes, use, value added and personal property taxes (other than income, franchise or similar taxes which may be imposed or assessed against State Street) shall be borne by the Fund. Any claimed exemption from such tariffs, duties or taxes shall be supported by proper documentary evidence delivered to State Street. 8. TRAINING, IMPLEMENTATION AND CONVERSION a. Training. State Street agrees to provide training, at a designated State Street - -------- training facility or at the Designated Locations, to the Fund's personnel in connection with the use of the System on the Designated Configuration. The Fund agrees that it will set aside, during regular business hours or at other times agreed upon by both parties, sufficient time to enable all operators of the System and the Data Access Services, designated by the Fund, to receive the training offered by State Street pursuant to this Addendum. b. Installation and Conversion. State Street and the Fund shall be responsible for - ------------ --- ---------- the technical installation and conversion ("INSTALLATION AND CONVERSION") of the Designated Configuration. The Fund shall have the following responsibilities in connection with Installation and Conversion of the System: (i) The Fund shall be solely responsible for the timely acquisition and maintenance of the hardware and software that attach to the Designated Configuration in order to use the Data Access Services at the Designated Locations, and (ii) State Street and the Fund each agree that they will assign qualified personnel to actively participate during the Installation and Conversion phase of the System implementation to enable both parties to perform their respective obligations under this Addendum. 9. SUPPORT During the term of this Addendum, State Street agrees to provide the support services set out in Attachment D to this Addendum. 10. TERM a. Term. This Addendum shall become effective on the date of its execution by - ---- State Street and shall remain in full force and effect until terminated as herein provided. b. Termination. Either party may terminate this Addendum (i) for any reason by - ----------- giving the other party at least one-hundred and eighty (180) days' prior written notice in the case of notice of termination by State Street to the Fund or thirty (30) days' notice in the case of notice from the Fund to State Street of termination; or (ii) immediately for failure of the other party to comply with any material term and condition of the Addendum by giving the other party written notice of termination. In the event the Fund shall cease doing business, shall become subject to proceedings under the bankruptcy laws (other than a petition for reorganization or similar proceeding) or shall be adjudicated bankrupt, this Addendum and the rights granted hereunder shall, at the option of State Street, immediately terminate with notice to the Fund. This Addendum shall in any event terminate as to any Fund within ninety (90) days after the termination of the Custodian Agreement. c. Termination of the Right to Use. Upon termination of this Addendum for any - ----------- -- --- ----- -- --- reason, any right to use the System and access to the Data Access Services shall terminate and the Fund shall immediately cease use of the System and the Data Access Services. Immediately upon termination of this Addendum for any reason, the Fund shall return to State Street all copies of documentation and other Proprietary Information in its possession; provided, however, that in the event that either party terminates this Addendum or the Custodian Agreement for any reason other than the Fund's breach, State Street shall provide the Data Access Services for a period of time and at a price to be agreed upon in writing by the parties. 11. MISCELLANEOUS a.Year 2000. State Street will take all steps necessary to ensure that its ---- ---- products (and those of its third-party suppliers) reflect the available state of the art technology to offer products that are Year 2000 compliant, including, but not limited to, century recognition of dates, calculations that correctly compute same century and multi-century formulas and date values, and interface values that reflect the date issues arising between now and the next one-hundred years. If any changes are required, State Street will make the changes to its products at no cost to the Fund and in a commercially reasonable time frame and will require third-party suppliers to do likewise. b. Assignment; Successors. This Addendum and the rights and obligations of the - ----------- ---------- Fund and State Street hereunder shall not be assigned by either party without the prior written consent of the other party, except that State Street may assign this Addendum to a successor of all or a substantial portion of its business, or to a party controlling, controlled by, or under common control with State Street. c. Survival. All provisions regarding indemnification, warranty, liability and - -------- limits thereon, and confidentiality and/or protection of proprietary rights and trade secrets shall survive the termination of this Addendum. d. Entire Agreement. This Addendum and the attachments hereto constitute the - ------ --------- entire understanding of the parties hereto with respect to the Data Access Services and the use of the System and supersedes any and all prior or contemporaneous representations or agreements, whether oral or written, between the parties as such may relate to the Data Access Services or the System, and cannot be modified or altered except in a writing duly executed by the parties. This Addendum is not intended to supersede or modify the duties and liabilities of the parties hereto under the Custodian Agreement or any other agreement between the parties hereto except to the extent that any such agreement specifically refers to the Data Access Services or the System. No single waiver or any right hereunder shall be deemed to be a continuing waiver. e. Severability. ------------ If any provision or provisions of this Addendum shall be held to be invalid, unlawful, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired. f. Governing Law. This Addendum shall be interpreted and construed in accordance - --------- --- with the internal laws of The Commonwealth of Massachusetts without regard to the conflict of laws provisions thereof. ATTACHMENT A MULTICURRENCY HORIZON/R/ ACCOUNTING SYSTEM SYSTEM PRODUCT DESCRIPTION I. The Multicurrency HORIZON/R/ Accounting System is designed to provide lot level portfolio and general ledger accounting for SEC and ERISA type requirements and includes the following services: 1) recording of general ledger entries; 2) calculation of daily income and expense; 3) reconciliation of daily activity with the trial balance, and 4) appropriate automated feeding mechanisms to (i) domestic and international settlement systems, (ii) daily, weekly and monthly evaluation services, (iii) portfolio performance and analytic services, (iv) customer's internal computing systems and (v) various State Street provided information services products. II. GlobalQuest/R/ GlobalQuest/R/ is designed to provide customer access to the following information maintained on The Multicurrency HORIZON/R/ Accounting System: 1) cash transactions and balances; 2) purchases and sales; 3) income receivables; 4) tax refund; 5) daily priced positions; 6) open trades; 7) settlement status; 8) foreign exchange transactions; 9) trade history; and 10) daily, weekly and monthly evaluation services. III. HORIZON/R/ Gateway. HORIZON/R/ Gateway provides customers with the ability to (i) generate reports using information maintained on the Multicurrency HORIZON/R/ Accounting System which may be viewed or printed at the customer's location; (ii) extract and download data from the Multicurrency HORIZONR Accounting System; and (iii) access previous day and historical data. The following information which may be accessed for these purposes: 1) holdings; 2) holdings pricing; 3) transactions, 4) open trades; 5) income; 6) general ledger and 7) cash. IV. State Street Interchange. State Street Interchange is an open ------------------------ information delivery architecture wherein proprietary communication products, data formats and workstation tools are replaced by industry standards and is designed to enable the connection of State Street's network to customer networks, thereby facilitating the sharing of information. ATTACHMENT C UNDERTAKING (FUND ACCOUNTANTS) The undersigned understands that in the course of its employment as Fund Accountant to each fund listed on Appendix A (as amended from time to time) to that certain Custodian Agreement dated as of January 28, 1998 (the "FUND"), it will have access to State Street Bank and Trust Company's Multicurrency HORIZON Accounting System and other information systems (collectively, the "SYSTEM"). The undersigned acknowledges that the System and the databases, computer programs, screen formats, report formats, interactive design techniques, documentation, and other information made available to the Undersigned by State Street Bank and Trust Company ("STATE STREET") as part of the Data Access Services provided to the Fund and through the use of the System constitute copyrighted, trade secret, or other proprietary information of substantial value to State Street. Any and all such information provided by State Street to the Undersigned shall be deemed proprietary and confidential information of State Street (hereinafter "PROPRIETARY INFORMATION"). The undersigned agrees that it will hold such Proprietary Information in confidence and secure and protect it in a manner consistent with its own procedures for the protection of its own confidential information and to take appropriate action by instruction or agreement with its employees who are permitted access to the Proprietary Information to satisfy its obligations hereunder. The undersigned will not attempt to intercept data, gain access to data in transmission, or attempt entry into any system or files for which it is not authorized. It will not intentionally adversely affect the integrity of the System through the introduction of unauthorized code or data, or through unauthorized deletion. Upon notice by State Street for any reason, any right to use the System and access to the Data Access Services shall terminate and the Undersigned shall immediately cease use of the System and the Data Access Services. Immediately upon notice by State Street for any reason, the undersigned shall return to State Street all copies of documentation and other Proprietary Information in its possession. [The Fund Accountants] By: ______________________________ Title: ______________________________ Date: ______________________________ ATTACHMENT C-1 UNDERTAKING (AUDITOR) The undersigned understands that in the course of its employment as Auditor to each fund listed on Appendix A (as amended from time to time) to that certain Custodian Agreement dated as of January 28, 1998 (the "FUND") it will have access to State Street Bank and Trust Company's Multicurrency HORIZON Accounting System and other information systems (collectively, the "SYSTEM"). The undersigned acknowledges that the System and the databases, computer programs, screen formats, report formats, interactive design techniques, documentation, and other information made available to the Undersigned by State Street Bank and Trust Company ("STATE STREET") as part of the Data Access Services provided to the Fund and through the use of the System constitute copyrighted, trade secret, or other proprietary information of substantial value to State Street. Any and all such information provided by State Street to the Undersigned shall be deemed proprietary and confidential information of State Street (hereinafter "PROPRIETARY INFORMATION"). The undersigned agrees that it will hold such Proprietary Information in confidence and secure and protect it in a manner consistent with its own procedures for the protection of its own confidential information and to take appropriate action by instruction or agreement with its employees who are permitted access to the Proprietary Information to satisfy its obligations hereunder. The undersigned will not attempt to intercept data, gain access to data in transmission, or attempt entry into any system or files for which it is not authorized. It will not intentionally adversely affect the integrity of the System through the introduction of unauthorized code or data, or through unauthorized deletion. Upon notice by State Street for any reason, any right to use the System and access to the Data Access Services shall terminate and the Undersigned shall immediately cease use of the System and the Data Access Services. Immediately upon notice by State Street for any reason, the undersigned shall return to State Street all copies of documentation and other Proprietary Information in its possession. [The Auditor] By: ______________________________ Title: ______________________________ Date: ______________________________ ATTACHMENT D SUPPORT During the term of this Addendum, State Street agrees to provide the following on-going support services: a. Telephone Support. The Fund Designated Persons may contact State Street's HORIZON/R/ Help Desk and Fund Assistance Center between the hours of 8 a.m. and 6 p.m. (Eastern time) on all business days for the purpose of obtaining answers to questions about the use of the System, or to report apparent problems with the System. From time to time, the Fund shall provide to State Street a list of persons who shall be permitted to contact State Street for assistance (such persons being referred to as the "FUND DESIGNATED PERSONS"). b. Technical Support. State Street will provide technical support to assist the - --------- ------- Fund in using the System and the Data Access Services. The total amount of technical support provided by State Street shall not exceed 10 resource days per year. State Street shall provide such additional technical support as is expressly set forth in the fee schedule in effect from time to time between the parties (the "FEE SCHEDULE"). Technical support, including during installation and testing, is subject to the fees and other terms set forth in the Fee Schedule. c. Maintenance Support. State Street shall use commercially reasonable ------------------- efforts to correct system functions that do not work according to the System Product Description as set forth on Attachment A in priority order in the next scheduled delivery release or otherwise as soon as is practicable. d. System Enhancements. State Street will provide to the Fund any enhancements to - ------ ------------ the System developed by State Street and made a part of the System; provided that State Street offer the Fund reasonable training on the enhancement. Charges for system enhancements shall be as provided in the Fee Schedule. State Street retains the right to charge for related systems or products that may be developed and separately made available for use other than through the System. e. Custom Modifications. In the event the Fund desires custom modifications in - ------ ------------- connection with its use of the System, the Fund shall make a written request to State Street providing specifications for the desired modification. Any custom modifications may be undertaken by State Street in its sole discretion in accordance with the Fee Schedule. f. Limitation on Support. State Street shall have no obligation to support the - ---------- -- ------- Fund's use of the System: (1) for use on any computer equipment or telecommunication facilities which does not conform to the Designated Configuration or (ii) in the event the Fund has modified the System in breach of this Addendum. In WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and on its behalf by its duly authorized representative as of the date and year first written above. T. ROWE PRICE GROWTH STOCK FUND, INC. T. ROWE PRICE NEW HORIZONS FUND, INC. T. ROWE PRICE NEW ERA FUND, INC. T. ROWE PRICE NEW INCOME FUND, INC. T. ROWE PRICE PRIME RESERVE FUND, INC. T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. Rowe Price International Bond Fund T. Rowe Price International Stock Fund T. Rowe Price International Discovery Fund T. Rowe Price European Stock Fund T. Rowe Price New Asia Fund T. Rowe Price Global Government Bond Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price Emerging Markets Bond Fund T. Rowe Price Emerging Markets Stock Fund T. Rowe Price Global Stock Fund T. ROWE PRICE GROWTH & INCOME FUND, INC. T. ROWE PRICE SHORT-TERM BOND FUND, INC. T. ROWE PRICE TAX-FREE INCOME FUND, INC. T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC. T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC. T. ROWE PRICE HIGH YIELD FUND, INC. T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC. T. ROWE PRICE NEW AMERICA GROWTH FUND T. ROWE PRICE EQUITY INCOME FUND T. ROWE PRICE GNMA FUND T. ROWE PRICE CAPITAL APPRECIATION FUND T. ROWE PRICE STATE TAX-FREE INCOME TRUST Maryland Tax-Free Bond Fund Maryland Short-Term Tax-Free Bond Fund New York Tax-Free Bond Fund New York Tax-Free Money Fund Virginia Tax-Free Bond Fund Virginia Short-Term Tax-Free Bond Fund New Jersey Tax-Free Bond Fund Georgia Tax-Free Bond Fund Florida Insured Intermediate Tax-Free Fund T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST California Tax-Free Bond Fund California Tax-Free Money Fund T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC. T. ROWE PRICE SMALL-CAP VALUE FUND, INC. INSTITUTIONAL INTERNATIONAL FUNDS, INC. Foreign Equity Fund T. ROWE PRICE U.S. TREASURY FUNDS, INC. U.S. Treasury Intermediate Fund U.S. Treasury Long-Term Fund U.S. Treasury Money Fund T. ROWE PRICE INDEX TRUST, INC. T. Rowe Price Equity Index 500 Fund T. Rowe Price Extended Equity Market Index Fund T. Rowe Price Total Equity Market Index Fund T. ROWE PRICE SPECTRUM FUND, INC. Spectrum Growth Fund Spectrum Income Fund Spectrum International Fund T. ROWE PRICE BALANCED FUND, INC. T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC. T. ROWE PRICE MID-CAP GROWTH FUND, INC. T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND FUND, INC. T. ROWE PRICE DIVIDEND GROWTH FUND, INC. T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. T. ROWE PRICE SUMMIT FUNDS, INC. T. Rowe Price Summit Cash Reserves Fund T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price Summit GNMA Fund T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. T. Rowe Price Summit Municipal Money Market Fund T. Rowe Price Summit Municipal Intermediate Fund T. Rowe Price Summit Municipal Income Fund T. ROWE PRICE EQUITY SERIES, INC. T. Rowe Price Equity Income Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price Mid-Cap Growth Portfolio T. ROWE PRICE INTERNATIONAL SERIES, INC. T. Rowe Price International Stock Portfolio T. ROWE PRICE FIXED INCOME SERIES, INC. T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price Prime Reserve Portfolio T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC. T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. ROWE PRICE VALUE FUND, INC. T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC. T. ROWE PRICE CORPORATE INCOME FUND, INC. T. ROWE PRICE HEALTH SCIENCES FUND, INC. T. ROWE PRICE MID-CAP VALUE FUND, INC. INSTITUTIONAL DOMESTIC EQUITY FUNDS, INC. Mid-Cap Equity Growth Fund T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC. T. ROWE PRICE FINANCIAL SERVICES FUND, INC. T. ROWE PRICE REAL ESTATE FUND, INC. T. ROWE PRICE SMALL CAP STOCK FUND, INC. T. Rowe Price Small Cap Stock Fund T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC. T. ROWE PRICE TAX EFFICIENT BALANCED FUND, INC. RESERVE INVESTMENT FUNDS, INC. Government Reserve Investment Fund Reserve Investment Fund SIGNATURE ATTESTED TO: EXECUTED ON BEHALF OF EACH FUND: /s/Suzanne E. Fraunhoffer /s/Carmen Deyesu By: _____________________ By:____________________ Name: Suzanne E. Fraunhoffer Name: Carmen Deyesu Title: Legal Assistant Title: Treasurer for each of the foregoing SIGNATURE ATTESTED TO: STATE STREET BANK AND TRUST COMPANY /s/Glenn Ciotti /s/Ronald E. Logue By: _____________________ By:____________________ Name: Glenn Ciotti Name: Ronald E. Logue Title: VP & Assoc. Counsel Title: Executive Vice President SCHEDULE A COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY United Kingdom State Street Bank None; and Trust Company The Bank of England, The Central Gilts Office (CGO); The Central Moneymarkets Office (CMO) Euroclear (The Euroclear System)/ State Street London Limited APPENDIX A T. ROWE PRICE GROWTH STOCK FUND, INC. T. ROWE PRICE NEW HORIZONS FUND, INC. T. ROWE PRICE NEW ERA FUND, INC. T. ROWE PRICE NEW INCOME FUND, INC. T. ROWE PRICE PRIME RESERVE FUND, INC. T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. Rowe Price International Bond Fund T. Rowe Price International Stock Fund T. Rowe Price International Discovery Fund T. Rowe Price European Stock Fund T. Rowe Price New Asia Fund T. Rowe Price Global Government Bond Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price Emerging Markets Bond Fund T. Rowe Price Emerging Markets Stock Fund T. Rowe Price Global Stock Fund T. ROWE PRICE GROWTH & INCOME FUND, INC. T. ROWE PRICE SHORT-TERM BOND FUND, INC. T. ROWE PRICE TAX-FREE INCOME FUND, INC. T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC. T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC. T. ROWE PRICE HIGH YIELD FUND, INC. T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC. T. ROWE PRICE NEW AMERICA GROWTH FUND T. ROWE PRICE EQUITY INCOME FUND T. ROWE PRICE GNMA FUND T. ROWE PRICE CAPITAL APPRECIATION FUND T. ROWE PRICE STATE TAX-FREE INCOME TRUST Maryland Tax-Free Bond Fund Maryland Short-Term Tax-Free Bond Fund New York Tax-Free Bond Fund New York Tax-Free Money Fund Virginia Tax-Free Bond Fund Virginia Short-Term Tax-Free Bond Fund New Jersey Tax-Free Bond Fund Georgia Tax-Free Bond Fund Florida Insured Intermediate Tax-Free Fund T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST California Tax-Free Bond Fund California Tax-Free Money Fund T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC. T. ROWE PRICE SMALL-CAP VALUE FUND, INC. INSTITUTIONAL INTERNATIONAL FUNDS, INC. Foreign Equity Fund T. ROWE PRICE U.S. TREASURY FUNDS, INC. U.S. Treasury Intermediate Fund U.S. Treasury Long-Term Fund U.S. Treasury Money Fund T. ROWE PRICE INDEX TRUST, INC. T. Rowe Price Equity Index 500 Fund T. Rowe Price Extended Equity Market Index Fund T. Rowe Price Total Equity Market Index Fund T. ROWE PRICE SPECTRUM FUND, INC. Spectrum Growth Fund Spectrum Income Fund Spectrum International Fund T. ROWE PRICE BALANCED FUND, INC. T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC. T. ROWE PRICE MID-CAP GROWTH FUND, INC. T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND FUND, INC. T. ROWE PRICE DIVIDEND GROWTH FUND, INC. T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. T. ROWE PRICE SUMMIT FUNDS, INC. T. Rowe Price Summit Cash Reserves Fund T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price Summit GNMA Fund T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. T. Rowe Price Summit Municipal Money Market Fund T. Rowe Price Summit Municipal Intermediate Fund T. Rowe Price Summit Municipal Income Fund T. ROWE PRICE EQUITY SERIES, INC. T. Rowe Price Equity Income Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price Mid-Cap Growth Portfolio T. ROWE PRICE INTERNATIONAL SERIES, INC. T. Rowe Price International Stock Portfolio T. ROWE PRICE FIXED INCOME SERIES, INC. T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price Prime Reserve Portfolio T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC. T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. ROWE PRICE VALUE FUND, INC. T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC. T. ROWE PRICE CORPORATE INCOME FUND, INC. T. ROWE PRICE HEALTH SCIENCES FUND, INC. T. ROWE PRICE MID-CAP VALUE FUND, INC. INSTITUTIONAL DOMESTIC EQUITY FUNDS, INC. Mid-Cap Equity Growth Fund T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC. T. ROWE PRICE FINANCIAL SERVICES FUND, INC. T. ROWE PRICE REAL ESTATE FUND, INC. T. ROWE PRICE SMALL CAP STOCK FUND, INC. T. Rowe Price Small Cap Stock Fund T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC. T. ROWE PRICE TAX EFFICIENT BALANCED FUND, INC. RESERVE INVESTMENT FUNDS, INC. Government Reserve Investment Fund Reserve Investment Fund AMENDMENT NO. 1 TO CUSTODIAN CONTRACT BETWEEN STATE STREET BANK AND TRUST COMPANY AND THE T. ROWE PRICE FUNDS The Custodian Contract of January 28, 1998, between State Street Bank and Trust Company and each of the Parties listed on Appendix A thereto is hereby further amended, as of November 4, 1998, by adding thereto T. Rowe Price International Funds, Inc., on behalf of T. Rowe Price International Growth & Income Fund. T. ROWE PRICE BALANCED FUND, INC. T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST California Tax-Free Bond Fund California Tax-Free Money Fund T. ROWE PRICE CAPITAL APPRECIATION FUND T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC. T. ROWE PRICE CORPORATE INCOME FUND, INC. T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC. T. ROWE PRICE DIVIDEND GROWTH FUND, INC. T. ROWE PRICE EQUITY INCOME FUND T. ROWE PRICE EQUITY SERIES, INC. T. Rowe Price Equity Income Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price Mid-Cap Growth Portfolio T. ROWE PRICE FINANCIAL SERVICES FUND, INC. T. ROWE PRICE FIXED INCOME SERIES, INC. T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price Prime Reserve Portfolio T. ROWE PRICE GNMA FUND T. ROWE PRICE GROWTH & INCOME FUND, INC. T. ROWE PRICE GROWTH STOCK FUND, INC. T. ROWE PRICE HEALTH SCIENCES FUND, INC. T. ROWE PRICE HIGH YIELD FUND, INC. T. ROWE PRICE INDEX TRUST, INC. T. Rowe Price Equity Index 500 Fund T. Rowe Price Extended Equity Market Index Fund T. Rowe Price Total Equity Market Index Fund INSTITUTIONAL EQUITY FUNDS, INC. Mid-Cap Equity Growth Fund INSTITUTIONAL INTERNATIONAL FUNDS, INC. Foreign Equity Fund T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. Rowe Price International Bond Fund T. Rowe Price International Discovery Fund T. Rowe Price International Stock Fund T. Rowe Price European Stock Fund T. Rowe Price New Asia Fund T. Rowe Price Global Bond Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price Emerging Markets Bond Fund T. Rowe Price Emerging Markets Stock Fund T. Rowe Price Global Stock Fund T. Rowe Price International Growth & Income Fund T. ROWE PRICE INTERNATIONAL SERIES, INC. T. Rowe Price International Stock Portfolio T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC. T. ROWE PRICE MID-CAP GROWTH FUND, INC. T. ROWE PRICE MID-CAP VALUE FUND, INC. T. ROWE PRICE NEW AMERICA GROWTH FUND T. ROWE PRICE NEW ERA FUND, INC. T. ROWE PRICE NEW HORIZONS FUNDS, INC. T. ROWE PRICE NEW INCOME FUND, INC. T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC. T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. ROWE PRICE PRIME RESERVE FUND, INC. T. ROWE PRICE REAL ESTATE FUND, INC. RESERVE INVESTMENT FUNDS, INC. Reserve Investment Fund Government Reserve Investment Fund T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC. T. ROWE PRICE SHORT-TERM BOND FUND, INC. T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC. T. ROWE PRICE SMALL-CAP STOCK FUND, INC. T. ROWE PRICE SMALL-CAP VALUE FUND, INC. T. ROWE PRICE SPECTRUM FUND, INC. Spectrum Growth Fund Spectrum Income Fund Spectrum International Fund T. ROWE PRICE STATE TAX-FREE INCOME TRUST Maryland Tax-Free Bond Fund Maryland Short-Term Tax-Free Bond Fund New York Tax-Free Bond Fund New York Tax-Free Money Fund New Jersey Tax-Free Bond Fund Virginia Tax-Free Bond Fund Virginia Short-Term Tax-Free Bond Fund Florida Intermediate Tax-Free Fund Georgia Tax-Free Bond Fund T. ROWE PRICE TAX-EFFICIENT BALANCED FUND, INC. T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC. T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC. T. ROWE PRICE TAX-FREE INCOME FUND, INC. T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC. T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC. T. ROWE PRICE U.S. TREASURY FUNDS, INC. U.S. Treasury Intermediate Fund U.S. Treasury Long-Term Fund U.S. Treasury Money Fund T. ROWE PRICE SUMMIT FUNDS, INC. T. Rowe Price Summit Cash Reserves Fund T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price Summit GNMA Fund T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. T. Rowe Price Summit Municipal Money Market Fund T. Rowe Price Summit Municipal Intermediate Fund T. Rowe Price Summit Municipal Income Fund T. ROWE PRICE VALUE FUND, INC. /s/Henry H. Hopkins By: _____________________________________ Henry H. Hopkins, Vice President STATE STREET BANK AND TRUST COMPANY /s/Stephen F. Brown By: _____________________________________ Stephen F. Brown, Vice President AMENDMENT NO. 2 TO CUSTODIAN CONTRACT BETWEEN STATE STREET BANK AND TRUST COMPANY AND THE T. ROWE PRICE FUNDS The Custodian Contract of January 28, 1998, as amended November 4, 1998 between State Street Bank and Trust Company and each of the Parties listed on Appendix A thereto is hereby further amended, as of April 21, 1999, by adding thereto T. Rowe Price Tax-Efficient Funds, Inc., on behalf of T. Rowe Price Tax-Efficient Balanced Fund and T. Rowe Price Tax-Efficient Growth Fund. T. ROWE PRICE BALANCED FUND, INC. T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST California Tax-Free Bond Fund California Tax-Free Money Fund T. ROWE PRICE CAPITAL APPRECIATION FUND T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC. T. ROWE PRICE CORPORATE INCOME FUND, INC. T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC. T. ROWE PRICE DIVIDEND GROWTH FUND, INC. T. ROWE PRICE EQUITY INCOME FUND T. ROWE PRICE EQUITY SERIES, INC. T. Rowe Price Equity Income Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price Mid-Cap Growth Portfolio T. ROWE PRICE FINANCIAL SERVICES FUND, INC. T. ROWE PRICE FIXED INCOME SERIES, INC. T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price Prime Reserve Portfolio T. ROWE PRICE GNMA FUND T. ROWE PRICE GROWTH & INCOME FUND, INC. T. ROWE PRICE GROWTH STOCK FUND, INC. T. ROWE PRICE HEALTH SCIENCES FUND, INC. T. ROWE PRICE HIGH YIELD FUND, INC. T. ROWE PRICE INDEX TRUST, INC. T. Rowe Price Equity Index 500 Fund T. Rowe Price Extended Equity Market Index Fund T. Rowe Price Total Equity Market Index Fund INSTITUTIONAL EQUITY FUNDS, INC. Mid-Cap Equity Growth Fund INSTITUTIONAL INTERNATIONAL FUNDS, INC. Foreign Equity Fund T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. Rowe Price International Bond Fund T. Rowe Price International Discovery Fund T. Rowe Price International Stock Fund T. Rowe Price European Stock Fund T. Rowe Price New Asia Fund T. Rowe Price Global Bond Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price Emerging Markets Bond Fund T. Rowe Price Emerging Markets Stock Fund T. Rowe Price Global Stock Fund T. Rowe Price International Growth & Income Fund T. ROWE PRICE INTERNATIONAL SERIES, INC. T. Rowe Price International Stock Portfolio T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC. T. ROWE PRICE MID-CAP GROWTH FUND, INC. T. ROWE PRICE MID-CAP VALUE FUND, INC. T. ROWE PRICE NEW AMERICA GROWTH FUND T. ROWE PRICE NEW ERA FUND, INC. T. ROWE PRICE NEW HORIZONS FUNDS, INC. T. ROWE PRICE NEW INCOME FUND, INC. T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC. T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. ROWE PRICE PRIME RESERVE FUND, INC. T. ROWE PRICE REAL ESTATE FUND, INC. RESERVE INVESTMENT FUNDS, INC. Reserve Investment Fund Government Reserve Investment Fund T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC. T. ROWE PRICE SHORT-TERM BOND FUND, INC. T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC. T. ROWE PRICE SMALL-CAP STOCK FUND, INC. T. ROWE PRICE SMALL-CAP VALUE FUND, INC. T. ROWE PRICE SPECTRUM FUND, INC. Spectrum Growth Fund Spectrum Income Fund Spectrum International Fund T. ROWE PRICE STATE TAX-FREE INCOME TRUST Maryland Tax-Free Bond Fund Maryland Short-Term Tax-Free Bond Fund New York Tax-Free Bond Fund New York Tax-Free Money Fund New Jersey Tax-Free Bond Fund Virginia Tax-Free Bond Fund Virginia Short-Term Tax-Free Bond Fund Florida Intermediate Tax-Free Fund Georgia Tax-Free Bond Fund T. ROWE PRICE TAX-EFFICIENT FUNDS, INC. T. Rowe Price Tax-Efficient Balanced Fund T. Rowe Price Tax-Efficient Growth Fund T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC. T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC. T. ROWE PRICE TAX-FREE INCOME FUND, INC. T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC. T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC. T. ROWE PRICE U.S. TREASURY FUNDS, INC. U.S. Treasury Intermediate Fund U.S. Treasury Long-Term Fund U.S. Treasury Money Fund T. ROWE PRICE SUMMIT FUNDS, INC. T. Rowe Price Summit Cash Reserves Fund T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price Summit GNMA Fund T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. T. Rowe Price Summit Municipal Money Market Fund T. Rowe Price Summit Municipal Intermediate Fund T. Rowe Price Summit Municipal Income Fund T. ROWE PRICE VALUE FUND, INC. /s/ Henry H. Hopkins By: _____________________________________ Henry H. Hopkins, Vice President STATE STREET BANK AND TRUST COMPANY /s/ Ronald E. Logue By: _____________________________________ Ronald E. Logue, Vice Chairman AMENDMENT NO. 3 TO CUSTODIAN CONTRACT BETWEEN STATE STREET BANK AND TRUST COMPANY AND THE T. ROWE PRICE FUNDS The Custodian Contract of January 28, 1998, as amended November 4, 1998 and April 21, 1999 between State Street Bank and Trust Company and each of the Parties listed on Appendix A thereto is hereby further amended, as of February 9, 2000, by adding thereto Institutional Equity Funds, Inc., on behalf of Institutional Large-Cap Value Fund and Institutional Small-Cap Stock Fund. T. ROWE PRICE BALANCED FUND, INC. T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST California Tax-Free Bond Fund California Tax-Free Money Fund T. ROWE PRICE CAPITAL APPRECIATION FUND T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC. T. ROWE PRICE CORPORATE INCOME FUND, INC. T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC. T. ROWE PRICE DIVIDEND GROWTH FUND, INC. T. ROWE PRICE EQUITY INCOME FUND T. ROWE PRICE EQUITY SERIES, INC. T. Rowe Price Equity Income Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price Mid-Cap Growth Portfolio T. ROWE PRICE FINANCIAL SERVICES FUND, INC. T. ROWE PRICE FIXED INCOME SERIES, INC. T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price Prime Reserve Portfolio T. ROWE PRICE GNMA FUND T. ROWE PRICE GROWTH & INCOME FUND, INC. T. ROWE PRICE GROWTH STOCK FUND, INC. T. ROWE PRICE HEALTH SCIENCES FUND, INC. T. ROWE PRICE HIGH YIELD FUND, INC. T. ROWE PRICE INDEX TRUST, INC. T. Rowe Price Equity Index 500 Fund T. Rowe Price Extended Equity Market Index Fund T. Rowe Price Total Equity Market Index Fund INSTITUTIONAL EQUITY FUNDS, INC. Institutional Large-Cap Value Fund Institutional Small-Cap Stock Fund Mid-Cap Equity Growth Fund INSTITUTIONAL INTERNATIONAL FUNDS, INC. Foreign Equity Fund T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. Rowe Price International Bond Fund T. Rowe Price International Discovery Fund T. Rowe Price International Stock Fund T. Rowe Price European Stock Fund T. Rowe Price New Asia Fund T. Rowe Price Global Bond Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price Emerging Markets Bond Fund T. Rowe Price Emerging Markets Stock Fund T. Rowe Price Global Stock Fund T. Rowe Price International Growth & Income Fund T. ROWE PRICE INTERNATIONAL SERIES, INC. T. Rowe Price International Stock Portfolio T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC. T. ROWE PRICE MID-CAP GROWTH FUND, INC. T. ROWE PRICE MID-CAP VALUE FUND, INC. T. ROWE PRICE NEW AMERICA GROWTH FUND T. ROWE PRICE NEW ERA FUND, INC. T. ROWE PRICE NEW HORIZONS FUNDS, INC. T. ROWE PRICE NEW INCOME FUND, INC. T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC. T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. ROWE PRICE PRIME RESERVE FUND, INC. T. ROWE PRICE REAL ESTATE FUND, INC. RESERVE INVESTMENT FUNDS, INC. Reserve Investment Fund Government Reserve Investment Fund T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC. T. ROWE PRICE SHORT-TERM BOND FUND, INC. T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC. T. ROWE PRICE SMALL-CAP STOCK FUND, INC. T. ROWE PRICE SMALL-CAP VALUE FUND, INC. T. ROWE PRICE SPECTRUM FUND, INC. Spectrum Growth Fund Spectrum Income Fund Spectrum International Fund T. ROWE PRICE STATE TAX-FREE INCOME TRUST Maryland Tax-Free Bond Fund Maryland Short-Term Tax-Free Bond Fund New York Tax-Free Bond Fund New York Tax-Free Money Fund New Jersey Tax-Free Bond Fund Virginia Tax-Free Bond Fund Virginia Short-Term Tax-Free Bond Fund Florida Intermediate Tax-Free Fund Georgia Tax-Free Bond Fund T. ROWE PRICE TAX-EFFICIENT FUNDS, INC. T. Rowe Price Tax-Efficient Balanced Fund T. Rowe Price Tax-Efficient Growth Fund T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC. T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC. T. ROWE PRICE TAX-FREE INCOME FUND, INC. T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC. T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC. T. ROWE PRICE U.S. TREASURY FUNDS, INC. U.S. Treasury Intermediate Fund U.S. Treasury Long-Term Fund U.S. Treasury Money Fund T. ROWE PRICE SUMMIT FUNDS, INC. T. Rowe Price Summit Cash Reserves Fund T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price Summit GNMA Fund T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. T. Rowe Price Summit Municipal Money Market Fund T. Rowe Price Summit Municipal Intermediate Fund T. Rowe Price Summit Municipal Income Fund T. ROWE PRICE VALUE FUND, INC. /s/ Henry H. Hopkins By: _____________________________________ Henry H. Hopkins, Vice President STATE STREET BANK AND TRUST COMPANY /s/ Ronald E. Logue By: _____________________________________ Ronald E. Logue, Vice Chairman AMENDMENT NO. 4 TO CUSTODIAN CONTRACT BETWEEN STATE STREET BANK AND TRUST COMPANY AND THE T. ROWE PRICE FUNDS The Custodian Contract of January 28, 1998, as amended November 4, 1998, April 21, 1999, and February 9, 2000 between State Street Bank and Trust Company and each of the Parties listed on Appendix A thereto is hereby further amended, as of April 19, 2000, by adding thereto T. Rowe Price International Funds, Inc., on behalf of T. Rowe Price Emerging Europe & Mediterranean Fund. T. ROWE PRICE BALANCED FUND, INC. T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST California Tax-Free Bond Fund California Tax-Free Money Fund T. ROWE PRICE CAPITAL APPRECIATION FUND T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC. T. ROWE PRICE CORPORATE INCOME FUND, INC. T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC. T. ROWE PRICE DIVIDEND GROWTH FUND, INC. T. ROWE PRICE EQUITY INCOME FUND T. ROWE PRICE EQUITY SERIES, INC. T. Rowe Price Equity Income Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price Mid-Cap Growth Portfolio T. ROWE PRICE FINANCIAL SERVICES FUND, INC. T. ROWE PRICE FIXED INCOME SERIES, INC. T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price Prime Reserve Portfolio T. ROWE PRICE GNMA FUND T. ROWE PRICE GROWTH & INCOME FUND, INC. T. ROWE PRICE GROWTH STOCK FUND, INC. T. ROWE PRICE HEALTH SCIENCES FUND, INC. T. ROWE PRICE HIGH YIELD FUND, INC. T. ROWE PRICE INDEX TRUST, INC. T. Rowe Price Equity Index 500 Fund T. Rowe Price Extended Equity Market Index Fund T. Rowe Price Total Equity Market Index Fund INSTITUTIONAL EQUITY FUNDS, INC. Institutional Large-Cap Value Fund Institutional Small-Cap Stock Fund Institutional Mid-Cap Equity Growth Fund INSTITUTIONAL INTERNATIONAL FUNDS, INC. Foreign Equity Fund T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. Rowe Price International Bond Fund T. Rowe Price International Discovery Fund T. Rowe Price International Stock Fund T. Rowe Price European Stock Fund T. Rowe Price New Asia Fund T. Rowe Price Global Bond Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price Emerging Markets Bond Fund T. Rowe Price Emerging Markets Stock Fund T. Rowe Price Global Stock Fund T. Rowe Price International Growth & Income Fund T. Rowe Price Emerging Europe & Mediterranean Fund T. ROWE PRICE INTERNATIONAL SERIES, INC. T. Rowe Price International Stock Portfolio T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC. T. ROWE PRICE MID-CAP GROWTH FUND, INC. T. ROWE PRICE MID-CAP VALUE FUND, INC. T. ROWE PRICE NEW AMERICA GROWTH FUND T. ROWE PRICE NEW ERA FUND, INC. T. ROWE PRICE NEW HORIZONS FUNDS, INC. T. ROWE PRICE NEW INCOME FUND, INC. T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC. T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. ROWE PRICE PRIME RESERVE FUND, INC. T. ROWE PRICE REAL ESTATE FUND, INC. RESERVE INVESTMENT FUNDS, INC. Reserve Investment Fund Government Reserve Investment Fund T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC. T. ROWE PRICE SHORT-TERM BOND FUND, INC. T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC. T. ROWE PRICE SMALL-CAP STOCK FUND, INC. T. ROWE PRICE SMALL-CAP VALUE FUND, INC. T. ROWE PRICE SPECTRUM FUND, INC. Spectrum Growth Fund Spectrum Income Fund Spectrum International Fund T. ROWE PRICE STATE TAX-FREE INCOME TRUST Maryland Tax-Free Bond Fund Maryland Short-Term Tax-Free Bond Fund New York Tax-Free Bond Fund New York Tax-Free Money Fund New Jersey Tax-Free Bond Fund Virginia Tax-Free Bond Fund Virginia Short-Term Tax-Free Bond Fund Florida Intermediate Tax-Free Fund Georgia Tax-Free Bond Fund T. ROWE PRICE TAX-EFFICIENT FUNDS, INC. T. Rowe Price Tax-Efficient Balanced Fund T. Rowe Price Tax-Efficient Growth Fund T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC. T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC. T. ROWE PRICE TAX-FREE INCOME FUND, INC. T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC. T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC. T. ROWE PRICE U.S. TREASURY FUNDS, INC. U.S. Treasury Intermediate Fund U.S. Treasury Long-Term Fund U.S. Treasury Money Fund T. ROWE PRICE SUMMIT FUNDS, INC. T. Rowe Price Summit Cash Reserves Fund T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price Summit GNMA Fund T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. T. Rowe Price Summit Municipal Money Market Fund T. Rowe Price Summit Municipal Intermediate Fund T. Rowe Price Summit Municipal Income Fund T. ROWE PRICE VALUE FUND, INC. /s/ Henry H. Hopkins By: _____________________________________ Henry H. Hopkins, Vice President STATE STREET BANK AND TRUST COMPANY /s/ Ronald E. Logue By: _____________________________________ Ronald E. Logue, Vice Chairman AMENDMENT NO. 5 TO CUSTODIAN CONTRACT BETWEEN STATE STREET BANK AND TRUST COMPANY AND THE T. ROWE PRICE FUNDS The Custodian Contract of January 28, 1998, as amended November 4, 1998, April 21, 1999, February 9, 2000, and April 19, 2000 between State Street Bank and Trust Company and each of the Parties listed on Appendix A thereto is hereby further amended, as of July 18, 2000, by adding thereto T. Rowe Price Developing Technologies Fund, Inc., T. Rowe Price Global Technology Fund, Inc., and T. Rowe Price U.S. Bond Index Fund, Inc. T. ROWE PRICE BALANCED FUND, INC. T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST California Tax-Free Bond Fund California Tax-Free Money Fund T. ROWE PRICE CAPITAL APPRECIATION FUND T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC. T. ROWE PRICE CORPORATE INCOME FUND, INC. T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC. T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC. T. ROWE PRICE DIVIDEND GROWTH FUND, INC. T. ROWE PRICE EQUITY INCOME FUND T. ROWE PRICE EQUITY SERIES, INC. T. Rowe Price Equity Income Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price Mid-Cap Growth Portfolio T. ROWE PRICE FINANCIAL SERVICES FUND, INC. T. ROWE PRICE FIXED INCOME SERIES, INC. T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price Prime Reserve Portfolio T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC. T. ROWE PRICE GNMA FUND T. ROWE PRICE GROWTH & INCOME FUND, INC. T. ROWE PRICE GROWTH STOCK FUND, INC. T. ROWE PRICE HEALTH SCIENCES FUND, INC. T. ROWE PRICE HIGH YIELD FUND, INC. T. ROWE PRICE INDEX TRUST, INC. T. Rowe Price Equity Index 500 Fund T. Rowe Price Extended Equity Market Index Fund T. Rowe Price Total Equity Market Index Fund INSTITUTIONAL EQUITY FUNDS, INC. Institutional Large-Cap Value Fund Institutional Small-Cap Stock Fund Institutional Mid-Cap Equity Growth Fund INSTITUTIONAL INTERNATIONAL FUNDS, INC. Foreign Equity Fund T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. Rowe Price International Bond Fund T. Rowe Price International Discovery Fund T. Rowe Price International Stock Fund T. Rowe Price European Stock Fund T. Rowe Price New Asia Fund T. Rowe Price Global Bond Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price Emerging Markets Bond Fund T. Rowe Price Emerging Markets Stock Fund T. Rowe Price Global Stock Fund T. Rowe Price International Growth & Income Fund T. Rowe Price Emerging Europe & Mediterranean Fund T. ROWE PRICE INTERNATIONAL SERIES, INC. T. Rowe Price International Stock Portfolio T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC. T. ROWE PRICE MID-CAP GROWTH FUND, INC. T. ROWE PRICE MID-CAP VALUE FUND, INC. T. ROWE PRICE NEW AMERICA GROWTH FUND T. ROWE PRICE NEW ERA FUND, INC. T. ROWE PRICE NEW HORIZONS FUNDS, INC. T. ROWE PRICE NEW INCOME FUND, INC. T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC. T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. ROWE PRICE PRIME RESERVE FUND, INC. T. ROWE PRICE REAL ESTATE FUND, INC. RESERVE INVESTMENT FUNDS, INC. Reserve Investment Fund Government Reserve Investment Fund T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC. T. ROWE PRICE SHORT-TERM BOND FUND, INC. T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC. T. ROWE PRICE SMALL-CAP STOCK FUND, INC. T. ROWE PRICE SMALL-CAP VALUE FUND, INC. T. ROWE PRICE SPECTRUM FUND, INC. Spectrum Growth Fund Spectrum Income Fund Spectrum International Fund T. ROWE PRICE STATE TAX-FREE INCOME TRUST Maryland Tax-Free Bond Fund Maryland Short-Term Tax-Free Bond Fund New York Tax-Free Bond Fund New York Tax-Free Money Fund New Jersey Tax-Free Bond Fund Virginia Tax-Free Bond Fund Virginia Short-Term Tax-Free Bond Fund Florida Intermediate Tax-Free Fund Georgia Tax-Free Bond Fund T. ROWE PRICE TAX-EFFICIENT FUNDS, INC. T. Rowe Price Tax-Efficient Balanced Fund T. Rowe Price Tax-Efficient Growth Fund T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC. T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC. T. ROWE PRICE TAX-FREE INCOME FUND, INC. T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC. T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC. T. ROWE PRICE U.S. BOND INDEX FUND, INC. T. ROWE PRICE U.S. TREASURY FUNDS, INC. U.S. Treasury Intermediate Fund U.S. Treasury Long-Term Fund U.S. Treasury Money Fund T. ROWE PRICE SUMMIT FUNDS, INC. T. Rowe Price Summit Cash Reserves Fund T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price Summit GNMA Fund T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. T. Rowe Price Summit Municipal Money Market Fund T. Rowe Price Summit Municipal Intermediate Fund T. Rowe Price Summit Municipal Income Fund T. ROWE PRICE VALUE FUND, INC. /s/ Henry H. Hopkins By: _____________________________________ Henry H. Hopkins, Vice President STATE STREET BANK AND TRUST COMPANY /s/ Ronald E. Logue By: _____________________________________ Ronald E. Logue, Vice Chairman AMENDMENT NO. 6 TO CUSTODIAN CONTRACT BETWEEN STATE STREET BANK AND TRUST COMPANY AND THE T. ROWE PRICE FUNDS The Custodian Contract of January 28, 1998, as amended November 4, 1998, April 21, 1999, February 9, 2000, April 19, 2000 and July 18, 2000 between State Street Bank and Trust Company and each of the Parties listed on Appendix A thereto is hereby further amended, as of October 25, 2000, by adding thereto T. Rowe Price International Index Fund, Inc., on behalf of T. Rowe Price International Equity Index Fund; T. Rowe Price Tax-Efficient Funds, Inc., on behalf of T. Rowe Price Tax-Efficient Multi-Cap Growth Fund; and T. Rowe Price Equity Series, Inc., on behalf of T. Rowe Price Blue Chip Growth Portfolio, T. Rowe Price Equity Index 500 Portfolio, and T. Rowe Price Health Sciences Portfolio. T. ROWE PRICE BALANCED FUND, INC. T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST California Tax-Free Bond Fund California Tax-Free Money Fund T. ROWE PRICE CAPITAL APPRECIATION FUND T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC. T. ROWE PRICE CORPORATE INCOME FUND, INC. T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC. T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC. T. ROWE PRICE DIVIDEND GROWTH FUND, INC. T. ROWE PRICE EQUITY INCOME FUND T. ROWE PRICE EQUITY SERIES, INC. T. Rowe Price Blue Chip Growth Portfolio T. Rowe Price Equity Income Portfolio T. Rowe Price Equity Index 500 Portfolio T. Rowe Price Health Sciences Portfolio T. Rowe Price Mid-Cap Growth Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. ROWE PRICE FINANCIAL SERVICES FUND, INC. T. ROWE PRICE FIXED INCOME SERIES, INC. T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price Prime Reserve Portfolio T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC. T. ROWE PRICE GNMA FUND T. ROWE PRICE GROWTH & INCOME FUND, INC. T. ROWE PRICE GROWTH STOCK FUND, INC. T. ROWE PRICE HEALTH SCIENCES FUND, INC. T. ROWE PRICE HIGH YIELD FUND, INC. T. ROWE PRICE INDEX TRUST, INC. T. Rowe Price Equity Index 500 Fund T. Rowe Price Extended Equity Market Index Fund T. Rowe Price Total Equity Market Index Fund INSTITUTIONAL EQUITY FUNDS, INC. Institutional Large-Cap Value Fund Institutional Small-Cap Stock Fund Institutional Mid-Cap Equity Growth Fund INSTITUTIONAL INTERNATIONAL FUNDS, INC. Foreign Equity Fund T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. Rowe Price International Bond Fund T. Rowe Price International Discovery Fund T. Rowe Price International Stock Fund T. Rowe Price European Stock Fund T. Rowe Price New Asia Fund T. Rowe Price Global Bond Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price Emerging Markets Bond Fund T. Rowe Price Emerging Markets Stock Fund T. Rowe Price Global Stock Fund T. Rowe Price International Growth & Income Fund T. Rowe Price Emerging Europe & Mediterranean Fund T. ROWE PRICE INTERNATIONAL INDEX FUND, INC. T. Rowe Price International Equity Index Fund T. ROWE PRICE INTERNATIONAL SERIES, INC. T. Rowe Price International Stock Portfolio T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC. T. ROWE PRICE MID-CAP GROWTH FUND, INC. T. ROWE PRICE MID-CAP VALUE FUND, INC. T. ROWE PRICE NEW AMERICA GROWTH FUND T. ROWE PRICE NEW ERA FUND, INC. T. ROWE PRICE NEW HORIZONS FUNDS, INC. T. ROWE PRICE NEW INCOME FUND, INC. T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC. T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. ROWE PRICE PRIME RESERVE FUND, INC. T. ROWE PRICE REAL ESTATE FUND, INC. RESERVE INVESTMENT FUNDS, INC. Reserve Investment Fund Government Reserve Investment Fund T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC. T. ROWE PRICE SHORT-TERM BOND FUND, INC. T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC. T. ROWE PRICE SMALL-CAP STOCK FUND, INC. T. ROWE PRICE SMALL-CAP VALUE FUND, INC. T. ROWE PRICE SPECTRUM FUND, INC. Spectrum Growth Fund Spectrum Income Fund Spectrum International Fund T. ROWE PRICE STATE TAX-FREE INCOME TRUST Maryland Tax-Free Bond Fund Maryland Short-Term Tax-Free Bond Fund New York Tax-Free Bond Fund New York Tax-Free Money Fund New Jersey Tax-Free Bond Fund Virginia Tax-Free Bond Fund Virginia Short-Term Tax-Free Bond Fund Florida Intermediate Tax-Free Fund Georgia Tax-Free Bond Fund T. ROWE PRICE TAX-EFFICIENT FUNDS, INC. T. Rowe Price Tax-Efficient Balanced Fund T. Rowe Price Tax-Efficient Growth Fund T. Rowe Price Tax-Efficient Multi-Cap Growth Fund T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC. T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC. T. ROWE PRICE TAX-FREE INCOME FUND, INC. T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC. T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC. T. ROWE PRICE U.S. BOND INDEX FUND, INC. T. ROWE PRICE U.S. TREASURY FUNDS, INC. U.S. Treasury Intermediate Fund U.S. Treasury Long-Term Fund U.S. Treasury Money Fund T. ROWE PRICE SUMMIT FUNDS, INC. T. Rowe Price Summit Cash Reserves Fund T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price Summit GNMA Fund T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. T. Rowe Price Summit Municipal Money Market Fund T. Rowe Price Summit Municipal Intermediate Fund T. Rowe Price Summit Municipal Income Fund T. ROWE PRICE VALUE FUND, INC. /s/ Henry H. Hopkins By: _____________________________________ Henry H. Hopkins, Vice President STATE STREET BANK AND TRUST COMPANY /s/ Ronald E. Logue By: _____________________________________ Ronald E. Logue, Vice Chairman AMENDMENT NO. 7 TO CUSTODIAN CONTRACT BETWEEN STATE STREET BANK AND TRUST COMPANY AND THE T. ROWE PRICE FUNDS The Custodian Contract of January 28, 1998, as amended November 4, 1998, April 21, 1999, February 9, 2000, April 19, 2000, July 18, 2000, and October 25, 2000 between State Street Bank and Trust Company and each of the Parties listed on Appendix A thereto is hereby further amended, as of February 7, 2001, by adding thereto T. Rowe Price State Tax-Free Income Trust, on behalf of Maryland Tax-Free Money Fund. T. ROWE PRICE BALANCED FUND, INC. T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST California Tax-Free Bond Fund California Tax-Free Money Fund T. ROWE PRICE CAPITAL APPRECIATION FUND T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC. T. ROWE PRICE CORPORATE INCOME FUND, INC. T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC. T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC. T. ROWE PRICE DIVIDEND GROWTH FUND, INC. T. ROWE PRICE EQUITY INCOME FUND T. ROWE PRICE EQUITY SERIES, INC. T. Rowe Price Blue Chip Growth Portfolio T. Rowe Price Equity Income Portfolio T. Rowe Price Equity Index 500 Portfolio T. Rowe Price Health Sciences Portfolio T. Rowe Price Mid-Cap Growth Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. ROWE PRICE FINANCIAL SERVICES FUND, INC. T. ROWE PRICE FIXED INCOME SERIES, INC. T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price Prime Reserve Portfolio T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC. T. ROWE PRICE GNMA FUND T. ROWE PRICE GROWTH & INCOME FUND, INC. T. ROWE PRICE GROWTH STOCK FUND, INC. T. ROWE PRICE HEALTH SCIENCES FUND, INC. T. ROWE PRICE HIGH YIELD FUND, INC. T. ROWE PRICE INDEX TRUST, INC. T. Rowe Price Equity Index 500 Fund T. Rowe Price Extended Equity Market Index Fund T. Rowe Price Total Equity Market Index Fund INSTITUTIONAL EQUITY FUNDS, INC. Institutional Large-Cap Value Fund Institutional Small-Cap Stock Fund Institutional Mid-Cap Equity Growth Fund INSTITUTIONAL INTERNATIONAL FUNDS, INC. Foreign Equity Fund T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. Rowe Price International Bond Fund T. Rowe Price International Discovery Fund T. Rowe Price International Stock Fund T. Rowe Price European Stock Fund T. Rowe Price New Asia Fund T. Rowe Price Global Bond Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price Emerging Markets Bond Fund T. Rowe Price Emerging Markets Stock Fund T. Rowe Price Global Stock Fund T. Rowe Price International Growth & Income Fund T. Rowe Price Emerging Europe & Mediterranean Fund T. ROWE PRICE INTERNATIONAL INDEX FUND, INC. T. Rowe Price International Equity Index Fund T. ROWE PRICE INTERNATIONAL SERIES, INC. T. Rowe Price International Stock Portfolio T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC. T. ROWE PRICE MID-CAP GROWTH FUND, INC. T. ROWE PRICE MID-CAP VALUE FUND, INC. T. ROWE PRICE NEW AMERICA GROWTH FUND T. ROWE PRICE NEW ERA FUND, INC. T. ROWE PRICE NEW HORIZONS FUNDS, INC. T. ROWE PRICE NEW INCOME FUND, INC. T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC. T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. ROWE PRICE PRIME RESERVE FUND, INC. T. ROWE PRICE REAL ESTATE FUND, INC. RESERVE INVESTMENT FUNDS, INC. Reserve Investment Fund Government Reserve Investment Fund T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC. T. ROWE PRICE SHORT-TERM BOND FUND, INC. T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC. T. ROWE PRICE SMALL-CAP STOCK FUND, INC. T. ROWE PRICE SMALL-CAP VALUE FUND, INC. T. ROWE PRICE SPECTRUM FUND, INC. Spectrum Growth Fund Spectrum Income Fund Spectrum International Fund T. ROWE PRICE STATE TAX-FREE INCOME TRUST Maryland Tax-Free Money Fund Maryland Tax-Free Bond Fund Maryland Short-Term Tax-Free Bond Fund New York Tax-Free Bond Fund New York Tax-Free Money Fund New Jersey Tax-Free Bond Fund Virginia Tax-Free Bond Fund Virginia Short-Term Tax-Free Bond Fund Florida Intermediate Tax-Free Fund Georgia Tax-Free Bond Fund T. ROWE PRICE TAX-EFFICIENT FUNDS, INC. T. Rowe Price Tax-Efficient Balanced Fund T. Rowe Price Tax-Efficient Growth Fund T. Rowe Price Tax-Efficient Multi-Cap Growth Fund T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC. T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC. T. ROWE PRICE TAX-FREE INCOME FUND, INC. T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC. T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC. T. ROWE PRICE U.S. BOND INDEX FUND, INC. T. ROWE PRICE U.S. TREASURY FUNDS, INC. U.S. Treasury Intermediate Fund U.S. Treasury Long-Term Fund U.S. Treasury Money Fund T. ROWE PRICE SUMMIT FUNDS, INC. T. Rowe Price Summit Cash Reserves Fund T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price Summit GNMA Fund T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. T. Rowe Price Summit Municipal Money Market Fund T. Rowe Price Summit Municipal Intermediate Fund T. Rowe Price Summit Municipal Income Fund T. ROWE PRICE VALUE FUND, INC. /s/ Henry H. Hopkins By: _____________________________________ Henry H. Hopkins, Vice President STATE STREET BANK AND TRUST COMPANY /s/ Ronald E. Logue By: _____________________________________ Ronald E. Logue, Vice Chairman GLOBAL CUSTODY AGREEMENT This AGREEMENT is effective January 3, 1994, and is between THE CHASE MANHATTAN BANK, N.A. (the "Bank") and EACH OF THE ENTITIES LISTED ON SCHEDULE A HERETO, Individually and Separately (each individually, the "Customer"). 