497J 1 combinedsai100108.htm
This is the Statement of Additional Information for all of the funds listed below. It is divided into two parts (Part I and Part II). Part I contains information that is particular to each fund, while Part II contains information that generally applies to all of the funds in the T. Rowe Price family of funds (the "Price Funds").

<R>
The date of this Statement of Additional Information ("SAI") is October 1, 2008.
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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 Blue Chip Growth Fund—R 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 Appreciation Fund—Advisor Class

T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
 T. Rowe Price Capital Opportunity Fund—Advisor Class
 T. Rowe Price Capital Opportunity Fund—R Class

T. ROWE PRICE CORPORATE INCOME FUND, INC.

T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC.

T. ROWE PRICE DIVERSIFIED MID-CAP GROWTH FUND, INC.

T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.

T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
 T. Rowe Price Dividend Growth Fund—Advisor Class

T. ROWE PRICE EQUITY INCOME FUND
 T. Rowe Price Equity Income Fund—Advisor Class
 T. Rowe Price Equity Income Fund—R Class

T. ROWE PRICE FINANCIAL SERVICES FUND, INC.

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 Growth Stock Fund—Advisor Class
 T. Rowe Price Growth Stock Fund—R Class

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

T. ROWE PRICE INFLATION PROTECTED BOND FUND, INC.

T. ROWE PRICE INSTITUTIONAL EQUITY FUNDS, INC. ("Institutional Equity Funds")
 T. Rowe Price Institutional Concentrated Large-Cap Value Fund
 T. Rowe Price Institutional Large-Cap Core Growth Fund
 T. Rowe Price Institutional Large-Cap Growth Fund
 T. Rowe Price Institutional Large-Cap Value Fund
 T. Rowe Price Institutional Mid-Cap Equity Growth Fund
 T. Rowe Price Institutional Small-Cap Stock Fund
 T. Rowe Price Institutional U.S. Structured Research Fund

T. ROWE PRICE INSTITUTIONAL INCOME FUNDS, INC.
 T. Rowe Price Institutional Core Plus Fund

statement of additional information

<R>
C00-043 10/1/08
</R>

T. Rowe Price Institutional Floating Rate Fund
 T. Rowe Price Institutional High Yield Fund

T. ROWE PRICE INSTITUTIONAL INTERNATIONAL FUNDS, INC.

T. Rowe Price Institutional Africa & Middle East Fund

T. Rowe Price Institutional Emerging Markets Bond Fund
 T. Rowe Price Institutional Emerging Markets Equity Fund
 T. Rowe Price Institutional Foreign Equity Fund
 T. Rowe Price Institutional Global Equity Fund
 T. Rowe Price Institutional International Bond Fund

T. ROWE PRICE INTERNATIONAL FUNDS, INC.

T. Rowe Price Africa & Middle East Fund
 T. Rowe Price Emerging Europe & Mediterranean Fund
 T. Rowe Price Emerging Markets Bond Fund
 T. Rowe Price Emerging Markets Stock Fund
 T. Rowe Price European Stock Fund
 T. Rowe Price Global Stock Fund
 T. Rowe Price Global Stock Fund—Advisor Class
 T. Rowe Price International Bond Fund®
 T. Rowe Price International Bond Fund—Advisor Class
 T. Rowe Price International Discovery Fund
 T. Rowe Price International Growth & Income Fund
 T. Rowe Price International Growth & Income Fund—Advisor Class
 T. Rowe Price International Growth & Income Fund—R Class
 T. Rowe Price International Stock Fund
 T. Rowe Price International Stock Fund—Advisor Class
 T. Rowe Price International Stock Fund—R Class
 T. Rowe Price Japan Fund
 T. Rowe Price Latin America Fund
 T. Rowe Price New Asia Fund
 T. Rowe Price Overseas Stock Fund

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 Growth Fund—Advisor Class
 T. Rowe Price Mid-Cap Growth Fund—R Class

T. ROWE PRICE MID-CAP VALUE FUND, INC.

T. Rowe Price Mid-Cap Value Fund—Advisor Class
 T. Rowe Price Mid-Cap Value Fund—R Class

T. ROWE PRICE NEW AMERICA GROWTH FUND

T. Rowe Price New America Growth Fund—Advisor Class

T. ROWE PRICE NEW ERA FUND, INC.

T. ROWE PRICE NEW HORIZONS FUND, INC.

T. ROWE PRICE NEW INCOME FUND, INC.

T. Rowe Price New Income Fund—Advisor Class
 T. Rowe Price New Income Fund—R Class

T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC. ("Personal Strategy Funds")

T. Rowe Price Personal Strategy Balanced Fund
 T. Rowe Price Personal Strategy Growth Fund
 T. Rowe Price Personal Strategy Income Fund

T. ROWE PRICE PRIME RESERVE FUND, INC.

T. ROWE PRICE REAL ESTATE FUND, INC.

T. Rowe Price Real Estate Fund—Advisor Class

T. ROWE PRICE RESERVE INVESTMENT FUNDS, INC. ("TRP Reserve Investment Funds")

T. Rowe Price Government Reserve Investment Fund ("TRP Government Reserve Investment Fund")
 T. Rowe Price Reserve Investment Fund ("TRP Reserve Investment Fund")

T. ROWE PRICE RETIREMENT FUNDS, INC. ("Retirement Funds")

T. Rowe Price Retirement 2005 Fund
 T. Rowe Price Retirement 2005 Fund—Advisor Class
 T. Rowe Price Retirement 2005 Fund—R Class
 T. Rowe Price Retirement 2010 Fund
 T. Rowe Price Retirement 2010 Fund—Advisor Class
 T. Rowe Price Retirement 2010 Fund—R Class
 T. Rowe Price Retirement 2015 Fund
 T. Rowe Price Retirement 2015 Fund—Advisor Class
 T. Rowe Price Retirement 2015 Fund—R Class
 T. Rowe Price Retirement 2020 Fund
 T. Rowe Price Retirement 2020 Fund—Advisor Class
 T. Rowe Price Retirement 2020 Fund—R Class
 T. Rowe Price Retirement 2025 Fund
 T. Rowe Price Retirement 2025 Fund—Advisor Class
 T. Rowe Price Retirement 2025 Fund—R Class
 T. Rowe Price Retirement 2030 Fund
 T. Rowe Price Retirement 2030 Fund—Advisor Class
 T. Rowe Price Retirement 2030 Fund—R Class
 T. Rowe Price Retirement 2035 Fund
 T. Rowe Price Retirement 2035 Fund—Advisor Class
 T. Rowe Price Retirement 2035 Fund—R Class
 T. Rowe Price Retirement 2040 Fund
 T. Rowe Price Retirement 2040 Fund—Advisor Class
 T. Rowe Price Retirement 2040 Fund—R Class
 T. Rowe Price Retirement 2045 Fund
 T. Rowe Price Retirement 2045 Fund—Advisor Class
 T. Rowe Price Retirement 2045 Fund—R Class
 T. Rowe Price Retirement 2050 Fund
 T. Rowe Price Retirement 2050 Fund—Advisor Class
 T. Rowe Price Retirement 2050 Fund—R Class
 T. Rowe Price Retirement 2055 Fund
 T. Rowe Price Retirement 2055 Fund—Advisor Class
 T. Rowe Price Retirement 2055 Fund—R Class
 T. Rowe Price Retirement Income Fund
 T. Rowe Price Retirement Income Fund—Advisor Class
 T. Rowe Price Retirement Income Fund—R Class

T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.

T. Rowe Price Science & Technology Fund—Advisor Class

T. ROWE PRICE SHORTTERM BOND FUND, INC.

T. Rowe Price Short-Term Bond Fund—Advisor Class

T. ROWE PRICE SHORTTERM INCOME 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 Funds")

Spectrum Growth Fund
 Spectrum Income Fund
 Spectrum International Fund

T. ROWE PRICE STATE TAX-FREE INCOME TRUST

Georgia Tax-Free Bond Fund
 Maryland Short-Term Tax-Free Bond Fund
 Maryland Tax-Free Bond Fund
 Maryland Tax-Free Money Fund
 New Jersey Tax-Free Bond Fund
 New York Tax-Free Bond Fund
 New York Tax-Free Money Fund
 Virginia Tax-Free Bond Fund

T. ROWE PRICE SUMMIT FUNDS, INC. ("Summit Income Funds")

T. Rowe Price Summit Cash Reserves Fund
 T. Rowe Price Summit GNMA Fund

T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC. ("Summit Municipal Funds")

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. ("Tax-Efficient Funds")

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 Income Fund—Advisor Class

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 Funds")

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

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 current fund prospectus, which may be obtained from T. Rowe Price Investment Services, Inc. ("Investment Services").

<R>
Each fund`s financial statements for its most recent fiscal period and the Report of Independent Registered Public Accounting Firm are included in each fund`s annual or semiannual report and incorporated by reference into this Statement of Additional Information. The Institutional Africa & Middle East Fund has not been in existence for a long enough time to have complete financial statements.
</R>

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 and it will be sent to you at no charge. Please read this material carefully.


PART I — TABLE OF CONTENTS
































Page








Page
















Management of the Funds
11

Distributor for the Funds
124
Principal Holders of Securities
74

Portfolio Transactions
127

Investment Management Agreements
103

Independent Registered Public Accounting Firm
149
Other Shareholder Services
120

Part II
150

References to the following are as indicated:

Internal Revenue Code of 1986, as amended ("Code")
Investment Company Act of 1940 ("1940 Act")
Moody`s Investors Service, Inc. ("Moody`s")
Securities Act of 1933 ("1933 Act")
Securities and Exchange Commission ("SEC")
Securities Exchange Act of 1934 ("1934 Act")
Standard & Poor`s Corporation ("S&P")
T. Rowe Price Associates, Inc. ("T. Rowe Price")
T. Rowe Price International, Inc. ("T. Rowe Price International")

Advisor Class

The Advisor Class is a share class of its respective T. Rowe Price fund and is not a separate mutual fund. The Advisor Class shares are designed to be sold only through brokers, dealers, banks, insurance companies, and other financial intermediaries that provide various distribution and administrative services.

R Class

The R Class is a share class of its respective T. Rowe Price fund and is not a separate mutual fund. The R Class shares are designed to be sold only through various third-party intermediaries that offer employer-sponsored defined contribution retirement plans, including brokers, dealers, banks, insurance companies, retirement plan recordkeepers, and others.

TRP Government Reserve Investment, TRP Reserve Investment and Short-Term Income Funds

These funds are not available for direct purchase by members of the public.

Institutional Funds

These funds have a $1,000,000 initial investment minimum and are designed for institutional investors. Institutional investors typically include banks, pension plans, and trust and investment companies.

PART I

Below is a table showing the prospectus and shareholder report dates for each fund. The table also lists each fund`s category, which should be used to identify groups of funds that are referenced throughout this SAI.

Fund


Fund Category


Fiscal Year End


Annual Report Date


Semiannual Report Date


Prospectus Date

Africa & Middle East
International Equity
Oct 31
Oct 31
Apr 30
March 1
Balanced
Blended
Dec 31
Dec 31
June 30
May 1
Blue Chip Growth
Equity
Dec 31
Dec 31
June 30
May 1
Blue Chip Growth Fund—Advisor Class
Equity
Dec 31
Dec 31
June 30
May 1
Blue Chip Growth Fund—R Class
Equity
Dec 31
Dec 31
June 30
May 1
Blue Chip Growth Portfolio
Equity
Variable Annuity
Dec 31
Dec 31
June 30
May 1
Blue Chip Growth Portfolio—II
Equity
Variable Annuity
Dec 31
Dec 31
June 30
May 1
California Tax-Free Bond
State Tax-Free Bond
Feb 28
Feb 28
Aug 30
July 1
California Tax-Free Money
State Tax-Free Money
Feb 28
Feb 28
Aug 30
July 1
Capital Appreciation
Equity
Dec 31
Dec 31
June 30
May 1
Capital Appreciation Fund—Advisor Class
Equity
Dec 31
Dec 31
June 30
May 1
Capital Opportunity
Equity
Dec 31
Dec 31
June 30
May 1
Capital Opportunity Fund—Advisor Class
Equity
Dec 31
Dec 31
June 30
May 1
Capital Opportunity Fund—R Class
Equity
Dec 31
Dec 31
June 30
May 1
Corporate Income
Taxable Bond
May 31
May 31
Nov 30
Oct 1
Developing Technologies
Equity
Dec 31
Dec 31
June 30
May 1
Diversified Mid-Cap Growth
Equity
Dec 31
Dec 31
June 30
May 1
Diversified Small-Cap Growth
Equity
Dec 31
Dec 31
June 30
May 1
Dividend Growth
Equity
Dec 31
Dec 31
June 30
May 1
Dividend Growth Fund—Advisor Class
Equity
Dec 31
Dec 31
June 30
May 1
Emerging Europe & Mediterranean
International Equity
Oct 31
Oct 31
Apr 30
March 1
Emerging Markets Bond
International Bond
Dec 31
Dec 31
June 30
May 1
Emerging Markets Stock
International Equity
Oct 31
Oct 31
Apr 30
March 1
Equity Income
Equity
Dec 31
Dec 31
June 30
May 1
Equity Income Fund—Advisor Class
Equity
Dec 31
Dec 31
June 30
May 1
Equity Income Fund—R Class
Equity
Dec 31
Dec 31
June 30
May 1
Equity Income Portfolio
Equity
Variable Annuity
Dec 31
Dec 31
June 30
May 1
Equity Income Portfolio—II
Equity
Variable Annuity
Dec 31
Dec 31
June 30
May 1
Equity Index 500
Index Equity
Dec 31
Dec 31
June 30
May 1
Equity Index 500 Portfolio
Index Equity
Variable Annuity
Dec 31
Dec 31
June 30
May 1
European Stock
International Equity
Oct 31
Oct 31
Apr 30
March 1
Extended Equity Market Index
Index Equity
Dec 31
Dec 31
June 30
May 1
Financial Services
Equity
Dec 31
Dec 31
June 30
May 1
Georgia Tax-Free Bond
State Tax-Free Bond
Feb 28
Feb 28
Aug 30
July 1
Global Stock
International Equity
Oct 31
Oct 31
Apr 30
March 1
Global Stock Fund—Advisor Class
International Equity
Oct 31
Oct 31
Apr 30
March 1
Global Technology
Equity
Dec 31
Dec 31
June 30
May 1
GNMA
Taxable Bond
May 31
May 31
Nov 30
Oct 1
TRP Government Reserve Investment
Taxable Money
May 31
May 31
Nov 30
Oct 1
Growth & Income
Equity
Dec 31
Dec 31
June 30
May 1
Growth Stock
Equity
Dec 31
Dec 31
June 30
May 1
Growth Stock Fund—Advisor Class
Equity
Dec 31
Dec 31
June 30
May 1
Growth Stock Fund—R Class
Equity
Dec 31
Dec 31
June 30
May 1
Health Sciences
Equity
Dec 31
Dec 31
June 30
May 1
Health Sciences Portfolio
Equity
Variable Annuity
Dec 31
Dec 31
June 30
May 1
Health Sciences Portfolio—II
Equity
Variable Annuity
Dec 31
Dec 31
June 30
May 1
High Yield
Taxable Bond
May 31
May 31
Nov 30
Oct 1
High Yield Fund—Advisor Class
Taxable Bond
May 31
May 31
Nov 30
Oct 1
Inflation Protected Bond
Taxable Bond
May 31
May 31
Nov 30
Oct 1
Institutional Africa & Middle East
International Equity
Oct 31
Oct 31
Apr 30
March 1
Institutional Concentrated Large-Cap Value
Equity
Dec 31
Dec 31
June 30
May 1
Institutional Core Plus
Taxable Bond
May 31
 May 31
Nov 30
Oct 1
Institutional Emerging Markets Bond
International Bond
Dec 31
Dec 31
June 30
May 1
Institutional Emerging Markets Equity
International Equity
Oct 31
Oct 31
Apr 30
March 1
Institutional Floating Rate
Taxable Bond
May 31
 May 31
Nov 30
Oct 1
Institutional Foreign Equity
International Equity
Oct 31
Oct 31
Apr 30
March 1
Institutional Global Equity
International Equity
Oct 31
Oct 31
Apr 30
March 1
Institutional High Yield
Taxable Bond
May 31
May 31
Nov 30
Oct 1
Institutional International Bond
International Bond
Dec 31
Dec 31
June 30
May 1
Institutional Large-Cap Core Growth
Equity
Dec 31
Dec 31
June 30
May 1
Institutional Large-Cap Growth
Equity
Dec 31
Dec 31
June 30
May 1
Institutional Large-Cap Value
Equity
Dec 31
Dec 31
June 30
May 1
Institutional Mid-Cap Equity Growth
Equity
Dec 31
Dec 31
June 30
May 1
Institutional Small-Cap Stock
Equity
Dec 31
Dec 31
June 30
May 1
Institutional U.S. Structured Research
Equity
Dec 31
Dec 31
June 30
May 1
International Bond
International Bond
Dec 31
Dec 31
June 30
May 1
International Bond Fund—Advisor Class
International Bond
Dec 31
Dec 31
June 30
May 1
International Discovery
International Equity
Oct 31
Oct 31
Apr 30
March 1
International Equity Index
International Equity
Oct 31
Oct 31
Apr 30
March 1
International Growth & Income
International Equity
Oct 31
Oct 31
Apr 30
March 1
International Growth & Income Fund—Advisor Class
International Equity
Oct 31
Oct 31
Apr 30
March 1
International Growth & Income Fund—R Class
International Equity
Oct 31
Oct 31
Apr 30
March 1
International Stock
International Equity
Oct 31
Oct 31
Apr 30
March 1
International Stock Fund—Advisor Class
International Equity
Oct 31
Oct 31
Apr 30
March 1
International Stock Fund—R Class
International Equity
Oct 31
Oct 31
Apr 30
March 1
International Stock Portfolio
International Equity Variable Annuity
Dec 31
Dec 31
June 30
May 1
Japan
International Equity
Oct 31
Oct 31
Apr 30
March 1
Latin America
International Equity
Oct 31
Oct 31
Apr 30
March 1
Limited-Term Bond Portfolio
Bond
Variable Annuity
Dec 31
Dec 31
June 30
May 1
Limited-Term Bond Portfolio—II
Bond
Variable Annuity
Dec 31
Dec 31
June 30
May 1
Maryland Short-Term Tax-Free Bond
State Tax-Free Bond
Feb 28
Feb 28
Aug 30
July 1
Maryland Tax-Free Bond
State Tax-Free Bond
Feb 28
Feb 28
Aug 30
July 1
Maryland Tax-Free Money
State Tax-Free Money
Feb 28
Feb 28
Aug 30
July 1
Media & Telecommunications
Equity
Dec 31
Dec 31
June 30
May 1
Mid-Cap Growth
Equity
Dec 31
Dec 31
June 30
May 1
Mid-Cap Growth Fund—Advisor Class
Equity
Dec 31
Dec 31
June 30
May 1
Mid-Cap Growth Fund—R Class
Equity
Dec 31
Dec 31
June 30
May 1
Mid-Cap Growth Portfolio
Equity
Variable Annuity
Dec 31
Dec 31
June 30
May 1
Mid-Cap Growth Portfolio—II
Equity
Variable Annuity
Dec 31
Dec 31
June 30
May 1
Mid-Cap Value
Equity
Dec 31
Dec 31
June 30
May 1
Mid-Cap Value Fund—Advisor Class
Equity
Dec 31
Dec 31
June 30
May 1
Mid-Cap Value Fund—R Class
Equity
Dec 31
Dec 31
June 30
May 1
New America Growth
Equity
Dec 31
Dec 31
June 30
May 1
New America Growth Fund—Advisor Class
Equity
Dec 31
Dec 31
June 30
May 1
New America Growth Portfolio
Equity
Variable Annuity
Dec 31
Dec 31
June 30
May 1
New Asia
International Equity
Oct 31
Oct 31
Apr 30
March 1
New Era
Equity
Dec 31
Dec 31
June 30
May 1
New Horizons
Equity
Dec 31
Dec 31
June 30
May 1
New Income
Taxable Bond
May 31
May 31
Nov 30
Oct 1
New Income Fund—Advisor Class
Taxable Bond
May 31
May 31
Nov 30
Oct 1
New Income Fund—R Class
Taxable Bond
May 31
May 31
Nov 30
Oct 1
New Jersey Tax-Free Bond
State Tax-Free Bond
Feb 28
Feb 28
Aug 30
July 1
New York Tax-Free Bond
State Tax-Free Bond
Feb 28
Feb 28
Aug 30
July 1
New York Tax-Free Money
State Tax-Free Money
Feb 28
Feb 28
Aug 30
July 1
Overseas Stock
International Equity
Oct 31
Oct 31
Apr 30
March 1
Personal Strategy Balanced
Blended
May 31
May 31
Nov 30
Oct 1
Personal Strategy Balanced Portfolio
Blended
Variable Annuity
Dec 31
Dec 31
June 30
May 1
Personal Strategy Growth
Blended
May 31
May 31
Nov 30
Oct 1
Personal Strategy Income
Blended
May 31
May 31
Nov 30
Oct 1
Prime Reserve
 Taxable Money
May 31
May 31
Nov 30
Oct 1
Prime Reserve Portfolio
 Money
Variable Annuity
Dec 31
Dec 31
June 30
May 1
Real Estate
Equity
Dec 31
Dec 31
June 30
May 1
Real Estate Fund—Advisor Class
Equity
Dec 31
Dec 31
June 30
May 1
TRP Reserve Investment
Taxable Money
May 31
May 31
Nov 30
Oct 1
Retirement 2005
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2005 Fund—Advisor Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2005 Fund—R Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2010
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2010 Fund—Advisor Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2010 Fund—R Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2015
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2015 Fund—Advisor Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2015 Fund—R Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2020
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2020 Fund—Advisor Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2020 Fund—R Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2025
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2025 Fund—Advisor Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2025 Fund—R Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2030
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2030 Fund—Advisor Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2030 Fund—R Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2035
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2035 Fund—Advisor Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2035 Fund—R Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2040
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2040 Fund—Advisor Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2040 Fund—R Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2045
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2045 Fund—Advisor Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2045 Fund—R Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2050
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2050 Fund—Advisor Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2050 Fund—R Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2055
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2055 Fund—Advisor Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement 2055 Fund—R Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement Income
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement Income Fund—Advisor Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Retirement Income Fund—R Class
Fund-of-Funds
May 31
May 31
Nov 30
Oct 1
Science & Technology
Equity
Dec 31
Dec 31
June 30
May 1
Science & Technology Fund—Advisor Class
Equity
Dec 31
Dec 31
June 30
May 1
Short-Term Bond
Taxable Bond
May 31
May 31
Nov 30
Oct 1
Short-Term Bond Fund—Advisor Class
Taxable Bond
May 31
May 31
Nov 30
Oct 1
Short-Term Income
Taxable Bond
May 31
May 31
Nov 30
Oct 1
Small-Cap Stock
Equity
Dec 31
Dec 31
June 30
May 1
Small-Cap Stock Fund—Advisor Class
Equity
Dec 31
Dec 31
June 30
May 1
Small-Cap Value
Equity
Dec 31
Dec 31
June 30
May 1
Small-Cap Value Fund—Advisor Class
Equity
Dec 31
Dec 31
June 30
May 1
Spectrum Growth
Fund-of-Funds
Dec 31
Dec 31
June 30
May 1
Spectrum Income
Fund-of-Funds
Dec 31
Dec 31
June 30
May 1
Spectrum International
Fund-of-Funds
Dec 31
Dec 31
June 30
May 1
Summit Cash Reserves
Taxable Money
Oct 31
Oct 31
Apr 30
March 1
Summit GNMA
Taxable Bond
Oct 31
Oct 31
Apr 30
March 1
Summit Municipal Income
Tax-Free Bond
Oct 31
Oct 31
Apr 30
March 1
Summit Municipal Intermediate
 Tax-Free Bond
Oct 31
Oct 31
Apr 30
March 1
Summit Municipal Money Market
Tax-Free Money
Oct 31
Oct 31
Apr 30
March 1
Tax-Efficient Balanced
Blended
Feb 28
Feb 28
Aug 30
July 1
Tax-Efficient Growth
Equity
Feb 28
Feb 28
Aug 30
July 1
Tax-Efficient Multi-Cap Growth
Equity
Feb 28
Feb 28
Aug 30
July 1
Tax-Exempt Money
Tax-Free Money
Feb 28
Feb 28
Aug 30
July 1
Tax-Free High Yield
Tax-Free Bond
Feb 28
Feb 28
Aug 30
July 1
Tax-Free Income
Tax-Free Bond
Feb 28
Feb 28
Aug 30
July 1
Tax-Free Income Fund—Advisor Class
Tax Free Bond
Feb 28
Feb 28
Aug 30
July 1
Tax-Free Short-Intermediate
Tax-Free Bond
Feb 28
Feb 28
Aug 30
July 1
Total Equity Market Index
Index Equity
Dec 31
Dec 31
June 30
May 1
U.S. Bond Index
Index Bond
Oct 31
Oct 31
Apr 30
March 1
U.S. Treasury Intermediate
Taxable Bond
May 31
May 31
Nov 30
Oct 1
U.S. Treasury Long-Term
Taxable Bond
May 31
May 31
Nov 30
Oct 1
U.S. Treasury Money
Taxable Money
May 31
May 31
Nov 30
Oct 1
Value
Equity
Dec 31
Dec 31
June 30
May 1
Value Fund—Advisor Class
Equity
Dec 31
Dec 31
June 30
May 1
Virginia Tax-Free Bond
State Tax-Free Bond
Feb 28
Feb 28
Aug 30
July 1

MANAGEMENT OF THE FUNDS

The officers and directors* of the Price Funds are listed below. Unless otherwise noted, the address of each is 100 East Pratt Street, Baltimore, Maryland 21202.

Each fund is governed by a Board of Directors/Trustees ("Board") that meets regularly to review a wide variety of matters affecting the funds, including performance, investment programs, compliance matters, advisory fees and expenses, service providers, and other business affairs. The Boards elect the funds` officers. The Boards also are responsible for performing various duties imposed on them by the 1940 Act, the laws of Maryland or Massachusetts, and other laws. At least 75% of Board members are independent of T. Rowe Price and T. Rowe Price International. The directors who are also employees or officers of T. Rowe Price are referred to as inside or interested directors. Except as indicated, each inside director or officer has been an employee of T. Rowe Price or T. Rowe Price International for five or more years. Each Board currently has three committees, described in the following paragraphs.

The Committee of Independent Directors, which consists of all of the independent directors of the funds, is responsible for selecting candidates for election as independent directors to fill vacancies on each fund`s Board. Anthony W. Deering is chairman of the committee. The committee will consider written recommendations from shareholders for possible nominees. Shareholders should submit their recommendations to the secretary of the funds. The committee held four formal meetings in 2007.

The Joint Audit Committee is composed of Jeremiah E. Casey, Karen N. Horn, and Theo C. Rodgers, all independent directors. The Joint Audit Committee holds two regular meetings during each fiscal year, at which time it meets with the independent registered public accounting firm of the Price Funds to review: (1) the services provided; (2) the findings of the most recent audits; (3) management`s response to the findings of the most recent audits; (4) the scope of the audits to be performed; (5) the accountants` fees; and (6) any accounting, tax, compliance, or other questions relating to particular areas of the Price Funds` operations or the operations of parties dealing with the Price Funds, as circumstances indicate. The Joint Audit Committee met three times in 2007.

The funds` Executive Committee, consisting of the funds` interested director(s), has been authorized by its respective Board to exercise all powers of the Boards to manage the funds in the intervals between meetings of the Boards, except the powers prohibited by statute from being delegated. All actions of the Executive

Committee must be approved in advance by one independent director and reviewed after the fact by the full Board.

* The term "director" is used to refer to directors or trustees, as applicable.

Independent Directors(a)

<R>

Name, Year of Birth, and Number
of Portfolios in Fund Complex
Overseen by Director


Principal Occupation(s)
During Past 5 Years


Directorships
of Public Companies

Jeremiah E. Casey
1940
123 portfolios
Director, National Life Insurance (2001 to 2005); Director, The Rouse Company, real estate developers (1990 to 2004)
None
Anthony W. Deering
1945
123 portfolios
Chairman, Exeter Capital, LLC, a private investment firm (2004 to present); Director, Vornado Real Estate Investment Trust (3/04 to present); Director, Mercantile Bankshares (2002 to 2007); Member, Advisory Board, Deutsche Bank North America (2004 to present); Director, Chairman of the Board, and Chief Executive Officer, The Rouse Company, real estate developers (1997 to 2004)
Vornado Real Estate Investment Trust and Deutsche Bank North America
Donald W. Dick, Jr.
1943
123 portfolios
Principal, EuroCapital Advisors, LLC, an acquisition and management advisory firm
(10/95 to present); Chairman, The Haven Group, a custom manufacturer of modular homes (1/04 to present)
None
David K. Fagin
1938
123 portfolios
Chairman and President, Nye Corporation (6/88 to present); Director, Golden Star Resources Ltd. (5/92 to present); Director, Pacific Rim Mining Corp. (2/02 to present); Director, B.C. Corporation (3/08 to present); Chairman, Canyon Resources Corp. (8/07 to 3/08); Director, Atna Resources Ltd. (3/08 to present)
B.C. Corporation, Golden Star Resources Ltd., Pacific Rim Mining Corp. and Atna Resources Ltd.
Karen N. Horn
1943
123 portfolios
Director, Eli Lilly and Company (1987 to present); Director, Simon Property Group (2004 to present); Director, Federal National Mortgage Association (9/06 to present); Director, Norfolk Southern (2/08 to present); Director, Georgia Pacific (5/04 to 12/05); Managing Director and President, Global Private Client Services, Marsh Inc. (1999 to 2003)
Federal National Mortgage Association, Norfolk Southern, Eli Lilly and Company, and Simon Property Group
Theo C. Rodgers
1941
123 portfolios
President, A&R Development Corporation
(1977 to present)
None
John G. Schreiber
1946
123 portfolios
Owner/President, Centaur Capital Partners, Inc., a real estate investment company (1991 to present); Partner, Blackstone Real Estate Advisors, L.P. (10/92 to present)
None
</R>

(a)All information about the directors was current as of December 31, 2007, except for the number of portfolios, which is current as of the date of this Statement of Additional Information.

Inside Directors(a)

The following persons are considered interested persons of the funds because they also serve as officers of the funds and/or T. Rowe Price or T. Rowe Price International. No more than two inside directors serve as directors of any fund.

<R>

Name, Year of Birth, and Number
of Portfolios in Fund Complex
Overseen by Director


Principal Occupation(s)
During Past 5 Years


Directorships
of Public Companies

Edward C. Bernard
1956
123 portfolios
Director and Vice President, T. Rowe Price; Vice Chairman of the Board, Director, and Vice President, T. Rowe Price Group, Inc.; Chairman of the Board, Director, and President, T. Rowe Price Investment Services, Inc.; Chairman of the Board and Director, T. Rowe Price Global Asset Management Limited, T. Rowe Price Global Investment Services Limited, T. Rowe Price Retirement Plan Services, Inc., T. Rowe Price Savings Bank, and T. Rowe Price Services, Inc.; Director, T. Rowe Price International, Inc.; Chief Executive Officer, Chairman of the Board, Director, and President, T. Rowe Price Trust CompanyChairman of the Board, all funds
None
John H. Laporte; CFA
1945
16 portfolios
Director and Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; Vice President, T. Rowe Price Trust CompanyPresident, New Horizons Fund; Executive Vice President, Spectrum Funds; Vice President, Diversified Small-Cap Growth Fund, Health Sciences Fund, Personal Strategy Funds, and Retirement Funds
None
Mary J. Miller; CFA
1955
38 portfolios
Director, T. Rowe Price Trust Company; Director and Vice President, T. Rowe Price; Vice President, T. Rowe Price Group, Inc.President, California Tax-Free Income Trust, Institutional Income Funds, State Tax-Free Income Trust, Summit Municipal Funds, Tax-Free Income Fund, and U.S. Treasury Funds; Executive Vice President, Spectrum Funds; Vice President, Corporate Income Fund, GNMA Fund, Inflation Protected Bond Fund, Personal Strategy Funds, Prime Reserve Fund, TRP Reserve Investment Funds, Retirement Funds, Summit Funds, Tax-Efficient Funds, Tax-Exempt Money Fund, Tax-Free High Yield Fund, and Tax-Free Short-Intermediate Fund
None
Brian C. Rogers; CFA, CIC
1955
69 portfolios
Chief Investment Officer, Director, and Vice President, T. Rowe Price; Chairman of the Board, Chief Investment Officer, Director, and Vice President, T. Rowe Price Group, Inc.; Vice President, T. Rowe Price Trust CompanyPresident, Equity Income Fund and Institutional Equity Funds; Vice President, Personal Strategy Funds, Retirement Funds, Spectrum Funds, and Value Fund
None
</R>

(a)All information about the directors was current as of December 31, 2007, except for the number of portfolios, which is current as of the date of this Statement of Additional Information.

Retirement and Spectrum Funds (individually, a "Fund-of-Funds" and collectively, "Funds-of-Funds")

The management of the business and affairs of the Funds-of-Funds is the responsibility of the Board. In exercising their responsibilities, the Board, among other things, will refer to the Special Servicing Agreement and policies and guidelines included in an Application for an Exemptive Order (and accompanying Notice and Order) issued by the SEC in connection with the Spectrum Funds (and which also applies to Retirement Funds). A majority of directors of the Funds-of-Funds are independent. However, the directors and officers of the Funds-of-Funds and certain directors and officers of T. Rowe Price and T. Rowe Price International also serve in similar positions with most of the various Price Funds in which the Retirement and Spectrum Funds invest (collectively, "underlying Price funds"). Thus, if the interests of the Funds-of-Funds and the underlying Price funds were ever to become divergent, it is possible that a conflict of interest could arise and affect how this latter group of persons fulfill their fiduciary duties to the Funds-of-Funds and the underlying Price funds. The directors of Funds-of-Funds believe they have structured the Funds-of-Funds to avoid these concerns. However, a situation could conceivably occur where proper action for the Funds-of-Funds could be adverse to the interests of an underlying Price fund, or the reverse could occur. If such a possibility arises, the directors and officers of the affected funds, T. Rowe Price, and T. Rowe Price International will carefully analyze the situation and take all steps they believe reasonable to minimize and, where possible, eliminate the potential conflict.

Term of Office and Length of Time Served

The directors serve until retirement, resignation, or election of a successor. The following table shows the year from which each director has served on each fund`s Board (or that of the corporation or trust of which the fund is a part).<R>

Fund/Corporation/Trust


Number of
 portfolios


Independent Directors


























Casey


Deering


Dick


Fagin


Horn


Rodgers


Schreiber

Balanced
1
2005
2001
1991
1991
2003
2005
2001
Blue Chip Growth
1
2005
2001
1993
1993
2003
2005
2001
California Tax-Free Income Trust
2
2006
1986
2001
2001
2003
2005
1992
Capital Appreciation
1
2005
2001
1986
1988
2003
2005
2001
Capital Opportunity
1
2005
2001
1994
1994
2003
2005
2001
Corporate Income
1
2006
1995
2001
2001
2003
2005
1995
Developing Technologies
1
2005
2001
2000
2000
2003
2005
2001
Diversified Mid-Cap Growth
1
2005
2003
2003
2003
2003
2005
2003
Diversified Small-Cap Growth
1
2005
2001
1997
1997
2003
2005
2001
Dividend Growth
1
2005
2001
1992
1992
2003
2005
2001
Equity Income
1
2005
2001
1994
1988
2003
2005
2001
Equity Series
7
2005
2001
1994
1994
2003
2005
2001
Financial Services
1
2005
2001
1996
1996
2003
2005
2001
Fixed Income Series
2
2006
1994
2001
2001
2003
2005
1994
Global Technology
1
2005
2001
2000
2000
2003
2005
2001
GNMA
1
2006
1985
2001
2001
2003
2005
1992
Growth & Income
1
2005
2001
1982
1994
2003
2005
2001
Growth Stock
1
2005
2001
1980
1994
2003
2005
2001
Health Sciences
1
2005
2001
1995
1995
2003
2005
2001
High Yield
1
2006
1984
2001
2001
2003
2005
1992
Index Trust
3
2005
2001
1994
1994
2003
2005
2001
Inflation Protected Bond
1
2006
2002
2002
2002
2003
2005
2002
Institutional Equity
7
2005
2001
1996
1996
2003
2005
2001
Institutional Income
3
2006
2002
2002
2002
2003
2005
2002
Institutional International
6
2006
1991
1989
2001
2003
2006
2001
International
14
2006
1991
1988
2001
2003
2006
2001
International Index
1
2006
2000
2000
2001
2003
2006
2001
International Series
1
2006
1994
1994
2001
2003
2006
2001
Media & Telecommunications
1
2005
2001
1997
1997
2003
2005
2001
Mid-Cap Growth
1
2005
2001
1992
1992
2003
2005
2001
Mid-Cap Value
1
2005
2001
1996
1996
2003
2005
2001
New America Growth
1
2005
2001
1985
1994
2003
2005
2001
New Era
1
2005
2001
1994
1988
2003
2005
2001
New Horizons
1
2005
2001
1994
1988
2003
2005
2001
New Income
1
2006
1980
2001
2001
2003
2005
1992
Personal Strategy
3
2005
2001
1994
1994
2003
2005
2001
Prime Reserve
1
2006
1979
2001
2001
2003
2005
1992
Real Estate
1
2005
2001
1997
1997
2003
2005
2001
TRP Reserve Investment
2
2006
1997
2001
2001
2003
2005
1997
Retirement
12
2005
2002
2002
2002
2003
2005
2002
Science & Technology
1
2005
2001
1994
1994
2003
2005
2001
Short-Term Bond
1
2006
1983
2001
2001
2003
2005
1992
Short-Term Income
1
2006
2006
2006
2006
2006
2006
2006
Small-Cap Stock
1
2005
2001
1992
1992
2003
2005
2001
Small-Cap Value
1
2005
2001
1994
1994
2003
2005
2001
Spectrum
3
2005
2001
1999
1999
2003
2005
2001
State Tax-Free Income Trust
8
2006
1986
2001
2001
2003
2005
1992
Summit
2
2006
1993
2001
2001
2003
2005
1993
Summit Municipal
3
2006
1993
2001
2001
2003
2005
1993
Tax-Efficient
3
2005
2001
1997
1997
2003
2005
2001
Tax-Exempt Money
1
2006
1983
2001
2001
2003
2005
1992
Tax-Free High Yield
1
2006
1984
2001
2001
2003
2005
1992
Tax-Free Income
1
2006
1983
2001
2001
2003
2005
1992
Tax-Free Short-Intermediate
1
2006
1983
2001
2001
2003
2005
1992
U.S. Bond Index
1
2006
2000
2001
2001
2003
2005
2000
U.S. Treasury
3
2006
1989
2001
2001
2003
2005
1992
Value
1
2005
2001
1994
1994
2003
2005
2001
</R>

<R>

Fund/Corporation/Trust



Number of Portfolios


Inside Directors

















Bernard


Laporte


Miller


Rogers

Balanced
1
2006
—
—
2006
Blue Chip Growth
1
2006
—
—
2006
California Tax-Free Income Trust
2
2006
—
2004
—
Capital Appreciation
1
2006
—
—
2006
Capital Opportunity
1
2006
1994
—
—
Corporate Income
1
2006
—
2004
—
Developing Technologies
1
2006
—
—
2006
Diversified Mid-Cap Growth
1
2006
2006
—
—
Diversified Small-Cap Growth
1
2006
1997
—
—
Dividend Growth
1
2006
—
—
2006
Equity Income
1
2006
—
—
2006
Equity Series
7
2006
1994
—
—
Financial Services
1
2006
—
—
2006
Fixed Income Series
2
2006
—
2004
—
Global Technology
1
2006
—
—
2006
GNMA
1
2006
—
2004
—
Growth & Income
1
2006
—
—
2006
Growth Stock
1
2006
—
—
2006
Health Sciences
1
2006
1995
—
—
High Yield
1
2006
—
2004
—
Index Trust
3
2006
—
—
2006
Inflation Protected Bond
1
2006
—
2004
—
Institutional Equity
7
2006
—
—
2006
Institutional Income
3
2006
—
2004
—
Institutional International
6
2006
—
—
2006
International
14
2006
—
—
2006
International Index
1
2006
—
—
2006
International Series
1
2006
—
—
2006
Media & Telecommunications
1
2006
—
—
2006
Mid-Cap Growth
1
2006
—
—
2006
Mid-Cap Value
1
2006
—
—
2006
New America Growth
1
2006
1985
—
—
New Era
1
2006
—
—
2006
New Horizons
1
2006
1988
—
—
New Income
1
2006
—
2004
—
Personal Strategy
3
2006
—
—
2006
Prime Reserve
1
2006
—
2004
—
Real Estate
1
2006
—
—
2006
TRP Reserve Investment
2
2006
—
2004
—
Retirement
12
2006
—
—
2006
Science & Technology
1
2006
1988
—
—
Short-Term Bond
1
2006
—
2004
—
Short-Term Income
1
2006
—
2006
—
Small-Cap Stock
1
2006
1994
—
—
Small-Cap Value
1
2006
1994
—
—
Spectrum
3
2006
—
—
2006
State Tax-Free Income Trust
8
2006
—
2004
—
Summit
2
2006
—
2004
—
Summit Municipal
3
2006
—
2004
—
Tax-Efficient
3
2006
—
—
2006
Tax-Exempt Money
1
2006
—
2004
—
Tax-Free High Yield
1
2006
—
2004
—
Tax-Free Income
1
2006
—
2004
—
Tax-Free Short-Intermediate
1
2006
—
2004
—
U.S. Bond Index
1
2006
—
2004
—
U.S. Treasury
3
2006
—
2004
—
Value
1
2006
—
—
2006
</R>

Officers


Fund


Name


Position Held
With Fund

All funds






Roger L. Fiery III
Gregory S. Golczewski
David Oestreicher
Julie L. Waples
Gregory K. Hinkle
Patricia B. Lippert
John R. Gilner
Vice President
Vice President
Vice President
Vice President
Treasurer
Secretary
Chief Compliance Officer

<R>

Fund


Name


Position Held
With Fund

Balanced







Edmund M. Notzon III
Richard T. Whitney
E. Frederick Bair
Wendy R. Diffenbaugh
Robert M. Larkins
Raymond A. Mills
Mark J. Vaselkiv
(See preceding table for remaining officers)
President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Blue Chip Growth














Larry J. Puglia
P. Robert Bartolo
Peter J. Bates
G. Mark Bussard
Richard de los Reyes
Shawn T. Driscoll
David J. Eiswert
Henry M. Ellenbogen
Thomas J. Huber
Jason Nogueira
Timothy E. Parker
Robert W. Sharps
Taymour R. Tamaddon
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
California Tax-Free Income Trust
 California Tax-Free Bond
 California Tax-Free Money











Mary J. Miller
Joseph K. Lynagh
Konstantine B. Mallas
Hugh D. McGuirk
Steven G. Brooks
G. Richard Dent
Charles E. Emrich
Alan D. Levenson
James M. McDonald
Linda A. Murphy
Timothy G. Taylor
M. Helena Condez
Chen Shao
(See preceding table for remaining officers)
President
Executive Vice President
Executive Vice President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
Assistant Vice President
Capital Appreciation















David R. Giroux
Francisco Alonso
Jeffrey W. Arricale
Mark S. Finn
John D. Linehan
Michael J. McGonigle
Heather K. McPherson
Sudhir Nanda
Christian M. O`Neill
Robert T. Quinn, Jr.
Gabriel Solomon
William J. Stromberg
Susan G. Troll
Eric L. Veiel
Tamara P. Wiggs
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Capital Opportunity














Anna M. Dopkin
Kennard W. Allen
Peter J. Bates
David J. Eiswert
Mark S. Finn
Ann M. Holcomb
Jennifer Martin
Philip A. Nestico
Jason Nogueira
Timothy E. Parker
Charles G. Pepin
Robert T. Quinn, Jr.
Gabriel Solomon
Eric L. Veiel
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Corporate Income













David A. Tiberii
Mark J. Vaselkiv
Steven E. Boothe
Steven G. Brooks
Alan D. Levenson
Michael J. McGonigle
Mary J. Miller
Vernon A. Reid, Jr.
Theodore E. Robson
Edward A. Wiese
Thea N. Williams
Michael J. Grogan
Robert L. McWilliam
(See preceding table for remaining officers)
President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
Assistant Vice President
Developing Technologies












Jeffrey Rottinghaus
Kennard W. Allen
Christopher W. Carlson
David J. Eiswert
Henry M. Ellenbogen
Hugh M. Evans III
Rhett K. Hunter
Michael F. Sola
Joshua K. Spencer
Chirag Vasavada
Thomas H. Watson
Nalin Yogasundram
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Diversified Mid-Cap Growth






Donald J. Peters
Donald J. Easley
Sudhir Nanda
Philip A. Nestico
John F. Wakeman
Mark R. Weigman
(See preceding table for remaining officers)
President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Diversified Small-Cap Growth









Sudhir Nanda
Wendy R. Diffenbaugh
Donald J. Easley
John H. Laporte
Curt J. Organt
Michael T. Roberts
J. David Wagner
Richard T. Whitney
John Z. Wood
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Dividend Growth










Thomas J. Huber
Peter J. Bates
David M. Lee
Daniel Martino
Jason Nogueira
Timothy E. Parker
Robert T. Quinn, Jr.
William J. Stromberg
Eric L. Veiel
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Equity Income










Brian C. Rogers
Jeffrey W. Arricale
Andrew M. Brooks
Mark S. Finn
David R. Giroux
Paul Greene II
John D. Linehan
Jason B. Polun
Robert T. Quinn, Jr.
Eric L. Veiel
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Financial Services














Jeffrey W. Arricale
Anna M. Dopkin
Christopher T. Fortune
Steven Krichbaum
Ian C. McDonald
Michael J. McGonigle
Hwee Jan Ng
Jason B. Polun
Frederick A. Rizzo
Federico Santilli
Gabriel Solomon
Mitchell J.K. Todd
Eric L. Veiel
Tamara P. Wiggs
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Global Technology













Jeffrey Rottinghaus
Kennard W. Allen
Christopher W. Carlson
David J. Eiswert
Daniel Flax
Rhett K. Hunter
Hiroaki Owaki
Michael F. Sola
Joshua K. Spencer
Chirag Vasavada
Thomas H. Watson
Alison Mei Ling Yip
Nalin Yogasundram
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
GNMA






Andrew McCormick
Keir R. Joyce
Alan D. Levenson
Mary J. Miller
John D. Wells
Christopher P. Brown
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
Growth & Income









Thomas J. Huber
Francisco Alonso
Jeffrey W. Arricale
G. Mark Bussard
Shawn T. Driscoll
David R. Giroux
David M. Lee
Joshua K. Spencer
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Growth Stock














P. Robert Bartolo
Kennard W. Allen
Henry M. Ellenbogen
Joseph B. Fath
Robert N. Gensler
Barry Henderson
Kris H. Jenner
Jason Nogueira
D. James Prey III
Larry J. Puglia
Robert W. Sharps
Robert W. Smith
Taymour R. Tamaddon
Eric L. Veiel
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Health Sciences










Kris H. Jenner
G. Mark Bussard
Andrew R. Hyman
Susan J. Klein
John H. Laporte
Jay S. Markowitz
Jason Nogueira
Charles G. Pepin
John C.A. Sherman
Taymour R. Tamaddon
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
High Yield











Mark J. Vaselkiv
David C. Beers
Andrew M. Brooks
Justin T. Gerbereux
Paul A. Karpers
Paul M. Massaro
Michael J. McGonigle
Brian A. Rubin
Walter P. Stuart III
Thomas E. Tewksbury
Thea N. Williams
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Index Trust
 Equity Index 500
 Extended Equity Market Index
 Total Equity Market Index


E. Frederick Bair
Ken D. Uematsu
Wendy R. Diffenbaugh
Sudhir Nanda
Paul W. Wojcik
(See preceding table for remaining officers)
President
Executive Vice President
Vice President
Vice President
Vice President
Inflation Protected Bond







Daniel O. Shackelford
Brian J. Brennan
Alan D. Levenson
Andrew McCormick
Mary J. Miller
Vernon A. Reid, Jr.
Geoffrey M. Hardin
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President

Institutional Equity Funds
 Institutional Concentrated Large-Cap Value
 Institutional Large-Cap Core Growth
 Institutional Large-Cap Growth
 Institutional Large-Cap Value
 Institutional Mid-Cap Equity Growth
 Institutional Small-Cap Stock Institutional U.S. Structured Research





Brian C. Rogers
Brian W.H. Berghuis
Anna M. Dopkin
David R. Giroux
John D. Linehan
Gregory A. McCrickard
Larry J. Puglia
Robert W. Sharps
Ann M. Holcomb
Joseph M. Milano
J. David Wagner
John F. Wakeman
(See preceding table for remaining officers)
President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Institutional Income Funds
 Institutional Core Plus
 Institutional Floating Rate
 Institutional High Yield
















Mary J. Miller
Brian J. Brennan
Paul A. Karpers
Andrew M. Brooks
Michael J. Conelius
Steven C. Huber
Ian D. Kelson
Andrew McCormick
Michael J. McGonigle
Daniel O. Shackelford
Walter P. Stuart III
Thomas E. Tewksbury
David A. Tiberii
Mark J. Vaselkiv
Thea N. Williams
David C. Beers
Justin T. Gerbereux
Paul M. Massaro
Brian A. Rubin
(See preceding table for remaining officers)
President
Executive Vice President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
Assistant Vice President
Assistant Vice President
Assistant Vice President
Institutional International Funds
 Institutional Africa & Middle East
 Institutional Emerging Markets Bond
 Institutional Emerging Markets Equity
 Institutional Foreign Equity
 Institutional Global Equity
 Institutional International Bond















David J.L. Warren
Christopher D. Alderson
R. Scott Berg
Michael J. Conelius
Robert N. Gensler
Ian D. Kelson
Robert W. Smith
Jeffrey W. Arricale
Mark C.J. Bickford-Smith
Richard N. Clattenburg
Frances Dydasco
Mark J.T. Edwards
Henry M. Ellenbogen
Niall P. Gallagher
M. Campbell Gunn
Kris H. Jenner
Charles M. Ober
Gonzalo Pangaro
Jeffrey Rottinghaus
Robert W. Sharps
Dean Tenerelli
(See preceding table for remaining officers)
President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
International Funds
 Africa & Middle East
 Emerging Europe & Mediterranean
 Emerging Markets Bond
 Emerging Markets Stock
 European Stock
 Global Stock
 International Bond
 International Discovery
 International Growth & Income
 International Stock
 Japan
 Latin America
 New Asia
 Overseas Stock




































David J.L. Warren
Christopher D. Alderson
R. Scott Berg
Michael J. Conelius
Frances Dydasco
Robert N. Gensler
M. Campbell Gunn
Ian D. Kelson
Raymond A. Mills
Gonzalo Pangaro
S. Leigh Robertson
Robert W. Smith
Dean Tenerelli
Justin Thomson
Ulle Adamson
Jeffrey W. Arricale
Mark C.J. Bickford-Smith
Brian J. Brennan
Jose Costa Buck
Archibald A. Ciganer
Richard N. Clattenburg
Richard de los Reyes
Mark J.T. Edwards
Henry M. Ellenbogen
May Foo
Niall P. Gallagher
Rahul Ghosh
Benjamin Griffiths
Kris H. Jenner
Lillian Yan Li
John D. Linehan
Anh Lu
Sebastien Mallet
Susanta Mazumdar
Inigo Mijangos
Philip A. Nestico
Hwee Jan Ng
Elena Nikolaeva
Sridhar Nishtala
Charles M. Ober
Hiroaki Owaki
Austin Powell
Frederick A. Rizzo
Joseph Rohm
Christopher J. Rothery
Jeffrey Rottinghaus
Federico Santilli
Francisco Sersale
Robert W. Sharps
John C.A. Sherman
Jonty Starbuck
President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
International Funds (continued)
 Africa & Middle East
 Emerging Europe & Mediterranean
 Emerging Markets Bond
 Emerging Markets Stock
 European Stock
 Global Stock
 International Bond
 International Discovery
 International Growth & Income
 International Stock
 Japan
 Latin America
 New Asia
 Overseas Stock
Miki Takeyama
Mitchell J.K. Todd
Verena E. Wachnitz
Hiroshi Watanabe
Christopher S. Whitehouse
Clive M. Williams
Ernest C. Yeung
Alison Mei Ling Yip
Christopher Yip
Ann B. Cranmer
(See preceding table for remaining officers)
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
International Index Fund
 International Equity Index



E. Frederick Bair
Neil Smith
Ken D. Uematsu
Paul W. Wojcik
(See preceding table for remaining officers)
President
Executive Vice President
Vice President
Vice President
Media & Telecommunications













Henry M. Ellenbogen
Ulle Adamson
P. Robert Bartolo
David J. Eiswert
Joseph B. Fath
May Foo
Paul Greene II
Daniel Martino
Curt J. Organt
D. James Prey III
Robert W. Smith
Christopher S. Whitehouse
Ernest C. Yeung
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Mid-Cap Growth












Brian W.H. Berghuis
John F. Wakeman
Kennard W. Allen
P. Robert Bartolo
Henry M. Ellenbogen
Kris H. Jenner
Robert J. Marcotte
Daniel Martino
Joseph M. Milano
Jeffrey Rottinghaus
Clark R. Shields
Taymour R. Tamaddon
(See preceding table for remaining officers)
President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Mid-Cap Value









David J. Wallack
Heather K. McPherson
Peter J. Bates
Christopher W. Carlson
Henry M. Ellenbogen
Mark S. Finn
Gregory A. McCrickard
Joseph M. Milano
J. David Wagner
(See preceding table for remaining officers)
President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
New America Growth












Joseph M. Milano
Francisco Alonso
Jeffrey W. Arricale
P. Robert Bartolo
Brian W.H. Berghuis
Shawn T. Driscoll
Jason Nogueira
Jeffrey Rottinghaus
Robert W. Sharps
Clark R. Shields
Craig A. Thiese
Eric L. Veiel
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
New Era












Charles M. Ober
Ryan Burgess
Richard de los Reyes
Shawn T. Driscoll
Mark S. Finn
David M. Lee
Susanta Mazumdar
Heather K. McPherson
Christian M. O`Neill
Timothy E. Parker
Craig A. Thiese
David J. Wallack
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
New Horizons



















John H. Laporte
Kennard W. Allen
Francisco Alonso
Brian W.H. Berghuis
G. Mark Bussard
Christopher W. Carlson
Hugh M. Evans III
Joseph B. Fath
Kris H. Jenner
Jay S. Markowitz
Joshua B. Nelson
Jason Nogueira
Timothy E. Parker
Jeffrey Rottinghaus
Clark R. Shields
Michael F. Sola
Taymour R. Tamaddon
Ashley R. Woodruff
Francies W. Hawks
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
New Income









Daniel O. Shackelford
Brian J. Brennan
Steven C. Huber
Alan D. Levenson
Andrew McCormick
Vernon A. Reid, Jr.
David A. Tiberii
Dimitri V. Grechenko
Michael J. Grogan
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
Assistant Vice President
Personal Strategy Funds
 Personal Strategy Balanced
 Personal Strategy Growth
 Personal Strategy Income












Edmund M. Notzon III
Jerome A. Clark
Kenneth D. Fuller
Ian D. Kelson
John H. Laporte
John D. Linehan
Gregory A. McCrickard
Mary J. Miller
Raymond A. Mills
Larry J. Puglia
Brian C. Rogers
Charles M. Shriver
Robert W. Smith
Mark J. Vaselkiv
Richard T. Whitney
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Prime Reserve












James M. McDonald
Joseph K. Lynagh
Steven E. Boothe
Steven G. Brooks
G. Richard Dent
Alisa Fiumara
Dylan Jones
Alan D. Levenson
Mary J. Miller
Susan G. Troll
Edward A. Wiese
Terri L. Hett
(See preceding table for remaining officers)
President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
Real Estate








David M. Lee
Richard N. Clattenburg
Anna M. Dopkin
Joseph B. Fath
Thomas J. Huber
Philip A. Nestico
Charles M. Ober
Theodore E. Robson
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
TRP Reserve Investment Funds
 TRP Government Reserve Investment
 TRP Reserve Investment








James M. McDonald
Joseph K. Lynagh
Steven E. Boothe
Steven G. Brooks
G. Richard Dent
Alan D. Levenson
Mary J. Miller
Edward A. Wiese
Terri L. Hett
Dylan Jones
(See preceding table for remaining officers)
President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
Assistant Vice President
Retirement Funds
 Retirement 2005
 Retirement 2010
 Retirement 2015
 Retirement 2020
 Retirement 2025
 Retirement 2030
 Retirement 2035
 Retirement 2040
 Retirement 2045
 Retirement 2050
 Retirement 2055
 Retirement Income
Edmund M. Notzon III
Jerome A. Clark
Kenneth D. Fuller
John H. Laporte
Wyatt A. Lee
Mary J. Miller
Brian C. Rogers
Robert W. Smith
Mark J. Vaselkiv
David J.L. Warren
Richard T. Whitney
Edward A. Wiese
(See preceding table for remaining officers)
President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Science & Technology












Michael F. Sola
Kennard W. Allen
Donald J. Easley
David J. Eiswert
Henry M. Ellenbogen
Daniel Flax
Hiroaki Owaki
D. James Prey III
Jeffrey Rottinghaus
Joshua K. Spencer
Chirag Vasavada
Alison Mei Ling Yip
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Short-Term Bond














Edward A. Wiese
Brian J. Brennan
Steven G. Brooks
Charles B. Hill
Andrew McCormick
Cheryl A. Mickel
Vernon A. Reid, Jr.
Daniel O. Shackelford
John D. Wells
Bridget A. Ebner
Michael J. Grogan
Geoffrey M. Hardin
Keir R. Joyce
Robert L. McWilliam
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
Assistant Vice President
Assistant Vice President
Assistant Vice President
Assistant Vice President
Short-Term Income















Edward A. Wiese
Brian J. Brennan
Steven G. Brooks
Jerome A. Clark
Charles B. Hill
James M. McDonald
Robert L. McWilliam
Edmund M. Notzon III
Vernon A. Reid, Jr.
Daniel O. Shackelford
John D. Wells
Bridget A. Ebner
Michael J. Grogan
Geoffrey M. Hardin
Keir R. Joyce
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
Assistant Vice President
Assistant Vice President
Assistant Vice President
Small-Cap Stock













Gregory A. McCrickard
Francisco Alonso
Preston G. Athey
Ira W. Carnahan
Hugh M. Evans III
Christopher T. Fortune
Robert J. Marcotte
Jay S. Markowitz
Joseph M. Milano
Curt J. Organt
Jeffrey Rottinghaus
J. David Wagner
Kwame C. Webb
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Small-Cap Value








Preston G. Athey
Hugh M. Evans III
Christopher T. Fortune
Susan J. Klein
Gregory A. McCrickard
Curt J. Organt
J. David Wagner
Kwame C. Webb
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Spectrum Funds
 Spectrum Growth
 Spectrum Income
 Spectrum International






Edmund M. Notzon III
John H. Laporte
Mary J. Miller
David J.L. Warren
Mark C.J. Bickford-Smith
Raymond A. Mills
Brian C. Rogers
Charles M. Shriver
Robert W. Smith
(See preceding table for remaining officers)
President
Executive Vice President
Executive Vice President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
State Tax-Free Income Trust
 Georgia Tax-Free Bond
 Maryland Short-Term Tax-Free Bond
 Maryland Tax-Free Bond
 Maryland Tax-Free Money
 New Jersey Tax-Free Bond
 New York Tax-Free Bond
 New York Tax-Free Money
 Virginia Tax-Free Bond








Mary J. Miller
Charles B. Hill
Joseph K. Lynagh
Konstantine B. Mallas
Hugh D. McGuirk
Jonathan M. Chirunga
G. Richard Dent
Charles E. Emrich
Marcy M. Lash
Alan D. Levenson
James M. McDonald
Linda A. Murphy
Timothy G. Taylor
M. Helena Condez
Kathryn A. Floyd
Chen Shao
(See preceding table for remaining officers)
President
Executive Vice President
Executive Vice President
Executive Vice President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
Assistant Vice President
Assistant Vice President
Summit Funds
 Summit Cash Reserves
 Summit GNMA













Edward A. Wiese
Andrew McCormick
James M. McDonald
Steven E. Boothe
G. Richard Dent
Alisa Fiumara
Keir R. Joyce
Alan D. Levenson
Joseph K. Lynagh
Mary J. Miller
Susan G. Troll
John D. Wells
Christopher P. Brown
Terri L. Hett
Dylan Jones
(See preceding table for remaining officers)
President
Executive Vice President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
Assistant Vice President
Assistant Vice President
Summit Municipal Funds
 Summit Municipal Income
 Summit Municipal Intermediate
 Summit Municipal Money Market













Mary J. Miller
Charles B. Hill
Joseph K. Lynagh
Konstantine B. Mallas
R. Lee Arnold, Jr.
G. Richard Dent
Marcy M. Lash
Alan D. Levenson
James M. McDonald
Hugh D. McGuirk
James M. Murphy
Timothy G. Taylor
Edward A. Wiese
M. Helena Condez
Kathryn A. Floyd
Chen Shao
(See preceding table for remaining officers)
President
Executive Vice President
Executive Vice President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
Assistant Vice President
Assistant Vice President
Tax-Efficient Funds
 Tax-Efficient Balanced
 Tax-Efficient Growth
 Tax-Efficient Multi-Cap Growth




Donald J. Peters
Hugh D. McGuirk
Donald J. Easley
Charles E. Emrich
Mary J. Miller
William J. Stromberg
Mark R. Weigman
(See preceding table for remaining officers)
President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Tax-Exempt Money










Joseph K. Lynagh
Steven G. Brooks
G. Richard Dent
Marcy M. Lash
Alan D. Levenson
James M. McDonald
Mary J. Miller
Edward A. Wiese
M. Helena Condez
Chen Shao
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
Assistant Vice President
Tax-Free High Yield











James M. Murphy
R. Lee Arnold, Jr.
G. Richard Dent
Charles B. Hill
Marcy M. Lash
Konstantine B. Mallas
Hugh D. McGuirk
Mary J. Miller
M. Helena Condez
Chen Shao
Timothy G. Taylor
(See preceding table for remaining officers)
President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
Assistant Vice President
Assistant Vice President
Tax-Free Income











Mary J. Miller
Konstantine B. Mallas
R. Lee Arnold, Jr.
G. Richard Dent
Charles B. Hill
Marcy M. Lash
Hugh D. McGuirk
James M. Murphy
M. Helena Condez
Chen Shao
Timothy G. Taylor
(See preceding table for remaining officers)
President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
Assistant Vice President
Assistant Vice President
Tax-Free Short-Intermediate











Charles B. Hill
G. Richard Dent
Charles E. Emrich
Marcy M. Lash
Konstantine B. Mallas
Hugh D. McGuirk
Mary J. Miller
Timothy G. Taylor
Edward A. Wiese
M. Helena Condez
Chen Shao
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
Assistant Vice President
U.S. Bond Index


Edmund M. Notzon III
Robert M. Larkins
(See preceding table for remaining officers)
President
Executive Vice President
U.S. Treasury Funds
 U.S. Treasury Intermediate
 U.S. Treasury Long-Term
 U.S. Treasury Money










Mary J. Miller
Brian J. Brennan
James M. McDonald
Steven E. Boothe
Steven G. Brooks
G. Richard Dent
Alan D. Levenson
Joseph K. Lynagh
Vernon A. Reid, Jr.
Daniel O. Shackelford
Geoffrey M. Hardin
Terri L. Hett
Dylan Jones
(See preceding table for remaining officers)
President
Executive Vice President
Executive Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Assistant Vice President
Assistant Vice President
Assistant Vice President
Value










John D. Linehan
Jeffrey W. Arricale
Peter J. Bates
Ryan Burgess
Ira W. Carnahan
David R. Giroux
Heather K. McPherson
Brian C. Rogers
Eric L. Veiel
Tamara P. Wiggs
(See preceding table for remaining officers)
President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
</R>

