0000080249-01-500010.txt : 20011009
0000080249-01-500010.hdr.sgml : 20011009
ACCESSION NUMBER: 0000080249-01-500010
CONFORMED SUBMISSION TYPE: 485BPOS
PUBLIC DOCUMENT COUNT: 12
FILED AS OF DATE: 20010921
EFFECTIVENESS DATE: 20011001
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PRICE T ROWE NEW INCOME FUND INC
CENTRAL INDEX KEY: 0000080249
STANDARD INDUSTRIAL CLASSIFICATION: []
IRS NUMBER: 520980581
FISCAL YEAR END: 0531
FILING VALUES:
FORM TYPE: 485BPOS
SEC ACT: 1933 Act
SEC FILE NUMBER: 002-48848
FILM NUMBER: 1742531
BUSINESS ADDRESS:
STREET 1: 100 EAST PRATT ST
CITY: BALTIMORE
STATE: MD
ZIP: 21202
BUSINESS PHONE: 4105472000
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PRICE T ROWE NEW INCOME FUND INC
CENTRAL INDEX KEY: 0000080249
STANDARD INDUSTRIAL CLASSIFICATION: []
IRS NUMBER: 520980581
FISCAL YEAR END: 0531
FILING VALUES:
FORM TYPE: 485BPOS
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-02396
FILM NUMBER: 1742532
BUSINESS ADDRESS:
STREET 1: 100 EAST PRATT ST
CITY: BALTIMORE
STATE: MD
ZIP: 21202
BUSINESS PHONE: 4105472000
485BPOS
1
nif52.txt
PAGE 1
Registration Nos. 002-48848/811-2396
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Post-Effective Amendment No. 52 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 27 /X/
T. ROWE PRICE NEW INCOME FUND, INC.
-----------------------------------
Exact Name of Registrant as Specified in Charter
100 East Pratt Street, Baltimore, Maryland 21202
------------------------------------------------
Address of Principal Executive Offices
410-345-2000
------------
Registrant's Telephone Number, Including Area Code
Henry H. Hopkins
100 East Pratt Street, Baltimore, Maryland 21202
------------------------------------------------
Name and Address of Agent for Service
Approximate Date of Proposed Public Offering October 1, 2001
---------------
It is proposed that this filing will become effective (check
appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/X/ On October 1, 2001, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / On (date), pursuant to paragraph (a)(1)
// 75 days after filing pursuant to paragraph (a)(2)
/ / On (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
PAGE 2
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a)(1) Articles of Incorporation of Registrant, dated July 1, 1983
(electronically filed with Amendment No. 19 dated April 25, 1994
(a)(2) Articles of Amendment, dated April 28, 1976, May 1, 1981, July 1, 1983
(electronically filed with Amendment No. 19 dated April 25, 1994)
(a)(3) Articles Supplementary, dated November 7, 1991 (electronically filed
with Amendment No. 19 dated April 25, 1994)
(a)(4) Articles of Amendment, dated October 16, 1998 (electronically filed
with Amendment No. 50 dated September 30, 1999)
(b) By-Laws of Registrant
(c) Article SEVENTH, Section I--Issue of the Corporation's Shares and
Section II--Redemption and Repurchase of the Corporation's Shares, in
their entirety, from the Registrant's Articles of Incorporation, is
hereby incorporated by referenced from Amendment No. 19 electronically
filed and dated April 25, 1994 and Article II, Stockholders, in its
entirety, and Article VIII, Capital Stock, in its entirety, from the
Registrant's By-Laws, are also hereby incorporated by reference from
Amendment No. 19 electronically filed and dated April 25, 1994.
(d) Investment Management Agreement between Registrant and T. Rowe Price
Associates, Inc., dated July 1, 1987 (electronically filed with
Amendment No. 19 dated April 25, 1994)
(e) Underwriting Agreement between Registrant and T. Rowe Price Marketing,
Inc., dated September 25, 1985 (electronically filed with Amendment No.
19 dated April 25, 1994)
(f) Inapplicable
(g) Custody Agreements
PAGE 3
(g)(1) Custodian Agreement between T. Rowe Price Funds and State Street Bank
and Trust Company, dated January 28, 1998, as amended November 4, 1998,
April 21, 1999, February 9, 2000, April 19, 2000, July 18, 2000,
October 25, 2000, February 7, 2001, June 7, 2001, and July 24, 2001
(g)(2) Global Custody Agreement between The Chase Manhattan Bank and T. Rowe
Price Funds, dated January 3, 1994, as amended April 18, 1994, August
15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, July 31,
1996, July 23, 1997, September 3, 1997, October 29, 1997, December 15,
1998, October 6, 1999, February 9, 2000, April 19, 2000, July 18, 2000,
October 25, 2000, April 25, 2001, and July 24, 2001
(h) Other Agreements
(h)(1) Transfer Agency and Service Agreement between T. Rowe Price Services,
Inc. and T. Rowe Price Funds, dated January 1, 2001, as amended
February 7, 2001 and July 24, 2001
(h)(2) Agreement between T. Rowe Price Associates, Inc. and T. Rowe Price
Funds for Fund Accounting Services, dated January 1, 2001, as amended
February 7, 2001 and July 24, 2001
(h)(3) Agreement between T. Rowe Price Retirement Plan Services, Inc. and the
Taxable Funds, dated January 1, 2001, as amended July 24, 2001
(i) Inapplicable
(j) Other Opinions
(j)(1) Consent of Independent Accountants
(j)(2) Opinion of Counsel
(j)(3) Power of Attorney
(k) Inapplicable
(l) Inapplicable
(m) Inapplicable
(n) Inapplicable
(p) Code of Ethics, dated May 1, 2001
PAGE 4
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 25. INDEMNIFICATION
The Registrant maintains comprehensive Errors and Omissions and
Officers and Directors insurance policies written by the Evanston Insurance
Company and ICI Mutual. These policies provide coverage for T. Rowe Price
Associates, Inc. ("Manager"), and its subsidiaries and affiliates as listed in
Item 26 of this Registration Statement (with the exception of the T. Rowe Price
Associates Foundation, Inc.), and all other investment companies in the T. Rowe
Price family of mutual funds. In addition to the corporate insureds, the
policies also cover the officers, directors, and employees of the Manager, its
subsidiaries, and affiliates. The premium is allocated among the named corporate
insureds in accordance with the provisions of Rule 17d-1(d)(7) under the
Investment Company Act of 1940.
GENERAL. The Charter of the Corporation provides that to the fullest extent
permitted by Maryland or federal law, no director or officer of the Corporation
shall be personally liable to the Corporation or the holders of Shares for money
damages and each director and officer shall be indemnified by the Corporation;
PROVIDED, HOWEVER, that nothing therein shall be deemed to protect any director
or officer of the Corporation against any liability to the Corporation of the
holders of Shares to which such director or officer would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office.
Article X, Section 10.01 of the Registrant's By-Laws provides as
follows:
Section 10.01.
INDEMNIFICATION AND PAYMENT OF EXPENSES IN ADVANCE: The Corporation shall
--------------- --- ------- -- -------- -- -------
indemnify any individual ("Indemnitee") who is a present or former director,
officer, employee, or agent of the Corporation, or who is or has been serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, who,
by reason of his position was, is, or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (hereinafter collectively referred to
as a "Proceeding") against any judgments, penalties, fines, settlements, and
reasonable expenses (including attorneys' fees) incurred by such Indemnitee in
connection with any Proceeding, to the fullest extent that such indemnification
may be lawful under Maryland law. The Corporation shall pay any
PAGE 5
reasonable expenses so incurred by such Indemnitee in defending a Proceeding in
advance of the final disposition thereof to the fullest extent that such advance
payment may be lawful under Maryland law. Subject to any applicable limitations
and requirements set forth in the Corporation's Articles of Incorporation and in
these By-Laws, any payment of indemnification or advance of expenses shall be
made in accordance with the procedures set forth in Maryland law.
Notwithstanding the foregoing, nothing herein shall protect or purport
to protect any Indemnitee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office
("Disabling Conduct").
Anything in this Article X to the contrary notwithstanding, no
indemnification shall be made by the Corporation to any Indemnitee unless:
(a)
there is a final decision on the merits by a court or other body before whom the
Proceeding was brought that the Indemnitee was not liable by reason of Disabling
Conduct; or
(b)
in the absence of such a decision, there is a reasonable determination, based
upon a review of the facts, that the Indemnitee was not liable by reason of
Disabling Conduct, which determination shall be made by:
(i)
the vote of a majority of a quorum of directors who are neither "interested
persons" of the Corporation as defined in Section 2(a)(19) of the Investment
Company Act, nor parties to the Proceeding; or
(ii) an independent legal counsel in a written opinion.
Anything in this Article X to the contrary notwithstanding, any advance
of expenses by the Corporation to any Indemnitee shall be made only upon the
undertaking by such Indemnitee to repay the advance unless it is ultimately
determined that such Indemnitee is entitled to indemnification as above
provided, and only if one of the following conditions is met:
(a) the Indemnitee provides a security for his undertaking; or
(b)
the Corporation shall be insured against losses arising by reason of any lawful
advances; or
PAGE 6
(c)
there is a determination, based on a review of readily available facts, that
there is reason to believe that the Indemnitee will ultimately be found entitled
to indemnification, which determination shall be made by:
(i)
a majority of a quorum of directors who are neither "interested persons" of the
Corporation as defined in Section 2(a)(19) of the Investment Company Act, nor
parties to the Proceeding; or
(ii) an independent legal counsel in a written opinion.
SECTION 10.02. INSURANCE OF OFFICERS, DIRECTORS, EMPLOYEES, AND AGENTS.
To the fullest extent permitted by applicable Maryland law and by Section 17(h)
of the Investment Company Act of 1940, as from time to time amended, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee, or agent of the Corporation, or who is or
was serving at the request of the Corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or other
enterprise, against any liability asserted against him and incurred by him in or
arising out of his position, whether or not the Corporation would have the power
to indemnify him against such liability.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT MANAGER
T. Rowe Price Group, Inc., ("GROUP") owns 100% of the stock of T. Rowe
Price Associates, Inc. Group was formed in 2000 as a holding company for the T.
Rowe Price affiliated companies.
PAGE 7
T. Rowe Price Savings Bank ("SAVINGS BANK"), a wholly owned subsidiary
of T. Rowe Price Associates, Inc., commenced operations in 2000. The Savings
Bank is a federally chartered savings bank, and provides federally insured bank
products to a national customer base.
T. Rowe Price International, Inc. (formerly Rowe Price-Fleming
International, Inc.), a Maryland corporation, is a wholly owned subsidiary of T.
Rowe Price Finance, Inc. T. Rowe Price International, Inc. ("T. ROWE PRICE
INTERNATIONAL") was incorporated in Maryland in 2000 and provides investment
counsel service with respect to foreign securities for institutional investors
in the United States. In addition to managing private counsel client accounts,
T. Rowe Price International also sponsors and serves as adviser and subadviser
to registered investment companies which invest in foreign securities, and
provides investment advice to the T. Rowe Price Trust Company, trustee of the
International Common Trust Fund.
T. Rowe Price Global Investment Services Limited is an English
Corporation, organized in 2000, and a wholly owned subsidiary of T. Rowe Price
Group, Inc. Global Investment Services provides investment management, sales,
and client servicing to non-U.S. institutional and retail investors.
T. Rowe Price Global Asset Management Limited ("GLOBAL ASSET
MANAGEMENT"), an English corporation, is an SEC registered investment adviser
under the Investment Advisers Act of 1940. Global Asset Management will provide
investment management services to Japanese investment trusts and other accounts
for institutional investors in Japan pursuant to one or more delegation
agreements entered into between Daiwa SB Investments, Ltd. and Global Asset
Management or other advisory agreements. Global Asset Management is a
wholly-owned subsidiary of T. Rowe Price Group, Inc.
T. Rowe Price Investment Services, Inc. ("INVESTMENT SERVICES"), a
wholly owned subsidiary of T. Rowe Price Associates, Inc., was incorporated in
Maryland in 1980 for the specific purpose of acting as principal underwriter and
distributor for the registered investment companies which T. Rowe Price
Associates, Inc. sponsors and serves as investment adviser (the "PRICE FUNDS").
Investment Services also serves as distributor for any proprietary variable
annuity products. Investment Services is registered as a broker-dealer under the
Securities Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. In 1984, Investment Services expanded its activities to
include a brokerage service.
PAGE 8
TRP Distribution, Inc., a wholly owned subsidiary of Investment
Services, was incorporated in Maryland in 1991. It was organized for, and
engages in, the sale of certain investment related products prepared by
Investment Services and T. Rowe Price Retirement Plan Services.
T. Rowe Price Associates Foundation, Inc. (the "FOUNDATION"), was
incorporated in 1981 (and is not a subsidiary of T. Rowe Price Associates,
Inc.). The Foundation's overall objective is to improve the quality of life in
the community at large by making charitable contributions to nonprofit
organizations benefiting education, arts and culture, civic and community, and
human services interests. In addition to grant making, the Foundation also has a
very generous matching gift program whereby contributions its employees make to
qualifying organizations of their choice are matched according to established
guidelines.
T. Rowe Price Services, Inc. ("PRICE SERVICES"), a wholly owned
subsidiary of T. Rowe Price Associates, Inc., was incorporated in Maryland in
1982 and is registered as a transfer agent under the Securities Exchange Act of
1934. Price Services provides transfer agent, dividend disbursing, and certain
other services, including shareholder services, to the Price Funds.
T. Rowe Price Retirement Plan Services, Inc. ("RPS"), a wholly owned
subsidiary of T. Rowe Price Associates, Inc., was incorporated in Maryland in
1991 and is registered as a transfer agent under the Securities Exchange Act of
1934. RPS provides administrative, recordkeeping, and subaccounting services to
administrators of employee benefit plans.
T. Rowe Price Trust Company ("TRUST COMPANY"), a wholly owned
subsidiary of T. Rowe Price Associates, Inc., is a Maryland-chartered
limited-service trust company, organized in 1983 for the purpose of providing
fiduciary services. The Trust Company serves as trustee and/or custodian of
certain qualified and non-qualified employee benefit plans, individual
retirement accounts, and common trust funds.
T. Rowe Price Investment Technologies, Inc. was incorporated in
Maryland in 1996. A wholly owned subsidiary of T. Rowe Price Associates, Inc.,
it owns the technology rights, hardware, and software of T. Rowe Price
Associates, Inc. and affiliated companies and provides technology services to
them.
TRPH Corporation, a wholly owned subsidiary of T. Rowe Price
Associates, Inc., was organized in 1997 to acquire an interest in a UK-based
corporate finance advisory firm.
PAGE 9
T. Rowe Price Threshold Fund Associates, Inc., a wholly owned
subsidiary of T. Rowe Price Associates, Inc., was incorporated in Maryland in
1994 and serves as the general partner of T. Rowe Price Threshold Fund III,
L.P., a Delaware limited partnership.
T. Rowe Price Threshold Fund III, L.P., a Delaware limited partnership,
was organized in 1994 by T. Rowe Price Associates, Inc. and invests in private
financings of small companies with high growth potential; Threshold Fund
Associates, Inc. is the General Partner of the partnership.
T. Rowe Price Stable Asset Management, Inc. ("STABLE ASSET
MANAGEMENT"), was incorporated in Maryland in 1988 as a wholly owned subsidiary
of T. Rowe Price Associates, Inc. Stable Asset Management is registered as an
investment adviser under the Investment Advisers Act of 1940, and specializes in
the management of investment portfolios which seek stable investment returns
through the use of guaranteed investment contracts, bank investment contracts,
structured investment contracts issued by insurance companies and banks, as well
as fixed income securities.
T. Rowe Price Recovery Fund Associates, Inc., a Maryland corporation,
is a wholly owned subsidiary of T. Rowe Price Associates, Inc. organized in 1988
for the purpose of serving as General Partner of T. Rowe Price Recovery Fund,
L.P., a Delaware limited partnership which invests in financially distressed
companies.
T. Rowe Price Recovery Fund II Associates, L.L.C., is a Maryland
limited liability company (with T. Rowe Price Associates, Inc. and T. Rowe Price
Trust Company as its members) organized in 1996 to serve as General Partner of
T. Rowe Price Recovery Fund II, L.P., a Delaware limited partnership which also
invests in financially distressed companies.
T. Rowe Price (Canada), Inc. ("TRP CANADA") is a Maryland corporation
organized in 1988 as a wholly owned subsidiary of T. Rowe Price Associates, Inc.
This entity is registered as an investment adviser under the Investment Advisers
Act of 1940 as well as with the Ontario Securities Commission to provide
advisory services to individual and institutional clients residing in Canada.
T. Rowe Price Insurance Agency, Inc., is a wholly owned subsidiary of
T. Rowe Price Group, Inc., organized in Maryland in 1994 and licensed to do
business in several states to act primarily as a distributor of proprietary
variable annuity products.
PAGE 10
Since 1983, T. Rowe Price Associates, Inc. has organized several
distinct Maryland limited partnerships, which are informally called the Pratt
Street Ventures partnerships, for the purpose of acquiring interests in
growth-oriented businesses.
TRP Suburban, Inc., is a Maryland corporation organized in 1990 as a
wholly owned subsidiary of T. Rowe Price Associates, Inc. It entered into
agreements with McDonogh School and CMANE-McDonogh-Rowe Limited Partnership to
construct an office building in Owings Mills, Maryland, which currently houses
T. Rowe Price Associates' transfer agent, plan administrative services,
retirement plan services, and operations support functions.
TRP Suburban Second, Inc., a wholly owned Maryland subsidiary of T.
Rowe Price Associates, Inc., was incorporated in 1995 to primarily engage in the
development and ownership of real property located in Owings Mills, Maryland.
TRP Suburban Third, Inc., a wholly owned Maryland subsidiary of T. Rowe
Price Associates, Inc., was incorporated in 1999 to primarily engage in the
development and ownership of real property located in Colorado Springs,
Colorado.
TRP Finance, Inc., a wholly owned subsidiary of T. Rowe Price
Associates, Inc., is a Delaware corporation organized in 1990 to manage certain
passive corporate investments and other intangible assets.
T. Rowe Price Strategic Partners Fund II, L.P. is a Delaware limited
partnership organized in 1992, for the purpose of investing in small public and
private companies seeking capital for expansion or undergoing a restructuring of
ownership. The general partner of T. Rowe Price Strategic Partners Fund II, L.P.
is T. Rowe Price Strategic Partners II, L.P., a Delaware limited partnership
whose general partner is T. Rowe Price Strategic Partners Associates, Inc.
T. Rowe Price Advisory Services, Inc., ("ADVISORY SERVICES"), a wholly
owned subsidiary of T. Rowe Price Group, Inc. was incorporated in Maryland in
2000 Advisory Services is registered as an investment adviser under the
Investment Advisers Act of 1940, and provides investment advisory services to
individuals, including shareholders of the Price Funds.
HorizonGuide, Inc., a Delaware corporation, is a wholly owned
subsidiary of T. Rowe Price Group, Inc., organized March 23, 2000 for the
specific purpose of providing services over the Internet to meet the financial,
emotional, lifestyle and other planning and advice needs of the pre-retirement
market.
PAGE 11
HorizonGuide has a separately incorporated subsidiary, HORIZONGUIDE SERVICES,
INC., organized on June 2, 2000, to sponsor the financial pages of the
HorizonGuide site.
Listed below are the directors, executive officers and managing
directors of T. Rowe Price Group, Inc. who have other substantial businesses,
professions, vocations, or employment aside from their association with T. Rowe
Price Associates, Inc.:
DIRECTORS OF T. ROWE PRICE GROUP, INC.
D. WILLIAM J. GARRETT, Director of T. Rowe Price Group, Inc. Mr. Garrett was the
Group Chief Executive of Robert Fleming Holdings Limited from 1997 until 2000
when the company was acquired by the Chase Manhattan Corporation. He also served
as a director of Rowe Price-Fleming International, Inc. (now T. Rowe Price
International) from 1981 until 2000. Mr. Garrett's address is 13 Stanley
Crescent, London W11 2NA, England.
JAMES H. GILLIAM, JR., Director of T. Rowe Price Group, Inc. Mr. Gilliam is an
attorney, private investor and consultant; counsel to Knickerbocker LLC, a
private investment company; and director or trustee at several institutions. Mr.
Gilliam's address is: Brandywine Plaza, 105 Foulk Road, Suite 101, Wilmington,
Delaware 19803.
DONALD B. HEBB, JR., Director of T. Rowe Price Group, Inc. Mr. Hebb is the
managing general partner of ABS Capital Partners. Mr. Hebb's address is One
South Street, 25th Floor, Baltimore, Maryland 21202.
RICHARD L. MENSCHEL, Director of T. Rowe Price Group, Inc. Mr. Menschel is a
limited partner of The Goldman Sachs Group, L.P., an investment banking firm.
Mr. Menschel's address is: 85 Broad Street, 2nd Floor, New York, New York 10004.
ANNE MARIE WHITTEMORE, Director of T. Rowe Price Group, Inc. Mrs. Whittemore is
a partner of the law firm of McGuire, Woods, Battle & Boothe L.L.P. and a
Director of Owens & Minor, Inc.; Fort James Corporation; and Albemarle
Corporation. Mrs. Whittemore's address is: One James Center, Richmond, Virginia
23219.
All of the following directors of T. Rowe Price Group, Inc. are employees of T.
Rowe Price Associates, Inc.
EDWARD C. BERNARD, Director and Managing Director of T. Rowe Price Group, Inc.,
and T. Rowe Price Associates, Inc.; Director and President of T. Rowe Price
Insurance Agency, Inc. and T. Rowe Price Investment Services, Inc.; Director of
T. Rowe Price Services, Inc.; Vice President of TRP Distribution, Inc.; Chairman
of the Board and Director of T. Rowe Price Savings Bank.
PAGE 12
HENRY H. HOPKINS, Director and Managing Director of T. Rowe Price Group, Inc.;
Managing Director of T. Rowe Price Associates, Inc.; Director of T. Rowe Price
Insurance Agency, Inc.; Vice President and Director of T. Rowe Price (Canada),
Inc., T. Rowe Price Investment Services, Inc., T. Rowe Price Services, Inc., T.
Rowe Price Threshold Fund Associates, Inc., T. Rowe Price Trust Company, TRP
Distribution, Inc., and TRPH Corporation; Vice President of T. Rowe Price
International, T. Rowe Price Real Estate Group, Inc., T. Rowe Price Retirement
Plan Services, Inc., T. Rowe Price Stable Asset Management, Inc., and T. Rowe
Price Strategic Partners Associates, Inc.
JAMES A.C. KENNEDY, Director and Managing Director of T. Rowe Price Group, Inc.,
and T. Rowe Price Associates, Inc.; President and Director of T. Rowe Price
Strategic Partners Associates, Inc.; Director and Vice President of T. Rowe
Price Threshold Fund Associates, Inc.
JOHN H. LAPORTE, JR., Director and Managing Director of T. Rowe Price Group,
Inc.; Managing Director of T. Rowe Price Associates, Inc.
WILLIAM T. REYNOLDS, Director and Managing Director of T. Rowe Price Group,
Inc., and T. Rowe Price Associates, Inc.; Chairman of the Board and Director of
T. Rowe Price Stable Asset Management, Inc.; Director of TRP Finance, Inc.
JAMES S. RIEPE, Vice-Chairman of the Board, Director, and Managing Director of
T. Rowe Price Group, Inc.; Director and Managing Director of T. Rowe Price
Associates, Inc.; Chairman of the Board, Director, President, and Trust Officer
of T. Rowe Price Trust Company; Chairman of the Board and Director of T. Rowe
Price (Canada), Inc., T. Rowe Price Investment Services, Inc., T. Rowe Price
Investment Technologies, Inc., T. Rowe Price Retirement Plan Services, Inc., and
T. Rowe Price Services, Inc.; Director of T. Rowe Price International, T. Rowe
Price Insurance Agency, Inc., and TRPH Corporation; Director and President of
TRP Distribution, Inc., TRP Suburban, Inc., TRP Suburban Second, Inc., and TRP
Suburban Third, Inc.; and Director and Vice President of T. Rowe Price Stable
Asset Management, Inc.
GEORGE A. ROCHE, Chairman of the Board, President, Director, and Managing
Director of T. Rowe Price Group, Inc.; President, Director and Managing Director
of T. Rowe Price Associates, Inc.; Chairman of the Board and Director of TRP
Finance, Inc.; Director of T. Rowe Price International, T. Rowe Price Retirement
Plan Services, Inc., and T. Rowe Price Strategic Partners, Inc., and Director
and Vice President of T. Rowe Price Threshold Fund Associates, Inc., TRP
Suburban, Inc., TRP Suburban Second, Inc., and TRP Suburban Third, Inc.
PAGE 13
BRIAN C. ROGERS, Director and Managing Director of T. Rowe Price Group, Inc.;
Managing Director of T. Rowe Price Associates, Inc.; Vice President of T. Rowe
Price Trust Company.
M. DAVID TESTA, Vice Chairman of the Board, Chief Investment Officer, Director,
and Managing Director of T. Rowe Price Group, Inc.; Director, Chief Investment
Officer, and Managing Director of T. Rowe Price Associates, Inc.; Director, T.
Rowe Price International; President and Director of T. Rowe Price (Canada),
Inc.; Director and Vice President of T. Rowe Price Trust Company; and Director
of TRPH Corporation.
MARTIN G. WADE, Director and Managing Director of T. Rowe Price Group, Inc.;
Managing Director of T. Rowe Price Associates, Inc.; Chairman of the Board and
Director of T. Rowe Price International.
ADDITIONAL EXECUTIVE OFFICERS
CHRISTINA WASIAK, Managing Director and Chief Financial Officer of T. Rowe Price
Group, Inc.; Vice President of T. Rowe Price Associates, Inc.
ADDITIONAL MANAGING DIRECTORS OF T. ROWE PRICE GROUP, INC. AND T. ROWE PRICE
ASSOCIATES, INC.
PRESTON G. ATHEY, Managing Director of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price Trust Company; Vice
President of T. Rowe Price Trust Company.
BRIAN W.H. BERGHUIS, Managing Director of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc.
STEPHEN W. BOESEL, Managing Director of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price Trust Company.
JOHN H. CAMMACK, Managing Director of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price Investment Services,
Inc. and T. Rowe Price Trust Company.
MICHAEL A. GOFF, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.; Director and the President of T. Rowe Price Investment
Technologies, Inc.
GREGORY A. McCRICKARD, Managing Director of T. Rowe Price Group Inc., and T.
Rowe Price Associates, Inc.; Vice President of T. Rowe Price Trust Company.
MARY J. MILLER, Managing Director of T. Rowe Price Group Inc., and T. Rowe Price
Associates, Inc.
PAGE 14
CHARLES A. MORRIS, Managing Director of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc.
NANCY M. MORRIS, Managing Director of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price International, T. Rowe
Price Investment Services, Inc., and T. Rowe Price Stable Asset Management,
Inc.; Director and Vice President of T. Rowe Price Trust Company.
GEORGE A. MURNAGHAN, Managing Director of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price Investment Services,
Inc. and T. Rowe Price Trust Company.
MARIA NALYWAYKO, Managing Director of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc.
EDMUND M. NOTZON III, Managing Director of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price Investment Services,
Inc., and T. Rowe Price Trust Company.
WAYNE D. O'MELIA, Managing Director of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc.; Director and Vice President of T. Rowe Price Investment
Services, Inc.; Director and President of T. Rowe Price Services, Inc.; Vice
President of T. Rowe Price Trust Company.
LARRY J. PUGLIA, Managing Director of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price (Canada), Inc.
JOHN R. ROCKWELL, Managing Director of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc.; Director and Senior Vice President of T. Rowe Price
Retirement Plan Services, Inc.; Director and Vice President of T. Rowe Price
Stable Asset Management, Inc. and T. Rowe Price Trust Company; Vice President of
T. Rowe Price Investment Services, Inc.
R. TODD RUPPERT, Managing Director of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc.; President of T. Rowe Price Global Asset Management
Limited; President and Director of TRPH Corporation; Vice President of T. Rowe
Price Retirement Plan Services, Inc. and T. Rowe Price Trust Company.
ROBERT W. SMITH, Managing Director of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price International.
WILLIAM J. STROMBERG, Managing Director of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc.
PAGE 15
MARK J. VASELKIV, Managing Director of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price Recovery Fund
Associates, Inc. and T. Rowe Price Recovery Fund II Associates, L.L.C.
CHARLES E. VIETH, Managing Director of T. Rowe Price Group, Inc., and T. Rowe
Price Associates, Inc.; Director and President of T. Rowe Price Retirement Plan
Services, Inc.; Director and Vice President of T. Rowe Price Investment
Services, Inc. and T. Rowe Price Services, Inc.; Vice President of T. Rowe Price
(Canada), Inc., T. Rowe Price Trust Company, and TRP Distribution, Inc.
RICHARD T. WHITNEY, Managing Director of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc.; Vice President of T. Rowe Price International and T.
Rowe Price Trust Company.
Certain directors and officers of T. Rowe Price Group Inc., and T. Rowe
Price Associates, Inc. are also officers and/or directors of one or more of the
Price Funds and/or one or more of the affiliated entities listed herein.
See also "Management of the Funds," in Registrant's Statement of
Additional Information.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) The principal underwriter for the Registrant is Investment Services.
Investment Services acts as the principal underwriter for the T. Rowe
Price family of mutual funds, including the following investment
companies: T. Rowe Price Growth Stock Fund, Inc., T. Rowe Price New
Horizons Fund, Inc., T. Rowe Price New Era Fund, Inc., T. Rowe Price
New Income Fund, Inc., T. Rowe Price Prime Reserve Fund, Inc., T. Rowe
Price Tax-Free Income Fund, Inc., T. Rowe Price Tax-Exempt Money Fund,
Inc., T. Rowe Price International Funds, Inc., T. Rowe Price Growth &
Income Fund, Inc., T. Rowe Price Tax-Free Short-Intermediate Fund,
Inc., T. Rowe Price Short-Term Bond Fund, Inc., T. Rowe Price High
Yield Fund, Inc., T. Rowe Price Tax-Free High Yield Fund, Inc., T. Rowe
Price New America Growth Fund, T. Rowe Price Equity Income Fund, T.
Rowe Price GNMA Fund, T. Rowe Price Capital Appreciation Fund, T. Rowe
Price California Tax-Free Income Trust, T. Rowe Price State Tax-Free
Income Trust, T. Rowe Price Science & Technology Fund, Inc., T. Rowe
Price Small-Cap Value Fund, Inc., Institutional International Funds,
Inc., T. Rowe Price U.S. Treasury Funds, Inc., T. Rowe Price Index
Trust, Inc., T. Rowe Price Spectrum Fund, Inc., T. Rowe Price Balanced
Fund, Inc., T. Rowe Price Mid-Cap Growth Fund,
PAGE 16
Inc., T. Rowe Price Small-Cap Stock Fund, Inc., T. Rowe Price Tax-Free
Intermediate Bond Fund, Inc., T. Rowe Price Dividend Growth Fund, Inc.,
T. Rowe Price Blue Chip Growth Fund, Inc., T. Rowe Price Summit Funds,
Inc., T. Rowe Price Summit Municipal Funds, Inc., T. Rowe Price Equity
Series, Inc., T. Rowe Price International Series, Inc., T. Rowe Price
Fixed Income Series, Inc., T. Rowe Price Personal Strategy Funds, Inc.,
T. Rowe Price Value Fund, Inc., T. Rowe Price Capital Opportunity Fund,
Inc., T. Rowe Price Corporate Income Fund, Inc., T. Rowe Price Health
Sciences Fund, Inc., T. Rowe Price Mid-Cap Value Fund, Inc.,
Institutional Equity Funds, Inc., T. Rowe Price Financial Services
Fund, Inc., T. Rowe Price Diversified Small-Cap Growth Fund, Inc., T.
Rowe Price Tax-Efficient Funds, Inc., T. Rowe Price Reserve Investment
Funds, Inc., T. Rowe Price Media & Telecommunications Fund, Inc., T.
Rowe Price Real Estate Fund, Inc., T. Rowe Price Developing
Technologies Fund, Inc., and T. Rowe Price Global Technology Fund,
Inc., T. Rowe Price U.S. Bond Index Fund, Inc., and T. Rowe Price
International Index Fund, Inc.
Investment Services is a wholly owned subsidiary of T. Rowe Price
Associates, Inc., is registered as a broker-dealer under the Securities
Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. Investment Services has been formed for the
limited purpose of distributing the shares of the Price Funds and will
not engage in the general securities business. Since the Price Funds
are sold on a no-load basis, Investment Services will not receive any
commissions or other compensation for acting as principal underwriter.
(b) The address of each of the directors and officers of Investment
Services listed below is 100 East Pratt Street, Baltimore, Maryland
21202.
NAME POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
UNDERWRITER REGISTRANT
James S. Riepe Chairman of the Board Director and Vice
and Director President
Edward C. Bernard President and Director None
Henry H. Hopkins Vice President and Director Vice President
Wayne D. O'Melia Vice President and Director None
Charles E. Vieth Vice President and Director None
Janet G. Albright Vice President None
Patricia M. Archer Vice President None
Steven J. Banks Vice President None
John T. Bielski Vice President None
Robert Birch Vice President None
John H. Boyd Vice President None
Darrell N. Braman Vice President None
Ronae M. Brock Vice President None
Edwin J. Brooks III Vice President None
Meredith C. Callanan Vice President None
John H. Cammack Vice President None
Ann R. Campbell Vice President None
Christine M. Carolan Vice President None
Joseph A. Carrier Vice President None
Laura H. Chasney Vice President None
Renee M. Christoff Vice President None
Jerome A. Clark Vice President None
Todd M. Cleary Vice President None
Joseph A. Crumbling Vice President None
Christine S. Fahlund Vice President None
Forrest R. Foss Vice President None
Thomas A. Gannon Vice President None
John R. Gilner vice President None
Douglas E. Harrison Vice President None
David J. Healy Vice President None
Joanne M. Heal Vice President None
y
Joseph P. Healy Vice President None
Walter J. Helmlinger Vice President None
Salvador G. LaBella Vice President None
Steven A. Larson Vice President None
Gayle A. Lomax Vice President None
Sarah McCafferty Vice President None
Mark J. Mitchell Vice President None
Nancy M. Morris Vice President None
George A. Murnaghan Vice President None
Steven E. Norwitz Vice President None
Edmund M. Notzon III Vice President None
Barbara A. O'Connor Vice President None
David Oestr Vice President None
e
icher
Regina M. Pizzonia Vice President None
Pamela D. Preston Vice President None
Suzanne J. Ricklin Vice President None
George D. Riedel Vice President None
James Robertson, Jr. Vice President None
John R. Rockwell Vice President None
Christopher J. Rohan Vice President None
Kenneth J. Rutherford Vice President None
Alexander Savich Vice President None
Kristin E. Seeberger Vice President None
John W. Seufert Vice President None
Donna B. Singer Vice President None
Carole H. Smith Vice President None
William W. Strickland, Jr. Vice President None
Scott Such Vice President None
Jerome Tuccille Vice President None
Walter Wdowiak Vice President None
Jane F. White Vice President None
Stephan Zinn Vice President None
Barbara A. O'Connor Treasurer and Controller None
Matthew B. Alsted Assistant Vice President None
Kimberly B. Andersen Assistant Vice President None
Russell B. Baker Assistant Vice President None
Richard J. Barna Assistant Vice President None
Catherine L. Berkenkemper Assistant Vice President None
Patricia Cannon Assistant Vice President None
Jodi Ann Casson Assistant Vice President None
Jon Derek Dry Assistant Vice President None
Cheryl L. Emory Assistant Vice President None
John A. Galateria Assistant Vice President None
Karen Glo Assistant Vice President None
o
ch
Jason L. Gounaris Assistant Vice President None
David A.J. Groves Assistant Vice President None
Kristen L. Heerema Assistant Vice President None
David A. Hueser Assistant Vice President None
Suzanne M. Knoll Assistant Vice President None
Patricia Assistant Vice President Secretary
B
.
Lippert
Cheryl J. Lisker Assistant Vice President None
Shannon Mab Assistant Vice President None
u
s
Gayatri Malik Assistant Vice President None
C. Lillian Matthews Assistant Vice President None
Janice D. McCrory Assistant Vice President None
John T. McGuigan Assistant Vice President None
Daniel M. Middelton Assistant Vice President None
Laurie K. Mitchell Assistant Vice President None
Janelyn A. Moore Assistant Vice President None
Clark P. Neel Assistant Vice President None
Danielle Assistant Vice President None
Nicholson
Smith
JeanneMarie B. Patella Assistant Vice President None
Kylelane Purcell Assistant Vice President None
Jean E. Ramos-Izquierdo Assistant Vice President None
Jennifer L. Richardson Assistant Vice President None
Kristin M. Rodriguez Assistant Vice President None
Ramon D. Rodriguez Assistant Vice President None
Deborah Seidel Assistant Vice President None
Kevin C. Shea Assistant Vice President None
John A. Stranovsky Assistant Vice President None
Nancy R. Tabor Assistant Vice President None
Judith B. Ward Assistant Vice President None
William R. Weker, Jr Assistant Vice President None
.
Natalie F. Assistant Vice President None
Widdowson
Mary G. Williams Assistant Vice President None
Timothy R. Yee Assistant Vice President None
Theodore J. Zamerski III Assistant Vice President and None
Assistant Controller
Nolan L. North Assistant Treasurer None
Barbara A. Van Horn Secretary None
PAGE 17
PAGE 18
PAGE 19
(c) Not applicable. Investment Services will not receive any compensation
with respect to its activities as underwriter for the Price Funds since
the Price Funds are sold on a no-load basis.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, and other documents required to be maintained by
the Registrant under Section 31(a) of the Investment Company Act of 1940 and the
rules thereunder will be maintained by the Registrant at its offices at 100 East
Pratt Street, Baltimore, Maryland 21202. Transfer, dividend disbursing, and
shareholder service activities are performed by T. Rowe Price Services, Inc., at
4515 Painters Mill Road, Owings Mills, Maryland 21117. Custodian activities for
the Registrant are performed at State Street Bank and Trust Company's Service
Center (State Street South), 1776 Heritage Drive, Quincy, Massachusetts 02171.
Custody of Registrant's portfolio securities which are purchased
outside the United States is maintained by The Chase Manhattan Bank, London, in
its foreign branches or with other U.S. banks. The Chase Manhattan Bank, London,
is located at Woolgate House, Coleman Street, London EC2P 2HD England.
ITEM 29. MANAGEMENT SERVICES
Registrant is not a party to any management-related service contract,
other than as set forth in the Prospectus or Statement of Additional
Information.
ITEM 30. UNDERTAKINGS
(a) Not applicable
PAGE 20
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant certifies
that it meets all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, duly authorized, in the City of Baltimore, State of Maryland, this
September 21, 2001.
T. Rowe Price New Income Fund, Inc.
/s/William T. Reynolds
By: William T. Reynolds
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/William T. Reynolds President September 21, 2001
William T. Reynolds (Chief Executive Officer)
/s/Joseph A. Carrier Treasurer (Chief September 21, 2001
Joseph A. Carrier Financial Officer)
* Director September 21, 2001
Calvin W. Burnett
* Director September 21, 2001
Anthony W. Deering
* Director September 21, 2001
F. Pierce Linaweaver
/s/James S. Riepe Director and September 21, 2001
James S. Riepe Vice President
* Director September 21, 2001
John G. Schreiber
/s/M. David Testa Director September 21, 2001
M. David Testa
*/s/Henry H. Hopkins Vice President and September 21, 2001
Henry H. Hopkins Attorney-In-Fact
EX-99
3
nif01.txt
PROSPECTUS
October 1, 2001
T. ROWE PRICE
New Income Fund
A bond fund investing primarily in investment-grade bonds to achieve an
attractive level of income.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
T. Rowe Price New Income Fund, Inc.
Prospectus
October 1, 2001
1 ABOUT THE FUND
Objective, Strategy, Risks, and Expenses 1
-----------------------------------------------
Other Information About the Fund 5
-----------------------------------------------
Some Characteristics of
Municipal Securities
-----------------------------------------------
Some Basics of Fixed-Income Investing 7
-----------------------------------------------
T. ROWE PRICE ACCOUNT INFORMATION
2
Pricing Shares and Receiving 9
Sale Proceeds
-----------------------------------------------
Useful Information on Distributions 12
and Taxes
-----------------------------------------------
Transaction Procedures and 16
Special Requirements
-----------------------------------------------
3 MORE ABOUT THE FUND
Organization and Management 19
-----------------------------------------------
Understanding Performance Information 20
-----------------------------------------------
Investment Policies and Practices 22
-----------------------------------------------
Financial Highlights 31
-----------------------------------------------
4 INVESTING WITH T. ROWE PRICE
Account Requirements 33
and Transaction Information
-----------------------------------------------
Opening a New Account 34
-----------------------------------------------
Purchasing Additional Shares 35
-----------------------------------------------
Exchanging and Redeeming Shares 36
-----------------------------------------------
Rights Reserved by the Funds 38
-----------------------------------------------
Information About Your Services 38
-----------------------------------------------
T. Rowe Price Brokerage 41
-----------------------------------------------
Investment Information 42
-----------------------------------------------
T. Rowe Price Privacy Policy 43
-----------------------------------------------
Founded in 1937 by the late Thomas Rowe Price, Jr., T. Rowe Price Associates,
Inc., and its affiliates managed $158.6 billion for more than eight million
individual and institutional investor accounts as of June 30, 2001.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any
depository institution. Shares are not insured by the FDIC, Federal Reserve, or
any other government agency, and are subject to investment risks, including
possible loss of the principal amount invested.
ABOUT THE FUND
OBJECTIVE, STRATEGY, RISKS, AND EXPENSES
----------------------------------------------------------
What is the fund's objective?
The fund seeks the highest level of income consistent with the preservation
of capital over time by investing primarily in marketable debt securities.
What is the fund's principal investment strategy?
We will invest at least 80% of the fund's total assets in income-producing
securities, which may include U.S. government and agency obligations,
mortgage- and asset-backed securities, corporate bonds, foreign securities,
collateralized mortgage obligations (CMOs), and others, including, on
occasion, equities.
All debt securities purchased by the fund must be rated investment grade
(AAA, AA, A, or BBB) by at least one major credit rating agency or, if
unrated, must have a T. Rowe Price equivalent rating. Up to 15% of total
assets may be invested in "split-rated securities," or those rated investment
grade by at least one rating agency, but below investment grade by others.
However, none of the fund's remaining assets can be invested in bonds rated
below investment grade by Standard & Poor's, Moody's, or Fitch IBCA, Inc.
We have considerable flexibility in seeking high yield for the fund. There
are no maturity restrictions, so we can purchase longer-term bonds, which
tend to have higher yields than shorter-term issues. However, the portfolio's
weighted average maturity is expected to be between four and 15 years. In
addition, when there is a large yield difference between the various quality
levels, we may move down the credit scale and purchase lower-rated bonds with
higher yields. When the difference is small or the outlook warrants, we may
concentrate investments in higher-rated issues.
We may also invest in other securities, including futures, options, and
swaps, in keeping with the fund's objective.
The fund may sell holdings for a variety of reasons, such as to adjust the
portfolio's average maturity or quality, or to shift assets into
higher-yielding securities or different sectors.
3 For details about the fund's investment program, please see the Investment
Policies and Practices section.
What are the main risks of investing in the fund?
. Interest rate risk Investors should be concerned primarily with this risk.
An increase in interest rates will likely cause the fund's share price to
fall, resulting in
T. ROWE PRICE 2
a loss of principal (see Table 3). That's because the bonds and notes in the
fund's portfolio become less attractive to other investors when securities
with higher yields become available. Even GNMAs and other securities whose
principal and interest payments are guaranteed can decline in price if rates
rise. Generally speaking, the longer a bond's maturity, the greater its
potential for price declines if rates rise and for price gains if rates fall.
Because the fund may invest in bonds of any maturity, it carries more
interest rate risk than short-term bond funds.
. Credit risk This is the chance that any of a fund's holdings will have its
credit rating downgraded or will default (fail to make scheduled interest or
principal payments), potentially reducing the fund's income level and share
price. While the fund's overall credit quality is high, it can own BBB
securities, which are more susceptible to adverse economic conditions and may
have speculative characteristics.
3 The fund may continue to hold a security that has been downgraded or loses
its investment-grade rating after purchase.
. Foreign investing risk To the extent the fund holds foreign bonds, it will
be subject to special risks whether the bonds are denominated in U.S. dollars
or foreign currencies. These risks include potentially adverse political and
economic developments overseas, greater volatility, lower liquidity, and the
possibility that foreign currencies will decline against the dollar, lowering
the value of securities denominated in those currencies and possibly the
fund's share price.
. Prepayment risk and extension risk A mortgage-backed bond, unlike most other
bonds, can be hurt when interest rates fall, because homeowners tend to
refinance and prepay principal. Receiving increasing prepayments in a falling
interest rate environment causes the average maturity of the portfolio to
shorten, reducing its potential for price gains. It also requires the fund to
reinvest proceeds at lower interest rates, which reduces the portfolio's
total return, reduces its yield, and may even cause certain bonds' prices to
fall below what the fund paid for them, resulting in a capital loss. Any of
these developments could cause a decrease in the fund's income, share price,
or total return.
Extension risk refers to a rise in interest rates that causes a fund's
average maturity to lengthen unexpectedly due to a drop in mortgage
prepayments. This would increase the fund's sensitivity to rising rates and
its potential for price declines.
. Derivatives risk Shareholders are also exposed to derivatives risk, the
potential that our investments in these complex and volatile instruments
could affect the fund's share price. In addition to CMOs and better-known
instruments such as swaps and futures, other derivatives that may be used in
limited fashion by the fund include interest-only (IO) and principal-only
(PO) securities known as "strips." The value of these instruments is derived
from an underlying pool of
ABOUT THE FUND 3
mortgage-backed securities or a CMO. Some of these instruments can be highly
volatile, and their value can fall dramatically in response to rapid or
unexpected changes in the mortgage, interest rate, or economic environment.
As with any mutual fund, there can be no guarantee the fund will achieve its
objective.
3 The share price and income level of the fund will fluctuate with changing
market conditions and interest rate levels. When you sell your shares, you
may lose money.
How can I tell if the fund is appropriate for me?
Consider your investment goals, your time horizon for achieving them, and
your tolerance for risk. The fund may be appropriate for you if you seek an
attractive level of income and are willing to accept the risk of a declining
share price when interest rates rise. Steadily reinvesting the fund's income
is a conservative strategy for building capital over time. If you are
investing primarily for safety and liquidity, you should consider a money
market fund.
The fund can be used in both regular and tax-deferred accounts, such as IRAs.
3 The fund should not represent your complete investment program or be used
for short-term trading purposes.
How has the fund performed in the past?
The bar chart showing calendar year returns and the average annual total
return table indicate risk by illustrating how much returns can differ from
one year to the next and over time. Fund past performance is no guarantee of
future returns.
The fund can also experience short-term performance swings, as shown by the
best and worst calendar quarter returns during the years depicted in the
chart.
T. ROWE PRICE 4
LOGO
Calendar Year Total Returns
"91" "92" "93" "94" "95" "96" "97" "98" "99" "00"
----------------------------------------------------------------------
15.51 4.96 9.58 -2.22 18.36 2.38 9.32 5.04 -1.58 11.13
----------------------------------------------------------------------
Quarter ended Total return
Best quarter 6/30/95 5.83%
Worst quarter 3/31/96 -2.53%
The fund's total return for the six months ended 6/30/01 was 3.40%.
Table 1 Average Annual Total Returns
Periods ended December 31, 2000
1 year 5 years 10 years
-------------------------------------------------------------------------------
New Income Fund 11.13% 5.16% 7.06%
Lehman Brothers U.S. Aggregate Index 11.63 6.46 7.96
Lipper Corporate Debt Funds A Rated 9.83 5.21 7.58
Average
-------------------------------------------------------------------------------
These figures include changes in principal value, reinvested dividends, and
capital gain distributions, if any.
Lehman indices do not reflect the deduction of any fees or expenses.
What fees or expenses will I pay?
The fund is 100% no load. There are no fees or charges to buy or sell fund
shares, reinvest dividends, or exchange into other T. Rowe Price funds. There
are no 12b-1 fees.
ABOUT THE FUND 5
Table 2 Fees and Expenses of the Fund*
Annual fund operating expenses
(expenses that are deducted from fund assets)
--------------------------------------------------------------------------------------
Management fee 0.47%/ // /
Other expenses 0.26%
Total annual fund operating expenses 0.73%/ // /
--------------------------------------------------------------------------------------
* Redemption proceeds of less than $5,000 sent by wire are subject to a $5 fee
paid to the fund. Accounts with less than a $2,000 balance (with certain
exceptions) are subject to a $10 fee. See Transaction Procedures and Special
Requirements - Account Maintenance and Small Account Fees.
Example. The following table gives you a rough idea of how expense ratios
may translate into dollars and helps you to compare the cost of investing in
this fund with that of other mutual funds. Although your actual costs may be
higher or lower, the table shows how much you would pay if operating expenses
remain the same, you invest $10,000, earn a 5% annual return, and hold the
investment for the following periods and then redeem:
1 year 3 years 5 years 10 years
----------------------------------------------------
$75 $233 $406 $906
----------------------------------------------------
OTHER INFORMATION ABOUT THE FUND
----------------------------------------------------------
What are the fund's potential rewards?
The fund can provide an attractive level of income to investors who want only
a moderate level of risk. It should offer higher yields than money market and
short-term bond funds and generally less volatility than longer-term bond
funds. In addition, the portfolio is widely diversified among various
fixed-income securities, thus reducing the effect of a single bond's price
fluctuations on the fund's share price or total return.
How does the portfolio manager try to reduce risk?
Consistent with the fund's objective, the portfolio manager uses various
tools to try to reduce risk and increase total return, including:
. Diversification of assets to reduce the impact of a single holding or sector
on the fund's net asset value.
. Thorough credit research by our own analysts.
. Adjustment of fund duration to try to reduce the drop in price when interest
rates rise or to benefit from the rise in price when rates fall. Duration is
a measure of a fund's sensitivity to interest rate changes.
T. ROWE PRICE 6
Is the fund a substitute for a money market fund?
No. Money market funds, which have an average maturity under one year,
ordinarily generate lower income in return for stability of net asset value.
The fund's total return is expected to fluctuate more than a money market
fund's and, as such, it should be viewed as a longer-term and riskier
investment.
Do mortgage-backed securities differ from other high-quality bonds?
Yes, in one major respect. Non-mortgage bonds generally repay principal (face
value of the bond) when their maturity date is reached, but most
mortgage-backed securities repay principal continually as homeowners make
mortgage payments. Homeowners have the option of paying either part or all of
the loan balance before maturity, perhaps to refinance or buy a new home. As
a result, the effective maturity of a mortgage-backed security is virtually
always shorter than its stated maturity.
For example, a new GNMA certificate backed by 30-year, fixed-rate mortgages
will generally have a far shorter life than 30 years - probably 12 or less.
Therefore, it will usually be about as volatile as a 10-year Treasury note.
It is possible to estimate the average life of an entire mortgage pool
backing a particular security with some accuracy, but not with certainty.
Why are yields on mortgage-backed securities higher than yields on Treasuries
of similar maturity?
The structure of mortgage-backed securities is much more complex, and their
effective maturities are uncertain because of unscheduled prepayments. Higher
yields compensate investors for these potentially negative features. See the
previous discussion of prepayment risk and extension risk.
What are derivatives and can the fund invest in them?
A derivative is a financial instrument whose value is derived from an
underlying security, such as a stock or bond, or from a market benchmark such
as an interest rate index. Many types of investments representing a wide
range of risks and potential rewards are derivatives, including conventional
instruments such as callable bonds, futures, and options, as well as more
exotic investments such as stripped mortgage securities, swaps, and
structured notes. Investment managers have used derivatives for many years.
We invest in derivatives only if the expected risks and rewards are
consistent with the fund's objective, policies, and overall risk profile
described in this prospectus. We use derivatives in situations where they may
enable the fund to increase yield, hedge against a decline in principal,
invest in other asset classes more efficiently and at a lower cost, or adjust
duration.
ABOUT THE FUND 7
We will not invest in any high-risk, highly leveraged derivative that we
believe would cause the portfolio to be more volatile than a long-term,
investment-grade bond.
Is there other information I can review before making a decision?
Investment Policies and Practices in Section 3 discusses various types of
portfolio securities the fund may purchase as well as types of management
practices the fund may use.
SOME BASICS OF FIXED-INCOME INVESTING
----------------------------------------------------------
Is a fund's yield fixed or will it vary?
It will vary. The yield is calculated every day by dividing a fund's net
income per share, expressed at annual rates, by the share price. Since both
income and share price will fluctuate, a fund's yield will also vary.
(Although money fund prices are stable, income is variable.)
Is yield the same as total return?
Not for bond funds. A fund's total return is the result of reinvested
distributions from income and capital gains and the change in share price for
a given period. Income is always a positive contributor to total return and
can either enhance a rise in share price or help offset a price decline.
What is credit quality and how does it affect yield?
Credit quality refers to a bond issuer's expected ability to make all
required interest and principal payments on time. Because highly rated
issuers represent less risk, they can borrow at lower interest rates than
less creditworthy issuers. Therefore, a fund investing in high-quality
securities should have a lower yield than an otherwise comparable fund
investing in lower-quality securities.
What is meant by a bond fund's maturity?
Every bond has a stated maturity date when the issuer must repay the bond's
entire principal value to the investor. However, many bonds are "callable,"
meaning their principal can be repaid earlier, on or after specified call
dates. Bonds are most likely to be called when interest rates are falling
because the issuer can refinance at a lower rate, just as a homeowner
refinances a mortgage. In that environment, a bond's "effective maturity" is
usually its nearest call date. For example, the rate at which homeowners pay
down their mortgage principal determines the effective maturity of
mortgage-backed bonds.
T. ROWE PRICE 8
A bond mutual fund has no real maturity, but it does have a weighted average
maturity and a weighted average effective maturity. Each of these numbers is
an average of the stated or effective maturities of the underlying bonds,
with each bond's maturity "weighted" by the percentage of fund assets it
represents. Some funds target effective maturities rather than stated
maturities when computing the average. This provides additional flexibility
in portfolio management.
What is meant by a bond fund's duration?
Duration is a calculation that seeks to measure the price sensitivity of a
bond or a bond fund to changes in interest rates. It is expressed in years,
like maturity, but it is a better indicator of price sensitivity than
maturity because it takes into account the time value of cash flows generated
over the bond's life. Future interest and principal payments are discounted
to reflect their present value and then are multiplied by the number of years
they will be received to produce a value expressed in years - the duration.
"Effective" duration takes into account call features and sinking fund
payments that may shorten a bond's life.
Since duration can also be computed for bond funds, you can estimate the
effect of interest rates on share prices by multiplying fund duration by an
expected change in interest rates. For example, the price of a bond fund with
a duration of five years would be expected to fall approximately 5% if rates
rose by one percentage point. (T. Rowe Price shareholder reports show
duration.)
How is a bond's price affected by changes in interest rates?
When interest rates rise, a bond's price usually falls, and vice versa. In
general, the longer a bond's maturity, the greater the price increase or
decrease in response to a given change in rates, as shown in Table 3.
Table 3 How Interest Rates May Affect Bond Prices
Price of a $1,000 face value bond if interest rates:
Bond maturity Coupon Increase Decrease
1 point 2 points 1 point 2 points
1 year 3.63% $990 $981 $1,010 $1,020
5 years 4.95 957 917 1,045 1,092
10 years 5.41 927 860 1,080 1,168
30 years 5.76 872 769 1,159 1,358
------------------------------------------------------------------------------------------------------------------
Coupons reflect yields on Treasury securities as of June 30, 2001. The table
may not be representative of price changes for mortgage-backed securities
because of prepayments. This is an illustration and does not represent expected
yields or share price changes of any T. Rowe Price fund.
T. ROWE PRICE ACCOUNT INFORMATION
Here are some procedures you should know when investing in the T. Rowe Price
family of taxable stock, bond, and money market funds.
PRICING SHARES AND RECEIVING SALE PROCEEDS
----------------------------------------------------------
How and when shares are priced
The share price (also called "net asset value" or NAV per share) for all
funds except the Japan Fund is calculated at the close of the New York Stock
Exchange, normally 4 p.m. ET, each day that the exchange is open for
business. (See the following section for information on the Japan Fund.) To
calculate the NAV, a fund's assets are valued and totaled, liabilities are
subtracted, and the balance, called net assets, is divided by the number of
shares outstanding. Market values are used to price stocks and bonds.
Amortized cost is used to price money market securities.
The securities of funds investing in foreign markets are usually valued on
the basis of the most recent closing market prices at 4 p.m. ET. Most foreign
markets close before that time. For securities primarily traded in the Far
East, for example, the most recent closing prices may be as much as 15 hours
old at 4 p.m. Normally, developments that could affect the values of
portfolio securities that occur between the close of the foreign market and 4
p.m. ET will not be reflected in a fund NAV. However, if a fund determines
that such developments are so significant that they will, in its judgment,
clearly and materially affect the value of the fund's securities, the fund
may adjust the previous closing prices to reflect what it believes to be the
fair value of the securities as of 4 p.m. ET. A fund may fair value
securities in other situations, for example, when a particular foreign market
is closed but the fund is open.
3 The various ways you can buy, sell, and exchange shares are explained at
the end of this prospectus and on the New Account Form. These procedures
may differ for institutional and employer-sponsored retirement accounts.
How your purchase, sale, or exchange price is determined
If we receive your request in correct form by 4 p.m. ET, your transaction
will be priced at that day's NAV. If we receive it after 4 p.m., it will be
priced at the next business day's NAV.
We cannot accept orders that request a particular day or price for your
transaction or any other special conditions.
T. ROWE PRICE 10
Fund shares may be purchased through various third-party intermediaries
including banks, brokers, and investment advisers. Where authorized by a
fund, orders will be priced at the NAV next computed after receipt by the
intermediary. Consult your intermediary to determine when your orders will be
priced. The intermediary may charge a fee for its services.
Note: The time at which transactions and shares are priced and the time until
which orders are accepted may be changed in case of an emergency or if the
New York Stock Exchange closes at a time other than 4 p.m. ET.
Japan Fund: Pricing and Transactions
The Japan Fund's share price is calculated at the close of the New York Stock
Exchange, normally 4 p.m. ET, when both it and the Tokyo Stock Exchange are
open. The fund will not price shares or process orders on any day when either
the New York or Tokyo Stock Exchange is closed. Orders received on such days
will be processed the next day the fund computes an NAV. As such, you may
experience a delay in purchasing or redeeming fund shares. Exchanges: If you
wish to exchange into the Japan Fund on a day the New York Stock Exchange is
open but the Tokyo Stock Exchange is closed, the exchange out of the other T.
Rowe Price fund will be processed on that day, but Japan Fund shares will not
be purchased until the day the Japan Fund reopens. If you wish to exchange
out of the Japan Fund on a day when the New York Stock Exchange is open but
the Tokyo Stock Exchange is closed, the exchange will be delayed until the
Japan Fund reopens.
The Tokyo Stock Exchange is scheduled to be closed on the following weekdays:
In 2001 -January 1, 2, 3, and 8; February 12; March 20; April 30; May 3 and
4; July 20; September 24; October 8; November 23; and December 24 and 31. In
2002 -January 1, 2, 3, and 14; February 11; March 21; April 29; May 3 and 6;
September 16 and 23; October 14; November 4; and December 23 and 31. If the
Tokyo Stock Exchange closes on dates not listed, the fund will not be priced
on those dates.
How you can receive the proceeds from a sale
3 When filling out the New Account Form, you may wish to give yourself the
widest range of options for receiving proceeds from a sale.
If your request is received by 4 p.m. ET in correct form, proceeds are
usually sent on the next business day. Proceeds can be sent to you by mail or
to your bank account by Automated Clearing House (ACH) transfer or bank wire.
ACH is an automated method of initiating payments from, and receiving
payments in, your financial institution account. Proceeds sent by ACH
transfer should be credited the second business day after the sale. Proceeds
sent by bank wire should be credited to your account the first business day
after the sale.
ABOUT THE FUND 11
. Exception: Under certain circumstances and when deemed to be in a fund's
best interest, your proceeds may not be sent for up to seven calendar days
after we receive your redemption request.
3 If for some reason we cannot accept your request to sell shares, we will
contact you.
Contingent Redemption Fee
Short-term "market timers" who engage in frequent purchases and redemptions
can disrupt a fund's investment program and create additional transaction
costs. For these reasons, certain T. Rowe Price funds, listed below, assess a
fee on redemptions (including exchanges) of fund shares held for less than
the time period shown:
Fund Holding period Redemption fee
Diversified Small-Cap Growth 6 months 1%
--------------------------------
Developing Technologies 1 year 1%
--------------------------------
Emerging Europe & Mediterranean 1 year 2%
--------------------------------
Emerging Markets Stock 1 year 2%
--------------------------------
Equity Index 500 6 months .50%
--------------------------------
Extended Equity Market Index 6 months .50%
--------------------------------
High Yield 1 year 1%
--------------------------------
International Discovery 1 year 2%
--------------------------------
International Equity Index 6 months 1%
--------------------------------
Latin America 1 year 2%
--------------------------------
Real Estate 6 months 1%
--------------------------------
Small-Cap Value 1 year 1%
--------------------------------
Tax-Efficient Balanced 1 year 1%
--------------------------------
Tax-Efficient Growth 2 years 1%
--------------------------------
Tax-Efficient Multi-Cap Growth 2 years 1%
--------------------------------
Total Equity Market Index 6 months .50%
--------------------------------
U.S. Bond Index 6 months .50%
-----------------------------------------------------------------------
Redemption fees are paid to a fund to help offset transaction costs and to
protect its long-term shareholders. The "first-in, first-out" (FIFO) method
is used to determine the holding period. Under this method, the date of the
redemption or exchange will be compared with the earliest purchase date of
shares held in the account. If this holding period is less than the
designated holding period, the fee will be charged.
T. ROWE PRICE 12
In determining a holding period, the fund will use the anniversary date of a
transaction. Thus, for a one-year period, shares purchased on January 1 will
be subject to the fee if they are redeemed on or prior to the following
December 31. If they are redeemed on or after January 1 of the following
year, they will not be subject to the fee.
The fee does not apply to any shares purchased through reinvested
distributions (dividends and capital gains), shares held in retirement plans,
such as 401(k), 403(b), 457, Keogh, profit sharing, SIMPLE IRA, SEP-IRA, and
money purchase pension accounts, or to shares redeemed through designated
systematic withdrawal plans. The fee does apply to all other types of
accounts including IRAs. The fee may also apply to shares in retirement plans
held in broker omnibus accounts.
USEFUL INFORMATION ON DISTRIBUTIONS AND TAXES
----------------------------------------------------------
3 All net investment income and realized capital gains are distributed to
shareholders.
Dividends and Other Distributions
Dividend and capital gain distributions are reinvested in additional fund
shares in your account unless you select another option on your New Account
Form. Reinvesting distributions results in compounding, that is, receiving
income dividends and capital gain distributions on a rising number of shares.
Distributions not reinvested are paid by check or transmitted to your bank
account via ACH. If the Post Office cannot deliver your check, or if your
check remains uncashed for six months, the fund reserves the right to
reinvest your distribution check in your account at the NAV on the day of the
reinvestment and to reinvest all subsequent distributions in shares of the
fund. No interest will accrue on amounts represented by uncashed distribution
or redemption checks.
The following chart provides details on dividend payments.
Table 4 Dividend Payment Schedule
Fund Dividends
Money market funds .
Declared daily to shareholders of record as
of 12 noon ET on that day. Other purchases
receive the dividend on the next business
day after payment has been received.
.Paid on the first business day of each
month.
----------------------------------------------------------------------------------
Bond funds .
Declared daily to shareholders of record as
of 4 p.m. ET the previous business day.
Other purchases receive the dividend on the
next business day after payment has been
received.
.Paid on the first business day of each
month.
---------------------------------------------------------------------------------------
These stock funds only:/1/ .
.Balanced Declared quarterly, if any, in March, June,
September, and December.
. Dividend Growth
.Must be a shareholder of record as of 4
. Equity Income p.m. ET on the record date.
. Equity Index 500
. Growth & Income
. Personal Strategy Balanced
. Personal Strategy Income
. Real Estate
----------------------------------------------------------------------------------
All other stock funds/1/ .Declared annually, if any, generally in
December.
.Must be a shareholder of record as of 4
p.m. ET on the record date.
----------------------------------------------------------------------------------
Tax-Efficient Balanced/1/ Municipal Portion
.Declared daily, paid on the last business
day of March, June, September, and
December.
Equity Portion
.Declared annually, if any, usually in
December.
.Must be a shareholder of record as of 4
p.m. ET on the record date.
---------------------------------------------------------------------------------------
ABOUT THE FUND 13
/1/Mutual fund dividends are eligible for the 70% deduction for dividends
received by corporations to the extent the fund's income consists of
dividends paid by U.S. corporations.
Fund shares will earn dividends through the date of redemption; also, shares
redeemed on a Friday or prior to a holiday (other than wire redemptions for
money funds received before 12 noon ET) will continue to earn dividends until
the next business day. Generally, if you redeem all of your bond or money
fund shares at any time during the month, you will also receive all dividends
earned through the date of redemption in the same check. When you redeem only
a portion of your bond or money fund shares, all dividends accrued on those
shares will be reinvested, or paid in cash, on the next dividend payment
date.
Capital gain payments
If a fund has net capital gains for the year (after subtracting any capital
losses), they are usually declared and paid in December to shareholders of
record on a specified date that month. If a second distribution is necessary,
it is paid the following year.
T. ROWE PRICE 14
Capital gain payments are not expected in money market funds, which are
managed to maintain a constant share price.
3 A capital gain or loss is the difference between the purchase and sale
price of a security.
Tax Information
3 You will be sent timely information for your tax filing needs.
You need to be aware of the possible tax consequences when:
. You sell fund shares, including an exchange from one fund to another.
. A fund makes a distribution to your account.
Taxes on fund redemptions
When you sell shares in any fund, you may realize a gain or loss. An exchange
from one fund to another is also a sale for tax purposes.
In January, you will be sent Form 1099-B indicating the date and amount of
each sale you made in the fund during the prior year. This information will
also be reported to the IRS. For most new accounts or those opened by
exchange in 1984 or later, we will provide the gain or loss on the shares you
sold during the year based on the "average cost" single category method. This
information is not reported to the IRS, and you do not have to use it. You
may calculate the cost basis using other methods acceptable to the IRS, such
as "specific identification."
To help you maintain accurate records, we send you a confirmation promptly
following each transaction you make (except for systematic purchases and
redemptions) and a year-end statement detailing all your transactions in each
fund account during the year.
Taxes on fund distributions
In January, you will be sent Form 1099-DIV indicating the tax status of any
dividend and capital gain distributions made to you. This information will
also be reported to the IRS. Distributions are generally taxable to you for
the year in which they were paid. You will be sent any additional information
you need to determine your taxes on fund distributions, such as the portion
of your dividends, if any, that may be exempt from state income taxes.
The tax treatment of a capital gain distribution is determined by how long
the fund held the portfolio securities, not how long you held shares in the
fund. Short-term (one year or less) capital gain distributions are taxable at
the same rate as ordinary income and long-term gains on securities held more
than 12 months are taxed at a maximum rate of 20%. If you realized a loss on
the sale or
ABOUT THE FUND 15
exchange of fund shares that you held six months or less, your short-term
loss must be reclassified to a long-term loss to the extent of any long-term
capital gain distribution received during the period you held the shares.
If the fund qualifies and elects to pass through nonrefundable foreign taxes
paid to foreign governments during the year, your portion of such taxes will
be reported to you as taxable income. However, you may be able to claim an
offsetting credit or deduction on your tax return for those amounts. There
can be no assurance that a fund will be able to meet the requirements to pass
through foreign income taxes paid.
Tax consequences of hedging
For funds investing in foreign securities, distributions resulting from the
sale of certain foreign currencies, currency contracts, and debt securities
are taxed as ordinary income. Net foreign currency losses may cause monthly
or quarterly dividends to be reclassified as a return of capital. Entering
into certain options, futures, swaps, and forward foreign exchange contracts
and transactions may result in the application of the mark-to-market and
straddle provisions of the Internal Revenue Code. These provisions could
result in the fund being required to distribute gains on such transactions
even though it did not close the contracts during the year or receive cash to
pay such distributions. The fund may not be able to reduce its distributions
for losses on such transactions to the extent of unrealized gains in
offsetting positions.
3 Distributions are taxable whether reinvested in additional shares or
received in cash.
Tax effect of buying shares before a capital gain distribution
If you buy shares shortly before or on the "record date" - the date that
establishes you as the person to receive the upcoming distribution - you
receive a portion of the money you just invested in the form of a taxable
distribution. Therefore, you may wish to find out a fund's record date before
investing. Of course, a fund's share price may, at any time, reflect
undistributed capital gains and unrealized appreciation, which may result in
future taxable distributions. Such distributions can occur even in a year
when the fund has a negative return.
3 The preceding tax information summary does not apply to retirement
accounts, such as IRAs, which are not subject to current tax.
T. ROWE PRICE 16
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
----------------------------------------------------------
3 Following these procedures helps assure timely and accurate transactions.
Purchase Conditions
Nonpayment
If you pay with a check or ACH transfer that does not clear or if your
payment is not timely received, your purchase will be canceled. You will be
responsible for any losses or expenses incurred by the fund or transfer
agent, and the fund can redeem shares you own in this or another identically
registered T. Rowe Price account as reimbursement. The fund and its agents
have the right to reject or cancel any purchase, exchange, or redemption due
to nonpayment.
U.S. dollars; type of check
All purchases must be paid for in U.S. dollars; checks must be drawn on U.S.
banks.
Sale (Redemption) Conditions
Holds on immediate redemptions: 10-day hold
If you sell shares that you just purchased and paid for by check or ACH
transfer, the fund will process your redemption but will generally delay
sending you the proceeds for up to 10 calendar days to allow the check or
transfer to clear. If, during the clearing period, we receive a check drawn
against your bond or money market account, it will be returned marked
"uncollected." (The 10-day hold does not apply to purchases paid for by bank
wire or automatic purchases through your paycheck.)
Telephone, Tele*Access/(R)/, and online account access
Exchange and redemption services through telephone, Tele*Access, and online
account access are authorized when you sign the New Account Form unless you
check the boxes that state you do not want them. Personal computer
transactions must be authorized separately. T. Rowe Price funds and their
agents use reasonable procedures to verify the identity of the shareholder.
If these procedures are followed, the funds and their agents are not liable
for any losses that may occur from acting on unauthorized instructions. A
confirmation is sent promptly after a transaction. Please review it carefully
and contact T. Rowe Price immediately about any transaction you believe to be
unauthorized. All telephone conversations are recorded.
Redemptions over $250,000
Large sales can adversely affect a portfolio manager's ability to implement a
fund's investment strategy by causing the premature sale of securities that
would otherwise be held. If, in any 90-day period, you redeem (sell) more
than
ABOUT THE FUND 17
$250,000, or your sale amounts to more than 1% of fund net assets, the fund
has the right to pay the difference between the redemption amount and the
lesser of the two previously mentioned figures with securities from the fund.
Excessive Trading
3 T. Rowe Price may bar excessive traders from purchasing shares.
Frequent trades in your account or accounts controlled by you can disrupt
management of a fund and raise its expenses. To deter such activity, each
fund has adopted an excessive trading policy. If you violate this policy, you
may be barred indefinitely and without further notice from further purchases
of T. Rowe Price funds.
. Trades placed directly with T. Rowe Price If you trade directly with T.
Rowe Price, you can make one purchase and one sale or one sale and one
purchase involving the same fund within any 120-day period. If you exceed
this limit, or if your trade activity involves market timing, you are in
violation of our excessive trading policy.
Two types of transactions are exempt from this policy: 1) trades solely in
money market funds (exchanges between a money fund and a nonmoney fund are
not exempt); and 2) systematic purchases and redemptions (see Information
About Your Services).
. Trades placed through intermediaries If you purchase fund shares through an
intermediary including a broker, bank, investment adviser, or other third
party, you can make one purchase and one sale or one sale and one purchase
involving the same fund within any 120-day period. If you exceed this limit
or if you hold fund shares for less than 60 calendar days, you are in
violation of our excessive trading policy. Systematic purchases and
redemptions are exempt from this policy.
Keeping Your Account Open
Due to the relatively high cost to a fund of maintaining small accounts, we
ask you to maintain an account balance of at least $1,000 ($10,000 for Summit
Funds). If your balance is below this amount for three months or longer, we
have the right to close your account after giving you 60 days to increase
your balance.
Account Maintenance and Small Account Fees
. Small Account Fee (all funds except Index Funds) Because of the
disproportionately high costs of servicing accounts with low balances, a $10
fee, paid to T. Rowe Price Services, the funds' transfer agent, will
automatically be deducted from nonretirement accounts with balances falling
below a minimum. The valuation of accounts and the deduction are expected to
take place during the last five business days of September. The fee will be
deducted from accounts with
T. ROWE PRICE 18
balances below $2,000, except for UGMA/UTMA accounts, for which the minimum
is $500. The fee will be waived for any investor whose T. Rowe Price mutual
fund accounts total $25,000 or more. Accounts employing automatic investing
(e.g., payroll deduction, automatic purchase from a bank account, etc.) are
also exempt from the charge. The fee does not apply to IRAs and other
retirement plan accounts, but a separate custodial fee may apply to such
accounts.
. Account Maintenance Fee (Index Funds only) The account maintenance fee is
charged on a quarterly basis usually during the last week of a calendar
quarter. On the day of the assessment, accounts with balances below $10,000
will be charged the fee. Please note that the fee will be charged to accounts
that fall below $10,000 due to market fluctuations, redemptions, or
exchanges. When an account with less than $10,000 is closed either through
redemption or exchange, the fee will be charged and deducted from the
proceeds. The fee will apply to IRA accounts. The fee does not apply to
retirement plans directly registered with T. Rowe Price Services, or accounts
maintained by intermediaries through NSCC/(R)/Networking.
Signature Guarantees
3 A signature guarantee is designed to protect you and the T. Rowe Price
funds from fraud by verifying your signature.
You may need to have your signature guaranteed in certain situations, such
as:
. Written requests 1) to redeem over $100,000 or 2) to wire redemption
proceeds.
. Remitting redemption proceeds to any person, address, or bank account not on
record.
. Transferring redemption proceeds to a T. Rowe Price fund account with a
different registration (name or ownership) from yours.
. Establishing certain services after the account is opened.
You can obtain a signature guarantee from most banks, savings institutions,
broker-dealers, and other guarantors acceptable to T. Rowe Price. We cannot
accept guarantees from notaries public or organizations that do not provide
reimbursement in the case of fraud.
MORE ABOUT THE FUND
ORGANIZATION AND MANAGEMENT
----------------------------------------------------------
How is the fund organized?
The fund was incorporated in Maryland in 1973 and is a "diversified, open-end
investment company," or mutual fund. Mutual funds pool money received from
shareholders and invest it to try to achieve specified objectives.
3 Shareholders benefit from T. Rowe Price's 64 years of investment management
experience.
What is meant by "shares"?
As with all mutual funds, investors purchase shares when they put money in a
fund. These shares are part of a fund's authorized capital stock, but share
certificates are not issued.
Each share and fractional share entitles the shareholder to:
. Receive a proportional interest in a fund's income and capital gain
distributions.
. Cast one vote per share on certain fund matters, including the election of
fund directors, changes in fundamental policies, or approval of changes in
the fund's management contract.
Do T. Rowe Price funds have annual shareholder meetings?
The funds are not required to hold annual meetings and, to avoid unnecessary
costs to fund shareholders, do not do so except when certain matters, such as
a change in fundamental policies, must be decided. In addition, shareholders
representing at least 10% of all eligible votes may call a special meeting,
if they wish, for the purpose of voting on the removal of any fund director
or trustee. If a meeting is held and you cannot attend, you can vote by
proxy. Before the meeting, the fund will send you proxy materials that
explain the issues to be decided and include instructions on voting by mail
or telephone, or on the Internet.
Who runs the fund?
General Oversight
The fund is governed by a Board of Directors that meets regularly to review
the fund's investments, performance, expenses, and other business affairs.
The Board elects the fund's officers. The majority of Board members are
independent of T. Rowe Price Associates, Inc. (T. Rowe Price).
T. ROWE PRICE 20
3 All decisions regarding the purchase and sale of fund investments are made
by T. Rowe Price - specifically by the fund's portfolio managers.
Portfolio Management
The fund has an Investment Advisory Committee with the following members:
William T. Reynolds, Chairman, Connice A. Bavely, Brian J. Brennan, Patrick
S. Cassidy, Alan D. Levenson, Edmund M. Notzon, Vernon A. Reid, Jr., Robert
M. Rubino, and Daniel O. Shackelford. The committee chairman has day-to-day
responsibility for managing the fund and works with the committee in
developing and executing the fund's investment program. Mr. Reynolds became
chairman of the fund's committee in 1998. He joined T. Rowe Price in 1981 and
has been managing investments since 1978.