1. CUSTOMER ACCOUNTS. The Bank agrees to establish and maintain the following accounts ("Accounts"): (a) A custody account in the name of the Customer ("Custody Account") for any and all stocks, shares, bonds, debentures, notes, mortgages or other obligations for the payment of money, bullion, coin and any certificates, receipts, warrants or other instruments representing rights to receive, purchase or subscribe for the same or evidencing or representing any other rights or interests therein and other similar property whether certificated or uncertificated as may be received by the Bank or its Subcustodian (as defined in Section 3) for the account of the Customer ("Securities"); and (b) A deposit account in the name of the Customer ("Deposit Account") for any and all cash in any currency received by the Bank or its Subcustodian for the account of the Customer, which cash shall not be subject to withdrawal by draft or check. The Customer warrants its authority to: 1) deposit the cash and Securities ("Assets") received in the Accounts and 2) give Instructions (as defined in Section 11) concerning the Accounts. The Bank may deliver securities of the same class in place of those deposited in the Custody Account. Upon written agreement between the Bank and the Customer, additional Accounts may be established and separately accounted for as additional Accounts under the terms of this Agreement. 2. MAINTENANCE OF SECURITIES AND CASH AT BANK AND SUBCUSTODIAN LOCATIONS. Unless Instructions specifically require another location acceptable to the Bank: (a) Securities will be held in the country or other jurisdiction in which the principal trading market for such Securities is located, where such Securities are to be presented for payment or where such Securities are acquired; and (b) Cash will be credited to an account in a country or other jurisdiction in which such cash may be legally deposited or is the legal currency for the payment of public or private debts. Cash may be held pursuant to Instructions in either interest or non-interest bearing accounts as may be available for the particular currency. To the extent Instructions are issued and the Bank can comply with such Instructions, the Bank is authorized to maintain cash balances on deposit for the Customer with itself or one of its affiliates at such reasonable rates of interest as may from time to time be paid on such accounts, or in non-interest bearing accounts as the Customer may direct, if acceptable to the Bank. If the Customer wishes to have any of its Assets held in the custody of an institution other than the established Subcustodians as defined in Section 3 (or their securities depositories), such arrangement must be authorized by a written agreement, signed by the Bank and the Customer. 3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES. The Bank may act under this Agreement through the subcustodians listed in Schedule B of this Agreement with which the Bank has entered into subcustodial agreements ("Subcustodians"). The Customer authorizes the Bank to hold Assets in the Accounts in accounts which the Bank has established with one or more of its branches or Subcustodians. The Bank and Subcustodians are authorized to hold any of the Securities in their account with any securities depository in which they participate. The Bank reserves the right to add new, replace or remove Subcustodians. The Customer will be given reasonable notice by the Bank of any amendment to Schedule B. Upon request by the Customer, the Bank will identify the name, address and principal place of business of any Subcustodian of the Customer's Assets and the name and address of the governmental agency or other regulatory authority that supervises or regulates such Subcustodian. 4. USE OF SUBCUSTODIAN. (a) The Bank will identify such Assets on its books as belonging to the Customer. (b) A Subcustodian will hold such Assets together with assets belonging to other customers of the Bank in accounts identified on such Subcustodian's books as special custody accounts for the exclusive benefit of customers of the Bank. (c) Any Assets in the Accounts held by a Subcustodian will be subject only to the instructions of the Bank or its agent. Any Securities held in a securities depository for the account of a Subcustodian will be subject only to the instructions of such Subcustodian. (d) Any agreement the Bank enters into with a Subcustodian for holding its customer's assets shall provide that such assets will not be subject to any right, charge, security interest, lien or claim of any kind in favor of such Subcustodian or its creditors except for a claim for payment for safe custody or administration, and that the beneficial ownership of such assets will be freely transferable without the payment of money or value other than for safe custody or administration. The foregoing shall not apply to the extent of any special agreement or arrangement made by the Customer with any particular Subcustodian. 5. DEPOSIT ACCOUNT TRANSACTIONS. (a) The Bank or its Subcustodians will make payments from the Deposit Account upon receipt of Instructions which include all information required by the Bank. (b) In the event that any payment to be made under this Section 5 exceeds the funds available in the Deposit Account, the Bank, in its discretion, may advance the Customer such excess amount which shall be deemed a loan payable on demand, bearing interest at the rate customarily charged by the Bank on similar loans. (c) If the Bank credits the Deposit Account on a payable date, or at any time prior to actual collection and reconciliation to the Deposit Account, with interest, dividends, redemptions or any other amount due, the Customer will promptly return any such amount upon oral or written notification: (i) that such amount has not been received in the ordinary course of business or (ii) that such amount was incorrectly credited. If the Customer does not promptly return any amount upon such notification, the Bank shall be entitled, upon oral or written notification to the Customer, to reverse such credit by debiting the Deposit Account for the amount previously credited. The Bank or its Subcustodian shall have no duty or obligation to institute legal proceedings, file a claim or a proof of claim in any insolvency proceeding or take any other action with respect to the collection of such amount, but may act for the Customer upon Instructions after consultation with the Customer. 6. CUSTODY ACCOUNT TRANSACTIONS. (a) Securities will be transferred, exchanged or delivered by the Bank or its Subcustodian upon receipt by the Bank of Instructions which include all information required by the Bank. Settlement and payment for Securities received for, and delivery of Securities out of, the Custody Account may be made in accordance with the customary or established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivery of Securities to a purchaser, dealer or their agents against a receipt with the expectation of receiving later payment and free delivery. Delivery of Securities out of the Custody Account may also be made in any manner specifically required by Instructions acceptable to the Bank. (b) The Bank, in its discretion, may credit or debit the Accounts on a contractual settlement date with cash or Securities with respect to any sale, exchange or purchase of Securities. Otherwise, such transactions will be credited or debited to the Accounts on the date cash or Securities are actually received by the Bank and reconciled to the Account. (i) The Bank may reverse credits or debits made to the Accounts in its discretion if the related transaction fails to settle within a reasonable period, determined by the Bank in its discretion, after the contractual settlement date for the related transaction. (ii) If any Securities delivered pursuant to this Section 6 are returned by the recipient thereof, the Bank may reverse the credits and debits of the particular transaction at any time. 7. ACTIONS OF THE BANK. The Bank shall follow Instructions received regarding assets held in the Accounts. However, until it receives Instructions to the contrary, the Bank will: (a) Present for payment any Securities which are called, redeemed or retired or otherwise become payable and all coupons and other income items which call for payment upon presentation, to the extent that the Bank or Subcustodian is actually aware of such opportunities. (b) Execute in the name of the Customer such ownership and other certificates as may be required to obtain payments in respect of Securities. (c) Exchange interim receipts or temporary Securities for definitive Securities. (d) Appoint brokers and agents for any transaction involving the Securities, including, without limitation, affiliates of the Bank or any Subcustodian. (e) Issue statements to the Customer, at times mutually agreed upon, identifying the Assets in the Accounts. The Bank will send the Customer an advice or notification of any transfers of Assets to or from the Accounts. Such statements, advices or notifications shall indicate the identity of the entity having custody of the Assets. Unless the Customer sends the Bank a written exception or objection to any Bank statement within ninety (90) days of receipt, the Customer shall be deemed to have approved such statement. The Bank shall, to the extent permitted by law, be released, relieved and discharged with respect to all matters set forth in such statement or reasonably implied therefrom as though it had been settled by the decree of a court of competent jurisdiction in an action where the Customer and all persons having or claiming an interest in the Customer or the Customer's Accounts were parties if: (a) the Customer has failed to provide a written exception or objection to any Bank statement within ninety (90) days of receipt and where the Customer's failure to so provide a written exception or objection within such ninety (90) day period has limited the Bank's (i) access to the records, materials and other information required to investigate the Customer's exception or objection, and (ii) ability to recover from third parties any amounts for which the Bank may become liable in connection with such exception or objection, or (b) where the Customer has otherwise explicitly approved any such statement. All collections of funds or other property paid or distributed in respect of Securities in the Custody Account shall be made at the risk of the Customer. The Bank shall have no liability for any loss occasioned by delay in the actual receipt of notice by the Bank or by its Subcustodians of any payment, redemption or other transaction regarding Securities in the Custody Account in respect of which the Bank has agreed to take any action under this Agreement. 8. CORPORATE ACTIONS; PROXIES. Whenever the Bank receives information concerning the Securities which requires discretionary action by the beneficial owner of the Securities (other than a proxy), such as subscription rights, bonus issues, stock repurchase plans and rights offerings, or legal notices or other material intended to be transmitted to securities holders ("Corporate Actions"), the Bank will give the Customer notice of such Corporate Actions to the extent that the Bank's central corporate actions department has actual knowledge of a Corporate Action in time to notify its customers. When a rights entitlement or a fractional interest resulting from a rights issue, stock dividend, stock split or similar Corporate Action is received which bears an expiration date, the Bank will endeavor to obtain Instructions from the Customer or its Authorized Person, but if Instructions are not received in time for the Bank to take timely action, or actual notice of such Corporate Action was received too late to seek Instructions, the Bank is authorized to sell such rights entitlement or fractional interest and to credit the Deposit Account with the proceeds or take any other action it deems, in good faith, to be appropriate in which case it shall be held harmless for any such action. The Bank will deliver proxies to the Customer or its designated agent pursuant to special arrangements which may have been agreed to in writing. Such proxies shall be executed in the appropriate nominee name relating to Securities in the Custody Account registered in the name of such nominee but without indicating the manner in which such proxies are to be voted; and where bearer Securities are involved, proxies will be delivered in accordance with Instructions. 9. NOMINEES. Securities which are ordinarily held in registered form may be registered in a nominee name of the Bank, Subcustodian or securities depository, as the case may be. The Bank may without notice to the Customer cause any such Securities to cease to be registered in the name of any such nominee and to be registered in the name of the Customer. In the event that any Securities registered in a nominee name are called for partial redemption by the issuer, the Bank may allot the called portion to the respective beneficial holders of such class of security pro rata or in any other manner that is fair, equitable and practicable. The Customer agrees to hold the Bank, Subcustodians, and their respective nominees harmless from any liability arising directly or indirectly from their status as a mere record holder of Securities in the Custody Account. 10. AUTHORIZED PERSONS. As used in this Agreement, the term "Authorized Person" means employees or agents including investment managers as have been designated by written notice from the Customer or its designated agent to act on behalf of the Customer under this Agreement. Such persons shall continue to be Authorized Persons until such time as the Bank receives Instructions from the Customer or its designated agent that any such employee or agent is no longer an Authorized Person. 11. INSTRUCTIONS. The term "Instructions" means instructions of any Authorized Person received by the Bank, via telephone, telex, TWX, facsimile transmission, bank wire or other teleprocess or electronic instruction or trade information system acceptable to the Bank which the Bank believes in good faith to have been given by Authorized Persons or which are transmitted with proper testing or authentication pursuant to terms and conditions which the Bank may specify. Unless otherwise expressly provided, all Instructions shall continue in full force and effect until canceled or superseded. Any Instructions delivered to the Bank by telephone shall promptly thereafter be confirmed in writing by an Authorized Person (which confirmation may bear the facsimile signature of such Person), but the Customer will hold the Bank harmless for the failure of an Authorized Person to send such confirmation in writing, the failure of such confirmation to conform to the telephone instructions received or the Bank's failure to produce such confirmation at any subsequent time. The Bank may electronically record any Instructions given by telephone, and any other telephone discussions with respect to the Custody Account. The Customer shall be responsible for safeguarding any testkeys, identification codes or other security devices which the Bank shall make available to the Customer or its Authorized Persons. 12. STANDARD OF CARE; LIABILITIES. (a) The Bank shall be responsible for the performance of only such duties as are set forth in this Agreement or expressly contained in Instructions which are consistent with the provisions of this Agreement. Notwithstanding anything to the contrary in this Agreement: (i) The Bank will use reasonable care with respect to its obligations under this Agreement and the safekeeping of Assets. The Bank shall be liable to the Customer for any loss which shall occur as the result of the failure of a Subcustodian to exercise reasonable care with respect to the safekeeping of such Assets to the same extent that the Bank would be liable to the Customer if the Bank were holding such Assets in New York. In the event of any loss to the Customer by reason of the failure of the Bank or its Subcustodian to utilize reasonable care, the Bank shall be liable to the Customer only to the extent of the Customer's direct damages, and shall in no event be liable for any special or consequential damages. (ii) The Bank will not be responsible for any act, omission, default or for the solvency of any broker or agent which it or a Subcustodian appoints unless such appointment was made negligently or in bad faith or for any loss due to the negligent act of such broker or agent except to the extent that such broker or agent (other than a Subcustodian) performs in a negligent manner which is the cause of the loss to the Customer and the Bank failed to exercise reasonable care in monitoring such broker's or agent's performance where Customer has requested and Bank has agreed to accept such monitoring responsibility. (iii) The Bank shall be indemnified by, and without liability to the Customer for any action taken or omitted by the Bank whether pursuant to Instructions or otherwise within the scope of this Agreement if such act or omission was in good faith, without negligence. In performing its obligations under this Agreement, the Bank may rely on the genuineness of any document which it believes in good faith to have been validly executed. (iv)The Customer agrees to pay for and hold the Bank harmless from any liability or loss resulting from the imposition or assessment of any taxes or other governmental charges, and any related expenses with respect to income from or Assets in the Accounts, except to the extent that the Bank has failed to exercise reasonable care in performing any obligations which the Bank may have agreed to assume (in addition to those stated in this Agreement) with respect to taxes and such failure by the Bank is the direct cause of such imposition or assessment of such taxes, charges or expenses. (v) The Bank shall be entitled to rely, and may act, upon the advice of counsel (who may be counsel for the Customer) on all legal matters and shall be without liability for any action reasonably taken or omitted pursuant to such advice; provided, that the Bank gives (to the extent practicable) prior notice to Customer of Bank's intention to so seek advice of counsel and an opportunity for consultation with Customer on the proposed contact with counsel. (vi) The Bank represents and warrants that it currently maintain a banker's blanket bond which provides standard fidelity and non-negligent loss coverage with respect to the Securities and Cash which may be held by Subcustodians pursuant to this Agreement. The Bank agrees that if at any time it for any reason discontinues such coverage, it shall immediately give sixty (60) days' prior written notice to the Customer. The Bank need not maintain any insurance for the benefit of the Customer. (vii) Without limiting the foregoing, the Bank shall not be liable for any loss which results from: (1) the general risk of investing, or (2) investing or holding Assets in a particular country including, but not limited to, losses resulting from nationalization, expropriation or other governmental actions; regulation of the banking or securities industry; currency restrictions, devaluations or fluctuations; and market conditions which prevent the orderly execution of securities transactions or affect the value of Assets. (viii) Neither party shall be liable to the other for any loss due to forces beyond their control including, but not limited to strikes or work stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion, fission or radiation, or acts of God. (b) Consistent with and without limiting the first paragraph of this Section 12, it is specifically acknowledged that the Bank shall have no duty or responsibility to: (i) question Instructions or make any suggestions to the Customer or an Authorized Person regarding such Instructions; (ii) supervise or make recommendations with respect to investments or the retention of Securities; (iii) advise the Customer or an Authorized Person regarding any default in the payment of principal or income of any security other than as provided in Section 5(c) of this Agreement; (iv) evaluate or report to the Customer or an Authorized Person regarding the financial condition of any broker, agent (other than a Subcustodian) or other party to which Securities are delivered or payments are made pursuant to this Agreement; (v) review or reconcile trade confirmations received from brokers. The Customer or its Authorized Persons (as defined in Section 10) issuing Instructions shall bear any responsibility to review such confirmations against Instructions issued to and statements issued by the Bank. (c) The Customer authorizes the Bank to act under this Agreement notwithstanding that the Bank or any of its divisions or affiliates may have a material interest in a transaction, or circumstances are such that the Bank may have a potential conflict of duty or interest including the fact that the Bank or any of its affiliates may provide brokerage services to other customers, act as financial advisor to the issuer of Securities, act as a lender to the issuer of Securities, act in the same transaction as agent for more than one customer, have a material interest in the issue of Securities, or earn profits from any of the activities listed herein. 13. FEES AND EXPENSES. The Customer agrees to pay the Bank for its services under this Agreement such amount as may be agreed upon in writing, together with the Bank's reasonable out-of-pocket or incidental expenses, including, but not limited to, reasonable legal fees. The Bank shall have a lien on and is authorized to charge any Accounts of the Customer for any amount owing to the Bank under any provision of this Agreement upon notice to the Customer. 14. MISCELLANEOUS. (a) Foreign Exchange Transactions. Pursuant to Instructions, which may be ------------------------------ standing Instructions, to facilitate the administration of the Customer's trading and investment activity, the Bank is authorized to enter into spot or forward foreign exchange contracts with the Customer or an Authorized Person for the Customer and may also provide foreign exchange through its subsidiaries or Subcustodians. The Bank may establish rules or limitations concerning any foreign exchange facility made available. In all cases where the Bank, its subsidiaries, affiliates or Subcustodians enter into a foreign exchange contract related to Accounts, the terms and conditions of the then current foreign exchange contract of the Bank, its subsidiary, affiliate or Subcustodian and, to the extent not inconsistent, this Agreement shall apply to such transaction. (b) Certification of Residency, etc. The Customer certifies that it is a -------------------------------- resident of the United States and agrees to notify the Bank of any changes in residency. The Bank may rely upon this certification or the certification of such other facts as may be required to administer the Bank's obligations under this Agreement. The Customer will indemnify the Bank against all losses, liability, claims or demands arising directly or indirectly from any such certifications. (c) Access to Records. The Bank shall allow the Customer's independent public ------------------ accountants, officers and advisers reasonable access to the records of the Bank relating to the Assets as is required in connection with their examination of books and records pertaining to the Customer's affairs. Subject to restrictions under applicable law, the Bank shall also obtain an undertaking to permit the Customer's independent public accountants reasonable access to the records of any Subcustodian which has physical possession of any Assets as may be required in connection with the examination of the Customer's books and records. (d) Governing Law; Successors and Assigns. This Agreement shall be governed -------------------------------------- by the laws of the State of New York and shall not be assignable by either party, but shall bind the successors in interest of the Customer and the Bank. (e) Entire Agreement; Applicable Riders. Customer represents that the Assets ------------------------------------ deposited in the Accounts are (Check one): X Employee Benefit Plan or other assets subject to the Employee -- ---- Retirement Income Security Act of 1974, as amended ("ERISA"); X /2/ Mutual Fund assets subject to certain Securities and Exchange -- Commission ("SEC") rules and regulations; X /3/ Neither of the above. -- With respect to each Customer, this Agreement consists exclusively of this document together with Schedules A, B, Exhibits I - _______ and the following Rider(s) to the extent indicated on Schedule A hereto opposite the name of the Customer under the column headed "Applicable Riders to Agreement": X ERISA - - X MUTUAL FUND - - SPECIAL TERMS AND CONDITIONS --- There are no other provisions of this Agreement and this Agreement supersedes any other agreements, whether written or oral, between the parties. Any amendment to this Agreement must be in writing, executed by both parties. (f) Severability. In the event that one or more provisions of this Agreement ------------- are held invalid, illegal or enforceable in any respect on the basis of any particular circumstances or in any jurisdiction, the validity, legality and enforceability of such provision or provisions under other circumstances or in other jurisdictions and of the remaining provisions will not in any way be affected or impaired. (g) Waiver. Except as otherwise provided in this Agreement, no failure or ------- delay on the part of either party in exercising any power or right under this Agreement operates as a waiver, nor does any single or partial exercise of any power or right preclude any other or further exercise, or the exercise of any other power or right. No waiver by a party of any provision of this Agreement, or waiver of any breach or default, is effective unless in writing and signed by the party against whom the waiver is to be enforced. (h) Notices. All notices under this Agreement shall be effective when -------- actually received. Any notices or other ------------------------- With respect to each Customer listed on Schedule A hereto under the heading "ERISA Trusts." 2. With respect to each Customer listed on Schedule A hereto under the heading "Investment Companies/Portfolios Registered Under the Investment Company Act of 1940." 3. With respect to certain of the Customers listed on Schedule A hereto under the heading "Separate Accounts" as indicated on Schedule A. (h) Notices. All notices under this Agreement shall be effective when -------- actually received. Any notices or other EACH OF THE CUSTOMERS, INDIVIDUALLY AND SEPARATELY LISTED ON SECTION III OF SCHEDULE A HERETO By: /s/Alvin M. Younger Alvin M. Younger Treasurer THE CHASE MANHATTAN BANK, N.A. By: /s/Alan Naughton Alan Naughton Vice President Schedule A Page 1 of 2 LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO GLOBAL CUSTODY AGREEMENT WITH THE CHASE MANHATTAN BANK, N.A. DATED JANUARY 3, 1994 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is REGISTERED UNDER THE INVESTMENT applicable to all Customers COMPANY ACT OF 1940 listed under Section I of this Schedule A. Equity Funds ------------ T. Rowe Price Balanced Fund, Inc. T. Rowe Price Blue Chip Growth Fund, Inc. T. Rowe Price Capital Appreciation Fund T. Rowe Price Dividend Growth Fund, Inc. T. Rowe Price Equity Income Fund T. Rowe Price Growth & Income Fund, Inc. T. Rowe Price Growth Stock Fund, Inc. Institutional International Funds, Inc. on behalf of: Foreign Equity Fund T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price European Stock Fund T. Rowe Price International Discovery Fund T. Rowe Price International Stock Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price New Asia Fund T. Rowe Price Mid-Cap Growth Fund, Inc. T. Rowe Price New Era Fund, Inc. T. Rowe Price New Horizons Fund, Inc. T. Rowe Price OTC Fund, Inc. on behalf of: T. Rowe Price OTC Fund T. Rowe Price Science & Technology Fund, Inc. T. Rowe Price Small Cap Value Fund, Inc. CUNA Mutual Funds, Inc. on behalf of: CUNA Mutual Cornerstone Fund Schedule A Page 2 of 2 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT -------- ------------------------ Income Funds ------------ T. Rowe Price Adjustable Rate U.S. Government Fund, Inc. T. Rowe Price High Yield Fund, Inc. T. Rowe Price New Income Fund, Inc. T. Rowe Price Short-Term Bond Fund, Inc. T. Rowe Price Summit Funds, Inc. on behalf of: T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Global Government Bond Fund T. Rowe Price International Bond Fund T. Rowe Price Short-Term Global Income Fund APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all Customers Under Section II of this Schedule A. T. Rowe Price Trust Company as Trustee for the Johnson Matthey Salaried Common Trust Funds ------ ----- ----- T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: Foreign Discovery Trust Foreign Discovery Trust-Augment Pacific Discovery Trust European Discovery Trust Japan Discovery Trust Latin American Discovery Trust New York City International Common Trust Fund III. OTHER No Riders are applicable to the Customer listed RPFI International Partners, L.P. under Section III of this Schedule A. ERISA RIDER TO GLOBAL CUSTODY AGREEMENT BETWEEN THE CHASE MANHATTAN BANK, N.A. AND EACH OF THE ENTITIES LISTED ON SCHEDULE A HERETO EFFECTIVE JANUARY 3, 1994 Customer represents that the Assets being placed in the Bank's custody are subject to ERISA. It is understood that in connection therewith the Bank is a service provider and not a fiduciary of the plan and trust to which the assets are related. The Bank shall not be considered a party to the underlying plan and trust and the Customer hereby assumes all responsibility to assure that Instructions issued under this Agreement are in compliance with such plan and trust and ERISA. This Agreement will be interpreted as being in compliance with the Department of Labor Regulations Section 2550.404b-1 concerning the maintenance of indicia of ownership of plan assets outside of the jurisdiction of the district courts of the United States. The following modifications are made to the Agreement: Section 3. Subcustodians and Securities Depositories. ------------------------------------------ Add the following language to the end of Section 3: As used in this Agreement, the term Subcustodian and the term securities depositories include a branch of the Bank, a branch of a qualified U.S. bank, an eligible foreign custodian, or an eligible foreign securities depository, where such terms shall mean: (a) "qualified U.S. bank" shall mean a U.S. bank as described in paragraph (a)(2)(ii)(A)(1) of the Department of Labor Regulations Section 2550.404b-1; (b) "eligible foreign custodian" shall mean a banking institution incorporated or organized under the laws of a country other than the United States which is supervised or regulated by that country's government or an agency thereof or other regulatory authority in the foreign jurisdiction having authority over banks; and (c) "eligible foreign securities depository" shall mean a securities depository or clearing agency, incorporated or organized under the laws of a country other than the United States, which is supervised or regulated by that country's government or an agency thereof or other regulatory authority in the foreign jurisdiction having authority over such depositories or clearing agencies and which is described in paragraph (c)(2) of the Department of Labor Regulations Section 2550.404b-1. Section 4. Use of Subcustodian. -------------------- Subsection (d) of this section is modified by deleting the last sentence. Section 5. Deposit Account Payments. ------------------------- Subsection (b) is amended to read as follows: (b) In the event that any payment made under this Section 5 exceeds the funds available in the Deposit Account, such discretionary advance shall be deemed a service provided by the Bank under this Agreement for which it is entitled to recover its costs as may be determined by the Bank in good faith. Section 10. Authorized Persons. ------------------ Add the following paragraph at the end of Section 10: Customer represents that: a) Instructions will only be issued by or for a fiduciary pursuant to Department of Labor Regulation Section 404b-1 (a)(2)(i) and b) if Instructions are to be issued by an investment manager, such entity will meet the requirements of Section 3(38) of ERISA and will have been designated by the Customer to manage assets held in the Customer Accounts ("Investment Manager"). An Investment Manager may designate certain of its employees to act as Authorized Persons under this Agreement. Section 14(a). Foreign Exchange Transactions. ------------------------------ Add the following paragraph at the end of Subsection 14(a): Instructions to execute foreign exchange transactions with the Bank, its subsidiaries, affiliates or Subcustodians will include (1) the time period in which the transaction must be completed; (2) the location i.e., Chase New York, ---- Chase London, etc. or the Subcustodian with whom the contract is to be executed and (3) such additional information and guidelines as may be deemed necessary; and, if the Instruction is a standing Instruction, a provision allowing such Instruction to be overridden by specific contrary Instructions. MUTUAL FUND RIDER TO GLOBAL CUSTODY AGREEMENT BETWEEN THE CHASE MANHATTAN BANK, N.A. AND EACH OF THE ENTITIES LISTED ON SCHEDULE A HERETO EFFECTIVE JANUARY 3, 1994 Customer represents that the Assets being placed in the Bank's custody are subject to the Investment Company Act of 1940 (the Act), as the same may be amended from time to time. Except to the extent that the Bank has specifically agreed to comply with a condition of a rule, regulation, interpretation promulgated by or under the authority of the SEC or the Exemptive Order applicable to accounts of this nature issued to the Bank (Investment Company Act of 1940, Release No. 12053, November 20, 1981), as amended, or unless the Bank has otherwise specifically agreed, the Customer shall be solely responsible to assure that the maintenance of Assets under this Agreement complies with such rules, regulations, interpretations or exemptive order promulgated by or under the authority of the Securities Exchange Commission. The following modifications are made to the Agreement: Section 3. Subcustodians and Securities Depositories. ------------------------------------------ Add the following language to the end of Section 3: The terms Subcustodian and securities depositories as used in this Agreement shall mean a branch of a qualified U.S. bank, an eligible foreign custodian or an eligible foreign securities depository, which are further defined as follows: (a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined in Rule 17f-5 under the Investment Company Act of 1940; (b) "eligible foreign custodian" shall mean (i) a banking institution or trust company incorporated or organized under the laws of a country other than the United States that is regulated as such by that country's government or an agency thereof and that has shareholders' equity in excess of $200 million in U.S. currency (or a foreign currency equivalent thereof), (ii) a majority owned direct or indirect subsidiary of a qualified U.S. bank or bank holding company that is incorporated or organized under the laws of a country other than the United States and that has shareholders' equity in excess of $100 million in U.S. currency (or a foreign currency equivalent thereof)(iii) a banking institution or trust company incorporated or organized under the laws of a country other than the United States or a majority owned direct or indirect subsidiary of a qualified U.S. bank or bank holding company that is incorporated or organized under the laws of a country other than the United States which has such other qualifications as shall be specified in Instructions and approved by the Bank; or (iv) any other entity that shall have been so qualified by exemptive order, rule or other appropriate action of the SEC; and (c) "eligible foreign securities depository" shall mean a securities depository or clearing agency, incorporated or organized under the laws of a country other than the United States, which operates (i) the central system for handling securities or equivalent book-entries in that country, or (ii) a transnational system for the central handling of securities or equivalent book-entries. The Customer represents that its Board of Directors has approved each of the Subcustodians listed in Schedule B to this Agreement and the terms of the subcustody agreements between the Bank and each Subcustodian, which are attached as Exhibits I through of Schedule B, and further represents that its Board ---- has determined that the use of each Subcustodian and the terms of each subcustody agreement are consistent with the best interests of the Fund(s) and its (their) shareholders. The Bank will supply the Customer with any amendment to Schedule B for approval. As requested by the Bank, the Customer will supply the Bank with certified copies of its Board of Directors resolution(s) with respect to the foregoing prior to placing Assets with any Subcustodian so approved. Section 11. Instructions. ------------- Add the following language to the end of Section 11: Deposit Account Payments and Custody Account Transactions made pursuant to Section 5 and 6 of this Agreement may be made only for the purposes listed below. Instructions must specify the purpose for which any transaction is to be made and Customer shall be solely responsible to assure that Instructions are in accord with any limitations or restrictions applicable to the Customer by law or as may be set forth in its prospectus. (a) In connection with the purchase or sale of Securities at prices as confirmed by Instructions; (b) When Securities are called, redeemed or retired, or otherwise become payable; (c) In exchange for or upon conversion into other securities alone or other securities and cash pursuant to any plan or merger, consolidation, reorganization, recapitalization or readjustment; (d) Upon conversion of Securities pursuant to their terms into other securities; (e) Upon exercise of subscription, purchase or other similar rights represented by Securities; (f) For the payment of interest, taxes, management or supervisory fees, distributions or operating expenses; (g) In connection with any borrowings by the Customer requiring a pledge of Securities, but only against receipt of amounts borrowed; (h) In connection with any loans, but only against receipt of adequate collateral as specified in Instructions which shall reflect any restrictions applicable to the Customer; (i) For the purpose of redeeming shares of the capital stock of the Customer and the delivery to, or the crediting to the account of, the Bank, its Subcustodian or the Customer's transfer agent, such shares to be purchased or redeemed; (j) For the purpose of redeeming in kind shares of the Customer against delivery to the Bank, its Subcustodian or the Customer's transfer agent of such shares to be so redeemed; (k) For delivery in accordance with the provisions of any agreement among the Customer, the Bank and a broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Customer; (l) For release of Securities to designated brokers under covered call options, provided, however, that such Securities shall be released only upon payment to the Bank of monies for the premium due and a receipt for the Securities which are to be held in escrow. Upon exercise of the option, or at expiration, the Bank will receive from brokers the Securities previously deposited. The Bank will act strictly in accordance with Instructions in the delivery of Securities to be held in escrow and will have no responsibility or liability for any such Securities which are not returned promptly when due other than to make proper request for such return; (m) For spot or forward foreign exchange transactions to facilitate security trading, receipt of income from Securities or related transactions; (n) For other proper purposes as may be specified in Instructions issued by an officer of the Customer which shall include a statement of the purpose for which the delivery or payment is to be made, the amount of the payment or specific Securities to be delivered, the name of the person or persons to whom delivery or payment is to be made, and a certification that the purpose is a proper purpose under the instruments governing the Customer; and o) Upon the termination of this Agreement as set forth in Section 14(i). Section 12. Standard of Care; Liabilities. ------------------------------ Add the following subsection (c) to Section 12: (c) The Bank hereby warrants to the Customer that in its opinion, after due inquiry, the established procedures to be followed by each of its branches, each branch of a qualified U.S. bank, each eligible foreign custodian and each eligible foreign securities depository holding the Customer's Securities pursuant to this Agreement afford protection for such Securities at least equal to that afforded by the Bank's established procedures with respect to similar securities held by the Bank and its securities depositories in New York. Section 14. Access to Records. ------------------ Add the following language to the end of Section 14(c): Upon reasonable request from the Customer, the Bank shall furnish the Customer such reports (or portions thereof) of the Bank's system of internal accounting controls applicable to the Bank's duties under this Agreement. The Bank shall endeavor to obtain and furnish the Customer with such similar reports as it may reasonably request with respect to each Subcustodian and securities depository holding the Customer's assets. GLOBAL CUSTODY AGREEMENT WITH ----------------------------------- DATE ----------------------------------- SPECIAL TERMS AND CONDITIONS RIDER ---------------------------------- January, 1994 B SUB-CUSTODIANS EMPLOYED BY -------------------------- THE CHASE MANHATTAN BANK, N.A. LONDON, GLOBAL CUSTODY ----------------------------------------------------- COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK ARGENTINA The Chase Manhattan Bank, The Chase Manhattan N.A., Main Branch Bank, N.A. 25 De Mayo 130/140 Buenos Aires Buenos Aires ARGENTINA AUSTRALIA The Chase Manhattan Bank, The Chase Manhattan Bank Australia Limited Australia Limited Sydney 36th Floor World Trade Centre Jamison Street Sydney New South Wales 2000 AUSTRALIA AUSTRIA Creditanstalt - Bankvereln Credit Lyonnais Vienna Schottengasse 6 A - 1011, Vienna AUSTRIA BANGLADESH Standard Chartered Bank Standard Chartered Bank 18-20 Motijheel C.A. Dhaka Box 536, Dhaka-1000 BANGLADESH BELGIUM Generale Bank Credit Lyonnais Bank 3 Montagne Du Parc Brussels 1000 Bruxelles BELGIUM BOTSWANA Standard Chartered Bank Standard Chartered Bank Botswana Ltd. Botswana Ltd. 4th Floor Commerce House Gabarone The Mall Gaborone BOTSWANA BRAZIL Banco Chase Manhattan, S.A. Banco Chase Manhattan Chase Manhattan Center S.A., Sao Paolo Rua Verbo Divino, 1400 Sao Paulo, SP 04719-002 BRAZIL CANADA The Royal Bank of Canada Toronto Dominion Bank Royal Bank Plaza Toronto Toronto Ontario M5J 2J5 CANADA Canada Trust Toronto Dominion Bank Canada Trust Tower Toronto BCE Place 161 Bay at Front Toronto Ontario M5J 2T2 CANADA CHILE The Chase Manhattan Bank, The Chase Manhattan N.A., Agustinas 1235 Bank, N.A., Santiago Casilla 9192 Santiago CHILE COLOMBIA Cititrust Colombia S.A. Cititrust Colombia S.A. Sociedad Fiduciaria Sociedad Fiduciaria Av. Jimenez No 8-89 Santafe de Bogota Santafe de Bogota, DC COLOMBIA CZECH Ceskoslovenska Obchodni Ceskoslovenska REPUBLIC Banka, A.S.; Na Prikoope 14 Obchodni Banka, A.S. 115 20 Praha 1 Praha CZECH REPUBLIC DENMARK Den Danske Bank Den Danske Bak 2 Holmens Kanala DK 1091 Copenhagen Copenhagen DENMARK EUROBONDS Cedel S.A. A/c No. 17817 67 Blvd Grande Duchesse ECU:Lloyds Bank PLC Charlotte LUXEMBOURG International Banking Dividion A/c Chase Manhattan Bank, London N.A. London For all other currencies: see relevant country EURO CDS First Chicago Clearing Centre ECU:Lloyds Bank PLC 27 Leadenhall Street Banking Division London London EC3A 1AA For all other UK currencies: see relevant country FINLAND Kansallis-Osake-Pankki Kanasallis-Osake-Pankki Aleksanterinkatu 42 00100 Helsinki 10 FINLAND FRANCE Banque Paribas Societe Generale Paris Ref 256 BP 141 3, Rue D'Antin 75078 Paris Cedex 02 FRANCE GERMANY Chase Bank A.G. Chase Bank A.G. Alexanderstrasse 59 Frankfurt Postfach 90 01 09 60441 Frankfurt/Main GERMANY GREECE National Bank of Greece S.A. National Bank of Greece 38 Stadiou Street S.A. Athens Athens A/c Chase Manhattan GREECE Bank, N.A., London A/c No. 040/7/921578-68 HONG KONG The Chase Manhattan Bank,NA The Chase Manhattan 40/F One Exchange Square Bank, N.A., Hong Kong 8, Connaught Place Central, Hong Kong HONG KONG HUNGARY Citibank Budapest Rt. Citibank Budapest Rt. Vaci Utca 19-21 Budapest 1052 Budapest V HUNGARY INDIA The Hongkong and Shanghai The Hongkong and Banking Corporation Limited Shanghai Banking 52/60 Mahatma Gandhi Road Corporation Limited, Bombay 400 001 Bombay INDIA INDONESIA The Hongkong and Shanghai The Chase Manhattan Banking Corporation Limited Bank, N.A., Jakarta World Trade Center J1. Jend Sudirman Kav. 29-31 Jakarta 10023 INDONESIA IRELAND Bank of Ireland Allied Irish Bank Dublin International Financial Services Centre 1 Hargourmaster Place Dublin 1 IRELAND ISRAEL Bank Leumi Le-Israel B.M. Bank Leumi Le-Israel 19 Herzi Street B.M., Tel Aviv 65136 Tel Aviv ISRAEL ITALY The Chase Manhattan Bank, The Chase Manhattan N.A., Piazza Meda 1 Bank, N.A., Milan 20121 Milan ITALY JAPAN The Chase Manhattan Bank, The Chase Manhattan N.A.,1-3 Marunouchi 1-Chome Bank, N.A., Tokyo Chiyoda-Ku Tokyo 100 JAPAN JORDAN Arab Bank Limited Arab Bank Limited P.O. Box 950544-5 Amman Amman Shmeisani JORDAN LUXEMBOURG Banque Generale du Luxembourg Banque Generale du S.A., 27 Avenue Monterey Luxembourg S.A. LUXEMBOURG Luxembourg MALAYSIA The Chase Manhattan Bank, The Chase Manhattan N.A., Pernas International Bank, N.A., Kuala Lumpur Jalan Sultan Ismail 50250, Kuala Lumpur MALAYSIA MEXICO The Chase Manhattan Bank, No correspondent Bank N.A., Hamburgo 213, Piso 7 (Equities) 06660 Mexico D.F. MEXICO (Government Banco Nacional de Mexico, Banque Commerciale du Bonds) Avenida Juarez No. Maroc 104-11 Piso Casablanca 06040 Mexico D.F. MEXICO NETHERLANDS ABN AMRO N.V. Credit Lyonnais Securities Centre Bank Nederland N.V. P.O. Box 3200 Rotterdam 4800 De Breda NETHERLANDS NEW ZEALAND National Nominees Limited National Bank of New Zealand Level 2 BNZ Tower Wellington 125 Queen Street Auckland NEW ZEALAND NORWAY Den Norske Bank Den Norske Bank Kirkegaten 21 Oslo Oslo 1 NORWAY PAKISTAN Citibank N.A. Citibank N.A. State Life Building No.1 Karachi I.I. Chundrigar Road Karachi PAKISTAN PERU Citibank, N.A. Citibank N.A. Lima Camino Real 457 CC Torre Real - 5th Floor San Isidro, Lima 27 PERU PHILIPPINES The Hongkong and Shanghai The Hongkong and Shaghai Banking Corporation Limited Banking Corporation Hong Kong Bank Centre 3/F Limited, Manila San Miguel Avenue Ortigas Commercial Centre Pasig Metro Manila PHILIPPINES POLAND Bank Polska Kasa Opieki Bank Potska Kasa Opieki S.A., 6/12 Nowy Swiat Str S.A., Warsaw 00-920 Warsaw POLAND PORTUGAL Banco Espirito Santo & Banco Pinto & Comercial de Lisboa Sotto Mayor Servico de Gestaode Titulos Avenida Fontes R. Mouzinho da Silvelra, Pereira de Melo 36 r/c, 1200 Lisbon 1000 Lisbon PORTUGAL SHANGHAI The Hongkong and Shanghai The Chase Manhattan (CHINA) Banking Corporation Limited Bank, N.A.,Hong Kong Shanghai Branch Corporate Banking Centre Unit 504, 5/F Shanghai Centre 1376 Hanjing Xi Lu Shanghai THE PEOPLE'S REPUBLIC OF CHINA SCHENZHEN The Hongkong and Shanghai The Chase Manhattan (CHINA) Banking Corporation Limited Bank, N.A., Hong Kong 1st Floor Central Plaza Hotel No. 1 Chun Feng Lu Shenzhen THE PEOPLE'S REPUBLIC OF CHINA SINGAPORE The Chase Manhattan Bank, The Chase Manhattan N.A. Bank, N.A. Shell Tower Singapore 50 Raffles Place Singapore 0104 SINGAPORE SOUTH KOREA The Hongkong & Shanghai The Hongkong & Shanghai Banking Corporation Limited Banking Corporation 6/F Kyobo Building Limited, Seoul #1 Chongro, 1-ka Chongro-Ku, Seoul SOUGH KOREA SPAIN The Chase Manhattan Bank, Banco Zaragozano, S.A. N.A.,Calle Peonias 2 Madrid 7th Floor La Piovera 28042 Madrid SPAIN URUGUAY The First National Bank The First National Bank of Boston of Boston Zabala 1463 Montevideo Montevideo URUGUAY U.S.A The Chase Manhattan Bank, The Chase Manhattan N.A. Bank, N.A. 1 Chase Manhattan Plaza New York New York NY 10081 U.S.A. VENEZUELA Citibank N.A. Citibank N.A. Carmelitas a Altagracia Caracas Edificio Citibank Caracas 1010 VENEZUELA AMENDMENT AGREEMENT AMENDMENT AGREEMENT, dated as of April 18, 1994 (the "AMENDMENT AGREEMENT") to the Global Custody Agreement, effective January 3, 1994 (the "CUSTODY AGREEMENT") by and between each of the Entities listed in Attachment A hereto, separately and individually (each such entity referred to hereinafter as the "CUSTOMER") and THE CHASE MANHATTAN BANK, N.A. (the "BANK"). Terms defined in the Custody Agreement are used herein as therein defined. WITNESSETH: WHEREAS, the Customer wishes to appoint the Bank as its global custodian and the bank wishes to accept such appointment pursuant to the terms of the Custody Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1. Amendment. Section I of Schedule A of the Custody Agreement ("SCHEDULE --------- A") shall be amended to add each Customer listed in Attachment A hereto. The revised Schedule A incorporating these changes in the form attached hereto as Attachment B shall supersede the existing Schedule A in its entirety. 