Officers

<R>

Name, Year of Birth, and Principal Occupation(s)
During Past 5 Years


Position(s) Held With Fund(s)


Ulle Adamson, 1979
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.; formerly student, Sussex University and Stockholm School of Economics (to 2003); CFA
Vice President, International Funds and Media & Telecommunications Fund
Christopher D. Alderson, 1962
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.
Executive Vice President, Institutional International Funds and International Funds
Kennard W. Allen, 1977
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Vice President, Capital Opportunity Fund, Developing Technologies Fund, Global Technology Fund, Growth Stock Fund, Mid-Cap Growth Fund, New Horizons Fund, and Science & Technology Fund
Francisco Alonso, 1978
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Vice President, Capital Appreciation Fund, Growth & Income Fund, New America Growth Fund, New Horizons Fund, and Small-Cap Stock Fund
R. Lee Arnold, Jr., 1970
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price International, Inc.; CFA, CPA
Executive Vice President, Tax-Free High Yield Fund; Vice President, Summit Municipal Funds and Tax-Free Income Fund
Jeffrey W. Arricale, 1971
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CPA
President, Financial Services Fund; Vice President, Capital Appreciation Fund, Equity Income Fund, Growth & Income Fund, Institutional International Funds, International Funds, New America Growth Fund, and Value Fund
Preston G. Athey, 1949
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA, CIC
President, Small-Cap Value Fund; Vice President, Small-Cap Stock Fund
E. Frederick Bair, 1969
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA, CPA
President, Index Trust and International Index Fund; Vice President, Balanced Fund
P. Robert Bartolo, 1972
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA, CPA
President, Growth Stock Fund; Vice President, Blue Chip Growth Fund, Media & Telecommunications Fund, Mid-Cap Growth Fund, and New America Growth Fund
Peter J. Bates, 1974
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; formerly intern, T. Rowe Price (to 2004) and Vice President of Finance, Rent-A-Center, Inc. (to 2003); CFA
Vice President, Blue Chip Growth Fund, Capital Opportunity Fund, Dividend Growth Fund, Mid-Cap Value Fund, and Value Fund
David C. Beers, 1970
Vice President, T. Rowe Price; formerly High Yield Analyst, Chartwell Investment Partners and Business Analyst/Software Developer, Morgan Stanley Investment Management (to 2004); CFA
Vice President, High Yield Fund; Assistant Vice President, Institutional Income Funds
R. Scott Berg, 1972
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
Executive Vice President, Institutional International Funds and International Funds
Brian W.H. Berghuis, 1958
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA
President, Mid-Cap Growth Fund; Executive Vice President, Institutional Equity Funds; Vice President, New America Growth Fund and New Horizons Fund
Mark C.J. Bickford-Smith, 1962
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.
Vice President, Institutional International Funds, International Funds, and Spectrum Funds
Steven E. Boothe, 1977
Vice President, T. Rowe Price; CFA
Vice President, Corporate Income Fund, Prime Reserve Fund, TRP Reserve Investment Funds, Summit Funds, and U.S. Treasury Funds
Brian J. Brennan, 1964
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA
Executive Vice President, Institutional Income Funds and U.S. Treasury Funds; Vice President, Inflation Protected Bond Fund, International Funds, New Income Fund, Short-Term Bond Fund, and Short-Term Income Fund
Andrew M. Brooks, 1956
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Vice President, Equity Income Fund, High Yield Fund, and Institutional Income Funds
Steven G. Brooks, 1954
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
Vice President, California Tax-Free Income Trust, Corporate Income Fund, Prime Reserve Fund, TRP Reserve Investment Funds, Short-Term Bond Fund, Short-Term Income Fund, Tax-Exempt Money Fund, and U.S. Treasury Funds
Christopher P. Brown, 1977
Assistant Vice President, T. Rowe Price; formerly Fixed-Income Analyst Trader, Riggs Investment Advisors, Inc. (to 2005); Investment Analyst, Cambridge Associates, LLC (to 2004)
Assistant Vice President, GNMA Fund and Summit Funds
Jose Costa Buck, 1972
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.
Vice President, International Funds
Ryan Burgess, 1974
Employee, T. Rowe Price; formerly intern, T. Rowe Price (to 2006); Vice President and Senior Portfolio Manager, Evergreen Private Asset Management (to 2005); CFA
Vice President, New Era Fund and Value Fund
G. Mark Bussard, 1972
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; formerly Co-founder and Chief Operating Officer, Rivanna Pharmaceuticals (to 2006); student, Darden Graduate School of Business and University of Virginia (to 2004)
Vice President, Blue Chip Growth Fund, Growth & Income Fund, Health Sciences Fund, and New Horizons Fund
Christopher W. Carlson, 1967
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Vice President, Developing Technologies Fund, Global Technology Fund, Mid-Cap Value Fund, and New Horizons Fund
Ira W. Carnahan, 1963
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; formerly Associate Editor, Forbes Magazine (to 2005); CFA
Vice President, Small-Cap Stock Fund and Value Fund
Jonathan M. Chirunga, 1966
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Vice President, State Tax-Free Income Trust
Archibald A. Ciganer, 1966
Vice President, T Rowe Price Global Investment Services Limited; Associate, Investment Banking, CTI Tokyo, (to 2003); Senior Associate, Corporate Finance Tokyo (to 2005); CFA
Vice President, International Funds
Jerome A. Clark, 1961
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price Investment Services, Inc., and T. Rowe Price Trust Company; CFA
Executive Vice President, Retirement Funds; Vice President, Personal Strategy Funds and Short-Term Income Fund
Richard N. Clattenburg, 1979
Vice President, T. Rowe Price; formerly Financial Analyst, Goldman Sachs (to 2005); CFA
Vice President, Institutional International Funds, International Funds, and Real Estate Fund
M. Helena Condez, 1962
Assistant Vice President, T. Rowe Price
Assistant Vice President, California Tax-Free Income Trust, State Tax-Free Income Trust, Summit Municipal Funds, Tax-Exempt Money Fund, Tax-Free High Yield Fund, Tax-Free Income Fund, and Tax-Free Short-Intermediate Fund
Michael J. Conelius, 1964
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price International, Inc., and T. Rowe Price Trust Company; CFA
Executive Vice President, Institutional International Funds and International Funds; Vice President, Institutional Income Funds
Ann B. Cranmer, 1947
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.; Vice President and Secretary, T. Rowe Price Global Asset Management Limited and T. Rowe Price Global Investment Services Limited; FCIS
Assistant Vice President, International Funds
Richard de los Reyes, 1975
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; formerly Analyst, Soros Fund Management (to 2006)
Vice President, Blue Chip Growth Fund, International Funds, and New Era Fund
G. Richard Dent, 1960
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Vice President, California Tax-Free Income Trust, Prime Reserve Fund, TRP Reserve Investment Funds, State Tax-Free Income Trust, Summit Funds, Summit Municipal Funds, Tax-Exempt Money Fund, Tax-Free High Yield Fund, Tax-Free Income Fund, Tax-Free Short-Intermediate Fund, and U.S. Treasury Funds
Wendy R. Diffenbaugh, 1954
Vice President, T. Rowe Price
Vice President, Balanced Fund, Diversified Small-Cap Growth Fund, and Index Trust
Anna M. Dopkin, 1967
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA
President, Capital Opportunity Fund; Executive Vice President, Institutional Equity Funds; Vice President, Financial Services Fund and Real Estate Fund
Shawn T. Driscoll, 1975
Vice President, T. Rowe Price Group, Inc.; formerly Equity Research Analyst, MTB Investment Advisors (to 2006); student, New York University (to 2003)
Vice President, Blue Chip Growth Fund, Growth & Income Fund, New America Growth Fund, and New Era Fund
Frances Dydasco, 1966
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.
Executive Vice President, International Funds; Vice President, Institutional International Funds
Donald J. Easley, 1971
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
Executive Vice President, Diversified Mid-Cap Growth Fund; Vice President, Diversified Small-Cap Growth Fund, Science & Technology Fund, and Tax-Efficient Funds
Bridget A. Ebner, 1970
Vice President, T. Rowe Price
Assistant Vice President, Short-Term Bond Fund and Short-Term Income Fund
Mark J.T. Edwards, 1957
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.
Vice President, Institutional International Funds and International Funds
David J. Eiswert, 1972
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; formerly Analyst, Mellon Growth Advisors and Fidelity Management and Research (to 2003); CFA
Vice President, Blue Chip Growth Fund, Capital Opportunity Fund, Developing Technologies Fund, Global Technology Fund, Media & Telecommunications Fund, and Science & Technology Fund
Henry M. Ellenbogen, 1973
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
President, Media & Telecommunications Fund; Vice President, Blue Chip Growth Fund, Developing Technologies Fund, Growth Stock Fund, Institutional International Funds, International Funds, Mid-Cap Growth Fund, Mid-Cap Value Fund, and Science & Technology Fund
Charles E. Emrich, 1961
Vice President, T. Rowe Price; formerly First Vice President/Credit Analyst, Legg Mason Wood Walker, Inc. (to 2005)
Vice President, California Tax-Free Income Trust, State Tax-Free Income Trust, Tax-Efficient Funds, and Tax-Free Short-Intermediate Fund
Hugh M. Evans III, 1966
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
Vice President, Developing Technologies Fund, New Horizons Fund, Small-Cap Stock Fund, and Small-Cap Value Fund
Joseph B. Fath, 1971
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CPA
Vice President, Growth Stock Fund, Media & Telecommunications Fund, New Horizons Fund, and Real Estate Fund
Roger L. Fiery III, 1959
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price International, Inc., and T. Rowe Price Trust Company; CPA
Vice President, all funds
Mark S. Finn, 1963
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA, CPA
Vice President, Capital Appreciation Fund, Capital Opportunity Fund, Equity Income Fund, Mid-Cap Value Fund, and New Era Fund
Alisa Fiumara, 1974
Vice President, T. Rowe Price; CFA
Vice President, Prime Reserve Fund and Summit Funds
Daniel Flax, 1974
Vice President, T. Rowe Price; formerly student, Columbia Business School (to 2006); Equity Analyst/Trader, Madoff Securities International (London) (to 2004)
Vice President, Global Technology Fund and Science & Technology Fund
Kathryn A. Floyd, 1982
Vice President, T. Rowe Price; formerly student, University of Virginia, McIntire School of Commerce (to 2004)
Assistant Vice President, State Tax-Free Income Trust and Summit Municipal Funds
May Foo, 1977
Vice President, T. Rowe Price International, Inc.; CFA
Vice President, International Funds and Media & Telecommunications Fund
Christopher T. Fortune, 1973
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; formerly intern, Hillman Capital Management (to 2005)
Vice President, Financial Services Fund, Small-Cap Stock Fund, and Small-Cap Value Fund
Kenneth D. Fuller, 1958
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company
Vice President, Personal Strategy Funds and Retirement Funds
Niall P. Gallagher, 1972
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.; formerly European Analyst and Portfolio Manager, Merrill Lynch (London) (to 2006); CFA
Vice President, Institutional International Funds and International Funds
Robert N. Gensler, 1957
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price International, Inc.
Executive Vice President, Institutional International Funds and International Funds; Vice President, Growth Stock Fund
Justin T. Gerbereux, 1975
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; formerly student, Mary Washington College and Darden School of Business Administration, University of Virginia (to 2003); CFA
Vice President, High Yield Fund; Assistant Vice President, Institutional Income Funds
Rahul Ghosh, 1976
Vice President, T. Rowe Price International, Inc.; formerly Financial Analyst, Warburg Pincus (Singapore) (to 2004)
Vice President, International Funds
John R. Gilner, 1961
Chief Compliance Officer and Vice President, T. Rowe Price; Vice President, T. Rowe Price Group, Inc. and T. Rowe Price Investment Services, Inc.
Chief Compliance Officer, all funds
David R. Giroux, 1975
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA
President, Capital Appreciation Fund; Executive Vice President, Institutional Equity Funds; Vice President, Equity Income Fund, Growth & Income Fund, and Value Fund
Gregory S. Golczewski, 1966
Vice President, T. Rowe Price and T. Rowe Price Trust Company
Vice President, all funds
Dimitri V. Grechenko, 1963
Assistant Vice President, T. Rowe Price; CFA
Assistant Vice President, New Income Fund
Paul Greene II, 1978
Vice President, T. Rowe Price; formerly student, Graduate School of Business, Stanford University (to 2006); Finance & Operations Analyst, ArvinMeritor, Inc. (to 2004)
Vice President, Equity Income Fund and Media & Telecommunications Fund
Benjamin Griffiths, 1977
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.; formerly Investment Manager, Baillie Gifford (to 2006); CFA
Vice President, International Funds
Michael J. Grogan, 1971
Vice President, T. Rowe Price; CFA
Assistant Vice President, Corporate Income Fund, New Income Fund, Short-Term Bond Fund, and Short-Term Income Fund
M. Campbell Gunn, 1956
Vice President, T. Rowe Price Global Investment Services Limited, T. Rowe Price Group, Inc., and T. Rowe Price International, Inc.
Executive Vice President, International Funds; Vice President, Institutional International Funds
Geoffrey M. Hardin, 1971
Vice President, T. Rowe Price; formerly, Investment Analyst, Morgan Stanley`s Alternative Investment Partners Group (to 2007); Associate Portfolio Manager, Smith Breeden Associates (to 2005)
Assistant Vice President, Inflation Protected Bond Fund, Short-Term Bond Fund, Short-Term Income Fund, and U.S. Treasury Funds
Francies W. Hawks, 1944
Assistant Vice President, T. Rowe Price
Assistant Vice President, New Horizons Fund
Barry Henderson, 1966
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; formerly Research Analyst, Soros Fund Management (to 2006)
Vice President, Growth Stock Fund
Terri L. Hett, 1959
Assistant Vice President, T. Rowe Price
Assistant Vice President, Prime Reserve Fund, TRP Reserve Investment Funds, Summit Funds, and U.S. Treasury Funds
Charles B. Hill, 1961
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
President, Tax-Free Short-Intermediate Fund; Executive Vice President, State Tax-Free Income Trust and Summit Municipal Funds; Vice President, Short-Term Bond Fund, Short-Term Income Fund, Tax-Free High Yield Fund, and Tax-Free Income Fund
Gregory K. Hinkle, 1958
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price Investment Services, Inc., and T. Rowe Price Trust Company; formerly, partner, PricewaterhouseCoopers, LLP (to 2007); CPA
Treasurer, all funds
Ann M. Holcomb, 1972
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA
Vice President, Capital Opportunity Fund and Institutional Equity Funds
Steven C. Huber, 1958
Vice President, T. Rowe Price Group, Inc.; formerly chief investment officer, Maryland State Retirement Agency pension fund; CFA, FSA
Vice President, Institutional Income Funds and New Income Fund
Thomas J. Huber, 1966
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA
President, Dividend Growth Fund and Growth & Income Fund; Vice President, Blue Chip Growth Fund and Real Estate Fund
Rhett K. Hunter, 1977
Employee, T. Rowe Price; formerly student, MIT Sloan School of Management (to 2007), Bowdoin College, (to 2005)
Vice President, Developing Technologies Fund and Global Technology Fund
Andrew R. Hyman, 1968
Vice President, T. Rowe Price International; formerly Principal, L. Capital Partners (to 2007); Health Care Analyst, Columbus Circle Investors (to 2005); M.D.
Vice President, Health Sciences Fund
Kris H. Jenner, 1962
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; M.D., D. Phil.
President, Health Sciences Fund; Vice President, Growth Stock Fund, Institutional International Funds, International Funds, Mid-Cap Growth Fund, and New Horizons Fund
Dylan Jones, 1971
Assistant Vice President, T. Rowe Price; CFA
Vice President, Prime Reserve Fund; Assistant Vice President, TRP Reserve Investment Funds, Summit Funds, and U.S. Treasury Funds
Keir R. Joyce, 1972
Vice President, T. Rowe Price; CFA
Vice President, GNMA Fund and Summit Funds; Assistant Vice President, Short-Term Bond Fund and Short-Term Income Fund
Paul A. Karpers, 1967
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
Executive Vice President, Institutional Income Funds; Vice President, High Yield Fund
Ian D. Kelson, 1956
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price International, Inc.
Executive Vice President, Institutional International Funds and International Funds; Vice President, Institutional Income Funds and Personal Strategy Funds
Susan J. Klein, 1950
Vice President, T. Rowe Price
Vice President, Health Sciences Fund and Small-Cap Value Fund
Steven Krichbaum, 1977
Employee, T. Rowe Price; formerly intern, T. Rowe Price (summer 2006); student, University of Michigan (to 2007) Economist/Statistical Analyst, Colorado Department of Labor and Employment (to 2004)
Vice President, Financial Services Fund
Robert M. Larkins, 1973
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; formerly student, The Wharton Business School, University of Pennsylvania (to 2003); CFA
Executive Vice President, U.S. Bond Index Fund; Vice President, Balanced Fund
Marcy M. Lash, 1963
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Vice President, State Tax-Free Income Trust, Summit Municipal Funds, Tax-Exempt Money Fund, Tax-Free High Yield Fund, Tax-Free Income Fund, and Tax-Free Short-Intermediate Fund
David M. Lee, 1962
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
President, Real Estate Fund; Vice President, Dividend Growth Fund, Growth & Income Fund, and New Era Fund
Wyatt A. Lee, 1971
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA
Vice President, Retirement Funds
Alan D. Levenson, 1958
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; Ph.D.
Vice President, California Tax-Free Income Trust, Corporate Income Fund, GNMA Fund, Inflation Protected Bond Fund, New Income Fund, Prime Reserve Fund, TRP Reserve Investment Funds, State Tax-Free Income Trust, Summit Funds, Summit Municipal Funds, Tax-Exempt Money Fund, and U.S. Treasury Funds
Lillian Yan Li, 1979
Employee, T. Rowe Price; Analyst, Deutsche Bank (Hong Kong) (to 2007); CFA
Vice President, International Funds
John D. Linehan, 1965
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA
President, Value Fund; Executive Vice President, Institutional Equity Funds; Vice President, Capital Appreciation Fund, Equity Income Fund, International Funds, and Personal Strategy Funds
Patricia B. Lippert, 1953
Assistant Vice President, T. Rowe Price and T. Rowe Price Investment Services, Inc.
Secretary, all funds
Anh Lu, 1968
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.
Vice President, International Funds
Joseph K. Lynagh, 1958
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
President, Tax-Exempt Money Fund; Executive Vice President, California Tax-Free Income Trust, Prime Reserve Fund, TRP Reserve Investment Funds, State Tax-Free Income Trust, and Summit Municipal Funds; Vice President, Summit Funds and U.S. Treasury Funds
Konstantine B. Mallas, 1963
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Executive Vice President, California Tax-Free Income Trust, State Tax-Free Income Trust, Summit Municipal Funds, and Tax-Free Income Fund; Vice President, Tax-Free High Yield Fund and Tax-Free Short-Intermediate Fund
Sebastien Mallet, 1974
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.
Vice President, International Funds
Robert J. Marcotte, 1962
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Vice President, Mid-Cap Growth Fund and Small-Cap Stock Fund
Jay S. Markowitz, 1962
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; M.D.
Vice President, Health Sciences Fund, New Horizons Fund, and Small-Cap Stock Fund
Jennifer Martin, 1972
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Vice President, Capital Opportunity Fund
Daniel Martino, 1974
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; formerly Research Analyst and Co-portfolio Manager, Taurus Asset Management and ONEX (to 2006); CFA
Vice President, Dividend Growth Fund, Media & Telecommunications Fund, and Mid-Cap Growth Fund
Paul M. Massaro, 1975
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; formerly student, The Wharton Business School, University of Pennsylvania (to 2003); CFA
Vice President, High Yield Fund; Assistant Vice President, Institutional Income Funds
Susanta Mazumdar, 1968
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.; formerly Director of Equity Research, UBS India Securities (to 2003)
Vice President, International Funds and New Era Fund
Andrew McCormick, 1960
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; formerly Chief Investment Officer, IMPAC Mortgage Holdings (to 2006); Senior Portfolio Manager, Avenue Capital Group, and Senior Vice President, Portfolio Transactions, Federal National Mortgage Association (to 2005)
President, GNMA Fund; Executive Vice President, Summit Funds; Vice President, Inflation Protected Bond Fund, Institutional Income Funds, New Income Fund, and Short-Term Bond Fund
Gregory A. McCrickard, 1958
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA
President, Small-Cap Stock Fund; Executive Vice President, Institutional Equity Funds; Vice President, Mid-Cap Value Fund, Personal Strategy Funds, and Small-Cap Value Fund
Ian C. McDonald, 1971
Employee, T. Rowe Price; formerly insurance correspondent and staff reporter, The Wall Street Journal
Vice President, Financial Services Fund
James M. McDonald, 1949
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company
President, Prime Reserve Fund and TRP Reserve Investment Funds; Executive Vice President, Summit Funds and U.S. Treasury Funds; Vice President, California Tax-Free Income Trust, Short-Term Income Fund, State Tax-Free Income Trust, Summit Municipal Funds, and Tax-Exempt Money Fund
Michael J. McGonigle, 1966
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Vice President, Capital Appreciation Fund, Corporate Income Fund, Financial Services Fund, High Yield Fund, and Institutional Income Funds
Hugh D. McGuirk, 1960
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
Executive Vice President, California Tax-Free Income Trust, State Tax-Free Income Trust, and Tax-Efficient Funds; Vice President, Summit Municipal Funds, Tax-Free High Yield Fund, Tax-Free Income Fund, and Tax-Free Short-Intermediate Fund
Heather K. McPherson, 1967
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CPA
Executive Vice President, Mid-Cap Value Fund; Vice President, Capital Appreciation Fund, New Era Fund, and Value Fund
Robert L. McWilliam, 1970
Vice President, T. Rowe Price; formerly Portfolio Manager, Sailfish Capital Partners (to 2006); Vice President, Merrill Lynch (to 2006)
Vice President, Short-Term Income Fund; Assistant Vice President, Corporate Income Fund and Short-Term Bond Fund
Cheryl A. Mickel, 1967
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
Vice President, Short-Term Bond Fund
Inigo Mijangos, 1975
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.; formerly Analyst, Kepler Equities (to 2005); Financial Analyst, Credit Agricole Indosuez Cheuvreux (Spain) (to 2004)
Vice President, International Funds
Joseph M. Milano, 1972
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
President, New America Growth Fund; Vice President, Institutional Equity Funds, Mid-Cap Growth Fund, Mid-Cap Value Fund, and Small-Cap Stock Fund
Raymond A. Mills, 1960
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price International, Inc., and T. Rowe Price Trust Company; Ph.D., CFA
Executive Vice President, International Funds; Vice President, Balanced Fund, Personal Strategy Funds, and Spectrum Funds
James M. Murphy, 1967
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
President, Tax-Free High Yield Fund; Vice President, Summit Municipal Funds and Tax-Free Income Fund
Linda A. Murphy, 1959
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Vice President, California Tax-Free Income Trust and State Tax-Free Income Trust
Sudhir Nanda, 1959
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; Ph.D., CFA
President, Diversified Small-Cap Growth Fund; Vice President, Capital Appreciation Fund, Diversified Mid-Cap Growth Fund, and Index Trust
Joshua B. Nelson, 1977
Employee, T. Rowe Price; formerly Assistant Vice President, Citigroup Global Markets, Inc.
Vice President, New Horizons Fund
Philip A. Nestico, 1976
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Vice President, Capital Opportunity Fund, Diversified Mid-Cap Growth Fund, International Funds, and Real Estate Fund
Hwee Jan Ng, 1966
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.; formerly Vice President of Equity Research, Merrill Lynch Investment Managers in Singapore (to 2005); CFA
Vice President, Financial Services Fund and International Funds
Elena Nikolaeva, 1980
Employee, T. Rowe Price; formerly Equity Analyst, JP Morgan (London) (to 2007); Analyst, PricewaterhouseCoopers, LLP (London) (to 2006)
Vice President, International Funds
Sridhar Nishtala, 1975
Vice President, T. Rowe Price International, Inc.; formerly Analyst, JM Morgan Stanley Private Limited (Mumbai) (to 2004)
Vice President, International Funds
Jason Nogueira, 1974
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; formerly Healthcare Equity Analyst, Putnam Investments (to 2004); student, Harvard Business School (to 2003); CFA
Vice President, Blue Chip Growth Fund, Capital Opportunity Fund, Dividend Growth Fund, Growth Stock Fund, Health Sciences Fund, New America Growth Fund, and New Horizons Fund
Edmund M. Notzon III, 1945
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price Investment Services, Inc., and T. Rowe Price Trust Company; Ph.D., CFA
President, Balanced Fund, Personal Strategy Funds, Retirement Funds, Spectrum Funds, and U.S. Bond Index Fund; Vice President, Short-Term Income Fund
Charles M. Ober, 1950
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
President, New Era Fund; Vice President, Institutional International Funds, International Funds, and Real Estate Fund
David Oestreicher, 1967
Director and Vice President, T. Rowe Price Investment Services, Inc., T. Rowe Price Trust Company, and T. Rowe Price Services, Inc.; Vice President, T. Rowe Price, T. Rowe Price Global Asset Management Limited, T. Rowe Price Global Investment Services Limited, T. Rowe Price Group, Inc., T. Rowe Price International, Inc., and T. Rowe Price Retirement Plan Services, Inc.
Vice President, all funds
Christian M. O`Neill, 1969
Vice President, T. Rowe Price; formerly Equity Research Analyst, Morgan Stanley and Trader and Operations Scheduler, Exxon Mobil Corporation (to 2006)
Vice President, Capital Appreciation Fund and New Era Fund
Curt J. Organt, 1968
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
Vice President, Diversified Small-Cap Growth Fund, Media & Telecommunications Fund, Small-Cap Stock Fund, and Small-Cap Value Fund
Hiroaki Owaki, 1962
Vice President, T. Rowe Price Global Investment Services Limited and T. Rowe Price Group, Inc.; formerly Senior Investment Analyst, ABN Amro Asset Management (to 2004); CFA
Vice President, Global Technology Fund, International Funds, and Science & Technology Fund
Gonzalo Pangaro, 1968
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.; CFA
Executive Vice President, International Funds; Vice President, Institutional International Funds
Timothy E. Parker, 1974
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
Vice President, Blue Chip Growth Fund, Capital Opportunity Fund, Dividend Growth Fund, New Era Fund, and New Horizons Fund
Charles G. Pepin, 1966
Director, T. Rowe Price Trust Company; Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Vice President, Capital Opportunity Fund and Health Sciences Fund
Donald J. Peters, 1959
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
President, Diversified Mid-Cap Growth Fund and Tax-Efficient Funds
Jason B. Polun, 1974
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; formerly Vice President, Wellington Management LLP (to 2006); student, The Wharton Business School, University of Pennsylvania (to 2004); CFA
Vice President, Equity Income Fund and Financial Services Fund
Austin Powell, 1969
Vice President, T. Rowe Price Global Investment Services Limited and T. Rowe Price Group, Inc.; formerly Fund Manager, INVESCO Asset Management (Japan) Tokyo (to 2004); CFA
Vice President, International Funds
D. James Prey III, 1959
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Vice President, Growth Stock Fund, Media & Telecommunications Fund, and Science & Technology Fund
Larry J. Puglia, 1960
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA, CPA
President, Blue Chip Growth Fund; Executive Vice President, Institutional Equity Funds; Vice President, Growth Stock Fund and Personal Strategy Funds
Robert T. Quinn, Jr., 1972
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; formerly Director of Investment Banking, UBS Investment Bank (to 2004)
Vice President, Capital Appreciation Fund, Capital Opportunity Fund, Dividend Growth Fund, and Equity Income Fund
Vernon A. Reid, Jr., 1954
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Vice President, Corporate Income Fund, Inflation Protected Bond Fund, New Income Fund, Short-Term Bond Fund, Short-Term Income Fund, and U.S. Treasury Funds
Frederick A. Rizzo, 1969
Vice President, T. Rowe Price International, Inc.; formerly Analyst, F&C Asset Management (London) (to 2006); Senior Equity Analyst, Citigroup (London) (to 2004)
Vice President, Financial Services Fund and International Funds
Michael T. Roberts, 1980
Vice President, T. Rowe Price; formerly student, Brown University, and Research Analyst, Chicago Board of Options Exchange (to 2005); Research Analyst, Roberts & Dybdahl Inc. (to 2004); Math Instructor, Peace Corps., and Calculus Teaching Assistant, University of Chicago (to 2003)
Vice President, Diversified Small-Cap Growth Fund
S. Leigh Robertson, 1976
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.; CFA
Executive Vice President, International Funds
Theodore E. Robson, 1965
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA
Vice President, Corporate Income Fund and Real Estate Fund
Joseph Rohm, 1966
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.; formerly Equity Analyst, Insight Investment (to 2005)
Vice President, International Funds
Christopher J. Rothery, 1963
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.
Vice President, International Funds
Jeffrey Rottinghaus, 1970
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CPA
President, Developing Technologies Fund and Global Technology Fund; Vice President, Institutional International Funds, International Funds, Mid-Cap Growth Fund, New America Growth Fund, New Horizons Fund, Science & Technology Fund, and Small-Cap Stock Fund
Brian A. Rubin, 1974
Vice President, T. Rowe Price and T. Rowe Price Trust Company; CPA
Vice President, High Yield Fund; Assistant Vice President, Institutional Income Funds
Federico Santilli, 1974
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.; CFA
Vice President, Financial Services Fund and International Funds
Francisco Sersale, 1980
Employee, T. Rowe Price; formerly Investment Analyst, Explorador Capital Management, LLC (to 2005); Paralegal, Morris, James, Hitchens & Williams (to 2002)
Vice President, International Funds
Daniel O. Shackelford, 1958
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA
President, Inflation Protected Bond Fund and New Income Fund; Vice President, Institutional Income Funds, Short-Term Bond Fund, Short-Term Income Fund, and U.S. Treasury Funds
Chen Shao, 1980
Employee, T. Rowe Price; formerly Junior Accountant, News America Corporation, and Reconciliation Associate, Cablevision Corporation (to 2005); Assistant Store Manager, Walgreen Company (to 2004)
Assistant Vice President, California Tax-Free Income Trust, State Tax-Free Income Trust, Summit Municipal Funds, Tax-Exempt Money Fund, Tax-Free High Yield Fund, Tax-Free Income Fund, and Tax-Free Short-Intermediate Fund
Robert W. Sharps, 1971
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA, CPA
Executive Vice President, Institutional Equity Funds; Vice President, Blue Chip Growth Fund, Growth Stock Fund, Institutional International Funds, International Funds, and New America Growth Fund
John C.A. Sherman, 1969
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.
Vice President, Health Sciences Fund and International Funds
Clark R. Shields, 1976
Vice President, T. Rowe Price; formerly student, Harvard Business School (to 2006); Associate, MDT Advisers (to 2004)
Vice President, Mid-Cap Growth Fund, New America Growth Fund, and New Horizons Fund
Charles M. Shriver, 1967
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
Vice President, Personal Strategy Funds and Spectrum Funds
Neil Smith, 1972
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.
Executive Vice President, International Index Fund
Robert W. Smith, 1961
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company
Executive Vice President, Institutional International Funds and International Funds; Vice President, Growth Stock Fund, Media & Telecommunications Fund, Personal Strategy Funds, Retirement Funds, and Spectrum Funds
Michael F. Sola, 1969
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
President, Science & Technology Fund; Vice President, Developing Technologies Fund, Global Technology Fund, and New Horizons Fund
Gabriel Solomon, 1977
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; formerly student, The Wharton Business School, University of Pennsylvania (to 2004); Equity Analyst Intern, Wellington Management Company, LLP (to 2003)
Vice President, Capital Appreciation Fund, Capital Opportunity Fund, and Financial Services Fund
Joshua K. Spencer, 1973
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; formerly Research Analyst and Sector Fund Portfolio Manager, Fidelity Investments (to 2004); CFA
Vice President, Developing Technologies Fund, Global Technology Fund, Growth & Income Fund, and Science & Technology Fund
Jonty Starbuck, 1975
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.
Vice President, International Funds
William J. Stromberg, 1960
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA
Vice President, Capital Appreciation Fund, Dividend Growth Fund, and Tax-Efficient Funds
Walter P. Stuart III, 1960
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
Vice President, High Yield Fund and Institutional Income Funds
Miki Takeyama, 1970
Vice President, T. Rowe Price Global Investment Services Limited and T. Rowe Price Group, Inc.
Vice President, International Funds
Taymour R. Tamaddon, 1976
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; formerly intern, T. Rowe Price (to 2004); CFA
Vice President, Blue Chip Growth Fund, Growth Stock Fund, Health Sciences Fund, Mid-Cap Growth Fund, and New Horizons Fund
Timothy G. Taylor, 1975
Vice President, T. Rowe Price; CFA
Vice President, California Tax-Free Income Trust, State Tax-Free Income Trust, Summit Municipal Funds, and Tax-Free Short-Intermediate Fund; Assistant Vice President, Tax-Free High Yield Fund and Tax-Free Income Fund
Dean Tenerelli, 1964
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.
Executive Vice President, International Funds; Vice President, Institutional International Funds
Thomas E. Tewksbury, 1961
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company
Vice President, High Yield Fund and Institutional Income Funds
Craig A. Thiese, 1975
Vice President, T. Rowe Price; formerly Equity Trader, Rydex Investments (to 2006); Equity Trader, Eagle Asset Management (to 2003)
Vice President, New America Growth Fund and New Era Fund
Justin Thomson, 1968
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.
Executive Vice President, International Funds
David A. Tiberii, 1965
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
President, Corporate Income Fund; Vice President, Institutional Income Funds and New Income Fund
Mitchell J.K. Todd, 1974
Vice President, T. Rowe Price International, Inc.; formerly Senior Research Analyst, F&C Asset Management (to 2003)
Vice President, Financial Services Fund and International Funds
Susan G. Troll, 1966
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CPA
Vice President, Capital Appreciation Fund, Prime Reserve Fund, and Summit Funds
Ken D. Uematsu, 1969
Assistant Vice President, T. Rowe Price; CFA
Executive Vice President, Index Trust; Vice President, International Index Fund
Chirag Vasavada, 1972
Vice President, T. Rowe Price; formerly Senior Manager in the Corporate Strategy and Development Group, Microsoft Corporation (to 2005)
Vice President, Developing Technologies Fund, Global Technology Fund, and Science & Technology Fund
Mark J. Vaselkiv, 1958
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company
President, High Yield Fund; Executive Vice President, Corporate Income Fund; Vice President, Balanced Fund, Institutional Income Funds, Personal Strategy Funds, and Retirement Funds
Eric L. Veiel, 1972
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; formerly Senior Equity Analyst, Wachovia Securities (to 2005); CFA
Vice President, Capital Appreciation Fund, Capital Opportunity Fund, Dividend Growth Fund, Equity Income Fund, Financial Services Fund, Growth Stock Fund, New America Growth Fund, and Value Fund
Verena E. Wachnitz, 1978
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.; CFA
Vice President, International Funds
J. David Wagner, 1974
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
Vice President, Diversified Small-Cap Growth Fund, Institutional Equity Funds, Mid-Cap Value Fund, Small-Cap Stock Fund, and Small-Cap Value Fund
John F. Wakeman, 1962
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Executive Vice President, Mid-Cap Growth Fund; Vice President, Diversified Mid-Cap Growth Fund and Institutional Equity Funds
David J. Wallack, 1960
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company
President, Mid-Cap Value Fund; Vice President, New Era Fund
Julie L. Waples, 1970
Vice President, T. Rowe Price
Vice President, all funds
David J.L. Warren, 1957
Director, T. Rowe Price, T. Rowe Price Global Asset Management Limited, and T. Rowe Price Global Investment Services Limited; Vice President, T. Rowe Price Group, Inc.; Chief Executive Officer, Director, and President, T. Rowe Price International, Inc.
President, Institutional International Funds and International Funds; Executive Vice President, Spectrum Funds; Vice President, Retirement Funds
Hiroshi Watanabe, 1975
Vice President, T. Rowe Price Global Investment Services Limited; formerly Deputy Director, Space Industry Office with the Ministry of Economy (Tokyo) (to 2003)
Vice President, International Funds
Thomas H. Watson, 1977
Employee, T. Rowe Price; formerly Strategy Analyst, Forrester Research (2002 to 2005)
Vice President, Developing Technologies Fund and Global Technology Fund
Kwame C. Webb, 1982
Vice President, T. Rowe Price; formerly student, The College of William & Mary (to 2004)
Vice President, Small-Cap Stock Fund and Small-Cap Value Fund
Mark R. Weigman, 1962
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; CFA, CIC
Vice President, Diversified Mid-Cap Growth Fund and Tax-Efficient Funds
John D. Wells, 1960
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Savings Bank
Vice President, GNMA Fund, Short-Term Bond Fund, Short-Term Income Fund, and Summit Funds
Christopher S. Whitehouse, 1972
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.; formerly Telecoms Analyst and Fund Manager, Deutsche Asset Management (to 2005)
Vice President, International Funds and Media & Telecommunications Fund
Richard T. Whitney, 1958
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price International, Inc., and T. Rowe Price Trust Company; CFA
Executive Vice President, Balanced Fund; Vice President, Diversified Small-Cap Growth Fund, Personal Strategy Funds, and Retirement Funds
Edward A. Wiese, 1959
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; Chief Investment Officer, Director, and Vice President, T. Rowe Price Savings Bank; CFA
President, Short-Term Bond Fund, Short-Term Income Fund, and Summit Funds; Vice President, Corporate Income Fund, Prime Reserve Fund, TRP Reserve Investment Funds, Retirement Funds, Summit Municipal Funds, Tax-Exempt Money Fund, and Tax-Free Short-Intermediate Fund
Tamara P. Wiggs, 1979
Vice President, T. Rowe Price; formerly Vice President, Institutional Equity Trading, Merrill Lynch (to 2003)
Vice President, Capital Appreciation Fund, Financial Services Fund, and Value Fund
Clive M. Williams, 1966
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.
Vice President, International Funds
Thea N. Williams, 1961
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company
Vice President, Corporate Income Fund, High Yield Fund, and Institutional Income Funds
Paul W. Wojcik, 1970
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
Vice President, Index Trust and International Index Funds
John Z. Wood, 1972
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; CFA
Vice President, Diversified Small-Cap Growth Fund
Ashley R. Woodruff, 1979
Vice President, T. Rowe Price; formerly Senior Vice President and Senior Restaurants Analyst, Friedman, Billings, Ramsey & Co. (to 2006); Analyst, Bear Stearns & Co., (to 2003); CFA
Vice President, New Horizons Fund
Ernest C. Yeung, 1979
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.; CFA
Vice President, International Funds and Media & Telecommunications Fund
Alison Mei Ling Yip, 1966
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.; formerly Analyst, Credit Suisse First Boston (to 2006)
Vice President, Global Technology Fund, International Funds, and Science & Technology Fund
Christopher Yip, 1975
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.; formerly Senior Analyst, Mercer Management Consulting (to 2004); CFA
Vice President, International Funds
Nalin Yogasundram, 1975
Employee, T. Rowe Price; formerly Equity Analyst Intern, American Century Investments (to 2006); Project Lead, Ceterus Networks (to 2005); Project Lead, Mahi Networks, (to 2004)
Vice President, Developing Technologies Fund and Global Technology Fund
</R>

Directors` Compensation

The following table shows remuneration paid by the funds to the independent directors. The independent directors are paid $190,000 for their service on the Boards. A director serving on the Joint Audit Committee receives an additional $7,500 for his/her service and the chairman of the Joint Audit Committee receives an additional $15,000 for his/her service. The Lead Independent Director receives an additional $100,000 for serving in this capacity. Any director of the fund who is an officer or employee of T. Rowe Price or T. Rowe Price International (inside directors) does not receive any remuneration from the funds. The funds do not pay pension or retirement benefits to any of their directors or officers.

The following table shows the total compensation from the funds paid to the directors for the calendar year 2007:

Directors


Total Compensation

Casey
$192,500
Deering (Lead)
290,000
Dick
200,000
Fagin
190,000
Horn
200,000
Rodgers
197,500
Schreiber
190,000

The following table shows the amounts paid to the directors by each fund based on accrued compensation for the calendar year 2007:<R>

Fund


Aggregate Compensation From Fund























Casey


Deering


Dick


Fagin


Horn


Rodgers


Schreiber

Africa & Middle East(a)
$231
$339
$222
$223
$240
$231
$223
Balanced
2,105
3,173
2,190
2,078
2,187
2,160
2,078
Blue Chip Growth
5,743
8,650
5,963
5,667
5,967
5,891
5,667
California Tax-Free Bond
804
1,211
835
793
835
824
793
California Tax-Free Money
715
1,077
743
705
743
733
705
Capital Appreciation
5,483
8,264
5,704
5,414
5,697
5,627
5,414
Capital Opportunity
770
1,160
800
760
800
789
760
Corporate Income
758
1,142
787
748
787
778
748
Developing Technologies
683
1,029
709
674
709
701
674
Diversified Mid-Cap Growth
707
1,066
735
698
735
726
698
Diversified Small-Cap Growth
701
1,056
729
692
729
719
692
Dividend Growth
1,074
1,619
1,117
1,061
1,116
1,102
1,061
Emerging Europe & Mediterranean
1,428
2,153
1,486
1,410
1,485
1,466
1,410
Emerging Markets Bond
956
1,441
995
944
994
982
944
Emerging Markets Stock
2,194
3,302
2,272
2,164
2,280
2,249
2,164
Equity Income
5,934
8,938
6,164
5,856
6,164
6,087
5,856
Equity Index 500
4,791
7,217
4,976
4,728
4,977
4,915
4,728
European Stock
1,169
1,762
1,216
1,154
1,215
1,200
1,154
Extended Equity Market Index
844
1,272
877
833
878
866
833
Financial Services
866
1,305
899
855
899
889
855
Georgia Tax-Free Bond
719
1,083
747
709
747
737
709
Global Stock
938
1,413
974
926
975
962
926
Global Technology
733
1,105
762
724
762
752
724
GNMA
1,254
1,889
1,303
1,238
1,302
1,287
1,238
TRP Government Reserve Investment
1,172
1,765
1,218
1,156
1,217
1,202
1,156
Growth & Income
1,394
2,102
1,452
1,377
1,448
1,431
1,377
Growth Stock
5,934
8,938
6,164
5,856
6,164
6,087
5,856
Health Sciences
1,550
2,335
1,610
1,530
1,610
1,590
1,530
High Yield
3,073
4,635
3,202
3,037
3,193
3,156
3,037
Inflation Protected Bond
707
1,065
735
698
735
726
698
Institutional Africa & Middle East(b)
3,500
3,500
3,500
3,500
3,500
3,500
3,500
Institutional Concentrated Large-Cap Value
663
998
689
654
689
680
654
Institutional Core Plus
685
1,032
711
676
711
703
676
Institutional Emerging Markets Bond
671
1,011
697
663
697
688
663
Institutional Emerging Markets Equity
769
1,158
799
759
799
788
759
Institutional Floating Rate(c)
4,583
4,583
4,583
4,583
4,583
4,583
4,583
Institutional Foreign Equity
742
1,118
771
732
771
761
732
Institutional Global Equity
661
996
687
652
688
678
652
Institutional High Yield
870
1,311
904
859
903
893
859
Institutional International Bond(d)
403
602
407
394
419
410
394
Institutional Large-Cap Core Growth
678
1,021
705
669
704
696
669
Institutional Large-Cap Growth
1,151
1,732
1,192
1,135
1,196
1,180
1,135
Institutional Large-Cap Value
773
1,164
803
763
802
793
763
Institutional Mid-Cap Equity Growth
866
1,304
900
855
899
888
855
Institutional Small-Cap Stock
858
1,294
892
848
892
881
848
Institutional U.S. Structured Research(e)
115
169
111
111
117
115
111
International Bond
1,769
2,664
1,838
1,745
1,837
1,814
1,745
International Discovery
1,919
2,891
1,994
1,894
1,994
1,969
1,894
International Equity Index
873
1,314
906
861
906
865
861
International
Growth & Income
1,875
2,825
1,949
1,852
1,948
1,924
1,852
International Stock
3,878
5,847
4,039
3,831
4,029
3,981
3,831
Japan
882
1,330
918
871
917
906
871
Latin America
1,999
3,008
2,071
1,971
2,077
2,046
1,971
Maryland Short-Term Tax-Free Bond
728
1,097
757
718
756
747
718
Maryland Tax-Free Bond
1,332
2,008
1,386
1,316
1,384
1,368
1,316
Maryland Tax-Free Money
760
1,145
789
750
788
780
750
Media & Telecommunications
1,514
2,280
1,572
1,494
1,572
1,553
1,494
Mid-Cap Growth
5,933
8,938
6,165
5,856
6,164
6,087
5,856
Mid-Cap Value
4,408
6,648
4,593
4,355
4,581
4,527
4,355
New America Growth
1,046
1,576
1,087
1,033
1,087
1,074
1,033
New Asia
2,220
3,336
2,289
2,185
2,306
2,272
2,185
New Era
3,137
4,723
3,253
3,094
3,260
3,217
3,094
New Horizons
4,084
6,157
4,251
4,034
4,244
4,193
4,034
New Income
3,334
5,017
3,453
3,287
3,461
3,417
3,287
New Jersey Tax-Free Bond
757
1,141
787
748
787
777
748
New York Tax-Free Bond
788
1,187
819
777
818
808
777
New York Tax-Free Money
720
1,084
748
710
748
738
710
Overseas Stock
982
1,475
1,012
967
1,020
1,005
967
Personal Strategy Balanced
1,339
2,018
1,393
1,323
1,391
1,374
1,323
Personal Strategy Growth
1,209
1,822
1,256
1,194
1,256
1,241
1,194
Personal Strategy Income
970
1,462
1,008
958
1,008
996
958
Prime Reserve
3,274
4,935
3,406
3,233
3,403
3,361
3,233
Real Estate
1,847
2,787
1,927
1,826
1,921
1,898
1,826
TRP Reserve Investment
5,682
8,563
5,910
5,610
5,904
5,832
5,610
Retirement 2005
1,011
1,523
1,051
998
1,051
1,038
998
Retirement 2010
2,333
3,512
2,419
2,301
2,423
2,392
2,301
Retirement 2015
1,877
2,825
1,946
1,851
1,950
1,924
1,851
Retirement 2020
3,095
4,658
3,207
3,052
3,215
3,172
3,052
Retirement 2025
1,753
2,639
1,817
1,729
1,821
1,797
1,729
Retirement 2030
2,289
3,445
2,372
2,257
2,378
2,346
2,257
Retirement 2035
1,194
1,798
1,238
1,178
1,241
1,225
1,178
Retirement 2040
1,494
2,248
1,548
1,473
1,552
1,531
1,473
Retirement 2045
830
1,250
862
819
863
852
819
Retirement 2050(d)
669
1,008
696
660
695
687
660
Retirement 2055(d)
666
1,004
692
658
692
684
658
Retirement Income
1,163
1,751
1,207
1,147
1,208
1,193
1,147
Science & Technology
2,162
3,259
2,249
2,135
2,248
2,219
2,135
Short-Term Bond
1,332
2,008
1,386
1,316
1,384
1,368
1,316
Short-Term Income
1,092
1,644
1,134
1,077
1,135
1,120
1,077
Small-Cap Stock
4,265
6,432
4,446
4,214
4,431
4,381
4,214
Small-Cap Value
3,598
5,426
3,750
3,555
3,739
3,696
3,555
Spectrum Growth
2,400
3,617
2,497
2,370
2,493
2,463
2,370
Spectrum Income
2,819
4,247
2,930
2,783
2,929
2,893
2,783
Spectrum International
835
1,257
867
824
867
856
824
Summit Cash Reserves
3,049
4,595
3,171
3,010
3,169
3,129
3,010
Summit GNMA
694
1,046
722
685
722
713
685
Summit Municipal Income
868
1,308
902
857
902
891
857
Summit Municipal Intermediate
922
1,389
958
910
958
945
910
Summit Municipal Money Market
798
1,203
830
788
830
819
788
Tax-Efficient Balanced
678
1,021
704
669
705
695
669
Tax-Efficient Growth
690
1,039
717
681
716
708
681
Tax-Efficient Multi-Cap Growth
678
1,021
705
669
704
696
669
Tax-Exempt Money
1,098
1,654
1,141
1,084
1,141
1,127
1,084
Tax-Free High Yield
1,386
2,090
1,443
1,369
1,440
1,423
1,369
Tax-Free Income
1,514
2,282
1,576
1,495
1,574
1,554
1,495
Tax-Free Short-Intermediate
891
1,343
926
880
926
914
880
Total Equity Market Index
894
1,347
929
883
929
918
883
U.S. Bond Index
761
1,146
790
751
791
781
751
U.S. Treasury Intermediate
769
1,158
798
759
798
788
759
U.S. Treasury Long-Term
831
1,252
864
820
864
853
820
U.S. Treasury Money
1,132
1,706
1,176
1,117
1,176
1,162
1,117
Value
4,150
6,253
4,314
4,097
4,312
4,258
4,097
Virginia Tax-Free Bond
913
1,376
949
902
949
937
902
</R>

(a)For the period September 4, 2007, through December 31, 2007.

(b)Estimated for the period April 30, 2008, through December 31, 2008.

(c)Estimated for the period January 31, 2008, through December 31, 2008.

(d)For the period May 31, 2007, through December 31, 2007.

(e)For the period October 31, 2007, through December 31, 2007.

Directors` Holdings in the Price Funds

The following tables set forth the Price Fund holdings of the independent and inside directors, as of December 31, 2007, unless otherwise indicated.


Aggregate Holdings,
All Funds


Independent Directors























Casey


Deering


Dick


Fagin


Horn


Rodgers


Schreiber





over $100,000


over $100,000


over $100,000


over $100,000


over $100,000


over $100,000


over $100,000

Africa & Middle East
None
over $100,000
None
None
None
None
None
Balanced
None
None
None
None
None
None
None
Blue Chip Growth
over $100,000
None
$10,001-$50,000
over $100,000
$50,001-$100,000
 None
over $100,000
Blue Chip Growth Fund—Advisor Class
None
None
None
None
None
None
None
Blue Chip Growth Fund—
R Class
None
None
None
None
None
None
None
Blue Chip Growth Portfolio
None
None
None
None
None
None
None
Blue Chip Growth Portfolio—II
None
None
None
None
None
None
None
California Tax-Free Bond
None
None
None
None
None
None
None
California Tax-Free Money
None
None
None
None
None
None
None
Capital Appreciation
None
None
over $100,000
None
None
over $100,000
None
Capital Appreciation Fund—Advisor Class
None
None
None
None
None
None
None
Capital Opportunity
over $100,000
None
None
None
None
None
None
Capital Opportunity Fund—Advisor Class
None
None
None
None
None
None
None
Capital Opportunity Fund—R Class
None
None
None
None
None
None
None
Corporate Income
over $100,000
None
$50,001-$100,000
None
None
None
None
Developing Technologies
None
None
None
None
None
over $100,000
None
Diversified Mid-Cap Growth
None
None
None
$50,001-$100,000
None
over $100,000
None
Diversified Small-Cap Growth
None
None
None
None
None
None
None
Dividend Growth
None
None
None
$50,001-$100,000
$50,001-$100,000
None
None
Dividend Growth Fund—Advisor Class
None
None
None
None
None
None
None
Emerging Europe & Mediterranean
None
None
None
None
None
None
None
Emerging Markets Bond
None
None
None
None
None
over $100,000
None
Emerging Markets Stock
$50,001-$100,000
over $100,000
None
None
None
over $100,000
None
Equity Income
over $100,000
over $100,000
over $100,000
over $100,000
None
None
None
Equity Income Fund—Advisor Class
None
None
None
None
None
None
None
Equity Income Fund—
R Class
None
None
None
None
None
None
None
Equity Income Portfolio
None
None
None
None
None
None
None
Equity Income Portfolio—II
None
None
None
None
None
None
None
Equity Index 500
None
None
None
None
None
None
None
Equity Index 500 Portfolio
None
None
None
None
None
None
None
European Stock
None
$10,001-$50,000
None
$50,001-$100,000
None
None
None
Extended Equity Market Index
None
None
None
None
None
over $100,000
None
Financial Services
None
None
$10,001-$50,000
None
None
None
None
Georgia Tax-Free Bond
None
None
None
None
None
None
None
Global Stock
None
over $100,000
over $100,000
$10,001-$50,000
None
None
None
Global Stock Fund—Advisor Class
None
None
None
None
None
None
None
Global Technology
None
None
None
None
None
None
None
GNMA
None
None
None
None
None
None
over $100,000
TRP Government Reserve Investment
None
None
None
None
None
None
None
Growth & Income
None
None
$1-$10,000
None
None
None
over $100,000
Growth Stock
None
over $100,000
over $100,000
over $100,000
None
None
None
Growth Stock Fund—Advisor Class
None
None
None
None
None
None
None
Growth Stock Fund—
R Class
None
None
None
None
None
None
None
Health Sciences
None
None
$10,001-$50,000
$50,001-$100,000
None
None
None
Health Sciences Portfolio
None
None
None
None
None
None
None
Health Sciences Portfolio—II
None
None
None
None
None
None
None
High Yield
$50,001-$100,000
None
$50,001-$100,000
None
$1-$10,000
None
over $100,000
High Yield Fund—Advisor Class
None
None
None
None
None
None
None
Inflation Protected Bond
None
None
None
None
None
None
None
Institutional Concentrated Large-Cap Value
None
None
None
None
None
None
None
Institutional Core Plus
None
None
None
None
None
None
None
Institutional Emerging Markets Bond
None
None
None
None
None
None
None
Institutional Emerging Markets Equity
None
None
None
None
None
None
None
Institutional Foreign Equity
None
None
None
None
None
None
None
Institutional Global Equity
None
None
None
None
None
None
None
Institutional High Yield
None
None
None
None
None
None
None
Institutional International Bond
None
None
None
None
None
None
None
Institutional Large-Cap Core Growth
None
None
None
None
None
None
None
Institutional Large-Cap Growth
None
None
None
None
None
None
None
Institutional Large-Cap Value
None
None
None
None
None
None
None
Institutional Mid-Cap Equity Growth
None
None
None
None
None
None
None
Institutional Small-Cap Stock
None
None
None
None
None
None
None
Institutional U.S. Structured Research
None
None
None
None
None
None
None
International Bond
None
None
$50,001-$100,000
None
None
None
None
International Bond Fund—Advisor Class
None
None
None
None
None
None
None
International Discovery
$10,001-$50,000
$50,001-$100,000
None
None
None
None
None
International Equity Index
None
None
None
None
None
None
None
International Growth & Income
None
None
None
$50,001-$100,000
None
None
None
International Growth & Income Fund—Advisor Class
None
None
None
None
None
None
None
International Growth & Income Fund—R Class
None
None
None
None
None
None
None
International Stock
None
over $100,000
None
over $100,000
None
None
None
International Stock Fund—Advisor Class
None
None
None
None
None
None
None
International Stock Fund—
R Class
None
None
None
None
None
None
None
International Stock Portfolio
None
None
None
None
None
None
None
Japan
None
None
None
None
None
None
None
Latin America
None
None
None
None
None
over $100,000
None
Limited-Term Bond Portfolio
None
None
None
None
None
None
None
Limited-Term Bond Portfolio—II
None
None
None
None
None
None
None
Maryland Short-Term
Tax-Free Bond
None
None
None
None
None
None
None
Maryland Tax-Free Bond
None
None
None
None
None
None
None
Maryland Tax-Free Money
None
None
None
None
None
None
None
Media & Telecommunications
$10,001-$50,000
over $100,000
None
$50,001-$100,000
None
None
None
Mid-Cap Growth
None
None
$10,001-$50,000
over $100,000
None
None
None
Mid-Cap Growth Fund—Advisor Class
None
None
None
None
None
None
None
Mid-Cap Growth Fund—
R Class
None
None
None
None
None
None
None
Mid-Cap Growth Portfolio
None
None
None
None
None
None
None
Mid-Cap Growth
Portfolio—II
None
None
None
None
None
None
None
Mid-Cap Value
None
None
None
over $100,000
None
None
None
Mid-Cap Value Fund—Advisor Class
None
None
None
None
None
None
None
Mid-Cap Value Fund—
R Class
None
None
None
None
None
None
None
New America Growth
None
None
None
None
None
over $100,000
None
New America Growth Fund—Advisor Class
None
None
None
None
None
None
None
New America Growth Portfolio
None
None
None
None
None
None
None
New Asia
None
None
None
$50,001-$100,000
None
None
None
New Era
None
None
None
over $100,000
None
None
None
New Horizons
over $100,000
None
$10,001-$50,000
$1-$10,000
None
None
None
New Income
over $100,000
None
over $100,000
over $100,000
None
None
over $100,000
New Income Fund—Advisor Class
None
None
None
None
None
None
None
New Income Fund—
R Class
None
None
None
None
None
None
None
New Jersey Tax-Free Bond
None
None
None
None
None
None
None
New York Tax-Free Bond
None
None
None
None
None
None
None
New York Tax-Free Money
None
None
None
None
None
None
None
Overseas Stock
None
None
None
None
None
None
None
Personal Strategy Balanced
None
None
None
None
None
None
None
Personal Strategy Balanced Portfolio
None
None
None
None
None
None
None
Personal Strategy Growth
None
None
None
None
None
None
None
Personal Strategy Income
None
None
None
None
None
None
None
Prime Reserve
None
None
$1-$10,000
None
None
$10,001-$50,000
$10,001-$50,000
Prime Reserve Portfolio
None
None
None
None
None
None
None
Real Estate
$50,001-$100,000
None
None
$50,001-$100,000
None
None
None
Real Estate Fund—Advisor Class
None
None
None
None
None
None
None
TRP Reserve Investment
None
None
None
None
None
None
None
Retirement 2005
None
None
None
None
None
None
None
Retirement 2005 Fund—Advisor Class
None
None
None
None
None
None
None
Retirement 2005 Fund—
R Class
None
None
None
None
None
None
None
Retirement 2010
None
None
None
None
None
None
None
Retirement 2010 Fund—Advisor Class
None
None
None
None
None
None
None
Retirement 2010 Fund—
R Class
None
None
None
None
None
None
None
Retirement 2015
None
None
None
None
None
None
None
Retirement 2015 Fund—Advisor Class
None
None
None
None
None
None
None
Retirement 2015 Fund—
R Class
None
None
None
None
None
None
None
Retirement 2020
None
None
None
None
$50,001-$100,000
None
None
Retirement 2020 Fund—Advisor Class
None
None
None
None
None
None
None
Retirement 2020 Fund—
R Class
None
None
None
None
None
None
None
Retirement 2025
None
None
None
None
None
None
None
Retirement 2025 Fund—Advisor Class
None
None
None
None
None
None
None
Retirement 2025 Fund—
R Class
None
None
None
None
None
None
None
Retirement 2030
None
None
None
None
None
None
None
Retirement 2030 Fund—Advisor Class
None
None
None
None
None
None
None
Retirement 2030 Fund—
R Class
None
None
None
None
None
None
None
Retirement 2035
None
None
None
None
None
None
None
Retirement 2035 Fund—Advisor Class
None
None
None
None
None
None
None
Retirement 2035 Fund—
R Class
None
None
None
None
None
None
None
Retirement 2040
None
None
None
None
None
None
None
Retirement 2040 Fund—Advisor Class
None
None
None
None
None
None
None
Retirement 2040 Fund—
R Class
None
None
None
None
None
None
None
Retirement 2045
None
None
None
None
None
None
None
Retirement 2045 Fund—Advisor Class
None
None
None
None
None
None
None
Retirement 2045 Fund—
R Class
None
None
None
None
None
None
None
Retirement 2050
None
None
None
None
None
None
None
Retirement 2050 Fund—Advisor Class
None
None
None
None
None
None
None
Retirement 2050 Fund—
R Class
None
None
None
None
None
None
None
Retirement 2055
None
None
None
None
None
None
None
Retirement 2055 Fund—Advisor Class
None
None
None
None
None
None
None
Retirement 2055 Fund—
R Class
None
None
None
None
None
None
None
Retirement Income
None
None
None
None
None
None
None
Retirement Income Fund—Advisor Class
None
None
None
None
None
None
None
Retirement Income Fund—
R Class
None
None
None
None
None
None
None
Science & Technology
None
None
None
None
None
over $100,000
None
Science & Technology Fund—Advisor Class
None
None
None
None
None
None
None
Short-Term Bond
None
None
$50,001-$100,000
over $100,000
None
None
over $100,000
Short-Term Bond Fund—Advisor Class
None
None
None
None
None
None
None
Short-Term Income
None
None
None
None
None
None
None
Small-Cap Stock
None
None
$10,001-$50,000
over $100,000
None
None
None
Small-Cap Stock Fund—Advisor Class
None
None
None
None
None
None
None
Small-Cap Value
None
None
$10,001-$50,000
None
None
None
None
Small-Cap Value Fund—Advisor Class
None
None
None
None
None
None
None
Spectrum Growth
None
None
None
$10,001-$50,000
None
over $100,000
None
Spectrum Income
None
None
over $100,000
None
None
None
None
Spectrum International
None
None
None
None
None
None
None
Summit Cash Reserves
None
None
over $100,000
over $100,000
$50,001-$100,000
None
$1-$10,000
Summit GNMA
None
None
over $100,000
None
None
None
None
Summit Municipal Income
None
None
None
None
None
None
over $100,000
Summit Municipal Intermediate
None
None
None
over $100,000
None
None
over $100,000
Summit Municipal Money Market
None
None
None
$10,001-$50,000
None
None
$50,001-$100,000
Tax-Efficient Balanced
None
None
None
None
None
None
None
Tax-Efficient Growth
None
None
None
None
None
None
None
Tax-Efficient Multi-Cap Growth
None
None
None
None
None
None
None
Tax-Exempt Money
None
None
None
None
None
None
$1-$10,000
Tax-Free High Yield
None
None
None
$50,001-$100,000
None
None
over $100,000
Tax-Free Income
None
None
None
None
None
None
over $100,000
Tax-Free Income Fund—Advisor Class
None
None
None
None
None
None
None
Tax-Free Short-Intermediate
None
None
None
over $100,000
None
None
over $100,000
Total Equity Market Index
None
None
None
None
None
None
None
U.S. Bond Index
None
None
None
None
None
None
None
U.S. Treasury Intermediate
None
None
$50,001-$100,000
None
None
None
over $100,000
U.S. Treasury Long-Term
None
None
None
None
None
None
over $100,000
U.S. Treasury Money
None
None
None
None
None
None
$1-$10,000
Value
None
None
None
over $100,000
None
None
over $100,000
Value Fund—Advisor Class
None
None
None
None
None
None
None
Virginia Tax-Free Bond
None
None
None
None
None
None
None