The Management Fee
This fee has two parts - an "individual fund fee," which reflects a fund's
particular characteristics, and a "group fee." The group fee, which is
designed to reflect the benefits of the shared resources of the T. Rowe Price
investment management complex, is calculated daily based on the combined net
assets of all T. Rowe Price funds (except the Spectrum Funds, and any
institutional, index, or private label mutual funds). The group fee schedule
(shown below) is graduated, declining as the asset total rises, so
shareholders benefit from the overall growth in mutual fund assets.
Group Fee Schedule
0.334%/a/ First $50 billion
0.305% Next $30 billion
0.300% Next $40 billion
0.295% Thereafter
-------------------------------------
/a/ Represents a blended group fee rate containing various break points.
The fund's portion of the group fee is determined by the ratio of its daily
net assets to the daily net assets of all the T. Rowe Price funds described
previously. Based on combined T. Rowe Price fund assets of over $97 billion
at May 31, 2001, the group fee was 0.32%. The individual fund fee is 0.15%.
UNDERSTANDING PERFORMANCE INFORMATION
----------------------------------------------------------
This section should help you understand the terms used to describe fund
performance. You will come across them in shareholder reports you receive
from us; in our education and informational materials; in T. Rowe Price
advertisements; and in the media.
ABOUT THE FUND 21
Total Return
This tells you how much an investment has changed in value over a given time
period. It reflects any net increase or decrease in the share price and
assumes that all dividends and capital gains (if any) paid during the period
were reinvested in additional shares. Therefore, total return numbers include
the effect of compounding.
Advertisements may include cumulative or average annual total return figures,
which may be compared with various indices, other performance measures, or
other mutual funds.
Cumulative Total Return
This is the actual return of an investment for a specified period. A
cumulative return does not indicate how much the value of the investment may
have fluctuated during the period. For example, an investment could have a
10-year positive cumulative return despite experiencing some negative years
during that time.
Average Annual Total Return
This is always hypothetical and should not be confused with actual
year-by-year results. It smooths out all the variations in annual performance
to tell you what constant year-by-year return would have produced the
investment's actual cumulative return. This gives you an idea of an
investment's annual contribution to your portfolio, provided you held it for
the entire period.
Yield
The current or "dividend" yield on a fund or any investment tells you the
relationship between the investment's current level of annual income and its
price on a particular day. The dividend yield reflects the actual income paid
to shareholders for a given period, annualized, and divided by the price at
the end of the period. For example, a fund providing $5 of annual income per
share and a price of $50 has a current yield of 10%. Yields can be calculated
for any time period.
The advertised or SEC yield is found by determining the net income per share
(as defined by the Securities and Exchange Commission) earned by a fund
during a 30-day base period and dividing this amount by the per share price
on the last day of the base period. The SEC yield-also called the
standardized yield-may differ from the dividend yield.
T. ROWE PRICE 22
INVESTMENT POLICIES AND PRACTICES
----------------------------------------------------------
This section takes a detailed look at some of the types of fund securities
and the various kinds of investment practices that may be used in day-to-day
portfolio management. Fund investments are subject to further restrictions
and risks described in the Statement of Additional Information.
Shareholder approval is required to substantively change fund objectives and
certain investment restrictions noted in the following section as
"fundamental policies." The managers also follow certain "operating policies"
which can be changed without shareholder approval. However, significant
changes are discussed with shareholders in fund reports. Fund investment
restrictions and policies are adhered to at the time of investment. A later
change in circumstances will not require the sale of an investment if it was
proper at the time it was made.
Fund holdings of certain kinds of investments cannot exceed maximum
percentages of total assets, which are set forth in this prospectus. For
instance, fund investments in hybrid instruments are limited to 10% of total
assets. While these restrictions provide a useful level of detail about fund
investments, investors should not view them as an accurate gauge of the
potential risk of such investments. For example, in a given period, a 5%
investment in hybrid instruments could have significantly more of an impact
on a fund's share price than its weighting in the portfolio. The net effect
of a particular investment depends on its volatility and the size of its
overall return in relation to the performance of all other fund investments.
Changes in fund holdings, fund performance, and the contribution of various
investments are discussed in the shareholder reports sent to you.
3 Fund managers have considerable leeway in choosing investment strategies
and selecting securities they believe will help achieve fund objectives.
Types of Portfolio Securities
In seeking to meet its investment objective, the fund may invest in any type
of security or instrument (including certain potentially high-risk
derivatives described in this section) whose investment characteristics are
consistent with its investment program. The following pages describe various
types of fund securities and investment management practices.
Fundamental policy The fund will not purchase a security if, as a result,
with respect to 75% of its total assets, more than 5% of its total assets
would be invested in securities of a single issuer, or if more than 10% of
the outstanding
ABOUT THE FUND 23
voting securities of the issuer would be held by the fund. These limitations
do not apply to the fund's purchase of securities issued or guaranteed by the
U.S. government, its agencies, or instrumentalities.
Bonds
A bond is an interest-bearing security. The issuer has a contractual
obligation to pay interest at a stated rate on specific dates and to repay
principal (the bond's face value) on a specified date. An issuer may have the
right to redeem or "call" a bond before maturity, and the investor may have
to reinvest the proceeds at lower market rates.
A bond's annual interest income, set by its coupon rate, is usually fixed for
the life of the bond. Its yield (income as a percent of current price) will
fluctuate to reflect changes in interest rate levels. A bond's price usually
rises when interest rates fall, and vice versa, so its yield stays consistent
with current market conditions.
Bonds may be unsecured (backed by the issuer's general creditworthiness only)
or secured (also backed by specified collateral). Bonds include asset- and
mortgage-backed securities.
Certain bonds have interest rates that are adjusted periodically. These
interest rate adjustments tend to minimize fluctuations in the bonds'
principal values. The maturity of those securities may be shortened under
certain specified conditions.
Bonds may be designated as senior or subordinated obligations. Senior
obligations generally have the first claim on a corporation's earnings and
assets and, in the event of liquidation, are paid before subordinated debt.
Common and Preferred Stocks
Stocks represent shares of ownership in a company. Generally, preferred stock
has a specified dividend and ranks after bonds and before common stocks in
its claim on income for dividend payments and on assets should the company be
liquidated. After other claims are satisfied, common stockholders participate
in company profits on a pro-rata basis; profits may be paid out in dividends
or reinvested in the company to help it grow. Increases and decreases in
earnings are usually reflected in a company's stock price, so common stocks
generally have the greatest appreciation and depreciation potential of all
corporate securities. While most preferred stocks pay a dividend, preferred
stock may be purchased where the issuer has omitted, or is in danger of
omitting, payment of its dividend. Such investments would be made primarily
for their capital appreciation potential.
T. ROWE PRICE 24
Convertible Securities and Warrants
Investments may be made in debt or preferred equity securities convertible
into, or exchangeable for, equity securities. Traditionally, convertible
securities have paid dividends or interest at rates higher than common stocks
but lower than nonconvertible securities. They generally participate in the
appreciation or depreciation of the underlying stock into which they are
convertible, but to a lesser degree. In recent years, convertibles have been
developed which combine higher or lower current income with options and other
features. Warrants are options to buy a stated number of shares of common
stock at a specified price anytime during the life of the warrants
(generally, two or more years). Warrants can be highly volatile, have no
voting rights, and pay no dividends.
Operating policy Without regard to quality, the fund may invest up to 25% of
its total assets (not including cash) in preferred and common stocks and
convertible securities, convertible into or which carry warrants for common
stocks or other equity securities.
Foreign Securities
Investments may be made in foreign securities. These include
nondollar-denominated securities traded outside of the U.S. and
dollar-denominated securities of foreign issuers traded in the U.S. (such as
Yankee bonds). Such investments increase a portfolio's diversification and
may enhance return, but they also involve some special risks such as exposure
to potentially adverse local, political, and economic developments;
nationalization and exchange controls; potentially lower liquidity and higher
volatility; possible problems arising from accounting, disclosure,
settlement, and regulatory practices that differ from U.S. standards; and the
chance that fluctuations in foreign exchange rates will decrease the
investment's value (favorable changes can increase its value). These risks
are heightened for investments in developing countries.
Operating policy There is no limit on fund investments in U.S.
dollar-denominated debt securities issued by foreign issuers, foreign
branches of U.S. banks, and U.S. branches of foreign banks. The fund may also
invest up to 20% of its total assets (excluding reserves) in non-U.S.
dollar-denominated fixed-income securities.
Asset-Backed Securities
An underlying pool of assets, such as credit card or automobile trade
receivables or corporate loans or bonds, backs these bonds and provides the
interest and principal payments to investors. On occasion, the pool of assets
may also include a swap obligation, which is used to change the cash flows on
the underlying assets. As an example, a swap may be used to allow floating
rate assets to back a fixed-rate obligation. Credit quality depends primarily
on the quality of the underlying assets, the level of credit support, if any,
provided by the structure or by a third-party insurance wrap, and the credit
quality of the swap counterparty,
ABOUT THE FUND 25
if any. The underlying assets (i.e., loans) are sometimes subject to
prepayments, which can shorten the security's weighted average life and may
lower its return. The value of these securities also may change because of
actual or perceived changes in the creditworthiness of the originator, the
servicing agent, the financial institution providing the credit support, or
the swap counterparty. There is no limit on fund investments in these
securities.
Mortgage-Backed Securities
The fund may invest in a variety of mortgage-backed securities. Mortgage
lenders pool individual home mortgages with similar characteristics to back a
certificate or bond, which is sold to investors such as the fund. Interest
and principal payments generated by the underlying mortgages are passed
through to the investors. The "big three" issuers are the Government National
Mortgage Association (GNMA), the Federal National Mortgage Association
(Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac).
GNMA certificates are backed by the full faith and credit of the U.S.
government, while others, such as Fannie Mae and Freddie Mac certificates,
are only supported by the ability to borrow from the U.S. Treasury or by the
credit of the agency. Private mortgage bankers and other institutions also
issue mortgage-backed securities.
Mortgage-backed securities are subject to scheduled and unscheduled principal
payments as homeowners pay down or prepay their mortgages. As these payments
are received, they must be reinvested when interest rates may be higher or
lower than on the original mortgage security. Therefore, these securities are
not an effective means of locking in long-term interest rates. In addition,
when interest rates fall, the pace of mortgage prepayments picks up. These
refinanced mortgages are paid off at face value (par), causing a loss for any
investor who may have purchased the security at a price above par. In such an
environment, this risk limits the potential price appreciation of these
securities and can negatively affect the fund's net asset value. When rates
rise, the prices of mortgage-backed securities can be expected to decline,
although historically these securities have experienced smaller price
declines than comparable quality bonds. In addition, when rates rise and
prepayments slow, the effective duration of mortgage-backed securities
extends, resulting in increased volatility.
3 There is no limit on fund investments in mortgage-backed securities.
Additional mortgage-backed securities in which the fund may invest include:
. Collateralized Mortgage Obligations (CMOs) CMOs are debt securities that are
fully collateralized by a portfolio of mortgages or mortgage-backed
securities. All interest and principal payments from the underlying mortgages
are passed through to the CMOs in such a way as to create some classes with
more stable average lives than the underlying mortgages and other classes
with more volatile
T. ROWE PRICE 26
average lives. CMO classes may pay fixed or variable rates of interest, and
certain classes have priority over others with respect to the receipt of
prepayments.
. Stripped Mortgage Securities Stripped mortgage securities (a type of
potentially high-risk derivative) are created by separating the interest and
principal payments generated by a pool of mortgage-backed securities or a CMO
to create additional classes of securities. Generally, one class receives
only interest payments (IOs), and another receives principal payments (POs).
Unlike with other mortgage-backed securities and POs, the value of IOs tends
to move in the same direction as interest rates. The fund can use IOs as a
hedge against falling prepayment rates (interest rates are rising) and/or a
bear market environment. POs can be used as a hedge against rising prepayment
rates (interest rates are falling) and/or a bull market environment. IOs and
POs are acutely sensitive to interest rate changes and to the rate of
principal prepayments.
A rapid or unexpected increase in prepayments can severely depress the price
of IOs, while a rapid or unexpected decrease in prepayments could have the
same effect on POs. Of course, under the opposite conditions these securities
may appreciate in value. These securities can be very volatile in price and
may have lower liquidity than most other mortgage-backed securities. Certain
non-stripped CMO classes may also exhibit these qualities, especially those
that pay variable rates of interest that adjust inversely with, and more
rapidly than, short-term interest rates. In addition, if interest rates rise
rapidly and prepayment rates slow more than expected, certain CMO classes, in
addition to losing value, can exhibit characteristics of longer-term
securities and become more volatile. There is no guarantee that fund
investments in CMOs, IOs, or POs will be successful, and fund total return
could be adversely affected as a result.
Operating policy Fund investments in stripped mortgage securities are
limited to 10% of total assets.
. Commercial Mortgage-Backed Securities (CMBS) CMBS are securities created
from a pool of commercial mortgage loans, such as loans for hotels, shopping
centers, office buildings, apartment buildings, etc. Interest and principal
payments from the loans are passed on to the investor according to a schedule
of payments. Credit quality depends primarily on the quality of the loans
themselves and on the structure of the particular deal. Generally, deals are
structured with senior and subordinate classes. The amount of subordination
is determined by the rating agencies who rate the individual classes of the
structure. Commercial mortgages are generally structured with prepayment
penalties, which greatly reduces prepayment risk to the investor. However,
the value of these securities may change because of actual or perceived
changes in the creditworthiness of the individual borrowers, their tenants,
the servicing agents, or the general state of commercial real estate. There
is no limit on fund investments in these securities.
ABOUT THE FUND 27
Hybrid Instruments
These instruments (a type of potentially high-risk derivative) can combine
the characteristics of securities, futures, and options. For example, the
principal amount or interest rate of a hybrid could be tied (positively or
negatively) to the price of some commodity, currency, or securities index or
another interest rate (each a "benchmark"). Hybrids can be used as an
efficient means of pursuing a variety of investment goals, including currency
hedging, duration management, and increased total return. Hybrids may or may
not bear interest or pay dividends. The value of a hybrid or its interest
rate may be a multiple of a benchmark and, as a result, may be leveraged and
move (up or down) more steeply and rapidly than the benchmark. These
benchmarks may be sensitive to economic and political events, such as
commodity shortages and currency devaluations, which cannot be readily
foreseen by the purchaser of a hybrid. Under certain conditions, the
redemption value of a hybrid could be zero. Thus, an investment in a hybrid
may entail significant market risks that are not associated with a similar
investment in a traditional, U.S. dollar-denominated bond that has a fixed
principal amount and pays a fixed rate or floating rate of interest. The
purchase of hybrids also exposes the fund to the credit risk of the issuer of
the hybrid. These risks may cause significant fluctuations in the net asset
value of the fund.
3 Hybrids can have volatile prices and limited liquidity, and their use may
not be successful.
Operating policy Fund investments in hybrid instruments are limited to 10%
of total assets.
Deferrable Subordinated Securities
These are securities with long maturities that are deeply subordinated in the
issuer's capital structure. They generally have 30-year maturities and permit
the issuer to defer distributions for up to five years. These characteristics
give the issuer more financial flexibility than is typically the case with
traditional bonds. As a result, the securities may be viewed as possessing
certain "equity-like" features by rating agencies and bank regulators.
However, the securities are treated as debt securities by market
participants, and the fund intends to treat them as such as well. These
securities may offer a mandatory put or remarketing option that creates an
effective maturity date significantly shorter than the stated one. Fund
investments will be made in these securities to the extent their yield,
credit, and maturity characteristics are consistent with the fund's
investment objective and program.
T. ROWE PRICE 28
Private Placements
These securities are sold directly to a small number of investors, usually
institutions. Unlike public offerings, such securities are not registered
with the SEC. Although certain of these securities may be readily sold, for
example, under Rule 144A, others may be illiquid, and their sale may involve
substantial delays and additional costs.
Operating policy Fund investments in illiquid securities are limited to 15%
of net assets.
Utility Industry Concentration
The fund may, under certain circumstances, invest a substantial amount of its
assets in the utility industry. Investments in this industry may be affected
by environmental conditions, energy conservation programs, fuel shortages,
availability of capital to finance operations and construction programs, and
federal and state legislative and regulatory actions. T. Rowe Price believes
that any risk to the fund which might result from concentrating in any such
industry will be minimized by diversification of the fund's investments.
Operating policy The fund has no current intention of concentrating in the
utility industry.
Fundamental policy The fund will, under certain conditions, invest up to 50%
of its assets in any one of the following industries: gas utility, gas
transmission utility, electric utility, telephone utility, and petroleum.
Types of Investment Management Practices
Reserve Position
A certain portion of fund assets will be held in money market reserves. Fund
reserve positions are expected to consist primarily of shares of one or more
T. Rowe Price internal money market funds. Short-term, high-quality U.S. and
foreign dollar-denominated money market securities, including repurchase
agreements, may also be held. For temporary, defensive purposes, there is no
limit on fund investments in money market reserves. The effect of taking such
a position is that the fund may not achieve its investment objective. The
reserve position provides flexibility in meeting redemptions, paying
expenses, and in the timing of new investments and can serve as a short-term
defense during periods of unusual market volatility.
Borrowing Money and Transferring Assets
Fund borrowings may be made from banks and other T. Rowe Price funds for
temporary emergency purposes to facilitate redemption requests, or for other
purposes consistent with fund policies as set forth in this prospectus. Such
borrowings may be collateralized with fund assets, subject to restrictions.
Fundamental policy Borrowings may not exceed 33/1//\\/3/\\% of total fund
assets.
ABOUT THE FUND 29
Operating policy Fund transfers of portfolio securities as collateral will
not be made except as necessary in connection with permissible borrowings or
investments, and then such transfers may not exceed 33/1//\\/3/\\% of fund
total assets. Fund purchases of additional securities will not be made when
borrowings exceed 5% of total assets.
Futures and Options
Futures, a type of potentially high-risk derivative, are often used to manage
or hedge risk because they enable the investor to buy or sell an asset in the
future at an agreed-upon price. Options, another type of potentially
high-risk derivative, give the investor the right (where the investor
purchases the option), or the obligation (where the investor "writes" or
sells the option), to buy or sell an asset at a predetermined price in the
future. Futures and options contracts may be bought or sold for any number of
reasons, including: to manage its exposure to changes in interest rates, bond
prices, and foreign currencies; as an efficient means of adjusting fund
overall exposure to certain markets; in an effort to enhance income; to
protect the value of portfolio securities; as a cash management tool; and to
adjust portfolio duration. Call and put options may be purchased or sold on
securities, financial indices, and foreign currencies.
Futures contracts and options may not always be successful hedges; their
prices can be highly volatile; using them could lower fund total return; and
the potential loss from the use of futures can exceed a fund's initial
investment in such contracts.
Operating policies Futures: Initial margin deposits and premiums on options
used for nonhedging purposes will not exceed 5% of fund net asset value.
Options on securities: The total market value of securities covering call or
put options may not exceed 25% of fund total assets. No more than 5% of fund
total assets will be committed to premiums when purchasing call or put
options.
Swaps
The fund may enter into interest rate, index, total return, credit and, to
the extent it may invest in foreign currency-denominated securities, currency
swap agreements. The fund may also enter into options on swap agreements or
swap options. All of these agreements are considered derivatives and, in
certain cases, high-risk derivatives. Swap agreements are two-party contracts
under which the fund and a counterpart, such as a broker or dealer, agree to
exchange the returns (or differentials in rates of return) earned or realized
on a particular predetermined investment, index, or currency. Swaps and swap
options can be used for a variety of purposes, including: to manage fund
exposure to changes in interest rates, nondollar securities, and credit
quality; as an efficient means of adjusting fund overall exposure to certain
markets; in an effort to enhance income or total return; to protect the value
of portfolio securities; as a cash management tool; and to adjust portfolio
duration.
T. ROWE PRICE 30
There are risks in the use of swaps and swap options. Interest rate and
currency swaps could result in losses if interest rate or currency changes
are not correctly anticipated by the fund. Total return swaps could result in
losses if the reference index, security, or investments do not perform as
anticipated by the fund. Credit default swaps could result in losses if the
fund does not correctly evaluate the creditworthiness of the company on which
the credit default swap is based. Swaps and swap options may not always be
successful hedges; using them could lower fund total return and the other
party to a swap agreement could default on its obligations or refuse to cash
out the fund's investment at a reasonable price, which could turn an expected
gain into a loss.
Operating policies The fund will not enter into a swap agreement with any
single counterparty if the net amount owed or to be received under existing
contracts with that party would exceed 5% of fund total assets, or if the net
amount owed or to be received by the fund under all outstanding swap
agreements will exceed 10% of fund total assets. The total market value of
securities covering call or put options may not exceed 25% of fund total
assets. No more than 5% of fund total assets will be committed to premiums
when purchasing call or put options.
Managing Foreign Exchange Risk
Investors in foreign securities may attempt to "hedge" their exposure to
potentially unfavorable currency changes. The primary means of doing this is
through the use of "forwards"- contracts to exchange one currency for another
on some future date at a specified exchange rate. However, futures, swaps,
and options on these instruments may also be used. In certain circumstances,
a "proxy currency" may be substituted for the currency in which the
investment is denominated, a strategy known as "proxy hedging." The fund may
also use these instruments to create a synthetic bond issued in one currency,
but with the currency component transformed into another currency. If the
fund were to engage in any of these foreign currency transactions, they would
be used primarily to protect the fund's foreign securities from adverse
currency movements relative to the dollar. Such transactions involve the risk
that anticipated currency movements will not occur, and the fund's total
return could be reduced.
Operating policy The fund will not commit more than 20% of its total assets
to any combination of foreign currency instruments.
Lending of Portfolio Securities
Fund securities may be lent to broker-dealers, other institutions, or other
persons to earn additional income. The principal risk is the potential
insolvency of the broker-dealer or other borrower. In this event, a fund
could experience delays in recovering its securities and capital losses.
ABOUT THE FUND 31
Fundamental policy The value of loaned securities may not exceed
33/1//\\/3/\\% of total fund assets.
When-Issued Securities and Forward Commitment Contracts
The fund may purchase securities on a when-issued or delayed delivery basis
or may purchase or sell securities on a forward commitment basis. There is no
limit on fund investments in these securities. The price of these securities
is fixed at the time of the commitment to buy, but delivery and payment can
take place a month or more later. During the interim period, the market value
of the securities can fluctuate, and no interest accrues to the purchaser. At
the time of delivery, the value of the securities may be more or less than
the purchase or sale price. To the extent the fund remains fully or almost
fully invested (in securities with a remaining maturity of more than one
year) at the same time it purchases these securities, there will be greater
fluctuations in the fund's net asset value than if the fund did not purchase
them.
Portfolio Turnover
The fund will not generally trade in securities for short-term profits, but,
when circumstances warrant, securities may be purchased and sold without
regard to the length of time held. A high turnover rate may increase
transaction costs, result in additional capital gain distributions, and
reduce fund total return. The fund's portfolio turnover rates are shown in
the Financial Highlights table.
FINANCIAL HIGHLIGHTS
----------------------------------------------------------
Table 5, which provides information about the fund's financial history, is
based on a single share outstanding throughout the periods shown. The table
is part of the fund's financial statements, which are included in its annual
report and are incorporated by reference into the Statement of Additional
Information (available upon request). The total returns in the table
represent the rate that an investor would have earned or lost on an
investment in the fund (assuming reinvestment of all dividends and
distributions and no payment of account or (if applicable) redemption fees).
The financial statements in the annual report were audited by the fund's
independent accountants, PricewaterhouseCoopers LLP.
T. ROWE PRICE 32
Table 5 Financial Highlights
Year ended May 31
1997 1998 1999 2000 2001
-------------------------------------------------------------------------------
Net asset value,
beginning of period $ 8.70 $ 8.77 $ 9.09 $ 8.50 $ 8.07
Income From Investment Operations
Net investment income 0.58 0.57 0.54 0.52 0.53
---------------------------------------------
Net gains or losses on
securities (both realized 0.07 0.36 (0.45) (0.43) 0.46
and unrealized)
---------------------------------------------
Total from investment
operations 0.65 0.93 0.09 0.09 0.99
Less Distributions
Dividends (from net (0.58) (0.57) (0.54) (0.52) (0.53)
investment income)
---------------------------------------------
Distributions (from -- (0.04) (0.14) -- --
capital gains)
---------------------------------------------
Returns of capital -- -- -- -- --
---------------------------------------------
Total distributions (0.58) (0.61) (0.68) (0.52) (0.53)
---------------------------------------------
Net asset value, $ 8.77 $ 9.09 $ 8.50 $ 8.07 $ 8.53
end of period
---------------------------------------------
Total return 7.70% 10.84% 1.02% 1.13% 12.54%
Ratios/Supplemental Data
Net assets, end of period $1,711 $2,076 $1,942 $1,633 $1,684
(in millions)
---------------------------------------------
Ratio of expenses to 0.74% 0.71% 0.72% 0.73% 0.73%
average net assets
---------------------------------------------
Ratio of net income to 6.65% 6.31% 6.16% 6.32% 6.30%
average net assets
---------------------------------------------
Portfolio turnover rate 87.1% 147.3% 94.3% 83.6% 112.1%
-------------------------------------------------------------------------------
INVESTING WITH T. ROWE PRICE
ACCOUNT REQUIREMENTS AND TRANSACTION INFORMATION
----------------------------------------------------------
Tax Identification Number
We must have your correct Social Security or tax identification number on a
signed New Account Form or W-9 Form. Otherwise, federal law requires the funds
to withhold a percentage (currently 30.5%) of your dividends, capital gain
distributions, and redemptions, and may subject you to an IRS fine. If this
information is not received within 60 days after your account is established,
your account may be redeemed at the fund's NAV on the redemption date.
Transaction Confirmations
We send immediate confirmations for most of your fund transactions, but some,
such as systematic purchases and dividend reinvestments, are reported on your
account statement. Please review confirmations and statements as soon as your
receive them and promptly report any discrepancies to Shareholder Services.
Employer-Sponsored Retirement Plans and Institutional Accounts T. Rowe Price
Trust Company 1-800-492-7670
Transaction procedures in the following sections may not apply to
employer-sponsored retirement plans and institutional accounts. For procedures
regarding employer-sponsored retirement plans, please call T. Rowe Price Trust
Company or consult your plan administrator. For institutional account
procedures, please call your designated account manager or service
representative.
We do not accept third-party checks, except for IRA Rollover checks that are
properly endorsed. In addition, T. Rowe Price does not accept purchases made by
credit card check.
T. ROWE PRICE 34
OPENING A NEW ACCOUNT
----------------------------------------------------------
$2,500 minimum initial investment; $1,000 for retirement plans or gifts or
transfers to minors (UGMA/UTMA) accounts ($25,000 minimum initial investment for
Summit Funds only)
Account Registration
If you own other T. Rowe Price funds, be sure to register any new account just
like your existing accounts so you can exchange among them easily. (The name and
account type would have to be identical.)
By Mail
Please make your check payable to T. Rowe Price Funds (otherwise it will be
returned) and send your check, together with the New Account Form, to the
appropriate address below:
via U.S. Postal Service
T. Rowe Price Account Services P.O. Box 17300 Baltimore, MD 21297-1300
via private carriers/overnight services
T. Rowe Price Account Services Mailcode 17300 4515 Painters Mill Road Owings
Mills, MD 21117-4903
By Wire
Call Investor Services for an account number and give the following wire
information to your bank:
Receiving Bank: PNC Bank, N.A. (Pittsburgh) Receiving Bank ABA#: 043000096
Beneficiary: T. Rowe Price [fund name] Beneficiary Account: 1004397951
Originator to Beneficiary Information (OBI): name of owner(s) and account
number
Complete a New Account Form and mail it to the appropriate T. Rowe Price
addresses listed under "By Mail."
Note: Investment will be made, but no services will be established and IRS
penalty withholding may occur until we receive a signed New Account Form. Also,
retirement plan accounts and IRAs cannot be opened by wire.
ABOUT THE FUND 35
By Exchange
Call Shareholder Services or use Tele*Access or your personal computer (see
Automated Services under Information About Your Services). The new account will
have the same registration as the account from which you are exchanging.
Services for the new account may be carried over by telephone request if they
are preauthorized on the existing account. For limitations on exchanging, see
the explanation of Excessive Trading under Transaction Procedures and Special
Requirements.
In Person
Drop off your New Account Form at any location listed on the back cover and
obtain a receipt.
PURCHASING ADDITIONAL SHARES
----------------------------------------------------------
$100 minimum additional purchase ($1,000 for Summit Funds). For retirement
plans, Automatic Asset Builder, and gifts or transfers to minors (UGMA/UTMA)
accounts $50, except $100 for Summit Funds.
By ACH Transfer
Use Tele*Access or your personal computer or call Shareholder Services if you
have established electronic transfers using the ACH system.
By Wire
Call Shareholder Services or use the instructions in Opening a New Account.
By Mail
1. Make your check payable to T. Rowe Price Funds (otherwise it may be
returned).
2. Mail the check to us at the following address with either a fund
reinvestment slip or a note indicating the fund you want to buy and your fund
account number.
3. Remember to provide your account number and the fund name on the memo line
of your check.
via U.S. Postal Service
T. Rowe Price Account Services P.O. Box 17300 Baltimore, MD 21297-1300
/(For //mail via private carriers and overnight services//, see previous /
/section.)/
T. ROWE PRICE 36
By Automatic Asset Builder
Fill out the Automatic Asset Builder section on the New Account or Shareholder
Services Form.
EXCHANGING AND REDEEMING SHARES
----------------------------------------------------------
Exchange Service
You can move money from one account to an existing identically registered
account or open a new identically registered account. Remember, exchanges are
purchases and sales for tax purposes. (Exchanges into a state tax-free fund are
limited to investors living in states where the fund is registered.)
Redemptions
Redemption proceeds can be mailed to your account address, sent by ACH transfer
to your bank, or wired to your bank (provided your bank information is already
on file). For charges, see Electronic Transfers-By Wire under Information About
Your Services. Please note that large redemption requests initiated through
automated services may be routed to a service representative.
If you request to redeem a specific dollar amount, and the market value of your
account is less than the amount of your request, we will redeem all shares from
your account.
Some of the T. Rowe Price funds may impose a redemption fee of 0.5% to 2% on
shares held for less than six months, one year, or two years, as specified in
the prospectus. The fee is paid to the fund.
For redemptions by check or electronic transfer, please see Information About
Your Services.
By Phone
Call Shareholder Services
If you find our phones busy during unusually volatile markets, please consider
placing your order by your personal computer or Tele*Access (if you have
previously authorized these services), mailgram, or express mail. For exchange
policies, please see Transaction Procedures and Special Requirements - Excessive
Trading.
ABOUT THE FUND 37
By Mail
For each account involved, provide the account name, number, fund name, and
exchange or redemption amount. For exchanges, be sure to specify any fund you
are exchanging out of and the fund or funds you are exchanging into. T. Rowe
Price requires the signatures of all owners exactly as registered, and possibly
a signature guarantee (see Transaction Procedures and Special Requirements -
Signature Guarantees). Please use the appropriate address below:
For nonretirement and IRA accounts:
via U.S. Postal Service
T. Rowe Price Account Services P.O. Box 17302 Baltimore, MD 21297-1302
via private carriers/overnight services
T. Rowe Price Account Services Mailcode 17302 4515 Painters Mill Road Owings
Mills, MD 21117-4903
For employer-sponsored retirement accounts:
via U.S. Postal Service
T. Rowe Price Trust Company P.O. Box 17479 Baltimore, MD 21297-1479
via private carriers/overnight services
T. Rowe Price Trust Company Mailcode 17479 4515 Painters Mill Road Owings Mills,
MD 21117-4903
Requests for redemptions from employer-sponsored retirement accounts must be in
writing; please call T. Rowe Price Trust Company or your plan administrator for
instructions. IRA distributions may be requested in writing or by telephone;
please call Shareholder Services to obtain an IRA Distribution Form or an IRA
Shareholder Services Form to authorize the telephone redemption service.
T. ROWE PRICE 38
RIGHTS RESERVED BY THE FUNDS
----------------------------------------------------------
T. Rowe Price funds and their agents reserve the following rights: (1) to waive
or lower investment minimums; (2) to accept initial purchases by telephone or
mailgram; (3) to refuse any purchase or exchange order; (4) to cancel or rescind
any purchase or exchange order (including, but not limited to, orders deemed to
result in excessive trading, market timing, fraud, or 5% ownership) upon notice
to the shareholder within five business days of the trade or if the written
confirmation has not been received by the shareholder, whichever is sooner; (5)
to freeze any account and suspend account services when notice has been received
of a dispute between the registered or beneficial account owners or there is
reason to believe a fraudulent transaction may occur; (6) to otherwise modify
the conditions of purchase and any services at any time; (7) to waive any
redemption, small account, maintenance or other fees charged to a shareholder;
and (8) to act on instructions reasonably believed to be genuine. These actions
will be taken when, in the sole discretion of management, they are deemed to be
in the best interest of the fund.
In an effort to protect T. Rowe Price funds from the possible adverse effects of
a substantial redemption in a large account, as a matter of general policy, no
shareholder or group of shareholders controlled by the same person or group of
persons will knowingly be permitted to purchase in excess of 5% of the
outstanding shares of a fund, except upon approval of the fund's management.
INFORMATION ABOUT YOUR SERVICES
----------------------------------------------------------
Shareholder Services 1-800-225-5132 Investor Services 1-800-638-5660
Many services are available to you as a shareholder; some you receive
automatically, and others you must authorize or request on the New Account Form.
By signing up for services on the New Account Form rather than later on, you
avoid having to complete a separate form and obtain a signature guarantee. This
section discusses some of the services currently offered.
ABOUT THE FUND 39
Our Services Guide, which we mail to all new shareholders, contains detailed
descriptions of these and other services.
Note: Corporate and other institutional accounts require an original or
certified resolution to establish services and to redeem by mail. Certain other
fiduciary accounts (such as trusts or power of attorney arrangements) require
documentation, which may include an original or certified copy of the trust or
power of attorney to establish services and to redeem by mail. For more
information, call Investor Services.
Retirement Plans
We offer a wide range of plans for individuals, institutions, and large and
small businesses: Traditional IRAs, Roth IRAs, SIMPLE IRAs, SEP-IRAs, Keoghs
(profit sharing, money purchase pension), 401(k)s, and 403(b)(7)s. For
information on IRAs or our no-load variable annuity, call Investor Services. For
information on all other retirement plans, please call our Trust Company at
1-800-492-7670.
Investing for College Expenses
We can help you save for future college expenses on a tax-advantaged basis.
Education IRAs
Invest up to $500 per year; account earnings are tax-deferred until withdrawn
for college.
529 Plans
The T. Rowe Price College Savings Plan (for any U.S. resident) and the
University of Alaska College Savings Plan (for Alaska residents) allow you to
contribute up to an aggregate account balance of $250,000 per student
beneficiary. Earnings are tax-deferred until withdrawn. For more information on
tax-related features and the plans' investment approaches, risks, and expenses,
call toll-free 1-866-521-1894.
Automated Services Tele*Access 1-800-638-2587 24 hours, 7 days
Tele*Access
24-hour service via a toll-free number enables you to (1) access information on
fund performance, prices, distributions, account balances, and your latest
transaction; (2) request checks, prospectuses, services forms, duplicate
statements, and tax forms; and (3) buy, sell, and exchange shares in your
accounts (see Electronic Transfers in this section).
T. ROWE PRICE 40
Web Address www.troweprice.com
Online Account Access
You can sign up online to conduct account transactions through our Web site on
the Internet. If you subscribe to America Online/(R)/, you can access our Web
site via keyword "T. Rowe Price" and conduct transactions in your account.
Plan Account Line 1-800-401-3279
This 24-hour service is similar to Tele*Access but is designed specifically to
meet the needs of retirement plan investors.
By Telephone and In Person
Buy, sell, or exchange shares by calling one of our service representatives or
by visiting one of our investor center locations whose addresses are listed on
the back cover.
Electronic Transfers
By ACH
With no charges to pay, you can move as little as $100 or as much as $100,000
between your bank account and fund account using the ACH system. Enter
instructions via Tele*Access or your personal computer, or call Shareholder
Services.
By Wire
Electronic transfers can be conducted via bank wire. There is a $5 fee for wire
redemptions under $5,000, and your bank may charge for incoming or outgoing wire
transfers regardless of size.
Checkwriting
(Not available for equity funds or the High Yield, Emerging Markets Bond, or
U.S. Bond Index Funds) You may write an unlimited number of free checks on any
money market fund and most bond funds, with a minimum of $500 per check. Keep in
mind, however, that a check results in a redemption; a check written on a bond
fund will create a taxable event which you and we must report to the IRS.
Automatic Investing
Automatic Asset Builder
You can instruct us to move $50 ($100 for Summit Funds) or more from your bank
account, or you can instruct your employer to send all or a portion of your
paycheck to the fund or funds you designate.
Automatic Exchange
You can set up systematic investments from one fund account into another, such
as from a money fund into a stock fund.
ABOUT THE FUND 41
T. ROWE PRICE BROKERAGE
----------------------------------------------------------
To Open an Account 1-800-638-5660 For Existing Brokerage Customers
1-800-225-7720
Investments available through our brokerage service include stocks, options,
bonds, and others at commission savings over full-service brokers/*/. We also
provide a wide range of services, including:
Automated Telephone and Computer Services
You can enter stock and option orders, access quotes, and review account
information around the clock by phone with Tele-Trader or via the Internet with
Account Access-Brokerage. Any trades entered through Tele-Trader save you an
additional 10% on commissions. For stock trades entered through Account
Access-Brokerage, you will pay a commission of $19.95 for up to 1,000 shares
plus $.02 for each share over 1,000. Option trades entered through Account
Access-Brokerage save you 10% over our standard commission schedule. All trades
are subject to a $35 minimum commission except stock trades placed through
Account Access-Brokerage.
Investor Information
A variety of informative reports, such as our Brokerage Insights series and S&P
Market Month newsletter, as well as access to online research tools can help you
better evaluate economic trends and investment opportunities.
Dividend Reinvestment Service
If you elect to participate in this service, the cash dividends from the
eligible securities held in your account will automatically be reinvested in
additional shares of the same securities free of charge. Most securities listed
on national securities exchanges or Nasdaq are eligible for this service.
/*Services //v//ary //b//y //f//irm./
/T. Rowe Price// Brokerage is a division of //T. Rowe Price// Investment /
/Services, Inc., Member NASD/SIPC./
T. ROWE PRICE 42
INVESTMENT INFORMATION
----------------------------------------------------------
To help you monitor your investments and make decisions that accurately reflect
your financial goals, T. Rowe Price offers a wide variety of information in
addition to account statements. Most of this information is also available on
our Web site at www.troweprice.com.
A note on mailing procedures: If two or more members of a household own the same
fund, we economize on fund expenses by sending only one fund report and
prospectus. If you need additional copies or do not want your mailings to be
"householded," please call Shareholder Services at 1-800-225-5132 or write to us
at P.O. Box 17630, Baltimore, Maryland 21297-1630.
Shareholder Reports
Fund managers' annual and semiannual reviews of their strategies and
performance.
The T. Rowe Price Report
A quarterly investment newsletter discussing markets and financial strategies
and including the Performance Update, a review of all T. Rowe Price fund
results.
Insights
Educational reports on investment strategies and financial markets.
Investment Guides
Asset Mix Worksheet, College Planning Kit, Diversifying Overseas: A T. Rowe
Price Guide to International Investing, Managing Your Retirement Distribution,
Personal Strategy Planner, Retirement Readiness Guide, Retirement Planning Kit,
and Tax Considerations for Investors.
ABOUT THE FUND 43
T. ROWE PRICE PRIVACY POLICY
----------------------------------------------------------
In the course of doing business with T. Rowe Price, you share personal and
financial information with us. We treat this information as confidential and
recognize the importance of protecting access to it.
You may provide information when communicating or transacting with us in
writing, electronically, or by phone. For instance, information may come from
applications, requests for forms or literature, and your transactions and
account positions with us. On occasion, such information may come from consumer
reporting agencies and those providing services to us.
We do not sell information about current or former customers to any third
parties, and we do not disclose it to third parties unless necessary to process
a transaction, service an account, or as otherwise permitted by law. We may
share information within the T. Rowe Price family of companies in the course of
providing or offering products and services to best meet your investing needs.
We may also share that information with companies that perform administrative
or marketing services for T. Rowe Price, with a research firm we have hired, or
with a business partner, such as a bank or insurance company with whom we are
developing or offering investment products. When we enter into such a
relationship, our contracts restrict the companies' use of our customer
information, prohibiting them from sharing or using it for any purposes other
than those for which they were hired.
We maintain physical, electronic, and procedural safeguards to protect your
personal information. Within T. Rowe Price, access to such information is
limited to those who need it to perform their jobs, such as servicing your
accounts, resolving problems, or informing you of new products or services.
Finally, our Code of Ethics, which applies to all employees, restricts the use
of customer information and requires that it be held in strict confidence.
This Privacy Policy applies to the following T. Rowe Price family of companies:
T. Rowe Price Associates, Inc.; T. Rowe Price Advisory Services, Inc.; T. Rowe
Price Investment Services, Inc.; T. Rowe Price Savings Bank; T. Rowe Price
Trust Company; and the T. Rowe Price Funds.
To help you achieve your financial goals, T. Rowe Price offers a wide range of
stock, bond, and money market investments, as well as convenient services and
informative reports.
A fund Statement of Additional Information has been filed with the Securities
and Exchange Commission and is incorporated by reference into this prospectus.
Further information about fund investments, including a review of market
conditions and the manager's recent strategies and their impact on performance,
is available in the annual and semiannual shareholder reports. To obtain free
copies of any of these documents, or for shareholder inquiries, call
1-800-638-5660.
Fund information and Statements of Additional Information are also available
from the Public Reference Room of the Securities and Exchange Commission. Infor-
mation on the operation of the Public Reference Room may be obtained by calling
the SEC at 1-202-942-8090. Fund reports and other fund information are available
on the EDGAR Database on the SEC's Internet site at http://www.sec.gov. Copies
of this information may be obtained, after paying a duplicating fee, by
electronic request at publicinfo@sec.gov, or by writing the Public Reference
Room, Washington D.C. 20549-0102.
For mutual fund or T. Rowe Price Brokerage information
Investor Services
1-800-638-5660
For existing accounts
Shareholder Services
1-800-225-5132
For the hearing impaired
1-800-367-0763
For performance, prices, account information, or to conduct transactions
Tele*Access/(R)/
24 hours, 7 days 1-800-638-2587
Internet address
www.troweprice.com
Plan Account Line
For retirement plan investors: The appropriate 800 number appears on your
retirement account statement.
Investor Centers
For directions, call 1-800-225-5132 or visit our Web site
Baltimore Area
Downtown
105 East Lombard Street
Owings Mills
Three Financial Center 4515 Painters Mill Road
Boston Area
386 Washington Street Wellesley
Chicago Area
1900 Spring Road Suite 104 Oak Brook
Colorado Springs
2260 Briargate Parkway
Los Angeles Area
Warner Center 21800 Oxnard Street Suite 270 Woodland Hills
New Jersey/New York Area
51 JFK Parkway, 1st Floor Short Hills, New Jersey
San Francisco Area
1990 N. California Blvd. Suite 100 Walnut Creek
Tampa
4200 West Cypress Street 10th Floor
Washington, D.C. Area
Downtown
900 17th Street, N.W. Farragut Square
Tysons Corner
1600 Tysons Boulevard Suite 150
T. Rowe Price Associates, Inc. 100 East Pratt Street Baltimore, MD 21202
F43-040 10/1/01
1940 Act File No. 811-2396
EX-99
4
incomesai01.txt
STATEMENT OF ADDITIONAL INFORMATION
The date of this Statement of Additional Information is October 1, 2001.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE HIGH YIELD FUND, INC.
T. Rowe Price High Yield Fund-Advisor Class
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. Rowe Price Prime Reserve Fund
T. Rowe Price Prime Reserve Fund-PLUS Class
T. ROWE PRICE RESERVE INVESTMENT FUNDS, INC.
T. Rowe Price Government Reserve Investment Fund
T. Rowe Price Reserve Investment Fund
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
and
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
-------------------------------------------------------------------------------
Mailing Address: T. Rowe Price Investment Services, Inc. 100 East Pratt
Street Baltimore, Maryland 21202 1-800-638-5660
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the appropriate fund prospectus dated October 1,
2001, which may be obtained from T. Rowe Price Investment Services, Inc.
("Investment Services").
Each fund's financial statements for the year ended May 31, 2001, and the
report of independent accountants are included in each fund's Annual Report
and incorporated by reference into this Statement of Additional Information.
If you would like a prospectus or an annual or semiannual shareholder report
for a fund of which you are not a shareholder, please call 1-800-638-5660. A
prospectus with more complete information, including management fees and
expenses, will be sent to you. Please read it carefully.
Government Reserve and Reserve Investment Funds are not available for direct
purchase by members of the public.
C22-043 10/1/01
TABLE OF CONTENTS
-----------------
Page Page
---- ----
Capital Stock Management of the Funds
------------------------------ --------------------------------------------
Code of Ethics Net Asset Value Per Share
------------------------------ --------------------------------------------
Custodian Portfolio Management Practices
------------------------------ --------------------------------------------
Distributor for the Portfolio Transactions
Fund
------------------------------ --------------------------------------------
Dividends and Pricing of Securities
Distributions
------------------------------ --------------------------------------------
Federal Registration Principal Holders of Securities
of Shares
------------------------------ --------------------------------------------
Independent Ratings of Commercial Paper
Accountants
------------------------------ --------------------------------------------
Investment Management Ratings of Corporate Debt Securities
Services
------------------------------ --------------------------------------------
Investment Objectives Risk Factors
and Policies
------------------------------ --------------------------------------------
Investment Performance Services
by Outside Parties
------------------------------ --------------------------------------------
Investment Program Tax Status
------------------------------ --------------------------------------------
Investment Yield Information
Restrictions
------------------------------ --------------------------------------------
Legal Counsel
------------------------------ --------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
-------------------------------------------------------------------------------
The following information supplements the discussion of each fund's
investment objectives and policies discussed in each fund's prospectus.
Shareholder approval is required to substantively change fund objectives.
Unless otherwise specified, the investment programs and restrictions of the
funds are not fundamental policies. Each fund's operating policies are
subject to change by each Board of Directors/Trustees without shareholder
approval. However, shareholders will be notified of a material change in an
operating policy. Each fund's fundamental policies may not be changed without
the approval of at least a majority of the outstanding shares of the fund or,
if it is less, 67% of the shares represented at a meeting of shareholders at
which the holders of 50% or more of the shares are represented. References to
the following are as indicated:
Investment Company Act of 1940 ("1940 Act")
Securities and Exchange Commission ("SEC")
T. Rowe Price Associates, Inc. ("T. Rowe Price")
Moody's Investors Service, Inc. ("Moody's")
Standard & Poor's Corporation ("S&P")
Internal Revenue Code of 1986 ("Code")
T. Rowe Price International, Inc. ("T. Rowe Price
International")
Throughout this Statement of Additional Information, "the fund" is intended
to refer to each fund listed on the cover page, unless otherwise indicated.
2
RISK FACTORS
-------------------------------------------------------------------------------
Reference is also made to the sections entitled "Types of Securities" and
"Portfolio Management Practices" for discussions of the risks associated with
the investments and practices described therein as they apply to the fund.
All funds
Debt Obligations
Yields on short-, intermediate-, and long-term debt securities are dependent
on a variety of factors, including the general conditions of the money and
bond markets, the maturity of the obligation, and the credit quality and
rating of the issue. Debt securities with longer maturities tend to have
higher yields and are generally subject to potentially greater capital
appreciation and depreciation than obligations with shorter maturities and
lower yields. The market prices of debt securities usually vary, depending
upon available yields. An increase in interest rates will generally reduce
the value of portfolio debt securities, and a decline in interest rates will
generally increase the value of portfolio debt securities. The ability of the
fund to achieve its investment objective is also dependent on the continuing
ability of the issuers of the debt securities in which the fund invests to
meet their obligations for the payment of interest and principal when due.
Although the fund seeks to reduce risk by portfolio diversification, credit
analysis, and attention to trends in the economy, industries, and financial
markets, such efforts will not eliminate all risk. There can, of course, be
no assurance that the fund will achieve its investment objective.
After purchase by the fund, a debt security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the fund.
Neither event will require a sale of such security by the fund. However, T.
Rowe Price will consider such events in its determination of whether the fund
should continue to hold the security. To the extent that the ratings given by
Moody's or S&P may change as a result of changes in such organizations or
their rating systems, the fund will attempt to use comparable ratings as
standards for investments in accordance with the investment policies
contained in the prospectus. When purchasing unrated securities, T. Rowe
Price, under the supervision of the fund's Board of Directors/Trustees,
determines whether the unrated security is of a quality comparable to that
which the fund is allowed to purchase.
Government Reserve Investment, Prime Reserve, Reserve Investment, and U.S.
Treasury Money Funds
There can be no assurance that the fund will achieve its investment objective
or be able to maintain its net asset value per share at $1.00. The price of
the fund is not guaranteed or insured by the U.S. government and its yield is
not fixed. An increase in interest rates could reduce the value of the fund's
portfolio investments, and a decline in interest rates could increase the
value.
All funds except Government Reserve Investment, Prime Reserve, Reserve
Investment, and U.S. Treasury Money Funds
Because of its investment policy, the fund may or may not be suitable or
appropriate for any particular investor. The fund is not a money market fund
and is not an appropriate investment for those whose primary objective is
principal stability. The value of the portfolio securities of the fund will
fluctuate based upon market conditions. Although the fund seeks to reduce
risk by investing in a diversified portfolio, such diversification does not
eliminate all risk. There can, of course, be no assurance that the fund will
achieve its investment objective.
Mortgage-backed 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., the fund) receives
monthly scheduled payments of principal and interest, and may receive
unscheduled principal payments representing prepayments on the underlying
mortgages. The incidence of unscheduled principal prepayments is also likely
to increase in mortgage pools owned by the fund 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 fund to reinvest principal payments at the then lower
prevailing interest
3
rate, and (2) reduce the potential for capital appreciation beyond the face
amount of the security. Conversely, the fund may realize a gain on
prepayments of mortgage pools trading at a discount. Such prepayments will
provide an early return of principal which may then be reinvested at the then
higher prevailing interest rate.
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 ARM securities may prevent income on the ARM
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 which when distributed to shareholders will be taxable as ordinary
income.
Corporate Income, High Yield, and Personal Strategy Funds
Special Risks of Investing in Junk Bonds The following special considerations
are additional risk factors associated with the fund's investments in
lower-rated debt securities.
. Youth and Growth of the Lower-Rated Debt Securities Market The market for
lower-rated debt securities is relatively new and its growth has paralleled a
long economic expansion. Past experience may not, therefore, provide an
accurate indication of future performance of this market, particularly during
periods of economic recession. An economic downturn or increase in interest
rates is likely to have a greater negative effect on this market, the value
of lower-rated debt securities in the fund's portfolio, the fund's net asset
value and the ability of the bonds' issuers to repay principal and interest,
meet projected business goals, and obtain additional financing than on
higher-rated securities. These circumstances also may result in a higher
incidence of defaults than with respect to higher-rated securities. An
investment in the fund is more risky than investment in shares of a fund
which invests only in higher-rated debt securities.
. Sensitivity to Interest Rate and Economic Changes Prices of lower-rated debt
securities may be more sensitive to adverse economic changes or corporate
developments than higher-rated investments. Debt securities with longer
maturities, which may have higher yields, may increase or decrease in value
more than debt securities with shorter maturities. Market prices of
lower-rated debt securities structured as zero coupon or pay-in-kind
securities are affected to a greater extent by interest rate changes and may
be more volatile than securities which pay interest periodically and in cash.
Where it deems it appropriate and in the best interests of fund shareholders,
the fund may incur additional expenses to seek recovery on a debt security on
which the issuer has defaulted and to pursue litigation to protect the
interests of security holders of its portfolio companies.
. Liquidity and Valuation Because the market for lower-rated securities may be
thinner and less active than for higher-rated securities, there may be market
price volatility for these securities and limited liquidity in the resale
market. Nonrated securities are usually not as attractive to as many buyers
as rated securities are, a factor which may make nonrated securities less
marketable. These factors may have the effect of limiting the availability of
the securities for purchase by the fund and may also limit the ability of the
fund to sell such securities at their fair value either to meet redemption
requests or in response to changes in the economy or the financial markets.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of lower-rated
debt securities, especially in a thinly traded market. To the extent the fund
owns or may acquire illiquid or restricted lower-rated securities, these
securities may involve special registration responsibilities, liabilities and
costs, and liquidity and valuation difficulties. Changes in values of debt
securities which the fund owns will affect its net asset value per share. If
market quotations are not readily available for the fund's lower-rated or
nonrated securities, these securities will be valued by a method
4
that the fund's Board of Directors believes accurately reflects fair value.
Judgment plays a greater role in valuing lower-rated debt securities than
with respect to securities for which more external sources of quotations and
last sale information are available.
. Taxation Special tax considerations are associated with investing in
lower-rated debt securities structured as zero coupon or pay-in-kind
securities. The fund accrues income on these securities prior to the receipt
of cash payments. The fund must distribute substantially all of its income to
its shareholders to qualify for pass-through treatment under the tax laws and
may, therefore, have to dispose of its portfolio securities to satisfy
distribution requirements.
Corporate Income, High Yield, New Income, Personal Strategy, and Short-Term
Bond Funds
Risk Factors of Foreign Investing There are special risks in foreign
investing. Certain of these risks are inherent in any mutual fund while
others relate more to the countries in which the fund will invest. Many of
the risks are more pronounced for investments in developing or emerging
market countries, such as many of the countries of Asia, Latin America,
Eastern Europe, Russia, Africa, and the Middle East. Although there is no
universally accepted definition, a developing country is generally considered
to be a country which is in the initial stages of its industrialization cycle
with a per capita gross national product of less than $8,000.
. Political and Economic Factors Individual foreign economies of some
countries differ favorably or unfavorably from the United States' economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
The internal politics of some foreign countries are not as stable as in the
United States. For example, in 1991, the existing government in Thailand was
overthrown in a military coup. In 1994-1995, the Mexican peso plunged in
value, setting off a severe crisis in the Mexican economy. Asia is still
coming to terms with its own crisis and recessionary conditions sparked by
widespread currency weakness in late 1997. In 1998, there was substantial
turmoil in markets throughout the world. In 1999, the democratically elected
government of Pakistan was overthrown by a military coup. The Russian
government also defaulted on all its domestic debt. In addition, significant
external political risks currently affect some foreign countries. Both Taiwan
and China still claim sovereignty of one another and there is a demilitarized
border and hostile relations between North and South Korea.
Governments in certain foreign countries continue to participate to a
significant degree, through ownership interest or regulation, in their
respective economies. Action by these governments could have a significant
effect on market prices of securities and payment of dividends. The economies
of many foreign countries are heavily dependent upon international trade and
are accordingly affected by protective trade barriers and economic conditions
of their trading partners. The enactment by these trading partners of
protectionist trade legislation could have a significant adverse effect upon
the securities markets of such countries.
. Currency Fluctuations The fund invests in securities denominated in various
currencies. Accordingly, a change in the value of any such currency against
the U.S. dollar will result in a corresponding change in the U.S. dollar
value of the fund's assets denominated in that currency. Such changes will
also affect the fund's income. Generally, when a given currency appreciates
against the dollar (the dollar weakens), the value of the fund's securities
denominated in that currency will rise. When a given currency depreciates
against the dollar (the dollar strengthens), the value of the fund's
securities denominated in that currency would be expected to decline.
. Investment and Repatriation Restrictions Foreign investment in the
securities markets of certain foreign countries is restricted or controlled
in varying degrees. These restrictions limit at times and preclude investment
in certain of such countries and increase the cost and expenses of the fund.
Investments by foreign investors are subject to a variety of restrictions in
many developing countries. These restrictions may take the form of prior
governmental approval, limits on the amount or type of securities held by
foreigners, and limits on the types of companies in which foreigners may
invest. Additional or different restrictions may be imposed at any time by
these or other countries in which the fund invests. In addition, the
repatriation of both investment income and capital from several foreign
countries is restricted and controlled under certain regulations, including
in some cases the need for certain government consents. For example, capital
invested in Chile normally cannot be repatriated for one year. In 1998, the
government of Malaysia imposed currency
5
controls which effectively made it impossible for foreign investors to
convert Malaysian ringgits to foreign currencies.
. Market Characteristics It is contemplated that most foreign securities will
be purchased in over-the-counter markets or on securities exchanges located
in the countries in which the respective principal offices of the issuers of
the various securities are located, if that is the best available market.
Investments in certain markets may be made through American Depository
Receipts ("ADRs") and Global Depository Receipts ("GDRs") traded in the
United States or on foreign exchanges. Foreign securities markets are
generally not as developed or efficient as, and more volatile than, those in
the United States. While growing in volume, they usually have substantially
less volume than U.S. markets and the fund's portfolio securities may be less
liquid and subject to more rapid and erratic price movements than securities
of comparable U.S. companies. Securities may trade at price/earnings
multiples higher than comparable United States securities and such levels may
not be sustainable. Commissions on foreign securities trades are generally
higher than commissions on United States exchanges, and while there are an
increasing number of overseas securities markets that have adopted a system
of negotiated rates, a number are still subject to an established schedule of
minimum commission rates. There is generally less government supervision and
regulation of foreign securities exchanges, brokers, and listed companies
than in the United States. Moreover, settlement practices for transactions in
foreign markets may differ from those in United States markets. Such
differences include delays beyond periods customary in the United States and
practices, such as delivery of securities prior to receipt of payment, which
increase the likelihood of a "failed settlement." Failed settlements can
result in losses to the fund.
. Investment Funds The fund may invest in investment funds which have been
authorized by the governments of certain countries specifically to permit
foreign investment in securities of companies listed and traded on the stock
exchanges in these respective countries. The fund's investment in these funds
is subject to the provisions of the 1940 Act. If the fund invests in such
investment funds, the fund's shareholders will bear not only their
proportionate share of the expenses of the fund (including operating expenses
and the fees of the investment manager), but also will bear indirectly
similar expenses of the underlying investment funds. In addition, the
securities of these investment funds may trade at a premium over their net
asset value.
. Information and Supervision There is generally less publicly available
information about foreign companies comparable to reports and ratings that
are published about companies in the United States. Foreign companies are
also generally not subject to uniform accounting, auditing, and financial
reporting standards, practices, and requirements comparable to those
applicable to United States companies. It also is often more difficult to
keep currently informed of corporate actions which affect the prices of
portfolio securities.
. Taxes The dividends and interest payable on certain of the fund's foreign
portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount of income available for distribution to the fund's
shareholders.
. Other With respect to certain foreign countries, especially developing and
emerging ones, there is the possibility of adverse changes in investment or
exchange control regulations, expropriation or confiscatory taxation,
limitations on the removal of funds or other assets of the fund, political or
social instability, or diplomatic developments which could affect investments
by U.S. persons in those countries.
. Eastern Europe and Russia Changes occurring in Eastern Europe and Russia
today could have long-term potential consequences. As restrictions fall, this
could result in rising standards of living, lower manufacturing costs,
growing consumer spending, and substantial economic growth. However,
investment in most countries of Eastern Europe and Russia is highly
speculative at this time. Political and economic reforms are too recent to
establish a definite trend away from centrally planned economies and
state-owned industries. The collapse of the ruble from its crawling peg
exchange rate against the U.S. dollar has set back the path of reform for
several years. In many of the countries of Eastern Europe and Russia, there
is no stock exchange or formal market for securities. Such countries may also
have government exchange controls, currencies with no recognizable market
value relative to the established currencies of western market economies,
little or no experience in trading in securities, no financial reporting
standards, a lack of a banking and securities infrastructure to handle such
trading, and a legal tradition which does not recognize rights in private
property. In addition, these countries may have national policies which
restrict investments in companies deemed
6
sensitive to the country's national interest. Further, the governments in
such countries may require governmental or quasi-governmental authorities to
act as custodian of the fund's assets invested in such countries, and these
authorities may not qualify as a foreign custodian under the 1940 Act and
exemptive relief from such Act may be required. All of these considerations
are among the factors which cause significant risks and uncertainties to
investment in Eastern Europe and Russia.
. Latin America
Inflation Most Latin American countries have experienced, at one time or
another, severe and persistent levels of inflation, including, in some cases,
hyperinflation. This has, in turn, led to high interest rates, extreme
measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth. Although inflation in many countries
has lessened, there is no guarantee it will remain at lower levels.
Political Instability The political history of certain Latin American
countries has been characterized by political uncertainty, intervention by
the military in civilian and economic spheres, and political corruption. Such
developments, if they were to reoccur, could reverse favorable trends toward
market and economic reform, privatization, and removal of trade barriers, and
result in significant disruption in securities markets.
Foreign Currency Certain Latin American countries may experience sudden and
large adjustments in their currency which, in turn, can have a disruptive and
negative effect on foreign investors. For example, in late 1994 the value of
the Mexican peso lost more than one-third of its value relative to the
dollar. In 1999, the Brazilian real lost 30% of its value against the U.S.
dollar. Certain Latin American countries may impose restrictions on the free
conversion of their currency into foreign currencies, including the U.S.
dollar. There is no significant foreign exchange market for many currencies
and it would, as a result, be difficult for the fund to engage in foreign
currency transactions designed to protect the value of the fund's interests
in securities denominated in such currencies.
Sovereign Debt A number of Latin American countries are among the largest
debtors of developing countries. There have been moratoria on, and
reschedulings of, repayment with respect to these debts. Such events can
restrict the flexibility of these debtor nations in the international markets
and result in the imposition of onerous conditions on their economies.
INVESTMENT PROGRAM
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Types of Securities
Set forth below is additional information about certain of the investments
described in each fund's prospectus.
Debt Securities
Fixed income securities in which the fund may invest include, but are not
limited to, those described below.
All funds
. 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, Government
National Mortgage Association, Federal Home Loan Bank, Federal Land Banks,
Farmers Home Administration, Banks for Cooperatives, Federal Intermediate
Credit Banks, Federal Financing Bank, Farm Credit Banks, the Small Business
Association, and the Tennessee Valley Authority. Some of these securities are
supported by the full faith and credit of the U.S. Treasury; the remainder
are supported only by the credit of the instrumentality, which may or may not
include the right of the issuer to borrow from the Treasury.
The GNMA, U.S. Treasury Money, Intermediate, and Long-Term Funds and GRIF may
only invest in these securities if they are supported by the full faith and
credit of the U.S. government.
7
All funds except GNMA, Government Reserve Investment, U.S. Treasury Money,
Intermediate, and Long-Term Funds
. Bank Obligations Certificates of deposit, bankers' acceptances, and other
short-term debt obligations. Certificates of deposit are short-term
obligations of commercial banks. A bankers' acceptance is a time draft drawn
on a commercial bank by a borrower, usually in connection with international
commercial transactions. Certificates of deposit may have fixed or variable
rates. The fund may invest in U.S. banks, foreign branches of U.S. banks,
U.S. branches of foreign banks, and foreign branches of foreign banks.
. Corporate Debt Securities Outstanding corporate debt securities (e.g.,
bonds and debentures). 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.
. 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.
All funds except Government Reserve Investment, Prime Reserve, Reserve
Investment, and U.S. Treasury Money Funds
Mortgage-Related Securities
Mortgage-related securities in which the fund may invest include, but are not
limited to, those described below. The GNMA, U.S. Treasury Intermediate and
U.S. Treasury Long-Term Funds may only invest in these securities to the
extent they are backed by the full faith and credit of the U.S. government.
. 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 fixed rate,
graduated payment, and 15-year. Principal and interest payments made on the
mortgages in the underlying mortgage pool are passed through to the fund.
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 fund. This principal is
returned to the fund 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 United States government or one of its agencies
or instrumentalities, such as the Government National Mortgage Association
("Ginnie Mae" or "GNMA"), the Federal National Mortgage Association ("Fannie
Mae" or "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 United States
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
8
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.
. Ginnie Mae Certificates Ginnie Mae 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 Ginnie Mae 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 United States 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, Ginnie Mae is authorized to borrow from
the United States Treasury with no limitations as to amount.
. Fannie Mae Certificates Fannie Mae 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 Fannie Mae. 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.
. Freddie Mac Certificates Freddie Mac is a corporate instrumentality of the
United States created pursuant to the Emergency Home Finance Act of 1970, as
amended ("FHLMC Act"). Freddie Mac Certificates represent a pro-rata interest
in a group of mortgage loans ("Freddie Mac Certificates") purchased by
Freddie Mac. Freddie Mac 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
Freddie Mac are obligations solely of Freddie Mac and are not backed by the
full faith and credit of the U.S. government.
. Farmer Mac Certificates Farmer Mac is a federally chartered instrumentality
of the United States established by Title VIII of the Farm Credit Act of
1971, as amended ("Charter Act"). Farmer Mac 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. Farmer
Mac 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 ("Farmer Mac
Certificates"). Similar to Fannie Mae and Freddie Mac, Farmer Mac
Certificates are not supported by the full faith and credit of the U.S.
government; rather, Farmer Mac 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 fund. 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 Ginnie Mae Certificates are
backed by mortgages of this type, and, accordingly, the generally accepted
practice treats Ginnie Mae Certificates as 30-year securities which prepay in
full in the 12th year. FNMA and Freddie Mac Certificates may have differing
prepayment characteristics.
9
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 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 fund invests, 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
Collateralized Mortgage Obligations (CMOs), U.S. Government Agency
Multi-class Pass-Through Securities, which include FNMA Guaranteed REMIC
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--
10
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 non-governmental 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 fund's quality standards. The fund 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 fund's 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. "IOs" (interest only securities) receive the interest
portion of the cash flow while "POs" (principal only securities) 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 other mortgage-backed securities described herein, like
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 fund.
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, but not
the timing, of cash flows provided to the investor. In contrast, prepayments
on the mortgage pool affect the timing, but not the amount, 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, an investor may fail to fully recoup
its 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 fund that it believes the fund should
treat IOs and POs, other than government-issued IOs or POs backed by fixed
rate mortgages, as illiquid securities and, accordingly, limit its
investments in such securities, together with all other illiquid securities,
to 15% of the fund's 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 fund's Board of
Directors/Trustees. The fund's Board of Directors/Trustees has 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; size of the issue and the number of dealers who make a market in
the IO or PO.
11
. Adjustable Rate Mortgage Securities 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 fund 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 The fund expects that 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 fund's objective, policies and quality standards,
consider making investments in such new types of securities.
All funds except GNMA, Government Reserve Investment, U.S. Treasury Money,
U.S. Treasury Intermediate, and U.S. Treasury Long-Term Funds
Asset-Backed Securities
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 security 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 on any asset-backed
security is difficult to predict with precision and actual yield to maturity
may be more or less than the anticipated yield to maturity. Asset-backed
securities may be classified as pass-through certificates or collateralized
obligations.
Pass-through certificates are asset-backed securities which represent an
undivided fractional ownership interest in an underlying pool of assets.
Pass-through certificates usually provide for payments of principal and
interest received to be passed through to their holders, usually after
deduction for certain costs and expenses incurred in administering the pool.
Because pass-through certificates represent an ownership interest in the
underlying assets, the holders thereof bear directly the risk of any defaults
by the obligors on the underlying assets not covered by any credit support.
See "Types of Credit Support."
Asset-backed securities issued in the form of debt instruments, also known as
collateralized obligations, are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt. Such assets are most often trade, credit card or
automobile receivables. The assets collateralizing such asset-backed
securities are pledged to a trustee or custodian for the benefit of the
holders thereof. Such issuers generally hold no assets other than those
underlying the asset-backed securities and any credit support provided. As a
result, although payments on such asset-backed securities are obligations of
the issuers, in the event of defaults on the underlying assets not covered by
any credit support (see "Types of Credit Support"), the issuing entities are
unlikely to have sufficient assets to satisfy their obligations on the
related asset-backed securities.
. Methods of Allocating Cash Flows While many 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. See "Types of Credit
Support." Second, multiple classes may permit the issuance of
12
securities with payment terms, interest rates or other characteristics
differing both from those of each other and from those of the underlying
assets. Examples include so-called "strips" (asset-backed securities
entitling the holder to disproportionate interests with respect to the
allocation of interest and principal of the assets backing the security), and
securities with class or classes having characteristics which mimic the
characteristics of non-asset-backed securities, such as floating interest
rates (i.e., interest rates which adjust as a specified benchmark changes) or
scheduled amortization of principal.
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 fund may invest in such asset-backed securities if such
investment is otherwise consistent with its investment objectives and
policies and with the investment restrictions of the fund.
. Types of Credit Support Asset-backed securities are often backed by a pool
of assets representing the obligations of a number of different parties. To
lessen the effect of failures by obligors on 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 "senior-subordinated securities" (multiple class
asset-backed securities with certain classes subordinate to other classes as
to the payment of principal thereon, with the result that defaults on the
underlying assets are borne first by the holders of the subordinated class)
and asset-backed securities that have "reserve funds" (where cash or
investments, sometimes funded from a portion of the initial payments on the
underlying assets, are held in reserve against future losses) or that have
been "over collateralized" (where the scheduled payments on, or the principal
amount of, the underlying assets substantially exceeds that required to make
payment of the asset-backed securities and pay any servicing or other fees).
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.
. Automobile Receivable Securities The fund may invest in asset-backed
securities which are backed by receivables from motor vehicle installment
sales contracts or installment loans secured by motor vehicles ("Automobile
Receivable Securities"). Since installment sales contracts for motor vehicles
or installment loans related thereto ("Automobile Contracts") typically have
shorter durations and lower incidences of prepayment, Automobile Receivable
Securities generally will exhibit a shorter average life and are less
susceptible to prepayment risk.
Most entities that issue Automobile Receivable Securities create an
enforceable interest in their respective Automobile Contracts only by filing
a financing statement and by having the servicer of the Automobile Contracts,
which is usually the originator of the Automobile Contracts, take custody
thereof. In such circumstances, if the servicer of the Automobile Contracts
were to sell the same Automobile Contracts to another party, in violation of
its obligation not to do so, there is a risk that such party could acquire an
interest in the Automobile Contracts superior to that of the holders of
Automobile Receivable Securities. Also, although most Automobile Contracts
grant a security interest in the motor vehicle being financed, in most states
the security interest in a motor vehicle must be noted on the certificate of
title to create an enforceable security interest against competing claims of
other parties. Due to the large number of vehicles involved, however, the
certificate of title to each vehicle financed, pursuant to the Automobile
Contracts underlying the Automobile Receivable Security, usually is not
amended to reflect the assignment of the seller's security interest for the
benefit of the holders of the Automobile Receivable Securities. Therefore,
there is the possibility that recoveries on repossessed collateral may not,
in some cases, be available to support payments
13
on the securities. In addition, various state and federal securities laws
give the motor vehicle owner the right to assert against the holder of the
owner's Automobile Contract certain defenses such owner would have against
the seller of the motor vehicle. The assertion of such defenses could reduce
payments on the Automobile Receivable Securities.
. Credit Card Receivable Securities The fund may invest in asset-backed
securities backed by receivables from revolving credit card agreements
("Credit Card Receivable Securities"). Credit balances on revolving credit
card agreements ("Accounts") are generally paid down more rapidly than are
Automobile Contracts. Most of the Credit Card Receivable Securities issued
publicly to date have been Pass-Through Certificates. In order to lengthen
the maturity of Credit Card Receivable Securities, most such securities
provide for a fixed period during which only interest payments on the
underlying Accounts are passed through to the security holder and principal
payments received on such Accounts are used to fund the transfer to the pool
of assets supporting the related Credit Card Receivable Securities of
additional credit card charges made on an Account. The initial fixed period
usually may be shortened upon the occurrence of specified events which signal
a potential deterioration in the quality of the assets backing the security,
such as the imposition of a cap on interest rates. The ability of the issuer
to extend the life of an issue of Credit Card Receivable Securities thus
depends upon the continued generation of additional principal amounts in the
underlying account during the initial period and the non-occurrence of
specified events. An acceleration in cardholders' payment rates or any other
event which shortens the period during which additional credit card charges
on an Account may be transferred to the pool of assets supporting the related
Credit Card Receivable Security could shorten the weighted average life and
yield of the Credit Card Receivable Security.
Credit cardholders are entitled to the protection of a number of state and
federal consumer credit laws, many of which give such holder the right to set
off certain amounts against balances owed on the credit card, thereby
reducing amounts paid on Accounts. In addition, unlike most other
asset-backed securities, Accounts are unsecured obligations of the
cardholder.
. Other Assets Asset-backed securities backed by assets other than those
described above, including, but not limited to, home equity loans,
small-business loans and accounts receivable, equipment leases, commercial
real estate loans, boat loans and manufacturing housing loans. The fund may
invest in such securities in the future if such investment is otherwise
consistent with its investment objective and policies.
There are, of course, other types of securities that are, or may become
available, which are similar to the foregoing and the fund may invest in
these securities.
High Yield 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 buy-outs 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 fund 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
14
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 fund 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 fund would consider the
loan participation as illiquid and subject to the fund's restriction on
investing no more than 15% of its net assets in illiquid securities.
Where required by applicable SEC positions, the fund 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 fund 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 non-qualifying income earned by the fund cannot exceed 10% of total
income.
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 both 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
15
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 "non-qualifying" under the Code. The fund may have up to
10% of its gross income (including capital gains) derived from non-qualifying
sources.
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. PIK's
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
fund until the maturity or call date of the bond. The fund will nonetheless
be required to distribute substantially all of this gross income each year to
comply with the Internal Revenue Code, and such distributions could reduce
the amount of cash available for investment by the fund.
High Yield, New Income, and Personal Strategy Funds
Warrants
The fund may acquire 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.
16
Corporate Income, High Yield, New Income, Personal Strategy, and Short-Term
Bond Funds
Hybrid Instruments
Hybrid instruments (a type of potentially high-risk derivative) have been
developed and combine the elements of futures contracts or options with those
of debt, preferred equity, or a depository instrument (hereinafter "hybrid
instruments"). Generally, a hybrid instrument will be a debt security,
preferred stock, depository share, trust certificate, certificate of deposit,
or other evidence of indebtedness on which a portion of or all interest
payments, and/or the principal or stated amount payable at maturity,
redemption, or retirement, is determined by reference to prices, changes in
prices, or differences between prices of securities, currencies, intangibles,
goods, articles, or commodities (collectively "underlying assets") or by
another objective index, economic factor, or other measure, such as interest
rates, currency exchange rates, commodity indices, and securities indices
(collectively "benchmarks"). Thus, hybrid instruments may take a variety of
forms, including, but not limited to, debt instruments with interest or
principal payments or redemption terms determined by reference to the value
of a currency or commodity or securities index at a future point in time,
preferred stock with dividend rates determined by reference to the value of a
currency, or convertible securities with the conversion terms related to a
particular commodity.
Hybrid instruments can be an efficient means of creating exposure to a
particular market, or segment of a market, with the objective of enhancing
total return. For example, a fund may wish to take advantage of expected
declines in interest rates in several European countries, but avoid the
transaction costs associated with buying and currency-hedging the foreign
bond positions. One solution would be to purchase a U.S. dollar-denominated
hybrid instrument whose redemption price is linked to the average three-year
interest rate in a designated group of countries. The redemption price
formula would provide for payoffs of greater than par if the average interest
rate was lower than a specified level, and payoffs of less than par if rates
were above the specified level. Furthermore, the fund could limit the
downside risk of the security by establishing a minimum redemption price so
that the principal paid at maturity could not be below a predetermined
minimum level if interest rates were to rise significantly. The purpose of
this arrangement, known as a structured security with an embedded put option,
would be to give the fund the desired European bond exposure while avoiding
currency risk, limiting downside market risk, and lowering transactions
costs. Of course, there is no guarantee that the strategy will be successful,
and the fund could lose money if, for example, interest rates do not move as
anticipated or credit problems develop with the issuer of the hybrid
instruments.
The risks of investing in hybrid instruments reflect a combination of the
risks of investing in securities, options, futures, and currencies. Thus, an
investment in a hybrid instrument may entail significant risks that are not
associated with a similar investment in a traditional debt instrument that
has a fixed principal amount, is denominated in U.S. dollars, or bears
interest either at a fixed rate or a floating rate determined by reference to
a common, nationally published benchmark. The risks of a particular hybrid
instrument will, of course, depend upon the terms of the instrument, but may
include, without limitation, the possibility of significant changes in the
benchmarks or the prices of underlying assets to which the instrument is
linked. Such risks generally depend upon factors which are unrelated to the
operations or credit quality of the issuer of the hybrid instrument and which
may not be readily foreseen by the purchaser, such as economic and political
events, the supply and demand for the underlying assets, and interest rate
movements. In recent years, various benchmarks and prices for underlying
assets have been highly volatile, and such volatility may be expected in the
future. Reference is also made to the discussion of futures, options, and
forward contracts herein for a discussion of the risks associated with such
investments.
Hybrid instruments are potentially more volatile and carry greater market
risks than traditional debt instruments. Depending on the structure of the
particular hybrid instrument, changes in a benchmark may be magnified by the
terms of the hybrid instrument and have an even more dramatic and substantial
effect upon 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
17
principal loss (or gain). The latter scenario may result if "leverage" is
used to structure the hybrid instrument. Leverage risk occurs when the hybrid
instrument is structured so that a given change in a benchmark or underlying
asset is multiplied to produce a greater value change in the hybrid
instrument, thereby magnifying the risk of loss as well as the potential for
gain.