2. Agreement. The Customer agrees to be bound in all respects by all the --------- terms and conditions of the Custody Agreement and shall be fully liable thereunder as a "Customer" as defined in the Custody Agreement. 3. Confirmation of Agreement. Except as amended hereby, the Custody ------------------------- Agreement is in full force and effect and as so amended is hereby ratified, approved and confirmed by the Customer and the Bank in all respects. 4. Governing Law. This Amendment Agreement shall be construed in ------------- accordance with and governed by the law of the State of New York without regard to its conflict of law principles. IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the day and year first above written. THE CHASE MANHATTAN BANK, N.A. By: /s/Alan P. Naughton Alan P. Naughton Vice President EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO, SEPARATELY AND INDIVIDUALLY By: /s/Carmen F. Deyesu Carmen F. Deyesu Treasurer Attachment A LIST OF CUSTOMERS T. Rowe Price International Series, Inc. on behalf of the T. Rowe Price International Stock Portfolio T. Rowe Price Equity Series, Inc. on behalf of the T. Rowe Price Equity Income Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price New America Growth Fund, Inc. T. Rowe Price Income Series, Inc. on behalf of T. Rowe Price Limited-Term Bond Portfolio Attachment B Schedule A Page 1 of 2 LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO GLOBAL CUSTODY AGREEMENT WITH THE CHASE MANHATTAN BANK, N.A. DATED JANUARY 3, 1993 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is REGISTERED UNDER THE INVESTMENT applicable to all Customers COMPANY ACT OF 1940 listed under Section I of this Schedule A. Equity Funds ------------ T. Rowe Price Balanced Fund, Inc. T. Rowe Price Blue Chip Growth Fund, Inc. T. Rowe Price Capital Appreciation Fund T. Rowe Price Dividend Growth Fund, Inc. T. Rowe Price Equity Income Fund T. Rowe Price Growth & Income Fund, Inc. T. Rowe Price Growth Stock Fund, Inc. Institutional International Funds, Inc. on behalf of: Foreign Equity Fund T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price European Stock Fund T. Rowe Price International Discovery Fund T. Rowe Price International Stock Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price New Asia Fund T. Rowe Price International Series, Inc., on behalf of: T. Rowe Price International Stock Portfolio T. Rowe Price Mid-Cap Growth Fund, Inc. T. Rowe Price New Era Fund, Inc. T. Rowe Price New Horizons Fund, Inc. T. Rowe Price OTC Fund, Inc. on behalf of: T. Rowe Price OTC Fund T. Rowe Price Science & Technology Fund, Inc. T. Rowe Price Small-Cap Value Fund, Inc. CUNA Mutual Funds, Inc. on behalf of: CUNA Mutual Cornerstone Fund T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Equity Income Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price New America Growth Fund, Inc. Attachment B Schedule A Page 2 of 2 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY -------- -------------- AGREEMENT ---------- Income Funds ------------ T. Rowe Price Adjustable Rate U.S. Government Fund, Inc. T. Rowe Price High Yield Fund, Inc. T. Rowe Price New Income Fund, Inc. T. Rowe Price Short-Term Bond Fund, Inc. T. Rowe Price Summit Funds, Inc. on behalf of: T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Global Government Income Fund T. Rowe Price International Bond Fund T. Rowe Price Short-Term Global Income Fund T. Rowe Price Income Series, Inc. on behalf of: T. Rowe Price Limited-Term Bond Portfolio II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all Customers Under Section II of this Schedule A. T. Rowe Price Trust Company as Trustee for the Johnson Matthey Salaried Savings Plan Common Trust Funds ------------------ T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: Foreign Discovery Trust Foreign Discovery Trust-Augment Pacific Discovery Trust European Discovery Trust Japan Discovery Trust Latin American Discovery Trust New York City International Common Trust Fund III. OTHER No Riders are applicable to the Customer listed under RPFI International Section III of this Partners, L.P. Schedule A. AMENDMENT AGREEMENT AMENDMENT AGREEMENT, dated as of August 15, 1994 (the "AMENDMENT AGREEMENT") to the Global Custody Agreement, effective January 3, 1994, as amended (the "CUSTODY AGREEMENT") by and between each of the Entities listed in Attachment A hereto, separately and individually (each such entity referred to hereinafter as the "CUSTOMER") and THE CHASE MANHATTAN BANK, N.A. (the "BANK"). Terms defined in the Custody Agreement are used herein as therein defined. WITNESSETH: WHEREAS, the Customer wishes to appoint the Bank as its global custodian and the Bank wishes to accept such appointment pursuant to the terms of the Custody Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1. Amendment. Section I of Schedule A of the Custody Agreement ("SCHEDULE --------- A") shall be amended to add each Customer listed in Attachment A hereto. The revised Schedule A incorporating these changes in the form attached hereto as Attachment B shall supersede the existing Schedule A in its entirety. 2. Agreement. The Customer agrees to be bound in all respects by all the --------- terms and conditions of the Custody Agreement and shall be fully liable thereunder as a "Customer" as defined in the Custody Agreement. 3. Confirmation of Agreement. Except as amended hereby, the Custody ------------------------- Agreement is in full force and effect and as so amended is hereby ratified, approved and confirmed by the Customer and the Bank in all respects. 4. Governing Law. This Amendment Agreement shall be construed in ------------- accordance with and governed by the law of the State of New York without regard to its conflict of law principles. IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the day and year first above written. THE CHASE MANHATTAN BANK, N.A. By: /s/Alan P. Naughton Alan P. Naughton Vice President EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO, SEPARATELY AND INDIVIDUALLY By: /s/Carmen F. Deyesu Carmen F. Deyesu Treasurer Attachment A LIST OF CUSTOMERS T. Rowe Price Equity Series, Inc. on behalf of the T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price Personal Strategy Funds, Inc. on behalf of T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund Attachment B Schedule A Page 1 of 2 LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO GLOBAL CUSTODY AGREEMENT WITH THE CHASE MANHATTAN BANK, N.A. DATED JANUARY 3, 1993 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is REGISTERED UNDER THE INVESTMENT applicable to all Customers COMPANY ACT OF 1940 listed under Section I of this Schedule A. Equity Funds ------------ T. Rowe Price Balanced Fund, Inc. T. Rowe Price Blue Chip Growth Fund, Inc. T. Rowe Price Capital Appreciation Fund T. Rowe Price Dividend Growth Fund, Inc. T. Rowe Price Equity Income Fund T. Rowe Price Growth & Income Fund, Inc. T. Rowe Price Growth Stock Fund, Inc. Institutional International Funds, Inc. on behalf of: Foreign Equity Fund T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price European Stock Fund T. Rowe Price International Discovery Fund T. Rowe Price International Stock Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price New Asia Fund T. Rowe Price International Series, Inc., on behalf of: T. Rowe Price International Stock Portfolio T. Rowe Price Mid-Cap Growth Fund, Inc. T. Rowe Price New Era Fund, Inc. T. Rowe Price New Horizons Fund, Inc. T. Rowe Price OTC Fund, Inc. on behalf of: T. Rowe Price OTC Fund T. Rowe Price Science & Technology Fund, Inc. T. Rowe Price Small-Cap Value Fund, Inc. CUNA Mutual Funds, Inc. on behalf of: CUNA Mutual Cornerstone Fund T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Equity Income Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price New America Growth Fund, Inc. Attachment B Schedule A Page 2 of 3 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY -------- -------------- AGREEMENT ---------- Income Funds ------------ T. Rowe Price Adjustable Rate U.S. Government Fund, Inc. T. Rowe Price High Yield Fund, Inc. T. Rowe Price New Income Fund, Inc. T. Rowe Price Short-Term Bond Fund, Inc. T. Rowe Price Summit Funds, Inc. on behalf of: T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Global Government Income Fund T. Rowe Price International Bond Fund T. Rowe Price Short-Term Global Income Fund T. Rowe Price Income Series, Inc. on behalf of: T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price Personal Strategy Funds, Inc. on behalf of: T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all Customers Under Section II of this Schedule A. T. Rowe Price Trust Company as Trustee for the Johnson Matthey Salaried Savings Plan Common Trust Funds ------------------ T. Rowe Price Trust company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: Foreign Discovery Trust Foreign Discovery Trust-Augment Pacific Discovery Trust European Discovery Trust Japan Discovery Trust Latin American Discovery Trust New York City International Common Trust Fund III. OTHER No Riders are applicable to the Customer listed under RPFI International Section III of this Partners, L.P. Schedule A. AMENDMENT AGREEMENT AMENDMENT AGREEMENT, dated as of November 28, 1994 (the "Amendment Agreement") to the Global Custody Agreement, effective January 3, 1994, as amended (the "Custody Agreement") by and between each of the Entities listed in Attachment A hereto, separately and individually (each such entity referred to hereinafter as the "Customer") and THE CHASE MANHATTAN BANK, N.A. (the "Bank"). Terms defined in the Custody Agreement are used herein as therein defined. WITNESSETH: WHEREAS, the Customer wishes to appoint the Bank as its global custodian and the Bank wishes to accept such appointment pursuant to the terms of the Custody Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1. Amendment. Section I of Schedule A of the Custody Agreement ("Schedule A") shall be amended to add each Customer listed in Attachment A hereto. The revised Schedule A incorporating these changes in the form attached hereto as Attachment B shall supersede the existing Schedule A in its entirety. 2. Agreement. The Customer agrees to be bound in all respects by all the terms and conditions of the Custody Agreement and shall be fully liable thereunder as a "Customer" as defined in the Custody Agreement. 3. Confirmation of Agreement. Except as amended hereby, the Custody Agreement is in full force and effect and as so amended is hereby ratified, approved and confirmed by the Customer and the Bank in all respects. 4. Governing Law. This Amendment Agreement shall be construed in accordance with and governed by the law of the State of New York without regard to its conflict of law principles. IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the day and year first above written. THE CHASE MANHATTAN BANK, N.A. /s/Alan P. Naughton By :_________________________________ Alan P. Naughton Vice President EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO, SEPARATELY AND INDIVIDUALLY /s/Carmen F. Deyesu By: _________________________________ Carmen F. Deyesu Treasurer Attachment A LIST OF CUSTOMERS T. Rowe Price Value Fund, Inc. T. Rowe Price Capital Opportunity Fund, Inc. T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Bond Fund Attachment B Schedule A Page 1 of 2 LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO GLOBAL CUSTODY AGREEMENT WITH THE CHASE MANHATTAN BANK, N.A. DATED JANUARY 3, 1993 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is REGISTERED UNDER THE INVESTMENT applicable to all Customers COMPANY ACT OF 1940 listed under Section I of this Schedule A. Equity Funds T. Rowe Price Balanced Fund, Inc. T. Rowe Price Blue Chip Growth Fund, Inc. T. Rowe Price Capital Appreciation Fund T. Rowe Price Capital Opportunity Fund, Inc. T. Rowe Price Dividend Growth Fund, Inc. T. Rowe Price Equity Income Fund T. Rowe Price Growth & Income Fund, Inc. T. Rowe Price Growth Stock Fund, Inc. Institutional International Funds, Inc. on behalf of: Foreign Equity Fund T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price European Stock Fund T. Rowe Price International Discovery Fund T. Rowe Price International Stock Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price New Asia Fund T. Rowe Price International Series, Inc., on behalf of: T. Rowe Price International Stock Portfolio T. Rowe Price Mid-Cap Growth Fund, Inc. T. Rowe Price New Era Fund, Inc. T. Rowe Price New Horizons Fund, Inc. T. Rowe Price OTC Fund, Inc. on behalf of: T. Rowe Price OTC Fund T. Rowe Price Science & Technology Fund, Inc. T. Rowe Price Small-Cap Value Fund, Inc. CUNA Mutual Funds, Inc. on behalf of: CUNA Mutual Cornerstone Fund T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Equity Income Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price New America Growth Fund, Inc. T. Rowe Price Value Fund, Inc. Attachment B Schedule A Page 2 of 2 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT Income Funds T. Rowe Price Adjustable Rate U.S. Government Fund, Inc. T. Rowe Price High Yield Fund, Inc. T. Rowe Price New Income Fund, Inc. T. Rowe Price Short-Term Bond Fund, Inc. T. Rowe Price Summit Funds, Inc. on behalf of: T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Global Government Income Fund T. Rowe Price International Bond Fund T. Rowe Price Short-Term Global Income Fund T. Rowe Price Emerging Markets Bond Fund T. Rowe Price Income Series, Inc. on behalf of: T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price Personal Strategy Funds, Inc. on behalf of: T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all Customers Under Section II of this Schedule A. T. Rowe Price Trust Company as Trustee for the Johnson Matthey Salaried Savings Plan Common Trust Funds T. Rowe Price Trust company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: Foreign Discovery Trust Foreign Discovery Trust-Augment Pacific Discovery Trust European Discovery Trust Japan Discovery Trust Latin American Discovery Trust New York City International Common Trust Fund III. OTHER No Riders are applicable to the Customer listed under RPFI International Section III of this Partners, L.P. Schedule A. AMENDMENT AGREEMENT AMENDMENT AGREEMENT, dated as of May 31, 1995 (the "Amendment Agreement") to the Global Custody Agreement, effective January 3, 1994, as amended (the "Custody Agreement") by and between each of the Entities listed in Attachment A hereto, separately and individually (each such entity referred to hereinafter as the "Customer") and THE CHASE MANHATTAN BANK, N.A. (the "Bank"). Terms defined in the Custody Agreement are used herein as therein defined. WITNESSETH: WHEREAS, the Customer wishes to appoint the Bank as its global custodian and the Bank wishes to accept such appointment pursuant to the terms of the Custody Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1. Amendment. Section I of Schedule A of the Custody Agreement ("Schedule A") shall be amended to add and delete certain Customers as specified in Attachment A hereto. The revised Schedule A incorporating these changes in the form attached hereto as Attachment B shall supersede the existing Schedule A in its entirety. 2. Agreement. The Customer agrees to be bound in all respects by all the terms and conditions of the Custody Agreement and shall be fully liable thereunder as a "Customer" as defined in the Custody Agreement. 3. Confirmation of Agreement. Except as amended hereby, the Custody Agreement is in full force and effect and as so amended is hereby ratified, approved and confirmed by the Customer and the Bank in all respects. 4. Governing Law. This Amendment Agreement shall be construed in accordance with and governed by the law of the State of New York without regard to its conflict of law principles. IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the day and year first above written. THE CHASE MANHATTAN BANK, N.A. /s/Alan P. Naughton By: _________________________________ Alan P. Naughton Vice President EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO, SEPARATELY AND INDIVIDUALLY /s/Carmen F. Deyesu By: _________________________________ Carmen F. Deyesu Treasurer Attachment A LIST OF CUSTOMERS Add the following Fund: T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Stock Fund Delete the following Fund: CUNA Mutual Funds, Inc. on behalf of: CUNA Mutual Cornerstone Fund Attachment B Schedule A Page 1 of 2 LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO GLOBAL CUSTODY AGREEMENT WITH THE CHASE MANHATTAN BANK, N.A. DATED JANUARY 3, 1993 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is REGISTERED UNDER THE INVESTMENT applicable to all Customers COMPANY ACT OF 1940 listed under Section I of this Schedule A. Equity Funds T. Rowe Price Balanced Fund, Inc. T. Rowe Price Blue Chip Growth Fund, Inc. T. Rowe Price Capital Appreciation Fund T. Rowe Price Capital Opportunity Fund, Inc. T. Rowe Price Dividend Growth Fund, Inc. T. Rowe Price Equity Income Fund T. Rowe Price Growth & Income Fund, Inc. T. Rowe Price Growth Stock Fund, Inc. Institutional International Funds, Inc. on behalf of: Foreign Equity Fund T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price European Stock Fund T. Rowe Price International Discovery Fund T. Rowe Price International Stock Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price New Asia Fund T. Rowe Price Emerging Markets Stock Fund T. Rowe Price International Series, Inc., on behalf of: T. Rowe Price International Stock Portfolio T. Rowe Price Mid-Cap Growth Fund, Inc. T. Rowe Price New Era Fund, Inc. T. Rowe Price New Horizons Fund, Inc. T. Rowe Price OTC Fund, Inc. on behalf of: T. Rowe Price OTC Fund T. Rowe Price Science & Technology Fund, Inc. T. Rowe Price Small-Cap Value Fund, Inc. T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Equity Income Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price New America Growth Fund, Inc. T. Rowe Price Value Fund, Inc. Attachment B Schedule A Page 2 of 2 Income Funds T. Rowe Price Adjustable Rate U.S. Government Fund, Inc. T. Rowe Price High Yield Fund, Inc. T. Rowe Price New Income Fund, Inc. T. Rowe Price Short-Term Bond Fund, Inc. T. Rowe Price Summit Funds, Inc. on behalf of: T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Global Government Income Fund T. Rowe Price International Bond Fund T. Rowe Price Short-Term Global Income Fund T. Rowe Price Emerging Markets Bond Fund T. Rowe Price Income Series, Inc. on behalf of: T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price Personal Strategy Funds, Inc. on behalf of: T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all Customers Under Section II of this Schedule A. T. Rowe Price Trust Company as Trustee for the Johnson Matthey Salaried Savings Plan Common Trust Funds T. Rowe Price Trust company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: Foreign Discovery Trust Foreign Discovery Trust-Augment Pacific Discovery Trust European Discovery Trust Japan Discovery Trust Latin American Discovery Trust New York City International Common Trust Fund III. OTHER No Riders are applicable to the Customer listed under RPFI International Section III of this Partners, L.P. Schedule A. AMENDMENT AGREEMENT AMENDMENT AGREEMENT, dated as of November 1, 1995 (the "Amendment Agreement") to the Global Custody Agreement, effective January 3, 1994, as amended (the "Custody Agreement") by and between each of the Entities listed in Attachment A hereto, separately and individually (each such entity referred to hereinafter as the "Customer") and THE CHASE MANHATTAN BANK, N.A. (the "Bank"). Terms defined in the Custody Agreement are used herein as therein defined. WITNESSETH: WHEREAS, the Customer wishes to appoint the Bank as its global custodian and the Bank wishes to accept such appointment pursuant to the terms of the Custody Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1. Amendment. Section I of Schedule A of the Custody Agreement ("Schedule A") shall be amended to add and delete certain Customers as specified in Attachment A hereto. The revised Schedule A incorporating these changes in the form attached hereto as Attachment B shall supersede the existing Schedule A in its entirety. 2. Agreement. The Customer agrees to be bound in all respects by all the terms and conditions of the Custody Agreement and shall be fully liable thereunder as a "Customer" as defined in the Custody Agreement. 3. Confirmation of Agreement. Except as amended hereby, the Custody Agreement is in full force and effect and as so amended is hereby ratified, approved and confirmed by the Customer and the Bank in all respects. 4. Governing Law. This Amendment Agreement shall be construed in accordance with and governed by the law of the State of New York without regard to its conflict of law principles. IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the day and year first above written. THE CHASE MANHATTAN BANK, N.A. /s/Alan R. Naughton By: _________________________________ Alan R. Naughton Vice President EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO, SEPARATELY AND INDIVIDUALLY /s/Carmen F. Deyesu By: _________________________________ Carmen F. Deyesu Treasurer Attachment A LIST OF CUSTOMERS Add the following Funds: T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Global Stock Fund T. Rowe Price Corporate Income Fund, Inc. T. Rowe Price Health & Life Sciences Fund, Inc. Attachment B Schedule A Page 1 of 2 LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO GLOBAL CUSTODY AGREEMENT WITH THE CHASE MANHATTAN BANK, N.A. DATED JANUARY 3, 1993 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is REGISTERED UNDER THE INVESTMENT applicable to all Customers COMPANY ACT OF 1940 listed under Section I of this Schedule A. Equity Funds T. Rowe Price Balanced Fund, Inc. T. Rowe Price Blue Chip Growth Fund, Inc. T. Rowe Price Capital Appreciation Fund T. Rowe Price Capital Opportunity Fund, Inc. T. Rowe Price Dividend Growth Fund, Inc. T. Rowe Price Equity Income Fund T. Rowe Price Growth & Income Fund, Inc. T. Rowe Price Growth Stock Fund, Inc. Institutional International Funds, Inc. on behalf of: Foreign Equity Fund T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price European Stock Fund T. Rowe Price International Discovery Fund T. Rowe Price International Stock Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price New Asia Fund T. Rowe Price Emerging Markets Stock Fund T. Rowe Price Global Stock Fund T. Rowe Price International Series, Inc., on behalf of: T. Rowe Price International Stock Portfolio T. Rowe Price Mid-Cap Growth Fund, Inc. T. Rowe Price New Era Fund, Inc. T. Rowe Price New Horizons Fund, Inc. T. Rowe Price OTC Fund, Inc. on behalf of: T. Rowe Price OTC Fund T. Rowe Price Science & Technology Fund, Inc. T. Rowe Price Small-Cap Value Fund, Inc. T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Equity Income Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price New America Growth Fund, Inc. T. Rowe Price Value Fund, Inc. T. Rowe Price Health & Life Sciences Fund, Inc. Attachment B Schedule A Page 1 of 2 Income Funds T. Rowe Price Adjustable Rate U.S. Government Fund, Inc. T. Rowe Price High Yield Fund, Inc. T. Rowe Price New Income Fund, Inc. T. Rowe Price Short-Term Bond Fund, Inc. T. Rowe Price Summit Funds, Inc. on behalf of: T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Global Government Income Fund T. Rowe Price International Bond Fund T. Rowe Price Short-Term Global Income Fund T. Rowe Price Emerging Markets Bond Fund T. Rowe Price Income Series, Inc. on behalf of: T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price Personal Strategy Funds, Inc. on behalf of: T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. Rowe Price Corporate Income Fund, Inc. APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all Customers Under Section II of this Schedule A. T. Rowe Price Trust Company as Trustee for the Johnson Matthey Salaried Savings Plan Common Trust Funds T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: Foreign Discovery Trust Foreign Discovery Trust-Augment Pacific Discovery Trust European Discovery Trust Japan Discovery Trust Latin American Discovery Trust New York City International Common Trust Fund III. OTHER No Riders are applicable to the Customer listed under RPFI International Section III of this Partners, L.P. Schedule A. AMENDMENT AGREEMENT The Global Custody Agreement of January 3, 1994, as amended April 18, 1994, August 15, 1994, November 28, 1994, May 31, 1995, and November 1, 1995 (the "Custody Agreement"), by and between each of the Entities listed in Attachment A hereto, separately and individually (each such entity referred to hereinafter as the "Customer") and The Chase Manhattan Bank, N.A., which contracts have been assumed by operation of law by THE CHASE MANHATTAN BANK (the "Bank") is hereby further amended, as of July 31, 1996 (the "Amendment Agreement"). Terms defined in the Custody Agreement are used herein as therein defined. WITNESSETH: WHEREAS, the Customer wishes to appoint the Bank as its global custodian and the Bank wishes to accept such appointment pursuant to the terms of the Custody Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1. Amendment. Section I of Schedule A of the Custody Agreement ("Schedule A") shall be amended to add and delete certain Customers as specified in Attachment A hereto. The revised Schedule A incorporating these changes in the form attached hereto as Attachment B shall supersede the existing Schedule A in its entirety. 2. Agreement. The Customer agrees to be bound in all respects by all the terms and conditions of the Custody Agreement and shall be fully liable thereunder as a "Customer" as defined in the Custody Agreement. 3. Confirmation of Agreement. Except as amended hereby, the Custody Agreement is in full force and effect and as so amended is hereby ratified, approved and confirmed by the Customer and the Bank in all respects. 4. Governing Law. This Amendment Agreement shall be construed in accordance with and governed by the law of the State of New York without regard to its conflict of law principles. IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the day and year first above written. THE CHASE MANHATTAN BANK /s/Caroline Willson By:_________________________________ Caroline Willson Vice President EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO, SEPARATELY AND INDIVIDUALLY /s/Carmen F. Deyesu By:________________________________ Carmen F. Deyesu Treasurer Attachment A LIST OF CUSTOMERS Add the following Funds: T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Mid-Cap Growth Portfolio T. Rowe Price Financial Services Fund, Inc. Institutional Equity Funds, Inc. on behalf of: Mid-Cap Equity Growth Fund T. Rowe Price Mid-Cap Value Fund, Inc. T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of: Emerging Markets Equity Trust Attachment B Schedule A Page 1 of 2 LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO GLOBAL CUSTODY AGREEMENT WITH THE CHASE MANHATTAN BANK, N.A. DATED JANUARY 3, 1994 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is REGISTERED UNDER THE INVESTMENT applicable to all Customers COMPANY ACT OF 1940 listed under Section I of this Schedule A. Equity Funds T. Rowe Price Balanced Fund, Inc. T. Rowe Price Blue Chip Growth Fund, Inc. T. Rowe Price Capital Appreciation Fund T. Rowe Price Capital Opportunity Fund, Inc. T. Rowe Price Dividend Growth Fund, Inc. T. Rowe Price Equity Income Fund T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Equity Income Portfolio T. Rowe Price Mid-Cap Growth Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price Financial Services Fund, Inc. T. Rowe Price Growth & Income Fund, Inc. T. Rowe Price Growth Stock Fund, Inc. T. Rowe Price Health Sciences Fund, Inc. Institutional Equity Funds, Inc. on behalf of: Mid-Cap Equity Growth Fund Institutional International Funds, Inc. on behalf of: Foreign Equity Fund T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Stock Fund T. Rowe Price European Stock Fund T. Rowe Price Global Stock Fund T. Rowe Price International Discovery Fund T. Rowe Price International Stock Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price New Asia Fund T. Rowe Price International Series, Inc., on behalf of: T. Rowe Price International Stock Portfolio T. Rowe Price Mid-Cap Growth Fund, Inc. T. Rowe Price Mid-Cap Value Fund, Inc. T. Rowe Price New America Growth Fund T. Rowe Price New Era Fund, Inc. T. Rowe Price New Horizons Fund, Inc. T. Rowe Price OTC Fund, Inc. on behalf of: T. Rowe Price OTC Fund T. Rowe Price Science & Technology Fund, Inc. T. Rowe Price Small-Cap Value Fund, Inc. T. Rowe Price Value Fund, Inc. Income Funds T. Rowe Price Corporate Income Fund, Inc. T. Rowe Price High Yield Fund, Inc. T. Rowe Price Income Series, Inc. on behalf of: T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Bond Fund T. Rowe Price Global Government Bond Fund T. Rowe Price International Bond Fund T. Rowe Price Short-Term Global Income Fund T. Rowe Price New Income Fund, Inc. T. Rowe Price Personal Strategy Funds, Inc. on behalf of: T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. Rowe Price Short-Term Bond Fund, Inc. T. Rowe Price Short-Term U.S. Government Fund, Inc. T. Rowe Price Summit Funds, Inc. on behalf of: T. Rowe Price Summit Limited-Term Bond Fund APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all Customers Under Section II of this Schedule A. T. Rowe Price Trust Company as Trustee for the Johnson Matthey Salaried Savings Plan Common Trust Funds T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: Emerging Markets Equity Trust European Discovery Trust Foreign Discovery Trust Foreign Discovery Trust-Augment Japan Discovery Trust Latin America Discovery Trust Pacific Discovery Trust New York City International Common Trust Fund III. OTHER No Riders are applicable to the Customer listed under RPFI International Section III of this Partners, L.P. Schedule A. AMENDMENT, dated July 17, 1997 to the January 3, 1994 Custody Agreement ("Agreement"), as amended July 31, 1996 ("Amendment Agreement"), by and between each of the Entities listed in Attachment B of the Amendment Agreement, separately and individually (each such entity hereinafter referred to as the "Customer"), and The Chase Manhattan Bank, N.A. whose obligations have since been adopted by The Chase Manhattan Bank ("Bank"), having a place of business at One Chase Manhattan Plaza, New York, N.Y. 10081 It is hereby agreed as follows: Section 1. Except as modified hereby, the Agreement is confirmed in all respects. Capitalized terms used herein without definition shall have the meanings ascribed to them in the Agreement. Section 2. The Agreement is amended as follows by adding the following as new ' 15: (a) "CMBI" shall mean Chase Manhattan Bank International, an indirect wholly-owned subsidiary of Bank, located in Moscow, Russia, and any nominee companies appointed by it. (b) "International Financial Institution" shall mean any bank in the top 1,000 (together with their affiliated companies) as measured by "Tier 1" capital or any broker/dealer in the top 100 as measured by capital. (c) "Negligence" shall mean the failure to exercise "Reasonable Care". (d) "No-Action Letter" shall mean the response of the Securities and Exchange Commission's Office of Chief Counsel of Investment Management, dated April 18, 1995, in respect of the Templeton Russia Fund, Inc. (SEC Ref. No. 95-151-CC, File No. 811-8788) providing "no-action" relief under '17(f) of the Investment Company Act of 1940, as amended, and SEC Rule 17-f5 thereunder, in connection with custody of such Templeton Russia Fund, Inc.'s investments in Russian Securities. (e) "Reasonable Care" shall mean the use of reasonable custodial practices under the applicable circumstances as measured by the custodial practices then prevailing in Russia of International Financial Institutions acting as custodians for their institutional investor clients in Russia. (f) "Registrar Company" shall mean any entity providing share registration services to an issuer of Russian Securities. (g) "Registrar Contact" shall mean a contract between CMBI and a Registrar Company (and as the same may be amended from time to time) containing, inter alia, the contractual provisions described at paragraphs (a)-(e) on pps. 5-6 of the No-Action Letter. (h) "Russian Security" shall mean a Security issued by a Russian issuer. (i) "Share Extract" shall mean: (i) an extract of its share registration books issued by a Registrar Company indicating an investor's ownership of a security; and (ii) a form prepared by CMBI or its agent in those cases where a Registrar Company in unwilling to issue a Share Extract. Section 3. Section 6(a) of the Agreement is amended by adding the following at the end thereof: "With respect to Russia, payment for Russian Securities shall not be made prior to the issuance of the Share Extract relating to such Russian Security. Delivery of Russian Securities may be made in accordance with the customary or established securities trading or securities processing practices and procedures in Russia. Delivery of Russian Securities may also be made in any manner specifically required by Instructions acceptable to the Bank. Customer shall promptly supply such transaction and settlement information as may be requested by Bank or CMBI in connection with particular transactions." Section 4. Section 8 of the Agreement is amended by adding a new paragraph to the end thereof as follows: "It is understood and agreed that Bank need only use its reasonable efforts with respect to performing the functions described in this '8 with respect to Russian Securities." Section 5. Section 12(a)(i) of the Agreement is amended with respect to Russian custody by deleting the phrase "reasonable care" wherever it appears and substituting, in lieu thereof, the phrase "Reasonable Care." Section 6. Section 12(a)(i) of the Agreement is further amended with respect to Russian custody by inserting the following at the end of the first sentence thereof: "provided that, with respect to Russian Securities, Bank's responsibilities shall be limited to safekeeping of relevant Share Extracts." Section 7. Section 12(a)(i) of the Agreement is further amended with respect to Russian custody by inserting the following after the second sentence thereof: "In connection with the foregoing, neither Bank nor CMBI shall assume responsibility for, and neither shall be liable for, any action or inaction of any Registrar Company and no Registrar Company shall be, or shall be deemed to be, Bank, CMBI, a Subcustodian, a securities depository or the employee, agent or personnel of any of the foregoing. To the extent that CMBI employs agents to perform any of the functions to be performed by Bank or CMBI with respect to Russian Securities, neither Bank nor CMBI shall be responsible for any act, omission, default or for the solvency of any such agent unless the appointment of such agent was made with Negligence or in bad faith, or for any loss due to the negligent act of such agent except to the extent that such agent performs in a negligent manner which is the cause of the loss to the Customer and the Bank or CMBI failed to exercise reasonable care in monitoring such agent's performance where Customer has requested and Bank has agreed to accept such monitoring responsibility and except that where Bank or CMBI uses (i) an affiliated nominee or (ii) an agent to perform the share registration or share confirmation functions described in paragraphs (a)-(e) on pps. 5-6 of the No-Action Letter, and, to the extent applicable to CMBI, the share registration functions described on pps. 2-3 of the No-Action Letter, Bank and CMBI shall be liable to Customer as if CMBI were responsible for performing such services itself." Section 8. Section 12(a)(ii) is amended with respect to Russian custody by deleting the word "negligently" and substituting, in lieu thereof, the word "Negligently." Section 9. Section 12(a)(iii) is amended with respect to Russian custody by deleting the word "negligence" and substituting, in lieu thereof, the word "Negligence." Section 10. Add a new Section 16 to the Agreement as follows: (a) Bank will advise Customer (and will update such advice from time to time as changes occur) of those Registrar Companies with which CMBI has entered into a Registrar Contract. Bank shall cause CMBI both to monitor each Registrar Company and to promptly advise Customer when CMBI has actual knowledge of the occurrence of any one or more of the events described in paragraphs (i)-(v) on pps. 8-9 of the No-Action Letter with respect to a Registrar Company that serves in that capacity for any issuer the shares of which are held by Customer. (b) Where Customer is considering investing in the Russian Securities of an issuer as to which CMBI does not have a Registrar Company, Customer may request that Bank ask that CMBI both consider whether it would be willing to attempt to enter into such a Registrar Contract and to advise Customer of its willingness to do so. Where CMBI has agreed to make such an attempt, Bank will advise Customer of the occurrence of any one or more or the events described in paragraphs (i)-(iv) on pps. 8-9 of the No-Action Letter of which CMBI has actual knowledge. (c) Where Customer is considering investing in the Russian Securities of an issuer as to which CMBI has a Registrar Contract with the issuer's Registrar Company, Customer may advise Bank of its interest in investing in such issuer and, in such event, Bank will advise Customer of the occurrence of any one or more of the events described in paragraphs (i)-(v) on pps. 8-9 of the No-Action Letter of which CMBI has actual knowledge. Section 11. Add a new Section 17 to the Agreement as follows: "Customer shall pay for and hold Bank and CMBI harmless from any liability or loss resulting from the imposition or assessment of any taxes (including, but not limited to, state, stamp and other duties) or other governmental charges, and any related expenses with respect to income on Russian Securities." Section 12. Add a new Section 18 to the Agreement as follows: "Customer acknowledges and agrees that CMBI may not be able, in given cases and despite its reasonable efforts, to obtain a Share Extract from a Registrar Company and CMBI shall not be liable in any such even including with respect to any losses resulting from such failure." Section 13. Add a new Section 19 to the Agreement as follows: "Customer acknowledges that it has received, reviewed and understands that Chase market report for Russia, including, but not limited to, the risks described therein." Section 14. Add a new Section 20 to the Agreement as follows: "Subject to the cooperation of a Registrar Company, for at least the first two years following CMBI's first use of a Registrar Company, Bank shall cause CMBI to conduct share confirmations on at least a quarterly basis, although thereafter confirmations may be conducted on a less frequent basis if Customer's Board of Directors, in consultation with CMBI, determines it to be appropriate." Section 15. Add a new Section 21 to the Agreement as follows: "Bank shall cause CMBI to prepare for distribution to Customer's Board of Directors a quarterly report identifying: (i) any concerns it has regarding the Russian share registration system that should be brought to the attention of the Board of Directors; and (ii) the steps CMBI has taken during the reporting period to ensure that Customer's interests continue to be appropriately recorded." Section 16. Add a new Section 22 to the Agreement as follows: "Except as provided in new '16(b), the services to be provided by Bank hereunder will be provided only in relation to Russian Securities for which CMBI has entered into a Registrar Contract with the relevant Registrar Company." ********************* IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. for EACH CUSTOMER THE CHASE MANHATTAN BANK separately and individually /s/Henry H. Hopkins /s/Helen C. Bairsto Henry H. Hopkins Helen C. Bairsto Vice President Vice President AMENDMENT AGREEMENT The Global Custody Agreement of January 3, 1994, as amended April 18, 1994, August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, and July 31, 1996 (the "Custody Agreement"), by and between each of the Entities listed in Attachment A hereto, separately and individually (each such entity referred to hereinafter as the "Customer") and The Chase Manhattan Bank, N.A., which contracts have been assumed by operation of law by THE CHASE MANHATTAN BANK (the "Bank") is hereby further amended, as of July 23, 1997 (the "Amendment Agreement"). Terms defined in the Custody Agreement are used herein as therein defined. WITNESSETH: WHEREAS, the Customer wishes to appoint the Bank as its global custodian and the Bank wishes to accept such appointment pursuant to the terms of the Custody Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1. Amendment. Section 1 of Schedule A of the Custody Agreement ("Schedule A") shall be amended to add certain Customers as specified in Attachment A hereto. The revised Schedule A incorporating these changes in the form attached hereto as Attachment B shall supersede the existing Schedule A in its entirety. 2. Agreement. The Customer agrees to be bound in all respects by all the terms and conditions of the Custody Agreement and shall be fully liable thereunder as a "Customer" as defined in the Custody Agreement. 3. Confirmation of Agreement. Except as amended hereby, the Custody Agreement is in full force and effect and as so amended is hereby ratified, approved and confirmed by the Customer and the Bank in all respects. 4. Governing Law: This Amendment Agreement shall be construed in accordance with and governed by the law of the State of New York without regard to its conflict of law principles. IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the day and year first above written. THE CHASE MANHATTAN BANK By: /S/Caroline Willson Caroline Willson Vice President EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO, SEPARATELY AND INDIVIDUALLY By: /s/Carmen F. Deyesu Carmen F. Deyesu Treasurer Attachment A LIST OF CUSTOMERS Add the following Funds: T. Rowe Price Diversified Small-Cap Growth Fund, Inc. T. Rowe Price Media & Telecommunications Fund, Inc. T. Rowe Price Tax-Efficient Balanced Fund, Inc. Change the name of the following Fund: T. Rowe Price OTC Fund, Inc., on behalf of: T. Rowe Price OTC Fund Effective May 1, 1997, the fund name changed to: T. Rowe Price Small-Cap Stock Fund, Inc. Delete the following Fund: T. Rowe Price International Funds, Inc., on behalf of: T. Rowe Price Short-Term Global Income Fund Attachment B Schedule A Page 1 of 3 LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO GLOBAL CUSTODY AGREEMENT WITH THE CHASE MANHATTAN BANK DATED JANUARY 3, 1994 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is REGISTERED UNDER THE INVESTMENT applicable to all Customers COMPANY ACT OF 1940 listed under Section I of this Schedule A. Equity Funds T. Rowe Price Balanced Fund, Inc. T. Rowe Price Blue Chip Growth Fund, Inc. T. Rowe Price Capital Appreciation Fund T. Rowe Price Capital Opportunity Fund, Inc. T. Rowe Price Diversified Small-Cap Growth Fund, Inc. T. Rowe Price Dividend Growth Fund, Inc. T. Rowe Price Equity Income Fund T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Equity Income Portfolio T. Rowe Price Mid-Cap Growth Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price Financial Services Fund, Inc. T. Rowe Price Growth & Income Fund, Inc. T. Rowe Price Growth Stock Fund, Inc. T. Rowe Price Health Sciences Fund, Inc. Institutional Equity Funds, Inc. on behalf of: Mid-Cap Equity Growth Fund Institutional International Funds, Inc. on behalf of: Foreign Equity Fund T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Stock Fund T. Rowe Price European Stock Fund T. Rowe Price Global Stock Fund T. Rowe Price International Discovery Fund T. Rowe Price International Stock Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price New Asia Fund PAGE 69 Attachment B Schedule A Page 2 of 3 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT T. Rowe Price International Series, Inc. on behalf of: T. Rowe Price International Stock Portfolio T. Rowe Price Media & Telecommunications Fund, Inc. T. Rowe Price Mid-Cap Growth Fund, Inc. T. Rowe Price Mid-Cap Value Fund, Inc. T. Rowe Price New America Growth Fund T. Rowe Price New Era Fund, Inc. T. Rowe Price New Horizons Fund, Inc. T. Rowe Price Science & Technology Fund, Inc. T. Rowe Price Small-Cap Stock Fund, Inc. T. Rowe Price Small-Cap Value Fund, Inc. T. Rowe Price Value Fund, Inc. Income Funds T. Rowe Price Corporate Income Fund, Inc. T. Rowe Price High Yield Fund, Inc. T. Rowe Price Income Series, Inc. on behalf of: T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Bond Fund T. Rowe Price Global Government Bond Fund T. Rowe Price International Bond Fund T. Rowe Price New Income Fund, Inc. T. Rowe Price Personal Strategy Funds, Inc. on behalf of: T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. Rowe Price Short-Term Bond Fund, Inc. T. Rowe Price Short-Term U.S. Government Fund, Inc. T. Rowe Price Summit Funds, Inc. on behalf of: T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price Tax-Efficient Balanced Fund, Inc. Attachment B Schedule A Page 3 of 3 APPLICABLE RIDERS TO APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all Customers Under Section II of this Schedule A. T. Rowe Price Trust Company as Trustee for the Johnson Matthey Salaried Savings Plan Common Trust Funds T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: Emerging Markets Equity Trust European Discovery Trust Foreign Discovery Trust Foreign Discovery Trust - Augment Japan Discovery Trust Latin America Discovery Trust Pacific Discovery Trust New York City International Common Trust Fund III. OTHER RPFI International Partners, L.P. No Riders are applicable to the Customer listed under Section III of this Schedule A. AMENDMENT, dated July 23, 1997, to the Custody Agreement ("Agreement"), dated January 3, 1994, between The Chase Manhattan Bank (as successor to The Chase Manhattan Bank, N.A.), having an office at 270 Park Avenue, New York, NY 10017-2070 and certain T. Rowe Price funds. It is agreed as follows: 1. The third line of '8 of the Agreement is deleted and the following is inserted, in lieu thereof: Bank shall provide proxy voting services in accordance with the terms of the proxy voting services rider ("Proxy Rider") annexed hereto as Exhibit 1. Proxy voting services may be provided by Bank or, in whole or in part, by one or more third parties appointed by Bank (which may be Affiliates of Bank). 2. Except as modified hereby, the Agreement is confirmed in all respects. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. EACH OF THE CUSTOMERS, INDIVIDUALLY THE CHASE MANHATTAN AND SEPARATELY LISTED ON SECTION 1 OF BANK SCHEDULE A HERETO By:/s/Henry H. Hopkins By:/s/Helen C. Bairsto Henry H. Hopkins Helen C. Bairsto Vice President Vice President EACH OF THE CUSTOMERS, INDIVIDUALLY AND SEPARATELY LISTED ON SECTION 2 OF SCHEDULE A HERETO By:/s/Nancy M. Morris Nancy M. Morris Vice President Exhibit 1 GLOBAL PROXY SERVICE RIDER TO GLOBAL CUSTODY AGREEMENT BETWEEN THE CHASE MANHATTAN BANK AND CERTAIN T. ROWE PRICE FUNDS DATED 3RD JANUARY, 1994 1. Global Proxy Services ("Proxy Services") shall be provided for the countries listed in the procedures and guidelines ("Procedures") furnished to the Customer, as the same may be amended by Bank from time to time on prior notice to Customer. The Procedures are incorporated by reference herein and form a part of this Rider. 2. Proxy Services shall consist of those elements as set forth in the Procedures, and shall include (a) notifications ("Notifications") by Bank to Customer of the dates of pending shareholder meetings, resolutions to be voted upon and the return dates as may be received by Bank or provided to Bank by its Subcustodians or third parties, and (b) voting by Bank of proxies based on Customer directions. Original proxy materials or copies thereof shall not be provided. Notifications shall generally be in English and, where necessary, shall be summarized and translated from such non-English materials as have been made available to Bank or its Subcustodian. In this respect Bank=s only obligation is to provide information from sources it believes to be reliable and/or to provide materials summarized and/or translated in good faith. Bank reserves the right to provide Notifications, or parts thereof, in the language received. Upon reasonable advance request by Customer, backup information relative to Notifications, such as annual reports, explanatory material concerning resolutions, management recommendations or other material relevant to the exercise of proxy voting rights shall be provided as available, but without translation. 3. While Bank shall attempt to provide accurate and complete Notifications, whether or not translated, Bank shall not be liable for any losses or other consequences that may result from reliance by Customer upon Notifications where Bank prepared the same in good faith. 