Aggregate Holdings,
All Funds


Inside Directors














Bernard


Laporte


Miller


Rogers





over $100,000


over $100,000


over $100,000


over $100,000

Africa & Middle East
None
None
None
None
Balanced
None
None
None
None
Blue Chip Growth
None
None
None
None
Blue Chip Growth Fund—Advisor Class
None
None
None
None
Blue Chip Growth Fund—R Class
None
None
None
None
Blue Chip Growth Portfolio
None
None
None
None
Blue Chip Growth Portfolio—II
None
None
None
None
California Tax-Free Bond
None
None
None
None
California Tax-Free Money
None
None
None
None
Capital Appreciation
None
over $100,000
None
None
Capital Appreciation Fund—Advisor Class
None
None
None
None
Capital Opportunity
None
over $100,000
None
None
Capital Opportunity Fund—Advisor Class
None
None
None
None
Capital Opportunity Fund—R Class
None
None
None
None
Corporate Income
None
None
None
None
Developing Technologies
$50,001-$100,000
over $100,000
over $100,000
over $100,000
Diversified Mid-Cap Growth
None
None
None
None
Diversified Small-Cap Growth
None
None
None
None
Dividend Growth
None
None
None
None
Dividend Growth Fund—Advisor Class
None
None
None
None
Emerging Europe & Mediterranean
None
None
None
None
Emerging Markets Bond
None
None
over $100,000
None
Emerging Markets Stock
over $100,000
None
None
None
Equity Income
over $100,000
None
over $100,000
over $100,000
Equity Income Fund—Advisor Class
None
None
None
None
Equity Income Fund—R Class
None
None
None
None
Equity Income Portfolio
None
None
None
None
Equity Income Portfolio—II
None
None
None
None
Equity Index 500
None
None
None
None
Equity Index 500 Portfolio
None
None
None
None
European Stock
None
$50,001-$100,000
over $100,000
None
Extended Equity Market Index
None
None
None
None
Financial Services
None
None
None
None
Georgia Tax-Free Bond
None
None
None
None
Global Stock
over $100,000
over $100,000
None
over $100,000
Global Stock Fund—Advisor Class
None
None
None
None
Global Technology
None
None
None
None
GNMA
None
None
None
None
TRP Government Reserve Investment
None
None
None
None
Growth & Income
None
None
None
None
Growth Stock
over $100,000
over $100,000
$50,001-$100,000
over $100,000
Growth Stock Fund—Advisor Class
None
None
None
None
Growth Stock Fund—R Class
None
None
None
None
Health Sciences
None
None
None
None
Health Sciences Portfolio
None
None
None
None
Health Sciences Portfolio—II
None
None
None
None
High Yield
$10,001-$50,000
None
over $100,000
None
High Yield Fund—Advisor Class
None
None
None
None
Inflation Protected Bond
None
None
over $100,000
None
Institutional Concentrated Large-Cap Value
None
None
None
None
Institutional Core Plus
None
None
None
None
Institutional Emerging Markets Bond
None
None
None
None
Institutional Emerging Markets Equity
None
None
None
None
Institutional Foreign Equity
None
None
None
None
Institutional Global Equity
None
None
None
None
Institutional High Yield
None
None
None
None
Institutional International Bond
None
None
None
None
Institutional Large-Cap Core Growth
None
None
None
None
Institutional Large-Cap Growth
None
None
None
None
Institutional Large-Cap Value
None
None
None
None
Institutional Mid-Cap Equity Growth
None
None
None
None
Institutional Small-Cap Stock
None
None
None
None
Institutional U.S. Structured Research
None
None
None
None
International Bond
None
None
over $100,000
None
International Bond Fund—Advisor Class
None
None
None
None
International Discovery
$10,001-$50,000
over $100,000
None
None
International Equity Index
None
None
None
None
International Growth & Income
None
None
None
None
International Growth & Income Fund—Advisor Class
None
None
None
None
International Growth & Income Fund—R Class
None
None
None
None
International Stock
over $100,000
over $100,000
over $100,000
None
International Stock Fund—Advisor Class
None
None
None
None
International Stock Fund—R Class
None
None
None
None
International Stock Portfolio
None
None
None
None
Japan
None
None
over $100,000
over $100,000
Latin America
None
None
None
None
Limited-Term Bond Portfolio
None
None
None
None
Limited-Term Bond Portfolio—II
None
None
None
None
Maryland Short-Term Tax-Free Bond
None
None
None
None
Maryland Tax-Free Bond
None
over $100,000
over $100,000
None
Maryland Tax-Free Money
None
None
over $100,000
None
Media & Telecommunications
None
over $100,000
None
$50,001-$100,000
Mid-Cap Growth
over $100,000
over $100,000
None
None
Mid-Cap Growth Fund—Advisor Class
None
None
None
None
Mid-Cap Growth Fund—R Class
None
None
None
None
Mid-Cap Growth Portfolio
None
None
None
None
Mid-Cap Growth Portfolio—II
None
None
None
None
Mid-Cap Value
None
None
None
None
Mid-Cap Value Fund—Advisor Class
None
None
None
None
Mid-Cap Value Fund—R Class
None
None
None
None
New America Growth
None
over $100,000
None
over $100,000
New America Growth Fund—Advisor Class
None
None
None
None
New America Growth Portfolio
None
None
None
None
New Asia
over $100,000
over $100,000
over $100,000
None
New Era
None
None
over $100,000
None
New Horizons
over $100,000
over $100,000
None
None
New Income
None
$50,001-$100,000
None
$50,001-$100,000
New Income Fund—Advisor Class
None
None
None
None
New Income Fund—R Class
None
None
None
None
New Jersey Tax-Free Bond
None
None
None
None
New York Tax-Free Bond
None
None
None
None
New York Tax-Free Money
None
None
None
None
Overseas Stock
None
None
None
None
Personal Strategy Balanced
None
None
None
None
Personal Strategy Balanced Portfolio
None
None
None
None
Personal Strategy Growth
None
None
None
None
Personal Strategy Income
None
None
None
None
Prime Reserve
over $100,000
over $100,000
None
$50,001-$100,000
Prime Reserve Portfolio
None
None
None
None
Real Estate
None
None
None
None
Real Estate Fund—Advisor Class
None
None
None
None
TRP Reserve Investment
None
None
None
None
Retirement 2005
None
None
None
None
Retirement 2005 Fund—Advisor Class
None
None
None
None
Retirement 2005 Fund—R Class
None
None
None
None
Retirement 2010
None
None
None
None
Retirement 2010 Fund—Advisor Class
None
None
None
None
Retirement 2010 Fund—R Class
None
None
None
None
Retirement 2015
None
None
None
None
Retirement 2015 Fund—Advisor Class
None
None
None
None
Retirement 2015 Fund—R Class
None
None
None
None
Retirement 2020
None
None
None
None
Retirement 2020 Fund—Advisor Class
None
None
None
None
Retirement 2020 Fund—R Class
None
None
None
None
Retirement 2025
None
None
None
None
Retirement 2025 Fund—Advisor Class
None
None
None
None
Retirement 2025 Fund—R Class
None
None
None
None
Retirement 2030
None
None
None
None
Retirement 2030 Fund—Advisor Class
None
None
None
None
Retirement 2030 Fund—R Class
None
None
None
None
Retirement 2035
None
None
None
None
Retirement 2035 Fund—Advisor Class
None
None
None
None
Retirement 2035 Fund—R Class
None
None
None
None
Retirement 2040
None
None
None
None
Retirement 2040 Fund—Advisor Class
None
None
None
None
Retirement 2040 Fund—R Class
None
None
None
None
Retirement 2045
None
None
None
None
Retirement 2045 Fund—Advisor Class
None
None
None
None
Retirement 2045 Fund—R Class
None
None
None
None
Retirement 2050
None
None
None
None
Retirement 2050 Fund—Advisor Class
None
None
None
None
Retirement 2050 Fund—R Class
None
None
None
None
Retirement 2055
over $100,000
None
None
None
Retirement 2055 Fund—Advisor Class
None
None
None
None
Retirement 2055 Fund—R Class
None
None
None
None
Retirement Income
None
None
None
None
Retirement Income Fund—Advisor Class
None
None
None
None
Retirement Income Fund—R Class
None
None
None
None
Science & Technology
$50,001-$100,000
over $100,000
$10,001-$50,000
None
Science & Technology Fund—Advisor Class
None
None
None
None
Short-Term Bond
None
None
over $100,000
over $100,000
Short-Term Bond Fund—Advisor Class
None
None
None
None
Short-Term Income
None
None
None
None
Small-Cap Stock
$10,001-$50,000
None
$10,001-$50,000
None
Small-Cap Stock Fund—Advisor Class
None
None
None
None
Small-Cap Value
over $100,000
None
None
over $100,000
Small-Cap Value Fund—Advisor Class
None
None
None
None
Spectrum Growth
None
None
over $100,000
None
Spectrum Income
$10,001-$50,000
None
$50,001-$100,000
over $100,000
Spectrum International
$10,001-$50,000
None
None
None
Summit Cash Reserves
over $100,000
over $100,000
over $100,000
over $100,000
Summit GNMA
None
None
None
None
Summit Municipal Income
None
None
None
None
Summit Municipal Intermediate
None
None
None
None
Summit Municipal Money Market
None
None
None
None
Tax-Efficient Balanced
None
None
over $100,000
None
Tax-Efficient Growth
None
None
None
None
Tax-Efficient Multi-Cap Growth
None
None
None
None
Tax-Exempt Money
None
None
$10,001-$50,000
None
Tax-Free High Yield
None
None
None
None
Tax-Free Income
None
None
over $100,000
None
Tax-Free Income Fund—Advisor Class
None
None
None
None
Tax-Free Short-Intermediate
None
None
None
None
Total Equity Market Index
None
None
None
None
U.S. Bond Index
None
None
None
None
U.S. Treasury Intermediate
None
None
None
None
U.S. Treasury Long-Term
None
None
$50,001-$100,000
None
U.S. Treasury Money
None
None
None
None
Value
None
over $100,000
$50,001-$100,000
over $100,000
Value Fund—Advisor Class
None
None
None
None
Virginia Tax-Free Bond
None
None
None
None

Portfolio Managers` Holdings in the Price Funds

The following tables set forth the Price Fund holdings of each fund`s portfolio manager(s). The portfolio manager for each fund normally serves as chairman of the fund`s Investment Advisory Committee, and has day-to-day responsibility for managing the fund and executing the fund`s investment program.<R>

Fund





Range of Fund Holdings
as of Fund`s Fiscal Year a


All Funds
Range as of
12/31/07





Portfolio Manager







Africa & Middle East
Christopher D. Alderson (b)
over $1,000,000
over $1,000,000
Balanced
Edmund M. Notzon III
none
over $1,000,000
Blue Chip Growth
Larry J. Puglia
$500,001—$1,000,000
over $1,000,000
Capital Appreciation
David R. Giroux
$100,001—$500,000
$100,001—$500,000
Capital Opportunity
Anna Dopkin
$500,001—$1,000,000
over $1,000,000
Corporate Income
David A. Tiberii
$10,001—$50,000
$500,001—$1,000,000
Developing Technologies
Jeffrey Rottinghaus
$10,001—$50,000
over $1,000,000
Diversified Mid-Cap Growth
Donald J. Peters
$500,001—$1,000,000
over $1,000,000
Diversified Small-Cap Growth
Sudhir Nanda
$10,001—$50,000
$100,001—$500,000
Dividend Growth
Thomas J. Huber
$100,001—$500,000
over $1,000,000
Emerging Europe & Mediterranean
S. Leigh Robertson
none
none
Emerging Markets Bond
Michael J. Conelius
$100,001—$500,000
over $1,000,000
Emerging Markets Stock
Christopher D. AldersonGonzalo Pangaro
$100,001—$500,000(c)
over $1,000,000over $1,000,000
Equity Income
Brian C. Rogers
over $1,000,000
over $1,000,000
Equity Index 500
E. Frederick Bair
$50,001—$100,000
$100,001—$500,000
European Stock 
Dean Tenerelli
none
none
Extended Equity Market Index
E. Frederick Bair
$10,001—$50,000
$100,001—$500,000
Financial Services
Jeffrey W. Arricale
$50,001—$100,000
$100,001—$500,000
Global Stock
Robert N. Gensler
over $1,000,000
over $1,000,000
Global Technology
David J. Eiswert
(d)
$500,000-$1,000,000
GNMA
Andrew McCormick
$10,001—$50,000
(e)
Growth & Income
Thomas J. Huber
$100,001—$500,000
over $1,000,000
Growth Stock
P. Robert Bartolo
$100,001—$500,000
over $1,000,000
Health Sciences
Kris H. Jenner
$100,001—$500,000
$500,001—$1,000,000
High Yield
Mark J. Vaselkiv
$100,001—$500,000
over $1,000,000
Inflation Protected Bond
Daniel O. Shackelford
$10,001—$50,000
over $1,000,000
International Bond
Ian D. Kelson
$100,001—$500,000
$100,001—$500,000
International Discovery 
Justin Thomson
$100,001—$500,000
$100,001—$500,000
International Equity Index
E. Frederick Bair
Neil Smith
$10,001—$50,000
none
$100,001—$500,000
none
International Growth & Income
Raymond A. Mills, Ph.D.
$100,001—$500,000
$500,001—$1,000,000
International Stock 
Robert W. Smith
$100,001—$500,000
over $1,000,000
Japan
M. Campbell Gunn
none
none
Latin America
Gonzalo Pangaro (f)
$100,001—$500,000
over $1,000,000
Maryland Short-Term Tax-Free Bond
Charles B. Hill
$1—$10,000
over $1,000,000
Maryland Tax-Free Bond
Hugh D. McGuirk
$100,001—$500,000
over $1,000,000
Maryland Tax-Free Money
Joseph K. Lynagh
$10,001—$50,000
over $1,000,000
Media & Telecommunications
Henry M. Ellenbogen
$100,001—$500,000
over $1,000,000
Mid-Cap Growth
Brian W.H. Berghuis
over $1,000,000
over $1,000,000
Mid-Cap Value
David J. Wallack
$500,001—$1,000,000
over $1,000,000
New America Growth
Joseph M. Milano
over $1,000,000
over $1,000,000
New Asia
Frances Dydasco
none
$10,001—$50,000
New Era
Charles M. Ober
$100,001—$500,000
over $1,000,000
New Horizons
John H. Laporte
over $1,000,000
over $1,000,000
New Income
Daniel O. Shackelford
$10,001—$50,000
over $1,000,000
Overseas Stock
Raymond A. Mills, Ph.D.
$100,001—$500,000
$500,001—$1,000,000
Personal Strategy Balanced
Edmund M. Notzon III
$100,001—$500,000
over $1,000,000
Personal Strategy Growth
Edmund M. Notzon III
$100,001—$500,000
over $1,000,000
Personal Strategy Income
Edmund M. Notzon III
$100,001—$500,000
over $1,000,000
Prime Reserve
James M. McDonald (g)
$100,001—$500,000
over $1,000,000
Real Estate
David M. Lee
$100,001—$500,000
over $1,000,000
Science & Technology
Michael F. Sola (h)
$100,001—$500,000
over $1,000,000
Short-Term Bond
Edward A. Wiese
$100,001—$500,000
over $1,000,000
Small-Cap Stock
Gregory A. McCrickard
$100,001—$500,000
over $1,000,000
Small-Cap Value
Preston G. Athey
over $1,000,000
over $1,000,000
Spectrum Growth
Edmund M. Notzon III
$500,001—$1,000,000
over $1,000,000
Spectrum Income
Edmund M. Notzon III
$500,001—$1,000,000
over $1,000,000
Spectrum International
David J.L. Warren (i)
none
$500,001—$1,000,000
Summit Cash Reserves
James M. McDonald (g)
$10,001—$50,000
over $1,000,000
Summit GNMA
Andrew McCormick
(j)
(e)
Summit Municipal Income
Konstantine B. Mallas
$10,001—$50,000
over $1,000,000
Summit Municipal Intermediate
Charles B. Hill
$10,001—$50,000
over $1,000,000
Summit Municipal Money Market
Joseph K. Lynagh
none
over $1,000,000
Tax-Efficient Balanced
Hugh D. McGuirk
Donald J. Peters
$100,000—$500,000
over $1,000,000
over $1,000,000
over $1,000,000
Tax-Efficient Growth
Donald J. Peters
over $1,000,000
over $1,000,000
Tax-Efficient Multi-Cap Growth
Donald J. Peters
over $1,000,000
over $1,000,000
Tax-Exempt Money
Joseph K. Lynagh
none
over $1,000,000
Tax-Free High Yield
James M. Murphy
$10,001—$50,000
over $1,000,000
Tax-Free Income
Konstantine B. Mallas
Mary J. Miller
none
$500,001—$1,000,000
over $1,000,000
over $1,000,000
Tax-Free Short-Intermediate
Charles B. Hill
none
over $1,000,000
Total Equity Market Index
E. Frederick Bair
Ken D. Uematsu
$10,001—$50,000
$0—$10,000
$100,001—$500,000
$100,001—$500,000
U.S. Bond Index
Robert M. Larkins
$1—$10,000
$100,001—$500,000
U.S. Treasury Intermediate
Brian J. Brennan
$10,001—$50,000
$500,001—$1,000,000
U.S. Treasury Long-Term
Brian J. Brennan
$10,001—$50,000
$500,001—$1,000,000
U.S. Treasury Money
James M. McDonald (g)
none
over $1,000,000
Value
John D. Linehan
$100,001—$500,000
over $1,000,000
</R>

<R>
(a)See table beginning on page 6 for the fiscal year of the funds. The range of fund holdings as of the fund`s fiscal year is updated concurrently with each fund`s prospectus date as shown in the table beginning on page 6.
</R>

<R>
(b)On March 31, 2009, Joseph Rohm will replace Christopher D. Alderson as portfolio manager of the fund.
</R>

<R>
(c)On September 11, 2008, Gonzalo Pangaro became co-portfolio manager of the fund. The range of fund holdings as of the fund`s fiscal year will be updated concurrently with its prospectus date as shown in the table beginning on page 6.
</R>

<R>
(d)On October 1, 2008, David J. Eiswert became the portfolio manager of the fund. The range of fund holdings as of the fund`s fiscal year will be updated concurrently with its prospectus date as shown in the table beginning on page 6.
</R>

<R>
(e)Andrew McCormick joined T. Rowe Price in 2008. Therefore, the range of fund holdings in all T. Rowe Price funds are not available as of 12/31/07.
</R>

<R>
(f)On December 31, 2008, Jose Costa Buck will replace Gonzalo Pangaro as portfolio manager of the fund.
</R>

<R>
(g)On January 30, 2009, Joseph K. Lynagh will replace James M. McDonald as portfolio manager of the fund.
</R>

<R>
(h)Effective January 1, 2009, Kennard W. Allen will replace Michael F. Sola as portfolio manager of the fund.
</R>

<R>
(i)On March 31, 2009, Christopher D. Alderson will replace David J.L. Warren as portfolio manager of the fund.
</R>

<R>
(j)On April 1, 2008, Andrew McCormick became the portfolio manager of the fund. The range of fund holdings as of the fund`s fiscal year will be updated concurrently with its prospectus date as shown in the table beginning on page 6.
</R>

<R>
The following funds may be purchased only by institutional investors.<R>

Fund





Range of Fund Holdings
as of Fund`s Fiscal Year a


All Funds
Range as of
12/31/07





Portfolio Manager







Institutional Africa & Middle East
Christopher D. Alderson (b)
(c)
over $1,000,000
Institutional Concentrated Large-Cap Value
David R. Giroux
John D. Linehan
none
none
$100,001—$500,000
 over $1,000,000
Institutional Core Plus 
Brian J. Brennan
none
$500,001—$1,000,000
Institutional Emerging Markets Bond 
Michael J. Conelius
none
 over $1,000,000
Institutional Emerging Markets Equity 
Christopher D. AldersonGonzalo Pangaro
none(d)
over $1,000,000over $1,000,000
Institutional Floating Rate
Mark J. Vaselkiv
none
over $1,000,000
Institutional Foreign Equity
Robert W. Smith
none
over $1,000,000
Institutional Global Equity
Robert N. Gensler
none
over $1,000,000
Institutional High Yield 
Paul A. Karpers
none
$500,001—$1,000,000
Institutional International Bond
Ian D. Kelson
none
$100,001—$500,000
Institutional Large-Cap Core Growth
Larry J. Puglia
none
over $1,000,000
Institutional Large-Cap Growth
Robert W. Sharps
$100,001—$500,000
over $1,000,000
Institutional Large-Cap Value
David Giroux
John D. Linehan
Brian C. Rogers
none
none
none
$100,001—$500,000
over $1,000,000
over $1,000,000
Institutional Mid-Cap Equity Growth
Brian W.H. Berghuis
none
over $1,000,000
Institutional Small-Cap Stock
Gregory A. McCrickard
none
over $1,000,000
Institutional U.S. Structured Research
Anna Dopkin
none
over $1,000,000
</R>

</R>

<R>
(a)See table beginning on page 6 for the fiscal year of the funds. The range of fund holdings as of the fund`s fiscal year is updated concurrently with each fund`s prospectus date as shown in the table beginning on page 6.
</R>

<R>
(b)On March 31, 2009, Joseph Rohm will replace Christopher D. Alderson as portfolio manager of the fund.
</R>

<R>
(c)The fund incepted after its fiscal year end, therefore, the range of fund holdings as of the fund`s fiscal year will be updated concurrently with its prospectus date as shown in the table beginning on page 6.
</R>

<R>
(d)On September 11, 2008, Gonzalo Pangaro became co-portfolio manager of the fund. The range of fund holdings as of the fund`s fiscal year will be updated concurrently with its prospectus date as shown in the table beginning on page 6.
</R>

<R>
</R>

The following funds are designed as investment options for insurance companies issuing variable annuity or variable life insurance contracts. Variable life insurance contracts may not be suitable investments for these portfolio managers.<R>

Fund





Range of Fund Holdings
as of Fund`s Fiscal Yeara


All Funds
Range as of
12/31/07





Portfolio Manager







Blue Chip Growth Portfolio
Larry J. Puglia
none
over $1,000,000
Equity Income Portfolio
Brian C. Rogers
none
over $1,000,000
Equity Index 500 Portfolio
E. Frederick Bair
none
$100,001—$500,000
Health Sciences Portfolio
Kris H. Jenner
none
$500,001—$1,000,000
International Stock Portfolio
Robert W. Smith
none
over $1,000,000
Limited-Term Bond Portfolio
Edward A. Wiese
none
over $1,000,000
Mid-Cap Growth Portfolio
Brian W.H. Berghuis
none
over $1,000,000
New America Growth Portfolio
Joseph M. Milano
none
over $1,000,000
Personal Strategy Balanced Portfolio
Edmund M. Notzon III
none
over $1,000,000
Prime Reserve Portfolio
James M. McDonald (b)
none
over $1,000,000
</R>

<R>
(a)See table beginning on page 6 for the fiscal year of the funds. The range of fund holdings as of the fund`s fiscal year is updated concurrently with each fund`s prospectus date as shown in the table beginning on page 6.
</R>

<R>
(b)On January 30, 2009, Joseph K. Lynagh will replace James M. McDonald as portfolio manager of the fund.
</R>

The following funds are designed for persons residing in the indicated state. The portfolio managers reside in Maryland.

Fund





Range of Fund Holdings
as of Fund`s Fiscal Year a


All Funds
Range as of
12/31/07





Portfolio Manager







California Tax-Free Bond
Konstantine B. Mallas
none
over $1,000,000
California Tax-Free Money
Joseph K. Lynagh
none
over $1,000,000
Georgia Tax-Free Bond
Hugh D. McGuirk
none
over $1,000,000
New Jersey Tax-Free Bond
Konstantine B. Mallas
none
over $1,000,000
New York Tax-Free Bond
Konstantine B. Mallas
none
over $1,000,000
New York Tax-Free Money 
Joseph K. Lynagh
none
over $1,000,000
Virginia Tax-Free Bond
Hugh D. McGuirk
none
over $1,000,000

<R>
(a)See table beginning on page 6 for the fiscal year of the funds. The range of fund holdings as of the fund`s fiscal year is updated concurrently with each fund`s prospectus date as shown in the table beginning on page 6.
</R>

The following funds are designed such that a single individual would normally select one fund based on that person`s expected retirement date.<R>

Fund





Range of Fund Holdings
as of Fund`s Fiscal Year a


All Funds
Range as of
12/31/07





Portfolio Manager







Retirement 2005
Jerome A. Clark
Edmund M. Notzon III
none
none
$500,001—$1,000,000
over $1,000,000
Retirement 2010 
Jerome A. Clark
Edmund M. Notzon III
none
none
$500,001—$1,000,000
over $1,000,000
Retirement 2015
Jerome A. Clark
Edmund M. Notzon III
none
none
$500,001—$1,000,000
over $1,000,000
Retirement 2020 
Jerome A. Clark
Edmund M. Notzon III
none
none
$500,001—$1,000,000
over $1,000,000
Retirement 2025
Jerome A. Clark
Edmund M. Notzon III
none
none
$500,001—$1,000,000
over $1,000,000
Retirement 2030
Jerome A. Clark
Edmund M. Notzon III
none
none
$500,001—$1,000,000
over $1,000,000
Retirement 2035
Jerome A. Clark
Edmund M. Notzon III
none
none
$500,001—$1,000,000
over $1,000,000
Retirement 2040
Jerome A. Clark
Edmund M. Notzon III
$500,001—$1,000,000
none
$500,001—$1,000,000
over $1,000,000
Retirement 2045
Jerome A. Clark
Edmund M. Notzon III
none
$100,001-$500,000
$500,001—$1,000,000
over $1,000,000
Retirement 2050

Jerome A. Clark
Edmund M. Notzon III
none
none
$500,001—$1,000,000
over $1,000,000
Retirement 2055

Jerome A. Clark
Edmund M. Notzon III
none
none
$500,001—$1,000,000
over $1,000,000
Retirement Income
Jerome A. Clark
Edmund M. Notzon III
none
none
$500,001—$1,000,000
over $1,000,000
</R>

<R>
(a)See table beginning on page 6 for the fiscal year of the funds. The range of fund holdings as of the fund`s fiscal year is updated concurrently with each fund`s prospectus date as shown in the table beginning on page 6.
</R>

<R>
The following funds are not available for direct purchase by members of the public.<R>

Fund





Range of Fund Holdings
as of Fund`s Fiscal Year a


All Funds
Range as of
12/31/07





Portfolio Manager







TRP Government Reserve Investment
James M. McDonald (b)
none
over $1,000,000
TRP Reserve Investment
James M. McDonald (b)
none
over $1,000,000
Short-Term Income
Edward A. Wiese
none
over $1,000,000
</R>

</R>

<R>
(a)See table beginning on page 6 for the fiscal year of the funds. The range of fund holdings as of the fund`s fiscal year is updated concurrently with each fund`s prospectus date as shown in the table beginning on page 6.
</R>

<R>
(b)On January 30, 2009, Joseph K. Lynagh will replace James M. McDonald as portfolio manager of the fund.
</R>

<R>
Portfolio Manager Compensation
</R>

<R>
Portfolio manager compensation consists primarily of a base salary, a cash bonus, and an equity incentive that usually comes in the form of a stock option grant. Occasionally, portfolio managers will also have the opportunity to participate in venture capital partnerships. Compensation is variable and is determined based on the following factors.
</R>

<R>
Investment performance over 1-, 3-, 5-, and 10-year periods is the most important input. T. Rowe Price and T. Rowe Price International, as appropriate, evaluate performance in absolute, relative, and risk-adjusted terms. Relative performance and risk-adjusted performance are determined with reference to the broad-based index (e.g., S&P 500) and the Lipper index (e.g., Large-Cap Growth) set forth in the total returns table in the fund`s prospectus, although other benchmarks may be used as well. Investment results are also measured against comparably managed funds of competitive investment management firms. The selection of comparable funds is approved by the applicable investment steering committee (as described under the "Disclosure of Fund Portfolio Information" section) and those funds are the same ones presented to the directors of the Price Funds in their regular review of fund performance. Performance is primarily measured on a pretax basis though tax efficiency is considered and is especially important for the Tax-Efficient Funds. Compensation is viewed with a long-term time horizon. The more consistent a manager`s performance over time, the higher the compensation opportunity. The increase or decrease in a fund`s assets due to the purchase or sale of fund shares is not considered a material factor. In reviewing relative performance for fixed-income funds, a fund`s expense ratio is usually taken into account.
</R>

<R>
Contribution to our overall investment process is an important consideration as well. Sharing ideas with other portfolio managers, working effectively with and mentoring our younger analysts, and being good corporate citizens are important components of our long-term success and are highly valued.
</R>

<R>
All employees of T. Rowe Price, including portfolio managers, participate in a 401(k) plan sponsored by T. Rowe Price Group. In addition, all employees are eligible to purchase T. Rowe Price common stock through an employee stock purchase plan that features a limited corporate matching contribution. Eligibility for and participation in these plans is on the same basis as for all employees. Finally, all vice presidents of T. Rowe Price Group, including all portfolio managers, receive supplemental medical/hospital reimbursement benefits.
</R>

<R>
This compensation structure is used for all portfolios managed by the portfolio manager.
</R>

<R>
Assets Under Management
</R>

The following table sets forth the number and total assets of the mutual funds and accounts managed by the Price Funds` portfolio managers as of the fiscal year of the funds they manage, unless otherwise indicated. All of the assets of the funds that have multiple portfolio managers are shown as being allocated to all managers of those funds. There are no accounts for which the advisory fee is based on the performance of the account.

<R>




Registered Investment
Companies


Other Pooled Investment
Vehicles


Other Accounts











Portfolio Manager


Number


Total Assets


Number


Total Assets


Number


Total Assets

Christopher D. Alderson
7
$5,994,639,350
4
$4,608,465,674
8
$4,125,737,648
Preston G. Athey
7
7,632,714,515
2
4,612,450
9
655,149,011
Jeffrey W. Arricale
1
368,447,824
—
—
—
—
E. Frederick Bair
9
12,332,946,028
1
3,210,337,269
1
538,003,705
P. Robert Bartolo
12
32,099,484,414
1
232,342,182
7
435,682,172
Brian W.H. Berghuis
8
22,138,787,186
—
—
6
905,933,250
Mark C.J. Bickford-Smith
3
1,461,994,503
1
144,151,894
4
2,071,536,293
Brian J. Brennan
4
861,814,703
5
3,059,510,517
5
657,544,743
Jerome A. Clark
48
37,549,026,945
5
77,680,887
—
—
Michael J. Conelius
4
1,358,408,472
3
263,393,346
1
560,066,402
Anna M. Dopkin
6
2,458,100,862
3
3,304,776,932
36
11,858,072,324
Frances Dydasco
2
10,719,001,818
2
318,228,327
—
—
Mark J.T. Edwards
1
4,817,604,395
1
312,811,515
—
—
Henry M. Ellenbogen
1
2,088,892,732
—
—
—
—
David J. Eiswert (a)
—
—
—
—
—
—
Robert N. Gensler
11
2,588,510,540
6
4,165,743,116
11
5,635,148,114
David R. Giroux
5
15,784,918,345
1
101,114,241
—
—
M. Campbell Gunn
3
3,832,186,637
1
63,631,783
3
1,162,955,561
Charles B. Hill
3
1,320,334,630
2
374,489,606
12
1,133,496,688
Thomas J. Huber
2
2,352,713,063
1
251,256,797
—
—
Kris H. Jenner
5
2,978,801,311
2
78,681,064
1
30,874,052
Paul A. Karpers
1
533,128,001
—
—
—
—
Ian D. Kelson
13
3,676,147,786
23
501,910,149
3
52,828,254
John H. Laporte
2
7,453,520,197
2
316,226,185
8
892,144,853
Robert M. Larkins
1
253,906,934
2
559,206,090
7
1,117,711,356
David M. Lee
3
2,467,002,108
—
—
1
20,479,178
John D. Linehan
6
9,616,367,331
1
259,252,054
13
956,838,134
Anh Lu
1
3,281,732,266
—
—
—
—
Joseph K. Lynagh
5
1,926,630,051
—
—
10
385,150,142
Konstantine B. Mallas
5
3,010,310,238
—
—
4
85,893,936
Andrew McCormick
5
1,661,465,863
1
145,796,744
3
886,109,381
Gregory A. McCrickard
4
7,374,344,493
2
178,589,674
4
536,366,146
James M. McDonald
6
26,300,935,242
1
549,355,087
—
—
Hugh D. McGuirk
4
2,135,325,872
—
—
13
342,252,105
Joseph M. Milano
2
947,716,806
—
—
—
—
Mary J. Miller
1
1,798,668,759
—
—
2
181,984,635
Raymond A. Mills, Ph.D.
4
4,629,259,958
—
—
2
76,647,055
James M. Murphy
1
1,355,086,005
—
—
—
—
Sudhir Nanda
3
694,016,332
—
—
—
—
Edmund M. Notzon III
19
15,572,630,962
14
2,128,922,720
12
1,390,881,170
Charles M. Ober
2
7,965,642,320
1
181,864,187
5
414,380,702
Gonzalo Pangaro
2
8,802,590,757
—
—
—
—
Donald J. Peters
14
2,524,307,678
—
—
24
1,694,102,333
Larry J. Puglia
10
20,381,106,658
1
12,489,423
12
1,488,190,828
S. Leigh Robertson
1
1,730,852,718
—
—
—
—
Brian C. Rogers
12
33,507,593,209
3
659,187,632
16
1,943,552,538
Jeffrey Rottinghaus
2
157,000,380
2
7,886,309
—
—
Daniel O. Shackelford
5
8,925,857,187
1
269,169,016
4
876,246,210
Robert W. Sharps
9
6,248,379,627
4
2,583,548,847
33
6,722,917,766
Neil Smith
1
678,867,039
—
—
—
—
Robert W. Smith
3
7,805,860,977
2
164,935,215
1
156,675,674
Michael F. Sola
3
3,634,678,878
—
—
—
—
Dean Tenerelli
1
1,217,481,612
3
468,437,315
—
—
Justin Thomson
1
3,281,732,266
—
—
—
—
David A. Tiberii
2
275,842,356
2
147,294,366
6
1,845,400,603
Ken D. Uematsu
1
524,938,388
—
—
—
—
Mark J. Vaselkiv
8
6,664,834,741
7
1,811,794,761
16
2,167,789,804
David J. Wallack
3
7,726,736,555
—
—
2
373,106,510
David J.L. Warren
1
417,572,283
—
—
1
103,681,159
Edward A. Wiese
7
3,734,629,481
1
106,440,650
10
2,595,047,711
</R>

<R>
(a)This individual assumed portfolio management responsibility on October 1, 2008, therefore, information on other managed accounts will be provided concurrently with the upcoming prospectus date of the managed mutual fund.
</R>

Conflicts of Interest

Portfolio managers at T. Rowe Price and T. Rowe Price International typically manage multiple accounts. These accounts may include, among others, mutual funds, separate accounts (assets managed on behalf of institutions such as pension funds, colleges and universities, foundations), Luxembourg SICAVs and commingled trust accounts. Portfolio managers make investment decisions for each portfolio based on the investment objectives, policies, practices, and other relevant investment considerations that the managers believe are applicable to that portfolio. Consequently, portfolio managers may purchase (or sell) securities for one portfolio and not another portfolio. T. Rowe Price and T. Rowe Price International have adopted brokerage and trade allocation policies and procedures which they believe are reasonably designed to address any potential conflicts associated with managing multiple accounts for multiple clients. Also, as disclosed under the "Portfolio Manager Compensation" section, our portfolio managers` compensation is determined in the same manner with respect to all portfolios managed by the portfolio manager. Please see the "Portfolio Transactions" section of this Statement of Additional Information for more information on our brokerage and trade allocation policies.

T. Rowe Price funds may, from time to time, own shares of Morningstar, Inc. Morningstar is a provider of investment research to individual and institutional investors, and publishes ratings on mutual funds, including the Price Funds. T. Rowe Price manages the Morningstar retirement plan and T. Rowe Price and its affiliates pay Morningstar for a variety of products and services. In addition, Morningstar may provide investment consulting and investment management services to clients of T. Rowe Price or its affiliates.

PRINCIPAL HOLDERS OF SECURITIES

As of the dates indicated, the directors and officers of the funds, as a group, owned less than 1% of the outstanding shares of any fund, except for the funds shown in the following table.

<R>
<R>

Fund


%*

Developing Technologies
5.0
Global Stock
1.0
Maryland Short-Term Tax-Free Bond
1.4
Maryland Tax-Free Money
2.5
Summit Municipal Income
1.1
Tax-Efficient Balanced
6.0
Tax-Efficient Growth
4.2
Tax-Efficient Multi-Cap Growth
3.4
Tax-Exempt Money
1.4
</R>

</R>

<R>
(*)Based on July 31, 2008 data for the inside directors and officers and December 31, 2007, data for the independent directors.
</R>

<R>
As of August 31, 2008, the following shareholders of record owned more than 5% of the outstanding shares of the indicated funds and/or classes.
</R>

<R>
<R>

Fund


Shareholder


%

Africa & Middle East Fund
Charles Schwab & Company, Inc.
Reinvest Account
Attn.: Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104

MLPF&S for the Sole Benefit of Its Customers
4800 Deerlake Drive
Jacksonville, Florida 32246

National Financial Services for the Exclusive Benefit of
Our Customers
200 Liberty Street
One Financial Center, 4th Floor
New York, New York 10005
10.26





9.14



17.12




Balanced
T. Rowe Price Trust Company
Attn.: TRPS Institutional Control Department
P.O. Box 17215
Baltimore, Maryland 21297
44.26(c)
Blue Chip Growth
Pirateline & Company
T. Rowe Price Associates
Attn.: Fund Accounting Department
100 East Pratt Street
Baltimore, Maryland 21202

T. Rowe Price Retirement Plan Services, Inc.
Blue Chip Growth Fund
Attn.: Asset Reconciliations
P.O. Box 17215
Baltimore, Maryland 21297
5.88





22.73
Blue Chip Growth Fund—Advisor Class
John Hancock Life Insurance Company USA
RPS SEG Funds and Accounting
601 Congress Street
Boston, Massachusetts 02210

National Financial Services for the Exclusive Benefit of
Our Customers

Union Central Life Insurance Company
1876 Waycross Road #3
Cincinnati, Ohio 45240
24.99




17.33


6.58
Blue Chip Growth Fund—R Class
American United Life
Separate Account II
Attn.: Dan Schluge
P.O. Box 1995
Indianapolis, Indiana 46206

Massachusetts Mutual Life Insurance Company
1295 State Street
Fund Operations
Springfield, Massachusetts 01111

Nationwide Trust Company FSB
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, Ohio 43218
16.42





10.44




12.92
California Tax-Free Money
Georgette O`Connor Day TR
Georgette O`Connor Day Trust
Los Angeles, California
8.05
Capital Appreciation
Charles Schwab & Company, Inc.

National Financial Services for the Exclusive Benefit of
Our Customers

T. Rowe Price Trust Company
Attn.: TRPS Institutional Control Department
9.17

10.41


6.07
Capital Appreciation Fund—Advisor Class
Ameritas Life Insurance Corporation
Separate Account G
5900 O Street
Lincoln, Nebraska 68510

Charles Schwab & Company, Inc.

National Financial Services for the Exclusive Benefit of
Our Customers
5.72




32.51(a)

24.69
Capital Opportunity
McWood & Company
P.O. Box 29522
Raleigh, North Carolina 27626

Swebak & Company
c/o Amcore Investment Group
P.O. Box 4599
Rockford, Illinois 61110

TRP Finance, Inc.
40.33(a)



13.49




7.67
Capital Opportunity Fund—Advisor Class
Charles Schwab Trust Company
Eyelet Design Inc. 401(k) Plan
215 Fremont Street, FL 6
San Francisco, California 94105

T. Rowe Price Associates
Attn.: Financial Reporting Department
29.95(a)




60.07(e)
Capital Opportunity Fund—R Class
BX2 Logistics Inc. 401(k)FBO Tony Beeston
6185 Mount Olympus Drive
Castro Valley, California 94552

GPC As Agent for MFS Heritage Trust Company
FBO Lamoureux Pagano Associates Inc. Plan
P.O. Box 79377
Atlanta, Georgia 30357

T. Rowe Price Associates
Attn.: Financial Reporting Department
5.28




16.25




72.06(e)
Corporate Income
Yachtcrew & Company
T. Rowe Price Associates
Attn.: Fund Accounting Department
51.23(d)
Developing Technologies
TRP Finance, Inc.

Trustees of T. Rowe Price
U.S. Retirement Program
Attn.: Financial Reporting Department
P.O. Box 89000
Baltimore, Maryland 21289
7.04

7.46
Dividend Growth
T. Rowe Price Trust Company
Dividend Growth Fund (DGF)
Attn.: Asset Reconciliation
9.54
Dividend Growth Fund—Advisor Class
Charles Schwab & Company, Inc.

National Financial Services for the Exclusive Benefit of
Our Customers
77.74(a)

20.64
Emerging Europe & Mediterranean
National Financial Services for the Exclusive Benefit of
Our Customers
18.98
Emerging Markets Bond
Charles Schwab & Company, Inc.

National Financial Services for the Exclusive Benefit of
Our Customers

Yachtcrew & Company
9.76

7.45


21.86
Emerging Markets Stock
Charles Schwab & Company, Inc.

National Financial Services for the Exclusive Benefit of
Our Customers
6.13

15.04
Equity Income
T. Rowe Price Trust Company
Attn.: TRPS Institutional Control Department
18.70
Equity Income Fund—Advisor Class
Citigroup Global Markets Inc.
333 West 34th Street, 3rd Floor
New York, New York 10001

John Hancock Life Insurance Company USA

National Financial Services for the Exclusive Benefit of
Our Customers
9.43



11.86

46.37(a)
Equity Income Fund—R Class
American United Life
Separate Account II

Nationwide Trust Company FSB

Wachovia Bank
FBO Various Retirement Plans
1525 West WT Harris Boulevard
Charlotte, North Carolina 28288
17.23


11.63

9.05
Equity Index 500
Retirement Portfolio 2010
T. Rowe Price Associates
Attn.: Fund Accounting Department

Retirement Portfolio 2015
T. Rowe Price Associates
Attn.: Fund Accounting Department

Retirement Portfolio 2020
T. Rowe Price Associates
Attn.: Fund Accounting Department

Retirement Portfolio 2025
T. Rowe Price Associates
Attn.: Fund Accounting Department

Retirement Portfolio 2030
T. Rowe Price Associates
Attn.: Fund Accounting Department

T. Rowe Price Trust Company
Attn.: RPS Control Department
10090 Red Run Boulevard
Owings Mills, Maryland 21117
13.16



8.48



14.35



5.34



6.95



6.85
European Stock
Bobstay & Company
T. Rowe Price Associates
Attn.: Fund Accounting Department

Charles Schwab & Company, Inc.
14.23



5.32
Extended Equity Market Index
T. Rowe Price Trust Company
Attn.: TRPS Institutional Control Department
21.86
Financial Services
Charles Schwab & Company, Inc.
5.27
Georgia Tax-Free Bond
Charles Schwab & Company, Inc.

National Financial Services for the Exclusive Benefit of
Our Customers
10.86

7.91
Global Stock
Charles Schwab & Company, Inc.

JP Morgan as Directed Trustee for Ernest & Young Defined
Benefit Retirement Plan Trust
Attn.: Phyllis Mancini
4 New York Plaza
New York, New York 10004

National Financial Services for the Exclusive Benefit of
Our Customers

T. Rowe Price Retirement Plan Services, Inc.
Omnibus Plan
7.02

7.33





8.72


5.34
Global Stock Fund—Advisor Class
JP Morgan
ADP Enterprise 401(k) Product
3 Metrotech Center, 6th Floor
Brooklyn, New York 11245

National Financial Services for the Exclusive Benefit of
Our Customers

Wachovia Bank
35.00(a)




50.24(a)


6.16
Global Technology
National Financial Services for the Exclusive Benefit of
Our Customers
6.40
GNMA
Yachtcrew & Company
48.48(d)
TRP Government Reserve Investment
Barnaclesail
c/o T. Rowe Price Associates
Attn.: Mid-Cap Growth Fund

Bridgesail & Company
c/o T. Rowe Price Associates
Attn.: Science & Technology Fund

Heirloom & Company
c/o T. Rowe Price Associates
Attn.: Media & Telecommunications Fund

T. Rowe Price Retirement Plan Services, Inc.
Attn.: RPS Cash Group
61.94(e)



11.00



5.08



9.63
Growth & Income
T. Rowe Price Trust Company
Attn.: TRPS Institutional Control Department
8.00
Growth Stock
National Financial Services for the Exclusive Benefit of
Our Customers

Retirement Portfolio 2020

Retirement Portfolio 2030

T. Rowe Price Trust Company
Attn.: TRPS Institutional Control Department
6.06


6.44

6.47

9.89
Growth Stock Fund—Advisor Class
National Financial Services for the Exclusive Benefit of
Our Customers

PRIAC
FBO Various Retirement Plans
801 Pennsylvania Avenue
Kansas City, Missouri 64105

U.S. Bank
FBO Private Asset Department
OA Platform
P.O. Box 1787
Milwaukee, Wisconsin 53201
34.33(a)


5.80




8.94
Growth Stock Fund—R Class
American United Life
Separate Account II

Nationwide Trust Company FSB
5.32


8.38
Health Sciences
Charles Schwab & Company, Inc.

John Hancock Life Insurance Company USA

National Financial Services for the Exclusive Benefit of
Our Customers
6.67

8.39

6.97
High Yield
Retirement Portfolio 2010

Retirement Portfolio 2020

Yachtcrew & Company
5.40

8.30

21.34
High Yield Fund—Advisor Class
National Financial Services for the Exclusive Benefit of
Our Customers
94.99(a)
Inflation Protected Bond
T. Rowe Price Retirement Plan Services, Inc.
Omnibus Account
Inflation Protected Bond
9.22
Institutional Concentrated Large-Cap Value
TRP Finance, Inc.
100.00(f)
Institutional Core Plus
Dewey & Leboeuf LLP Pension Plan
Attn.: Linda Howard
125 West 55 Street
New York, New York 10019

Jeanette Stump
Robert J. Hennessy TR
Special Metals Corporation Retiree Benefit Trust
Pittsburgh, Pennsylvania

Saxon and Company
P.O. Box 7780-1888
Philadelphia, Pennsylvania 19182

SEI Private Trust Company
c/o Mellon
One Freedom Valley Drive
Oaks, Pennsylvania 19456
The Church Foundation
240 South 4th Street
Philadelphia, Pennsylvania 19106

TRP Finance, Inc.
19.79




13.30




11.74



5.74




28.15(a)



17.52
Institutional Emerging Markets Bond
Ampere & Company
c/o T. Rowe Price Associates
Attn.: Institutional Core Plus Fund

DBTCO
P.O. Box 747
Dubuque, Iowa 52004

TRP Finance, Inc.
5.54



39.37



48.71(f)
Institutional Emerging Markets Equity
Ladybug & Company
c/o T. Rowe Price Associates
Attn.: Personal Strategy Balanced Fund

Lakeside & Company
c/o T. Rowe Price Associates
Attn.: Personal Strategy Growth Fund

MLPF&S for the Sole Benefit of Its Customers

Patterson & Company Omnibus
1525 West Wt. Harris Boulevard
Charlotte, North Carolina 28288

SEI Private Trust Company
Attn.: Mutual Funds
5.47



5.76



30.48(a)

16.19



9.58
Institutional Floating Rate
Nutmeg & Company
c/o T. Rowe Price Associates
Attn.: Value Fund

Seamile & Company
c/o T. Rowe Price Associates
Attn.: Capital Appreciation Fund

Taskforce & Company
c/o T. Rowe Price Associates
Attn.: Equity Income Fund

Tuna & Company
c/o T. Rowe Price Associates
Attn.: New Income Fund
12.16



46.64(e)



21.62



17.10
Institutional Foreign Equity
Dewey & Leboeuf LLP Pension Plan

Mac & Company

National Financial Services for the Exclusive Benefit of
Our Customers

Saxon and Company

State Street Bank & Trust Company Cust.
Houston Metro Transit Authority Fund—MTA Union
805 Pennsylvania Avenue
Tower 2, 5th Floor
Kansas City, Missouri 64105

State Street Bank & Trust Company Cust.
Houston Metro Transit Authority Fund—MTA Non-Union

The Church Foundation
6.87

5.02

7.85


14.76

27.37(a)





18.07


8.08
Institutional Global Equity
Currie & Company
c/o Fiduciary Trust Company International
P.O. Box 3199
Church Street Station
New York, New York 10008

Keybank NA
FBO JCF - T. Rowe Price Cust.
P.O. Box 94871
Cleveland, Ohio 44101

SEI Private Trust Company
c/o Suntrust Bank

State Street Bank & Trust Company
Trustee for Riverside Health System Retirement Income Plan
125 Sunnynoll Court, Suite 200
Winston Salem, North Carolina 27106

The Bank of New York Mellon as Trustee for
Computer Science Trust Pension
1 Wall Street
New York, New York 10286

U.S. Bank
FBO NREL/MRI
Mutual Fund Trading
5.35





7.29
7.70


18.84




41.34(a)




6.09
Institutional High Yield
Bread & Company
c/o T. Rowe Price Associates
Attn.: Balanced Fund

Brown Brothers Harriman & Company
as Custodian for 660187
525 Washington Boulevard
Jersey City, New JErsey 07310

Fidelity Investments
Institutional Operations Company
FIIOC as Agent for Ford SSIP
100 Magellan Way
Covington, Kentucky 41015

Ladybug & Company

Ladybird & Company
c/o T. Rowe Price Associates
Attn.: Personal Strategy Income Fund

State Street Bank & Trust Company
Citigroup 401(k) Plan
105 Rosemont Avenue
Westwood, Massachusetts 02090

Tuna & Company
15.03



8.43




11.15





7.57

6.53



8.57




13.47
Institutional International Bond
Ladybird & Company

Ladybug & Company

Lakeside & Company

Peacemaker & Company
c/o T. Rowe Price Associates
Attn.: Personal Strategy Balanced Portfolio
35.61(e)

41.39(e)

14.33

5.25
Institutional Large-Cap Core Growth
Charles Schwab & Company, Inc.

Fidelity Investments
Institutional Operations Company
FBO Omnicom Group Inc.

Fidelity Investments
Institutional Operations Company
FBO Williams Investment

Immaculate Heart Missions, Inc.
Casa Generalizia
Via S. Giovanni Eudes 95
Rome, Italy 00163

Middlesex Hospital Endowment Fund
28 Crescent Street
Middletown, Connecticut 06457

SEI Private Trust Company

The Jewish Foundation of Cincinnati
8044 Montgomery Road, Suite 700
Cincinnati, Ohio 45236
18.96

32.82(a)



8.08



6.95




8.01



8.88

6.09
Institutional Large-Cap Growth
Charles Schwab & Company, Inc.

National Financial Services for the Exclusive Benefit of
Our Customers

SEI Private Trust Company
c/o Suntrust Bank

State Street Bank & Trust Company
Washington Savannah River Company LLC
13.45

7.84


13.41


9.07
Institutional Large-Cap Value
Charles Schwab & Company, Inc.

Dewey & Leboeuf LLP Pension Plan

National Financial Services for the Exclusive Benefit of
Our Customers

The Church Foundation

WFBW FBO New York Metro Transit Authority
New York Metro Transit Authority
8515 East Orchard Road #2T2
Greenwood Village, Colorado 80111
19.26

5.96

28.30(a)


6.32

20.19
Institutional Mid-Cap Equity Growth

Charles Schwab & Company, Inc.

Kentucky Public Employees Deferred
Compensation Authority
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, Ohio 43218

National Financial Services for the Exclusive Benefit of
Our Customers

SEI Private Trust Company
c/o M&T Bank
12.47

16.12





8.10


7.17

Institutional Small-Cap Stock
Fidelity Investments
Institutional Operations Company
FIIOC as Agent for
Raytheon Savings & Investment Plan & SOP 10001

National Financial Services for the Exclusive Benefit of
Our Customers

Pinnacol Assurance
7501 East Lowry Boulevard
Denver, Colorado 80230

Trust & Custody Services Bank LTD
Tower Z Harumi Triton Square 8-12
Harumi 1-Chome Chuo-Ku
Tokyo, Japan 104-6228
30.69(a)




16.68


5.36



12.27
Institutional U.S. Structured Research
Keybank NA
FBO St. Luke`s Foundation - T. Rowe Price

Northern Trust Company
FBO Alsac
P.O. Box 92956
Chicago, Illinois 60675

The UCLA Foundation
10920 Wilshire Boulevard, Suite 900
Los Angeles, California 90024

U.S. Bank
FBO Adams County

U.S. Bank
FBO Metro Wastewater Reclamation
District Retirement Plan
8.15


23.04




23.87



17.82


9.20
International Bond
Charles Schwab & Company, Inc.

National Financial Services for the Exclusive Benefit of
Our Customers

Yachtcrew & Company
14.53

13.60


24.42
International Bond Fund—Advisor Class
Citigroup Global Markets Inc.
22.13
International Discovery
Fidelity Investments
Institutional Operations Company
FIIOC as Agent for Ford SSIP

National Financial Services for the Exclusive Benefit of
Our Customers

T. Rowe Price Retirement Plan Services, Inc.
Attn.: Asset Reconciliation

Vanguard Fiduciary Trust Company
T. Rowe Price Retail Class Funds
Attn.: Outside Funds
P.O. Box 2600
Valley Forge, Pennsylvania 19482
9.32



5.82


5.71


9.23
International Equity Index
T. Rowe Price Retirement Plan Services, Inc.
Omnibus Plan
New Business Group Conv. Asset
32.46(b)
International Growth & Income
Pirateline & Company

Retirement Portfolio 2010

Retirement Portfolio 2015

Retirement Portfolio 2020

Retirement Portfolio 2025

Retirement Portfolio 2030

Retirement Portfolio 2040
T. Rowe Price Associates
Attn.: Fund Accounting Department
10.02

6.07

5.34

12.15

5.97

10.04

5.55
International Growth & Income Fund—Advisor Class
National Financial Services for the Exclusive Benefit of
Our Customers

U.S. Bank
FBO Private Asset Department
OA Platform
7.88


63.71(a)
International Growth & Income Fund—R Class
American United Life
American Unit Investment Trust

American United Life
Separate Account II

Delaware Charter Guarantee & Trust
FBO Various Qualified Plans
711 High Street
Des Moines, Iowa 50309

Nationwide Trust Company FSB
5.16


28.09(a)


10.46




9.45
International Stock
Pirateline & Company

Retirement Portfolio 2020

T. Rowe Price Trust Company
Attn.: TRPS Institutional Control Department
5.32

5.99

9.19
International Stock Fund—Advisor Class
National Financial Services for the Exclusive Benefit of
Our Customers

U.S. Bank
FBO Private Asset Department
OA Platform
7.37


35.05(a)
International Stock Fund—R Class
American United Life
American Unit Trust

American United Life
Separate Account II

National Financial Services for the Exclusive Benefit of
Our Customers
9.37


42.66(a)


5.85
Japan
Bobstay & Company

Charles Schwab & Company, Inc.

Knotfloat & Company
P.O. Box 5496
Boston, Massachusetts 02206

MLPF&S for the Sole Benefit of Its Customers
12.61

6.72

9.47



7.38
Latin America
Charles Schwab & Company, Inc.
7.26
Maryland Short-Term Tax-Free Bond
Charles Schwab & Company, Inc.
6.93
Maryland Tax-Free Money
T. Rowe Price Associates
Attn.: Financial Reporting Department
15.33
Media & Telecommunications
Charles Schwab & Company, Inc.

National Financial Services for the Exclusive Benefit of
Our Customers

T. Rowe Price Trust Company
Media & Telecommunications Fund
6.50

5.42


7.59
Mid-Cap Growth
Charles Schwab & Company, Inc.

National Financial Services for the Exclusive Benefit of
Our Customers

T. Rowe Price Trust Company
Attn.: Asset Reconciliations
5.98

5.94


19.04
Mid-Cap Growth Fund—Advisor Class
MLPF&S for the Sole Benefit of its Customers
4800 Deerlake Drive, E 3rd Floor
Jacksonville, FL 32246

National Financial Services for the Exclusive Benefit of
Our Customers

U.S. Bank
FBO Private Asset Department
OA Platform

Vanguard Fiduciary Trust Company
T. Rowe Price Advisor Class Funds
Attn.: Outside Funds
P.O. Box 2900
Valley Forge, Pennsylvania 19482
7.44



14.97


8.71



6.20




Mid-Cap Growth Fund—R Class
American United Life Separate Account II

ING Life Insurance & Annuity Company
1 Orange Way 83N
Windsor, Connecticut 06095

ING National Trust
1 Orange Way 83N
Windsor, Connecticut 06095

Nationwide Trust Company FSB
6.41

19.91



5.06



16.65
Mid-Cap Value
National Financial Services for the Exclusive Benefit of
Our Customers

T. Rowe Price Retirement Plan Services, Inc.
Omnibus Account
New Business Group
7.37


7.81
Mid-Cap Value Fund—Advisor Class
John Hancock Life Insurance Company USA

National Financial Services for the Exclusive Benefit of
Our Customers

Union Central Life Insurance Company

U.S. Bank
FBO Private Asset Department
OA Platform
5.83

23.68


5.45

7.56

Mid-Cap Value Fund—R Class
ING Life Insurance & Annuity Company

J.P. Morgan Chase TR
FBO ADP Mid Market Product
Attn.: Lisa Glenn
3 Metrotech Center 6th Floor
Brooklyn, New York 11245

Nationwide Trust Company FSB

State Street Bank & TR
FBO ADP Daily Valuation B
7.83

8.08





13.64

28.52(a)
New America Growth
T. Rowe Price Trust Company
Attn.: TRPS Institutional Control Department

Wilmington Trust Company
FBO Continental Airlines Inc. DCP Plan
c/o Mutual Funds
P.O. Box 8971
Wilmington, Delaware 19899
18.69


7.38
New America Growth Fund—Advisor Class
National Financial Services for the Exclusive Benefit of Our
Customers
99.60(a)
New Asia
Charles Schwab & Company, Inc.

National Financial Services for the Exclusive Benefit of
Our Customers
6.32

5.25
New Era
Charles Schwab & Company, Inc.

National Financial Services for the Exclusive Benefit of Our
Customers
9.11

7.94
New Horizons
Pirateline & Company

T. Rowe Price Trust Company
Attn.: TRPS Institutional Control Department
5.39

22.77
New Income
Retirement Portfolio 2010

Retirement Portfolio 2015

Retirement Portfolio 2020

Retirement Portfolio 2030

Yachtcrew & Company
15.45

9.55

15.21

5.15

15.77
New Income Fund—Advisor Class
National Financial Services for the Exclusive Benefit of Our
Customers
5.02
New Income Fund—R Class
Emjay Corp. Cust.
FBO Plans of RPSA Customers
c/o Great West

Marshall & Ilsley Trust Company
FBO Bank 98 Dly RCRDKPG
STE 400
Attn.: Mutual Funds
11270 West Park Place
NFS LLC FEBO
Milwaukee, Wisconsin 53224

Nationwide Trust Company FSB

PIMS/Prudential Retirement as Nominee for the Tellabs Retirement Plan
1415 West Diehl Road
MS 447
Naperville, Illinois 60563
11.62



41.64(a)







20.72

9.53
New Jersey Tax-Free Bond
PFPC Inc. as Agent for PFPC Trust
FBO JJB Hilliard WL Lyons Inc.
760 Moore Road
King of Prussia, Pennsylvania 19406
13.92
New York Tax-Free Money
H. Mark Glasberg
Paula D. Glasberg Jt. Ten.
New York, New York

Robert S. Kaplan
Jamie Schuval Jt. Ten.
New York, New York
5.98



5.11
Overseas Stock
Retirement Portfolio 2010

Retirement Portfolio 2015

Retirement Portfolio 2020

Retirement Portfolio 2025

Retirement Portfolio 2030

Retirement Portfolio 2035
T. Rowe Price Associates
Attn.: Fund Accounting Department

Retirement Portfolio 2040
10.28

8.87

20.43

10.03

17.13

6.38



9.49
Personal Strategy Balanced
T. Rowe Price Trust Company
Balanced
Attn.: Asset Reconciliation
34.15(c)
Personal Strategy Growth
T. Rowe Price Trust Company
Attn.: Growth Asset
27.84(c)
Personal Strategy Income
T. Rowe Price Trust Company
Income
Attn.: Asset Reconciliation
24.21
Prime Reserve
T. Rowe Price Trust Company
Attn.: TRPS Institutional Control Department
10.12
Real Estate
Wachovia Bank
Omnibus
23.52
Real Estate Fund—Advisor Class
Fiduciary Trust Company of New Hampshire
as Fiduciary for Various Retirement Accounts
One Security Benefit Place
Topeka, Kansas 66636

National Financial Services for the Exclusive Benefit of
Our Customers
7.61




56.30(a)

TRP Reserve Investment
Covewater & Company
c/o T. Rowe Price Associates
Attn.: Mid-Cap Value Fund

Eye & Company
c/o T. Rowe Price Associates
Attn.: Growth Stock Fund

Seamile & Company

Taskforce & Company

Tuna & Company
6.88



6.99



13.31

6.68

6.41
Retirement 2005 Fund—Advisor Class
Counsel Trust DBA MATC
Ironworkers Local 16 Annuity Fund
1251 Waterfront Place
Pittsburgh, Pennsylvania 15222

Mercer Trust Company Inc. Savings Plan for Employees of Fairchild Corporation

New York Life Trust Company
Client Account
169 Lackawanna Avenue
Parsippany, New Jersey 07054

National Financial Services for the Exclusive Benefit of
Our Customers

Wachovia Bank
14.98




8.93


11.86




29.63(a)


9.26
Retirement 2005 Fund—R Class
T. Rowe Price Associates
Attn.: Financial Reporting Department
89.24(e)
Retirement 2010
T. Rowe Price Retirement Plan Services, Inc.
Omnibus Account
Retirement 2010
48.05(b)
Retirement 2010 Fund—Advisor Class
Charles Schwab & Company, Inc.

Massachusetts Mutual Life Insurance Company

National Financial Services for the Exclusive Benefit of
Our Customers
6.99

8.58

12.59
Retirement 2010 Fund—R Class
PIMS/Prudential Retirement as nominee for the TTEE/Cust. Plan 701
NEPC - Taft Hartley Ironworkers
123 Main Avenue
Salt Lake City, Utah 84101

Saxon and Company

State Street Bank & Trust Company
American Red Cross Savings Plan

Wachovia Bank
FBO Various Retirement Plans
5.07





8.89

17.13


5.61
Retirement 2015
T. Rowe Price Retirement Plan Services, Inc.
Omnibus Account Retirement
55.06(b)
Retirement 2015 Fund—Advisor Class
Citistreet Retirement Services
Mutual Fund Select Portfolio
Reliance Trust Company
Attn.: Plan Valuation Services
400 Atrium Drive
Somerset, New Jersey 08873

Counsel Trust DBA MATC
Ironworkers Local 16 Annuity Fund

Mercer Trust Company
FBO Constellation Brands Inc.

Mercer Trust Company TTEE
Texas Industries Inc. Retirement Plan

National Financial Services for the Exclusive Benefit of
Our Customers

New York Life Trust Company
Client Account

Taynik & Company
c/o Investors Bank & Trust
P.O. Box 9130
Boston, Massachusetts 02117
20.01






5.54


9.93


9.71


7.43


13.42


7.90
Retirement 2015 Fund—R Class
Huntington National Bank
FBO EB Accounts
7 Easton Oval #EA4E70
Columbus, Ohio 43219

Reliance Trust Company
The Copeland Retirement Trust
CO DTD 4/21/95
Attn.: Plan Valuation Services
400 Atrium Drive
Somerset, New Jersey 08873

Suntrust Bank
FBO CMA Group Salary Def Retirement Plan
8515 East Orchard Road #2T2
Greenwood Village, Colorado 80111

Suntrust Bank
FBO Flintco 401K
5.45




42.56(a)






6.08




15.66
Retirement 2020
T. Rowe Price Retirement Plan Services, Inc.
Omnibus Account
Retirement 2020
54.17(b)
Retirement 2020 Fund—Advisor Class
Charles Schwab & Company, Inc.

Massachusetts Mutual Life Insurance Company

National Financial Services for the Exclusive Benefit of
Our Customers

Union Central Life Insurance Company
6.58

9.03

15.28


5.10
Retirement 2020 Fund—R Class
Saxon and Company

State Street Bank & Trust Company
FBO ADP Daily Valuation B

Wachovia Bank
FBO Various Retirement Plans
9.87

7.44


5.16
Retirement 2025
T. Rowe Price Retirement Plan Services, Inc.
Omnibus Account Retirement
59.83(b)
Retirement 2025 Fund—Advisor Class
Citistreet Retirement Services
Mutual Fund Select Portfolio
Reliance Trust Company

Counsel Trust DBA MATC
Ironworkers Local 16 Annuity Fund

Mercer Trust Company TTEE
FBO Constellation Brands Inc.