Hybrid instruments may also carry liquidity risk since the instruments are
often "customized" to meet the portfolio needs of a particular investor, and
therefore, the number of investors that are willing and able to buy such
instruments in the secondary market may be smaller than that for more
traditional debt securities. In addition, because the purchase and sale of
hybrid instruments could take place in an over-the-counter market without the
guarantee of a central clearing organization or in a transaction between the
fund and the issuer of the hybrid instrument, the creditworthiness of the
counterparty or issuer of the hybrid instrument would be an additional risk
factor which the fund would have to consider and monitor. Hybrid instruments
also may not be subject to regulation of the Commodities Futures Trading
Commission ("CFTC"), which generally regulates the trading of commodity
futures by U.S. persons, the SEC, which regulates the offer and sale of
securities by and to U.S. persons, or any other governmental regulatory
authority.
The various risks discussed above, particularly the market risk of such
instruments, may in turn cause significant fluctuations in the net asset
value of the fund. Accordingly, the fund will limit its investments in hybrid
instruments to 10% of total assets. However, because of their volatility, it
is possible that the fund's investment in hybrid instruments will account for
more than 10% of the fund's return (positive or negative).
All funds
When-Issued Securities and Forward Commitment Contracts
The price of such securities, which may be expressed in yield terms, is fixed
at the time the commitment to purchase is made, but delivery and payment take
place at a later date. Normally, the settlement date occurs within 90 days of
the purchase for when-issueds, but may be substantially longer for forwards.
During the period between purchase and settlement, no payment is made by the
fund to the issuer and no interest accrues to the fund. The purchase of these
securities will result in a loss if their values decline prior to the
settlement date. This could occur, for example, if interest rates increase
prior to settlement. The longer the period between purchase and settlement,
the greater the risks are. At the time the fund makes the commitment to
purchase these securities, it will record the transaction and reflect the
value of the security in determining its net asset value. The fund will cover
these securities by maintaining cash, liquid, high-grade debt securities, or
other suitable cover as permitted by the SEC with its custodian bank equal in
value to commitments for them during the time between the purchase and the
settlement. Therefore, the longer this period, the longer the period during
which alternative investment options are not available to the fund (to the
extent of the securities used for cover). Such securities either will mature
or, if necessary, be sold on or before the settlement date.
To the extent the fund remains fully or almost fully invested (in securities
with a remaining maturity of more than one year) at the same time it
purchases these securities, there will be greater fluctuations in the fund's
net asset value than if the fund did not purchase them.
Additional Adjustable Rate Securities
Certain securities may be issued with adjustable interest rates that are
reset periodically by predetermined formulas or indexes in order to minimize
movements in the principal value of the investment. 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 the following
forms:
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
18
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.
Floating Rate Securities Floating rate instruments are those whose terms
provide for the adjustment of their interest rates whenever a specified
interest rate changes and which, at any time, can reasonably be expected to
have a market value that approximates its par value. The maturity of a
floating rate instrument 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. Floating rate instruments with
demand features are deemed to have a maturity equal to the period remaining
until the principal amount can be recovered through demand.
Put Option Bonds Long-term obligations with maturities longer than one year
may provide purchasers an optional or mandatory tender of the security at par
value at predetermined intervals, often ranging from one month to several
years (e.g., a 30-year bond with a five-year tender period). These
instruments are deemed to have a maturity equal to the period remaining to
the put date.
Corporate Income, High Yield, New Income, Personal Strategy, Prime Reserve,
Reserve Investment, and Short-Term Bond Funds
Illiquid or Restricted Securities
Restricted securities may be sold only in privately negotiated transactions
or in a public offering with respect to which a registration statement is in
effect under the Securities Act of 1933 (the "1933 Act"). Where registration
is required, the fund may be obligated to pay all or part of the registration
expenses, and a considerable period may elapse between the time of the
decision to sell and the time the fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the fund might obtain a less favorable
price than prevailed when it decided to sell. Restricted securities will be
priced at fair value as determined in accordance with procedures prescribed
by the fund's Board of Directors/Trustees. If, through the appreciation of
illiquid securities or the depreciation of liquid securities, the fund should
be in a position where more than 15% (10% for Government Reserve Investment;
Prime Reserve; Reserve Investment; and U.S. Treasury Money Funds)of the value
of its net assets is invested in illiquid assets, including restricted
securities, the fund will take appropriate steps to protect liquidity.
Notwithstanding the above, the fund may purchase securities which, while
privately placed, are eligible for purchase and sale under Rule 144A under
the 1933 Act. This rule permits certain qualified institutional buyers, such
as the fund, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. T. Rowe Price, under the
supervision of the fund's Board of Directors/Trustees, will consider whether
securities purchased under Rule 144A are illiquid and thus subject to the
fund's restriction of investing no more than 15% (10% for Government Reserve
Investment; Prime Reserve; Reserve Investment; and U.S. Treasury Money
Funds)of its net assets in illiquid securities. A determination of whether a
Rule 144A security is liquid or not is a question of fact. In making this
determination, T. Rowe Price will consider the trading markets for the
specific security taking into account the unregistered nature of a Rule 144A
security. In addition, T. Rowe Price could consider the following: (1)
frequency of trades and quotes; (2) number of dealers and potential
purchasers; (3) dealer undertakings to make a market; and (4) the nature of
the security and of marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers, and the mechanics of
transfer). The liquidity of Rule 144A securities would be monitored and, if
as a result of changed conditions it is determined that a Rule 144A security
is no longer liquid, the fund's holdings of illiquid securities would be
reviewed to determine what, if any, steps are required to assure that the
fund does not invest more than 15% (10% for Government Reserve Investment;
Prime Reserve; Reserve Investment; and U.S. Treasury Money Funds)of its net
assets in illiquid securities. Investing in Rule 144A securities could have
the effect of increasing the amount of the fund's assets invested in illiquid
securities if qualified institutional buyers are unwilling to purchase such
securities.
19
New Income and Short-Term Bond Funds
Industry Concentration
When the market for corporate debt securities is dominated by issues in the
gas utility, gas transmission utility, electric utility, telephone utility,
or petroleum industry, the fund will as a matter of fundamental policy
concentrate 25% or more, but not more than 50%, of its assets, in any one
such industry, if the fund has cash for such investment (i.e., the fund will
not sell portfolio securities to raise cash) and, if in T. Rowe Price's
judgment, the return available and the marketability, quality, and
availability of the debt securities of such industry justifies such
concentration in light of the fund's investment objectives. Domination would
exist with respect to any one such industry, when, in the preceding 30-day
period, more than 25% of all new-issue corporate debt offerings (within the
four highest grades of Moody's or S&P's and with maturities of 10 years or
less) of $25,000,000 or more consisted of issues in such industry. Although
the fund will normally purchase corporate debt securities in the secondary
market as opposed to new offerings, T. Rowe Price believes that the new
issue-based dominance standard, as defined above, is appropriate because it
is easily determined and represents an accurate correlation to the secondary
market. Investors should understand that concentration in any industry may
result in increased risk. Investments in any of these industries may be
affected by environmental conditions, energy conservation programs, fuel
shortages, difficulty in obtaining adequate return on capital in financing
operations and large construction programs, and the ability of the capital
markets to absorb debt issues. In addition, it is possible that the public
service commissions which have jurisdiction over these industries may not
grant future increases in rates sufficient to offset increases in operating
expenses. These industries also face numerous legislative and regulatory
uncertainties at both federal and state government levels. Management
believes that any risk to the fund which might result from concentration in
any industry will be minimized by the fund's practice of diversifying its
investments in other respects. The fund's policy with respect to industry
concentration is a Fundamental policy. (For investment restriction on
industry concentration, see "Investment Restrictions").
PORTFOLIO MANAGEMENT PRACTICES
-------------------------------------------------------------------------------
Lending of Portfolio Securities
Securities loans are made to broker-dealers, institutional investors, or
other persons, pursuant to agreements requiring that the loans be
continuously secured by collateral at least equal at all times to the value
of the securities lent, marked to market on a daily basis. The collateral
received will consist of cash, U.S. government securities, letters of credit,
or such other collateral as may be permitted under its investment program.
While the securities are being lent, the fund will continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities,
as well as interest on the investment of the collateral or a fee from the
borrower. The fund has a right to call each loan and obtain the securities,
within such period of time which coincides with the normal settlement period
for purchases and sales of such securities in the respective markets. The
fund will not have the right to vote on securities while they are being lent,
but it will call a loan in anticipation of any important vote. The risks in
lending portfolio securities, as with other extensions of secured credit,
consist of possible delay in receiving additional collateral or in the
recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially. Loans will only be made to firms deemed
by T. Rowe Price 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.
Interfund Borrowing and Lending
The fund is a party to an exemptive order received from the SEC on December
8, 1998, amended on November 23, 1999, that permits it to borrow money from
and/or lend money to other funds in the T. Rowe Price complex ("Price
Funds"). All loans are set at an interest rate between rates charged on
overnight repurchase agreements and short-term bank loans. All loans are
subject to numerous conditions designed to ensure fair and equitable
treatment of all participating funds. The program is subject to the oversight
and periodic review of the Boards of Directors of the Price Funds.
20
Repurchase Agreements
The fund may enter into a repurchase agreement through which an investor
(such as the fund) purchases a security (known as the "underlying security")
from a well-established securities dealer or a bank that is a member of the
Federal Reserve System. Any such dealer or bank will be on T. Rowe Price's
approved list. At that time, the bank or securities dealer agrees to
repurchase the underlying security at the same price, plus specified
interest. Repurchase agreements are generally for a short period of time,
often less than a week. Repurchase agreements which do not provide for
payment within seven days will be treated as illiquid securities. The fund
will only enter into repurchase agreements where (i) (A) Prime Reserve, U.S.
Treasury Money, Government Reserve Investment, and Reserve Investment
Funds--the underlying securities are either U.S. government securities or
securities that, at the time the repurchase agreement is entered into, are
rated in the highest rating category by the requisite number of NRSROs (as
required by Rule 2a-7 under the 1940 Act) and otherwise are of the type
(excluding maturity limitations) which the fund's investment guidelines would
allow it to purchase directly, (B) GNMA, High Yield, New Income, Personal
Strategy, Short-Term Bond, and U.S. Treasury Intermediate and Long-Term
Funds--the underlying securities are of the type (excluding maturity
limitations) which the fund's investment guidelines would allow it to
purchase directly; (ii) the market value of the underlying security,
including interest accrued, will be equal to or exceed the value of the
repurchase agreement; and (iii) payment for the underlying security is made
only upon physical delivery or evidence of book-entry transfer to the account
of the custodian or a bank acting as agent. In the event of a bankruptcy or
other default of a seller of a repurchase agreement, the fund could
experience both delays in liquidating the underlying security and losses,
including: (a) possible decline in the value of the underlying security
during the period while the fund seeks to enforce its rights thereto; (b)
possible subnormal levels of income and lack of access to income during this
period; and (c) expenses of enforcing its rights.
Reverse Repurchase Agreements
Although the fund has no current intention of engaging in reverse repurchase
agreements, the fund reserves 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 fund, subject to
Investment Restriction (1). (See "Investment Restrictions.")
Money Market Reserves
It is expected that the fund will invest its cash reserves primarily in one
or more money market funds established for the exclusive use of the T. Rowe
Price family of mutual funds and other clients of T. Rowe Price. Currently,
two such money market funds are in operation-T. Rowe Price Reserve Investment
Fund ("RIF") and T. Rowe Price Government Reserve Investment Fund ("GRF"),
each a series of the T. Rowe Price Reserve Investment Funds, Inc. (The Prime
Reserve and U.S. Treasury Money Funds will not purchase shares of either
fund, and the GNMA and U.S. Treasury Intermediate and U.S. Treasury Long-Term
Funds can only purchase shares of GRF.) Additional series may be created in
the future. These funds were created and operate under an Exemptive Order
issued by the SEC (Investment Company Act Release No. IC-22770, July 29,
1997).
Both funds must comply with the requirements of Rule 2a-7 under the 1940 Act
governing money market funds. The RIF invests at least 95% of its total
assets in prime money market instruments receiving the highest credit rating.
The GRF invests primarily in a portfolio of U.S. government-backed
securities, primarily U.S. Treasuries, and repurchase agreements thereon.
The RIF and GRF provide a very efficient means of managing the cash reserves
of the fund. While neither RIF or GRF pay an advisory fee to the Investment
Manager, they will incur other expenses. However, the RIF and GRF are
expected by T. Rowe Price to operate at very low expense ratios. The fund
will only invest in RIF or GRF to the extent it is consistent with its
objective and program.
21
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 Fund
Short Sales
The fund may make short sales for hedging purposes to protect the fund
against companies whose credit is deteriorating. Short sales are transactions
in which the fund sells a security it does not own in anticipation of a
decline in the market value of that security. The fund's short sales would be
limited to situations where the fund owns 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 fund's net assets.
To complete a short sale transaction, the fund must borrow the security to
make delivery to the buyer. The fund then is 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
fund is 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 fund 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 fund replaces a borrowed security in connection with a short sale,
the fund 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 its was sold short; or (b)
otherwise cover its short position.
The fund 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 fund replaces the borrowed security. The fund 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 fund 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 fund 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 fund enters 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
fund is permitted to invest may cause certain appreciated positions in
securities held by the fund 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 fund 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
fund. Because these rules do not apply to "straight" debt transactions, it is
not anticipated that they will have a significant impact on the fund;
however, the effect cannot be determined until the issuance of clarifying
regulations.
22
All funds except Government Reserve Investment, Prime Reserve, Reserve
Investment, and U.S. Treasury Money Funds
Options
Options are a type of potentially high-risk derivative.
Writing Covered Call Options
The fund may write (sell) American or European style "covered" call options
and purchase options to close out options previously written by the fund. In
writing covered call options, the fund expects to generate additional premium
income which should serve to enhance the fund's total return and reduce the
effect of 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 fund.
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 fund generally will write only covered call options. This means that the
fund 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 fund will write a call option that is not
covered as indicated above but where the fund 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 fund 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 fund's investment objective. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk
(in contrast to the writing of naked or uncovered options, which the fund
generally will not do), but capable of enhancing the fund's total return.
When writing a covered call option, a fund, in return for the premium, gives
up the opportunity for profit from a price increase in the underlying
security or currency above the exercise price, but conversely retains the
risk of loss should the price of the security or currency decline. Unlike one
who owns securities or currencies not subject to an option, the fund has no
control over when it may be required to sell the underlying securities or
currencies, since it may be assigned an exercise notice at any time prior to
the expiration of its obligation as a writer. If a call option which the fund
has written expires, the fund will realize a gain in the amount of the
premium; however, such gain may be offset by a decline in the market value of
the underlying security or currency during the option period. If the call
option is exercised, the fund will realize a gain or loss from the sale of
the underlying security or currency. The fund does not consider a security or
currency covered by a call to be "pledged" as that term is used in the fund's
policy which limits the pledging or mortgaging of its assets. If the fund
writes an uncovered option as described above, it will bear the risk of
having to purchase the security subject to the option at a price higher than
the exercise price of the option. As the price of a security could appreciate
substantially, the fund's loss could be significant.
23
The premium received is the market value of an option. The premium the fund
will receive from writing a call option will reflect, among other things, the
current market price of the underlying security or currency, the relationship
of the exercise price to such market price, the historical price volatility
of the underlying security or currency, and the length of the option period.
Once the decision to write a call option has been made, T. Rowe Price, in
determining whether a particular call option should be written on a
particular security or currency, will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will
exist for those options. The premium received by the fund for writing covered
call options will be recorded as a liability of the fund in the portfolio of
investments. This liability will be adjusted daily to the option's current
market value, which will be the latest sale price at the time at which the
net asset value per share of the fund is computed (close of the New York
Stock Exchange), or, in the absence of such sale, the mean of the latest bid
and asked prices. The option will be terminated upon expiration of the
option, the purchase of an identical option in a closing transaction, or
delivery of the underlying security or currency upon the exercise of the
option.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the fund to write
another call option on the underlying security or currency with either a
different exercise price or expiration date or both. If the fund desires to
sell a particular security or currency from its portfolio on which it has
written a call option, or purchased a put option, it will seek to effect a
closing transaction prior to, or concurrently with, the sale of the security
or currency. There is, of course, no assurance that the fund will be able to
effect such closing transactions at favorable prices. If the fund cannot
enter into such a transaction, it may be required to hold a security or
currency that it might otherwise have sold. When the fund writes a covered
call option, it runs the risk of not being able to participate in the
appreciation of the underlying securities or currencies above the exercise
price, as well as the risk of being required to hold on to securities or
currencies that are depreciating in value. This could result in higher
transaction costs. The fund will pay transaction costs in connection with the
writing of options to close out previously written options. Such transaction
costs are normally higher than those applicable to purchases and sales of
portfolio securities.
Call options written by the fund will normally have expiration dates of less
than nine months from the date written. The exercise price of the options may
be below, equal to, or above the current market values of the underlying
securities or currencies at the time the options are written. From time to
time, the fund may purchase an underlying security or currency for delivery
in accordance with an exercise notice of a call option assigned to it, rather
than delivering such security or currency from its portfolio. In such cases,
additional costs may be incurred.
The fund will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more than the premium received from
the writing of the option. Because increases in the market price of a call
option will generally reflect increases in the market price of the underlying
security or currency, any loss resulting from the repurchase of a call option
is likely to be offset in whole or in part by appreciation of the underlying
security or currency owned by the fund.
The fund will not write a covered call option if, as a result, the aggregate
market value of all portfolio securities or currencies covering written call
or put options exceeds 25% of the market value of the funds' total assets. In
calculating the 25% limit, the fund will offset the value of securities
underlying purchased calls and puts on identical securities or currencies
with identical maturity dates.
Writing Covered Put Options
The fund may write American or European style covered put options and
purchase options to close out options previously written by the fund. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) has the obligation to buy, the underlying security or currency at
the exercise price during the option period (American style) or at the
expiration of the option (European style). So long as the obligation of the
writer continues, he may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring him to make payment to the
exercise price against delivery of the underlying security or
24
currency. The operation of put options in other respects, including their
related risks and rewards, is substantially identical to that of call
options.
The fund would write put options only on a covered basis, which means that
the fund would maintain in a segregated account cash, U.S. government
securities, other liquid high-grade debt obligations, or other suitable cover
as determined by the SEC, in an amount not less than the exercise price or
the fund will own an option to sell the underlying security or currency
subject to the option having an exercise price equal to or greater than the
exercise price of the "covered" option at all times while the put option is
outstanding. (The rules of a clearing corporation currently require that such
assets be deposited in escrow to secure payment of the exercise price.)
The fund would generally write covered put options in circumstances where T.
Rowe Price wishes to purchase the underlying security or currency for the
fund's portfolio at a price lower than the current market price of the
security or currency. In such event the fund would write a put option at an
exercise price which, reduced by the premium received on the option, reflects
the lower price it is willing to pay. Since the fund would also receive
interest on debt securities or currencies maintained to cover the exercise
price of the option, this technique could be used to enhance current return
during periods of market uncertainty. The risk in such a transaction would be
that the market price of the underlying security or currency would decline
below the exercise price less the premiums received. Such a decline could be
substantial and result in a significant loss to the fund. In addition, the
fund, because it does not own the specific securities or currencies which it
may be required to purchase in exercise of the put, cannot benefit from
appreciation, if any, with respect to such specific securities or currencies.
The fund will not write a covered put option if, as a result, the aggregate
market value of all portfolio securities or currencies covering put or call
options exceeds 25% of the market value of the fund's total assets. In
calculating the 25% limit, the fund will offset the value of securities
underlying purchased puts and calls on identical securities or currencies
with identical maturity dates.
Purchasing Put Options
The fund may purchase American or European style put options. As the holder
of a put option, the fund has the right to sell the underlying security or
currency at the exercise price at any time during the option period (American
style) or at the expiration of the option (European style). The fund may
enter into closing sale transactions with respect to such options, exercise
them or permit them to expire. The fund may purchase put options for
defensive purposes in order to protect against an anticipated decline in the
value of its securities or currencies. An example of such use of put options
is provided next.
The fund may purchase a put option on an underlying security or currency (a
"protective put") owned by the fund as a defensive technique in order to
protect against an anticipated decline in the value of the security or
currency. Such hedge protection is provided only during the life of the put
option when the fund, as the holder of the put option, is able to sell the
underlying security or currency at the put exercise price regardless of any
decline in the underlying security's market price or currency's exchange
value. For example, a put option may be purchased in order to protect
unrealized appreciation of a security or currency where T. Rowe Price deems
it desirable to continue to hold the security or currency because of tax
considerations. The premium paid for the put option and any transaction costs
would reduce any capital gain otherwise available for distribution when the
security or currency is eventually sold.
The fund may also purchase put options at a time when the fund does not own
the underlying security or currency. By purchasing put options on a security
or currency it does not own, the fund seeks to benefit from a decline in the
market price of the underlying security or currency. If the put option is not
sold when it has remaining value, and if the market price of the underlying
security or currency remains equal to or greater than the exercise price
during the life of the put option, the fund will lose its entire investment
in the put option. In order for the purchase of a put option to be
profitable, the market price of the underlying security or currency must
decline sufficiently below the exercise price to cover the premium and
transaction costs, unless the put option is sold in a closing sale
transaction.
25
The fund will not commit more than 5% of its assets to premiums when
purchasing put and call options. The premium paid by the fund when purchasing
a put option will be recorded as an asset of the fund in the portfolio of
investments. This asset will be adjusted daily to the option's current market
value, which will be the latest sale price at the time at which the net asset
value per share of the fund is computed (close of New York Stock Exchange),
or, in the absence of such sale, the mean of the latest bid and asked 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 fund may purchase American or European style call options. As the holder
of a call option, the fund has the right to purchase the underlying security
or currency at the exercise price at any time during the option period
(American style) or at the expiration of the option (European style). The
fund may enter into closing sale transactions with respect to such options,
exercise them, or permit them to expire. The fund may purchase call options
for the purpose of increasing its current return or avoiding tax consequences
which could reduce its current return. The fund may also purchase call
options in order to acquire the underlying securities or currencies. Examples
of such uses of call options are provided next.
Call options may be purchased by the fund for the purpose of acquiring the
underlying securities or currencies for its portfolio. Utilized in this
fashion, the purchase of call options enables the fund to acquire the
securities or currencies at the exercise price of the call option plus the
premium paid. At times the net cost of acquiring securities or currencies in
this manner may be less than the cost of acquiring the securities or
currencies directly. This technique may also be useful to the fund in
purchasing a large block of securities or currencies that would be more
difficult to acquire by direct market purchases. So long as it holds such a
call option rather than the underlying security or currency itself, the fund
is partially protected from any unexpected decline in the market price of the
underlying security or currency and in such event could allow the call option
to expire, incurring a loss only to the extent of the premium paid for the
option.
The fund will not commit more than 5% of its assets to premiums when
purchasing call and put options. The fund may also purchase call options on
underlying securities or currencies it owns in order to protect unrealized
gains on call options previously written by it. A call option would be
purchased for this purpose where tax considerations make it inadvisable to
realize such gains through a closing purchase transaction. Call options may
also be purchased at times to avoid realizing losses.
Dealer (Over-the-Counter) Options
The fund may engage in transactions involving dealer options. Certain risks
are specific to dealer options. While the fund would look to a clearing
corporation to exercise exchange-traded options, if the fund were to purchase
a dealer option, it would rely on the dealer from whom it purchased the
option to perform if the option were exercised. Failure by the dealer to do
so would result in the loss of the premium paid by the fund as well as loss
of the expected benefit of the transaction.
Exchange-traded options generally have a continuous liquid market while
dealer options have none. Consequently, the fund will generally be able to
realize the value of a dealer option it has purchased only by exercising it
or reselling it to the dealer who issued it. Similarly, when the fund writes
a dealer option, it generally will be able to close out the option prior to
its expiration only by entering into a closing purchase transaction with the
dealer to which the fund originally wrote the option. While the fund will
seek to enter into dealer options only with dealers who will agree to and
which are expected to be capable of entering into closing transactions with
the fund, there can be no assurance that the fund will be able to liquidate a
dealer option at a favorable price at any time prior to expiration. Until the
fund, as a covered dealer call option writer, is able to effect a closing
purchase transaction, it will not be able to liquidate securities (or other
assets) or currencies used as cover until the option expires or is exercised.
In the event of insolvency of the contra party, the fund may be unable to
liquidate a dealer option. With respect to options written by the fund, the
inability to enter into a closing transaction may result in material losses
to the fund. For example, since the fund must maintain a secured position
with respect to any call option on a security it writes, the fund may not
sell the assets which it has segregated to secure the position while it is
obligated under the option. This
26
requirement may impair a fund's ability to sell portfolio securities or
currencies at a time when such sale might be advantageous.
The Staff of the SEC has taken the position that purchased dealer options and
the assets used to secure the written dealer options are illiquid securities.
The fund may treat the cover used for written Over-the-Counter ("OTC")
options as liquid if the dealer agrees that the fund may repurchase the OTC
option it has written for a maximum price to be calculated by a predetermined
formula. In such cases, the OTC option would be considered illiquid only to
the extent the maximum repurchase price under the formula exceeds the
intrinsic value of the option.
High Yield Fund
Spread Option Transactions
The fund may purchase from and sell to securities dealers covered spread
options. Such covered spread options are not presently exchange listed or
traded. The purchase of a spread option gives the fund the right to put, or
sell, a security that it owns at a fixed dollar spread or fixed yield spread
in relationship to another security that the fund does not own, but which is
used as a benchmark. The risk to the fund in purchasing covered spread
options is the cost of the premium paid for the spread options and any
transaction costs. In addition, there is no assurance that closing
transactions will be available. The purchase of spread options will be used
to protect the fund against adverse changes in prevailing credit quality
spreads, i.e., the yield spread between high-quality and lower-quality
securities. Such protection is only provided during the life of the spread
option. The security covering the spread option will be maintained in a
segregated account by the fund's custodian. The fund does not consider a
security covered by a spread option to be "pledged" as that term is used in
the fund's policy limiting the pledging or mortgaging of its assets. The fund
may also buy and sell uncovered spread options. Such options would be used
for the same purposes and be subject to similar risks as covered spread
options. However, in an uncovered spread option, the fund would not own
either of the securities involved in the spread.
All funds except Government Reserve Investment, Prime Reserve, Reserve
Investment, and U.S. Treasury Money Funds
Futures Contracts
Futures contracts are a type of potentially high-risk derivative.
Transactions in Futures
The fund may enter into futures contracts including stock index, interest
rate, and currency futures ("futures" or "futures contracts").
Stock index futures contracts may be used to provide a hedge for a portion of
the fund's portfolio, as a cash management tool, or as an efficient way for
T. Rowe Price to implement either an increase or decrease in portfolio market
exposure in response to changing market conditions. The fund may purchase or
sell futures contracts with respect to any stock index. Nevertheless, to
hedge the fund's portfolio successfully, the fund must sell futures contacts
with respect to indices or subindices whose movements will have a significant
correlation with movements in the prices of the fund's portfolio securities.
Interest rate or currency futures contracts may be used as a hedge against
changes in prevailing levels of interest rates or currency exchange rates in
order to establish more definitely the effective return on securities or
currencies held or intended to be acquired by the fund. In this regard, the
fund could sell interest rate or currency futures as an offset against the
effect of expected increases in interest rates or currency exchange rates and
purchase such futures as an offset against the effect of expected declines in
interest rates or currency exchange rates.
The fund will enter into futures contracts which are traded on national or
foreign futures exchanges, and are standardized as to maturity date and
underlying financial instrument. Futures exchanges and trading in the United
States are regulated under the Commodity Exchange Act by the CFTC. Although
techniques other than
27
the sale and purchase of futures contracts could be used for the
above-referenced purposes, futures contracts offer an effective and
relatively low cost means of implementing the fund's objectives in these
areas.
Regulatory Limitations
If the fund purchases or sells futures contracts or related options which do
not qualify as bona fide hedging under applicable CFTC rules, the aggregate
initial margin deposits and premium required to establish those positions
cannot exceed 5% of the liquidation value of the fund after taking into
account unrealized profits and unrealized losses on any such contracts it has
entered into; provided, however, that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded
in calculating the 5% limitation. For purposes of this policy, options on
futures contracts and foreign currency options traded on a commodities
exchange will be considered "related options." This policy may be modified by
the Board of Directors/Trustees without a shareholder vote and does not limit
the percentage of the fund's assets at risk to 5%.
In instances involving the purchase of futures contracts or the writing of
call or put options thereon by the fund, an amount of cash, liquid assets, or
other suitable cover as permitted by the SEC, equal to the market value of
the futures contracts and options thereon (less any related margin deposits),
will be identified by the fund to cover the position, or alternative cover
(such as owning an offsetting position) will be employed. Assets used as
cover or held in an identified account cannot be sold while the position in
the corresponding option or future is open, unless they are replaced with
similar assets. As a result, the commitment of a large portion of a fund's
assets to cover or identified accounts could impede portfolio management or
the fund's ability to meet redemption requests or other current obligations.
If the CFTC or other regulatory authorities adopt different (including less
stringent) or additional restrictions, the fund would comply with such new
restrictions.
Trading in Futures Contracts
A futures contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument (e.g.,
units of a debt security) for a specified price, date, time and place
designated at the time the contract is made. Brokerage fees are incurred when
a futures contract is bought or sold and margin deposits must be maintained.
Entering into a contract to buy is commonly referred to as buying or
purchasing a contract or holding a long position. Entering into a contract to
sell is commonly referred to as selling a contract or holding a short
position.
Unlike when the fund purchases or sells a security, no price would be paid or
received by the fund upon the purchase or sale of a futures contract. Upon
entering into a futures contract, and to maintain the fund's open positions
in futures contracts, the fund would be required to deposit with its
custodian in a segregated account in the name of the futures broker an amount
of cash, or liquid assets known as "initial margin." The margin required for
a particular futures contract is set by the exchange on which the contract is
traded, and may be significantly modified from time to time by the exchange
during the term of the contract. Futures contracts are customarily purchased
and sold on margins that may range upward from less than 5% of the value of
the contract being traded.
If the price of an open futures contract changes (by increase in the case of
a sale or by decrease in the case of a purchase) so that the loss on the
futures contract reaches a point at which the margin on deposit does not
satisfy margin requirements, the broker will require an increase in the
margin. However, if the value of a position increases because of favorable
price changes in the futures contract so that the margin deposit exceeds the
required margin, the broker will pay the excess to the fund.
These subsequent payments, called "variation margin," to and from the futures
broker, are made on a daily basis as the price of the underlying assets
fluctuate, making the long and short positions in the futures contract more
or less valuable, a process known as "marking to market."
Although certain futures contracts, by their terms, require actual future
delivery of and payment for the underlying instruments, in practice most
futures contracts are usually closed out before the delivery date. Closing
out an open futures contract purchase or sale is effected by entering into an
offsetting futures contract
28
sale or purchase, respectively, for the same aggregate amount of the
identical securities and the same delivery date. If the offsetting purchase
price is less than the original sale price, the fund realizes a gain; if it
is more, the fund realizes a loss. Conversely, if the offsetting sale price
is more than the original purchase price, the fund realizes a gain; if it is
less, the fund realizes a loss. The transaction costs must also be included
in these calculations. There can be no assurance, however, that the fund will
be able to enter into an offsetting transaction with respect to a particular
futures contract at a particular time. If the fund is not able to enter into
an offsetting transaction, the fund will continue to be required to maintain
the margin deposits on the futures contract.
As an example of an offsetting transaction in which the underlying instrument
is not delivered, the contractual obligations arising from the sale of one
contract of September Treasury bills on an exchange may be fulfilled at any
time before delivery of the contract is required (i.e., on a specified date
in September, the "delivery month") by the purchase of one contract of
September Treasury bills on the same exchange. In such instance, the
difference between the price at which the futures contract was sold and the
price paid for the offsetting purchase, after allowance for transaction
costs, represents the profit or loss to the fund.
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 fund 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 fund enters 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 fund will gain $1,000 (250 units x gain of $4). If the fund
enters 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 fund will lose $500 (250 units x loss of $2).
Special Risks of Transactions in Futures Contracts
. Volatility and Leverage The prices of futures contracts are volatile and are
influenced, among other things, by actual and anticipated changes in the
market and interest rates, which in turn are affected by fiscal and monetary
policies and national and international political and economic events.
Most United States futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. The daily
limit establishes the maximum amount that the price of a futures contract may
vary either up or down from the previous day's settlement price at the end of
a trading session. Once the daily limit has been reached in a particular type
of futures contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a particular
trading day and therefore does not limit potential losses, because the limit
may prevent the liquidation of unfavorable positions. Futures contract prices
have occasionally moved to the daily limit for several consecutive trading
days with little or no trading, thereby preventing prompt liquidation of
futures positions and subjecting some futures traders to substantial losses.
Margin deposits required on futures trading are low. As a result, a
relatively small price movement in a futures contract may result in immediate
and substantial loss, as well as gain, to the investor. For example, if at
the time of purchase, 10% of the value of the futures contract is deposited
as margin, a subsequent 10% decrease in the value of the futures contract
would result in a total loss of the margin deposit, before any deduction for
the transaction costs, if the account were then closed out. A 15% decrease
would result in a loss equal to 150% of the original margin deposit, if the
contract were closed out. Thus, a purchase or sale of a futures contract may
result in losses in excess of the amount invested in the futures contract.
. Liquidity The fund may elect to close some or all of its futures positions
at any time prior to their expiration. The fund would do so to reduce
exposure represented by long futures positions or short futures positions.
The
29
fund may close its positions by taking opposite positions which would operate
to terminate the fund's position in the futures contracts. Final
determinations of variation margin would then be made, additional cash would
be required to be paid by or released to the fund, and the fund would realize
a loss or a gain.
Futures contracts may be closed out only on the exchange or board of trade
where the contracts were initially traded. Although the fund intends to
purchase or sell futures contracts only on exchanges or boards of trade where
there appears to be an active market, there is no assurance that a liquid
market on an exchange or board of trade will exist for any particular
contract at any particular time. In such event, it might not be possible to
close a futures contract, and in the event of adverse price movements, the
fund would continue to be required to make daily cash payments of variation
margin. However, in the event futures contracts have been used to hedge the
underlying instruments, the fund would continue to hold the underlying
instruments subject to the hedge until the futures contracts could be
terminated. In such circumstances, an increase in the price of underlying
instruments, if any, might partially or completely offset losses on the
futures contract. However, as described next, there is no guarantee that the
price of the underlying instruments will, in fact, correlate with the price
movements in the futures contract and thus provide an offset to losses on a
futures contract.
. Hedging Risk A decision of whether, when, and how to hedge involves skill
and judgment, and even a well-conceived hedge may be unsuccessful to some
degree because of unexpected market behavior, market or interest rate trends.
There are several risks in connection with the use by the fund of futures
contracts as a hedging device. One risk arises because of the imperfect
correlation between movements in the prices of the 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 fund's underlying
instruments sought to be hedged.
Successful use of futures contracts by the fund for hedging purposes is also
subject to T. Rowe Price's ability to correctly predict movements in the
direction of the market. It is possible that, when the fund has sold futures
to hedge its portfolio against a decline in the market, the index, indices,
or instruments underlying futures might advance and the value of the
underlying instruments held in the fund's portfolio might decline. If this
were to occur, the fund would lose money on the futures and also would
experience a decline in value in its underlying instruments. However, while
this might occur to a certain degree, T. Rowe Price believes that over time
the value of the fund's portfolio will tend to move in the same direction as
the market indices used to hedge the portfolio. It is also possible that, if
the fund were to hedge against the possibility of a decline in the market
(adversely affecting the underlying instruments held in its portfolio) and
prices instead increased, the fund would lose part or all of the benefit of
increased value of those underlying instruments that it has hedged, because
it would have offsetting losses in its futures positions. In addition, in
such situations, if the fund had insufficient cash, it might have to sell
underlying instruments to meet daily variation margin requirements. Such
sales of underlying instruments might be, but would not necessarily be, at
increased prices (which would reflect the rising market). The fund might have
to sell underlying instruments at a time when it would be disadvantageous to
do so.
In addition to the possibility that there might be an imperfect correlation,
or no correlation at all, between price movements in the futures contracts
and the portion of the portfolio being hedged, the price movements of futures
contracts might not correlate perfectly with price movements in the
underlying instruments due to certain market distortions. First, all
participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors might close futures contracts through offsetting
transactions, which could distort the normal relationship between the
underlying instruments and futures markets. Second, the margin requirements
in the futures market are less onerous than margin requirements in the
securities markets and, as a result, the futures market might attract more
speculators than the securities markets. Increased participation by
speculators in the futures market might also cause temporary price
distortions. Due to the possibility of price distortion in the futures market
and also because of imperfect correlation between price movements in the
underlying instruments and movements in the prices of futures contracts, even
a correct forecast of general market trends by T. Rowe Price might not result
in a successful hedging transaction over a very short time period.
30
Options on Futures Contracts
The fund may purchase and sell options on the same types of futures in which
it may invest.
Options (another type of potentially high-risk derivative) on futures are
similar to options on underlying instruments except that options on futures
give the purchaser the right, in return for the premium paid, to assume a
position in a futures contract (a long position if the option is a call and a
short position if the option is a put), rather than to purchase or sell the
futures contract, at a specified exercise price at any time during the period
of the option. Upon exercise of the option, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by the delivery of the accumulated balance in the writer's
futures margin account which represents the amount by which the market price
of the futures contract, at exercise, exceeds (in the case of a call) or is
less than (in the case of a put) the exercise price of the option on the
futures contract. Purchasers of options who fail to exercise their options
prior to the exercise date suffer a loss of the premium paid.
As an alternative to writing or purchasing call and put options on interest
rate futures, the fund may write or purchase call and put options on
financial indices. Such options would be used in a manner similar to the use
of options on futures contracts. From time to time, a single order to
purchase or sell futures contracts (or options thereon) may be made on behalf
of the fund and other T. Rowe Price funds. Such aggregated orders would be
allocated among the funds and the other T. Rowe Price funds in a fair and
nondiscriminatory manner.
Special Risks of Transactions in Options on Futures Contracts
The risks described under "Special Risks in Transactions on Futures
Contracts" are substantially the same as the risks of using options on
futures. If the fund were to write an option on a futures contract, it would
be required to deposit and maintain initial and variation margin in the same
manner as a regular futures contract. In addition, where the fund seeks to
close out an option position by writing or buying an offsetting option
covering the same index, underlying instrument or contract and having the
same exercise price and expiration date, its ability to establish and close
out positions on such options will be subject to the maintenance of a liquid
secondary market. Reasons for the absence of a liquid secondary market on an
exchange include the following: (1) there may be insufficient trading
interest in certain options; (2) restrictions may be imposed by an exchange
on opening transactions or closing transactions or both; (3) trading halts,
suspensions, or other restrictions may be imposed with respect to particular
classes or series of options, or underlying instruments; (4) unusual or
unforeseen circumstances may interrupt normal operations on an exchange; (5)
the facilities of an exchange or a clearing corporation may not at all times
be adequate to handle current trading volume; or (6) one or more exchanges
could, for economic or other reasons, decide or be compelled at some future
date to discontinue the trading of options (or a particular class or series
of options), in which event the secondary market on that exchange (or in the
class or series of options) would cease to exist, although outstanding
options on the exchange that had been issued by a clearing corporation as a
result of trades on that exchange would continue to be exercisable in
accordance with their terms. There is no assurance that higher than
anticipated trading activity or other unforeseen events might not, at times,
render certain of the facilities of any of the clearing corporations
inadequate, and thereby result in the institution by an exchange of special
procedures which may interfere with the timely execution of customers'
orders.
Additional Futures and Options Contracts
Although the fund has no current intention of engaging in futures or options
transactions other than those described above, it reserves the right to do
so. Such futures and options trading might involve risks which differ from
those involved in the futures and options described above.
Foreign Futures and Options
Participation in foreign futures and foreign options transactions involves
the execution and clearing of trades on or subject to the rules of a foreign
board of trade. Neither the National Futures Association nor any domestic
exchange regulates activities of any foreign boards of trade, including the
execution, delivery, and clearing of transactions, or has the power to compel
enforcement of the rules of a foreign board of trade or any applicable
foreign law. This is true even if the exchange is formally linked to a
domestic market so that a
31
position taken on the market may be liquidated by a transaction on another
market. Moreover, such laws or regulations will vary depending on the foreign
country in which the foreign futures or foreign options transaction occurs.
For these reasons, when the fund trades foreign futures or foreign options
contracts, it may not be afforded certain of the protective measures provided
by the Commodity Exchange Act, the CFTC's regulations, and the rules of the
National Futures Association and any domestic exchange, including the right
to use reparations proceedings before the CFTC and arbitration proceedings
provided by the National Futures Association or any domestic futures
exchange. In particular, funds received from the fund for foreign futures or
foreign options transactions may not be provided the same protections as
funds received in respect of transactions on United States futures exchanges.
In addition, the price of any foreign futures or foreign options contract
and, therefore, the potential profit and loss thereon may be affected by any
variance in the foreign exchange rate between the time the fund's order is
placed and the time it is liquidated, offset or exercised.
Swap Agreements
The fund may enter into interest rate, index, total return, credit and, to
the extent it may invest in foreign currency-denominated securities, currency
rate swap agreements. The fund may also enter into options on swap agreements
("swap options") on the types of swaps listed above.
Swap agreements are 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 swap option 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 fund
may write (sell) and purchase put and call swap options.
One example of the use of swaps within a fund may be to manage the interest
rate sensitivity of the fund. The fund 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 fund. Or, the fund may buy
or sell swap options to effect the same result. The fund 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 default swap is a bilateral contract that enables an investor
to buy/sell protection against a defined-issuer credit event. The seller of
credit protection against a security or basket of securities receives an
up-front or periodic payment to compensate against potential default
event(s). The fund may enhance income by selling protection or protect credit
risk by buying protection. Market supply and demand factors may cause
distortions between the cash securities market and the default swap market.
The credit protection market is still relatively new and should be considered
illiquid.
Most swap agreements entered into by the fund would calculate the obligations
of the parties to the agreement on a "net basis." Consequently, the fund's
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 fund's current obligations under a net swap agreement
will be accrued daily (offset against any amounts owed to the fund) 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 fund entails certain risks. Interest rate
and currency swaps could result in losses if interest rate or currency
changes are not correctly anticipated by the fund. Total return swaps could
result in losses if the reference index, security, or investments do not
perform as anticipated by the fund. Credit default swaps could result in
losses if the fund does not correctly evaluate the creditworthiness of the
company on which the credit default swap is based.
32
The fund will generally incur a greater degree of risk when it writes a swap
option than when it purchases a swap option. When the fund purchases a swap
option it risks losing only the amount of the premium it has paid should it
decide to let the option expire unexercised. However, when the fund writes a
swap option it 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 fund bears 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 fund will enter into swap agreements only
with counterparties that meet certain standards of creditworthiness. The
swaps market is a relatively new market and is largely unregulated. It is
possible that developments in the swaps market, including potential
government regulation, could adversely affect the fund's ability to terminate
existing swap agreements or to realize amounts to be received under such
agreements.
U.S. Treasury Intermediate and Long-Term Funds
Limitations on Futures and Options for Intermediate and Long-Term Funds
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 fund's net asset value. In addition, neither
of the funds will enter into a futures transaction if it would be obligated
to purchase or deliver under outstanding open futures contracts amounts which
would exceed 15% of the fund's total assets.
A fund 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 fund's
total assets.
A fund 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 fund's 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: a fund may invest up to 15% of its total assets
in premiums on put options and 15% of its total assets in premiums on call
options. The total amount of a fund's total assets invested in futures and
options will not exceed 15% of the fund's total assets.
Corporate Income, High Yield, New Income, Personal Strategy, and Short-Term
Bond 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 fund may enter into forward contracts for a variety of purposes in
connection with the management of the foreign securities portion of its
portfolio. The fund's use of such contracts would include, but not be limited
to, the following:
First, when the fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may desire to "lock in" the
U.S. dollar price of the security. By entering into a forward contract for
the purchase or sale, for a fixed amount of dollars, of the amount of foreign
currency involved in the underlying security transactions, the fund will be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date the security is purchased or sold
and the date on which payment is made or received.
Second, when T. Rowe Price believes that one currency may experience a
substantial movement against another currency, including the U.S. dollar, it
may enter into a forward contract to sell or buy the amount of the former
foreign currency, approximating the value of some or all of the fund's
portfolio securities
33
denominated in such foreign currency. Alternatively, where appropriate, the
fund may hedge all or part of its foreign currency exposure through the use
of a basket of currencies or a proxy currency where such currency or
currencies act as an effective proxy for other currencies. In such a case,
the fund may enter into a forward contract where the amount of the foreign
currency to be sold exceeds the value of the securities denominated in such
currency. The use of this basket hedging technique may be more efficient and
economical than entering into separate forward contracts for each currency
held in the fund. The precise matching of the forward contract amounts and
the value of the securities involved will not generally be possible since the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. The
projection of short-term currency market movement is extremely difficult, and
the successful execution of a short-term hedging strategy is highly
uncertain. Under normal circumstances, consideration of the prospect for
relative currency values will be incorporated into the longer-term investment
decisions made with regard to overall diversification strategies. However, T.
Rowe Price believes that it is important to have the flexibility to enter
into such forward contracts when it determines that the best interest of the
fund will be served.
Third, the fund may use forward contracts when the fund wishes 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 fund may enter into forward contacts for any other purpose consistent
with the fund's investment objective and program. However, the fund will not
enter into a forward contract, or maintain exposure to any such contract(s),
if the amount of foreign currency required to be delivered thereunder would
exceed the fund's holdings of liquid, high-grade debt securities, currency
available for cover of the forward contract(s), or other suitable cover as
permitted by the SEC. In determining the amount to be delivered under a
contract, the fund may net offsetting positions.
At the maturity of a forward contract, the fund may sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and either extend the maturity of the forward contract (by "rolling"
that contract forward) or may initiate a new forward contract.
If the fund retains the portfolio security and engages in an offsetting
transaction, the fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If the fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward prices decline
during the period between the fund's entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting contract
for the purchase of the foreign currency, the fund will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase. Should forward prices increase, the
fund will suffer a loss to the extent of the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
The fund's dealing in forward foreign currency exchange contracts will
generally be limited to the transactions described above. However, the fund
reserves the right to enter into forward foreign currency contracts for
different purposes and under different circumstances. Of course, the fund is
not required to enter into forward contracts with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate
by T. Rowe Price. It also should be realized that this method of hedging
against a decline in the value of a currency does not eliminate fluctuations
in the underlying prices of the securities. It simply establishes a rate of
exchange at a future date. Additionally, although such contracts tend to
minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time, they tend to limit any potential gain which might
result from an increase in the value of that currency.
Although the fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on
a daily basis. It will do so from time to time, and there are costs
associated with currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to
the fund at one rate, while offering a lesser rate of exchange should the
fund desire to resell that currency to the dealer.
34
Federal Tax Treatment of Options, Futures Contracts, and Forward Foreign
Exchange Contracts
The fund may enter into certain options, futures, and forward foreign
exchange contracts, including options and futures on currencies, which will
be treated as Section 1256 contracts or straddles.
Transactions that are considered Section 1256 contracts will be considered to
have been closed at the end of the fund's fiscal year and any gains or losses
will be recognized for tax purposes at that time. Such gains or losses from
the normal closing or settlement of such transactions will be characterized
as 60% long-term capital gain (taxable at a maximum rate of 20%) or loss and
40% short-term capital gain or loss regardless of the holding period of the
instrument (ordinary income or loss for foreign exchange contracts). The fund
will be required to distribute net gains on such transactions to shareholders
even though it may not have closed the transaction and received cash to pay
such distributions.
Options, futures, and forward foreign exchange contracts, including options
and futures on currencies which offset a foreign dollar-denominated bond or
currency position, may be considered straddles for tax purposes, in which
case a loss on any position in a straddle will be subject to deferral to the
extent of unrealized gain in an offsetting position. The holding period of
the securities or currencies comprising the straddle will be deemed not to
begin until the straddle is terminated. The holding period of the security
offsetting an "in-the-money qualified covered call" option on an equity
security will not include the period of time the option is outstanding.
Losses on written covered calls and purchased puts on securities, excluding
certain "qualified covered call" options on equity securities, may be
long-term capital losses, if the security covering the option was held for
more than 12 months prior to the writing of the option.
In order for the fund to continue to qualify for federal income tax treatment
as a regulated investment company, at least 90% of its gross income for a
taxable year must be derived from qualifying income, i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities or currencies. Tax regulations could be issued limiting the extent
that net gain realized from options, futures, or foreign forward exchange
contracts on currencies is qualifying income for purposes of the 90%
requirement.
As a result of the "Taxpayer Relief Act of 1997," entering into certain
options, futures contracts, or foreign forward contracts may result in the
"constructive sale" of offsetting stocks or debt securities of the fund. See
"Portfolio Management Practices-Short Sales" for further discussion.
INVESTMENT RESTRICTIONS
-------------------------------------------------------------------------------
Fundamental policies may not be changed without the approval of the lesser of
(1) 67% of the fund's shares present at a meeting of shareholders if the
holders of more than 50% of the outstanding shares are present in person or
by proxy or (2) more than 50% of a fund's outstanding shares. Other
restrictions in the form of operating policies are subject to change by the
fund's Board of Directors/Trustees without shareholder approval. Any
investment restriction which involves a maximum percentage of securities or
assets shall not be considered to be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition of
securities or assets of, or borrowings by, the fund. Calculation of the
fund's total assets for compliance with any of the following fundamental or
operating policies or any other investment restrictions set forth in the
fund's prospectus or Statement of Additional Information will not include
cash collateral held in connection with securities lending activities.
Fundamental Policies
As a matter of fundamental policy, the fund may not:
(1) Borrowing Borrow money except that the fund may (i) borrow for
non-leveraging, temporary, or emergency purposes; and (ii) engage in
reverse repurchase agreements and make other investments or engage in
other transactions, which may involve a borrowing, in a manner consistent
with the fund's investment objective and program, provided that the
combination of (i) and (ii) shall not exceed 33/1//\\/3/\\%
35
of the value of the fund's total assets (including the amount borrowed)
less liabilities (other than borrowings) or such other percentage
permitted by law. Any borrowings which come to exceed this amount will be
reduced in accordance with applicable law. The fund may borrow from
banks, other Price Funds, or other persons to the extent permitted by
applicable law;
(2) Commodities Purchase or sell physical commodities; except that the fund
(other than the Prime Reserve, U.S. Treasury Money, Government Reserve
Investment, and Reserve Investment Funds) may enter into futures
contracts and options thereon;
(3) (a)
Industry Concentration (All funds except High Yield, New Income, Prime
Reserve, Reserve Investment, and Short-Term Bond 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;
(b)
Industry Concentration (High Yield Fund) Purchase the securities of any
issuer if, as a result, more than 25% of the value of the fund's total
assets would be invested in the securities of issuers having their
principal business activities in the same industry; provided, however,
that the fund will normally concentrate 25% or more of its assets in
securities of the banking industry when the fund's position in issues
maturing in one year or less equals 35% or more of the fund's total
assets;
(c) Industry Concentration (New Income Fund) Purchase the securities of
any issuer if, as a result, more than 25% of the value of the fund's
total assets would be invested in the securities of issuers having their
principal business activities in the same industry; provided, however,
that the fund will invest more than 25% of its total assets, but not more
than 50%, in any one of the gas utility, gas transmission utility,
electric utility, telephone utility, and petroleum industries under
certain circumstances, and further provided that this limitation does not
apply to securities of the banking industry including, but not limited
to, certificates of deposit and bankers' acceptances;
(d)
Industry Concentration (Prime Reserve and Reserve Investment 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; provided, however, that this limitation does not apply to
securities of the banking industry including, but not limited to,
certificates of deposit and bankers' acceptances; and
(e)
Industry Concentration (Short-Term Bond Fund) Purchase the securities of
any issuer if, as a result, more than 25% of the value of the fund's
total assets would be invested in the securities of issuers having their
principal business activities in the same industry; provided, however,
that the fund will normally invest more than 25% of its total assets in
the securities of the banking industry including, but not limited to,
bank certificates of deposit and bankers' acceptances when the fund's
position in issues maturing in one year or less equals 35% or more of the
fund's total assets; provided, further, that the fund will invest more
than 25% of its total assets, but not more than 50%, in any one of the
gas utility, gas transmission utility, electric utility, telephone
utility, and petroleum industries under certain circumstances;
(4) Loans Make loans, although the fund may (i) lend portfolio securities and
participate in an interfund lending program with other Price Funds
provided that no such loan may be made if, as a result, the aggregate of
such loans would exceed 33/1//\\/3/\\% of the value of the fund's total
assets; (ii) purchase money market securities and enter into repurchase
agreements; and (iii) acquire publicly distributed or privately placed
debt securities and purchase debt;
(5) Percent Limit on Assets Invested in Any One Issuer Purchase a security
if, as a result, with respect to 75% of the value of its total assets,
more than 5% of the value of the fund's total assets would be invested in
the securities of a single issuer, except securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities;
(6) Percent Limit on Share Ownership of Any One Issuer Purchase a security
if, as a result, with respect to 75% of the value of the fund's total
assets, more than 10% of the outstanding voting securities of any
36
issuer would be held by the fund (other than obligations issued or
guaranteed by the U.S. government, its agencies, or instrumentalities);
(7) Real Estate Purchase or sell real estate, including limited partnership
interests therein, unless acquired as a result of ownership of securities
or other instruments (but this shall not prevent the fund from investing
in securities or other instruments backed by real estate or securities of
companies engaged in the real estate business);
(8) Senior Securities Issue senior securities except in compliance with the
1940 Act; or
(9) Underwriting Underwrite securities issued by other persons, except to the
extent that the fund may be deemed to be an underwriter within the
meaning of the 1933 Act in connection with the purchase and sale of its
portfolio securities in the ordinary course of pursuing its investment
program.
NOTES
The following Notes should be read in connection with the above-described
fundamental policies. The Notes are not fundamental policies.
With respect to investment restriction (1), the Government Reserve
Investment, Prime Reserve, Reserve Investment, and U.S. Treasury Money
Funds have no current intention of engaging in any borrowing
transactions.
With respect to investment restriction (2), the fund does not consider
currency contracts or hybrid investments to be commodities.
For purposes of investment restriction (3), U.S., state, or local
governments, or related agencies or instrumentalities, are not considered
an industry. Industries are determined by reference to the
classifications of industries set forth in the fund's semiannual and
annual reports. It is the position of the Staff of the SEC that foreign
governments are industries for purposes of this restriction.
For purposes of investment restriction (4), the fund will consider the
acquisition of a debt security to include the execution of a note or
other evidence of an extension of credit with a term of more than nine
months.
For purposes of investment restriction (5), the fund will consider a
repurchase agreement fully collateralized with U.S. government securities
to be U.S. government securities.
Operating Policies
As a matter of operating policy, the fund may not:
(1) Borrowing Purchase additional securities when money borrowed exceeds 5%
of its total assets;
(2) Control of Portfolio Companies Invest in companies for the purpose of
exercising management or control;
(3) (a)
Equity Securities (All funds, except High Yield and New Income Funds)
Purchase any equity security or security convertible into an equity
security except as set forth in its prospectus and operating policy on
investment companies;
(b)
Equity Securities (High Yield Fund) Invest more than 20% of the fund's
total assets in equity securities (including up to 10% in warrants);
(c)
Equity Securities (New Income Fund) Invest more than 25% of the fund's
total assets in equity securities;
(4) Futures Contracts Purchase a futures contract or an option thereon, if,
with respect to positions in futures or options on futures which do not
represent bona fide hedging, the aggregate initial margin and premiums on
such options would exceed 5% of the fund's net asset value;
37
(5) Illiquid Securities Purchase illiquid securities if, as a result, more
than 15% (10% for the Government Reserve Investment, Prime Reserve,
Reserve Investment, and U.S. Treasury Money Funds) of its net assets
would be invested in such securities;
(6) Investment Companies Purchase securities of open-end or closed-end
investment companies except (i) in compliance with the 1940 Act; (ii)
securities of the T. Rowe Price Reserve Investment or Government Reserve
Investment Funds; or (iii) in the case of the T. Rowe Price Government
Reserve Investment, Prime Reserve, T. Rowe Price Reserve Investment, and
U.S. Treasury Money Funds, only securities of other money market funds;
(7) Margin Purchase securities on margin, except (i) for use of short-term
credit necessary for clearance of purchases of portfolio securities and
(ii) it may make margin deposits in connection with futures contracts or
other permissible investments;
(8) Mortgaging Mortgage, pledge, hypothecate or, in any manner, transfer any
security owned by the fund as security for indebtedness except as may be
necessary in connection with permissible borrowings or investments and
then such mortgaging, pledging, or hypothecating may not exceed
33/1//\\/3/\\% of the fund's total assets at the time of borrowing or
investment;
(9) Oil and Gas Programs Purchase participations or other direct interests
in, or enter into leases with respect to oil, gas, or other mineral
exploration or development programs if, as a result thereof, more than 5%
of the value of the total assets of the fund would be invested in such
programs;
(10) Options, etc. Invest in puts, calls, straddles, spreads, or any
combination thereof, except to the extent permitted by the prospectus and
Statement of Additional Information;
(11) (a) Short Sales (All funds except High Yield Fund) Effect short sales of
securities;
(b)
Short Sales (High Yield Fund) Effect short sales of securities, other
than as set forth in its prospectus and Statement of Additional
Information; or
(12) Warrants Invest in warrants if, as a result thereof, more than 10% of
the value of the net assets of the fund would be invested in warrants.
Personal Strategy Funds
Notwithstanding anything in the above fundamental and operating restrictions
to the contrary, the fund may invest all of its 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 fund (a "Feeder"), and one or more
other funds with the same investment objective and program as the fund,
sought to accomplish its investment objective and program by investing all of
its assets in the shares of another investment company (the "Master"). The
Master would, in turn, have the same investment objective and program as the
fund. The fund 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.
MANAGEMENT OF THE FUNDS
-------------------------------------------------------------------------------
The officers and directors/trustees of the fund are listed below. Unless
otherwise noted, the address of each is 100 East Pratt Street, Baltimore,
Maryland 21202. Except as indicated, each has been an employee of T. Rowe
Price for more than five years. In the list below, the fund's
directors/trustees who are considered "interested persons" of T. Rowe Price
as defined under Section 2(a)(19) of the 1940 Act are noted with an asterisk
(*). These directors/trustees are referred to as inside directors by virtue
of their officership, directorship, and/or employment with T. Rowe Price.
38
Independent Directors/Trustees/(a)/
Name, Date of Birth, Address, and
Principal Occupations/a/ Title and Fund(s) Served
-------------------------------------------------------------------------------
Calvin W. Burnett, PhD., 3/16/32
2500 West North Avenue, Baltimore, Maryland 21216
President, Coppin State College; formerly: Director,
Maryland Chamber of Commerce and Provident Bank of
Maryland; formerly: President, Baltimore Area
Council Boy Scouts of America; Vice President and
Board of Directors, The Walters Art Gallery
-------------------------------------------------------------------------------
Anthony W. Deering, 1/28/45
10275 Little Patuxent Parkway, Columbia, Maryland
21044
Director, Chairman of the Board, President, and
Chief Executive Officer, The Rouse Company, real
estate developers, Columbia, Maryland
-------------------------------------------------------------------------------
Donald W. Dick, Jr., 1/27/43
EuroCapital Advisors LLC, P.O. Box 491, Chilmark,
Massachusetts 02535
Principal, EuroCapital Advisors, LLC, an acquisition
and management advisory firm; formerly (5/89-6/95)
Principal, Overseas Partners, Inc., a financial
investment firm; formerly (6/65-3/89) Director and
Vice President, Consumer Products Group, McCormick &
Company, Inc., international food processors;
Director, Waverly, Inc., Baltimore, Maryland
-------------------------------------------------------------------------------
David K. Fagin, 4/9/38
33 Glenmoor Drive, Englewood, Colorado 80110-7115
Director, Western Exploration and Development, Ltd.
(7/97 to present) formerly: Chairman (7/97 to 2/00);
Director, Dayton Mining Corporation (6/98 to
present); Chairman and President, Nye Corporation
(6/88 to present); Director, Nescor Corporation
(6/94 to 6/96); Director of Canyon Resources, Corp.
(5/00 to present); Director, Golden Star Resources,
Ltd.; formerly: Chairman (5/92 to 12/97) and Chief
Executive Officer (5/92 to 5/96); formerly:
President, Chief Operating Officer, and Director,
Homestake Mining Company (5/86 to
7/91)
-------------------------------------------------------------------------------
F. Pierce Linaweaver, 8/22/34
Green Spring Station, 2360 West Joppa Road, Suite
224,
Lutherville, Maryland 21093
President, F. Pierce Linaweaver & Associates, Inc.;
Consulting Environmental & Civil Engineers; formerly
(1987-1991) Executive Vice President, EA
Engineering, Science, and Technology, Inc., and
President, EA Engineering, Inc., Baltimore, Maryland
-------------------------------------------------------------------------------
Hanne M. Merriman, 11/16/41
3201 New Mexico Avenue, N.W., Suite 350, Washington,
D.C. 20016
Retail Business Consultant; Director, Ann Taylor
Stores Corporation, Central Illinois Public Service
Company, Ameren Corp., Finlay Enterprises, Inc., The
Rouse Company, State Farm Mutual Automobile
Insurance Company and USAirways Group, Inc.
-------------------------------------------------------------------------------
John G. Schrieber, 10/21/46
One Westminster Place, Lake Forest, Illinois 60045
Owner/President, Centaur Capital Partners, Inc., a
real estate investment company; Director, AMLI
Residential Properties Trust and The Brickman Group
LTP; Partner, Blackstone Real Estate Partners, L.P.;
Director and formerly Executive Vice President, JMB
Realty Corporation, a national real estate
investment manager and developer
-------------------------------------------------------------------------------
Hubert D. Vos, 8/2/33
1114 State Street, Suite 247, P.O. Box 90409, Santa
Barbara,
California 93190-0409
Owner/President, Stonington Capital Corporation, a
private investment company
-------------------------------------------------------------------------------
Paul M. Wythes, 6/23/33
755 Page Mill Road, Suite A200, Palo Alto,
California
94304-1005
Founding Partner of Sutter Hill Ventures, a venture
capital limited partnership, providing equity
capital to young high technology companies
throughout the United States; Director, Teltone
Corporation
-------------------------------------------------------------------------------
39
(a) Unless otherwise indicated, the Independent Directors/Trustees have
been at their respective companies for at least five years.
40
Inside Directors/Trustees/Officers
Name, Date of Birth, Address, and
Principal Occupations Title and Fund(s) Served
-------------------------------------------------------------------------------
R. Lee Arnold, Jr., 9/7/70
Assistant Vice President, T. Rowe Price; Chartered
Financial Analyst; Certified Public Accountant
-------------------------------------------------------------------------------
Preston G. Athey, 7/17/49
Managing Director, T. Rowe Price and T. Rowe Price
Group, Inc.; Vice President, T. Rowe Price Trust
Company; Chartered Financial Analyst
-------------------------------------------------------------------------------
Jeremy M. Baker, 2/27/68
Assistant Vice President, T. Rowe Price; Chartered
Financial Analyst
-------------------------------------------------------------------------------
Stephen W. Boesel, 12/28/44
Managing Director, T. Rowe Price and T. Rowe Price
Group, Inc.; Vice President, T. Rowe Price Trust
Company
-------------------------------------------------------------------------------
Linda A. Brisson, 7/8/59
Vice President, T. Rowe Price and T. Rowe Price
Group, Inc.
-------------------------------------------------------------------------------
Joseph A. Carrier, 12/30/60
Vice President, T. Rowe Price, T. Rowe Price Group,
Inc., and T. Rowe Price Investment Services, Inc.
-------------------------------------------------------------------------------
Robert N. Gensler, 10/18/57
Vice President, T. Rowe Price and T. Rowe Price
Group, Inc.
-------------------------------------------------------------------------------
Jill Hauser, 6/23/58
Vice President, T. Rowe Price and T. Rowe Price
Group, Inc.
-------------------------------------------------------------------------------
Charles B. Hill, 9/22/61
Vice President, T. Rowe Price and T. Rowe Price
Group, Inc.
-------------------------------------------------------------------------------
Henry H. Hopkins, 12/23/42
Managing Director, T. Rowe Price; Director and
Managing Director, T. Rowe Price Group, Inc.; Vice
President, T. Rowe Price International, Inc. and T.
Rowe Price Retirement Plan Services, Inc.; Vice
President and Director, T. Rowe Price Investment
Services, Inc., T. Rowe Price Services, Inc., and T.
Rowe Price Trust Company
-------------------------------------------------------------------------------
Thomas J. Huber, 9/23/66
Vice President, T. Rowe Price and T. Rowe Price
Group, Inc.; formerly Corporate Banking Officer with
NationsBank; Chartered Financial Analyst
-------------------------------------------------------------------------------
*James A.C. Kennedy, 8/17/53
Director and Managing Director, T. Rowe Price and T.
Rowe Price Group, Inc.; Chartered Financial Analyst
-------------------------------------------------------------------------------
J. Jeffrey Lang, 1/10/62
Vice President, T. Rowe Price
-------------------------------------------------------------------------------
Marcy M. Lash, 1/30/63
Assistant Vice President, T. Rowe Price; (1998)
formerly Assistant Vice President, underwriting, at
Connie Lee Insurance Company
-------------------------------------------------------------------------------
Patricia B. Lippert, 1/12/53 Secretary, all funds
Assistant Vice President, T. Rowe Price and T. Rowe
Price Investment Services, Inc.
-------------------------------------------------------------------------------
Joseph K. Lynagh, 6/9/58
Vice President, T. Rowe Price and T. Rowe Price
Group, Inc.; formerly Corporate Banking Officer with
NationsBank; Chartered Financial Analyst
-------------------------------------------------------------------------------
Eric N. Mader, 12/20/68
Assistant Vice President, T. Rowe Price; (1998)
formerly Special Assistant to the CFO, District of
Columbia Public Schools
-------------------------------------------------------------------------------
Konstantine B. Mallas, 5/26/63
Vice President, T. Rowe Price and T. Rowe Price
Group, Inc.
-------------------------------------------------------------------------------
Hugh D. McGuirk, 7/6/60
Vice President, T. Rowe Price and T. Rowe Price
Group, Inc.
-------------------------------------------------------------------------------
David S. Middleton, 1/18/56 Controller, all funds
Vice President, T. Rowe Price, T. Rowe Price Group,
Inc., and T. Rowe Price Trust Company
-------------------------------------------------------------------------------
Mary J. Miller, 7/19/55
Managing Director, T. Rowe Price and T. Rowe Price
Group, Inc.
-------------------------------------------------------------------------------
James M. Murphy, 4/23/67
Vice President, T. Rowe Price and T. Rowe Price
Group, Inc.; formerly Portfolio Manager at
Prudential Investments; Chartered Financial Analyst
-------------------------------------------------------------------------------
Donald J. Peters, 7/3/59
Vice President, T. Rowe Price and T. Rowe Price
Group, Inc.
-------------------------------------------------------------------------------
Larry J. Puglia, 8/25/60
Managing Director, T. Rowe Price and T. Rowe Price
Group, Inc.; Chartered Financial Analyst
-------------------------------------------------------------------------------
*William T. Reynolds, 5/26/48
Director and Managing Director, T. Rowe Price and T.
Rowe Price Group, Inc.; Chartered Financial Analyst
-------------------------------------------------------------------------------
*James S. Riepe, 6/25/43
Director and Managing Director, T. Rowe Price; Vice
Chairman of the Board and Managing Director, T. Rowe
Price Group, Inc.; Chairman of the Board, T. Rowe
Price Investment Services, Inc., T. Rowe Price
Retirement Plan Services, Inc., and T. Rowe Price
Services, Inc.; Director, T. Rowe Price
International, Inc.; Chairman of the Board,
President, and Trust Officer, T. Rowe Price Trust
Company
-------------------------------------------------------------------------------
Stephen P. Richter, 10/18/69
Vice President, T. Rowe Price; formerly Vice
President at Euler ACI; Chartered Financial Analyst
-------------------------------------------------------------------------------
Robert W. Sharps, 6/10/71
Vice President, T. Rowe Price and T. Rowe Price
Group, Inc.; formerly Senior Consultant at KPMG Peat
Marwick; Chartered Financial Analyst
-------------------------------------------------------------------------------
William J. Stromberg, 3/10/60
Managing Director, T. Rowe Price and T. Rowe Price
Group, Inc.; Chartered Financial Analyst
-------------------------------------------------------------------------------
*M. David Testa, 4/22/44
Chief Investment Officer, Director, and Managing
Director, T. Rowe Price; Vice Chairman of the Board,
Chief Investment Officer, Managing Director, and
Director, T. Rowe Price Group, Inc.; Vice President
and Director, T. Rowe Price Trust Company; Director,
T. Rowe Price International, Inc.; Chartered
Financial Analyst
-------------------------------------------------------------------------------
Arthur S. Varnado, 6/1/60
Vice President, T. Rowe Price and T. Rowe Price
Group, Inc.
-------------------------------------------------------------------------------
John F. Wakeman, 11/25/62
Vice President, T. Rowe Price and T. Rowe Price
Group, Inc.
-------------------------------------------------------------------------------
Mark R. Weigman, 7/30/62
Vice President, T. Rowe Price, T. Rowe Price Group,
Inc., and T. Rowe Price Trust Company; Chartered
Financial Analyst
-------------------------------------------------------------------------------
Edward A. Wiese, 4/12/59
Vice President, T. Rowe Price, T. Rowe Price Group,
Inc., and T. Rowe Price Trust Company; Vice
President, Director, and Chief Investment Officer,
T. Rowe Price Savings Bank; Chartered Financial
Analyst
-------------------------------------------------------------------------------
Paul W. Wojcik, 11/28/70
Vice President, T. Rowe Price and T. Rowe Price
Group, Inc.; formerly Senior Programmer/Analyst at
Fidelity Investments; Chartered Financial Analyst
-------------------------------------------------------------------------------
41
42
43
Compensation Table
The fund does not pay pension or retirement benefits to its officers or
directors/trustees. Also, any director/trustee of the fund who is an officer
or employee of T. Rowe Price or T. Rowe Price International does not receive
any remuneration from the fund.<
Name of Person, Aggregate Compensation from Total Compensation from Fund and
Position Fund(a) Fund Complex Paid to Directors/
-------- -------------------------------------------- Trustees(b)
--------------------------------------------------
-----------------------
Corporate Income Fund
Calvin W. Burnett, Ph.D.,
Trustee $1,373 $83,750
Anthony W. Deering, Trustee 1,607 92,500
F. Pierce Linaweaver, Trustee 1,411 85,750
John G. Schreiber, Trustee 1,411 85,750
-----------------------------------------------------------------------------------------------------------------------------------
GNMA Fund
Calvin W. Burnett, Ph.D.,
Trustee $2,388 $83,750
Anthony W. Deering, Trustee 2,796 92,500
F. Pierce Linaweaver, Trustee 2,454 85,750
John G. Schreiber, Trustee 2,454 85,750
-----------------------------------------------------------------------------------------------------------------------------------
High Yield Fund
Calvin W. Burnett, Ph.D.,
Director $2,864 $83,750
Anthony W. Deering, Director 3,352 92,500
F. Pierce Linaweaver, Director 2,943 85,750
John G. Schreiber, Director 2,943 85,750
-----------------------------------------------------------------------------------------------------------------------------------
New Income Fund
Calvin W. Burnett, Ph.D.,
Director $3,003 $83,750
Anthony W. Deering, Director 3,515 92,500
F. Pierce Linaweaver, Director 3,086 85,750
John G. Schreiber, Director 3,086 85,750
-----------------------------------------------------------------------------------------------------------------------------------
Personal Strategy Balanced Fund
Donald W. Dick, Jr., Director $1,403 $92,500
David K. Fagin, Director 1,199 83,750
Hanne M. Merriman, Director 1,199 83,750
Hubert D. Vos, Director 1,232 85,750
Paul M. Wythes, Director 1,435 94,500
-----------------------------------------------------------------------------------------------------------------------------------
Personal Strategy Growth Fund
Donald W. Dick, Jr., Director $1,287 $92,500
David K. Fagin, Director 1,100 83,750
Hanne M. Merriman, Director 1,100 83,750
Hubert D. Vos, Director 1,130 85,750
Paul M. Wythes, Director 1,318 94,500
-----------------------------------------------------------------------------------------------------------------------------------
Personal Strategy Income Fund
Donald W. Dick, Jr., Director $1,267 $92,500
David K. Fagin, Director 1,083 83,750
Hanne M. Merriman, Director 1,083 83,750
Hubert D. Vos, Director 1,113 85,750
Paul M. Wythes, Director 1,297 94,500
-----------------------------------------------------------------------------------------------------------------------------------
Prime Reserve Fund
Calvin W. Burnett, Ph.D.,
Director $6,981 $83,750
Anthony W. Deering, Director 8,170 92,500
F. Pierce Linaweaver, Director 7,173 85,750
John G. Schreiber, Director 7,173 85,750
-----------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond Fund
Calvin W. Burnett, Ph.D.,
Director $1,691 $83,750
Anthony W. Deering, Director 1,980 92,500
F. Pierce Linaweaver, Director 1,739 85,750
John G. Schreiber, Director 1,739 85,750
-----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Intermediate Fund
Calvin W. Burnett, Ph.D.,
Director $1,557 $83,750
Anthony W. Deering, Director 1,822 92,500
F. Pierce Linaweaver, Director 1,600 85,750
John G. Schreiber, Director 1,600 85,750
-----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Long-Term Fund
Calvin W. Burnett, Ph.D.,
Director $1,629 $83,750
Anthony W. Deering, Director 1,907 92,500
F. Pierce Linaweaver, Director 1,674 85,750
John G. Schreiber, Director 1,674 85,750
-----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Money Fund
Calvin W. Burnett, Ph.D.,
Director $2,250 $83,750
Anthony W. Deering, Director 2,634 92,500
F. Pierce Linaweaver, Director 2,312 85,750
John G. Schreiber, Director 2,312 85,750
-----------------------------------------------------------------------------------------------------------------------------------
44
(a) Amounts in this column are based on accrued compensation for fiscal year
2001.
(b) Amounts in this column are based on compensation received for the
calendar year 2001. The T. Rowe Price complex included 95 funds as of
December 31, 2000.
Note: Government Reserve Investment and Reserve Investments Funds will not
incur director's fees.
All funds
The fund's Executive Committee, consisting of the fund's interested
directors/trustees, has been authorized by its respective Board of
Directors/Trustees to exercise all powers of the Board to manage the fund in
the intervals between meetings of the Board, except the powers prohibited by
statute from being delegated.
45
PRINCIPAL HOLDERS OF SECURITIES
-------------------------------------------------------------------------------
As of August 31, 2001, the officers and directors/trustees of the fund, as a
group, owned less than 1% of the outstanding shares of the fund.
As of August 31, 2001, the following shareholders of record owned more than
5% of the outstanding shares of any share class of the fund:
Corporate Income Fund: T. Rowe Price RPS Inc., OMNIPLAN Account, Corporate
Income Fund, Fund #02/112, P.O. Box 17215, Baltimore, Maryland 21297-1215;
GNMA: Yachtcrew & Co., T. Rowe Price Associates, Inc., Attn.: Fund Accounting
Dept., 100 East Pratt Street, Baltimore, Maryland 21202-1009; T. Rowe Price
Trust Company, Inc., Attn.: RPS Control Dept., 10090 Red Run Boulevard.,
Owings Mills, Maryland 21117-4842;
High Yield Fund: Yachtcrew & Co., T. Rowe Price Associates, Inc., Attn.: Fund
Accounting Dept., 100 East Pratt Street, Baltimore, Maryland 21202-1009;
New Income Fund: Yachtcrew & Co., T. Rowe Price Associates, Inc., Attn.: Fund
Accounting Dept., 100 East Pratt Street, Baltimore, Maryland 21202-1009; T.
Rowe Price Trust Company, Inc., Attn.: TRPS Inst. Control Dept., P.O. Box
17215, Baltimore, Maryland 21297-1215;
Personal Strategy Balanced Fund: T. Rowe Price Trust Co. Tr. Balanced, Attn.:
Asset Reconciliation, P.O. Box 17215, Baltimore, Maryland 21297-1215;
Personal Strategy Growth Fund: T. Rowe Price Trust Co. Tr., Attn.: Growth
Asset, P.O. Box 17215, Baltimore, Maryland 21297-1215;
Personal Strategy Income Fund: T. Rowe Price Trust Co. Tr. Income, Attn.:
Asset Reconciliation, P.O. Box 17215, Baltimore, Maryland 21297-1215;
Prime Reserve Fund: T. Rowe Price Trust Company, Inc., Attn.: TRPS Inst.
Control Dept., P.O. Box 17215, Baltimore, Maryland 21297-1215;
Prime Reserve Fund-PLUS Class: Pershing Div. of DLJ Secs. Corp. for Exclusive
Benefit of TRP Money Fund Customer Accounts, 1 Pershing Plaza, Jersey City,
New Jersey, 07399-0002;
Short-Term Bond Fund: T. Rowe Price Trust Company, Inc., Attn.: TRPS Inst.