4. Notwithstanding the fact that Bank may act in a fiduciary capacity with respect to Customer under other agreements or otherwise under the Agreement, in performing Proxy Services Bank shall be acting solely as the agent of Customer, and shall not exercise any discretion with regard to such Proxy Services. 5. Proxy voting may be precluded or restricted in a variety of circumstances, including, without limitation, where the relevant Securities are: (I) on loan; (ii) at registrar for registration or reregistration; (iii) the subject of a conversion or other corporate action; (iv) not held in a name subject to the control of Bank or its Subcustodian or are otherwise held in a manner which precludes voting; (v) not capable of being voted on account of local market regulations or practices or restrictions by the issuer; or (vi) held in a margin or collateral account. 6. Customer acknowledges that in certain countries Bank may be unable to vote individual proxies but shall only be able to vote proxies on a net basis (e.g., a net yes or no vote given the voting instructions received from all customers). 7. Customer shall not make any use of the information provided hereunder, except in connection with the funds or plans covered hereby, and shall in no event sell, license, give or otherwise make the information provided hereunder available, to any third party, and shall not directly or indirectly compete with Bank or diminish the market for Proxy Services by provision of such information, in whole or in part, for compensation or otherwise, to any third party. 8. The names of Authorized Persons for Proxy Services shall be furnished to Bank in accordance with '10 of the Agreement. Proxy Services fees shall be as separately agreed. SCHEDULE A SECTION 1 T. Rowe Price Balanced Fund, Inc. T. Rowe Price Blue Chip Growth Fund, Inc. T. Rowe Price Capital Appreciation Fund T. Rowe Price Capital Opportunity Fund, Inc. T. Rowe Price Corporate Income Fund, Inc. T. Rowe Price Diversified Small-Cap Growth Fund, Inc. T. Rowe Price Dividend Growth Fund, Inc. T. Rowe Price Equity Income Fund T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Mid-Cap Growth Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price Financial Services Fund, Inc. T. Rowe Price Growth & Income Fund, Inc. T. Rowe Price Growth Stock Fund, Inc. T. Rowe Price Health Sciences Fund, Inc. T. Rowe Price High Yield Fund, Inc. T. Rowe Price Income Series, Inc. on behalf of: T. Rowe Price Limited Term Bond Portfolio Institutional Equity Funds, Inc. on behalf of: Mid-Cap Equity Growth Fund T. Rowe Price Media & Telecommunications Fund, Inc. T. Rowe Price Mid-Cap Growth Fund, Inc. T. Rowe Price Mid-Cap Value Fund, Inc. T. Rowe Price New America Growth Fund, Inc. T. Rowe Price New Era Fund, Inc. T. Rowe Price New Horizons Fund, Inc. T. Rowe Price New Income Fund, Inc. T. Rowe Price Personal Strategy Funds, Inc. on behalf of: T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. Rowe Price Science & Technology Fund, Inc. T. Rowe Price Short-Term Bond Fund, Inc. T. Rowe Price Short-Term U.S. Government Fund, Inc. T. Rowe Price Small-Cap Stock Fund, Inc. T. Rowe Price Small-Cap Value Fund, Inc. T. Rowe Price Summit Funds, Inc. on behalf of: T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price Tax-Efficient Balanced Fund, Inc. T. Rowe Price Value Fund, Inc. SECTION 2 NYC International Common Trust Fund AMENDMENT, dated October 29, 1997, to the Custody Agreement ("Agreement"), dated January 3, 1994, between The Chase Manhattan Bank (as successor to The Chase Manhattan Bank, N.A.), having an office at 270 Park Avenue, New York, NY 10017-2070 and certain T. Rowe Price funds. It is agreed as follows: 1. The third line of '8 of the Agreement is deleted and the following is inserted, in lieu thereof: Bank shall provide proxy voting services in accordance with the terms of the proxy voting services rider ("Proxy Rider") annexed hereto as Exhibit 1. Proxy voting services may be provided by Bank or, in whole or in part, by one or more third parties appointed by Bank (which may be Affiliates of Bank). 2. Except as modified hereby, the Agreement is confirmed in all respects. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. EACH OF THE CUSTOMERS, INDIVIDUALLY THE CHASE MANHATTAN AND SEPARATELY LISTED ON SECTION 1 OF BANK SCHEDULE A HERETO By:/s/Henry H. Hopkins By:/s/Helen C. Bairsto Henry H. Hopkins Helen C. Bairsto Vice President Vice President EACH OF THE CUSTOMERS, INDIVIDUALLY AND SEPARATELY LISTED ON SECTION 2 OF SCHEDULE A HERETO By:/s/Nancy M. Morris Nancy M. Morris Vice President GLOBAL PROXY SERVICE RIDER TO GLOBAL CUSTODY AGREEMENT BETWEEN THE CHASE MANHATTAN BANK AND CERTAIN T. ROWE PRICE FUNDS DATED 3RD JANUARY, 1994 1. Global Proxy Services ("Proxy Services") shall be provided for the countries listed in the procedures and guidelines ("Procedures") furnished to the Customer, as the same may be amended by Bank from time to time on prior notice to Customer. The Procedures are incorporated by reference herein and form a part of this Rider. 2. Proxy Services shall consist of those elements as set forth in the Procedures, and shall include (a) notifications ("Notifications") by Bank to Customer of the dates of pending shareholder meetings, resolutions to be voted upon and the return dates as may be received by Bank or provided to Bank by its Subcustodians or third parties, and (b) voting by Bank of proxies based on Customer directions. Original proxy materials or copies thereof shall not be provided. Notifications shall generally be in English and, where necessary, shall be summarized and translated from such non-English materials as have been made available to Bank or its Subcustodian. In this respect Bank=s only obligation is to provide information from sources it believes to be reliable and/or to provide materials summarized and/or translated in good faith. Bank reserves the right to provide Notifications, or parts thereof, in the language received. Upon reasonable advance request by Customer, backup information relative to Notifications, such as annual reports, explanatory material concerning resolutions, management recommendations or other material relevant to the exercise of proxy voting rights shall be provided as available, but without translation. 3. While Bank shall attempt to provide accurate and complete Notifications, whether or not translated, Bank shall not be liable for any losses or other consequences that may result from reliance by Customer upon Notifications where Bank prepared the same in good faith. 4. Notwithstanding the fact that Bank may act in a fiduciary capacity with respect to Customer under other agreements or otherwise under the Agreement, in performing Proxy Services Bank shall be acting solely as the agent of Customer, and shall not exercise any discretion with regard to such Proxy Services. 5. Proxy voting may be precluded or restricted in a variety of circumstances, including, without limitation, where the relevant Securities are: (I) on loan; (ii) at registrar for registration or reregistration; (iii) the subject of a conversion or other corporate action; (iv) not held in a name subject to the control of Bank or its Subcustodian or are otherwise held in a manner which precludes voting; (v) not capable of being voted on account of local market regulations or practices or restrictions by the issuer; or (vi) held in a margin or collateral account. 6. Customer acknowledges that in certain countries Bank may be unable to vote individual proxies but shall only be able to vote proxies on a net basis (e.g., a net yes or no vote given the voting instructions received from all customers). 7. Customer shall not make any use of the information provided hereunder, except in connection with the funds or plans covered hereby, and shall in no event sell, license, give or otherwise make the information provided hereunder available, to any third party, and shall not directly or indirectly compete with Bank or diminish the market for Proxy Services by provision of such information, in whole or in part, for compensation or otherwise, to any third party. 8. The names of Authorized Persons for Proxy Services shall be furnished to Bank in accordance with '10 of the Agreement. Proxy Services fees shall be as separately agreed. SCHEDULE A SECTION 1 T. Rowe Price Balanced Fund, Inc. T. Rowe Price Blue Chip Growth Fund, Inc. T. Rowe Price Capital Appreciation Fund T. Rowe Price Capital Opportunity Fund, Inc. T. Rowe Price Corporate Income Fund, Inc. T. Rowe Price Diversified Small-Cap Growth Fund, Inc. T. Rowe Price Dividend Growth Fund, Inc. T. Rowe Price Equity Income Fund T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Mid-Cap Growth Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price Financial Services Fund, Inc. T. Rowe Price Growth & Income Fund, Inc. T. Rowe Price Growth Stock Fund, Inc. T. Rowe Price Health Sciences Fund, Inc. T. Rowe Price High Yield Fund, Inc. T. Rowe Price Income Series, Inc. on behalf of: T. Rowe Price Limited Term Bond Portfolio Institutional Equity Funds, Inc. on behalf of: Mid-Cap Equity Growth Fund T. Rowe Price Media & Telecommunications Fund, Inc. T. Rowe Price Mid-Cap Growth Fund, Inc. T. Rowe Price Mid-Cap Value Fund, Inc. T. Rowe Price New America Growth Fund, Inc. T. Rowe Price New Era Fund, Inc. T. Rowe Price New Horizons Fund, Inc. T. Rowe Price New Income Fund, Inc. T. Rowe Price Personal Strategy Funds, Inc. on behalf of: T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. Rowe Price Real Estate Fund, Inc. T. Rowe Price Science & Technology Fund, Inc. T. Rowe Price Short-Term Bond Fund, Inc. T. Rowe Price Short-Term U.S. Government Fund, Inc. T. Rowe Price Small-Cap Stock Fund, Inc. T. Rowe Price Small-Cap Value Fund, Inc. T. Rowe Price Summit Funds, Inc. on behalf of: T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price Tax-Efficient Balanced Fund, Inc. T. Rowe Price Value Fund, Inc. SECTION 2 NYC International Common Trust Fund AMENDMENT AGREEMENT The Global Custody Agreement of January 3, 1994, as amended April 18, 1994, August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, July 31, 1996, and July 23, 1997 (the "Custody Agreement"), by and between each of the Entities listed in Attachment A hereto, separately and individually (each such entity referred to hereinafter as the "Customer") and The Chase Manhattan Bank, N.A., which contracts have been assumed by operation of law by THE CHASE MANHATTAN BANK (the "Bank") is hereby further amended, as of October 29, 1997 (the "Amendment Agreement"). Terms defined in the Custody Agreement are used herein as therein defined. WITNESSETH: WHEREAS, the Customer wishes to appoint the Bank as its global custodian and the Bank wishes to accept such appointment pursuant to the terms of the Custody Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1. Amendment. Section 1 of Schedule A of the Custody Agreement ("Schedule A") shall be amended to add certain Customers as specified in Attachment A hereto. The revised Schedule A incorporating these changes in the form attached hereto as Attachment B shall supersede the existing Schedule A in its entirety. 2. Agreement. The Customer agrees to be bound in all respects by all the terms and conditions of the Custody Agreement and shall be fully liable thereunder as a "Customer" as defined in the Custody Agreement. 3. Confirmation of Agreement. Except as amended hereby, the Custody Agreement is in full force and effect and as so amended is hereby ratified, approved and confirmed by the Customer and the Bank in all respects. 4. Governing Law: This Amendment Agreement shall be construed in accordance with and governed by the law of the State of New York without regard to its conflict of law principles. IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the day and year first above written. THE CHASE MANHATTAN BANK By: /s/Helen C. Bairsto Helen C. Bairsto Vice President EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO, SEPARATELY AND INDIVIDUALLY By: /s/Carmen F. Deyesu Carmen F. Deyesu Treasurer Attachment A LIST OF CUSTOMERS Add the following Fund: T. Rowe Price Real Estate Fund, Inc. Attachment B Schedule A Page 1 of 3 LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO GLOBAL CUSTODY AGREEMENT WITH THE CHASE MANHATTAN BANK DATED JANUARY 3, 1994 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is REGISTERED UNDER THE INVESTMENT applicable to all Customers COMPANY ACT OF 1940 listed under Section I of this Schedule A. Equity Funds T. Rowe Price Balanced Fund, Inc. T. Rowe Price Blue Chip Growth Fund, Inc. T. Rowe Price Capital Appreciation Fund T. Rowe Price Capital Opportunity Fund, Inc. T. Rowe Price Diversified Small-Cap Growth Fund, Inc. T. Rowe Price Dividend Growth Fund, Inc. T. Rowe Price Equity Income Fund T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Equity Income Portfolio T. Rowe Price Mid-Cap Growth Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price Financial Services Fund, Inc. T. Rowe Price Growth & Income Fund, Inc. T. Rowe Price Growth Stock Fund, Inc. T. Rowe Price Health Sciences Fund, Inc. Institutional Equity Funds, Inc. on behalf of: Mid-Cap Equity Growth Fund Institutional International Funds, Inc. on behalf of: Foreign Equity Fund T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Stock Fund T. Rowe Price European Stock Fund T. Rowe Price Global Stock Fund T. Rowe Price International Discovery Fund T. Rowe Price International Stock Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price New Asia Fund Attachment B Schedule A Page 2 of 3 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT T. Rowe Price International Series, Inc. on behalf of: T. Rowe Price International Stock Portfolio T. Rowe Price Media & Telecommunications Fund, Inc. T. Rowe Price Mid-Cap Growth Fund, Inc. T. Rowe Price Mid-Cap Value Fund, Inc. T. Rowe Price New America Growth Fund T. Rowe Price New Era Fund, Inc. T. Rowe Price New Horizons Fund, Inc. T. Rowe Price Real Estate Fund, Inc. T. Rowe Price Science & Technology Fund, Inc. T. Rowe Price Small-Cap Stock Fund, Inc. T. Rowe Price Small-Cap Value Fund, Inc. T. Rowe Price Value Fund, Inc. Income Funds T. Rowe Price Corporate Income Fund, Inc. T. Rowe Price High Yield Fund, Inc. T. Rowe Price Income Series, Inc. on behalf of: T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Bond Fund T. Rowe Price Global Government Bond Fund T. Rowe Price International Bond Fund T. Rowe Price New Income Fund, Inc. T. Rowe Price Personal Strategy Funds, Inc. on behalf of: T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. Rowe Price Short-Term Bond Fund, Inc. T. Rowe Price Short-Term U.S. Government Fund, Inc. T. Rowe Price Summit Funds, Inc. on behalf of: T. Rowe Price Summit Limited-Term Bond Fund T. Rowe Price Tax-Efficient Balanced Fund, Inc. Attachment B Schedule A Page 3 of 3 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all Customers Under Section II of this Schedule A. T. Rowe Price Trust Company as Trustee for the Johnson Matthey Salaried Employee Savings Plan Common Trust Funds T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: Emerging Markets Equity Trust European Discovery Trust Foreign Discovery Trust Foreign Discovery Trust - Augment Japan Discovery Trust Latin America Discovery Trust Pacific Discovery Trust New York City International Common Trust Fund III. OTHER RPFI International Partners, L.P. No Riders are applicable to the Customer listed under Section III of this Schedule A. AMENDMENT AGREEMENT TO RUSSIAN RIDER TO THE GLOBAL CUSTODY AGREEMENT AMENDMENT to Attachment B of Global Custody Agreement dated January 3, 1994, as amended July 23, 1997, is hereby further amended as of September 3, 1997. NOW, THEREFORE, the parties hereto agree as follows: 1. Amendment. Amend Attachment B to consist of the following funds when pertaining to the Russian Rider dated July 17, 1997: Institutional International Funds, Inc., on behalf of: Foreign Equity Fund T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Bond Fund T. Rowe Price Emerging Markets Stock Fund T. Rowe Price European Stock Fund T. Rowe Price Global Government Bond Fund T. Rowe Price Global Stock Fund T. Rowe Price International Bond Fund T. Rowe Price International Discovery Fund T. Rowe Price International Stock Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price New Asia Fund T. Rowe Price International Series, Inc. on behalf of: T. Rowe Price International Stock Portfolio IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the day and year first above written. THE CHASE MANHATTAN BANK EACH OF THE PARTIES LISTED ABOVE By: /s/Helen C. Bairsto By:/s/Henry H. Hopkins Helen C. Bairsto Henry H. Hopkins Vice President Vice President AMENDMENT AGREEMENT The Global Custody Agreement of January 3, 1994, as amended April 18, 1994, August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, July 31, 1996, July 23, 1997, September 3, 1997, and October 29, 1997 (the "Custody Agreement"), by and between each of the Entities listed in Schedule A, as amended thereto, severally and not jointly (each such entity referred to hereinafter as the "Customer") and The Chase Manhattan Bank, N.A., which contracts have been assumed by operation of law by THE CHASE MANHATTAN BANK (the "Bank") is hereby further amended, as of December 15, 1998 (the "Amendment Agreement"). Terms defined in the Custody Agreement are used herein as therein defined. WITNESSETH: WHEREAS, the Customer wishes to appoint the Bank as its global custodian and the Bank wishes to accept such appointment pursuant to the terms of the Custody Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1. Amendment. Sections 1 and 3 of Schedule A of the Custody Agreement ---------- ("Schedule A") shall be amended to add or change certain Customers as specified in Attachment A hereto. The revised Schedule A incorporating these changes in the form attached shall supersede the existing Schedule A in its entirety. 2. Agreement. The Customer agrees to be bound in all respects by all the ---------- terms and conditions of the Custody Agreement and shall be fully liable thereunder as a "Customer" as defined in the Custody Agreement. 3. Confirmation of Agreement. Except as amended hereby, the Custody -------------------------- Agreement is in full force and effect and as so amended is hereby ratified, approved and confirmed by the Customer and the Bank in all respects. 4. Governing Law. This Amendment Agreement shall be construed in accordance -------------- with and governed by the law of the State of New York without regard to its conflict of law principles. IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the day and year first above written. THE CHASE MANHATTAN BANK /s/Joseph M. Rondinelli By: _____________________________________ Joseph M. Rondinelli Vice President EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO, SEVERALLY AND NOT JOINTLY /s/Henry H. Hopkins By: _____________________________________ Henry H. Hopkins Vice President Attachment A LIST OF CUSTOMERS Change the name of the following Fund: - -------------------------------------- T. Rowe Price Global Government Bond Fund Effective May 1, 1998, the fund name changed to: T. Rowe Price Global Bond Fund Add the following Fund: - ----------------------- T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price International Growth & Income Fund Add the following Funds to the Russian Rider: - --------------------------------------------- T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price International Growth & Income Fund RPFI International Partners, L.P. Schedule A Page 1 of 3 LIST OF CUSTOMERS, SEVERALLY AND NOT JOINTLY PARTIES TO GLOBAL CUSTODY AGREEMENT WITH THE CHASE MANHATTAN BANK DATED JANUARY 3, 1994 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is REGISTERED UNDER THE INVESTMENT applicable to all Customers COMPANY ACT OF 1940 listed under Section I of this Schedule A. Equity Funds ------------ T. Rowe Price Balanced Fund, Inc. Global Proxy Service Rider T. Rowe Price Blue Chip Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Capital Appreciation Fund Global Proxy Service Rider T. Rowe Price Capital Opportunity Fund, Inc. Global Proxy Service Rider T. Rowe Price Diversified Small-Cap Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Dividend Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Equity Income Fund Global Proxy Service Rider T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Equity Income Portfolio T. Rowe Price Mid-Cap Growth Portfolio Global Proxy Service Rider T. Rowe Price New America Growth Portfolio Global Proxy Service Rider T. Rowe Price Personal Strategy Balanced Portfolio Global Proxy Service Rider T. Rowe Price Financial Services Fund, Inc. Global Proxy Service Rider T. Rowe Price Growth & Income Fund, Inc. Global Proxy Service Rider T. Rowe Price Growth Stock Fund, Inc. Global Proxy Service Rider T. Rowe Price Health Sciences Fund, Inc. Global Proxy Service Rider Institutional Equity Funds, Inc. on behalf of: Mid-Cap Equity Growth Fund Global Proxy Service Rider Institutional International Funds, Inc. on behalf of: Foreign Equity Fund Russian Rider T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Stock Fund Russian Rider T. Rowe Price European Stock Fund Russian Rider T. Rowe Price Global Stock Fund Russian Rider T. Rowe Price International Discovery Fund Russian Rider T. Rowe Price International Growth & Income Fund Russian Rider T. Rowe Price International Stock Fund Russian Rider T. Rowe Price Japan Fund Russian Rider T. Rowe Price Latin America Fund Russian Rider T. Rowe Price New Asia Fund Russian Rider Schedule A Page 2 of 3 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT T. Rowe Price International Series, Inc. on behalf of: T. Rowe Price International Stock Portfolio Russian Rider T. Rowe Price Media & Telecommunications Fund, Inc. Global Proxy Service Rider T. Rowe Price Mid-Cap Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Mid-Cap Value Fund, Inc. Global Proxy Service Rider T. Rowe Price New America Growth Fund Global Proxy Service Rider T. Rowe Price New Era Fund, Inc. Global Proxy Service Rider T. Rowe Price New Horizons Fund, Inc. Global Proxy Service Rider T. Rowe Price Real Estate Fund, Inc. Global Proxy Service Rider T. Rowe Price Science & Technology Fund, Inc. Global Proxy Service Rider T. Rowe Price Small-Cap Stock Fund, Inc. Global Proxy Service Rider T. Rowe Price Small-Cap Value Fund, Inc. Global Proxy Service Rider T. Rowe Price Value Fund, Inc. Global Proxy Service Rider Income Funds ------------ T. Rowe Price Corporate Income Fund, Inc. Global Proxy Service Rider T. Rowe Price High Yield Fund, Inc. Global Proxy Service Rider T. Rowe Price Income Series, Inc. on behalf of: T. Rowe Price Limited-Term Bond Portfolio Global Proxy Service Rider T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Bond Fund Russian Rider T. Rowe Price Global Bond Fund Russian Rider T. Rowe Price International Bond Fund Russian Rider T. Rowe Price New Income Fund, Inc. Global Proxy Service Rider T. Rowe Price Personal Strategy Funds, Inc. on behalf of: T. Rowe Price Personal Strategy Balanced Fund Global Proxy Service Rider T. Rowe Price Personal Strategy Growth Fund Global Proxy Service Rider T. Rowe Price Personal Strategy Income Fund Global Proxy Service Rider T. Rowe Price Short-Term Bond Fund, Inc. Global Proxy Service Rider T. Rowe Price Short-Term U.S. Government Fund, Inc. Global Proxy Service Rider T. Rowe Price Summit Funds, Inc. on behalf of: T. Rowe Price Summit Limited-Term Bond Fund Global Proxy Service Rider T. Rowe Price Tax-Efficient Balanced Fund, Inc. Global Proxy Service Rider Schedule A Page 3 of 3 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all Customers Under Section II of this Schedule A. T. Rowe Price Trust Company, as Trustee for the Johnson Matthey Salaried Employee Savings Plan Common Trust Funds ------------------ T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: Emerging Markets Equity Trust European Discovery Trust Foreign Discovery Trust Foreign Discovery Trust - Augment Japan Discovery Trust Latin America Discovery Trust Pacific Discovery Trust New York City International Common Trust Fund Global Proxy Service Rider III. OTHER RPFI International Partners, L.P. Russian Rider AMENDMENT AGREEMENT The Global Custody Agreement of January 3, 1994, as amended April 18, 1994, August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, July 31, 1996, July 23, 1997, September 3, 1997, October 29, 1997 and December 15, 1998 (the "Custody Agreement") by and between each of the Entities listed in Schedule A, as amended thereto, severally and not jointly (each such entity referred to hereinafter as the "Customer") and The Chase Manhattan Bank, N.A., whose contracts have been assumed by THE CHASE MANHATTAN BANK (the "Bank") is hereby further amended, as of October 6, 1999 (the "Amendment Agreement"). Terms defined in the Custody Agreement are used herein as therein defined. WITNESSETH: WHEREAS, the Customer wishes to appoint the Bank as its global custodian and the Bank wishes to accept such appointment pursuant to the terms of the Custody Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1.Amendment. Sections I, II and III of Schedule A of the Custody Agreement ---------- ("Schedule A") shall be amended to add or change certain Customers as specified in Attachment A hereto. The revised Schedule A incorporating these changes in the form attached shall supersede the existing Schedule A in its entirety. 2. Agreement. The Customer and Bank agree to be bound in all respects by all the - ---------- terms and conditions of the Custody Agreement and shall be fully liable and responsible thereunder as a "Customer" and "Bank," respectively, as defined in the Custody Agreement. 3. Confirmation of Agreement. Except as amended hereby, the Custody Agreement is - ------------ -- --------- in full force and effect and as so amended is hereby ratified, approved and confirmed by the Customer and the Bank in all respects. 4. Governing Law: This Amendment Agreement shall be construed in accordance with - --------- ---- and governed by the law of the State of New York without regard to its conflict of law principles. IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the day and year first above written. THE CHASE MANHATTAN BANK /s/Joseph M. Rondinelli By: ____________________________________ Joseph M. Rondinelli Vice President EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO, SEVERALLY AND NOT JOINTLY /s/Henry H. Hopkins By: ____________________________________ Henry H. Hopkins Vice President ATTACHMENT A PAGE 1 OF 2 LIST OF CUSTOMERS Change the name of the following Fund: - ------------------------------------- T. Rowe Price Tax-Efficient Balanced Fund, Inc. Effective May 27, 1999, the fund name changed to: T. Rowe Price Tax-Efficient Funds, Inc., on behalf of T. Rowe Price Tax-Efficient Balanced Fund Add the following Fund: - ----------------------- T. Rowe Price Tax-Efficient Funds, Inc., on behalf of: T. Rowe Price Tax-Efficient Growth Fund Add the following Trusts: - ------------------------ T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund, on behalf of the Underlying Trusts: Foreign Discovery Trust - B International Small-Cap Trust Delete the following Trust: - -------------------------- New York City International Common Trust Fund Add the following Funds/Trusts/Limited Partnerships to the Global Proxy Service - ------------------------------------------------------------------------------- Rider: - ----- T. Rowe Price Equity Series, Inc. T. Rowe Price Equity Income Portfolio T. Rowe Price Tax-Efficient Funds, Inc., on behalf of T. Rowe Price Tax-Efficient Growth Fund Institutional International Funds, Inc., on behalf of Foreign Equity Fund ATTACHMENT A PAGE 2 OF 2 T. Rowe Price International Funds, Inc., on behalf of T. Rowe Price Emerging Markets Stock Fund T. Rowe Price Emerging Markets Bond Fund T. Rowe Price European Stock Fund T. Rowe Price Global Bond Fund T. Rowe Price Global Stock Fund T. Rowe Price International Bond Fund T. Rowe Price International Discovery Fund T. Rowe Price International Growth & Income Fund T. Rowe Price International Stock Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price New Asia Fund T. Rowe Price International Series, Inc., on behalf of T. Rowe Price International Stock Portfolio T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: Emerging Markets Equity Trust European Discovery Trust Foreign Discovery Trust Foreign Discovery Trust - Augment Foreign Discovery Trust - B International Small-Cap Trust Japan Discovery Trust Latin America Discovery Trust Pacific Discovery Trust RPFI International Partners, L.P. SCHEDULE A PAGE 1 OF 3 LIST OF CUSTOMERS, SEVERALLY AND NOT JOINTLY PARTIES TO GLOBAL CUSTODY AGREEMENT WITH THE CHASE MANHATTAN BANK DATED JANUARY 3, 1994 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is applicable to REGISTERED UNDER THE INVESTMENT all Customers listed under Section I of COMPANY ACT OF 1940 this Schedule A. Equity Funds ------------ T. Rowe Price Balanced Fund, Inc. Global Proxy Service Rider T. Rowe Price Blue Chip Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Capital Appreciation Fund Global Proxy Service Rider T. Rowe Price Capital Opportunity Fund, Inc. Global Proxy Service Rider T. Rowe Price Diversified Small-Cap Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Dividend Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Equity Income Fund Global Proxy Service Rider T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Equity Income Portfolio Global Proxy Service Rider T. Rowe Price Mid-Cap Growth Portfolio Global Proxy Service Rider T. Rowe Price New America Growth Portfolio Global Proxy Service Rider T. Rowe Price Personal Strategy Balanced Portfolio Global Proxy Service Rider T. Rowe Price Financial Services Fund, Inc. Global Proxy Service Rider T. Rowe Price Growth & Income Fund, Inc. Global Proxy Service Rider T. Rowe Price Growth Stock Fund, Inc. Global Proxy Service Rider T. Rowe Price Health Sciences Fund, Inc. Global Proxy Service Rider Institutional Equity Funds, Inc. on behalf of: Mid-Cap Equity Growth Fund Global Proxy Service Rider Institutional International Funds, Inc. on behalf of: Foreign Equity Fund Global Proxy Service and Russian Rider T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Stock Fund Global Proxy Service and Russian Rider T. Rowe Price European Stock Fund Global Proxy Service and Russian Rider T. Rowe Price Global Stock Fund Global Proxy Service and Russian Rider T. Rowe Price International Discovery Fund Global Proxy Service and Russian Rider T. Rowe Price International Growth & Income Fund Global Proxy Service and Russian Rider T. Rowe Price International Stock Fund Global Proxy Service and Russian Rider T. Rowe Price Japan Fund Global Proxy Service and Russian Rider T. Rowe Price Latin America Fund Global Proxy Service and Russian Rider T. Rowe Price New Asia Fund Global Proxy Service and Russian Rider SCHEDULE A PAGE 2 OF 3 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT T. Rowe Price International Series, Inc. on behalf of: T. Rowe Price International Stock Portfolio Global Proxy Service and Russian Rider T. Rowe Price Media & Telecommunications Fund, Inc. Global Proxy Service Rider T. Rowe Price Mid-Cap Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Mid-Cap Value Fund, Inc. Global Proxy Service Rider T. Rowe Price New America Growth Fund Global Proxy Service Rider T. Rowe Price New Era Fund, Inc. Global Proxy Service Rider T. Rowe Price New Horizons Fund, Inc. Global Proxy Service Rider T. Rowe Price Real Estate Fund, Inc. Global Proxy Service Rider T. Rowe Price Science & Technology Fund, Inc. Global Proxy Service Rider T. Rowe Price Small-Cap Stock Fund, Inc. Global Proxy Service Rider T. Rowe Price Small-Cap Value Fund, Inc. Global Proxy Service Rider T. Rowe Price Value Fund, Inc. Global Proxy Service Rider Income Funds ------------ T. Rowe Price Corporate Income Fund, Inc. Global Proxy Service Rider T. Rowe Price High Yield Fund, Inc. Global Proxy Service Rider T. Rowe Price Income Series, Inc. on behalf of: T. Rowe Price Limited-Term Bond Portfolio Global Proxy Service Rider T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Bond Fund Global Proxy Service and Russian Rider T. Rowe Price Global Bond Fund Global Proxy Service and Russian Rider T. Rowe Price International Bond Fund Global Proxy Service and Russian Rider T. Rowe Price New Income Fund, Inc. Global Proxy Service Rider T. Rowe Price Personal Strategy Funds, Inc. on behalf of: T. Rowe Price Personal Strategy Balanced Fund Global Proxy Service Rider T. Rowe Price Personal Strategy Growth Fund Global Proxy Service Rider T. Rowe Price Personal Strategy Income Fund Global Proxy Service Rider T. Rowe Price Short-Term Bond Fund, Inc. Global Proxy Service Rider T. Rowe Price Short-Term U.S. Government Fund, Inc. Global Proxy Service Rider T. Rowe Price Summit Funds, Inc. on behalf of: T. Rowe Price Summit Limited-Term Bond Fund Global Proxy Service Rider T. Rowe Price Tax-Efficient Funds, Inc. on behalf of: T. Rowe Price Tax-Efficient Balanced Fund Global Proxy Service Rider T. Rowe Price Tax-Efficient Growth Fund Global Proxy Service Rider SCHEDULE A PAGE 3 OF 3 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all Customers under Section II of this Schedule A. T. Rowe Price Trust Company, as Trustee for the Johnson Matthey Salaried Employee Savings Plan Common Trust Funds ------------------ T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: Emerging Markets Equity Trust Global Proxy Service Rider European Discovery Trust Global Proxy Service Rider Foreign Discovery Trust Global Proxy Service Rider Foreign Discovery Trust - Augment Global Proxy Service Rider Foreign Discovery Trust - B Global Proxy Service Rider International Small-Cap Trust Global Proxy Service Rider Japan Discovery Trust Global Proxy Service Rider Latin America Discovery Trust Global Proxy Service Rider Pacific Discovery Trust Global Proxy Service Rider III. OTHER RPFI International Partners, L.P. Global Proxy Service and Russian Rider AMENDMENT AGREEMENT The Global Custody Agreement of January 3, 1994, as amended April 18, 1994, August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, July 31, 1996, July 23, 1997, September 3, 1997, October 29, 1997, December 15, 1998 and October 6, 1999 (the "Custody Agreement") by and between each of the Entities listed in Schedule A, as amended thereto, severally and not jointly (each such entity referred to hereinafter as the "Customer") and The Chase Manhattan Bank, N.A., whose contracts have been assumed by THE CHASE MANHATTAN BANK (the "Bank") is hereby further amended, as of February 9, 2000 (the "Amendment Agreement"). Terms defined in the Custody Agreement are used herein as therein defined. WITNESSETH: WHEREAS, the Customer wishes to appoint the Bank as its global custodian and the Bank wishes to accept such appointment pursuant to the terms of the Custody Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1.Amendment. Sections I, II and III of Schedule A of the Custody Agreement ---------- ("Schedule A") shall be amended to add or change certain Customers as specified in Attachment A hereto. The revised Schedule A incorporating these changes in the form attached shall supersede the existing Schedule A in its entirety. 2. Agreement. The Customer and Bank agree to be bound in all respects by all the - ---------- terms and conditions of the Custody Agreement and shall be fully liable and responsible thereunder as a "Customer" and "Bank," respectively, as defined in the Custody Agreement. 3. Confirmation of Agreement. Except as amended hereby, the Custody Agreement is - ------------ -- --------- in full force and effect and as so amended is hereby ratified, approved and confirmed by the Customer and the Bank in all respects. 4. Governing Law: This Amendment Agreement shall be construed in accordance with - --------- ---- and governed by the law of the State of New York without regard to its conflict of law principles. IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the day and year first above written. THE CHASE MANHATTAN BANK /s/Joseph M. Rondinelli By: ____________________________________ Joseph M. Rondinelli Vice President EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO, SEVERALLY AND NOT JOINTLY /s/Henry H. Hopkins By: ____________________________________ Henry H. Hopkins Vice President ATTACHMENT A PAGE 1 OF 1 LIST OF CUSTOMERS Add the following Funds: - ------------------------ Institutional Equity Funds, Inc., on behalf of: Institutional Large-Cap Value Fund Institutional Small-Cap Stock Fund Add the following Funds to the Global Proxy Service Rider: - --------------------------------------------------------- Institutional Equity Funds, Inc., on behalf of Institutional Large-Cap Value Fund Institutional Small-Cap Stock Fund SCHEDULE A PAGE 1 OF 3 LIST OF CUSTOMERS, SEVERALLY AND NOT JOINTLY PARTIES TO GLOBAL CUSTODY AGREEMENT WITH THE CHASE MANHATTAN BANK DATED JANUARY 3, 1994 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is applicable to REGISTERED UNDER THE INVESTMENT all Customers listed under Section I of COMPANY ACT OF 1940 this Schedule A. Equity Funds ------------ T. Rowe Price Balanced Fund, Inc. Global Proxy Service Rider T. Rowe Price Blue Chip Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Capital Appreciation Fund Global Proxy Service Rider T. Rowe Price Capital Opportunity Fund, Inc. Global Proxy Service Rider T. Rowe Price Diversified Small-Cap Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Dividend Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Equity Income Fund Global Proxy Service Rider T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Equity Income Portfolio Global Proxy Service Rider T. Rowe Price Mid-Cap Growth Portfolio Global Proxy Service Rider T. Rowe Price New America Growth Portfolio Global Proxy Service Rider T. Rowe Price Personal Strategy Balanced Portfolio Global Proxy Service Rider T. Rowe Price Financial Services Fund, Inc. Global Proxy Service Rider T. Rowe Price Growth & Income Fund, Inc. Global Proxy Service Rider T. Rowe Price Growth Stock Fund, Inc. Global Proxy Service Rider T. Rowe Price Health Sciences Fund, Inc. Global Proxy Service Rider Institutional Equity Funds, Inc. on behalf of: Institutional Large-Cap Value Fund Global Proxy Service Rider Institutional Small-Cap Stock Fund Global Proxy Service Rider Mid-Cap Equity Growth Fund Global Proxy Service Rider Institutional International Funds, Inc. on behalf of: Foreign Equity Fund Global Proxy Service and Russian Rider T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Stock Fund Global Proxy Service and Russian Rider T. Rowe Price European Stock Fund Global Proxy Service and Russian Rider T. Rowe Price Global Stock Fund Global Proxy Service and Russian Rider T. Rowe Price International Discovery Fund Global Proxy Service and Russian Rider T. Rowe Price International Growth & Income Fund Global Proxy Service and Russian Rider T. Rowe Price International Stock Fund Global Proxy Service and Russian Rider T. Rowe Price Japan Fund Global Proxy Service and Russian Rider T. Rowe Price Latin America Fund Global Proxy Service and Russian Rider T. Rowe Price New Asia Fund Global Proxy Service and Russian Rider SCHEDULE A PAGE 2 OF 3 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT T. Rowe Price International Series, Inc. on behalf of: T. Rowe Price International Stock Portfolio Global Proxy Service and Russian Rider T. Rowe Price Media & Telecommunications Fund, Inc. Global Proxy Service Rider T. Rowe Price Mid-Cap Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Mid-Cap Value Fund, Inc. Global Proxy Service Rider T. Rowe Price New America Growth Fund Global Proxy Service Rider T. Rowe Price New Era Fund, Inc. Global Proxy Service Rider T. Rowe Price New Horizons Fund, Inc. Global Proxy Service Rider T. Rowe Price Real Estate Fund, Inc. Global Proxy Service Rider T. Rowe Price Science & Technology Fund, Inc. Global Proxy Service Rider T. Rowe Price Small-Cap Stock Fund, Inc. Global Proxy Service Rider T. Rowe Price Small-Cap Value Fund, Inc. Global Proxy Service Rider T. Rowe Price Value Fund, Inc. Global Proxy Service Rider Income Funds ------------ T. Rowe Price Corporate Income Fund, Inc. Global Proxy Service Rider T. Rowe Price High Yield Fund, Inc. Global Proxy Service Rider T. Rowe Price Income Series, Inc. on behalf of: T. Rowe Price Limited-Term Bond Portfolio Global Proxy Service Rider T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Bond Fund Global Proxy Service and Russian Rider T. Rowe Price Global Bond Fund Global Proxy Service and Russian Rider T. Rowe Price International Bond Fund Global Proxy Service and Russian Rider T. Rowe Price New Income Fund, Inc. Global Proxy Service Rider T. Rowe Price Personal Strategy Funds, Inc. on behalf of: T. Rowe Price Personal Strategy Balanced Fund Global Proxy Service Rider T. Rowe Price Personal Strategy Growth Fund Global Proxy Service Rider T. Rowe Price Personal Strategy Income Fund Global Proxy Service Rider T. Rowe Price Short-Term Bond Fund, Inc. Global Proxy Service Rider T. Rowe Price Short-Term U.S. Government Fund, Inc. Global Proxy Service Rider T. Rowe Price Summit Funds, Inc. on behalf of: T. Rowe Price Summit Limited-Term Bond Fund Global Proxy Service Rider T. Rowe Price Tax-Efficient Funds, Inc. on behalf of: T. Rowe Price Tax-Efficient Balanced Fund Global Proxy Service Rider T. Rowe Price Tax-Efficient Growth Fund Global Proxy Service Rider SCHEDULE A PAGE 3 OF 3 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all Customers under Section II of this Schedule A. T. Rowe Price Trust Company, as Trustee for the Johnson Matthey Salaried Employee Savings Plan Common Trust Funds ------------------ T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: Emerging Markets Equity Trust Global Proxy Service Rider European Discovery Trust Global Proxy Service Rider Foreign Discovery Trust Global Proxy Service Rider Foreign Discovery Trust - Augment Global Proxy Service Rider Foreign Discovery Trust - B Global Proxy Service Rider International Small-Cap Trust Global Proxy Service Rider Japan Discovery Trust Global Proxy Service Rider Latin America Discovery Trust Global Proxy Service Rider Pacific Discovery Trust Global Proxy Service Rider III. OTHER RPFI International Partners, L.P. Global Proxy Service and Russian Rider AMENDMENT AGREEMENT The Global Custody Agreement of January 3, 1994, as amended April 18, 1994, August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, July 31, 1996, July 23, 1997, September 3, 1997, October 29, 1997, December 15, 1998, October 6, 1999 and February 9, 2000 (the "Custody Agreement") by and between each of the Entities listed in Schedule A, as amended thereto, severally and not jointly (each such entity referred to hereinafter as the "Customer") and The Chase Manhattan Bank, N.A., whose contracts have been assumed by THE CHASE MANHATTAN BANK (the "Bank") is hereby further amended, as of April 19, 2000 (the "Amendment Agreement"). Terms defined in the Custody Agreement are used herein as therein defined. WITNESSETH: WHEREAS, the Customer wishes to appoint the Bank as its global custodian and the Bank wishes to accept such appointment pursuant to the terms of the Custody Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1.Amendment. Sections I, II and III of Schedule A of the Custody Agreement ---------- ("Schedule A") shall be amended to add or change certain Customers as specified in Attachment A hereto. The revised Schedule A incorporating these changes in the form attached shall supersede the existing Schedule A in its entirety. 2. Agreement. The Customer and Bank agree to be bound in all respects by all the - ---------- terms and conditions of the Custody Agreement and shall be fully liable and responsible thereunder as a "Customer" and "Bank," respectively, as defined in the Custody Agreement. 3. Confirmation of Agreement. Except as amended hereby, the Custody Agreement is - ------------ -- --------- in full force and effect and as so amended is hereby ratified, approved and confirmed by the Customer and the Bank in all respects. 4. Governing Law: This Amendment Agreement shall be construed in accordance with - --------- ---- and governed by the law of the State of New York without regard to its conflict of law principles. IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the day and year first above written. THE CHASE MANHATTAN BANK /s/Joseph M. Rondinelli By: ____________________________________ Joseph M. Rondinelli Vice President EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO, SEVERALLY AND NOT JOINTLY /s/Henry H. Hopkins By: ____________________________________ Henry H. Hopkins Vice President ATTACHMENT A PAGE 1 OF 1 LIST OF CUSTOMERS Add the following Fund: - ----------------------- T. Rowe Price International Funds, Inc., on behalf of: T. Rowe Price Emerging Europe & Mediterranean Fund Add the following Fund to the Global Proxy Service and Russian Rider: - -------------------------------------------------------------------- T. Rowe Price International Funds, Inc., on behalf of: T. Rowe Price Emerging Europe & Mediterranean Fund SCHEDULE A PAGE 1 OF 3 LIST OF CUSTOMERS, SEVERALLY AND NOT JOINTLY PARTIES TO GLOBAL CUSTODY AGREEMENT WITH THE CHASE MANHATTAN BANK DATED JANUARY 3, 1994 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is applicable to REGISTERED UNDER THE INVESTMENT all Customers listed under Section I of COMPANY ACT OF 1940 this Schedule A. Equity Funds ------------ T. Rowe Price Balanced Fund, Inc. Global Proxy Service Rider T. Rowe Price Blue Chip Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Capital Appreciation Fund Global Proxy Service Rider T. Rowe Price Capital Opportunity Fund, Inc. Global Proxy Service Rider T. Rowe Price Diversified Small-Cap Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Dividend Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Equity Income Fund Global Proxy Service Rider T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Equity Income Portfolio Global Proxy Service Rider T. Rowe Price Mid-Cap Growth Portfolio Global Proxy Service Rider T. Rowe Price New America Growth Portfolio Global Proxy Service Rider T. Rowe Price Personal Strategy Balanced Portfolio Global Proxy Service Rider T. Rowe Price Financial Services Fund, Inc. Global Proxy Service Rider T. Rowe Price Growth & Income Fund, Inc. Global Proxy Service Rider T. Rowe Price Growth Stock Fund, Inc. Global Proxy Service Rider T. Rowe Price Health Sciences Fund, Inc. Global Proxy Service Rider Institutional Equity Funds, Inc. on behalf of: Institutional Large-Cap Value Fund Global Proxy Service Rider Institutional Small-Cap Stock Fund Global Proxy Service Rider Mid-Cap Equity Growth Fund Global Proxy Service Rider Institutional International Funds, Inc. on behalf of: Foreign Equity Fund Global Proxy Service and Russian Rider T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Europe & Mediterranean Fund Global Proxy Service and Russian Rider T. Rowe Price Emerging Markets Stock Fund Global Proxy Service and Russian Rider T. Rowe Price European Stock Fund Global Proxy Service and Russian Rider T. Rowe Price Global Stock Fund Global Proxy Service and Russian Rider T. Rowe Price International Discovery Fund Global Proxy Service and Russian Rider T. Rowe Price International Growth & Income Fund Global Proxy Service and Russian Rider T. Rowe Price International Stock Fund Global Proxy Service and Russian Rider T. Rowe Price Japan Fund Global Proxy Service and Russian Rider T. Rowe Price Latin America Fund Global Proxy Service and Russian Rider T. Rowe Price New Asia Fund Global Proxy Service and Russian Rider SCHEDULE A PAGE 2 OF 3 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT T. Rowe Price International Series, Inc. on behalf of: T. Rowe Price International Stock Portfolio Global Proxy Service and Russian Rider T. Rowe Price Media & Telecommunications Fund, Inc. Global Proxy Service Rider T. Rowe Price Mid-Cap Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Mid-Cap Value Fund, Inc. Global Proxy Service Rider T. Rowe Price New America Growth Fund Global Proxy Service Rider T. Rowe Price New Era Fund, Inc. Global Proxy Service Rider T. Rowe Price New Horizons Fund, Inc. Global Proxy Service Rider T. Rowe Price Real Estate Fund, Inc. Global Proxy Service Rider T. Rowe Price Science & Technology Fund, Inc. Global Proxy Service Rider T. Rowe Price Small-Cap Stock Fund, Inc. Global Proxy Service Rider T. Rowe Price Small-Cap Value Fund, Inc. Global Proxy Service Rider T. Rowe Price Value Fund, Inc. Global Proxy Service Rider Income Funds ------------ T. Rowe Price Corporate Income Fund, Inc. Global Proxy Service Rider T. Rowe Price High Yield Fund, Inc. Global Proxy Service Rider T. Rowe Price Income Series, Inc. on behalf of: T. Rowe Price Limited-Term Bond Portfolio Global Proxy Service Rider T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Bond Fund Global Proxy Service and Russian Rider T. Rowe Price Global Bond Fund Global Proxy Service and Russian Rider T. Rowe Price International Bond Fund Global Proxy Service and Russian Rider T. Rowe Price New Income Fund, Inc. Global Proxy Service Rider T. Rowe Price Personal Strategy Funds, Inc. on behalf of: T. Rowe Price Personal Strategy Balanced Fund Global Proxy Service Rider T. Rowe Price Personal Strategy Growth Fund Global Proxy Service Rider T. Rowe Price Personal Strategy Income Fund Global Proxy Service Rider T. Rowe Price Short-Term Bond Fund, Inc. Global Proxy Service Rider T. Rowe Price Short-Term U.S. Government Fund, Inc. Global Proxy Service Rider T. Rowe Price Summit Funds, Inc. on behalf of: T. Rowe Price Summit Limited-Term Bond Fund Global Proxy Service Rider T. Rowe Price Tax-Efficient Funds, Inc. on behalf of: T. Rowe Price Tax-Efficient Balanced Fund Global Proxy Service Rider T. Rowe Price Tax-Efficient Growth Fund Global Proxy Service Rider SCHEDULE A PAGE 3 OF 3 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all Customers under Section II of this Schedule A. T. Rowe Price Trust Company, as Trustee for the Johnson Matthey Salaried Employee Savings Plan Common Trust Funds ------------------ T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: Emerging Markets Equity Trust Global Proxy Service Rider European Discovery Trust Global Proxy Service Rider Foreign Discovery Trust Global Proxy Service Rider Foreign Discovery Trust - Augment Global Proxy Service Rider Foreign Discovery Trust - B Global Proxy Service Rider International Small-Cap Trust Global Proxy Service Rider Japan Discovery Trust Global Proxy Service Rider Latin America Discovery Trust Global Proxy Service Rider Pacific Discovery Trust Global Proxy Service Rider III. OTHER RPFI International Partners, L.P. Global Proxy Service and Russian Rider AMENDMENT AGREEMENT The Global Custody Agreement of January 3, 1994, as amended April 18, 1994, August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, July 31, 1996, July 23, 1997, September 3, 1997, October 29, 1997, December 15, 1998, October 6, 1999, February 9, 2000 and April 19, 2000 (the "Custody Agreement") by and between each of the Entities listed in Schedule A, as amended thereto, severally and not jointly (each such entity referred to hereinafter as the "Customer") and The Chase Manhattan Bank, N.A., whose contracts have been assumed by THE CHASE MANHATTAN BANK (the "Bank") is hereby further amended, as of July 18, 2000 (the "Amendment Agreement"). Terms defined in the Custody Agreement are used herein as therein defined. WITNESSETH: WHEREAS, the Customer wishes to appoint the Bank as its global custodian and the Bank wishes to accept such appointment pursuant to the terms of the Custody Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1.Amendment. Sections I, II and III of Schedule A of the Custody Agreement ---------- ("Schedule A") shall be amended to add or change certain Customers as specified in Attachment A hereto. The revised Schedule A incorporating these changes in the form attached shall supersede the existing Schedule A in its entirety. 2. Agreement. The Customer and Bank agree to be bound in all respects by all the - ---------- terms and conditions of the Custody Agreement and shall be fully liable and responsible thereunder as a "Customer" and "Bank," respectively, as defined in the Custody Agreement. 3. Confirmation of Agreement. Except as amended hereby, the Custody Agreement is - ------------ -- --------- in full force and effect and as so amended is hereby ratified, approved and confirmed by the Customer and the Bank in all respects. 