Mercer Trust Company TTEE
Texas Industries Inc. Retirement Plan

National Financial Services for the Exclusive Benefit of
Our Customers

New York Life Trust Company
Client Account

Taynik & Company
13.50



5.42


10.24


6.99


10.28


22.49


5.84
Retirement 2025 Fund—R Class
Huntington National Bank

Mercer Trust Company
FBO Huizenga Manufacturing Group
Retirement Savings Plan & Trust
1 Investors Way
Northwood, Massachusetts 02062

Reliance Trust Company

Suntrust Bank
FBO Community Bankshares Inc. Cash or DS

Wachovia Bank
FBO Various Retirement Plans
8.30

8.98





32.13(a)

21.84


8.63
Retirement 2030
T. Rowe Price Retirement Plan Services, Inc.
Omnibus Account
Retirement 2030
56.31(b)
Retirement 2030 Fund—Advisor Class
Charles Schwab & Company, Inc.

Massachusetts Mutual Life Insurance Company

National Financial Services for the Exclusive Benefit of
Our Customers

Union Central Life Insurance Company

Wachovia Bank
FBO Various Retirement Plans
5.86

12.23

11.25


5.76

5.17
Retirement 2030 Fund—R Class
J.P. Morgan Chase TR
FBO ADP Mid Market Product

Saxon and Company

State Street Bank & Trust Company
FBO ADP Daily Valuation B

State Street Bank & Trust Company
American Red Cross Savings Plan

Taynik & Company

Wachovia Bank
FBO Various Retirement Plans
5.22


9.71

9.50


5.53


5.81

5.78
Retirement 2035
T. Rowe Price Retirement Plan Services, Inc.
Omnibus Account Retirement
60.01(b)
Retirement 2035 Fund—Advisor Class
Citistreet Retirement Services
Mutual Fund Select Portfolio
Reliance Trust Company

Mercer Trust Company
Constellation Brands Inc.

National Financial Services for the Exclusive Benefit of
Our Customers

New York Life Trust Company
Client Account

Taynik & Company
8.83



12.52


12.58


30.80(a)


5.03
Retirement 2035 Fund—R Class
Reliance Trust Company

Suntrust Bank
FBO Community Bankshares Inc. Cash or DS

Suntrust Bank
FBO Flintco 401K

Wachovia Bank
FBO Various Retirement Plans
43.58(a)

5.42


5.41


18.89
Retirement 2040
T. Rowe Price Retirement Plan Services, Inc.
Omnibus Account
Retirement 2040
58.45(b)
Retirement 2040 Fund—Advisor Class
Massachusetts Mutual Life Insurance Co.

National Financial Services for the Exclusive Benefit of
Our Customers

New York Life Trust Company
Client Account

Wachovia Bank
FBO Various Retirement Plans
14.54

13.86


5.06


5.24
Retirement 2040 Fund—R Class
J.P. Morgan Chase TR
FBO ADP Mid Market Product

Saxon and Company

State Street Bank & TR
FBO ADP Daily Valuation B

Taynik & Company

Wachovia Bank
FBO Various Retirement Plans
5.90


8.47

12.69


6.02

7.31
Retirement 2045
T. Rowe Price Retirement Plan Services, Inc.
Omnibus Account Retirement
63.79(b)
Retirement 2045 Fund—Advisor Class
Citistreet Retirement Services
Mutual Fund Select Portfolio
Reliance Trust Company

Mercer Trust Company TTEE
FBO Constellation Brands Inc.

Mercer Trust Company TTEE
Texas Industries Inc. Retirement Plan

National Financial Services for the Exclusive Benefit of
Our Customers

New York Life Trust Company
Client Account
9.27



9.85


5.29


10.72


36.62(a)
Retirement 2045 Fund—R Class
Mercer Trust Company
FBO Huizenga Manufacturing Group

Reliance Trust
FBO Ortho Sprt 401K

Reliance Trust Company

State Street Bank Trust Company
Various Retirement Plans
4 Manhattanville Road
Purchase, New York 10577

Suntrust Bank
FBO Flintco 401K

Wachovia Bank
FBO Various Retirement Plans
6.48


6.83


30.14(a)

6.83




5.04


34.85(a)
Retirement 2050
T. Rowe Price Retirement Plan Services, Inc.
Omnibus Account Retirement
58.26(b)
Retirement 2050 Fund—Advisor Class
DWS Trust Company
FBO IBEW Local Union 252
Contribution/401(k) Plan
Attn.: Share Recon. Department 062962
P.O. Box 1757
Salem, New Hampshire 03079

Mercer Trust Company TTEE
FBO Constellation Brands Inc.

National Financial Services for the Exclusive Benefit of
Our Customers

New York Life Trust Company
Client Account

Saxon and Company

Wachovia Bank
FBO Various Retirement Plans
9.55






5.53


10.54


8.78


6.93

5.46
Retirement 2050 Fund—R Class
Emjay Corp. Cust.

Hartford Life Insurance Company
Separate Account
Attn.: UIT Operations
P.O. Box 2999
Hartford, Connecticut 06140

Saxon and Company

State Street Bank & TR
FBO ADP Daily Valuation B

Suntrust Bank TR
FBO P & L 401K

Wachovia Bank
FBO Various Retirement Plans
7.08

9.79





17.84

9.68


8.13


5.63
Retirement 2055
T. Rowe Price Retirement Plan Services, Inc.
Omnibus Account Retirement
52.94(b)
Retirement 2055 Fund—Advisor Class
Mercer Trust Company TTEE
FBO Chaparral Steel Retirement Plan

Orchard Trust Company TTEE
Employee Benefits Clients

Taynik & Company
6.98


70.63(a)


5.19
Retirement 2055 Fund—R Class
T. Rowe Price Associates
Attn.: Financial Reporting Department

Wachovia Bank
FBO Various Retirement Plans
79.01(e)



11.49
Retirement Income
T. Rowe Price Retirement Plan Services, Inc.
Omnibus Account
Retirement Income
33.27(b)
Retirement Income Fund—Advisor Class
Massachusetts Mutual Life Insurance Company

National Financial Services for the Exclusive Benefit of
Our Customers

Reliance Trust Company
The Copeland Retirement Trust

State Street Bank & Trust Company
7.76

27.36(a)


8.54


5.82
Retirement Income Fund—R Class
Citistreet Retirement Services
Trusteed by State Street Bank & Trust
1 Heritage Drive
Quincy, Massachusetts 02171

Mac & Company

Massachusetts Mutual Life Insurance Company

State Street Bank & TR
FBO ADP Daily Valuation BTaynik & Company

Wachovia Bank
FBO Various Retirement Plans
11.47




6.73

5.62

9.60


5.18

12.58
Science & Technology
T. Rowe Price Trust Company
Attn.: TRPS Institutional Control Department
19.00
Science & Technology Fund—Advisor Class
John Hancock Life Insurance Company USA
89.89(a)
Short-Term Bond
Yachtcrew & Company
26.81(d)
Short-Term Bond Fund—Advisor Class
MS&CO
Elida M. Nixon Trust
778 East 156th Place
South Holland, Illinois 60473

National Financial Services for the Exclusive Benefit of
Our Customers

Penfirn Company
P.O. Box 3327
Omaha, Nebraska 68103

RSGroup Trust Company
c/o Retirement System Consultants
3 Enterprise Drive, Suite 105
Shelton, Connecticut 06484
Trust Company of America
P.O. Box 6503
Englewood, Colorado 80155
5.27




16.70


7.00



19.96




35.67(a)
Short-Term Income
Short-Term Income Fund
T. Rowe Price Associates
Attn.: Fund Accounting Department

T. Rowe Price Services, Inc.
FBO Alaska College Savings Trust
Portfolio College
Attn.: Kim Vanscoy, Fixed Income
85.95(e)



9.43
Small-Cap Stock
Norwest Bank Company NA TR
FBO State of Minnesota Deferred Compensation Plan
Minnesota State Deferred Compensation Plan Trust
c/o Great West Life Recordkeeper

T. Rowe Price Trust Company
T. Rowe Price OTC Fund
Attn.: RPS Control Department
6.44




15.89
Small-Cap Stock Fund—Advisor Class
ICMA Retirement Trust
777 North Capitol Street NE, Suite 600
Washington, D.C. 20002

Minnesota Life
401 Robert Street North
Saint Paul, Minnesota 55101

Northern Trust Company TR Home Depot
Future Builder 401(k) Plan
P.O. Box 92994
Chicago, Illinois 60675

Vanguard Fiduciary Trust Company
7.17



13.57



20.28




26.12 (a)
Small-Cap Value
T. Rowe Price Trust Company
Attn.: TRPS Institutional Control Department
27.29(c)
Small-Cap Value Fund—Advisor Class
ICMA Retirement Trust

John Hancock Life Insurance Company USA

National Financial Services for the Exclusive Benefit of
Our Customers

U.S. Bank
FBO Private Asset Department
OA Platform
32.59(a)

27.24(a)

7.99


8.25


Spectrum Growth
T. Rowe Price Trust Company
Attn.: TRPS Institutional Control Department
14.06
Spectrum Income
T. Rowe Price Trust Company
Attn.: TRPS Institutional Control Department
22.93
Spectrum International
T. Rowe Price Retirement Plan Services, Inc.
Omniplan Account
New Business Group
7.43
Summit Cash Reserves
T. Rowe Price Trust Company
Attn.: Asset Reconciliations

T. Rowe Price Group, Inc.
Attn.: Financial Reporting Department
10.16


5.89
Summit Municipal Income
National Financial Services for the Exclusive Benefit of
Our Customers

Saxon and Company
29.25(a)


14.08
Summit Municipal Intermediate
Charles Schwab & Company, Inc.

National Financial Services for the Exclusive Benefit of
Our Customers

Prudential Investment Management Services
FBO Mutual Funds Clients
Attn.: Pruchoice Unit
5.04

7.02


19.53
Summit Municipal Money Market
T. Rowe Price Associates
Attn.: Financial Reporting Department

M. David Testa
Hobe Sound, Florida
9.63


7.22
Tax-Efficient Balanced
National Financial Services for the Exclusive Benefit of
Our Customers
9.36
Tax-Exempt Money
Pershing Division of DLJ Secs. Corp. for Exclusive Benefit
of TRP Money Fund Customer Accounts
1 Pershing Plaza
Jersey City, New Jersey 07399

T. Rowe Price Associates
Attn.: Financial Reporting Department
5.60




10.23
Tax-Free High Yield
Charles Schwab & Company, Inc.

National Financial Services for the Exclusive Benefit of
Our Customers
5.46

7.12
Tax-Free Income Fund—Advisor Class
National Financial Services for the Exclusive Benefit of
Our Customers
94.06(a)
Tax-Free Short-Intermediate
Charles Schwab & Company, Inc.

T. Rowe Price Associates
Attn.: Financial Reporting Department
8.53

9.41
U.S. Bond Index
Alaska College Savings Trust
ACT Portfolio
c/o T. Rowe Price Associates

National Financial Services for the Exclusive Benefit of
Our Customers

T. Rowe Price Retirement Plan Services, Inc.
Omnibus Plan
New Business Group Conv. Asset
8.80



15.39


19.24
U.S. Treasury Intermediate
T. Rowe Price Trust Company
Attn.: TRPS Institutional Control Department
10.51
U.S. Treasury Long-Term
T. Rowe Price Trust Company
Attn.: TRPS Institutional Control Department

Yachtcrew & Company
10.39


40.40(d)
U.S. Treasury Money
T. Rowe Price Trust Company
Attn.: TRPS Institutional Control Department
12.04
Value
Pirateline & Company

Retirement Portfolio 2020

Retirement Portfolio 2025

Retirement Portfolio 2030

Retirement Portfolio 2035

Retirement Portfolio 2040

T. Rowe Price Trust Company
Attn.: Installation Team for TRPS Institutional Control Department
6.84(e)

14.84

8.56

15.90

6.10

9.21

6.74
Value Fund—Advisor Class
Citigroup Global Markets, Inc.

National Financial Services for the Exclusive Benefit of
Our Customers
6.05

78.92(a)
Virginia Tax-Free Bond
Charles Schwab & Company, Inc.

National Financial Services for the Exclusive Benefit of
Our Customers
6.85

5.11
</R>

</R>

(a)At the level of ownership indicated, the shareholder would be able to determine the outcome of most issues that are submitted to shareholders for vote.

(b)T. Rowe Price Retirement Plan Services, Inc., is a wholly owned subsidiary of T. Rowe Price Associates, Inc., which is a wholly owned subsidiary of T. Rowe Price Group, Inc., each a Maryland corporation. T. Rowe Price Retirement Plan Services is not the beneficial owner of these shares. Such shares are held of record by T. Rowe Price Retirement Plan Services and are normally voted by various retirement plans and retirement plan participants.

(c)T. Rowe Price Trust Company is a wholly owned subsidiary of T. Rowe Price Associates, Inc., which is a wholly owned subsidiary of T. Rowe Price Group, Inc., each a Maryland corporation. T. Rowe Price Trust Company is not the beneficial owner of these shares. Such shares are held of record by T. Rowe Price Trust Company and are normally voted by various retirement plans and retirement plan participants.

(d)Yachtcrew & Co. owns the indicated percentage of the outstanding shares of the fund through the Spectrum Funds. Shares of the fund held by the Spectrum Funds are "echo-voted" by Spectrum Funds in the same proportion as the shares of the fund are voted by its non-Spectrum Fund shareholders.

(e)T. Rowe Price Associates is a wholly owned subsidiary of T. Rowe Price Group, Inc., each a Maryland corporation. Securities owned by T. Rowe Price Associates are the result of its contributions to the fund at the fund`s inception in order to provide the fund with sufficient capital to invest in accordance with its investment program. At the level of ownership indicated, T. Rowe Price Associates would be able to determine the outcome of most issues that were submitted to shareholders for vote.

(f)T. Rowe Price Finance, a Delaware corporation, is a wholly owned subsidiary of T. Rowe Price Associates, Inc., which is a wholly owned subsidiary of T. Rowe Price Group, Inc. T. Rowe Price Associates Inc., and T. Rowe Group, Inc., are Maryland corporations. Securities owned by T. Rowe Price Finance are the result of its contributions to the fund at the fund`s inception in order to provide the fund with sufficient capital to invest in accordance with its investment program. At the level of ownership indicated, T. Rowe Price Finance would be able to determine the outcome of most issues that were submitted to shareholders for vote.

INVESTMENT MANAGEMENT AGREEMENTS

T. Rowe Price International, Inc. is the investment manager for all international and foreign Price Funds and has executed an Investment Management Agreement with each such fund. T. Rowe Price Associates, Inc. is the investment manager for all other Price Funds and has executed an Investment Management Agreement with each such fund. T. Rowe Price Associates and T. Rowe Price International are hereinafter referred to as

"Investment Managers." T. Rowe Price Associates is a wholly owned subsidiary of T. Rowe Price Group, Inc. T. Rowe Price International is a wholly owned subsidiary of T. Rowe Price Finance, Inc., which is a wholly owned subsidiary of T. Rowe Price Associates.

Services

Under the Investment Management Agreements (except with respect to the Japan Fund and the Japanese investments of the International Discovery Fund), the Investment Managers provide the funds with discretionary investment services. Specifically, the Investment Managers are responsible for supervising and directing the investments of the funds in accordance with the funds` investment objectives, programs, and restrictions as provided in the funds` prospectuses and this SAI. The Investment Managers are also responsible for effecting all security transactions on behalf of the funds, including the negotiation of commissions and the allocation of principal business and portfolio brokerage. For the Japan Fund and the Japanese investments of the International Discovery Fund, T. Rowe Price International has entered into a subadvisory agreement with T. Rowe Price Global Investment Services Limited ("Global Investment Services") under which, subject to the supervision of T. Rowe Price International, Global Investment Services provides the same services described above that T. Rowe Price International provides for the other funds.

In addition to the services described above, the Investment Managers provide the funds with certain corporate administrative services, including: maintaining the funds` corporate existence and corporate records; registering and qualifying fund shares under federal laws; monitoring the financial, accounting, and administrative functions of the funds; maintaining liaison with the agents employed by the funds such as the funds` custodian and transfer agent; assisting the funds in the coordination of such agent`s activities; and permitting employees of the Investment Managers to serve as officers, directors, and committee members of the funds without cost to the funds.

The Investment Management Agreements also provide that the Investment Managers, their directors, officers, employees, and certain other persons performing specific functions for the funds will be liable to the funds only for losses resulting from willful misfeasance, bad faith, gross negligence, or reckless disregard of duty. The subadvisory agreements with respect to the Japan and International Discovery Funds have a similar provision limiting the liability of Global Investment Services for errors, mistakes, and losses other than those caused by its willful misfeasance, bad faith, or gross negligence.

Under the Investment Management Agreements, the Investment Managers are permitted to utilize the services or facilities of others to provide them or the funds with statistical and other factual information, advice regarding economic factors and trends, advice as to occasional transactions in specific securities, and such other information, advice, or assistance as the Investment Managers may deem necessary, appropriate, or convenient for the discharge of their obligations under the Investment Management Agreements or otherwise helpful to the funds. The subadvisory agreement with respect to the Japan and International Discovery Funds has a similar provision permitting Global Investment Services to utilize, at its own cost, the services or facilities of others.

All funds except Index, Institutional, TRP Reserve Investment, Retirement, Spectrum, Summit Income, and Summit Municipal Funds

Management Fees

The funds pay the Investment Managers 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 the Investment Managers 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 Funds` 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
0.300%
Next $40 billion

0.390%
Next $1 billion
0.330%
Next $10 billion
0.295%
Next $40 billion

0.370%
Next $1 billion
0.320%
Next $10 billion
0.290%
Next $60 billion





0.285%
Thereafter

For the purpose of calculating the Group Fee, the Price Funds include all the mutual funds distributed by Investment Services (excluding the Retirement Funds, Spectrum Funds, TRP Reserve Investment Funds, and any 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 each 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. The product of this calculation is multiplied 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 are listed in the following tables:

Fund


Fee %

Africa & Middle East
0.75
Balanced
0.15
Blue Chip Growth
0.30(a)
California Tax-Free Bond
0.10
California Tax-Free Money
0.10
Capital Appreciation
0.30
Capital Opportunity
0.20
Corporate Income
0.15
Developing Technologies
0.60
Diversified Mid-Cap Growth
0.35
Diversified Small-Cap Growth
0.35
Dividend Growth
0.20
Emerging Europe & Mediterranean
0.75
Emerging Markets Bond
0.45
Emerging Markets Stock
0.75
Equity Income
0.25(b)
European Stock
0.50
Financial Services
0.35
GNMA
0.15
Georgia Tax-Free Bond
0.10
Global Stock
0.35
Global Technology
0.45
Growth & Income
0.25
Growth Stock
0.25(b)
Health Sciences
0.35
High Yield
0.30
Inflation Protected Bond
0.05
International Bond
0.35
International Discovery
0.75
International Growth & Income
0.35
International Stock
0.35
Japan
0.50
Latin America
0.75
Maryland Short-Term Tax-Free Bond
0.10
Maryland Tax-Free Bond
0.10
Maryland Tax-Free Money
0.10
Media & Telecommunications
0.35
Mid-Cap Growth
0.35(c)
Mid-Cap Value
0.35
New America Growth
0.35
New Asia
0.50
New Era
0.25
New Horizons
0.35
New Income
0.15
New Jersey Tax-Free Bond
0.10
New York Tax-Free Bond
0.10
New York Tax-Free Money
0.10
Overseas Stock
0.35
Personal Strategy Balanced
0.25
Personal Strategy Growth
0.30
Personal Strategy Income
0.15
Prime Reserve
0.05
Real Estate
0.30
Science & Technology
0.35
Short-Term Bond
0.10
Small-Cap Stock
0.45
Small-Cap Value
0.35
Tax-Efficient Balanced
0.20
Tax-Efficient Growth
0.30
Tax-Efficient Multi-Cap Growth
0.35
Tax-Exempt Money
0.10
Tax-Free High Yield
0.30
Tax-Free Income
0.15
Tax-Free Short-Intermediate
0.10
U.S. Treasury Intermediate
0.00
U.S. Treasury Long-Term
0.00
U.S. Treasury Money
0.00
Value
0.35
Virginia Tax-Free Bond
0.10

(a)On assets up to $15 billion and 0.255% on assets above $15 billion.

(b)On assets up to $15 billion and 0.21% on assets above $15 billion.

(c)On assets up to $15 billion and 0.30% on assets above $15 billion.

Index, Institutional, Summit Income, and Summit Municipal Funds

The following funds pay the Investment Managers an annual investment management fee in monthly installments of the amount listed below based on the average daily net asset value of the fund.

Fund


Fee %

Equity Index 500
0.15
Institutional Africa & Middle East
1.00
Institutional Concentrated Large-Cap Value
0.55
Institutional Foreign Equity
0.70
Institutional Global Equity
0.65
Institutional Large-Cap Core Growth
0.55
Institutional Large-Cap Growth
0.55
Institutional Large-Cap Value
0.55
Institutional Mid-Cap Equity Growth
0.60
Institutional Small-Cap Stock
0.65
Institutional U.S. Structured Research
0.50

The following funds ("Single Fee Funds") pay the Investment Managers a single annual investment management fee in monthly installments of the amount listed below based on the average daily net asset value of the fund.

Fund


Fee %

Extended Equity Market Index
0.40
Institutional Core Plus
0.45
Institutional Emerging Markets Bond
0.70
Institutional Emerging Markets Equity
1.10
Institutional Floating Rate
0.55
Institutional High Yield
0.50
Institutional International Bond
0.55
International Equity Index
0.50
Short-Term Income
0.50
Summit Cash Reserves
0.45
Summit GNMA
0.60
Summit Municipal Money Market
0.45
Summit Municipal Intermediate
0.50
Summit Municipal Income
0.50
Total Equity Market Index
0.40
U.S. Bond Index
0.30

The Investment Management Agreement between each Single Fee Fund and the Investment Managers provides that the Investment Managers will pay all expenses of each fund`s operations, except interest, taxes, brokerage commissions, and other charges incident to the purchase, sale, or lending of the fund`s portfolio securities, and such non-recurring or extraordinary expenses that may arise, including the costs of actions, suits, or proceedings to which the fund is a party and the expenses the fund may incur as a result of its obligation to provide indemnification to its officers, directors, and agents. However, the Boards for the funds reserve the right to impose additional fees against shareholder accounts to defray expenses which would otherwise be paid by the Investment Managers under the Investment Management Agreement. The Boards do not anticipate levying such charges; such a fee, if charged, may be retained by the funds or paid to the Investment Managers.

The Fee is paid monthly to the Investment Managers on the first business day of the next succeeding calendar month and is the sum of the Daily Fee accruals for each month. The Daily 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 appropriate Fee. The product of this calculation is multiplied by the net assets of the fund for that day, as determined in accordance with each fund`s prospectus as of the close of business on the previous business day on which the fund was open for business.

TRP Government Reserve Investment, TRP Reserve Investment, Retirement, and Spectrum Funds

None of these funds pays T. Rowe Price an investment management fee.

Japan Fund

Under a subadvisory agreement between T. Rowe Price International and Global Investment Services approved by the directors of the Japan Fund, Global Investment Services, subject to the supervision of T. Rowe Price International, manages all the investments of the Japan Fund. For its services, Global Investment Services receives 50% of the investment management fee received by T. Rowe Price International from the Japan Fund.

International Discovery Fund

Under a subadvisory agreement between T. Rowe Price International and Global Investment Services approved by the directors of the International Discovery Fund, Global Investment Services, subject to the supervision of T. Rowe Price International, manages the yen-denominated investments of the International Discovery Fund. For its services, Global Investment Services receives 50% of the investment management fee received by T. Rowe Price International from the International Discovery Fund attributable to the yen-denominated investments of the International Discovery Fund.

Management Fee Compensation

The following table sets forth the total management fees, if any, paid to the Investment Managers by each fund, during the fiscal years indicated:

Fund


Fiscal Year Ended











2/29/08


2/28/07


2/28/06

California Tax-Free Bond
$1,266,000
$1,215,000
$1,145,000
California Tax-Free Money
489,000
457,000
436,000
Georgia Tax-Free Bond
526,000
471,000
421,000
Maryland Short-Term Tax-Free Bond
589,000
639,000
763,000
Maryland Tax-Free Bond
5,888,000
5,681,000
5,478,000
Maryland Tax-Free Money
905,000
744,000
547,000
New Jersey Tax-Free Bond
871,000
786,000
709,000
New York Tax-Free Bond
1,134,000
1,063,000
1,014,000
New York Tax-Free Money
540,000
495,000
486,000
Tax-Efficient Balanced
196,000
200,000
214,000
Tax-Efficient Growth
390,000
387,000
435,000
Tax-Efficient Multi-Cap Growth
265,000
234,000
217,000
Tax-Exempt Money
4,070,000
3,817,000
4,261,000
Tax-Free High Yield
9,250,000
9,183,000
8,186,000
Tax-Free Income(a)
8,413,000
8,228,000
8,083,000
Tax-Free Short-Intermediate
2,059,000
2,010,000
2,202,000
Virginia Tax-Free Bond
2,260,000
2,056,000
1,899,000

(a)The fund has two classes of shares. The management fee is allocated to each class based on relative net assets.

<R>

Fund


Fiscal Year Ended











5/31/08


5/31/07


5/31/06

Corporate Income
$1,004,000
$945,000
$1,008,000
GNMA
6,066,000
5,703,000
6,014,000
TRP Government Reserve Investment
(a)
(a)
(a)
High Yield(b)
31,095,000
29,564,000
25,189,000
Inflation Protected Bond
488,000
371,000
381,000
Institutional Core Plus
351,000
183,000
132,000
Institutional Floating Rate
763,000
(c)
(c)
Institutional High Yield
2,377,000
1,865,000
1,941,000
New Income(d)
32,498,000
20,717,000
16,131,000
Personal Strategy Balanced
8,280,000
7,611,000
6,785,000
Personal Strategy Growth
7,393,000
6,431,000
5,546,000
Personal Strategy Income
3,396,000
2,698,000
2,218,000
Prime Reserve
21,268,000
19,238,000
17,663,000
TRP Reserve Investment
(a)
(a)
(a)
Retirement 2005
(a)
(a)
(a)
Retirement 2010
(a)
(a)
(a)
Retirement 2015
(a)
(a)
(a)
Retirement 2020
(a)
(a)
(a)
Retirement 2025
(a)
(a)
(a)
Retirement 2030
(a)
(a)
(a)
Retirement 2035
(a)
(a)
(a)
Retirement 2040
(a)
(a)
(a)
Retirement 2045
(a)
(a)
(a)
Retirement 2050
(a)
(a)
(c)
Retirement 2055
(a)
(a)
(c)
Retirement Income
(a)
(a)
(a)
Short-Term Bond(b)
6,261,000
5,934,000
5,290,000
Short-Term Income
6,158,000
2,349,000
(c)
U.S. Treasury Intermediate
861,000
727,000
927,000
U.S. Treasury Long-Term
1,350,000
905,000
816,000
U.S. Treasury Money
3,588,000
2,897,000
2,730,000
</R>

(a)The fund does not pay an investment management fee.

(b)The fund has two classes of shares. The management fee is allocated to each class based on relative net assets.

(c)Prior to commencement of operations.

(d)The fund has three classes of shares. The management fee is allocated to each class based on relative net assets.


Fund


Fiscal Year Ended











10/31/07


10/31/06


10/31/05

Africa & Middle East
$55,000
(a)
(a)
Emerging Europe & Mediterranean
17,207,000
$13,763,000
$4,431,000
Emerging Markets Stock
33,350,000
20,603,000
9,850,000
European Stock
8,716,000
6,952,000
6,666,000
Global Stock(b)
3,726,000
1,778,000
617,000
Institutional Africa & Middle East
(a)
(a)
(a)
Institutional Emerging Markets Equity(c)
2,506,000
1,818,000
857,000
Institutional Foreign Equity
1,256,000
1,633,000
3,507,000
Institutional Global Equity
18,000
(a)
(a)
International Discovery
27,857,000
19,009,000
11,725,000
International Equity Index(c)
2,169,000
967,000
455,000
International Growth & Income(d)
16,832,000
10,907,000
5,281,000
International Stock(d)
45,077,000
39,845,000
33,990,000
Japan
3,936,000
4,587,000
1,711,000
Latin America
29,000,000
16,235,000
4,911,000
New Asia
25,366,000
13,131,000
9,017,000
Overseas Stock
3,992,000
(a)
(a)
Summit Cash Reserves(c)
22,987,000
20,157,000
15,826,000
Summit GNMA(c)
448,000
453,000
487,000
Summit Municipal Income(c)
2,219,000
1,165,000
605,000
Summit Municipal Intermediate(c)
2,765,000
1,212,000
966,000
Summit Municipal Money Market(c)
1,348,000
1,520,000
2,621,000
U.S. Bond Index(c)
641,000
510,000
455,000

(a)Prior to commencement of operations.

(b)The fund has two classes of shares. The management fee is allocated to each class based on relative net assets.

(c)The fee includes investment management fees and administrative expenses.

(d)The fund has three classes of shares. The management fee is allocated to each class based on relative net assets.


Fund


Fiscal Year Ended











12/31/07


12/31/06


12/31/05

Balanced
$14,293,000
$12,298,000
$11,137,000
Blue Chip Growth(a)
68,145,000
54,951,000
52,428,000
Capital Appreciation(b)
63,628,000
50,070,000
38,637,000
Capital Opportunity(a)
1,206,000
983,000
596,000
Developing Technologies
451,000
417,000
376,000
Diversified Mid-Cap Growth
691,000
545,000
327,000
Diversified Small-Cap Growth
584,000
608,000
537,000
Dividend Growth
4,521,000
4,071,000
3,900,000
Emerging Markets Bond
4,873,000
4,221,000
2,772,000
Equity Income(a)
132,535,000
117,294,000
108,721,000
Equity Index 500
13,738,000
9,845,000
7,880,000
Extended Equity Market Index(d)
1,611,000
1,226,000
856,000
Financial Services
2,853,000
2,693,000
2,554,000
Global Technology
1,235,000
992,000
793,000
Growth & Income
8,655,000
9,117,000
9,955,000
Growth Stock(a)
128,122,000
85,341,000
59,274,000
Health Sciences
12,874,000
10,661,000
8,634,000
Institutional Concentrated Large-Cap Value
36,000
0
(c)
Institutional Emerging Markets Bond(d)
183,000
6,000
(c)
Institutional International Bond(d)
223,000
(c)
(c)
Institutional Large-Cap Core Growth
229,000
206,000
178,000
Institutional Large-Cap Growth
6,378,000
2,086,000
581,000
Institutional Large-Cap Value
1,372,000
1,091,000
592,000
Institutional Mid-Cap Equity Growth
2,728,000
2,708,000
2,518,000
Institutional Small-Cap Stock
2,716,000
2,971,000
2,822,000
Institutional U.S. Structured Research
52,000
(c)
(c)
International Bond(b)
16,095,000
12,552,000
11,938,000
Media & Telecommunications
12,475,000
7,935,000
5,959,000
Mid-Cap Growth(a)
110,090,000
104,459,000
91,962,000
Mid-Cap Value(a)
52,862,000
43,317,000
37,633,000
New America Growth
5,482,000
5,413,000
5,812,000
New Era
30,900,000
24,158,000
16,831,000
New Horizons
48,350,000
45,283,000
39,472,000
Real Estate(b)
15,234,000
9,483,000
4,773,000
Science & Technology(b)
21,145,000
22,379,000
26,486,000
Small-Cap Stock(b)
57,945,000
58,392,000
52,878,000
Small-Cap Value(b)
41,099,000
38,934,000
34,086,000
Spectrum Growth
(e)
(e)
(e)
Spectrum Income
(e)
(e)
(e)
Spectrum International
(e)
(e)
(e)
Total Equity Market Index(d)
2,045,000
1,672,000
1,448,000
Value(b)
50,381,000
32,436,000
19,701,000

(a)The fund has three classes of shares. The management fee is allocated to each class based on relative net assets.

(b)The fund has two classes of shares. The management fee is allocated to each class based on relative net assets.

(c)Prior to commencement of operations.

(d)The fee includes investment management fees and administrative expenses.

<R>
(e)The fund does not pay an investment management fee.
</R>

Expense Limitations and Reimbursements

The following chart sets forth contractual expense ratio limitations and the periods for which they are effective. For each fund, the Investment Managers have agreed to bear any fund expenses (other than interest, taxes, brokerage, and other expenditures that are capitalized in accordance with generally accepted accounting principles and extraordinary expenses) which would cause the funds` ratio of expenses to average net assets to exceed the indicated percentage limitation. The expenses borne by the Investment Managers are subject to reimbursement by the funds through the indicated reimbursement date, provided no reimbursement will be made if it would result in the funds` expense ratios exceeding their applicable limitations.<R>

Fund


Limitation Period


Expense
Ratio
Limitation %


Reimbursement
Date

Africa & Middle East
September 4, 2007 — February 28, 2010
1.75
(a)
California Tax-Free Money(b)
July 1, 2007 — June 30, 2009
0.55
(a)
Capital Opportunity(c)
October 1, 2005 — April 30, 2008
0.95
April 30, 2010(d)
Capital Opportunity Fund—Advisor Class(e)
May 1, 2008 — April 30, 2010
1.10
April 30, 2012(d)
Capital Opportunity Fund—R Class(f)
May 1, 2008 — April 30, 2010
1.35
April 30, 2012(d)
Developing Technologies(g)
May 1, 2007 — April 30, 2009
1.50
April 30, 2011(d)
Diversified Mid-Cap Growth(h)
May 1, 2006 — April 30, 2008
1.25
(a)
Diversified Small-Cap Growth(i)
May 1, 2008 — April 30, 2010
1.25
April 30, 2012(d)
Dividend Growth Fund—Advisor Class(j)
May 1, 2008 — April 30, 2010
1.05
April 30, 2012(d)
Emerging Europe & Mediterranean
March 1, 2005 — February 28, 2007
1.75
February 28, 2009(d)
Equity Index 500(k)
May 1, 2008 — April 30, 2010
0.35
April 30, 2012(d)
Global Stock
October 1, 2005 — February 29, 2008
1.00
February 28, 2010(d)
Global Stock Fund—Advisor Class(l)
March 1, 2008 — February 28, 2010
1.15
February 29, 2012(d)
Global Technology
May 1, 2005 — April 30, 2007
1.50
April 30, 2009(d)
Inflation Protected Bond(m)
October 1, 2008 — September 30, 2010
0.50
September 30, 2012(d)
Institutional Africa & Middle East
April 30, 2008 — February 28, 2011
1.25
(a)
Institutional Concentrated Large-Cap Value
September 30, 2006 — April 30, 2009
0.65
(a)
Institutional Global Equity
June 30, 2006 — February 28, 2009
0.75
(a)
Institutional Large-Cap Core Growth(n)
May 1, 2007 — April 30, 2009
0.65
April 30, 2011(d)
Institutional Large-Cap Growth(o)
May 1, 2007 — April 30, 2009
0.58
April 30, 2011(d)
Institutional Large-Cap Value(p)
May 1, 2008 — April 30, 2010
0.65
April 30, 2012(d)
Institutional U.S. Structured Research
October 31, 2007 — April 30, 2010
0.55
(a)
International Growth & Income Fund—Advisor Class
March 1, 2006 — February 29, 2008
1.15
February 28, 2010(d)
International Growth & Income Fund—
R Class(q)
March 1, 2008 — February 28, 2010
1.40
February 29, 2012(d)
International Stock Fund—Advisor Class
March 1, 2008 — February 28, 2010
1.15
(a)
International Stock Fund—R Class
March 1, 2008 — February 28, 2010
1.40
(a)
Maryland Tax-Free Money
July 1, 2005 — June 30, 2007
0.55
June 30, 2009(d)
New America Growth Fund—Advisor Class(r)
May 1, 2008 — April 30, 2010
1.10
(a)
New Income Fund—Advisor Class(s)
October 1, 2008 — September 30, 2010
0.90
(a)
New Income Fund—R Class(t)
October 1, 2008 — September 30, 2010
1.15
(a)
New York Tax-Free Money
July 1, 2007 — June 30, 2009
0.55
(a)
Overseas Stock
December 29, 2006 — February 28, 2009
1.15
(a)
Personal Strategy Balanced
October 1, 2006 — September 30, 2008
0.90
September 30, 2010(d)
Personal Strategy Growth
October 1, 2006 — September 30, 2008
1.00
September 30, 2010(d)
Personal Strategy Income
October 1, 2006 — September 30, 2008
0.80
September 30, 2010(d)
Real Estate Fund—Advisor Class
January 1, 2005 — April 30, 2007
1.20
April 30, 2009(d)
Short-Term Bond(u)
October 1, 2007 — September 30, 2009
0.55
(a)
Short-Term Bond Fund—Advisor Class
October 1, 2007 — September 30, 2009
0.85
(a)
Tax-Efficient Multi-Cap Growth(v)
July 1, 2008 — June 30, 2010
1.25
June 30, 2012(d)
</R>

(a)No reimbursement will be made more than three years after any waiver or payment.

(b)The California Tax-Free Money Fund previously operated under a 0.55% expense limitation that expired June 30, 2007.

(c)The Capital Opportunity Fund previously operated under a 0.95% expense limitation that expired April 30, 2008.

(d)No reimbursement will be made after the reimbursement date or three years after any waiver or payment, whichever is sooner.

(e)The Capital Opportunity Fund—Advisor Class previously operated under a l.10% expense limitation that expired April 30, 2008.

(f)The Capital Opportunity Fund—R Class previously operated under a 1.35% expense limitation that expired April 30, 2008.

(g)The Developing Technologies Fund previously operated under a 1.50% expense limitation that expired April 30, 2007. The reimbursement period for this limitation extends through April 30, 2009.

(h)The Diversified Mid-Cap Growth Fund previously operated under a 1.25% expense limitation that expired April 30, 2008.

(i)The Diversified Small-Cap Growth Fund previously operated under a 1.25% expense limitation that expired April 30, 2008. The reimbursement period for this limitation extends through April 30, 2010.

(j)The Dividend Growth Fund—Advisor Class previously operated under a 1.05% expense limitation that expired April 30, 2008. The reimbursement period for this limitation extends through April 30, 2010.

(k)The Equity Index 500 Fund previously operated under a 0.35% expense limitation that expired April 30, 2008. The reimbursement period for this limitation extends through April 30, 2010.

(l)The Global Stock Fund—Advisor Class previously operated under a 1.15% expense limitation that expired February 29, 2008. The reimbursement period for this limitation extends through February 28, 2010.

<R>
(m)The Inflation Protected Bond Fund previously operated under a 0.50% expense limitation that expired September 30, 2008. The reimbursement period for this limitation extends through September 30, 2010.
</R>

(n)The Institutional Large-Cap Core Growth Fund previously operated under a 0.65% expense limitation that expired April 30, 2007. The reimbursement period for this limitation extends through April 30, 2009.

(o)The Institutional Large-Cap Growth Fund previously operated under a 0.58% expense limitation that expired April 30, 2007. The reimbursement period for this limitation extends through April 30, 2009.

(p)The Institutional Large-Cap Value Fund previously operated under a 0.65% expense limitation that expired April 30, 2008. The reimbursement period for this limitation extends through April 30, 2010.

(q)The International Growth & Income Fund—R Class previously operated under a 1.40% expense limitation that expired February 29, 2008. The reimbursement period for this limitation extends through February 28, 2010.

(r)The New America Growth Fund—Advisor Class previously operated under a l.10% expense limitation that expired April 30, 2008.

<R>
(s)The New Income Fund—Advisor Class previously operated under a 0.90% expense limitation that expired September 30, 2008.
</R>

<R>
(t)The New Income Fund—R Class previously operated under a 1.15% expense limitation that expired September 30, 2008.
</R>

<R>
(u)The Short-Term Bond Fund previously operated under a 0.55% expense limitation that expired September 30, 2007.
</R>

<R>
(v)The Tax-Efficient Multi-Cap Growth Fund previously operated under a 1.25% expense limitation that expired June 30, 2008. The reimbursement period for this limitation extends through June 30, 2010.
</R>

The Investment Management Agreements between the funds and the Investment Managers provide that each fund will bear all expenses of its operations not specifically assumed by the Investment Managers.

For the purpose of determining whether a fund is entitled to expense limitation, the expenses of a fund are calculated on a monthly basis. If a fund is entitled to expense limitation, that month`s advisory fee will be reduced or postponed, with any adjustment made after the end of the year.

Except for the California and New York Funds, each of the above-referenced funds` Investment Management Agreement also provides that one or more additional expense limitation periods (of the same or different time periods) may be implemented after the expiration of the current expense limitation, and that with respect to any such additional limitation period, the funds may reimburse the Investment Managers, provided the reimbursement does not result in the funds` aggregate expenses exceeding the additional expense limitation. No reimbursement may be made by the California and New York Funds unless approved by shareholders.

Africa & Middle East Fund At October 31, 2007, management fees in the amount of $10,000 were waived. Including these amounts, management fees waived in the amount of $10,000 remain subject to repayment.

California Tax-Free Money Fund At February 29, 2008, management fees in the amount of $73,000 were waived. Including these amounts, management fees waived in the amount of $202,000 remain subject to repayment.

Capital Opportunity Fund, Capital Opportunity Fund—Advisor and R Classes At December 31, 2007, expenses in the amount of $10,000 were reimbursed by the manager. Including these amounts, expenses previously reimbursed by the manager in the amount of $22,000 remain subject to repayment.

<R>
Developing Technologies Fund At December 31, 2007, management fees in the amount of $92,000 were waived. Including these amounts, management fees waived in the amount of $231,000 remain subject to repayment.
</R>

Diversified Mid-Cap Growth Fund At December 31, 2007, management fees in the amount of $120,000 were repaid. Management fees waived in the amount of $20,000 remain subject to repayment.

Diversified Small-Cap Growth Fund At December 31, 2007, management fees in the amount of $9,000 were repaid. Management fees waived in the amount of $1,000 remain subject to repayment.

Dividend Growth Fund—Advisor Class At December 31, 2007, expenses in the amount of $3,000 were reimbursed by the manager. Including these amounts, expenses previously reimbursed by the manager in the amount of $6,000 remain subject to repayment.

Equity Index 500 Fund At December 31, 2007, management fees in the amount of $558,000 were repaid. Including these amounts, management fees waived in the amount of $2,292,000 remain subject to repayment.

Global Stock Fund At October 31, 2007, expenses in the amount of $15,000 were repaid to the manager. Including these amounts, expenses previously reimbursed by the manager in the amount of $3,000 remain subject to repayment.

Global Technology Fund At December 31, 2007, there were no amounts subject to repayment by the fund. The fund operated below its expense limitation.

<R>
Inflation Protected Bond Fund At May 31, 2008, management fees in the amount of $333,000 were waived and expenses in the amount of $2,000 were reimbursed by the manager. Including these amounts, management fees waived and expenses previously reimbursed by the manager in the amount of $895,000 remain subject to repayment.
</R>

Institutional Concentrated Large-Cap Value Fund At December 31, 2007, management fees in the amount of $36,000 were waived and expenses in the amount of $171,000 were reimbursed by the manager. Including these amounts, management fees waived and expenses previously reimbursed by the manager in the amount of $235,000 remain subject to repayment.

Institutional Global Equity Fund At October 31, 2007, management fees in the amount of $18,000 were waived and expenses in the amount of $230,000 were reimbursed by the manager. Including these amounts, management fees waived and expenses previously reimbursed by the manager in the amount of $306,000 remain subject to repayment.

Institutional Large-Cap Core Growth Fund At December 31, 2007, management fees in the amount of $158,000 were waived and expenses in the amount of $20,000 were reimbursed by the manager. Including these amounts, management fees waived and expenses previously reimbursed in the amount of $405,000 remain subject to repayment.

Institutional Large-Cap Growth Fund At December 31, 2007, management fees in the amount of $26,000 were repaid. Including these amounts, management fees waived and expenses previously reimbursed by the manager in the amount of $180,000 remain subject to repayment.

Institutional Large-Cap Value Fund At December 31, 2007, management fees in the amount of $14,000 were repaid. Including these amounts, management fees waived in the amount of $97,000 remain subject to repayment.

International Growth & Income Fund, International Growth & Income Fund—Advisor and R Classes At October 31, 2007, management fees in the amount of $9,000 were repaid to the manager. There were no amounts subject to repayment. Each class operated below its expense limitation.

International Stock Fund—Advisor and R Classes At October 31, 2007, management fees in the amount of $3,000 were repaid to the manager. Including these amounts, management fees and expenses previously reimbursed by the manager in the amount of $1,000 remain subject to repayment. Each class operated below its expense limitation.

Maryland Tax-Free Money Fund At February 29, 2008, management fees in the amount of $30,000 were repaid. There were no amounts subject to repayment.

New America Growth Fund At December 31, 2007, expenses in the amount of $5,000 were reimbursed by the manager. Including these amounts, expenses previously reimbursed by the manager in the amount of $8,000 remain subject to repayment.

<R>
New Income Fund—Advisor and R Classes At May 31, 2008, management fees in the amount of $177,000 were waived and expenses in the amount of $1,000 were repaid to the manager. Including these amounts, expenses previously reimbursed by the manager in the amount of $13,000 remain subject to repayment.
</R>

<R>
New York Tax-Free Money Fund At February 29, 2008, management fees in the amount of $53,000 were waived. Including these amounts, management fees waived in the amount of $138,000 remain subject to repayment.
</R>

Overseas Stock Fund For the year ended October 31, 2007, the fund operated below its expense limitation.

<R>
Personal Strategy Balanced Fund For the year ended May 31, 2008, the fund operated below its expense limitation. There were no amounts subject to repayment.
</R>

<R>
Personal Strategy Growth Fund For the year ended May 31, 2008, the fund operated below its expense limitation. There were no amounts subject to repayment.
</R>

<R>
Personal Strategy Income Fund For the year ended May 31, 2008, the fund operated below its expense limitation. There were no amounts subject to repayment.
</R>

Real Estate Fund and Real Estate Fund—Advisor Class At December 31, 2007, there were no amounts subject to repayment. The Advisor Class operated below its expense limitation.

<R>
Short-Term Bond Fund and Short-Term Bond Fund—Advisor Class At May 31, 2008, management fees in the amount of $172,000 were waived and expenses in the amount of $485,000 were reimbursed by the manager. Including these amounts, management fees waived and expenses previously reimbursed by the manager in the amount of $2,921,000 remain subject to repayment.
</R>

Tax-Efficient Multi-Cap Growth Fund At February 29, 2008, management fees in the amount of $20,000 were waived. Including these amounts, management fees waived in the amount of $83,000 remain subject to repayment.

Management Related Services

In addition to the management fee, the funds (other than the Single-Fee Funds) pay 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 directors` fees and expenses.

T. Rowe Price Services, Inc. ("Services"), a wholly owned subsidiary of T. Rowe Price, acts as the funds` transfer and dividend disbursing agent and provides shareholder and administrative services. T. Rowe Price Retirement Plan Services, Inc. ("RPS"), also a wholly owned subsidiary, provides recordkeeping, sub-transfer agency, and administrative services for certain types of retirement plans investing in the funds. The fees paid by the funds to Services are based on the costs to Services of providing these services plus a return on capital employed in support of the services.

The fees paid to RPS are based on a per plan participant fee. The fees paid to Services and RPS are set forth in each fund`s shareholder report under "Related Party Transactions." The address for Services and RPS is 100 East Pratt Street, Baltimore, Maryland 21202.

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 during the fiscal years indicated to T. Rowe Price for accounting services.<R>

Fund


Fiscal Year Ended











2/29/08


2/28/07


2/28/06

California Tax-Free Bond
$96,000
$69,000
$64,000
California Tax-Free Money
96,000
69,000
64,000
Georgia Tax-Free Bond
96,000
69,000
64,000
Maryland Short-Term Tax-Free Bond
96,000
69,000
64,000
Maryland Tax-Free Bond
125,000
91,000
84,000
Maryland Tax-Free Money
96,000
69,000
64,000
New Jersey Tax-Free Bond
96,000
69,000
64,000
New York Tax-Free Bond
96,000
69,000
64,000
New York Tax-Free Money
96,000
69,000
64,000
Tax-Efficient Balanced
96,000
69,000
64,000
Tax-Efficient Growth
96,000
69,000
64,000
Tax-Efficient Multi-Cap Growth
96,000
69,000
64,000
Tax-Exempt Money
125,000
91,000
84,000
Tax-Free High Yield
155,000
112,000
104,000
Tax-Free Income
139,000
100,000
94,000
Tax-Free Income Fund—Advisor Class
31,000
22,000
18,000
Tax-Free Short-Intermediate
96,000
69,000
64,000
Virginia Tax-Free Bond
96,000
69,000
64,000
</R>

<R>

Fund


Fiscal Year Ended











5/31/08


5/31/07


5/31/06

Corporate Income
$159,089
$124,000
$104,000
GNMA
159,083
124,000
104,000
TRP Government Reserve Investment
98,333
77,000
64,000
High Yield
160,548
126,000
105,000
High Yield Fund—Advisor Class
44,327
33,000
28,000
Inflation Protected Bond
128,000
100,000
84,000
Institutional Core Plus
173,250
112,000
84,000
Institutional Floating Rate
67,667
(a)
(a)
Institutional High Yield
190,167
148,000
124,000
New Income
224,631
171,000
145,000
New Income Fund—Advisor Class
(b)
(b)
(b)
New Income Fund—R Class
(b)
(b)
(b)
Personal Strategy Balanced
191,284
148,000
125,000
Personal Strategy Growth
190,993
148,000
125,000
Personal Strategy Income
190,783
148,000
124,000
Prime Reserve
128,000
100,000
84,000
TRP Reserve Investment
128,000
100,000
84,000
Retirement 2005
(c)
(c)
(c)
Retirement 2005 Fund—Advisor Class
(c)
(a)
(a)
Retirement 2005 Fund—R Class
(c)
(a)
(a)
Retirement 2010
(c)
(c)
(c)
Retirement 2010 Fund—Advisor Class
(c)
(c)
(c)
Retirement 2010 Fund—R Class
(c)
(c)
(c)
Retirement 2015
(c)
(c)
(c)
Retirement 2015 Fund—Advisor Class
(c)
(a)
(a)
Retirement 2015 Fund—R Class
(c)
(a)
(a)
Retirement 2020
(c)
(c)
(c)
Retirement 2020 Fund—Advisor Class
(c)
(c)
(c)
Retirement 2020 Fund—R Class
(c)
(c)
(c)
Retirement 2025
(c)
(c)
(c)
Retirement 2025 Fund—Advisor Class
(c)
(a)
(a)
Retirement 2025 Fund—R Class
(c)
(a)
(a)
Retirement 2030
(c)
(c)
(c)
Retirement 2030 Fund—Advisor Class
(c)
(c)
(c)
Retirement 2030 Fund—R Class
(c)
(c)
(c)
Retirement 2035
(c)
(c)
(c)
Retirement 2035 Fund—Advisor Class
(c)
(a)
(a)
Retirement 2035 Fund—R Class
(c)
(a)
(a)
Retirement 2040
(c)
(c)
(c)
Retirement 2040 Fund—Advisor Class
(c)
(c)
(c)
Retirement 2040 Fund—R Class
(c)
(c)
(c)
Retirement 2045
(c)
(c)
(c)
Retirement 2045 Fund—Advisor Class
(c)
(a)
(a)
Retirement 2045 Fund—R Class
(c)
(a)
(a)
Retirement 2050
(c)
(c)
(a)
Retirement 2050 Fund—Advisor Class
(c)
(c)
(a)
Retirement 2050 Fund—R Class
(c)
(c)
(a)
Retirement 2055
(c)
(c)
(a)
Retirement 2055 Fund—Advisor Class
(c)
(a)
(a)
Retirement 2055 Fund—R Class
(c)
(a)
(a)
Retirement Income
(c)
(c)
(c)
Short-Term Bond
173,570
135,000
112,000
Short-Term Bond Fund—Advisor Class
(b)
(b)
(b)
Short-Term Income
159,239
89,000
(a)
U.S. Treasury Intermediate
98,333
77,000
64,000
U.S. Treasury Long-Term
98,333
77,000
64,000
U.S. Treasury Money
98,333
77,000
64,000
</R>

(a)Prior to commencement of operations.

(b)Less than $1,000.

(c)Paid by underlying Price funds pursuant to the Special Servicing Agreement.

<R>

Fund


Fiscal Year Ended











10/31/07


10/31/06


10/31/05

Africa & Middle East
$30,000
(a)
(a)
Emerging Europe & Mediterranean
117,000
$86,000
$85,000
Emerging Markets Stock
121,000
88,000
86,000
European Stock
118,000
89,000
87,000
Global Stock
130,000
89,000
84,000
Global Stock Fund—Advisor Class
(b)
(b)
(a)
Institutional Africa & Middle East
(a)
(a)
(a)
Institutional Emerging Markets Equity
117,000
84,000
84,000
Institutional Foreign Equity
120,000
108,000
105,000
Institutional Global Equity
117,000
28,000
(a)
International Discovery
120,000
92,000
88,000
International Equity Index
145,000
104,000
104,000
International Growth & Income
122,000
84,000
90,000
International Growth & Income Fund—Advisor Class
23,000
20,000
14,000
International Growth & Income Fund—
R Class
3,000
1,000
(b)
International Stock
180,000
130,000
136,000
International Stock Fund—Advisor Class
1,700
1,000
(b)
International Stock Fund—R Class
(b)
(b)
(b)
Japan
91,000
67,000
65,000
Latin America
91,000
67,000
64,000
New Asia
119,000
86,000
87,000
Overseas Stock
127,000
(a)
(a)
Summit Cash Reserves
117,000
84,000
84,000
Summit GNMA
117,000
84,000
84,000
Summit Municipal Income
90,000
64,000
64,000
Summit Municipal Intermediate
90,000
64,000
64,000
Summit Municipal Money Market
117,000
84,000
84,000
U.S. Bond Index
117,000
84,000
81,000
</R>

(a)Prior to commencement of operations.

(b)Less than $1,000.


Fund


Fiscal Year Ended











12/31/07


12/31/06


12/31/05

Balanced
$153,000
$106,000
$107,000
Blue Chip Growth
112,000
75,000
71,000
Blue Chip Growth Fund—Advisor Class
11,000
7,000
11,000
Blue Chip Growth Fund—R Class
1,000
(a)
(a)
Capital Appreciation
137,000
93,000
93,000
Capital Appreciation Fund—Advisor Class
2,000
(a)
(a)
Capital Opportunity
151,000
102,000
102,000
Capital Opportunity Fund—Advisor Class
(a)
(a)
(a)
Capital Opportunity Fund—R Class
(a)
(a)
(a)
Developing Technologies
95,000
64,000
64,000
Diversified Mid-Cap Growth
95,000
64,000
64,000
Diversified Small-Cap Growth
95,000
64,000
64,000
Dividend Growth
109,000
73,000
64,000
Dividend Growth Fund—Advisor Class
(a)
(a)
(b)
Emerging Markets Bond
181,000
125,000
126,000
Equity Income
111,000
74,000
72,000
Equity Income Fund—Advisor Class
13,000
8,000
10,000
Equity Income Fund—R Class
1,000
(a)
(a)
Equity Index 500
153,000
105,000
105,000
Extended Equity Market Index
153,000
105,000
104,000
Financial Services
95,000
64,000
64,000
Global Technology
123,000
84,000
84,000
Growth & Income
95,000
64,000
64,000
Growth Stock
126,000
88,000
92,000
Growth Stock Fund—Advisor Class
21,000
11,000
8,000
Growth Stock Fund—R Class
5,000
3,000
2,000
Health Sciences
152,000
104,000
104,000
Institutional Concentrated Large-Cap Value
95,000
16,000
(b)
Institutional Emerging Markets Bond
181,000
10,000
(b)
Institutional International Bond
106,000
(b)
(b)
Institutional Large-Cap Core Growth
95,000
64,000
64,000
Institutional Large-Cap Growth
95,000
64,000
64,000
Institutional Large-Cap Value
95,000
64,000
64,000
Institutional Mid-Cap Equity Growth
95,000
64,000
64,000
Institutional Small-Cap Stock
95,000
64,000
64,000
Institutional U.S. Structured Research
20,000
(b)
(b)
International Bond
176,000
126,000
126,000
International Bond Fund—Advisor Class
19,000
7,000
7,000
Media & Telecommunications
95,000
64,000
64,000
Mid-Cap Growth
119,000
82,000
78,000
Mid-Cap Growth Fund—Advisor Class
4,000
3,000
3,000
Mid-Cap Growth Fund—R Class
1,000
(a)
(a)
Mid-Cap Value
112,000
72,000
73,000
Mid-Cap Value Fund—Advisor Class
10,000
6,000
5,000
Mid-Cap Value Fund—R Class
7,000
4,000
4,000
New America Growth
109,000
73,000
64,000
New America Growth Fund—Advisor Class
(a)
(a)
(b)
New Era
96,000
64,000
64,000
New Horizons
123,000
84,000
84,000
Real Estate
107,000
71,000
73,000
Real Estate Fund—Advisor Class
2,000
2,000
(a)
Science & Technology
118,000
80,000
81,000
Science & Technology Fund—Advisor Class
19,000
13,000
12,000
Small-Cap Stock
101,000
67,000
68,000
Small-Cap Stock Fund—Advisor Class
9,000
6,000
5,000
Small-Cap Value
121,000
82,000
81,000
Small-Cap Value Fund—Advisor Class
17,000
11,000
12,000
Spectrum Growth
(c)
(c)
(c)
Spectrum Income
(c)
(c)
(c)
Spectrum International
(c)
(c)
(c)
Total Equity Market Index
152,000
104,000
104,000
Value
91,000
62,000
69,000
Value Fund—Advisor Class
19,000
11,000
4,000

(a)Less than $1,000.

(b)Prior to commencement of operations.

<R>
(c)Paid by underlying Price funds pursuant to the Special Servicing Agreement.
</R>

other shareholder services

The funds have adopted an administrative fee payment ("AFP") program that authorizes the funds to make payments for services provided on behalf of the funds. Payments are made to retirement plans, retirement plan recordkeepers, insurance companies, banks, and broker-dealers for transfer agency, recordkeeping, and other administrative services. These services include, but are not limited to: transmitting net purchase and redemption orders; maintaining separate records for shareholders reflecting purchases, redemptions, and share balances; mailing shareholder confirmations and periodic statements; processing dividend payments; and telephone services in connection with the above. Under the AFP program, the funds paid the amounts set forth below in calendar year 2007.

Fund


Payment

Africa & Middle East
$0
Balanced
475,448
Blue Chip Growth
1,693,737
California Tax-Free Bond
1,201
California Tax-Free Money
13
Capital Appreciation
757,570
Capital Opportunity
3,130
Corporate Income
601
Developing Technologies
48
Diversified Mid-Cap Growth
1,772
Diversified Small-Cap Growth
119
Dividend Growth
21,994
Emerging Europe & Mediterranean
27,664
Emerging Markets Bond
10,409
Emerging Markets Stock
523,409
Equity Income
2,299,144
Equity Index 500
17,245
European Stock
36,697
Extended Equity Market Index
6,689
Financial Services
26,372
Georgia Tax-Free Bond
3,144
GNMA
14,388
TRP Government Reserve Investment
0
Global Stock
8,023
Global Technology
2,251
Growth & Income
19,544
Growth Stock
3,273,271
Health Sciences
353,950
High Yield
201,615
Inflation Protected Bond
639
Institutional Africa & Middle East
(a)
Institutional Concentrated Large-Cap Value
0
Institutional Core Plus
578
Institutional Emerging Markets Bond
0
Institutional Emerging Markets Equity
0
Institutional Floating Rate
(a)
Institutional Foreign Equity
0
Institutional Global Equity
0
Institutional High Yield
0
Institutional International Bond
0
Institutional Large-Cap Core Growth
171
Institutional Large-Cap Growth
0
Institutional Large-Cap Value
0
Institutional Mid-Cap Equity Growth
0
Institutional Small-Cap Stock
0
Institutional U.S. Structured Research
481
International Bond
342,047
International Discovery
778,270
International Equity Index
1,306
International Growth & Income
82,015
International Stock
440,286
Japan
10,794
Latin America
300,617
Maryland Short-Term Tax-Free Bond
1,028
Maryland Tax-Free Bond
39,016
Maryland Tax-Free Money
0
Media & Telecommunications
83,851
Mid-Cap Growth
4,698,222
Mid-Cap Value
1,337,067
New America Growth
75,883
New Asia
279,664
New Era
432,689
New Horizons
790,809
New Income
36,356
New Jersey Tax-Free Bond
392
New York Tax-Free Bond
1,989
New York Tax-Free Money
16
Overseas Stock
63
Personal Strategy Balanced
393,339
Personal Strategy Growth
198,124
Personal Strategy Income
72,966
Prime Reserve
35,682
Real Estate
273,320
TRP Reserve Investment
0
Retirement 2005
(b)
Retirement 2010
(b)
Retirement 2015
(b)
Retirement 2020
(b)
Retirement 2025
(b)
Retirement 2030
(b)
Retirement 2035
(b)
Retirement 2040
(b)
Retirement 2045
(b)
Retirement 2050
(b)
Retirement 2055
(b)
Retirement Income
(b)
Science & Technology
243,533
Short-Term Bond
57,395
Short-Term Income
0
Small-Cap Stock
2,995,777
Small-Cap Value
763,019
Spectrum Growth
(b)
Spectrum Income
(b)
Spectrum International
(b)
Summit Cash Reserves
1,564
Summit GNMA
63
Summit Municipal Income
44,899
Summit Municipal Intermediate
61,263
Summit Municipal Money Market
46
Tax-Efficient Balanced
116
Tax-Efficient Growth
266
Tax-Efficient Multi-Cap Growth
384
Tax-Exempt Money
353
Tax-Free High Yield
15,469
Tax-Free Income
21,309
Tax-Free Short-Intermediate
16,576
Total Equity Market Index
15,028
U.S. Bond Index
143
U.S. Treasury Intermediate
11,220
U.S. Treasury Long-Term
553
U.S. Treasury Money
22,208
Value
402,239
Virginia Tax-Free Bond
22,912

(a)Prior to commencement of operations.

(b)Paid by underlying Price funds pursuant to the Special Servicing Agreement.

Each Advisor and R Class has adopted an AFP program under which various third parties, including third parties receiving 12b-1 payments, may receive payments from the class in addition to 12b-1 fees for providing various recordkeeping, transfer agency, and administrative services to the classes and/or shareholders thereof. These services include, but are not limited to: transmitting net purchase and redemption orders; maintaining separate records for shareholders reflecting purchases, redemptions, and share balances; mailing shareholder confirmations and periodic statements; processing dividend payments; and telephone services in connection with the above. Under this AFP program, the funds paid the amounts set forth below in calendar year 2007.

Fund


Payment

Blue Chip Growth Fund—Advisor Class
$993,516
Blue Chip Growth Fund—R Class
93,132
Capital Appreciation Fund—Advisor Class
127,373
Capital Opportunity Fund—Advisor Class
107
Capital Opportunity Fund—R Class
70
Dividend Growth Fund—Advisor Class
898
Equity Income Fund—Advisor Class
2,038,297
Equity Income Fund—R Class
270,016
Global Stock Fund—Advisor Class
3,401
Growth Stock Fund—Advisor Class
3,413,949
Growth Stock Fund—R Class
853,701
High Yield Fund—Advisor Class
1,346,376
International Bond Fund—Advisor Class
179,104
International Growth & Income Fund—Advisor Class
405,601
International Growth & Income Fund—
R Class
53,933
International Stock Fund—Advisor Class
30,273
International Stock Fund—R Class
1,997
Mid-Cap Growth Fund—Advisor Class
501,168
Mid-Cap Growth Fund—R Class
174,560
Mid-Cap Value Fund—Advisor Class
549,286
Mid-Cap Value Fund—R Class
420,040
New America Growth Fund—Advisor Class
3,794
New Income Fund—Advisor Class
3,369
New Income Fund—R Class
2,565
Real Estate Fund—Advisor Class
52,292
Retirement 2005 Fund—Advisor Class
(a)
Retirement 2005 Fund—R Class
(a)
Retirement 2010 Fund—Advisor Class
(a)
Retirement 2010 Fund—R Class
(a)
Retirement 2015 Fund—Advisor Class
(a)
Retirement 2015 Fund—R Class
(a)
Retirement 2020 Fund—Advisor Class
(a)
Retirement 2020 Fund—R Class
(a)
Retirement 2025 Fund—Advisor Class
(a)
Retirement 2025 Fund—R Class
(a)
Retirement 2030 Fund—Advisor Class
(a)
Retirement 2030 Fund—R Class
(a)
Retirement 2035 Fund—Advisor Class
(a)
Retirement 2035 Fund—R Class
(a)
Retirement 2040 Fund—Advisor Class
(a)
Retirement 2040 Fund—R Class
(a)
Retirement 2045 Fund—Advisor Class
(a)
Retirement 2045 Fund—R Class
(a)
Retirement 2050 Fund—Advisor Class
(a)
Retirement 2050 Fund—R Class
(a)
Retirement 2055 Fund—Advisor Class
(a)
Retirement 2055 Fund—R Class
(a)
Retirement Income Fund—Advisor Class
(a)
Retirement Income Fund—R Class
(a)
Science & Technology Fund—Advisor Class
451,746
Short-Term Bond Fund—Advisor Class
2,164
Small-Cap Stock Fund—Advisor Class
542,028
Small-Cap Value Fund—Advisor Class
813,301
Tax-Free Income Fund—Advisor Class
336,693
Value Fund—Advisor Class
1,555,762

(a)Paid by underlying Price funds pursuant to the special servicing agreement.