Control Dept., P.O. Box 17215, Baltimore, Maryland 21297-1215;
U.S. Treasury Intermediate Bond Fund: T. Rowe Price Trust Company, Inc.,
Attn.: TRPS Inst. Control Dept., P.O. Box 17215, Baltimore, Maryland
21297-1215;
U.S. Treasury Long-Term Bond Fund: Yachtcrew & Co., T. Rowe Price Associates,
Inc., Attn.: Fund Accounting Dept., 100 East Pratt Street, Baltimore,
Maryland 21202-1009; T. Rowe Price Trust Company, Inc., Attn.: TRPS Inst.
Control Dept., P.O. Box 17215, Baltimore, Maryland 21297-1215;
U.S. Treasury Money Fund: T. Rowe Price Trust Company, Inc., Attn.: TRPS
Inst. Control Dept., P.O. Box 17215, Baltimore, Maryland 21297-1215; T. Rowe
Price Retirement Plan Service, Inc., Attn.: RPS Cash, 10090 Red Run
Boulevard., Owings Mills, Maryland 21117-4842.
INVESTMENT MANAGEMENT SERVICES
-------------------------------------------------------------------------------
Services
Under the Management Agreement, T. Rowe Price provides the fund with
discretionary investment services. Specifically, T. Rowe Price is responsible
for supervising and directing the investments of the fund in accordance with
the fund's investment objectives, program, and restrictions as provided in
its prospectus and this Statement of Additional Information. T. Rowe Price is
also responsible for effecting all security
46
transactions on behalf of the fund, including the negotiation of commissions
and the allocation of principal business and portfolio brokerage. In addition
to these services, T. Rowe Price provides the fund with certain corporate
administrative services, including: maintaining the fund's corporate
existence and corporate records; registering and qualifying fund shares under
federal laws; monitoring the financial, accounting, and administrative
functions of the fund; maintaining liaison with the agents employed by the
fund such as the fund's custodian and transfer agent; assisting the fund in
the coordination of such agents' activities; and permitting T. Rowe Price's
employees to serve as officers, directors/trustees, and committee members of
the fund without cost to the fund.
The Management Agreement also provides that T. Rowe Price, its
directors/trustees, officers, employees, and certain other persons performing
specific functions for the fund will only be liable to the fund for losses
resulting from willful misfeasance, bad faith, gross negligence, or reckless
disregard of duty.
All funds except Government Reserve Investment and Reserve Investment Funds
Management Fee
The fund pays T. Rowe Price a fee ("Fee") which consists of two components: a
Group Management Fee ("Group Fee") and an Individual Fund Fee ("Fund Fee").
The Fee is paid monthly to T. Rowe Price on the first business day of the
next succeeding calendar month and is calculated as described next.
The monthly Group Fee ("Monthly Group Fee") is the sum of the daily Group Fee
accruals ("Daily Group Fee Accruals") for each month. The Daily Group Fee
Accrual for any particular day is computed by multiplying the Price Funds'
group fee accrual as determined below ("Daily Price Funds' Group Fee
Accrual") by the ratio of the Price Fund's net assets for that day to the sum
of the aggregate net assets of the Price Funds for that day. The Daily Price
Funds' Group Fee Accrual for any particular day is calculated by multiplying
the fraction of one (1) over the number of calendar days in the year by the
annualized Daily Price Funds' Group Fee Accrual for that day as determined in
accordance with the following schedule:
0.480% First $1 billion 0.360% Next $2 billion 0.310% Next $16 billion
------------------------------------------------------------------------------
0.450% Next $1 billion 0.350% Next $2 billion 0.305% Next $30 billion
------------------------------------------------------------------------------
0.420% Next $1 billion 0.340% Next $5 billion 0.300% Next $40 billion
------------------------------------------------------------------------------
0.390% Next $1 billion 0.330% Next $10 billion 0. Thereafter
295
%
------------------------------------------------------------------------------
0.370% Next $1 billion 0.320% Next $10 billion
For the purpose of calculating the Group Fee, the Price Funds include all the
mutual funds distributed by Investment Services, (excluding the T. Rowe Price
Spectrum Funds, and any institutional, index, or private label mutual funds).
For the purpose of calculating the Daily Price Funds' Group Fee Accrual for
any particular day, the net assets of each Price Fund are determined in
accordance with the fund's prospectus as of the close of business on the
previous business day on which the fund was open for business.
The monthly Fund Fee ("Monthly Fund Fee") is the sum of the daily Fund Fee
accruals ("Daily Fund Fee Accruals") for each month. The Daily Fund Fee
Accrual for any particular day is computed by multiplying the fraction of one
(1) over the number of calendar days in the year by the individual Fund Fee
Rate and multiplying this product by the net assets of the fund for that day,
as determined in accordance with the fund's prospectus as of the close of
business on the previous business day on which the fund was open for
business. The individual fund fees are listed in the following chart:
Corporate Income Fund 0.15%
GNMA Fund 0.15
High Yield Fund 0.30
New Income Fund 0.15
Personal Strategy Balanced Fund 0.25
Personal Strategy Growth Fund 0.30
Personal Strategy Income Fund 0.15
Prime Reserve Fund 0.05
Prime Reserve Fund-PLUS Class 0.05
Short-Term Bond Fund 0.10
U.S. Treasury Intermediate Fund 0.05
U.S. Treasury Long-Term Fund 0.05
U.S. Treasury Money Fund 0.00
47
The following chart sets forth the total management fees, if any, paid to T.
Rowe Price by each fund, during the last three years:
Fund 2001 2000 1999
---- ---- ---- ----
Corporate Income $ 124,000 $ 112,000 $ 71,000
GNMA 5,005,000 5,086,000 5,388,000
High Yield* 9,413,000 10,209,000 10,598,000
New Income 7,887,000 8,438,000 9,740,000
Personal Strategy Balanced 3,604,000 3,341,000 2,479,000
Personal Strategy Growth 1,696,000 1,493,000 1,010,000
Personal Strategy Income 914,000 1,044,000 897,000
Prime Reserve* 21,004,000 19,755,000 18,779,000
Short-Term Bond 1,219,000 1,276,000 1,423,000
U.S. Treasury Intermediate 869,000 901,000 931,000
U.S. Treasury Long-Term 1,128,000 1,200,000 1,150,000
U.S. Treasury Money 2,945,000 2,922,000 2,890,000
----------------------------
* The fund has two classes of shares. The management fee is allocated to
each class based on relative net assets.
Limitation on Fund Expenses
The Management Agreement between the fund and T. Rowe Price provides that the
fund will bear all expenses of its operations not specifically assumed by T.
Rowe Price.
The following chart sets forth expense ratio limitations and the periods for
which they are effective. For each, T. Rowe Price has agreed to bear any fund
expenses (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 fund's ratio of expenses to
average net assets to exceed the indicated percentage limitations. (The
expense limitation for the High Yield Fund-Advisor Class relates to operating
expenses other than management fees). The expenses borne by T. Rowe Price are
subject to reimbursement by the fund through the indicated reimbursement
date, provided no reimbursement will be made if it would result in the fund's
expense ratio exceeding its applicable limitation.
48
Expense Reimbursement
Fund Limitation Period ------- -------------
---- ----------------- Ratio Date
----- ----
Limitation
----------
June 1, 1999-May 31, May 31, 200
Corporate Income 2001 0.80% 3
High Yield March 31,
Fund-Advisor Class 2000-December 31, 2001 1.05% December 31, 2003
Personal Strategy June 1, 2000-May 31,
Income (a) 2002 0.90% May 31, 2004
Personal Strategy June 1, 2000-May 31,
Growth (b) 2002 1.10% May 31, 2004
Prime Reserve May 1, 2000-April 30, April 30, 200
Fund-PLUS Class (c) 2002 1.00% 4
May
November 1, 2000-May 3
Short-Term Bond 31, 2002 0.55% 1
, 2004
-------------------------------------------------------------------------------
(a) The Personal Strategy Income Fund previously operated under a 0.90%
limitation that expired May 31, 2000. The reimbursement period for this
limitation extends through May 31, 2002.
(b) The Personal Strategy Growth Fund previously operated under a 1.10%
limitation that expired May 31, 2000. The reimbursement period for this
limitation extends through May 31, 2002.
(c) The Prime Reserve Fund-PLUS Class previously operated under a 1.00%
limitation that expired April 30, 2000. The reimbursement period for this
limitation extends through April 30, 2002.
Each of the above-referenced fund's Management Agreement also provides that
one or more additional expense limitations periods (of the same or different
time periods) may be implemented after the expiration of the current expense
limitation, and that with respect to any such additional limitation period,
the fund may reimburse T. Rowe Price, provided the reimbursement does not
result in the fund's aggregate expenses exceeding the additional expense
limitation.
Corporate Income Fund
Pursuant to the current expense limitation, $118,000 of management fees were
not accrued by the fund for the year ended May 31, 2001, unaccrued fees in
the amount of $239,000 remain subject to reimbursement by the fund through
May 31, 2003.
Personal Strategy Growth Fund
Pursuant to the current expense limitation, $58,000 of management fees were
not accrued by the fund for the year ended May 31, 2001. At May 31, 2001,
unaccrued fees in the amount of $87,000 remain subject to reimbursement by
the fund through May 31, 2002, and $58,000 through May 31, 2004.
Personal Strategy Income Fund
Pursuant to the current expense limitation, $129,000 of management fees were
not accrued by the fund for the year ended May 31, 2001. At May 31, 2001,
unaccrued fees in the amount of $10,000 remain subject to reimbursement by
the fund through May 31, 2002, and $129,000 through May 31, 2004.
Short-Term Bond Fund
Pursuant to the current expense limitation, $425,000 of management fees were
not accrued by the fund for the year ended May 31, 2001. At May 31, 2001,
unaccrued fees in the amount of $425,000 remain subject to reimbursement by
the fund through May 31, 2004.
GNMA, High Yield, New Income, Short-Term Bond, and U.S. Treasury Long-Term
Funds
T. Rowe Price Spectrum Fund, Inc.
The funds listed above are a party to a Special Servicing Agreement
("Agreement") between and among T. Rowe Price Spectrum Fund, Inc. ("Spectrum
Fund"), T. Rowe Price, and various other T. Rowe Price funds which, along
with such fund, are funds in which Spectrum Fund invests (collectively all
such funds "Underlying Price Funds").
The Agreement provides that, if the Board of Directors/Trustees of any
underlying Price fund determines that such underlying fund's share of the
aggregate expenses of Spectrum Fund is less than the estimated savings to
49
the underlying Price fund from the operation of Spectrum Fund, the underlying
Price fund will bear those expenses in proportion to the average daily value
of its shares owned by Spectrum Fund, provided further that no underlying
Price fund will bear such expenses in excess of the estimated savings to it.
Such savings are expected to result primarily from the elimination of
numerous separate shareholder accounts which are or would have been invested
directly in the underlying Price funds and the resulting reduction in
shareholder servicing costs. Although such cost savings are not certain, the
estimated savings to the underlying Price funds generated by the operation of
Spectrum Fund are expected to be sufficient to offset most, if not all, of
the expenses incurred by Spectrum Fund.
Management Fee
Government Reserve Investment and Reserve Investment Funds
Neither fund pays T. Rowe Price an investment management fee.
Management Related Services
As noted above, the Management Agreement spells out the expenses to be paid
by the fund. In addition to the Management Fee, the fund pays for the
following: shareholder service expenses; custodial, accounting, legal, and
audit fees; costs of preparing and printing prospectuses and reports sent to
shareholders; registration fees and expenses; proxy and annual meeting
expenses (if any); and director/trustee fees and expenses.
T. Rowe Price Services, Inc., a wholly owned subsidiary of T. Rowe Price,
acts as the fund's transfer and dividend disbursing agent and provides
shareholder and administrative services. Services for certain types of
retirement plans are provided by T. Rowe Price Retirement Plan Services,
Inc., also a wholly owned subsidiary. The address for each is 100 East Pratt
St., Baltimore, MD 21202. Additionally, T. Rowe Price, under a separate
agreement with the funds, provides accounting services to the funds.
The funds paid the expenses shown in the following table for the fiscal year
ended May 31, 2001, to T. Rowe Price and its affiliates.
Transfer Agent and Retirement
Fund ------------------ ---------- Accounting Services
---- Shareholder Services Subaccounting -------------------
-------------------- -------------
Services
--------
Corporate Income $ 63,000 $ 23,000 $ 84,000
GNMA 1,652,000 257,000 104,000
Government Reserve
Investment 5,000 -- 64,000
High Yield 2,387,000 206,000 142,000
High Yield
Fund-Advisor Class 1,000 -- 0(a)
New Income 2,257,000 1,440,000 106,000
Personal Strategy
Balanced 200,000 2,090,000 85,000
Personal Strategy
Growth 201,000 791,000 84,000
Personal Strategy
Income 79,000 670,000 84,000
Prime Reserve 5,269,000 4,053,000 98,000
Prime Reserve
Fund-PLUS Class 93,000 -- 1,000
Reserve Investment 0(a) -- 64,000
Short-Term Bond 434,000 316,000 84,000
U.S. Treasury
Intermediate 219,000 193,000 64,000
U.S. Treasury
Long-Term 565,000 57,000 64,000
U.S. Treasury Money 698,000 445,000 64,000
------------------------
(a) Less than $1,000.
50
SERVICES BY OUTSIDE PARTIES
-------------------------------------------------------------------------------
The shares of some fund shareholders are held in omnibus accounts maintained
by various third parties, including retirement plan sponsors, insurance
companies, banks and broker-dealers. The fund has adopted an administrative
fee payment ("AFP") program that authorizes the fund to make payments to
these third parties. The payments are made for transfer agent, recordkeeping,
and other administrative services provided by, or on behalf of, the third
parties with respect to such shareholders and the omnibus accounts. Under the
AFP program, the funds paid the amounts set forth below to various third
parties in calendar year 2000.
GNMA Fund $ 2,287
High Yield Fund 30,180
New Income Fund 35,085
Personal Strategy Balanced Fund 14,149
Personal Strategy Growth Fund 13,740
Personal Strategy Income Fund 5,548
Prime Reserve Fund 14,804
Short-Term Bond Fund 253
U.S. Treasury Intermediate Fund 25,607
U.S. Treasury Money Fund 10,185
The Advisor Class has adopted an Advisor Class administrative fee payment
program ("Advisor Class AFP") under which various intermediaries, including
intermediaries receiving 12b-1 payments, may receive payments from the
Advisor Class in addition to 12b-1 fees for providing various recordkeeping
and transfer agent type services to the Advisor classes and/or shareholders
thereof. These services include, but are not limited to: transmission of net
purchase and redemption orders; maintenance of separate records for
shareholders reflecting purchases, redemptions, and share balances; mailing
of shareholder confirmations and periodic statements; and telephone services
in connection with the above. Under the Advisor Class AFP program, the funds
paid the amounts set forth below to various third parties in calendar year
2000
High Yield Fund-Advisor Class $1,043.07
All funds except Government Reserve Investment and Reserve Investment Funds
DISTRIBUTOR FOR THE FUND
-------------------------------------------------------------------------------
Investment Services, a Maryland corporation formed in 1980 as a wholly owned
subsidiary of T. Rowe Price, serves as the fund's distributor. Investment
Services is registered as a broker-dealer under the Securities Exchange Act
of 1934 and is a member of the National Association of Securities Dealers,
Inc. The offering of the fund's shares is continuous.
Investment Services is located at the same address as the fund and T. Rowe
Price-100 East Pratt Street, Baltimore, Maryland 21202.
Investment Services serves as distributor to the fund pursuant to an
Underwriting Agreement ("Underwriting Agreement"), which provides that the
fund will pay all fees and expenses in connection with: necessary state
filings; preparing, setting in type, printing, and mailing its prospectuses
and reports to shareholders; and issuing its shares, including expenses of
confirming purchase orders.
The Underwriting Agreement provides that Investment Services will pay all
fees and expenses in connection with: printing and distributing prospectuses
and reports for use in offering and selling fund shares; preparing, setting
in type, printing, and mailing all sales literature and advertising;
Investment Services' federal and state registrations as a broker-dealer; and
offering and selling fundshares, except for those fees and expenses
specifically assumed by the fund. Investment Services' expenses are paid by
T. Rowe Price.
51
Investment Services acts as the agent of the fund in connection with the sale
of its shares in the various states in which Investment Services is qualified
as a broker-dealer. Under the Underwriting Agreement, Investment Services
accepts orders for fund shares at net asset value. No sales charges are paid
by investors or the fund.
High Yield Fund-Advisor Class
Distribution and Shareholder Services Plan
The fund Directors/Trustees adopted a Plan pursuant to Rule 12b-1 on February
9, 2000 with respect to each Advisor Class. Each Plan provides that the
Advisor Class may compensate Investment Services or such other persons as the
fund or Investment Services designates, to finance any or all of the
distribution, shareholder servicing, maintenance of shareholder accounts,
and/or other administrative services with respect to Advisor Class shares. It
is expected that most, if not all, payments under the Plan will be made
(either directly, or indirectly through Investment Services) to brokers,
dealers, banks, insurance companies, and intermediaries other than Investment
Services. Under the Plan, each Advisor Class pays a fee at the annual rate of
up to 0.25% of that class's average daily net assets. Normally, the full
amount of the fee is paid to the intermediary on shares sold through that
intermediary. However, a lesser amount may be paid based on the level of
services provided. Intermediaries may use the payments for, among other
purposes, compensating employees engaged in sales and/or shareholder
servicing of the Advisor Class, as well as for a wide variety of other
purposes associated with supporting, distributing, and servicing the Advisor
Class shares. The amount of fees paid by an Advisor Class during any year may
be more or less than the cost of distribution and other services provided to
the Advisor Class and its investors. NASD rules limit the amount of annual
distribution and service fees that may be paid by a mutual fund and impose a
ceiling on the cumulative distribution fees paid. The Plan complies with
these rules.
The Plan requires that Investment Services provide, or cause to be provided,
to the fund Directors/Trustees for their review a quarterly written report
identifying the amounts expended by each Advisor Class and the purposes for
which such expenditures were made.
Prior to approving the Plan, the fund considered various factors relating to
the implementation of the Plan and determined that there is a reasonable
likelihood that the Plan will benefit each fund, its Advisor Class and the
Advisor Class's shareholders. The fund Directors/Trustees noted that to the
extent the Plan allows a fund to sell Advisor Class shares in markets to
which it would not otherwise have access, the Plan may result in additional
sales of fund shares. This may enable a fund to achieve economies of scale
that could reduce expenses. In addition, certain ongoing shareholder services
may be provided more effectively by intermediaries with which shareholders
have an existing relationship.
The Plan continued until March 31, 2002. The Plan is renewable thereafter
from year to year with respect to each fund, so long as its continuance is
approved at least annually (1) by the vote of a majority of the fund
Directors/Trustees and (2) by a vote of the majority of the Rule 12b-1
Directors/Trustees, cast in person at a meeting called for the purpose of
voting on such approval. The Plan may not be amended to increase materially
the amount of fees paid by any Advisor Class thereunder unless such amendment
is approved by a majority vote of the outstanding shares of such Advisor
Class and by the fund Directors/Trustees in the manner prescribed by Rule
12b-1 under the 1940 Act. The Plan is terminable with respect to an Advisor
Class at any time by a vote of a majority of the Rule 12b-1
Directors/Trustees or by a majority vote of the outstanding shares in the
Advisor Class.
The following payments for the period ended May 31, 2001 were made to third
party intermediaries, including broker-dealers and insurance companies, for
the distribution, shareholder servicing, maintenance of shareholder accounts
and/or other administration services under the 12b-1 Plan.
High Yield Fund-Advisor Class $2,000
52
CUSTODIAN
-------------------------------------------------------------------------------
State Street Bank and Trust Company is the custodian for the fund's U.S.
securities and cash, but it does not participate in the fund's investment
decisions. Portfolio securities purchased in the U.S. are maintained in the
custody of the Bank and may be entered into the Federal Reserve Book Entry
System, or the security depository system of the Depository Trust
Corporation. State Street Bank's main office is at 225 Franklin Street,
Boston, Massachusetts 02110.
The fund (other than GNMA, Prime Reserve, U.S. Treasury Intermediate,
Long-Term, Money, Government Reserve Investment, and Reserve Investment
Funds) has entered into a Custodian Agreement with The Chase Manhattan Bank,
London, pursuant to which portfolio securities which are purchased outside
the United States are maintained in the custody of various foreign branches
of The Chase Manhattan Bank and such other custodians, including foreign
banks and foreign securities depositories as are approved in accordance with
regulations under the 1940 Act. The address for The Chase Manhattan Bank,
London is Woolgate House, Coleman Street, London, EC2P 2HD, England.
CODE OF ETHICS
-------------------------------------------------------------------------------
The fund, its investment adviser (T. Rowe Price), and its principal
underwriter (T. Rowe Price Investment Services), have a written Code of
Ethics which requires persons with access to investment information ("Access
Persons") to obtain prior clearance before engaging in personal securities
transactions. In addition, all Access Persons must report their personal
securities transactions within 10 days of their execution. Access Persons
will not be permitted to effect transactions in a security: if there are
pending client orders in the security; the security has been purchased or
sold by a client within seven calendar days; the security is being considered
for purchase for a client; or the security is subject to internal trading
restrictions. In addition, Access Persons are prohibited from profiting from
short-term trading (e.g., purchases and sales involving the same security
within 60 days). Any person becoming an Access Person must file a statement
of personal securities holdings within 10 days of this date. All Access
Persons are required to file an annual statement with respect to their
personal securities holdings. Any material violation of the Code of Ethics is
reported to the Board of the fund. The Board also reviews the administration
of the Code of Ethics on an annual basis.
PORTFOLIO TRANSACTIONS
-------------------------------------------------------------------------------
Investment or Brokerage Discretion
Decisions with respect to the purchase and sale of portfolio securities on
behalf of the fund are made by T. Rowe Price. T. Rowe Price is also
responsible for implementing these decisions, including the negotiation of
commissions and the allocation of portfolio brokerage and principal business
and the use of affiliates to assist in routing orders for execution. The
fund's purchases and sales of fixed-income portfolio securities are normally
done on a principal basis and do not involve the payment of a commission
although they may involve the designation of selling concessions. That part
of the discussion below relating solely to brokerage commissions would not
normally apply to the fund (except to the extent it purchases equity
securities (High Yield, New Income, and Personal Strategy Funds only)).
However, it is included because T. Rowe Price does manage a significant
number of common stock portfolios which do engage in agency transactions and
pay commissions and because some research and services resulting from the
payment of such commissions may benefit the fund.
How Brokers and Dealers Are Selected
Equity Securities
In purchasing and selling equity securities, it is T. Rowe Price's policy to
obtain quality execution at the most favorable prices through responsible
brokers and dealers and at competitive commission rates where such
53
rates are negotiable. However, under certain conditions, the fund may pay
higher brokerage commissions in return for brokerage and research services.
As a general practice, over-the-counter orders are executed with
market-makers. In selecting among market-makers, T. Rowe Price generally
seeks to select those it believes to be actively and effectively trading the
security being purchased or sold. In selecting broker-dealers to execute the
fund's portfolio transactions, consideration is given to such factors as the
price of the security, the rate of the commission, the size and difficulty of
the order, the reliability, integrity, financial condition, general execution
and operational capabilities of competing brokers and dealers, their
expertise in particular markets and brokerage and research services provided
by them. It is not the policy of T. Rowe Price to seek the lowest available
commission rate where it is believed that a broker or dealer charging a
higher commission rate would offer greater reliability or provide better
price or execution.
Fixed-Income Securities
Fixed-income securities are generally purchased from the issuer or a primary
market-maker acting as principal for the securities on a net basis, with no
brokerage commission being paid by the client although the price usually
includes an undisclosed compensation. Transactions placed through dealers
serving as primary market-makers reflect the spread between the bid and asked
prices. Securities may also be purchased from underwriters at prices which
include underwriting fees.
With respect to equity and fixed-income securities, T. Rowe Price may effect
principal transactions on behalf of the fund with a broker or dealer who
furnishes brokerage and/or research services, designate any such broker or
dealer to receive selling concessions, discounts, or other allowances, or
otherwise deal with any such broker or dealer in connection with the
acquisition of securities in underwritings. T. Rowe Price may receive
research services in connection with brokerage transactions, including
designations in fixed price offerings.
How Evaluations Are Made of the Overall Reasonableness of Brokerage Commissions
Paid
On a continuing basis, T. Rowe Price seeks to determine what levels of
commission rates are reasonable in the marketplace for transactions executed
on behalf of the fund. In evaluating the reasonableness of commission rates,
T. Rowe Price considers: (a) historical commission rates; (b) rates which
other institutional investors are paying, based on available public
information; (c) rates quoted by brokers and dealers; (d) the size of a
particular transaction, in terms of the number of shares, dollar amount, and
number of clients involved; (e) the complexity of a particular transaction in
terms of both execution and settlement; (f) the level and type of business
done with a particular firm over a period of time; and (g) the extent to
which the broker or dealer has capital at risk in the transaction.
Descriptions of Research Services Received From Brokers and Dealers
T. Rowe Price receives a wide range of research services from brokers and
dealers. These services include information on the economy, industries,
groups of securities, individual companies, statistical information,
accounting and tax law interpretations, political developments, legal
developments affecting portfolio securities, technical market action, pricing
and appraisal services, credit analysis, risk measurement analysis,
performance analysis, and analysis of corporate responsibility issues. These
services provide both domestic and international perspective. Research
services are received primarily in the form of written reports,
computer-generated services, telephone contacts, and personal meetings with
security analysts. In addition, such services may be provided in the form of
meetings arranged with corporate and industry spokespersons, economists,
academicians, and government representatives. In some cases, research
services are generated by third parties but are provided to T. Rowe Price by
or through broker-dealers.
Research services received from brokers and dealers are supplemental to T.
Rowe Price's own research effort and, when utilized, are subject to internal
analysis before being incorporated by T. Rowe Price into its investment
process. As a practical matter, it would not be possible for T. Rowe Price's
Equity Research Division to generate all of the information presently
provided by brokers and dealers. T. Rowe Price pays cash for certain research
services received from external sources. T. Rowe Price also allocates
brokerage for research services which are available for cash. While receipt
of research services from brokerage firms has not reduced T. Rowe Price's
normal research activities, the expenses of T. Rowe Price could be materially
increased if it attempted to generate such additional information through its
own staff. To the extent that research services of
54
value are provided by brokers or dealers, T. Rowe Price may be relieved of
expenses which it might otherwise bear.
T. Rowe Price has a policy of not allocating brokerage business in return for
products or services other than brokerage or research services. In accordance
with the provisions of Section 28(e) of the Securities Exchange Act of 1934,
T. Rowe Price may from time to time receive services and products which serve
both research and non-research functions. In such event, T. Rowe Price makes
a good faith determination of the anticipated research and non-research use
of the product or service and allocates brokerage only with respect to the
research component.
Commissions to Brokers Who Furnish Research Services
Certain brokers and dealers who provide quality brokerage and execution
services also furnish research services to T. Rowe Price. With regard to the
payment of brokerage commissions, T. Rowe Price has adopted a brokerage
allocation policy embodying the concepts of Section 28(e) of the Securities
Exchange Act of 1934, which permits an investment adviser to cause an account
to pay commission rates in excess of those another broker or dealer would
have charged for effecting the same transaction, if the adviser determines in
good faith that the commission paid is reasonable in relation to the value of
the brokerage and research services provided. The determination may be viewed
in terms of either the particular transaction involved or the overall
responsibilities of the adviser with respect to the accounts over which it
exercises investment discretion. Accordingly, while T. Rowe Price cannot
readily determine the extent to which commission rates or net prices charged
by broker-dealers reflect the value of their research services, T. Rowe Price
would expect to assess the reasonableness of commissions in light of the
total brokerage and research services provided by each particular broker. T.
Rowe Price may receive research, as defined in Section 28(e), in connection
with selling concessions and designations in fixed price offerings in which
the funds participate.
Internal Allocation Procedures
T. Rowe Price has a policy of not precommitting a specific amount of business
to any broker or dealer over any specific time period. Historically, the
majority of brokerage placement has been determined by the needs of a
specific transaction such as market-making, availability of a buyer or seller
of a particular security, or specialized execution skills. However, T. Rowe
Price does have an internal brokerage allocation procedure for that portion
of its discretionary client brokerage business where special needs do not
exist, or where the business may be allocated among several brokers or
dealers which are able to meet the needs of the transaction.
Each year, T. Rowe Price assesses the contribution of the brokerage and
research services provided by brokers or dealers, and attempts to allocate a
portion of its brokerage business in response to these assessments. Research
analysts, counselors, various investment committees, and the Trading
Department each seek to evaluate the brokerage and research services they
receive from brokers or dealers and make judgments as to the level of
business which would recognize such services. In addition, brokers or dealers
sometimes suggest a level of business they would like to receive in return
for the various brokerage and research services they provide. Actual
brokerage received by any firm may be less than the suggested allocations but
can, and often does, exceed the suggestions, because the total business is
allocated on the basis of all the considerations described above. In no case
is a broker or dealer excluded from receiving business from T. Rowe Price
because it has not been identified as providing research services.
Miscellaneous
T. Rowe Price's brokerage allocation policy is consistently applied to all
its fully discretionary accounts, which represent a substantial majority of
all assets under management. Research services furnished by brokers or
dealers through which T. Rowe Price effects securities transactions may be
used in servicing all accounts (including non-fund accounts) managed by T.
Rowe Price. Conversely, research services received from brokers or dealers
which execute transactions for the fund are not necessarily used by T. Rowe
Price exclusively in connection with the management of the fund.
From time to time, orders for clients may be placed through a computerized
transaction network.
55
The fund does not allocate business to any broker-dealer on the basis of its
sales of the fund's shares. However, this does not mean that broker-dealers
who purchase fund shares for their clients will not receive business from the
fund.
Some of T. Rowe Price's other clients have investment objectives and programs
similar to those of the fund. T. Rowe Price may occasionally make
recommendations to other clients which result in their purchasing or selling
securities simultaneously with the fund. As a result, the demand for
securities being purchased or the supply of securities being sold may
increase, and this could have an adverse effect on the price of those
securities. It is T. Rowe Price's policy not to favor one client over another
in making recommendations or in placing orders. T. Rowe Price frequently
follows the practice of grouping orders of various clients for execution
which generally results in lower commission rates being attained. In certain
cases, where the aggregate order is executed in a series of transactions at
various prices on a given day, each participating client's proportionate
share of such order reflects the average price paid or received with respect
to the total order. T. Rowe Price has established a general investment policy
that it will ordinarily not make additional purchases of a common stock of a
company for its clients (including the T. Rowe Price funds) if, as a result
of such purchases, 10% or more of the outstanding common stock of such
company would be held by its clients in the aggregate.
At the present time, T. Rowe Price does not recapture commissions or
underwriting discounts or selling group concessions in connection with
taxable securities acquired in underwritten offerings. T. Rowe Price does,
however, attempt to negotiate elimination of all or a portion of the selling
group concession or underwriting discount when purchasing tax-exempt
municipal securities on behalf of its clients in underwritten offerings.
Other
For the fiscal years ended May 31, 2001, 2000, and 1999, the fund's engaged
in portfolio transactions involving broker-dealers in the following amounts:
Fund 2001 2000 1999
---- ---- ---- ----
Corporate Income $ 113,035,000 $ 87,158,000 $ 148,017,000
GNMA 1,478,634,000 1,340,767,000 1,928,467,000
Government Reserve
Investment 168,448,618,000 208,368,283,000 125,867,962,000
High Yield 2,151,430,000 2,228,594,000 3,133,849,000
New Income 3,606,669,000 2,787,051,000 3,883,982,000
Personal Strategy
Balanced 784,704,000 572,235,000 443,414,000
Personal Strategy
Growth 330,295,000 232,667,000 177,166,000
Personal Strategy
Income 339,026,000 169,938,000 263,137,000
Prime Reserve 38,321,006,000 44,694,574,000 32,055,326,000
Reserve Investment 79,731,548,000 85,643,368,000 82,675,097,000
Short-Term Bond 547,984,000 267,997,000 268,240,000
U.S. Treasury
Intermediate 508,503,000 253,839,000 343,197,000
U.S. Treasury Long-Term 191,764,000 155,975,000 509,554,000
U.S. Treasury Money 4,879,524,000 5,655,456,000 4,583,442,000
-------------------------
With respect to the GNMA, Government Reserve, Prime Reserve, Reserve
Investment, U.S. Treasury Intermediate, U.S. Treasury Long-Term, and U.S.
Treasury Money Funds, the entire amount for each of these years represented
principal transactions as to which the funds have no knowledge of the profits
or losses realized by the respective broker-dealers for the fiscal years
ended May 31, 2001, 2000, and 1999.
With respect to the Corporate Income, High Yield, New Income, Short-Term
Bond, Personal Strategy Balanced, Personal Strategy Growth, and Personal
Strategy Income Funds, the following amounts consisted of principal
transactions as to which the funds have no knowledge of the profits or losses
realized by the respective broker-dealers for the fiscal years ended May 31,
2001, 2000, and 1999.
56
Fund 2001 2000 1999
---- ---- ---- ----
Corporate Income $ 96,190,000 $ 81,635,000 $ 132,909,000
High Yield 1,841,819,000 1,950,820,000 2,667,387,000
New Income 3,186,861,000 2,589,971,000 3,624,940,000
Personal Strategy Balanced 478,739,000 241,804,000 245,489,000
Personal Strategy Growth 157,439,000 69,314,000 78,262,000
Personal Strategy Income 254,071,000 89,593,000 148,720,000
Short-Term Bond 454,590,000 216,139,000 237,228,000
----------------------------
The following amounts involved trades with brokers acting as agents or
underwriters for the fiscal years ended May 31, 2001, 2000, and 1999.
Fund 2001 2000 1999
---- ---- ---- ----
Corporate Income $ 16,845,000 $ 5,523,000 $ 15,108,000
High Yield 309,611,000 277,774,000 466,462,000
New Income 419,808,000 197,080,000 259,042,000
Personal Strategy Balanced 305,965,000 330,431,000 197,925,000
Personal Strategy Growth 172,856,000 163,353,000 98,904,000
Personal Strategy Income 84,955,000 80,344,000 114,417,000
Short-Term Bond 93,393,000 51,858,000 31,012,000
----------------------------
The amounts shown below involved trades with brokers acting as agents or
underwriters, in which such brokers received total commissions, including
discounts received in connection with underwritings for the fiscal years
ended May 31, 2001, 2000, and 1999.
Fund 2001 2000 1999
---- ---- ---- ----
Corporate Income $ 103,000 $ 35,000 $ 53,000
High Yield 7,746,000 7,250,000 11,755,000
New Income 1,387,000 700,000 1,041,000
Personal Strategy Balanced 564,000 448,000 281,000
Personal Strategy Growth 218,000 208,000 82,000
Personal Strategy Income 215,000 112,000 134,000
Short-Term Bond 217,000 105,000 105,000
----------------------------
The percentage of total portfolio transactions, placed with firms which
provided research, statistical, or other services to T. Rowe Price in
connection with the management of the funds, or in some cases, to the funds
for the fiscal years ended May 31, 2001, 2000, and 1999, are shown below:
Fund 2001 2000 1999
---- ---- ---- ----
Corporate Income 98% 93% 96%
GNMA 71 94 86
Government Reserve Investment -- 98 78
High Yield 87 86 95
New Income 112 92 94
Personal Strategy Balanced 11 25 20
Personal Strategy Growth 17 30 29
Personal Strategy Income 7 25 16
Prime Reserve -- 94 78
Reserve Investment -- 93 65
Short-Term Bond 78 90 93
U.S. Treasury Intermediate 108 95 100
U.S. Treasury Long-Term 31 71 99
U.S. Treasury Money -- 98 61
-------------------------------
57
The portfolio turnover rates for the following funds for the fiscal years
ended May 31, 2001, 2000, and 1999, are as follows:
Fund 2001 2000 1999
---- ---- ---- ----
Corporate Income 98.1% 90.9% 140.8%
GNMA 71.2 63.8 86.7
High Yield 80.1 75.9 95.6
New Income 112.1 83.6 94.3
Personal Strategy Balanced 61.5 48.2 34.3
Personal Strategy Growth 54.8 42.6 36.1
Personal Strategy Income 79.8 45.4 48.9
Short-Term Bond 77.6 50.7 51.6
U.S. Treasury Intermediate 108.0 48.5 61.2
U.S. Treasury Long-Term 31.3 21.7 74.1
----------------------------
Government Reserve Investment, Prime Reserve, Reserve Investment, and U.S.
Treasury Money Funds
The fund, in pursuing its objectives, may engage in short-term trading to
take advantage of market variations. The fund will seek to protect principal,
improve liquidity of its securities, or enhance yield by purchasing and
selling securities based upon existing or anticipated market discrepancies.
PRICING OF SECURITIES
-------------------------------------------------------------------------------
Corporate Income, GNMA, High Yield, New Income, Personal Strategy, Short-Term
Bond, U.S. Treasury Intermediate, and U.S. Treasury Long-Term Funds
Debt securities are generally traded in the over-the-counter market.
Investments in domestic securities with original maturities of one year or
more and foreign securities are stated at fair value using a bid-side
valuation as 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. Domestic securities with
original maturities less than one year are stated at fair value which is
determined by using a matrix system that establishes a value for each
security based on bid-side money market yields. The Personal Strategy Funds
value short-term debt securities at their cost in local currency which, when
combined with accrued interest, approximates fair value.
There are a number of pricing services available, and the Board of
Directors/Trustees, on the basis of an ongoing evaluation of these services,
may use or may discontinue the use of any pricing service in whole or part.
58
Corporate Income, High Yield, New Income, and Personal Strategy Funds
Equity securities listed or regularly traded on a securities exchange are
valued at the last quoted sales price at the time the valuations are made. A
security that is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for such
security. Listed securities not traded on a particular day and securities
regularly traded in the over-the-counter market are valued at the mean of the
latest bid and asked prices. Other equity securities are valued at a price
within the limits of the latest bid and asked prices deemed by the Board of
Directors/Trustees, or by persons delegated by the Board, best to reflect
fair value.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
Government Reserve Investment, Prime Reserve, Reserve Investment, and U.S.
Treasury Money Funds
Securities are valued at amortized cost.
Corporate Income, High Yield, New Income, Personal Strategy, and Short-Term
Bond Funds
For the purposes of determining the fund's net asset value per share, the
U.S. dollar value of all assets and liabilities initially expressed in
foreign currencies is determined by using the mean of the bid and offer
prices of such currencies against U.S. dollars quoted by a major bank.
All funds
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value, are stated at fair
value as determined in good faith by or under the supervision of the officers
of the fund, as authorized by the Board of Directors/Trustees.
Government Reserve Investment, Prime Reserve, Reserve Investment, and U.S.
Treasury Money Funds
Maintenance of Money Fund's Net Asset Value Per Share at $1.00
It is the policy of the fund 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 fund's acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than by reference to their market
value. Under Rule 2a-7:
(a) The Board of Directors must establish written procedures reasonably
designed, taking into account current market conditions and the fund's
investment objectives, to stabilize the fund's net asset value per share,
as computed for the purpose of distribution, redemption, and repurchase,
at a single value;
(b) The fund must (i) maintain a dollar-weighted average portfolio maturity
appropriate to its 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 dollar-weighted average portfolio maturity
of 90 days or less;
(c) The fund must limit its purchase of portfolio instruments, including
repurchase agreements, to those U.S. dollar-denominated instruments which
the fund's Board of Directors determines present minimal credit risks,
and which are eligible securities as defined by Rule 2a-7; and
(d) The Board of Directors must determine that (i) it is in the best interest
of the fund and its shareholders to maintain a stable net asset value per
share under the amortized cost method; and (ii) the fund will continue to
use the amortized cost method only so long as the Board of Directors
believes that it fairly reflects the market based net asset value per
share.
Although the fund believes that it will be able to maintain its net asset
value at $1.00 per share under most conditions, there can be no absolute
assurance that it will be able to do so on a continuous basis. If the fund's
net asset value per share declined, or was expected to decline, below $1.00
(rounded to the nearest one cent),
59
the Board of Directors of the fund 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 fund's net asset value per share were to
increase, or were anticipated to increase above $1.00 (rounded to the nearest
one cent), the Board of Directors of the fund might supplement dividends in
an effort to maintain the net asset value at $1.00 per share.
Prime Reserve and 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 fund's Board of Directors.
All funds
NET ASSET VALUE PER SHARE
-------------------------------------------------------------------------------
The purchase and redemption price of the fund's shares is equal to the fund's
net asset value per share or share price. The fund determines its net asset
value per share by subtracting its liabilities (including accrued expenses
and dividends payable) from its total assets (the market value of the
securities the fund holds plus cash and other assets, including income
accrued but not yet received) and dividing the result by the total number of
shares outstanding. The net asset value per share of the fund is normally
calculated as of the close of trading on the New York Stock Exchange ("NYSE")
every day the NYSE is open for trading. The NYSE is closed on the following
days: New Year's Day, Dr. Martin Luther King, Jr. Holiday, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
Determination of net asset value (and the offering, sale, redemption, and
repurchase of shares) for the fund may be suspended at times (a) during which
the NYSE is closed, other than customary weekend and holiday closings, (b)
during which trading on the NYSE is restricted, (c) during which an emergency
exists as a result of which disposal by the fund of securities owned by it is
not reasonably practicable or it is not reasonably practicable for the fund
fairly to determine the value of its net assets, or (d) during which a
governmental body having jurisdiction over the fund may by order permit such
a suspension for the protection of the fund's shareholders; provided that
applicable rules and regulations of the SEC (or any succeeding governmental
authority) shall govern as to whether the conditions prescribed in (b), (c),
or (d) exist.
DIVIDENDS AND DISTRIBUTIONS
-------------------------------------------------------------------------------
Unless you elect otherwise, the fund's annual capital gain distribution, if
any, will be reinvested on the reinvestment date using the NAV per share of
that date. The reinvestment date normally precedes the payment date by one
day, although the exact timing is subject to change and can be as great as 10
days.
60
TAX STATUS
-------------------------------------------------------------------------------
The fund intends to qualify as a "regulated investment company" under
Subchapter M of the Code.
A portion of the dividends paid by the fund may be eligible for the
dividends-received deduction applicable to corporate shareholders. Long-term
capital gain distributions paid from the fund is never eligible for the
dividend received deduction. For tax purposes, it does not make any
difference whether dividends and capital gain distributions are paid in cash
or in additional shares. Each fund must declare dividends by December 31 of
each year equal to at least 98% of ordinary income (as of December 31) and
capital gains (as of October 31) in order to avoid a federal excise tax and
distribute within 12 months 100% of ordinary income and capital gains as of
to avoid a federal income tax.
At the time of your purchase, the fund's net asset value may reflect
undistributed income, capital gains or net unrealized appreciation of
securities held by the fund. A subsequent distribution to you of such
amounts, although constituting a return of your investment, would be taxable
either as dividend or capital gain distributions. For federal income tax
purposes, the fund is permitted to carry forward its net realized capital
losses, if any, for eight years and realize net capital gains up to the
amount of such losses without being required to pay taxes on, or distribute,
such gains.
If, in any taxable year, the fund should not qualify as a regulated
investment company under the Code: (1) the fund would be taxed at normal
corporate rates on the entire amount of its taxable income, if any, without
deduction for dividends or other distributions to shareholders; and (2) the
fund's distributions to the extent made out of the fund's current or
accumulated earnings and profits would be taxable to shareholders as ordinary
dividends (regardless of whether they would otherwise have been considered
capital gain dividends) and the fund may qualify for the 70% deduction for
dividends received by corporations.
Taxation of Foreign Shareholders
The Code provides that dividends from net income will be subject to U.S. tax.
For shareholders who are not engaged in a business in the U.S., this tax
would be imposed at the rate of 30% upon the gross amount of the dividends in
the absence of a Tax Treaty providing for a reduced rate or exemption from
U.S. taxation. Distributions of net long-term capital gains realized by the
fund are not subject to tax unless the foreign shareholder is engaged in a
business in the U.S. and the gains are connected with that business or
shareholder is a nonresident alien individual who was physically present in
the U.S. during the tax year for more than 182 days.
To the extent the fund invests in foreign securities, the following would
apply:
Passive Foreign Investment Companies
The fund may purchase the securities of certain foreign investment funds or
trusts called passive foreign investment companies for U.S. tax purposes.
Such foreign investment funds or trusts have been the only or primary way to
invest in certain countries. In addition to bearing their proportionate share
of the fund's expenses (management fees and operating expenses), shareholders
will also indirectly bear similar expenses of such foreign investment funds
or trusts. Capital gains on the sale of such holdings are considered ordinary
income regardless of how long the fund held its investment. In addition, the
fund may be subject to corporate income tax and an interest charge on certain
dividends and capital gains earned from these investments, regardless of
whether such income and gains are distributed to shareholders.
To avoid such tax and interest, the fund intends to treat these securities as
sold on the last day of its fiscal year and recognize any gains for tax
purposes at that time; deductions for losses are allowable only to the extent
of any gains resulting from these deemed sales for prior taxable years. Such
gains and losses will be treated as ordinary income. The fund will be
required to distribute any resulting income even though it has not sold the
security and received cash to pay such distributions.
Foreign Currency Gains and Losses
Foreign currency gains and losses, including the portion of gain or loss on
the sale of debt securities attributable to foreign exchange rate
fluctuations, are taxable as ordinary income. If the net effect of these
61
transactions is a gain, the ordinary income dividend paid by the fund will be
increased. If the result is a loss, the income dividend paid by the fund will
be decreased, or to the extent such dividend has already been paid, it may be
classified as a return of capital. Adjustments to reflect these gains and
losses will be made at the end of the fund's taxable year.
YIELD INFORMATION
-------------------------------------------------------------------------------
GNMA Fund
In conformity with regulations of the SEC, an income factor is calculated for
each security in the portfolio based upon the security's coupon rate. The
income factors are then adjusted for any gains or losses which have resulted
from prepayments of principal during the period. The income factors are then
totaled for all securities in the portfolio. Next, expenses of the fund for
the period, net of expected reimbursements, are deducted from the income to
arrive at net income, which is then converted to a per-share amount by
dividing net income by the average number of shares outstanding during the
period. The net income per share is divided by the net asset value on the
last day of the period to produce a monthly yield which is then annualized.
Quoted yield factors are for comparison purposes only, and are not intended
to indicate future performance or forecast the dividend per share of the
fund.
The yield of the GNMA Fund calculated under the above-described method for
the month ended May 31, 2001, was 6.17%.
Corporate Income, High Yield, New Income, Short-Term Bond, U.S. Treasury
Intermediate, and U.S. Treasury Long-Term Funds
An income factor is calculated for each security in the portfolio based upon
the security's market value at the beginning of the period and yield as
determined in conformity with regulations of the SEC. The income factors are
then totaled for all securities in the portfolio. Next, expenses of the fund
for the period, net of expected reimbursements, are deducted from the income
to arrive at net income, which is then converted to a per share amount by
dividing net income by the average number of shares outstanding during the
period. The net income per share is divided by the net asset value on the
last day of the period to produce a monthly yield which is then annualized.
If applicable, a taxable-equivalent yield is calculated by dividing this
yield by one minus the effective federal, state, and/or city or local income
tax rates. Quoted yield factors are for comparison purposes only, and are not
intended to indicate future performance or forecast the dividend per share of
the fund.
The yields of the Corporate Income, High Yield, High Yield Fund-Advisor
Class, New Income, Short-Term Bond, U.S. Treasury Intermediate, and U.S.
Treasury Long-Term Funds calculated under the above-described method for the
month ended May 31, 2001, were 7.14%, 10.98%, 10.81%, 5.90%, 5.49%, 4.73%,
and 5.38%, respectively.
Government Reserve Investment, Prime Reserve, Reserve Investment, and U.S.
Treasury Money Funds
The fund's current and historical yield for a period is calculated by
dividing the net change in value of an account (including all dividends
accrued and dividends reinvested in additional shares) by the account value
at the beginning of the period to obtain the base period return. This base
period return is divided by the number of days in the period, then multiplied
by 365 to arrive at the annualized yield for that period. The fund's
annualized compound yield for such period is compounded by dividing the base
period return by the number of days in the period, and compounding that
figure over 365 days.
The seven-day yields ending May 31, 2001, for the Prime Reserve, Prime
Reserve Fund-PLUS Class, and U.S. Treasury Money Funds were 4.12%, 3.81%, and
3.90%, respectively, and the funds' compound yield for the same period were
4.21%, 3.89%, and 3.97%, respectively.
62
All funds
INVESTMENT PERFORMANCE
-------------------------------------------------------------------------------
Total Return Performance
The fund's calculation of total return performance includes the reinvestment
of all capital gain distributions and income dividends for the period or
periods indicated, without regard to tax consequences to a shareholder in the
fund. Total return is calculated as the percentage change between the
beginning value of a static account in the fund and the ending value of that
account measured by the then current net asset value, including all shares
acquired through reinvestment of income and capital gain dividends. The
results shown are historical and should not be considered indicative of the
future performance of the fund. Each average annual compound rate of return
is derived from the cumulative performance of the fund over the time period
specified. The annual compound rate of return for the fund over any other
period of time will vary from the average.
Cumulative Performance Percentage Change
1 Yr. 5 Yrs. 10 Yrs. % Since Inception
Fund Ended Ended Ended Inception Date
---- 5/31/01 5/31/01 5/31/01 5/31/01 ----
------- ------- ------- -------
Corporate Income 13.86% 40.57% -- 40.70% 10/31/95
GNMA 12.31 42.13 99.70% 215.27 11/26/85
High Yield 3.96 37.93 137.32 316.44 12/31/84
High Yield Fund-Advisor Class 3.86 -- -- 2.92 03/31/00
New Income 12.54 37.25 95.88 844.29 08/31/73
Personal Strategy Balanced 4.60 67.30 -- 125.69 07/29/94
Personal Strategy Growth 2.46 77.25 -- 151.77 07/29/94
Personal Strategy Income 6.54 58.32 -- 103.46 07/29/94
Prime Reserve 5.82 28.76 56.99 491.77 01/26/76
Prime Reserve Fund-PLUS Class 5.66 -- -- 13.76 11/01/98
Short-Term Bond 10.61 35.39 74.18 220.71 03/02/84
U.S. Treasury Intermediate 11.85 38.78 94.79 127.06 09/29/89
U.S. Treasury Long-Term 10.74 49.65 121.92 153.38 09/29/89
U.S. Treasury Money 5.44 26.77 53.40 188.91 06/28/82
------------------------------- -----------
63
Average Annual Compound Rates of Return
1 Yr. 5 Yrs. 10 Yrs. % Since Inception
Fund Ended Ended Ended Inception Date
---- 5/31/01 5/31/01 5/31/01 5/31/01 ----
------- ------- ------- -------
Corporate Income 13.86% 7.05% -- 6.31% 10/31/95
GNMA 12.31 7.28 7.16% 7.69 11/26/85
High Yield 3.96 6.64 9.03 9.08 12/31/84
High Yield Fund-Advisor Class -- -- -- 2.49 03/31/00
New Income 12.54 6.54 6.95 8.43 08/31/73
Personal Strategy Balanced 4.60 10.84 -- 12.64 07/29/94
Personal Strategy Growth 2.46 12.13 -- 14.46 07/29/94
Personal Strategy Income 6.54 9.62 -- 10.95 07/29/94
Prime Reserve 5.82 5.19 4.61 7.27 01/26/76
Prime Reserve Fund-PLUS Class 5.66 -- -- 5.12 11/01/98
Short-Term Bond 10.61 6.25 5.71 6.99 03/02/84
U.S. Treasury Intermediate 11.85 6.77 6.89 7.28 09/29/89
U.S. Treasury Long-Term 10.74 8.40 8.30 8.29 09/29/89
U.S. Treasury Money 5.44 4.86 4.37 5.77 06/28/82
------------------------------- -----------
Outside Sources of Information
From time to time, in reports and promotional literature: (1) the fund's
total return performance, ranking, or any other measure of the fund's
performance may be compared to any one or combination of the following: (a) a
broad-based index, (b) other groups of mutual funds, including T. Rowe Price
funds, tracked by independent research firm's ranking entities, or financial
publications; (c) indices of securities comparable to those in which the fund
invests; (2) the Consumer Price Index (or any other measure for inflation),
government statistics, such as GNP may be used to illustrate investment
attributes of the fund or the general economic, business, investment, or
financial environment in which the fund operates; (3) various financial,
economic, and market statistics developed by brokers, dealers, and other
persons may be used to illustrate aspects of the fund's performance; (4) the
effect of tax-deferred compounding on the fund's investment returns, or on
returns in general in both qualified and nonqualified retirement plans or any
other tax advantage product, may be illustrated by graphs, charts, etc.; and
(5) the sectors or industries in which the fund invests may be compared to
relevant indices or surveys in order to evaluate the fund's historical
performance or current or potential value with respect to the particular
industry or sector.
Other Publications
From time to time, in newsletters and other publications issued by Investment
Services, T. Rowe Price mutual fund portfolio managers may discuss economic,
financial, and political developments in the U.S. and abroad and how these
conditions have affected or may affect securities prices or the fund;
individual securities within the fund's portfolio; and their philosophy
regarding the selection of individual stocks, including why specific stocks
have been added, removed, or excluded from the fund's portfolio.
Other Features and Benefits
The fund is a member of the T. Rowe Price family of funds and may help
investors achieve various long-term investment goals, which include, but are
not limited to, investing money for retirement, saving for a down payment on
a home, or paying college costs. To explain how the fund could be used to
assist investors in planning for these goals and to illustrate basic
principles of investing, various worksheets and guides prepared by T. Rowe
Price and/or Investment Services may be made available.
64
No-Load Versus Load and 12b-1 Funds
Many mutual funds charge sales fees to investors or use fund assets to
finance distribution activities. These fees are in addition to the normal
advisory fees and expenses charged by all mutual funds. There are several
types of fees charged which vary in magnitude and which may often be used in
combination. A sales charge (or "load") can be charged at the time the fund
is purchased (front-end load) or at the time of redemption (back-end load).
Front-end loads are charged on the total amount invested. Back-end loads are
charged either on the amount originally invested or on the amount redeemed.
12b-1 plans allow for the payment of marketing and sales expenses from fund
assets. These expenses are usually computed daily as a fixed percentage of
assets.
The T. Rowe Price funds, including the Advisor Classes, are considered to be
"no-load" funds. They impose no front-end or back-end sales loads. However,
the Advisor Classes do charge 12b-1 fees. Under applicable National
Association of Securities Dealers Regulation, Inc. ("NASDR") regulations,
mutual funds that have no front-end or deferred sales charges and whose total
asset-based charges for sales-related expenses and/or service fees (as
defined by NASDR) do not exceed 0.25% of average net assets per year may be
referred to as no-load funds.
Redemptions in Kind
The fund has filed a notice of election under Rule 18f-1 of the 1940 Act.
This permits the fund to effect redemptions in kind and in cash as set forth
in its prospectus.
In the unlikely event a shareholder were to receive an in kind redemption of
portfolio securities of the fund, it would be the responsibility of the
shareholder to dispose of the securities. The shareholder would be at risk
that the value of the securities would decline prior to their sale, that it
would be difficult to sell the securities and that brokerage fees could be
incurred.
Issuance of Fund Shares for Securities
Transactions involving issuance of fund shares for securities or assets other
than cash will be limited to (1) bona fide reorganizations; (2) statutory
mergers; or (3) other acquisitions of portfolio securities that: (a) meet the
investment objective and policies of the fund; (b) are acquired for
investment and not for resale except in accordance with applicable law; (c)
have a value that is readily ascertainable via listing on or trading in a
recognized United States or international exchange or market; and (d) are not
illiquid.
All funds except GNMA Fund
CAPITAL STOCK
-------------------------------------------------------------------------------
The fund's Charter authorizes the Board of Directors to classify and
reclassify any and all shares which are then unissued, including unissued
shares of capital stock into any number of classes or series, each class or
series consisting of such number of shares and having such designations, such
powers, preferences, rights, qualifications, limitations, and restrictions,
as shall be determined by the Board subject to the 1940 Act and other
applicable law. The shares of any such additional classes or series might
therefore differ from the shares of the present class and series of capital
stock and from each other as to preferences, conversions or other rights,
voting powers, restrictions, limitations as to dividends, qualifications or
terms or conditions of redemption, subject to applicable law, and might thus
be superior or inferior to the capital stock or to other classes or series in
various characteristics. The Board of Directors may increase or decrease the
aggregate number of shares of stock or the number of shares of stock of any
class or series that the fund has authorized to issue without shareholder
approval.
Except to the extent that the fund's Board of Directors might provide by
resolution 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 Charter contains no provision entitling the holders
of the present class of capital stock to a vote as a class on any matter.
Accordingly, the preferences, rights, and other characteristics attaching to
any class of shares, including the present class of capital stock, might be
altered or eliminated, or the class might be combined with another class or
classes, by action
65
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 fund, in which event the
holders of the remaining shares will be unable to elect any person as a
director. As set forth in the By-Laws of the fund, a special meeting of
shareholders of the fund shall be called by the Secretary of the fund on the
written request of shareholders entitled to cast at least 10% of all the
votes of the fund entitled to be cast at such meeting. Shareholders
requesting such a meeting must pay to the fund the reasonably estimated costs
of preparing and mailing the notice of the meeting. The fund, however, will
otherwise assist the shareholders seeking to hold the special meeting in
communicating to the other shareholders of the fund to the extent required by
Section 16(c) of the 1940 Act.
GNMA Fund
Description of the Fund
For tax and business reasons, the fund was organized in 1985 as a
Massachusetts Business Trust, and is registered with the SEC under the 1940
Act as diversified, open-end investment companies, commonly known as "mutual
funds."
The Declaration of Trust permits the Board of Trustees to issue an unlimited
number of full and fractional shares of a single class. The Declaration of
Trust also provides that the Board of Trustees may issue additional series or
classes of shares. Each share represents an equal proportionate beneficial
interest in the fund. In the event of the liquidation of the fund, each share
is entitled to a pro-rata share of the net assets of the fund.
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 fund 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 Trust, 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 Trust.
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 Trust may be
terminated (i) upon the sale of its assets to another diversified, open-end
management investment company, if approved by the vote of the holders of
two-thirds of the outstanding shares of the Trust, or (ii) upon liquidation
and distribution of the assets of the Trust, if approved by the vote of the
holders of a majority of the outstanding shares of the Trust. If not so
terminated, the Trust will continue indefinitely.
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the fund. However, the
Declaration of Trust disclaims shareholder liability for acts or obligations
of the fund and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by the fund or
a Trustee. The Declaration of Trust provides for indemnification from
66
fund property for all losses and expenses of any shareholder held personally
liable for the obligations of the fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the fund itself would be unable to meet its
obligations, a possibility which T. Rowe Price believes is remote. Upon
payment of any liability incurred by the fund, the shareholders of the fund
paying such liability will be entitled to reimbursement from the general
assets of the fund. The Trustees intend to conduct the operations of the fund
in such a way so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of such fund.
FEDERAL REGISTRATION OF SHARES
-------------------------------------------------------------------------------
The fund's shares (except for Government Reserve and Reserve Investment
Funds)are registered for sale under the 1933 Act. Registration of the fund's
shares is not required under any state law, but the fund is required to make
certain filings with and pay fees to the states in order to sell its shares
in the states.
LEGAL COUNSEL
-------------------------------------------------------------------------------
Shearman & Sterling, whose address is 801 Pennsylvania Avenue, N.W.,
Washington, D.C. 20004-2604, is legal counsel to the fund.
INDEPENDENT ACCOUNTANTS
-------------------------------------------------------------------------------
PricewaterhouseCoopers LLP, 250 West Pratt Street, 21st Floor, Baltimore,
Maryland 21201, are the independent accountants to the fund.
The financial statements of the funds listed below for the period ended May
31, 2001, and the report of independent accountants are included in each
fund's Annual Report for the period ended May 31, 2001. A copy of each Annual
Report accompanies this Statement of Additional Information. The following
financial statements and the report of independent accountants appearing in
each Annual Report for the period ended May 31, 2001, are incorporated into
this Statement of Additional Information by reference:
ANNUAL REPORT REFERENCES:
CORPORATE PRIME PRIME RESERVE
INCOME GNMA RESERVE FUND-PLUS CLASS
------ ---- ------- -----
Financial Highlights 8 7 7 8
Statement of Net Assets, May
31, 2001 9-18 8-11 9-19 9-19
Statement of Operations, year
ended
May 31, 2001 19 12 20 20
Statement of Changes in Net
Assets, years
ended May 31, 2001 and May 31,
2000 20 13 21 21
Notes to Financial Statements,
May 31, 2001 21-24 14-17 22-23 22-23
Report of Independent
Accountants 25 18 24 24
67
PERSONAL PERSONAL PERSONAL NEW
STRATEGY STRATEGY STRATEGY ---
BALANCED GROWTH INCOME INCOME
-------- ------ ------ ------
Financial Highlights 2 2 2 9
Portfolio of Investments, May 31,
2001 3-35 3-34 3-34 10-19
Statement of Assets and
Liabilities, May 31, 2001 36 35 35 20
Statement of Operations, year ended
May 31, 2001 37 36 36 21
Statement of Changes in Net Assets,
years ended
May 31, 2001 and May 31, 2000 38 37 37 22
Notes to Financial Statements, May
31, 2001 39-43 38-42 38-42 23-27
Report of Independent Accountants 44 43 43 28
SHORT-TERM HIGH YIELD
HIGH YIELD BOND FUND-ADVISOR
---------- ----- CLASS
-----
Financial Highlights 10 8 10
Statement of Net Assets, May 31, 2001 11-23 9-16 11-23
Statement of Operations, year ended
May 31, 2001 24 17 24
Statement of Changes in Net Assets,
years ended
May 31, 2001 and May 31, 2000 25-26 18 25-26
Notes to Financial Statements, May 31,
2001 27-31 19-23 27-31
Report of Independent Accountants 32 24 32
U.S. TREASURY U.S. TREASURY U.S. TREASURY
INTERMEDIATE LONG-TERM MONEY
------------ --------- -----
Financial Highlights 12 13 11
Statement of Net Assets, May 31,
2001 16-18 19-21 14-15
Statement of Operations, year
ended
May 31, 2001 22 22 22
Statement of Changes in Net
Assets, years ended
May 31, 2001 and May 31, 2000 24 25 23
Notes to Financial Statements,
May 31, 2001 26-30 26-30 26-30
Report of Independent
Accountants 31 31 31
RESERVE GOVERNMENT
INVESTMENT RESERVE
---------- INVESTMENT
----------
Financial Highlights 4 5
Statement of Net Assets, May 31, 2001 6-8 9
Statement of Operations, year ended May 31, 2001 10 10
Statement of Changes in Net Assets, years ended
May 31, 2001 and May 31, 2000 11 12
Notes to Financial Statements, May 31, 2001 13-14 13-14
Report of Independent Accountants 15 15
68
RATINGS OF COMMERCIAL PAPER
-------------------------------------------------------------------------------
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 IBCA, Inc. 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.
Government Reserve Investment, Prime Reserve, and Reserve Investment Funds
RATINGS OF CORPORATE DEBT SECURITIES
-------------------------------------------------------------------------------
Moody's Investors Service, Inc.
Aaa-Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge."
Aa-Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally know as high-grade bonds.
A-Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium-grade obligations.
Baa-Bonds rated Baa are considered as medium-grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
Ba-Bonds rated Ba are judged to have speculative elements: their futures
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
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.
69
C-Bonds rated C represent the lowest rated and have extremely poor prospects
of attaining investment standing.
Standard & Poor's Corporation
AAA-This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA-Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong.
A-Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB-Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds
in this category than for bonds in the A category.
BB, B, CCC, CC, C-Bonds rated BB, B, CCC, CC, and C are regarded on balance
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal. BB indicates the lowest degree of speculation
and C the highest degree of speculation. While such bonds will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
D-In default.
Fitch IBCA, Inc.
AAA-High grade, broadly marketable, suitable for investment by trustees and
fiduciary institutions, and liable to slight market fluctuation other than
through changes in the money rate. The prime feature of a "AAA" bond is the
showing of earnings several times or many times interest requirements for
such stability of applicable interest that safety is beyond reasonable
question whenever changes occur in conditions. Other features may enter, such
as wide margin of protection through collateral, security or direct lien on
specific property. Sinking funds or voluntary reduction of debt by call or
purchase are often factors, while guarantee or assumption by parties other
than the original debtor may influence their rating.
AA-Of safety virtually beyond question and readily salable. Their merits are
not greatly unlike those of "AAA" class but a bond so rated may be junior
though of strong lien, or the margin of safety is less strikingly broad. The
issue may be the obligation of a small company, strongly secured, but
influenced as to rating by the lesser financial power of the enterprise and
more local type of market.
A-Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB-Bonds rated BBB are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore 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.
70
EX-99.G CUST AGREEMT
5
custodian2001.txt
CUSTODIAN AGREEMENT
THIS AGREEMENT is made as of January 28, 1998 by and between each entity
set forth on Appendix A hereto (as such Appendix A may be amended from time to
time) which executes a copy of this Agreement (each referred to herein as the
"FUND"), and State Street Bank and Trust Company, a Massachusetts trust company
with its principal place of business at 225 Franklin Street, Boston,
Massachusetts 02110 (the "CUSTODIAN").
WITNESSETH:
WHEREAS, each Fund desires to retain the Custodian to act as custodian of
certain of the assets of the Fund, and the Custodian is willing to provide such
services to each Fund, upon the terms and conditions hereinafter set forth; and
WHEREAS, except as otherwise set forth herein, this Agreement is intended
to supersede that certain custodian contract among the parties hereto dated
September 28, 1987, as amended; and
WHEREAS, the Funds have retained CHASE MANHATTAN BANK, N.A. to act as the
Funds' custodian with respect to the assets of each such Fund to be held outside
of the United States of America (except as otherwise set forth in this
Agreement) pursuant to a written custodian agreement (the "FOREIGN CUSTODIAN
AGREEMENT"),
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, each of the parties hereto agrees as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT.
Each Fund hereby employs the Custodian as the custodian of certain of its
assets, including those securities it desires to be held within the United
States of America ("DOMESTIC SECURITIES") and those securities it desires to be
held outside the United States of America (the "UNITED STATES") which are (i)
not held on the Funds' behalf by CHASE MANHATTAN BANK, N.A. pursuant to the
Foreign Custodian Agreement and (ii) described with greater particularity in
Section 3 hereof (such securities shall be referred to herein as "FOREIGN
SECURITIES"). Each Fund agrees to deliver to the Custodian all domestic
securities, foreign securities and cash owned by it from time to time, and all
payments of income, payments of principal or capital distributions received by
it with respect to
securities held by it hereunder, and the cash consideration received by it for
such new or treasury shares of capital stock of each Fund as may be issued or
sold from time to time ("SHARES"). The Custodian shall not be responsible for
any property of any Fund held or received by such Fund (i) not delivered to the
Custodian, or (ii) held in the custody of CHASE MANHATTAN BANK N.A.
The Custodian is authorized to employ one or more sub-custodians located
within the United States, provided that the Custodian shall have obtained the
written acknowledgment of the Fund with respect to such employment. The
Custodian is authorized to employ sub-custodians located outside the United
States as noted on Schedule A attached hereto (as such Schedule A may be amended
from time to time). The Custodian shall have no more or less responsibility or
liability to any Fund on account of any actions or omissions of any
sub-custodian so employed than any such sub-custodian has to the Custodian and
shall not release any sub-custodian from any responsibility or liability unless
so agreed in writing by the Custodian and the applicable Fund. With the
exception of State Street Bank and Trust Company (London branch), the Custodian
shall not be liable for losses arising from the bankruptcy, insolvency or
receivership of any sub-custodian located outside the United States.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUNDS HELD
BY THE CUSTODIAN IN THE UNITED STATES.
SECTION 2.1
HOLDING SECURITIES. The Custodian shall hold and physically segregate for the
account of each Fund all non-cash property to be held by it in the United
States, including all domestic securities owned by the Fund other than (a)
securities which are maintained pursuant to Section 2.9 in a clearing agency
which acts as a securities depository or in a book-entry system authorized by
the United States Department of the Treasury and certain federal agencies (each,
a "U.S. SECURITIES SYSTEM") and (b) commercial paper of an issuer for which the
Custodian acts as issuing and paying agent ("DIRECT PAPER") which is deposited
and/or maintained in the Direct Paper system of the Custodian (the "DIRECT PAPER
SYSTEM") pursuant to Section 2.10.
SECTION 2.2
DELIVERY OF INVESTMENTS. The Custodian shall release and deliver domestic
investments owned by a Fund held by the Custodian or in a U.S. Securities System
account of the Custodian or in the Custodian's Direct Paper System account
("DIRECT PAPER SYSTEM ACCOUNT") only upon receipt of Proper Instructions, which
may be continuing instructions when agreed to by the parties, and only in the
following cases:
1)Upon sale of such investments for the account of the Fund and
receipt of payment therefor;
2)Upon the receipt of payment in connection with any repurchase
agreement related to such investments entered into by the Fund;
3)
In the case of a sale effected through a U.S. Securities System, in
accordance with the provisions of Section 2.9 hereof;
4)
To the depository agent in connection with tender or other similar
offers for portfolio investments of the Fund;
5)
To the issuer thereof or its agent when such investments are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6)
To the issuer thereof, or its agent, for transfer into the name of
the Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.8 or into the name or nominee name of any
sub-custodian appointed pursuant to Section 1; or for exchange for a
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, in any such case, the new securities are to be
delivered to the Custodian;
7)
Upon the sale of such investments for the account of the Fund, to
the broker or its clearing agent, against a receipt, for examination
in accordance with usual "street delivery" custom; provided that in
any such case the Custodian shall have no responsibility or
liability for any loss arising from the delivery of such investments
prior to receiving payment for such investments except as may arise
from the Custodian's own negligence or willful misconduct;
8)For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the investments of the issuer of such investments, or pursuant to
provisions for conversion contained in such investments, or pursuant
to any deposit agreement; provided that, in any such case, the new
investments and cash, if any, are to be delivered to the Custodian;
9)In the case of warrants, rights or similar investments, the
surrender thereof in the exercise of such warrants, rights or
similar investments or the surrender of interim receipts or
temporary investments for definitive investments; provided that, in
any such case, the new investments and cash, if any, are to be
delivered to the Custodian or against a receipt;
10)
For delivery in connection with any loans of investments made on
behalf of the Fund, but only against receipt of adequate collateral
as agreed upon from time to time by the Fund or its duly-appointed
agent (which may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities, or such
other property as the Fund may agree), except that in connection
with any loans for which collateral is to be credited to the
Custodian's account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held liable or
responsible for the delivery of investments owned by the Fund prior
to the receipt of such collateral in the absence of the Custodian's
negligence or willful misconduct;
11)
For delivery as security in connection with any borrowing by the
Fund requiring a pledge of assets by the Fund, but only against
receipt of amounts borrowed, except where additional collateral is
required to secure a borrowing already made, subject to Proper
Instructions, further securities may be released and delivered for
that purpose;
12)
For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered under
the Securities Exchange Act of 1934 (the "EXCHANGE ACT") and a
member of The National Association of Securities Dealers, Inc.
("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation, the rules of any registered national securities
exchange or of any similar organization or organizations, or under
the Investment Company Act of 1940, as amended from time to time
(the "1940 ACT"), regarding escrow or other arrangements in
connection with transactions by the Fund;
13)
For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or
any Contract Market, or any similar organization or organizations,
or under the 1940 Act, regarding account deposits in connection with
transactions by the Fund;
14)
Upon receipt of instructions from the transfer agent for the Fund
(the "TRANSFER AGENT"), for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind, as
may be described from time to time in the Fund's currently effective
prospectus, statement of additional information or other offering
documents (all, as amended, supplemented or revised from time to
time, the "PROSPECTUS"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15)
For any other purpose, but only upon receipt of Proper Instructions
specifying (a) the investments to be delivered, (b) setting forth
the purpose for which such delivery is to be made, and (c) naming
the person or persons to whom delivery of such investments shall be
made.
SECTION 2.3
REGISTRATION OF INVESTMENTS. Domestic investments held by the Custodian (other
than bearer securities) shall be registered in the name of the Fund or in the
name of any nominee of the Fund or of any nominee of the Custodian which nominee
shall be assigned exclusively to the Fund, unless the Fund has authorized in
writing the appointment of a nominee to be used in common with other registered
investment companies having the same investment adviser as the Fund, or in the
name or nominee name of any agent appointed pursuant to Section 2.8 or in the
name or nominee name of any sub-custodian appointed pursuant to Section 1. All
securities accepted by the Custodian on behalf of the Fund under the terms of
this Agreement shall be in good deliverable form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund of relevant corporate actions including,
without limitation, pendency of calls, maturities, tender or exchange offers.
SECTION 2.4
BANK ACCOUNTS. The Custodian shall open and maintain a separate bank account or
accounts in the United States in the name of the Fund, subject only to draft or
order by the Custodian acting pursuant to the terms of this Agreement, and shall
hold in such account or accounts, subject to the provisions hereof, all cash
received by it from or for the account of the Fund, other than cash maintained
by the Fund in a bank account established and used in accordance with Rule 17f-3
under the 1940 Act. Monies held by the Custodian for the Fund may be deposited
by the Custodian to its credit as custodian in the banking department of the
Custodian or in such other banks or trust companies as it may in its discretion
deem necessary or desirable in the performance of its duties hereunder;
provided, however, that every such bank or trust company shall be qualified to
act as a custodian under the 1940 Act, and that each such bank or trust company
and the funds to be deposited with each such bank or trust company shall be
approved by vote of a majority of the board of directors or the board of
trustees of the applicable Fund (as appropriate and in each case, the "BOARD").
Such funds shall be deposited by the Custodian in its capacity as custodian and
shall be withdrawable by the Custodian only in that capacity.
SECTION 2.5
COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the Custodian
shall collect on a timely basis all income and other payments with respect to
United States registered investments held hereunder to which the Fund shall be
entitled either by law or pursuant to custom in the investments business, and
shall collect on a timely basis all income and other payments with respect to
United States bearer investments if, on the date of payment by the issuer, such
investments are held by the Custodian or its agent thereof and shall credit such
income, as collected, to the Fund's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for payment
all coupons and other income items requiring presentation as and when they
become due, collect interest when due on investments held hereunder, and receive
and collect all stock dividends, rights and other items of like nature as and
when they become due and payable. With respect to income due the Fund on United
States investments of the Fund loaned (pursuant to the provisions of Section 2.2
(10))
in accordance with a separate agreement between the Fund and the Custodian in
its capacity as lending agent, collection thereof shall be in accordance with
the terms of such agreement. Except as otherwise set forth in the immediately
preceding sentence, income due the Fund on United States investments of the Fund
loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund; the Custodian will have no duty or responsibility in
connection therewith other than to provide the Fund with such information or
data as may be necessary to assist the Fund in arranging for the timely delivery
to the Custodian of the income to which the Fund is properly entitled.
SECTION 2.6
PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions, which may be
continuing instructions when agreed to by the parties, the Custodian shall, from
monies of the Fund held by the Custodian, pay out such monies in the following
cases only:
1)Upon the purchase of domestic investments, options, futures
contracts or options on futures contracts for the account of the
Fund but only (a) against the delivery of such investments, or
evidence of title to such options, futures contracts or options on
futures contracts, to the Custodian (or any bank, banking firm or
trust company doing business in the United States or abroad which is
qualified under the 1940 Act to act as a custodian and has been
designated by the Custodian as its agent for this purpose in
accordance with Section 2.8) registered in the name of the Fund or
in the name of a nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in the case of a purchase
effected through a U.S. Securities System, in accordance with the
conditions set forth in Section 2.9 hereof; (c) in the case of a
purchase involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.10 hereof; or (d) for transfer to
a time deposit account of the Fund in any bank, whether domestic or
foreign, such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank pursuant to
Proper Instructions;
2)
In connection with conversion, exchange or surrender of investments
owned by the Fund as set forth in Section 2.2 hereof;
3)
For the redemption or repurchase of Shares as set forth in Section 4
hereof;
4)
For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account
of the Fund: interest, taxes, management fees, accounting fees,
transfer agent fees, legal fees, and operating expenses of the Fund
(whether or not such expenses are to be in whole or part capitalized
or treated as deferred expenses);
5) For the payment of any dividends declared by the Board;
6)For payment of the amount of dividends received in respect of
investments sold short;
7)
For repayment of a loan upon redelivery of pledged securities and
upon surrender of the note(s), if any, evidencing the loan; or
8)
In connection with any repurchase agreement entered into by the Fund
with respect to which the collateral is held by the Custodian, the
Custodian shall act as the Fund's "securities intermediary"( as that
term is defined in Part 5 of Article 8 of the Massachusetts Uniform
Commercial Code, as amended), and, as securities intermediary, the
Custodian shall take the following steps on behalf of the Fund: (a)
provide the Fund with notification of the receipt of the purchased
securities, and (b), by book-entry identify on the books of the
Custodian as belonging to the Fund uncertificated securities
registered in the name of the Fund and held in the Custodian's
account at the Federal Reserve Bank. In connection with any
repurchase agreement entered into by the Fund with respect to which
the collateral is not held by the Custodian, the Custodian shall (a)
provide the Fund with such notification as it may receive with
respect to such collateral, and (b), by book-entry or otherwise,
identify as belonging to the Fund securities as shown in the
Custodian's account on the books of the entity appointed by the Fund
to hold such collateral.