4. Governing Law: This Amendment Agreement shall be construed in accordance with - --------- ---- and governed by the law of the State of New York without regard to its conflict of law principles. IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the day and year first above written. THE CHASE MANHATTAN BANK /s/Joseph M. Rondinelli By: ____________________________________ Joseph M. Rondinelli Vice President EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO, SEVERALLY AND NOT JOINTLY /s/Henry H. Hopkins By: ____________________________________ Henry H. Hopkins Vice President ATTACHMENT A PAGE 1 OF 1 LIST OF CUSTOMERS Add the following Funds: - ------------------------ Equity Funds - ------------ T. Rowe Price Developing Technologies Fund, Inc. T. Rowe Price Global Technology Fund, Inc. Income Fund - ----------- T. Rowe Price U.S. Bond Index Fund, Inc. T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: India Trust Taiwan Trust Add the following Funds to the Global Proxy Service Rider: - --------------------------------------------------------- Equity Funds - ------------ T. Rowe Price Developing Technologies Fund, Inc. T. Rowe Price Global Technology Fund, Inc. Income Fund - ----------- T. Rowe Price U.S. Bond Index Fund, Inc. T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: India Trust Taiwan Trust SCHEDULE A PAGE 1 OF 3 LIST OF CUSTOMERS, SEVERALLY AND NOT JOINTLY PARTIES TO GLOBAL CUSTODY AGREEMENT WITH THE CHASE MANHATTAN BANK DATED JANUARY 3, 1994 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is applicable to REGISTERED UNDER THE INVESTMENT all Customers listed under Section I of COMPANY ACT OF 1940 this Schedule A. Equity Funds ------------ T. Rowe Price Balanced Fund, Inc. Global Proxy Service Rider T. Rowe Price Blue Chip Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Capital Appreciation Fund Global Proxy Service Rider T. Rowe Price Capital Opportunity Fund, Inc. Global Proxy Service Rider T. Rowe Price Developing Technologies Fund, Inc. Global Proxy Service Rider T. Rowe Price Diversified Small-Cap Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Dividend Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Equity Income Fund Global Proxy Service Rider T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Equity Income Portfolio Global Proxy Service Rider T. Rowe Price Mid-Cap Growth Portfolio Global Proxy Service Rider T. Rowe Price New America Growth Portfolio Global Proxy Service Rider T. Rowe Price Personal Strategy Balanced Portfolio Global Proxy Service Rider T. Rowe Price Financial Services Fund, Inc. Global Proxy Service Rider T. Rowe Price Global Technology Fund, Inc. Global Proxy Service Rider T. Rowe Price Growth & Income Fund, Inc. Global Proxy Service Rider T. Rowe Price Growth Stock Fund, Inc. Global Proxy Service Rider T. Rowe Price Health Sciences Fund, Inc. Global Proxy Service Rider Institutional Equity Funds, Inc. on behalf of: Institutional Large-Cap Value Fund Global Proxy Service Rider Institutional Small-Cap Stock Fund Global Proxy Service Rider Mid-Cap Equity Growth Fund Global Proxy Service Rider Institutional International Funds, Inc. on behalf of: Foreign Equity Fund Global Proxy Service and Russian Rider T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Europe & Mediterranean Fund Global Proxy Service and Russian Rider T. Rowe Price Emerging Markets Stock Fund Global Proxy Service and Russian Rider T. Rowe Price European Stock Fund Global Proxy Service and Russian Rider T. Rowe Price Global Stock Fund Global Proxy Service and Russian Rider SCHEDULE A PAGE 2 OF 3 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT T. Rowe Price International Funds, Inc. on behalf of (continued): T. Rowe Price International Discovery Fund Global Proxy Service and Russian Rider T. Rowe Price International Growth & Income Fund Global Proxy Service and Russian Rider T. Rowe Price International Stock Fund Global Proxy Service and Russian Rider T. Rowe Price Japan Fund Global Proxy Service and Russian Rider T. Rowe Price Latin America Fund Global Proxy Service and Russian Rider T. Rowe Price New Asia Fund Global Proxy Service and Russian Rider T. Rowe Price International Series, Inc. on behalf of: T. Rowe Price International Stock Portfolio Global Proxy Service and Russian Rider T. Rowe Price Media & Telecommunications Fund, Inc. Global Proxy Service Rider T. Rowe Price Mid-Cap Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Mid-Cap Value Fund, Inc. Global Proxy Service Rider T. Rowe Price New America Growth Fund Global Proxy Service Rider T. Rowe Price New Era Fund, Inc. Global Proxy Service Rider T. Rowe Price New Horizons Fund, Inc. Global Proxy Service Rider T. Rowe Price Real Estate Fund, Inc. Global Proxy Service Rider T. Rowe Price Science & Technology Fund, Inc. Global Proxy Service Rider T. Rowe Price Small-Cap Stock Fund, Inc. Global Proxy Service Rider T. Rowe Price Small-Cap Value Fund, Inc. Global Proxy Service Rider T. Rowe Price Value Fund, Inc. Global Proxy Service Rider Income Funds ------------ T. Rowe Price Corporate Income Fund, Inc. Global Proxy Service Rider T. Rowe Price High Yield Fund, Inc. Global Proxy Service Rider T. Rowe Price Income Series, Inc. on behalf of: T. Rowe Price Limited-Term Bond Portfolio Global Proxy Service Rider T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Bond Fund Global Proxy Service and Russian Rider T. Rowe Price Global Bond Fund Global Proxy Service and Russian Rider T. Rowe Price International Bond Fund Global Proxy Service and Russian Rider T. Rowe Price New Income Fund, Inc. Global Proxy Service Rider T. Rowe Price Personal Strategy Funds, Inc. on behalf of: T. Rowe Price Personal Strategy Balanced Fund Global Proxy Service Rider T. Rowe Price Personal Strategy Growth Fund Global Proxy Service Rider T. Rowe Price Personal Strategy Income Fund Global Proxy Service Rider T. Rowe Price Short-Term Bond Fund, Inc. Global Proxy Service Rider T. Rowe Price Short-Term U.S. Government Fund, Inc. Global Proxy Service Rider T. Rowe Price Summit Funds, Inc. on behalf of: T. Rowe Price Summit Limited-Term Bond Fund Global Proxy Service Rider SCHEDULE A PAGE 3 OF 3 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT T. Rowe Price Tax-Efficient Funds, Inc. on behalf of: T. Rowe Price Tax-Efficient Balanced Fund Global Proxy Service Rider T. Rowe Price Tax-Efficient Growth Fund Global Proxy Service Rider T. Rowe Price U.S. Bond Index Fund, Inc. Global Proxy Service Rider II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all Customers under Section II of this Schedule A. T. Rowe Price Trust Company, as Trustee for the Johnson Matthey Salaried Employee Savings Plan Common Trust Funds ------------------ T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: Emerging Markets Equity Trust Global Proxy Service Rider European Discovery Trust Global Proxy Service Rider Foreign Discovery Trust Global Proxy Service Rider Foreign Discovery Trust - Augment Global Proxy Service Rider Foreign Discovery Trust - B Global Proxy Service Rider India Trust Global Proxy Service Rider International Small-Cap Trust Global Proxy Service Rider Japan Discovery Trust Global Proxy Service Rider Latin America Discovery Trust Global Proxy Service Rider Pacific Discovery Trust Global Proxy Service Rider Taiwan Trust Global Proxy Service Rider III. OTHER RPFI International Partners, L.P. Global Proxy Service and Russian Rider AMENDMENT AGREEMENT The Global Custody Agreement of January 3, 1994, as amended April 18, 1994, August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, July 31, 1996, July 23, 1997, September 3, 1997, October 29, 1997, December 15, 1998, October 6, 1999, February 9, 2000, April 19, 2000 and July 18, 2000 (the "Custody Agreement") by and between each of the Entities listed in Schedule A, as amended thereto, severally and not jointly (each such entity referred to hereinafter as the "Customer") and The Chase Manhattan Bank, N.A., whose contracts have been assumed by THE CHASE MANHATTAN BANK (the "Bank") is hereby further amended, as of October 25, 2000 (the "Amendment Agreement"). Terms defined in the Custody Agreement are used herein as therein defined. WITNESSETH: WHEREAS, the Customer wishes to appoint the Bank as its global custodian and the Bank wishes to accept such appointment pursuant to the terms of the Custody Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1.Amendment. Sections I, II and III of Schedule A of the Custody Agreement ---------- ("Schedule A") shall be amended to add or change certain Customers as specified in Attachment A hereto. The revised Schedule A incorporating these changes in the form attached shall supersede the existing Schedule A in its entirety. 2. Agreement. The Customer and Bank agree to be bound in all respects by all the - ---------- terms and conditions of the Custody Agreement and shall be fully liable and responsible thereunder as a "Customer" and "Bank," respectively, as defined in the Custody Agreement. 3. Confirmation of Agreement. Except as amended hereby, the Custody Agreement is - ------------ -- --------- in full force and effect and as so amended is hereby ratified, approved and confirmed by the Customer and the Bank in all respects. 4. Governing Law: This Amendment Agreement shall be construed in accordance with - --------- ---- and governed by the law of the State of New York without regard to its conflict of law principles. IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of the day and year first above written. THE CHASE MANHATTAN BANK /s/Joseph M. Rondinelli By: ____________________________________ Joseph M. Rondinelli Vice President EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO, SEVERALLY AND NOT JOINTLY /s/Henry H. Hopkins By: ____________________________________ Henry H. Hopkins Vice President ATTACHMENT A PAGE 1 OF 1 LIST OF CUSTOMERS Add the following Funds: - ------------------------ Equity Funds - ------------ T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Blue Chip Growth Portfolio T. Rowe Price Health Sciences Portfolio T. Rowe Price International Index Fund, Inc. on behalf of: T. Rowe Price International Equity Index Fund Income Fund - ----------- T. Rowe Price Tax-Efficient Funds, Inc., on behalf of: T. Rowe Price Tax-Efficient Multi-Cap Growth Fund Delete the following Funds/Trusts: - --------------------------------- Income Funds: - ------------- T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Global Bond Fund T. Rowe Price Short-Term U.S. Government Fund, Inc. T. Rowe Price Summit Funds, Inc., on behalf of: T. Rowe Price Summit Limited-Term Bond Fund Common Trust Funds: - ------------------ T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: European Discovery Trust Foreign Discovery Trust-Augment Latin America Discovery Trust Pacific Discovery Trust Other: - ----- RPFI International Partners, L.P. Add the following Funds to the Global Proxy Service Rider: - --------------------------------------------------------- Equity Funds - ------------ T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Blue Chip Growth Portfolio T. Rowe Price Health Sciences Portfolio Income Fund - ----------- T. Rowe Price Tax-Efficient Funds, Inc., on behalf of: T. Rowe Price Tax-Efficient Multi-Cap Growth Fund Delete the following Funds/Trusts from the Global Proxy Service Rider: - --------------------------------------------------------------------- Income Funds: - ------------- T. Rowe Price Short-Term U.S. Government Fund, Inc. T. Rowe Price Summit Funds, Inc., on behalf of: T. Rowe Price Summit Limited-Term Bond Fund Common Trust Funds: - ------------------ T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: European Discovery Trust Foreign Discovery Trust-Augment Latin America Discovery Trust Pacific Discovery Trust Add the following Fund to the Global Proxy Service and Russian Rider - -------------------------------------------------------------------- Equity Fund - ----------- T. Rowe Price International Index Fund, Inc. on behalf of: T. Rowe Price International Equity Index Fund Delete the following Fund/Other from the Global Proxy Service and Russian Rider: - -------------------------------------------------------------------------------- Income Funds: - ------------ T. Rowe Price International Funds, Inc., on behalf of: T. Rowe Price Global Bond Fund Other: - ----- RPFI International Partners, L.P. SCHEDULE A PAGE 1 OF 3 LIST OF CUSTOMERS, SEVERALLY AND NOT JOINTLY PARTIES TO GLOBAL CUSTODY AGREEMENT WITH THE CHASE MANHATTAN BANK DATED JANUARY 3, 1994 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is applicable to REGISTERED UNDER THE INVESTMENT all Customers listed under Section I of COMPANY ACT OF 1940 this Schedule A. Equity Funds ------------ T. Rowe Price Balanced Fund, Inc. Global Proxy Service Rider T. Rowe Price Blue Chip Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Capital Appreciation Fund Global Proxy Service Rider T. Rowe Price Capital Opportunity Fund, Inc. Global Proxy Service Rider T. Rowe Price Developing Technologies Fund, Inc. Global Proxy Service Rider T. Rowe Price Diversified Small-Cap Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Dividend Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Equity Income Fund Global Proxy Service Rider T. Rowe Price Equity Series, Inc. on behalf of: T. Rowe Price Blue Chip Growth Portfolio Global Proxy Service Rider T. Rowe Price Equity Income Portfolio Global Proxy Service Rider T. Rowe Price Health Sciences Portfolio Global Proxy Service Rider T. Rowe Price Mid-Cap Growth Portfolio Global Proxy Service Rider T. Rowe Price New America Growth Portfolio Global Proxy Service Rider T. Rowe Price Personal Strategy Balanced Portfolio Global Proxy Service Rider T. Rowe Price Financial Services Fund, Inc. Global Proxy Service Rider T. Rowe Price Global Technology Fund, Inc. Global Proxy Service Rider T. Rowe Price Growth & Income Fund, Inc. Global Proxy Service Rider T. Rowe Price Growth Stock Fund, Inc. Global Proxy Service Rider T. Rowe Price Health Sciences Fund, Inc. Global Proxy Service Rider Institutional Equity Funds, Inc. on behalf of: Institutional Large-Cap Value Fund Global Proxy Service Rider Institutional Small-Cap Stock Fund Global Proxy Service Rider Mid-Cap Equity Growth Fund Global Proxy Service Rider Institutional International Funds, Inc. on behalf of: Foreign Equity Fund Global Proxy Service and Russian Rider T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Europe & Mediterranean Fund Global Proxy Service and Russian Rider T. Rowe Price Emerging Markets Stock Fund Global Proxy Service and Russian Rider SCHEDULE A PAGE 2 OF 3 APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT T. Rowe Price International Funds, Inc. on behalf of (continued): T. Rowe Price European Stock Fund Global Proxy Service and Russian Rider T. Rowe Price Global Stock Fund Global Proxy Service and Russian Rider T. Rowe Price International Discovery Fund Global Proxy Service and Russian Rider T. Rowe Price International Growth & Income Fund Global Proxy Service and Russian Rider T. Rowe Price International Stock Fund Global Proxy Service and Russian Rider T. Rowe Price Japan Fund Global Proxy Service and Russian Rider T. Rowe Price Latin America Fund Global Proxy Service and Russian Rider T. Rowe Price New Asia Fund Global Proxy Service and Russian Rider T. Rowe Price International Index Fund, Inc. on behalf of: T. Rowe Price International Equity Index Fund Global Proxy Service and Russian Rider T. Rowe Price International Series, Inc. on behalf of: T. Rowe Price International Stock Portfolio Global Proxy Service and Russian Rider T. Rowe Price Media & Telecommunications Fund, Inc. Global Proxy Service Rider T. Rowe Price Mid-Cap Growth Fund, Inc. Global Proxy Service Rider T. Rowe Price Mid-Cap Value Fund, Inc. Global Proxy Service Rider T. Rowe Price New America Growth Fund Global Proxy Service Rider T. Rowe Price New Era Fund, Inc. Global Proxy Service Rider T. Rowe Price New Horizons Fund, Inc. Global Proxy Service Rider T. Rowe Price Real Estate Fund, Inc. Global Proxy Service Rider T. Rowe Price Science & Technology Fund, Inc. Global Proxy Service Rider T. Rowe Price Small-Cap Stock Fund, Inc. Global Proxy Service Rider T. Rowe Price Small-Cap Value Fund, Inc. Global Proxy Service Rider T. Rowe Price Value Fund, Inc. Global Proxy Service Rider Income Funds ------------ T. Rowe Price Corporate Income Fund, Inc. Global Proxy Service Rider T. Rowe Price High Yield Fund, Inc. Global Proxy Service Rider T. Rowe Price Income Series, Inc. on behalf of: T. Rowe Price Limited-Term Bond Portfolio Global Proxy Service Rider T. Rowe Price International Funds, Inc. on behalf of: T. Rowe Price Emerging Markets Bond Fund Global Proxy Service and Russian Rider T. Rowe Price International Bond Fund Global Proxy Service and Russian Rider T. Rowe Price New Income Fund, Inc. Global Proxy Service Rider T. Rowe Price Personal Strategy Funds, Inc. on behalf of: T. Rowe Price Personal Strategy Balanced Fund Global Proxy Service Rider T. Rowe Price Personal Strategy Growth Fund Global Proxy Service Rider T. Rowe Price Personal Strategy Income Fund Global Proxy Service Rider T. Rowe Price Short-Term Bond Fund, Inc. Global Proxy Service Rider SCHEDULE A PAGE 3 OF 3 T. Rowe Price Tax-Efficient Funds, Inc. on behalf of: T. Rowe Price Tax-Efficient Balanced Fund Global Proxy Service Rider T. Rowe Price Tax-Efficient Growth Fund Global Proxy Service Rider T. Rowe Price Tax-Efficient Multi-Cap Growth Fund Global Proxy Service Rider T. Rowe Price U.S. Bond Index Fund, Inc. Global Proxy Service Rider APPLICABLE RIDERS TO CUSTOMER GLOBAL CUSTODY AGREEMENT II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all Customers under Section II of this Schedule A. T. Rowe Price Trust Company, as Trustee for the Johnson Matthey Salaried Employee Savings Plan Common Trust Funds ------------------ T. Rowe Price Trust Company, as Trustee for the International Common Trust Fund on behalf of the Underlying Trusts: Emerging Markets Equity Trust Global Proxy Service Rider Foreign Discovery Trust Global Proxy Service Rider Foreign Discovery Trust - B Global Proxy Service Rider India Trust Global Proxy Service Rider International Small-Cap Trust Global Proxy Service Rider Japan Discovery Trust Global Proxy Service Rider Taiwan Trust Global Proxy Service Rider ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT None ITEM 25. INDEMNIFICATION The Registrant maintains comprehensive Errors and Omissions and Officers and Directors insurance policies written by the Evanston Insurance Company and ICI Mutual. These policies provide coverage for T. Rowe Price Associates, Inc. ("Manager"), and its subsidiaries and affiliates as listed in Item 26 of this Registration Statement (with the exception of the T. Rowe Price Associates Foundation, Inc.), and all other investment companies in the T. Rowe Price family of mutual funds. In addition to the corporate insureds, the policies also cover the officers, directors, and employees of the Manager, its subsidiaries, and affiliates. The premium is allocated among the named corporate insureds in accordance with the provisions of Rule 17d-1(d)(7) under the Investment Company Act of 1940. GENERAL. The Charter of the Corporation provides that to the fullest extent permitted by Maryland or federal law, no director or officer of the Corporation shall be personally liable to the Corporation or the holders of Shares for money damages and each director and officer shall be indemnified by the Corporation; PROVIDED, HOWEVER, that nothing therein shall be deemed to protect any director or officer of the Corporation against any liability to the Corporation of the holders of Shares to which such director or officer would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. Article X, Section 10.01 of the Registrant's By-Laws provides as follows: Section 10.01. INDEMNIFICATION AND PAYMENT OF EXPENSES IN ADVANCE: The Corporation shall - --------------- --- ------- -- -------- -- ------- indemnify any individual ("Indemnitee") who is a present or former director, officer, employee, or agent of the Corporation, or who is or has been serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, who, by reason of his position was, is, or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (hereinafter collectively referred to as a "Proceeding") against any judgments, penalties, fines, settlements, and reasonable expenses (including attorneys' fees) incurred by such Indemnitee in connection with any Proceeding, to the fullest extent that such indemnification may be lawful under Maryland law. The Corporation shall pay any reasonable expenses so incurred by such Indemnitee in defending a Proceeding in advance of the final disposition thereof to the fullest extent that such advance payment may be lawful under Maryland law. Subject to any applicable limitations and requirements set forth in the Corporation's Articles of Incorporation and in these By-Laws, any payment of indemnification or advance of expenses shall be made in accordance with the procedures set forth in Maryland law. Notwithstanding the foregoing, nothing herein shall protect or purport to protect any Indemnitee against any liability to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office ("Disabling Conduct"). Anything in this Article X to the contrary notwithstanding, no indemnification shall be made by the Corporation to any Indemnitee unless: (a) there is a final decision on the merits by a court or other body before whom the Proceeding was brought that the Indemnitee was not liable by reason of Disabling Conduct; or (b) in the absence of such a decision, there is a reasonable determination, based upon a review of the facts, that the Indemnitee was not liable by reason of Disabling Conduct, which determination shall be made by: (i) the vote of a majority of a quorum of directors who are neither "interested persons" of the Corporation as defined in Section 2(a)(19) of the Investment Company Act, nor parties to the Proceeding; or (ii) an independent legal counsel in a written opinion. Anything in this Article X to the contrary notwithstanding, any advance of expenses by the Corporation to any Indemnitee shall be made only upon the undertaking by such Indemnitee to repay the advance unless it is ultimately determined that such Indemnitee is entitled to indemnification as above provided, and only if one of the following conditions is met: (a) the Indemnitee provides a security for his undertaking; or (b) the Corporation shall be insured against losses arising by reason of any lawful advances; or (c) there is a determination, based on a review of readily available facts, that there is reason to believe that the Indemnitee will ultimately be found entitled to indemnification, which determination shall be made by: (i) a majority of a quorum of directors who are neither "interested persons" of the Corporation as defined in Section 2(a)(19) of the Investment Company Act, nor parties to the Proceeding; or (ii) an independent legal counsel in a written opinion. SECTION 10.02. INSURANCE OF OFFICERS, DIRECTORS, EMPLOYEES, AND AGENTS. To the fullest extent permitted by applicable Maryland law and by Section 17(h) of the Investment Company Act of 1940, as from time to time amended, the Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the Corporation, or who is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against any liability asserted against him and incurred by him in or arising out of his position, whether or not the Corporation would have the power to indemnify him against such liability. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT MANAGER T. Rowe Price International, Inc. (formerly Rowe Price-Fleming International, Inc.), a Maryland corporation, is a wholly owned subsidiary of T. Rowe Price Associates, Inc. T. Rowe Price International, Inc. ("T. ROWE PRICE INTERNATIONAL") was incorporated in Maryland in 2000 and provides investment counsel service with respect to foreign securities for institutional investors in the United States. In addition to managing private counsel client accounts, T. Rowe Price International also sponsors registered investment companies which invest in foreign securities, serves as general partner of T. Rowe Price International Partners, Limited Partnership, and provides investment advice to the T. Rowe Price Trust Company, trustee of the International Common Trust Fund. T. Rowe Price Global Investment Services Limited is an English Corporation, organized in 2000, and a wholly owned subsidiary of T. Rowe Price Group. Global Investment Services provides investment management, sales, and client servicing to institutional and retail investors, primarily to non-United States investors. M. DAVID TESTA, Director of T. Rowe Price International; Vice-Chairman of the Board, Chief Investment Officer, and Managing Director, T. Rowe Price Associates, Inc.; Vice President and Director, T. Rowe Price Trust Company. JOHN R. FORD, Director, T. Rowe Price International. GEORGE A. MURNAGHAN, Executive Vice President, T. Rowe Price International; Managing Director, T. Rowe Price Associates, Inc.; Vice President of T. Rowe Price Trust Company and T. Rowe Price Investment Services, Inc. JAMES S. RIEPE, Vice-Chairman, T. Rowe Price International; Vice-Chairman of the Board, Director, and Managing Director of T. Rowe Price Associates, Inc.; Chairman of the Board and Director, T. Rowe Price Investment Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price Retirement Plan Services, Inc.; Chairman of the Board, Director, and Trust Officer, T. Rowe Price Trust Company. GEORGE A. ROCHE, Director of T. Rowe Price International; Chairman of the Board, President, and Managing Director of T. Rowe Price Associates, Inc. MARTIN G. WADE, Chairman of T. Rowe Price International; Director of T. Rowe Price Associates, Inc. DAVID J.L. WARREN, Chief Executive officer, President and Director, T. Rowe Price International. With the exception of Christopher D. Alderson, Steven J. Banks, Mark C.J. Bickford-Smith, Michael J. Conelius, Ann B. Cranmer, Julio A. Delgado, Frances Dydasco, Mark J.T. Edwards, Carol A. Eve, Roger L. Fiery III, Abigail Fulton, R. Aran Gordon, Pascal Hautcoeur, Todd J. Henry, Leah P. Holmes, Henry H. Hopkins, Paul Kitney, Ian J. Macdonald, Nancy M. Morris, Thomas O. Murther, Gonzalo Pangaro, Sally Patterson, Kathleen G. Polk, Robert Revel-Chion, Christopher Rothery, James B.M. Seddon, Robert W. Smith, Benedict R.F. Thomas, Justin Thomson, Christine To, William F. Wendler II, and Richard T. Whitney, all officers of T. Rowe Price International are officers and/or employees of Price Associates and may also be officers and/or directors of one or more subsidiaries of Price Associates and/or one or more of the registered investment companies for which Price Associates or T. Rowe Price International serves as investment adviser. Ms. Cranmer is a Director of Fleming Investment Management Limited and Robert Fleming Management Services. See also "Management of the Funds," in the Registrant's Statement of Additional Information. ITEM 27. PRINCIPAL UNDERWRITERS (a) The principal underwriter for the Registrant is Investment Services. Investment Services acts as the principal underwriter for the T. Rowe Price family of mutual funds, including the following investment companies: T. Rowe Price Growth Stock Fund, Inc., T. Rowe Price New Horizons Fund, Inc., T. Rowe Price New Era Fund, Inc., T. Rowe Price New Income Fund, Inc., T. Rowe Price Prime Reserve Fund, Inc., T. Rowe Price Tax-Free Income Fund, Inc., T. Rowe Price Tax-Exempt Money Fund, Inc., T. Rowe Price International Funds, Inc., T. Rowe Price Growth & Income Fund, Inc., T. Rowe Price Tax-Free Short-Intermediate Fund, Inc., T. Rowe Price Short-Term Bond Fund, Inc., T. Rowe Price High Yield Fund, Inc., T. Rowe Price Tax-Free High Yield Fund, Inc., T. Rowe Price New America Growth Fund, T. Rowe Price Equity Income Fund, T. Rowe Price GNMA Fund, T. Rowe Price Capital Appreciation Fund, T. Rowe Price California Tax-Free Income Trust, T. Rowe Price State Tax-Free Income Trust, T. Rowe Price Science & Technology Fund, Inc., T. Rowe Price Small-Cap Value Fund, Inc., Institutional International Funds, Inc., T. Rowe Price U.S. Treasury Funds, Inc., T. Rowe Price Index Trust, Inc., T. Rowe Price Spectrum Fund, Inc., T. Rowe Price Balanced Fund, Inc., T. Rowe Price Mid-Cap Growth Fund, Inc., T. Rowe Price Small-Cap Stock Fund, Inc., T. Rowe Price Tax-Free Intermediate Bond Fund, Inc., T. Rowe Price Dividend Growth Fund, Inc., T. Rowe Price Blue Chip Growth Fund, Inc., T. Rowe Price Summit Funds, Inc., T. Rowe Price Summit Municipal Funds, Inc., T. Rowe Price Equity Series, Inc., T. Rowe Price International Series, Inc., T. Rowe Price Fixed Income Series, Inc., T. Rowe Price Personal Strategy Funds, Inc., T. Rowe Price Value Fund, Inc., T. Rowe Price Capital Opportunity Fund, Inc., T. Rowe Price Corporate Income Fund, Inc., T. Rowe Price Health Sciences Fund, Inc., T. Rowe Price Mid-Cap Value Fund, Inc., Institutional Equity Funds, Inc., T. Rowe Price Financial Services Fund, Inc., T. Rowe Price Diversified Small-Cap Growth Fund, Inc., T. Rowe Price Tax-Efficient Funds, Inc., T. Rowe Price Reserve Investment Funds, Inc., T. Rowe Price Media & Telecommunications Fund, Inc., T. Rowe Price Real Estate Fund, Inc., T. Rowe Price Developing Technologies Fund, Inc., and T. Rowe Price Global Technology Fund, Inc., T. Rowe Price U.S. Bond Index Fund, Inc., and T. Rowe Price International Index Fund, Inc.
NAME POSITIONS AND POSITIONS AND OFFICES WITH OFFICES WITH UNDERWRITER REGISTRANT James S. Riepe Chairman of the Board Trustee and Vice and Director President Edward C. Bernard President and Director None Henry H. Hopkins Vice President and Director Vice President Charles E. Vieth Vice President and Director None Patricia M. Archer Vice President None Steven J. Banks Vice President None John T. Bielski Vice President None Darrell N. Braman Vice President None Ronae M. Brock Vice President None Meredith C. Callanan Vice President None John H. Cammack Vice President None Ann R. Campbell Vice President None Christine M. Carolan Vice President None Joseph A. Carrier Vice President None Laura H. Chasney Vice President None Renee M. Christoff Vice President None Christopher W. Dyer Vice President None Christine S. Fahlund Vice President None Forrest R. Foss Vice President None Thomas A. Gannon Vice President None Andrea G. Griffin Vice President None Douglas E. Harrison Vice President None David J. Healy Vice President None Joanne M. Healey Vice President None Joseph P. Healy Vice President None Walter J. Helmlinger Vice President None Eric G. Knauss Vice President None Sharon R. Krieger Vice President None Steven A. Larson Vice President None Keith W. Lewis Vice President None Gayle A. Lomax Vice President None Sarah McCafferty Vice President None Mark J. Mitchell Vice President None Nancy M. Morris Vice President None George A. Murnaghan Vice President None Steven E. Norwitz Vice President None Kathleen M. O'Brien Vice President None Barbara A. O'Connor Vice President None Wayne D. O'Melia Vice President None David Oestreicher Vice President None Robert Petrow Vice President None Pamela D. Preston Vice President None George D. Riedel Vice President None John R. Rockwell Vice President None Kenneth J. Rutherford Vice President None Alexander Savich Vice President None Kristin E. Seeberger Vice President None Donna B. Singer Vice President None Bruce D. Stewart Vice President None William W. Strickland, Jr. Vice President None Jerome Tuccille Vice President None Walter Wdowiak Vice President None William F. Wendler II Vice President None Jane F. White Vice President None Thomas R. Woolley Vice President None Barbara A. O'Connor Controller None Theodore J. Zamerski III Assistant Vice President and None Assistant Controller Matthew B. Alsted Assistant Vice President None Kimberly B. Andersen Assistant Vice President None Richard J. Barna Assistant Vice President None Catherine L.Berkenkemper Assistant Vice President None Edwin J. Brooks III Assistant Vice President None Carl A. Cox Assistant Vice President None Cheryl L. Emory Assistant Vice President None John A. Galateria Assistant Vice President None Janelyn A. Healey Assistant Vice President None Sandra J. Kiefler Assistant Vice President None Suzanne M. Knoll Assistant Vice President None Patricia B. Lippert Assistant Vice President Secretary Teresa M. Loeffert Assistant Vice President None C. Lillian Matthews Assistant Vice President None Janice D. McCrory Assistant Vice President None Danielle Nicholson Smith Assistant Vice President None JeanneMarie B. Patella Assistant Vice President None Kylelane Purcell Assistant Vice President None David A. Roscum Assistant Vice President None Carole H. Smith Assistant Vice President None John A. Stranovsky Assistant Vice President None Nolan L. North Assistant Treasurer None Barbara A. Van Horn Secretary None
(c) Not applicable. Investment Services will not receive any compensation with respect to its activities as underwriter for the Price Funds since the Price Funds are sold on a no-load basis. ITEM 28. LOCATION OF ACCOUNTS AND RECORDS All accounts, books, and other documents required to be maintained by the Registrant under Section 31(a) of the Investment Company Act of 1940 and the rules thereunder will be maintained by the Registrant at its offices at 100 East Pratt Street, Baltimore, Maryland 21202. Transfer, dividend disbursing, and shareholder service activities are performed by T. Rowe Price Services, Inc., at 4515 Painters Mill Road, Owings Mills, Maryland 21117. Custodian activities for the Registrant are performed at State Street Bank and Trust Company's Service Center (State Street South), 1776 Heritage Drive, Quincy, Massachusetts 02171. Custody of Registrant's portfolio securities which are purchased outside the United States is maintained by The Chase Manhattan Bank, London, in its foreign branches or with other U.S. banks. The Chase Manhattan Bank, London, is located at Woolgate House, Coleman Street, London EC2P 2HD England. ITEM 29. MANAGEMENT SERVICES Registrant is not a party to any management-related service contract, other than as set forth in the Prospectus or Statement of Additional Information. ITEM 30. UNDERTAKINGS (a) Not applicable Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Baltimore, State of Maryland, this April 30, 2001. T. Rowe Price International Funds, Inc. /s/Martin G. Wade By: Martin G. Wade Chairman of the Board Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated: Signature Title Date - --------- ----- ---- /s/Martin G. Wade Chairman of the Board April 30, 2001 Martin G. Wade (Chief Executive Officer) /s/Joseph A. Carrier Treasurer (Chief April 30, 2001 Joseph A. Carrier Financial Officer) /s/M. David Testa Director and April 30, 2001 M. David Testa Vice President * Director April 30, 2001 Anthony W. Deering * Director April 30, 2001 Donald W. Dick, Jr. * Director April 30, 2001 Paul M. Wythes */s/Henry H. Hopkins Attorney-In-Fact April 30, 2001 Henry H. Hopkins and Vice President EX-99.2RCODEETH 2 trpicode.txt T. ROWE PRICE INTERNATIONAL, INC. STATEMENT OF POLICY ON SECURITIES TRANSACTIONS BACKGROUND INFORMATION. LEGAL REQUIREMENT. In accordance with the requirements of the securities laws of the United States (i.e., the Securities Exchange Act of 1934, the Investment Company Act of 1940, the Investment Advisers Act of 1940 and the Insider Trading and Securities Fraud Enforcement Act of 1988) and the various United Kingdom laws and regulations, T. Rowe Price International, Inc. ("TRPI") and the mutual funds which it manages ("TRPI FUNDS") have adopted this Statement of Policy on Securities Transactions ("STATEMENT"). Both T. Rowe Price Associates, Inc. ("PRICE ASSOCIATES" OR "TRPA") and T. Rowe Fleming Asset Management ("TRFAM") have also adopted Statements of Policy on Securities Transactions. Funds sponsored and managed by Price Associates or TRPI may be referred to collectively in this Statement as the "PRICE FUNDS." TRPI'S FIDUCIARY POSITION. As an investment adviser, TRPI is in a fiduciary position which requires it to act with an eye only to the benefit of its clients, avoiding those situations which might place, or appear to place, the interests of TRPI or its officers, directors or employees in conflict with the interests of clients. PURPOSE OF STATEMENT. The Statement was developed to help guide TRPI, its officers and employees, and the independent directors of the TRPI Funds, including all Access Persons as defined below, in the conduct of their personal investments and to: /2/ eliminate the possibility of a transaction occurring that the United States Securities and Exchange Commission or other regulatory bodies would view as illegal, such as FRONT RUNNING (see definition below); /2/ avoid situations where it might appear that TRPI or the TRPI Funds or any of their officers, directors or employees had personally benefited at the expense of a client or fund shareholder or taken inappropriate advantage of their fiduciary positions; and /2/ prevent, as well as detect, the misuse of material, non-public information. All those covered by this Statement are urged to consider the reasons for the adoption of this Statement. TRPI's and the TRPI Funds' reputations could be adversely affected as the result of even a single transaction considered questionable in light of the fiduciary duties of TRPI and the independent directors of the TRPI Funds. FRONT RUNNING. Front Running is illegal. It is generally defined as the purchase or sale of a security by an officer, director or employee of an investment adviser or mutual fund in anticipation of and prior to the adviser effecting similar transactions for its clients in order to take advantage of or avoid changes in market prices effected by the clients' transactions. ETHICS COMMITTEE. TRPI has established an Ethics Committee which is responsible for the administration of this Statement. Its members are Martin Wade and David Warren (London) and Henry Hopkins and M. David Testa (Baltimore). TRPI INVESTMENT COMPLIANCE TEAM. The Ethics Committee has designated the TRPI Investment Compliance Team to carry out the compliance functions described in this Statement. The members of the TRPI Investment Compliance Team include Carol Eve, Rachel Dickens, and Maxine Martin. PERSONS SUBJECT TO STATEMENT. The provisions of this Statement apply to the following persons and entities. In the case of an individual, the Statement also applies to the individual's spouse, minor children, and certain other relatives, as further described on page 4-4 of this Statement. TRPI. TRPI for its own account, including sponsored retirement plans of the firm, if any. TRPI OFFICERS, DIRECTORS AND EMPLOYEES. Each officer, director, and employee of TRPI. The term "Director" means any TRPI Director who is an officer or employee of TRPI or Price Associates. Each Officer, Director, and Employee stationed in TRPI's Baltimore office will be referred to as BALTIMORE EMPLOYEES. Baltimore Employees are subject to all the provisions of the TRPA Statement, including its prior clearance and various reporting requirements. Therefore, although Baltimore Employees will be subject to this Statement's general principles, they will not be subject to the Statement's specific prior clearance or reporting requirements. The TRPA Statement is considered a part of this Statement. CERTAIN TEMPORARY WORKERS. These workers include: /2/ Any temporary or consultant when his or her assignment at TRPI exceeds or will exceed four weeks or when his or her cumulative assignments exceed eight weeks over a twelve-month period; and /2/ Any contingent worker immediately at the time of engagement if his or her assignment is more than casual in nature or if he or she will be exposed to the kinds of information and situations that would create conflicts on matters covered in the Code. TRFAM PERSONNEL. As stated earlier, a Statement of Policy on Securities Transactions has been adopted by TRFAM. Under that Statement, any TRFAM officer, director, or employee who has been seconded to TRFAM by TRPI and who works in any office other than Baltimore will be subject to this Statement. INDEPENDENT DIRECTORS OF THE TRPI FUNDS. The Independent Directors of the TRPI Funds are prohibited from owning the stock of Price Associates. They are SUBJECT to: /2/ the Statement's general principles; /2/ the Statement's transaction reporting requirements; /2/ restrictions on dealing with clients; /2/ co-investing restrictions; /2/ investment in client investment partnership restrictions; and /2/ 1/2 of 1% ownership reporting requirements They are EXEMPT from: /2/ prior clearance requirements; and /2/ the requirements and rules dealing with: /2/ new issues; /2/ investment clubs; /2/ private placements; /2/ short sales; /2/ trading activity; /2/ brokerage confirmations, periodic account statements and notification of broker/dealer accounts; /2/ the 60-Day Rule; and /2/ disclosure of personal securities holdings. ACCESS PERSONS. The term "ACCESS PERSON" means: /2/ TRPI; /2/ any officer (vice president or above) or director of TRPI or the Price Funds (excluding the Independent Directors of the TRPI Funds); /2/ any employee of TRPI, or the Price Funds who, in connection with his or her regular functions or duties, makes, participates in, obtains, or has access to information regarding the purchase or sale of securities by a Price Fund or other advisory client, or whose functions relate to the making of any recommendations with respect to the purchases or sales; or /2/ any person in a control relationship to TRPI or a Price Fund who obtains or has access to information concerning recommendations made to a Price Fund or other advisory client with regard to the purchase or sale of securities by the Price Fund or advisory client. The TRPI Investment Compliance Team notifies each Access Person of his or her status under the Code. ALL OFFICERS, DIRECTORS AND EMPLOYEES OF TRPI ARE DEEMED TO BE ACCESS PERSONS. INVESTMENT PERSONNEL. An Access Person is further identified as "INVESTMENT PERSONNEL" if, in connection with his or her regular functions or duties, he or she makes or participates in making recommendations regarding the purchase or sale of securities by a Price Fund or other advisory client. The term "Investment Personnel" includes, but is not limited to, employees who are: /2/ authorized to make investment decisions or to recommend securities transactions on behalf of TRPI's clients; /2/ research and credit analysts; and /2/ TRPI traders. All Investment Personnel are deemed Access Persons under the Code. The TRPI Investment Compliance Team notifies all Investment Personnel of their status under the Code. QUESTIONS ABOUT THE STATEMENT. Covered Persons are urged to seek the advice of Martin Wade, David Warren, Henry Hopkins, the TRPI Compliance Officer or their designees when they have questions as to the application of this Statement to their individual circumstances. TRANSACTIONS SUBJECT TO STATEMENT. Except as provided below, the provisions of this Statement apply to securities transactions that fall under one of the following two conditions: IF, you are a "BENEFICIAL OWNER" of the security under the Rule 16a-1 of the United States Securities Exchange Act of 1934 ("EXCHANGE ACT"), as defined below. OR, if you CONTROL or direct securities trading for another person or entity, those trades are subject to this Statement even if you are not a beneficial owner of the securities. For example, if you have a power of attorney to direct transactions in another person's account or give ongoing advice to another person about his or her securities transactions, those transactions will be subject to this Statement to the same extent your personal trades would be, unless exempted as described below. DEFINITION OF BENEFICIAL OWNER. A "beneficial owner" is any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, has or shares in the opportunity to derive any profit from a transaction in the security. For example, a person has beneficial ownership in: /2/ securities held by members of the person's immediate family SHARING THE SAME HOUSEHOLD; /2/ securities held by a trust, if that person is either a trust beneficiary or a trustee with investment control; /2/ the right to acquire securities through the exercise or conversion of any derivative security, whether or not presently exercisable; /2/ a proportionate interest in the portfolio securities held by a general or limited partnership if that person is a general partner; /2/ certain performance-related fees other than an asset-based fee, received by any broker, dealer, bank, insurance company, investment company, investment adviser, investment manager, trustee or person or entity performing a similar function; and /2/ the right to dividends that is separated or separable from the underlying securities. Otherwise, a right to dividends alone shall not represent beneficial ownership in the securities. A shareholder shall not be deemed to have beneficial ownership in the portfolio securities held by a corporation or similar entity in which the person owns securities if the shareholder is not a controlling shareholder of the entity and does not have or share investment control over the entity's portfolio. REQUESTS FOR EXEMPTIONS. If you have beneficial ownership of a security, any transaction involving that security is presumed to be subject to the relevant requirements of this Statement, UNLESS you have no control over the transaction. Such a situation MAY arise, for example, if you have delegated investment authority to an independent investment adviser, or your spouse has an independent trading program in which you have no input. Similarly, if your spouse has investment control over, but no beneficial ownership in, an unrelated account, an exemption may be appropriate. If you feel you should not be subject to the Statement's relevant prior approval and/or reporting requirements, you should submit a written request for clarification or exemption to the TRPI Investment Compliance Team. Any such request for clarification or exemption should name the account, your interest in the account, the persons or firms responsible for its management, and the basis upon which the exemption is being claimed. Exemptions are NOT self-executing; any exemption must be granted through the TRPI Investment Compliance Team. NOTIFICATION OF BROKER/DEALER ACCOUNTS. ALL ACCESS PERSONS must give written notice to the TRPI Investment Compliance Team before opening or trading in a securities account with any broker/dealer. NEW ACCESS PERSONS. New Access Persons must give written notice to the TRPI Investment Compliance Team of any existing securities accounts maintained with any broker/dealer when joining the firm (no later than 10 days after the starting date). TRANSACTION REPORTING REQUIREMENTS (OTHER THAN PRICE ASSOCIATES' STOCK). TRANSACTIONS THAT MUST BE REPORTED. Other than for the transactions specified below as exempt, every person subject to this Statement is required to report to the TRPI Investment Compliance Team ALL securities transactions, including the following: PRO RATA DISTRIBUTIONS. Purchase effected by the exercise of rights issued pro rata to all holders of a class of securities or the sale of rights so received. REGULAR SAVINGS SCHEMES. Transactions involving the purchase of securities pursuant to a systematic investment plan, (i.e., a regular savings scheme or savings plan) if the underlying investment(s) is not exempt from prior clearance. REPORTING OF THESE TRANSACTIONS MUST BE MADE PROMPTLY AFTER THE INDIVIDUAL RECEIVES HIS OR HER REPORTS REGARDING THESE TRANSACTIONS (e.g., if the individual receives reports semi-annually only, he or she must report the transactions on that basis). MANDATORY TENDERS. Purchases and sales of securities pursuant to a mandatory tender offer. SPOUSAL PAYROLL DEDUCTION PLANS/SPOUSAL STOCK OPTIONS. Transactions involving the purchase or exchange of securities by a spouse pursuant to a payroll deduction plan or the exercise by a spouse of a stock option issued by the spouse's employer. REPORTING OF SPOUSAL PAYROLL DEDUCTION PLAN TRANSACTIONS MUST BE MADE PROMPTLY AFTER THE INDIVIDUAL RECEIVES HIS OR HER REPORTS REGARDING THESE TRANSACTIONS (e.g., if the individual receives reports semi-annually only, he or she must report the transactions on that basis); REPORTING OF A SPOUSAL STOCK OPTION EXERCISE MUST BE MADE WITHIN 10 DAYS OF THE EXERCISE. INHERITANCES. Acquisition of securities through inheritance. GIFTS. Acquisition or disposition of securities by gift. TRANSACTIONS EXEMPT FROM REPORTING. The following transactions are exempt from the reporting requirements: OPEN-ENDED COLLECTIVE INVESTMENT SCHEMES, INCLUDING UNIT TRUSTS AND U.S. MUTUAL FUNDS. Purchases or redemptions of shares of any open-ended collective investment schemes, unit trusts and U.S. open-end investment companies, including the Price Funds and similar, foreign-registered investment vehicles, except that any person covered by this Statement who serves as the president, chairman of the board, or executive vice president of a Price Fund must report his or her beneficial ownership or control of shares in that Fund to Baltimore Legal/Compliance at the time of the initial purchase of shares. GOVERNMENT OBLIGATIONS. Purchases or sales of direct U.S. or Foreign Government obligations. CORPORATE ACTIONS (E.G., STOCK SPLITS AND SIMILAR TRANSACTIONS). The acquisition of additional shares of existing corporate holdings through the reinvestment of income dividends and capital gains in mutual funds and similar investment vehicles, stock splits, stock dividends, exercise of rights, exchanges or conversions. DIVIDEND REINVESTMENT PLANS. The purchase of securities with dividends effected through an established DRP. If, however, a Connected Purchase or a sale by an Access Person must receive prior clearance (see p. 4-9), that transaction must also be reported. BROKERAGE CONFIRMATIONS, PERIODIC ACCOUNT STATEMENTS AND OTHER REPORTING FORMS. ALL ACCESS PERSONS must request broker-dealers executing their transactions to send to the attention of the TRPI Investment Compliance Team a duplicate confirmation or contract note with respect to each and every reportable transaction, including Price Associates' stock, and a copy of all periodic statements for all securities accounts in which the Access Person is considered to have beneficial ownership and/or control (see Page 4-4 for a discussion of beneficial ownership and control concepts). All transactions not reported directly to the TRPI Investment Compliance Team by the executing broker/dealer must be reported by the employee on the form designated "TRPI Report of Securities Transactions," which is available from the TRPI Investment Compliance Team. WHEN REPORTS ARE DUE. Unless your broker/dealer provides a confirmation, contract note, or statement directly to the TRPI Investment Compliance Team, you must report a securities transaction within ten (10) days after the trade date (for example, a purchase in a private placement), or within ten (10) days after the date on which you first gain knowledge of the transaction (for example, a bequest) if this is later. Transactions involving either a regular savings scheme or the purchase of securities by a spouse pursuant to a payroll deduction plan, however, may be reported when the report is received. The TRPI Investment Compliance Team will send all such reports to Baltimore Legal/Compliance on a quarterly basis. TRANSACTION REPORTING REQUIREMENTS OF THE INDEPENDENT DIRECTORS OF THE TRPI FUNDS. The Independent Directors of the TRPI Funds are subject to similar reporting requirements as Access Persons, except that reports need only be filed quarterly and the reports of the Independent Directors are filed in Baltimore. Specifically, each Independent Director must file a report for each quarter's transactions with Baltimore Legal/ Compliance no later than ten (10) calendar days after the end of the calendar quarter in which the transactions were effected. Reports must be filed for each quarter, regardless of whether there have been any reportable transactions. Baltimore Legal/Compliance will send the Independent Directors of the TRPI Funds a reminder letter and Reporting Form approximately ten (10) days prior to the end of each calendar quarter. DISCLOSURE OF