529 Plans

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T. Rowe Price is the investment manager of several college savings plans established by states under section 529 of the Code. Each plan has a number of portfolios that invest in underlying Price Funds including Blue Chip Growth, Emerging Markets Stock, Equity Index 500, International Growth & Income, International Stock, Mid-Cap Growth, Mid-Cap Value, Overseas Stock, Short-Term Bond, Short-Term Income, Small-Cap Stock, Spectrum Income, Summit Cash Reserves, Total Equity Market Index, U.S. Bond Index, and Value Funds. Each portfolio establishes an omnibus account in the underlying Price Funds. Transfer agent and recordkeeping expenses incurred by the portfolios as a result of transactions by participants in the 529 plans that invest in the Price Funds are paid for by the underlying Price Funds under their agreement with their transfer agent, T. Rowe Price Services, Inc. The expenses borne by each underlying Price Fund are set forth in the shareholder report of the underlying fund under "Related Party Transactions."
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Control of Investment Adviser

T. Rowe Price Group, Inc. ("Group") is a publicly owned company and owns 100% of the stock of T. Rowe Price Associates, Inc., which in turn indirectly owns 100% of T. Rowe Price International, Inc. Group was formed in 2000 as a holding company for the T. Rowe Price-affiliated companies.

DISTRIBUTOR FOR THE FUNDs

Investment Services, a Maryland corporation formed in 1980 as a wholly owned subsidiary of T. Rowe Price, serves as distributor for all T. Rowe Price mutual funds on a continuous basis. Investment Services is registered as a broker-dealer under the Securities Exchange Act of 1934 and is a member of the Financial Industry Regulatory Authority, Inc. ("FINRA").

Investment Services is located at the same address as the funds and T. Rowe Price—100 East Pratt Street, Baltimore, Maryland 21202.

Investment Services serves as distributor to the funds, pursuant to an Underwriting Agreement ("Underwriting Agreement"), which provides that the funds (other than the Single-Fee Funds) will pay all fees and expenses in connection with necessary state filings; preparing, setting in type, printing, and mailing of prospectuses and reports to shareholders; and issuing shares, including expenses of confirming purchase orders. For the Single-Fee Funds, the Underwriting Agreement provides that Investment Services will pay, or will arrange for others to pay, all of these fees and expenses.

The Underwriting Agreement also provides that Investment Services will pay all fees and expenses in connection with printing and distributing prospectuses and reports for use in offering and selling fund shares; preparing, setting in type, printing, and mailing all sales literature and advertising; Investment Services` federal and state registrations as a broker-dealer; and offering and selling shares for each fund, except for those fees and expenses specifically assumed by the funds. Investment Services` expenses are paid by T. Rowe Price.

Investment Services acts as the agent of the funds, in connection with the sale of fund 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. Other than as described below with respect to the Advisor and R Class shares, no sales charges are paid by investors or the funds. No compensation is paid to Investment Services.

Advisor and R Class

Distribution and Shareholder Services Plan

The fund directors adopted a plan pursuant to Rule 12b-1 with respect to each Advisor and R Class (collectively "Class"). Each plan provides that the Class may compensate Investment Services or such other persons as the funds 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 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 intermediaries other than Investment Services such as broker-dealers, banks, insurance companies, and retirement plan recordkeepers. 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 and each R Class pays a fee at the annual rate of up to 0.50% 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. In addition, the fee may be split among intermediaries based on the level of services provided by each. Intermediaries may use the payments for, among other purposes, compensating employees engaged in sales and/or shareholder servicing of the Class, as well as for a wide variety of other purposes associated with supporting, distributing, and servicing Class shares. The amount of fees paid by a Class during any year may be more or less than the cost of distribution and other services provided to the Class and its investors. FINRA 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, a quarterly written report identifying the amounts expended by each Class and the purposes for which such expenditures were made to the fund directors for their review.

Prior to approving the plan, the funds 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 Class, and the Class`s shareholders. The fund directors noted that to the extent the plan allows a fund to sell 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 is renewable 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 funds` independent 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 Class thereunder unless such amendment is approved by a majority vote of the outstanding shares of such 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 a Class at any time by a vote of a majority of the independent directors or by a majority vote of the outstanding shares in the Class.

Payments under the 12b-1 plans will normally be made for funds that are closed to new investors. Such payments are made for the various services provided to the investors by the intermediaries receiving such payments.

The following payments for the fiscal year indicated were made to intermediaries, including broker-dealers and insurance companies, for the distribution, shareholder servicing, maintenance of shareholder accounts, and/or other administrative services under the plan.


Fund


Fiscal Year Ended
 2/29/08

Tax-Free Income Fund—Advisor Class
$845,000

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Fund


Fiscal Year Ended
5/31/08

High Yield Fund—Advisor Class
$2,798,000
New Income Fund—Advisor Class
22,000
New Income Fund—R Class
20,000
Retirement 2005 Fund—Advisor Class
2,000
Retirement 2005 Fund—R Class
1,000
Retirement 2010 Fund—Advisor Class
798,000
Retirement 2010 Fund—R Class
1,135,000
Retirement 2015 Fund—Advisor Class
49,000
Retirement 2015 Fund—R Class
8,000
Retirement 2020 Fund—Advisor Class
1,225,000
Retirement 2020 Fund—R Class
1,700,000
Retirement 2025 Fund—Advisor Class
47,000
Retirement 2025 Fund—R Class
7,000
Retirement 2030 Fund—Advisor Class
850,000
Retirement 2030 Fund—R Class
1,216,000
Retirement 2035 Fund—Advisor Class
27,000
Retirement 2035 Fund—R Class
5,000
Retirement 2040 Fund—Advisor Class
493,000
Retirement 2040 Fund—R Class
642,000
Retirement 2045 Fund—Advisor Class
11,000
Retirement 2045 Fund—R Class
3,000
Retirement 2050 Fund—Advisor Class
16,000
Retirement 2050 Fund—R Class
11,000
Retirement 2055 Fund—Advisor Class
3,000
Retirement 2055 Fund—R Class
1,000
Retirement Income Fund—Advisor Class
193,000
Retirement Income Fund—R Class
249,000
Short-Term Bond Fund—Advisor Class
5,000
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Fund


Fiscal Year Ended
10/31/07

Global Stock Fund—Advisor Class
$6,000
International Growth & Income Fund—Advisor Class
1,012,000
International Growth & Income Fund—
R Class
252,000
International Stock Fund—Advisor Class
162,000
International Stock Fund—R Class
12,000

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Fund


Fiscal Year Ended
12/31/07

Blue Chip Growth Fund—Advisor Class
$2,577,000
Blue Chip Growth Fund—R Class
433,000
Capital Appreciation Fund—Advisor Class
342,000
Capital Opportunity Fund—Advisor Class
1,000
Capital Opportunity Fund—R Class
2,000
Dividend Growth Fund—Advisor Class
3,000
Equity Income Fund—Advisor Class
6,301,000
Equity Income Fund—R Class
1,365,000
Growth Stock Fund—Advisor Class
8,219,000
Growth Stock Fund—R Class
4,174,000
International Bond Fund—Advisor Class
645,000
Mid-Cap Growth Fund—Advisor Class
1,435,000
Mid-Cap Growth Fund—R Class
917,000
Mid-Cap Value Fund—Advisor Class
1,506,000
Mid-Cap Value Fund—R Class
2,131,000
New America Growth Fund—Advisor Class
10,000
Real Estate Fund—Advisor Class
134,000
Science & Technology Fund—Advisor Class
1,131,000
Small-Cap Stock Fund—Advisor Class
1,497,000
Small-Cap Value Fund—Advisor Class
1,928,000
Value Fund—Advisor Class
3,366,000

PORTFOLIO TRANSACTIONS

Investment or Brokerage Discretion

Decisions with respect to the selection, purchase, and sale of portfolio securities on behalf of the international Price Funds are made by T. Rowe Price International. Decisions with respect to the selection, purchase, and sale of portfolio securities on behalf of all other Price Funds are made by T. Rowe Price. T. Rowe Price and T. Rowe Price International are responsible for implementing these decisions for the Price Funds, including, where applicable, the negotiation of commissions, the allocation of portfolio brokerage and principal business, and the use of affiliates to assist in routing orders for execution.

How Broker-Dealers Are Selected

With respect to equity and debt securities, T. Rowe Price or T. Rowe Price International may effect principal transactions on behalf of a fund with a broker-dealer that furnishes brokerage and/or research services; designate any such broker-dealer to receive selling concessions, discounts, or other allowances; or otherwise deal with any such broker-dealer in connection with the acquisition of securities in underwritings. T. Rowe Price or T. Rowe Price International may receive research services in connection with brokerage transactions, including designations in fixed-price offerings.

Debt Securities

In purchasing and selling debt securities, T. Rowe Price and T. Rowe Price International ordinarily place transactions with the issuer or a primary market-maker acting as principal for the securities on a net basis, with no brokerage commission being paid by the client (although the price usually includes undisclosed compensation) and may involve the designation of selling concessions. Debt securities may also be purchased from underwriters at prices which include underwriting fees. Any transactions placed through broker-dealers serving as primary market-makers reflect the spread between the bid and ask prices. Funds that invest exclusively or primarily in debt securities may nonetheless benefit from research and services received through the use of commissions generated by funds investing in equity securities.

Equity Securities

In purchasing and selling equity securities, T. Rowe Price and T. Rowe Price International seek to obtain quality execution at favorable security prices through responsible broker-dealers and, in the case of agency transactions, at competitive commission rates. However, under certain conditions, higher brokerage commissions may be paid in return for a mix of brokerage and research services.

In selecting broker-dealers to execute the Price Funds` 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, general execution, and operational capabilities of competing broker-dealers, their expertise in particular markets, and brokerage and research services provided by them. It is not the policy of T. Rowe Price or T. Rowe Price International to seek the lowest available commission rate where it is believed that a broker-dealer charging a higher commission rate would offer greater reliability or provide better price or execution.

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As a general practice, transactions involving U.S. equity securities are executed in the primary market with market-makers, or through an electronic communications network ("ECN") or Alternative Trading System. In selecting from among these options, T. Rowe Price generally seeks to select the broker-dealers or electronic venue it believes to be actively and effectively trading the security being purchased or sold. In an effort to obtain quality execution, orders for foreign equity securities may be placed through T. Rowe Price International`s trading desk. Executions of orders may be directed to an affiliated trading desk that is best situated to execute a particular order.
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Transactions on stock exchanges involve the payment of brokerage commissions. In transactions on stock exchanges in the U.S., these commissions are negotiated. Traditionally, commission rates have generally not been negotiated on stock markets outside the U.S. However, an increasing number of overseas stock markets have adopted a system of negotiated rates or ranges of rates, although a small 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.
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Evaluating the Overall Reasonableness of Brokerage Commissions Paid
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On a continuing basis, T. Rowe Price and T. Rowe Price International seek to determine what levels of commission rates are reasonable in the marketplace for transactions executed on behalf of mutual funds and other institutional clients. In evaluating the reasonableness of commission rates, T. Rowe Price and T. Rowe Price International may consider any or all of the following: (a) rates quoted by broker-dealers; (b) the size of a
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particular transaction, in terms of the number of shares, dollar amount, and number of clients involved; (c) the complexity of a particular transaction in terms of both execution and settlement; (d) the level and type of business done with a particular firm over a period of time; (e) the extent to which the broker-dealer has capital at risk in the transaction; (f) historical commission rates; and (g) rates paid by other institutional investors based on available public information.
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Commissions Paid to Broker-Dealers for Research
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T. Rowe Price and T. Rowe Price International receive a wide range of research services from broker-dealers. The services provide domestic and international perspectives and may cover investment opportunities throughout the world. These services include information on the economy, industries, groups of securities, individual companies, statistics, accounting and tax law interpretations, political developments, legal developments affecting portfolio securities, technical market action, pricing and appraisal services, performance analysis, credit analysis, risk measurement analysis, and analysis of corporate responsibility issues. Research services are received primarily in the form of written reports, e-mails, computer-generated services, telephone contacts, and personal meetings with security analysts. Such services may also be provided through meetings arranged with corporate management, industry spokespersons, economists, academicians, and government representatives. Some research may be incorporated into firm-wide systems or communications. Therefore, T. Rowe Price may have access to research obtained through commissions generated by T. Rowe Price International and T. Rowe Price International may have access to research obtained through commissions generated by T. Rowe Price.
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Certain broker-dealers that provide quality brokerage and execution services also furnish proprietary research services to T. Rowe Price and T. Rowe Price International. Proprietary research may also include research provided by an affiliate of the broker-dealer. With regard to the payment of brokerage commissions and receipt of proprietary research, T. Rowe Price and T. Rowe Price International have adopted brokerage allocation policies which embody the concepts of Section 28(e) of the 1934 Act and which are in accordance with the Conduct of Business Rules of the United Kingdom Financial Services Authority. Section 28(e) permits an investment adviser to cause its accounts or clients to pay a higher commission to a broker-dealer that furnishes research services than what might be charged by another broker-dealer that does not furnish research services (or that furnishes brokerage and research services deemed to be of lesser value). The adviser must determine in good faith that the commission is reasonable in relation to the value of the research services (and any brokerage services) provided. The determination may be viewed in terms of either that particular transaction or the overall responsibilities of the adviser with respect to the accounts over which it exercises investment discretion. As a result, research may not necessarily benefit all accounts paying commissions to such broker-dealers.
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Except as set forth in the following section on "Directed Brokerage," T. Rowe Price and T. Rowe Price International have policies of not allocating brokerage business in return for products or services other than brokerage or research services, although from time to time each receives third-party vendor services and products serving both research and non-research functions in accordance with the provisions of Section 28(e). T. Rowe Price and T. Rowe Price International cannot always readily determine the extent to which commissions charged by broker-dealers reflect the value of their research services. However, in accordance with regulations issued by the United Kingdom Financial Services Authority, T. Rowe Price International makes a good faith determination of the amount of its clients` commissions attributable to research.
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T. Rowe Price and T. Rowe Price International may receive proprietary research from broker-dealers in connection with brokerage transactions, including selling concessions and designations in fixed-price offerings in which a Price Fund or non-ERISA client participates.
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T. Rowe Price and T. Rowe Price International do not use brokerage commissions to acquire independent, third-party research and related services of non-broker-dealer entities. Proprietary research and services may be acquired or received either directly from executing brokers or indirectly through other brokers in step-out or other transactions or similar arrangements. A "step-out" is an arrangement by which an investment manager executes a trade through one broker-dealer but instructs that entity to step-out all or a portion of the trade to another broker-dealer. This second broker-dealer will clear and settle, and receive commissions for, the stepped-out portion. In the case of the Price Funds, T. Rowe Price or T. Rowe Price International would use a
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step-out to compensate broker-dealers who provide valuable proprietary research services. These broker-dealers may or may not have trading desks of their own.
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Research services received from broker-dealers are supplemental to the research efforts of T. Rowe Price and T. Rowe Price International and, when utilized, are subject to internal analysis before being incorporated into their investment process. As a practical matter, it would not be possible to take into consideration all of the information and varied opinions presently provided by broker-dealers. Independent third-party research is an important component of the Price Funds` investment selection process but is currently paid for directly by T. Rowe Price or T. Rowe Price International, rather than through third-party soft dollar arrangements. T. Rowe Price may use full service broker-dealers that provide "bundled" proprietary research, either directly or through step-out transactions with other brokers, subject to T. Rowe Price`s best execution obligations. Lower commissions may be available from other broker-dealers that do not provide research.
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While receipt of research services from brokerage firms has not reduced normal research activities by T. Rowe Price or T. Rowe Price International, the expenses of either could be materially increased if it attempted to generate such additional information through its own staff. To the extent that research services of value are provided by broker-dealers, T. Rowe Price and T. Rowe Price International are relieved of expenses which they might otherwise bear.
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Directed Brokerage
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The Price Funds that invest in U.S. equity securities have adopted a commission recapture program. Under the program, a percentage of commissions generated by the portfolio transactions of those funds is rebated to the funds by the broker-dealers and credited to short-term security gain/loss.
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At the present time, the Price Funds do not recapture commissions, underwriting discounts, or selling group concessions in connection with debt securities acquired in underwritten offerings. T. Rowe Price and T. Rowe Price International may, however, have the opportunity to designate a portion of the underwriting spread to broker-dealers that participate in the offering.
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Allocation of Brokerage Commissions
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T. Rowe Price and T. Rowe Price International have policies of not pre-committing a specific amount of business to any broker-dealer over any specific time period. Historically, brokerage placement has been determined, as appropriate, by the needs of a specific transaction such as market-making, availability of a buyer or seller of a particular security, or specialized execution skills. T. Rowe Price and T. Rowe Price International may choose to allocate brokerage among several broker-dealers that are able to meet the needs of the transaction.
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Each year, T. Rowe Price and T. Rowe Price International assess the contributions of the equity brokerage and research services provided by broker-dealers and create a ranking of broker-dealers in response to these assessments. Portfolio managers, research analysts, and the trading department each evaluate the brokerage, execution, and research services they receive from broker-dealers and make judgments as to the quality of such services. Actual business received by a particular firm may not directly reflect its ranking in the voting process. It may be less than the suggested target but can, and often does, exceed the suggestions because the total business is allocated on the basis of all the considerations described above. Allocation of brokerage business is monitored on a periodic basis by the Equity and Fixed Income Brokerage and Trading Control Committees. In no event is a broker-dealer excluded from receiving business from T. Rowe Price or T. Rowe Price International because it has not been identified as providing research services. Discount or execution-only brokers, as well as ECNs, are used where deemed appropriate.
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Trade Allocation Policies
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T. Rowe Price and T. Rowe Price International have developed written trade allocation guidelines for their trading desks. Generally, when the amount of securities available in a public offering or the secondary markets is insufficient to satisfy the volume or price requirements for the participating client portfolios, the guidelines require a pro-rata allocation based upon the relative sizes of the participating client portfolios or the relative sizes of the participating client orders, depending upon the market involved. In allocating trades made on a combined basis, the trading desks seek to achieve the same net unit price of the securities for each
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participating client. Because a pro-rata allocation may not always adequately accommodate all facts and circumstances, the guidelines provide for exceptions to allocate trades on an adjusted basis, which may include a system-generated random allocation. For example, adjustments may be made: (i) to eliminate de minimis positions; (ii) to give priority to accounts with specialized investment policies and objectives; and (iii) to reallocate in light of a participating portfolio`s characteristics (e.g., available cash, industry or issuer concentration, duration, credit exposure). With respect to any private placement transactions, conditions imposed by the issuer may limit availability of allocations to client accounts.
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Miscellaneous
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The brokerage allocation policies for T. Rowe Price and T. Rowe Price International are generally applied to all of their fully discretionary accounts, which represent a substantial majority of all assets under management. Research services furnished by broker-dealers through which T. Rowe Price or T. Rowe Price International effect securities transactions may be used in servicing all accounts (including non-Price Funds) managed by T. Rowe Price or T. Rowe Price International. Therefore, research services received from broker-dealers that execute transactions for a particular fund will not necessarily be used by T. Rowe Price or T. Rowe Price International in connection with the management of that fund. The Price Funds do not allocate business to any broker-dealer on the basis of its sales of the funds` shares. However, this does not mean that broker-dealers who purchase fund shares for their clients will not receive business from the fund.
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Since certain clients of T. Rowe Price and T. Rowe Price International have similar investment objectives and programs to those of a particular Price Fund, T. Rowe Price or T. Rowe Price International may make recommendations to other clients that 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 the policy of T. Rowe Price and T. Rowe Price International not to favor one client over another in making recommendations or in placing orders. T. Rowe Price frequently follows the practice of grouping orders of various clients for execution. T. Rowe Price International may also follow this practice. Clients should be aware, however, that the grouping of their orders with other clients` orders may sometimes result in a more favorable price and at other times may result in a less favorable price than if the client orders had not been grouped. Where an 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 will reflect the average price paid or received with respect to the total order.
</R>

<R>
T. Rowe Price may also include orders on behalf of the T. Rowe Price Associates Foundation, Inc. and the T. Rowe Price Program for Charitable Giving, Inc., not for profit entities, and the T. Rowe Price Savings Bank in aggregated orders from time to time.
</R>

<R>
T. Rowe Price and T. Rowe Price International may give advice and take action for clients, including the Price Funds, which differs from advice given or the timing or nature of action taken for other clients. T. Rowe Price and T. Rowe Price International are not obligated to initiate transactions for clients in any security that their principals, affiliates, or employees may purchase or sell for their own accounts or for other clients.
</R>

<R>
Purchase and sale transactions may be effected directly among and between non-ERISA client accounts (including affiliated mutual funds), provided no commission is paid to any broker-dealer, the security traded has readily available market quotations, and the transaction is effected at the independent current market price.
</R>

<R>
T. Rowe Price and T. Rowe Price International have established the Equity and Fixed Income Brokerage and Trading Control Committees, which are responsible for developing and monitoring brokerage policies and resolving questions relating to those policies.
</R>

<R>
T. Rowe Price and T. Rowe Price International have established a general investment policy that they will ordinarily not make additional purchases of a common stock for their clients (including the Price funds) if, as a result of such purchases, 10% or more of the outstanding common stock of the issuer would be held by clients in the aggregate. In certain limited instances, however, T. Rowe Price or T. Rowe Price International may increase aggregate ownership to a maximum of 15% or more. All aggregate ownership decisions are reviewed by the appropriate oversight committee. For purposes of monitoring both of these limits, securities held by clients and clients of affiliated advisers are included.
</R>

All funds

Total Brokerage Commissions

For the fiscal years indicated, the total brokerage commissions paid by each fund, including the discounts received by securities dealers in connection with underwritings, and the percentage of these commissions paid to firms which provided research, statistical, or other services to T. Rowe Price or T. Rowe Price International in connection with the management of each fund that invests in equity securities, are shown below.


Fund


Fiscal Year Ended




















2/29/08


%


2/28/07


%


2/28/06


%

California Tax-Free Bond
$255,000
(a)
$251,000
(a)
$278,000
(a)
California Tax-Free Money
0
(a)
2,000
(a)
3,000
(a)
Georgia Tax-Free Bond
60,000
(a)
67,000
(a)
69,000
(a)
Maryland Short-Term Tax-Free Bond
35,000
(a)
32,000
(a)
17,000
(a)
Maryland Tax-Free Bond
390,000
(a)
665,000
(a)
417,000
(a)
Maryland Tax-Free Money
2,000
(a)
26,000
(a)
5,000
(a)
New Jersey Tax-Free Bond
132,000
(a)
146,000
(a)
140,000
(a)
New York Tax-Free Bond
168,000
(a)
325,000
(a)
247,000
(a)
New York Tax-Free Money
4,000
(a)
0
(a)
1,000
(a)
Tax-Efficient Balanced
8,000
77.00
10,000
2.43
12,000
2.50
Tax-Efficient Growth
14,000
0
10,000
0.70
9,000
2.50
Tax-Efficient Multi-Cap Growth
11,000
1.47
10,000
2.43
8,000
8.44
Tax-Exempt Money
2,000
(a)
5,000
(a)
7,000
(a)
Tax-Free High Yield
1,256,000
(a)
720,000
(a)
1,552,000
(a)
Tax-Free Income
1,136,000
(a)
1,121,000
(a)
1,271,000
(a)
Tax-Free Short-Intermediate
96,000
(a)
98,000
(a)
79,000
(a)
Virginia Tax-Free Bond
261,000
(a)
245,000
(a)
277,000
(a)

(a)Percentages are not required for funds that do not invest in equity securities.

<R>

Fund


Fiscal Year Ended




















5/31/08


%


5/31/07


%


5/31/06


%

Corporate Income
$415,000
95.7
$148,000
93.2
$193,000
92.5
GNMA
85,000
(a)
200,000
(a)
5,000
(a)
TRP Government Reserve Investment
(b)
(b)
(b)
(b)
(b)
(b)
High Yield
6,936,000
92.1
18,250,000
91.8
15,965,000
76.4
Inflation Protected Bond
4,000
(a)
3,000
(a)
1,000
(a)
Institutional Core Plus
43,000
96.2
19,000
94.2
13,000
83.1
Institutional Floating Rate
(b)
(b)
(c)
(c)
(c)
(c)
Institutional High Yield
1,063,000
90.9
1,399,000
91.8
1,473,000
80.8
New Income
3,519,000
96.2
2,152,000
93.7
2,952,000
87.6
Personal Strategy Balanced
873,000
15.5
648,000
24.5
556,000
25.2
Personal Strategy Growth
817,000
18.4
540,000
28.9
461,000
28.9
Personal Strategy Income
370,000
13.0
230,000
20.3
182,000
21.1
Prime Reserve
(b)
(b)
(b)
(b)
(b)
(b)
TRP Reserve Investment
(b)
(b)
(b)
(b)
(b)
(b)
Retirement 2005
(b)
(b)
(b)
(b)
(b)
(b)
Retirement 2010
(b)
(b)
(b)
(b)
(b)
(b)
Retirement 2015
(b)
(b)
(b)
(b)
(b)
(b)
Retirement 2020
(b)
(b)
(b)
(b)
(b)
(b)
Retirement 2025
(b)
(b)
(b)
(b)
(b)
(b)
Retirement 2030
(b)
(b)
(b)
(b)
(b)
(b)
Retirement 2035
(b)
(b)
(b)
(b)
(b)
(b)
Retirement 2040
(b)
(b)
(b)
(b)
(b)
(b)
Retirement 2045
(b)
(b)
(b)
(b)
(b)
(b)
Retirement 2050
(b)
(b)
(b)
(b)
(c)
(c)
Retirement 2055
(b)
(b)
(b)
(b)
(c)
(c)
Retirement Income
(b)
(b)
(b)
(b)
(b)
(b)
Short-Term Bond
658,000
(a)
471,000
(a)
341,000
(a)
Short-Term Income
550,000
(a)
175,000
(a)
(c)
(c)
U.S. Treasury Intermediate
8,000
(a)
7,000
(a)
1,000
(a)
U.S. Treasury Long-Term
20,000
(a)
13,000
(a)
4,000
(a)
U.S. Treasury Money
(b)
(b)
(b)
(b)
(b)
(b)
</R>

(a)Percentages are not required for funds that do not invest in equity securities.

(b)Not applicable.

(c)Prior to commencement of operations.


Fund


Fiscal Year Ended




















10/31/07


%


10/31/06


%


10/31/05


%

Africa & Middle East
$193,000
8.6
(a)
(a)
(a)
(a)
Emerging Europe & Mediterranean
4,009,000
4.9
$3,958,000
1.6
$2,100,000
5.8
Emerging Markets Stock
6,981,000
3.9
5,791,000
4.6
3,173,000
7.5
European Stock
2,949,000
0.6
2,491,000
0.04
1,289,000
1.4
Global Stock
2,013,000
13.1
1,470,000
14.0
511,000
21.3
Institutional Africa & Middle East
(a)
(a)
(a)
(a)
(a)
(a)
Institutional Emerging Markets Equity
486,000
3.8
490,000
4.4
330,000
6.0
Institutional Foreign Equity
426,000
1.6
538,000
2.1
1,476,000
3.2
Institutional Global Equity
11,000
10.2
2,000
19.8
(a)
(a)
International Discovery
6,898,000
0.5
5,437,000
0.6
3,883,000
0.5
International Equity Index
246,000
0.0
116,000
0.3
94,000
1.2
International Growth & Income
1,488,000
1.2
1,236,000
2.3
580,000
8.0
International Stock
15,191,000
1.6
12,660,000
1.8
12,633,000
1.9
Japan
1,415,000
0.0
2,551,000
0.0
1,033,000
0.0
Latin America
6,254,000
9.8
4,236,000
33.8
1,194,000
60.7
New Asia
11,086,000
0.5
7,064,000
0.5
4,219,000
0.0
Overseas Stock
1,040,000
0.4
(a)
(a)
(a)
(a)
Summit Cash Reserves
0
(b)
0
(b)
0
(b)
Summit GNMA
5,000
(b)
4,000
(b)
2,000
(b)
Summit Municipal Income
569,000
(b)
475,000
(b)
244,000
(b)
Summit Municipal Intermediate
132,000
(b)
95,000
(b)
103,000
(b)
Summit Municipal Money Market
2,200
(b)
0
(b)
9,000
(b)
U.S. Bond Index
54,000
(b)
23,000
(b)
34,000
(b)

(a)Prior to commencement of operations.

(b)Percentages are not required for funds that do not invest in equity securities.


Fund


Fiscal Year Ended




















12/31/07


%


12/31/06


%


12/31/05


%

Balanced
$887,000
8.6
$379,000
3.2
$574,000
25.0
Blue Chip Growth
5,546,000
33.9
5,490,000
52.9
6,645,000
56.5
Capital Appreciation
7,240,000
38.7
6,828,000
41.2
5,854,000
22.0
Capital Opportunity
219,000
31.0
194,000
41.7
148,000
38.4
Developing Technologies
138,000
44.7
231,000
41.4
161,000
53.7
Diversified Mid-Cap Growth
44,000
8.9
69,000
6.5
50,000
25.0
Diversified Small-Cap Growth
49,000
16.4
93,000
39.2
174,000
49.8
Dividend Growth
290,000
38.7
322,000
44.8
2,923,000
65.3
Emerging Markets Bond
0
(a)
3,000
(a)
3,000
(a)
Equity Income
12,007,000
25.1
6,840,000
45.4
6,388,000
54.9
Equity Index 500
483,000
3.3
435,000
1.2
299,000
0.4
Extended Equity Market Index
116,000
2.1
58,000
1.6
346,000
20.9
Financial Services
1,451,000
30.7
937,000
36.1
601,000
27.8
Global Technology
676,000
25.7
538,000
26.8
1,154,000
40.3
Growth & Income
928,000
45.4
1,749,000
56.8
4,836,000
43.0
Growth Stock
25,290,000
23.2
15,130,000
32.5
11,037,000
38.3
Health Sciences
5,621,000
22.2
4,392,000
31.4
2,694,000
57.1
Institutional Concentrated Large-Cap Value
1,000
22.1
1,000
0.3
(b)
(b)
Institutional Emerging Markets Bond
0
(a)
(a)
(a)
(a)
(a)
Institutional International Bond
0
(a)
(b)
(b)
(b)
(b)
Institutional Large-Cap Core Growth
33,000
15.5
24,000
33.8
36,000
55.9
Institutional Large-Cap Growth
1,268,000
32.8
444,000
40.0
120,000
41.2
Institutional Large-Cap Value
60,000
27.9
65,000
22.3
140,000
45.1
Institutional Mid-Cap Equity Growth
416,000
25.6
564,000
27.4
510,000
30.5
Institutional Small-Cap Stock
463,000
21.5
480,000
20.6
458,000
19.4
Institutional U.S. Structured Research
26,000
14.1
(b)
(b)
(b)
(b)
International Bond
0
(a)
44,000
(a)
62,000
(a)
Media & Telecommunications
4,653,000
10.4
2,994,000
16.6
2,511,000
23.3
Mid-Cap Growth
14,570,000
29.1
19,865,000
28.6
14,723,000
32.6
Mid-Cap Value
14,064,000
55.0
10,578,000
62.0
11,861,000
50.9
New America Growth
720,000
44.0
969,000
55.5
1,179,000
54.1
New Era
2,438,000
25.3
1,798,000
37.7
4,065,000
47.7
New Horizons
14,497,000
19.0
12,117,000
22.4
10,919,000
29.7
Real Estate
1,624,000
28.9
3,267,000
19.7
669,000
39.1
Science & Technology
7,083,000
24.5
10,182,000
31.6
8,350,000
33.1
Small-Cap Stock
8,137,000
23.3
7,602,000
23.6
6,415,000
34.3
Small-Cap Value
5,001,000
31.3
3,002,000
42.3
3,933,000
43.7
Spectrum Growth
(c)
(c)
(c)
(c)
(c)
(c)
Spectrum Income
(c)
(c)
(c)
(c)
(c)
(c)
Spectrum International
(c)
(c)
(c)
(c)
(c)
(c)
Total Equity Market Index
37,000
4.6
28,000
1.5
26,000
1.7
Value
4,054,000
25.1
2,210,000
42.7
2,745,000
40.3

(a)Percentages are not required for funds that do not invest in equity securities.

(b)Prior to commencement of operations.

(c)Not applicable.

Fund Holdings in Securities of Brokers and Dealers

The following lists the funds` holdings in securities of its regular brokers and dealers as of the end of the fiscal years indicated.








Fiscal Year Ended 2/29/08





Fund


Broker


Value of Stock Holdings


Value of Bond Holdings

California Tax-Free Bond




Goldman Sachs
—
$1,559,000

Merrill Lynch
—
4,781,000
New York Tax-Free Bond




Goldman Sachs
—
1,206,000
Tax-Efficient Balanced




Citigroup
$62,000
—

Goldman Sachs
170,000
225,000
Tax-Efficient Growth




Citigroup
24,000
—

Goldman Sachs
594,000
—
Tax-Exempt Money




Lehman Brothers
—
34,695,000
Tax-Free High Yield




Merrill Lynch
—
6,347,000
Tax-Free Income




Goldman Sachs
—
31,294,000
Tax-Free Short-
Intermediate




Goldman Sachs
—
10,233,000

Merrill Lynch
—
3,751,000

<R>







Fiscal Year Ended 5/31/08





Fund


Broker


Value of Stock Holdings


Value of Bond Holdings

Corporate Income




Bank of America Securities
—
$3,300,000

Citigroup Global Markets
—
5,930,000

CS First Boston
—
856,000

Deutsche Bank
—
1,575,000

Goldman Sachs
—
3,029,000

JPMorgan Chase
—
4,358,000

Lehman Brothers
—
6,432,000

Merrill Lynch
$413,000
3,906,000

Morgan Stanley
—
3,192,000

UBS Securities
—
1,504,000

Wachovia Securities
—
1,083,000
GNMA




Bear Stearns
—
6,642,000

Citigroup Global Markets
—
2,994,000

Deutsche Bank
—
2,994,000

JP Morgan Chase
—
8,098,000

Lehman Brothers
—
19,946,000

Morgan Stanley
—
25,442,000

UBS
—
19,946,000
TRP Government Reserve Investment




Bank of America
—
200,000,000

Barclays
—
200,000,000

CS First Boston
—
175,494,000

Deutsche Bank
—
300,000,000

Merrill Lynch
—
150,000,000

Wachovia
—
60,000,000
High Yield




Bank of America
16,074,000
—

Citigroup Global Markets
24,426,000
—
Institutional Core Plus




Bank of America
—
2,092,000

Citigroup Global Markets
—
2,081,000

CS First Boston
—
116,000

Deutsche Bank
—
823,000

Goldman Sachs
—
523,000

JPMorgan Chase
—
1,990,000

Lehman Brothers
—
1,815,000

Merrill Lynch
83,000
458,000

Morgan Stanley
—
582,000

UBS
—
1,127,000

Wachovia
—
301,000
Institutional High Yield




Bank of America
1,628,000
—

Citigroup Global Markets
2,522,000
—

Merrill Lynch
496,000
—
New Income




Bank of America
—
162,611,000

Citigroup
—
143,439,000

CS First Boston
—
48,037,000

Deutsche Bank
—
52,986,000

Goldman Sachs
—
42,224,000

Greenwich Capital Markets
—
37,448,000

JPMorgan Chase
—
128,439,000

Lehman Brothers
—
114,677,000

Merrill Lynch
3,714,000
45,176,000

Morgan Stanley
—
88,424,000

Wachovia
—
30,665,000
Personal Strategy
Balanced




Bank of America
4,027,000
11,209,000

Barclays
—
759,000

Bear Stearns
—
7,379,000

Citigroup
3,222,000
7,624,000

Countrywide
—
749,000

CS First Boston
—
2,200,000

Deutsche Bank
—
2,223,000

Goldman Sachs
4,887,000
2,026,000

JPMorgan Chase
2,296,000
9,671,000

Lehman Brothers
995,000
8,629,000

Merrill Lynch
5,830,000
2,691,000

Morgan Stanley
5,684,000
3,639,000

UBS
—
5,721,000
Personal Strategy Growth




Bank of America
4,384,000
4,531,000

Barclays
—
904,000

Bear Stearns
—
2,414,000

Citigroup
3,503,000
3,078,000

Countrywide
—
747,000

CS First Boston
—
1,211,000

Deutsche Bank
—
1,168,000

Goldman Sachs
5,275,000
1,128,000

JPMorgan Chase
2,468,000
3,608,000

Lehman Brothers
1,077,000
3,276,000

Merrill Lynch
4,537,000
3,437,000

Morgan Stanley
6,113,000
986,000

UBS
—
2,018,000
Personal Strategy Income




Bank of America
1,479,000
6,577,000

Barclays
—
249,000

Bear Stearns
—
5,328,000

Citigroup
1,188,000
6,775,000

Countrywide
—
437,000

CS First Boston
—
959,000

Deutsche Bank
—
2,553,000

Goldman Sachs
1,782,000
1,630,000

JPMorgan Chase
847,000
6,405,000

Lehman Brothers
370,000
5,271,000

Merrill Lynch
2,024,000
1,542,000

Morgan Stanley
2,052,000
2,948,000

UBS
—
3,321,000
Prime Reserve




Bank of America
—
166,610,000

Citigroup
—
168,135,000

CS First Boston
—
36,000,000

Deutsche Bank
—
49,643,000

Goldman Sachs
—
41,250,000

JPMorgan Chase
—
54,835,000

Lehman Brothers
—
41,651,000

Merrill Lynch
—
38,611,000

Morgan Stanley
—
41,511,000
TRP Reserve
Investment




Bank of America
—
241,323,000

Barclays
—
110,000,000

CS First Boston
—
54,751,000

Deutsche Bank
—
77,914,000

Goldman Sachs
—
62,000,000

JPMorgan Chase
—
152,464,000

Lehman Brothers
—
61,873,000

Merrill Lynch
—
63,083,000

Morgan Stanley
—
66,670,000

Wachovia
—
43,741,000
Short-Term Bond




Bank of America
—
28,177,000

Citigroup
—
30,870,000

Countrywide
—
5,255,000

CS First Boston
—
18,334,000

Deutsche Bank
—
5,028,000

Goldman Sachs
—
13,205,000

Greenwich Capital Markets
—
15,684,000

JPMorgan Chase
—
27,206,000

Lehman Brothers
—
33,804,000

Merrill Lynch
—
11,630,000

Morgan Stanley
—
22,908,000

Wachovia
—
11,852,000
Short-Term Income




Bank of America
—
15,739,000

Citigroup
—
27,033,000

Countrywide
—
3,750,000

CS First Boston
—
22,909,000

Deutsche Bank
—
2,632,000

Goldman Sachs
—
11,141,000

Greenwich Capital Markets
—
13,136,000

JPMorgan Chase
—
24,811,000

Lehman Brothers
—
27,615,000

Merrill Lynch
—
9,684,000

Morgan Stanley
—
28,515,000

Wachovia
—
7,570,000
</R>








Fiscal Year Ended 10/31/07





Fund


Broker


Value of Stock Holdings


Value of Bond Holdings

European Stock




UBS
$16,775,000
—

Credit Suisse Group
8,207,000
—
Global Stock




Goldman Sachs
18,594,000
—

UBS
8,851,000
—

Merrill Lynch
4,952,000
—
Institutional Emerging Markets Equity




EFG-Hermes
4,035,000
—
Institutional Foreign Equity




UBS
2,317,000
—

Credit Suisse Group
1,318,000
—
Institutional Global Equity




Goldman Sachs
131,000
—

UBS
60,000
—

Merrill Lynch
33,000
—
International Equity Index




UBS
4,341,000
—

Credit Suisse Group
3,379,000
—

Deutsche Bank
2,765,000
—
International Growth & Income




Credit Suisse Group
32,025,000
—

UBS
19,327,000
—
International Stock




UBS
105,741,000
—

Credit Suisse Group
60,440,000
—
Overseas Stock




UBS
11,485,000
—
Summit Cash Reserves




Bank of America
—
123,735,000

JPMorgan Chase
—
59,816,000

Deutsche Bank
—
50,000,000

Citigroup
—
49,834,000

Merrill Lynch
—
47,000,000

Lehman Brothers
—
35,717,000

Goldman Sachs
—
30,000,000

Morgan Stanley
—
15,811,000
Summit GNMA




UBS
—
907,000

Lehman Brothers
—
907,000

Morgan Stanley
—
842,000

Bank of America
—
519,000

JPMorgan Chase
—
401,000
Summit Municipal Income




Goldman Sachs
—
5,786,000
Summit Municipal Intermediate




Goldman Sachs
—
5,630,000
Summit Municipal Money Market




Lehman Brothers
—
25,785,000

Merrill Lynch
—
10,800,000
U.S. Bond Index




Bear Sterns
—
5,589,000

Bank of America
—
3,000,000

JPMorgan Chase
—
2,874,000

Morgan Stanley
—
2,842,000

Citigroup
—
1,789,000

Greenwich Capital Markets
—
1,191,000

Goldman Sachs
—
1,109,000

Credit Suisse Group
—
973,000

Lehman Brothers

605,000

Deutsche Bank

570,000

Merrill Lynch
—
502,000

<R>







Fiscal Year Ended 12/31/07





Fund


Broker


Value of Stock Holdings


Value of Bond Holdings

Balanced




Bank of America
$11,528,000
$9,625,000

Bear Stearns
124,000
7,819,000

Citigroup
8,673,000
23,350,000

Countrywide
1,551,000
407,000

Credit Suisse Group
—
12,289,000

Deutsche Bank
—
12,752,000

Goldman Sachs
17,310,000
4,255,000

JPMorgan Chase
8,102,000
25,127,000

Lehman Brothers
1,314,000
2,430,000

Merrill Lynch
3,146,000
2,977,000

Morgan Stanley
8,925,000
7,676,000

UBS
3,763,000
4,344,000
Blue Chip Growth




Goldman Sachs
174,406,000
—

Merrill Lynch
46,165,000
—

Morgan Stanley
84,976,000
—

UBS
92,567,000
—
Capital Appreciation




Merrill Lynch
134,254,000
—

Morgan Stanley
32,551,000
—
Capital Opportunity




Bank of America
2,310,000
—

Bear Stearns
88,000
—

Citigroup
3,394,000
—

Goldman Sachs
1,656,000
—

JPMorgan Chase
3,527,000
—

Lehman Brothers
851,000
—

Merrill Lynch
1,219,000
—

Morgan Stanley
1,471,000
—
Diversified Mid-Cap Growth




Bear Stearns
256,000
—
Dividend Growth




Citigroup
11,187,000
—

Morgan Stanley
7,133,000
—
Emerging Markets Bond




Standard Bank
—
14,424,000
Equity Income




Citigroup
168,397,000
—

JPMorgan Chase
553,656,000
—

Merrill Lynch
267,058,000
—
Equity Index 500




Bank of America
142,823,000
—

Citigroup
114,610,000
—

Goldman Sachs
66,542,000
—

JPMorgan Chase
114,396,000
—

Lehman Brothers
26,971,000
—

Merrill Lynch
35,725,000
—

Morgan Stanley
43,849,000
—

PNC
17,858,000
—
Extended Equity
Market Index




Investment Technology Group
286,000
—

Stifel Financial
142,000
—
Financial Services




Bear Stearns
3,027,000
—

Citigroup
12,483,000
—

JPMorgan Chase
2,907,000
—

Lehman Brothers
1,944,000
—

Merrill Lynch
7,515,000
—

Morgan Stanley
3,898,000
—

UBS
3,762,000
—
Growth & Income




Citigroup
22,374,000
—

Goldman Sachs
8,620,000
—

Merrill Lynch
10,736,000
—

Morgan Stanley
10,888,000
—
Growth Stock




Goldman Sachs
158,277,000
—

Morgan Stanley
72,973,000
—
Institutional
Concentrated Large-Cap Value




Citigroup
149,000
—

Merrill Lynch
223,000
—
Institutional Emerging Markets Bond




Standard Bank
—
648,000
Institutional
International Bond




Barclays
—
60,000

Citigroup
—
162,000

Goldman Sachs
—
67,000

Greenwich
—
213,000

JPMorgan Chase
—
135,000

Lehman Brothers
—
64,000

Merrill Lynch
—
61,000

Standard Bank
—
81,000

UBS
—
96,000
Institutional Large-Cap Core Growth




Goldman Sachs
1,000,000
—

Merrill Lynch
263,000
—

Morgan Stanley
489,000
—

UBS
531,000
—
Institutional Large-Cap Growth




Morgan Stanley
22,949,000
—
Institutional Large-Cap Value




Bank of America
5,776,000
—

Citigroup
3,147,000
—

JPMorgan Chase
7,447,000
—

Merrill Lynch
3,505,000
—

Morgan Stanley
2,682,000
—
Institutional
U.S. Structured Research




Bank of America
961,000
—

Bear Stearns
26,000
—

Citigroup
1,378,000
—

Goldman Sachs
656,000
—

JPMorgan Chase
1,432,000
—

Lehman Brothers
340,000
—

Merrill Lynch
499,000
—

Morgan Stanley
558,000
—
International Bond




Barclays
—
2,528,000

Citigroup
—
5,094,000

Deutsche Bank
—
2,756,000

Goldman Sachs
—
1,748,000

Greenwich
—
4,223,000

JPMorgan Chase
—
5,441,000

Lehman Brothers
—
3,048,000

Merrill Lynch
—
1,650,000

Morgan Stanley
—
3,627,000

Standard Bank
—
2,965,000

UBS
—
3,689,000
New America Growth




Merrill Lynch
7,515,000
—

Morgan Stanley
7,967,000
—
New Horizons




Thomas Weisel
4,188,000
—
Small-Cap Stock




Piper Jaffray
36,445,000
—
Total Equity Market Index




Bank of America
5,734,000
—

Citigroup
4,619,000
—

Goldman Sachs
2,744,000
—

Investment Technology Group
110,000
—

JPMorgan Chase
4,630,000
—

Lehman Brothers
1,065,000
—

Merrill Lynch
1,432,000
—

Morgan Stanley
1,747,000
—

PNC
651,000
—

Stifel Financial
89,000
—
Value




Bank of America
60,652,000
—

Citigroup
81,696,000
—

JPMorgan Chase
62,638,000
—

Merrill Lynch
77,031,000
—

Morgan Stanley
53,375,000
—

</R>

Portfolio Turnover

The portfolio turnover rates for the funds (if applicable) for the fiscal years indicated are as follows:

Fund


Fiscal Year Ended











2/29/08


2/28/07


2/28/06

California Tax-Free Bond
18.1%
27.5%
21.2%
California Tax-Free Money
(a)
(a)
(a)
Georgia Tax-Free Bond
19.7
27.0
17.7
Maryland Short-Term Tax-Free Bond
29.4
69.7
44.3
Maryland Tax-Free Bond
22.9
19.6
17.8
Maryland Tax-Free Money
(a)
(a)
(a)
New Jersey Tax-Free Bond
16.7
14.8
17.8
New York Tax-Free Bond
28.4
26.6
28.9
New York Tax-Free Money
(a)
(a)
(a)
Tax-Efficient Balanced
17.9
17.8
20.1
Tax-Efficient Growth
30.3
14.7
15.7
Tax-Efficient Multi-Cap Growth
21.3
16.7
19.6
Tax-Exempt Money
(a)
(a)
(a)
Tax-Free High Yield
31.2
25.2
20.0
Tax-Free Income
29.9
28.1
31.0
Tax-Free Short-Intermediate
43.2
46.9
29.7
Virginia Tax-Free Bond
26.4
28.7
32.4

(a)Money funds are not required to show portfolio turnover.

<R>

Fund


Fiscal Year Ended











5/31/08


5/31/07


5/31/06

Corporate Income
38.9%
42.8%
59.4%
GNMA
89.6(a)
80.7(a)
135.1(a)
TRP Government Reserve Investment
(b)
(b)
(b)
High Yield
68.9
72.0
65.1
Inflation Protected Bond
7.5
14.3
15.9
Institutional Core Plus
146.7
110.0
128.3
Institutional Floating Rate
70.8(c)
(d)
(d)
Institutional High Yield
61.9
73.0
80.4
New Income
128.3(a)
104.8(a)
111.1(a)
Personal Strategy Balanced
73.3
62.4
49.3
Personal Strategy Growth
57.7
50.1
36.5
Personal Strategy Income
81.4
70.0
53.3
Prime Reserve
(b)
(b)
(b)
TRP Reserve Investment
(b)
(b)
(b)
Retirement 2005
15.3
22.3
17.1
Retirement 2010
7.8
13.1
11.3
Retirement 2015
7.6
10.3
11.4
Retirement 2020
6.7
8.4
11.9
Retirement 2025
5.9
8.7
13.2
Retirement 2030
5.6
7.8
11.9
Retirement 2035
5.4
8.0
11.2
Retirement 2040
7.3
8.4
11.3
Retirement 2045
6.4
8.9
28.4
Retirement 2050
13.4
24.0(c)
(d)
Retirement 2055
17.0
33.0(c)
(d)
Retirement Income
7.8
36.3
10.2
Short-Term Bond
58.8
70.4
39.9
Short-Term Income
59.0
39.0(c)
(d)
U.S. Treasury Intermediate
101.1
37.3
47.4
U.S. Treasury Long-Term
64.9
33.6
26.4
U.S. Treasury Money
(b)
(b)
(b)
</R>

<R>
(a)The portfolio turnover rate calculation includes purchases and sales from mortgage dollar roll transactions.
</R>

<R>
(b)Money funds are not required to show portfolio turnover.
</R>

<R>
(c)Annualized.
</R>

<R>
(d)Prior to commencement of operations.
</R>

<R>

Fund


Fiscal Year Ended











10/31/07


10/31/06


10/31/05

Africa & Middle East
16.6%(a)
(b)
(b)
Emerging Europe & Mediterranean
59.6
55.1%
28.1%
Emerging Markets Stock
43.5
49.4
53.3
European Stock
88.4
83.7
82.0
Global Stock
109.8
140.6
154.8
Institutional Africa & Middle East
(b)
(b)
(b)
Institutional Emerging Markets Equity
49.9
57.0
57.4
Institutional Foreign Equity
73.7
66.1
56.2
Institutional Global Equity
138.0
127.6(a)
(b)
International Discovery
67.9
82.3
85.3
International Equity Index
30.5
36.3
53.1
International Growth & Income
32.8
36.9
26.9
International Stock
74.1
64.5
62.7
Japan
110.8
154.2
161.2
Latin America
23.3
34.5
17.8
New Asia
53.4
76.3
55.9
Overseas Stock
46.2(a)
(b)
(b)
Summit Cash Reserves
(c)
(c)
(c)
Summit GNMA
92.4
108.3
187.2
Summit Municipal Income
37.4
19.3
24.8
Summit Municipal Intermediate
24.4
24.8
22.3
Summit Municipal Money Market
(c)
(c)
(c)
U.S. Bond Index(e)
73.7
72.4
98.2

</R>

(a)Annualized.

(b)Prior to commencement of operations.

(c)Money funds are not required to show portfolio turnover.


Fund


Fiscal Year Ended











12/31/07


12/31/06


12/31/05

Balanced
60.4%
42.4%
27.3%
Blue Chip Growth
31.5
39.2
43.9
Capital Appreciation
52.6
53.7
12.1
Capital Opportunity
53.9
52.5
46.2
Developing Technologies
64.0
89.2
75.0
Diversified Mid-Cap Growth
27.9
29.8
20.0
Diversified Small-Cap Growth
47.2
39.1
29.4
Dividend Growth
16.5
19.6
23.2
Emerging Markets Bond
63.4
57.4
50.5
Equity Income
25.7
17.3
20.5
Equity Index 500
4.4
2.9
8.4
Extended Equity Market Index
37.6
17.5
17.3
Financial Services
139.8
113.4(a)
55.7
Global Technology
107.3
124.7
96.4
Growth & Income
30.8
50.7
52.1
Growth Stock
51.2
37.8
36.2
Health Sciences
44.8
48.8
55.7
Institutional Concentrated Large-Cap Value
19.8
3.2(b)
(c)
Institutional Emerging Markets Bond
83.8
145.2(b)
(c)
Institutional International Bond
69.3(b)
(c)
(c)
Institutional Large-Cap Core Growth
78.4
48.5
16.9
Institutional Large-Cap Growth
61.2
51.5
64.4
Institutional Large-Cap Value
21.5
24.5
24.0
Institutional Mid-Cap Equity Growth
52.4
30.8
33.0
Institutional Small-Cap Stock
39.8
22.1
19.2
Institutional U.S. Structured Research
42.5(b)
(c)
(c)
International Bond
78.4
120.8
103.7
Media & Telecommunications
64.6
55.4
77.8
Mid-Cap Growth
35.2
33.8
28.6
Mid-Cap Value
73.4
62.4
45.8
New America Growth
60.1
61.3
53.0
New Era
17.5
15.6
35.7
New Horizons
27.7
23.2
23.5
Real Estate
32.5
25.2
18.3
Science & Technology
80.3
101.3
59.2
Small-Cap Stock
21.7
20.0
20.4
Small-Cap Value
14.0
12.2
11.9
Spectrum Growth
5.0
7.6
10.1
Spectrum Income
9.0
12.5
40.3
Spectrum International
1.4
12.7
2.7
Total Equity Market Index
9.1
4.2
4.5
Value
18.8
9.6
19.4

(a)The increase in the fund`s portfolio turnover from 2005 to 2006 was primarily the result of changes in the fund`s portfolio holdings and structure initiated by the fund`s new portfolio manager.

(b)Annualized.

(c)Prior to commencement of operations.

Related Performance Information

The information set forth below shows historical total returns for the Non-U.S. Equity Core Composite. The composite is not a mutual fund. Rather, it is a collection of all the portfolios managed by T. Rowe Price International that have investment objectives, policies, and strategies that are substantially similar to those of the T. Rowe Price Overseas Stock Fund.

The performance information is historical and should not be considered predictive of the fund`s future results.

<R>
Certain portfolios that comprise the composite may not be mutual funds and thus will not be subject to the diversification requirements and other restrictions and investment limitations imposed on the T. Rowe Price Overseas Stock Fund by the 1940 Act or the Code which, if applicable, may have adversely affected the performance results.
</R>

<R>
As of June 30, 2008, there were two portfolios in the composite.
</R>

<R>
The following table shows return figures for the composite net of expenses of 0.93%, which is the highest expense ratio of any of the underlying portfolios. Because the expense ratio of the fund is higher than the expense ratios of certain portfolios comprising the composite, the performance shown is lower than the actual returns of the composite.
</R>

<R>
<R>Prior Performance of Similar Portfolios Managed by T. Rowe Price International




Periods ended June 30, 2008














1 year


3 years


5 years


Since inception
(1/31/00)

Non-U.S. Equity Core Composite*




Average Annual
-12.75%
13.01%
16.63%
5.47%
Cumulative
-12.75
44.31
115.80
56.45
MSCI EAFE Index




Average Annual
-10.15
13.34
17.16
4.78
Cumulative
-10.15
45.61
120.77
48.05
</R>

</R>

<R>
*These figures reflect the prior performance of similar portfolios and are net of 0.93% expenses. Asset-weighted returns are calculated monthly. Each portfolio`s contribution to the composite for the month is calculated by multiplying the monthly portfolio return by the ratio of the portfolio`s beginning asset value as expressed as a percentage of the composite`s beginning asset value. Contributions for all portfolios are summed to determine the composite`s asset-weighted performance for the month. Monthly returns are subsequently linked to determine quarterly asset-weighted returns. This differs from the required SEC method for calculating mutual fund performance.
</R>

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PricewaterhouseCoopers LLP, 100 East Pratt Street, Suite 1900, Baltimore, Maryland 21202, is the independent registered public accounting firm to the funds.

The financial statements and Report of Independent Registered Public Accounting Firm of the funds included in each fund`s annual report are incorporated into this SAI by reference. A copy of the annual report of each fund with respect to which an inquiry is made will accompany this SAI.


PART II — TABLE OF CONTENTS
































Page








Page
















Investment Objectives and Policies
150

In-Kind Redemptions and Purchases
208
Risk Factors
150

Tax Status
208
Portfolio Securities
165

Capital Stock
211
Derivatives
179

Organization of the Funds
216
Portfolio Management Practices
195

Proxy Voting — Process and Policies
217
Investment Restrictions
197

Federal Registration of Shares
219
Custodian
202

Legal Counsel
220
Code of Ethics
203

Ratings of Commercial Paper
220
Disclosure of Fund Portfolio Information
203

Ratings of Corporate and Municipal Debt Securities
220

Pricing of Securities
205

Ratings of Municipal Notes and Variable Rate Securities
220
Net Asset Value per Share
206

Index
223
Dividends and Distributions
207



PART II

Part II of this SAI describes risks, policies, and practices that apply to the funds in the T. Rowe Price family of funds.

INVESTMENT OBJECTIVES AND POLICIES

The following information supplements the discussion of the funds` investment objectives and policies discussed in the funds` prospectuses. You should refer to each fund`s prospectus to determine the types of securities in which the fund invests. You will then be able to review additional information set forth herein on those types of securities and their risks.

Shareholder approval is required to substantively change fund objectives. Unless otherwise specified, the investment programs and restrictions of the funds are not fundamental policies. The funds` operating policies are subject to change by the funds` Boards without shareholder approval. The funds` fundamental policies may not be changed without the approval of at least a majority of the outstanding shares of the funds or, if it is less, 67% of the shares represented at a meeting of shareholders at which the holders of more than 50% of the shares are represented.

RISK FACTORS

Reference is also made to the sections entitled "Investment Program" and "Portfolio Management Practices" for discussions of the risks associated with the investments and practices described therein as they apply to the funds.

Risk Factors of Investing in Foreign Securities

General

Foreign securities include U.S. dollar-denominated and non-U.S. dollar-denominated securities of foreign issuers.

There are special risks in foreign investing. Certain of these risks are inherent in any mutual fund investing in foreign securities while others relate more to the countries in which the funds will invest. Many of the risks are more pronounced for investments in developing or emerging market countries, such as many of the countries of Africa, Asia, Eastern Europe, Latin America, the Middle East, and Russia. There is no universally accepted definition of an emerging country, but the funds generally use MSCI Barra to make a classification.

  • Political and Economic Factors Foreign investments involve risks unique to the local political, economic, and regulatory structures in place, as well as the potential for social instability, military unrest, or diplomatic developments that could prove adverse to the interests of U.S. investors. Individual foreign economies can differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency, and balance of payments position. In addition, significant external political and economic risks currently affect some foreign countries. For example, both Taiwan and China still claim sovereignty over one another and there is a demilitarized border and hostile relations between North and South Korea. War and terrorism affect many countries, especially those in Africa and the Middle East. Many countries throughout the world are dependent on a healthy U.S. economy and are adversely affected when the U.S. economy weakens or its markets decline. For example, in 2007, the meltdown in the U.S. subprime mortgage market quickly spread throughout global credit markets, triggering a liquidity crisis that affected fixed-income and equity markets around the world. European countries can be significantly affected by the tight fiscal and monetary controls that the European Economic and Monetary Union ("EMU") imposes for membership. Europe`s economies are diverse, its governments are decentralized, and its cultures vary widely. As a result, there is continued concern about national-level support for the euro and the accompanying coordination of fiscal and wage policy among EMU member countries. Member countries are required to maintain tight control over inflation, public debt, and budget deficit to qualify for membership in the EMU. These requirements can severely limit EMU member countries` ability to implement monetary policy to address regional economic conditions.

    • 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 Investments in foreign securities will normally be denominated in foreign currencies. American Depository Receipts ("ADRs") are investments in foreign companies but are denominated in U.S. dollars. 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 funds` assets denominated in that currency. Such changes will also affect the funds` income. Generally, when a given currency appreciates against the dollar (the dollar weakens), the value of the funds` securities denominated in that currency will rise. When a given currency depreciates against the dollar (the dollar strengthens), the value of the funds` 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 to varying degrees. These restrictions limit and, at times, preclude investment in such countries and increase the cost and expenses of the funds. Investments by foreign investors are subject to a variety of restrictions in many developing countries. These restrictions may take the form of prior governmental approval, limits on the amount or type of securities held by foreigners, and limits on the types of companies in which foreigners may invest. Additional or different restrictions may be imposed at any time by these or other countries in which the funds invest. In addition, the repatriation of both investment income and capital from several foreign countries is restricted and controlled under certain regulations, including in some cases the need for certain government consents.

  • 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 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 funds` 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 U.S. securities and such levels may not be sustainable. Commissions on foreign securities trades are generally higher than commissions on U.S. 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 U.S. 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 funds.

  • Investment Funds The funds may invest in investment funds which have been authorized by the governments of certain countries specifically to permit foreign investment in securities of companies listed and traded on the stock exchanges in these respective countries. Investment in these funds is subject to the provisions of the 1940 Act. If the funds invest in such investment funds, 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 indirectly bear 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 U.S. 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 funds` foreign portfolio securities may be subject to foreign withholding taxes, thus reducing the net amount of income available for distribution to the funds` shareholders.

  • Costs Investors should understand that the expense ratios of a fund investing primarily in foreign securities 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 funds, 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-sized companies.

  • Emerging Europe, Middle East, and Africa

    • Political Instability Many formerly communist, eastern European countries have experienced significant political and economic reform in recent years, and the eastward expansion of the European Union could help anchor this reform process. However, the democratization process is still relatively new in a number of the smaller states and political turmoil and popular uprising remains a threat. Russia has made advances in establishing a new political outlook and a market economy, but political risk remains high. Many Middle Eastern economies have little or no democratic tradition and are led by family structures. Opposition parties

    are often banned, leading to dissidence and militancy. Despite a growing trend toward a democratic process, many African nations have a history of dictatorship, military intervention, and corruption. In all regions, such developments, if they were to reoccur, could reverse favorable trends toward economic and market reform, privatization, and removal of trade barriers, and result in significant disruption in securities markets.

    Foreign Currency Certain countries in the region may have managed currencies which are pegged to the U.S. dollar or the euro, rather than at levels determined by the market. This type of system can lead to sudden and large adjustments in the currency, which may, in turn, have a disruptive and negative effect on investors. There is no significant foreign exchange market for certain currencies, and it would, as a result, be difficult for the funds to engage in foreign currency transactions designed to protect the value of the funds` interests in securities denominated in such currencies.

    Energy/Resources Russia, the Middle East, and many African nations are highly reliant on income from oil sales. Oil prices can have a major impact on the domestic economy. Other commodities such as base and precious metals are also important to these economies. Fluctuating supply and demand can significantly impact the price of such commodities.

  • 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 recur, 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. 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 funds to engage in foreign currency transactions designed to protect the value of the funds` interests in securities denominated in such currencies.

    Sovereign Debt A number of Latin American countries have been 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.