9)
For any other purpose, but only upon receipt of Proper Instructions
specifying (a) the amount of such payment,
(b) setting forth the purpose for which such payment is to be made,
and (c) naming the person or persons to whom such payment is to be
made.
SECTION 2.7
LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. In any
and every case where payment for purchase of domestic securities for the
account of the Fund is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions from the
Fund to so pay in advance, the Custodian shall be absolutely liable to the Fund
for such securities to the same extent as if the securities had been received by
the Custodian.
SECTION 2.8
APPOINTMENT OF AGENTS. The Custodian may at any time or times in its discretion
appoint (and may at any time remove) any other bank or trust company, which is
itself qualified under the 1940 Act to act as a custodian, as its agent to carry
out such of the provisions of this Section 2 as the Custodian may from time to
time direct; provided, however, that the appointment of any such agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder.
SECTION 2.9
DEPOSIT OF INVESTMENTS IN U.S. SECURITIES SYSTEMS. The Custodian may deposit
and/or maintain domestic investments owned by the Fund in a U.S. Securities
System in accordance with applicable Federal Reserve Board and United States
Securities and Exchange Commission ("SEC") rules and regulations, if any,
subject to the following provisions:
1)
The Custodian may keep domestic investments of the Fund in a U.S.
Securities System provided that such investments are represented in
an account of the Custodian in the U.S. Securities System
("ACCOUNT") which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise for
customers;
2)
The records of the Custodian with respect to domestic investments of
the Fund which are maintained in a U.S. Securities System shall
identify by book-entry those investments belonging to the Fund;
3)
The Custodian shall pay for domestic investments purchased for the
account of the Fund upon (i) receipt of advice from the U.S.
Securities System that such investments have been transferred to the
Account, and
(ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund. The
Custodian shall transfer domestic investments sold for the account
of the Fund upon (i) receipt of advice from the U.S. Securities
System that payment for such investments has been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of
the Fund. Copies of all advices from the U.S. Securities System of
transfers of domestic investments for the account of the Fund shall
identify the Fund, be maintained for the Fund by the Custodian and
be provided to the Fund at its request. Upon request, the Custodian
shall furnish the Fund confirmation of each transfer to or from the
account of the Fund in the form of a written advice or notice and
shall furnish to the Fund copies of daily transaction sheets
reflecting each day's transactions in the U.S. Securities System for
the account of the Fund;
4)
The Custodian shall provide the Fund with any report obtained by the
Custodian on the U.S. Securities System's accounting system,
internal accounting control and procedures for safeguarding domestic
investments deposited in the U.S. Securities System;
5)
The Custodian shall have received from the Fund the initial or
annual certificate, as the case may be, described in Section 10
hereof; and
6)
Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to the
Fund resulting from use of the U.S. Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or any of
its agents or of any of its or their employees, or from failure of
the Custodian or any such agent to enforce effectively such rights
as it may have against the U.S. Securities System. At the election
of the Fund, the Fund shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim against the U.S.
Securities System or any other person which the Custodian may have
as a consequence of any such loss, expense or damage if and to the
extent that
the Fund has not been made whole for any such loss, expense or
damage.
SECTION 2.10
FUND ASSETS HELD IN THE DIRECT PAPER SYSTEM. The Custodian may deposit and/or
maintain investments owned by the Fund in the Direct Paper System subject to the
following provisions:
1)
No transaction relating to investments in the Direct Paper System
will be effected in the absence of Proper Instructions;
2)
The Custodian may keep investments of the Fund in the Direct Paper
System only if such investments are represented in the Direct Paper
System Account, which account shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
3)
The records of the Custodian with respect to investments of the Fund
which are maintained in the Direct Paper System shall identify by
book-entry those investments belonging to the Fund;
4)
The Custodian shall pay for investments purchased for the account of
the Fund upon the making of an entry on the records of the Custodian
to reflect such payment and transfer of investments to the account
of the Fund. The Custodian shall transfer investments sold for the
account of the Fund upon the making of an entry on the records of
the Custodian to reflect such transfer and receipt of payment for
the account of the Fund;
5)
The Custodian shall furnish the Fund confirmation of each transfer
to or from the account of the Fund, in the form of a written advice
or notice, of Direct Paper on the next business day following such
transfer and shall furnish to the Fund copies of daily transaction
sheets reflecting each day's transaction in the Direct Paper System
for the account of the Fund; and
6)
The Custodian shall provide the Fund with any report on its system
of internal accounting control as the Fund may reasonably request
from time to time.
SECTION 2.11
SEGREGATED ACCOUNT. The Custodian shall, upon receipt of Proper Instructions,
establish and maintain a segregated
account or accounts for and on behalf of the Fund, into which account or
accounts may be transferred cash and/or investments, including investments
maintained in an account by the Custodian pursuant to Section 2.10 hereof, (i)
in accordance with the provisions of any agreement among the Fund, the Custodian
and a broker-dealer registered under the Exchange Act and a member of the NASD
(or any futures commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options Clearing Corporation
and of any registered national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund, (ii) for purposes of segregating cash
or government investments in connection with options purchased, sold or written
by the Fund or commodity futures contracts or options thereon purchased or sold
by the Fund, (iii) for the purposes of compliance by the Fund with the
procedures required by 1940 Act Release No. 10666, or any other procedures
subsequently required under the 1940 Act relating to the maintenance of
segregated accounts by registered investment companies, and (iv) for other
purposes, but only, in the case of clause (iv) upon receipt of Proper
Instructions specifying (a) the investments to be delivered, (b) setting forth
the purpose for which such delivery is to be made, and (c) naming the person or
persons to whom delivery of such investments shall be made.
SECTION 2.12
OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute ownership
and other certificates and affidavits for all United States federal and state
tax purposes in connection with receipt of income or other payments with respect
to domestic investments of the Fund held by it hereunder and in connection with
transfers of such investments.
SECTION 2.13
PROXIES. The Custodian shall, with respect to the domestic investments held
hereunder, cause to be promptly executed by the registered holder of such
investments, if the investments are registered otherwise than in the name of the
Fund or a nominee of the Fund, all proxies without indication of the manner in
which such proxies are to be voted, and shall promptly deliver to the Fund such
proxies, all proxy soliciting materials received by the Custodian and all
notices received relating to such investments.
SECTION 2.14
COMMUNICATIONS RELATING TO FUND INVESTMENTS. Subject to the provisions of
Section 2.3, the Custodian shall transmit promptly to the Fund all written
information (including, without limitation, pendency of calls and maturities of
domestic investments and expirations of rights in connection therewith and
notices of
exercise of call and put options written by the Fund and the maturity of futures
contracts purchased or sold by the Fund) received by the Custodian in connection
with the domestic investments being held for the Fund pursuant to this
Agreement. With respect to tender or exchange offers, the Custodian shall
transmit to the Fund all written information received by the Custodian, any
agent appointed pursuant to Section 2.8 hereof, or any sub-custodian appointed
pursuant to Section 1 hereof, from issuers of the domestic investments whose
tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Fund desires to take action with respect to
any tender offer, exchange offer or any other similar transaction, the Fund
shall notify the Custodian at least two (2) New York Stock Exchange business
days prior to the time such action must be taken under the terms of the tender,
exchange offer or other similar transaction, and it will be the responsibility
of the Custodian to timely transmit to the appropriate person(s) such notice.
Where the Fund provides the Custodian with less than two (2) New York Stock
Exchange business days notice of its desired action, the Custodian shall use its
best efforts to timely transmit the Fund's notice to the appropriate person. It
is expressly noted that the parties may agree to alternative procedures with
respect to such two (2) New York Stock Exchange business days notice period on a
selective and individual basis.
SECTION 2.15
REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS. The Custodian shall provide
the Fund, at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding investments, futures contracts and
options on futures contracts, including domestic investments deposited and/or
maintained in a U.S. Securities System, relating to the services provided by the
Custodian under this Agreement. Such reports shall be of sufficient scope and
detail, as may reasonably be required by the Fund, to provide reasonable
assurance that any material inadequacies would be disclosed by such examination,
and if there are no such inadequacies the reports shall so state.
SECTION 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO CERTAIN PROPERTY OF THE
FUNDS HELD OUTSIDE OF THE UNITED STATES
SECTION 3.1
DEFINITIONS. The following capitalized terms shall have the respective following
meanings:
"FOREIGN SECURITIES SYSTEM" means a clearing agency or a securities depository
listed on Schedule A hereto.
"FOREIGN SUB-CUSTODIAN" means a foreign banking institution set forth on
Schedule A hereto.
SECTION 3.2
HOLDING SECURITIES. The Custodian shall identify on its books as belonging to
the Funds the foreign securities held by each Foreign Sub-Custodian or Foreign
Securities System. The Custodian may hold foreign securities for all of its
customers, including the Funds, with any Foreign Sub-Custodian in an account
that is identified as belonging to the Custodian for the benefit of its
customers, provided however, that (i) the records of the Custodian with respect
to foreign securities of the Funds which are maintained in such account shall
identify those securities as belonging to the Funds and (ii) the Custodian shall
require that securities so held by the Foreign Sub-Custodian be held separately
from any assets of such Foreign Sub-Custodian or of other customers of such
Foreign Sub-Custodian.
SECTION 3.3
FOREIGN SECURITIES SYSTEMS. Foreign securities shall be maintained in a Foreign
Securities System in a designated country only through arrangements implemented
by the Foreign Sub-Custodian in such country pursuant to the terms of this
Agreement.
SECTION 3.4 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
3.4.1.
Delivery of Foreign Securities. The Custodian or a Foreign Sub-Custodian shall
-------- -- ------- -----------
release and deliver foreign securities of the Funds held by such Foreign
Sub-Custodian, or in a Foreign Securities System account, only upon receipt of
Proper Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
(i)
upon the sale of such foreign securities for the Funds in accordance
with reasonable market practice in the country where such foreign
securities are held or traded, including, without limitation: (A)
delivery against expectation of receiving later payment; or (B) in
the case of a sale effected through a Foreign Securities System in
accordance with the rules governing the operation of the Foreign
Securities System;
(ii)
in connection with any repurchase agreement related to foreign
securities;
(iii)
to the depository agent in connection with tender or other similar
offers for foreign securities of the Funds;
(iv)
to the issuer thereof or its agent when such foreign securities are
called, redeemed, retired or otherwise become payable;
(v)
to the issuer thereof, or its agent, for transfer into the name of
the Custodian (or the name of the respective Foreign Sub-Custodian
or of any nominee of the Custodian or such Foreign Sub-Custodian)
or for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or number
of units;
(vi)
to brokers, clearing banks or other clearing agents for examination
or trade execution in accordance with market custom; provided that
in any such case the Foreign Sub-Custodian shall have no
responsibility or liability for any loss arising from the delivery
of such securities prior to receiving payment for such securities
except as may arise from the Foreign Sub-Custodian's own negligence
or willful misconduct;
(vii)for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement;
(viii)
in the case of warrants, rights or similar foreign securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or temporary
securities for definitive securities;
(ix)
or delivery as security in connection with any borrowing by the
Funds requiring a pledge of assets by the Funds;
(x)in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii)
for any other proper purpose, but only upon receipt of Proper
Instructions specifying the foreign securities to be delivered,
setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper Fund purpose, and naming the
person or persons to whom delivery of such securities shall be made.
3.4.2.
Payment of Fund Monies. Upon receipt of Proper Instructions, which may be
------- -- ---- -------
continuing instructions when deemed appropriate by the parties, the Custodian
shall pay out, or direct the respective Foreign Sub-Custodian or the respective
Foreign Securities System to pay out, monies of a Fund in the following cases
only:
(i)upon the purchase of foreign securities for the Fund, unless
otherwise directed by Proper Instructions, by (A) delivering money
to the seller thereof or to a dealer therefor (or an agent for such
seller or dealer) against expectation of receiving later delivery of
such foreign securities; or (B) in the case of a purchase effected
through a Foreign Securities System, in accordance with the rules
governing the operation of such Foreign Securities System;
(ii)
in connection with the conversion, exchange or surrender of foreign
securities of the Fund;
(iii)
for the payment of any expense or liability of the Fund, including
but not limited to the following payments: interest, taxes,
investment advisory fees, transfer agency fees, fees under this
Agreement, legal fees, accounting fees, and other operating
expenses;
(iv)
for the purchase or sale of foreign exchange or foreign exchange
contracts for the Fund, including transactions executed with or
through the Custodian or its Foreign Sub-Custodians;
(v)in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(vii)
in connection with the borrowing or lending of foreign securities;
and
(viii)
for any other proper Fund purpose, but only upon receipt of Proper
Instructions specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such
purpose to be a proper Fund purpose, and naming the person or
persons to whom such payment is to be made.
3.4.3.
Market Conditions. Notwithstanding any provision of this Agreement to the
------ -----------
contrary, settlement and payment for foreign securities received for the account
of the Funds and delivery of foreign securities maintained for the account of
the Funds may be effected in accordance with the customary established
securities trading or processing practices and procedures in the country or
market in which the transaction occurs, including, without limitation,
delivering foreign securities to the purchaser thereof or to a dealer therefor
(or an agent for such purchaser or dealer) with the expectation of receiving
later payment for such foreign securities from such purchaser or dealer.
SECTION 3.5
REGISTRATION OF FOREIGN SECURITIES. The foreign securities maintained in the
custody of a Foreign Custodian (other than bearer securities) shall be
registered in the name of the applicable Fund or in the name of the Custodian or
in the name of any Foreign Sub-Custodian or in the name of any nominee of the
foregoing, and the Fund agrees to hold any such nominee harmless from any
liability as a holder of record of such foreign securities. The Custodian or a
Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a
Fund under the terms of this Agreement unless the form of such securities and
the manner in which they are delivered are in accordance with reasonable market
practice.
SECTION 3.6
BANK ACCOUNTS. A bank account or bank accounts opened and maintained outside
the United States on behalf of a Fund with a Foreign Sub-Custodian shall be
subject only to draft or order by the Custodian or such Foreign Sub-Custodian,
acting pursuant to the terms of this Agreement to hold cash received by or from
or for the account of the Fund.
SECTION 3.7
COLLECTION OF INCOME. The Custodian shall use reasonable commercial efforts to
collect all income and other payments with respect to the foreign securities
held hereunder to which the Funds shall be entitled and shall credit such
income, as
collected, to the applicable Fund. In the event that extraordinary measures are
required to collect such income, the Fund and the Custodian shall consult as to
such measures and as to the compensation and expenses of the Custodian relating
to such measures.
SECTION 3.8
PROXIES. With respect to the foreign securities held under this Section 3, the
Custodian will use reasonable commercial efforts to facilitate the exercise of
voting and other shareholder proxy rights, subject always to the laws,
regulations and practical constraints that may exist in the country where such
securities are issued. The Fund acknowledges that local conditions, including
lack of regulation, onerous procedural obligations, lack of notice and other
factors may have the effect of severely limiting the ability of the Fund to
exercise shareholder rights.
SECTION 3.9
COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian shall transmit
promptly to the Fund written information (including, without limitation,
pendency of calls and maturities of foreign securities and expirations of rights
in connection therewith) received by the Custodian in connection with the
foreign securities being held for the account of the Fund. With respect to
tender or exchange offers, the Custodian shall transmit promptly to the Fund
written information so received by the Custodian in connection with the foreign
securities whose tender or exchange is sought or from the party (or its agents)
making the tender or exchange offer.
SECTION 3.10
LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES SYSTEMS. Each
agreement pursuant to which the Custodian employs as a Foreign Sub-Custodian
shall, to the extent possible, require the Foreign Sub-Custodian to exercise
reasonable care in the performance of its duties and, to the extent possible, to
indemnify, and hold harmless, the Custodian from and against any loss, damage,
cost, expense, liability or claim arising out of or in connection with the
Foreign Sub-Custodian's performance of such obligations. At the Fund's
election, the Funds shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a Foreign Sub-Custodian as a
consequence of any such loss, damage, cost, expense, liability or claim if and
to the extent that the Funds have not been made whole for any such loss, damage,
cost, expense, liability or claim.
SECTION 3.11
TAX LAW. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as custodian
of the Funds by
the tax law of the United States or of any state or political subdivision
thereof. It shall be the responsibility of the Fund to notify the Custodian of
the obligations imposed on the Fund or the Custodian as custodian of the Funds
by the tax law of countries set forth on Schedule A hereto, including
responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for exemption or
refund under the tax law of countries for which the Fund has provided such
information.
SECTION 4. PAYMENTS FOR REPURCHASES OR REDEMPTIONS AND SALES OF SHARES.
From such funds as may be available for the purpose, the Custodian shall,
upon receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares which have delivered to the Transfer Agent a
request for redemption or repurchase of their Shares. In connection with the
redemption or repurchase of Shares, the Custodian is authorized upon receipt of,
and in accordance with, instructions from the Transfer Agent to wire funds to or
through a commercial bank designated by the redeeming shareholders. In
connection with the redemption or repurchase of Shares, the Custodian shall
honor checks drawn on the Custodian by a holder of Shares, which checks have
been furnished by the Fund to the holder of Shares, when presented to the
Custodian in accordance with such written procedures and controls as may be
mutually agreed upon from time to time between the Fund and the Custodian.
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent and deposit to the account of the Fund such payments as are
received by the distributor or the Transfer Agent, as the case may be, for
Shares issued or sold from time to time. The Custodian will notify the Fund and
the Transfer Agent of any payments for Shares received by it from time to time.
SECTION 5. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME.
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board to keep the books of account of the
Fund and/or compute the net asset value per Share of the outstanding Shares or,
if directed in writing
to do so by the Fund, shall itself keep such books of account and/ or compute
such net asset value per Share. If so directed, the Custodian shall also (i)
calculate daily the net income of the Fund as described in the Prospectus and
shall advise the Fund and the Transfer Agent daily of the total amounts of such
net income, and/ or (ii) advise the Transfer Agent periodically of the division
of such net income among its various components. The calculations of the net
asset value per share and the daily income of the Fund shall be made at the time
or times described from time to time in the Prospectus.
SECTION 6. PROPER INSTRUCTIONS.
"Proper Instructions," as such term is used throughout this Agreement,
means either (i) a writing, including a facsimile transmission, signed by one or
more persons as set forth on, and in accordance with, an "Authorized Persons
List," as such term is defined herein (each such instruction a "Written Proper
Instruction"), (ii) a "Client Originated Electronic Financial Instruction," as
such term is defined in the Data Access Services Addendum hereto, given in
accordance with the terms of such Addendum, or (iii) instructions received by
the Custodian from a third party in accordance with any three-party agreement
which requires a segregated asset account in accordance with Section 2.11.
Each Written Proper Instruction shall set forth a brief description of the
type of transaction involved (choosing from among the types of transactions set
forth on the Authorized Persons List), including a specific statement of the
purpose for which such action is requested, and any modification to a Written
Proper Instruction must itself be a Written Proper Instruction and subject to
all the provisions herein relating to Written Proper Instructions. The Fund
will provide the Custodian with an "Authorized Persons List," which list shall
set forth (a) the names of the individuals (each an "Authorized Person") who are
authorized by the Board to give Written Proper Instructions with respect to the
transactions described therein, and (b) the number of Authorized Persons whose
signature or approval, as the case may be, is necessary for the Custodian to be
able to act in accordance with such Written Proper Instructions with respect to
a particular type of transaction. The Custodian may accept oral instructions or
instructions delivered via electronic mail as Proper Instructions if the
Custodian reasonably believes such instructions to have been given by an
Authorized Person or Persons (as appropriate to the type of transaction);
provided, however, that in no event will instructions delivered orally or via
electronic mail be considered Proper
Instructions with respect to transactions involving the movement of cash,
securities or other assets of a Fund. The Custodian shall be entitled to rely
upon instructions given in accordance with an Authorized Persons List until it
actually receives written notice from the Board of the applicable Fund to the
contrary.
SECTION 7. EVIDENCE OF AUTHORITY.
Subject to Section 9 hereof, the Custodian shall be protected in acting
upon any instructions, notice, request, consent, certificate or other instrument
or paper reasonably and in good faith believed by it to be genuine and to have
been properly executed by or on behalf of the Fund. The Custodian may receive
and accept a copy of a vote of the Board, certified by the secretary or an
assistant secretary of the applicable Fund, as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or (b) of any
determination or of any action by the Board described in such vote, and such
vote may be considered as in full force and effect until receipt by the
Custodian of written notice to the contrary.
SECTION 8. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY.
The Custodian may in its discretion and without express authority from the
Fund:
1)
make payments to itself or others for minor expenses of handling
investments or other similar items relating to its duties under this
Agreement, provided that all such payments shall be accounted for to
the Fund;
2) surrender investments in temporary form for investments in definitive
form;
3) endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other
dealings with the investments and property of the Fund except as
otherwise directed by the Board.
SECTION 9. RESPONSIBILITY OF CUSTODIAN.
The Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. Notwithstanding anything to the
contrary herein, the Custodian shall be held to the exercise of reasonable care
in carrying out the provisions of this Agreement, and it shall be kept
indemnified by and shall be without liability to the Fund for any action taken
or omitted by it in good faith without negligence. In order for the
indemnification provision contained in this Section to apply, it is understood
that if in any case the Fund may be asked by the Custodian to indemnify or hold
the Custodian harmless, the Fund shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Custodian will use reasonable care to identify, and notify
the Fund promptly concerning, any situation which presents or appears likely to
present the probability of such a claim for indemnification. The Fund shall
have the option to defend the Custodian against any claim which may be the
subject of a claim for indemnification hereunder, and in the event that the Fund
so elects, it will notify the Custodian thereof and, thereupon, (i) the Fund
shall take over complete defense of the claim and (ii) the Custodian shall
initiate no further legal or other expenses with respect to such claim. The
Custodian shall in no case confess any claim or make any compromise with respect
to any claim for which it will seek indemnity from the Fund except with the
Fund's prior written consent. Nothing herein shall be construed to limit any
right or cause of action on the part of the Custodian under this Agreement which
is independent of any right or cause of action on the part of the Fund. The
Custodian shall be entitled to rely on and may act upon advice of counsel (who
may be counsel for the Fund or other such counsel as agreed to by the parties)
on all matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice. The Custodian shall be entitled to rely
upon, and shall have no duty of inquiry with respect to, the accuracy of any
representation or warranty given to it by the Fund or any duly-authorized
employee or agent thereof, and shall be without liability for any action
reasonably taken or omitted by it in reliance thereon. Regardless of whether
assets held pursuant to this Agreement are maintained in the custody of a
foreign banking institution, a foreign securities depository, or a branch or
affiliate of a U.S. bank, the Custodian shall not be liable for any loss,
damage, cost, expense, liability
The Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. Notwithstanding anything to the
contrary herein, the Custodian shall be held to the exercise of reasonable care
in carrying out the provisions of this Agreement, and it shall be kept
indemnified by and shall be without liability to the Fund for any action taken
or omitted by it in good faith without negligence. In order for the
indemnification provision contained in this Section to apply, it is understood
that if in any case the Fund may be asked by the Custodian to indemnify or hold
the Custodian harmless, the Fund shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Custodian will use reasonable care to identify, and notify
the Fund promptly concerning, any situation which presents or appears likely to
present the probability of such a claim for indemnification. The Fund shall
have the option to defend the Custodian against any claim which may be the
subject of a claim for indemnification hereunder, and in the event that the Fund
so elects, it will notify the Custodian thereof and, thereupon, (i) the Fund
shall take over complete defense of the claim and (ii) the Custodian shall
initiate no further legal or other expenses with respect to such claim. The
Custodian shall in no case confess any claim or make any compromise with respect
to any claim for which it will seek indemnity from the Fund except with the
Fund's prior written consent. Nothing herein shall be construed to limit any
right or cause of action on the part of the Custodian under this Agreement which
is independent of any right or cause of action on the part of the Fund. The
Custodian shall be entitled to rely on and may act upon advice of counsel (who
may be counsel for the Fund or other such counsel as agreed to by the parties)
on all matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice. The Custodian shall be entitled to rely
upon, and shall have no duty of inquiry with respect to, the accuracy of any
representation or warranty given to it by the Fund or any duly-authorized
employee or agent thereof, and shall be without liability for any action
reasonably taken or omitted by it in reliance thereon. Regardless of whether
assets held pursuant to this Agreement are maintained in the custody of a
foreign banking institution, a foreign securities depository, or a branch or
affiliate of a U.S. bank, the Custodian shall not be liable for any loss,
damage, cost, expense, liability
If the Fund requires the Custodian to take any action with respect to
investments, which action involves the payment of money or which action may, in
the reasonable opinion of the Custodian, result in the Custodian or its nominee
assigned to the Fund being liable for the payment of money or incurring
liability of some other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the Custodian in an
amount and form satisfactory to it.
If the Custodian, or any of its affiliates, subsidiaries or agents,
advances cash or investments to the Fund for any purpose (including but not
limited to securities settlements, foreign exchange contracts and assumed
settlement), or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor, and should the Fund fail to repay the Custodian promptly the
Custodian shall be entitled to utilize available cash and to dispose of the Fund
assets to the extent necessary to obtain reimbursement, provided that the
Custodian gives the Fund reasonable notice to repay such cash or securities
advanced, and provided further that such notice requirement shall not preclude
the Custodian's right to assert and execute on such lien.
Except as may arise from the Custodian's own negligence or willful
misconduct, or the negligence or willful misconduct of a subcustodian or agent
appointed by the Custodian, the Fund agrees to indemnify and hold the Custodian
harmless from and against any and all costs, expenses, losses, damages, charges,
reasonable counsel fees, payments and liabilities which may be asserted against
the Custodian (i) acting in accordance with any Proper Instruction, or (ii) for
any acts or omissions of CHASE MANHATTAN BANK N.A.
Notwithstanding any provision herein to the contrary, to the extent the
Custodian is found to be liable hereunder for any loss, liability, claim,
expense or damage, the Custodian shall be liable only for such loss, liability,
claim, expense or damage which was reasonably foreseeable.
SECTION 10. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT.
This Agreement shall become effective as of the date of its execution,
shall continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties hereto,
and may be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect not
sooner than thirty (30) days after the date of such delivery or mailing in the
case of a termination by the Fund, and not sooner than one hundred eighty (180)
days after the date of such delivery or mailing in the case of termination by
the Custodian; provided, however that the Custodian shall not act under Section
2.9 hereof in the absence of receipt of an initial certificate of a Fund's
secretary, or an assistant secretary thereof, that the Board has approved the
initial use of a particular U.S. Securities System, as required by the 1940 Act
or any applicable Rule thereunder, and that the Custodian shall not act under
Section 2.10 hereof in the absence of receipt of an initial certificate of a
Fund's secretary, or an assistant secretary thereof, that the Board has approved
the initial use of the Direct Paper System; provided further, however, that the
Fund shall not amend or terminate this Agreement in contravention of any
applicable federal or state regulations, or any provision of the Fund's articles
of incorporation, agreement of trust, by-laws and/or registration statement (as
applicable, the "GOVERNING DOCUMENTS"); and further provided that the Fund may
at any time by action of its Board (i) substitute another bank or trust company
for the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for the Custodian by the United States Comptroller of
the Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Agreement, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its reasonable costs, expenses and disbursements,
provided that the Custodian shall not incur any costs, expenses or disbursements
specifically in connection with such termination unless it has received prior
approval from the Fund, such approval not to be unreasonably withheld.
SECTION 11. SUCCESSOR CUSTODIAN.
If a successor custodian shall be appointed by the Board, the Custodian
shall, upon termination, deliver to such successor custodian at the offices of
the Custodian, duly endorsed and in the form for transfer, all investments and
other properties then held by it hereunder, and shall transfer to an account of
the successor custodian all of the Fund's investments held in a Securities
System. If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a copy of a vote of the Board, certified by the
secretary or an assistant secretary of the applicable Fund, deliver at the
offices of the Custodian and transfer such investments, funds and other
properties in accordance with such vote. In the event that no written order
designating a successor custodian or certified copy of a vote of the Board shall
have been delivered to the Custodian on or before the date when such termination
shall become effective, then the Custodian shall have the right to deliver to a
bank or trust company, which is a "bank" as defined in the 1940 Act, doing
business in Boston, Massachusetts, or New York, New York, of its own selection
and having an aggregate capital, surplus, and undivided profits, as shown by its
last published report, of not less than $100,000,000, all property held by the
Custodian under this Agreement and to transfer to an account of such successor
custodian all of the Fund's investments held in any Securities System;
thereafter, such bank or trust company shall be the successor of the Custodian
under this Agreement.
In the event that any property held pursuant to this Agreement remains in
the possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board to appoint a successor custodian, the Custodian shall be entitled to
fair compensation for its services during such period as the Custodian retains
possession of such property, and the provisions of this Agreement relating to
the duties and obligations of the Custodian shall remain in full force and
effect.
SECTION 12. GENERAL.
SECTION 12.1
COMPENSATION OF CUSTODIAN. The Custodian shall be entitled to compensation for
its services and reimbursement of its expenses as Custodian as agreed upon from
time to time between the Fund and the Custodian.
SECTION 12.2
MASSACHUSETTS LAW TO APPLY. This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with laws of The
Commonwealth of Massachusetts.
SECTION 12.3
RECORDS. The Custodian shall create and maintain all records relating to its
activities and obligations under this Agreement in such manner as will meet the
obligations of the Fund under the 1940 Act, with particular attention to Section
31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the
property of the Fund and shall at all times during the regular business hours of
the Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the SEC. The Custodian shall, at
the Fund's request, supply the Fund with a tabulation of investments owned by
the Fund and held by the Custodian hereunder, and shall, when requested to do so
by an officer of the Fund, and for such compensation as shall be agreed upon
between the Fund and the Custodian, include certificate numbers in such
tabulations.
SECTION 12.4
OPINION OF FUND'S INDEPENDENT ACCOUNTANT. The Custodian shall take all
reasonable action as the Fund may from time to time request to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the preparation of the Fund's
Form N-1A, the preparation of the Fund's Form N-SAR, the preparation of any
other annual reports to the SEC with respect to the Fund, and with respect to
any other requirements of the SEC.
SECTION 12.5
INTERPRETIVE AND ADDITIONAL PROVISIONS. In connection with the operation of
this Agreement, the Custodian and the Fund may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Agreement as
may in their joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Governing Documents. No interpretive
or additional provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Agreement.
SECTION 12.6
BOND. The Custodian shall at all times maintain a bond in such form and amount
as is acceptable to the Fund, which shall be issued by a reputable fidelity
insurance company authorized to do business in the place where such bond is
issued, against larceny and embezzlement, covering each officer and employee of
the Custodian who may, singly or jointly with others, have access to securities
or funds of the Fund, either directly or through authority to receive and carry
out any certificate instruction, order request, note or other instrument
required or permitted by this Agreement. The Custodian agrees that it shall not
cancel, terminate or modify such bond insofar as it adversely affects the Fund
except after written notice given to the Fund not less than 10 days prior to the
effective date of such cancellation, termination or modification. The Custodian
shall, upon request, furnish to the Fund a copy of each such bond and each
amendment thereto.
SECTION 12.7
CONFIDENTIALITY. The Custodian agrees to treat all records and other
information relative to the Fund and its prior, present or future shareholders
as confidential, and the Custodian, on behalf of itself and its employees,
agrees to keep confidential all such information except, after prior
notification to and approval in writing by the Fund, which approval shall not be
unreasonably withheld and may not be withheld where the Custodian may be exposed
to civil or criminal contempt proceedings for failure to comply when requested
to divulge such information by duly constituted authorities, or when so
requested by the Fund.
SECTION 12.8
EXEMPTION FROM LIEN. Except as set forth in Section 9 hereof, the securities
and other assets held by the Custodian hereunder shall not be subject to lien or
charge of any kind in favor of the Custodian or any person claiming through the
Custodian. Nothing herein shall be deemed to deprive the Custodian of its right
to invoke any and all remedies available at law or equity to collect amounts due
it under this Agreement.
SECTION 12.9
ASSIGNMENT. This Agreement may not be assigned by either party without the
written consent of the other, except that either party may assign its rights and
obligations hereunder to a party controlling, controlled by, or under common
control with such party.
SECTION 12.10 PRIOR AGREEMENTS. Without derogating the rights established
thereunder prior to the date of this Agreement, this Agreement supersedes and
terminates, as of the date hereof, all prior agreements between the Fund and the
Custodian relating to the custody of Fund assets.
SECTION 12.11 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all such
counterparts taken together shall constitute but one and the same Agreement.
SECTION 12.12 NOTICES. Any notice, instruction or other instrument
required to be given hereunder may be delivered in person to the offices of the
parties as set forth herein during normal business hours or delivered prepaid
registered mail or by telex, cable or telecopy to the parties at the following
addresses or such other addresses as may be notified by any party from time to
time.
To any Fund: c/o T. ROWE PRICE ASSOCIATES, INC.
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Carmen Deyesu
Telephone: 410-345-6658
Telecopy: 410-685-8827/8830
To the Custodian: STATE STREET BANK AND TRUST COMPANY
1776 Heritage Drive
North Quincy, Massachusetts 02171, U.S.A.
Attention: Carol C. Ayotte
Telephone: 617-985-6894
Telecopy: 617-537-6321
Such notice, instruction or other instrument shall be deemed to have been
served in the case of a registered letter at the expiration of five business
days after posting, in the case of cable twenty-four hours after dispatch and,
in the case of telex, immediately on dispatch and if delivered outside normal
business hours it shall be deemed to have been received at the next time after
delivery when normal business hours commence and in the case of cable, telex or
telecopy on the business day after the receipt thereof. Evidence that the
notice was properly addressed, stamped and put into the post shall be conclusive
evidence of posting.
SECTION 12.13 ENTIRE AGREEMENT. This Agreement (including all schedules,
appendices, exhibits and attachments hereto) constitutes the entire Agreement
between the parties with respect to the subject matter hereof.
SECTION 12.14 HEADINGS NOT CONTROLLING. Headings used in this Agreement
are for reference purposes only and shall not be deemed a part of this
Agreement.
SECTION 12.15 SURVIVAL. All provisions regarding indemnification,
confidentiality, warranty, liability and limits thereon shall survive following
the expiration or termination of this Agreement.
SECTION 12.16 SEVERABILITY. In the event any provision of this Agreement
is held illegal, void or unenforceable, the balance shall remain in effect.
SECTION 12.17 THE PARTIES. All references herein to the "Fund" are to each
of the funds listed on Appendix A hereto individually, as if this Agreement were
between such individual Fund and the Custodian. In the case of a series fund or
trust, all references to the "Fund" are to the individual series or portfolio of
such fund or trust, or to such fund or trust on behalf of the individual series
or portfolio, as appropriate. Any reference in this Agreement to "the parties"
shall mean the Custodian and such other individual Fund as to which the matter
pertains. Each Fund hereby represents and warranties that (i) it has the
requisite power and authority under applicable laws and its Governing Documents
to enter into and perform this Agreement, (ii) all requisite proceedings have
been taken to authorize it to enter into and perform this Agreement, and (iii)
its entrance into this Agreement shall not cause a material breach or be in
material conflict with any other agreement or obligation of the Fund or any law
or regulation applicable to it.
SECTION 12.18 DIRECTORS AND TRUSTEES. It is understood and is expressly
stipulated that neither the holders of Shares nor any member of the Board be
personally liable hereunder. Whenever reference is made herein to an action
required to be taken by the Board, such action may also be taken by the Board's
executive committee.
SECTION 12.19 MASSACHUSETTS BUSINESS TRUST. With respect to any Fund which
is a party to this Agreement and which is organized as a Massachusetts business
trust, the term "Fund" means and refers to the trustees from time to time
serving under the applicable trust agreement of such trust, as the same may be
amended from time to time (the "DECLARATION OF TRUST"). It is expressly agreed
that the obligations of any such Fund hereunder shall not be binding upon any of
the trustees, shareholders, nominees, officers, agents or employees of the Fund
personally, but bind only the trust property of the Fund as set forth in the
applicable Declaration of Trust. In the case of each Fund which is a
Massachusetts business trust (in each case, a "TRUST"), the execution and
delivery of this Agreement on behalf of the Trust has been authorized by the
trustees, and signed by an authorized officer, of the Trust, in each case acting
in such capacity and not individually, and neither such authorization by the
trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them
individually, but shall bind only the trust property of the Trust as provided in
its Declaration of Trust.
SECTION 12.20 REPRODUCTION OF DOCUMENTS. This Agreement and all schedules,
exhibits, attachments and amendments hereto may be reproduced by any
photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process. The parties hereto all/each agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
SECTION 12.21 SHAREHOLDER COMMUNICATIONS ELECTION. SEC Rule 14b-2 requires
banks which hold securities for the account of customers to respond to requests
by issuers of securities for the names, addresses and holdings of beneficial
owners of securities of that issuer held by the bank unless the beneficial owner
has expressly objected to disclosure of this information. In order to comply
with the rule, the Custodian needs the Fund to indicate whether it authorizes
the Custodian to provide the Fund's name, address, and share position to
requesting companies whose securities the Fund owns. If the Fund tells the
Custodian "no", the Custodian will not provide this information to requesting
companies. If the Fund tells the Custodian "yes" or does not check either "yes"
or "no" below, the Custodian is required by the rule to treat the Fund as
consenting to disclosure of this information for all securities owned by the
Fund or any funds or accounts established by the Fund. For the Fund's
protection, the Rule prohibits the requesting company from using the Fund's name
and address for any purpose other than corporate communications. Please
indicate below whether the Fund consents or objects by checking one of the
alternatives below.
YES [ ]
The Custodian is authorized to release the Fund's name, address,
and share positions.
NO [X]
The Custodian is not authorized to release the Fund's name,
address, and share positions.
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
Addendum to the Custodian Agreement (as defined below) between each fund
listed on Appendix A to the Custodian Agreement, as such Appendix A is amended
from time to time (each such fund listed on Appendix A shall be individually
referred to herein as the "FUND"), and State Street Bank and Trust Company
("STATE STREET").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain assets of
the Fund pursuant to a certain Custodian Agreement (the "CUSTODIAN AGREEMENT")
dated as of January 28, 1998, and amended thereafter from time to time;
WHEREAS, State Street has developed and utilizes proprietary accounting and
other systems, including State Street's proprietary Multicurrency HORIZON/R/
Accounting System, in its role as custodian of the Fund, and maintains certain
Fund-related data ("FUND DATA") in databases under the control and ownership of
State Street (the "DATA ACCESS SERVICES"); and
WHEREAS, State Street makes available to the Fund (and certain of the
Fund's agents as set forth herein) certain Data Access Services solely for the
benefit of the Fund, and intends to provide additional services, consistent with
the terms and conditions of this Addendum.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a.
System. Subject to the terms and conditions of this Addendum and solely for the
------
purpose of providing access to Fund Data as set forth herein, State Street
hereby agrees to provide the Fund, or certain third parties approved by State
Street that serve as the Fund's investment advisors, investment managers or fund
accountants (the "FUND ACCOUNTANTS") or as the Fund's independent auditors (the
"AUDITOR"), with access to State Street's Multicurrency HORIZON/R/ Accounting
System and the other information systems described in Attachment A
(collectively, the "SYSTEM") on a remote basis solely on the computer hardware,
system software and telecommunication links described in Attachment B (the
"DESIGNATED
CONFIGURATION") or on any designated substitute or back-up equipment
configuration consented to in writing by State Street, such consent not to be
unreasonably withheld.
b.
Data Access Services. State Street agrees to make available to the Fund the
---- ------ --------
Data Access Services subject to the terms and conditions of this Addendum and
such data access operating standards and procedures as may be issued by State
Street from time to time. The Fund shall be able to access the System to (i)
originate electronic instructions to State Street in order to (a) effect the
transfer or movement of cash or securities held under custody by State Street or
(b) transmit accounting or other information (the transactions described in
(i)(a) and (i)(b) above are referred to herein as "CLIENT ORIGINATED ELECTRONIC
FINANCIAL INSTRUCTIONS"), and (ii) access data for the purpose of reporting and
analysis, which shall all be deemed to be Data Access Services for purposes of
this Addendum.
c.
Additional Services. State Street may from time to time agree to make available
---------- --------
to the Fund additional Systems that are not described in the attachments to this
Addendum. In the absence of any other written agreement concerning such
additional systems, the term "SYSTEM" shall include, and this Addendum shall
govern, the Fund's access to and use of any additional System made available by
State Street and/or accessed by the Fund.
2. NO USE OF THIRD PARTY SYSTEMS-LEVEL SOFTWARE
State Street and the Fund acknowledge that in connection with the Data
Access Services provided under this Addendum, the Fund will have access, through
the Data Access Services, to Fund Data and to functions of State Street's
proprietary systems; provided, however that in no event will the Fund have
direct access to any third party systems-level software that retrieves data for,
stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a.
Designated Equipment; Designated Locations. The System and the Data Access
---------- ---------- ---------- ---------
Services shall be used and accessed solely on and through the Designated
Configuration at the offices of the Fund or the Fund Accountants in Baltimore,
Maryland or Owings Mills, Maryland ("DESIGNATED LOCATIONS").
b.
Designated Configuration; Trained Personnel. State Street and the Fund shall
---------- -------------- ------- ---------
be responsible for supplying, installing
and maintaining the Designated Configuration at the Designated Locations. State
Street and the Fund agree that each will engage or retain the services of
trained personnel to enable both parties to perform their respective obligations
under this Addendum. State Street agrees to use commercially reasonable efforts
to maintain the System so that it remains serviceable, provided, however, that
State Street does not guarantee or assure uninterrupted remote access use of the
System.
c.
Scope of Use. The Fund will use the System and the Data Access Services only
----- -- ---
for the processing of securities transactions, the keeping of books of account
for the Fund and accessing data for purposes of reporting and analysis. The
Fund shall not, and shall cause its employees and agents not to (i) permit any
unauthorized third party to use the System or the Data Access Services, (ii)
sell, rent, license or otherwise use the System or the Data Access Services in
the operation of a service bureau or for any purpose other than as expressly
authorized under this Addendum, (iii) use the System or the Data Access Services
for any fund, trust or other investment vehicle), other than as set forth
herein, without the prior written consent of State Street, (iv) allow access to
the System or the Data Access Services through terminals or any other computer
or telecommunications facilities located outside the Designated Locations, (v)
allow or cause any information (other than portfolio holdings, valuations of
portfolio holdings, and other information reasonably necessary for the
management or distribution of the assets of the Fund) transmitted from State
Street's databases, including data from third party sources, available through
use of the System or the Data Access Services to be redistributed or
retransmitted to another computer, terminal or other device for other than use
for or on behalf of the Fund or (vi) modify the System in any way, including
without limitation developing any software for or attaching any devices or
computer programs to any equipment, system, software or database which forms a
part of or is resident on the Designated Configuration.
d.
Other Locations. Except in the event of an emergency or of a planned System
----- ---------
shutdown, the Fund's access to services performed by the System or to Data
Access Services at the Designated Locations may be transferred to a different
location only upon the prior written consent of State Street. In the event of
an emergency or System shutdown, the Fund may use any back-up site included in
the Designated Configuration or any other back-up site agreed to by State
Street, which agreement will not be unreasonably withheld. The Fund may secure
from State Street the right to access the System or the Data Access Services
through computer and telecommunications
facilities or devices complying with the Designated Configuration at additional
locations only upon the prior written consent of State Street and on terms to be
mutually agreed upon by the parties.
e.
Title. Title and all ownership and proprietary rights to the System, including
-----
any enhancements or modifications thereto, whether or not made by State Street,
are and shall remain with State Street.
f.
No Modification. Without the prior written consent of State Street, the Fund
-- ------------
shall not modify, enhance or otherwise create derivative works based upon the
System, nor shall the Fund reverse engineer, decompile or otherwise attempt to
secure the source code for all or any part of the System.
g.
Security Procedures. The Fund shall comply with data access operating standards
-------- ----------
and procedures and with user identification or other password control
requirements and other security procedures as may be issued from time to time by
State Street for use of the System on a remote basis and to access the Data
Access Services. The Fund shall have access only to the Fund Data and
authorized transactions agreed upon from time to time by State Street and, upon
notice from State Street, the Fund shall discontinue remote use of the System
and access to Data Access Services for any security reasons cited by State
Street; provided, that, in such event, State Street shall, for a period not less
than 180 days (or such other shorter period specified by the Fund) after such
discontinuance, assume responsibility to provide accounting services under the
terms of the Custodian Agreement.
h.
Inspections. State Street shall have the right to inspect the use of the System
-----------
and the Data Access Services by the Fund, the Fund Accountants and the Auditor
to ensure compliance with this Addendum. The on-site inspections shall be upon
prior written notice to Fund, the Fund Accountants and the Auditor and at
reasonably convenient times and frequencies so as not to result in an
unreasonable disruption of the Fund's or the Fund Accountants' or the Auditor
respective businesses.
4. PROPRIETARY INFORMATION
a.
Proprietary Information. The Fund acknowledges and State Street represents that
----------- -----------
the System and the databases, computer programs, screen formats, report formats,
interactive design techniques, documentation and other information made
available to the Fund by State Street as part of the Data Access Services and
through the use of the System constitute copyrighted, trade secret, or other
proprietary information of substantial value to State Street. Any and all such
information provided by State Street to the Fund shall be deemed proprietary and
confidential information of State Street (hereinafter "PROPRIETARY
INFORMATION"). The Fund agrees that it will hold such Proprietary Information
in the strictest confidence and secure and protect it in a manner consistent
with its own procedures for the protection of its own confidential information
and to take appropriate action by instruction or agreement with its employees or
agents who are permitted access to the Proprietary Information to satisfy its
obligations hereunder. The Fund further acknowledges that State Street shall
not be required to provide the Fund Accountants or the Auditor with access to
the System unless it has first received from the Fund Accountants and the
Auditor an undertaking with respect to State Street's Proprietary Information in
the form of Attachment C and/or Attachment C-1 to this Addendum. The Fund shall
use all commercially reasonable efforts to assist State Street in identifying
and preventing any unauthorized use, copying or disclosure of the Proprietary
Information or any portions thereof or any of the logic, formats or designs
contained therein.
b.
Cooperation. Without limitation of the foregoing, the Fund shall advise State
-----------
Street immediately in the event the Fund learns or has reason to believe that
any person to whom the Fund has given access to the Proprietary Information, or
any portion thereof, has violated or intends to violate the terms of this
Addendum, and the Fund will, at its reasonable expense, cooperate with State
Street in seeking injunctive or other equitable relief in the name of the Fund
or State Street against any such person.
c.
Injunctive Relief. The Fund acknowledges that the disclosure of any Proprietary
---------- ------
Information, or of any information which at law or equity ought to remain
confidential, will immediately give rise to continuing irreparable injury to
State Street inadequately compensable in damages at law. In addition, State
Street shall be entitled to obtain immediate injunctive relief against the
breach or threatened breach of any of the foregoing undertakings, in addition to
any other legal remedies which may be available.
d.
Survival. The provisions of this Section 4 shall survive the termination of
--------
this Addendum.
5. LIMITATION ON LIABILITY
a.
Standard of Care and Limitation on Amount and Time for Bringing Action. State
-------- -- ---- --- ---------- -- ------ --- ---- --- -------- ------
Street shall be held to a standard of reasonable care with respect to all of its
duties and obligations under this Addendum. The Fund agrees that any liability
of State Street to the Fund or any third party arising with respect to the
System or State Street's provision of Data Access Services under this Data
Access Services Addendum shall be limited to the amount paid by the Fund for the
preceding 24 months for such services. The foregoing limitation shall relate
solely to State Street's provision of the Data Access Services pursuant to this
Addendum and is not intended to limit State Street's responsibility to perform
in accordance with the Custodian Agreement, including its duty to act in
accordance with Proper Instructions. In no event shall State Street be liable
to the Fund or any other party pursuant to this Addendum for any special,
indirect, punitive or consequential damages even if advised of the possibility
of such damages. No action, regardless of form, arising out of the terms of
this Addendum may be brought by the Fund more than two years after the Fund has
knowledge that the cause of action has arisen.
b.
Limited Warranties. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING,
------- ----------
WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, ARE MADE BY STATE STREET.
c.
Third-Party Data. Organizations from which State Street may obtain certain data
----------- ----
included in the System or the Data Access Services are solely responsible for
the contents of such data, and State Street shall have no liability for claims
arising out of the contents of such third-party data, including, but not limited
to, the accuracy thereof.
d.
Regulatory Requirements. As between State Street and the Fund, the Fund shall
---------- ------------
be solely responsible for the accuracy of any accounting statements or reports
produced using the Data Access Services and the System and the conformity
thereof with any requirements of law.
e.
Force Majeure. Neither party shall be liable for any costs or damages due to
----- -------
delay or nonperformance under this Data Access Services Addendum arising out of
any cause or event beyond such party's control, including, without limitation,
cessation of services hereunder or any damages resulting therefrom to the other
party as a result of work stoppage, power or other mechanical
failure, computer virus, natural disaster, governmental action, or communication
disruption.
6. INDEMNIFICATION
The Fund agrees to indemnify and hold State Street harmless from any loss,
damage or expense including reasonable attorney's fees, (a "loss") suffered by
State Street arising from (i) the negligence or willful misconduct in the use by
the Fund of the Data Access Services or the System, including any loss incurred
by State Street resulting from a security breach at the Designated Locations or
committed by the Fund's employees or agents or the Fund Accountants or the and
Auditor, and (ii) any loss resulting from incorrect Client Originated Electronic
Financial Instructions. State Street shall be entitled to rely on the validity
and authenticity of Client Originated Electronic Financial Instructions without
undertaking any further inquiry as long as such instruction is undertaken in
conformity with security procedures established by State Street from time to
time.
7. FEES
Fees and charges for the use of the System and the Data Access Services and
related payment terms shall be as set forth in the custody fee schedule in
effect from time to time between the parties (the "FEE SCHEDULE"). Any tariffs,
duties or taxes imposed or levied by any government or governmental agency by
reason of the transactions contemplated by this Addendum, including, without
limitation, federal, state and local taxes, use, value added and personal
property taxes (other than income, franchise or similar taxes which may be
imposed or assessed against State Street) shall be borne by the Fund. Any
claimed exemption from such tariffs, duties or taxes shall be supported by
proper documentary evidence delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a.
Training. State Street agrees to provide training, at a designated State Street
--------
training facility or at the Designated Locations, to the Fund's personnel in
connection with the use of the System on the Designated Configuration. The Fund
agrees that it will set aside, during regular business hours or at other times
agreed upon by both parties, sufficient time to enable all operators of the
System and the Data Access Services, designated by the Fund, to receive the
training offered by State Street pursuant to this Addendum.
b.
Installation and Conversion. State Street and the Fund shall be responsible for
------------ --- ----------
the technical installation and conversion ("INSTALLATION AND CONVERSION") of the
Designated Configuration. The Fund shall have the following responsibilities in
connection with Installation and Conversion of the System:
(i)
The Fund shall be solely responsible for the timely acquisition and
maintenance of the hardware and software that attach to the Designated
Configuration in order to use the Data Access Services at the
Designated Locations, and
(ii)
State Street and the Fund each agree that they will assign qualified
personnel to actively participate during the Installation and
Conversion phase of the System implementation to enable both parties
to perform their respective obligations under this Addendum.
9. SUPPORT
During the term of this Addendum, State Street agrees to provide the
support services set out in Attachment D to this Addendum.
10. TERM
a.
Term. This Addendum shall become effective on the date of its execution by
----
State Street and shall remain in full force and effect until terminated as
herein provided.
b.
Termination. Either party may terminate this Addendum (i) for any reason by
-----------
giving the other party at least one-hundred and eighty (180) days' prior written
notice in the case of notice of termination by State Street to the Fund or
thirty (30) days' notice in the case of notice from the Fund to State Street of
termination; or (ii) immediately for failure of the other party to comply with
any material term and condition of the Addendum by giving the other party
written notice of termination. In the event the Fund shall cease doing
business, shall become subject to proceedings under the bankruptcy laws (other
than a petition for reorganization or similar proceeding) or shall be
adjudicated bankrupt, this Addendum and the rights granted hereunder shall, at
the option of State Street, immediately terminate with notice to the Fund. This
Addendum shall in any event terminate as to any Fund within ninety (90) days
after the termination of the Custodian Agreement.
c.
Termination of the Right to Use. Upon termination of this Addendum for any
----------- -- --- ----- -- ---
reason, any right to use the System and access to the Data Access Services shall
terminate and the Fund shall immediately cease use of the System and the Data
Access Services. Immediately upon termination of this Addendum for any reason,
the Fund shall return to State Street all copies of documentation and other
Proprietary Information in its possession; provided, however, that in the event
that either party terminates this Addendum or the Custodian Agreement for any
reason other than the Fund's breach, State Street shall provide the Data Access
Services for a period of time and at a price to be agreed upon in writing by the
parties.
11. MISCELLANEOUS
a.Year 2000. State Street will take all steps necessary to ensure that its
---- ----
products (and those of its third-party suppliers) reflect the available state of
the art technology to offer products that are Year 2000 compliant, including,
but not limited to, century recognition of dates, calculations that correctly
compute same century and multi-century formulas and date values, and interface
values that reflect the date issues arising between now and the next one-hundred
years. If any changes are required, State Street will make the changes to its
products at no cost to the Fund and in a commercially reasonable time frame and
will require third-party suppliers to do likewise.
b.
Assignment; Successors. This Addendum and the rights and obligations of the
----------- ----------
Fund and State Street hereunder shall not be assigned by either party without
the prior written consent of the other party, except that State Street may
assign this Addendum to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by, or under common control with
State Street.
c.
Survival. All provisions regarding indemnification, warranty, liability and
--------
limits thereon, and confidentiality and/or protection of proprietary rights and
trade secrets shall survive the termination of this Addendum.
d.
Entire Agreement. This Addendum and the attachments hereto constitute the
------ ---------
entire understanding of the parties hereto with respect to the Data Access
Services and the use of the System and supersedes any and all prior or
contemporaneous representations or agreements, whether oral or written, between
the parties as such may relate to the Data Access Services or the System, and
cannot
be modified or altered except in a writing duly executed by the parties. This
Addendum is not intended to supersede or modify the duties and liabilities of
the parties hereto under the Custodian Agreement or any other agreement between
the parties hereto except to the extent that any such agreement specifically
refers to the Data Access Services or the System. No single waiver or any right
hereunder shall be deemed to be a continuing waiver.
e. Severability.
------------
If any provision or provisions of this Addendum shall be held to be invalid,
unlawful, or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired.
f.
Governing Law. This Addendum shall be interpreted and construed in accordance
--------- ---
with the internal laws of The Commonwealth of Massachusetts without regard to
the conflict of laws provisions thereof.
ATTACHMENT A
MULTICURRENCY HORIZON/R/ ACCOUNTING SYSTEM
SYSTEM PRODUCT DESCRIPTION
I. The Multicurrency HORIZON/R/ Accounting System is designed to provide lot
level portfolio and general ledger accounting for SEC and ERISA type
requirements and includes the following services: 1) recording of general ledger
entries; 2) calculation of daily income and expense; 3) reconciliation of daily
activity with the trial balance, and 4) appropriate automated feeding mechanisms
to (i) domestic and international settlement systems, (ii) daily, weekly and
monthly evaluation services, (iii) portfolio performance and analytic services,
(iv) customer's internal computing systems and (v) various State Street provided
information services products.
II. GlobalQuest/R/ GlobalQuest/R/ is designed to provide customer access to
the following information maintained on The Multicurrency HORIZON/R/ Accounting
System: 1) cash transactions and balances; 2) purchases and sales; 3) income
receivables; 4) tax refund; 5) daily priced positions; 6) open trades; 7)
settlement status; 8) foreign exchange transactions; 9) trade history; and 10)
daily, weekly and monthly evaluation services.
III. HORIZON/R/ Gateway. HORIZON/R/ Gateway provides customers with the
ability to (i) generate reports using information maintained on the
Multicurrency HORIZON/R/ Accounting System which may be viewed or printed at the
customer's location; (ii) extract and download data from the Multicurrency
HORIZONR Accounting System; and (iii) access previous day and historical data.
The following information which may be accessed for these purposes: 1)
holdings; 2) holdings pricing; 3) transactions, 4) open trades; 5) income;
6) general ledger and 7) cash.
IV. State Street Interchange. State Street Interchange is an open
------------------------
information delivery architecture wherein proprietary communication products,
data formats and workstation tools are replaced by industry standards and is
designed to enable the connection of State Street's network to customer
networks, thereby facilitating the sharing of information.
ATTACHMENT C
UNDERTAKING
(FUND ACCOUNTANTS)
The undersigned understands that in the course of its employment as Fund
Accountant to each fund listed on Appendix A (as amended from time to time) to
that certain Custodian Agreement dated as of January 28, 1998 (the "FUND"), it
will have access to State Street Bank and Trust Company's Multicurrency HORIZON
Accounting System and other information systems (collectively, the "SYSTEM").
The undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation, and other information made available to the Undersigned by State
Street Bank and Trust Company ("STATE STREET") as part of the Data Access
Services provided to the Fund and through the use of the System constitute
copyrighted, trade secret, or other proprietary information of substantial value
to State Street. Any and all such information provided by State Street to the
Undersigned shall be deemed proprietary and confidential information of State
Street (hereinafter "PROPRIETARY INFORMATION"). The undersigned agrees that it
will hold such Proprietary Information in confidence and secure and protect it
in a manner consistent with its own procedures for the protection of its own
confidential information and to take appropriate action by instruction or
agreement with its employees who are permitted access to the Proprietary
Information to satisfy its obligations hereunder.
The undersigned will not attempt to intercept data, gain access to data in
transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System and
access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
[The Fund Accountants]
By: ______________________________
Title: ______________________________
Date: ______________________________
ATTACHMENT C-1
UNDERTAKING
(AUDITOR)
The undersigned understands that in the course of its employment as Auditor
to each fund listed on Appendix A (as amended from time to time) to that certain
Custodian Agreement dated as of January 28, 1998 (the "FUND") it will have
access to State Street Bank and Trust Company's Multicurrency HORIZON Accounting
System and other information systems (collectively, the "SYSTEM").
The undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation, and other information made available to the Undersigned by State
Street Bank and Trust Company ("STATE STREET") as part of the Data Access
Services provided to the Fund and through the use of the System constitute
copyrighted, trade secret, or other proprietary information of substantial value
to State Street. Any and all such information provided by State Street to the
Undersigned shall be deemed proprietary and confidential information of State
Street (hereinafter "PROPRIETARY INFORMATION"). The undersigned agrees that it
will hold such Proprietary Information in confidence and secure and protect it
in a manner consistent with its own procedures for the protection of its own
confidential information and to take appropriate action by instruction or
agreement with its employees who are permitted access to the Proprietary
Information to satisfy its obligations hereunder.
The undersigned will not attempt to intercept data, gain access to data in
transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System and
access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
[The Auditor]
By: ______________________________
Title: ______________________________
Date: ______________________________
ATTACHMENT D
SUPPORT
During the term of this Addendum, State Street agrees to provide the
following on-going support services:
a.
Telephone Support. The Fund Designated Persons may contact State Street's
HORIZON/R/ Help Desk and Fund Assistance Center between the hours of 8 a.m. and
6 p.m. (Eastern time) on all business days for the purpose of obtaining answers
to questions about the use of the System, or to report apparent problems with
the System. From time to time, the Fund shall provide to State Street a list of
persons who shall be permitted to contact State Street for assistance (such
persons being referred to as the "FUND DESIGNATED PERSONS").
b.
Technical Support. State Street will provide technical support to assist the
--------- -------
Fund in using the System and the Data Access Services. The total amount of
technical support provided by State Street shall not exceed 10 resource days per
year. State Street shall provide such additional technical support as is
expressly set forth in the fee schedule in effect from time to time between the
parties (the "FEE SCHEDULE"). Technical support, including during installation
and testing, is subject to the fees and other terms set forth in the Fee
Schedule.
c. Maintenance Support. State Street shall use commercially reasonable
-------------------
efforts to correct system functions that do not work according to the System
Product Description as set forth on Attachment A in priority order in the next
scheduled delivery release or otherwise as soon as is practicable.
d.
System Enhancements. State Street will provide to the Fund any enhancements to
------ ------------
the System developed by State Street and made a part of the System; provided
that State Street offer the Fund reasonable training on the enhancement.
Charges for system enhancements shall be as provided in the Fee Schedule.
State Street retains the right to charge for related systems or products that
may be developed and separately made available for use other than through the
System.
e.
Custom Modifications. In the event the Fund desires custom modifications in
------ -------------
connection with its use of the System, the Fund shall make a written request to
State Street providing specifications for the desired modification. Any custom
modifications may be undertaken by State Street in its sole discretion in
accordance with the Fee Schedule.
f.
Limitation on Support. State Street shall have no obligation to support the
---------- -- -------
Fund's use of the System: (1) for use on any computer equipment or
telecommunication facilities which does not conform to the Designated
Configuration or (ii) in the event the Fund has modified the System in breach of
this Addendum.
In WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and on its behalf by its duly authorized representative as
of the date and year first written above.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE VALUE FUND, INC.
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
INSTITUTIONAL DOMESTIC EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
T. ROWE PRICE SMALL CAP STOCK FUND, INC.
T. Rowe Price Small Cap Stock Fund
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE TAX EFFICIENT BALANCED FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Government Reserve Investment Fund
Reserve Investment Fund
SIGNATURE ATTESTED TO: EXECUTED ON BEHALF OF EACH FUND:
/s/Suzanne E. Fraunhoffer /s/Carmen Deyesu
By: _____________________ By:____________________
Name: Suzanne E. Fraunhoffer Name: Carmen Deyesu
Title: Legal Assistant Title: Treasurer for
each of the foregoing
SIGNATURE ATTESTED TO:
STATE STREET BANK AND TRUST COMPANY
/s/Glenn Ciotti /s/Ronald E. Logue
By: _____________________ By:____________________
Name: Glenn Ciotti Name: Ronald E. Logue
Title: VP & Assoc. Counsel Title: Executive Vice
President
SCHEDULE A
COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
United Kingdom State Street Bank None;
and Trust Company The Bank of England,
The Central Gilts Office (CGO);
The Central Moneymarkets Office (CMO)
Euroclear (The Euroclear System)/ State Street London Limited
APPENDIX A
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE GNMA FUND
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Georgia Tax-Free Bond Fund
Florida Insured Intermediate Tax-Free Fund
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE VALUE FUND, INC.
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
INSTITUTIONAL DOMESTIC EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
T. ROWE PRICE SMALL CAP STOCK FUND, INC.
T. Rowe Price Small Cap Stock Fund
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE TAX EFFICIENT BALANCED FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Government Reserve Investment Fund
Reserve Investment Fund
AMENDMENT NO. 1
TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
The Custodian Contract of January 28, 1998, between State Street Bank and Trust
Company and each of the Parties listed on Appendix A thereto is hereby further
amended, as of November 4, 1998, by adding thereto T. Rowe Price International
Funds, Inc., on behalf of T. Rowe Price International Growth & Income Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Growth & Income Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT BALANCED FUND, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
/s/Henry H. Hopkins
By: _____________________________________
Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/Stephen F. Brown
By: _____________________________________
Stephen F. Brown, Vice President
AMENDMENT NO. 2
TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
The Custodian Contract of January 28, 1998, as amended November 4, 1998 between
State Street Bank and Trust Company and each of the Parties listed on Appendix A
thereto is hereby further amended, as of April 21, 1999, by adding thereto T.
Rowe Price Tax-Efficient Funds, Inc., on behalf of T. Rowe Price Tax-Efficient
Balanced Fund and T. Rowe Price Tax-Efficient Growth Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Growth & Income Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT FUNDS, INC.
T. Rowe Price Tax-Efficient Balanced Fund
T. Rowe Price Tax-Efficient Growth Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
/s/ Henry H. Hopkins
By: _____________________________________
Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/ Ronald E. Logue
By: _____________________________________
Ronald E. Logue, Vice Chairman
AMENDMENT NO. 3
TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
The Custodian Contract of January 28, 1998, as amended November 4, 1998 and
April 21, 1999 between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended, as of February
9, 2000, by adding thereto Institutional Equity Funds, Inc., on behalf of
Institutional Large-Cap Value Fund and Institutional Small-Cap Stock Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Institutional Large-Cap Value Fund
Institutional Small-Cap Stock Fund
Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Growth & Income Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT FUNDS, INC.
T. Rowe Price Tax-Efficient Balanced Fund
T. Rowe Price Tax-Efficient Growth Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
/s/ Henry H. Hopkins
By: _____________________________________
Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/ Ronald E. Logue
By: _____________________________________
Ronald E. Logue, Vice Chairman
AMENDMENT NO. 4
TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
The Custodian Contract of January 28, 1998, as amended November 4, 1998, April
21, 1999, and February 9, 2000 between State Street Bank and Trust Company and
each of the Parties listed on Appendix A thereto is hereby further amended, as
of April 19, 2000, by adding thereto T. Rowe Price International Funds, Inc., on
behalf of T. Rowe Price Emerging Europe & Mediterranean Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Institutional Large-Cap Value Fund
Institutional Small-Cap Stock Fund
Institutional Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Growth & Income Fund
T. Rowe Price Emerging Europe & Mediterranean Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT FUNDS, INC.
T. Rowe Price Tax-Efficient Balanced Fund
T. Rowe Price Tax-Efficient Growth Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
/s/ Henry H. Hopkins
By: _____________________________________
Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/ Ronald E. Logue
By: _____________________________________
Ronald E. Logue, Vice Chairman
AMENDMENT NO. 5
TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
The Custodian Contract of January 28, 1998, as amended November 4, 1998, April
21, 1999, February 9, 2000, and April 19, 2000 between State Street Bank and
Trust Company and each of the Parties listed on Appendix A thereto is hereby
further amended, as of July 18, 2000, by adding thereto T. Rowe Price Developing
Technologies Fund, Inc., T. Rowe Price Global Technology Fund, Inc., and T. Rowe
Price U.S. Bond Index Fund, Inc.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Institutional Large-Cap Value Fund
Institutional Small-Cap Stock Fund
Institutional Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Growth & Income Fund
T. Rowe Price Emerging Europe & Mediterranean Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT FUNDS, INC.
T. Rowe Price Tax-Efficient Balanced Fund
T. Rowe Price Tax-Efficient Growth Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. BOND INDEX FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
/s/ Henry H. Hopkins
By: _____________________________________
Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/ Ronald E. Logue
By: _____________________________________
Ronald E. Logue, Vice Chairman
AMENDMENT NO. 6
TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
The Custodian Contract of January 28, 1998, as amended November 4, 1998, April
21, 1999, February 9, 2000, April 19, 2000 and July 18, 2000 between State
Street Bank and Trust Company and each of the Parties listed on Appendix A
thereto is hereby further amended, as of October 25, 2000, by adding thereto T.
Rowe Price International Index Fund, Inc., on behalf of T. Rowe Price
International Equity Index Fund; T. Rowe Price Tax-Efficient Funds, Inc., on
behalf of T. Rowe Price Tax-Efficient Multi-Cap Growth Fund; and T. Rowe Price
Equity Series, Inc., on behalf of T. Rowe Price Blue Chip Growth Portfolio, T.
Rowe Price Equity Index 500 Portfolio, and T. Rowe Price Health Sciences
Portfolio.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Blue Chip Growth Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Equity Index 500 Portfolio
T. Rowe Price Health Sciences Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Institutional Large-Cap Value Fund
Institutional Small-Cap Stock Fund
Institutional Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Growth & Income Fund
T. Rowe Price Emerging Europe & Mediterranean Fund
T. ROWE PRICE INTERNATIONAL INDEX FUND, INC.
T. Rowe Price International Equity Index Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT FUNDS, INC.
T. Rowe Price Tax-Efficient Balanced Fund
T. Rowe Price Tax-Efficient Growth Fund
T. Rowe Price Tax-Efficient Multi-Cap Growth Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. BOND INDEX FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
/s/ Henry H. Hopkins
By: _____________________________________
Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/ Ronald E. Logue
By: _____________________________________
Ronald E. Logue, Vice Chairman
AMENDMENT NO. 7
TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
The Custodian Contract of January 28, 1998, as amended November 4, 1998, April
21, 1999, February 9, 2000, April 19, 2000, July 18, 2000, and October 25, 2000
between State Street Bank and Trust Company and each of the Parties listed on
Appendix A thereto is hereby further amended, as of February 7, 2001, by adding
thereto T. Rowe Price State Tax-Free Income Trust, on behalf of Maryland
Tax-Free Money Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Blue Chip Growth Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Equity Index 500 Portfolio
T. Rowe Price Health Sciences Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Institutional Large-Cap Value Fund
Institutional Small-Cap Stock Fund
Institutional Mid-Cap Equity Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Growth & Income Fund
T. Rowe Price Emerging Europe & Mediterranean Fund
T. ROWE PRICE INTERNATIONAL INDEX FUND, INC.
T. Rowe Price International Equity Index Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SHORT-TERM U.S. GOVERNMENT FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Money Fund
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Virginia Short-Term Tax-Free Bond Fund
Florida Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT FUNDS, INC.
T. Rowe Price Tax-Efficient Balanced Fund
T. Rowe Price Tax-Efficient Growth Fund
T. Rowe Price Tax-Efficient Multi-Cap Growth Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. BOND INDEX FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
/s/ Henry H. Hopkins
By: _____________________________________
Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/ Ronald E. Logue
By: _____________________________________
Ronald E. Logue, Vice Chairman
AMENDMENT NO. 8
TO CUSTODIAN CONTRACT BETWEEN
STATE STREET BANK AND TRUST COMPANY AND
THE T. ROWE PRICE FUNDS
The Custodian Contract of January 28, 1998, as amended November 4, 1998, April
21, 1999, February 9, 2000, April 19, 2000, July 18, 2000, October 25, 2000, and
February 7, 2001 between State Street Bank and Trust Company and each of the
Parties listed on Appendix A thereto is hereby further amended, as of July 24,
2001, by adding thereto Institutional Equity Funds, Inc., on behalf of
Institutional Large-Cap Growth Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Blue Chip Growth Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Equity Index 500 Portfolio
T. Rowe Price Health Sciences Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Institutional Large-Cap Value Fund
Institutional Small-Cap Stock Fund
Institutional Mid-Cap Equity Growth Fund
Institutional Large-Cap Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Global Bond Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Growth & Income Fund
T. Rowe Price Emerging Europe & Mediterranean Fund
T. ROWE PRICE INTERNATIONAL INDEX FUND, INC.
T. Rowe Price International Equity Index Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE REAL ESTATE FUND, INC.
T. ROWE PRICE RESERVE INVESTMENT FUNDS, INC.
T. Rowe Price Reserve Investment Fund
T. Rowe Price Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
Maryland Tax-Free Money Fund
Maryland Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
New York Tax-Free Bond Fund
New York Tax-Free Money Fund
New Jersey Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
Florida Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
T. ROWE PRICE TAX-EFFICIENT FUNDS, INC.
T. Rowe Price Tax-Efficient Balanced Fund
T. Rowe Price Tax-Efficient Growth Fund
T. Rowe Price Tax-Efficient Multi-Cap Growth Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. BOND INDEX FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE VALUE FUND, INC.
/s/ Henry H. Hopkins
By: _____________________________________
Henry H. Hopkins, Vice President
STATE STREET BANK AND TRUST COMPANY
/s/ Ronald E. Logue
By: _____________________________________
Ronald E. Logue, Vice Chairman
EX-99.G CUST AGREEMT
6
globalcustagr.txt
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective January 3, 1994, and is between THE CHASE
MANHATTAN BANK, N.A. (the "Bank") and EACH OF THE ENTITIES LISTED ON SCHEDULE A
HERETO, Individually and Separately (each individually, the "Customer").
1. CUSTOMER ACCOUNTS.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a)
A custody account in the name of the Customer ("Custody Account") for any
and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase or subscribe for the same or evidencing or representing any other
rights or interests therein and other similar property whether
certificated or uncertificated as may be received by the Bank or its
Subcustodian (as defined in Section 3) for the account of the Customer
("Securities"); and
(b)
A deposit account in the name of the Customer ("Deposit Account") for any
and all cash in any currency received by the Bank or its Subcustodian for
the account of the Customer, which cash shall not be subject to withdrawal
by draft or check.
The Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts. The Bank may deliver securities of the
same class in place of those deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional Accounts
may be established and separately accounted for as additional Accounts under the
terms of this Agreement.
2. MAINTENANCE OF SECURITIES AND CASH AT BANK AND SUBCUSTODIAN LOCATIONS.
Unless Instructions specifically require another location acceptable to the
Bank:
(a)
Securities will be held in the country or other jurisdiction in which the
principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b)
Cash will be credited to an account in a country or other jurisdiction in
which such cash may be legally deposited or is the legal currency for the
payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or non-interest
bearing accounts as may be available for the particular currency. To the extent
Instructions are issued and the Bank can comply with such Instructions, the Bank
is authorized to maintain cash balances on deposit for the Customer with itself
or one of its affiliates at such reasonable rates of interest as may from time
to time be paid on such accounts, or in non-interest bearing accounts as the
Customer may direct, if acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians as defined in Section 3 (or
their securities depositories), such arrangement must be authorized by a written
agreement, signed by the Bank and the Customer.
3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
The Bank may act under this Agreement through the subcustodians listed in
Schedule B of this Agreement with which the Bank has entered into subcustodial
agreements ("Subcustodians"). The Customer authorizes the Bank to hold Assets
in the Accounts in accounts which the Bank has established with one or more of
its branches or Subcustodians. The Bank and Subcustodians are authorized to
hold any of the Securities in their account with any securities depository in
which they participate.
The Bank reserves the right to add new, replace or remove Subcustodians. The
Customer will be given reasonable notice by the Bank of any amendment to
Schedule B. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other regulatory
authority that supervises or regulates such Subcustodian.
4. USE OF SUBCUSTODIAN.
(a) The Bank will identify such Assets on its books as belonging to the
Customer.
(b) A Subcustodian will hold such Assets together with assets belonging to
other customers of the Bank in accounts identified on such Subcustodian's
books as special custody accounts for the exclusive benefit of customers
of the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject only to
the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject
only to the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding its
customer's assets shall provide that such assets will not be subject to
any right, charge, security interest, lien or claim of any kind in favor
of such Subcustodian or its creditors except for a claim for payment for
safe custody or administration, and that the beneficial ownership of such
assets will be freely transferable without the payment of money or value
other than for safe custody or administration.
The foregoing shall not apply to the extent of any special agreement or
arrangement made by the Customer with any particular Subcustodian.
5. DEPOSIT ACCOUNT TRANSACTIONS.
(a) The Bank or its Subcustodians will make payments from the Deposit Account
upon receipt of Instructions which include all information required by the
Bank.
(b) In the event that any payment to be made under this Section 5 exceeds the
funds available in the Deposit Account, the Bank, in its discretion, may
advance the Customer such excess amount which shall be deemed a loan
payable on demand, bearing interest at the rate customarily charged by the
Bank on similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or at any time
prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, the Customer
will promptly return any such amount upon oral or written notification:
(i) that such amount has not been received in the ordinary course of
business or (ii) that such amount was incorrectly credited. If the
Customer does not promptly return any amount upon such notification, the
Bank shall be entitled, upon oral or written notification to the Customer,
to reverse such credit by debiting the Deposit Account for the amount
previously credited. The Bank or its Subcustodian shall have no duty or
obligation to institute legal proceedings, file a claim or a proof of
claim in any insolvency proceeding or take any other action with respect
to the collection of such amount, but may act for the Customer upon
Instructions after consultation with the Customer.
6. CUSTODY ACCOUNT TRANSACTIONS.
(a) Securities will be transferred, exchanged or delivered by the Bank or its
Subcustodian upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for Securities
received for, and delivery of Securities out of, the Custody Account may
be made in accordance with the customary or established securities trading
or securities processing practices and procedures in the jurisdiction or
market in which the transaction occurs, including, without limitation,
delivery of Securities to a purchaser, dealer or their agents against a
receipt with the expectation of receiving later payment and free delivery.
Delivery of Securities out of the Custody Account may also be made in any
manner specifically required by Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any
sale, exchange or purchase of Securities. Otherwise, such transactions
will be credited or debited to the Accounts on the date cash or Securities
are actually received by the Bank and reconciled to the Account.
(i) The Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a
reasonable period, determined by the Bank in its discretion, after the
contractual settlement date for the related transaction.
(ii)
If any Securities delivered pursuant to this Section 6 are returned by
the recipient thereof, the Bank may reverse the credits and debits of
the particular transaction at any time.