PERSONAL SECURITIES HOLDINGS BY ACCESS PERSONS. Upon commencement of employment, appointment or promotion (no later than 10 days after the starting date), each Access Person must disclose in writing all current securities holdings in which he or she is considered to have beneficial ownership and control ("SECURITIES HOLDINGS REPORT") (see page 4-4 for definitions of Beneficial Owner/Control). The form to provide the Securities Holdings Report will be provided upon commencement of employment, appointment or promotion and should be submitted to the TRPI Investment Compliance Team, which will provide a copy to Baltimore Legal/Compliance. Effective January 2001, ALL Access Persons are also required to file a Securities Holding Report on an annual basis, pursuant to United States law. CONFIDENTIALITY OF RECORDS. TRPI makes every effort to protect the privacy of all personnel in connection with their Securities Holdings Reports and Reports of Securities Transactions. PRIOR CLEARANCE REQUIREMENTS FOR ACCESS PERSONS (OTHER THAN PRICE ASSOCIATES' STOCK). All Access Persons must obtain prior clearance before directly or indirectly initiating, recommending, or in any way participating in the purchase or sale of a security in which the Access Person has, or by reason of such transaction may acquire, any beneficial interest or which he or she controls, unless exempted below. PRIOR CLEARANCE MUST BE OBTAINED REGARDLESS OF HOW THE TRANSACTION IS EFFECTED. Receiving prior clearance does not relieve Access Persons from conducting their personal securities transactions in full compliance with the Code including its prohibition on trading while in possession of material, inside information, and with applicable law, including the prohibition on Front Running (see page 4-2 for definition of Front Running). Compliance with the 60-Day Rule (p. 4-14) is the responsibility of the Access Person; it is not covered by prior clearance procedures. It is also the Access Person's responsibility to ensure that all custody and settlement requirements are met. TRANSACTIONS EXEMPT FROM PRIOR CLEARANCE REQUIREMENTS (OTHER THAN PRICE ASSOCIATES' STOCK). All securities transactions must receive prior clearance except the following: OPEN-ENDED COLLECTIVE INVESTMENT SCHEMES, INCLUDING UNIT TRUSTS AND U.S. MUTUAL FUNDS. Purchases or redemptions of shares of any open-ended collective investment scheme, unit trust and U.S. open-end investment companies, including the Price Funds, and similar foreign-registered investment vehicles. GOVERNMENT OBLIGATIONS. Purchases or sales of direct U.S. or Foreign Government obligations. REGULAR SAVINGS SCHEMES. Purchases effected through a systematic investment plan involving the automatic investment of a set amount on predetermined dates (i.e., a regular savings scheme or savings plan), provided that, if the underlying investment(s) in the scheme or plan is not exempt from prior clearance, the TRPI Investment Compliance Team has been previously notified by the Access Person that he or she will be participating in the scheme or plan, and any purchase to initiate participation in the scheme or plan or any sale receives prior clearance. DIVIDEND REINVESTMENT PLANS. Purchases effected through an established Dividend Reinvestment Plan ("DRP"), provided the TRPI Investment Compliance Team is first notified by the Access Person that he or she will be participating in the DRP. An Access Person's purchase of share(s) of the issuer to initiate participation in the DRP or his or her purchase of shares in addition to those purchased with dividends (a "CONNECTED PURCHASE") AND any sales of shares from the DRP MUST receive prior clearance. CORPORATE ACTIONS (E.G., STOCK SPLITS AND SIMILAR TRANSACTIONS). The acquisition of additional shares of an existing holding through the reinvestment of income dividends and capital gains in mutual funds and similar investment vehicles, stock splits, stock dividends, exercise of rights, exchanges or conversions. MANDATORY TENDERS. Purchases and sales of securities pursuant to a mandatory tender offer. SPOUSAL PAYROLL DEDUCTION PLANS. Purchases or exchanges by an Access Person's spouse pursuant to a payroll deduction plan, provided the TRPI Investment Compliance Team has been previously notified by the Access Person that the spouse will be participating in the payroll deduction plan. EXERCISE OF STOCK OPTION OF CORPORATE EMPLOYER BY SPOUSE. Transactions involving the exercise by an Access Person's spouse of a stock option issued by the corporation employing the spouse. INHERITANCES. Acquisition of securities through inheritance. GIFTS. Acquisition or disposition of securities by gift. PROCEDURES FOR OBTAINING PRIOR CLEARANCE (OTHER THAN PRICE ASSOCIATES' STOCK) FOR ACCESS PERSONS. Requests for prior clearance may be made by electronic mail or by submitting a written form to the TRPI Investment Compliance Team. The TRPI Investment Compliance Team is responsible for processing and maintaining the records of all such requests. All requests must include the name of the security, the number of shares or amount of bond involved, and the estimated value of the requested transaction. The TRPI Investment Compliance Team will record whether the request was approved or disapproved and the date and time of the approval or disapproval; the reason for any disapproval; if approval was granted pursuant to an exemption being granted; the nature of the transaction (i.e., whether the transaction is a purchase or a sale) and whether the securities are part of a new issue or private placement. Responses to all requests will be confirmed by the TRPI Investment Compliance Team by electronic mail or on a standard written form documenting the request and its approval/disapproval. Requests will normally be processed on the same day they are received; HOWEVER, ADDITIONAL TIME MAY BE REQUIRED TO ALLOW CHECKS TO BE MADE WITH OVERSEAS OFFICES. EFFECTIVENESS OF PRIOR CLEARANCE. Prior clearance of a securities transaction is effective for three (3) business days FROM AND INCLUDING the date the clearance is granted. If the proposed securities transaction is not executed within this time, a new clearance must be obtained. FOR EXAMPLE, IF APPROVAL IS GRANTED AT 2:00 PM MONDAY, THE TRADE MUST BE EXECUTED BY WEDNESDAY. REASONS FOR DISALLOWING PROPOSED TRANSACTIONS. A proposed security transaction will be disapproved by the TRPI Investment Compliance Team if: PENDING CLIENT ORDERS BY TRPI. An order has been placed by TRPI to purchase or sell the security through the London, Baltimore or Hong Kong trading desk. PENDING CLIENT ORDERS BY PRICE ASSOCIATES. An order has been placed by Price Associates to purchase or sell the security. PURCHASES AND SALES WITHIN SEVEN (7) CALENDAR DAYS. The security has been purchased or sold by any client of TRPI or Price Associates within the seven (7) calendar days immediately prior to the date of the proposed transaction. For example, if a client transaction occurs on Monday, an Access Person may not purchase or sell that security until Tuesday of the following week. If all clients have eliminated their holdings in a particular security, the seven-day restriction is not applicable to an Access Person's transactions in that security. SECURITIES SUBJECT TO INTERNAL TRADING RESTRICTIONS. The issuer has been placed on the TRPI Restricted List. PROCEDURES FOR OBTAINING PRIOR CLEARANCE FOR INITIAL PUBLIC OFFERINGS ("IPOS"). INVESTMENT PERSONNEL. Although subject to prior clearance, Investment Personnel may purchase securities which are the subject of an IPO if the TRPI Investment Compliance Team determines that all of the following conditions are met: /2/ The issue is open to the general public and allocations are made by the issuer/syndicate on a purely random basis (lottery) or on a pro-rata basis per application ( collectively "PRO-RATA OFFERING"); /2/ No order for the purchase of any such securities has been entered by TRPI or Price Associates on behalf of any client; /2/ The number of shares to be purchased is commensurate with the normal size and activity of the Investment Personnel's account; and /2/ Another member of the Investment Team has reviewed the proposed purchase and has determined that the Investment Personnel wishing to purchase the securities is not likely to participate in the firm's investment decision regarding any client investment in the IPO. Investment Personnel are not permitted to participate in an IPO in any other circumstances. NON-INVESTMENT PERSONNEL. Access Persons other than Investment Personnel ("NON-INVESTMENT PERSONNEL") may purchase securities in a Pro-rata Offering if the first three of the four conditions described above are met. Non-Investment Personnel may also be granted approval to purchase securities which are the subject of a Non-Pro-rata Offering. In considering such a request for approval, the TRPI Investment Compliance Team will determine whether the proposed transaction presents a conflict of interest with any of the firm's clients or otherwise violates the Code. Approvals will carry the following conditions: 1. The purchase is made through the Non-Investment Personnel's regular broker, bank, or from a syndicate member through a general solicitation or subscription form, if relevant; and 2. The number of shares to be purchased is commensurate with the normal size and activity of the Non-Investment Personnel's account. ALL ACCESS PERSONS. Neither Investment Personnel nor Non-Investment Personnel will be permitted to purchase in an IPO if any of TRPI's or Price Associates' clients are prohibited from doing so. This prohibition will remain in effect until these clients have had the opportunity to purchase in the secondary market once the underwriting is completed -- commonly referred to as the aftermarket. In addition, the 60-Day Rule applies to transactions in securities purchased in an IPO. JAPANESE NEW ISSUES. All Access Persons are prohibited from purchasing a security which is the subject of an IPO in Japan. PROCEDURES FOR OBTAINING PRIOR CLEARANCE FOR PRIVATE PLACEMENTS. Approval for an Access Person to invest in or sell securities through a private placement of securities, including the purchase of limited partnership interests, must be sought from the TRPI Investment Compliance Team in the usual manner. The approval process will include a review by a member of the Investment Team to determine whether the investment opportunity (private placement) should be reserved for the firm's clients and whether the opportunity is being offered to the Access Person by virtue of his or her position with the firm, as well as approval by a member of the Ethics Committee. CONTINUING OBLIGATION. Any Access Person who has received approval to invest in a private placement of securities and who, at a later date, anticipates participating in the firm's investment decision process regarding the purchase or sale of securities of the issuer of that private placement on behalf of any client, must immediately disclose his or her prior investment in the private placement to the TRPI Investment Compliance Team. REQUESTS FOR WAIVERS OF PRIOR CLEARANCE DENIALS. If an Access Person has been denied prior clearance, he or she may apply to the TRPI Investment Compliance Team, which will refer the matter to a member of the Ethics Committee for a waiver. All such requests must be in writing and must fully describe the basis upon which the waiver is being requested. Waivers are NOT routinely granted. LARGE CAPITALIZATION EXEMPTION. Although subject to prior clearance, transactions involving securities in large companies, within the parameters set by the Ethics Committee, will be approved under normal circumstances ("LARGE CAPITALIZATION SECURITIES"). TRANSACTIONS INVOLVING LARGE CAPITALIZATION SECURITIES. This exemption applies to transactions involving no more than $20,000 (all dollar references are to U.S. dollars) or the nearest round lot (if the amount of the transaction only marginally exceeds $20,000) per security per week in securities of companies with market capitalizations of $5 billion or more. TRANSACTIONS INVOLVING OPTIONS ON LARGE CAPITALIZATION SECURITIES. Access Persons may not purchase uncovered put options or sell uncovered call options unless otherwise permitted under the "Options and Futures" discussion on p. 4-13. Otherwise, in the case of options on an individual security qualifying for the Large Capitalization Exemption, an Access Person may trade the GREATER of 5 contracts or sufficient option contracts to control $20,000 in the underlying security; for example, an Access Person may trade 5 contracts even if this permits the Access Person to control $50,000 (i.e., more than $20,000) in the underlying security. Similarly, the Access Person may trade more than 5 contracts as long as those contracts do not permit him or her to control more than $20,000 in the underlying security. These parameters are subject to change by the Ethics Committee. EXCHANGE-TRADED INDEX OPTIONS. Although subject to prior clearance, an Access Person's transactions involving exchange-traded index options, within the following parameters set by the Ethics Committee, will be approved under normal circumstances. Generally, an Access Person may trade the GREATER of 5 contracts or sufficient contracts to control $20,000 in the underlying securities; thus an Access Person may trade 5 contracts even if this permits the Access Person to control more than $20,000 in the underlying security. Similarly, the Access Person may trade more than 5 contracts as long as the number of contracts does not permit him or her to control more than $20,000 in the underlying security. These parameters are subject to change by the Ethics Committee. CLIENT LIMIT ORDERS. The TRPI Investment Compliance Team may approve an Access Person's proposed trade even if a limit order has been entered for a client for the same security, if the client's limit order is 10% or more away from the market at the time of approval. Access Persons are required to enter market orders. INVESTMENT CLUBS. An Access Person may not form or participate in a stock or investment club unless prior written approval has been obtained from a member of the Ethics Committee. All transactions by such a stock or investment club in which an individual has beneficial ownership or control are subject to the same prior clearance and reporting requirements applicable to an individual's trades. However, if an Access Person has beneficial ownership solely by virtue of his or her spouse's participation in the club and has no investment control or input into decisions regarding the club's securities transactions, he or she may request the waiver of prior clearance requirements for the club's transactions, but not of reporting requirements, from a member of the Ethics Committee as part of the approval process. Prior clearance waiver requests for transactions in Price Associates' stock (see p. 4-15) will not be granted. OPTIONS AND FUTURES. Please consult the specific section on Exchange-Traded Index Options (p. 4-12) for transactions in these options.
BEFORE ENGAGING IN OPTIONS AND FUTURES TRANSACTIONS, ACCESS PERSONS SHOULD UNDERSTAND THE IMPACT THAT THE 60-DAY RULE MAY HAVE ON THEIR ABILITY TO CLOSE OUT A POSITION (SEE PAGE 4-14). --------------------------------------------------------------
OPTIONS AND FUTURES ON SECURITIES AND INDICES NOT HELD BY TRPI'S OR PRICE ASSOCIATES' CLIENTS. There are no specific restrictions with respect to the purchase, sale or writing of put or call options or any other option or futures activity, such as multiple writings, spreads and straddles, on securities of issuers (and options or futures on such securities) which are not held by any of TRPI's or Price Associates' clients. OPTIONS ON SECURITIES OF COMPANIES HELD BY TRPI'S OR PRICE ASSOCIATES' CLIENTS. With respect to options on securities of issuers which are held by any of TRPI's or Price Associates' clients, it is the Firm's policy that an Access Person should not profit from a price decline of a security owned by a client. Therefore, an Access Person may: (i) purchase call options and sell covered call options and (ii) purchase covered put options and sell put options. An Access Person may NOT purchase uncovered put options or sell uncovered call options, even if the issuer of the underlying security is eligible for the Large Capitalization Exemption, unless purchased in connection with other options on the same security as part of a straddle, combination or spread strategy which is designed to result in a profit to the Access Person if the underlying security rises in or does not change in value. The purchase, sale and exercise of options are subject to the same restrictions as those set forth with respect to securities, i.e., the option should be treated as if it were the common stock itself. OTHER OPTIONS AND FUTURES HELD BY TRPI'S OR PRICE ASSOCIATES' CLIENTS. Any other option or futures transaction with respect to securities held by any of TRPI's or Price Associates' clients will be approved or disapproved on a case-by-case basis after due consideration is given to whether the proposed transaction or series of transactions might appear to or actually create a conflict with the interests of any of TRPI's or Price Associates' clients. Such securities include financial instruments regulated solely by the United States Commodity Futures Trading Commission ("CFTC"). SHORT SALES. Access Persons may not sell any security short which is owned by any client of TRPI or Price Associates. 60-DAY RULE. Access Persons are prohibited from the purchase and sale or sale and purchase of the same (or equivalent) security within 60 calendar days. An "equivalent" security means any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege at a price related to the subject security, or similar securities with a value derived from the value of the subject security. Thus, for example, the rule prohibits options transactions on or short sales of a security within 60 days of its purchase. In addition, the rule applies regardless of the Access Person's other holdings of the same security or whether the person has split his or her holdings into tax lots. For example, if an Access Person buys 100 shares of XYZ stock on March 1, 1998 and another 100 shares of XYZ stock on July 1, 2000, he or she may not sell ANY shares of XYZ stock for 60 days following July 1, 2000. The 60-Day Rule "clock" restarts EACH time a trade is made in that security. For purposes of this Code, the 60-Day Rule does not apply to: /2/ any transaction exempt from prior clearance (see p. 4-8); /2/ the purchase and sale or sale and purchase of exchange-traded index options; and /2/ the exercise of "in the money" Price Associates' stock options and the subsequent sale of the derivative shares. Prior clearance procedures do NOT check compliance with the 60-Day Rule when considering a trading request. Access Persons are responsible for checking their compliance with this rule before entering a trade. Access Persons may apply for a waiver from the 60-Day Rule to the TRPI Investment Compliance Team, which will refer the matter to a member of the Ethics Committee. All such requests must be in writing and must fully describe the basis upon which the waiver is being requested; such waivers are NOT routinely granted. INVESTMENTS IN NON-LISTED SECURITIES FIRMS. Access Persons may not purchase or sell the shares of a broker/dealer, underwriter or a U.S. or other government registered investment adviser unless that entity is traded on a recognized U.S., U.K., or foreign exchange, listed as a NASDAQ/NMS stock, or permission is given under the Private Placement Procedures (see p. 4-11). TRANSACTIONS IN STOCK OF PRICE ASSOCIATES. Because Price Associates, the parent of TRPI, is a public company, ownership of its stock subjects its officers, inside and independent directors, and employees to special legal requirements under the United States securities laws. These requirements have been extended to apply to TRPI Officers, Directors and Employees. However, the Independent Directors of the TRPI Funds are prohibited from owning the stock of Price Associates. Each TRPI Officer, Director, and Employee is responsible for his or her own compliance with these requirements. Price Associates' stock may be purchased through any broker-dealer, including T. Rowe Price Investment Services, Inc's TRP Brokerage and AMA Divisions, as long as all other requirements have been met. In connection with these legal requirements, TRPI has adopted the following rules and procedures: QUARTERLY EARNINGS REPORT. TRPI Officers, Directors and Employees must refrain from initiating transactions in Price Associates' stock in which they have a beneficial interest, generally from the sixth trading day following the end of the quarter (or such other date as management shall from time to time determine) until the third trading day following the public release of earnings. They will be notified through the Office of the Secretary of Price Associates ("SECRETARY") from time to time as to the controlling dates. PRIOR CLEARANCE. TRPI Officers, Directors and Employees are required to obtain clearance prior to effecting any proposed transaction (including gifts and transfers) involving shares of Price Associates' stock owned beneficially. Requests for prior clearance must be in writing on the form entitled "Notification of Proposed Transaction" (available from the Price Associates' Corporate Records Department) and submitted to the Secretary, who is responsible for processing and maintaining the records of all such requests. Receiving prior clearance does not relieve TRPI Officers, Directors and Employees from conducting their personal securities transactions in full compliance with the Code and applicable securities laws and regulations, including the prohibition on trading while in possession of material, inside information. Transactions in Price Associates' stock are subject to the 60-Day Rule except for certain options exercises. See p. 4-14. ALL TRPI OFFICERS, DIRECTORS AND EMPLOYEES MUST OBTAIN PRIOR CLEARANCE OF ANY TRANSACTION INVOLVING PRICE ASSOCIATES' STOCK FROM THE OFFICE OF THE SECRETARY OF PRICE ASSOCIATES. CONTACT CLARA SALVINO (410-345-6790) OR BARBARA VAN HORN (410-345-7733). INITIAL DISCLOSURE OF HOLDINGS. Each new Employee must report to the Secretary any shares of Price Associates' stock in which he or she has beneficial ownership no later than 10 days after his or her starting date of employment. DIVIDEND REINVESTMENT PLANS. Purchases of Price Associates' stock effected through a dividend reinvestment plan need not receive prior clearance if the Secretary's office has been previously notified by the TRPI Officer, Director, or Employee that he or she will be participating in that plan. Reporting of transactions effected through that plan need only be made quarterly, except that TRPI Officers, Directors, and Employees who are subject to Section 16 of the United States Securities Exchange Act of 1934 reporting must report such transactions monthly. EFFECTIVENESS OF PRIOR CLEARANCE. Prior clearance of transactions in Price Associates' stock is effective for five (5) business days from and including the date the clearance is granted, unless (i) advised to the contrary by the Secretary prior to the proposed transaction, or (ii) the person receiving the approval comes into possession of material, non-public information concerning the firm. If the proposed transaction in Price Associates' stock is not executed within this time period, a new clearance must be obtained. REPORTING OF DISPOSITION OF PROPOSED TRANSACTION. TRPI Officers, Directors, and Employees must notify the Secretary whether the proposed transaction in Price Associates' stock was effected within two business days of its execution, or within seven business days of the date of prior clearance, if not executed. INSIDER REPORTING AND LIABILITY. Under current rules, certain officers, directors and 10% stockholders of a publicly traded company ("INSIDERS") are subject to the requirements of Section 16. Insiders include the Directors and certain Managing Directors of Price Associates. SEC REPORTING. There are three reporting forms which insiders are required to file with the SEC to report their purchase, sale and transfer transactions in, and holdings of, Price Associates' stock. Although the Secretary will provide assistance in complying with these requirements as an accommodation to insiders, it remains the legal responsibility of each insider to assure that the applicable reports are filed in a timely manner. /2/ FORM 3. The initial ownership report by an insider is required to be filed on Form 3. This report must be filed within ten days after a person becomes an insider (i.e., is elected as a director or appointed as managing director) to report all current holdings of Price Associates' stock. Following the election or appointment of an insider, the Secretary will deliver to the insider a Form 3 for appropriate signatures and will file such Form with the SEC. /2/ FORM 4. Any change in the insider's ownership of Price Associates' stock must be reported on a Form 4 unless eligible for deferred reporting on year-end Form 5. The Form 4 is due by the 10th day following the end of the month in which the ownership change occurred. Following receipt of the Notice of Disposition of the proposed transaction, the Secretary will deliver to the insider a Form 4, as applicable, for appropriate signatures and will file such Form with the SEC. /2/ FORM 5. Any transaction or holding which is exempt from reporting on Form 4, such as option exercises, small purchases of stock, gifts, etc. may be reported on a deferred basis on Form 5 within 45 days after the end of the calendar year in which the transaction occurred. No Form 5 is necessary if all transactions and holdings were previously reported on Form 4. LIABILITY FOR SHORT-SWING PROFITS. Under United States securities laws, profit realized by certain officers, as well as directors and 10% stockholders of a company (including Price Associates) as a result of a purchase and sale (or sale and purchase) of stock of the company within a period of less than six months must be returned to the firm upon request. OFFICE OF THRIFT SUPERVISION ("OTS") REPORTING. Price Associates is the holding company of T. Rowe Price Savings Bank, which is regulated by the OTS, a division of the United States Department of the Treasury. OTS regulations require that the Managing Directors of Price Associates, as well as any vice president in charge of any Price Associates' affiliate, file reports regarding their personal holdings of the stock of Price Associates and of the stock of any non-affiliated U.S. savings banks or savings and loan holding companies. Although the Secretary will provide assistance in complying with these requirements as an accommodation, it remains the responsibility of each person required to file such reports to ensure that such reports are filed in a timely manner. DEALING WITH CLIENTS IN A PRINCIPAL TRANSACTION. TRPI Officers, Directors or Employees may not, directly or indirectly, sell to or purchase from an TRPI client any security. This prohibition does not preclude the purchase or redemption of shares of any mutual fund that is a client of TRPI. CLIENT INVESTMENT PARTNERSHIPS. CO-INVESTING. TRPI Access Persons are not permitted to co-invest in client investment partnerships of TRPI, Price Associates, or their affiliates, such as International Partners, Strategic Partners and Threshold. DIRECT INVESTMENT. The Independent Directors of the TRPI Funds are not permitted to invest as limited partners in client investment partnerships of TRPI, Price Associates, or their affiliates. MARGIN ACCOUNTS. While brokerage margin accounts are discouraged, Access Persons may open and maintain margin accounts for the purchase of securities provided such accounts are with brokerage firms with which the Access Persons maintains a regular brokerage account. TRADING ACTIVITY. Access Persons are discouraged from engaging in a pattern of securities transactions which is either: /2/ So excessively frequent as to potentially impact his or her ability to carry out assigned responsibilities, or /2/ Involve securities positions which are disproportionate to his or her net assets. At the discretion of the Ethics Committee, written notification of excessive trading may be sent to the supervisor of the Access Person. OWNERSHIP REPORTING REQUIREMENTS - ONE-HALF OF ONE PERCENT OWNERSHIP. If an Access Person beneficially owns more than 1/2 of 1% of the total outstanding shares of a public or private company, he or she must immediately report in writing such fact to the TRPI Investment Compliance Team, providing the name of the company and the total number of such company's shares beneficially owned. The TRPI Investment Compliance Team will inform Baltimore Legal/Compliance about any such ownership promptly. SANCTIONS. Strict compliance with the provisions of this Statement is considered a basic provision of association with TRPI and the TRPI Funds. The Ethics Committee and the TRPI Investment Compliance Team are primarily responsible for administering this Statement. In fulfilling this function, the Ethics Committee will institute such procedures as it deems reasonably necessary to monitor compliance with this Statement and to otherwise prevent and detect violations. VIOLATIONS BY PERSONS COVERED BY THIS STATEMENT. Upon discovering a material violation of this Statement by a person covered by this Statement, the Ethics Committee will impose such sanctions as it deems appropriate or may, in its discretion, refer the matter to the Board of Directors of TRPI to determine the appropriate sanctions. Sanctions may include, inter alia, a letter of censure or suspension, a fine, a suspension of trading privileges, or termination of employment and/or officership of the violator. In addition, the violator may be required to surrender to TRPI, or to the party or parties it may designate, any profit realized from any transaction that is in violation of this Statement. All material violations of this Statement shall be reported to the Board of Directors of TRPI and to the Board of Directors of any TRPI Fund with respect to whose securities such violations may have been involved. VIOLATIONS BY INDEPENDENT DIRECTORS OF TRPI FUNDS. Upon discovering a material violation of this Statement by an Independent Director of a TRPI Fund, the Ethics Committee shall report such violation to the Board of Directors of TRPI and to the TRPI Fund Boards on which the director serves. The TRPI Board of Directors and the TRPI Fund Boards will impose such sanctions as they deem appropriate. VIOLATIONS BY BALTIMORE EMPLOYEES OF TRPI. Upon discovering a material violation of the Price Associates' Statement of Policy on Securities Transactions by a Baltimore-based employee of TRPI, the Price Associates' Ethics Committee shall report such violation to the Board of Directors of TRPI and to the Board of Directors of any TRPI Fund with respect to whose securities such violations may have been involved. EX-99.16PWROFATTY 3 interpoa01.txt T. ROWE PRICE INTERNATIONAL FUNDS, INC. INSTITUTIONAL INTERNATIONAL FUNDS, INC. T. ROWE PRICE INTERNATIONAL SERIES, INC. T. ROWE PRICE INTERNATIONAL INDEX FUND, INC. POWER OF ATTORNEY RESOLVED, that each of the above listed Corporations (collectively the "Corporations" and individually the "Corporation") and each of its directors do hereby constitute and authorize, M. David Testa, Joel H. Goldberg, and Henry H. Hopkins, and each of them individually, their true and lawful attorneys and agents to take any and all action and execute any and all instruments which said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and any rules, regulations, orders or other requirements of the United States Securities and Exchange Commission thereunder, in connection with the registration under the Securities Act of 1933, as amended, of shares of the Corporation, to be offered by the Corporation, and the registration of the Corporation under the Investment Company Act of 1940, as amended, including specifically, but without limitation of the foregoing, power and authority to sign the name of the Corporation on its behalf, and to sign the names of each of such directors and officers on his behalf as such director or officer to any (i) Registration Statement on Form N-1A of the Corporation filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended; (ii) Registration Statement on Form N-1A of the Corporation under the Investment Company Act of 1940, as amended; (iii) amendment or supplement (including, but not limited to, Post-Effective Amendments adding additional series or classes of the Corporation) to said Registration Statement; and (iv) instruments or documents filed or to be filed as a part of or in connection with such Registration Statement, including Articles Supplementary, Articles of Amendment, and other instruments with respect to the Articles of Incorporation of the Corporation. IN WITNESS WHEREOF, the Corporations have caused these presents to be signed and the same attested by their Secretary, each thereunto duly authorized by their Board of Directors, and each of the undersigned has hereunto set his hand and seal as of the day set opposite his name. T. ROWE PRICE INTERNATIONAL INDEX FUND, INC. By:____________________________________ MARTIN G. WADE, Director T. ROWE PRICE INTERNATIONAL FUNDS, INC. INSTITUTIONAL INTERNATIONAL FUNDS, INC. T. ROWE PRICE INTERNATIONAL SERIES, INC. By:____________________________________ MARTIN G. WADE, Chairman of the Board (Principal Executive Officer) April 25, 2001 Attest: ______________________________ Patricia B. Lippert, Secretary (Signatures Continued) ____________________________ Treasurer (Principal Financial Officer) April 25, 2001 Joseph A. Carrier ____________________________ Director April 25, 2001 Anthony W. Deering ____________________________ Director April 25, 2001 Donald W. Dick, Jr. ____________________________ Director April 25, 2001 Paul M. Wythes T. ROWE PRICE INTERNATIONAL INDEX FUND, INC. ____________________________ President April 25, 2001 Richard T. Whitney (Signatures Continued) edg\agmts\POAInter.fm M. DAVID TESTA, Director T. ROWE PRICE INTERNATIONAL INDEX FUND, INC. M. DAVID TESTA, Vice President and Director INSTITUTIONAL INTERNATIONAL FUNDS, INC. T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. ROWE PRICE INTERNATIONAL SERIES, INC. ____________________________ April 25, 2001 M. David Testa edg\agmts\POAInter.fm EX-99.JOTHEROPININ 4 intfiopinion01.txt April 26, 2001 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: T. Rowe Price International Funds, Inc. (the "Registrant") File Nos.: 002-65539/811-2958 Post-Effective Amendment No. 81 Commissioners: We are counsel to the above-referenced registrant which proposes to file, pursuant to paragraph (b) of Rule 485 (the "Rule"), the above-referenced Post-Effective Amendment (the "Amendment") to its registration statement under the Securities Act of 1933, as amended. Pursuant to paragraph (b)(4) of the Rule, we represent that the Amendment does not contain disclosures which would render it ineligible to become effective pursuant to paragraph (b) of the Rule. Sincerely, /s/Swidler Berlin Shereff Friedman, LLP Swidler Berlin Shereff Friedman, LLP EX-99.JOTHEROPININ 5 intficonsent01.txt CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus and Statement of Additional Information constituting parts of this Post-Effective Amendment No. 81 to the Registration Statement on Form N-1A (the "Registration Statement") of our reports dated January 19, 2001, relating to the financial statements and financial highlights appearing in the December 31, 2000 Annual Reports to Shareholders of the International Bond Fund and Emerging Markets Bond Fund (comprising T. Rowe Price International Funds, Inc.), which are incorporated by referenced into the Registration Statement. We also consent to the references to us under the heading "Financial Highlights" in the Prospectus and under the heading "Independent Accountants" in the Statement of Additional Information. PricewaterhouseCoopers LLP Baltimore, Maryland April 24, 2001 EX-99.HOTHMATCONT 6 transfer01.txt TRANSFER AGENCY AND SERVICE AGREEMENT BETWEEN T. ROWE PRICE SERVICES, INC. AND THE T. ROWE PRICE FUNDS TABLE OF CONTENTS ----------------- PAGE ---- Article A Terms of Appointment 2 Article B Duties of Price Services 3 1. Receipt of Orders/Payments 3 2. Redemptions 5 3. Transfers 7 4. Confirmations 7 5. Returned Checks and ACH Debits7 6. Redemption of Shares under a Hold 8 7. Dividends, Distributions and Other Corporate Actions 10 8. Abandoned Property and Lost Shareholders10 9. Books and Records 11 10. Authorized Issued and Outstanding Shares13 11. Tax Information13 12. Information to be Furnished to the Fund 13 13. Correspondence 14 14. Lost or Stolen Securities14 15. Telephone/Computer Services 14 16. Collection of Shareholder Fees15 17. Form N-SAR15 18. Cooperation With Accountants 15 19. Blue Sky 15 20. Other Services 15 Article C Fees and Out-of-Pocket Expenses 15 Article D Representations and Warranties of the Price Services 17 Article E Representations and Warranties of the Fund .18 Article F Standard of Care/Indemnification 18 Article G Dual Interests 20 Article H Documentation 21 Article I References to Price Services 22 Article J Compliance with Governmental Rules and Regulations22 i Article K Ownership of Software and Related Material 23 Article L Quality Service Standards23 Article M As of Transactions 23 Article N Term and Termination of Agreement 26 Article O Notice 26 Article P Assignment27 Article Q Amendment/Interpretive Provisions 27 Article R Further Assurances 27 Article S Maryland Law to Apply 27 Article T Merger of Agreement 27 Article U Counterparts 28 Article V The Parties 28 Article W Directors, Trustees, Shareholders and Massachusetts Business Trust 28 Article X Captions 29 ii TRANSFER AGENCY AND SERVICE AGREEMENT ------------------------------------- AGREEMENT made as of the first day of January, 2001, by and between T. ROWE PRICE SERVICES, INC., a Maryland corporation having its principal office and place of business at 100 East Pratt Street, Baltimore, Maryland 21202 ("PRICE SERVICES"), and EACH FUND WHICH IS LISTED ON APPENDIX A (as such Appendix may be amended from time to time) and which evidences its agreement to be bound hereby by executing a copy of this Agreement (each such Fund individually hereinafter referred to as "THE FUND", whose definition may be found in Article V); WHEREAS, the Fund desires to appoint Price Services as its transfer agent, dividend disbursing agent and agent in connection with certain other activities, and Price Services desires to accept such appointment; WHEREAS, Price Services represents that it is registered with the Securities and Exchange Commission as a Transfer Agent under Section 17A of the Securities Exchange Act of 1934 ("'34 ACT") and will notify each Fund promptly if such registration is revoked or if any proceeding is commenced before the Securities and Exchange Commission which may lead to such revocation; WHEREAS, Price Services has the capability of providing shareholder services on behalf of the Funds for the accounts of shareholders in the Funds, including banks and brokers on behalf of underlying clients; WHEREAS, certain of the Funds are named investment options under various tax-sheltered retirement plans including, but not limited to, individual retirement accounts, Sep-IRA's, SIMPLE plans, deferred compensation plans, 403(b) plans, and profit sharing, thrift, and money purchase pension plans for self-employed individuals and professional partnerships and corporations, (collectively referred to as "RETIREMENT PLANS"); WHEREAS, Price Services also has the capability of providing special services, on behalf of the Funds, for the accounts of shareholders participating in these Retirement Plans ("RETIREMENT ACCOUNTS"). WHEREAS, Price Services may subcontract or jointly contract with other parties, on behalf of the Funds to perform certain of the functions and services described herein including services to Retirement Plans and Retirement Accounts; WHEREAS, Price Services may enter into agreements with certain third party intermediaries, who will perform certain of the services described herein for beneficial shareholders of the Funds and may accept orders on behalf of the Fund from such beneficial shareholders; WHEREAS, Price Services may also enter into, on behalf of the Funds, certain banking relationships to perform various banking services including, but not limited to, check deposits, check disbursements, automated clearing house transactions ("ACH") and wire transfers. NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: A. TERMS OF APPOINTMENT -------------------- Subject to the terms and conditions set forth in this Agreement, the Fund hereby employs and appoints Price Services to act, and Price Services agrees to act, as the Fund's transfer agent, dividend disbursing agent and agent in connection with: (1) the Fund's authorized and issued shares of its common stock or shares of beneficial interest (all such stock and shares to be referred to as "SHARES"); (2) any dividend reinvestment or other services provided to the shareholders of the Fund ("SHAREHOLDERS"), including, without limitation, any periodic investment plan or periodic withdrawal program; and (3) certain Retirement Plan and Retirement Accounts as agreed upon by the parties. The parties to the Agreement hereby acknowledge that from time to time, Price Services and T. Rowe Price Trust Company may enter into contracts ("OTHER CONTRACTS") with employee benefit plans and/or their sponsors for the provision of certain plan participant services to Retirement Plans and Retirement Accounts. Compensation paid to Price Services pursuant to this Agreement is with respect to the services described herein and not with respect to services provided under Other Contracts. B. DUTIES OF PRICE SERVICES ------------------------ Price Services agrees that it will perform the following services: 1. RECEIPT OF ORDERS/PAYMENTS ------- -- --------------- Receive for acceptance, orders/payments for the purchase of Shares and promptly deliver payment and appropriate documentation thereof to the authorized custodian of the Fund (the "CUSTODIAN"). Upon receipt of any check or other instrument drawn or endorsed to it as agent for, or identified as being for the account of, the Fund, Price Services will process the order as follows: /2/ Examine the check to determine if the check conforms to the Funds' acceptance procedures (including certain third-party check procedures). If the check con- forms, Price Services will endorse the check and include the date of receipt, will process the same for payment, and deposit the net amount to the parties agreed upon designated bank account prior to such deposit in the Custodial account, and will notify the Fund and the Custodian, respectively, of such deposits (such notification to be given on a daily basis of the total amount deposited to said accounts during the prior business day); /2/ Subject to guidelines mutually agreed upon by the Funds and Price Services, excess balances, if any, resulting from deposit in these designated bank accounts will be invested and the income therefrom will be used to offset fees which would otherwise be charged to the Funds under this Agreement; /2/ Ensure that any documentation received from Shareholder is in "good order" and all appropriate documentation is received to establish an account. /2/ Open a new account, if necessary, and credit the account of the investor with the number of Shares to be purchased according to the price of the Fund's Shares in effect for purchases made on that date, subject to any instructions which the Fund may have given to Price Services with respect to acceptance of orders for Shares; /2/ Maintain a record of all unpaid purchases and report such information to the Fund daily; /2/ Process periodic payment orders, as authorized by investors, in accordance with the payment procedures mutually agreed upon by both parties; /2/ Receive monies from Retirement Plans and determine the proper allocation of such monies to the Retirement Accounts based upon instructions received from Retirement Plan participants or Retirement Plan administrators ("ADMINISTRATORS"); /2/ Process orders received from third party intermediaries on behalf of beneficial Shareholders for omnibus accounts and individual accounts in the Funds in accordance with procedures established by agreement with such intermediaries. Receipt of orders by such third party intermediaries shall be deemed receipt by the Fund for purposes of Rule 22c-1 of the Investment Company Act of 1940; and /2/ Process telephone orders for purchases of Fund shares from the Shareholder's bank account (via wire or ACH) to the Fund in accordance with procedures mutually agreed upon by both parties. Upon receipt of funds through the Federal Reserve Wire System that are designated for purchases in Funds which declare dividends at 12:00 p.m. (or such time as set forth in the Fund's current prospectus), Price Services shall promptly notify the Fund and the Custodian of such deposit. 2. REDEMPTIONS ----------- Receive for acceptance redemption requests, including telephone redemptions and requests received from Administrators for distributions to participants or their designated beneficiaries or for payment of fees due the Administrator or such other person, including Price Services, and deliver the appropriate documentation thereof to the Custo- dian. Price Services shall receive and stamp with the date of receipt, all requests for redemptions of Shares (including all certificates delivered to it for redemption) and shall process said redemption requests as follows, subject to the provisions of Section 6 hereof: /2/ Examine the redemption request and, for written redemptions, the supporting documentation, to determine that the request is in good order and all requirements have been met; /2/ Notify the Fund on the next business day of the total number of Shares presented and covered by all such requests; /2/ For those Funds that impose redemption fees, calculate the fee owed on the redemption in accordance with the guidelines established between the Fund and Price Services; /2/ As set forth in the prospectus of the Fund, and in any event, on or prior to the seventh (7th) calendar day succeeding any such request for redemption, Price Services shall, from funds available in the accounts maintained by Price Services as agent for the Funds, pay the applicable redemption price in accordance with the current prospectus of the Fund, to the investor, participant, beneficiary, Administrator or such other person, as the case may be; /2/ Instruct custodian to wire redemption proceeds to a designated bank account of Price Services. Subject to guidelines mutually agreed upon by the Funds and Price Services, excess balances, if any, resulting from deposit in these bank accounts will be invested and the income therefrom will be used to offset fees which would otherwise be charged to the Funds under this Agreement; /2/ If any request for redemption does not comply with the Fund's requirements, Price Services shall promptly notify the investor of such fact, together with the reason therefore, and shall effect such redemption at the price in effect at the time of receipt of all appropriate documents; /2/ Make such withholdings as may be required under applicable Federal tax laws; /2/ In the event redemption proceeds for the payment of fees are to be wired through the Federal Reserve Wire System or via ACH, Price Services shall cause such proceeds to be wired in Federal funds or via ACH to the bank account designated by Shareholder; and /2/ Process redemption orders received from third party intermediaries on behalf of beneficial Shareholders for omnibus accounts and individual accounts in the Funds in accordance with procedures established by agreement with such intermediaries. Receipt of redemption orders by such third party intermediaries shall be deemed receipt by the Fund for purposes of Rule 22c-1 of the Investment Company Act of 1940; /2/ Process periodic redemption orders as authorized by the investor in accordance with the periodic withdrawal procedures for Systematic Withdrawal Plan ("SWP") and systematic ACH redemptions mutually agreed upon by both parties. Procedures and requirements for effecting and accepting redemption orders from investors by telephone, Tele*Access, computer, or written instructions shall be established by mutual agreement between Price Services and the Fund consistent with the Fund's current prospectus. 3. TRANSFERS --------- Effect transfers of Shares by the registered owners thereof upon receipt of appropriate instructions and documentation and examine such instructions for conformance with appropriate procedures and requirements. In this regard, Price Services, upon receipt of a proper request for transfer, including any transfer involving the surrender of certificates of Shares, is authorized to transfer, on the records of the Fund, Shares of the Fund, including cancellation of surrendered certificates, if any, to credit a like amount of Shares to the transferee. 4. CONFIRMATIONS ------------- Mail all confirmations and statements as well as other enclosures requested by the Fund to the shareholder, and in the case of Retirement Accounts, to the Administrators, as may be required by the Funds or by applicable Federal or state law. 5. RETURNED CHECKS AND ACH DEBITS -------- ------ --- --- ------ In order to minimize the risk of loss to the Fund by reason of any check being returned unpaid, Price Services will promptly identify and follow-up on any check or ACH debit returned unpaid. For items returned, Price Services may telephone the investor and/or redeposit the check or debit for collection or cancel the purchase, as deemed appropriate. Price Services and the Funds will establish procedures for the collection of money owed the Fund from investors who have caused losses due to these returned items. 6. REDEMPTION OF SHARES UNDER A HOLD ---------- -- ------ ----- - ---- /2/ UNCOLLECTED FUNDS. Shares purchased by personal, corporate, governmental check, cashier's, treasurer's, certified or official checks or by ACH will be considered uncollected until the tenth calendar date following the trade date of the trade ("UNCOLLECTED FUNDS"); /2/ GOOD FUNDS. Shares purchased by wire transfer or automatically through a shareholder's paycheck will be considered collected immediately ("GOOD FUNDS"). Absent information to the contrary (i.e., notification from the payee institution), Uncollected Funds will be considered Good Funds on the tenth calendar day following trade date. /2/ REDEMPTION OF UNCOLLECTED FUNDS /2/ Shareholders making telephone requests for redemption of shares purchased with Uncollected Funds will be given two options: 1. The Shareholder will be permitted to exchange to another Fund until the payment is deemed Good Funds; or 2. The redemption can be processed utilizing the same procedures for written redemptions described below. /2/ If a written redemption request is made for shares where any portion of the payment for said shares is in Uncollected Funds, and the request is in good order, Price Services will promptly obtain the information relative to the payment necessary to determine when the payment becomes Good Funds. The redemption will be processed in accordance with normal procedures, and the proceeds will be held until confirmation that the payment is Good Funds. On the seventh (7th) calendar day after trade date, and each day thereafter until either confirmation is received or the tenth (10th) calendar day Price Services will call the paying institution to request confirmation that the check or ACH in question has been paid. On the tenth calendar day after trade date, the redemption proceeds will be released, regardless of whether confirmation has been received. /2/ CHECKWRITING REDEMPTIONS. /2/ Daily, all checkwriting redemptions $10,000 and over reported as Uncollected Funds or insufficient funds will be reviewed. An attempt will be made to contact the shareholder to make good the funds (through wire, exchange, transfer). Generally by 12:00 p.m. the same day, if the matter has not been resolved, the redemption request will be rejected and the check returned to the Shareholder. /2/ All checkwriting redemptions under $10,000 reported as Uncollected or insufficient funds will be rejected and the check returned to the Shareholder. The Funds and Services may agree to contact shareholders presenting checks under $10,000 reported as insufficient to obtain alternative instructions for payment. /2/ CONFIRMATIONS OF AVAILABLE FUNDS. The Fund expects that situations may develop whereby it would be beneficial to determine if a person who has placed an order for Shares has sufficient funds in his or her checking account to cover the payment for the Shares purchased. When this situation occurs, Price Services may call the bank in question and request that it confirm that suffi- cient funds to cover the purchase are currently credited to the account in question. Price Services will maintain written documentation or a recording of each telephone call which is made under the procedures outlined above. None of the above procedures shall preclude Price Services from inquiring as to the status of any check received by it in payment for the Fund's Shares as Price Services may deem appropriate or necessary to protect both the Fund and Price Services. If a conflict arises between Section 2 and this Section 6, Section 6 will govern. 