    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. 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 funds to engage in foreign currency transactions designed to protect the value of the funds` interests in securities denominated in such currencies.

    Economy A number of Asian companies are highly dependent on foreign loans for their operation, some of which may impose strict repayment term schedules and require significant economic and financial restructuring. The economies of many countries in the region are heavily dependent on international trade and are accordingly affected by protective trade barriers and the economic conditions of their trading partners. China has had an increasingly significant and positive impact on the global economy, but its continued success depends on its ability to retain the legal and financial systems that have fostered economic freedom and market expansion.

    Risk Factors of Investing in Taxable Debt Obligations

    General

    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 carry higher yields and are generally subject to 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 funds investing in debt securities to achieve their investment objectives is also dependent on the continuing ability of the issuers of the debt securities in which the funds invest to meet their obligations for the payment of interest and principal when due.

    After purchase by the funds, a debt security may cease to be rated or its rating may be reduced below the minimum required for purchase by the funds. Neither event will require a sale of such security by the funds. However, such events will be considered in determining whether the funds should continue to hold the security. To the extent that the ratings given by Moody`s, S&P, or others may change as a result of changes in such organizations or their rating systems, the funds will attempt to use comparable ratings as standards for investments in accordance with the investment policies contained in the prospectus. The ratings of Moody`s, S&P, and others represent their opinions as to the quality of securities that they undertake to rate. Ratings are not absolute standards of quality. When purchasing unrated securities, T. Rowe Price, under the supervision of the funds` Boards, determines whether the unrated security is of a quality comparable to that which the funds are allowed to purchase.

    Full Faith and Credit Securities

    Securities backed by the full faith and credit of the United States (for example, GNMA and U.S. Treasury securities) are generally considered to be among the most, if not the most, creditworthy investments available. While the U.S. government has honored its credit obligations continuously for the last 200 years, political events have, at times, called into question whether the United States would default on its obligations. Such an event would be unprecedented and there is no way to predict its results on the securities markets or the funds. However, it is very likely that default by the United States would result in losses to the funds.

    Mortgage Securities

    Mortgage-backed securities, including Government National Mortgage Association ("Ginnie Mae" or "GNMA") securities differ from conventional bonds in that principal is paid back over the life of the security rather than at maturity. As a result, the holder of a mortgage-backed security (i.e., a fund) receives monthly scheduled payments of principal and interest, and may receive unscheduled principal payments representing prepayments on the underlying mortgages. Therefore, GNMA securities may not be an effective means of "locking in" long-term interest rates due to the need for the funds to reinvest scheduled and unscheduled principal payments. The incidence of unscheduled principal prepayments is also likely to increase in mortgage pools owned by the funds when prevailing mortgage loan rates fall below the mortgage rates of the securities underlying the individual pool. The effect of such prepayments in a falling rate environment is to (1) cause the funds to reinvest principal payments at the then lower prevailing interest rate, and (2) reduce the potential for capital appreciation beyond the face amount of the security and adversely affect the return to the funds. Conversely, in a rising interest rate environment such prepayments can be reinvested at higher prevailing interest rates which will reduce the potential effect of capital depreciation to which bonds are subject when interest rates rise. When interest rates rise and prepayments decline, GNMA securities become subject to extension risk or the risk that the price of the securities will fluctuate more. In addition, prepayments of mortgage securities purchased at a premium (or discount) will cause such securities to be paid off at par, resulting in a loss (gain) to the funds. T. Rowe Price will actively manage the funds` portfolios in an attempt to reduce the risk associated with investment in mortgage-backed securities.

    The market value of adjustable rate mortgage securities ("ARMs"), like other U.S. government securities, will generally vary inversely with changes in market interest rates, declining when interest rates rise and rising when interest rates decline. Because of their periodic adjustment feature, ARMs should be more sensitive to short-term interest rates than long-term rates. They should also display less volatility than long-term mortgage-backed securities. Thus, while having less risk of a decline during periods of rapidly rising rates, ARMs may also have less potential for capital appreciation than other investments of comparable maturities. Interest rate caps on mortgages underlying ARMs may prevent income on the ARMs from increasing to prevailing interest rate levels and cause the securities to decline in value. In addition, to the extent ARMs are purchased at a premium, mortgage foreclosures and unscheduled principal prepayments may result in some loss of the holders` principal investment to the extent of the premium paid. On the other hand, if ARMs are purchased at a discount, both a scheduled payment of principal and an unscheduled prepayment of principal will increase current and total returns and will accelerate the recognition of income that, when distributed to shareholders, will be taxable as ordinary income.

    High-Yield Securities

    Special Risks of Investing in Junk Bonds The following special considerations are additional risk factors of funds investing in lower-rated securities.

  • Lower-Rated Debt Securities Market 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 funds` portfolios, the funds` 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. Investment in funds which invest in lower-rated debt securities is more risky than investment in shares of funds which invest 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 funds 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 funds and may also limit the ability of the funds 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 funds own or may acquire illiquid or restricted lower-rated securities, these securities may involve special registration responsibilities, liabilities, costs, and liquidity and valuation difficulties. Changes in values of debt securities which the funds own will affect its net asset value per share. If market quotations are not readily available for the funds` lower-rated or nonrated securities, these securities will be valued by a method that the funds` Boards believe 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 funds accrue income on these securities prior to the receipt of cash payments. The funds 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 portfolio securities to satisfy distribution requirements.

    • Risk Factors of Investing in Municipal Securities

    General

    Yields on municipal securities are dependent on a variety of factors, including the general conditions of the money market and the municipal bond market, the size of a particular offering, the maturity of the obligations, and the rating of the issue. Municipal 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 municipal 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 all the funds to achieve their investment objectives is also dependent on the continuing ability of the issuers of municipal securities in which the funds invest to meet their obligations for the payment of interest and principal when due. The ratings of Moody`s, S&P, and Fitch IBCA, Inc. ("Fitch") represent their opinions as to the quality of municipal securities which they undertake to rate. Ratings are not absolute standards of quality; consequently, municipal securities with the same maturity, coupon, and rating may have different yields. There are variations in municipal securities, both within a particular classification and between classifications, depending on numerous factors. It should also be pointed out that, unlike other types of investments, offerings of municipal securities have traditionally not been subject to regulation by, or registration with, the SEC, although there have been proposals which would provide for regulation in the future.

    The federal bankruptcy statutes relating to the debts of political subdivisions and authorities of states of the United States provide that, in certain circumstances, such subdivisions or authorities may be authorized to initiate bankruptcy proceedings without prior notice to or consent of creditors, which proceedings could result in material and adverse changes in the rights of holders of their obligations.

    Proposals have been introduced in Congress to restrict or eliminate the federal income tax exemption for interest on municipal securities, and similar proposals may be introduced in the future. Proposed "Flat Tax" and "Value Added Tax" proposals would also have the effect of eliminating the tax preference for municipal securities. Some of the past proposals would have applied to interest on municipal securities issued before the date of enactment, which would have adversely affected their value to a material degree. If such a proposal were enacted, the availability of municipal securities for investment by the funds and the value of a fund`s portfolio would be affected and, in such an event, the funds would reevaluate their investment objectives and

    policies. Also, recent changes to tax laws broadly lowering tax rates, including lower tax rates on dividends and capital gains, could have a negative impact on the desirability of owning municipal securities.

    Although the banks and securities dealers with which the funds will transact business will be banks and securities dealers that T. Rowe Price believes to be financially sound, there can be no assurance that they will be able to honor their obligations to the funds with respect to such transactions.

    Municipal Bond Insurance The funds may purchase insured bonds from time to time. Municipal bond insurance provides an unconditional and irrevocable guarantee that the insured bond`s principal and interest will be paid when due. Insurance does not guarantee the price of the bond. The guarantee is purchased from a private, nongovernmental insurance company.

    There are two types of insured securities that may be purchased by the funds: bonds carrying either (1) new issue insurance; or (2) secondary insurance. New issue insurance is purchased by the issuer of a bond in order to improve the bond`s credit rating. By meeting the insurer`s standards and paying an insurance premium based on the bond`s principal value, the issuer is able to obtain a higher credit rating for the bond. Once purchased, municipal bond insurance cannot be canceled, and the protection it affords continues as long as the bonds are outstanding and the insurer remains solvent.

    The funds may also purchase bonds that carry secondary insurance purchased by an investor after a bond`s original issuance. Such policies insure a security for the remainder of its term. Generally, the funds expect that portfolio bonds carrying secondary insurance will have been insured by a prior investor. However, the funds may, on occasion, purchase secondary insurance on their own behalf.

    Each of the municipal bond insurance companies has established reserves to cover estimated losses. Both the method of establishing these reserves and the amount of the reserves vary from company to company. The risk that a municipal bond insurance company may experience a claim extends over the life of each insured bond. Municipal bond insurance companies are obligated to pay a bond`s interest and principal when due if the issuing entity defaults on the insured bond. Although defaults on insured municipal bonds have been low to date, it is possible for default rates on insured bonds to increase substantially, which could deplete an insurer`s loss reserves and adversely affect the ability of a municipal bond insurer to pay claims to holders of insured bonds, such as the funds. The inability of an insurer to pay a particular claim, or a downgrade of the insurer`s rating, could adversely affect the values of all the bonds it insures. The number of municipal bond insurers is relatively small and, therefore, a significant amount of a municipal bond fund`s assets may be insured by a single issuer.

    High-Yield Securities Lower-quality bonds, commonly referred to as "junk bonds," are regarded as predominantly speculative with respect to the issuer`s continuing ability to meet principal and interest payments. Because investment in low- and lower-medium-quality bonds involves greater investment risk, to the extent the funds invest in such bonds, achievement of their investment objectives will be more dependent on T. Rowe Price`s credit analysis than would be the case if the funds were investing in higher-quality bonds. High-yield bonds may be more susceptible to real or perceived adverse economic conditions than investment-grade bonds. A projection of an economic downturn or higher interest rates, for example, could cause a decline in high-yield bond prices because the advent of such events could lessen the ability of highly leveraged issuers to make principal and interest payments on their debt securities. In addition, the secondary trading market for high-yield bonds may be less liquid than the market for higher-grade bonds, which can adversely affect the ability of the funds to dispose of their portfolio securities. Bonds for which there is only a "thin" market can be more difficult to value inasmuch as objective pricing data may be less available, and judgment may play a greater role in the valuation process.

    Risk Factors of Investing in Taxable and Tax-Free Money Market Funds

    The T. Rowe Price money market funds will limit their purchases of portfolio instruments to those U.S. dollar-denominated securities which the funds` Boards determine present minimal credit risk and which are eligible securities as defined in Rule 2a-7 under the 1940 Act. Eligible securities are generally securities which have been rated (or whose issuer has been rated or whose issuer has comparable securities rated) in one of the two highest short-term rating categories (which may include sub-categories) by nationally recognized statistical rating organizations ("NRSROs") or, in the case of any instrument that is not so rated, is of comparable high quality as determined by T. Rowe Price pursuant to written guidelines established under the supervision of the

    funds` Boards. In addition, the funds may treat variable and floating rate instruments with demand features as short-term securities pursuant to Rule 2a-7 under the 1940 Act.

    There can be no assurance that the funds will achieve their investment objectives or be able to maintain their net asset values per share at $1.00. The price of the funds is not guaranteed or insured by the U.S. government and their yields are not fixed. While the funds invest in high-grade money market instruments, investment in the funds is not without risk even if all portfolio instruments are paid in full at maturity. An increase in interest rates could reduce the value of the funds` portfolio investments, and a decline in interest rates could increase the value.

    State Tax-Free Funds

    The following information about the state tax-free funds is updated in June of each year. More current information is available in shareholder reports for these funds.

    California Tax-Free Bond and California Tax-Free Money Funds

    Risk Factors Associated with a California Portfolio

    The funds` concentration in the debt obligations of one state carries a higher risk than a portfolio that is more geographically diversified.

    Types of Municipal Debt The funds invest in municipal bonds and other municipal debt instruments issued by the state of California and its various political subdivisions and agencies. The issuers of these debt obligations include the state of California and its agencies and authorities, counties and municipalities and their agencies and authorities, various California public institutions of higher education, and certain California not-for-profit organizations (e.g., hospitals, private colleges, and nursing homes). The credit quality and risk of these investments will vary according to each security`s structure and underlying economics.

    Debt is issued for a wide variety of public purposes, including transportation, housing, education, electric power, and healthcare. The state of California, and its local governments, agencies and authorities, issue two basic types of debt: general obligation bonds and revenue bonds. General obligation bonds are backed by the unlimited taxing power of the issuer. However, bonds issued by certain counties, municipalities, and agencies of the state and local government are not backed by the full faith and credit of the state. Revenue bonds are typically secured by specific pledged fees or charges for a related project, such as fees generated from use of facilities or enterprises financed by the bonds. As part of its cash management program, the state regularly issues short-term notes to meet its disbursement requirements in advance of the receipt of revenues. Included within the revenue bond sector are tax-exempt lease obligations that are subject to annual appropriations of a governmental body, usually with no implied tax or specific revenue pledge. Local governments also raise capital through the use of Mello-Roos, 1915 Act Bonds, and Tax Increment Bonds, all of which are generally riskier than general obligation debt as they often rely on tax revenues to be generated by future development for their support.

    The funds may also invest in private activity bond issues for corporate and nonprofit borrowers. Sold through various governmental conduits, these issues are backed solely by the revenues pledged by the respective borrowing corporations. No governmental support is implied.

    Political and Legislative Conditions Certain provisions of the California state constitution and state statutes limit the taxing and spending authority of California governmental entities, thus affecting their ability to meet debt service obligations. For example, the constitution limits ad valorem taxes on real property to 1% of "full cash value" and restricts the ability of taxing entities to increase real property taxes. It also prohibits the state from spending revenues beyond its annually adjusted "appropriations limit." Yet another provision further restricts the ability of local governments to levy and collect existing and future taxes, assessments, and fees. In addition to limiting the financial flexibility of local governments in the state, the provision also increases the possibility of voter-determined tax rollbacks and repeals.

    One effect of the tax and spending limitations in California has been a broad scale shift by local governments away from general obligation debt requiring voter approval and pledging of future tax revenues toward lease revenue financing that is subject to abatement and does not require voter approval. Lease-backed debt is generally viewed as a less secure form of borrowing and therefore entails greater credit risk.

    Future initiatives, if proposed and adopted, or future court decisions could create renewed pressure on California governments and their ability to raise revenues. Although Orange County notably filed for protection under the U.S. Bankruptcy Code in 1994, overall the state and its underlying governments have displayed flexibility in overcoming the negative effects of past initiatives.

    Economic and Financial Conditions To a large degree, the credit risk of the portfolio is dependent upon the financial strength of the state of California, its localities and agencies. Financial strength is, in turn, influenced by changing economic conditions which affect the level of taxes collected and revenues earned. While California`s economy has been diverse and resilient, and is typically the largest among the 50 states, the state of California is also normally among the most highly indebted states in the nation. The state has historically experienced more extreme swings in employment levels and property values relative to the rest of the country. In addition, California is more prone to earthquakes, which can result in sudden economic downturns and the unexpected inability of issuers to meet their obligations. More detailed information regarding economic conditions and the financial strength of California is available in the funds` annual and semi-annual shareholder reports.

    Sectors Investment concentration in a particular sector can present unique risks. For example, a significant portion of the funds` assets may be invested in issues related to health care providers. For over a decade, the hospital industry has been under significant pressure to reduce expenses and shorten length of hospital stays, a phenomenon that has negatively affected the financial health of some hospitals. All hospitals are dependent on third-party reimbursement mechanisms that are typically complex, subject to numerous conditions, and uncertain as to how long they will continue.

    The funds may from time to time invest in electric revenue issues. The financial performance of these utilities was impacted by the industry`s moves toward deregulation and increased competition. California`s original electric utility restructuring plan proved to be flawed as it placed over-reliance on the spot market for power purchases during a period of substantial supply and demand imbalance. Now that deregulation has been suspended, municipal utilities face a more traditional set of challenges. In particular, some electric revenue issuers have exposure to or participate in nuclear power plants, which could affect the issuer`s financial performance. Other risks include unexpected outages, plant shutdowns, and more stringent environmental regulations.

    Georgia Tax-Free Bond Fund

    Risk Factors Associated with a Georgia Portfolio

    The fund`s concentration in the debt obligations of one state carries a higher risk than a portfolio that is more geographically diversified.

    Types of Municipal Debt The fund invests in municipal bonds and other municipal debt instruments issued by the state of Georgia and its various political subdivisions and agencies. The issuers of these debt obligations include the state of Georgia and its agencies and authorities, counties and municipalities and their agencies and authorities, various Georgia public institutions of higher education, and certain Georgia not-for-profit organizations (e.g., hospitals, private colleges, and nursing homes). The credit quality and risk of these investments will vary according to each security`s structure and underlying economics.

    The state of Georgia, and its local governments, agencies and authorities, issue two basic types of debt: general obligation bonds and revenue bonds. General obligation bonds are backed by the unlimited taxing power of the issuer. However, bonds issued by certain counties, municipalities, and agencies of the state and local government are not backed by the full faith and credit of the state and may or may not be subject to annual appropriations from the state`s general fund. Revenue bonds are typically secured by specific pledged fees or charges for a related project, such as fees generated from use of facilities or enterprises financed by the bonds. Included within the revenue bond sector are tax-exempt lease obligations that are subject to annual appropriations of a governmental body, usually with no implied tax or specific revenue pledge.

    The Georgia Constitution imposes certain debt limits and controls. The state`s general obligation debt service cannot exceed 10% of total revenue receipts less refunds of the state treasury and state-issued general obligation bonds have a 25-year maturity limit. The state also established "debt affordability" limits which

    provide that outstanding debt will not exceed 2.7% of personal income or that maximum annual debt service will not exceed 5% of the prior year`s revenues.

    The fund may also invest in private activity bond issues for corporate and nonprofit borrowers. Sold through various governmental conduits, these issues are backed solely by the revenues pledged by the respective borrowing corporations. No governmental support is implied.

    Economic and Financial Conditions To a large degree, the credit risk of the portfolio is dependent upon the financial strength of the state of Georgia, its localities and agencies. Financial strength is, in turn, influenced by changing economic conditions which affect the level of taxes collected and revenues earned. While local governments in Georgia are primarily reliant on independent revenue sources, such as property taxes, they are not immune to budget shortfalls caused by cutbacks in state aid. More detailed information regarding economic conditions and the financial strength of Georgia is available in the fund`s annual and semi-annual shareholder reports.

    Sectors Investment concentration in a particular sector can present unique risks. For example, a significant portion of the fund`s assets may be invested in issues related to health care providers. For over a decade, the hospital industry has been under significant pressure to reduce expenses and shorten length of hospital stays, a phenomenon that has negatively affected the financial health of some hospitals. All hospitals are dependent on third-party reimbursement mechanisms that are typically complex, subject to numerous conditions, and uncertain as to how long they will continue.

    The fund may from time to time invest in electric revenue issues that have exposure to or participate in nuclear power plants, which could affect the issuer`s financial performance. Such risks include delay in construction and operation due to increased regulation, unexpected outages or plant shutdowns, increased Nuclear Regulatory Commission surveillance, or inadequate rate relief. In addition, the financial performance of electric utilities may be impacted by increased competition and deregulation of the industry.

    The fund may invest in issues related to life care, which includes nursing homes, assisted living facilities, and continuing care retirement communities. These bonds are typically issued with longer-term maturities, although they are usually callable by the issuer on prescribed dates before maturity. Many life care municipal bonds are considered below investment-grade or are not rated by a major rating agency. Reasons for the higher credit risk include uncertainty over future regulations and Medicaid funding, increased competition, and a lack of affordability.

    Maryland Short-Term Tax-Free Bond, Maryland Tax-Free Bond, and Maryland Tax-Free Money Funds

    Risk Factors Associated with a Maryland Portfolio

    The funds` concentration in the debt obligations of one state carries a higher risk than a portfolio that is more geographically diversified.

    Types of Municipal Debt The funds invest in municipal bonds and other municipal debt instruments issued by the state of Maryland and its various political subdivisions and agencies. The issuers of these debt obligations include the state of Maryland and its agencies and authorities, counties and municipalities and their agencies and authorities, various Maryland public institutions of higher education, and certain Maryland not-for-profit organizations (e.g., hospitals, private colleges, and nursing homes). The credit quality and risk of these investments will vary according to each security`s structure and underlying economics.

    The state of Maryland, and its local governments, agencies and authorities, issue two basic types of debt: general obligation bonds and revenue bonds. General obligation bonds are backed by the unlimited taxing power of the issuer. However, many counties, municipalities, and agencies of the state and local government are authorized to borrow money under laws expressly providing that the loan obligations are not debts or pledges of the full faith and credit of the state. The state constitution imposes a 15-year maturity limit on state-issued general obligation bonds. Revenue bonds are typically secured by specific pledged fees or charges for a related project, such as fees generated from use of facilities or enterprises financed by the bonds. Included within the revenue bond sector are tax-exempt lease obligations that are subject to annual appropriations of a governmental body, usually with no implied tax or specific revenue pledge.

    The funds may also invest in private activity bond issues for corporate and nonprofit borrowers. Sold through various governmental conduits, these issues are backed solely by the revenues pledged by the respective borrowing corporations. No governmental support is implied.

    Economic and Financial Conditions To a large degree, the credit risk of the portfolio is dependent upon the financial strength of the state of Maryland, its localities and agencies. Financial strength is, in turn, influenced by changing economic conditions which affect the level of taxes collected and revenues earned. More detailed information regarding economic conditions and the financial strength of Maryland is available in the funds` annual and semi-annual shareholder reports.

    Sectors Investment concentration in a particular sector can present unique risks. For example, a significant portion of the funds` assets may be invested in issues related to health care providers. For over a decade, the hospital industry has been under significant pressure to reduce expenses and shorten length of hospital stays, a phenomenon that has negatively affected the financial health of some hospitals. All hospitals are dependent on third-party reimbursement mechanisms that are typically complex, subject to numerous conditions, and of uncertain duration.

    The funds may from time to time invest in electric revenue issues that have exposure to or participate in nuclear power plants, which could affect the issuer`s financial performance. Such risks include delay in construction and operation due to increased regulation, unexpected outages or plant shutdowns, increased Nuclear Regulatory Commission surveillance, or inadequate rate relief. In addition, the financial performance of electric utilities may be impacted by increased competition and deregulation of the industry.

    The funds may invest in issues related to life care, which includes nursing homes, assisted living facilities, and continuing care retirement communities. These bonds are typically issued with longer-term maturities, although they are usually callable by the issuer on prescribed dates before maturity. Many life care municipal bonds are considered below investment-grade or are not rated by a major rating agency. Reasons for the higher credit risk include uncertainty over future regulations and Medicaid funding, increased competition, and a lack of affordability.

    New Jersey Tax-Free Bond Fund

    Risk Factors Associated with a New Jersey Portfolio

    The fund`s concentration in the debt obligations of one state carries a higher risk than a portfolio that is more geographically diversified.

    Types of Municipal Debt The fund invests in municipal bonds and other municipal debt instruments issued by the state of New Jersey and its various political subdivisions and agencies. The issuers of these debt obligations include the state of New Jersey and its agencies and authorities, counties and municipalities and their agencies and authorities, various New Jersey public institutions of higher education, and certain New Jersey not-for-profit organizations (e.g., hospitals, private colleges, and nursing homes). The credit quality and risk of these investments will vary according to each security`s structure and underlying economics.

    The state of New Jersey, and its local governments, agencies and authorities, issue two basic types of debt: general obligation bonds and revenue bonds. General obligation bonds are backed by the unlimited taxing power of the issuer. However, many counties, municipalities, and agencies of the state and local government are authorized to borrow money under laws expressly providing that the loan obligations are not debts or pledges of the full faith and credit of the state. Revenue bonds are typically secured by specific pledged fees or charges for a related project, such as fees generated from use of facilities or enterprises financed by the bonds. Included within the revenue bond sector are tax-exempt lease obligations that are subject to annual appropriations of a governmental body, usually with no implied tax or specific revenue pledge.

    The majority of the state`s debt is "appropriation-backed." This means that the debt service payments on these obligations must be funded annually by the state legislature, but the legislature has no legal obligation to continue to make such appropriations.

    The fund may also invest in private activity bond issues for corporate and nonprofit borrowers. These issues are sold through various governmental conduits, such as the New Jersey Economic Development Authority and various local issuers, and are backed solely by the revenues pledged by the respective borrowing

    corporations. No governmental support is implied. In the past, a number of New Jersey Economic Development Authority issues have defaulted as a result of borrower financial difficulties.

    Economic and Financial Conditions To a large degree, the credit risk of the portfolio is dependent upon the financial strength of the state of New Jersey, its localities and agencies. Financial strength is, in turn, influenced by changing economic conditions which affect the level of taxes collected and revenues earned. More detailed information regarding economic conditions and the financial strength of New Jersey is available in the fund`s annual and semi-annual shareholder reports.

    Sectors Investment concentration in a particular sector can present unique risks. For example, a significant portion of the fund`s assets may be invested in issues related to health care providers. For over a decade, the hospital industry has been under significant pressure to reduce expenses and shorten length of hospital stays, a phenomenon that has negatively affected the financial health of some hospitals. All hospitals are dependent on third-party reimbursement mechanisms that are typically complex, subject to numerous conditions, and uncertain as to how long they will continue.

    The fund may from time to time invest in electric revenue issues that have exposure to or participate in nuclear power plants, which could affect the issuer`s financial performance. Such risks include delay in construction and operation due to increased regulation, unexpected outages or plant shutdowns, increased Nuclear Regulatory Commission surveillance, or inadequate rate relief. In addition, the financial performance of electric utilities may be impacted by increased competition and deregulation of the industry.

    The fund may invest in issues related to life care, which includes nursing homes, assisted living facilities, and continuing care retirement communities. These bonds are typically issued with longer-term maturities, although they are usually callable by the issuer on prescribed dates before maturity. Many life care municipal bonds are considered below investment-grade or are not rated by a major rating agency. Reasons for the higher credit risk include uncertainty over future regulations and Medicaid funding, increased competition, and a lack of consumer affordability.

    New York Tax-Free Bond and New York Tax-Free Money Funds

    Risk Factors Associated with a New York Portfolio

    The funds` concentration in the debt obligations of one state carries a higher risk than a portfolio that is more geographically diversified.

    Types of Municipal Debt The funds invest in municipal bonds and other municipal debt instruments issued by the state of New York and its various political subdivisions and agencies. The issuers of these debt obligations include: the state of New York, New York City, and their agencies and authorities; counties, other municipalities, and their agencies and authorities; various New York public institutions of higher education; and certain New York not-for-profit organizations (e.g., hospitals, private colleges, and nursing homes). The credit quality and risk of these investments will vary according to each security`s structure and underlying economics.

    The state of New York, and its local governments, agencies and authorities, issue two basic types of debt: general obligation bonds and revenue bonds. General obligation bonds are backed by the unlimited taxing power of the issuer. However, bonds issued by certain counties, municipalities, and agencies of the state and local government are not backed by the full faith and credit of the state of New York or New York City. Revenue bonds are typically secured by specific pledged fees or charges for a related project, such as fees generated from use of facilities or enterprises financed by the bonds. Included within the revenue bond sector are tax-exempt lease obligations that are subject to annual appropriations of a governmental body, usually with no implied tax or specific revenue pledge.

    The majority of the state`s debt is "appropriation-backed." This means that the debt service payments on these obligations must be funded annually by the state legislature, but the legislature has no legal obligation to continue to make such appropriations.

    The funds may also invest in private activity bond issues for corporate and nonprofit borrowers. Sold through various governmental conduits, these issues are backed solely by the revenues pledged by the respective borrowing corporations. No governmental support is implied.

    Economic and Financial Conditions To a large degree, the credit risk of the portfolio is dependent upon the financial strength of the state of New York, its localities and agencies. Financial strength is, in turn, influenced by changing economic conditions which affect the level of taxes collected and revenues earned. The state of New York is typically among the most highly indebted states in the nation and New York City is typically one of the most indebted U.S. cities. More detailed information regarding economic conditions and the financial strength of New York is available in the funds` annual and semi-annual shareholder reports.

    Sectors Investment concentration in a particular sector can present unique risks. For example, a significant portion of the funds` assets may be invested in issues related to health care providers. For over a decade, the hospital industry has been under significant pressure to reduce expenses and shorten length of hospital stays, a phenomenon that has negatively affected the financial health of some hospitals. All hospitals are dependent on third-party reimbursement mechanisms that are typically complex, subject to numerous conditions, and uncertain as to how long they will continue.

    The funds may from time to time invest in electric revenue issues that have exposure to or participate in nuclear power plants, which could affect the issuer`s financial performance. Such risks include delay in construction and operation due to increased regulation, unexpected outages or plant shutdowns, increased Nuclear Regulatory Commission surveillance, or inadequate rate relief. In addition, the financial performance of electric utilities may be impacted by increased competition and deregulation of the industry.

    The funds may invest in issues related to life care, which includes nursing homes, assisted living facilities, and continuing care retirement communities. These bonds are typically issued with longer-term maturities, although they are usually callable by the issuer on prescribed dates before maturity. Many life care municipal bonds are considered below investment-grade or are not rated by a major rating agency. Reasons for the higher credit risk include uncertainty over future regulations and Medicaid funding, increased competition, and a lack of consumer affordability.

    Virginia Tax-Free Bond Fund

    Risk Factors Associated with a Virginia Portfolio

    The fund`s concentration in the debt obligations of one state carries a higher risk than a portfolio that is more geographically diversified.

    Types of Municipal Debt The fund invests in municipal bonds and other municipal debt instruments issued by the commonwealth of Virginia and its various political subdivisions and agencies. The issuers of these debt obligations include the commonwealth of Virginia and its agencies and authorities, counties and municipalities and their agencies and authorities, various Virginia public institutions of higher education, and certain Virginia not-for-profit organizations (e.g., hospitals, private colleges, and nursing homes). The credit quality and risk of these investments will vary according to each security`s structure and underlying economics.

    Debt is issued for a wide variety of public purposes, including transportation, housing, education, healthcare, and industrial development. The commonwealth of Virginia, and its local governments, agencies and authorities, issue two basic types of debt: general obligation bonds and revenue bonds. General obligation bonds are backed by the unlimited taxing power of the issuer. Under Virginia law, general obligation debt is limited to 1.15 times the average of the preceding three years` income tax and sales and use collections. However, bonds issued by many counties, municipalities, and agencies of the commonwealth and local government are not backed by the full faith and credit of the commonwealth but instead are subject to annual appropriations from the commonwealth`s general fund. Revenue bonds are typically secured by specific pledged fees or charges for a related project, such as fees generated from use of facilities or enterprises financed by the bonds. Included within the revenue bond sector are tax-exempt lease obligations that are subject to annual appropriations of a governmental body, usually with no implied tax or specific revenue pledge.

    The fund may also invest in private activity bond issues for corporate and nonprofit borrowers. Sold through various governmental conduits, these issues are backed solely by the revenues pledged by the respective borrowing corporations. No governmental support is implied.

    Economic and Financial Conditions To a large degree, the credit risk of the portfolio is dependent upon the financial strength of the commonwealth of Virginia, its localities and agencies. Financial strength is, in turn, influenced by changing economic conditions which affect the level of taxes collected and revenues earned. While local governments in Virginia are primarily reliant on independent revenue sources, such as property taxes, they are not immune to budget shortfalls caused by cutbacks in state aid. More detailed information regarding economic conditions and the financial strength of Virginia is available in the fund`s annual and semi-annual shareholder reports.

    Sectors Investment concentration in a particular sector can present unique risks. For example, a significant portion of the fund`s assets may be invested in issues related to health care providers. For over a decade, the hospital industry has been under significant pressure to reduce expenses and shorten length of hospital stays, a phenomenon that has negatively affected the financial health of some hospitals. All hospitals are dependent on third-party reimbursement mechanisms that are typically complex, subject to numerous conditions, and uncertain as to how long they will continue.

    The fund may from time to time invest in electric revenue issues that have exposure to or participate in nuclear power plants, which could affect the issuer`s financial performance. Such risks include delay in construction and operation due to increased regulation, unexpected outages or plant shutdowns, increased Nuclear Regulatory Commission surveillance, or inadequate rate relief. In addition, the financial performance of electric utilities may be impacted by increased competition and deregulation of the industry.

    The fund may invest in issues related to life care, which includes nursing homes, assisted living facilities, and continuing care retirement communities. These bonds are typically issued with longer-term maturities, although they are usually callable by the issuer on prescribed dates before maturity. Many life care municipal bonds are considered below investment-grade or are not rated by a major rating agency. Reasons for the higher credit risk include uncertainty over future regulations and Medicaid funding, increased competition, and a lack of affordability.

    All State Tax-Free Funds

    Risk Factors Associated with Investing in Puerto Rico

    From time to time, the funds invest in debt obligations of the commonwealth of Puerto Rico and its public corporations, the interest of which may be exempt from federal, state, and local income taxes. As of April 1, 2008, the general obligation debt of the commonwealth was rated Baa3 by Moody`s and BBB- by S&P. Both agencies have assigned stable outlooks to the ratings. The credit ratings reflect, in part, their concerns regarding a weak economy, structural budget imbalance, and rising debt burden.

    Types of Debt The debt obligations of Puerto Rico include bonds and notes issued by the commonwealth, its municipalities, and its public corporations, such as highways, water and sewer, and electric power companies. The credit quality and risk of these investments will vary according to each security`s structure and underlying economics.

    Guaranteed direct obligations of the commonwealth supported by a general obligation pledge are subject to strict limitations imposed by the commonwealth`s constitution. Debts of its municipalities are typically supported by property taxes and municipal license taxes, with support from the commonwealth, if necessary. Debts of its public corporations are generally supported by the corporation`s revenues or by commonwealth appropriations or taxes.

    Economic and Financial Conditions Though different measures suggest Puerto Rico`s debt burden is high relative to a U.S. state, the commonwealth issues or supports bonds on behalf of municipalities and other governmental units. In many cases, this type of debt would be issued by local government or public agencies that are independent entities in the United States. One measure to monitor the commonwealth debt levels is by comparing the rate of growth of its debt to the rate of growth of its gross domestic product ("GDP"). For the five -year period ended in June 2007, total public sector debt increased by 44%, whereas GDP rose by 20%.

    Puerto Rico`s economy is often closely linked to the U.S. economy. The dominant sectors of the Puerto Rico economy are manufacturing and services. Manufacturing, especially pharmaceuticals, is very important to the

    local economy. For 2007, manufacturing accounted for approximately 40% of GDP and approximately 10% of non-farm payroll employment. Total employment levels declined 10% from 2003 to 2007. Many of the losses were in labor-intensive industries as jobs were shifted to more capital-intensive and skilled positions. Services are another component of the local economy, and represented 40% of GDP and 55% of employment. Tourism is an important sub-sector of services, and one of the primary drivers of Puerto Rico`s economy. San Juan is the largest home port for cruise ships in the Caribbean and one of the largest ports in the world. Between 2003 and 2007, the number of tourists rose approximately 4.0% annually while visitors` expenditures increased approximately 8.0%.

    Government officials estimate that general fund revenues and expenditures were both $9.0 billion in fiscal year 2007. However, when adjusted for note proceeds and repayments of various borrowings and transfers, the commonwealth experienced a budget gap of $480 million. The deficit is expected to funded by various fiscal and tax reforms. These measures are anticipated to shrink the gap over the next few years.

    Tax Concerns For many years, U.S. companies operating in Puerto Rico were eligible to receive a special tax treatment. Since 1976, Section 936 of the U.S. tax code entitled certain corporations to credit income derived from business activities in the commonwealth against their U.S. corporate income tax, which in turn spurred significant expansion in capital intensive manufacturing, particularly by large pharmaceutical firms. The tax benefits, however, were phased out over a ten-year period beginning in 1996 and were eliminated beginning with the 2006 tax year. While the ultimate impact of the elimination of the income tax credits over the short- and long-term cannot be determined, preliminary indications are that major pharmaceutical, instrument, and electronic manufacturing firms have not exited the market.

    PORTFOLIO SECURITIES

    Types of Securities

    Set forth below is additional information about certain of the investments described in the funds` prospectuses.

    Debt Securities

  • U.S. Government Obligations  Bills, notes, bonds, and other 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 ("Fannie Mae" or "FNMA"), GNMA, 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 U.S. Treasury.

  • Bank Obligations  Certificates of deposit, banker`s acceptances, and other short-term debt obligations. Certificates of deposit are short-term obligations of commercial banks. A banker`s 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 funds 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.

  • Corporate Debt Securities  Outstanding corporate debt securities (e.g., bonds and debentures). Corporate notes may have fixed, variable, or floating rates.

  • Short-Term Corporate Debt Securities Outstanding nonconvertible corporate debt securities (e.g., bonds and debentures) which have one year or less remaining to maturity. Corporate notes may have fixed, variable, or floating rates.

  • Commercial Paper and Commercial Notes  Short-term promissory notes issued by corporations primarily to finance short-term credit needs. Certain notes may have floating or variable rates and may contain options, exercisable by either the buyer or the seller, that extend or shorten the maturity of the note.

  • Foreign Government Securities  Issued or guaranteed by a foreign government, province, instrumentality, political subdivision, or similar unit thereof.

  • Funding Agreements Obligations of indebtedness negotiated privately between the funds and an insurance company. Often such instruments will have maturities with unconditional put features, exercisable by the funds, requiring return of principal within one year or less.

    • There are, of course, other types of securities that are or may become available that are similar to the foregoing, and the funds may invest in these securities.

    Mortgage-Related Securities

  • Mortgage-Backed Securities Mortgage-backed securities are securities representing an interest in a pool of mortgages. The mortgages may be of a variety of types, including adjustable rate, conventional 30-year and 15-year fixed rate, and graduated payment mortgages. Principal and interest payments made on the mortgages in the underlying mortgage pool are passed through to the funds. This is in contrast to traditional bonds where principal is normally paid back at maturity in a lump sum. Unscheduled prepayments of principal shorten the securities` weighted average life and may lower their total return. (When a mortgage in the underlying mortgage pool is prepaid, an unscheduled principal prepayment is passed through to the funds. This principal is returned to the funds at par. As a result, if a mortgage security were trading at a premium, its total return would be lowered by prepayments, and if a mortgage security were trading at a discount, its total return would be increased by prepayments.) The value of these securities also may change because of changes in the market`s perception of the creditworthiness of the federal agency that issued them. In addition, the mortgage securities market in general may be adversely affected by changes in governmental regulation or tax policies.

  • U.S. Government Agency Mortgage-Backed Securities These are obligations issued or guaranteed by the U.S. government or one of its agencies or instrumentalities, such as GNMA, FNMA, the Federal Home Loan Mortgage Corporation ("Freddie Mac" or "FHLMC"), and the Federal Agricultural Mortgage Corporation ("Farmer Mac" or "FAMC"). FNMA, FHLMC, and FAMC obligations are not backed by the full faith and credit of the U.S. government as GNMA certificates are, but they are supported by the instrumentality`s right to borrow from the U.S. Treasury. U.S. Government Agency Mortgage-Backed Certificates provide for the pass-through to investors of their pro-rata share of monthly payments (including any prepayments) made by the individual borrowers on the pooled mortgage loans, net of any fees paid to the guarantor of such securities and the servicer of the underlying mortgage loans. Each of GNMA, FNMA, FHLMC, and FAMC guarantees timely distributions of interest to certificate holders. GNMA and FNMA guarantee timely distributions of scheduled principal. FHLMC has in the past guaranteed only the ultimate collection of principal of the underlying mortgage loan; however, FHLMC now issues mortgage-backed securities (FHLMC Gold PCS) which also guarantee timely payment of monthly principal reductions.

  • GNMA Certificates GNMA is a wholly owned corporate instrumentality of the United States within the Department of Housing and Urban Development. The National Housing Act of 1934, as amended (the "Housing Act"), authorizes GNMA to guarantee the timely payment of the principal of and interest on certificates that are based on and backed by a pool of mortgage loans insured by the Federal Housing Administration under the Housing Act, or Title V of the Housing Act of 1949 ("FHA Loans"), or guaranteed by the Department of Veterans Affairs under the Servicemen`s Readjustment Act of 1944, as amended ("VA Loans"), or by pools of other eligible mortgage loans. The Housing Act provides that the full faith and credit of the U.S. government is pledged to the payment of all amounts that may be required to be paid under any guaranty. In order to meet its obligations under such guaranty, GNMA is authorized to borrow from the U.S. Treasury with no limitations as to amount.

  • FNMA Certificates FNMA is a federally chartered and privately owned corporation organized and existing under the Federal National Mortgage Association Charter Act of 1938. FNMA Certificates represent a pro-rata interest in a group of mortgage loans purchased by FNMA. FNMA guarantees the timely payment of principal and interest on the securities it issues. The obligations of FNMA are not backed by the full faith and credit of the U.S. government.

  • FHLMC Certificates FHLMC is a corporate instrumentality of the United States created pursuant to the Emergency Home Finance Act of 1970, as amended ("FHLMC Act"). FHLMC Certificates represent a pro-rata interest in a group of mortgage loans purchased by FHLMC. FHLMC guarantees timely payment of interest and principal on certain securities it issues and timely payment of interest and eventual payment of principal on other securities it issues. The obligations of FHLMC are obligations solely of FHLMC and are not backed by the full faith and credit of the U.S. government.

  • FAMC Certificates FAMC is a federally chartered instrumentality of the United States established by Title VIII of the Farm Credit Act of 1971, as amended ("Charter Act"). FAMC was chartered primarily to attract new capital for financing of agricultural real estate by making a secondary market in certain qualified agricultural real estate loans. FAMC provides guarantees of timely payment of principal and interest on securities representing interests in, or obligations backed by, pools of mortgages secured by first liens on agricultural real estate. Similar to FNMA and FHLMC, FAMC Certificates are not supported by the full faith and credit of the U.S. government; rather, FAMC may borrow from the U.S. Treasury to meet its guaranty obligations.

    • As discussed above, prepayments on the underlying mortgages and their effect upon the rate of return of a mortgage-backed security is the principal investment risk for a purchaser of such securities, like the funds. Over time, any pool of mortgages will experience prepayments due to a variety of factors, including (1) sales of the underlying homes (including foreclosures), (2) refinancings of the underlying mortgages, and (3) increased amortization by the mortgagee. These factors, in turn, depend upon general economic factors, such as level of interest rates and economic growth. Thus, investors normally expect prepayment rates to increase during periods of strong economic growth or declining interest rates, and to decrease in recessions and rising interest rate environments. Accordingly, the life of the mortgage-backed security is likely to be substantially shorter than the stated maturity of the mortgages in the underlying pool. Because of such variation in prepayment rates, it is not possible to predict the life of a particular mortgage-backed security, but FHA statistics indicate that 25- to 30-year single family dwelling mortgages have an average life of approximately 12 years. The majority of GNMA Certificates are backed by mortgages of this type, and, accordingly, the generally accepted practice treats GNMA Certificates as 30-year securities which prepay in full in the 12th year. FNMA and FHLMC Certificates may have differing prepayment characteristics.

    Fixed-rate mortgage-backed securities bear a stated "coupon rate" which represents the effective mortgage rate at the time of issuance, less certain fees to GNMA, FNMA, and FHLMC for providing the guarantee, and the issuer for assembling the pool and for passing through monthly payments of interest and principal.

    Payments to holders of mortgage-backed securities consist of the monthly distributions of interest and principal less the applicable fees. The actual yield to be earned by a holder of mortgage-backed securities is calculated by dividing interest payments by the purchase price paid for the mortgage-backed securities (which may be at a premium or a discount from the face value of the certificate).

    Monthly distributions of interest, as contrasted to semiannual distributions which are common for other fixed interest investments, have the effect of compounding and thereby raising the effective annual yield earned on mortgage-backed securities. Because of the variation in the life of the pools of mortgages which back various mortgage-backed securities, and because it is impossible to anticipate the rate of interest at which future principal payments may be reinvested, the actual yield earned from a portfolio of mortgage-backed securities will differ significantly from the yield estimated by using an assumption of a certain life for each mortgage-backed security included in such a portfolio as described above.

  • 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 a 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.

    • In recent years, new types of CMO tranches have evolved. These include floating-rate CMOs, planned amortization classes, accrual bonds, and CMO residuals. These newer structures affect the amount and timing of principal and interest received by each tranche from the underlying collateral. Under certain of these new structures, given classes of CMOs have priority over others with respect to the receipt of prepayments on the mortgages. Therefore, depending on the type of CMOs in which the funds invest, the investment may be subject to a greater or lesser risk of prepayment than other types of mortgage-related securities.

    The primary risk of any mortgage security is the uncertainty of the timing of cash flows. For CMOs, the primary risk results from the rate of prepayments on the underlying mortgages serving as collateral and from the structure of the deal (priority of the individual tranches). An increase or decrease in prepayment rates (resulting from a decrease or increase in mortgage interest rates) will affect the yield, average life, and price of CMOs. The prices of certain CMOs, depending on their structure and the rate of prepayments, can be volatile. Some CMOs may also not be as liquid as other securities.

  • U.S. Government Agency Multi-Class Pass-Through Securities Unlike CMOs, U.S. Government Agency Multi-Class Pass-Through Securities, which include FNMA Guaranteed Real Estate Mortgage Investment Conduit Pass-Through Certificates and FHLMC Multi-Class Mortgage Participation Certificates, are ownership interests in a pool of mortgage assets. Unless the context indicates otherwise, all references herein to CMOs include multi-class pass-through securities.

  • Multi-Class Residential Mortgage Securities Such securities represent interests in pools of mortgage loans to residential home buyers made by commercial banks, savings and loan associations, or other financial institutions. Unlike GNMA, FNMA, and FHLMC securities, the payment of principal and interest on Multi-Class Residential Mortgage Securities is not guaranteed by the U.S. government or any of its agencies. Accordingly, yields on Multi-Class Residential Mortgage Securities have been historically higher than the yields on U.S. government mortgage securities. However, the risk of loss due to default on such instruments is higher since they are not guaranteed by the U.S. government or its agencies. Additionally, pools of such securities may be divided into senior or subordinated segments. Although subordinated mortgage securities may have a higher yield than senior mortgage securities, the risk of loss of principal is greater because losses on the underlying mortgage loans must be borne by persons holding subordinated securities before those holding senior mortgage securities.

  • Privately Issued Mortgage-Backed Certificates These are pass-through certificates issued by nongovernmental issuers. Pools of conventional residential or commercial mortgage loans created by such issuers generally offer a higher rate of interest than government and government-related pools because there are no direct or indirect government guarantees of payment. Timely payment of interest and principal of these pools is, however, generally supported by various forms of insurance or guarantees, including individual loan, title, pool, and hazard insurance. The insurance and guarantees are issued by government entities, private insurance, or the mortgage poolers. Such insurance and guarantees and the creditworthiness of the issuers thereof will be considered in determining whether a mortgage-related security meets the funds` quality standards. The funds may buy mortgage-related securities without insurance or guarantees if through an examination of the loan experience and practices of the poolers, the investment manager determines that the securities meet the funds` quality standards.

  • Stripped Mortgage-Backed Securities These instruments are a type of potentially high-risk derivative. They represent interests in a pool of mortgages, the cash flow of which has been separated into its interest and principal components. Interest only securities ("IOs") receive the interest portion of the cash flow while principal only securities ("POs") receive the principal portion. IOs and POs are usually structured as tranches of a CMO. Stripped Mortgage-Backed Securities may be issued by U.S. government agencies or by private issuers similar to those described above with respect to CMOs and privately issued mortgage-backed certificates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. The value of the PO, as with other mortgage-backed securities described herein, and other debt instruments, will tend to move in the opposite direction compared to interest rates. Under the Code, POs may generate taxable income from the current accrual of original issue discount, without a corresponding distribution of cash to the funds.

    • The cash flows and yields on IO and PO classes are extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets. In the case of IOs, prepayments affect the amount of cash flows provided to the investor. In contrast, prepayments on the mortgage pool affect the timing of cash flows received by investors in POs. For example, a rapid or slow rate of principal payments may have a material adverse effect on the prices of IOs or POs, respectively. If the underlying mortgage assets experience greater than anticipated prepayments of principal, investors may fail to fully recoup their initial investment in an IO class of a stripped mortgage-backed security, even if the IO class is rated AAA or Aaa or is derived from a full faith and credit obligation. Conversely, if the underlying mortgage assets experience slower than anticipated prepayments of principal, the price on a PO class will be affected more severely than would be the case with a traditional mortgage-backed security.

    The staff of the SEC has advised the funds that it believes the funds should treat IOs and POs, other than government-issued IOs or POs backed by fixed-rate mortgages, as illiquid securities and, accordingly, limit their investments in such securities, together with all other illiquid securities, to 15% of the funds` net assets. Under the staff`s position, the determination of whether a particular government-issued IO or PO backed by fixed-rate mortgages is liquid may be made on a case by case basis under guidelines and standards established by the funds` Boards. The funds` Boards have delegated to T. Rowe Price the authority to determine the liquidity of these investments based on the following guidelines: the type of issuer; type of collateral, including age and prepayment characteristics; rate of interest on coupon relative to current market rates and the effect of the rate on the potential for prepayments; complexity of the issue`s structure, including the number of tranches; and size of the issue and the number of dealers who make a market in the IO or PO.

  • Adjustable Rate Mortgage Securities ("ARMs") ARMs, like fixed-rate mortgages, have a specified maturity date, and the principal amount of the mortgage is repaid over the life of the mortgage. Unlike fixed-rate mortgages, the interest rate on ARMs is adjusted at regular intervals based on a specified, published interest rate "index" such as a Treasury rate index. The new rate is determined by adding a specific interest amount, the "margin," to the interest rate of the index. Investment in ARM securities allows the funds to participate in changing interest rate levels through regular adjustments in the coupons of the underlying mortgages, resulting in more variable current income and lower price volatility than longer-term fixed-rate mortgage securities. ARM securities are a less effective means of locking in long-term rates than fixed-rate mortgages since the income from adjustable rate mortgages will increase during periods of rising interest rates and decline during periods of falling rates.

  • Other Mortgage-Related Securities Governmental, government-related, or private entities may create mortgage loan pools offering pass-through investments in addition to those described above. The mortgages underlying these securities may be alternative mortgage instruments, that is, mortgage instruments whose principal or interest payments may vary or whose terms to maturity may differ from customary long-term fixed-rate mortgages. As new types of mortgage-related securities are developed and offered to investors, the investment manager will, consistent with the funds` objectives, policies, and quality standards, consider making investments in such new types of securities.

    • Asset-Backed Securities

    Background  The asset-backed securities ("ABS") market has been one of the fastest growing sectors of the U.S. fixed-income market since its inception in late 1985. Although initial ABS transactions were backed by auto loans and credit card receivables, today`s market has evolved to include a variety of asset types including

    home equity loans, student loans, equipment leases, stranded utility costs, and collateralized bond/loan obligations. For investors, securitization typically provides an opportunity to invest in high-quality securities with higher credit ratings and less downgrade/event risk than corporate bonds. Unlike mortgages, prepayments on ABS collateral are less sensitive to changes in interest rates. They can also be structured into classes that meet the market`s demand for various maturities and credit quality.

    Structure  Asset-backed securities are bonds that represent an ownership interest in a pool of receivables sold by originators into a special purpose vehicle (SPV). The collateral types can vary, so long as they are secured by homogeneous assets with relatively predictable cash flows. Assets that are transferred through a sale to a special purpose vehicle are legally separated from those of the seller/servicer, which insulates investors from bankruptcy or other event risk associated with the seller/servicer of those assets. Most senior tranches of ABS are structured to a triple-A rated level through credit enhancement; however, ABS credit ratings range from AAA to non-investment-grade. Many ABS transactions are structured to include payout events/performance triggers which provide added protection against deteriorating credit quality.

    ABS structures are generally categorized by two distinct types of collateral. Amortizing assets (such as home equity loans, auto loans, and equipment leases) typically pass through principal and interest payments directly to investors, while revolving assets (such as credit card receivables, home equity lines of credit, and dealer floor-plan loans) typically reinvest principal and interest payments in new collateral for a specified period of time. The majority of amortizing transactions are structured as straight sequential-pay transactions. In these structures, all principal amortization and prepayments are directed to the shortest maturity class until it is retired, then to the next shortest class and so on. The majority of revolving assets are structured as bullets, whereby investors receive periodic interest payments and only one final payment of principal at maturity.

    Underlying Assets  The asset-backed securities that may be purchased include securities backed by pools of mortgage-related receivables known as home equity loans, or of consumer receivables such as automobile loans or credit card loans. Other types of ABS may also be purchased. The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying such securities, how well the entity issuing the securities is insulated from the credit risk of the originator or any other affiliated entities, and the amount and quality of any credit support provided to the securities. The rate of principal payment on asset-backed securities generally depends on the rate of principal payments received on the underlying assets, which in turn may be affected by a variety of economic and other factors. As a result, the yield and return on any asset-backed security is difficult to predict with precision and actual return or yield to maturity may be more or less than the anticipated return or yield to maturity.

    Methods of Allocating Cash Flows  While some asset-backed securities are issued with only one class of security, many asset-backed securities are issued in more than one class, each with different payment terms. Multiple class asset-backed securities are issued for two main reasons. First, multiple classes may be used as a method of providing credit support. This is accomplished typically through creation of one or more classes whose right to payments on the asset-backed security is made subordinate to the right to such payments of the remaining class or classes. Second, multiple classes may permit the issuance of securities with payment terms, interest rates, or other characteristics differing both from those of each other and from those of the underlying assets. Asset-backed securities in which the payment streams on the underlying assets are allocated in a manner different than those described above may be issued in the future. The funds may invest in such asset-backed securities if the investment is otherwise consistent with the fund`s investment objectives, policies, and restrictions.

    Types of Credit Support  Asset-backed securities are typically backed by a pool of assets representing the obligations of a diversified pool of numerous obligors. To lessen the effect of failures by obligors on the ability of underlying assets to make payments, such securities may contain elements of credit support. Such credit support falls into two classes: liquidity protection and protection against ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that scheduled payments on the underlying pool are made in a timely fashion. Protection against ultimate default ensures ultimate payment of the obligations on at least a portion of the assets in the pool. Such protection may be provided through guarantees, insurance policies, or letters of credit obtained from third parties, "external credit enhancement", through various means of

    structuring the transaction, "internal credit enhancement", or through a combination of such approaches. Examples of asset-backed securities with credit support arising out of the structure of the transaction include:

  • Excess Spread  Typically, the first layer of protection against losses, equal to the cash flow from the underlying receivables remaining after deducting the sum of the investor coupon, servicing fees, and losses.

  • Subordination  Interest and principal that would have otherwise been distributed to a subordinate class is used to support the more senior classes. This feature is intended to enhance the likelihood that the holder of the senior class certificate will receive regular payments of interest and principal. Subordinate classes have a greater risk of loss than senior classes.

  • Reserve Funds  Cash that is deposited and/or captured in a designated account that may be used to cover any shortfalls in principal, interest, or servicing fees.

  • Overcollateralization  A form of credit enhancement whereby the principal amount of collateral used to secure a given transaction exceeds the principal of the securities issued. Overcollateralization can be created at the time of issuance or may build over time.

  • Surety Bonds  Typically consist of third party guarantees to irrevocably and unconditionally make timely payments of interest and ultimate repayment of principal in the event there are insufficient cash flows from the underlying collateral.

    • The degree of credit support provided on each issue is based generally on historical information respecting the level of credit risk associated with such payments. Depending upon the type of assets securitized, historical information on credit risk and prepayment rates may be limited or even unavailable. Delinquency or loss in excess of that anticipated could adversely affect the return on an investment in an asset-backed security. There is no guarantee that the amount of any type of credit enhancement available will be sufficient to protect against future losses on the underlying collateral.

    Some of the specific types of ABS that the funds may invest in include the following:

  • Home Equity Loans  These ABS typically are backed by pools of mortgage loans made to subprime borrowers or borrowers with blemished credit histories. The underwriting standards for these loans are more flexible than the standards generally used by banks for borrowers with non-blemished credit histories with regard to the borrower`s credit standing and repayment ability. Borrowers who qualify generally have impaired credit histories, which may include a record of major derogatory credit items such as outstanding judgments or prior bankruptcies. In addition, they may not have the documentation required to qualify for a standard mortgage loan.

    • As a result, the mortgage loans in the mortgage pool are likely to experience rates of delinquency, foreclosure, and bankruptcy that are higher, and that may be substantially higher, than those experienced by mortgage loans underwritten in a more traditional manner. Furthermore, changes in the values of the mortgaged properties, as well as changes in interest rates, may have a greater effect on the delinquency, foreclosure, bankruptcy, and loss experience of the mortgage loans in the mortgage pool than on mortgage loans originated in a more traditional manner.

    With respect to first lien mortgage loans, the underwriting standards do not prohibit a mortgagor from obtaining, at the time of origination of the originator`s first lien mortgage loan, additional financing which is subordinate to that first lien mortgage loan, which subordinate financing would reduce the equity the mortgagor would otherwise appear to have in the related mortgaged property as indicated in the loan-to-value ratio.

    Risk regarding mortgage rates

    The pass-through rates on the adjustable-rate certificates may adjust monthly and are generally based on one-month LIBOR. The mortgage rates on the mortgage loans are either fixed or adjusted semiannually based on six-month LIBOR, which is referred to as a mortgage index. Because the mortgage index may respond to various economic and market factors different than those affecting one-month LIBOR, there is not necessarily a correlation in the movement between the interest rates on those mortgage loans and the pass-through rates of the adjustable rate certificates. As a result, the interest payable on the related interest-bearing certificates may be reduced because of the imposition of a pass-through rate cap called the "net rate cap."

    Yield and reinvestment could be adversely affected by unpredictability of prepayments

    No one can accurately predict the level of prepayments that an asset-backed mortgage pool may experience. Factors which influence prepayment behavior include general economic conditions, the level of prevailing interest rates, the availability of alternative financing, the applicability of prepayment charges, and homeowner mobility. Reinvestment risk results from a faster or slower rate of principal payments than expected. A rising interest rate environment and the resulting slowing of prepayments could result in greater volatility of these securities. A falling interest rate environment and the resulting increase in prepayments could require reinvestment in lower yielding securities.

    Credit Card Backed Securities  These ABS are backed by revolving pools of credit card receivables. Due to the revolving nature of these assets, the credit quality could change over time. Unlike most other asset-backed securities, credit card receivables are unsecured obligations of the cardholder and payments by cardholders are the primary source of payment on these securities. The revolving nature of these card accounts generally provides for monthly payments to the trust. In order to issue securities with longer dated maturities, most Credit Card Backed Securities are issued with an initial "revolving" period during which collections are reinvested in new receivables. The revolving period may be shortened upon the occurrence of specified events which may signal a potential deterioration in the quality of the assets backing the security.

    Automobile Loans  These ABS are backed by receivables from motor vehicle installment sales contracts or installment loans secured by motor vehicles. These securities are primarily discrete pools of assets which pay down over the life of the ABS. The securities are not obligations of the seller of the vehicle, or servicer of the loans. The primary source of funds for payments on the securities comes from payment on the underlying trust receivables as well as from credit support.

    Inflation-Linked Securities

    Inflation-linked securities are income-generating instruments whose interest and principal payments are adjusted for inflation—a sustained increase in prices that erodes the purchasing power of money. TIPS, or Treasury inflation-protected securities, are inflation-linked securities issued by the U.S. government. Inflation-linked bonds are also issued by corporations, U.S. government agencies, states, and foreign countries. The inflation adjustment, which is typically applied monthly to the principal of the bond, follows a designated inflation index, such as the consumer price index (CPI). A fixed coupon rate is applied to the inflation-adjusted principal so that as inflation rises, both the principal value and the interest payments increase. This can provide investors with a hedge against inflation, as it helps preserve the purchasing power of your investment. Because of this inflation-adjustment feature, inflation-protected bonds typically have lower yields than conventional fixed-rate bonds. Municipal inflation bonds generally have a fixed principal amount and the inflation component is reflected in the nominal coupon.

    Inflation-protected bonds normally will decline in price when real interest rates rise. (A real interest rate is calculated by subtracting the inflation rate from a nominal interest rate. For example, if a 10-year Treasury note is yielding 5% and the rate of inflation is 2%, the real interest rate is 3%.) If inflation is negative, the principal and income of an inflation-protected bond will decline and could result in losses for the fund.

    Collateralized Bond or Loan Obligations

    Collateralized Bond Obligations ("CBOs") are bonds collateralized by corporate bonds, mortgages, or asset-backed securities and Collateralized Loan Obligations ("CLOs") are bonds collateralized by bank loans. CBOs and CLOs are structured into tranches, and payments are allocated such that each tranche has a predictable cash flow stream and average life. CBOs are fairly recent entrants to the fixed-income market. Most CBOs issued to date have been collateralized by high-yield bonds or loans, with heavy credit enhancement.

    Loan Participations and Assignments

    Loan participations and assignments (collectively, "participations") will typically be participating interests in loans made by a syndicate of banks, represented by an agent bank which has negotiated and structured the loan, to corporate borrowers to finance internal growth, mergers, acquisitions, stock repurchases, leveraged buyouts, and other corporate activities. Such loans may also have been made to governmental borrowers, especially governments of developing countries which is referred to as Loans to Developing Countries debt ("LDC debt"). LDC debt will involve the risk that the governmental entity responsible for the repayment of

    the debt may be unable or unwilling to do so when due. The loans underlying such participations may be secured or unsecured, and the funds may invest in loans collateralized by mortgages on real property or which have no collateral. The loan participations themselves may extend for the entire term of the loan or may extend only for short "strips" that correspond to a quarterly or monthly floating-rate interest period on the underlying loan. Thus, a term or revolving credit that extends for several years may be subdivided into shorter periods.

    The loan participations in which the funds will invest will also vary in legal structure. Occasionally, lenders assign to another institution both the lender`s rights and obligations under a credit agreement. Since this type of assignment relieves the original lender of its obligations, it is called a novation. More typically, a lender assigns only its right to receive payments of principal and interest under a promissory note, credit agreement, or similar document. A true assignment shifts to the assignee the direct debtor-creditor relationship with the underlying borrower. Alternatively, a lender may assign only part of its rights to receive payments pursuant to the underlying instrument or loan agreement. Such partial assignments, which are more accurately characterized as "participating interests," do not shift the debtor-creditor relationship to the assignee, who must rely on the original lending institution to collect sums due and to otherwise enforce its rights against the agent bank which administers the loan or against the underlying borrower.

    There may not be a recognizable, liquid public market for loan participations. To the extent this is the case, the funds would consider the loan participation as illiquid and subject to the funds` restriction on investing no more than 15% of their net assets in illiquid securities.

    Where required by applicable SEC positions, the funds will treat both the corporate borrower and the bank selling the participation interest as an issuer for purposes of its fundamental investment restriction on diversification.

    Various service fees received by the funds from loan participations may be treated as non-interest income depending on the nature of the fee (commitment, takedown, commission, service, or loan origination). To the extent the service fees are not interest income, they will not qualify as income under Section 851(b) of the Code. Thus the sum of such fees plus any other nonqualifying income earned by the funds cannot exceed 10% of total income.

    Zero-Coupon and Pay-in-Kind Bonds

    A zero-coupon security has no cash coupon payments. Instead, the issuer sells the security at a substantial discount from its maturity value. The interest received by the investor from holding this security to maturity is the difference between the maturity value and the purchase price. The advantage to the investor is that reinvestment risk of the income received during the life of the bond is eliminated. However, zero-coupon bonds, like other bonds, retain interest rate and credit risk and usually display more price volatility than those securities that pay a cash coupon.

    Pay-in-Kind ("PIK") Instruments are securities that pay interest in either cash or additional securities, at the issuer`s option, for a specified period. PIKs, like zero-coupon bonds, are designed to give an issuer flexibility in managing cash flow. PIK bonds can be either senior or subordinated debt and trade flat (i.e., without accrued interest). The price of PIK bonds is expected to reflect the market value of the underlying debt plus an amount representing accrued interest since the last payment. PIKs are usually less volatile than zero-coupon bonds, but more volatile than cash pay securities.