7. ACTIONS OF THE BANK.
The Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will:
(a) Present for payment any Securities which are called, redeemed or retired
or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that the Bank or
Subcustodian is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other certificates
as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the Securities,
including, without limitation, affiliates of the Bank or any Subcustodian.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any transfers of
Assets to or from the Accounts. Such statements, advices or notifications shall
indicate the identity of the entity having custody of the Assets. Unless the
Customer sends the Bank a written exception or objection to any Bank statement
within ninety (90) days of receipt, the Customer shall be deemed to have
approved such statement. The Bank shall, to the extent permitted by law, be
released, relieved and discharged with respect to all matters set forth in such
statement or reasonably implied therefrom as though it had been settled by the
decree of a court of competent jurisdiction in an action where the Customer and
all persons having or claiming an interest in the Customer or the Customer's
Accounts were parties if: (a) the Customer has failed to provide a written
exception or objection to any Bank statement within ninety (90) days of receipt
and where the Customer's failure to so provide a written exception or objection
within such ninety (90) day period has limited the Bank's (i) access to the
records, materials and other information required to investigate the Customer's
exception or objection, and (ii) ability to recover from third parties any
amounts for which the Bank may become liable in connection with such exception
or objection, or (b) where the Customer has otherwise explicitly approved any
such statement.
All collections of funds or other property paid or distributed in respect of
Securities in the Custody Account shall be made at the risk of the Customer.
The Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank or by its Subcustodians of any payment, redemption
or other transaction regarding Securities in the Custody Account in respect of
which the Bank has agreed to take any action under this Agreement.
8. CORPORATE ACTIONS; PROXIES.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities (other
than a proxy), such as subscription rights, bonus issues, stock repurchase plans
and rights offerings, or legal notices or other material intended to be
transmitted to securities holders ("Corporate Actions"), the Bank will give the
Customer notice of such Corporate Actions to the extent that the Bank's central
corporate actions department has actual knowledge of a Corporate Action in time
to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received which
bears an expiration date, the Bank will endeavor to obtain Instructions from the
Customer or its Authorized Person, but if Instructions are not received in time
for the Bank to take timely action, or actual notice of such Corporate Action
was received too late to seek Instructions, the Bank is authorized to sell such
rights entitlement or fractional interest and to credit the Deposit Account with
the proceeds or take any other action it deems, in good faith, to be appropriate
in which case it shall be held harmless for any such action.
The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing. Such
proxies shall be executed in the appropriate nominee name relating to Securities
in the Custody Account registered in the name of such nominee but without
indicating the manner in which such proxies are to be voted; and where bearer
Securities are involved, proxies will be delivered in accordance with
Instructions.
9. NOMINEES.
Securities which are ordinarily held in registered form may be registered in
a nominee name of the Bank, Subcustodian or securities depository, as the case
may be. The Bank may without notice to the Customer cause any such Securities
to cease to be registered in the name of any such nominee and to be registered
in the name of the Customer. In the event that any Securities registered in a
nominee name are called for partial redemption by the issuer, the Bank may allot
the called portion to the respective beneficial holders of such class of
security pro rata or in any other manner that is fair, equitable and
practicable. The Customer agrees to hold the Bank, Subcustodians, and their
respective nominees harmless from any liability arising directly or indirectly
from their status as a mere record holder of Securities in the Custody Account.
10. AUTHORIZED PERSONS.
As used in this Agreement, the term "Authorized Person" means employees or
agents including investment managers as have been designated by written notice
from the Customer or its designated agent to act on behalf of the Customer under
this Agreement. Such persons shall continue to be Authorized Persons until such
time as the Bank receives Instructions from the Customer or its designated agent
that any such employee or agent is no longer an Authorized Person.
11. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person received
by the Bank, via telephone, telex, TWX, facsimile transmission, bank wire or
other teleprocess or electronic instruction or trade information system
acceptable to the Bank which the Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly thereafter
be confirmed in writing by an Authorized Person (which confirmation may bear the
facsimile signature of such Person), but the Customer will hold the Bank
harmless for the failure of an Authorized Person to send such confirmation in
writing, the failure of such confirmation to conform to the telephone
instructions received or the Bank's failure to produce such confirmation at any
subsequent time. The Bank may electronically record any Instructions given by
telephone, and any other telephone discussions with respect to the Custody
Account. The Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which the Bank shall make
available to the Customer or its Authorized Persons.
12. STANDARD OF CARE; LIABILITIES.
(a) The Bank shall be responsible for the performance of only such duties as
are set forth in this Agreement or expressly contained in Instructions
which are consistent with the provisions of this Agreement.
Notwithstanding anything to the contrary in this Agreement:
(i) The Bank will use reasonable care with respect to its obligations
under this Agreement and the safekeeping of Assets. The Bank shall be
liable to the Customer for any loss which shall occur as the result of
the failure of a Subcustodian to exercise reasonable care with respect
to the safekeeping of such Assets to the same extent that the Bank
would be liable to the Customer if the Bank were holding such Assets in
New York. In the event of any loss to the Customer by reason of the
failure of the Bank or its Subcustodian to utilize reasonable care, the
Bank shall be liable to the Customer only to the extent of the
Customer's direct damages, and shall in no event be liable for any
special or consequential damages.
(ii)
The Bank will not be responsible for any act, omission, default or for
the solvency of any broker or agent which it or a Subcustodian appoints
unless such appointment was made negligently or in bad faith or for any
loss due to the negligent act of such broker or agent except to the
extent that such broker or agent (other than a Subcustodian) performs
in a negligent manner which is the cause of the loss to the Customer
and the Bank failed to exercise reasonable care in monitoring such
broker's or agent's performance where Customer has requested and Bank
has agreed to accept such monitoring responsibility.
(iii)
The Bank shall be indemnified by, and without liability to the Customer
for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise within the scope of this Agreement if such
act or omission was in good faith, without negligence. In performing
its obligations under this Agreement, the Bank may rely on the
genuineness of any document which it believes in good faith to have
been validly executed.
(iv)The Customer agrees to pay for and hold the Bank harmless from any
liability or loss resulting from the imposition or assessment of any
taxes or other governmental charges, and any related expenses with
respect to income from or Assets in the Accounts, except to the extent
that the Bank has failed to exercise reasonable care in performing any
obligations which the Bank may have agreed to assume (in addition to
those stated in this Agreement) with respect to taxes and such failure
by the Bank is the direct cause of such imposition or assessment of
such taxes, charges or expenses.
(v) The Bank shall be entitled to rely, and may act, upon the advice of
counsel (who may be counsel for the Customer) on all legal matters and
shall be without liability for any action reasonably taken or omitted
pursuant to such advice; provided, that the Bank gives (to the extent
practicable) prior notice to Customer of Bank's intention to so seek
advice of counsel and an opportunity for consultation with Customer on
the proposed contact with counsel.
(vi)
The Bank represents and warrants that it currently maintain a banker's
blanket bond which provides standard fidelity and non-negligent loss
coverage with respect to the Securities and Cash which may be held by
Subcustodians pursuant to this Agreement. The Bank agrees that if at
any time it for any reason discontinues such coverage, it shall
immediately give sixty (60) days' prior written notice to the Customer.
The Bank need not maintain any insurance for the benefit of the
Customer.
(vii)
Without limiting the foregoing, the Bank shall not be liable for any
loss which results from: (1) the general risk of investing, or (2)
investing or holding Assets in a particular country including, but not
limited to, losses resulting from nationalization, expropriation or
other governmental actions; regulation of the banking or securities
industry; currency restrictions, devaluations or fluctuations; and
market conditions which prevent the orderly execution of securities
transactions or affect the value of Assets.
(viii)
Neither party shall be liable to the other for any loss due to forces
beyond their control including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear
fusion, fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this Section
12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to the Customer or an
Authorized Person regarding such Instructions;
(ii)
supervise or make recommendations with respect to investments or the
retention of Securities;
(iii)
advise the Customer or an Authorized Person regarding any default in
the payment of principal or income of any security other than as
provided in Section 5(c) of this Agreement;
(iv)
evaluate or report to the Customer or an Authorized Person regarding
the financial condition of any broker, agent (other than a
Subcustodian) or other party to which Securities are delivered or
payments are made pursuant to this Agreement;
(v) review or reconcile trade confirmations received from brokers. The
Customer or its Authorized Persons (as defined in Section 10) issuing
Instructions shall bear any responsibility to review such confirmations
against Instructions issued to and statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may
have a material interest in a transaction, or circumstances are such that
the Bank may have a potential conflict of duty or interest including the
fact that the Bank or any of its affiliates may provide brokerage services
to other customers, act as financial advisor to the issuer of Securities,
act as a lender to the issuer of Securities, act in the same transaction
as agent for more than one customer, have a material interest in the issue
of Securities, or earn profits from any of the activities listed herein.
13. FEES AND EXPENSES.
The Customer agrees to pay the Bank for its services under this Agreement
such amount as may be agreed upon in writing, together with the Bank's
reasonable out-of-pocket or incidental expenses, including, but not limited to,
reasonable legal fees. The Bank shall have a lien on and is authorized to charge
any Accounts of the Customer for any amount owing to the Bank under any
provision of this Agreement upon notice to the Customer.
14. MISCELLANEOUS.
(a) Foreign Exchange Transactions. Pursuant to Instructions, which may be
------------------------------
standing Instructions, to facilitate the administration of the Customer's
trading and investment activity, the Bank is authorized to enter into spot
or forward foreign exchange contracts with the Customer or an Authorized
Person for the Customer and may also provide foreign exchange through its
subsidiaries or Subcustodians. The Bank may establish rules or limitations
concerning any foreign exchange facility made available. In all cases
where the Bank, its subsidiaries, affiliates or Subcustodians enter into a
foreign exchange contract related to Accounts, the terms and conditions of
the then current foreign exchange contract of the Bank, its subsidiary,
affiliate or Subcustodian and, to the extent not inconsistent, this
Agreement shall apply to such transaction.
(b) Certification of Residency, etc. The Customer certifies that it is a
--------------------------------
resident of the United States and agrees to notify the Bank of any changes
in residency. The Bank may rely upon this certification or the
certification of such other facts as may be required to administer the
Bank's obligations under this Agreement. The Customer will indemnify the
Bank against all losses, liability, claims or demands arising directly or
indirectly from any such certifications.
(c) Access to Records. The Bank shall allow the Customer's independent public
------------------
accountants, officers and advisers reasonable access to the records of the
Bank relating to the Assets as is required in connection with their
examination of books and records pertaining to the Customer's affairs.
Subject to restrictions under applicable law, the Bank shall also obtain
an undertaking to permit the Customer's independent public accountants
reasonable access to the records of any Subcustodian which has physical
possession of any Assets as may be required in connection with the
examination of the Customer's books and records.
(d) Governing Law; Successors and Assigns. This Agreement shall be governed
--------------------------------------
by the laws of the State of New York and shall not be assignable by either
party, but shall bind the successors in interest of the Customer and the
Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that the Assets
------------------------------------
deposited in the Accounts are (Check one):
X Employee Benefit Plan or other assets subject to the Employee
-- ----
Retirement Income Security Act of 1974, as amended ("ERISA");
X /2/ Mutual Fund assets subject to certain Securities and Exchange
--
Commission ("SEC") rules and regulations;
X /3/ Neither of the above.
--
With respect to each Customer, this Agreement consists exclusively of this
document together with Schedules A, B, Exhibits I - _______ and the
following Rider(s) to the extent indicated on Schedule A hereto opposite
the name of the Customer under the column headed "Applicable Riders to
Agreement":
X ERISA
- -
X MUTUAL FUND
- -
SPECIAL TERMS AND CONDITIONS
---
There are no other provisions of this Agreement and this Agreement supersedes
any other agreements, whether written or oral, between the parties. Any
amendment to this Agreement must be in writing, executed by both parties.
(f) Severability. In the event that one or more provisions of this Agreement
-------------
are held invalid, illegal or enforceable in any respect on the basis of
any particular circumstances or in any jurisdiction, the validity,
legality and enforceability of such provision or provisions under other
circumstances or in other jurisdictions and of the remaining provisions
will not in any way be affected or impaired.
(g) Waiver. Except as otherwise provided in this Agreement, no failure or
-------
delay on the part of either party in exercising any power or right under
this Agreement operates as a waiver, nor does any single or partial
exercise of any power or right preclude any other or further exercise, or
the exercise of any other power or right. No waiver by a party of any
provision of this Agreement, or waiver of any breach or default, is
effective unless in writing and signed by the party against whom the
waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be effective when
--------
actually received. Any notices or other
-------------------------
With respect to each Customer listed on Schedule A hereto under the heading
"ERISA Trusts."
2.
With respect to each Customer listed on Schedule A hereto under the heading
"Investment Companies/Portfolios Registered Under the Investment Company
Act of 1940."
3.
With respect to certain of the Customers listed on Schedule A hereto under
the heading "Separate Accounts" as indicated on Schedule A.
(h) Notices. All notices under this Agreement shall be effective when
--------
actually received. Any notices or other
EACH OF THE CUSTOMERS, INDIVIDUALLY AND SEPARATELY
LISTED ON SECTION III OF SCHEDULE A HERETO
By:
/s/Alvin M. Younger
Alvin M. Younger
Treasurer
THE CHASE MANHATTAN BANK, N.A.
By:
/s/Alan Naughton
Alan Naughton
Vice President
Schedule A
Page 1 of 2
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1994
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is
REGISTERED UNDER THE INVESTMENT applicable to all Customers
COMPANY ACT OF 1940 listed under Section I of
this Schedule A.
Equity Funds
------------
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small Cap Value Fund, Inc.
CUNA Mutual Funds, Inc. on behalf of:
CUNA Mutual Cornerstone Fund
Schedule A
Page 2 of 2
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
-------- ------------------------
Income Funds
------------
T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Government Bond Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable
to all Customers Under
Section II of this
Schedule A.
T. Rowe Price Trust Company as Trustee for the
Johnson Matthey Salaried
Common Trust Funds
------ ----- -----
T. Rowe Price Trust Company, as Trustee
for the International Common Trust Fund
on behalf of the Underlying Trusts:
Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust
New York City International Common Trust Fund
III. OTHER No Riders are applicable
to the Customer listed
RPFI International Partners, L.P. under Section III of
this Schedule A.
ERISA RIDER TO GLOBAL CUSTODY AGREEMENT
BETWEEN THE CHASE MANHATTAN BANK, N.A. AND
EACH OF THE ENTITIES LISTED ON SCHEDULE A HERETO
EFFECTIVE JANUARY 3, 1994
Customer represents that the Assets being placed in the Bank's custody are
subject to ERISA. It is understood that in connection therewith the Bank is a
service provider and not a fiduciary of the plan and trust to which the assets
are related. The Bank shall not be considered a party to the underlying plan
and trust and the Customer hereby assumes all responsibility to assure that
Instructions issued under this Agreement are in compliance with such plan and
trust and ERISA.
This Agreement will be interpreted as being in compliance with the Department
of Labor Regulations Section 2550.404b-1 concerning the maintenance of indicia
of ownership of plan assets outside of the jurisdiction of the district courts
of the United States.
The following modifications are made to the Agreement:
Section 3. Subcustodians and Securities Depositories.
------------------------------------------
Add the following language to the end of Section 3:
As used in this Agreement, the term Subcustodian and the term securities
depositories include a branch of the Bank, a branch of a qualified U.S. bank, an
eligible foreign custodian, or an eligible foreign securities depository, where
such terms shall mean:
(a) "qualified U.S. bank" shall mean a U.S. bank as described in paragraph
(a)(2)(ii)(A)(1) of the Department of Labor Regulations Section
2550.404b-1;
(b) "eligible foreign custodian" shall mean a banking institution
incorporated or organized under the laws of a country other than the
United States which is supervised or regulated by that country's
government or an agency thereof or other regulatory authority in the
foreign jurisdiction having authority over banks; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of
a country other than the United States, which is supervised or regulated
by that country's government or an agency thereof or other regulatory
authority in the foreign jurisdiction having authority over such
depositories or clearing agencies and which is described in paragraph
(c)(2) of the Department of Labor Regulations Section 2550.404b-1.
Section 4. Use of Subcustodian.
--------------------
Subsection (d) of this section is modified by deleting the last sentence.
Section 5. Deposit Account Payments.
-------------------------
Subsection (b) is amended to read as follows:
(b) In the event that any payment made under this Section 5 exceeds the
funds available in the Deposit Account, such discretionary advance shall
be deemed a service provided by the Bank under this Agreement for which it
is entitled to recover its costs as may be determined by the Bank in good
faith.
Section 10. Authorized Persons.
------------------
Add the following paragraph at the end of Section 10:
Customer represents that: a) Instructions will only be issued by or for a
fiduciary pursuant to Department of Labor Regulation Section 404b-1 (a)(2)(i)
and b) if Instructions are to be issued by an investment manager, such entity
will meet the requirements of Section 3(38) of ERISA and will have been
designated by the Customer to manage assets held in the Customer Accounts
("Investment Manager"). An Investment Manager may designate certain of its
employees to act as Authorized Persons under this Agreement.
Section 14(a). Foreign Exchange Transactions.
------------------------------
Add the following paragraph at the end of Subsection 14(a):
Instructions to execute foreign exchange transactions with the Bank, its
subsidiaries, affiliates or Subcustodians will include (1) the time period in
which the transaction must be completed; (2) the location i.e., Chase New York,
----
Chase London, etc. or the Subcustodian with whom the contract is to be executed
and (3) such additional information and guidelines as may be deemed necessary;
and, if the Instruction is a standing Instruction, a provision allowing such
Instruction to be overridden by specific contrary Instructions.
MUTUAL FUND RIDER TO GLOBAL CUSTODY AGREEMENT
BETWEEN THE CHASE MANHATTAN BANK, N.A. AND
EACH OF THE ENTITIES LISTED ON SCHEDULE A HERETO
EFFECTIVE JANUARY 3, 1994
Customer represents that the Assets being placed in the Bank's custody are
subject to the Investment Company Act of 1940 (the Act), as the same may be
amended from time to time.
Except to the extent that the Bank has specifically agreed to comply with a
condition of a rule, regulation, interpretation promulgated by or under the
authority of the SEC or the Exemptive Order applicable to accounts of this
nature issued to the Bank (Investment Company Act of 1940, Release No. 12053,
November 20, 1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall be solely responsible to assure that the maintenance
of Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority of the
Securities Exchange Commission.
The following modifications are made to the Agreement:
Section 3. Subcustodians and Securities Depositories.
------------------------------------------
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used in this Agreement
shall mean a branch of a qualified U.S. bank, an eligible foreign custodian or
an eligible foreign securities depository, which are further defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined in Rule
17f-5 under the Investment Company Act of 1940;
(b) "eligible foreign custodian" shall mean (i) a banking institution or
trust company incorporated or organized under the laws of a country other
than the United States that is regulated as such by that country's
government or an agency thereof and that has shareholders' equity in
excess of $200 million in U.S. currency (or a foreign currency equivalent
thereof), (ii) a majority owned direct or indirect subsidiary of a
qualified U.S. bank or bank holding company that is incorporated or
organized under the laws of a country other than the United States and
that has shareholders' equity in excess of $100 million in U.S. currency
(or a foreign currency equivalent thereof)(iii) a banking institution or
trust company incorporated or organized under the laws of a country other
than the United States or a majority owned direct or indirect subsidiary
of a qualified U.S. bank or bank holding company that is incorporated or
organized under the laws of a country other than the United States which
has such other qualifications as shall be specified in Instructions and
approved by the Bank; or (iv) any other entity that shall have been so
qualified by exemptive order, rule or other appropriate action of the SEC;
and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of
a country other than the United States, which operates (i) the central
system for handling securities or equivalent book-entries in that country,
or (ii) a transnational system for the central handling of securities or
equivalent book-entries.
The Customer represents that its Board of Directors has approved each of the
Subcustodians listed in Schedule B to this Agreement and the terms of the
subcustody agreements between the Bank and each Subcustodian, which are attached
as Exhibits I through of Schedule B, and further represents that its Board
----
has determined that the use of each Subcustodian and the terms of each
subcustody agreement are consistent with the best interests of the Fund(s) and
its (their) shareholders. The Bank will supply the Customer with any amendment
to Schedule B for approval. As requested by the Bank, the Customer will supply
the Bank with certified copies of its Board of Directors resolution(s) with
respect to the foregoing prior to placing Assets with any Subcustodian so
approved.
Section 11. Instructions.
-------------
Add the following language to the end of Section 11:
Deposit Account Payments and Custody Account Transactions made pursuant to
Section 5 and 6 of this Agreement may be made only for the purposes listed
below. Instructions must specify the purpose for which any transaction is to be
made and Customer shall be solely responsible to assure that Instructions are in
accord with any limitations or restrictions applicable to the Customer by law or
as may be set forth in its prospectus.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or otherwise become
payable;
(c) In exchange for or upon conversion into other securities alone or other
securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment;
(d) Upon conversion of Securities pursuant to their terms into other
securities;
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities;
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses;
(g) In connection with any borrowings by the Customer requiring a pledge of
Securities, but only against receipt of amounts borrowed;
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any
restrictions applicable to the Customer;
(i) For the purpose of redeeming shares of the capital stock of the Customer
and the delivery to, or the crediting to the account of, the Bank, its
Subcustodian or the Customer's transfer agent, such shares to be purchased
or redeemed;
(j) For the purpose of redeeming in kind shares of the Customer against
delivery to the Bank, its Subcustodian or the Customer's transfer agent of
such shares to be so redeemed;
(k) For delivery in accordance with the provisions of any agreement among the
Customer, the Bank and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to compliance
with the rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Customer;
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only
upon payment to the Bank of monies for the premium due and a receipt for
the Securities which are to be held in escrow. Upon exercise of the
option, or at expiration, the Bank will receive from brokers the
Securities previously deposited. The Bank will act strictly in accordance
with Instructions in the delivery of Securities to be held in escrow and
will have no responsibility or liability for any such Securities which are
not returned promptly when due other than to make proper request for such
return;
(m) For spot or forward foreign exchange transactions to facilitate security
trading, receipt of income from Securities or related transactions;
(n) For other proper purposes as may be specified in Instructions issued by
an officer of the Customer which shall include a statement of the purpose
for which the delivery or payment is to be made, the amount of the payment
or specific Securities to be delivered, the name of the person or persons
to whom delivery or payment is to be made, and a certification that the
purpose is a proper purpose under the instruments governing the Customer;
and
o) Upon the termination of this Agreement as set forth in Section 14(i).
Section 12. Standard of Care; Liabilities.
------------------------------
Add the following subsection (c) to Section 12:
(c) The Bank hereby warrants to the Customer that in its opinion, after due
inquiry, the established procedures to be followed by each of its
branches, each branch of a qualified U.S. bank, each eligible foreign
custodian and each eligible foreign securities depository holding the
Customer's Securities pursuant to this Agreement afford protection for
such Securities at least equal to that afforded by the Bank's established
procedures with respect to similar securities held by the Bank and its
securities depositories in New York.
Section 14. Access to Records.
------------------
Add the following language to the end of Section 14(c):
Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of internal
accounting controls applicable to the Bank's duties under this Agreement. The
Bank shall endeavor to obtain and furnish the Customer with such similar reports
as it may reasonably request with respect to each Subcustodian and securities
depository holding the Customer's assets.
GLOBAL CUSTODY AGREEMENT
WITH
-----------------------------------
DATE
-----------------------------------
SPECIAL TERMS AND CONDITIONS RIDER
----------------------------------
January, 1994
B
SUB-CUSTODIANS EMPLOYED BY
--------------------------
THE CHASE MANHATTAN BANK, N.A. LONDON, GLOBAL CUSTODY
-----------------------------------------------------
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
ARGENTINA The Chase Manhattan Bank, The Chase Manhattan
N.A., Main Branch Bank, N.A.
25 De Mayo 130/140 Buenos Aires
Buenos Aires
ARGENTINA
AUSTRALIA The Chase Manhattan Bank, The Chase Manhattan Bank
Australia Limited Australia Limited Sydney
36th Floor
World Trade Centre
Jamison Street
Sydney
New South Wales 2000
AUSTRALIA
AUSTRIA Creditanstalt - Bankvereln Credit Lyonnais Vienna
Schottengasse 6
A - 1011, Vienna
AUSTRIA
BANGLADESH Standard Chartered Bank Standard Chartered Bank
18-20 Motijheel C.A. Dhaka
Box 536,
Dhaka-1000
BANGLADESH
BELGIUM Generale Bank Credit Lyonnais Bank
3 Montagne Du Parc Brussels
1000 Bruxelles
BELGIUM
BOTSWANA Standard Chartered Bank Standard Chartered Bank
Botswana Ltd. Botswana Ltd.
4th Floor Commerce House Gabarone
The Mall
Gaborone
BOTSWANA
BRAZIL Banco Chase Manhattan, S.A. Banco Chase Manhattan
Chase Manhattan Center S.A., Sao Paolo
Rua Verbo Divino, 1400
Sao Paulo, SP 04719-002
BRAZIL
CANADA The Royal Bank of Canada Toronto Dominion Bank
Royal Bank Plaza Toronto
Toronto
Ontario M5J 2J5
CANADA
Canada Trust Toronto Dominion Bank
Canada Trust Tower Toronto
BCE Place
161 Bay at Front
Toronto
Ontario M5J 2T2
CANADA
CHILE The Chase Manhattan Bank, The Chase Manhattan
N.A., Agustinas 1235 Bank, N.A., Santiago
Casilla 9192
Santiago
CHILE
COLOMBIA Cititrust Colombia S.A. Cititrust Colombia S.A.
Sociedad Fiduciaria Sociedad Fiduciaria
Av. Jimenez No 8-89 Santafe de Bogota
Santafe de Bogota, DC
COLOMBIA
CZECH Ceskoslovenska Obchodni Ceskoslovenska
REPUBLIC Banka, A.S.; Na Prikoope 14 Obchodni Banka, A.S.
115 20 Praha 1 Praha
CZECH REPUBLIC
DENMARK Den Danske Bank Den Danske Bak
2 Holmens Kanala DK 1091 Copenhagen
Copenhagen
DENMARK
EUROBONDS Cedel S.A. A/c No. 17817
67 Blvd Grande Duchesse ECU:Lloyds Bank PLC
Charlotte LUXEMBOURG International Banking
Dividion
A/c Chase Manhattan Bank, London
N.A. London For all other
currencies: see
relevant country
EURO CDS First Chicago Clearing Centre ECU:Lloyds Bank PLC
27 Leadenhall Street Banking Division London
London EC3A 1AA For all other
UK currencies: see
relevant country
FINLAND Kansallis-Osake-Pankki Kanasallis-Osake-Pankki
Aleksanterinkatu 42
00100 Helsinki 10
FINLAND
FRANCE Banque Paribas Societe Generale Paris
Ref 256
BP 141
3, Rue D'Antin
75078 Paris
Cedex 02
FRANCE
GERMANY Chase Bank A.G. Chase Bank A.G.
Alexanderstrasse 59 Frankfurt
Postfach 90 01 09
60441 Frankfurt/Main
GERMANY
GREECE National Bank of Greece S.A. National Bank of Greece
38 Stadiou Street S.A. Athens
Athens A/c Chase Manhattan
GREECE Bank, N.A., London
A/c No. 040/7/921578-68
HONG KONG The Chase Manhattan Bank,NA The Chase Manhattan
40/F One Exchange Square Bank, N.A., Hong Kong
8, Connaught Place
Central, Hong Kong
HONG KONG
HUNGARY Citibank Budapest Rt. Citibank Budapest Rt.
Vaci Utca 19-21 Budapest
1052 Budapest V
HUNGARY
INDIA The Hongkong and Shanghai The Hongkong and
Banking Corporation Limited Shanghai Banking
52/60 Mahatma Gandhi Road Corporation Limited,
Bombay 400 001 Bombay
INDIA
INDONESIA The Hongkong and Shanghai The Chase Manhattan
Banking Corporation Limited Bank, N.A., Jakarta
World Trade Center
J1. Jend Sudirman Kav. 29-31
Jakarta 10023
INDONESIA
IRELAND Bank of Ireland Allied Irish Bank Dublin
International Financial Services Centre
1 Hargourmaster Place
Dublin 1
IRELAND
ISRAEL Bank Leumi Le-Israel B.M. Bank Leumi Le-Israel
19 Herzi Street B.M., Tel Aviv
65136 Tel Aviv
ISRAEL
ITALY The Chase Manhattan Bank, The Chase Manhattan
N.A., Piazza Meda 1 Bank, N.A., Milan
20121 Milan
ITALY
JAPAN The Chase Manhattan Bank, The Chase Manhattan
N.A.,1-3 Marunouchi 1-Chome Bank, N.A., Tokyo
Chiyoda-Ku
Tokyo 100
JAPAN
JORDAN Arab Bank Limited Arab Bank Limited
P.O. Box 950544-5 Amman
Amman
Shmeisani
JORDAN
LUXEMBOURG Banque Generale du Luxembourg Banque Generale du
S.A., 27 Avenue Monterey Luxembourg S.A.
LUXEMBOURG Luxembourg
MALAYSIA The Chase Manhattan Bank, The Chase Manhattan
N.A., Pernas International Bank, N.A., Kuala Lumpur
Jalan Sultan Ismail
50250, Kuala Lumpur
MALAYSIA
MEXICO The Chase Manhattan Bank, No correspondent Bank
N.A., Hamburgo 213, Piso 7 (Equities)
06660 Mexico D.F.
MEXICO
(Government Banco Nacional de Mexico, Banque Commerciale du
Bonds) Avenida Juarez No. Maroc
104-11 Piso Casablanca
06040 Mexico D.F.
MEXICO
NETHERLANDS ABN AMRO N.V. Credit Lyonnais
Securities Centre Bank Nederland N.V.
P.O. Box 3200 Rotterdam
4800 De Breda
NETHERLANDS
NEW ZEALAND National Nominees Limited National Bank of New Zealand
Level 2 BNZ Tower Wellington
125 Queen Street
Auckland
NEW ZEALAND
NORWAY Den Norske Bank Den Norske Bank
Kirkegaten 21 Oslo
Oslo 1
NORWAY
PAKISTAN Citibank N.A. Citibank N.A.
State Life Building No.1 Karachi
I.I. Chundrigar Road
Karachi
PAKISTAN
PERU Citibank, N.A. Citibank N.A. Lima
Camino Real 457
CC Torre Real - 5th Floor
San Isidro, Lima 27
PERU
PHILIPPINES The Hongkong and Shanghai The Hongkong and Shaghai
Banking Corporation Limited Banking Corporation
Hong Kong Bank Centre 3/F Limited, Manila
San Miguel Avenue
Ortigas Commercial Centre
Pasig Metro Manila
PHILIPPINES
POLAND Bank Polska Kasa Opieki Bank Potska Kasa Opieki
S.A., 6/12 Nowy Swiat Str S.A., Warsaw
00-920 Warsaw
POLAND
PORTUGAL Banco Espirito Santo & Banco Pinto &
Comercial de Lisboa Sotto Mayor
Servico de Gestaode Titulos Avenida Fontes
R. Mouzinho da Silvelra, Pereira de Melo
36 r/c, 1200 Lisbon 1000 Lisbon
PORTUGAL
SHANGHAI The Hongkong and Shanghai The Chase Manhattan
(CHINA) Banking Corporation Limited Bank, N.A.,Hong Kong
Shanghai Branch
Corporate Banking Centre
Unit 504, 5/F Shanghai Centre
1376 Hanjing Xi Lu
Shanghai
THE PEOPLE'S REPUBLIC OF CHINA
SCHENZHEN The Hongkong and Shanghai The Chase Manhattan
(CHINA) Banking Corporation Limited Bank, N.A., Hong Kong
1st Floor
Central Plaza Hotel
No. 1 Chun Feng Lu
Shenzhen
THE PEOPLE'S REPUBLIC OF CHINA
SINGAPORE The Chase Manhattan Bank, The Chase Manhattan
N.A. Bank, N.A.
Shell Tower Singapore
50 Raffles Place
Singapore 0104
SINGAPORE
SOUTH KOREA The Hongkong & Shanghai The Hongkong & Shanghai
Banking Corporation Limited Banking Corporation
6/F Kyobo Building Limited, Seoul
#1 Chongro, 1-ka Chongro-Ku,
Seoul
SOUGH KOREA
SPAIN The Chase Manhattan Bank, Banco Zaragozano, S.A.
N.A.,Calle Peonias 2 Madrid
7th Floor
La Piovera
28042 Madrid
SPAIN
URUGUAY The First National Bank The First National Bank
of Boston of Boston
Zabala 1463 Montevideo
Montevideo
URUGUAY
U.S.A The Chase Manhattan Bank, The Chase Manhattan
N.A. Bank, N.A.
1 Chase Manhattan Plaza New York
New York
NY 10081
U.S.A.
VENEZUELA Citibank N.A. Citibank N.A.
Carmelitas a Altagracia Caracas
Edificio Citibank
Caracas 1010
VENEZUELA
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT, dated as of April 18, 1994 (the "AMENDMENT AGREEMENT")
to the Global Custody Agreement, effective January 3, 1994 (the "CUSTODY
AGREEMENT") by and between each of the Entities listed in Attachment A hereto,
separately and individually (each such entity referred to hereinafter as the
"CUSTOMER") and THE CHASE MANHATTAN BANK, N.A. (the "BANK"). Terms defined in
the Custody Agreement are used herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its global custodian
and the bank wishes to accept such appointment pursuant to the terms of the
Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Section I of Schedule A of the Custody Agreement ("SCHEDULE
---------
A") shall be amended to add each Customer listed in Attachment A hereto. The
revised Schedule A incorporating these changes in the form attached hereto as
Attachment B shall supersede the existing Schedule A in its entirety.
2. Agreement. The Customer agrees to be bound in all respects by all the
---------
terms and conditions of the Custody Agreement and shall be fully liable
thereunder as a "Customer" as defined in the Custody Agreement.
3. Confirmation of Agreement. Except as amended hereby, the Custody
-------------------------
Agreement is in full force and effect and as so amended is hereby ratified,
approved and confirmed by the Customer and the Bank in all respects.
4. Governing Law. This Amendment Agreement shall be construed in
-------------
accordance with and governed by the law of the State of New York without regard
to its conflict of law principles.
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as
of the day and year first above written.
THE CHASE MANHATTAN BANK, N.A.
By: /s/Alan P. Naughton
Alan P. Naughton
Vice President
EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO,
SEPARATELY AND INDIVIDUALLY
By: /s/Carmen F. Deyesu
Carmen F. Deyesu
Treasurer
Attachment A
LIST OF CUSTOMERS
T. Rowe Price International Series, Inc. on behalf of the
T. Rowe Price International Stock Portfolio
T. Rowe Price Equity Series, Inc. on behalf of the
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price New America Growth Fund, Inc.
T. Rowe Price Income Series, Inc. on behalf of
T. Rowe Price Limited-Term Bond Portfolio
Attachment B Schedule A
Page 1 of 2
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1993
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is
REGISTERED UNDER THE INVESTMENT applicable to all Customers
COMPANY ACT OF 1940 listed under Section I of
this Schedule A.
Equity Funds
------------
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
CUNA Mutual Funds, Inc. on behalf of:
CUNA Mutual Cornerstone Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price New America Growth Fund, Inc.
Attachment B Schedule A
Page 2 of 2
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
-------- --------------
AGREEMENT
----------
Income Funds
------------
T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Government Income Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable
to all Customers Under
Section II of this
Schedule A.
T. Rowe Price Trust Company as Trustee for the
Johnson Matthey Salaried
Savings Plan
Common Trust Funds
------------------
T. Rowe Price Trust Company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:
Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust
New York City International Common Trust Fund
III. OTHER No Riders are applicable to
the Customer listed under
RPFI International Section III of this
Partners, L.P. Schedule A.
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT, dated as of August 15, 1994 (the "AMENDMENT
AGREEMENT") to the Global Custody Agreement, effective January 3, 1994, as
amended (the "CUSTODY AGREEMENT") by and between each of the Entities listed in
Attachment A hereto, separately and individually (each such entity referred to
hereinafter as the "CUSTOMER") and THE CHASE MANHATTAN BANK, N.A. (the "BANK").
Terms defined in the Custody Agreement are used herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its global custodian
and the Bank wishes to accept such appointment pursuant to the terms of the
Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Section I of Schedule A of the Custody Agreement ("SCHEDULE
---------
A") shall be amended to add each Customer listed in Attachment A hereto. The
revised Schedule A incorporating these changes in the form attached hereto as
Attachment B shall supersede the existing Schedule A in its entirety.
2. Agreement. The Customer agrees to be bound in all respects by all the
---------
terms and conditions of the Custody Agreement and shall be fully liable
thereunder as a "Customer" as defined in the Custody Agreement.
3. Confirmation of Agreement. Except as amended hereby, the Custody
-------------------------
Agreement is in full force and effect and as so amended is hereby ratified,
approved and confirmed by the Customer and the Bank in all respects.
4. Governing Law. This Amendment Agreement shall be construed in
-------------
accordance with and governed by the law of the State of New York without regard
to its conflict of law principles.
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as
of the day and year first above written.
THE CHASE MANHATTAN BANK, N.A.
By: /s/Alan P. Naughton
Alan P. Naughton
Vice President
EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO,
SEPARATELY AND INDIVIDUALLY
By: /s/Carmen F. Deyesu
Carmen F. Deyesu
Treasurer
Attachment A
LIST OF CUSTOMERS
T. Rowe Price Equity Series, Inc. on behalf of the
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Personal Strategy Funds, Inc. on behalf of
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
Attachment B Schedule A
Page 1 of 2
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1993
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is
REGISTERED UNDER THE INVESTMENT applicable to all Customers
COMPANY ACT OF 1940 listed under Section I of
this Schedule A.
Equity Funds
------------
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
CUNA Mutual Funds, Inc. on behalf of:
CUNA Mutual Cornerstone Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price New America Growth Fund, Inc.
Attachment B Schedule A
Page 2 of 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
-------- --------------
AGREEMENT
----------
Income Funds
------------
T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Government Income Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable
to all Customers Under
Section II of this
Schedule A.
T. Rowe Price Trust Company as Trustee for the
Johnson Matthey Salaried
Savings Plan
Common Trust Funds
------------------
T. Rowe Price Trust company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:
Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust
New York City International Common Trust Fund
III. OTHER No Riders are applicable to
the Customer listed under
RPFI International Section III of this
Partners, L.P. Schedule A.
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT, dated as of November 28, 1994 (the "Amendment
Agreement") to the Global Custody Agreement, effective January 3, 1994, as
amended (the "Custody Agreement") by and between each of the Entities listed in
Attachment A hereto, separately and individually (each such entity referred to
hereinafter as the "Customer") and THE CHASE MANHATTAN BANK, N.A. (the "Bank").
Terms defined in the Custody Agreement are used herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its global custodian
and the Bank wishes to accept such appointment pursuant to the terms of the
Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Section I of Schedule A of the Custody Agreement ("Schedule
A") shall be amended to add each Customer listed in Attachment A hereto. The
revised Schedule A incorporating these changes in the form attached hereto as
Attachment B shall supersede the existing Schedule A in its entirety.
2. Agreement. The Customer agrees to be bound in all respects by all the
terms and conditions of the Custody Agreement and shall be fully liable
thereunder as a "Customer" as defined in the Custody Agreement.
3. Confirmation of Agreement. Except as amended hereby, the Custody
Agreement is in full force and effect and as so amended is hereby ratified,
approved and confirmed by the Customer and the Bank in all respects.
4. Governing Law. This Amendment Agreement shall be construed in
accordance with and governed by the law of the State of New York without regard
to its conflict of law principles.
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as
of the day and year first above written.
THE CHASE MANHATTAN BANK, N.A.
/s/Alan P. Naughton
By :_________________________________
Alan P. Naughton
Vice President
EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO,
SEPARATELY AND INDIVIDUALLY
/s/Carmen F. Deyesu
By: _________________________________
Carmen F. Deyesu
Treasurer
Attachment A
LIST OF CUSTOMERS
T. Rowe Price Value Fund, Inc.
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund
Attachment B Schedule A
Page 1 of 2
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1993
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is
REGISTERED UNDER THE INVESTMENT applicable to all Customers
COMPANY ACT OF 1940 listed under Section I of
this Schedule A.
Equity Funds
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
CUNA Mutual Funds, Inc. on behalf of:
CUNA Mutual Cornerstone Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price New America Growth Fund, Inc.
T. Rowe Price Value Fund, Inc.
Attachment B Schedule A
Page 2 of 2
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
Income Funds
T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Government Income Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable
to all Customers Under
Section II of this
Schedule A.
T. Rowe Price Trust Company as Trustee for the
Johnson Matthey Salaried
Savings Plan
Common Trust Funds
T. Rowe Price Trust company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:
Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust
New York City International Common Trust Fund
III. OTHER No Riders are applicable to
the Customer listed under
RPFI International Section III of this
Partners, L.P. Schedule A.
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT, dated as of May 31, 1995 (the "Amendment Agreement")
to the Global Custody Agreement, effective January 3, 1994, as amended (the
"Custody Agreement") by and between each of the Entities listed in Attachment A
hereto, separately and individually (each such entity referred to hereinafter as
the "Customer") and THE CHASE MANHATTAN BANK, N.A. (the "Bank"). Terms defined
in the Custody Agreement are used herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its global custodian
and the Bank wishes to accept such appointment pursuant to the terms of the
Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Section I of Schedule A of the Custody Agreement ("Schedule
A") shall be amended to add and delete certain Customers as specified in
Attachment A hereto. The revised Schedule A incorporating these changes in the
form attached hereto as Attachment B shall supersede the existing Schedule A in
its entirety.
2. Agreement. The Customer agrees to be bound in all respects by all the
terms and conditions of the Custody Agreement and shall be fully liable
thereunder as a "Customer" as defined in the Custody Agreement.
3. Confirmation of Agreement. Except as amended hereby, the Custody
Agreement is in full force and effect and as so amended is hereby ratified,
approved and confirmed by the Customer and the Bank in all respects.
4. Governing Law. This Amendment Agreement shall be construed in
accordance with and governed by the law of the State of New York without regard
to its conflict of law principles.
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as
of the
day and year first above written.
THE CHASE MANHATTAN BANK, N.A.
/s/Alan P. Naughton
By: _________________________________
Alan P. Naughton
Vice President
EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO,
SEPARATELY AND INDIVIDUALLY
/s/Carmen F. Deyesu
By: _________________________________
Carmen F. Deyesu
Treasurer
Attachment A
LIST OF CUSTOMERS
Add the following Fund:
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Stock Fund
Delete the following Fund:
CUNA Mutual Funds, Inc. on behalf of:
CUNA Mutual Cornerstone Fund
Attachment B Schedule A
Page 1 of 2
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1993
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is
REGISTERED UNDER THE INVESTMENT applicable to all Customers
COMPANY ACT OF 1940 listed under Section I of
this Schedule A.
Equity Funds
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price New America Growth Fund, Inc.
T. Rowe Price Value Fund, Inc.
Attachment B Schedule A
Page 2 of 2
Income Funds
T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Government Income Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable
to all Customers Under
Section II of this
Schedule A.
T. Rowe Price Trust Company as Trustee for the
Johnson Matthey Salaried
Savings Plan
Common Trust Funds
T. Rowe Price Trust company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:
Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust
New York City International Common Trust Fund
III. OTHER No Riders are applicable to
the Customer listed under
RPFI International Section III of this
Partners, L.P. Schedule A.
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT, dated as of November 1, 1995 (the "Amendment
Agreement") to the Global Custody Agreement, effective January 3, 1994, as
amended (the "Custody Agreement") by and between each of the Entities listed in
Attachment A hereto, separately and individually (each such entity referred to
hereinafter as the "Customer") and THE CHASE MANHATTAN BANK, N.A. (the "Bank").
Terms defined in the Custody Agreement are used herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its global custodian
and the Bank wishes to accept such appointment pursuant to the terms of the
Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Section I of Schedule A of the Custody Agreement ("Schedule
A") shall be amended to add and delete certain Customers as specified in
Attachment A hereto. The revised Schedule A incorporating these changes in the
form attached hereto as Attachment B shall supersede the existing Schedule A in
its entirety.
2. Agreement. The Customer agrees to be bound in all respects by all the
terms and conditions of the Custody Agreement and shall be fully liable
thereunder as a "Customer" as defined in the Custody Agreement.
3. Confirmation of Agreement. Except as amended hereby, the Custody
Agreement is in full force and effect and as so amended is hereby ratified,
approved and confirmed by the Customer and the Bank in all respects.
4. Governing Law. This Amendment Agreement shall be construed in
accordance with and governed by the law of the State of New York without regard
to its conflict of law principles.
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as
of the day and year first above written.
THE CHASE MANHATTAN BANK, N.A.
/s/Alan R. Naughton
By: _________________________________
Alan R. Naughton
Vice President
EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO,
SEPARATELY AND INDIVIDUALLY
/s/Carmen F. Deyesu
By: _________________________________
Carmen F. Deyesu
Treasurer
Attachment A
LIST OF CUSTOMERS
Add the following Funds:
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Stock Fund
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price Health & Life Sciences Fund, Inc.
Attachment B Schedule A
Page 1 of 2
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1993
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is
REGISTERED UNDER THE INVESTMENT applicable to all Customers
COMPANY ACT OF 1940 listed under Section I of
this Schedule A.
Equity Funds
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price European Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price New America Growth Fund, Inc.
T. Rowe Price Value Fund, Inc.
T. Rowe Price Health & Life Sciences Fund, Inc.
Attachment B Schedule A
Page 1 of 2
Income Funds
T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Government Income Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Corporate Income Fund, Inc.
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable
to all Customers Under
Section II of this
Schedule A.
T. Rowe Price Trust Company as Trustee for the
Johnson Matthey Salaried
Savings Plan
Common Trust Funds
T. Rowe Price Trust Company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:
Foreign Discovery Trust
Foreign Discovery Trust-Augment
Pacific Discovery Trust
European Discovery Trust
Japan Discovery Trust
Latin American Discovery Trust
New York City International Common Trust Fund
III. OTHER No Riders are applicable to
the Customer listed under
RPFI International Section III of this
Partners, L.P. Schedule A.
AMENDMENT AGREEMENT
The Global Custody Agreement of January 3, 1994, as amended April 18, 1994,
August 15, 1994, November 28, 1994, May 31, 1995, and November 1, 1995 (the
"Custody Agreement"), by and between each of the Entities listed in Attachment A
hereto, separately and individually (each such entity referred to hereinafter as
the "Customer") and The Chase Manhattan Bank, N.A., which contracts have been
assumed by operation of law by THE CHASE MANHATTAN BANK (the "Bank") is hereby
further amended, as of July 31, 1996 (the "Amendment Agreement"). Terms defined
in the Custody Agreement are used herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its global custodian
and the Bank wishes to accept such appointment pursuant to the terms of the
Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Section I of Schedule A of the Custody Agreement ("Schedule
A") shall be amended to add and delete certain Customers as specified in
Attachment A hereto. The revised Schedule A incorporating these changes in the
form attached hereto as Attachment B shall supersede the existing Schedule A in
its entirety.
2. Agreement. The Customer agrees to be bound in all respects by all the
terms and conditions of the Custody Agreement and shall be fully liable
thereunder as a "Customer" as defined in the Custody Agreement.
3. Confirmation of Agreement. Except as amended hereby, the Custody
Agreement is in full force and effect and as so amended is hereby ratified,
approved and confirmed by the Customer and the Bank in all respects.
4. Governing Law. This Amendment Agreement shall be construed in
accordance with and governed by the law of the State of New York without regard
to its conflict of law principles.
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as
of the day and year first above written.
THE CHASE MANHATTAN BANK
/s/Caroline Willson
By:_________________________________
Caroline Willson Vice President
EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEPARATELY AND
INDIVIDUALLY
/s/Carmen F. Deyesu
By:________________________________
Carmen F. Deyesu
Treasurer
Attachment A
LIST OF CUSTOMERS
Add the following Funds:
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price Financial Services Fund, Inc.
Institutional Equity Funds, Inc. on behalf of:
Mid-Cap Equity Growth Fund
T. Rowe Price Mid-Cap Value Fund, Inc.
T. Rowe Price Trust Company, as Trustee for the
International Common Trust Fund on behalf of:
Emerging Markets Equity Trust
Attachment B Schedule A
Page 1 of 2
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK, N.A.
DATED JANUARY 3, 1994
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is
REGISTERED UNDER THE INVESTMENT applicable to all Customers
COMPANY ACT OF 1940 listed under Section I of
this Schedule A.
Equity Funds
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Financial Services Fund, Inc.
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price Health Sciences Fund, Inc.
Institutional Equity Funds, Inc. on behalf of:
Mid-Cap Equity Growth Fund
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price International Series, Inc., on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price Mid-Cap Value Fund, Inc.
T. Rowe Price New America Growth Fund
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price OTC Fund, Inc. on behalf of:
T. Rowe Price OTC Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Value Fund, Inc.
Income Funds
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price International Bond Fund
T. Rowe Price Short-Term Global Income Fund
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable
to all Customers Under
Section II of this
Schedule A.
T. Rowe Price Trust Company as Trustee for the
Johnson Matthey Salaried
Savings Plan
Common Trust Funds
T. Rowe Price Trust Company,
as Trustee for the International
Common Trust Fund on behalf of
the Underlying Trusts:
Emerging Markets Equity Trust
European Discovery Trust
Foreign Discovery Trust
Foreign Discovery Trust-Augment
Japan Discovery Trust
Latin America Discovery Trust
Pacific Discovery Trust
New York City International Common Trust Fund
III. OTHER No Riders are applicable to the
Customer
listed under
RPFI International Section III of this
Partners, L.P. Schedule A.
AMENDMENT, dated July 17, 1997 to the January 3, 1994 Custody Agreement
("Agreement"), as amended July 31, 1996 ("Amendment Agreement"), by and between
each of the Entities listed in Attachment B of the Amendment Agreement,
separately and individually (each such entity hereinafter referred to as the
"Customer"), and The Chase Manhattan Bank, N.A. whose obligations have since
been adopted by The Chase Manhattan Bank ("Bank"), having a place of business at
One Chase Manhattan Plaza, New York, N.Y. 10081
It is hereby agreed as follows:
Section 1. Except as modified hereby, the Agreement is confirmed in all
respects. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Agreement.
Section 2. The Agreement is amended as follows by adding the following as
new ' 15:
(a) "CMBI" shall mean Chase Manhattan Bank International, an indirect
wholly-owned subsidiary of Bank, located in Moscow, Russia, and any nominee
companies appointed by it.
(b) "International Financial Institution" shall mean any bank in the top
1,000 (together with their affiliated companies) as measured by "Tier 1" capital
or any broker/dealer in the top 100 as measured by capital.
(c) "Negligence" shall mean the failure to exercise "Reasonable Care".
(d) "No-Action Letter" shall mean the response of the Securities and
Exchange Commission's Office of Chief Counsel of Investment Management, dated
April 18, 1995, in respect of the Templeton Russia Fund, Inc. (SEC Ref. No.
95-151-CC, File No. 811-8788) providing "no-action" relief under '17(f) of the
Investment Company Act of 1940, as amended, and SEC Rule 17-f5 thereunder, in
connection with custody of such Templeton Russia Fund, Inc.'s investments in
Russian Securities.
(e) "Reasonable Care" shall mean the use of reasonable custodial practices
under the applicable circumstances as measured by the custodial practices then
prevailing in Russia of
International Financial Institutions acting as custodians for their
institutional investor clients in Russia.
(f) "Registrar Company" shall mean any entity providing share registration
services to an issuer of Russian Securities.
(g) "Registrar Contact" shall mean a contract between CMBI and a Registrar
Company (and as the same may be amended from time to time) containing, inter
alia, the contractual provisions described at paragraphs (a)-(e) on pps. 5-6 of
the No-Action Letter.
(h) "Russian Security" shall mean a Security issued by a Russian issuer.
(i) "Share Extract" shall mean: (i) an extract of its share registration
books issued by a Registrar Company indicating an investor's ownership of a
security; and (ii) a form prepared by CMBI or its agent in those cases where a
Registrar Company in unwilling to issue a Share Extract.
Section 3. Section 6(a) of the Agreement is amended by adding the following
at the end thereof: "With respect to Russia, payment for Russian Securities
shall not be made prior to the issuance of the Share Extract relating to such
Russian Security. Delivery of Russian Securities may be made in accordance with
the customary or established securities trading or securities processing
practices and procedures in Russia. Delivery of Russian Securities may also be
made in any manner specifically required by Instructions acceptable to the Bank.
Customer shall promptly supply such transaction and settlement information as
may be requested by Bank or CMBI in connection with particular transactions."
Section 4. Section 8 of the Agreement is amended by adding a new paragraph
to the end thereof as follows: "It is understood and agreed that Bank need only
use its reasonable efforts with respect to performing the functions described in
this '8 with respect to Russian Securities."
Section 5. Section 12(a)(i) of the Agreement is amended with respect to
Russian custody by deleting the phrase "reasonable care" wherever it appears and
substituting, in lieu thereof, the phrase "Reasonable Care."
Section 6. Section 12(a)(i) of the Agreement is further amended with
respect to Russian
custody by inserting the following at the end of the first sentence thereof:
"provided that, with respect to Russian Securities, Bank's responsibilities
shall be limited to safekeeping of relevant Share Extracts."
Section 7. Section 12(a)(i) of the Agreement is further amended with
respect to Russian custody by inserting the following after the second sentence
thereof: "In connection with the foregoing, neither Bank nor CMBI shall assume
responsibility for, and neither shall be liable for, any action or inaction of
any Registrar Company and no Registrar Company shall be, or shall be deemed to
be, Bank, CMBI, a Subcustodian, a securities depository or the employee, agent
or personnel of any of the foregoing. To the extent that CMBI employs agents to
perform any of the functions to be performed by Bank or CMBI with respect to
Russian Securities, neither Bank nor CMBI shall be responsible for any act,
omission, default or for the solvency of any such agent unless the appointment
of such agent was made with Negligence or in bad faith, or for any loss due to
the negligent act of such agent except to the extent that such agent performs in
a negligent manner which is the cause of the loss to the Customer and the Bank
or CMBI failed to exercise reasonable care in monitoring such agent's
performance where Customer has requested and Bank has agreed to accept such
monitoring responsibility and except that where Bank or CMBI uses (i) an
affiliated nominee or (ii) an agent to perform the share registration or share
confirmation functions described in paragraphs (a)-(e) on pps. 5-6 of the
No-Action Letter, and, to the extent applicable to CMBI, the share registration
functions described on pps. 2-3 of the No-Action Letter, Bank and CMBI shall be
liable to Customer as if CMBI were responsible for performing such services
itself."
Section 8. Section 12(a)(ii) is amended with respect to Russian custody by
deleting the word "negligently" and substituting, in lieu thereof, the word
"Negligently."
Section 9. Section 12(a)(iii) is amended with respect to Russian custody by
deleting the word "negligence" and substituting, in lieu thereof, the word
"Negligence."
Section 10. Add a new Section 16 to the Agreement as follows:
(a) Bank will advise Customer (and will update such advice from time to
time as changes occur) of those Registrar Companies with which CMBI has entered
into a Registrar Contract. Bank shall cause CMBI both to monitor each Registrar
Company and to promptly advise Customer when
CMBI has actual knowledge of the occurrence of any one or more of the events
described in paragraphs (i)-(v) on pps. 8-9 of the No-Action Letter with respect
to a Registrar Company that serves in that capacity for any issuer the shares of
which are held by Customer.
(b) Where Customer is considering investing in the Russian Securities of an
issuer as to which CMBI does not have a Registrar Company, Customer may request
that Bank ask that CMBI both consider whether it would be willing to attempt to
enter into such a Registrar Contract and to advise Customer of its willingness
to do so. Where CMBI has agreed to make such an attempt, Bank will advise
Customer of the occurrence of any one or more or the events described in
paragraphs (i)-(iv) on pps. 8-9 of the No-Action Letter of which CMBI has actual
knowledge.
(c) Where Customer is considering investing in the Russian Securities of an
issuer as to which CMBI has a Registrar Contract with the issuer's Registrar
Company, Customer may advise Bank of its interest in investing in such issuer
and, in such event, Bank will advise Customer of the occurrence of any one or
more of the events described in paragraphs (i)-(v) on pps. 8-9 of the No-Action
Letter of which CMBI has actual knowledge.
Section 11. Add a new Section 17 to the Agreement as follows: "Customer
shall pay for and hold Bank and CMBI harmless from any liability or loss
resulting from the imposition or assessment of any taxes (including, but not
limited to, state, stamp and other duties) or other governmental charges, and
any related expenses with respect to income on Russian Securities."
Section 12. Add a new Section 18 to the Agreement as follows: "Customer
acknowledges and agrees that CMBI may not be able, in given cases and despite
its reasonable efforts, to obtain a Share Extract from a Registrar Company and
CMBI shall not be liable in any such even including with respect to any losses
resulting from such failure."
Section 13. Add a new Section 19 to the Agreement as follows: "Customer
acknowledges that it has received, reviewed and understands that Chase market
report for Russia, including, but not limited to, the risks described therein."
Section 14. Add a new Section 20 to the Agreement as follows: "Subject to
the cooperation of a Registrar Company, for at least the first two years
following CMBI's first use of a Registrar
Company, Bank shall cause CMBI to conduct share confirmations on at least a
quarterly basis, although thereafter confirmations may be conducted on a less
frequent basis if Customer's Board of Directors, in consultation with CMBI,
determines it to be appropriate."
Section 15. Add a new Section 21 to the Agreement as follows: "Bank shall
cause CMBI to prepare for distribution to Customer's Board of Directors a
quarterly report identifying: (i) any concerns it has regarding the Russian
share registration system that should be brought to the attention of the Board
of Directors; and (ii) the steps CMBI has taken during the reporting period to
ensure that Customer's interests continue to be appropriately recorded."
Section 16. Add a new Section 22 to the Agreement as follows: "Except as
provided in new '16(b), the services to be provided by Bank hereunder will be
provided only in relation to Russian Securities for which CMBI has entered into
a Registrar Contract with the relevant Registrar Company."
*********************
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
for EACH CUSTOMER THE CHASE MANHATTAN
BANK
separately and individually
/s/Henry H. Hopkins /s/Helen C. Bairsto
Henry H. Hopkins Helen C. Bairsto
Vice President Vice President
AMENDMENT AGREEMENT
The Global Custody Agreement of January 3, 1994, as amended April 18, 1994,
August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, and July 31,
1996 (the "Custody Agreement"), by and between each of the Entities listed in
Attachment A hereto, separately and individually (each such entity referred to
hereinafter as the "Customer") and The Chase Manhattan Bank, N.A., which
contracts have been assumed by operation of law by THE CHASE MANHATTAN BANK (the
"Bank") is hereby further amended, as of July 23, 1997 (the "Amendment
Agreement"). Terms defined in the Custody Agreement are used herein as therein
defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its global custodian
and the Bank wishes to accept such appointment pursuant to the terms of the
Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Section 1 of Schedule A of the Custody Agreement ("Schedule
A") shall be amended to add certain Customers as specified in Attachment A
hereto. The revised Schedule A incorporating these changes in the form attached
hereto as Attachment B shall supersede the existing Schedule A in its entirety.
2. Agreement. The Customer agrees to be bound in all respects by all the
terms and conditions of the Custody Agreement and shall be fully liable
thereunder as a "Customer" as defined in the Custody Agreement.
3. Confirmation of Agreement. Except as amended hereby, the Custody
Agreement is in full force and effect and as so amended is hereby ratified,
approved and confirmed by the Customer and the Bank in all respects.
4. Governing Law: This Amendment Agreement shall be construed in accordance
with and governed by the law of the State of New York without regard to its
conflict of law principles.
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as
of the
day and year first above written.
THE CHASE MANHATTAN BANK
By: /S/Caroline Willson
Caroline Willson
Vice President
EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO,
SEPARATELY AND INDIVIDUALLY
By: /s/Carmen F. Deyesu
Carmen F. Deyesu
Treasurer
Attachment A
LIST OF CUSTOMERS
Add the following Funds:
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
T. Rowe Price Media & Telecommunications Fund, Inc.
T. Rowe Price Tax-Efficient Balanced Fund, Inc.
Change the name of the following Fund:
T. Rowe Price OTC Fund, Inc., on behalf of:
T. Rowe Price OTC Fund
Effective May 1, 1997, the fund name changed to:
T. Rowe Price Small-Cap Stock Fund, Inc.
Delete the following Fund:
T. Rowe Price International Funds, Inc., on behalf of:
T. Rowe Price Short-Term Global Income Fund
Attachment B
Schedule A
Page 1 of 3
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK
DATED JANUARY 3, 1994
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is
REGISTERED UNDER THE INVESTMENT applicable to all Customers
COMPANY ACT OF 1940 listed under Section I of
this Schedule A.
Equity Funds
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Financial Services Fund, Inc.
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price Health Sciences Fund, Inc.
Institutional Equity Funds, Inc. on behalf of:
Mid-Cap Equity Growth Fund
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
PAGE 69
Attachment B
Schedule A
Page 2 of 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
T. Rowe Price International Series, Inc. on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Media & Telecommunications Fund, Inc.
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price Mid-Cap Value Fund, Inc.
T. Rowe Price New America Growth Fund
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Stock Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Value Fund, Inc.
Income Funds
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price International Bond Fund
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Tax-Efficient Balanced Fund, Inc.
Attachment B
Schedule A
Page 3 of 3
APPLICABLE RIDERS TO
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable
to all Customers Under
Section II of this
Schedule A.
T. Rowe Price Trust Company as Trustee for the
Johnson Matthey Salaried
Savings Plan
Common Trust Funds
T. Rowe Price Trust Company, as Trustee for the
International Common Trust Fund on behalf of the Underlying Trusts:
Emerging Markets Equity Trust
European Discovery Trust
Foreign Discovery Trust
Foreign Discovery Trust - Augment
Japan Discovery Trust
Latin America Discovery Trust
Pacific Discovery Trust
New York City International Common Trust Fund
III. OTHER
RPFI International Partners, L.P. No Riders are applicable to the
Customer listed under Section III of this Schedule A.
AMENDMENT, dated July 23, 1997, to the Custody Agreement ("Agreement"),
dated January 3, 1994, between The Chase Manhattan Bank (as successor to The
Chase Manhattan Bank, N.A.), having an office at 270 Park Avenue, New York, NY
10017-2070 and certain T. Rowe Price funds.
It is agreed as follows:
1. The third line of '8 of the Agreement is deleted and the following is
inserted, in lieu thereof:
Bank shall provide proxy voting services in accordance with the
terms of the proxy voting services rider ("Proxy Rider") annexed
hereto as Exhibit 1. Proxy voting services may be provided by Bank
or, in whole or in part, by one or more third parties appointed by
Bank (which may be Affiliates of Bank).
2. Except as modified hereby, the Agreement is confirmed in all respects.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
EACH OF THE CUSTOMERS, INDIVIDUALLY THE CHASE MANHATTAN
AND SEPARATELY LISTED ON SECTION 1 OF BANK
SCHEDULE A HERETO
By:/s/Henry H. Hopkins By:/s/Helen C. Bairsto
Henry H. Hopkins Helen C. Bairsto
Vice President Vice President
EACH OF THE CUSTOMERS, INDIVIDUALLY AND
SEPARATELY LISTED ON SECTION 2 OF
SCHEDULE A HERETO
By:/s/Nancy M. Morris
Nancy M. Morris
Vice President
Exhibit 1
GLOBAL PROXY SERVICE RIDER
TO GLOBAL CUSTODY AGREEMENT
BETWEEN
THE CHASE MANHATTAN BANK
AND
CERTAIN T. ROWE PRICE FUNDS
DATED 3RD JANUARY, 1994
1. Global Proxy Services ("Proxy Services") shall be provided for the
countries listed in the procedures and guidelines ("Procedures") furnished to
the Customer, as the same may be amended by Bank from time to time on prior
notice to Customer. The Procedures are incorporated by reference herein and form
a part of this Rider.
2. Proxy Services shall consist of those elements as set forth in the
Procedures, and shall include (a) notifications ("Notifications") by Bank to
Customer of the dates of pending shareholder meetings, resolutions to be voted
upon and the return dates as may be received by Bank or provided to Bank by its
Subcustodians or third parties, and (b) voting by Bank of proxies based on
Customer directions. Original proxy materials or copies thereof shall not be
provided. Notifications shall generally be in English and, where necessary,
shall be summarized and translated from such non-English materials as have been
made available to Bank or its Subcustodian. In this respect Bank=s only
obligation is to provide information from sources it believes to be reliable
and/or to provide materials summarized and/or translated in good faith. Bank
reserves the right to provide Notifications, or parts thereof, in the language
received. Upon reasonable advance request by Customer, backup information
relative to Notifications, such as annual reports, explanatory material
concerning resolutions, management recommendations or other material relevant to
the exercise of proxy voting rights shall be provided as available, but without
translation.
3. While Bank shall attempt to provide accurate and complete Notifications,
whether or not translated, Bank shall not be liable for any losses or other
consequences that may result from reliance by Customer upon Notifications where
Bank prepared the same in good faith.
4. Notwithstanding the fact that Bank may act in a fiduciary capacity with
respect to Customer under other agreements or otherwise under the Agreement, in
performing Proxy Services
Bank shall be acting solely as the agent of Customer, and shall not
exercise any discretion with regard to such Proxy Services.
5. Proxy voting may be precluded or restricted in a variety of circumstances,
including, without limitation, where the relevant Securities are: (I) on loan;
(ii) at registrar for registration or reregistration; (iii) the subject of a
conversion or other corporate action; (iv) not held in a name subject to the
control of Bank or its Subcustodian or are otherwise held in a manner which
precludes voting; (v) not capable of being voted on account of local market
regulations or practices or restrictions by the issuer; or (vi) held in a margin
or collateral account.
6. Customer acknowledges that in certain countries Bank may be unable to vote
individual proxies but shall only be able to vote proxies on a net basis (e.g.,
a net yes or no vote given the voting instructions received from all customers).
7. Customer shall not make any use of the information provided hereunder,
except in connection with the funds or plans covered hereby, and shall in no
event sell, license, give or otherwise make the information provided hereunder
available, to any third party, and shall not directly or indirectly compete with
Bank or diminish the market for Proxy Services by provision of such information,
in whole or in part, for compensation or otherwise, to any third party.
8. The names of Authorized Persons for Proxy Services shall be furnished to
Bank in accordance with '10 of the Agreement. Proxy Services fees shall be as
separately agreed.
SCHEDULE A
SECTION 1
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Financial Services Fund, Inc.
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price Health Sciences Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited Term Bond Portfolio
Institutional Equity Funds, Inc. on behalf of:
Mid-Cap Equity Growth Fund
T. Rowe Price Media & Telecommunications Fund, Inc.
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price Mid-Cap Value Fund, Inc.
T. Rowe Price New America Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Small-Cap Stock Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Tax-Efficient Balanced Fund, Inc.
T. Rowe Price Value Fund, Inc.
SECTION 2
NYC International Common Trust Fund
AMENDMENT, dated October 29, 1997, to the Custody Agreement ("Agreement"),
dated January 3, 1994, between The Chase Manhattan Bank (as successor to The
Chase Manhattan Bank, N.A.), having an office at 270 Park Avenue, New York, NY
10017-2070 and certain T. Rowe Price funds.
It is agreed as follows:
1. The third line of '8 of the Agreement is deleted and the following is
inserted, in lieu thereof:
Bank shall provide proxy voting services in accordance with the
terms of the proxy voting services rider ("Proxy Rider") annexed
hereto as Exhibit 1. Proxy voting services may be provided by Bank
or, in whole or in part, by one or more third parties appointed by
Bank (which may be Affiliates of Bank).
2. Except as modified hereby, the Agreement is confirmed in all respects.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
EACH OF THE CUSTOMERS, INDIVIDUALLY THE CHASE MANHATTAN
AND SEPARATELY LISTED ON SECTION 1 OF BANK
SCHEDULE A HERETO
By:/s/Henry H. Hopkins By:/s/Helen C. Bairsto
Henry H. Hopkins Helen C. Bairsto
Vice President Vice President
EACH OF THE CUSTOMERS, INDIVIDUALLY AND
SEPARATELY LISTED ON SECTION 2 OF
SCHEDULE A HERETO
By:/s/Nancy M. Morris
Nancy M. Morris
Vice President
GLOBAL PROXY SERVICE RIDER
TO GLOBAL CUSTODY AGREEMENT
BETWEEN
THE CHASE MANHATTAN BANK
AND
CERTAIN T. ROWE PRICE FUNDS
DATED 3RD JANUARY, 1994
1. Global Proxy Services ("Proxy Services") shall be provided for the
countries listed in the procedures and guidelines ("Procedures") furnished to
the Customer, as the same may be amended by Bank from time to time on prior
notice to Customer. The Procedures are incorporated by reference herein and form
a part of this Rider.
2. Proxy Services shall consist of those elements as set forth in the
Procedures, and shall include (a) notifications ("Notifications") by Bank to
Customer of the dates of pending shareholder meetings, resolutions to be voted
upon and the return dates as may be received by Bank or provided to Bank by its
Subcustodians or third parties, and (b) voting by Bank of proxies based on
Customer directions. Original proxy materials or copies thereof shall not be
provided. Notifications shall generally be in English and, where necessary,
shall be summarized and translated from such non-English materials as have been
made available to Bank or its Subcustodian. In this respect Bank=s only
obligation is to provide information from sources it believes to be reliable
and/or to provide materials summarized and/or translated in good faith. Bank
reserves the right to provide Notifications, or parts thereof, in the language
received. Upon reasonable advance request by Customer, backup information
relative to Notifications, such as annual reports, explanatory material
concerning resolutions, management recommendations or other material relevant to
the exercise of proxy voting rights shall be provided as available, but without
translation.
3. While Bank shall attempt to provide accurate and complete Notifications,
whether or not translated, Bank shall not be liable for any losses or other
consequences that may result from reliance by Customer upon Notifications where
Bank prepared the same in good faith.
4. Notwithstanding the fact that Bank may act in a fiduciary capacity with
respect to Customer under other agreements or otherwise under the Agreement, in
performing Proxy Services
Bank shall be acting solely as the agent of Customer, and shall not
exercise any discretion with regard to such Proxy Services.
5. Proxy voting may be precluded or restricted in a variety of circumstances,
including, without limitation, where the relevant Securities are: (I) on loan;
(ii) at registrar for registration or reregistration; (iii) the subject of a
conversion or other corporate action; (iv) not held in a name
subject to the control of Bank or its Subcustodian or are otherwise held in a
manner which precludes voting; (v) not capable of being voted on account of
local market regulations or practices or restrictions by the issuer; or (vi)
held in a margin or collateral account.
6. Customer acknowledges that in certain countries Bank may be unable to vote
individual proxies but shall only be able to vote proxies on a net basis (e.g.,
a net yes or no vote given the voting instructions received from all customers).
7. Customer shall not make any use of the information provided hereunder,
except in connection with the funds or plans covered hereby, and shall in no
event sell, license, give or otherwise make the information provided hereunder
available, to any third party, and shall not directly or indirectly compete with
Bank or diminish the market for Proxy Services by provision of such information,
in whole or in part, for compensation or otherwise, to any third party.
8. The names of Authorized Persons for Proxy Services shall be furnished to
Bank in accordance with '10 of the Agreement. Proxy Services fees shall be as
separately agreed.
SCHEDULE A
SECTION 1
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Financial Services Fund, Inc.
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price Health Sciences Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited Term Bond Portfolio
Institutional Equity Funds, Inc. on behalf of:
Mid-Cap Equity Growth Fund
T. Rowe Price Media & Telecommunications Fund, Inc.
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price Mid-Cap Value Fund, Inc.
T. Rowe Price New America Growth Fund, Inc.
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Real Estate Fund, Inc.
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Small-Cap Stock Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Tax-Efficient Balanced Fund, Inc.
T. Rowe Price Value Fund, Inc.
SECTION 2
NYC International Common Trust Fund
AMENDMENT AGREEMENT
The Global Custody Agreement of January 3, 1994, as amended April 18, 1994,
August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, July 31,
1996, and July 23, 1997 (the "Custody Agreement"), by and between each of the
Entities listed in Attachment A hereto, separately and individually (each such
entity referred to hereinafter as the "Customer") and The Chase Manhattan Bank,
N.A., which contracts have been assumed by operation of law by THE CHASE
MANHATTAN BANK (the "Bank") is hereby further amended, as of October 29, 1997
(the "Amendment Agreement"). Terms defined in the Custody Agreement are used
herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its global custodian
and the Bank wishes to accept such appointment pursuant to the terms of the
Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Section 1 of Schedule A of the Custody Agreement ("Schedule
A") shall be amended to add certain Customers as specified in Attachment A
hereto. The revised Schedule A incorporating these changes in the form attached
hereto as Attachment B shall supersede the existing Schedule A in its entirety.
2. Agreement. The Customer agrees to be bound in all respects by all the
terms and conditions of the Custody Agreement and shall be fully liable
thereunder as a "Customer" as defined in the Custody Agreement.
3. Confirmation of Agreement. Except as amended hereby, the Custody
Agreement is in full force and effect and as so amended is hereby ratified,
approved and confirmed by the Customer and the Bank in all respects.
4. Governing Law: This Amendment Agreement shall be construed in
accordance with and governed by the law of the State of New York without regard
to its conflict
of law principles.
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as
of the day and year first above written.
THE CHASE MANHATTAN BANK
By: /s/Helen C. Bairsto
Helen C. Bairsto
Vice President
EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO,
SEPARATELY AND INDIVIDUALLY
By: /s/Carmen F. Deyesu
Carmen F. Deyesu
Treasurer
Attachment A
LIST OF CUSTOMERS
Add the following Fund:
T. Rowe Price Real Estate Fund, Inc.
Attachment B
Schedule A
Page 1 of 3
LIST OF CUSTOMERS, EACH INDIVIDUALLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK
DATED JANUARY 3, 1994
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is
REGISTERED UNDER THE INVESTMENT applicable to all Customers
COMPANY ACT OF 1940 listed under Section I of
this Schedule A.
Equity Funds
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Financial Services Fund, Inc.
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price Health Sciences Fund, Inc.
Institutional Equity Funds, Inc. on behalf of:
Mid-Cap Equity Growth Fund
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
Attachment B
Schedule A
Page 2 of 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
T. Rowe Price International Series, Inc. on behalf of:
T. Rowe Price International Stock Portfolio
T. Rowe Price Media & Telecommunications Fund, Inc.
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price Mid-Cap Value Fund, Inc.
T. Rowe Price New America Growth Fund
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price Real Estate Fund, Inc.
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Stock Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Value Fund, Inc.
Income Funds
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price International Bond Fund
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Tax-Efficient Balanced Fund, Inc.
Attachment B
Schedule A
Page 3 of 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable
to all Customers Under
Section II of this
Schedule A.
T. Rowe Price Trust Company as Trustee for the
Johnson Matthey Salaried
Employee Savings Plan
Common Trust Funds
T. Rowe Price Trust Company, as Trustee for the
International Common Trust Fund on behalf of the Underlying Trusts:
Emerging Markets Equity Trust
European Discovery Trust
Foreign Discovery Trust
Foreign Discovery Trust - Augment
Japan Discovery Trust
Latin America Discovery Trust
Pacific Discovery Trust
New York City International Common Trust Fund
III. OTHER
RPFI International Partners, L.P. No Riders are
applicable to the
Customer listed under
Section III of this
Schedule A.
AMENDMENT AGREEMENT TO
RUSSIAN RIDER TO THE GLOBAL
CUSTODY AGREEMENT
AMENDMENT to Attachment B of Global Custody Agreement dated January 3,
1994, as amended July 23, 1997, is hereby further amended as of September 3,
1997.
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Amend Attachment B to consist of the following funds when
pertaining to the Russian Rider dated July 17, 1997:
Institutional International Funds, Inc., on behalf of:
Foreign Equity Fund
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price Global Government Bond Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price International Series, Inc. on behalf of:
T. Rowe Price International Stock Portfolio
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as
of the day and year first above written.
THE CHASE MANHATTAN BANK EACH OF THE PARTIES LISTED ABOVE
By: /s/Helen C. Bairsto By:/s/Henry H. Hopkins
Helen C. Bairsto Henry H. Hopkins
Vice President Vice President
AMENDMENT AGREEMENT
The Global Custody Agreement of January 3, 1994, as amended April 18, 1994,
August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, July 31,
1996, July 23, 1997, September 3, 1997, and October 29, 1997 (the "Custody
Agreement"), by and between each of the Entities listed in Schedule A, as
amended thereto, severally and not jointly (each such entity referred to
hereinafter as the "Customer") and The Chase Manhattan Bank, N.A., which
contracts have been assumed by operation of law by THE CHASE MANHATTAN BANK (the
"Bank") is hereby further amended, as of December 15, 1998 (the "Amendment
Agreement"). Terms defined in the Custody Agreement are used herein as therein
defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its global custodian
and the Bank wishes to accept such appointment pursuant to the terms of the
Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Sections 1 and 3 of Schedule A of the Custody Agreement
----------
("Schedule A") shall be amended to add or change certain Customers as specified
in Attachment A hereto. The revised Schedule A incorporating these changes in
the form attached shall supersede the existing Schedule A in its entirety.
2. Agreement. The Customer agrees to be bound in all respects by all the
----------
terms and conditions of the Custody Agreement and shall be fully liable
thereunder as a "Customer" as defined in the Custody Agreement.
3. Confirmation of Agreement. Except as amended hereby, the Custody
--------------------------
Agreement is in full force and effect and as so amended is hereby ratified,
approved and confirmed by the Customer and the Bank in all respects.
4. Governing Law. This Amendment Agreement shall be construed in accordance
--------------
with and governed by the law of the State of New York without regard to its
conflict of law principles.
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as
of the day and year first above written.