7. DIVIDENDS, DISTRIBUTIONS AND OTHER CORPORATE ACTIONS ---------- ------------- --- ----- --------- ------- /2/ The Fund will promptly inform Price Services of the declaration of any dividend, distribution, stock split or any other distributions of a similar kind on account of its Capital Stock. /2/ Price Services shall act as Dividend Disbursing Agent for the Fund, and as such, shall prepare and make income and capital gain payments to investors. As Dividend Disbursing Agent, Price Services will on or before the payment date of any such dividend or distribution, notify the Custodian of the estimated amount required to pay any portion of said dividend or distribution which is payable in cash, and the Fund agrees that on or about the payment date of such distribution, it shall instruct the Custodian to make available to Price Services sufficient funds for the cash amount to be paid out. If an investor is entitled to receive additional Shares by virtue of any such distribution or dividend, appropriate credits will be made to his or her account. 8. ABANDONED PROPERTY AND LOST SHAREHOLDERS --------- -------- --- ---- ------------ In accordance with procedures agreed upon by both parties, report abandoned property to appropriate state and governmental authorities of the Fund. Price Services shall, 90 days prior to the annual reporting of abandoned property to each of the states, make reasonable attempts to locate Shareholders for which (a) checks, tax forms, statements or confirms have been returned; (b) for which accounts have aged outstanding checks; or (c) accounts with share balances that have been coded with stop mail and meet the dormancy period guidelines specified in the individual states. Price Services shall make reasonable attempts to contact shareholders for those accounts which have significant aged outstanding checks and those checks meet a specified dollar threshold. Price Services shall also comply with applicable securities regulations with respect to searching for lost shareholders. 9. BOOKS AND RECORDS ----- --- ------- Maintain records showing for each Shareholder's account, Retirement Plan or Retirement Account, as the case may be, the following: /2/ Names, address and tax identification number; /2/ Number of Shares held; /2/ Certain historical information regarding the account of each Shareholder, including dividends and distributions distributed in cash or invested in Shares; /2/ Pertinent information regarding the establishment and maintenance of Retirement Plans and Retirement Accounts necessary to properly administer each account; /2/ Information with respect to the source of dividends and distributions allocated among income (taxable and nontaxable income), realized short-term gains and realized long-term gains; /2/ Any stop or restraining order placed against a Shareholder's account; /2/ Information with respect to withholdings on domestic and foreign accounts; /2/ Any instructions from a Shareholder including, all forms furnished by the Fund and executed by a Shareholder with respect to (i) dividend or distribution elections, and (ii) elections with respect to payment options in connection with the redemption of Shares; /2/ Any correspondence relating to the current maintenance of a Shareholder's account; /2/ Certificate numbers and denominations for any Shareholder holding certificates; /2/ Any information required in order for Price Services to perform the calculations contemplated under this Agreement. Price Services shall maintain files and furnish statistical and other information as required under this Agreement and as may be agreed upon from time to time by both parties or required by applicable law. However, Price Services reserves the right to delete, change or add any information to the files maintained; provided such deletions, changes or additions do not contravene the terms of this Agreement or applicable law and do not materially reduce the level of services described in this Agreement. Price Services shall also use its best efforts to obtain additional statistical and other information as each Fund may reasonably request for additional fees as may be agreed to by both parties. Any such records maintained pursuant to Rule 31a-1 under the Investment Company Act of 1940 ("THE ACT") will be preserved for the periods and maintained in a manner prescribed in Rule 31a-2 thereunder. Disposition of such records after such prescribed periods shall be as mutually agreed upon by the Fund and Price Services. The retention of such records, which may be inspected by the Fund at reasonable times, shall be at the expense of the Fund. All records maintained by Price Services in connection with the performance of its duties under this Agreement will remain the property of the Fund and, in the event of termination of this Agreement, will be delivered to the Fund as of the date of termination or at such other time as may be mutually agreed upon. All books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except after prior notification to and approval by the other party hereto, which approval shall not be unreasonably withheld and may not be withheld where Price Services or the Fund may be exposed to civil or criminal contempt proceedings for failure to comply; when requested to divulge such information by duly constituted governmental authorities; or after so requested by the other party hereto. 10. AUTHORIZED ISSUED AND OUTSTANDING SHARES ---------- ------ --- ----------- ------ Record the issuance of Shares of the Fund and maintain, pursuant to Rule 17Ad-10(e) of the '34 Act, a record of the total number of Shares of the Fund which are authorized, issued and outstanding, based upon data provided to it by the Fund. Price Services shall also provide the Fund on a regular basis the total number of Shares which are authorized and issued and outstanding. Price Services shall have no obligation, when recording the issuance of Shares, to monitor the issuance of such Shares or to take cognizance of any laws relating to the issuance or sale of such Shares. 11. TAX INFORMATION --- ----------- Prepare and file with the Internal Revenue Service and with other appropriate state agencies and, if required, mail to investors, those returns for reporting dividends and distributions paid as required to be so filed and mailed, and shall withhold such sums required to be withheld under applicable Federal income tax laws, rules, and regulations. Additionally, Price Services will file and, as applicable, mail to investors, any appropriate information returns required to be filed in connection with Retirement Plan processing, such as 1099R, 5498, as well as any other appropriate forms that the Fund or Price Services may deem necessary. The Fund and Price Services shall agree to procedures to be followed with respect to Price Services' responsibilities in connection with compliance with back-up withholding and other tax laws. 12. INFORMATION TO BE FURNISHED TO THE FUND ----------- -- -- --------- -- --- ---- Furnish to the Fund such information as may be agreed upon between the Fund and Price Services including any information that the Fund and Price Services agree is necessary to the daily operations of the business. 13. CORRESPONDENCE -------------- Promptly and fully answer correspondence from shareholders and Administrators relating to Shareholder Accounts, Retirement Accounts, transfer agent procedures, and such other correspondence as may from time to time be mutually agreed upon with the Funds. Unless otherwise instructed, copies of all correspondence will be retained by Price Services in accordance with applicable law and procedures. 14. LOST OR STOLEN SECURITIES ---- -- ------ ---------- Pursuant to Rule 17f-1 of the '34 Act, report to the Securities Information Center and/or the FBI or other appropriate person on Form X-17-F-1A all lost, stolen, missing or counterfeit securities. Provide any other services relating to lost, stolen or missing securities as may be mutually agreed upon by both parties. 15. TELEPHONE/COMPUTER SERVICES ------------------ -------- Maintain a Telephone Servicing Staff of representatives ("REPRESENTATIVES") sufficient to timely respond to all telephonic inquiries reasonably foreseeable. The Representatives will also effect telephone purchases, redemptions, exchanges, and other transactions mutually agreed upon by both parties, for those Shareholders who have authorized telephone services. The Representatives shall require each Shareholder effecting a telephone transaction to properly identify himself/herself before the transaction is effected, in accordance with procedures agreed upon between by both parties. Procedures for processing telephone transactions will be mutually agreed upon by both parties. Price Services will also be responsible for providing Tele*Access, On-Line Access and such other Services as may be offered by the Funds from time to time. Price Services will maintain a special Shareholder Servicing staff to service certain Shareholders with substantial relationships with the Funds. 16. COLLECTION OF SHAREHOLDER FEES ---------- -- ----------- ---- Calculate and notify shareholders of any fees owed the Fund, its affiliates or its agents. Such fees include the small account fee IRA custodial fee and wire fee. 17. FORM N-SAR ---- ----- Maintain such records, if any, as shall enable the Fund to fulfill the requirements of Form N-SAR. 18. COOPERATION WITH ACCOUNTANTS ----------- ---- ----------- Cooperate with each Fund's independent public accountants and take all reasonable action in the performance of its obligations under the Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion without any qualification as to the scope of their examination, including, but not limited to, their opinion included in each such Fund's annual report on Form N-SAR and annual amendment to Form N-1A. 19. BLUE SKY ---- --- Provide to the Fund or its agent, on a daily, weekly, monthly and quarterly basis, and for each state in which the Fund's Shares are sold, sales reports and other materials for blue sky compliance purposes as shall be agreed upon by the parties. 20. OTHER SERVICES ----- -------- Provide such other services as may be mutually agreed upon between Price Services and the Fund. C. FEES AND OUT-OF-POCKET EXPENSES ------------------------------- Each Fund shall pay to Price Services and/or its agents for its Transfer Agent Services hereunder, fees computed as set forth in Schedule A attached. Except as provided below, Price Services will be responsible for all expenses relating to the providing of Services. Each Fund, however, will reimburse Price Services for the following out-of-pocket expenses and charges incurred in providing Services: /2/ POSTAGE. The cost of postage and freight for mailing materials to Shareholders and Retirement Plan participants, or their agents, including overnight delivery, UPS and other express mail services and special courier services required to transport mail between Price Services locations and mail processing vendors. /2/ PROXIES. The cost to mail proxy cards and other material supplied to it by the Fund and costs related to the receipt, examination and tabulation of returned proxies and the certification of the vote to the Fund. /2/ COMMUNICATIONS /2/ PRINT. The printed forms used internally and externally for documentation and processing Shareholder and Retirement Plan participant, or their agent's inquiries and requests; paper and envelope supplies for letters, notices, and other written communications sent to Shareholders and Retirement Plan participants, or their agents. /2/ PRINT & MAIL HOUSE. The cost of internal and third party printing and mail house services, including printing of statements and reports. /2/ VOICE AND DATA. The cost of equipment (including associated maintenance), supplies and services used for communicating with and servicing Shareholders of the Fund and Retirement Plan participants, or their agents, and other Fund offices or other agents of either the Fund or Price Services. These charges shall include: /2/ telephone toll charges (both incoming and outgoing, local, long distance and mailgrams); and /2/ data and telephone expenses to communicate with shareholders and transfer shareholders between T. Rowe Price facilities. /2/ Production support, service enhancements and custom reporting for the shareholder mainframe recordkeeping system. /2/ RECORD RETENTION. The cost of maintenance and supplies used to maintain, microfilm, copy, record, index, display, retrieve, and store, in optical disc, microfiche or microfilm form, documents and records. /2/ DISASTER RECOVERY. The cost of services, equipment, facilities and other charges necessary to provide disaster recovery for any and all services listed in this Agreement. Out-of-pocket costs will be billed at cost to the Funds. Allocation of monthly costs among the Funds will generally be made based upon the number of Shareholder and Retirement Accounts serviced by Price Services each month. Some invoices for these costs will contain costs for both the Funds and other funds serviced by Price Services. These costs will be allocated based on a reasonable allocation methodology. Where possible, such as in the case of inbound and outbound WATS charges, allocation will be made on the actual distribution or usage. D. REPRESENTATIONS AND WARRANTIES OF PRICE SERVICES ------------------------------------------------ Price Services represents and warrants to the Fund that: 1. It is a corporation duly organized and existing and in good standing under the laws of Maryland; 2. It is duly qualified to carry on its business in Maryland, Colorado and Florida; 3. It is empowered under applicable laws and by its charter and by-laws to enter into and perform this Agreement; 4. All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement; 5. It is registered with the Securities and Exchange Commission as a Transfer Agent pursuant to Section 17A of the '34 Act; and 6. It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement. E. REPRESENTATIONS AND WARRANTIES OF THE FUND ------------------------------------------ The Fund represents and warrants to Price Services that: 1. It is a corporation or business trust duly organized and existing and in good standing under the laws of Maryland or Massachusetts, as the case may be; 2. It is empowered under applicable laws and by its Articles of Incorporation or Declaration of Trust, as the case may be, and By-Laws to enter into and perform this Agreement; 3. All proceedings required by said Articles of Incorporation or Declaration of Trust, as the case may be, and By-Laws have been taken to authorize it to enter into and perform this Agreement; 4. It is an investment company registered under the Act; and 5. A registration statement under the Securities Act of 1933 ("THE '33 ACT") is currently effective and will remain effective, and appropriate state securities law filings have been made and will continue to be made, with respect to all Shares of the Fund being offered for sale. F. STANDARD OF CARE/INDEMNIFICATION -------------------------------- Notwithstanding anything to the contrary in this Agreement: 1. Price Services shall not be liable to any Fund for any act or failure to act by it or its agents or subcontractors on behalf of the Fund in carrying or attempting to carry out the terms and provisions of this Agreement provided Price Services has acted in good faith and without negligence or willful misconduct and selected and monitored the performance of its agents and subcontractors with reasonable care. 2. The Fund shall indemnify and hold Price Services harmless from and against all losses, costs, damages, claims, actions and expenses, including reasonable expenses for legal counsel, incurred by Price Services resulting from: (i) any action or omission by Price Services or its agents or subcontractors in the performance of their duties hereunder; (ii) Price Services acting upon instructions believed by it to have been executed by a duly authorized officer of the Fund; or (iii) Price Services acting upon information provided by the Fund in form and under policies agreed to by Price Services and the Fund. Price Services shall not be entitled to such indemnification in respect of actions or omissions constituting negligence or willful misconduct of Price Services or where Price Services has not exercised reasonable care in selecting or monitoring the performance of its agents or subcontractors. 3. Except as provided in Article M of this Agreement, Price Services shall indemnify and hold harmless the Fund from all losses, costs, damages, claims, actions and expenses, including reasonable expenses for legal counsel, incurred by the Fund resulting from the negligence or willful misconduct of Price Services or which result from Price Services' failure to exercise reasonable care in selecting or monitoring the performance of its agents or subcontractors. The Fund shall not be entitled to such indemnification in respect of actions or omissions constituting negligence or willful misconduct of such Fund or its agents or subcontractors; unless such negligence or misconduct is attributable to Price Services. 4. In determining Price Services' liability, an isolated error or omission will normally not be deemed to constitute negligence when it is determined that: /2/ Price Services had in place "appropriate procedures;" /2/ the employee(s) responsible for the error or omission had been reasonably trained and were being appropriately monitored; and /2/ the error or omission did not result from wanton or reckless conduct on the part of the employee(s). It is understood that Price Services is not obligated to have in place separate procedures to prevent each and every conceivable type of error or omission. The term "appropriate procedures" shall mean procedures reasonably designed to prevent and detect errors and omissions. In determining the reasonableness of such procedures, weight will be given to such factors as are appropriate, including the prior occurrence of any similar errors or omissions when such procedures were in place and transfer agent industry standards in place at the time of the occurrence. 5. In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes or other causes reasonably beyond its control, such party shall not be liable to the other party for any loss, cost, damage, claim, action or expense resulting from such failure to perform or otherwise from such causes. 6. In order that the indemnification provisions contained in this Article E shall apply, upon the assertion of a claim for which either party may be required to indemnify the other, the party seeking indemnification shall promptly notify the other party of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. The party who may be required to indemnify shall have the option to participate with the party seeking indemnification in the defense of such claim, or to defend against said claim in its own name or in the name of the other party. The party seeking indemnification shall in no case confess any claim or make any compromise in any case in which the other party may be required to indemnify it except with the other party's prior written consent. 7. Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement. G. DUAL INTERESTS -------------- It is understood that some person or persons may be directors, officers, or shareholders of both the Funds and Price Services (including Price Services' affiliates), and that the existence of any such dual interest shall not affect the validity of this Agreement or of any transactions hereunder except as otherwise provided by a specific provision of applicable law. H. DOCUMENTATION ------------- As requested by Price Services, the Fund shall promptly furnish to Price Services the following: /2/ A certified copy of the resolution of the Directors/Trustees of the Fund authorizing the appointment of Price Services and the execution and delivery of this Agreement; /2/ A copy of the Articles of Incorporation or Declaration of Trust, as the case may be, and By-Laws of the Fund and all amendments thereto; /2/ As applicable, specimens of all forms of outstanding and new stock/share certificates in the forms approved by the Board of Directors/Trustees of the Fund with a certificate of the Secretary of the Fund as to such approval; /2/ All account application forms and other documents relating to Shareholders' accounts; /2/ An opinion of counsel for the Fund with respect to the validity of the stock, the number of Shares authorized, the status of redeemed Shares, and the number of Shares with respect to which a Registration Statement has been filed and is in effect; and /2/ A copy of the Fund's current prospectus. The delivery of any such document for the purpose of any other agreement to which the Fund and Price Services are or were parties shall be deemed to be delivery for the purposes of this Agreement. /2/ As requested by Price Services, the Fund will also furnish from time to time the following documents: /2/ Each resolution of the Board of Directors/Trustees of the Fund authorizing the original issue of its Shares; /2/ Each Registration Statement filed with the Securities and Exchange Commission and amendments and orders thereto in effect with respect to the sale of Shares with respect to the Fund; /2/ A certified copy of each amendment to the Articles of Incorporation or Declaration of Trust, and the By-Laws of the Fund; /2/ Certified copies of each vote of the Board of Directors/Trustees authorizing officers to give instructions to the Transfer Agent; /2/ Such other documents or opinions which Price Services, in its discretion, may reasonably deem necessary or appropriate in the proper performance of its duties; and /2/ Copies of new prospectuses issued. Price Services hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Fund for safekeeping of stock certificates, check forms and facsimile signature imprinting devices, if any; and for the preparation or use, and for keeping account of, such certificates, forms and devices. I. REFERENCES TO PRICE SERVICES ---------------------------- Each Fund agrees not to circulate any printed matter which contains any reference to Price Services without the prior approval of Price Services, excepting solely such printed matter that merely identifies Price Services as agent of the Fund. The Fund will submit printed matter requiring approval to Price Services in draft form, allowing sufficient time for review by Price Services and its legal counsel prior to any deadline for printing. J. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS -------------------------------------------------- Except as otherwise provided in the Agreement and except for the accuracy of information furnished to the Fund by Price Services, each Fund assumes full responsibility for the preparation, contents and distribution of its prospectuses and compliance with all applicable requirements of the Act, the '34 Act, the '33 Act, and any other laws, rules and regulations of governmental authorities having jurisdiction over the Fund. Price Services shall be responsible for complying with all laws, rules and regulations of governmental authorities having jurisdiction over transfer agents and their activities. K. OWNERSHIP OF SOFTWARE AND RELATED MATERIAL ------------------------------------------ All computer programs, magnetic tapes, written procedures and similar items purchased and/or developed and used by Price Services in performance of the Agreement shall be the property of Price Services and will not become the property of the Fund. L. QUALITY SERVICE STANDARDS ------------------------- Price Services and the Fund may from time to time agree to certain quality service standards, as well as incentives and penalties with respect to Price Services' hereunder. M. AS OF TRANSACTIONS ------------------ For purposes of this Article M, the term "TRANSACTION" shall mean any single or "related transaction" (as defined below) involving the purchase or redemption of Shares (including exchanges) that is processed at a time other than the time of the computation of the Fund's net asset value per Share next computed after receipt of any such transaction order by Price Services due to an act or omission of Price Services. "AS OF PROCESSING" refers to the processing of these Transactions. If more than one Transaction ("RELATED TRANSACTION") in the Fund is caused by or occurs as a result of the same act or omission, such transactions shall be aggregated with other transactions in the Fund and be considered as one Transaction. /2/ REPORTING Price Services shall: 1. Utilize a system to identify all Transactions, and shall compute the net effect of such Transactions upon the Fund on a daily, monthly and rolling 365 day basis. The monthly and rolling 365 day periods are hereafter referred to as "CUMULATIVE". 2. Supply to the Fund, from time to time as mutually agreed upon, a report summarizing the Transactions and the daily and Cumulative net effects of such Transactions both in terms of aggregate dilution and loss ("DILUTION") or gain and negative dilution ("GAIN") experienced by the Fund, and the impact such Gain or Dilution has had upon the Fund's net asset value per Share. 3. With respect to any Transaction which causes Dilution to the Fund of $100,000 or more, immediately provide the Fund: (i) a report identifying the Transaction and the Dilution resulting therefrom, (ii) the reason such Transaction was processed as described above, and (iii) the action that Price Services has or intends to take to prevent the reoccurrence of such as of processing ("REPORT"). /2/ LIABILITY 1. It will be the normal practice of the Funds not to hold Price Services liable with respect to any Transaction which causes Dilution to any single Fund of less than $25,000. Price Services will, however, closely monitor for each Fund the daily and Cumulative Gain/Dilution which is caused by Transactions of less than $25,000. When the Cumulative Dilution to any Fund exceeds 3/10 of 1% per share, Price Services, in consultation with counsel to the Fund, will make appropriate inquiry to determine whether it should take any remedial action. Price Services will report to the Board of Directors/Trustees of the Fund ("BOARD") any action it has taken. 2. Where a Transaction causes Dilution to a Fund greater than $25,000 ("SIGNIFICANT TRANSACTION"), but less than $100,000, Price Services will review with Counsel to the Fund the circumstances surrounding the underlying Transaction to determine whether the Transaction was caused by or occurred as a result of a negligent act or omission by Price Services. If it is determined that the Dilution is the result of a negligent action or omission by Price Services, Price Services and outside counsel for the Fund will negotiate settlement. Significant Transactions greater than $25,000 will be reported to the Audit Committee at its annual meeting (unless the settlement fully compensates the Fund for any Dilution). Any Significant Transaction, however, causing Dilution in excess of the lesser of $100,000 or a penny per share will be promptly reported to the Board and resolved at -------- the next scheduled Board Meeting. Settlement for Significant Transactions causing Dilution of $100,000 or more will not be entered into until approved by the Board. The factors to consider in making any determination regarding the settlement of a Significant Transaction would include but not be limited to: /2/ Procedures and controls adopted by Price Services to prevent As Of Processing; /2/ Whether such procedures and controls were being followed at the time of the Significant Transaction; /2/ The absolute and relative volume of all transactions processed by Price Services on the day of the Significant Transaction; /2/ The number of Transactions processed by Price Services during prior relevant periods, and the net Dilution/Gain as a result of all such Transactions to the Fund and to all other Price Funds; /2/ The prior response of Price Services to recommendations made by the Funds regarding improvement to Price Services' As Of Processing procedures. 3. In determining Price Services' liability with respect to a Significant Transaction, an isolated error or omission will normally not be deemed to constitute negligence when it is determined that: /2/ Price Services had in place "appropriate procedures". /2/ the employee(s) responsible for the error or omission had been reasonably trained and were being appropriately monitored; and /2/ the error or omission did not result from wanton or reckless conduct on the part of the employee(s). It is understood that Price Services is not obligated to have in place separate procedures to prevent each and every conceivable type of error or omission. The term "appropriate procedures" shall mean procedures reasonably designed to prevent and detect errors and omissions. In determining the reasonableness of such procedures, weight will be given to such factors as are appropriate, including the prior occurrence of any similar errors or omissions when such procedures were in place and transfer agent industry standards in place at the time of the occurrence. /2/ AS OF TRANSACTIONS - INTERMEDIARIES If an As Of Transaction is performed by an intermediary, which is designated by the Fund to received orders for Fund Shares, Price Services shall cause such intermediary to promptly reimburse the Fund for any Dilution caused by such As Of Transaction; provided, however, Price Services shall not be obligated to seek reimbursement from such intermediary if the Dilution is less than $100. N. TERM AND TERMINATION OF AGREEMENT --------------------------------- /2/ This Agreement shall run for a period of one (1) year from the date first written above and will be renewed from year to year thereafter unless terminated by either party as provided hereunder. /2/ This Agreement may be terminated by the Fund upon one hundred twenty (120) days' written notice to Price Services; and by Price Services, upon three hundred sixty-five (365) days' writing notice to the Fund. /2/ Upon termination hereof, the Fund shall pay to Price Services such compensation as may be due as of the date of such termination, and shall likewise reimburse for out-of-pocket expenses related to its services hereunder. O. NOTICE ------ Any notice as required by this Agreement shall be sufficiently given (i) when sent to an authorized person of the other party at the address of such party set forth above or at such other address as such party may from time to time specify in writing to the other party; or (ii) as otherwise agreed upon by appropriate officers of the parties hereto. P. ASSIGNMENT ---------- Neither this Agreement nor any rights or obligations hereunder may be assigned either voluntarily or involuntarily, by operation of law or otherwise, by either party without the prior written consent of the other party, provided this shall not preclude Price Services from employing such agents and subcontractors as it deems appropriate to carry out its obligations set forth hereunder. Q. AMENDMENT/INTERPRETIVE PROVISIONS --------------------------------- The parties by mutual written agreement may amend this Agreement at any time. In addition, in connection with the operation of this Agreement, Price Services and the Fund may agree from time to time on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions are to be signed by all parties and annexed hereto, but no such provision shall contravene any applicable Federal or state law or regulation and no such interpretive or additional provision shall be deemed to be an amendment of this Agreement. R. FURTHER ASSURANCES ------------------ Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. S. MARYLAND LAW TO APPLY --------------------- This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of Maryland. T. MERGER OF AGREEMENT ------------------- This Agreement, including the attached Appendices and Schedules supersedes any prior agreement with respect to the subject hereof, whether oral or written. U. COUNTERPARTS ------------ This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instruments. V. THE PARTIES ----------- All references herein to "the Fund" are to each of the Funds listed on Appendix A individually, as if this Agreement were between such individual Fund and Price Services. In the case of a series Fund or trust, all references to "the Fund" are to the individual series or portfolio of such Fund or trust, or to such Fund or trust on behalf of the individual series or portfolio, as appropriate. The "Fund" also includes any T. Rowe Price Funds which may be established after the execution of this Agreement. Any reference in this Agreement to "the parties" shall mean Price Services and such other individual Fund as to which the matter pertains. W. DIRECTORS, TRUSTEES AND SHAREHOLDERS AND MASSACHUSETTS BUSINESS TRUST --------------------------------------------------------------------- It is understood and is expressly stipulated that neither the holders of Shares in the Fund nor any Directors or Trustees of the Fund shall be personally liable hereunder. With respect to any Fund which is a party to this Agreement and which is organized as a Massachusetts business trust, the term "Fund" means and refers to the trustees from time to time serving under the applicable trust agreement (Declaration of Trust) of such Trust as the same may be amended from time to time. It is expressly agreed that the obligations of any such Trust hereunder shall not be binding upon any of the trustees, shareholders, nominees, officers, agents or employees of the Trust, personally, but bind only the trust property of the Trust, as provided in the Declaration of Trust of the Trust. The execution and delivery of this Agreement has been autho- rized by the trustees and signed by an authorized officer of the Trust, acting as such, and neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them, but shall bind only the trust property of the Trust as provided in its Declaration of Trust. X. CAPTIONS -------- The captions in the Agreement are included for convenience of reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf under their seals by and through their duly authorized officers. T. ROWE PRICE SERVICES, INC. T. ROWE PRICE FUNDS BY: BY: DATED: DATED: lhc\wpdata\agrmnt\2001.PriceServices.TransferAgencyAgreement.doc APPENDIX A ---------- T. ROWE PRICE BALANCED FUND, INC. T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. T. Rowe Price Blue Chip Growth Fund-Advisor Class T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST California Tax-Free Bond Fund California Tax-Free Money Fund T. ROWE PRICE CAPITAL APPRECIATION FUND T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC. T. ROWE PRICE CORPORATE INCOME FUND, INC. T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC. T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC. T. ROWE PRICE DIVIDEND GROWTH FUND, INC. T. ROWE PRICE EQUITY INCOME FUND T. Rowe Price Equity Income Fund-Advisor Class T. ROWE PRICE EQUITY SERIES, INC. T. Rowe Price Equity Income Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price Mid-Cap Growth Portfolio T. Rowe Price Blue Chip Growth Portfolio T. Rowe Price Equity Index 500 Portfolio T. Rowe Price Health Sciences Portfolio T. ROWE PRICE FINANCIAL SERVICES FUND, INC. T. ROWE PRICE FIXED INCOME SERIES, INC. T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price Prime Reserve Portfolio T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC. T. ROWE PRICE GNMA FUND T. ROWE PRICE GROWTH & INCOME FUND, INC. T. ROWE PRICE GROWTH STOCK FUND, INC. T. ROWE PRICE HEALTH SCIENCES FUND, INC. T. ROWE PRICE HIGH YIELD FUND, INC. T. Rowe Price High Yield Fund-Advisor Class T. ROWE PRICE INDEX TRUST, INC. T. Rowe Price Equity Index 500 Fund T. Rowe Price Extended Equity Market Index Fund T. Rowe Price Total Equity Market Index Fund INSTITUTIONAL EQUITY FUNDS, INC. Institutional Mid-Cap Equity Growth Fund Institutional Large-Cap Value Fund Institutional Small-Cap Stock Fund INSTITUTIONAL INTERNATIONAL FUNDS, INC. Foreign Equity Fund T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. Rowe Price International Stock Fund T. Rowe Price International Discovery Fund T. Rowe Price European Stock Fund T. Rowe Price New Asia Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price Emerging Markets Stock Fund T. Rowe Price Global Stock Fund T. Rowe Price International Growth & Income Fund T. Rowe Price International Stock Fund-Advisor Class T. Rowe Price Emerging Europe & Mediterranean Fund T. Rowe Price International Bond Fund T. Rowe Price Emerging Markets Bond Fund T. Rowe Price International Bond Fund-Advisor Class T. ROWE PRICE INTERNATIONAL INDEX FUND, INC. T. Rowe Price International Equity Index Fund T. ROWE PRICE INTERNATIONAL SERIES, INC. T. Rowe Price International Stock Portfolio T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC. T. ROWE PRICE MID-CAP GROWTH FUND, INC. T. Rowe Price Mid-Cap Growth Fund-Advisor Class T. ROWE PRICE MID-CAP VALUE FUND, INC. T. ROWE PRICE NEW AMERICA GROWTH FUND T. ROWE PRICE NEW ERA FUND, INC. T. ROWE PRICE NEW HORIZONS FUNDS, INC. T. ROWE PRICE NEW INCOME FUND, INC. T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC. T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. ROWE PRICE PRIME RESERVE FUND, INC. T. Rowe Price Prime Reserve Fund-PLUS Class T. ROWE PRICE REAL ESTATE FUND, INC. RESERVE INVESTMENT FUNDS, INC. Reserve Investment Fund Government Reserve Investment Fund T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC. T. Rowe Price Science & Technology Fund-Advisor Class T. ROWE PRICE SHORT-TERM BOND FUND, INC. T. ROWE PRICE SMALL-CAP STOCK FUND, INC. T. Rowe Price Small-Cap Stock Fund-Advisor Class T. ROWE PRICE SMALL-CAP VALUE FUND, INC. T. Rowe Price Small-Cap Value Fund-Advisor Class T. ROWE PRICE SPECTRUM FUND, INC. Spectrum Income Fund Spectrum Growth Fund Spectrum International Fund T. ROWE PRICE STATE TAX-FREE INCOME TRUST New York Tax-Free Money Fund New York Tax-Free Bond Fund Maryland Tax-Free Bond Fund Virginia Tax-Free Bond Fund New Jersey Tax-Free Bond Fund Maryland Short-Term Tax-Free Bond Fund Florida Intermediate Tax-Free Fund Georgia Tax-Free Bond Fund T. ROWE PRICE SUMMIT FUNDS, INC. T. Rowe Price Summit Cash Reserves Fund T. Rowe Price Summit GNMA Fund T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. T. Rowe Price Summit Municipal Money Market Fund T. Rowe Price Summit Municipal Intermediate Fund T. Rowe Price Summit Municipal Income Fund T. ROWE PRICE TAX-EFFICIENT FUNDS, INC. T. Rowe Price Tax-Efficient Balanced Fund T. Rowe Price Tax-Efficient Growth Fund T. Rowe Price Tax-Efficient Multi-Cap Growth Fund T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC. T. Rowe Price Tax-Exempt Money Fund - PLUS Class T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC. T. ROWE PRICE TAX-FREE INCOME FUND, INC. T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC. T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC. T. ROWE PRICE U.S. BOND INDEX FUND, INC. T. ROWE PRICE U.S. TREASURY FUNDS, INC. U.S. Treasury Intermediate Fund U.S. Treasury Long-Term Fund U.S. Treasury Money Fund T. ROWE PRICE VALUE FUND, INC. T. Rowe Price Value Fund-Advisor Class EX-99.HOTHMATCONT 7 fundacctg01.txt AGREEMENT BETWEEN T. ROWE PRICE ASSOCIATES, INC. AND THE T. ROWE PRICE FUNDS FOR FUND ACCOUNTING SERVICES TABLE OF CONTENTS ----------------- PAGE ---- Article A.....Terms of Appointment/Duties of Price Associates 1 Article B.....................Fees and Out-of-Pocket Expenses 3 Article C..Representations and Warranties of Price Associates 3 Article D..........Representations and Warranties of the Fund 4 Article E..........Ownership of Software and Related Material 4 Article F...........................Quality Service Standards 4 Article G....................Standard of Care/Indemnification 4 Article H......................................Dual Interests 7 Article I.......................................Documentation 7 Article J.......................Recordkeeping/Confidentiality 7 Article K..Compliance with Governmental Rules and Regulations 8 Article L..................Terms and Termination of Agreement 8 Article M..............................................Notice 8 Article N..........................................Assignment 9 Article O...................Amendment/Interpretive Provisions 9 Article P..................................Further Assurances 9 Article Q...............................Maryland Law to Apply 9 Article R.................................Merger of Agreement 10 Article S........................................Counterparts 10 Article T.........................................The Parties 10 Article UDirectors, Trustee and Shareholders and Massachusetts Business Trust 10 Article V............................................Captions 11 i AGREEMENT made as of the first day of January, 2001, by and between T. ROWE PRICE ASSOCIATES, INC., a Maryland corporation having its principal office and place of business at 100 East Pratt Street, Baltimore, Maryland 21202 ("PRICE ASSOCIATES"), and each Fund which is listed on Appendix A (as such Appendix may be amended from time to time) and which evidences its agreement to be bound hereby by executing a copy of this Agreement (each such Fund individually hereinafter referred to as "THE FUND", whose definition may be found in Article T); WHEREAS, Price Associates has the capability of providing the Funds with certain accounting services ("ACCOUNTING SERVICES"); WHEREAS, the Fund desires to appoint Price Associates to provide these Accounting Services and Price Associates desires to accept such appointment; WHEREAS, the Board of Directors of the Fund has authorized the Fund to utilize various pricing services for the purpose of providing to Price Associates securities prices for the calculation of the Fund's net asset value. NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: A. TERMS OF APPOINTMENT/DUTIES OF PRICE ASSOCIATES ----------------------------------------------- Subject to the terms and conditions set forth in this Agreement, the Fund hereby employs and appoints Price Associates to provide, and Price Associates agrees to provide, the following Accounting Services: 1. Maintain for each Fund a daily trial balance, a general ledger, subsidiary records and capital stock accounts; 2. Maintain for each Fund an investment ledger, including amortized bond and foreign dollar denominated costs where applicable; 3. Maintain for each Fund all records relating to the Fund's income and expenses; 4. Provide for the daily valuation of each Fund's portfolio securities and the computation of each Fund's daily net asset value per share ("NAV"). Such daily valuations shall be made in accordance with the valuation policies established by each of the Fund's Board of Directors including, but not limited to, the utilization of such pricing valuation sources and/or pricing services as determined by the Boards. Price Associates shall have no liability for any losses or damages incurred by the Fund as a result of erroneous portfolio security evaluations provided by such designated sources and/or pricing services; provided that, Price Associates reasonably believes the prices are accurate, has adhered to its normal verification control procedures, and has otherwise met the standard of care as set forth in Article G of this Agreement; 5. Provide daily cash flow and transaction status information to each Fund's adviser; 6. Authorize the payment of Fund expenses, either through instruction of custodial bank or utilization of custodian's automated transfer system; 7. Prepare for each Fund such financial information that is reasonably necessary for shareholder reports, reports to the Board of Directors and to the officers of the Fund, reports to the Securities and Exchange Commission, the Internal Revenue Service and other Federal and state regulatory agencies; 8. Provide each Fund with such advice that may be reasonably necessary to properly account for all financial transactions and to maintain the Fund's accounting procedures and records so as to insure compliance with generally accepted accounting and tax practices and rules; 9. Maintain for each Fund all records that may be reasonably required in connection with the audit performed by each Fund's independent accountant, the Securities and Exchange Commission, the Internal Revenue Service or such other Federal or state regulatory agencies; and 10. Cooperate with each Fund's independent public accountants and take all reasonable action in the performance of its obligations under the Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion without any qualification as to the scope of their examination including, but not limited to, their opinion included in each such Fund's annual report on Form N-SAR and annual amendment to Form N-1A. B. FEES AND OUT-OF-POCKET EXPENSES ------------------------------- Each Fund shall pay to Price Associates for its Accounting Services hereunder, fees as set forth in the Schedule attached hereto. In addition, each Fund will reimburse Price Associates for out-of-pocket expenses such as postage, printed forms, voice and data transmissions, record retention, disaster recovery, third party vendors, equipment leases and other similar items as may be agreed upon between Price Associates and the Fund. Some invoices will contain costs for both the Funds and other funds serviced by Price Associates. In these cases, a reasonable allocation methodology will be used to allocate these costs to the Funds. C. REPRESENTATIONS AND WARRANTEES OF PRICE ASSOCIATES -------------------------------------------------- Price Associates represents and warrants to the Fund that: 1. It is a corporation duly organized and existing in good standing under the laws of Maryland. 2. It is duly qualified to carry on its business in Maryland. 3. It is empowered under applicable laws and by its charter and By-Laws to enter into and perform this Agreement. 4. All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement. 5. It has, and will continue to have, access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement. D. REPRESENTATIONS AND WARRANTIES OF THE FUND ------------------------------------------ The Fund represents and warrants to Price Associates that: 1. It is a corporation or business trust, as the case may be, duly organized and existing and in good standing under the laws of Maryland or Massachusetts, as the case may be. 2. It is empowered under applicable laws and by its Articles of Incorporation or Declaration of Trust, as the case may be, and By-Laws have been taken to authorize it to enter into and perform this Agreement. 3. All proceedings required by said Articles of Incorporation or Declaration of Trust, as the case may be, and By-Laws have been taken to authorize it to enter into and perform this Agreement. E. OWNERSHIP OF SOFTWARE AND RELATED MATERIAL ------------------------------------------ All computer programs, magnetic tapes, written procedures, and similar items purchased and/or developed and used by Price Associates in performance of this Agreement shall be the property of Price Associates and will not become the property of the Funds. F. QUALITY SERVICE STANDARDS ------------------------- Price Associates and the Fund may, from time to time, agree to certain quality service standards, with respect to Price Associates' services hereunder. G. STANDARD OF CARE/INDEMNIFICATION -------------------------------- Notwithstanding anything to the contrary in this Agreement: 1. Where a pricing error results in loss or dilution to a Fund of less than $10,000, the determination of liability for the error will be made by Price Associates. Where a pricing error results in loss or dilution to a Fund of $10,000 or more but less than $100,000, liability for the error will be resolved through negotiations between Fund Counsel and Price Associates. Where a pricing error results in loss or dilution to a Fund of the lesser of 1/2 of 1% of NAV or $100,000 or more, the error will be promptly reported to the Board of Directors of the Fund (unless the Fund is fully compensated for the loss or dilution), provided that final settlement with respect to such errors will not be made until approved by the Board of Directors of the Fund. A summary of all pricing errors and their effect on the Funds will be reported to the Funds' Audit Committee on an annual basis. In determining the liability of Price Associates for a pricing error, an error or omission will not be deemed to constitute negligence when it is determined that: /2/ Price Associates had in place "appropriate procedures and an adequate system of internal controls;" /2/ the employee responsible for the error or omission had been reasonably trained and was being appropriately monitored; and /2/ the error or omission did not result from wanton or reckless conduct on the part of the employee. It is understood that Price Associates is not obligated to have in place separate procedures to prevent each and every conceivable type of error or omission. The term "appropriate procedures and adequate system of internal controls" shall mean procedures and controls reasonably designed to prevent and detect errors and omissions. In determining the reasonableness of such procedures and controls, weight will be given to such factors as are appropriate, including the prior occurrence of any similar errors or omissions, when such procedures and controls were in place and fund accounting industry standards in place at the time of the error. 2. The Fund shall indemnify and hold Price Associates harmless from and against all losses, costs, damages, claims, actions, and expenses, including reasonable expenses for legal counsel, incurred by Price Associates resulting from: (i) any action or omission by Price Associates or its agents or subcontractors in the performance of their duties hereunder; (ii) Price Associates acting upon instructions believed by it to have been executed by a duly authorized officer of the Fund; or (iii) Price Associates acting upon information provided by the Fund in form and under policies agreed to by Price Associates and the Fund. Price Associates shall not be entitled to such indemnification in respect of actions or omissions constituting negligence or willful misconduct of Price Associates or where Price Associates has not exercised reasonable care in selecting or monitoring the performance of its agents or subcontractors. 3. Price Associates shall indemnify and hold harmless the Fund from all losses, costs, damages, claims, actions and expenses, including reasonable expenses for legal counsel, incurred by the Fund resulting from the negligence or willful misconduct of Price Associates or which result from Price Associates' failure to exercise reasonable care in selecting or monitoring the performance of its agents or subcontractors. The Fund shall not be entitled to such indemnification with respect to actions or omissions constituting negligence or willful misconduct of such Fund or its agents or subcontractors; unless such negligence or misconduct is attributable to Price Associates. 