    For federal income tax purposes, these types of bonds will require the recognition of gross income each year even though no cash may be paid to the funds until the maturity or call date of the bond. The funds will nonetheless be required to distribute substantially all of this gross income each year to comply with the Code, and such distributions could reduce the amount of cash available for investment by the funds.

    Trade Claims

    Trade claims are non-securitized rights of payment arising from obligations other than borrowed funds. Trade claims typically arise when, in the ordinary course of business, vendors and suppliers extend credit to a company by offering payment terms. Generally, when a company files for bankruptcy protection, payments on these trade claims cease and the claims are subject to compromise along with the other debts of the company. Trade claims typically are bought and sold at a discount reflecting the degree of uncertainty with respect to the

    timing and extent of recovery. In addition to the risks otherwise associated with low-quality obligations, trade claims have other risks, including the possibility that the amount of the claim may be disputed by the obligor.

    Over the last few years, a market for the trade claims of bankrupt companies has developed. Many vendors are either unwilling or lack the resources to hold their claim through the extended bankruptcy process with an uncertain outcome and timing. Some vendors are also aggressive in establishing reserves against these receivables, so that the sale of the claim at a discount may not result in the recognition of a loss.

    Trade claims can represent an attractive investment opportunity because these claims typically are priced at a discount to comparable public securities. This discount is a reflection of a less liquid market, a smaller universe of potential buyers, and the risks peculiar to trade claim investing. It is not unusual for trade claims to be priced at a discount to public securities that have an equal or lower priority claim.

    As noted above, investing in trade claims does carry some unique risks which include:

  • Establishing the Amount of the Claim Frequently, the supplier`s estimate of its receivable will differ from the customer`s estimate of its payable. Resolution of these differences can result in a reduction in the amount of the claim. This risk can be reduced by only purchasing scheduled claims (claims already listed as liabilities by the debtor) and seeking representations from the seller.

  • Defenses to Claims The debtor has a variety of defenses that can be asserted under the bankruptcy code against any claim. Trade claims are subject to these defenses, the most common of which for trade claims relates to preference payments. (Preference payments are all payments made by the debtor during the 90 days prior to the filing. These payments are presumed to have benefited the receiving creditor at the expense of the other creditors. The receiving creditor may be required to return the payment unless it can show the payments were received in the ordinary course of business.) While none of these defenses can result in any additional liability of the purchaser of the trade claim, they can reduce or wipe out the entire purchased claim. This risk can be reduced by seeking representations and indemnification from the seller.

  • Documentation/Indemnification Each trade claim purchased requires documentation that must be negotiated between the buyer and seller. This documentation is extremely important since it can protect the purchaser from losses such as those described above. Legal expenses in negotiating a purchase agreement can be fairly high. Additionally, it is important to note that the value of an indemnification depends on the seller`s credit.

  • Volatile Pricing Due to Illiquid Market There are only a handful of brokers for trade claims and the quoted price of these claims can be volatile. Generally, it is expected that trade claims would be considered illiquid investments.

  • No Current Yield/Ultimate Recovery Trade claims are almost never entitled to earn interest. As a result, the return on such an investment is very sensitive to the length of the bankruptcy, which is uncertain. Although not unique to trade claims, it is worth noting that the ultimate recovery on the claim is uncertain and there is no way to calculate a conventional yield to maturity on this investment. Additionally, the exit for this investment is a plan of reorganization which may include the distribution of new securities. These securities may be as illiquid as the original trade claim investment.

  • Tax Issue Although the issue is not free from doubt, it is likely that trade claims would be treated as non-securities investments. As a result, any gains would be considered "nonqualifying" under the Code. The funds may have up to 10% of their gross income (including capital gains) derived from nonqualifying sources.

    • Municipal Securities

    Subject to the investment objectives and programs described in the prospectus and the additional investment restrictions described in this Statement of Additional Information, the funds` portfolios may consist of any combination of the various types of municipal securities described below or other types of municipal securities that may be developed. The amount of the funds` assets invested in any particular type of municipal security can be expected to vary.

    The term "municipal securities" means obligations issued by or on behalf of states, territories, and possessions of the United States and the District of Columbia and their political subdivisions, agencies, and instrumentalities, as well as certain other persons and entities, the interest from which is exempt from federal income tax. In determining the tax-exempt status of a municipal security, the funds rely on the opinion of the

    issuer`s bond counsel at the time of the issuance of the security. However, it is possible this opinion could be overturned, and, as a result, the interest received by the funds from such a security might not be exempt from federal income tax.

    Municipal securities are classified by maturity as notes, bonds, or adjustable rate securities.

    Municipal Notes

    Municipal notes generally are used to provide short-term operating or capital needs and generally have maturities of one year or less. Municipal notes include:

  • Tax Anticipation Notes Tax anticipation notes are issued to finance working capital needs of municipalities. Generally, they are issued in anticipation of various seasonal tax revenue, such as income, property, use, and business taxes, and are payable from these specific future taxes.

  • Revenue Anticipation Notes Revenue anticipation notes are issued in expectation of receipt of revenues, such as sales taxes, toll revenues, or water and sewer charges, that are used to pay off the notes.

  • Bond Anticipation Notes Bond anticipation notes are issued to provide interim financing until long-term financing can be arranged. In most cases, the long-term bonds then provide the money for the repayment of the notes.

  • Tax-Exempt Commercial Paper Tax-exempt commercial paper is a short-term obligation with a stated maturity of 270 days or less. It is issued by state and local governments or their agencies to finance seasonal working capital needs or as short-term financing in anticipation of longer-term financing.

  • Municipal Bonds Municipal bonds, which meet longer-term capital needs and generally have maturities of more than one year when issued, have two principal classifications: general obligation bonds and revenue bonds. Additional categories of potential purchases include lease revenue bonds and prerefunded/escrowed to maturity bonds, private activity bonds, industrial development bonds, and participation interests.

  • General Obligation Bonds Issuers of general obligation bonds include states, counties, cities, towns, and special districts. The proceeds of these obligations are used to fund a wide range of public projects, including construction or improvement of schools, public buildings, highways and roads, and general projects not supported by user fees or specifically identified revenues. The basic security behind general obligation bonds is the issuer`s pledge of its full faith and credit and taxing power for the payment of principal and interest. The taxes that can be levied for the payment of debt service may be limited or unlimited as to the rate or amount of special assessments. In many cases voter approval is required before an issuer may sell this type of bond.

  • Revenue Bonds The principal security for a revenue bond is generally the net revenues derived from a particular facility or enterprise or, in some cases, the proceeds of a special charge or other pledged revenue source. Revenue bonds are issued to finance a wide variety of capital projects including: electric, gas, water, and sewer systems; highways, bridges, and tunnels; port and airport facilities; colleges and universities; and hospitals. Revenue bonds are sometimes used to finance various privately operated facilities provided they meet certain tests established for tax-exempt status.

    • Although the principal security behind these bonds may vary, many provide additional security in the form of a mortgage or debt service reserve fund. Some authorities provide further security in the form of the state`s ability (without obligation) to make up deficiencies in the debt service reserve fund. Revenue bonds usually do not require prior voter approval before they may be issued.

  • Lease Revenue Bonds Municipal borrowers may also finance capital improvements or purchases with tax-exempt leases. The security for a lease is generally the borrower`s pledge to make annual appropriations for lease payments. The lease payment is treated as an operating expense subject to appropriation risk and not a full faith and credit obligation of the issuer. Lease revenue bonds are generally considered less secure than a general obligation or revenue bond and often do not include a debt service reserve fund. To the extent the funds` Boards determine such securities are illiquid, they will be subject to the funds` limit on illiquid securities. There have also been certain legal challenges to the use of lease revenue bonds in various states.

    • The liquidity of such securities will be determined based on a variety of factors which may include, among others: (1) the frequency of trades and quotes for the obligation; (2) the number of dealers willing to purchase

    or sell the security and the number of other potential buyers; (3) the willingness of dealers to undertake to make a market in the security; (4) the nature of the marketplace trades, including the time needed to dispose of the security, the method of soliciting offers, and the mechanics of transfer; and (5) the rating assigned to the obligation by an established rating agency or T. Rowe Price.

  • Prerefunded/Escrowed to Maturity Bonds Certain municipal bonds have been refunded with a later bond issue from the same issuer. The proceeds from the later issue are used to defease the original issue. In many cases the original issue cannot be redeemed or repaid until the first call date or original maturity date. In these cases, the refunding bond proceeds typically are used to buy U.S. Treasury securities that are held in an escrow account until the original call date or maturity date. The original bonds then become "prerefunded" or "escrowed to maturity" and are considered high-quality investments. While still tax-exempt, the security is the proceeds of the escrow account. To the extent permitted by the SEC and the Internal Revenue Service, a fund`s investment in such securities refunded with U.S. Treasury securities will, for purposes of diversification rules applicable to the funds, be considered an investment in U.S. Treasury securities.

  • Private Activity Bonds Under current tax law, all municipal debt is divided broadly into two groups: governmental purpose bonds and private activity bonds. Governmental purpose bonds are issued to finance traditional public purpose projects such as public buildings and roads. Private activity bonds may be issued by a state or local government or public authority but principally benefit private users and are considered taxable unless a specific exemption is provided.

    • The tax code currently provides exemptions for certain private activity bonds such as not-for-profit hospital bonds, small-issue industrial development revenue bonds, and mortgage subsidy bonds, which may still be issued as tax-exempt bonds. Some, but not all, private activity bonds are subject to alternative minimum tax.

  • Industrial Development Bonds Industrial development bonds are considered municipal bonds if the interest paid is exempt from federal income tax. They are issued by or on behalf of public authorities to raise money to finance various privately operated facilities for business and manufacturing, housing, sports, and pollution control. These bonds are also used to finance public facilities such as airports, mass transit systems, ports, and parking. The payment of the principal and interest on such bonds is dependent solely on the ability of the facility`s user to meet its financial obligations and the pledge, if any, of real and personal property so financed as security for such payment.

  • Participation Interests The funds may purchase from third parties participation interests in all or part of specific holdings of municipal securities. The purchase may take different forms: in the case of short-term securities, the participation may be backed by a liquidity facility that allows the interest to be sold back to the third party (such as a trust, broker, or bank) for a predetermined price of par at stated intervals. The seller may receive a fee from the funds in connection with the arrangement.

    • In the case of longer-term bonds, the funds may purchase interests in a pool of municipal bonds or a single municipal bond or lease without the right to sell the interest back to the third party.

    The funds will not purchase participation interests unless a satisfactory opinion of counsel or ruling of the Internal Revenue Service has been issued that the interest earned from the municipal securities on which the funds hold participation interests is exempt from federal income tax to the funds. However, there is no guarantee the IRS would treat such interest income as tax-exempt.

    When-Issued Securities

    New issues of municipal securities are often offered on a when-issued basis; that is, delivery and payment for the securities normally takes place 15 to 45 days or more after the date of the commitment to purchase. The payment obligation and the interest rate that will be received on the securities are each fixed at the time the buyer enters into the commitment. The funds will only make a commitment to purchase such securities with the intention of actually acquiring the securities. However, the funds may sell these securities before the settlement date if it is deemed advisable as a matter of investment strategy. The funds will maintain cash, high-grade marketable debt securities, or other suitable cover with its custodian bank equal in value to commitments for when-issued securities. Such securities either will mature or, if necessary, be sold on or before the settlement date. Securities purchased on a when-issued basis and the securities held in the funds` portfolios are subject to changes in market value based upon the public perception of the creditworthiness of

    the issuer and changes in the level of interest rates (which will generally result in similar changes in value, i.e., both experiencing appreciation when interest rates decline and depreciation when interest rates rise). Therefore, to the extent the funds remain fully invested or almost fully invested at the same time that they have purchased securities on a when-issued basis, there will be greater fluctuations in their net asset value than if they solely set aside cash to pay for when-issued securities. In the case of the money funds, this could increase the possibility that the market value of the funds` assets could vary from $1.00 per share. In addition, there will be a greater potential for the realization of capital gains, which are not exempt from federal income tax. When the time comes to pay for when-issued securities, the funds will meet their obligations from then-available cash flow, sale of securities, or, although it would not normally expect to do so, from sale of the when-issued securities themselves (which may have a value greater or less than the payment obligation). The policies described in this paragraph are not fundamental and may be changed by the funds upon notice to shareholders.

    Forwards

    In some cases, the funds may purchase bonds on a when-issued basis with longer-than-standard settlement dates, in some cases exceeding one to two years. In such cases, the funds must execute a receipt evidencing the obligation to purchase the bond on the specified issue date, and must segregate cash internally to meet that forward commitment. Municipal "forwards" typically carry a substantial yield premium to compensate the buyer for the risks associated with a long when-issued period, including: shifts in market interest rates that could materially impact the principal value of the bond, deterioration in the credit quality of the issuer, loss of alternative investment options during the when-issued period, changes in tax law or issuer actions that would affect the exempt interest status of the bonds and prevent delivery, failure of the issuer to complete various steps required to issue the bonds, and limited liquidity for the buyer to sell the escrow receipts during the when-issued period.

    Residual Interest Bonds

    Residual interest bonds are a type of high-risk derivative. The funds may purchase municipal bond issues that are structured as two-part, residual interest bond and variable rate security offerings. The issuer is obligated only to pay a fixed amount of tax-free income that is to be divided among the holders of the two securities. The interest rate for the holders of the variable rate securities will be determined by an index or auction process held approximately every seven to 35 days while the bondholders will receive all interest paid by the issuer minus the amount given to the variable rate security holders and a nominal auction fee. Therefore, the coupon of the residual interest bonds, and thus the income received, will move inversely with respect to short-term, 7- to 35-day tax-exempt interest rates. There is no assurance that the auction will be successful and that the variable rate security will provide short-term liquidity. The issuer is not obligated to provide such liquidity. In general, these securities offer a significant yield advantage over standard municipal securities, due to the uncertainty of the shape of the yield curve (i.e., short-term versus long-term rates) and consequent income flows.

    Unlike many adjustable rate securities, residual interest bonds are not necessarily expected to trade at par and in fact present significant market risks. In certain market environments, residual interest bonds may carry substantial premiums, be at deep discounts, or have limited liquidity.

    The funds may invest in other types of derivative instruments as they become available.

    For the purpose of the funds` investment restrictions, the identification of the "issuer" of municipal securities which are not general obligation bonds is made by T. Rowe Price, on the basis of the characteristics of the obligation as described above, the most significant of which is the source of funds for the payment of principal and interest on such securities.

    There are, of course, other types of securities that are or may become available that are similar to the foregoing, and the funds may invest in these securities.

    Real Estate and Real Estate Investment Trusts ("REITs")

    Investments in REITs may experience many of the same risks involved with investing in real estate directly. These risks include: declines in real estate values, risks related to local or general economic conditions, particularly lack of demand, overbuilding and increased competition, increases in property taxes and

    operating expenses, changes in zoning laws, heavy cash flow dependency, possible lack of availability of mortgage funds, obsolescence, losses due to natural disasters, condemnation of properties, regulatory limitations on rents and fluctuations in rental income, variations in market rental rates, and possible environmental liabilities. REITs may own real estate properties (Equity REITs) and be subject to these risks directly, or may make or purchase mortgages (Mortgage REITs) and be subject to these risks indirectly through underlying construction, development, and long-term mortgage loans that may default or have payment problems.

    Equity REITs can be affected by rising interest rates that may cause investors to demand a high annual yield from future distributions which, in turn, could decrease the market prices for the REITs. In addition, rising interest rates also increase the costs of obtaining financing for real estate projects. Since many real estate projects are dependent upon receiving financing, this could cause the value of the Equity REITs in which the funds invest to decline.

    Mortgage REITs may hold mortgages that the mortgagors elect to prepay during periods of declining interest rates, which may diminish the yield on such REITs. In addition, borrowers may not be able to repay mortgages when due, which could have a negative effect on the funds.

    Some REITs have relatively small market capitalizations which could increase their volatility. REITs tend to be dependent upon specialized management skills and have limited diversification so they are subject to risks inherent in operating and financing a limited number of properties. In addition, when the funds invest in REITs, a shareholder will bear his proportionate share of fund expenses and indirectly bear similar expenses of the REITs. REITs depend generally on their ability to generate cash flow to make distributions to shareholders. In addition, both Equity and Mortgage REITs are subject to the risks of failing to qualify for tax-free status of income under the Code or failing to maintain exemption from the 1940 Act.

    Adjustable Rate Securities

    Generally, the maturity of a security is deemed to be the period remaining until the date (noted on the face of the instrument) on which the principal amount must be paid or, in the case of an instrument called for redemption, the date on which the redemption payment must be made. However, certain securities may be issued with demand features or adjustable interest rates that are reset periodically by predetermined formulas or indexes in order to minimize movements in the principal value of the investment in accordance with Rule 2a-7 under the 1940 Act. Such securities may have long-term maturities, but may be treated as a short-term investment under certain conditions. Generally, as interest rates decrease or increase, the potential for capital appreciation or depreciation on these securities is less than for fixed rate obligations. These securities may take a variety of forms, including variable rate, floating rate, and put option securities.

    Variable Rate Securities Variable rate instruments are those whose terms provide for the adjustment of their interest rates on set dates and which, upon such adjustment, can reasonably be expected to have a market value that approximates its par value. A variable rate instrument, the principal amount of which is scheduled to be paid in 397 days or less, is deemed to have a maturity equal to the period remaining until the next readjustment of the interest rate. A variable rate instrument which is subject to a demand feature entitles the purchaser to receive the principal amount of the underlying security or securities, either (i) upon notice of no more than 30 days or (ii) at specified intervals not exceeding 397 days and upon no more than 30 days` notice, is deemed to have a maturity equal to the longer of the period remaining until the next readjustment of the interest rate or the period remaining until the principal amount can be recovered through demand.

    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 funds to the issuer and no interest accrues to the funds. The purchase of these securities will result in a loss if their values decline prior to the settlement 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. At the time the funds make 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 funds 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 its commitments for the securities 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 funds (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 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 funds` net asset value than if the funds did not purchase them.

    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 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 funds` Boards. If, through the appreciation of illiquid securities or the depreciation of liquid securities, the funds should be in a position where more than the allowable amount of its net assets is invested in illiquid assets, including restricted securities, the funds will take appropriate steps to protect liquidity.

    Notwithstanding the above, the funds 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 funds, to trade in privately placed securities even though such securities are not registered under the 1933 Act. The liquidity of these securities is monitored based on a variety of factors.

    Money Funds

    Determination of Maturity of Money Market Securities

    The funds may only purchase securities which at the time of investment have remaining maturities of 397 calendar days or less. The other funds may also purchase money market securities. In determining the maturity of money market securities, funds will follow the provisions of Rule 2a-7 under the 1940 Act.

    Prime Reserve, Summit Cash Reserves, and TRP Reserve Investment Funds

    First Tier Money Market Securities Defined

    At least 95% of the funds` total assets will be maintained in first tier money market securities. First tier money market securities are those which are described as First Tier Securities under Rule 2a-7 of the 1940 Act. These include any security with a remaining maturity of 397 days or less that is rated (or that has been issued by an issuer that is rated with respect to a class of short-term debt obligations, or any security within that class that is comparable in priority and security with the security) by any two nationally recognized statistical rating organizations (or if only one NRSRO has issued a rating, that NRSRO) in the highest rating category for short-term debt obligations (within which there may be sub-categories). First Tier Securities also include unrated securities comparable in quality to rated securities, as determined by T. Rowe Price pursuant to written guidelines established in accordance with Rule 2a-7 under the 1940 Act under the supervision of the funds` Boards.

    DERIVATIVES

    The funds may use derivatives whose characteristics are consistent with the funds` investment program.

    A derivative is a financial instrument that has a value based on — or "derived from" — the value of other assets, reference rates, or indexes. Derivatives generally take the form of contracts under which the parties agree to payments between them based upon the performance of a wide variety of underlying references, such as

    stocks, bonds, commodities, interest rates, currency exchange rates, and various domestic and foreign indexes. The main types of derivatives are futures, options, forward contracts, swaps, and hybrid instruments.

    Like most other fund investments, derivatives are subject to the risk that the market value of the underlying asset will change in a way detrimental to the funds` interest. However, the risks associated with the use of derivatives are different from, and potentially much greater than, the risks associated with investing directly in the instruments on which the derivatives are based. Because some derivatives involve leverage, returns can be magnified, either positively or negatively, and adverse changes in the value or level of the underlying asset, reference rate, or index can result in a loss substantially greater than the amount invested in the derivative itself.

    Some derivatives are traded on exchanges, while other derivatives are privately negotiated and entered into in the over-the-counter ("OTC") market. Exchange-traded derivatives are traded via specialized derivatives exchanges or other securities exchanges. The exchange acts as an intermediary to the transactions and the terms for each type of contract are generally standardized. OTC derivatives are traded between two parties directly without going through a regulated exchange. The terms of the contract are subject to negotiation by the parties to the contract.

    OTC derivatives are subject to counterparty risk, whereas the exposure to default for exchange-traded derivatives is assumed by the exchange`s clearinghouse. Counterparty risk is the risk that a party to an OTC derivatives contract may fail to perform on its obligations. A loss may be sustained as a result of the insolvency or bankruptcy of the counterparty, or the failure of the counterparty to make required payments or comply with the terms of the contract. In the event of insolvency of the counterparty, the funds may be unable to liquidate a derivatives position. Because the purchase and sale of an OTC derivative does not have the guarantee of a central clearing organization, the creditworthiness of the counterparty is an additional risk factor that the funds need to consider and monitor.

    Futures Contracts

    Futures contracts are a type of potentially high-risk derivative.

    Transactions in Futures

    The funds may enter into futures contracts including stock index, interest rate, and currency futures ("futures" or "futures contracts").

    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 funds. Interest rate or currency futures can be sold as an offset against the effect of expected increases in interest rates or currency exchange rates and purchased as an offset against the effect of expected declines in interest rates or currency exchange rates.

    Futures can also be used as an efficient means of regulating the funds` exposure to the market.

    Index Funds may only enter into futures contracts that are appropriate for their investment programs to provide an efficient means of maintaining liquidity while being invested in the market, to facilitate trading, or to reduce transaction costs. They will not use futures for hedging purposes. Otherwise the nature of such futures and the regulatory limitations and risks to which they are subject are the same as those described below.

    Stock index futures contracts may be used to provide a hedge for a portion of the funds` portfolios, as a cash management tool, or as an efficient way to implement either an increase or decrease in portfolio market exposure in response to changing market conditions. The funds may purchase or sell futures contracts with respect to any stock index. Nevertheless, to hedge the funds` portfolios successfully, the funds must sell futures contracts with respect to indices or subindices whose movements will have a significant correlation with movements in the prices of the funds` portfolio securities.

    The funds will enter into futures contracts that are traded on national (or foreign) futures exchanges and are standardized as to maturity date and underlying financial instrument. A public market exists in futures contracts covering various taxable fixed-income securities as well as municipal bonds. Futures exchanges and trading in the United States are regulated under the Commodity Exchange Act by the Commodities Futures

    Trading Commission ("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 funds` objectives in these areas.

    Regulatory Limitations

    If the funds purchase or sell 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 positions cannot exceed 5% of the liquidation value of the funds after taking into account unrealized profits and unrealized losses on any such contracts they have 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 Boards without a shareholder vote and does not limit the percentage of the funds` assets at risk to 5%.

    In instances involving the purchase of futures contracts or the writing of call or put options thereon by the funds, 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 funds 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 the funds` assets to cover or identified accounts could impede portfolio management or the funds` 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 funds 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 funds purchase or sell a security, no price would be paid or received by the funds upon the purchase or sale of a futures contract. Upon entering into a futures contract, and to maintain the funds` open positions in futures contracts, the funds would be required to deposit with their 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.

    Financial futures are valued daily at closing settlement prices. 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 a payment by the funds ("variation margin") to restore the margin account to the amount of the initial margin.

    Subsequent payments ("mark-to-market payments") to and from the futures broker are made on a daily basis as the price of the underlying assets fluctuates, making the long and short positions in the futures contract more or less valuable. If the value of the open futures position increases in the case of a sale or decreases in the case of a purchase, the funds will pay the amount of the daily change in value to the broker. However, if the value of the open futures position decreases in the case of a sale or increases in the case of a purchase, the broker will pay the amount of the daily change in value to the funds.

    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 funds realize a gain; if it is more, the funds realize a loss. Conversely, if the offsetting sale price is more than the original purchase price, the funds realize a gain; if it is less, the funds realize a loss. The transaction costs must also be included in these calculations. There can be no assurance, however, that the funds will be able to enter into an offsetting transaction with respect to a particular futures contract at a particular time. If the funds are not able to enter into an offsetting transaction, the funds 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 funds.

    Settlement of a stock index futures contract may or may not be in the underlying security. If not in the underlying security, then settlement will be made in cash, equivalent over time to the difference between the contract price and the actual price of the underlying asset (as adjusted by a multiplier) at the time the stock index futures contract expires.

    For example, the S&P 500 Stock Index is made up of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The S&P 500 Index assigns relative weightings to the common stocks included in the index, and the index fluctuates with changes in the market values of those common stocks. In the case of futures contracts on the S&P 500 Index, the contracts are to buy or sell 250 units. Thus, if the value of the S&P 500 Index were $150, one contract would be worth $37,500 (250 units x $150). The stock index futures contract specifies that no delivery of the actual stocks making up the index will take place. Instead, settlement in cash occurs. Over the life of the contract, the gain or loss realized by the funds will equal the difference between the purchase (or sale) price of the contract and the price at which the contract is terminated. For example, if the funds enter into a futures contract to buy 250 units of the S&P 500 Index at a specified future date at a contract price of $150 and the S&P 500 Index is at $154 on that future date, the funds will gain $1,000 (250 units x gain of $4). If the funds enter into a futures contract to sell 250 units of the stock index at a specified future date at a contract price of $150 and the S&P 500 Index is at $152 on that future date, the funds will lose $500 (250 units x loss of $2).

    It is possible that hedging activities of funds investing in municipal securities will occur through the use of U.S. Treasury bond futures.

    All funds (other than the Money Funds)

    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 U.S. 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 funds may elect to close some or all of their futures positions at any time prior to their expiration. The funds would do so to reduce exposure represented by long futures positions or short futures positions. The funds may close their position by taking opposite positions, which would operate to terminate the funds` position in the futures contracts. Final determinations of mark-to-market payments would then be made, additional cash would be required to be paid by or released to the funds, and the funds 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 funds intend 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 funds would continue to be required to make daily mark-to-market and variation margin payments. However, in the event futures contracts have been used to hedge the underlying instruments, the funds 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 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 or economic events. There are several risks in connection with the use by the funds of futures contracts as a hedging device. One risk arises because of the imperfect correlation between movements in the prices of the futures contracts and movements in the prices of the underlying instruments which are the subject of the hedge. T. Rowe Price 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 funds` underlying instruments sought to be hedged.

    • Successful use of futures contracts by the funds for hedging purposes is also subject to T. Rowe Price`s ability to correctly predict movements in the direction of the market. It is possible that, when the funds have sold futures to hedge their portfolios 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 funds` portfolios might decline. If this were to occur, the funds would lose money on the futures and also would experience a decline in value in their underlying instruments. However, while this might occur to a certain degree, T. Rowe Price believes that over time the value of the funds` portfolios will tend to move in the same direction as the market indices used to hedge the portfolio. It is also possible that, if the funds were to hedge against the possibility of a decline in the market (adversely affecting the underlying instruments held in their portfolios) and prices instead increased, the funds would lose part or all of the benefit of increased value of those underlying instruments that it had hedged because it would have offsetting losses in their futures positions. In addition, in such situations, if the funds have insufficient cash, it might have to sell underlying instruments to meet daily mark-to-market and 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 funds 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 might not result in a successful hedging transaction over a very short time period.

    Options on Futures Contracts

    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. Options on futures contracts are valued daily at the last sale price on its primary exchange at the time at which the net asset value per share of the funds are computed (close of New York Stock Exchange), or, in the absence of such sale, the mean of closing bid and ask prices.

    Writing a put option on a futures contract serves as a partial hedge against an increase in the value of securities the funds intend to acquire. If the futures price at expiration of the option is above the exercise price, the funds will retain the full amount of the option premium, which provides a partial hedge against any increase that may have occurred in the price of the debt securities the funds intend to acquire. If the futures price when the option is exercised is below the exercise price, however, the funds will incur a loss, which may be wholly or partially offset by the decrease in the price of the securities the funds intend to acquire.

    Funds investing in municipal securities may trade in municipal bond index option futures or similar options on futures developed in the future. In addition, the funds may trade in options on futures contracts on U.S. government securities and any U.S. government securities futures index contract which might be developed.

    From time to time, a single order to purchase or sell futures contracts (or options thereon) may be made on behalf of a fund and other T. Rowe Price funds. Such aggregated orders would be allocated among the fund and the other T. Rowe Price funds in a fair and nondiscriminatory manner.

    Call and put options may be purchased or written on financial indices as an alternative to options on futures.

    Special Risks of Transactions in Options on Futures Contracts

    The risks described under "Special Risks of Transactions in Futures Contracts" are substantially the same as the risks of using options on futures. If the funds were to write an option on a futures contract, it would be required to deposit initial margin and maintain mark-to-market payments in the same manner as a regular futures contract. In addition, where the funds seek 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, their 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.

    In the event no such market exists for a particular contract in which the funds maintain a position, in the case of a written option, the funds would have to wait to sell the underlying securities or futures positions until the option expires or is exercised. The funds would be required to maintain margin deposits on payments until the contract is closed. Options on futures are treated for accounting purposes in the same way as the analogous option on securities are treated.

    In addition, the correlation between movements in the price of options on futures contracts and movements in the price of the securities hedged can only be approximate. This risk is significantly increased when an option on a U.S. government securities future or an option on some type of index future is used as a proxy for hedging a portfolio consisting of other types of securities. Another risk is that if the movements in the price of options on futures contracts and the value of the call increase by more than the increase in the value of the securities held as cover, the funds may realize a loss on the call, which is not completely offset by the appreciation in the price of the securities held as cover and the premium received for writing the call.

    The successful use of options on futures contracts requires special expertise and techniques different from those involved in portfolio securities transactions. A decision 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 or interest rate trends. During periods when municipal securities market prices are appreciating, the funds may experience poorer overall performance than if it had not entered into any options on futures contracts.

    General Considerations Transactions by the funds in options on futures will be subject to limitations established by each of the exchanges, boards of trade, or other trading facilities governing the maximum number of options in each class which may be written or purchased by a single investor or group of investors acting in concert, regardless of whether the options are written on the same or different exchanges, boards of trade, or other trading facilities or are held or written in one or more accounts or through one or more brokers. Thus, the number of contracts which the funds may write or purchase may be affected by contracts written or purchased by other investment advisory clients of T. Rowe Price. An exchange, boards of trade, or other trading facility may order the liquidations of positions found to be in excess of these limits, and it may impose certain other sanctions.

    Additional Futures and Options Contracts

    Although the funds have 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 funds trade 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 funds for foreign futures or foreign options transactions may not be provided the same protections as funds received for transactions on U.S. 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 funds` orders are placed and the time they are liquidated, offset, or exercised.

    U.S. Treasury Intermediate and U.S. Treasury Long-Term Funds

    Limitations on Futures and Options

    The funds will not purchase a futures contract or 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 positions would exceed 5% of the funds` net asset value. In addition, neither of the funds will enter into a futures transaction if it would be obligated to purchase or deliver amounts that would exceed 15% of the funds` total assets.

    The funds will not write a covered call option if, as a result, the aggregate market value of all portfolio securities covering call options or subject to delivery under put options exceeds 15% of the market value of the funds` total assets.

    The funds will not write a covered put option if, as a result, the aggregate market value of all portfolio securities subject to such put options or covering call options exceeds 15% of the market value of the funds` total assets.

    The funds have no current intention of investing in options on securities. However, they reserve the right to do so in the future and could be subject to the following limitations: the funds may invest up to 15% of total assets in premiums on put options and 15% of total assets in premiums on call options. The total amount of the funds` total assets invested in futures and options will not exceed 15% of the funds` total assets.

    All Funds

    Foreign Currency Transactions

    A forward foreign currency exchange contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are principally traded in the interbank market conducted directly between currency traders (usually large, commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades. The funds may enter into forward contracts for a variety of purposes in connection with the management of the foreign securities portion of their portfolios. The funds` use of such contracts would include, but not be limited to, the following:

    First, when the funds enter into a contract for the purchase or sale of a security denominated in a foreign currency, they 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 funds will be able to protect themselves 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 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 funds` portfolio securities denominated in such foreign currency. Alternatively, where appropriate, the funds may hedge all or part of their 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 funds 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 funds. 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 believes that it is important to have

    the flexibility to enter into such forward contracts when it determines that the best interests of the funds will be served.

    Third, the funds may use forward contracts when the funds wish to hedge out of the dollar into a foreign currency in order to create a synthetic bond or money market instrument—the security would be issued in U.S. dollars but the dollar component would be transformed into a foreign currency through a forward contract.

    The funds may enter into forward contracts for any other purpose consistent with the funds` investment objectives and programs. However, the funds 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 funds` 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 funds may net offsetting positions.

    At the maturity of a forward contract, the funds may sell the portfolio security and make delivery of the foreign currency, or they 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 funds retain the portfolio security and engage in an offsetting transaction, the funds will incur a gain or a loss (as described below) to the extent that there has been movement in forward contract prices. If the funds engage in an offsetting transaction, they may subsequently enter into a new forward contract to sell the foreign currency. Should forward prices decline during the period between the funds` entering into a forward contract for the sale of a foreign currency and the date they enter into an offsetting contract for the purchase of the foreign currency, the funds will realize a gain to the extent the price of the currency they have agreed to sell exceeds the price of the currency they have agreed to purchase. Should forward prices increase, the funds will suffer a loss to the extent the price of the currency they have agreed to purchase exceeds the price of the currency they have agreed to sell.

    The funds` dealing in forward foreign currency exchange contracts will generally be limited to the transactions described above. However, the funds reserve the right to enter into forward foreign currency contracts for different purposes and under different circumstances. Of course, the funds are not required to enter into forward contracts with regard to their foreign currency-denominated securities and will not do so unless deemed appropriate by T. Rowe Price. It also should be realized that this method of hedging against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange at a future date. Additionally, although such contracts tend to minimize the risk of loss due to a decline in the value of the hedged currency, at the same time, they tend to limit any potential gain which might result from an increase in the value of that currency.

    Although the funds value their assets daily in terms of U.S. dollars, they do not intend to convert their holdings of foreign currencies into U.S. dollars on a daily basis. They 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 between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the funds at one rate, while offering a lesser rate of exchange should the funds desire to resell that currency to the dealer.

    Federal Tax Treatment of Options, Futures Contracts, and Forward Foreign Exchange Contracts

    The funds may enter into certain options, futures, forward foreign exchange contracts, and swaps, including options and futures on currencies. Entering into such transactions can affect the timing and character of the income and gains realized by the funds and the timing and character of fund distributions.

    Such contracts, which qualify as Section 1256 contracts, will be considered to have been closed at the end of the funds` fiscal years and any gains or losses will be recognized for tax purposes at that time. Such gains or losses (as well as 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 15%) 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 funds 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.

    Certain options, futures, forward foreign exchange contracts, and swaps, which offset another security in the fund, including options, futures, and forward exchange contracts on currencies, which offset a foreign dollar-denominated bond or currency position, may be considered straddles for tax purposes. Generally, a loss on any position in a straddle will be subject to deferral to the extent of any unrealized gain in an offsetting position. For securities that were held for one year or less at inception of the straddle, the holding period may be deemed not to begin until the straddle is terminated. If securities comprising a straddle have been held for more than one year at inception of the straddle, losses on offsetting positions may be treated as entirely long-term capital losses even if the offsetting positions have been held for less than one year. However, a fund may choose to comply with certain identification requirements for offsetting positions that are components of a straddle. Losses with respect to identified positions are not deferred, rather the basis of the identified position that offset the loss position is increased.

    In order for the funds to continue to qualify for federal income tax treatment as regulated investment companies, at least 90% of their gross income for a taxable year must be derived from qualifying income, e.g., generally 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 to which the net gain realized from options, futures, or forward foreign exchange contracts on currencies is qualifying income for purposes of the 90% requirement.

    Entering into certain options, futures, forward foreign exchange contracts, or swaps may result in a "constructive sale" of offsetting stocks or debt securities of the funds. In such case the funds will be required to realize gain, but not loss, on the sale of such positions as if the position were sold on that date.

    For certain options, futures, forward foreign exchange contracts, or swaps, the IRS has not issued comprehensive rules relating to the timing and character of income and gains realized on such contracts. Although not anticipated, it is possible that final rules could result in changes to the amounts recorded by the funds, potentially resulting in tax consequences to the funds.

    Options

    Options are a type of potentially high-risk derivative.

    Writing Covered Call Options

    The funds may write (sell) American or European style "covered" call options and purchase options to close out options previously written. In writing covered call options, the funds expect to generate additional premium income, which should serve to enhance the funds` total return and reduce the effect of any price decline of the security or currency involved in the option. Covered call options will generally be written on securities or currencies which, in T. Rowe Price`s opinion, are not expected to have any major price increases or moves in the near future but which, over the long term, are deemed to be attractive investments for the funds.

    A call option gives the holder (buyer) the right to purchase, and the writer (seller) has the obligation to sell, a security or currency at a specified price (the exercise price) at expiration of the option (European style) or at any time until a certain date (the expiration date) (American style). So long as the obligation of the writer of a call option continues, he may be assigned an exercise notice by the broker-dealer through whom such option was sold, requiring him to deliver the underlying security or currency against payment of the exercise price. This obligation terminates upon the expiration of the call option or such earlier time at which the writer effects a closing purchase transaction by repurchasing an option identical to that previously sold. To secure his obligation to deliver the underlying security or currency in the case of a call option, a writer is required to deposit in escrow the underlying security or currency or other assets in accordance with the rules of a clearing corporation.

    The funds generally will write only covered call options. This means that the funds will either own the security or currency subject to the option or an option to purchase the same underlying security or currency having an exercise price equal to or less than the exercise price of the "covered" option. From time to time, the funds will write a call option that is not covered as indicated above but where the funds will establish and maintain, with its custodian for the term of the option, an account consisting of cash, U.S. government securities, other liquid high-grade debt obligations, or other suitable cover as permitted by the SEC, having a value equal to the

    fluctuating market value of the optioned securities or currencies. While such an option would be "covered" with sufficient collateral to satisfy SEC prohibitions on issuing senior securities, this type of strategy would expose the funds to the risks of writing uncovered options.

    Portfolio securities or currencies on which call options may be written will be purchased solely on the basis of investment considerations consistent with the funds` investment objectives. The writing of covered call options is a conservative investment technique believed to involve relatively little risk (in contrast to the writing of naked or uncovered options, which the funds generally will not do) but capable of enhancing the funds` total return. When writing a covered call option, the funds, in return for the premium, give up the opportunity for profit from a price increase in the underlying security or currency above the exercise price, but conversely retain the risk of loss should the price of the security or currency decline. Unlike one that owns securities or currencies not subject to an option, the funds have no control over when they may be required to sell the underlying securities or currencies, since they may be assigned an exercise notice at any time prior to the expiration of its obligation as a writer. If a call option the funds have written expires, the funds 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 funds will realize a gain or loss from the sale of the underlying security or currency. The funds do not consider a security or currency covered by a call to be "pledged" as that term is used in the funds` policy, which limits the pledging or mortgaging of 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 funds` loss could be significant.

    The premium received is the market value of an option. The premium the funds 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, 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 funds for writing covered call options will be recorded as a liability of the funds. This liability will be adjusted daily to the option`s current market value, which will be the latest sale price on its primary exchange at the time at which the net asset values per share of the funds are computed (close of the New York Stock Exchange) or, in the absence of such sale, the mean of closing bid and ask 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 funds to write another call option on the underlying security or currency with either a different exercise price or expiration date or both. If the funds desire to sell a particular security or currency from their portfolios on which they have written a call option, or purchased a put option, they 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 funds will be able to effect such closing transactions at favorable prices. If the funds cannot enter into such a transaction, they may be required to hold a security or currency that they might otherwise have sold. When the funds write a covered call option, they run 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 funds 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 funds 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 funds 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 their portfolios. In such cases, additional costs may be incurred.

    The funds 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 funds.

    The funds 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 funds` total assets. In calculating the 25% limit, the funds 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 funds may write American or European style covered put options and purchase options to close out options previously written by the funds. 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.

    If the funds write put options, they will do so only on a covered basis. This means that the funds 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. Alternatively, the funds 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 funds would generally write covered put options in circumstances where T. Rowe Price wishes to purchase the underlying security or currency for the funds` portfolios at a price lower than the current market price of the security or currency. In such event the funds 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 funds 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 funds. In addition, the funds, because they do not own the specific securities or currencies which they 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 funds 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 funds` total assets. In calculating the 25% limit, the funds will offset the value of securities underlying purchased puts and calls on identical securities or currencies with identical maturity dates.

    The premium received by the funds for writing covered put options will be recorded as a liability of the funds. This liability will be adjusted daily to the option`s current market value, which will be the latest sale price on its primary exchange at the time at which the net asset value per share of the funds is computed (close of the New York Stock Exchange), or, in the absence of such sale, the mean of the closing bid and ask prices.

    Purchasing Put Options

    The funds may purchase American or European style put options. As the holder of a put option, the funds have 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 funds may enter into closing

    sale transactions with respect to such options, exercise them, or permit them to expire. The funds may purchase put options for defensive purposes in order to protect against an anticipated decline in the value of their securities or currencies. An example of such use of put options is provided next.

    The funds may purchase a put option on an underlying security or currency (a "protective put") owned by the funds 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 funds, as holder of the put option, are able to sell the underlying security or currency at the put exercise price regardless of any decline in the underlying security`s market price or currency`s exchange value. For example, a put option may be purchased in order to protect unrealized appreciation of a security or currency where T. Rowe Price deems it desirable to continue to hold the security or currency because of tax considerations. The premium paid for the put option and any transaction costs would reduce any capital gain otherwise available for distribution when the security or currency is eventually sold.

    The funds may also purchase put options at a time when they do not own the underlying security or currency. By purchasing put options on a security or currency they do not own, the funds seek 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 funds will lose their 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 funds will not commit more than 5% of total assets to premiums when purchasing put options. The premium paid by the funds when purchasing a put option will be recorded as an asset of the funds 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 on its primary exchange at the time at which the net asset values per share of the funds are computed (close of New York Stock Exchange) or, in the absence of such sale, the mean of closing bid and ask prices. 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 funds may purchase American or European style call options. As the holder of a call option, the funds have 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 funds may enter into closing sale transactions with respect to such options, exercise them, or permit them to expire. The funds may purchase call options for the purpose of increasing their current return or avoiding tax consequences which could reduce their current return. The funds 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 funds for the purpose of acquiring the underlying securities or currencies for their portfolios. Utilized in this fashion, the purchase of call options enables the funds 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 funds in purchasing a large block of securities or currencies that would be more difficult to acquire by direct market purchases. So long as the funds hold such a call option, rather than the underlying security or currency itself, the funds are 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 funds may also purchase call options on underlying securities or currencies they own in order to protect unrealized gains on call options previously written by them. 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.

    The funds will not commit more than 5% of total assets to premiums when purchasing call and put options. The premium paid by the funds when purchasing a call option will be recorded as an asset of the funds 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 on its primary exchange at the time at which the net asset values per share of the funds are computed (close of New York Stock Exchange), or, in the absence of such sale, the mean of closing bid and ask prices.

    Dealer (Over-the-Counter) Options

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    The funds may engage in transactions involving dealer options. Certain risks, including credit risk and counterparty risk, are specific to dealer options. While the funds would look to a clearing corporation to exercise exchange-traded options, if the funds were to purchase a dealer option, they would rely primarily on the dealer from whom they purchased the option to perform if the option were exercised. Failure by the dealer to do so could result in the loss of the premium paid by the funds as well as loss of the expected benefit of the transaction.
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    Exchange-traded options generally have a continuous liquid market, while dealer options are less liquid or could have no liquidity. Consequently, the funds will generally be able to realize the value of a dealer option they have purchased only by exercising it or reselling it to the dealer who issued it. Under certain conditions, the funds may also be able to resell or assign a purchased dealer option to another dealer on substantially the same terms. Similarly, when the funds write a dealer option, unless they can assign the option to another dealer, they 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 funds originally wrote the option. While the funds will seek to enter into dealer options only with dealers who will agree to and are expected to be capable of entering into closing transactions with the funds, there can be no assurance that the dealers will consent to the closing transaction nor is it assured that the funds will realize a favorable price. Until the funds, as a covered dealer call option writer, are able to effect a closing purchase transaction, they 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 counter-party, the funds may be unable to liquidate a dealer option. With respect to options written by the funds, the inability to enter into a closing transaction may result in material losses to the funds.

    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 funds may treat the cover used for written Over-the-Counter ("OTC") options as liquid if the dealer agrees that the funds may repurchase the OTC option they have 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.

    For certain types of OTC options that have substantially similar terms to exchange-traded options, the funds may treat such options, and the underlying cover used for written options, as liquid based on the following factors: (1) the frequency and availability of dealer quotes and the comparability to prices available on an options exchange; (2) the number of dealers willing to purchase or accept assignments of such OTC options; and (3) the nature of the OTC options, their settlement terms and their termination provisions (i.e., the time needed to close out or terminate an OTC position, method of soliciting offers, and mechanics of transfer).

    Warrants

    Warrants can be highly volatile and have no voting rights, pay no dividends, and have no rights with respect to the assets of the corporation issuing them. Warrants basically are options to purchase securities at a specific price valid for a specific period of time. They do not represent ownership of the securities, but only the right to buy them. Warrants differ from call options in that warrants are issued by the issuer of the security which may be purchased on their exercise, whereas call options may be written or issued by anyone. The prices of warrants do not necessarily move parallel to the prices of the underlying securities.

    There are, of course, other types of securities that are or may become available that are similar to the foregoing, and the funds may invest in these securities.

    Hybrid Instruments

    A hybrid instrument is 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, the funds 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 funds 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 funds the desired European bond exposure while avoiding currency risk, limiting downside market risk, and lowering transaction costs. Of course, there is no guarantee that the strategy will be successful, and the funds 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 of 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 can carry greater market risks than traditional debt instruments. Depending on the structure of the particular hybrid instrument, changes in a benchmark may be magnified by the terms of the hybrid instrument and have an even more dramatic and substantial effect upon the value of the hybrid instrument. Also, the prices of the hybrid instrument and the benchmark or underlying asset may not move in the same direction or at the same time.

    Hybrid instruments may bear interest or pay preferred dividends at below market (or even relatively nominal) rates. Alternatively, hybrid instruments may bear interest at above market rates but bear an increased risk of principal loss (or gain). The latter scenario may result if "leverage" is used to structure the hybrid instrument. Leverage risk occurs when the hybrid instrument is structured so that a given change in a benchmark or underlying asset is multiplied to produce a greater value change in the hybrid instrument, thereby magnifying the risk of loss as well as the potential for gain.

    Hybrid instruments may also carry liquidity risk since the instruments are often "customized" to meet the portfolio needs of a particular investor, and therefore, the number of investors that are willing and able to buy such instruments in the secondary market may be smaller than that for more traditional debt securities. In addition, because the purchase and sale of hybrid instruments could take place in an over-the-counter market without the guarantee of a central clearing organization or in a transaction between the fund and the issuer of

    the hybrid instrument, the creditworthiness of the counterparty or issuer of the hybrid instrument would be an additional risk factor which the funds would have to consider and monitor. Hybrid instruments also may not be subject to regulation by the 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.

    Swap Agreements

    A number of the funds may enter into interest rate, index, total return, credit, and, to the extent they may invest in foreign currency-denominated securities, currency rate swap agreements. The funds may also enter into options on swap agreements ("swaptions") on the types of swaps listed above as well as swap forwards.

    Swap agreements are typically two-party contracts entered into primarily by institutional investors for a specified period of time. In a standard swap transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on a particular predetermined investment, index, or currency. The gross returns to be exchanged or swapped between the parties are generally calculated with respect to a notional amount, i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a basket of securities representing a particular index. A swaption is a contract that gives a counterparty the right (but not the obligation) to enter into a new swap agreement or to shorten, extend, cancel, or otherwise modify an existing swap agreement at some designated future time on specified terms. The funds may write (sell) and purchase put and call swaptions. A swap forward is an agreement to enter into a swap agreement at some point in the future, usually in 3 to 6 months.

    One example of the use of swaps by the funds is to manage the interest rate sensitivity of the funds. The funds might receive or pay a fixed-rate interest rate of a particular maturity and pay or receive a floating rate in order to increase or decrease the duration of the funds. Or, the funds may buy or sell swaptions to effect the same result. The funds may also replicate a security by selling it, placing the proceeds in cash deposits, and receiving a fixed rate in the swap market.

    Another example is the use of credit default swaps to buy or sell credit protection. A credit default swap is a contract that enables an investor to buy or sell protection against a predetermined issuer credit event. The seller of a credit default swap may enhance income by guaranteeing the creditworthiness of the debt issuer and the buyer is provided with protection against credit risks of the issuer. Market supply and demand factors may cause distortions between the cash securities market and the default swap market.

    Most swap agreements entered into by the funds would calculate the obligations of the parties to the agreement on a "net basis." Consequently, the funds` current obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the "net amount"). The funds` current obligations under a net swap agreement will be accrued daily (offset against any amounts owed to the funds) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by assets determined to be liquid by T. Rowe Price.

    The use of swap agreements by the funds entails certain risks. Interest rate and currency swaps could result in losses if interest rate or currency changes are not correctly anticipated by the funds. Total return swaps could result in losses if the reference index, security, or investments do not perform as anticipated by the funds. Credit default swaps could result in losses if the funds do not correctly evaluate the creditworthiness of the company on which the credit default swap is based.

    The funds will generally incur a greater degree of risk when it writes a swaption than when it purchases a swaption. When the funds purchase a swaption it risks losing only the amount of the premium they have paid should they decide to let the option expire unexercised. However, when the funds write a swaption they will become obligated, upon exercise of the option, according to the terms of the underlying agreement.

    Because swaps are two-party contracts and because they may have terms of greater than seven days, swap agreements may be considered to be illiquid. Moreover, the funds bear the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. The funds will enter into swap agreements only with counterparties that meet certain standards

    of creditworthiness. The swaps market is largely unregulated. It is possible that developments in the swaps market, including potential government regulation, could adversely affect the funds` ability to terminate existing swap agreements or to realize amounts to be received under such agreements.

    There are, of course, other types of securities that are or may become available that are similar to the foregoing, and the funds 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 the funds` investment program. The collateral, in turn, is invested in short-term securities. While the securities are being lent, the funds making the loan will continue to receive the equivalent of the interest or dividends paid by the issuer on the securities, as well as a portion of the interest on the investment of the collateral. Normally, the funds employ an agent to implement their securities lending program and the agent receives a fee from the funds for its services. The funds have a right to call each loan and obtain the securities within such period of time that coincides with the normal settlement period for purchases and sales of such securities in the respective markets. The funds will not have the right to vote on securities while they are being lent, but they may call a loan in anticipation of any important vote, when practical. The risks in lending portfolio securities, as with other extensions of secured credit, consist of a possible default by the borrower, 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 be made only to firms deemed by T. Rowe Price to be of good standing and will not be made unless, in the judgment of T. Rowe Price, the consideration to be earned from such loans would justify the risk. Additionally, the funds bear the risk that the reinvestment of collateral will result in a principal loss. Finally, there is also the risk that the price of the securities will increase while they are on loan and the collateral will not adequately cover their value.

    Interfund Borrowing and Lending

    The funds are parties to an exemptive order received from the SEC on December 8, 1998, amended on November 23, 1999, that permits them to borrow money from and/or lend money to other funds in the T. Rowe Price complex. 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 Price Funds.

    Repurchase Agreements

    The funds may enter into a repurchase agreement through which an investor (such as the funds) purchases securities (known as the "underlying security") from well-established securities dealers or banks that are members of the Federal Reserve System. Any such dealer or bank will be on T. Rowe Price`s approved list. 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 that do not provide for payment within seven days will be treated as illiquid securities. The funds will enter into repurchase agreements only where (1) the underlying securities are of the type (excluding maturity limitations) which the funds` investment guidelines would allow them 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 funds 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 funds seek to enforce their rights thereto;

    (b) possible subnormal levels of income and lack of access to income during this period; and (c) expenses of enforcing their rights.

    Reverse Repurchase Agreements

    Although the funds have no current intention of engaging in reverse repurchase agreements, they reserve the right to do so. Reverse repurchase agreements are ordinary repurchase agreements in which a fund is the seller of, rather than the investor in, securities and agrees to repurchase them at an agreed upon time and price. Use of a reverse repurchase agreement may be preferable to a regular sale and later repurchase of the securities because it avoids certain market risks and transaction costs. A reverse repurchase agreement may be viewed as a type of borrowing by the funds, subject to Investment Restriction (1). (See "Investment Restrictions.")

    Money Market Reserves

    The funds may invest their cash reserves primarily in one or more money market funds established for the exclusive use of the T. Rowe Price family of mutual funds and other clients of T. Rowe Price. Currently, two such money market funds are in operation: T. Rowe Price Government Reserve Investment Fund ("GRF") and T. Rowe Price Reserve Investment Fund ("RIF"), 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.

    Both funds must comply with the requirements of Rule 2a-7 under the 1940 Act governing money market funds. GRF invests primarily in a portfolio of U.S. government-backed securities, primarily U.S. Treasuries, and repurchase agreements thereon. RIF invests at least 95% of its total assets in prime money market instruments receiving the highest credit rating.

    GRF and RIF provide a very efficient means of managing the cash reserves of the funds. While neither GRF nor RIF pays an advisory fee to T. Rowe Price, they will incur other expenses. However, GRF and RIF are expected by T. Rowe Price to operate at very low expense ratios. The funds will only invest in GRF or RIF to the extent it is consistent with their investment objectives and programs.

    Neither fund is insured or guaranteed by the FDIC or any other government agency. Although the funds seek to maintain a stable net asset value of $1.00 per share, it is possible to lose money by investing in them.

    High Yield, Institutional Floating Rate, and Institutional High Yield Funds

    Short Sales

    The funds may make short sales for hedging purposes to protect them against companies whose credit is deteriorating. Short sales are transactions in which the funds sell a security they do not own in anticipation of a decline in the market value of that security. The funds` short sales would be limited to situations where the funds own a debt security of a company and would sell short the common or preferred stock or another debt security at a different level of the capital structure of the same company. No securities will be sold short if, after the effect is given to any such short sale, the total market value of all securities sold short would exceed 2% of the value of the funds` net assets.

    To complete a short-sale transaction, the funds must borrow the security to make delivery to the buyer. The funds then are obligated to replace the security borrowed by purchasing it at the market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the fund. Until the security is replaced, the funds are required to pay to the lender amounts equal to any dividends or interest which accrue during the period of the loan. To borrow the security, the funds also may be required to pay a premium, which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet margin requirements, until the short position is closed out.

    Until the funds replace a borrowed security in connection with a short sale, the funds will: (a) maintain daily a segregated account, containing cash, U.S. government securities, or other suitable cover as permitted by the SEC, at such a level that (i) the amount deposited in the account plus the amount deposited with the broker as collateral will equal the current value of the security sold short and (ii) the amount deposited in the segregated account plus the amount deposited with the broker as collateral will not be less than the market value of the security at the time it was sold short; or (b) otherwise cover its short position.

    The funds will incur a loss as a result of the short sale if the price of the security sold short increases between the date of the short sale and the date on which the funds replace the borrowed security. The funds will realize a gain if the security sold short declines in price between those dates. This result is the opposite of what one would expect from a cash purchase of a long position in a security. The amount of any gain will be decreased, and the amount of any loss increased, by the amount of any premium, dividends, or interest the funds may be required to pay in connection with a short sale. Any gain or loss on the security sold short would be separate from a gain or loss on the funds` security being hedged by the short sale.

    The Taxpayer Relief Act of 1997 requires a mutual fund to recognize gain upon entering into a constructive sale of stock, a partnership interest, or certain debt positions occurring after June 8, 1997. A constructive sale is deemed to occur if the funds enter into a short sale, an offsetting notional principal contract, or a futures or forward contract which is substantially identical to the appreciated position. Some of the transactions in which the funds are permitted to invest may cause certain appreciated positions in securities held by the funds to qualify as a "constructive sale," in which case it would be treated as sold and the resulting gain subjected to tax or, in the case of a mutual fund, distributed to shareholders. If this were to occur, the funds would be required to distribute such gains even though it would receive no cash until the later sale of the security. Such distributions could reduce the amount of cash available for investment by the funds. Because these rules do not apply to "straight" debt transactions, it is not anticipated that they will have a significant impact on the funds; however, the effect cannot be determined until the issuance of clarifying regulations.

    INVESTMENT RESTRICTIONS

    Fundamental policies may not be changed without the approval of the lesser of (1) 67% of the funds` 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 the funds` outstanding shares. Other restrictions in the form of operating policies are subject to change by the funds` Boards 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 funds. With the exception of the diversification test required by the Code, calculation of the funds` total assets for compliance with any of the following fundamental or operating policies or any other investment restrictions set forth in the funds` prospectuses or SAI will not include collateral held in connection with securities lending activities. For purposes of the tax diversification test, calculation of the fund`s total assets will include investments made with cash received by the funds as collateral for securities loaned. The diversification test required by the Code is set forth in the prospectuses of the funds referred to by name in restrictions (8) and (9) below.

    Fundamental Policies

    As a matter of fundamental policy, the funds may not:

    (a)Borrowing (All funds except Spectrum Funds) Borrow money, except that the funds 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 funds` investment objectives and programs, provided that the combination of (i) and (ii) shall not exceed 33xb6 /xb8 % of the value of the funds` 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 funds may borrow from banks, other Price Funds, or other persons to the extent permitted by applicable law;

    (b)Borrowing (Spectrum Funds) Borrow money, except the funds may borrow from banks or other Price Funds as a temporary measure for extraordinary or emergency purposes, and then only in amounts not exceeding 30% of total assets valued at market. The funds will not borrow in order to increase income (leveraging), but only to facilitate redemption requests which might otherwise require

    untimely disposition of portfolio securities. Interest paid on any such borrowings will reduce net investment income;

    (a)Commodities (All funds except Spectrum Growth and Spectrum Income Funds) Purchase or sell physical commodities, except that the funds (other than the Money Funds) may enter into futures contracts and options thereon;

    (b)Commodities (Spectrum Growth and Spectrum Income Funds) Purchase or sell commodities or commodity or futures contracts;

    Equity Securities (Summit Municipal Funds) Purchase equity securities or securities convertible into equity securities;

    (a)Industry Concentration (All funds except Equity Index 500, Extended Equity Market Index, Health Sciences, International Equity Index, Financial Services, Prime Reserve, Real Estate, TRP Reserve Investment, Retirement, Spectrum, Summit Cash Reserves, Total Equity Market Index, and U.S. Bond Index Funds) Purchase the securities of any issuer if, as a result, more than 25% of the value of the funds` total assets would be invested in the securities of issuers having their principal business activities in the same industry;

    (b)Industry Concentration (Financial Services, Health Sciences, and Real Estate Funds) Purchase the securities of any issuer if, as a result, more than 25% of the value of the funds` total assets would be invested in the securities of issuers having their principal business activities in the same industry, provided, however, that (i) the Health Sciences Fund will invest more than 25% of its total assets in the health sciences industry as defined in the fund`s prospectus; (ii) the Financial Services Fund will invest more than 25% of its total assets in the financial services industry as defined in the fund`s prospectus; and (iii) the Real Estate Fund will invest more than 25% of its total assets in the real estate industry as defined in the fund`s prospectus;

    (c)Industry Concentration (Equity Index 500, Extended Equity Market Index, International Equity Index, Total Equity Market Index, and U.S. Bond Index Funds) 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, except that the fund will invest more than 25% of the value of its total assets in issuers having their principal business activities in the same industry to the extent necessary to replicate the index that the fund uses as its benchmark as set forth in its prospectus;

    (d)Industry Concentration (Prime Reserve, TRP Reserve Investment, and Summit Cash Reserves Funds) Purchase the securities of any issuer if, as a result, more than 25% of the value of the funds` total assets would be invested in the securities of issuers having their principal business activities in the same industry, provided, however, that this limitation does not apply to securities of the banking industry including, but not limited to, certificates of deposit and banker`s acceptances;

    (e)Concentration (Retirement and Spectrum Funds) Concentrate in any industry, except that the funds will concentrate (invest more than 25% of total assets) in the mutual fund industry;

    (a)Loans (All funds except Retirement and Spectrum Funds) Make loans, although the funds 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 33xb6 /xb8 % of the value of the funds` total assets; (ii) purchase money market securities and enter into repurchase agreements; and (iii) acquire publicly distributed or privately placed debt securities and purchase debt;

    (b)Loans (Retirement and Spectrum Funds) Make loans, although the funds may purchase money market securities and enter into repurchase agreements;

    Margin (Spectrum Funds) Purchase securities on margin, except for use of short-term credit necessary for clearance of purchases of portfolio securities;

    Mortgaging (Spectrum Funds) Mortgage, pledge, hypothecate, or, in any manner, transfer any security owned by the funds as security for indebtedness, except as may be necessary in connection with

    permissible borrowings, in which event such mortgaging, pledging, or hypothecating may not exceed 30% of the funds` total assets, valued at market;

    Percent Limit on Assets Invested in Any One Issuer (All funds except Africa & Middle East, Emerging Europe & Mediterranean, Emerging Markets Bond, Institutional Africa & Middle East, Institutional Concentrated Large-Cap Value, Institutional Emerging Markets Bond, Institutional International Bond, Institutional Large-Cap Growth, International Bond, Latin America, New Asia, Retirement, and Spectrum Funds, and the State Tax-Free Income Trust) Purchase a security if, as a result, with respect to 75% of the value of the funds` total assets, more than 5% of the value of the funds` total assets would be invested in the securities of a single issuer, except securities issued or guaranteed by the U.S. government, its agencies, or instrumentalities;

    Percent Limit on Share Ownership of Any One Issuer (All funds except Africa & Middle East, Emerging Europe & Mediterranean, Emerging Markets Bond, Institutional Africa & Middle East, Institutional Concentrated Large-Cap Value, Institutional Emerging Markets Bond, Institutional International Bond, Institutional Large-Cap Growth, International Bond, Latin America, New Asia, Retirement, and Spectrum Funds, and the State Tax-Free Income Trust) Purchase a security if, as a result, with respect to 75% of the value of the funds` total assets, more than 10% of the outstanding voting securities of any issuer would be held by the funds (other than obligations issued or guaranteed by the U.S. government, its agencies, or instrumentalities);

    (a)Real Estate (All funds except Retirement and Spectrum Funds) 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 funds from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business);

    (b)Real Estate (Retirement and Spectrum Funds) Purchase or sell real estate, including limited partnership interests therein, unless acquired as a result of ownership of securities or other instruments (although the funds may purchase money market securities secured by real estate or interests therein, or issued by companies or investment trusts which invest in real estate or interests therein);

    (a)Senior Securities (All funds except Spectrum Funds) Issue senior securities except in compliance with the 1940 Act;

    (b)Senior Securities (Spectrum Funds) Issue senior securities;

    Short Sales (Spectrum Funds) Effect short sales of securities;

    Taxable Securities (California Tax-Free Income Trust, State Tax-Free Income Trust, and Tax-Free Funds) During periods of normal market conditions, purchase any security if, as a result, less than 80% of the funds` income would be exempt from federal and, if applicable, any state, city, or local income tax. Normally, the funds will not purchase a security if, as a result, more than 20% of the funds` income would be subject to the AMT; or

    Underwriting Underwrite securities issued by other persons, except to the extent that the funds may be deemed to be an underwriter within the meaning of the 1933 Act in connection with the purchase and sale of fund portfolio securities in the ordinary course of pursuing their investment programs.

    NOTES

    The following Notes should be read in connection with the above-described fundamental policies. The Notes are not fundamental policies.