THE CHASE MANHATTAN BANK
/s/Joseph M. Rondinelli
By: _____________________________________
Joseph M. Rondinelli
Vice President
EACH OF THE CUSTOMERS LISTED IN ATTACHMENT A HERETO,
SEVERALLY AND NOT JOINTLY
/s/Henry H. Hopkins
By: _____________________________________
Henry H. Hopkins
Vice President
Attachment A
LIST OF CUSTOMERS
Change the name of the following Fund:
--------------------------------------
T. Rowe Price Global Government Bond Fund
Effective May 1, 1998, the fund name changed to:
T. Rowe Price Global Bond Fund
Add the following Fund:
-----------------------
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price International Growth & Income Fund
Add the following Funds to the Russian Rider:
---------------------------------------------
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price International Growth & Income Fund
RPFI International Partners, L.P.
Schedule A Page 1 of 3
LIST OF CUSTOMERS, SEVERALLY AND NOT JOINTLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK
DATED JANUARY 3, 1994
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is
REGISTERED UNDER THE INVESTMENT applicable to all Customers
COMPANY ACT OF 1940 listed under Section I of
this Schedule A.
Equity Funds
------------
T. Rowe Price Balanced Fund, Inc. Global Proxy Service Rider
T. Rowe Price Blue Chip Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Capital Appreciation Fund Global Proxy Service Rider
T. Rowe Price Capital Opportunity Fund, Inc. Global Proxy Service Rider
T. Rowe Price Diversified Small-Cap Growth Fund, Inc. Global Proxy Service
Rider
T. Rowe Price Dividend Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Equity Income Fund Global Proxy Service Rider
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio
T. Rowe Price Mid-Cap Growth Portfolio Global Proxy Service Rider
T. Rowe Price New America Growth Portfolio Global Proxy Service Rider
T. Rowe Price Personal Strategy Balanced Portfolio Global Proxy Service
Rider
T. Rowe Price Financial Services Fund, Inc. Global Proxy Service Rider
T. Rowe Price Growth & Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price Growth Stock Fund, Inc. Global Proxy Service Rider
T. Rowe Price Health Sciences Fund, Inc. Global Proxy Service Rider
Institutional Equity Funds, Inc. on behalf of:
Mid-Cap Equity Growth Fund Global Proxy Service Rider
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund Russian Rider
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Stock Fund Russian Rider
T. Rowe Price European Stock Fund Russian Rider
T. Rowe Price Global Stock Fund Russian Rider
T. Rowe Price International Discovery Fund Russian Rider
T. Rowe Price International Growth & Income Fund Russian Rider
T. Rowe Price International Stock Fund Russian Rider
T. Rowe Price Japan Fund Russian Rider
T. Rowe Price Latin America Fund Russian Rider
T. Rowe Price New Asia Fund Russian Rider
Schedule A Page 2 of 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
T. Rowe Price International Series, Inc. on behalf of:
T. Rowe Price International Stock Portfolio Russian Rider
T. Rowe Price Media & Telecommunications Fund, Inc. Global Proxy Service
Rider
T. Rowe Price Mid-Cap Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Mid-Cap Value Fund, Inc. Global Proxy Service Rider
T. Rowe Price New America Growth Fund Global Proxy Service Rider
T. Rowe Price New Era Fund, Inc. Global Proxy Service Rider
T. Rowe Price New Horizons Fund, Inc. Global Proxy Service Rider
T. Rowe Price Real Estate Fund, Inc. Global Proxy Service Rider
T. Rowe Price Science & Technology Fund, Inc. Global Proxy Service Rider
T. Rowe Price Small-Cap Stock Fund, Inc. Global Proxy Service Rider
T. Rowe Price Small-Cap Value Fund, Inc. Global Proxy Service Rider
T. Rowe Price Value Fund, Inc. Global Proxy Service Rider
Income Funds
------------
T. Rowe Price Corporate Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price High Yield Fund, Inc. Global Proxy Service Rider
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio Global Proxy Service Rider
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund Russian Rider
T. Rowe Price Global Bond Fund Russian Rider
T. Rowe Price International Bond Fund Russian Rider
T. Rowe Price New Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund Global Proxy Service Rider
T. Rowe Price Personal Strategy Growth Fund Global Proxy Service Rider
T. Rowe Price Personal Strategy Income Fund Global Proxy Service Rider
T. Rowe Price Short-Term Bond Fund, Inc. Global Proxy Service Rider
T. Rowe Price Short-Term U.S. Government Fund, Inc. Global Proxy Service
Rider
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund Global Proxy Service Rider
T. Rowe Price Tax-Efficient Balanced Fund, Inc. Global Proxy Service Rider
Schedule A Page 3 of 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY
AGREEMENT
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable
to all Customers Under
Section II of this
Schedule A.
T. Rowe Price Trust Company, as Trustee for the
Johnson Matthey Salaried Employee Savings Plan
Common Trust Funds
------------------
T. Rowe Price Trust Company, as Trustee for the International
Common Trust Fund on behalf of the Underlying Trusts:
Emerging Markets Equity Trust
European Discovery Trust
Foreign Discovery Trust
Foreign Discovery Trust - Augment
Japan Discovery Trust
Latin America Discovery Trust
Pacific Discovery Trust
New York City International Common Trust Fund Global Proxy Service Rider
III. OTHER
RPFI International Partners, L.P. Russian Rider
AMENDMENT AGREEMENT
The Global Custody Agreement of January 3, 1994, as amended April 18, 1994,
August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, July 31,
1996, July 23, 1997, September 3, 1997, October 29, 1997 and December 15, 1998
(the "Custody Agreement") by and between each of the Entities listed in Schedule
A, as amended thereto, severally and not jointly (each such entity referred to
hereinafter as the "Customer") and The Chase Manhattan Bank, N.A., whose
contracts have been assumed by THE CHASE MANHATTAN BANK (the "Bank") is hereby
further amended, as of October 6, 1999 (the "Amendment Agreement"). Terms
defined in the Custody Agreement are used herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its global custodian
and the Bank wishes to accept such appointment pursuant to the terms of the
Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1.Amendment. Sections I, II and III of Schedule A of the Custody Agreement
----------
("Schedule A") shall be amended to add or change certain Customers as specified
in Attachment A hereto. The revised Schedule A incorporating these changes in
the form attached shall supersede the existing Schedule A in its entirety.
2.
Agreement. The Customer and Bank agree to be bound in all respects by all the
----------
terms and conditions of the Custody Agreement and shall be fully liable and
responsible thereunder as a "Customer" and "Bank," respectively, as defined in
the Custody Agreement.
3.
Confirmation of Agreement. Except as amended hereby, the Custody Agreement is
------------ -- ---------
in full force and effect and as so amended is hereby ratified, approved and
confirmed by the Customer and the Bank in all respects.
4.
Governing Law: This Amendment Agreement shall be construed in accordance with
--------- ----
and governed by the law of the State of New York without regard to its conflict
of law principles.
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as
of the day and year first above written.
THE CHASE MANHATTAN BANK
/s/Joseph M. Rondinelli
By: ____________________________________
Joseph M. Rondinelli
Vice President
EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEVERALLY
AND NOT JOINTLY
/s/Henry H. Hopkins
By: ____________________________________
Henry H. Hopkins
Vice President
ATTACHMENT A
PAGE 1 OF 2
LIST OF CUSTOMERS
Change the name of the following Fund:
-------------------------------------
T. Rowe Price Tax-Efficient Balanced Fund, Inc.
Effective May 27, 1999, the fund name changed to:
T. Rowe Price Tax-Efficient Funds, Inc., on behalf of
T. Rowe Price Tax-Efficient Balanced Fund
Add the following Fund:
-----------------------
T. Rowe Price Tax-Efficient Funds, Inc., on behalf of:
T. Rowe Price Tax-Efficient Growth Fund
Add the following Trusts:
------------------------
T. Rowe Price Trust Company, as Trustee for the International
Common Trust Fund, on behalf of the Underlying Trusts:
Foreign Discovery Trust - B
International Small-Cap Trust
Delete the following Trust:
--------------------------
New York City International Common Trust Fund
Add the following Funds/Trusts/Limited Partnerships to the Global Proxy Service
-------------------------------------------------------------------------------
Rider:
-----
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Income Portfolio
T. Rowe Price Tax-Efficient Funds, Inc., on behalf of
T. Rowe Price Tax-Efficient Growth Fund
Institutional International Funds, Inc., on behalf of
Foreign Equity Fund
ATTACHMENT A
PAGE 2 OF 2
T. Rowe Price International Funds, Inc., on behalf of
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price European Stock Fund
T. Rowe Price Global Bond Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Bond Fund
T. Rowe Price International Discovery Fund
T. Rowe Price International Growth & Income Fund
T. Rowe Price International Stock Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price New Asia Fund
T. Rowe Price International Series, Inc., on behalf of
T. Rowe Price International Stock Portfolio
T. Rowe Price Trust Company, as Trustee for the International
Common Trust Fund on behalf of the Underlying Trusts:
Emerging Markets Equity Trust
European Discovery Trust
Foreign Discovery Trust
Foreign Discovery Trust - Augment
Foreign Discovery Trust - B
International Small-Cap Trust
Japan Discovery Trust
Latin America Discovery Trust
Pacific Discovery Trust
RPFI International Partners, L.P.
SCHEDULE A
PAGE 1 OF 3
LIST OF CUSTOMERS, SEVERALLY AND NOT JOINTLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK
DATED JANUARY 3, 1994
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is applicable to
REGISTERED UNDER THE INVESTMENT all Customers listed under Section I of
COMPANY ACT OF 1940 this Schedule A.
Equity Funds
------------
T. Rowe Price Balanced Fund, Inc. Global Proxy Service Rider
T. Rowe Price Blue Chip Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Capital Appreciation Fund Global Proxy Service Rider
T. Rowe Price Capital Opportunity Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Dividend Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Equity Income Fund Global Proxy Service Rider
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio Global Proxy Service Rider
T. Rowe Price Mid-Cap Growth Portfolio Global Proxy Service Rider
T. Rowe Price New America Growth Portfolio Global Proxy Service Rider
T. Rowe Price Personal Strategy Balanced Portfolio
Global Proxy Service Rider
T. Rowe Price Financial Services Fund, Inc. Global Proxy Service Rider
T. Rowe Price Growth & Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price Growth Stock Fund, Inc. Global Proxy Service Rider
T. Rowe Price Health Sciences Fund, Inc. Global Proxy Service Rider
Institutional Equity Funds, Inc. on behalf of:
Mid-Cap Equity Growth Fund Global Proxy Service Rider
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund Global Proxy Service and Russian Rider
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Stock Fund
Global Proxy Service and Russian Rider
T. Rowe Price European Stock Fund Global Proxy Service and Russian Rider
T. Rowe Price Global Stock Fund Global Proxy Service and Russian Rider
T. Rowe Price International Discovery Fund
Global Proxy Service and Russian Rider
T. Rowe Price International Growth & Income Fund
Global Proxy Service and Russian Rider
T. Rowe Price International Stock Fund
Global Proxy Service and Russian Rider
T. Rowe Price Japan Fund Global Proxy Service and Russian Rider
T. Rowe Price Latin America Fund Global Proxy Service and Russian Rider
T. Rowe Price New Asia Fund Global Proxy Service and Russian Rider
SCHEDULE A
PAGE 2 OF 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
T. Rowe Price International Series, Inc. on behalf of:
T. Rowe Price International Stock Portfolio
Global Proxy Service and Russian Rider
T. Rowe Price Media & Telecommunications Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Mid-Cap Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Mid-Cap Value Fund, Inc. Global Proxy Service Rider
T. Rowe Price New America Growth Fund Global Proxy Service Rider
T. Rowe Price New Era Fund, Inc. Global Proxy Service Rider
T. Rowe Price New Horizons Fund, Inc. Global Proxy Service Rider
T. Rowe Price Real Estate Fund, Inc. Global Proxy Service Rider
T. Rowe Price Science & Technology Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Small-Cap Stock Fund, Inc. Global Proxy Service Rider
T. Rowe Price Small-Cap Value Fund, Inc. Global Proxy Service Rider
T. Rowe Price Value Fund, Inc. Global Proxy Service Rider
Income Funds
------------
T. Rowe Price Corporate Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price High Yield Fund, Inc. Global Proxy Service Rider
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio Global Proxy Service Rider
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund
Global Proxy Service and Russian Rider
T. Rowe Price Global Bond Fund Global Proxy Service and Russian Rider
T. Rowe Price International Bond Fund
Global Proxy Service and Russian Rider
T. Rowe Price New Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
Global Proxy Service Rider
T. Rowe Price Personal Strategy Growth Fund Global Proxy Service Rider
T. Rowe Price Personal Strategy Income Fund Global Proxy Service Rider
T. Rowe Price Short-Term Bond Fund, Inc. Global Proxy Service Rider
T. Rowe Price Short-Term U.S. Government Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund Global Proxy Service Rider
T. Rowe Price Tax-Efficient Funds, Inc. on behalf of:
T. Rowe Price Tax-Efficient Balanced Fund Global Proxy Service Rider
T. Rowe Price Tax-Efficient Growth Fund Global Proxy Service Rider
SCHEDULE A
PAGE 3 OF 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all
Customers under Section II of this
Schedule A.
T. Rowe Price Trust Company, as Trustee for the
Johnson Matthey Salaried Employee Savings Plan
Common Trust Funds
------------------
T. Rowe Price Trust Company, as Trustee for the International
Common Trust Fund on behalf of the Underlying Trusts:
Emerging Markets Equity Trust Global Proxy Service Rider
European Discovery Trust Global Proxy Service Rider
Foreign Discovery Trust Global Proxy Service Rider
Foreign Discovery Trust - Augment Global Proxy Service Rider
Foreign Discovery Trust - B Global Proxy Service Rider
International Small-Cap Trust Global Proxy Service Rider
Japan Discovery Trust Global Proxy Service Rider
Latin America Discovery Trust Global Proxy Service Rider
Pacific Discovery Trust Global Proxy Service Rider
III. OTHER
RPFI International Partners, L.P. Global Proxy Service and Russian Rider
AMENDMENT AGREEMENT
The Global Custody Agreement of January 3, 1994, as amended April 18, 1994,
August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, July 31,
1996, July 23, 1997, September 3, 1997, October 29, 1997, December 15, 1998 and
October 6, 1999 (the "Custody Agreement") by and between each of the Entities
listed in Schedule A, as amended thereto, severally and not jointly (each such
entity referred to hereinafter as the "Customer") and The Chase Manhattan Bank,
N.A., whose contracts have been assumed by THE CHASE MANHATTAN BANK (the "Bank")
is hereby further amended, as of February 9, 2000 (the "Amendment Agreement").
Terms defined in the Custody Agreement are used herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its global custodian
and the Bank wishes to accept such appointment pursuant to the terms of the
Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1.Amendment. Sections I, II and III of Schedule A of the Custody Agreement
----------
("Schedule A") shall be amended to add or change certain Customers as specified
in Attachment A hereto. The revised Schedule A incorporating these changes in
the form attached shall supersede the existing Schedule A in its entirety.
2.
Agreement. The Customer and Bank agree to be bound in all respects by all the
----------
terms and conditions of the Custody Agreement and shall be fully liable and
responsible thereunder as a "Customer" and "Bank," respectively, as defined in
the Custody Agreement.
3.
Confirmation of Agreement. Except as amended hereby, the Custody Agreement is
------------ -- ---------
in full force and effect and as so amended is hereby ratified, approved and
confirmed by the Customer and the Bank in all respects.
4.
Governing Law: This Amendment Agreement shall be construed in accordance with
--------- ----
and governed by the law of the State of New York without regard to its conflict
of law principles.
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as
of the day and year first above written.
THE CHASE MANHATTAN BANK
/s/Joseph M. Rondinelli
By: ____________________________________
Joseph M. Rondinelli
Vice President
EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEVERALLY
AND NOT JOINTLY
/s/Henry H. Hopkins
By: ____________________________________
Henry H. Hopkins
Vice President
ATTACHMENT A
PAGE 1 OF 1
LIST OF CUSTOMERS
Add the following Funds:
------------------------
Institutional Equity Funds, Inc., on behalf of:
Institutional Large-Cap Value Fund
Institutional Small-Cap Stock Fund
Add the following Funds to the Global Proxy Service Rider:
---------------------------------------------------------
Institutional Equity Funds, Inc., on behalf of
Institutional Large-Cap Value Fund
Institutional Small-Cap Stock Fund
SCHEDULE A
PAGE 1 OF 3
LIST OF CUSTOMERS, SEVERALLY AND NOT JOINTLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK
DATED JANUARY 3, 1994
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is applicable to
REGISTERED UNDER THE INVESTMENT all Customers listed under Section I of
COMPANY ACT OF 1940 this Schedule A.
Equity Funds
------------
T. Rowe Price Balanced Fund, Inc. Global Proxy Service Rider
T. Rowe Price Blue Chip Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Capital Appreciation Fund Global Proxy Service Rider
T. Rowe Price Capital Opportunity Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Dividend Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Equity Income Fund Global Proxy Service Rider
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio Global Proxy Service Rider
T. Rowe Price Mid-Cap Growth Portfolio Global Proxy Service Rider
T. Rowe Price New America Growth Portfolio Global Proxy Service Rider
T. Rowe Price Personal Strategy Balanced Portfolio
Global Proxy Service Rider
T. Rowe Price Financial Services Fund, Inc. Global Proxy Service Rider
T. Rowe Price Growth & Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price Growth Stock Fund, Inc. Global Proxy Service Rider
T. Rowe Price Health Sciences Fund, Inc. Global Proxy Service Rider
Institutional Equity Funds, Inc. on behalf of:
Institutional Large-Cap Value Fund Global Proxy Service Rider
Institutional Small-Cap Stock Fund Global Proxy Service Rider
Mid-Cap Equity Growth Fund Global Proxy Service Rider
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund Global Proxy Service and Russian Rider
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Stock Fund
Global Proxy Service and Russian Rider
T. Rowe Price European Stock Fund Global Proxy Service and Russian Rider
T. Rowe Price Global Stock Fund Global Proxy Service and Russian Rider
T. Rowe Price International Discovery Fund
Global Proxy Service and Russian Rider
T. Rowe Price International Growth & Income Fund
Global Proxy Service and Russian Rider
T. Rowe Price International Stock Fund
Global Proxy Service and Russian Rider
T. Rowe Price Japan Fund Global Proxy Service and Russian Rider
T. Rowe Price Latin America Fund Global Proxy Service and Russian Rider
T. Rowe Price New Asia Fund Global Proxy Service and Russian Rider
SCHEDULE A
PAGE 2 OF 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
T. Rowe Price International Series, Inc. on behalf of:
T. Rowe Price International Stock Portfolio
Global Proxy Service and Russian Rider
T. Rowe Price Media & Telecommunications Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Mid-Cap Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Mid-Cap Value Fund, Inc. Global Proxy Service Rider
T. Rowe Price New America Growth Fund Global Proxy Service Rider
T. Rowe Price New Era Fund, Inc. Global Proxy Service Rider
T. Rowe Price New Horizons Fund, Inc. Global Proxy Service Rider
T. Rowe Price Real Estate Fund, Inc. Global Proxy Service Rider
T. Rowe Price Science & Technology Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Small-Cap Stock Fund, Inc. Global Proxy Service Rider
T. Rowe Price Small-Cap Value Fund, Inc. Global Proxy Service Rider
T. Rowe Price Value Fund, Inc. Global Proxy Service Rider
Income Funds
------------
T. Rowe Price Corporate Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price High Yield Fund, Inc. Global Proxy Service Rider
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio Global Proxy Service Rider
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund
Global Proxy Service and Russian Rider
T. Rowe Price Global Bond Fund Global Proxy Service and Russian Rider
T. Rowe Price International Bond Fund
Global Proxy Service and Russian Rider
T. Rowe Price New Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
Global Proxy Service Rider
T. Rowe Price Personal Strategy Growth Fund Global Proxy Service Rider
T. Rowe Price Personal Strategy Income Fund Global Proxy Service Rider
T. Rowe Price Short-Term Bond Fund, Inc. Global Proxy Service Rider
T. Rowe Price Short-Term U.S. Government Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund Global Proxy Service Rider
T. Rowe Price Tax-Efficient Funds, Inc. on behalf of:
T. Rowe Price Tax-Efficient Balanced Fund Global Proxy Service Rider
T. Rowe Price Tax-Efficient Growth Fund Global Proxy Service Rider
SCHEDULE A
PAGE 3 OF 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all
Customers under Section II of this
Schedule A.
T. Rowe Price Trust Company, as Trustee for the
Johnson Matthey Salaried Employee Savings Plan
Common Trust Funds
------------------
T. Rowe Price Trust Company, as Trustee for the International
Common Trust Fund on behalf of the Underlying Trusts:
Emerging Markets Equity Trust Global Proxy Service Rider
European Discovery Trust Global Proxy Service Rider
Foreign Discovery Trust Global Proxy Service Rider
Foreign Discovery Trust - Augment Global Proxy Service Rider
Foreign Discovery Trust - B Global Proxy Service Rider
International Small-Cap Trust Global Proxy Service Rider
Japan Discovery Trust Global Proxy Service Rider
Latin America Discovery Trust Global Proxy Service Rider
Pacific Discovery Trust Global Proxy Service Rider
III. OTHER
RPFI International Partners, L.P. Global Proxy Service and Russian Rider
AMENDMENT AGREEMENT
The Global Custody Agreement of January 3, 1994, as amended April 18, 1994,
August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, July 31,
1996, July 23, 1997, September 3, 1997, October 29, 1997, December 15, 1998,
October 6, 1999 and February 9, 2000 (the "Custody Agreement") by and between
each of the Entities listed in Schedule A, as amended thereto, severally and not
jointly (each such entity referred to hereinafter as the "Customer") and The
Chase Manhattan Bank, N.A., whose contracts have been assumed by THE CHASE
MANHATTAN BANK (the "Bank") is hereby further amended, as of April 19, 2000 (the
"Amendment Agreement"). Terms defined in the Custody Agreement are used herein
as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its global custodian
and the Bank wishes to accept such appointment pursuant to the terms of the
Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1.Amendment. Sections I, II and III of Schedule A of the Custody Agreement
----------
("Schedule A") shall be amended to add or change certain Customers as specified
in Attachment A hereto. The revised Schedule A incorporating these changes in
the form attached shall supersede the existing Schedule A in its entirety.
2.
Agreement. The Customer and Bank agree to be bound in all respects by all the
----------
terms and conditions of the Custody Agreement and shall be fully liable and
responsible thereunder as a "Customer" and "Bank," respectively, as defined in
the Custody Agreement.
3.
Confirmation of Agreement. Except as amended hereby, the Custody Agreement is
------------ -- ---------
in full force and effect and as so amended is hereby ratified, approved and
confirmed by the Customer and the Bank in all respects.
4.
Governing Law: This Amendment Agreement shall be construed in accordance with
--------- ----
and governed by the law of the State of New York without regard to its conflict
of law principles.
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as
of the day and year first above written.
THE CHASE MANHATTAN BANK
/s/Joseph M. Rondinelli
By: ____________________________________
Joseph M. Rondinelli
Vice President
EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEVERALLY
AND NOT JOINTLY
/s/Henry H. Hopkins
By: ____________________________________
Henry H. Hopkins
Vice President
ATTACHMENT A
PAGE 1 OF 1
LIST OF CUSTOMERS
Add the following Fund:
-----------------------
T. Rowe Price International Funds, Inc., on behalf of:
T. Rowe Price Emerging Europe & Mediterranean Fund
Add the following Fund to the Global Proxy Service and Russian Rider:
--------------------------------------------------------------------
T. Rowe Price International Funds, Inc., on behalf of:
T. Rowe Price Emerging Europe & Mediterranean Fund
SCHEDULE A
PAGE 1 OF 3
LIST OF CUSTOMERS, SEVERALLY AND NOT JOINTLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK
DATED JANUARY 3, 1994
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is applicable to
REGISTERED UNDER THE INVESTMENT all Customers listed under Section I of
COMPANY ACT OF 1940 this Schedule A.
Equity Funds
------------
T. Rowe Price Balanced Fund, Inc. Global Proxy Service Rider
T. Rowe Price Blue Chip Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Capital Appreciation Fund Global Proxy Service Rider
T. Rowe Price Capital Opportunity Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Dividend Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Equity Income Fund Global Proxy Service Rider
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio Global Proxy Service Rider
T. Rowe Price Mid-Cap Growth Portfolio Global Proxy Service Rider
T. Rowe Price New America Growth Portfolio Global Proxy Service Rider
T. Rowe Price Personal Strategy Balanced Portfolio
Global Proxy Service Rider
T. Rowe Price Financial Services Fund, Inc. Global Proxy Service Rider
T. Rowe Price Growth & Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price Growth Stock Fund, Inc. Global Proxy Service Rider
T. Rowe Price Health Sciences Fund, Inc. Global Proxy Service Rider
Institutional Equity Funds, Inc. on behalf of:
Institutional Large-Cap Value Fund Global Proxy Service Rider
Institutional Small-Cap Stock Fund Global Proxy Service Rider
Mid-Cap Equity Growth Fund Global Proxy Service Rider
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund Global Proxy Service and Russian Rider
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Europe &
Mediterranean Fund Global Proxy Service and Russian Rider
T. Rowe Price Emerging Markets Stock Fund
Global Proxy Service and Russian Rider
T. Rowe Price European Stock Fund Global Proxy Service and Russian Rider
T. Rowe Price Global Stock Fund Global Proxy Service and Russian Rider
T. Rowe Price International Discovery Fund
Global Proxy Service and Russian Rider
T. Rowe Price International Growth & Income Fund
Global Proxy Service and Russian Rider
T. Rowe Price International Stock Fund
Global Proxy Service and Russian Rider
T. Rowe Price Japan Fund Global Proxy Service and Russian Rider
T. Rowe Price Latin America Fund Global Proxy Service and Russian Rider
T. Rowe Price New Asia Fund Global Proxy Service and Russian Rider
SCHEDULE A
PAGE 2 OF 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
T. Rowe Price International Series, Inc. on behalf of:
T. Rowe Price International Stock Portfolio
Global Proxy Service and Russian Rider
T. Rowe Price Media & Telecommunications Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Mid-Cap Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Mid-Cap Value Fund, Inc. Global Proxy Service Rider
T. Rowe Price New America Growth Fund Global Proxy Service Rider
T. Rowe Price New Era Fund, Inc. Global Proxy Service Rider
T. Rowe Price New Horizons Fund, Inc. Global Proxy Service Rider
T. Rowe Price Real Estate Fund, Inc. Global Proxy Service Rider
T. Rowe Price Science & Technology Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Small-Cap Stock Fund, Inc. Global Proxy Service Rider
T. Rowe Price Small-Cap Value Fund, Inc. Global Proxy Service Rider
T. Rowe Price Value Fund, Inc. Global Proxy Service Rider
Income Funds
------------
T. Rowe Price Corporate Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price High Yield Fund, Inc. Global Proxy Service Rider
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio Global Proxy Service Rider
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund
Global Proxy Service and Russian Rider
T. Rowe Price Global Bond Fund Global Proxy Service and Russian Rider
T. Rowe Price International Bond Fund
Global Proxy Service and Russian Rider
T. Rowe Price New Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
Global Proxy Service Rider
T. Rowe Price Personal Strategy Growth Fund Global Proxy Service Rider
T. Rowe Price Personal Strategy Income Fund Global Proxy Service Rider
T. Rowe Price Short-Term Bond Fund, Inc. Global Proxy Service Rider
T. Rowe Price Short-Term U.S. Government Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund Global Proxy Service Rider
T. Rowe Price Tax-Efficient Funds, Inc. on behalf of:
T. Rowe Price Tax-Efficient Balanced Fund Global Proxy Service Rider
T. Rowe Price Tax-Efficient Growth Fund Global Proxy Service Rider
SCHEDULE A
PAGE 3 OF 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all
Customers under Section II of this
Schedule A.
T. Rowe Price Trust Company, as Trustee for the
Johnson Matthey Salaried Employee Savings Plan
Common Trust Funds
------------------
T. Rowe Price Trust Company, as Trustee for the International
Common Trust Fund on behalf of the Underlying Trusts:
Emerging Markets Equity Trust Global Proxy Service Rider
European Discovery Trust Global Proxy Service Rider
Foreign Discovery Trust Global Proxy Service Rider
Foreign Discovery Trust - Augment Global Proxy Service Rider
Foreign Discovery Trust - B Global Proxy Service Rider
International Small-Cap Trust Global Proxy Service Rider
Japan Discovery Trust Global Proxy Service Rider
Latin America Discovery Trust Global Proxy Service Rider
Pacific Discovery Trust Global Proxy Service Rider
III. OTHER
RPFI International Partners, L.P. Global Proxy Service and Russian Rider
AMENDMENT AGREEMENT
The Global Custody Agreement of January 3, 1994, as amended April 18, 1994,
August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, July 31,
1996, July 23, 1997, September 3, 1997, October 29, 1997, December 15, 1998,
October 6, 1999, February 9, 2000 and April 19, 2000 (the "Custody Agreement")
by and between each of the Entities listed in Schedule A, as amended thereto,
severally and not jointly (each such entity referred to hereinafter as the
"Customer") and The Chase Manhattan Bank, N.A., whose contracts have been
assumed by THE CHASE MANHATTAN BANK (the "Bank") is hereby further amended, as
of July 18, 2000 (the "Amendment Agreement"). Terms defined in the Custody
Agreement are used herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its global custodian
and the Bank wishes to accept such appointment pursuant to the terms of the
Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1.Amendment. Sections I, II and III of Schedule A of the Custody Agreement
----------
("Schedule A") shall be amended to add or change certain Customers as specified
in Attachment A hereto. The revised Schedule A incorporating these changes in
the form attached shall supersede the existing Schedule A in its entirety.
2.
Agreement. The Customer and Bank agree to be bound in all respects by all the
----------
terms and conditions of the Custody Agreement and shall be fully liable and
responsible thereunder as a "Customer" and "Bank," respectively, as defined in
the Custody Agreement.
3.
Confirmation of Agreement. Except as amended hereby, the Custody Agreement is
------------ -- ---------
in full force and effect and as so amended is hereby ratified, approved and
confirmed by the Customer and the Bank in all respects.
4.
Governing Law: This Amendment Agreement shall be construed in accordance with
--------- ----
and governed by the law of the State of New York without regard to its conflict
of law principles.
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as
of the day and year first above written.
THE CHASE MANHATTAN BANK
/s/Joseph M. Rondinelli
By: ____________________________________
Joseph M. Rondinelli
Vice President
EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEVERALLY
AND NOT JOINTLY
/s/Henry H. Hopkins
By: ____________________________________
Henry H. Hopkins
Vice President
ATTACHMENT A
PAGE 1 OF 1
LIST OF CUSTOMERS
Add the following Funds:
------------------------
Equity Funds
------------
T. Rowe Price Developing Technologies Fund, Inc.
T. Rowe Price Global Technology Fund, Inc.
Income Fund
-----------
T. Rowe Price U.S. Bond Index Fund, Inc.
T. Rowe Price Trust Company, as Trustee for the International
Common Trust Fund on behalf of the Underlying Trusts:
India Trust
Taiwan Trust
Add the following Funds to the Global Proxy Service Rider:
---------------------------------------------------------
Equity Funds
------------
T. Rowe Price Developing Technologies Fund, Inc.
T. Rowe Price Global Technology Fund, Inc.
Income Fund
-----------
T. Rowe Price U.S. Bond Index Fund, Inc.
T. Rowe Price Trust Company, as Trustee for the International
Common Trust Fund on behalf of the Underlying Trusts:
India Trust
Taiwan Trust
SCHEDULE A
PAGE 1 OF 3
LIST OF CUSTOMERS, SEVERALLY AND NOT JOINTLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK
DATED JANUARY 3, 1994
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is applicable to
REGISTERED UNDER THE INVESTMENT all Customers listed under Section I of
COMPANY ACT OF 1940 this Schedule A.
Equity Funds
------------
T. Rowe Price Balanced Fund, Inc. Global Proxy Service Rider
T. Rowe Price Blue Chip Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Capital Appreciation Fund Global Proxy Service Rider
T. Rowe Price Capital Opportunity Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Developing Technologies Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Dividend Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Equity Income Fund Global Proxy Service Rider
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Equity Income Portfolio Global Proxy Service Rider
T. Rowe Price Mid-Cap Growth Portfolio Global Proxy Service Rider
T. Rowe Price New America Growth Portfolio Global Proxy Service Rider
T. Rowe Price Personal Strategy Balanced Portfolio
Global Proxy Service Rider
T. Rowe Price Financial Services Fund, Inc. Global Proxy Service Rider
T. Rowe Price Global Technology Fund, Inc. Global Proxy Service Rider
T. Rowe Price Growth & Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price Growth Stock Fund, Inc. Global Proxy Service Rider
T. Rowe Price Health Sciences Fund, Inc. Global Proxy Service Rider
Institutional Equity Funds, Inc. on behalf of:
Institutional Large-Cap Value Fund Global Proxy Service Rider
Institutional Small-Cap Stock Fund Global Proxy Service Rider
Mid-Cap Equity Growth Fund Global Proxy Service Rider
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund Global Proxy Service and Russian Rider
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Europe &
Mediterranean Fund Global Proxy Service and Russian Rider
T. Rowe Price Emerging Markets Stock Fund
Global Proxy Service and Russian Rider
T. Rowe Price European Stock Fund Global Proxy Service and Russian Rider
T. Rowe Price Global Stock Fund Global Proxy Service and Russian Rider
SCHEDULE A
PAGE 2 OF 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
T. Rowe Price International Funds, Inc. on behalf of (continued):
T. Rowe Price International Discovery Fund
Global Proxy Service and Russian Rider
T. Rowe Price International Growth & Income Fund
Global Proxy Service and Russian Rider
T. Rowe Price International Stock Fund
Global Proxy Service and Russian Rider
T. Rowe Price Japan Fund Global Proxy Service and Russian Rider
T. Rowe Price Latin America Fund Global Proxy Service and Russian Rider
T. Rowe Price New Asia Fund Global Proxy Service and Russian Rider
T. Rowe Price International Series, Inc. on behalf of:
T. Rowe Price International Stock Portfolio
Global Proxy Service and Russian Rider
T. Rowe Price Media & Telecommunications Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Mid-Cap Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Mid-Cap Value Fund, Inc. Global Proxy Service Rider
T. Rowe Price New America Growth Fund Global Proxy Service Rider
T. Rowe Price New Era Fund, Inc. Global Proxy Service Rider
T. Rowe Price New Horizons Fund, Inc. Global Proxy Service Rider
T. Rowe Price Real Estate Fund, Inc. Global Proxy Service Rider
T. Rowe Price Science & Technology Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Small-Cap Stock Fund, Inc. Global Proxy Service Rider
T. Rowe Price Small-Cap Value Fund, Inc. Global Proxy Service Rider
T. Rowe Price Value Fund, Inc. Global Proxy Service Rider
Income Funds
------------
T. Rowe Price Corporate Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price High Yield Fund, Inc. Global Proxy Service Rider
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio Global Proxy Service Rider
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund
Global Proxy Service and Russian Rider
T. Rowe Price Global Bond Fund Global Proxy Service and Russian Rider
T. Rowe Price International Bond Fund
Global Proxy Service and Russian Rider
T. Rowe Price New Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
Global Proxy Service Rider
T. Rowe Price Personal Strategy Growth Fund Global Proxy Service Rider
T. Rowe Price Personal Strategy Income Fund Global Proxy Service Rider
T. Rowe Price Short-Term Bond Fund, Inc. Global Proxy Service Rider
T. Rowe Price Short-Term U.S. Government Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Summit Funds, Inc. on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund Global Proxy Service Rider
SCHEDULE A
PAGE 3 OF 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
T. Rowe Price Tax-Efficient Funds, Inc. on behalf of:
T. Rowe Price Tax-Efficient Balanced Fund Global Proxy Service Rider
T. Rowe Price Tax-Efficient Growth Fund Global Proxy Service Rider
T. Rowe Price U.S. Bond Index Fund, Inc. Global Proxy Service Rider
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all
Customers under Section II of this
Schedule A.
T. Rowe Price Trust Company, as Trustee for the
Johnson Matthey Salaried Employee Savings Plan
Common Trust Funds
------------------
T. Rowe Price Trust Company, as Trustee for the International
Common Trust Fund on behalf of the Underlying Trusts:
Emerging Markets Equity Trust Global Proxy Service Rider
European Discovery Trust Global Proxy Service Rider
Foreign Discovery Trust Global Proxy Service Rider
Foreign Discovery Trust - Augment Global Proxy Service Rider
Foreign Discovery Trust - B Global Proxy Service Rider
India Trust Global Proxy Service Rider
International Small-Cap Trust Global Proxy Service Rider
Japan Discovery Trust Global Proxy Service Rider
Latin America Discovery Trust Global Proxy Service Rider
Pacific Discovery Trust Global Proxy Service Rider
Taiwan Trust Global Proxy Service Rider
III. OTHER
RPFI International Partners, L.P. Global Proxy Service and Russian Rider
AMENDMENT AGREEMENT
The Global Custody Agreement of January 3, 1994, as amended April 18, 1994,
August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, July 31,
1996, July 23, 1997, September 3, 1997, October 29, 1997, December 15, 1998,
October 6, 1999, February 9, 2000, April 19, 2000 and July 18, 2000 (the
"Custody Agreement") by and between each of the Entities listed in Schedule A,
as amended thereto, severally and not jointly (each such entity referred to
hereinafter as the "Customer") and The Chase Manhattan Bank, N.A., whose
contracts have been assumed by THE CHASE MANHATTAN BANK (the "Bank") is hereby
further amended, as of October 25, 2000 (the "Amendment Agreement"). Terms
defined in the Custody Agreement are used herein as therein defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its global custodian
and the Bank wishes to accept such appointment pursuant to the terms of the
Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1.Amendment. Sections I, II and III of Schedule A of the Custody Agreement
----------
("Schedule A") shall be amended to add or change certain Customers as specified
in Attachment A hereto. The revised Schedule A incorporating these changes in
the form attached shall supersede the existing Schedule A in its entirety.
2.
Agreement. The Customer and Bank agree to be bound in all respects by all the
----------
terms and conditions of the Custody Agreement and shall be fully liable and
responsible thereunder as a "Customer" and "Bank," respectively, as defined in
the Custody Agreement.
3.
Confirmation of Agreement. Except as amended hereby, the Custody Agreement is
------------ -- ---------
in full force and effect and as so amended is hereby ratified, approved and
confirmed by the Customer and the Bank in all respects.
4.
Governing Law: This Amendment Agreement shall be construed in accordance with
--------- ----
and governed by the law of the State of New York without regard to its conflict
of law principles.
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as
of the day and year first above written.
THE CHASE MANHATTAN BANK
/s/Joseph M. Rondinelli
By: ____________________________________
Joseph M. Rondinelli
Vice President
EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEVERALLY
AND NOT JOINTLY
/s/Henry H. Hopkins
By: ____________________________________
Henry H. Hopkins
Vice President
ATTACHMENT A
PAGE 1 OF 1
LIST OF CUSTOMERS
Add the following Funds:
------------------------
Equity Funds
------------
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Blue Chip Growth Portfolio
T. Rowe Price Health Sciences Portfolio
T. Rowe Price International Index Fund, Inc. on behalf of:
T. Rowe Price International Equity Index Fund
Income Fund
-----------
T. Rowe Price Tax-Efficient Funds, Inc., on behalf of:
T. Rowe Price Tax-Efficient Multi-Cap Growth Fund
Delete the following Funds/Trusts:
---------------------------------
Income Funds:
-------------
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Global Bond Fund
T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Summit Funds, Inc., on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
Common Trust Funds:
------------------
T. Rowe Price Trust Company, as Trustee for the International
Common Trust Fund on behalf of the Underlying Trusts:
European Discovery Trust
Foreign Discovery Trust-Augment
Latin America Discovery Trust
Pacific Discovery Trust
Other:
-----
RPFI International Partners, L.P.
Add the following Funds to the Global Proxy Service Rider:
---------------------------------------------------------
Equity Funds
------------
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Blue Chip Growth Portfolio
T. Rowe Price Health Sciences Portfolio
Income Fund
-----------
T. Rowe Price Tax-Efficient Funds, Inc., on behalf of:
T. Rowe Price Tax-Efficient Multi-Cap Growth Fund
Delete the following Funds/Trusts from the Global Proxy Service Rider:
---------------------------------------------------------------------
Income Funds:
-------------
T. Rowe Price Short-Term U.S. Government Fund, Inc.
T. Rowe Price Summit Funds, Inc., on behalf of:
T. Rowe Price Summit Limited-Term Bond Fund
Common Trust Funds:
------------------
T. Rowe Price Trust Company, as Trustee for the International
Common Trust Fund on behalf of the Underlying Trusts:
European Discovery Trust
Foreign Discovery Trust-Augment
Latin America Discovery Trust
Pacific Discovery Trust
Add the following Fund to the Global Proxy Service and Russian Rider
--------------------------------------------------------------------
Equity Fund
-----------
T. Rowe Price International Index Fund, Inc. on behalf of:
T. Rowe Price International Equity Index Fund
Delete the following Fund/Other from the Global Proxy Service and Russian Rider:
--------------------------------------------------------------------------------
Income Funds:
------------
T. Rowe Price International Funds, Inc., on behalf of:
T. Rowe Price Global Bond Fund
Other:
-----
RPFI International Partners, L.P.
SCHEDULE A
PAGE 1 OF 3
LIST OF CUSTOMERS, SEVERALLY AND NOT JOINTLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK
DATED JANUARY 3, 1994
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is applicable to
REGISTERED UNDER THE INVESTMENT all Customers listed under Section I of
COMPANY ACT OF 1940 this Schedule A.
Equity Funds
------------
T. Rowe Price Balanced Fund, Inc. Global Proxy Service Rider
T. Rowe Price Blue Chip Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Capital Appreciation Fund Global Proxy Service Rider
T. Rowe Price Capital Opportunity Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Developing Technologies Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Dividend Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Equity Income Fund Global Proxy Service Rider
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Blue Chip Growth Portfolio Global Proxy Service Rider
T. Rowe Price Equity Income Portfolio Global Proxy Service Rider
T. Rowe Price Health Sciences Portfolio Global Proxy Service Rider
T. Rowe Price Mid-Cap Growth Portfolio Global Proxy Service Rider
T. Rowe Price New America Growth Portfolio Global Proxy Service Rider
T. Rowe Price Personal Strategy Balanced Portfolio
Global Proxy Service Rider
T. Rowe Price Financial Services Fund, Inc. Global Proxy Service Rider
T. Rowe Price Global Technology Fund, Inc. Global Proxy Service Rider
T. Rowe Price Growth & Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price Growth Stock Fund, Inc. Global Proxy Service Rider
T. Rowe Price Health Sciences Fund, Inc. Global Proxy Service Rider
Institutional Equity Funds, Inc. on behalf of:
Institutional Large-Cap Value Fund Global Proxy Service Rider
Institutional Small-Cap Stock Fund Global Proxy Service Rider
Mid-Cap Equity Growth Fund Global Proxy Service Rider
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund Global Proxy Service and Russian Rider
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Europe &
Mediterranean Fund Global Proxy Service and Russian Rider
T. Rowe Price Emerging Markets Stock Fund
Global Proxy Service and Russian Rider
SCHEDULE A
PAGE 2 OF 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
T. Rowe Price International Funds, Inc. on behalf of (continued):
T. Rowe Price European Stock Fund Global Proxy Service and Russian Rider
T. Rowe Price Global Stock Fund Global Proxy Service and Russian Rider
T. Rowe Price International Discovery Fund
Global Proxy Service and Russian Rider
T. Rowe Price International Growth & Income Fund
Global Proxy Service and Russian Rider
T. Rowe Price International Stock Fund
Global Proxy Service and Russian Rider
T. Rowe Price Japan Fund Global Proxy Service and Russian Rider
T. Rowe Price Latin America Fund Global Proxy Service and Russian Rider
T. Rowe Price New Asia Fund Global Proxy Service and Russian Rider
T. Rowe Price International Index Fund, Inc. on behalf of:
T. Rowe Price International Equity Index Fund
Global Proxy Service and Russian Rider
T. Rowe Price International Series, Inc. on behalf of:
T. Rowe Price International Stock Portfolio
Global Proxy Service and Russian Rider
T. Rowe Price Media & Telecommunications Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Mid-Cap Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Mid-Cap Value Fund, Inc. Global Proxy Service Rider
T. Rowe Price New America Growth Fund Global Proxy Service Rider
T. Rowe Price New Era Fund, Inc. Global Proxy Service Rider
T. Rowe Price New Horizons Fund, Inc. Global Proxy Service Rider
T. Rowe Price Real Estate Fund, Inc. Global Proxy Service Rider
T. Rowe Price Science & Technology Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Small-Cap Stock Fund, Inc. Global Proxy Service Rider
T. Rowe Price Small-Cap Value Fund, Inc. Global Proxy Service Rider
T. Rowe Price Value Fund, Inc. Global Proxy Service Rider
Income Funds
------------
T. Rowe Price Corporate Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price High Yield Fund, Inc. Global Proxy Service Rider
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio Global Proxy Service Rider
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund
Global Proxy Service and Russian Rider
T. Rowe Price International Bond Fund
Global Proxy Service and Russian Rider
T. Rowe Price New Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
Global Proxy Service Rider
T. Rowe Price Personal Strategy Growth Fund Global Proxy Service Rider
T. Rowe Price Personal Strategy Income Fund Global Proxy Service Rider
T. Rowe Price Short-Term Bond Fund, Inc. Global Proxy Service Rider
SCHEDULE A
PAGE 3 OF 3
T. Rowe Price Tax-Efficient Funds, Inc. on behalf of:
T. Rowe Price Tax-Efficient Balanced Fund Global Proxy Service Rider
T. Rowe Price Tax-Efficient Growth Fund Global Proxy Service Rider
T. Rowe Price Tax-Efficient Multi-Cap Growth Fund
Global Proxy Service Rider
T. Rowe Price U.S. Bond Index Fund, Inc. Global Proxy Service Rider
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all
Customers under Section II of this
Schedule A.
T. Rowe Price Trust Company, as Trustee for the
Johnson Matthey Salaried Employee Savings Plan
Common Trust Funds
------------------
T. Rowe Price Trust Company, as Trustee for the International
Common Trust Fund on behalf of the Underlying Trusts:
Emerging Markets Equity Trust Global Proxy Service Rider
Foreign Discovery Trust Global Proxy Service Rider
Foreign Discovery Trust - B Global Proxy Service Rider
India Trust Global Proxy Service Rider
International Small-Cap Trust Global Proxy Service Rider
Japan Discovery Trust Global Proxy Service Rider
Taiwan Trust Global Proxy Service Rider
AMENDMENT, dated April 25, 2001 to the January 3, 1994 custody agreement
("Agreement"), between each of the T. Rowe Price Funds, severally and not
jointly, set forth on Appendix 2 ("Customer"), having a place of business at 100
East Pratt Street, Baltimore, Maryland 21202, and The Chase Manhattan Bank
("Bank"), having a place of business at 270 Park Ave., New York, N.Y.
10017-2070.
It is hereby agreed as follows:
Section 1. Except as modified hereby, the Agreement is confirmed in all
respects. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Agreement.
Section 2. The Agreement is amended by deleting the investment company
rider thereto and inserting, in lieu thereof, the following investment company
rider:
1. "Add new Section 15 to the Agreement as follows:
15. Compliance with Securities and Exchange Commission rule 17f-5 ("rule
17f-5").
(a) Customer's board of directors (or equivalent body) (hereinafter
"Board") hereby delegates to Bank, and Bank hereby accepts the delegation to it
of, the obligations set forth in rule SEC rule 17f-5(c)(1)-(3) to perform as
Customer's "Foreign Custody Manager" (as that term is defined in rule
17f-5(a)(3)), including for the purposes of (i) selecting Eligible Foreign
Custodians (as that term is defined in rule 17f-5(a)(1), as the same may be
amended from time to time, or are otherwise deemed an Eligible Foreign Custodian
pursuant to an SEC exemptive order, rule other appropriate SEC action) to hold
Customer's Foreign Assets, (ii) evaluating the contractual arrangements with
such Eligible Foreign Custodians (as set forth in rule 17f-5(c)(2)); and (iii)
monitoring such foreign custody arrangements (as set forth in rule 17f-5(c)(3)).
(b) In connection with the foregoing, Bank shall:
(i) provide written reports notifying Customer's Board of the placement and
withdrawal of Foreign Assets with particular Eligible Foreign Custodians and of
any material change in the arrangements with such Eligible Foreign Custodians,
with such reports to be provided to Customer's Board at such times as the Board
deems reasonable and appropriate based on the circumstances of Customer's
foreign custody arrangements but until further notice from Customer requesting a
different schedule, such
reports shall be provided not less than quarterly in summary form, with a more
detailed report annually.
(ii) exercise such reasonable care, prudence and diligence in performing as
Customer's Foreign Custody Manager as a person having responsibility for the
safekeeping of Foreign Assets would exercise;
(iii) in selecting each Eligible Foreign Custodian, determine that Foreign
Assets placed and maintained in the safekeeping of such Eligible Foreign
Custodian shall be subject to reasonable care, based on the standards applicable
to custodians in the relevant market, after having considered all factors
relevant to the safekeeping of such Foreign Assets, including, without
limitation, those factors set forth in rule 17f-5(c)(1)(i)-(iv);
(iv) determine that the written contract with the Eligible Foreign Custodian
will (a) satisfy the requirements of rule 17f-5(c)(2), and (b) provide
reasonable care for Foreign Assets based on the standards specified in
17-5(c)(1); and
(v) establish a system to monitor (i) the continued appropriateness of
maintaining Foreign Assets with particular Eligible Foreign Custodians and (ii)
the performance of the contract governing the custody arrangements; it being
understood, however, that in the event that Bank shall have determined that an
existing Eligible Foreign Custodian in a given country would no longer meet the
requirements of rule 17f-5(c), Bank shall determine whether any other Eligible
Foreign Custodian in that country would meet such requirements. In the event
that another Eligible Foreign Custodian does so meet the requirements, Bank
shall withdraw the Foreign Assets from the custody of the incumbent Eligible
Foreign Custodian and deposit them with the other Eligible Foreign Custodian as
soon as reasonably practicable, and promptly advise Customer of such withdrawal
and deposit. If Bank shall determine that no other Eligible Foreign Custodian
in that country would meet the requirements of rule 17f-5(c), Bank shall so
advise Customer and shall then act in accordance with the Instructions of
Customer with respect to the disposition of the affected Foreign Assets.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
Foreign Assets on behalf of Customer with Eligible Foreign Custodians pursuant
to a written contract deemed appropriate by Bank.
(c) Except as expressly provided herein and in Section 16 hereof, Customer
shall be solely responsible to assure that the maintenance of Foreign Assets
hereunder complies with the rules,
regulations, interpretations and exemptive orders promulgated by or under the
authority of the SEC.
(d) Bank represents to Customer that it is a U.S. Bank as defined in rule
17f-5(a)(7). Customer represents to Bank that: (1) the Assets being placed and
maintained in Bank's custody are subject to the Investment Company Act of 1940,
as amended (the "1940 Act") as the same may be amended from time to time; (2)
its Board (or other governing body) has determined that it is reasonable to rely
on Bank to perform as Customer's Foreign Custody Manager; and (3) its Board (or
other governing body) or its investment adviser shall have determined that
Customer may maintain Foreign Assets in each country in which Customer's Foreign
Assets shall be held hereunder and determined to accept the risks arising
therefrom (including, but not limited to, a country's financial infrastructure,
prevailing custody and settlement practices, laws applicable to the safekeeping
and recovery of Foreign Assets held in custody, and the likelihood of
nationalization, currency controls and the like) (collectively ("Country
Risk")). Nothing contained herein shall require Bank to make any selection on
behalf of Customer that would entail consideration of Country Risk and, except
as may be provided in (e) below, to engage in any monitoring of Country Risk.
(e) Bank shall provide to Customer such information relating to Country
Risk as is specified in Appendix 1-A hereto. Customer hereby acknowledges that:
(i) such information is solely designed to inform Customer of market conditions
and procedures and is not intended as a recommendation to invest or not invest
in particular markets; and (ii) Bank has gathered the information from sources
it considers reliable, but that Bank shall have no responsibility for
inaccuracies or incomplete information.
2. Add the following after the first sentence of Section 3 of the
Agreement:
At the request of Customer, Bank may, but need not, add to Schedule A an
Eligible Foreign Custodian where Bank has not acted as Foreign Custody Manager
with respect to the selection thereof. Bank shall notify Customer in the event
that it elects to add any such entity.
3. Add the following language to the end of Section 3 of the Agreement:
The term Subcustodian as used herein shall mean the following:
(a) a U.S. bank as defined in rule 17f-5(a)(7); and
(b) an "Eligible Foreign Custodian," which, as defined in rule 17f-5(a)(1)
and (5), shall mean (i) a banking institution or trust company, incorporated or
organized under the laws of a country other than the United States, that is
regulated as such by that country's government or an agency thereof, and (ii) a
majority-owned direct or indirect subsidiary of a U.S. Bank or bank holding
company which subsidiary is incorporated or organized under the laws of a
country other than the United States. In addition, an Eligible Foreign
Custodian shall also mean any other entity that shall have been so qualified by
exemptive order, rule or other appropriate action of the SEC.
(c) For purposes of provisions of the Agreement imposing liability on Bank,
the term Subcustodian shall not include any Eligible Foreign Custodian as to
which Bank has not acted as Foreign Custody Manager or, for purposes of clarity,
any securities depository."
4. Add the following language to the end of the first sentence of Section
4(d) of the Agreement: "or, in the case of cash deposits, except for liens or
rights in favor of creditors of the Subcustodian arising under bankruptcy,
insolvency or similar laws."
5. Add a new Section 16 to the Agreement as follows:
16. Compliance with Securities and Exchange Commission rule 17f-7 ("rule
17f-7").
(a) Bank shall, for consideration by Customer or Customer's investment
adviser, provide an analysis in accordance with rule 17f-7(a)(1)(i)(A) of the
custody risks associated with maintaining Customer's Foreign Assets with each
Eligible Securities Depository used by Bank as of the date hereof (or, in the
case of an Eligible Securities Depository not used by Bank as of the date
hereof, prior to the initial placement of Customer's Foreign Assets at such
Depository) and at which any Foreign Assets of Customer are held or are expected
to be held. The foregoing analysis will be provided to Customer at Bank's
Website. In connection with the foregoing, Customer shall notify Bank of any
Eligible Securities Depositories at which it does not choose to have its Foreign
Assets held. Bank shall monitor the custody risks associated with maintaining
Customer's Foreign Assets at each such Eligible Securities Depository on a
continuing basis and shall promptly notify (which may be electronic) Customer or
its adviser of any material changes in such risks in accordance with rule
17f-7(a)(1)(i)(B).
(b) Bank shall exercise reasonable care, prudence and diligence in
performing the requirements set forth in Section 16(a) above. The risk analysis
of an Eligible Securities Depository provided under paragraph 16(a) shall take
account of the specific rules of a given depository and shall, to the extent
reasonably practicable, generally consider: (1) the Depository's expertise and
market reputation; (2) the quality of the Depository's services; (3) the
Depository's financial strength; (4) any insurance or indemnification
arrangements; (5) the extent and quality of regulation and independent
examination of the Depository; (6) the Depository's standing in published
ratings; (7) the Depository's internal controls and other procedures for
safeguarding assets; and (8) any related legal protections.
(c) Based on the information available to it in the exercise of diligence,
Bank shall determine the eligibility under rule 17f-7 of each depository before
including it on Appendix 1-B hereto and shall promptly advise Customer if any
Eligible Securities Depository ceases to be eligible. (Eligible Securities
Depositories used by Bank as of the date hereof are set forth in Appendix 1-B
hereto, and as the same may be amended on notice to Customer from time to time.)
(d) Bank need not commence performing any of the duties set forth in this
Section 16 prior to March 31, 2001, but Bank shall advise Customer if it is
prepared to commence such duties prior to such date as to particular
depositories.
7. Add the following language to the end of Section 3 of the Agreement:
The term "securities depository" as used herein when referring to a
securities depository located outside the U.S. shall mean an "Eligible
Securities Depository" which, in turn, shall have the same meaning as in rule
17f-7(b)(1)(i)-(vi) as the same may be amended from time to time, or that has
otherwise been made exempt by an SEC exemptive order, rule or other appropriate
SEC action, except that prior to the compliance date with rule 17f-7 for a
particular securities depository the term "securities depositories" shall be as
defined in (a)(1)(ii)-(iii) of the 1997 amendments to rule 17f-5. The term
"securities depository" as used herein when referring to a securities depository
located in the U.S. shall mean a "securities depository" as defined in SEC rule
17f-4(a).
*********************
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
[Each of the THE CHASE MANHATTAN BANK
T. Rowe Price Funds,
severally and not jointly,
set forth on Appendix 2 [Customer]
/s/Henry H. Hopkins /s/Paul D. Hopkins
By:________________________ By:_____________________
Name: Henry H. Hopkins Name: Paul D. Hopkins
Title:Vice President Title: Vice President
Date: 4/26/01 Date: 5/15/01
Appendix 1-A
Information Regarding Country Risk
1. To aid Customer in its determinations regarding Country Risk, Bank
shall furnish annually and upon the initial placing of Foreign Assets into a
country the following information (check items applicable):
A Opinions of local counsel concerning:
___ i.
Whether applicable foreign law would restrict the access afforded Customer's
independent public accountants to books and records kept by an Eligible Foreign
Custodian located in that country.
___ ii.
Whether applicable foreign law would restrict the Customer's ability to recover
its assets in the event of the bankruptcy of an Eligible Foreign Custodian
located in that country.
___ iii.
Whether applicable foreign law would restrict the Customer's ability to recover
assets that are lost while under the control of an Eligible Foreign Custodian
located in the country.
B. Written information concerning:
___ i.
The likelihood of expropriation, nationalization, freezes, or confiscation of
Customer's assets.
___ ii.
Whether difficulties in converting Customer's cash and cash equivalents to U.S.
dollars are reasonably foreseeable.
C. A market report with respect to the following topics:
(i) securities regulatory environment, (ii) foreign ownership restrictions,
(iii) foreign exchange, (iv) securities settlement and registration, (v)
taxation, (vi) market settlement risk, (vii) Eligible Securities Depositories
(including Depository evaluation), if any.
2. Bank shall furnish the following additional information:
Market flashes, including with respect to changes in the information in
market reports.
Appendix 1-B
ELIGIBLE SECURITIES DEPOSITORIES
APPENDIX 2
T. ROWE PRICE INVESTMENT COMPANIES
T. Rowe Price Balanced Fund, Inc.
T. Rowe Price Blue Chip Growth Fund, Inc.
T. Rowe Price Capital Appreciation Fund
T. Rowe Price Capital Opportunity Fund, Inc.
T. Rowe Price Developing Technologies Fund, Inc.
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
T. Rowe Price Dividend Growth Fund, Inc.
T. Rowe Price Equity Income Fund
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Income Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Blue Chip Growth Portfolio
T. Rowe Price Health Sciences Portfolio
T. Rowe Price Financial Services Fund, Inc.
T. Rowe Price Global Technology Fund, Inc.
T. Rowe Price Growth & Income Fund, Inc.
T. Rowe Price Growth Stock Fund, Inc.
T. Rowe Price Health Sciences Fund, Inc.
Institutional International Funds, Inc.
Foreign Equity Fund
T. Rowe Price International Funds, Inc.
T. Rowe Price International Discovery Fund
T. Rowe Price International Stock Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Growth & Income Fund
T. Rowe Price Emerging Europe & Mediterranean Fund
T. Rowe Price International Bond Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price International Index Fund, Inc.
T. Rowe Price International Equity Index Fund
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio
T. Rowe Price Mid-Cap Growth Fund, Inc.
T. Rowe Price Mid-Cap Value Fund, Inc.
T. Rowe Price New America Growth Fund
T. Rowe Price New Era Fund, Inc.
T. Rowe Price New Horizons Fund, Inc.
T. Rowe Price Real Estate Fund, Inc.
T. Rowe Price Small-Cap Stock Fund, Inc.
T. Rowe Price Science & Technology Fund, Inc.
T. Rowe Price Small-Cap Value Fund, Inc.
T. Rowe Price Value Fund, Inc.
T. Rowe Price Media & Telecommunications Fund, Inc.
T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price Fixed Income Series, Inc.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price High Yield Fund, Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Personal Strategy Funds, Inc.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Tax-Efficient Funds, Inc.
T. Rowe Price Tax-Efficient Balanced Fund
T. Rowe Price Tax-Efficient Growth Fund
T. Rowe Price Tax-Efficient Multi-Cap Growth Fund
T. Rowe Price U.S. Bond Index Fund, Inc.
Institutional Equity Funds, Inc. on behalf of:
Institutional Mid-Cap Equity Growth Fund
Institutional Large-Cap Value Fund
Institutional Small-Cap Stock Fund
AMENDMENT AGREEMENT
The Global Custody Agreement of January 3, 1994, as amended April 18, 1994,
August 15, 1994, November 28, 1994, May 31, 1995, November 1, 1995, July 31,
1996, July 23, 1997, September 3, 1997, October 29, 1997, December 15, 1998,
October 6, 1999, February 9, 2000, April 19, 2000, July 18, 2000, October 25,
2000, and April 25, 2001 (the "Custody Agreement") by and between each of the
Entities listed in Schedule A, as amended thereto, severally and not jointly
(each such entity referred to hereinafter as the "Customer") and The Chase
Manhattan Bank, N.A., whose contracts have been assumed by THE CHASE MANHATTAN
BANK (the "Bank") is hereby further amended, as of July 24, 2001 (the "Amendment
Agreement"). Terms defined in the Custody Agreement are used herein as therein
defined.
WITNESSETH:
WHEREAS, the Customer wishes to appoint the Bank as its global custodian
and the Bank wishes to accept such appointment pursuant to the terms of the
Custody Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1.Amendment. Sections I, II and III of Schedule A of the Custody Agreement
----------
("Schedule A") shall be amended to add or change certain Customers as specified
in Attachment A hereto. The revised Schedule A incorporating these changes in
the form attached shall supersede the existing Schedule A in its entirety.
2.
Agreement. The Customer and Bank agree to be bound in all respects by all the
----------
terms and conditions of the Custody Agreement and shall be fully liable and
responsible thereunder as a "Customer" and "Bank," respectively, as defined in
the Custody Agreement.
3.
Confirmation of Agreement. Except as amended hereby, the Custody Agreement is
------------ -- ---------
in full force and effect and as so amended is hereby ratified, approved and
confirmed by the Customer and the Bank in all respects.
4.
Governing Law: This Amendment Agreement shall be construed in accordance with
--------- ----
and governed by the law of the State of New York without regard to its conflict
of law principles.
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as
of the day and year first above written.
THE CHASE MANHATTAN BANK
/s/Paul D. Hopkins
By: ____________________________________
Paul D. Hopkins
Vice President
EACH OF THE CUSTOMERS LISTED IN
ATTACHMENT A HERETO, SEVERALLY
AND NOT JOINTLY
/s/Henry H. Hopkins
By: ____________________________________
Henry H. Hopkins
Vice President
ATTACHMENT A
PAGE 1 OF 1
LIST OF CUSTOMERS
Add the following Funds:
------------------------
Equity Funds
------------
Institutional Equity Funds, Inc. on behalf of:
Institutional Large-Cap Growth Fund
Add the following Funds to the Global Proxy Service Rider:
---------------------------------------------------------
Equity Funds
------------
Institutional Equity Funds, Inc. on behalf of:
Institutional Large-Cap Growth Fund
Add the following Fund to the Global Proxy Service and Russian Rider
--------------------------------------------------------------------
Equity Fund
-----------
Institutional Equity Funds, Inc. on behalf of:
Institutional Large-Cap Growth Fund
SCHEDULE A
PAGE 1 OF 3
LIST OF CUSTOMERS, SEVERALLY AND NOT JOINTLY PARTIES TO
GLOBAL CUSTODY AGREEMENT WITH
THE CHASE MANHATTAN BANK
DATED JANUARY 3, 1994, AS AMENDED
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
I. INVESTMENT COMPANIES/PORTFOLIOS The Mutual Fund Rider is applicable to
REGISTERED UNDER THE INVESTMENT all Customers listed under Section I of
COMPANY ACT OF 1940 this Schedule A.
Equity Funds
------------
T. Rowe Price Balanced Fund, Inc. Global Proxy Service Rider
T. Rowe Price Blue Chip Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Capital Appreciation Fund Global Proxy Service Rider
T. Rowe Price Capital Opportunity Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Developing Technologies Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Dividend Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Equity Income Fund Global Proxy Service Rider
T. Rowe Price Equity Series, Inc. on behalf of:
T. Rowe Price Blue Chip Growth Portfolio Global Proxy Service Rider
T. Rowe Price Equity Income Portfolio Global Proxy Service Rider
T. Rowe Price Health Sciences Portfolio Global Proxy Service Rider
T. Rowe Price Mid-Cap Growth Portfolio Global Proxy Service Rider
T. Rowe Price New America Growth Portfolio Global Proxy Service Rider
T. Rowe Price Personal Strategy Balanced Portfolio
Global Proxy Service Rider
T. Rowe Price Financial Services Fund, Inc. Global Proxy Service Rider
T. Rowe Price Global Technology Fund, Inc. Global Proxy Service Rider
T. Rowe Price Growth & Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price Growth Stock Fund, Inc. Global Proxy Service Rider
T. Rowe Price Health Sciences Fund, Inc. Global Proxy Service Rider
Institutional Equity Funds, Inc. on behalf of:
Institutional Large-Cap Growth Fund Global Proxy Service Rider
Institutional Large-Cap Value Fund Global Proxy Service Rider
Institutional Small-Cap Stock Fund Global Proxy Service Rider
Institutional Mid-Cap Equity Growth Fund Global Proxy Service Rider
Institutional International Funds, Inc. on behalf of:
Foreign Equity Fund Global Proxy Service and Russian Rider
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Europe &
Mediterranean Fund Global Proxy Service and Russian Rider
T. Rowe Price Emerging Markets Stock Fund
Global Proxy Service and Russian Rider
SCHEDULE A
PAGE 2 OF 3
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
T. Rowe Price International Funds, Inc. on behalf of (continued):
T. Rowe Price European Stock Fund Global Proxy Service and Russian Rider
T. Rowe Price Global Stock Fund Global Proxy Service and Russian Rider
T. Rowe Price International Discovery Fund
Global Proxy Service and Russian Rider
T. Rowe Price International Growth & Income Fund
Global Proxy Service and Russian Rider
T. Rowe Price International Stock Fund
Global Proxy Service and Russian Rider
T. Rowe Price Japan Fund Global Proxy Service and Russian Rider
T. Rowe Price Latin America Fund Global Proxy Service and Russian Rider
T. Rowe Price New Asia Fund Global Proxy Service and Russian Rider
T. Rowe Price International Index Fund, Inc. on behalf of:
T. Rowe Price International Equity Index Fund
Global Proxy Service and Russian Rider
T. Rowe Price International Series, Inc. on behalf of:
T. Rowe Price International Stock Portfolio
Global Proxy Service and Russian Rider
T. Rowe Price Media & Telecommunications Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Mid-Cap Growth Fund, Inc. Global Proxy Service Rider
T. Rowe Price Mid-Cap Value Fund, Inc. Global Proxy Service Rider
T. Rowe Price New America Growth Fund Global Proxy Service Rider
T. Rowe Price New Era Fund, Inc. Global Proxy Service Rider
T. Rowe Price New Horizons Fund, Inc. Global Proxy Service Rider
T. Rowe Price Real Estate Fund, Inc. Global Proxy Service Rider
T. Rowe Price Science & Technology Fund, Inc.
Global Proxy Service Rider
T. Rowe Price Small-Cap Stock Fund, Inc. Global Proxy Service Rider
T. Rowe Price Small-Cap Value Fund, Inc. Global Proxy Service Rider
T. Rowe Price Value Fund, Inc. Global Proxy Service Rider
Income Funds
------------
T. Rowe Price Corporate Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price High Yield Fund, Inc. Global Proxy Service Rider
T. Rowe Price Income Series, Inc. on behalf of:
T. Rowe Price Limited-Term Bond Portfolio Global Proxy Service Rider
T. Rowe Price International Funds, Inc. on behalf of:
T. Rowe Price Emerging Markets Bond Fund
Global Proxy Service and Russian Rider
T. Rowe Price International Bond Fund
Global Proxy Service and Russian Rider
T. Rowe Price New Income Fund, Inc. Global Proxy Service Rider
T. Rowe Price Personal Strategy Funds, Inc. on behalf of:
T. Rowe Price Personal Strategy Balanced Fund
Global Proxy Service Rider
T. Rowe Price Personal Strategy Growth Fund Global Proxy Service Rider
T. Rowe Price Personal Strategy Income Fund Global Proxy Service Rider
T. Rowe Price Short-Term Bond Fund, Inc. Global Proxy Service Rider
SCHEDULE A
PAGE 3 OF 3
T. Rowe Price Tax-Efficient Funds, Inc. on behalf of:
T. Rowe Price Tax-Efficient Balanced Fund Global Proxy Service Rider
T. Rowe Price Tax-Efficient Growth Fund Global Proxy Service Rider
T. Rowe Price Tax-Efficient Multi-Cap Growth Fund
Global Proxy Service Rider
T. Rowe Price U.S. Bond Index Fund, Inc. Global Proxy Service Rider
APPLICABLE RIDERS TO
CUSTOMER GLOBAL CUSTODY AGREEMENT
II. ACCOUNTS SUBJECT TO ERISA The ERISA Rider is applicable to all
Customers under Section II of this
Schedule A.
T. Rowe Price Trust Company, as Trustee for the
Johnson Matthey Salaried Employee Savings Plan
Common Trust Funds
------------------
T. Rowe Price Trust Company, as Trustee for the International
Common Trust Fund on behalf of the Underlying Trusts:
Emerging Markets Equity Trust Global Proxy Service Rider
Foreign Discovery Trust Global Proxy Service Rider
Foreign Discovery Trust - B Global Proxy Service Rider
India Trust Global Proxy Service Rider
International Small-Cap Trust Global Proxy Service Rider
Japan Discovery Trust Global Proxy Service Rider
Taiwan Trust Global Proxy Service Rider
EX-99.H OTH MAT CONT
7
transfer01.txt
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
T. ROWE PRICE SERVICES, INC.
AND
THE T. ROWE PRICE FUNDS
TABLE OF CONTENTS
-----------------
PAGE
----
Article A Terms of Appointment 2
Article B Duties of Price Services 3
1. Receipt of Orders/Payments 3
2. Redemptions 5
3. Transfers 7
4. Confirmations 7
5. Returned Checks and ACH Debits7
6. Redemption of Shares under a Hold 8
7. Dividends, Distributions and Other Corporate Actions 10
8. Abandoned Property and Lost Shareholders10
9. Books and Records 11
10. Authorized Issued and Outstanding Shares13
11. Tax Information13
12. Information to be Furnished to the Fund 13
13. Correspondence 14
14. Lost or Stolen Securities14
15. Telephone/Computer Services 14
16. Collection of Shareholder Fees15
17. Form N-SAR15
18. Cooperation With Accountants 15
19. Blue Sky 15
20. Other Services 15
Article C Fees and Out-of-Pocket Expenses 15
Article D Representations and Warranties of the Price Services 17
Article E Representations and Warranties of the Fund .18
Article F Standard of Care/Indemnification 18
Article G Dual Interests 20
Article H Documentation 21
Article I References to Price Services 22
Article J Compliance with Governmental Rules and Regulations22
i
Article K Ownership of Software and Related Material 23
Article L Quality Service Standards23
Article M As of Transactions 23 Article N Term and Termination of Agreement 26
Article O Notice 26 Article P Assignment27 Article Q Amendment/Interpretive
Provisions 27 Article R Further Assurances 27 Article S Maryland Law to Apply 27
Article T Merger of Agreement 27 Article U Counterparts 28 Article V The Parties
28 Article W Directors, Trustees, Shareholders and Massachusetts Business Trust
28 Article X Captions 29
ii
TRANSFER AGENCY AND SERVICE AGREEMENT
-------------------------------------
AGREEMENT made as of the first day of January, 2001, by and between T. ROWE
PRICE SERVICES, INC., a Maryland corporation having its principal office and
place of business at 100 East Pratt Street, Baltimore, Maryland 21202 ("PRICE
SERVICES"), and EACH FUND WHICH IS LISTED ON APPENDIX A (as such Appendix may be
amended from time to time) and which evidences its agreement to be bound hereby
by executing a copy of this Agreement (each such Fund individually hereinafter
referred to as "THE FUND", whose definition may be found in Article V);
WHEREAS, the Fund desires to appoint Price Services as its transfer agent,
dividend disbursing agent and agent in connection with certain other activities,
and Price Services desires to accept such appointment;
WHEREAS, Price Services represents that it is registered with the
Securities and Exchange Commission as a Transfer Agent under Section 17A of the
Securities Exchange Act of 1934 ("'34 ACT") and will notify each Fund promptly
if such registration is revoked or if any proceeding is commenced before the
Securities and Exchange Commission which may lead to such revocation;
WHEREAS, Price Services has the capability of providing shareholder
services on behalf of the Funds for the accounts of shareholders in the Funds,
including banks and brokers on behalf of underlying clients;
WHEREAS, certain of the Funds are named investment options under various
tax-sheltered retirement plans including, but not limited to, individual
retirement accounts, Sep-IRA's, SIMPLE plans, deferred compensation plans,
403(b) plans, and profit sharing, thrift, and money purchase pension plans for
self-employed individuals and professional partnerships and corporations,
(collectively referred to as "RETIREMENT PLANS");
WHEREAS, Price Services also has the capability of providing special
services, on behalf of the Funds, for the accounts of shareholders participating
in these Retirement Plans ("RETIREMENT ACCOUNTS").
WHEREAS, Price Services may subcontract or jointly contract with other
parties, on behalf of the Funds to perform certain of the functions and services
described herein including services to Retirement Plans and Retirement Accounts;
WHEREAS, Price Services may enter into agreements with certain third party
intermediaries, who will perform certain of the services described herein for
beneficial shareholders of the Funds and may accept orders on behalf of the Fund
from such beneficial shareholders;
WHEREAS, Price Services may also enter into, on behalf of the Funds,
certain banking relationships to perform various banking services including, but
not limited to, check deposits, check disbursements, automated clearing house
transactions ("ACH") and wire transfers.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
A. TERMS OF APPOINTMENT
--------------------
Subject to the terms and conditions set forth in this Agreement, the Fund
hereby employs and appoints Price Services to act, and Price Services agrees to
act, as the Fund's transfer agent,
dividend disbursing agent and agent in connection with: (1) the Fund's
authorized and issued shares of its common stock or shares of beneficial
interest (all such stock and shares to be referred to as "SHARES"); (2) any
dividend reinvestment or other services provided to the shareholders of the Fund
("SHAREHOLDERS"), including, without limitation, any periodic investment plan or
periodic withdrawal program; and (3) certain Retirement Plan and Retirement
Accounts as agreed upon by the parties.
The parties to the Agreement hereby acknowledge that from time to time,
Price Services and T. Rowe Price Trust Company may enter into contracts ("OTHER
CONTRACTS") with employee benefit plans and/or their sponsors for the provision
of certain plan participant services to Retirement Plans and Retirement
Accounts. Compensation paid to Price Services pursuant to this Agreement is with
respect to the services described herein and not with respect to services
provided under Other Contracts.
B. DUTIES OF PRICE SERVICES
------------------------
Price Services agrees that it will perform the following services:
1. RECEIPT OF ORDERS/PAYMENTS
------- -- ---------------
Receive for acceptance, orders/payments for the purchase of Shares and
promptly deliver payment and appropriate documentation thereof to the
authorized custodian of the Fund (the "CUSTODIAN"). Upon receipt of any
check or other instrument drawn or endorsed to it as agent for, or
identified as being for the account of, the Fund, Price Services will
process the order as follows:
/2/ Examine the check to determine if the check conforms to the Funds'
acceptance procedures (including certain third-party check
procedures). If the check con-
forms, Price Services will endorse the check and include the date of
receipt, will process the same for payment, and deposit the net
amount to the parties agreed upon designated bank account prior to
such deposit in the Custodial account, and will notify the Fund and
the Custodian, respectively, of such deposits (such notification to
be given on a daily basis of the total amount deposited to said
accounts during the prior business day);
/2/ Subject to guidelines mutually agreed upon by the Funds and Price
Services, excess balances, if any, resulting from deposit in these
designated bank accounts will be invested and the income therefrom
will be used to offset fees which would otherwise be charged to the
Funds under this Agreement;
/2/ Ensure that any documentation received from Shareholder is in
"good order" and all appropriate documentation is received to
establish an account.