4. In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes or other causes reasonably beyond its control, such party shall not be liable to the other party for any loss, cost, damage, claim, action or expense resulting from such failure to perform or otherwise from such causes. 5. In order that the indemnification provisions contained in this Article G shall apply, upon the assertion of a claim for which either party may be required to indemnify the other, the party seeking indemnification shall promptly notify the other party of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. The party who may be required to indemnify shall have the option to participate with the party seeking indemnification in the defense of such claim, or to defend against said claim in its own name or in the name of the other party. The party seeking indemnification shall in no case confess any claim or make any compromise in any case in which the other party may be required to indemnify it except with the other party's prior written consent. 6. Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement. H. DUAL INTERESTS -------------- It is understood that some person or persons may be directors, officers, or shareholders of both the Fund and Price Associates (including Price Associates' affiliates), and that the existence of any such dual interest shall not affect the validity of this Agreement or of any transactions hereunder except as otherwise provided by a specific provision of applicable law. I. DOCUMENTATION ------------- As requested by Price Associates, the Fund shall promptly furnish to Price Associates such documents as it may reasonably request and as are necessary for Price Associates to carry out its responsibilities hereunder. J. RECORDKEEPING/CONFIDENTIALITY ----------------------------- 1. Price Associates shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable, provided that Price Associates shall keep all records in such form and in such manner as required by applicable law, including the Investment Company Act of 1940 ("THE ACT") and the Securities Exchange Act of 1934 ("THE '34 ACT"). 2. Price Associates and the Fund agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except: (a) after prior notification to and approval in writing by the other party hereto, which approval shall not be unreasonably withheld and may not be withheld where Price Associates or Fund may be exposed to civil or criminal contempt proceedings for failure to comply; (b) when requested to divulge such information by duly constituted governmental authorities; or (c) after so requested by the other party hereto. K. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS -------------------------------------------------- Except as otherwise provided in the Agreement and except for the accuracy of information furnished to the Funds by Price Associates, each Fund assumes full responsibility for the preparation, contents and distribution of its prospectuses, and for complying with all applicable requirements of the Act, the '34 Act, the Securities Act of 1933 ("THE '33 ACT"), and any laws, rules and regulations of governmental authorities having jurisdiction over the Funds. L. TERM AND TERMINATION OF AGREEMENT --------------------------------- 1. This Agreement shall run for a period of one (1) year from the date first written above and will be renewed from year to year thereafter unless terminated by either party as provided hereunder. 2. This Agreement may be terminated by the Fund upon sixty (60) days' written notice to Price Associates; and by Price Associates, upon three hundred sixty-five (365) days' written notice to the Fund. 3. Upon termination hereof, the Fund shall pay to Price Associates such compensation as may be due as of the date of such termination, and shall likewise reimburse for out-of-pocket expenses related to its services hereunder. M. NOTICE ------ Any notice as required by this Agreement shall be sufficiently given (i) when sent to an authorized person of the other party at the address of such party set forth above or at such other address as such party may from time to time specify in writing to the other party; or (ii) as otherwise agreed upon by appropriate officers of the parties hereto. N. ASSIGNMENT ---------- Neither this Agreement nor any rights or obligations hereunder may be assigned either voluntarily or involuntarily, by operation of law or otherwise, by either party without the prior written consent of the other party, provided this shall not preclude Price Associates from employing such agents and subcontractors as it deems appropriate to carry out its obligations set forth hereunder. O. AMENDMENT/INTERPRETIVE PROVISIONS --------------------------------- The parties by mutual written agreement may amend this Agreement at any time. In addition, in connection with the operation of this Agreement, Price Associates and the Fund may agree from time to time on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions are to be signed by all parties and annexed hereto, but no such provision shall contravene any applicable Federal or state law or regulation and no such interpretive or additional provision shall be deemed to be an amendment of this Agreement. P. FURTHER ASSURANCES ------------------ Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. Q. MARYLAND LAW TO APPLY --------------------- This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of Maryland. R. MERGER OF AGREEMENT ------------------- This Agreement, including the attached Appendix and Schedule supersedes any prior agreement with respect to the subject hereof, whether oral or written. S. COUNTERPARTS ------------ This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instruments. T. THE PARTIES ----------- All references herein to "the Fund" are to each of the Funds listed on Appendix A individually, as if this Agreement were between such individual Fund and Price Associates. In the case of a series Fund or trust, all references to "the Fund" are to the individual series or portfolio of such Fund or trust, or to such Fund or trust on behalf of the individual series or portfolio, as appropriate. The "Fund" also includes any T. Rowe Price Funds which may be established after the execution of this Agreement. Any reference in this Agreement to "the parties" shall mean Price Associates and such other individual Fund as to which the matter pertains. U. DIRECTORS, TRUSTEES AND SHAREHOLDERS AND MASSACHUSETTS BUSINESS TRUST --------------------------------------------------------------------- It is understood and is expressly stipulated that neither the holders of shares in the Fund nor any Directors or Trustees of the Fund shall be personally liable hereunder. With respect to any Fund which is a party to this Agreement and which is organized as a Massachusetts business trust, the term "Fund" means and refers to the trustees from time to time serving under the applicable trust agreement (Declaration of Trust) of such Trust as the same may be amended from time to time. It is expressly agreed that the obligations of any such Trust hereunder shall not be binding upon any of the trustees, shareholders, nominees, officers, agents or employees of the Trust, personally, but bind only the trust property of the Trust, as provided in the Declaration of Trust of the Trust. The execution and delivery of this Agreement has been authorized by the trustees and signed by an authorized officer of the Trust, acting as such, and neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them, but shall bind only the trust property of the Trust as provided in its Declaration of Trust. V. CAPTIONS -------- The captions in the Agreement are included for convenience of reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf under their seals by and through their duly authorized officers. T. ROWE PRICE ASSOCIATES, INC. T. ROWE PRICE FUNDS BY: BY: ---------------------------------------------------------------- DATED: DATED: -------------------------------------------------------- lhc\wpdata\agmnt\2000FundAccounting.ServiceAgreement.doc APPENDIX A ---------- T. ROWE PRICE BALANCED FUND, INC. T. ROWE PRICE BLUE CHIP GROWTH FUND T. Rowe Price Blue Chip Growth Fund--Advisor Class T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST California Tax-Free Bond Fund California Tax-Free Money Fund T. ROWE PRICE CAPITAL APPRECIATION FUND T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC. T. ROWE PRICE CORPORATE INCOME FUND, INC. T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC. T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC. T. ROWE PRICE DIVIDEND GROWTH FUND, INC. T. ROWE PRICE EQUITY INCOME FUND T. Rowe Price Equity Income Fund--Advisor Class T. ROWE PRICE EQUITY SERIES, INC. T. Rowe Price Equity Income Portfolio T. Rowe Price New America Growth Portfolio T. Rowe Price Personal Strategy Balanced Portfolio T. Rowe Price Mid-Cap Growth Portfolio T. Rowe Price Blue Chip Growth Portfolio T. Rowe Price Equity Index 500 Portfolio T. Rowe Price Health Sciences Portfolio T. ROWE PRICE FINANCIAL SERVICES FUND, INC. T. ROWE PRICE FIXED INCOME SERIES, INC. T. Rowe Price Limited-Term Bond Portfolio T. Rowe Price Prime Reserve Portfolio T. ROWE PRICE GNMA FUND T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC. T. ROWE PRICE GROWTH & INCOME FUND, INC. T. ROWE PRICE GROWTH STOCK FUND, INC. T. ROWE PRICE HEALTH SCIENCES FUND, INC. T. ROWE PRICE HIGH YIELD FUND, INC. T. ROWE PRICE INDEX TRUST, INC. T. Rowe Price Equity Index 500 Fund T. Rowe Price Extended Equity Market Index Fund T. Rowe Price Total Equity Market Index Fund INSTITUTIONAL EQUITY FUNDS, INC. Institutional Mid-Cap Equity Growth Fund Institutional Large-Cap Value Fund Institutional Small-Cap Stock Fund INSTITUTIONAL INTERNATIONAL FUNDS, INC. Foreign Equity Fund T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. Rowe Price International Stock Fund T. Rowe Price International Discovery Fund T. Rowe Price European Stock Fund T. Rowe Price New Asia Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price Emerging Markets Stock Fund T. Rowe Price Global Stock Fund T. Rowe Price International Growth & Income Fund T. Rowe Price International Stock Fund--Advisor Class T. Rowe Price Emerging Europe & Mediterranean Fund T. Rowe Price International Bond Fund T. Rowe Price Emerging Markets Bond Fund T. Rowe Price International Bond Fund--Advisor Class T. ROWE PRICE INTERNATIONAL INDEX FUND, INC, T. Rowe Price International Equity Index Fund T. ROWE PRICE INTERNATIONAL SERIES, INC. T. Rowe Price International Stock Portfolio T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC. T. ROWE PRICE MID-CAP GROWTH FUND, INC. T. Rowe Price Mid-Cap Growth Fund--Advisor Class T. ROWE PRICE MID-CAP VALUE FUND, INC. T. ROWE PRICE NEW AMERICA GROWTH FUND T. ROWE PRICE NEW ERA FUND, INC. T. ROWE PRICE NEW HORIZONS FUNDS, INC. T. ROWE PRICE NEW INCOME FUND, INC. T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC. T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. ROWE PRICE PRIME RESERVE FUND, INC. T. Rowe Price Prime Reserve Fund--PLUS Class T. ROWE PRICE REAL ESTATE FUND, INC. RESERVE INVESTMENT FUNDS, INC. Reserve Investment Fund Government Reserve Investment Fund T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC. T. Rowe Price Science & Technology Fund--Advisor Class T. ROWE PRICE SHORT-TERM BOND FUND, INC. T. ROWE PRICE SMALL-CAP STOCK FUND, INC. T. Rowe Price Small-Cap Stock Fund--Advisor Class T. Rowe Price OTC Fund T. ROWE PRICE SMALL-CAP VALUE FUND, INC. T. Rowe Price Small-Cap Value Fund--Advisor Class T. ROWE PRICE SPECTRUM FUND, INC. Spectrum Growth Fund Spectrum Income Fund Spectrum International Fund T. ROWE PRICE STATE TAX-FREE INCOME TRUST New York Tax-Free Money Fund New York Tax-Free Bond Fund Maryland Tax-Free Bond Fund Virginia Tax-Free Bond Fund New Jersey Tax-Free Bond Fund Maryland Short-Term Tax-Free Bond Fund Florida Intermediate Tax-Free Fund Georgia Tax-Free Bond Fund T. ROWE PRICE SUMMIT FUNDS, INC. T. Rowe Price Summit Cash Reserves Fund T. Rowe Price Summit GNMA Fund T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. T. Rowe Price Summit Municipal Money Market Fund T. Rowe Price Summit Municipal Intermediate Fund T. Rowe Price Summit Municipal Income Fund T. ROWE PRICE TAX-EFFICIENT FUNDS, INC. T. Rowe Price Tax-Efficient Balanced Fund T. Rowe Price Tax-Efficient Growth Fund T. Rowe Price Tax-Efficient Multi-Cap Growth Fund T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC. T. Rowe Price Tax-Exempt Money Fund--PLUS Class T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC. T. ROWE PRICE TAX-FREE INCOME FUND, INC. T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC. T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC. T. ROWE PRICE U.S. BOND INDEX FUND, INC. T. ROWE PRICE U.S. TREASURY FUNDS, INC. U.S. Treasury Intermediate Fund U.S. Treasury Long-Term Fund U.S. Treasury Money Fund T. ROWE PRICE VALUE FUND, INC. EX-99.HOTHMATCONT 8 rpsagmt01.txt AGREEMENT BETWEEN T. ROWE PRICE RETIREMENT PLAN SERVICES, INC. AND T. ROWE PRICE FUNDS TABLE OF CONTENTS ----------------- PAGE ---- Article A Terms of Appointment................................ 2 Article B Duties of RPS....................................... 2 1. Contributions - Retirement Plans and Retirement Accounts 2 2. Retirement Plans - Redemptions to Cover Distributions 3 3. Other Provisions............................. 4 4. Exchanges.................................... 5 5. Books and Records............................ 5 6. Tax Information.............................. 6 7. Other Information to be Furnished to the Funds 6 8. Telephone/On-Line Services................... 7 9. Correspondence............................... 7 10. Prospectuses/Confirmation Statements......... 7 11. Proxies...................................... 7 12. Form N-SAR................................... 7 13. Withholding.................................. 8 Article C Fee and Out-of-Pocket Expenses...................... 8 1. Postage...................................... 8 2. Proxies...................................... 8 3. Communications............................... 8 4. Record Retention............................. 9 5. Disaster Recovery............................ 9 Article D Representations and Warranties of RPS............... 9 Article E Representations and Warranties of the Fund.......... 10 Article F Standard of Care/Indemnification.................... 10 Article G Dual Interests...................................... 13 Article H Documentation....................................... 13 Article I Recordkeeping/Confidentiality....................... 15 Article J Ownership of Software and Related Material.......... 15 Article K As of Transactions.................................. 15 1. Reporting.................................... 16 2. Liability.................................... 16 Article L Term and Termination of Agreement .......................................... 19 Article M Notice ............................................. 19 Article N Assignment.......................................... 19 Article O Amendment/Interpretive Provisions................... 19 Article P Further Assurances.................................. 20 Article Q Maryland Law to Apply............................... 20 Article R Merger of Agreement................................. 20 Article S Counterparts........................................ 20 Article T The Parties......................................... 20 Article U Directors, Trustees and Shareholders and Massachusetts Business Trust 21 Article V Captions............................................ 21 AGREEMENT, made as of the first day of January, 2001, by and between T. ROWE PRICE RETIREMENT PLAN SERVICES, INC., a Maryland corporation having its principal office and place of business at 100 East Pratt Street, Baltimore, Maryland 21202 ("RPS"), and EACH FUND WHICH IS LISTED ON APPENDIX A (as such Appendix may be amended from time to time) and which evidences its agreement to be bound hereby by executing a copy of this Agreement (each Fund hereinafter referred to as "THE FUND") whose definition may be found in Article T; WHEREAS, the Funds are named investment options under various tax-sheltered plans, including, but not limited to, state and local government deferred compensation plans, 403(b) plans, and profit sharing, thrift, 401(k) and money purchase pension plans for self-employed individuals, professional partnerships and corporations (collectively referred to as "RETIREMENT PLANS"); and the Fund has determined that such investments of Retirement Plans in the Funds are in the best long-term interest of the Funds; WHEREAS, RPS has the capability of providing special services, on behalf of the Fund, for the accounts of individuals ("PARTICIPANTS") participating in these Retirement Plans ("RETIREMENT ACCOUNTS"); WHEREAS, RPS represents that it is registered with the Securities and Exchange Commission as a Transfer Agent under Section 17A of the Securities Exchange Act of 1934 (THE "'34 ACT"); WHEREAS, RPS may subcontract or jointly contract with other parties on behalf of the Funds to perform certain of the functions described herein, RPS may also enter into, on behalf of the Funds, certain banking relationships to perform various banking services, including, but not limited to, check deposits, disbursements, automatic clearing house transactions ("ACH") and wire transfers. Subject to guidelines mutually agreed upon by the Funds and RPS, excess balances, if any, resulting from these banking relationships will be invested and the income therefrom will be used to offset fees which would otherwise be charged to the Funds under this Agreement; WHEREAS, the Fund desires to contract with RPS to provide the functions and services described herein in connection with the Retirement Plans and Retirement Accounts; NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: A. TERMS OF APPOINTMENT -------------------- Subject to the terms and conditions set forth in this Agreement, the Fund hereby employs and appoints RPS to perform the services and functions described herein in connection with certain Retirement Plan and Retirement Accounts as agreed upon by the parties. B. DUTIES OF RPS ------------- RPS agrees that it will perform the following services: 1. CONTRIBUTIONS - RETIREMENT PLANS AND RETIREMENT ACCOUNTS ------------- - ---------- ----- --- ---------- -------- After RPS has received monies from Retirement Plans and has determined the proper allocation of such monies to the Retirement Accounts of Participants based upon instructions received from Participants, Retirement Plans or their designees, or Retirement Plan Administrator(s) ("ADMINISTRATOR(S)"), RPS will, as a responsibility under the Agreement: a. In the case of a new Participant, establish and maintain a Retirement Account for such Participant; b. Compute the number of shares of each Fund to which the Participant is entitled in accordance with the price per share of such Fund as calculated and provided by the Fund for orders received at that time and date, and purchase the appropriate shares in each such Retirement Account; c. Calculate the aggregate of all purchases in the Retirement Accounts and transmit the net purchase order to T. Rowe Price Services, Inc. ("SERVICES") through the National Securities Clearing Corporation ("NSCC") or such other agreed upon method or directly to the Fund, as the case may be, for purchase into an omnibus account established in each Fund registered in RPS' or its affiliates' name as agent for Retirement Plans or in the individual Retirement Plan's name ("OMNIBUS ACCOUNT"); and d. Transmit to Services, by wire directly or through the NSCC, at a time designated by the NSCC or mutually agreed upon by both parties, the aggregate money allocated to coincide with the purchase order. 2. RETIREMENT PLANS - REDEMPTIONS TO COVER DISTRIBUTIONS. ---------- ----- - ----------- -- ----- ------------- After RPS has received instructions from the Administrator regarding distributions to be made to Participants or their designated beneficiaries from Funds designated as investment options under the Retirement Plan, RPS will, as a responsibility under the Agreement: a. Compute the number of shares to be redeemed from each such Retirement Account for such distributions in accordance with the price per share of such Fund as calculated and provided by the Fund for orders received in good order at that time and date. b. After such computation, calculate the aggregate amount of all redemptions in the Retirement Accounts. c. Transmit any net redemption order to Services, through the NSCC or such other method mutually agreed upon, or directly to the Fund, as the case may be, for the Omnibus Account of each Fund. Services will wire proceeds to RPS, directly or through the NSCC, to coincide with the redemption order for each Omnibus Account. RPS will Distribute to Participants or their designated beneficiaries the amount to be disbursed. d. After RPS has received instructions from the Administrator regarding disbursements to be made regarding the payment of fees due the Administrator, or other persons including RPS, RPS will, as a responsibility under this Agreement: i. Compute the number of shares to be redeemed from each Retirement Account to pay for such disbursements and the total number of all shares to be redeemed in accordance with the price per share for orders received in good order at that time and date, of such Fund as calculated and provided by the Fund; ii. Inform Services, directly or through the NSCC, or the Funds directly, as the case may be, of the necessary Shares to be redeemed from the Omnibus Account of the Funds to cover such disbursements; and iii. Mail or wire to the Administrator or such other person as designated by the Administrator the amount to be disbursed. 3. OTHER PROVISIONS ----- ---------- a. If any instruction tendered by an Administrator to purchase or redeem shares in a Retirement Account is not satisfactory to RPS, RPS shall promptly notify the Administrator of such fact together with the reason therefore; b. The authority of RPS to perform its responsibilities under Paragraph B(2) with respect to each Fund shall be suspended upon RPS's receipt of notification from such Fund of the suspension of the determination of the Fund's net asset value per share and shall remain suspended until RPS receives proper notification from the Fund; and c. The Fund will promptly inform RPS of the declaration of any dividend or distribution on account of the capital stock of any Fund so that RPS may properly credit income and capital gain payments to each Retirement Account. 4. EXCHANGES --------- Effect exchanges of shares of the Funds in the Retirement Accounts upon receipt of appropriate instructions from the Administrator and/or Participant in accordance with the price per share of the Funds as calculated and provided by the Fund for orders received in good order at that time and date. Calculate and transmit a net purchase and redemption order to Services directly or through the NSCC, or the Fund, as the case may be, for the Omnibus Account of each Fund. RPS will transmit by wire to Services, directly or through the NSCC, the aggregate monies allocated to each Fund to coincide with any net purchase order or instruct Services to wire to it, directly or through the NSCC, monies from each Fund's Omnibus Account to coincide with any net redemption order. 5. BOOKS AND RECORDS ----- --- ------- RPS shall maintain records showing for each Retirement Plan or Retirement Account, the following: a. Names, addresses and tax identification numbers, when provided; b. Number of shares held of each Fund; c. Historical information regarding the account of each Participant and/or Retirement Plan, including dividends and capital gain distributions invested in shares; d. Any instructions from a Participant or Administrator, including all forms executed by a Participant with respect to elections with respect to payment options in connection with the redemption of shares or distribution elections, if applicable; and e. Any information required in order for RPS to perform the calculations contemplated under this Agreement. Any such records maintained pursuant to Rule 31a-1 under the Investment Company Act of 1940 ("THE ACT") will be preserved for the periods prescribed in Rule 31a-2 thereunder. Disposition of such records after such prescribed periods shall be as mutually agreed upon from time to time by RPS and the Funds. The retention of such records, which may be inspected by the Fund at reasonable times, shall be at the expense of the Funds. All records maintained by RPS in connection with the performance of its duties under this Agreement will remain the property of the Funds and, in the event of termination of this Agreement, will be delivered to the Fund as of the date of termination of this agreement or at such other time as may be mutually agreed upon. 6. TAX INFORMATION --- ----------- RPS shall also prepare and file with appropriate federal agencies, such information returns and reports as required by applicable Federal statutes relating to redemptions effected in Retirement Accounts which constitute reportable distributions. RPS will also prepare and submit to Participants, such reports containing information as is required by applicable Federal law. 7. OTHER INFORMATION TO BE FURNISHED TO THE FUNDS ----- ----------- -- -- --------- -- --- ----- RPS will furnish to the Fund, such information, including Participant lists and statistical information as may be agreed upon from time to time between RPS and the Fund. Permission of the Administrator may also be required. 8. TELEPHONE/ON-LINE SERVICES ----------------- -------- RPS will promptly respond to any telephone calls from Administrators and/or Participants relating to the Retirement Accounts and/or questions pertaining to the Funds. Procedures for processing telephone transactions will be mutually agreed upon by both parties. RPS will also be responsible for providing a telephone voice response unit and on-line access services. 9. CORRESPONDENCE -------------- RPS will promptly and fully answer correspondence from Administrators and Participants relating to Retirement Accounts and transfer agent procedures, and such other correspondence as may from time to time be mutually agreed upon with the Funds. Copies of all correspondence will be retained by RPS in accordance with applicable law. 10. PROSPECTUSES/CONFIRMATION STATEMENTS ------------------------- ---------- RPS will be responsible for mailing all confirmations and statements relating to transactions in the Funds, prospectuses, semi-annual and annual reports of the Funds and other enclosures and mailings, as may be requested by the Funds or required by applicable Federal law. 11. PROXIES ------- As requested by the Funds, RPS shall assist in the mailing of proxy cards and other material required to be mailed by the Fund in connection with shareholder meetings of the Fund and shall assist in the receipt, examination and tabulation of returned proxies and the certification of the vote to the Fund. 12. FORM N-SAR ---- ----- RPS shall maintain such records, if any, as shall enable the Fund to fulfill the requirements of Form N-SAR. 13. WITHHOLDING ----------- The Fund and RPS shall agree to procedures to be followed with respect to RPS's responsibilities in connection with compliance for federal withholding on distributions to Participants from Retirement Accounts. C. FEES AND OUT-OF-POCKET EXPENSES ------------------------------- Each Fund shall pay to RPS for its services hereunder fees computed as set forth in the Fee Schedule attached hereto. Except as provided below, RPS will be responsible for all expenses relating to the providing of services. Each Fund, however, will reimburse RPS for the following out-of-pocket expenses and charges incurred in providing services: 1. Postage. The cost of postage and freight for mailing materials, including -------- confirmations and statements as well as Fund prospectuses and Fund shareholder reports, to Participants with investments in the Fund, or their agents, including overnight delivery, UPS and other express mail services and special courier services required to transport mail between RPS locations and mail processing vendors. 2. Proxies. The cost to mail proxy cards and other material supplied to it ------- by the Fund and costs related to the receipt, examination and tabulation of returned proxies and the certification of the vote to the Fund. 3. Communications -------------- a. Print. The printed forms used internally and externally for ----- documentation and processing Participant, or their agent's, inquiries and requests; paper and envelope supplies for letters, notices, and other written communications sent to Administrators and Participants, or their agents. b. Print & Mail House. The cost of internal and third party printing and ----- - ---- ----- mail house services, including printing of statements and reports. c. Voice and Data. The cost of equipment (including associated ----- --- ---- maintenance), supplies and services used for communicating with the Participants or their Administrator, the Fund's transfer agent, other Fund offices, and other agents of either the Fund or RPS. These charges shall include: /2/ telephone toll charges (both incoming and outgoing, local, long distance and mailgrams); and /2/ data and telephone lines and associated equipment such as modems, multiplexers, and facsimile equipment. 4. Record Retention. The cost of maintenance and supplies used to maintain, ------ --------- microfilm, copy, record, index, display, retrieve, and store, in optical disc, cd rom or microfiche or microfilm form, documents and records. 5. Disaster Recovery. The cost of services, equipment, facilities and other -------- -------- charges necessary to provide disaster recovery for any and all services listed in this Agreement. D. REPRESENTATIONS AND WARRANTIES OF RPS ------------------------------------- RPS represents and warrants to the Fund that: 1. It is a corporation duly organized and existing and in good standing under the laws of Maryland. 2. It is duly qualified to carry on its business in Maryland, Florida and Colorado. 3. It is empowered under applicable laws and by its charter and by-laws to enter into and perform this Agreement. 4. All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement. 5. It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement. 6. It is registered with the Securities and Exchange Commission as a Transfer Agent pursuant to Section 17A of the '34 Act. E. REPRESENTATIONS AND WARRANTIES OF THE FUND ------------------------------------------ The Fund represents and warrants to RPS that: 1. It is a corporation or business trust duly organized and existing and in good standing under the laws of Maryland, or Massachusetts, as the case may be. 2. It is empowered under applicable laws and by its Articles of Incorporation or Declaration of Trust, as the case may be, and By-Laws to enter into and perform this Agreement. 3. All proceedings required by said Articles of Incorporation or Declaration of Trust, as the case may be, and By-Laws have been taken to authorize it to enter into and perform this Agreement. 4. It is an investment company registered under the Act. 5. A registration statement under the Securities Act of 1933 ("the '33 Act") is currently effective and will remain effective, and appropriate state securities law filing have been made and will continue to be made, with respect to all shares of the Fund being offered for sale. F. STANDARD OF CARE/INDEMNIFICATION -------------------------------- Notwithstanding anything to the contrary in this Agreement: 1. RPS shall not be liable to the Fund for any act or failure to act by it or its agents or subcontractors on behalf of the Fund in carrying or attempting to carry out the terms and provisions of this Agreement provided RPS has acted in good faith and without negligence or willful misconduct and selected and monitored the performance of its agents and subcontractors with reasonable care. 2. The Fund shall indemnify and hold RPS harmless from and against all losses, costs, damages, claims, actions and expenses, including reasonable expenses for legal counsel, incurred by RPS resulting from: (i) any action or omission by RPS or its agents or subcontractors in the performance of their duties hereunder; (ii) RPS acting upon instructions reasonably believed by it to have been executed by a duly authorized officer of the Fund; or (iii) RPS acting upon information provided by the Fund in form and under policies agreed to by RPS and the Fund. RPS shall not be entitled to such indemnification in respect of actions or omissions constituting negligence or willful misconduct of RPS or where RPS has not exercised reasonable care in selecting or monitoring the performance of its agents or subcontractors. 3. Except as provided in Article K of this Agreement, RPS shall indemnify and hold harmless the Fund from all losses, costs, damages, claims, actions and expenses, including reasonable expenses for legal counsel, incurred by the Fund resulting from negligence or willful misconduct of RPS or which result from RPS' failure to exercise reasonable care in selecting or monitoring the performance of its agents or subcontractors. The Fund shall not be entitled to such indemnification in respect of actions or omissions constituting negligence or willful misconduct of such Fund or its agents or subcontractors; unless such negligence or misconduct is attributable to RPS. 4. In determining RPS' liability, an isolated error or omission will normally not be deemed to constitute negligence when it is determined that: /2/ RPS had in place "appropriate procedures;" /2/ the employees responsible for the error or omission had been reasonably trained and were being appropriately monitored; and /2/ the error or omission did not result from wanton or reckless conduct on the part of the employees. It is understood that RPS is not obligated to have in place separate procedures to prevent each and every conceivable type of error or omission. The term "appropriate procedures" shall mean procedures reasonably designed to prevent and detect errors and omissions. In determining the reasonableness of such procedures, weight will be given to such factors as are appropriate, including the prior occurrence of any similar errors or omissions when such procedures were in place and transfer agent industry standards in place at the time of the occurrence. 5. In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes or other causes reasonably beyond its control, such party shall not be liable to the other party for any loss, cost, damage, claims, actions or expense resulting from such failure to perform or otherwise from such causes. 6. In order that the indemnification provisions contained in this Article F shall apply, upon the assertion of a claim for which either party may be required to indemnify the other, the party seeking indemnification shall promptly notify the other party of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. The party who may be required to indemnify shall have the option to participate with the party seeking indemnification in the defense of such claim, or to defend against said claim in its own name or in the name of the other party. The party seeking indemnification shall in no case confess any claim or make any compromise in any case in which the other party may be required to indemnify it except with the other party's prior written consent. 7. Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement. G. DUAL INTERESTS -------------- It is understood that some person or persons may be directors, officers, or shareholders of both RPS and the Fund and that the existence of any such dual interest shall not affect the validity of this Agreement or of any transactions hereunder except as otherwise provided by a specific provision of applicable law. H. DOCUMENTATION ------------- 1. As requested by RPS, the Fund shall promptly furnish to RPS the following: a. copy of the resolution of the Directors/Trustees of the Fund authorizing the appointment of RPS and the execution and delivery of this Agreement; b. A copy of the Articles of Incorporation or Declaration of Trust, as the case may be, and By-Laws of the Fund and all amendments thereto; c. An opinion of counsel for the Fund with respect to the validity of the stock, the number of Shares authorized, the status of redeemed Shares, and the number of Shares with respect to which a Registration Statement has been filed and is in effect; and d. A copy of the Fund's current and new prospectuses and shareholder reports issued by the Fund. The delivery of any such document to either party hereto for the purpose of any other agreement to which the Fund and RPS are or were parties shall be deemed to be delivery for the purposes of this Agreement. 2. As requested by RPS, the Fund will also furnish to RPS from time to time the following documents: a. Each resolution of the Board of Directors/Trustees of the Fund authorizing the original issue of its shares; b. Each Registration Statement filed with the Securities and Exchange Commission and amendments and orders thereto in effect with respect to the sale of shares with respect to the Fund; c. A certified copy of each amendment to the Articles of Incorporation or Declaration of Trust, and the By-Laws of the Fund; d. Certified copies of each vote of the Board of Directors/Trustees authorizing officers to give instructions to the Fund; and e. Such other documents or opinions which RPS, in its discretion, may reasonably deem necessary or appropriate in the proper performance of its duties under this Agreement. 3. RPS hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Fund for safekeeping of check forms and facsimile signature imprinting devices, if any, and for the preparation or use, and for keeping account of, such forms and devices. I. RECORDKEEPING/CONFIDENTIALITY ----------------------------- 1. RPS shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable, provided that RPS shall keep all records in such form and in such manner as required by applicable law, including the Act and the '34 Act. 2. RPS and the Fund agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except: (a) after prior notification to and approval in writing by the other party hereto, which approval shall not be unreasonably withheld and may not be withheld where RPS or the Fund may be exposed to civil or criminal contempt proceedings for failure to comply; (b) when requested to divulge such information by duly constituted governmental authorities; (c) after so requested by the other party hereto; or (d) by the Administrator. The permission of the Administrator may be required before disclosure is made to the Funds. J. OWNERSHIP OF SOFTWARE AND RELATED MATERIAL ------------------------------------------ All computer programs, magnetic tapes, written procedures and similar items purchased and/or developed and used by RPS in performance of the Agreement shall be the property of RPS and will not become the property of the Fund. K. AS OF TRANSACTIONS ------------------ For purposes of this Article K, the term "TRANSACTION" shall mean any single or "related transaction" (as defined below) involving the purchase or redemption of shares (including exchanges) processed at a time other than the time of the computation of the Fund's net asset value per share next computed after receipt of any such transaction order by RPS due to an act or omission of RPS. "AS OF PROCESSING" refers to the processing of these Transactions. If more than one Transaction ("RELATED TRANSACTION") in the Fund is caused by or occurs as a result of the same act or omission, such transactions shall be aggregated with other transactions in the Fund and be considered as one Transaction. 1. REPORTING RPS shall: a. Utilize a system to identify all Transactions, and shall compute the net effect of such Transactions upon the Fund on a daily, monthly and rolling 365 day basis. The monthly and rolling 365 day periods are hereinafter referred to as "CUMULATIVE." b. Supply to the Fund, from time to time as mutually agreed upon, a report summarizing the Transactions and the daily and Cumulative net effects of such Transactions both in terms of aggregate dilution and loss ("DILUTION") or gain and negative dilution ("GAIN") experienced by the Fund, and the impact such Gain or Dilution has had upon the Fund's net asset value per share. c. With respect to any Transaction which causes Dilution to the Fund of $100,000 or more, immediately provide the Fund: (i) a report identifying the Transaction and the Dilution resulting therefrom, (ii) the reason such Transaction was processed as described above, and (iii) the action that RPS has or intends to take to prevent the reoccurrence of such as of processing ("REPORT"). 2. LIABILITY a. It will be the normal practice of the Fund not to hold RPS liable with respect to any Transaction which causes Dilution to any single Fund of less than $25,000. RPS will, however, closely monitor for each Fund the daily and Cumulative Gain/Dilution which is caused by Transactions of less than $25,000. When the Cumulative Dilution to any Fund exceeds 3/10 of 1% per share, RPS, in consultation with counsel to the Fund, will make appropriate inquiry to determine whether it should take any remedial action. RPS will report to the Board of Directors/Trustees of the Fund ("BOARD"), as appropriate, any action it has taken. b. Where a Transaction causes Dilution to a Fund greater than $25,000 ("SIGNIFICANT TRANSACTION") but less than $100,000, RPS will review with Counsel to the Fund the circumstances surrounding the underlying Significant Transaction to determine whether the Significant Transaction was caused by or occurred as a result of a negligent act or omission by RPS. If it is determined that the Dilution is the result of a negligent action or omission by RPS, RPS and outside counsel for the Fund will negotiate settlement. All such Significant Transactions will be reported to the Audit Committee at its annual meeting (unless the settlement fully compensates the Fund for any Dilution). Any Significant Transaction, however, causing Dilution in excess of the lesser of $100,000 or a penny per share will be promptly reported to the Board -------- and resolved at the next scheduled Board Meeting. Settlement for Significant Transactions causing Dilution of $100,000 or more will not be entered into until approved by the Board. The factors to consider in making any determination regarding the settlement of a Significant Transaction would include but not be limited to: i. Procedures and controls adopted by RPS to prevent As Of Processing; ii. Whether such procedures and controls were being followed at the time of the Significant Transaction; iii. The absolute and relative volume of all transactions processed by RPS on the day of the Significant Transaction; iv. The number of Transactions processed by RPS during prior relevant periods, and the net Dilution/Gain as a result of all such Significant Transactions to the Fund and to all other Funds; and v. The prior response of RPS to recommendations made by the Funds regarding improvement to RPS's As Of Processing procedures. c. In determining RPS' liability with respect to a Significant Transaction, an isolated error or omission will normally not be deemed to constitute negligence when it is determined that: /2/ RPS had in place "appropriate procedures". /2/ the employees responsible for the error or omission had been reasonably trained and were being appropriately monitored; and /2/ the error or omission did not result from wanton or reckless conduct on the part of the employees. It is understood that RPS is not obligated to have in place separate procedures to prevent each and every conceivable type of error or omission. The term "appropriate procedures" shall mean procedures reasonably designed to prevent and detect errors and omissions. In determining the reasonableness of such procedures, weight will be given to such factors as are appropriate, including the prior occurrence of any similar errors or omissions when such procedures were in place and transfer agent industry standards in place at the time of the occurrence. L. TERM AND TERMINATION OF AGREEMENT --------------------------------- 1. This Agreement shall run for a period of one (1) year from the date first written above and will be renewed from year to year thereafter unless terminated by either party as provided hereunder. 2. This Agreement may be terminated by the Funds upon one hundred twenty (120) days' prior written notice to RPS; and by RPS, upon three hundred sixty-five (365) days' prior written notice to the Fund. 3. Upon termination hereof, the Fund shall pay to RPS such compensation as may be due as of the date of such termination, and shall likewise reimburse for out-of-pocket expenses related to its services hereunder. M. NOTICE ------ Any notice as required by this Agreement shall be sufficiently given (i) when sent to an authorized person of the other party at the address of such party set forth above or at such other address as such party may from time to time specify in writing to the other party; or (ii) as other- wise agreed upon by appropriate officers of the parties hereto. N. ASSIGNMENT ---------- Neither this Agreement nor any rights or obligations hereunder may be assigned either voluntarily or involuntarily, by operation of law or otherwise, by either party without the prior written consent of the other party. O. AMENDMENT/INTERPRETIVE PROVISIONS --------------------------------- The parties by mutual written agreement may amend this Agreement at any time. In addition, in connection with the operation of this Agreement, RPS and the Fund may agree from time to time on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions are to be signed by all parties and annexed hereto, but no such provision shall contravene any applicable federal or state law or regulation and no such interpretive or additional provision shall be deemed to be an amendment of this Agreement. P. FURTHER ASSURANCES ------------------ Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. Q. MARYLAND LAW TO APPLY --------------------- This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of Maryland. R. MERGER OF AGREEMENT ------------------- This Agreement, including the attached Schedule supersede any prior agreement with respect to the subject hereof, whether oral or written. S. COUNTERPARTS ------------ This Agreement may be executed by the parties hereto in any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. T. THE PARTIES ----------- All references herein to "the Fund" are to each of the Funds listed on Appendix A individ- ually, as if this Agreement were between such individual Fund and RPS. In the case of a series Fund or trust, all references to "the Fund" are to the individual series or portfolio of such Fund or trust, or to such Fund or trust on behalf of the individual series or portfolio, as appropriate. Any reference in this Agreement to "the parties" shall mean RPS and such other individual Fund as to which the matter pertains. The "Fund" also includes any T. Rowe Price Fund which may be established after the date of this Agreement. Any reference in this Agreement to "the parties" shall mean the Funds and RPS. U. DIRECTORS, TRUSTEES AND SHAREHOLDERS AND MASSACHUSETTS BUSINESS TRUST --------------------------------------------------------------------- It is understood and is expressly stipulated that neither the holders of shares in the Fund nor any Directors or Trustees of the Fund shall be personally liable hereunder. With respect to any Fund which is a party to this Agreement and which is organized as a Massachusetts business trust, the term "Fund" means and refers to the trustees from time to time serving under the applicable trust agreement (Declaration of Trust) of such Trust as the same may be amended from time to time. It is expressly agreed that the obligations of any such Trust hereunder shall not be binding upon any of the trustees, shareholders, nominees, officers, agents or employees of the Trust, personally, but bind only the trust property of the Trust, as provided in the Declaration of Trust of the Trust. The execution and delivery of this Agreement has been authorized by the Trustees and signed by an authorized officer of the Trust, acting as such, and neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them, but shall bind only the trust property of the Trust as provided in its Declaration of Trust. V. CAPTIONS -------- The captions in the Agreement are included for convenience of reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf under their seals by and through their duly authorized officers. T. ROWE PRICE RETIREMENT PLAN T. ROWE PRICE FUNDS SERVICES, INC. BY: ----------------------------------------------------------- BY: ---------------------------------------------------------- DATED: --------------------------------------------------- DATED: --------------------------------------------------- LHC\Agrmnt\2000RetirementPlanServices.ServiceAgreement.doc APPENDIX A -------- - T. ROWE PRICE BALANCED FUND, INC. T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. T. Rowe Price Blue Chip Growth Fund-Advisor Class T. ROWE PRICE CAPITAL APPRECIATION FUND T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC. T. ROWE PRICE CORPORATE INCOME FUND, INC. T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC. T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC. T. ROWE PRICE DIVIDEND GROWTH FUND, INC. T. ROWE PRICE EQUITY INCOME FUND T. Rowe Price Equity Income Fund-Advisor Class T. ROWE PRICE FINANCIAL SERVICES FUND, INC. T. ROWE PRICE GNMA FUND T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC. T. ROWE PRICE GROWTH & INCOME FUND, INC. T. ROWE PRICE GROWTH STOCK FUND, INC. T. ROWE PRICE HEALTH SCIENCES FUND, INC. T. ROWE PRICE HIGH YIELD FUND, INC. T. Rowe Price High Yield Fund-Advisor Class T. ROWE PRICE INDEX TRUST, INC. T. Rowe Price Equity Index 500 Fund T. Rowe Price Extended Equity Market Index Fund T. Rowe Price Total Equity Market Index Fund INSTITUTIONAL EQUITY FUNDS, INC. Institutional Mid-Cap Equity Growth Fund Institutional Large-Cap Value Fund Institutional Small-Cap Stock Fund INSTITUTIONAL INTERNATIONAL FUNDS, INC. Foreign Equity Fund T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. Rowe Price International Stock Fund T. Rowe Price International Discovery Fund T. Rowe Price European Stock Fund T. Rowe Price New Asia Fund T. Rowe Price Japan Fund T. Rowe Price Latin America Fund T. Rowe Price Emerging Markets Stock Fund T. Rowe Price Global Stock Fund T. Rowe Price International Growth & Income Fund T. Rowe Price International Stock Fund-Advisor Class T. Rowe Price Emerging Europe & Mediterranean Fund T. Rowe Price International Bond Fund T. Rowe Price Emerging Markets Bond Fund T. Rowe Price International Bond Fund-Advisor Class T. ROWE PRICE INTERNATIONAL INDEX FUND, INC. T. Rowe Price International Equity Index Fund T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC. T. ROWE PRICE MID-CAP GROWTH FUND, INC. T. ROWE PRICE MID-CAP VALUE FUND, INC. T. ROWE PRICE NEW AMERICA GROWTH FUND T. ROWE PRICE NEW ERA FUND, INC. T. ROWE PRICE NEW HORIZONS FUNDS, INC. T. ROWE PRICE NEW INCOME FUND, INC. T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC. T. Rowe Price Personal Strategy Balanced Fund T. Rowe Price Personal Strategy Growth Fund T. Rowe Price Personal Strategy Income Fund T. ROWE PRICE PRIME RESERVE FUND, INC. T. Rowe Price Prime Reserve Fund-PLUS Class T. ROWE PRICE REAL ESTATE FUND, INC. T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC. T. Rowe Price Science & Technology Fund-Advisor Class T. ROWE PRICE SHORT-TERM BOND FUND, INC. T. ROWE PRICE SMALL-CAP STOCK FUND, INC. T. Rowe Price Small-Cap Stock Fund-Advisor Class T. ROWE PRICE SMALL-CAP VALUE FUND, INC. T. Rowe Price Small-Cap Value Fund-Advisor Class T. ROWE PRICE SPECTRUM FUND, INC. Spectrum Income Fund Spectrum Growth Fund Spectrum International Fund T. ROWE PRICE SUMMIT FUNDS, INC. T. Rowe Price Summit Cash Reserves Fund T. Rowe Price Summit GNMA Fund T. ROWE PRICE U.S. BOND INDEX FUND, INC. T. ROWE PRICE U.S. TREASURY FUNDS, INC. U.S. Treasury Intermediate Fund U.S. Treasury Long-Term Fund U.S. Treasury Money Fund T. ROWE PRICE VALUE FUND, INC. -----END PRIVACY-ENHANCED MESSAGE-----