    Money funds With respect to investment restriction (1), the funds have no current intention of engaging in any borrowing transactions.

    All funds except Retirement and Spectrum Funds With respect to investment restriction (2), the funds do not consider currency contracts or hybrid investments to be commodities.

    All funds except Retirement and Spectrum Funds For purposes of investment restriction (4):

  • U.S., state, or local governments, or related agencies or instrumentalities, are not considered an industry.

    • <R>
  • Industries are determined by reference to the classifications of industries and sub-industries set forth in the Morgan Stanley Capital International/Standard & Poor`s (MSCI/S&P) Global Industry Classification Standard for the International Equity Funds, equity securities of the Tax-Efficient Funds, and Equity Funds except Developing Technologies, Financial Services, Global Technology, Media & Telecommunications, New Era, and Science & Technology Funds. For Developing Technologies, Financial Services, Global Technology, Media & Telecommunications, New Era, and Science & Technology Funds, industries are determined by reference to industry classifications set forth in their semiannual and annual reports. For the Corporate Income, Inflation Protected Bond, Institutional Core Plus, New Income, Short-Term Bond, Short-Term Income, U.S. Bond Index, and the fixed-income investments of the Balanced and Personal Strategy Funds, industries are determined by reference to the classifications of industries and sub-industries set forth in the Lehman Brothers Global Aggregate Bond Index (Lehman). For the Emerging Markets Bond, GNMA, High Yield, Institutional Emerging Markets Bond, Institutional Floating Rate, Institutional High Yield, Institutional International Bond, International Bond, Prime Reserve, TRP Reserve Investment, Summit Income, and U.S. Treasury Funds, industries are determined by reference to industry classifications set forth in their semiannual and annual reports. Annual changes by MSCI/S&P or Lehman to their classifications will be implemented within 30 days after the effective date of the change. The Africa & Middle East Fund, Institutional Africa & Middle East Fund, and Latin America Fund consider telephone and banking companies of a single country to be separate industries from telephone and banking companies of any other country. 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 International Bond Funds will not invest more than 25% of total assets in the securities of any single foreign governmental issuer. For purposes of this restriction, governmental entities are considered separate issuers.
    • </R>

    All funds except Summit Income and U.S. Bond Index Funds For purposes of investment restriction (5), the funds 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.

    All funds except Spectrum Funds For purposes of investment restrictions (8) and (9), the funds will treat bonds which are refunded with escrowed U.S. government securities as U.S. government securities.

    Taxable Bond and Money Funds For purposes of investment restrictions (8) and (9), the funds will consider a repurchase agreement fully collateralized with U.S. government securities to be U.S. government securities.

    With respect to investment restriction (11), under the 1940 Act, an open-end investment company can borrow money from a bank provided that immediately after such borrowing there is asset coverage of at least 300% for all borrowings. If the asset coverage falls below 300%, the company must, within three business days, reduce the amount of its borrowings to satisfy the 300% requirement.

    For purposes of investment restriction (13), the funds measure the amount of their income from taxable securities, including AMT securities, over the course of the funds` taxable year.

    Operating Policies

    As a matter of operating policy, the funds may not:

    Borrowing Purchase additional securities when money borrowed exceeds 5% of total assets;

    Control of Portfolio Companies Invest in companies for the purpose of exercising management or control;

    Equity Securities (California Tax-Free Income Trust, State Tax-Free Income Trust, and Tax-Free Funds) Purchase any equity security or security convertible into an equity security, provided that the funds

    (other than the Money Funds) may invest up to 10% of total assets in equity securities, which pay tax-exempt dividends and which are otherwise consistent with the funds` investment objectives and, further provided, that Money Funds may invest up to 10% of total assets in equity securities of other tax-free open-end money market funds;

    Forward Currency Contracts (Retirement and Spectrum Funds) Purchase forward currency contracts, although the funds reserve the right to do so in the future;

    (a)Futures Contracts (All funds except Money Funds and Retirement and Spectrum Funds) 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 funds` net asset value;

    (b)Futures (Retirement and Spectrum International Funds) Purchase futures, although the funds reserve the right to do so in the future;

    (c)Futures (Spectrum Growth and Spectrum Income Funds) Invest in futures;

    Illiquid Securities Purchase illiquid securities if, as a result, more than 15% (10% for Spectrum and Money Funds) of net assets would be invested in such securities;

    Investment Companies (All funds except Retirement and Spectrum Funds) Purchase securities of open-end or closed-end investment companies except (i) securities of the TRP Reserve Investment Funds (provided that the investing fund does not invest more than 25% of its total assets in such funds); (ii) securities of T. Rowe Price institutional funds; (iii) in the case of the Money Funds, only securities of other money market funds; (iv) in the case of the California Tax-Free Income Trust, State Tax-Free Income Trust, and Tax-Free Funds, only securities of other tax-free money market funds; (v) otherwise consistent with the 1940 Act;

    Margin (All funds except Spectrum Funds) Purchase securities on margin, except (i) for use of short-term credit necessary for clearance of purchases of portfolio securities and (ii) they may make margin deposits in connection with futures contracts or other permissible investments;

    Mortgaging (All funds except Spectrum Funds) Mortgage, pledge, hypothecate, or, in any manner, transfer any security owned by the funds as security for indebtedness, except as may be necessary in connection with permissible borrowings or investments, and then such mortgaging, pledging, or hypothecating may not exceed 33xb6 /xb8 % of the funds` total assets at the time of borrowing or investment;

    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 funds would be invested in such programs;

    (a)Options, etc. (All funds except Retirement and Spectrum Funds) Invest in options in excess of the limits set forth in the funds` prospectuses and SAI;

    (b)Options (Retirement Funds) Invest in options although the funds reserve the right to do so in the future;

    (c)Options (Spectrum Funds) Invest in options;

    (a)Short Sales (All funds except High Yield, Institutional Floating Rate, and Institutional High Yield Funds) Effect short sales of securities;

    (b)Short Sales (High Yield, Institutional Floating Rate, and Institutional High Yield Funds) Effect short sales of securities, other than as set forth in the funds` prospectuses and SAI; and

    Warrants Invest in warrants if, as a result, more than 10% of the value of the fund`s net assets would be invested in warrants, provided that, the Money, Retirement, Spectrum, State Tax-Free, Tax-Free, and Summit Municipal Funds will not invest in warrants.

    NOTES

    The following Notes should be read in connection with the above-described operating policies. The Notes are not operating policies.

    If a fund is subject to an 80% name test as set forth in its prospectus, it will be based on the fund`s net assets plus any borrowings for investment purposes. For purposes of determining whether a fund invests at least 80% of its net assets in a particular country or geographic region, the fund uses the country assigned to a security by MSCI Barra or, if one is not assigned by MSCI Barra, then the country assigned by Bloomberg. The funds generally follow this same process with respect to the remaining 20% of assets but may occasionally make an exception after assessing various factors relating to a company.

    Blue Chip Growth, Capital Opportunity, Developing Technologies, Diversified Small-Cap Growth, Financial Services, Global Technology, Health Sciences, High Yield, Institutional High Yield, Media & Telecommunications, Mid-Cap Value, Personal Strategy, Real Estate, Summit Income, Summit Municipal, U.S. Bond Index, and Value Funds

    Notwithstanding anything in the previously listed fundamental and operating restrictions to the contrary, the funds listed above may invest all of their assets in a single investment company or a series thereof in connection with a "master-feeder" arrangement. Such an investment would be made where the funds (a "Feeder"), and one or more other funds with the same investment objective and program as the funds, sought to accomplish their investment objectives and programs by investing all of their assets in the shares of another investment company (the "Master"). The Master would, in turn, have the same investment objective and program as the funds. The funds would invest in this manner in an effort to achieve the economies of scale associated with having a Master fund make investments in portfolio companies on behalf of a number of Feeder funds.

    International Funds

    In addition to the restrictions previously described, 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. The funds are subject to certain percentage limitations under the 1940 Act 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.

    Retirement and Spectrum Funds

    There is no limit on the amount the funds may own of the total outstanding voting securities of registered investment companies which are members of the Price Funds. The funds, in accordance with their prospectuses, may invest more than 5% of their total assets in any one or more of the Price Funds. The funds may invest more than 10% of their total assets, collectively, in registered investment companies which are members of the Price Funds.

    CUSTODIAN

    State Street Bank and Trust Company is the custodian for the funds` U.S. securities and cash, but it does not participate in the funds` 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, or any central depository system allowed by federal law. In addition, funds investing in municipal securities are authorized to maintain certain of their securities, in particular, variable rate demand notes, in uncertificated form, in the proprietary deposit systems of various dealers in municipal securities. State Street Bank`s main office is at 225 Franklin Street, Boston, Massachusetts 02110. State Street Bank maintains shares of the Retirement and Spectrum Funds in the book entry system of the funds` transfer agent, T. Rowe Price Services, Inc.

    All funds that can invest in foreign securities have entered into a Custodian Agreement with JPMorgan Chase Bank, London, pursuant to which portfolio securities which are purchased outside the United States are maintained in the custody of various foreign branches of JPMorgan Chase 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 JPMorgan Chase Bank, London is Woolgate House, Coleman Street, London, EC2P 2HD, England.

    CODE OF ETHICS

    The funds, their investment adviser (T. Rowe Price International for international funds and T. Rowe Price for all other funds), and their principal underwriter (T. Rowe Price Investment Services) have a written Code of Ethics and Conduct which requires persons with access to investment information ("Access Persons") to obtain prior clearance before engaging in most personal securities transactions. Transactions must be executed within three business days of their clearance. In addition, all Access Persons must report their personal securities transactions within 30 days after the end of the calendar quarter. Aside from certain limited transactions involving securities in certain issuers with high trading volumes, Access Persons are typically not permitted to effect transactions in a security if: there are pending client orders in the security; the security has been purchased or sold by a client within seven calendar days; the security is being considered for purchase for a client; a change has occurred in T. Rowe Price`s rating of the security within seven calendar days prior to the date of the proposed transaction; or the security is subject to internal trading restrictions. In addition, 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 Boards of the funds. The Boards also review the administration of the Code of Ethics on an annual basis.

    DISCLOSURE OF FUND PORTFOLIO INFORMATION

    Each fund`s portfolio holdings are disclosed on a regular basis in its semiannual and annual reports to shareholders as well as Form N-Q which is filed with the SEC within 60 days of a fund`s first and third fiscal quarter-end. In addition, the funds` Boards have adopted policies and procedures with respect to the disclosure of the funds` portfolio securities and the disclosure of portfolio commentary and statistical information about the funds` portfolios and their securities. The policy on the general manner in which the funds` portfolio securities are disclosed is set forth in the funds` prospectuses. In addition, portfolio holdings with respect to periods prior to the most recent quarter-end may be disclosed upon request, subject to the sole discretion of T. Rowe Price.

    This statement of additional information sets forth details of the funds` policy on portfolio holdings disclosure as well as the funds` policy on disclosing information about the funds` portfolios. In adopting the policies, the Boards of the funds took into account the views of the equity, fixed income and/or international steering committees of the funds` investment advisers on what information should be disclosed and when and to whom it should be disclosed. The steering committees have oversight responsibilities for managing the T. Rowe Price funds. Each steering committee is comprised of senior investment management personnel of T. Rowe Price or T. Rowe Price International, as applicable. Each committee as a whole determines the funds` policy on the disclosure of portfolio holdings and related information. The funds` Boards believe the policies they have adopted are in the best interests of the funds and that they strike an appropriate balance between the desire of some persons for information about the funds` portfolios and the need to protect the funds from potentially harmful disclosures.

    From time to time, officers of the funds, the funds` investment adviser or the funds` distributor (collectively "TRP") may express their views orally or in writing on one or more of the funds` portfolio securities or may state that the funds have recently purchased or sold one or more securities. Such views and statements may be

    made to members of the press, shareholders in the funds, persons considering investing in the funds or representatives of such shareholders or potential shareholders, such as fiduciaries of a 401(k) plan or a trust and their advisers and rating and ranking organizations such as Lipper Inc. and Morningstar, Inc. The nature and content of the views and statements provided to each of these persons may differ. The securities subject to these views and statements may be ones that were purchased or sold since the funds` most recent quarter-end and therefore may not be reflected on the list of the funds` most recent quarter-end portfolio holdings disclosed on the Web site.

    Additionally, TRP may provide oral or written information ("portfolio commentary") about the funds, including, but not limited to, how the funds` investments are divided among various sectors, industries, countries, value and growth stocks, small-, mid-, and large-cap stocks, and among stocks, bonds, currencies, and cash, types of bonds, bond maturities, bond coupons, and bond credit quality ratings. This portfolio commentary may also include information on how these various weightings and factors contributed to fund performance. TRP may also provide oral or written information ("statistical information") about various financial characteristics of the funds or their underlying portfolio securities including, but not limited to, alpha, beta, R-squared, duration, maturity, information ratio, Sharpe ratio, earnings growth, payout ratio, price/book value, projected earnings growth, return on equity, standard deviation, tracking error, weighted average quality, market capitalization, percent debt to equity, price to cash flow, dividend yield or growth, default rate, portfolio turnover, and risk and style characteristics. This portfolio commentary and statistical information about the funds may be based on the funds` most recent quarter-end portfolio or on some other interim period such as month-end. The portfolio commentary and statistical information may be provided to members of the press, shareholders in the funds, persons considering investing in the funds or representatives of such shareholders or potential shareholders, such as fiduciaries of a 401(k) plan or a trust and their advisers and rating and ranking organizations. The content and nature of the information provided to each of these persons may differ.

    None of the persons described above will receive any of the information described above if, in the sole judgment of TRP, the information could be used in a manner that would be harmful to the funds. The T. Rowe Price Code of Ethics contains a provision to this effect.

    TRP also discloses portfolio holdings in connection with the day-to-day operations and management of the funds. Full portfolio holdings are disclosed to the funds` custodians and auditors. Portfolio holdings are disclosed to the funds` pricing service vendors and other persons who provide systems or software support in connection with fund operations, including accounting, compliance support, and pricing. Portfolio holdings may also be disclosed to persons assisting the funds in the voting of proxies. In connection with managing the funds, the funds` investment advisers may use analytical systems provided by third parties who may have access to the funds` portfolio holdings. In all of these situations, the funds or TRP have entered into an agreement with the outside party under which the party undertakes to maintain the funds` portfolio holdings on a confidential basis and to refrain from trading on the basis of the information. TRP relies on these non-disclosure agreements in determining that such disclosures are not harmful to the funds. The names of these persons and the services they provide are set forth in the following table under "Fund Service Providers." The policies and procedures adopted by the funds` Boards require that any additions to the list of "Fund Service Providers" be approved by specified officers at TRP.

    Additionally, when purchasing and selling its securities through broker-dealers, requesting bids on securities, obtaining price quotations on securities as well as in connection with litigation involving the funds` portfolio securities, the funds may disclose one or more of their securities. The funds have not entered into formal non-disclosure agreements in connection with these situations; however, the funds would not continue to conduct business with a person who TRP believed was misusing the disclosed information.

    Fund Service Providers

    <R>

    Service Provider


    Service

    Broadridge Systems
    		Systems Vendor
    DSTI
    		Systems Vendor
    COR Financial Solutions
    		Systems Vendor
    ITG, Inc.
    		Pricing and Systems Vendor
    JPMorgan FCS Corporation
    		Systems Vendor
    JPMorgan Chase
    		Pricing Vendor
    JPMorgan Chase, London
    		Custodian
    S&P/JJ Kenny
    		Pricing Vendor
    WCI Consulting
    		Systems Vendor
    American Stock Exchange
    		Systems Vendor
    Bloomberg
    		Systems Vendor
    Bowne & Company
    		Systems Vendor
    Business Objects
    		Systems Vendor
    Charles River
    		Systems Vendor
    Citigroup
    		Systems Vendor
    Cognizant
    		Systems Vendor
    Eagle
    		Systems Vendor
    FactSet
    		Systems Vendor
    Interactive Data
    		Pricing Vendor
    Investor Tools, Inc.
    		Systems Vendor
    Jefferson Wells International
    		Professional Staffing Service
    Lehman Brothers
    		Systems Vendor
    Macgregor
    		Systems Vendor
    McArdle Printing Company
    		Printing and Mailing Vendor
    Omgeo LLC
    		Systems Vendor
    PricewaterhouseCoopers LLP
    		Independent Registered Public Accounting Firm
    RiskMetrics Group, Inc.
    		Proxy and Systems Vendor
    Thomson Reuters
    		Pricing Vendor
    Serena
    		Systems Vendor
    SmartStream Technologies
    		Systems Vendor
    State Street Bank
    		Custodian
    Sybase Inc.
    		Systems Vendor
    Vision
    		Systems Vendor
    Wall Street Concepts, Inc.
    		Market Information Vendor
    Wilhelm and Cooper LLC
    		Professional Staffing Service
    Wilshire
    		Systems Vendor
    </R>

    PRICING OF SECURITIES

    <R>
    All Price Funds (except Money Funds and Fund-of-Funds)
    </R>

    <R>
    Equity securities listed or regularly traded on a securities exchange or in the over-the-counter market are valued at the last quoted sale price or, for certain markets, the official closing price at the time the valuations are made, except for OTC Bulletin Board securities, which are valued at the mean of the latest bid and asked prices. A security that is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for such security. Listed securities not traded on a particular day are valued at the mean of the latest bid and asked prices for domestic securities and the last quoted sale price for international securities.
    </R>

    <R>
    Debt securities are generally traded in the over-the-counter market. Securities with remaining maturities of one year or more at the time of acquisition are valued using prices furnished by dealers who make markets in such securities or by an independent pricing service, which considers yield or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Securities with remaining maturities of less than one year at the time of acquisition generally use amortized cost in local currency to approximate fair value. However, if amortized cost is deemed not to reflect fair value or the fund holds a significant amount of such securities with remaining maturities of more than 60 days, the securities are valued at prices furnished by dealers who make markets in such securities, or by an independent pricing service.
    </R>

    <R>
    Investments in mutual funds are valued at the mutual fund`s closing net asset value per share on the day of valuation. Purchased and written options are valued at the mean of the closing bid and asked prices. Options on futures contracts are valued at the last sale price. Foreign currency forward contracts are valued using the prevailing forward exchange rate. Financial futures contracts are valued at closing settlement prices. Swaps are valued at prices furnished by independent swap dealers or by an independent pricing service.
    </R>

    <R>
    Assets, including investments, and liabilities denominated in foreign currencies are translated into U.S. dollar values each day at the prevailing exchange rate, using the mean of the bid and asked prices of such currencies against U.S. dollars as quoted by a major bank. Purchases and sales of securities, income, and expenses are translated into U.S. dollars at the prevailing exchange rate on the date of the transaction.
    </R>

    Trading in the portfolio securities of the funds may take place in various foreign markets on certain days (such as Saturday) when the funds are not open for business and do not calculate their net asset value. As a result, net asset values may be significantly affected by trading on days when shareholders cannot make transactions. In addition, trading in the funds` portfolio securities may not occur on days when the funds are open.

    Money Funds

    <R>
    In accordance with Rule 2a-7 under the 1940 Act, securities are valued at amortized cost which approximates fair value.
    </R>

    Fund-of-Funds

    <R>
    Investments in the underlying Price funds held by each fund are valued at their closing net asset value per share on the day of valuation.
    </R>

    All Price Funds

    Other investments, including restricted securities, and those 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 the T. Rowe Price Valuation Committee, established by the funds` Boards.

    NET ASSET VALUE PER SHARE

    The purchase and redemption price of the funds` shares is equal to the funds` net asset value per share or share price. The funds determine their net asset value per share by subtracting their liabilities (including accrued expenses and dividends payable) from their total assets (the market value of the securities the funds hold plus cash and other assets, including income accrued but not yet received) and dividing the result by the total number of shares outstanding. The net asset value per share of the funds is calculated as of the close of trading on the New York Stock Exchange ("NYSE") every day the NYSE is open for trading. Determination of net asset value (and the offering, sale, redemption, and repurchase of shares) for the funds 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 funds of securities owned by them is not reasonably practicable or it is not reasonably practicable for the funds fairly to determine the value of their net assets, or (d) during which a governmental body having jurisdiction over the funds may by order permit such a suspension for the protection of the funds`

    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.

    Money Funds

    Maintenance of Money Funds` Net Asset Value per Share at $1.00

    It is the policy of the funds to attempt to maintain a net asset value of $1.00 per share by using the amortized cost method of valuation permitted by Rule 2a-7 under the 1940 Act. Under this method, securities are valued by reference to the funds` acquisition costs as adjusted for amortization of premium or accumulation of discount, rather than by reference to their market value. Under Rule 2a-7:

    (a)The Boards must establish written procedures reasonably designed, taking into account current market conditions and the funds` investment objectives, to stabilize the funds` net asset value per share, as computed for the purpose of distribution, redemption, and repurchase, at a single value;

    (b)The funds must (i) maintain a dollarweighted average portfolio maturity appropriate to their objective of maintaining a stable price per share, (ii) not purchase any instrument with a remaining maturity greater than 397 days, and (iii) maintain a dollarweighted average portfolio maturity of 90 days or less;

    (c)The funds must limit their purchase of portfolio instruments, including repurchase agreements, to those U.S. dollar-denominated instruments which the funds` Boards determine present minimal credit risks and which are eligible securities as defined by Rule 2a-7; and

    (d)The Boards must determine that (i) it is in the best interest of the funds and the shareholders to maintain a stable net asset value per share under the amortized cost method; and (ii) the funds will continue to use the amortized cost method only so long as the Boards believe that it fairly reflects the market-based net asset value per share.

    Although the funds believe that they will be able to maintain their net asset value at $1.00 per share under most conditions, there can be no absolute assurance that they will be able to do so on a continuous basis. If the funds` net asset value per share declined, or was expected to decline, below $1.00 (rounded to the nearest one cent), the Boards of the funds might temporarily reduce or suspend dividend payments in an effort to maintain the net asset value at $1.00 per share. As a result of such reduction or suspension of dividends, an investor would receive less income during a given period than if such a reduction or suspension had not taken place. Such action could result in an investor receiving no dividend for the period during which he holds his shares and in his receiving, upon redemption, a price per share lower than that which he paid. On the other hand, if the funds` net asset value per share were to increase, or were anticipated to increase, above $1.00 (rounded to the nearest one cent), the Boards of the funds might supplement dividends in an effort to maintain the net asset value at $1.00 per share.

    Prime Reserve and TRP Reserve Investment Funds

    Prime Money Market Securities Defined

    Prime money market securities are those which are described as First Tier Securities under Rule 2a-7 of the 1940 Act. These include any security with a remaining maturity of 397 days or less that is rated (or that has been issued by an issuer that is rated with respect to a class of short-term debt obligations, or any security within that class that is comparable in priority and security with the security) by any two nationally recognized statistical rating organizations (NRSROs) (or if only one NRSRO has issued a rating, that NRSRO) in the highest rating category for short-term debt obligations (within which there may be sub-categories). First Tier Securities also include unrated securities comparable in quality to rated securities, as determined by T. Rowe Price under the supervision of the funds` Boards.

    DIVIDENDS AND DISTRIBUTIONS

    Unless you elect otherwise, capital gain distributions, final quarterly dividends and annual dividends, if any, will be reinvested on the reinvestment date using the net asset values per share on 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.

    IN-KIND REDEMPTIONS AND PURCHASES

    Redemptions In-Kind

    The Price Funds have filed with the SEC a notice of election under Rule 18f-1 of the 1940 Act. This election permits a fund to effect a redemption in-kind if, in any 90-day period, a shareholder redeems: (i) more than $250,000 from the fund; or (ii) redeems more than 1% of the fund`s net assets. If either of these conditions is met, the fund has the right to pay the difference between the redemption amount and the lesser of these two figures with securities from the fund`s portfolio rather than in cash.

    In the unlikely event a shareholder receives an in-kind redemption of portfolio securities from a fund, it would be the responsibility of the shareholder to dispose of the securities. The shareholder would be subject to the risks that the value of the securities could decline prior to their sale, the securities could be difficult to sell, and 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 objectives and policies of the funds; (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.

    TAX STATUS

    The funds intend to qualify as "regulated investment companies" under Subchapter M of the Code.

    To be entitled to the special tax benefits applicable to regulated investment companies, the funds will be required to distribute the sum of 90% of their investment company taxable income and 90% of their net tax-exempt income, if any, each year. In order to avoid federal income tax, the funds must distribute all of their investment company taxable income and realized long-term capital gains for each fiscal year within 12 months after the end of the fiscal year. To avoid federal excise tax, the funds 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) and distribute such amounts prior to February 1 of the following calendar year. Shareholders are required to include such distributions in their income for federal income tax purposes whether dividends and capital gain distributions are paid in cash or in additional shares.

    For individual shareholders, a portion of the funds` ordinary dividends representing "qualified dividend income" may be subject to tax at the lower rate applicable to long-term capital gains, rather than ordinary income. Unless extended, this favorable provision will expire on December 31, 2010, and ordinary dividends will again be taxed at tax rates applicable to ordinary income. "Qualified dividend income" is composed of certain dividends received from domestic and qualified foreign corporations. It excludes dividends representing payments in lieu of dividends related to loaned securities, dividends received on certain hedged positions, dividends on non-qualified foreign corporations, and dividends on stocks the funds have not held for more than 60 days during the 121-day period beginning 60 days before the stock became ex-dividend (90 and 181 days for certain preferred stock). Individual shareholders can only apply the lower rate to the qualified portion of the funds` dividends if they have held the shares in the funds on which the dividends were paid for the holding period surrounding the ex-dividend date of the funds` dividends. Little, if any, of the ordinary dividends from the Tax-Free, Taxable Bond, and Taxable Money Funds is expected to qualify for this lower rate.

    For corporate shareholders, a portion of the funds` ordinary dividends may be eligible for the 70% deduction for dividends received by corporations to the extent the funds` income consists of dividends paid by U.S. corporations. This deduction does not include dividends representing payments in lieu of dividends related to loaned securities, dividends received on certain hedged positions, dividends received from certain foreign corporations, and dividends on stocks the funds have not held for more than 45 days during the 90-day period beginning 45 days before the stock became ex-dividend (90 and 180 days for certain preferred stock). Corporate shareholders can only apply the lower rate to the qualified portion of the funds` dividends if they have held the shares in the funds on which the dividends were paid for the holding period surrounding the ex-dividend date of the funds` dividends. Little, if any, of the ordinary dividends from the Tax-Free, International (except Global Stock Fund), Taxable Bond, and Taxable Money Funds is expected to qualify for this deduction. Long-term capital gain distributions paid by the funds are not eligible for the dividends-received deduction.

    At the time of your purchase of shares (except in Money Funds), the funds` net asset value may reflect undistributed income, capital gains, or net unrealized appreciation of securities held by the funds. A subsequent distribution to you of such amounts, although constituting a return of your investment, would be taxable as either dividend or capital gain distributions. The funds may be able to reduce the amount of such distributions by utilizing their capital loss carry-overs, if any. For federal income tax purposes, the funds are permitted to carry forward their net realized capital losses, if any, for eight years and realize net capital gains up to the amount of such losses without being required to pay taxes on, or distribute, such gains.

    If, in any taxable year, a fund does not qualify as a regulated investment company under the Code: (1) the fund would be taxed at the normal corporate rates on the entire amount of its taxable income, if any, without a 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; (3) the fund may qualify for the 70% deduction for dividends received by corporations; and (4) foreign tax credits would not "pass through" to shareholders.

    Taxation of Foreign Shareholders

    Foreign shareholders may be subject to U.S. tax on the sale of shares in any fund, or on distributions of ordinary income and/or capital gains realized by a fund, depending on a number of factors, including the foreign shareholder`s country of tax residence, its other U.S. operations (if any), and the nature of the distribution received. Foreign shareholders should consult their own tax adviser to determine the precise U.S. and local tax consequences to an investment in any fund.

    Retirement and Spectrum Funds

    Distributions by the underlying Price funds, redemptions of shares in the underlying Price funds, and changes in asset allocations may result in taxable distributions of ordinary income or capital gains. In addition, the funds will generally not be able to currently offset gains realized by one underlying Price fund in which the funds invest against losses realized by another underlying Price fund. These factors could affect the amount, timing, and character of distributions to shareholders.

    State Tax-Free and Tax-Free Funds

    The funds anticipate that substantially all of the dividends to be paid by each fund will be exempt from federal income taxes. It is possible that a portion of the funds` dividends is not exempt from federal income taxes. You will receive a Form 1099-DIV, Form 1099-INT, or other IRS forms, as required, reporting the taxability of all dividends. The funds will also advise you of the percentage of your dividends, if any, which should be included in the computation of the alternative minimum tax. Social Security recipients who receive income dividends from tax-free funds may have to pay taxes on a portion of their Social Security benefits.

    Because the income dividends of the funds are expected to be derived from tax-exempt interest on municipal securities, any interest on money you borrow that is directly or indirectly used to purchase fund shares is not deductible. Further, entities or persons that are "substantial users" (or persons related to "substantial users") of facilities financed by industrial development bonds should consult their tax advisers before purchasing shares of these funds. The income from such bonds may not be tax-exempt for such substantial users.

    Foreign Income Taxes

    Income received by the funds 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 funds` total assets at the close of the taxable year comprises securities issued by foreign corporations or governments, the funds may file an election to "pass through" to the funds` shareholders any foreign income taxes as paid by the funds. There can be no assurance that the funds will be able to do so. Pursuant to this election, shareholders will be required to: (1) include in gross income, even though not actually received, their pro-rata share of foreign income taxes paid by the funds; (2) treat their pro-rata share of foreign income taxes as paid by them; and (3) either deduct their pro-rata share of foreign income taxes in computing their taxable income, or use it as a foreign tax credit against U.S. income taxes subject to certain limitations (but not both). A deduction for foreign income taxes may only be claimed by a shareholder who itemizes deductions.

    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 funds will be increased. If the result is a loss, the ordinary income dividend paid by the funds 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 funds` taxable year.

    Passive Foreign Investment Companies

    The funds may purchase the securities of certain foreign investment funds or trusts, called "passive foreign investment companies" for U.S. tax purposes. Sometimes such funds or trusts are the only or primary way to invest in companies in certain countries. Capital gains on the sale of such holdings are considered ordinary income regardless of how long the funds held the investment. In addition, the funds 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 funds intend to treat these securities as sold on the last day of each of their fiscal years and to 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 in prior taxable years. Such gains and losses will be treated as ordinary income or losses. The funds will be required to distribute any resulting income, even though they have not sold the security and received cash to pay such distributions.

    Investing in Mortgage Entities

    Special tax rules may apply to the funds` investments in entities which invest in or finance mortgage debt. Such investments include residual interests in Real Estate Mortgage Investment Conduits and interests in a REIT which qualifies as a taxable mortgage pool under the Code or has a qualified REIT subsidiary that is a taxable mortgage pool under the Code. Although it is the practice of the funds not to make such investments, there is no guarantee that the funds will be able to sustain this practice or avoid an inadvertent investment.

    Such investments may result in the funds receiving excess inclusion income ("EII") in which case a portion of its distributions will be characterized as EII and shareholders receiving such distributions, including shares held through nominee accounts, will be deemed to have received EII. This can result in the funds being required to pay tax on the portion allocated to disqualified organizations: certain cooperatives, agencies or instrumentalities of a government or international organization, and tax-exempt organizations that are not subject to tax on unrelated business taxable income. In addition, such amounts will be treated as unrelated business taxable income to tax-exempt organizations that are not disqualified organizations, and will be subject to a 30% withholding tax for shareholders who are not U.S. persons, notwithstanding any exemptions or rate reductions in any relevant tax treaties.

    CAPITAL STOCK (MARYLAND CORPORATIONS)

    All funds except Capital Appreciation, Equity Income, GNMA, and New America Growth Funds, and California Tax-Free Income Trust and State Tax-Free Income Trust

    All of the funds, other than those listed immediately above, are organized as Maryland corporations ("Corporations") or series thereof. The funds` Charters authorize the Boards 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 Boards 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 Boards 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 funds have authorized to issue without shareholder approval.

    Except to the extent that the funds` Boards might provide that holders of shares of a particular class are entitled to vote as a class on specified matters presented for a vote of the holders of all shares entitled to vote on such matters, there would be no right of class vote unless and to the extent that such a right might be construed to exist under Maryland law. The directors have provided that as to any matter with respect to which a separate vote of any class is required by the 1940 Act, such requirement as to a separate vote by that class shall apply in lieu of any voting requirements established by the Maryland General Corporation Law. Otherwise, holders of each class of capital stock are not entitled to vote as a class on any matter. Accordingly, the preferences, rights, and other characteristics attaching to any class of shares might be altered or eliminated, or the class might be combined with another class or classes, by action approved by the vote of the holders of a majority of all the shares of all classes entitled to be voted on the proposal, without any additional right to vote as a class by the holders of the capital stock or of another affected class or classes.

    Shareholders are entitled to one vote for each full share held (and fractional votes for fractional shares held) and will vote in the election of or removal of directors (to the extent hereinafter provided) and on other matters submitted to the vote of shareholders. There will normally be no meetings of shareholders for the purpose of electing directors unless and until such time as less than a majority of the directors holding office have been elected by shareholders, at which time the directors then in office will call a shareholders` meeting for the election of directors. Except as set forth above, the directors shall continue to hold office and may appoint successor directors. Voting rights are not cumulative, so that the holders of more than 50% of the shares voting in the election of directors can, if they choose to do so, elect all the directors of the funds, 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 Corporations, a special meeting of shareholders of the Corporations shall be called by the secretary of the Corporations on the written request of shareholders entitled to cast (a) in the case of a meeting for the purpose of removing a director, at least ten (10) percent and (b) in the case of a meeting for any other purpose, at least 25 percent, in each case of all the votes entitled to be cast at such meeting, provided that any such request shall state the purpose or purposes of the meeting and the matters proposed to be acted on. Shareholders requesting such a meeting must pay to the Corporations the reasonably estimated costs of preparing and mailing the notice of the meeting. The Corporations, however, will otherwise assist the shareholders seeking to hold the special meeting in communicating to the other shareholders of the Corporations to the extent required by Section 16(c) of the 1940 Act.

    The series (and classes) set forth in the following table have been established by the Boards under the Articles of Incorporation of the indicated Corporations. Each series represents a separate pool of assets of the Corporations` shares and has different objectives and investment policies. Maryland law provides that the debts, liabilities, obligations, and expenses incurred with respect to a particular series or class are enforceable against the assets associated with that series or class only. The Articles of Incorporation also provide that the Boards may issue additional series of shares. Each share of each fund represents an equal proportionate share in that fund with each other share and is entitled to such dividends and distributions of income belonging to

    that fund as are declared by the directors. In the event of the liquidation of a fund, each share is entitled to a pro-rata share of the net assets of that fund. Classes represent separate shares in the funds but share the same portfolios as the indicated funds. Each fund is registered with the SEC under the 1940 Act as an open-end management investment company, commonly known as a "mutual fund."

    Maryland Corporations

    T. Rowe Price Balanced Fund, Inc. (fund)
    T. Rowe Price Blue Chip Growth Fund, Inc. (fund)
     T. Rowe Price Blue Chip Growth Fund—Advisor Class (class)
     T. Rowe Price Blue Chip Growth Fund—R Class (class)
    T. Rowe Price Capital Opportunity Fund, Inc. (fund)
     T. Rowe Price Capital Opportunity Fund—Advisor Class (class)
     T. Rowe Price Capital Opportunity Fund—R Class (class)
    T. Rowe Price Corporate Income Fund, Inc. (fund)
    T. Rowe Price Developing Technologies Fund, Inc. (fund)
    T. Rowe Price Diversified Mid-Cap Growth Fund, Inc. (fund)
    T. Rowe Price Diversified Small-Cap Growth Fund, Inc. (fund)
    T. Rowe Price Dividend Growth Fund, Inc. (fund)
     T. Rowe Price Dividend Growth Fund—Advisor Class (class)
    T. Rowe Price Financial Services Fund, Inc. (fund)
    T. Rowe Price Global Technology Fund, Inc. (fund)
    T. Rowe Price Growth & Income Fund, Inc. (fund)
    T. Rowe Price Growth Stock Fund, Inc. (fund)
     T. Rowe Price Growth Stock Fund—Advisor Class (class)
     T. Rowe Price Growth Stock Fund—R Class (class)
    T. Rowe Price Health Sciences Fund, Inc. (fund)
    T. Rowe Price High Yield Fund, Inc. (fund)
     T. Rowe Price High Yield Fund—Advisor Class (class)
    T. Rowe Price Index Trust, Inc. (corporation)
     T. Rowe Price Equity Index 500 Fund (series)
     T. Rowe Price Extended Equity Market Index Fund (series)
     T. Rowe Price Total Equity Market Index Fund (series)
    T. Rowe Price Inflation Protected Bond Fund, Inc. (fund)
    T. Rowe Price Institutional Equity Funds, Inc. (corporation)
     T. Rowe Price Institutional Concentrated Large-Cap Value Fund (series)
     T. Rowe Price Institutional Large-Cap Core Growth Fund (series)
     T. Rowe Price Institutional Large-Cap Growth Fund (series)
     T. Rowe Price Institutional Large-Cap Value Fund (series)
     T. Rowe Price Institutional Mid-Cap Equity Growth Fund (series)
     T. Rowe Price Institutional Small-Cap Stock Fund (series)
     T. Rowe Price Institutional U.S. Structured Research Fund (series)
    T. Rowe Price Institutional Income Funds, Inc. (corporation)
     T. Rowe Price Institutional Core Plus Fund (series)
     T. Rowe Price Institutional Floating Rate Fund (series)
     T. Rowe Price Institutional High Yield Fund (series)
    T. Rowe Price Institutional International Funds, Inc. (corporation)
     T. Rowe Price Institutional Africa & Middle East Fund (series) T. Rowe Price Institutional Emerging Markets Bond Fund (series)
     T. Rowe Price Institutional Emerging Markets Equity Fund (series)
     T. Rowe Price Institutional Foreign Equity Fund (series)
     T. Rowe Price Institutional Global Equity Fund (series)
     T. Rowe Price Institutional International Bond Fund (series)
    T. Rowe Price International Funds, Inc. (corporation)
     T. Rowe Price Africa & Middle East Fund (series)
     T. Rowe Price Emerging Europe & Mediterranean Fund (series)
     T. Rowe Price Emerging Markets Bond Fund (series)
     T. Rowe Price Emerging Markets Stock Fund (series)
     T. Rowe Price European Stock Fund (series)
     T. Rowe Price Global Stock Fund (series)
     T. Rowe Price Global Stock Fund—Advisor Class (class)
     T. Rowe Price International Bond Fund (series)
     T. Rowe Price International Bond Fund—Advisor Class (class)
     T. Rowe Price International Discovery Fund (series)
     T. Rowe Price International Growth & Income Fund (series)
     T. Rowe Price International Growth & Income Fund—Advisor Class (class)
     T. Rowe Price International Growth & Income Fund—R Class (class)
     T. Rowe Price International Stock Fund (series)
     T. Rowe Price International Stock Fund—Advisor Class (class)
     T. Rowe Price International Stock Fund—R Class (class)
     T. Rowe Price Japan Fund (series)
     T. Rowe Price Latin America Fund (series)
     T. Rowe Price New Asia Fund (series)
     T. Rowe Price Overseas Stock Fund (series)
    T. Rowe Price International Index Fund, Inc. (corporation)
     T. Rowe Price International Equity Index Fund (series)
    T. Rowe Price Media & Telecommunications Fund, Inc. (fund)
    T. Rowe Price Mid-Cap Growth Fund, Inc. (fund)
     T. Rowe Price Mid-Cap Growth Fund—Advisor Class (class)
     T. Rowe Price Mid-Cap Growth Fund—R Class (class)
    T. Rowe Price Mid-Cap Value Fund, Inc. (fund)
     T. Rowe Price Mid-Cap Value Fund—Advisor Class (class)
     T. Rowe Price Mid-Cap Value Fund—R Class (class)
    T. Rowe Price New Era Fund, Inc. (fund)
    T. Rowe Price New Horizons Fund, Inc. (fund)
    T. Rowe Price New Income Fund, Inc. (fund)
     T. Rowe Price New Income Fund—Advisor Class (class)
     T. Rowe Price New Income Fund—R Class (class)
    T. Rowe Price Personal Strategy Funds, Inc. (corporation)
     T. Rowe Price Personal Strategy Balanced Fund (series)
     T. Rowe Price Personal Strategy Growth Fund (series)
     T. Rowe Price Personal Strategy Income Fund (series)
    T. Rowe Price Prime Reserve Fund, Inc. (fund)
    T. Rowe Price Real Estate Fund, Inc. (fund)
     T. Rowe Price Real Estate Fund—Advisor Class (class)
    T. Rowe Price Reserve Investment Funds, Inc. (corporation)
     T. Rowe Price Government Reserve Investment Fund (series)
     T. Rowe Price Reserve Investment Fund (series)
    T. Rowe Price Retirement Funds, Inc. (corporation)
     T. Rowe Price Retirement 2005 Fund (series)
     T. Rowe Price Retirement 2005 Fund—Advisor Class (class)
     T. Rowe Price Retirement 2005 Fund—R Class (class)
     T. Rowe Price Retirement 2010 Fund (series)
     T. Rowe Price Retirement 2010 Fund—Advisor Class (class)
     T. Rowe Price Retirement 2010 Fund—R Class (class)
     T. Rowe Price Retirement 2015 Fund (series)
     T. Rowe Price Retirement 2015 Fund—Advisor Class (class)
     T. Rowe Price Retirement 2015 Fund—R Class (class)
     T. Rowe Price Retirement 2020 Fund (series)
     T. Rowe Price Retirement 2020 Fund—Advisor Class (class)
     T. Rowe Price Retirement 2020 Fund—R Class (class)
     T. Rowe Price Retirement 2025 Fund (series)
     T. Rowe Price Retirement 2025 Fund—Advisor Class (class)
     T. Rowe Price Retirement 2025 Fund—R Class (class)
     T. Rowe Price Retirement 2030 Fund (series)
     T. Rowe Price Retirement 2030 Fund—Advisor Class (class)
     T. Rowe Price Retirement 2030 Fund—R Class (class)
     T. Rowe Price Retirement 2035 Fund (series)
     T. Rowe Price Retirement 2035 Fund—Advisor Class (class)
     T. Rowe Price Retirement 2035 Fund—R Class (class)
     T. Rowe Price Retirement 2040 Fund (series)
     T. Rowe Price Retirement 2040 Fund—Advisor Class (class)
     T. Rowe Price Retirement 2040 Fund—R Class (class)
     T. Rowe Price Retirement 2045 Fund (series)
     T. Rowe Price Retirement 2045 Fund—Advisor Class (class)
     T. Rowe Price Retirement 2045 Fund—R Class (class)
     T. Rowe Price Retirement 2050 Fund (series)
     T. Rowe Price Retirement 2050 Fund—Advisor Class (class)
     T. Rowe Price Retirement 2050 Fund—R Class (class)
     T. Rowe Price Retirement 2055 Fund (series)
     T. Rowe Price Retirement 2055 Fund—Advisor Class (class)
     T. Rowe Price Retirement 2055 Fund—R Class (class)
     T. Rowe Price Retirement Income Fund (series)
     T. Rowe Price Retirement Income Fund—Advisor Class (class)
     T. Rowe Price Retirement Income Fund—R Class (class)
    T. Rowe Price Science & Technology Fund, Inc. (fund)
     T. Rowe Price Science & Technology Fund—Advisor Class (class)
    T. Rowe Price Short-Term Bond Fund, Inc. (fund)
     T. Rowe Price Short-Term Bond Fund—Advisor Class (class)
    T. Rowe Price Short-Term Income Fund, Inc. (fund)
    T. Rowe Price Small-Cap Stock Fund, Inc. (fund)
     T. Rowe Price Small-Cap Stock Fund—Advisor Class (class)
    T. Rowe Price Small-Cap Value Fund, Inc. (fund)
     T. Rowe Price Small-Cap Value Fund—Advisor Class (class)
    T. Rowe Price Spectrum Fund, Inc. (corporation)
     Spectrum Growth Fund (series)
     Spectrum Income Fund (series)
     Spectrum International Fund (series)
    T. Rowe Price Summit Funds, Inc. (corporation)
     T. Rowe Price Summit Cash Reserves Fund (series)
     T. Rowe Price Summit GNMA Fund (series)
    T. Rowe Price Summit Municipal Funds, Inc. (corporation)
     T. Rowe Price Summit Municipal Money Market Fund (series)
     T. Rowe Price Summit Municipal Intermediate Fund (series)
     T. Rowe Price Summit Municipal Income Fund (series)
    T. Rowe Price Tax-Efficient Funds, Inc. (corporation)
     T. Rowe Price Tax-Efficient Balanced Fund (series)
     T. Rowe Price Tax-Efficient Growth Fund (series)
     T. Rowe Price Tax-Efficient Multi-Cap Growth Fund (series)
    T. Rowe Price Tax-Exempt Money Fund, Inc. (fund)
    T. Rowe Price Tax-Free High Yield Fund, Inc. (fund)
    T. Rowe Price Tax-Free Income Fund, Inc. (fund)
     T. Rowe Price Tax-Free Income Fund—Advisor Class (class)
    T. Rowe Price Tax-Free Short-Intermediate Fund, Inc. (fund)
    T. Rowe Price U.S. Bond Index Fund, Inc. (fund)
    T. Rowe Price U.S. Treasury Funds, Inc. (corporation)
     U.S. Treasury Intermediate Fund (series)
     U.S. Treasury Long-Term Fund (series)
     U.S. Treasury Money Fund (series)
    T. Rowe Price Value Fund, Inc. (fund)
     T. Rowe Price Value Fund—Advisor Class (class)

    Balanced Fund

    On August 31, 1992, the T. Rowe Price Balanced Fund acquired substantially all of the assets of the Axe-Houghton Fund B, a series of Axe-Houghton Funds, Inc. As a result of this acquisition, the SEC requires that the historical performance information of the Balanced Fund be based on the performance of Fund B. Therefore, all performance information of the Balanced Fund prior to September 1, 1992, reflects the performance of Fund B and investment managers other than T. Rowe Price. Performance information after August 31, 1992, reflects the combined assets of the Balanced Fund and Fund B.

    Media & Telecommunications Fund

    On July 28, 1997, the fund converted its status from a closed-end fund to an open-end mutual fund. Prior to the conversion the fund was known as New Age Media Fund, Inc.

    Small-Cap Stock Fund

    Effective May 1, 1997, the fund`s name was changed from the T. Rowe Price OTC Fund to the T. Rowe Price Small-Cap Stock Fund.

    Equity Index 500 Fund

    Effective January 30, 1998, the fund`s name was changed from T. Rowe Price Equity Index Fund to the T. Rowe Price Equity Index 500 Fund.

    ORGANIZATION OF THE FUNDS (MASSACHUSETTS BUSINESS TRUSTS)

    Capital Appreciation, Equity Income, GNMA, and New America Growth Funds, and California Tax-Free Income Trust and State Tax-Free Income Trust

    For tax and business reasons, these funds were organized as Massachusetts business trusts ("Trusts"). Each fund is registered with the SEC under the 1940 Act as an open-end management investment company, commonly known as a "mutual fund."

    The Declaration of Trust permits the Boards to issue an unlimited number of full and fractional shares of a single class. The Declaration of Trust also provides that the Boards may issue additional series or classes of shares. Each share represents an equal proportionate beneficial interest in the funds. In the event of the liquidation of the funds, each share is entitled to a pro-rata share of the net assets of the funds.

    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 trustees (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 trustees unless and until such time as less than a majority of the trustees holding office have been elected by shareholders, at which time the trustees then in office will call a shareholders` meeting for the election of trustees. Pursuant to Section 16(c) of the 1940 Act, holders of record of not less than two-thirds of the outstanding shares of the funds may remove a trustee by a vote cast in person or by proxy at a meeting called for that purpose. Except as set forth above, the trustees shall continue to hold office and may appoint successor trustees. Voting rights are not cumulative, so that the holders of more than 50% of the shares voting in the election of trustees can, if they choose to do so, elect all the trustees of the Trusts, in which event the holders of the remaining shares will be unable to elect any person as a trustee. No amendments may be made to the Declaration of Trust without the affirmative vote of a majority of the outstanding shares of the Trusts.

    Shares have no preemptive or conversion rights; the right of redemption and the privilege of exchange are described in the prospectus. Shares are fully paid and nonassessable, except as set forth below. The Trusts may be terminated (i) upon the sale of their assets to another open-end management investment company, if approved by the vote of the holders of two-thirds of the outstanding shares of the Trusts, or (ii) upon liquidation and distribution of the assets of the Trusts, if approved by the vote of the holders of a majority of the outstanding shares of the Trusts. If not so terminated, the Trusts will continue indefinitely.

    Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the funds. However, the Declaration of Trust disclaims shareholder liability for acts or obligations of the funds and requires that notice of such disclaimer be given in each agreement, obligation, or instrument entered into or executed by the funds or trustees. The Declaration of Trust provides for indemnification from fund property for all losses and expenses of any shareholder held personally liable for the obligations of the funds. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the funds themselves would be unable to meet their obligations, a possibility which T. Rowe Price believes is remote. Upon payment of any liability incurred by the funds, the shareholders of the funds paying such liability will be entitled to reimbursement from the general assets of the funds. The trustees intend to conduct the operations of the funds in such a way as to avoid, as far as possible, ultimate liability of the shareholders for liabilities of such funds.

    The series and classes set forth in the following table have been established by the Boards under the Declaration of Trust of the indicated trusts.

    Massachusetts Business Trusts

    T. Rowe Price California Tax-Free Income Trust (trust)
     California Tax-Free Bond Fund (series)
     California Tax-Free Money Fund (series)
    T. Rowe Price Capital Appreciation Fund (fund)
     T. Rowe Price Capital Appreciation Fund—Advisor Class (class)
    T. Rowe Price Equity Income Fund (fund)
     T. Rowe Price Equity Income Fund—Advisor Class (class)
     T. Rowe Price Equity Income Fund—R Class (class)
    T. Rowe Price GNMA Fund (fund)
    T. Rowe Price New America Growth Fund (fund)
     T. Rowe Price New America Growth Fund—Advisor Class (class)
    T. Rowe Price State Tax-Free Income Trust (trust)
     Georgia Tax-Free Bond Fund (series)
     Maryland Short-Term Tax-Free Bond Fund (series)
     Maryland Tax-Free Bond Fund (series)
     Maryland Tax-Free Money Fund (series)
     New Jersey Tax-Free Bond Fund (series)
     New York Tax-Free Bond Fund (series)
     New York Tax-Free Money Fund (series)
     Virginia Tax-Free Bond Fund (series)

    PROXY VOTING — Process and POLICIES

    T. Rowe Price Associates, Inc. and T. Rowe Price International, Inc. recognize and adhere to the principle that one of the privileges of owning stock in a company is the right to vote on issues submitted to shareholder vote—such as election of directors and important matters affecting a company`s structure and operations. As an investment adviser with a fiduciary responsibility to its clients, T. Rowe Price analyzes the proxy statements of issuers whose stock is owned by the investment companies that it sponsors and serves as investment adviser. T. Rowe Price also is involved in the proxy process on behalf of its institutional and private counsel clients who have requested such service. For those private counsel clients who have not delegated their voting responsibility but who request advice, T. Rowe Price makes recommendations regarding proxy voting. T. Rowe Price reserves the right to decline to vote proxies in accordance with client-specific voting guidelines.

    Proxy Administration

    The T. Rowe Price Proxy Committee develops our firm`s positions on all major corporate and social responsibility issues, creates guidelines, and oversees the voting process. The Proxy Committee, composed of portfolio managers, investment operations managers, and internal legal counsel, analyzes proxy policies based on whether they would adversely affect shareholders` interests and make a company less attractive to own. In evaluating proxy policies each year, the Proxy Committee relies upon our own fundamental research, independent proxy research provided by third parties such as RiskMetrics Group ("RMG") (formerly known as Institutional Shareholder Services) and Glass Lewis, and information presented by company managements and shareholder groups.

    Once the Proxy Committee establishes its recommendations, they are distributed to the firm`s portfolio managers as voting guidelines. Ultimately, the portfolio manager decides how to vote on the proxy proposals of companies in his or her portfolio. Because portfolio managers may have differences of opinion on portfolio companies and their proxies, or their portfolios may have different investment objectives, these factors, among others, may lead to different votes between portfolios on the same proxies. When portfolio managers cast votes that are counter to the Proxy Committee`s guidelines, they are required to document their reasons in writing to the Proxy Committee. Annually, the Proxy Committee reviews T. Rowe Price`s proxy voting process, policies, and voting records.

    T. Rowe Price has retained RMG, an expert in the proxy voting and corporate governance area, to provide proxy advisory and voting services. These services include in-depth research, analysis, and voting recommendations as well as vote execution, reporting, auditing and consulting assistance for the handling of proxy voting responsibility and corporate governance-related efforts. While the Proxy Committee relies upon RMG research in establishing T. Rowe Price`s voting guidelines—many of which are consistent with RMG

    positions—T. Rowe Price deviates from RMG recommendations on some general policy issues and a number of specific proxy proposals.

    Fiduciary Considerations

    T. Rowe Price`s decisions with respect to proxy issues are made in light of the anticipated impact of the issue on the desirability of investing in the portfolio company. Proxies are voted solely in the interests of the client, Price Fund shareholders or, where employee benefit plan assets are involved, in the interests of plan participants and beneficiaries. Practicalities and costs involved with international investing may make it impossible at times, and at other times disadvantageous, to vote proxies in every instance. For example, we might refrain from voting if we or our agents are required to appear in person at a shareholder meeting or if the exercise of voting rights results in the imposition of trading or other ownership restrictions.

    Consideration Given Management Recommendations

    When determining whether to invest in a particular company, one of the primary factors T. Rowe Price considers is the quality and depth of its management. As a result, T. Rowe Price believes that recommendations of management on most issues should be given weight in determining how proxy issues should be voted.

    T. Rowe Price Voting Policies

    Specific voting guidelines have been established by the Proxy Committee for recurring issues that appear on proxies. The following is a summary of the more significant T. Rowe Price policies:

    Election of Directors

    T. Rowe Price generally supports slates with a majority of independent directors. We withhold votes for outside directors on key committees that do not meet certain criteria relating to their independence or their inability to dedicate sufficient time to their board duties due to their commitment to other boards. We also withhold votes for inside directors serving on key board committees and for directors who miss more than one-fourth of the scheduled board meetings. We may also withhold votes from inside directors for failing to establish a formal nominating committee. T. Rowe Price supports shareholder proposals calling for a majority vote threshold for the election of directors as well as those that seek to dismantle a staggered board.

    Executive Compensation

    Our goal is to assure that a company`s equity-based compensation plan is aligned with shareholders` long-term interests. While we evaluate plans on a case-by-case basis, T. Rowe Price generally opposes compensation packages that provide what we view as excessive awards to a few senior executives or that contain excessively dilutive stock option plans. We base our review on criteria such as the costs associated with the plan, plan features, burn rates that are excessive in relation to the company`s peers, dilution to shareholders and comparability to plans in the company`s peer group. We generally oppose plans that give a company the ability to reprice options or to grant options at below market prices. For companies with particularly egregious pay practices we may withhold votes from compensation committee members.

    Mergers and Acquisitions

    T. Rowe Price considers takeover offers, mergers, and other extraordinary corporate transactions on a case-by-case basis to determine if they are beneficial to shareholders` current and future earnings stream and to ensure that our Price Funds and clients are receiving fair compensation in exchange for their investment.

    Anti-takeover, Capital Structure, and Corporate Governance Issues

    T. Rowe Price generally opposes anti-takeover measures and other proposals designed to limit the ability of shareholders to act on possible transactions. Such anti-takeover mechanisms include classified boards, supermajority voting requirements, dual share classes and poison pills. We also oppose proposals that give management a "blank check" to create new classes of stock with disparate rights and privileges. When voting on capital structure proposals, we will consider the dilutive impact to shareholders and the effect on shareholder rights. We generally support shareholder proposals that call for the separation of the Chairman and CEO positions unless there are sufficient governance safeguards already in place. With respect to proposals for the approval of a company`s auditor, we typically oppose auditors who have a significant non-audit relationship with the company.

    Social and Corporate Responsibility Issues

    T. Rowe Price generally votes with a company`s management on social, environmental, and corporate responsibility issues unless they have substantial investment implications for the company`s business and operations that have not been adequately addressed by management. T. Rowe Price may support well-targeted shareholder proposals that call for enhanced disclosure by companies on environmental and public policy issues that are particularly relevant to their businesses.

    Monitoring and Resolving Conflicts of Interest

    The Proxy Committee is also responsible for monitoring and resolving possible material conflicts between the interests of T. Rowe Price and those of its clients with respect to proxy voting. We have adopted safeguards to ensure that our proxy voting is not influenced by interests other than those of our fund shareholders. While membership on the Proxy Committee is diverse, it does not include individuals whose primary duties relate to client relationship management, marketing, or sales. Since our voting guidelines are predetermined by the Proxy Committee using recommendations from RMG, an independent third party, application of the T. Rowe Price guidelines to vote clients` proxies should in most instances adequately address any possible conflicts of interest. However, for proxy votes inconsistent with T. Rowe Price guidelines, the Proxy Committee reviews all such proxy votes in order to determine whether the portfolio manager`s voting rationale appears reasonable. The Proxy Committee also assesses whether any business or other relationships between T. Rowe Price and a portfolio company could have influenced an inconsistent vote on that company`s proxy. Issues raising possible conflicts of interest are referred to designated members of the Proxy Committee for immediate resolution prior to the time T. Rowe Price casts its vote. With respect to personal conflicts of interest, T. Rowe Price`s Code of Ethics requires all employees to avoid placing themselves in a "compromising position" where their interests may conflict with those of our clients and restricts their ability to engage in certain outside business activities. Portfolio managers or Proxy Committee members with a personal conflict of interest regarding a particular proxy vote must recuse themselves and not participate in the voting decisions with respect to that proxy.

    Index, Retirement, and Spectrum Funds

    Voting of T. Rowe Price Group, Inc., common stock (sym: TROW) by certain T. Rowe Price index funds will be done in all instances in accordance with T. Rowe Price policy, and votes inconsistent with policy will not be permitted. The Retirement and Spectrum Funds own shares in underlying T. Rowe Price funds. If an underlying T. Rowe Price fund has a shareholder meeting, the Retirement and Spectrum Funds normally would vote their shares in the underlying fund in the same proportion as the votes of the other shareholders of the underlying fund. This is known as "echo voting" and is designed to avoid any potential for a conflict of interest. This same process would be followed with respect to any T. Rowe Price funds owning shares in other T. Rowe Price funds.

    T. Rowe Price Proxy Vote Disclosure

    T. Rowe Price funds make broad disclosure of their proxy votes on troweprice.com and on the SEC`s Internet site at http://www.sec.gov. All funds, regardless of their fiscal years, must file with the SEC by August 31, their proxy voting records for the most recent 12-month period ended June 30.

    FEDERAL REGISTRATION OF SHARES

    The funds` shares (except for TRP Government Reserve Investment and TRP Reserve Investment Funds) are registered for sale under the 1933 Act. Registration of the funds` shares are not required under any state law, but the funds are required to make certain filings with and pay fees to the states in order to sell their shares in the states.

    LEGAL COUNSEL

    Willkie Farr & Gallagher LLP, whose address is 787 Seventh Avenue, New York, New York 10019, is legal counsel to the funds.

    RATINGS OF COMMERCIAL PAPER

    Moody`s Investors Service, Inc. P-1 superior capacity for repayment. P-2 strong capacity for repayment. P-3 acceptable capacity for repayment of short-term promissory obligations.

    Standard & Poor`s Corporation A-1 highest category, degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 satisfactory capacity to pay principal and interest. A-3 adequate capacity for timely payment, but are more vulnerable to adverse effects of changes in circumstances than higher-rated issues. B and C speculative capacity to pay principal and interest.

    Fitch Ratings F-1+ exceptionally strong credit quality, strongest degree of assurance for timely payment. F-1 very strong credit quality. F-2 good credit quality, having a satisfactory degree of assurance for timely payment. F-3 fair credit quality, assurance for timely payment is adequate, but adverse changes could cause the securities to be rated below investment grade.

    Moody`s Investors Service, Inc. The rating of Prime-1 is the highest commercial paper rating assigned by Moody`s. Among the factors considered by Moody`s in assigning ratings are the following: valuation of the management of the issuer; economic evaluation of the issuer`s industry or industries and an appraisal of speculative-type risks which may be inherent in certain areas; evaluation of the issuer`s products in relation to competition and customer acceptance; liquidity; amount and quality of long-term debt; trend of earnings over a period of 10 years; financial strength of the parent company and the relationships which exist with the issuer; and recognition by the management of obligations which may be present or may arise as a result of public interest questions and preparations to meet such obligations. These factors are all considered in determining whether the commercial paper is rated P1, P2, or P3.

    Standard & Poor`s Corporation Commercial paper rated A (highest quality) by S&P has the following characteristics: liquidity ratios are adequate to meet cash requirements; long-term senior debt is rated "A" or better, although in some cases "BBB" credits may be allowed. The issuer has access to at least two additional channels of borrowing. Basic earnings and cash flow have an upward trend with allowance made for unusual circumstances. Typically, the issuer`s industry is well established and the issuer has a strong position within the industry. The reliability and quality of management are unquestioned. The relative strength or weakness of the above factors determines whether the issuer`s commercial paper is rated A1, A2, or A3.

    Fitch Ratings Fitch 1—Highest grade Commercial paper assigned this rating is regarded as having the strongest degree of assurance for timely payment. Fitch 2—Very good grade Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than the strongest issues.

    RATINGS OF CORPORATE AND MUNICIPAL 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 edged."

    Aa—Bonds rated Aa are judged to be of high quality by all standards. Together with the Aaa group, they comprise what are generally known 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.

    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 Ratings

    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 an 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 the 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 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.

    RATINGS OF MUNICIPAL NOTES AND VARIABLE RATE SECURITIES

    Moody`s Investors Service, Inc. VMIG1/MIG-1 the best quality. VMIG2/MIG-2 high quality, with margins of protection ample, though not so large as in the preceding group. VMIG3/MIG-3 favorable quality, with all security elements accounted for, but lacking the undeniable strength of the preceding grades. Market access for refinancing, in particular, is likely to be less well established. SG adequate quality, but there is specific risk.

    Standard & Poor`s Corporation SP-1 very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. SP-2 satisfactory capacity to pay interest and principal. SP-3 speculative capacity to pay principal and interest.

    Fitch Ratings F-1+ exceptionally strong credit quality, strongest degree of assurance for timely payment. F-1 very strong credit quality. F-2 good credit quality, having a satisfactory degree of assurance for timely payment. F-3 fair credit quality, assurance for timely payment is adequate, but adverse changes could cause the securities to be rated below investment grade.


    INDEX
































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    Capital Stock
    		211

    		Organization of the Funds
    		216
    Code of Ethics
    		203

    		Other Shareholder Services
    		120
    Custodian
    		202

    		Part I
    		6
    Derivatives
    		179

    		Part II
    		150
    Disclosure of Fund Portfolio Information
    		203


    Portfolio Management Practices
    		195
    Distributor for the Funds
    		124

    		Portfolio Services
    		165
    Dividends and Distributions
    		207

    		Portfolio Transactions
    		127
    Federal Registration of Shares
    		219

    		Pricing of Securities
    		205
    Independent Registered Public Accounting Firm
    		149


    Principal Holders of Securities
    		74
    In-Kind Redemptions and Purchases
    		208

    		Proxy Voting — Process and Policies
    		217
    Investment Management Agreements
    		103

    		Ratings of Commercial Paper
    		220

    Investment Objectives and Policies
    		150

    		Ratings of Corporate and Municipal Debt Securities
    		220

    Investment Restrictions
    		197

    		Ratings of Municipal Notes and Variable Rate Securities
    		220
    Legal Counsel
    		220

    		Risk Factors
    		150
    Management of the Funds
    		11

    		Tax Status
    		208
    Net Asset Value per Share
    		206



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