/2/ Open a new account, if necessary, and credit the account of the
investor with the number of Shares to be purchased according to the
price of the Fund's Shares in effect for purchases made on that
date, subject to any instructions which the Fund may have given to
Price Services with respect to acceptance of orders for Shares;
/2/ Maintain a record of all unpaid purchases and report such
information to the Fund daily;
/2/ Process periodic payment orders, as authorized by investors, in
accordance with the payment procedures mutually agreed upon by both
parties;
/2/ Receive monies from Retirement Plans and determine the proper
allocation of such monies to the Retirement Accounts based upon
instructions received from Retirement Plan participants or
Retirement Plan administrators ("ADMINISTRATORS");
/2/ Process orders received from third party intermediaries on behalf
of beneficial Shareholders for omnibus accounts and individual
accounts in the Funds in accordance with procedures established by
agreement with such intermediaries. Receipt of orders by such third
party intermediaries shall be deemed receipt by the Fund for
purposes of Rule 22c-1 of the Investment Company Act of 1940; and
/2/ Process telephone orders for purchases of Fund shares from the
Shareholder's bank account (via wire or ACH) to the Fund in
accordance with procedures mutually agreed upon by both parties.
Upon receipt of funds through the Federal Reserve Wire System that are
designated for purchases in Funds which declare dividends at 12:00 p.m. (or
such time as set forth in the Fund's current prospectus), Price Services
shall promptly notify the Fund and the Custodian of such deposit.
2. REDEMPTIONS
-----------
Receive for acceptance redemption requests, including telephone redemptions
and requests received from Administrators for distributions to participants
or their designated beneficiaries or for payment of fees due the
Administrator or such other person, including Price Services, and deliver
the appropriate documentation thereof to the Custo-
dian. Price Services shall receive and stamp with the date of receipt, all
requests for redemptions of Shares (including all certificates delivered to
it for redemption) and shall process said redemption requests as follows,
subject to the provisions of Section 6 hereof:
/2/ Examine the redemption request and, for written redemptions, the
supporting documentation, to determine that the request is in good
order and all requirements have been met;
/2/ Notify the Fund on the next business day of the total number of
Shares presented and covered by all such requests;
/2/ For those Funds that impose redemption fees, calculate the fee
owed on the redemption in accordance with the guidelines established
between the Fund and Price Services;
/2/ As set forth in the prospectus of the Fund, and in any event, on
or prior to the seventh (7th) calendar day succeeding any such
request for redemption, Price Services shall, from funds available
in the accounts maintained by Price Services as agent for the Funds,
pay the applicable redemption price in accordance with the current
prospectus of the Fund, to the investor, participant, beneficiary,
Administrator or such other person, as the case may be;
/2/ Instruct custodian to wire redemption proceeds to a designated
bank account of Price Services. Subject to guidelines mutually
agreed upon by the Funds and Price Services, excess balances, if
any, resulting from deposit in these bank accounts will be invested
and the income therefrom will be used to offset fees which would
otherwise be charged to the Funds under this Agreement;
/2/ If any request for redemption does not comply with the Fund's
requirements,
Price Services shall promptly notify the investor of such fact,
together with the reason therefore, and shall effect such redemption
at the price in effect at the time of receipt of all appropriate
documents;
/2/ Make such withholdings as may be required under applicable Federal
tax laws;
/2/ In the event redemption proceeds for the payment of fees are to be
wired through the Federal Reserve Wire System or via ACH, Price
Services shall cause such proceeds to be wired in Federal funds or
via ACH to the bank account designated by Shareholder; and
/2/ Process redemption orders received from third party intermediaries
on behalf of beneficial Shareholders for omnibus accounts and
individual accounts in the Funds in accordance with procedures
established by agreement with such intermediaries. Receipt of
redemption orders by such third party intermediaries shall be deemed
receipt by the Fund for purposes of Rule 22c-1 of the Investment
Company Act of 1940;
/2/ Process periodic redemption orders as authorized by the investor
in accordance with the periodic withdrawal procedures for Systematic
Withdrawal Plan ("SWP") and systematic ACH redemptions mutually
agreed upon by both parties.
Procedures and requirements for effecting and accepting redemption orders
from investors by telephone, Tele*Access, computer, or written instructions
shall be established by mutual agreement between Price Services and the
Fund consistent with the Fund's current prospectus.
3. TRANSFERS
---------
Effect transfers of Shares by the registered owners thereof upon receipt of
appropriate instructions and documentation and examine such instructions
for conformance with appropriate procedures and requirements. In this
regard, Price Services, upon receipt of a proper request for transfer,
including any transfer involving the surrender of certificates of Shares,
is authorized to transfer, on the records of the Fund, Shares of the Fund,
including cancellation of surrendered certificates, if any, to credit a
like amount of Shares to the transferee.
4. CONFIRMATIONS
-------------
Mail all confirmations and statements as well as other enclosures requested
by the Fund to the shareholder, and in the case of Retirement Accounts, to
the Administrators, as may be required by the Funds or by applicable
Federal or state law.
5. RETURNED CHECKS AND ACH DEBITS
-------- ------ --- --- ------
In order to minimize the risk of loss to the Fund by reason of any check
being returned unpaid, Price Services will promptly identify and follow-up
on any check or ACH debit returned unpaid. For items returned, Price
Services may telephone the investor and/or redeposit the check or debit for
collection or cancel the purchase, as deemed appropriate. Price Services
and the Funds will establish procedures for the collection of money owed
the Fund from investors who have caused losses due to these returned items.
6. REDEMPTION OF SHARES UNDER A HOLD
---------- -- ------ ----- - ----
/2/ UNCOLLECTED FUNDS.
Shares purchased by personal, corporate, governmental check,
cashier's, treasurer's, certified or official checks or by ACH will
be considered uncollected until the tenth calendar date following
the trade date of the trade ("UNCOLLECTED FUNDS");
/2/ GOOD FUNDS. Shares purchased by wire transfer or automatically
through a shareholder's paycheck will be considered collected
immediately ("GOOD FUNDS"). Absent information to the contrary
(i.e., notification from the payee institution), Uncollected Funds
will be considered Good Funds on the tenth calendar day following
trade date.
/2/ REDEMPTION OF UNCOLLECTED FUNDS
/2/ Shareholders making telephone requests for redemption of shares
purchased with Uncollected Funds will be given two options:
1.
The Shareholder will be permitted to exchange to another Fund
until the payment is deemed Good Funds; or
2.
The redemption can be processed utilizing the same procedures
for written redemptions described below.
/2/ If a written redemption request is made for shares where any
portion of the payment for said shares is in Uncollected Funds, and
the request is in good order, Price Services will promptly obtain
the information relative to the payment necessary to determine when
the payment becomes Good Funds. The redemption will be processed in
accordance with normal procedures, and the proceeds
will be held until confirmation that the payment is Good Funds. On
the seventh (7th) calendar day after trade date, and each day
thereafter until either confirmation is received or the tenth (10th)
calendar day Price Services will call the paying institution to
request confirmation that the check or ACH in question has been
paid. On the tenth calendar day after trade date, the redemption
proceeds will be released, regardless of whether confirmation has
been received.
/2/ CHECKWRITING REDEMPTIONS.
/2/ Daily, all checkwriting redemptions $10,000 and over reported as
Uncollected Funds or insufficient funds will be reviewed. An attempt
will be made to contact the shareholder to make good the funds
(through wire, exchange, transfer). Generally by 12:00 p.m. the same
day, if the matter has not been resolved, the redemption request
will be rejected and the check returned to the Shareholder.
/2/ All checkwriting redemptions under $10,000 reported as Uncollected
or insufficient funds will be rejected and the check returned to the
Shareholder. The Funds and Services may agree to contact
shareholders presenting checks under $10,000 reported as
insufficient to obtain alternative instructions for payment.
/2/ CONFIRMATIONS OF AVAILABLE FUNDS. The Fund expects that situations
may develop whereby it would be beneficial to determine if a person
who has placed an order for Shares has sufficient funds in his or
her checking account to cover the payment for the Shares purchased.
When this situation occurs, Price Services may call the bank in
question and request that it confirm that sufficient funds to cover
the purchase are currently credited to the account in ques-
tion. Price Services will maintain written documentation or a
recording of each telephone call which is made under the procedures
outlined above. None of the above procedures shall preclude Price
Services from inquiring as to the status of any check received by it
in payment for the Fund's Shares as Price Services may deem
appropriate or necessary to protect both the Fund and Price
Services. If a conflict arises between Section 2 and this Section 6,
Section 6 will govern.
7. DIVIDENDS, DISTRIBUTIONS AND OTHER CORPORATE ACTIONS
---------- ------------- --- ----- --------- -------
/2/ The Fund will promptly inform Price Services of the declaration of
any dividend, distribution, stock split or any other distributions
of a similar kind on account of its Capital Stock.
/2/ Price Services shall act as Dividend Disbursing Agent for the
Fund, and as such, shall prepare and make income and capital gain
payments to investors. As Dividend Disbursing Agent, Price Services
will on or before the payment date of any such dividend or
distribution, notify the Custodian of the estimated amount required
to pay any portion of said dividend or distribution which is payable
in cash, and the Fund agrees that on or about the payment date of
such distribution, it shall instruct the Custodian to make available
to Price Services sufficient funds for the cash amount to be paid
out. If an investor is entitled to receive additional Shares by
virtue of any such distribution or dividend, appropriate credits
will be made to his or her account.
8. ABANDONED PROPERTY AND LOST SHAREHOLDERS
--------- -------- --- ---- ------------
In accordance with procedures agreed upon by both parties, report
abandoned property to appropriate state and governmental authorities
of the Fund. Price Services shall, 90 days prior to the annual
reporting of abandoned property to each of the states, make reasonable
attempts to locate Shareholders for which (a) checks, tax forms,
statements or confirms have been returned; (b) for which accounts have
aged outstanding checks; or (c) accounts with share balances that have
been coded with stop mail and meet the dormancy period guidelines
specified in the individual states. Price Services shall make
reasonable attempts to contact shareholders for those accounts which
have significant aged outstanding checks and those checks meet a
specified dollar threshold. Price Services shall also comply with
applicable securities regulations with respect to searching for lost
shareholders.
9. BOOKS AND RECORDS
----- --- -------
Maintain records showing for each Shareholder's account, Retirement
Plan or Retirement Account, as the case may be, the following: /2/
Names, address and tax identification number; /2/ Number of Shares
held; /2/ Certain historical information regarding the account of each
Shareholder, including dividends and distributions distributed in
cash or invested in Shares;
/2/ Pertinent information regarding the establishment and maintenance
of Retirement Plans and Retirement Accounts necessary to properly
administer each account;
/2/ Information with respect to the source of dividends and
distributions allocated
among income (taxable and nontaxable income), realized short-term
gains and realized long-term gains;
/2/ Any stop or restraining order placed against a Shareholder's
account;
/2/ Information with respect to withholdings on domestic and foreign
accounts;
/2/ Any instructions from a Shareholder including, all forms furnished
by the Fund and executed by a Shareholder with respect to (i)
dividend or distribution elections, and (ii) elections with respect
to payment options in connection with the redemption of Shares;
/2/ Any correspondence relating to the current maintenance of a
Shareholder's account;
/2/ Certificate numbers and denominations for any Shareholder holding
certificates;
/2/ Any information required in order for Price Services to perform
the calculations contemplated under this Agreement.
Price Services shall maintain files and furnish statistical and other
information as required under this Agreement and as may be agreed upon from
time to time by both parties or required by applicable law. However, Price
Services reserves the right to delete, change or add any information to the
files maintained; provided such deletions, changes or additions do not
contravene the terms of this Agreement or applicable law and do not
materially reduce the level of services described in this Agreement. Price
Services shall also use its best efforts to obtain additional statistical
and other information as each Fund may reasonably request for additional
fees as may be agreed to by both parties.
Any such records maintained pursuant to Rule 31a-1 under the Investment
Company Act of 1940 ("THE ACT") will be preserved for the periods and
maintained in a manner prescribed in Rule 31a-2 thereunder. Disposition of
such records after such prescribed periods shall be as mutually agreed upon
by the Fund and Price Services. The retention of such records, which may be
inspected by the Fund at reasonable times, shall be at the expense of the
Fund. All records maintained by Price Services in connection with the
performance of its duties under this Agreement will remain the property of
the Fund and, in the event of termination of this Agreement, will be
delivered to the Fund as of the date of termination or at such other time
as may be mutually agreed upon.
All books, records, information and data pertaining to the business of the
other party which are exchanged or received pursuant to the negotiation or
the carrying out of this Agreement shall remain confidential, and shall not
be voluntarily disclosed to any other person, except after prior
notification to and approval by the other party hereto, which approval
shall not be unreasonably withheld and may not be withheld where Price
Services or the Fund may be exposed to civil or criminal contempt
proceedings for failure to comply; when requested to divulge such
information by duly constituted governmental authorities; or after so
requested by the other party hereto.
10. AUTHORIZED ISSUED AND OUTSTANDING SHARES
---------- ------ --- ----------- ------
Record the issuance of Shares of the Fund and maintain, pursuant to Rule
17Ad-10(e) of the '34 Act, a record of the total number of Shares of the
Fund which are authorized, issued and outstanding, based upon data provided
to it by the Fund. Price Services shall also provide the Fund on a regular
basis the total number of Shares which are authorized and issued and
outstanding. Price Services shall have no obligation, when
recording the issuance of Shares, to monitor the issuance of such Shares or
to take cognizance of any laws relating to the issuance or sale of such
Shares.
11. TAX INFORMATION
--- -----------
Prepare and file with the Internal Revenue Service and with other
appropriate state agencies and, if required, mail to investors, those
returns for reporting dividends and distributions paid as required to be so
filed and mailed, and shall withhold such sums required to be withheld
under applicable Federal income tax laws, rules, and regulations.
Additionally, Price Services will file and, as applicable, mail to
investors, any appropriate information returns required to be filed in
connection with Retirement Plan processing, such as 1099R, 5498, as well as
any other appropriate forms that the Fund or Price Services may deem
necessary. The Fund and Price Services shall agree to procedures to be
followed with respect to Price Services' responsibilities in connection
with compliance with back-up withholding and other tax laws.
12. INFORMATION TO BE FURNISHED TO THE FUND
----------- -- -- --------- -- --- ----
Furnish to the Fund such information as may be agreed upon between the Fund
and Price Services including any information that the Fund and Price
Services agree is necessary to the daily operations of the business.
13. CORRESPONDENCE
--------------
Promptly and fully answer correspondence from shareholders and
Administrators relating to Shareholder Accounts, Retirement Accounts,
transfer agent procedures, and such other correspondence as may from time
to time be mutually agreed upon with the Funds. Unless otherwise
instructed, copies of all correspondence will be retained
by Price Services in accordance with applicable law and procedures.
14. LOST OR STOLEN SECURITIES
---- -- ------ ----------
Pursuant to Rule 17f-1 of the '34 Act, report to the Securities Information
Center and/or the FBI or other appropriate person on Form X-17-F-1A all
lost, stolen, missing or counterfeit securities. Provide any other services
relating to lost, stolen or missing securities as may be mutually agreed
upon by both parties.
15. TELEPHONE/COMPUTER SERVICES
------------------ --------
Maintain a Telephone Servicing Staff of representatives ("REPRESENTATIVES")
sufficient to timely respond to all telephonic inquiries reasonably
foreseeable. The Representatives will also effect telephone purchases,
redemptions, exchanges, and other transactions mutually agreed upon by both
parties, for those Shareholders who have authorized telephone services. The
Representatives shall require each Shareholder effecting a telephone
transaction to properly identify himself/herself before the transaction is
effected, in accordance with procedures agreed upon between by both
parties. Procedures for processing telephone transactions will be mutually
agreed upon by both parties. Price Services will also be responsible for
providing Tele*Access, On-Line Access and such other Services as may be
offered by the Funds from time to time. Price Services will maintain a
special Shareholder Servicing staff to service certain Shareholders with
substantial relationships with the Funds.
16. COLLECTION OF SHAREHOLDER FEES
---------- -- ----------- ----
Calculate and notify shareholders of any fees owed the Fund, its affiliates
or its agents. Such fees include the small account fee IRA custodial fee
and wire fee.
17. FORM N-SAR
---- -----
Maintain such records, if any, as shall enable the Fund to fulfill the
requirements of Form N-SAR.
18. COOPERATION WITH ACCOUNTANTS
----------- ---- -----------
Cooperate with each Fund's independent public accountants and take all
reasonable action in the performance of its obligations under the Agreement
to assure that the necessary information is made available to such
accountants for the expression of their opinion without any qualification
as to the scope of their examination, including, but not limited to, their
opinion included in each such Fund's annual report on Form N-SAR and annual
amendment to Form N-1A.
19. BLUE SKY
---- ---
Provide to the Fund or its agent, on a daily, weekly, monthly and quarterly
basis, and for each state in which the Fund's Shares are sold, sales
reports and other materials for blue sky compliance purposes as shall be
agreed upon by the parties.
20. OTHER SERVICES
----- --------
Provide such other services as may be mutually agreed upon
between Price
Services and the Fund.
C. FEES AND OUT-OF-POCKET EXPENSES
-------------------------------
Each Fund shall pay to Price Services and/or its agents for its Transfer
Agent Services hereunder, fees computed as set forth in Schedule A attached.
Except as provided below, Price Services will be responsible for all expenses
relating to the providing of Services. Each Fund, however, will reimburse Price
Services for the following out-of-pocket expenses and charges
incurred in providing Services:
/2/ POSTAGE. The cost of postage and freight for mailing materials to
Shareholders and Retirement Plan participants, or their agents,
including overnight delivery, UPS and other express mail services
and special courier services required to transport mail between
Price Services locations and mail processing vendors.
/2/ PROXIES. The cost to mail proxy cards and other material supplied
to it by the Fund and costs related to the receipt, examination and
tabulation of returned proxies and the certification of the vote to
the Fund.
/2/ COMMUNICATIONS
/2/ PRINT. The printed forms used internally and externally for
documentation and processing Shareholder and Retirement Plan
participant, or their agent's inquiries and requests; paper and
envelope supplies for letters, notices, and other written
communications sent to Shareholders and Retirement Plan
participants, or their agents.
/2/ PRINT & MAIL HOUSE. The cost of internal and third party
printing and mail house services, including printing of statements
and reports.
/2/ VOICE AND DATA. The cost of equipment (including associated
maintenance), supplies and services used for communicating with and
servicing Shareholders of the Fund and Retirement Plan participants,
or their agents, and other Fund offices or other agents of either
the Fund or Price Services. These charges shall include:
/2/ telephone toll charges (both incoming and outgoing, local,
long distance
and mailgrams); and
/2/ data and telephone expenses to communicate with shareholders and
transfer shareholders between T. Rowe Price facilities.
/2/ Production support, service enhancements and custom reporting
for the shareholder mainframe recordkeeping system.
/2/ RECORD RETENTION. The cost of maintenance and supplies used to
maintain, microfilm, copy, record, index, display, retrieve, and
store, in optical disc, microfiche or microfilm form, documents and
records.
/2/ DISASTER RECOVERY. The cost of services, equipment, facilities and
other charges necessary to provide disaster recovery for any and all
services listed in this Agreement.
Out-of-pocket costs will be billed at cost to the Funds. Allocation of
monthly costs among the Funds will generally be made based upon the number of
Shareholder and Retirement Accounts serviced by Price Services each month. Some
invoices for these costs will contain costs for both the Funds and other funds
serviced by Price Services. These costs will be allocated based on a reasonable
allocation methodology. Where possible, such as in the case of inbound and
outbound WATS charges, allocation will be made on the actual distribution or
usage.
D. REPRESENTATIONS AND WARRANTIES OF PRICE SERVICES
------------------------------------------------
Price Services represents and warrants to the Fund that:
1.
It is a corporation duly organized and existing and in good standing under
the laws of Maryland;
2.
It is duly qualified to carry on its business in Maryland, Colorado and
Florida;
3.
It is empowered under applicable laws and by its charter and by-laws to
enter into and perform this Agreement; 4.
All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement; 5.
It is registered with the Securities and Exchange Commission as a Transfer
Agent pursuant to Section 17A of the '34 Act; and 6.
It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
E. REPRESENTATIONS AND WARRANTIES OF THE FUND
------------------------------------------
The Fund represents and warrants to Price Services that:
1.
It is a corporation or business trust duly organized and existing and in
good standing under the laws of Maryland or Massachusetts, as the case may
be;
2.
It is empowered under applicable laws and by its Articles of Incorporation
or Declaration of Trust, as the case may be, and By-Laws to enter into and
perform this Agreement; 3. All proceedings required by said Articles of
Incorporation or Declaration of Trust, as the case may be, and By-Laws have
been taken to authorize it to enter into and perform this Agreement; 4. It
is an investment company registered under the Act; and 5. A registration
statement under the Securities Act of 1933 ("THE '33 ACT") is currently
effective and will remain effective, and appropriate state securities law
filings have been made and will continue to be made, with respect to all
Shares of the Fund being
offered for sale.
F. STANDARD OF CARE/INDEMNIFICATION
--------------------------------
Notwithstanding anything to the contrary in this Agreement: 1. Price
Services shall not be liable to any Fund for any act or failure to act by
it or its agents or subcontractors on behalf of the Fund in carrying or
attempting to carry out the terms and provisions of this Agreement provided
Price Services has acted in good faith and without negligence or willful
misconduct and selected and monitored the performance of its agents and
subcontractors with reasonable care. 2.
The Fund shall indemnify and hold Price Services harmless from and against
all losses, costs, damages, claims, actions and expenses, including
reasonable expenses for legal counsel, incurred by Price Services resulting
from: (i) any action or omission by Price Services or its agents or
subcontractors in the performance of their duties hereunder; (ii) Price
Services acting upon instructions believed by it to have been executed by a
duly authorized officer of the Fund; or (iii) Price Services acting upon
information provided by the Fund in form and under policies agreed to by
Price Services and the Fund. Price Services shall not be entitled to such
indemnification in respect of actions or omissions constituting negligence
or willful misconduct of Price Services or where Price Services has not
exercised reasonable care in selecting or monitoring the performance of its
agents or subcontractors.
3.
Except as provided in Article M of this Agreement, Price Services shall
indemnify and hold harmless the Fund from all losses, costs, damages,
claims, actions and expenses, including reasonable expenses for legal
counsel, incurred by the Fund resulting
from the negligence or willful misconduct of Price Services or which result
from Price Services' failure to exercise reasonable care in selecting or
monitoring the performance of its agents or subcontractors. The Fund shall
not be entitled to such indemnification in respect of actions or omissions
constituting negligence or willful misconduct of such Fund or its agents or
subcontractors; unless such negligence or misconduct is attributable to
Price Services.
4.
In determining Price Services' liability, an isolated error or omission
will normally not be deemed to constitute negligence when it is determined
that:
/2/ Price Services had in place "appropriate procedures;"
/2/ the employee(s) responsible for the error or omission had been
reasonably trained and were being appropriately monitored; and /2/ the
error or omission did not result from wanton or reckless conduct on
the part of the employee(s).
It is understood that Price Services is not obligated to have in place
separate procedures to prevent each and every conceivable type of error or
omission. The term "appropriate procedures" shall mean procedures
reasonably designed to prevent and detect errors and omissions. In
determining the reasonableness of such procedures, weight will be given to
such factors as are appropriate, including the prior occurrence of any
similar errors or omissions when such procedures were in place and transfer
agent industry standards in place at the time of the occurrence. 5.
In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes or other causes
reasonably beyond its
control, such party shall not be liable to the other party for any loss,
cost, damage, claim, action or expense resulting from such failure to
perform or otherwise from such causes.
6.
In order that the indemnification provisions contained in this Article E
shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The
party who may be required to indemnify shall have the option to participate
with the party seeking indemnification in the defense of such claim, or to
defend against said claim in its own name or in the name of the other
party. The party seeking indemnification shall in no case confess any claim
or make any compromise in any case in which the other party may be required
to indemnify it except with the other party's prior written consent. 7.
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement.
G. DUAL INTERESTS
--------------
It is understood that some person or persons may be directors, officers, or
shareholders of both the Funds and Price Services (including Price Services'
affiliates), and that the existence of any such dual interest shall not affect
the validity of this Agreement or of any transactions hereunder except as
otherwise provided by a specific provision of applicable law.
H. DOCUMENTATION
-------------
As requested by Price Services, the Fund shall promptly furnish to Price
Services the following:
/2/ A certified copy of the resolution of the Directors/Trustees of the
Fund authorizing the appointment of Price Services and the execution and
delivery of this Agreement;
/2/ A copy of the Articles of Incorporation or Declaration of Trust,
as the case may be, and By-Laws of the Fund and all amendments
thereto;
/2/ As applicable, specimens of all forms of outstanding and new
stock/share certificates in the forms approved by the Board of
Directors/Trustees of the Fund with a certificate of the Secretary
of the Fund as to such approval;
/2/ All account application forms and other documents relating to
Shareholders' accounts;
/2/ An opinion of counsel for the Fund with respect to the validity of
the stock, the number of Shares authorized, the status of redeemed
Shares, and the number of Shares with respect to which a
Registration Statement has been filed and is in effect; and
/2/ A copy of the Fund's current prospectus.
The delivery of any such document for the purpose of any other agreement to
which the Fund and Price Services are or were parties shall be deemed to be
delivery for the purposes of this Agreement.
/2/ As requested by Price Services, the Fund will also furnish from time to
time the following documents:
/2/ Each resolution of the Board of Directors/Trustees of the Fund
authorizing the original issue of its Shares;
/2/ Each Registration Statement filed with the Securities and Exchange
Commission
and amendments and orders thereto in effect with respect to the sale
of Shares with respect to the Fund;
/2/ A certified copy of each amendment to the Articles of Incorporation or
Declaration of Trust, and the By-Laws of the Fund;
/2/ Certified copies of each vote of the Board of Directors/Trustees
authorizing officers to give instructions to the Transfer Agent;
/2/ Such other documents or opinions which Price Services, in its
discretion, may reasonably deem necessary or appropriate in the
proper performance of its duties; and
/2/ Copies of new prospectuses issued.
Price Services hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
I. REFERENCES TO PRICE SERVICES
----------------------------
Each Fund agrees not to circulate any printed matter which contains any
reference to Price Services without the prior approval of Price Services,
excepting solely such printed matter that merely identifies Price Services as
agent of the Fund. The Fund will submit printed matter requiring approval to
Price Services in draft form, allowing sufficient time for review by Price
Services and its legal counsel prior to any deadline for printing. J. COMPLIANCE
WITH GOVERNMENTAL RULES AND REGULATIONS
--------------------------------------------------
Except as otherwise provided in the Agreement and except for the accuracy
of information
furnished to the Fund by Price Services, each Fund assumes full responsibility
for the preparation, contents and distribution of its prospectuses and
compliance with all applicable requirements of the Act, the '34 Act, the '33
Act, and any other laws, rules and regulations of governmental authorities
having jurisdiction over the Fund. Price Services shall be responsible for
complying with all laws, rules and regulations of governmental authorities
having jurisdiction over transfer agents and their activities.
K. OWNERSHIP OF SOFTWARE AND RELATED MATERIAL
------------------------------------------
All computer programs, magnetic tapes, written procedures and similar items
purchased and/or developed and used by Price Services in performance of the
Agreement shall be the property of Price Services and will not become the
property of the Fund.
L. QUALITY SERVICE STANDARDS
-------------------------
Price Services and the Fund may from time to time agree to certain quality
service standards, as well as incentives and penalties with respect to Price
Services' hereunder.
M. AS OF TRANSACTIONS
------------------
For purposes of this Article M, the term "TRANSACTION" shall mean any
single or "related transaction" (as defined below) involving the purchase or
redemption of Shares (including exchanges) that is processed at a time other
than the time of the computation of the Fund's net asset value per Share next
computed after receipt of any such transaction order by Price Services due to an
act or omission of Price Services. "AS OF PROCESSING" refers to the processing
of these Transactions. If more than one Transaction ("RELATED TRANSACTION") in
the Fund is caused by or occurs as a result of the same act or omission, such
transactions shall be aggregated with other transactions in the Fund and be
considered as one Transaction.
/2/ REPORTING
Price Services shall:
1.
Utilize a system to identify all Transactions, and shall compute the
net effect of such Transactions upon the Fund on a daily, monthly and
rolling 365 day basis. The monthly and rolling 365 day periods are
hereafter referred to as "CUMULATIVE".
2.
Supply to the Fund, from time to time as mutually agreed upon, a
report summarizing the Transactions and the daily and Cumulative net
effects of such Transactions both in terms of aggregate dilution and
loss ("DILUTION") or gain and negative dilution ("GAIN") experienced
by the Fund, and the impact such Gain or Dilution has had upon the
Fund's net asset value per Share.
3.
With respect to any Transaction which causes Dilution to the Fund of
$100,000 or more, immediately provide the Fund: (i) a report
identifying the Transaction and the Dilution resulting therefrom, (ii)
the reason such Transaction was processed as described above, and
(iii) the action that Price Services has or intends to take to prevent
the reoccurrence of such as of processing ("REPORT").
/2/ LIABILITY
1.
It will be the normal practice of the Funds not to hold Price Services
liable with respect to any Transaction which causes Dilution to any
single Fund of less than $25,000. Price Services will, however,
closely monitor for each Fund the daily and Cumulative Gain/Dilution
which is caused by Transactions of less than $25,000. When the
Cumulative Dilution to any Fund exceeds 3/10 of 1% per share, Price
Services, in consultation with counsel to the Fund, will make
appropriate inquiry to determine whether it should take any remedial
action. Price Services will report to the Board of Directors/Trustees
of the Fund ("BOARD") any action it has taken.
2.
Where a Transaction causes Dilution to a Fund greater than $25,000
("SIGNIFICANT TRANSACTION"), but less than $100,000, Price Services
will review with Counsel to the Fund the circumstances surrounding the
underlying Transaction to determine whether the Transaction was caused
by or occurred as a result of a negligent act or omission by Price
Services. If it is determined that the Dilution is the result of a
negligent action or omission by Price Services, Price Services and
outside counsel for the Fund will negotiate settlement. Significant
Transactions greater than $25,000 will be reported to the Audit
Committee at its annual meeting (unless the settlement fully
compensates the Fund for any Dilution). Any Significant Transaction,
however, causing Dilution in excess of the lesser of $100,000 or a
penny per share will be promptly reported to the Board and resolved at
--------
the next scheduled Board Meeting. Settlement for Significant
Transactions causing Dilution of $100,000 or more will not be entered
into until approved by the Board. The factors to consider in making
any determination regarding the settlement of a Significant
Transaction would include but not be limited to: /2/ Procedures and
controls adopted by Price Services to prevent As Of
Processing;
/2/ Whether such procedures and controls were being followed at the
time of the Significant Transaction;
/2/ The absolute and relative volume of all transactions processed by
Price Services
on the day of the Significant Transaction;
/2/ The number of Transactions processed by Price Services during
prior relevant periods, and the net Dilution/Gain as a result of all
such Transactions to the Fund and to all other Price Funds;
/2/ The prior response of Price Services to recommendations made by
the Funds regarding improvement to Price Services' As Of Processing
procedures.
3.
In determining Price Services' liability with respect to a Significant
Transaction, an isolated error or omission will normally not be deemed
to constitute negligence when it is determined that: /2/ Price
Services had in place "appropriate procedures". /2/ the employee(s)
responsible for the error or omission had been
reasonably trained and were being appropriately monitored; and
/2/ the error or omission did not result from wanton or reckless
conduct on the part of the employee(s).
It is understood that Price Services is not obligated to have in place
separate procedures to prevent each and every conceivable type of
error or omission. The term "appropriate procedures" shall mean
procedures reasonably designed to prevent and detect errors and
omissions. In determining the reasonableness of such procedures,
weight will be given to such factors as are appropriate, including the
prior occurrence of any similar errors or omissions when such
procedures were in place
and transfer agent industry standards in place at the time of the
occurrence.
/2/ AS OF TRANSACTIONS - INTERMEDIARIES
If an As Of Transaction is performed by an intermediary, which is
designated by the Fund to received orders for Fund Shares, Price
Services shall cause such intermediary to promptly reimburse the Fund
for any Dilution caused by such As Of Transaction; provided, however,
Price Services shall not be obligated to seek reimbursement from such
intermediary if the Dilution is less than $100.
N. TERM AND TERMINATION OF AGREEMENT
---------------------------------
/2/ This Agreement shall run for a period of one (1) year from the
date first written above and will be renewed from year to year
thereafter unless terminated by either party as provided hereunder.
/2/ This Agreement may be terminated by the Fund upon one hundred twenty
(120) days' written notice to Price Services; and by Price Services,
upon three hundred sixty-five (365) days' writing notice to the Fund.
/2/ Upon termination hereof, the Fund shall pay to Price Services such
compensation as may be due as of the date of such termination, and
shall likewise reimburse for out-of-pocket expenses related to its
services hereunder.
O. NOTICE
------
Any notice as required by this Agreement shall be sufficiently given (i)
when sent to an authorized person of the other party at the address of such
party set forth above or at such other address as such party may from time to
time specify in writing to the other party; or (ii) as otherwise agreed upon by
appropriate officers of the parties hereto.
P. ASSIGNMENT
----------
Neither this Agreement nor any rights or obligations hereunder may be
assigned either voluntarily or involuntarily, by operation of law or otherwise,
by either party without the prior written consent of the other party, provided
this shall not preclude Price Services from employing such agents and
subcontractors as it deems appropriate to carry out its obligations set forth
hereunder.
Q. AMENDMENT/INTERPRETIVE PROVISIONS
---------------------------------
The parties by mutual written agreement may amend this Agreement at any
time. In addition, in connection with the operation of this Agreement, Price
Services and the Fund may agree from time to time on such provisions
interpretive of or in addition to the provisions of this Agreement as may in
their joint opinion be consistent with the general tenor of this Agreement. Any
such interpretive or additional provisions are to be signed by all parties and
annexed hereto, but no such provision shall contravene any applicable Federal or
state law or regulation and no such interpretive or additional provision shall
be deemed to be an amendment of this Agreement.
R. FURTHER ASSURANCES
------------------
Each party agrees to perform such further acts and execute such further
documents as are necessary to effectuate the purposes hereof.
S. MARYLAND LAW TO APPLY
---------------------
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of Maryland.
T. MERGER OF AGREEMENT
-------------------
This Agreement, including the attached Appendices and Schedules supersedes
any prior
agreement with respect to the subject hereof, whether oral or written.
U. COUNTERPARTS
------------
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instruments.
V. THE PARTIES
-----------
All references herein to "the Fund" are to each of the Funds listed on
Appendix A individually, as if this Agreement were between such individual Fund
and Price Services. In the case of a series Fund or trust, all references to
"the Fund" are to the individual series or portfolio of such Fund or trust, or
to such Fund or trust on behalf of the individual series or portfolio, as
appropriate. The "Fund" also includes any T. Rowe Price Funds which may be
established after the execution of this Agreement. Any reference in this
Agreement to "the parties" shall mean Price Services and such other individual
Fund as to which the matter pertains.
W. DIRECTORS, TRUSTEES AND SHAREHOLDERS AND MASSACHUSETTS BUSINESS TRUST
---------------------------------------------------------------------
It is understood and is expressly stipulated that neither the holders of
Shares in the Fund nor any Directors or Trustees of the Fund shall be personally
liable hereunder.
With respect to any Fund which is a party to this Agreement and which is
organized as a Massachusetts business trust, the term "Fund" means and refers to
the trustees from time to time serving under the applicable trust agreement
(Declaration of Trust) of such Trust as the same may be amended from time to
time. It is expressly agreed that the obligations of any such Trust hereunder
shall not be binding upon any of the trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust, as provided in the Declaration of Trust of the Trust. The
execution and delivery of this Agreement has been autho-
rized by the trustees and signed by an authorized officer of the Trust, acting
as such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them, but
shall bind only the trust property of the Trust as provided in its Declaration
of Trust.
X. CAPTIONS
--------
The captions in the Agreement are included for convenience of reference
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers.
T. ROWE PRICE SERVICES, INC. T. ROWE PRICE FUNDS
BY: BY:
-------------------------------------------------
-------------------------------------------------
DATED:
---------------------------------------------
DATED:
---------------------------------------------
APPENDIX A
----------
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. Rowe Price Blue Chip Growth Fund--Advisor Class
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. Rowe Price Equity Income Fund-Advisor Class
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price Blue Chip Growth Portfolio
T. Rowe Price Equity Index 500 Portfolio
T. Rowe Price Health Sciences Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. Rowe Price High Yield Fund-Advisor Class
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Institutional Mid-Cap Equity Growth Fund
Institutional Large-Cap Value Fund
Institutional Small-Cap Stock Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Growth & Income Fund
T. Rowe Price International Stock Fund-Advisor Class
T. Rowe Price Emerging Europe & Mediterranean Fund
T. Rowe Price International Bond Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price International Bond Fund-Advisor Class
T. ROWE PRICE INTERNATIONAL INDEX FUND, INC.
T. Rowe Price International Equity Index Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. Rowe Price Mid-Cap Growth Fund-Advisor Class
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. Rowe Price Prime Reserve Fund-PLUS Class
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. Rowe Price Science & Technology Fund-Advisor Class
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. Rowe Price Small-Cap Stock Fund-Advisor Class
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. Rowe Price Small-Cap Value Fund-Advisor Class
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Income Fund
Spectrum Growth Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST New York Tax-Free Money Fund New York
Tax-Free Bond Fund Maryland Tax-Free Bond Fund Virginia Tax-Free Bond Fund New
Jersey Tax-Free Bond Fund Maryland Short-Term Tax-Free Bond Fund Florida
Intermediate Tax-Free Fund Georgia Tax-Free Bond Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE TAX-EFFICIENT FUNDS, INC.
T. Rowe Price Tax-Efficient Balanced Fund
T. Rowe Price Tax-Efficient Growth Fund
T. Rowe Price Tax-Efficient Multi-Cap Growth Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. Rowe Price Tax-Exempt Money Fund - PLUS Class
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. BOND INDEX FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE VALUE FUND, INC.
T. Rowe Price Value Fund-Advisor Class
AMENDMENT NO. 1
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
T. ROWE PRICE SERVICES, INC.
AND
THE T. ROWE PRICE FUNDS
The Transfer Agency and Service Agreement of January 1, 2001, between T. Rowe
Price Services, Inc., and each of the Parties listed on Appendix A thereto is
hereby amended, as of February 7, 2001, by adding thereto T. Rowe Price State
Tax-Free Income Trust, on behalf of Maryland Tax-Free Money Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. Rowe Price Blue Chip Growth Fund--Advisor Class
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. Rowe Price Equity Income Fund--Advisor Class
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price Blue Chip Growth Portfolio
T. Rowe Price Equity Index 500 Portfolio
T. Rowe Price Health Sciences Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. Rowe Price High Yield Fund--Advisor Class
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Institutional Mid-Cap Equity Growth Fund
Institutional Large-Cap Value Fund
Institutional Small-Cap Stock Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Growth & Income Fund
T. Rowe Price International Stock Fund--Advisor Class
T. Rowe Price Emerging Europe & Mediterranean Fund
T. Rowe Price International Bond Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price International Bond Fund--Advisor Class
T. ROWE PRICE INTERNATIONAL INDEX FUND, INC.
T. Rowe Price International Equity Index Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. Rowe Price Mid-Cap Growth Fund--Advisor Class
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. Rowe Price Prime Reserve Fund--PLUS Class
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. Rowe Price Science & Technology Fund--Advisor Class
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. Rowe Price Small-Cap Stock Fund--Advisor Class
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. Rowe Price Small-Cap Value Fund--Advisor Class
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Income Fund
Spectrum Growth Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST New York Tax-Free Money Fund New York
Tax-Free Bond Fund Maryland Tax-Free Bond Fund Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund Maryland Short-Term Tax-Free Bond Fund Florida
Intermediate Tax-Free Fund Georgia Tax-Free Bond Fund Maryland Tax-Free Money
Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE TAX-EFFICIENT FUNDS, INC.
T. Rowe Price Tax-Efficient Balanced Fund
T. Rowe Price Tax-Efficient Growth Fund
T. Rowe Price Tax-Efficient Multi-Cap Growth Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. Rowe Price Tax-Exempt Money Fund--PLUS Class
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. BOND INDEX FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE VALUE FUND, INC.
T. Rowe Price Value Fund--Advisor Class
Attest:
/s/Patricia B. Lippert /s/Joseph A. Carrier
------------------------ ---------------------------
Patricia B. Lippert By: Joseph A. Carrier
Secretary Treasurer
Attest: T. ROWE PRICE SERVICES, INC.
/s/Barbara A. Van Horn /s/ Henry H. Hopkins
------------------------ ---------------------------
Barbara A. Van Horn By: Henry H. Hopkins
Secretary Vice President
AMENDMENT NO. 2
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
T. ROWE PRICE SERVICES, INC.
AND
THE T. ROWE PRICE FUNDS
The Transfer Agency and Service Agreement of January 1, 2001, between T. Rowe
Price Services, Inc., and each of the Parties listed on Appendix A thereto is
hereby amended, as of July 24, 2001, by adding thereto Institutional Equity
Funds, Inc., on behalf of Institutional Large-Cap Growth Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. Rowe Price Blue Chip Growth Fund--Advisor Class
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. Rowe Price Equity Income Fund--Advisor Class
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price Blue Chip Growth Portfolio
T. Rowe Price Equity Index 500 Portfolio
T. Rowe Price Health Sciences Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. Rowe Price High Yield Fund--Advisor Class
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Institutional Mid-Cap Equity Growth Fund
Institutional Large-Cap Value Fund
Institutional Small-Cap Stock Fund
Institutional Large-Cap Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Growth & Income Fund
T. Rowe Price International Stock Fund--Advisor Class
T. Rowe Price Emerging Europe & Mediterranean Fund
T. Rowe Price International Bond Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price International Bond Fund--Advisor Class
T. ROWE PRICE INTERNATIONAL INDEX FUND, INC.
T. Rowe Price International Equity Index Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. Rowe Price Mid-Cap Growth Fund--Advisor Class
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. Rowe Price Prime Reserve Fund--PLUS Class
T. ROWE PRICE REAL ESTATE FUND, INC.
T. ROWE PRICE RESERVE INVESTMENT FUNDS, INC.
T. Rowe Price Reserve Investment Fund
T. Rowe Price Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. Rowe Price Science & Technology Fund--Advisor Class
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. Rowe Price Small-Cap Stock Fund--Advisor Class
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. Rowe Price Small-Cap Value Fund--Advisor Class
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Income Fund
Spectrum Growth Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
New York Tax-Free Money Fund
New York Tax-Free Bond Fund
Maryland Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
Florida Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
Maryland Tax-Free Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE TAX-EFFICIENT FUNDS, INC.
T. Rowe Price Tax-Efficient Balanced Fund
T. Rowe Price Tax-Efficient Growth Fund
T. Rowe Price Tax-Efficient Multi-Cap Growth Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. Rowe Price Tax-Exempt Money Fund--PLUS Class
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. BOND INDEX FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE VALUE FUND, INC.
T. Rowe Price Value Fund--Advisor Class
Attest:
/s/Patricia B. Lippert /s/Joseph A. Carrier
Patricia B. Lippert By: Joseph A. Carrier
Secretary Treasurer
Attest: T. ROWE PRICE SERVICES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
Barbara A. Van Horn By: Henry H. Hopkins
Secretary Vice President
L:\TRPPROD\EDG\AGMTS.EDG\2001Agmts\2001Transfer.fm
EX-99.H OTH MAT CONT
8
fundacctg01.txt
AGREEMENT
BETWEEN
T. ROWE PRICE ASSOCIATES, INC.
AND
THE T. ROWE PRICE FUNDS
FOR
FUND ACCOUNTING SERVICES
TABLE OF CONTENTS
-----------------
PAGE
----
Article A.....Terms of Appointment/Duties of Price Associates 1
Article B.....................Fees and Out-of-Pocket Expenses 3
Article C..Representations and Warranties of Price Associates 3
Article D..........Representations and Warranties of the Fund 4
Article E..........Ownership of Software and Related Material 4
Article F...........................Quality Service Standards 4
Article G....................Standard of Care/Indemnification 4
Article H......................................Dual Interests 7
Article I.......................................Documentation 7
Article J.......................Recordkeeping/Confidentiality 7
Article K..Compliance with Governmental Rules and Regulations 8
Article L..................Terms and Termination of Agreement 8
Article M..............................................Notice 8
Article N..........................................Assignment 9
Article O...................Amendment/Interpretive Provisions 9
Article P..................................Further Assurances 9
Article Q...............................Maryland Law to Apply 9
Article R.................................Merger of Agreement 10
Article S........................................Counterparts 10
Article T.........................................The Parties 10
Article UDirectors, Trustee and Shareholders and Massachusetts Business Trust
10
Article V............................................Captions 11
AGREEMENT made as of the first day of January, 2001, by and between T. ROWE
PRICE ASSOCIATES, INC., a Maryland corporation having its principal office and
place of business at 100 East Pratt Street, Baltimore, Maryland 21202 ("PRICE
ASSOCIATES"), and each Fund which is listed on Appendix A (as such Appendix may
be amended from time to time) and which evidences its agreement to be bound
hereby by executing a copy of this Agreement (each such Fund individually
hereinafter referred to as "THE FUND", whose definition may be found in Article
T);
WHEREAS, Price Associates has the capability of providing the Funds with
certain accounting services ("ACCOUNTING SERVICES");
WHEREAS, the Fund desires to appoint Price Associates to provide these
Accounting Services and Price Associates desires to accept such appointment;
WHEREAS, the Board of Directors of the Fund has authorized the Fund to
utilize various pricing services for the purpose of providing to Price
Associates securities prices for the calculation of the Fund's net asset value.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
A. TERMS OF APPOINTMENT/DUTIES OF PRICE ASSOCIATES
-----------------------------------------------
Subject to the terms and conditions set forth in this Agreement, the Fund
hereby employs and appoints Price Associates to provide, and Price Associates
agrees to provide, the following Accounting Services:
1.
Maintain for each Fund a daily trial balance, a general ledger, subsidiary
records and capital stock accounts;
2.
Maintain for each Fund an investment ledger, including amortized bond and
foreign dollar denominated costs where applicable;
3. Maintain for each Fund all records relating to the Fund's income and
expenses;
4.
Provide for the daily valuation of each Fund's portfolio securities and the
computation of each Fund's daily net asset value per share ("NAV"). Such daily
valuations shall be made in accordance with the valuation policies established
by each of the Fund's Board of Directors including, but not limited to, the
utilization of such pricing valuation sources and/or pricing services as
determined by the Boards.
Price Associates shall have no liability for any losses or damages incurred
by the Fund as a result of erroneous portfolio security evaluations provided by
such designated sources and/or pricing services; provided that, Price Associates
reasonably believes the prices are accurate, has adhered to its normal
verification control procedures, and has otherwise met the standard of care as
set forth in Article G of this Agreement;
5.
Provide daily cash flow and transaction status information to each
Fund's adviser;
6. Authorize the payment of Fund expenses, either through instruction of
custodial bank or utilization of custodian's automated transfer system;
7. Prepare for each Fund such financial information that is reasonably
necessary for shareholder reports, reports to the Board of Directors and to the
officers of the Fund, reports to the Securities and Exchange Commission, the
Internal Revenue Service and other Federal and state regulatory agencies;
8. Provide each Fund with such advice that may be reasonably necessary to
properly account for all financial transactions and to maintain the Fund's
accounting procedures and records so as to insure compliance with generally
accepted accounting and tax practices and rules;
9. Maintain for each Fund all records that may be reasonably required in
connection with the audit performed by each Fund's independent accountant, the
Securities and Exchange Commission, the Internal Revenue Service or such other
Federal or state regulatory agencies; and
10. Cooperate with each Fund's independent public accountants and take all
reasonable action in the performance of its obligations under the Agreement to
assure that the necessary information is made available to such accountants for
the expression of their opinion without any qualification as to the scope of
their examination including, but not limited to, their opinion included in each
such Fund's annual report on Form N-SAR and annual amendment to Form N-1A.
B. FEES AND OUT-OF-POCKET EXPENSES
-------------------------------
Each Fund shall pay to Price Associates for its Accounting Services
hereunder, fees as set forth in the Schedule attached hereto. In addition, each
Fund will reimburse Price Associates for out-of-pocket expenses such as postage,
printed forms, voice and data transmissions, record retention, disaster
recovery, third party vendors, equipment leases and other similar items as may
be agreed upon between Price Associates and the Fund. Some invoices will contain
costs for both the
Funds and other funds serviced by Price Associates. In these cases, a reasonable
allocation methodology will be used to allocate these costs to the Funds.
C. REPRESENTATIONS AND WARRANTEES OF PRICE ASSOCIATES
--------------------------------------------------
Price Associates represents and warrants to the Fund that:
1.
It is a corporation duly organized and existing in good standing under the laws
of Maryland.
2. It is duly qualified to carry on its business in Maryland.
3.
It is empowered under applicable laws and by its charter and By-Laws to enter
into and perform this Agreement.
4. All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
5. It has, and will continue to have, access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
D. REPRESENTATIONS AND WARRANTIES OF THE FUND
------------------------------------------
The Fund represents and warrants to Price Associates that:
1.
It is a corporation or business trust, as the case may be, duly organized and
existing and in good standing under the laws of Maryland or Massachusetts, as
the case may be.
2.
It is empowered under applicable laws and by its Articles of Incorporation or
Declaration of Trust, as the case may be, and By-Laws have been taken to
authorize it to enter into and perform this Agreement.
3.
All proceedings required by said Articles of Incorporation or Declaration of
Trust, as the case may be, and By-Laws have been taken to authorize it to enter
into and perform this Agreement.
E. OWNERSHIP OF SOFTWARE AND RELATED MATERIAL
------------------------------------------
All computer programs, magnetic tapes, written procedures, and similar
items purchased and/or developed and used by Price Associates in performance of
this Agreement shall be the property of Price Associates and will not become the
property of the Funds.
F. QUALITY SERVICE STANDARDS
-------------------------
Price Associates and the Fund may, from time to time, agree to certain
quality service standards, with respect to Price Associates' services hereunder.
G. STANDARD OF CARE/INDEMNIFICATION
--------------------------------
Notwithstanding anything to the contrary in this Agreement:
1.
Where a pricing error results in loss or dilution to a Fund of less than
$10,000, the determination of liability for the error will be made by Price
Associates. Where a pricing error results in loss or dilution to a Fund of
$10,000 or more but less than $100,000, liability for the error will be resolved
through negotiations between Fund Counsel and Price Associates. Where a pricing
error results in loss or dilution to a Fund of the lesser of 1/2 of 1% of NAV or
$100,000 or more, the error will be promptly reported to the Board of Directors
of the Fund (unless the Fund is fully compensated for the loss or dilution),
provided that final settlement with respect to such errors will not be made
until approved by the Board of Directors of the Fund. A summary of all pricing
errors and their effect on the Funds will be reported to the Funds' Audit
Committee on an annual basis. In determining the liability of Price Associates
for a pricing error, an error or omission will not be deemed to constitute
negligence when it is determined that:
/2/ Price Associates had in place "appropriate procedures and an adequate
system of internal controls;"
/2/ the employee responsible for the error or omission had been reasonably
trained and was being appropriately monitored; and
/2/ the error or omission did not result from wanton or reckless conduct on
the part of the employee.
It is understood that Price Associates is not obligated to have in place
separate procedures to prevent each and every conceivable type of error or
omission. The term "appropriate procedures and adequate system of internal
controls" shall mean procedures and controls reasonably designed to prevent and
detect errors and omissions. In determining the reasonableness of such
procedures and controls, weight will be given to such factors as are
appropriate, including the prior occurrence of any similar errors or omissions,
when such procedures and controls were in place and fund accounting industry
standards in place at the time of the error.
2. The Fund shall indemnify and hold Price Associates harmless from and
against all losses, costs, damages, claims, actions, and expenses, including
reasonable expenses for legal counsel, incurred by Price Associates resulting
from: (i) any action or omission by Price Associates or its agents or
subcontractors in the performance of their duties hereunder; (ii) Price
Associates acting upon instructions believed by it to have been executed by a
duly authorized officer of
the Fund; or (iii) Price Associates acting upon information provided by the Fund
in form and under policies agreed to by Price Associates and the Fund. Price
Associates shall not be entitled to such indemnification in respect of actions
or omissions constituting negligence or willful misconduct of Price Associates
or where Price Associates has not exercised reasonable care in selecting or
monitoring the performance of its agents or subcontractors.
3. Price Associates shall indemnify and hold harmless the Fund from all
losses, costs, damages, claims, actions and expenses, including reasonable
expenses for legal counsel, incurred by the Fund resulting from the negligence
or willful misconduct of Price Associates or which result from Price Associates'
failure to exercise reasonable care in selecting or monitoring the performance
of its agents or subcontractors. The Fund shall not be entitled to such
indemnification with respect to actions or omissions constituting negligence or
willful misconduct of such Fund or its agents or subcontractors; unless such
negligence or misconduct is attributable to Price Associates.
4.
In the event either party is unable to perform its obligations under the terms
of this Agreement because of acts of God, strikes or other causes reasonably
beyond its control, such party shall not be liable to the other party for any
loss, cost, damage, claim, action or expense resulting from such failure to
perform or otherwise from such causes.
5.
In order that the indemnification provisions contained in this Article G shall
apply, upon the assertion of a claim for which either party may be required to
indemnify the other, the party seeking indemnification shall promptly notify the
other party of such assertion, and shall keep the other party advised with
respect to all developments concerning such claim. The party who may be required
to indemnify shall have the option to participate with the party seeking
indemnification in the defense of such claim, or to defend against said claim in
its own name or in the name of the other party. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
6. Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement.
H. DUAL INTERESTS
--------------
It is understood that some person or persons may be directors, officers, or
shareholders of both the Fund and Price Associates (including Price Associates'
affiliates), and that the existence
of any such dual interest shall not affect the validity of this Agreement or of
any transactions hereunder except as otherwise provided by a specific provision
of applicable law.
I. DOCUMENTATION
-------------
As requested by Price Associates, the Fund shall promptly furnish to Price
Associates such documents as it may reasonably request and as are necessary for
Price Associates to carry out its responsibilities hereunder.
J. RECORDKEEPING/CONFIDENTIALITY
-----------------------------
1. Price Associates shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable, provided
that Price Associates shall keep all records in such form and in such manner as
required by applicable law, including the Investment Company Act of 1940 ("THE
ACT") and the Securities Exchange Act of 1934 ("THE '34 ACT").
2.
Price Associates and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except: (a) after prior notification to and approval in writing by the other
party hereto, which approval shall not be unreasonably withheld and may not be
withheld where Price Associates or Fund may be exposed to civil or criminal
contempt proceedings for failure to comply; (b) when requested to divulge such
information by duly constituted governmental authorities; or (c) after so
requested by the other party hereto.
K. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS
--------------------------------------------------
Except as otherwise provided in the Agreement and except for the accuracy
of information furnished to the Funds by Price Associates, each Fund assumes
full responsibility for the preparation, contents and distribution of its
prospectuses, and for complying with all applicable requirements of the Act, the
'34 Act, the Securities Act of 1933 ("THE '33 ACT"), and any laws, rules and
regulations of governmental authorities having jurisdiction over the Funds.
L. TERM AND TERMINATION OF AGREEMENT
---------------------------------
1.
This Agreement shall run for a period of one (1) year from the date first
written above and will be renewed from year to year thereafter unless terminated
by either party as provided hereunder.
2.
This Agreement may be terminated by the Fund upon sixty (60) days' written
notice to Price Associates; and by Price Associates, upon three hundred
sixty-five (365) days' written notice to the Fund.
3. Upon termination hereof, the Fund shall pay to Price Associates such
compensation as may be due as of the date of such termination, and shall
likewise reimburse for out-of-pocket expenses related to its services hereunder.
M. NOTICE
------
Any notice as required by this Agreement shall be sufficiently given (i)
when sent to an authorized person of the other party at the address of such
party set forth above or at such other address as such party may from time to
time specify in writing to the other party; or (ii) as otherwise agreed upon by
appropriate officers of the parties hereto.
N. ASSIGNMENT
----------
Neither this Agreement nor any rights or obligations hereunder may be
assigned either voluntarily or involuntarily, by operation of law or otherwise,
by either party without the prior written consent of the other party, provided
this shall not preclude Price Associates from employing such agents and
subcontractors as it deems appropriate to carry out its obligations set forth
hereunder.
O. AMENDMENT/INTERPRETIVE PROVISIONS
---------------------------------
The parties by mutual written agreement may amend this Agreement at any
time. In addition, in connection with the operation of this Agreement, Price
Associates and the Fund may agree from time to time on such provisions
interpretive of or in addition to the provisions of this Agreement as may in
their joint opinion be consistent with the general tenor of this Agreement. Any
such interpretive or additional provisions are to be signed by all parties and
annexed hereto, but no such provision shall contravene any applicable Federal or
state law or regulation and no such interpretive or additional provision shall
be deemed to be an amendment of this Agreement.
P. FURTHER ASSURANCES
------------------
Each party agrees to perform such further acts and execute such further
documents as are necessary to effectuate the purposes hereof.
Q. MARYLAND LAW TO APPLY
---------------------
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of Maryland.
R. MERGER OF AGREEMENT
-------------------
This Agreement, including the attached Appendix and Schedule supersedes any
prior agreement with respect to the subject hereof, whether oral or written.
S. COUNTERPARTS
------------
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instruments.
T. THE PARTIES
-----------
All references herein to "the Fund" are to each of the Funds listed on
Appendix A individually, as if this Agreement were between such individual Fund
and Price Associates. In the case of a series Fund or trust, all references to
"the Fund" are to the individual series or portfolio of such Fund or trust, or
to such Fund or trust on behalf of the individual series or portfolio, as
appropriate. The "Fund" also includes any T. Rowe Price Funds which may be
established after the execution of this Agreement. Any reference in this
Agreement to "the parties" shall mean Price Associates and such other individual
Fund as to which the matter pertains.
U. DIRECTORS, TRUSTEES AND SHAREHOLDERS AND MASSACHUSETTS BUSINESS TRUST
---------------------------------------------------------------------
It is understood and is expressly stipulated that neither the holders of
shares in the Fund nor any Directors or Trustees of the Fund shall be personally
liable hereunder.
With respect to any Fund which is a party to this Agreement and which is
organized as a Massachusetts business trust, the term "Fund" means and refers to
the trustees from time to time serving under the applicable trust agreement
(Declaration of Trust) of such Trust as the same may be amended from time to
time. It is expressly agreed that the obligations of any such Trust hereunder
shall not be binding upon any of the trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust, as provided in the Declaration of Trust of the Trust. The
execution and delivery of this Agreement has been authorized by the trustees and
signed by an authorized officer of the Trust, acting as such, and neither such
authorization by such Trustees nor such execution and delivery by such officer
shall be
deemed to have been made by any of them, but shall bind only the trust property
of the Trust as provided in its Declaration of Trust.
V. CAPTIONS
--------
The captions in the Agreement are included for convenience of reference
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers.
T. ROWE PRICE ASSOCIATES, INC. T. ROWE PRICE FUNDS
/s/Henry H. Hopkins /s/Joseph A. Carrier
BY: BY:
-------------------------------------------------
-------------------------------------------------
DATED:
---------------------------------------------
DATED:
---------------------------------------------
APPENDIX A
----------
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. Rowe Price Blue Chip Growth Fund--Advisor Class
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. Rowe Price Equity Income Fund--Advisor Class
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price Blue Chip Growth Portfolio
T. Rowe Price Equity Index 500 Portfolio
T. Rowe Price Health Sciences Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Institutional Mid-Cap Equity Growth Fund
Institutional Large-Cap Value Fund
Institutional Small-Cap Stock Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Growth & Income Fund
T. Rowe Price International Stock Fund--Advisor Class
T. Rowe Price Emerging Europe & Mediterranean Fund
T. Rowe Price International Bond Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price International Bond Fund--Advisor Class
T. ROWE PRICE INTERNATIONAL INDEX FUND, INC,
T. Rowe Price International Equity Index Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. Rowe Price Mid-Cap Growth Fund--Advisor Class
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. Rowe Price Prime Reserve Fund--PLUS Class
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. Rowe Price Science & Technology Fund--Advisor Class
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. Rowe Price Small-Cap Stock Fund--Advisor Class
T. Rowe Price OTC Fund
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. Rowe Price Small-Cap Value Fund--Advisor Class
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST New York Tax-Free Money Fund New York
Tax-Free Bond Fund Maryland Tax-Free Bond Fund Virginia Tax-Free Bond Fund New
Jersey Tax-Free Bond Fund Maryland Short-Term Tax-Free Bond Fund Florida
Intermediate Tax-Free Fund Georgia Tax-Free Bond Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE TAX-EFFICIENT FUNDS, INC.
T. Rowe Price Tax-Efficient Balanced Fund
T. Rowe Price Tax-Efficient Growth Fund
T. Rowe Price Tax-Efficient Multi-Cap Growth Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. Rowe Price Tax-Exempt Money Fund--PLUS Class
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. BOND INDEX FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE VALUE FUND, INC.
AMENDMENT NO. 1
AGREEMENT
BETWEEN
T. ROWE PRICE ASSOCIATES, INC.
AND
THE T. ROWE PRICE FUNDS
FOR
FUND ACCOUNTING SERVICES
The Agreement for Fund Accounting Services of January 1, 2001, between T. Rowe
Price Associates, Inc. and each of the Parties listed on Appendix A thereto is
hereby amended, as of February 7, 2001, by adding thereto T. Rowe Price State
Tax-Free Income Trust, on behalf of Maryland Tax-Free Money Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. Rowe Price Blue Chip Growth Fund--Advisor Class
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. Rowe Price Equity Income Fund--Advisor Class
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price Blue Chip Growth Portfolio
T. Rowe Price Equity Index 500 Portfolio
T. Rowe Price Health Sciences Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. Rowe Price High Yield Fund--Advisor Class
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Institutional Mid-Cap Equity Growth Fund
Institutional Large-Cap Value Fund
Institutional Small-Cap Stock Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Growth & Income Fund
T. Rowe Price International Stock Fund--Advisor Class
T. Rowe Price Emerging Europe & Mediterranean Fund
T. Rowe Price International Bond Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price International Bond Fund--Advisor Class
T. ROWE PRICE INTERNATIONAL INDEX FUND, INC.
T. Rowe Price International Equity Index Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. Rowe Price Mid-Cap Growth Fund--Advisor Class
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. Rowe Price Prime Reserve Fund--PLUS Class
T. ROWE PRICE REAL ESTATE FUND, INC.
RESERVE INVESTMENT FUNDS, INC.
Reserve Investment Fund
Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. Rowe Price Science & Technology Fund--Advisor Class
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. Rowe Price Small-Cap Stock Fund--Advisor Class
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. Rowe Price Small-Cap Value Fund--Advisor Class
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST New York Tax-Free Money Fund New York
Tax-Free Bond Fund Maryland Tax-Free Bond Fund Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund Maryland Short-Term Tax-Free Bond Fund Florida
Intermediate Tax-Free Fund Georgia Tax-Free Bond Fund Maryland Tax-Free Money
Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE TAX-EFFICIENT FUNDS, INC.
T. Rowe Price Tax-Efficient Balanced Fund
T. Rowe Price Tax-Efficient Growth Fund
T. Rowe Price Tax-Efficient Multi-Cap Growth Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. Rowe Price Tax-Exempt Money Fund--PLUS Class
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. BOND INDEX FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE VALUE FUND, INC.
T. Rowe Price Value Fund--Advisor Class
Attest:
/s/Patricia B. Lippert /s/Joseph A. Carrier
------------------------ ------------------------------
Patricia B. Lippert By: Joseph A. Carrier
Secretary Treasurer
Attest: T. ROWE PRICE ASSOCIATES, INC.
/s/Barbara A. Van Horn /s/ Henry H. Hopkins
------------------------ ------------------------------
Barbara A. Van Horn By: Henry H. Hopkins
Secretary Managing Director
AMENDMENT NO. 2
AGREEMENT
BETWEEN
T. ROWE PRICE ASSOCIATES, INC.
AND
THE T. ROWE PRICE FUNDS
FOR
FUND ACCOUNTING SERVICES
The Agreement for Fund Accounting Services of January 1, 2001, between T. Rowe
Price Associates, Inc. and each of the Parties listed on Appendix A thereto is
hereby amended, as of July 24, 2001, by adding thereto Institutional Equity
Funds, Inc., on behalf of Institutional Large-Cap Growth Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND
T. Rowe Price Blue Chip Growth Fund--Advisor Class
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
California Tax-Free Bond Fund
California Tax-Free Money Fund
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. Rowe Price Equity Income Fund--Advisor Class
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price Blue Chip Growth Portfolio
T. Rowe Price Equity Index 500 Portfolio
T. Rowe Price Health Sciences Portfolio
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. Rowe Price High Yield Fund--Advisor Class
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Institutional Mid-Cap Equity Growth Fund
Institutional Large-Cap Value Fund
Institutional Small-Cap Stock Fund
Institutional Large-Cap Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Growth & Income Fund
T. Rowe Price International Stock Fund--Advisor Class
T. Rowe Price Emerging Europe & Mediterranean Fund
T. Rowe Price International Bond Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price International Bond Fund--Advisor Class
T. ROWE PRICE INTERNATIONAL INDEX FUND, INC.
T. Rowe Price International Equity Index Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. Rowe Price Mid-Cap Growth Fund--Advisor Class
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. Rowe Price Prime Reserve Fund--PLUS Class
T. ROWE PRICE REAL ESTATE FUND, INC.
T. ROWE PRICE RESERVE INVESTMENT FUNDS, INC.
T. Rowe Price Reserve Investment Fund
T. Rowe Price Government Reserve Investment Fund
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. Rowe Price Science & Technology Fund--Advisor Class
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. Rowe Price Small-Cap Stock Fund--Advisor Class
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. Rowe Price Small-Cap Value Fund--Advisor Class
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Growth Fund
Spectrum Income Fund
Spectrum International Fund
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
New York Tax-Free Money Fund
New York Tax-Free Bond Fund
Maryland Tax-Free Bond Fund
Virginia Tax-Free Bond Fund
New Jersey Tax-Free Bond Fund
Maryland Short-Term Tax-Free Bond Fund
Florida Intermediate Tax-Free Fund
Georgia Tax-Free Bond Fund
Maryland Tax-Free Money Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. Rowe Price Summit Municipal Money Market Fund
T. Rowe Price Summit Municipal Intermediate Fund
T. Rowe Price Summit Municipal Income Fund
T. ROWE PRICE TAX-EFFICIENT FUNDS, INC.
T. Rowe Price Tax-Efficient Balanced Fund
T. Rowe Price Tax-Efficient Growth Fund
T. Rowe Price Tax-Efficient Multi-Cap Growth Fund
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. Rowe Price Tax-Exempt Money Fund--PLUS Class
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. BOND INDEX FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE VALUE FUND, INC.
T. Rowe Price Value Fund--Advisor Class
Attest:
/s/Patricia B. Lippert /s/Joseph A. Carrier
Patricia B. Lippert By: Joseph A. Carrier
Secretary Treasurer
Attest: T. ROWE PRICE ASSOCIATES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
Barbara A. Van Horn By: Henry H. Hopkins
Secretary Managing Director
L:\TRPPROD\EDG\AGMTS.EDG\2001Agmts\2001FundAcct.fm
EX-99.H OTH MAT CONT
9
rpsagmt01.txt
AGREEMENT
BETWEEN
T. ROWE PRICE RETIREMENT PLAN SERVICES, INC.
AND
T. ROWE PRICE FUNDS
TABLE OF CONTENTS
-----------------
PAGE
----
Article A Terms of Appointment................................ 2
Article B Duties of RPS....................................... 2
1. Contributions - Retirement Plans and Retirement Accounts 2
2. Retirement Plans - Redemptions to Cover Distributions 3
3. Other Provisions............................. 4
4. Exchanges.................................... 5
5. Books and Records............................ 5
6. Tax Information.............................. 6
7. Other Information to be Furnished to the Funds 6
8. Telephone/On-Line Services................... 7
9. Correspondence............................... 7
10. Prospectuses/Confirmation Statements......... 7
11. Proxies...................................... 7
12. Form N-SAR................................... 7
13. Withholding.................................. 8
Article C Fee and Out-of-Pocket Expenses...................... 8
1. Postage...................................... 8
2. Proxies...................................... 8
3. Communications............................... 8
4. Record Retention............................. 9
5. Disaster Recovery............................ 9
Article D Representations and Warranties of RPS............... 9
Article E Representations and Warranties of the Fund.......... 10
Article F Standard of Care/Indemnification.................... 10
Article G Dual Interests...................................... 13
Article H Documentation....................................... 13
Article I Recordkeeping/Confidentiality....................... 15
Article J Ownership of Software and Related Material.......... 15
Article K As of Transactions.................................. 15
1. Reporting.................................... 16
2. Liability.................................... 16
Article L Term and Termination of Agreement
.......................................... 19
Article M Notice ............................................. 19
Article N Assignment.......................................... 19
Article O Amendment/Interpretive Provisions................... 19
Article P Further Assurances.................................. 20
Article Q Maryland Law to Apply............................... 20
Article R Merger of Agreement................................. 20
Article S Counterparts........................................ 20
Article T The Parties......................................... 20
Article U Directors, Trustees and Shareholders and Massachusetts Business Trust
21
Article V Captions............................................ 21
AGREEMENT, made as of the first day of January, 2001, by and between T. ROWE
PRICE RETIREMENT PLAN SERVICES, INC., a Maryland corporation having its
principal office and place of business at 100 East Pratt Street, Baltimore,
Maryland 21202 ("RPS"), and EACH FUND WHICH IS LISTED ON APPENDIX A (as such
Appendix may be amended from time to time) and which evidences its agreement to
be bound hereby by executing a copy of this Agreement (each Fund hereinafter
referred to as "THE FUND") whose definition may be found in Article T;
WHEREAS, the Funds are named investment options under various tax-sheltered
plans, including, but not limited to, state and local government deferred
compensation plans, 403(b) plans, and profit sharing, thrift, 401(k) and money
purchase pension plans for self-employed individuals, professional partnerships
and corporations (collectively referred to as "RETIREMENT PLANS"); and the Fund
has determined that such investments of Retirement Plans in the Funds are in the
best long-term interest of the Funds;
WHEREAS, RPS has the capability of providing special services, on behalf of
the Fund, for the accounts of individuals ("PARTICIPANTS") participating in
these Retirement Plans ("RETIREMENT ACCOUNTS");
WHEREAS, RPS represents that it is registered with the Securities and
Exchange Commission as a Transfer Agent under Section 17A of the Securities
Exchange Act of 1934 (THE "'34 ACT");
WHEREAS, RPS may subcontract or jointly contract with other parties on behalf
of the Funds to perform certain of the functions described herein, RPS may also
enter into, on behalf of the Funds, certain banking relationships to perform
various banking services, including, but not limited to, check deposits,
disbursements, automatic clearing house transactions ("ACH") and wire transfers.
Subject to guidelines mutually agreed upon by the Funds and RPS, excess
balances, if any, resulting from these banking relationships will be invested
and the income therefrom will be used to offset fees which would otherwise be
charged to the Funds under this Agreement;
WHEREAS, the Fund desires to contract with RPS to provide the functions and
services described herein in connection with the Retirement Plans and Retirement
Accounts;
NOW THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
A. TERMS OF APPOINTMENT
--------------------
Subject to the terms and conditions set forth in this Agreement, the Fund
hereby employs and appoints RPS to perform the services and functions described
herein in connection with certain Retirement Plan and Retirement Accounts as
agreed upon by the parties.
B. DUTIES OF RPS
-------------
RPS agrees that it will perform the following services:
1. CONTRIBUTIONS - RETIREMENT PLANS AND RETIREMENT ACCOUNTS
------------- - ---------- ----- --- ---------- --------
After RPS has received monies from Retirement Plans and has determined the
proper allocation of such monies to the Retirement Accounts of Participants
based upon instructions received from Participants, Retirement Plans or their
designees, or Retirement Plan Administrator(s) ("ADMINISTRATOR(S)"), RPS
will, as a responsibility under the Agreement:
a.
In the case of a new Participant, establish and maintain a Retirement
Account for such Participant;
b.
Compute the number of shares of each Fund to which the Participant is
entitled in accordance with the price per share of such Fund as
calculated and provided by the Fund for orders received at that time and
date, and purchase the appropriate shares in each such Retirement
Account;
c.
Calculate the aggregate of all purchases in the Retirement Accounts and
transmit the net purchase order to T. Rowe Price Services, Inc.
("SERVICES") through the National Securities Clearing Corporation
("NSCC") or such other agreed upon method or directly to the Fund, as
the case may be, for purchase into an omnibus account established in
each Fund registered in RPS' or its affiliates' name as agent for
Retirement Plans or in the individual Retirement Plan's name ("OMNIBUS
ACCOUNT"); and
d.
Transmit to Services, by wire directly or through the NSCC, at a time
designated by the NSCC or mutually agreed upon by both parties, the
aggregate money allocated to coincide with the purchase order.
2. RETIREMENT PLANS - REDEMPTIONS TO COVER DISTRIBUTIONS.
---------- ----- - ----------- -- ----- -------------
After RPS has received instructions from the Administrator regarding
distributions to be made to Participants or their designated beneficiaries
from Funds designated as investment options under the Retirement Plan, RPS
will, as a responsibility under the Agreement:
a.
Compute the number of shares to be redeemed from each such Retirement
Account for such distributions in accordance with the price per share of
such Fund as calculated and provided by the Fund for orders received in
good order at that time and date.
b. After such computation, calculate the aggregate amount of all
redemptions in the Retirement Accounts.
c.
Transmit any net redemption order to Services, through the NSCC or such
other method mutually agreed upon, or directly to the Fund, as the case
may be, for the Omnibus Account of each Fund. Services will wire
proceeds to RPS, directly or through the NSCC, to coincide with the
redemption order for each Omnibus Account. RPS will Distribute to
Participants or their designated beneficiaries the amount to be
disbursed.
d.
After RPS has received instructions from the Administrator regarding
disbursements to be made regarding the payment of fees due the
Administrator, or other persons including RPS, RPS will, as a
responsibility under this Agreement:
i.
Compute the number of shares to be redeemed from each Retirement
Account to pay for such disbursements and the total number of all
shares to be redeemed in accordance with the price per share for
orders received in good order at that time and date, of such Fund as
calculated and provided by the Fund;
ii.
Inform Services, directly or through the NSCC, or the Funds directly,
as the case may be, of the necessary Shares to be redeemed from the
Omnibus Account of the Funds to cover such disbursements; and
iii.
Mail or wire to the Administrator or such other person as designated
by the Administrator the amount to be disbursed.
3. OTHER PROVISIONS
----- ----------
a.
If any instruction tendered by an Administrator to purchase or redeem
shares in a Retirement Account is not satisfactory to RPS, RPS shall
promptly notify the Administrator of such fact together with the
reason therefore;
b.
The authority of RPS to perform its responsibilities under Paragraph
B(2) with respect to each Fund shall be suspended upon RPS's receipt
of notification from such Fund of the suspension of the determination
of the Fund's net asset value per share and shall remain suspended
until RPS receives proper notification from the Fund; and
c.
The Fund will promptly inform RPS of the declaration of any dividend
or distribution on account of the capital stock of any Fund so that
RPS may properly credit income and capital gain payments to each
Retirement Account.
4. EXCHANGES
---------
Effect exchanges of shares of the Funds in the Retirement Accounts upon
receipt of appropriate instructions from the Administrator and/or Participant
in accordance with the price per share of the Funds as calculated and
provided by the Fund for orders received in good order at that time and date.
Calculate and transmit a net purchase and redemption order to Services
directly or through the NSCC, or the Fund, as the case may be, for the
Omnibus Account of each Fund. RPS will transmit by wire to Services,
directly or through the NSCC, the aggregate monies allocated to each Fund to
coincide with any net purchase order or instruct Services to wire to it,
directly or through the NSCC, monies from each Fund's Omnibus Account to
coincide with any net redemption order.
5. BOOKS AND RECORDS
----- --- -------
RPS shall maintain records showing for each Retirement Plan or Retirement
Account, the following:
a. Names, addresses and tax identification numbers, when provided;
b. Number of shares held of each Fund;
c.
Historical information regarding the account of each Participant and/or
Retirement Plan, including dividends and capital gain distributions
invested in shares;
d. Any instructions from a Participant or Administrator, including all
forms executed by a Participant with respect to elections with respect
to payment options in connection with the redemption of shares or
distribution elections, if applicable; and
e.
Any information required in order for RPS to perform the calculations
contemplated under this Agreement.
Any such records maintained pursuant to Rule 31a-1 under the Investment
Company Act of 1940 ("THE ACT") will be preserved for the periods prescribed
in Rule 31a-2 thereunder. Disposition of such records after such prescribed
periods shall be as mutually agreed upon from time to time by RPS and the
Funds. The retention of such records, which may be inspected by the Fund at
reasonable times, shall be at the expense of the Funds. All records
maintained by RPS in connection with the performance of its duties under this
Agreement will remain the property of the Funds and, in the event of
termination of this Agreement, will be delivered to the Fund as of the date
of termination of this agreement or at such other time as may be mutually
agreed upon.
6. TAX INFORMATION
--- -----------
RPS shall also prepare and file with appropriate federal agencies, such
information returns and reports as required by applicable Federal statutes
relating to redemptions effected in Retirement Accounts which constitute
reportable distributions. RPS will also prepare and submit to Participants,
such reports containing information as is required by applicable Federal law.
7. OTHER INFORMATION TO BE FURNISHED TO THE FUNDS
----- ----------- -- -- --------- -- --- -----
RPS will furnish to the Fund, such information, including Participant
lists and statistical information as may be agreed upon from time to time
between RPS and the Fund. Permission of the Administrator may also be
required.
8. TELEPHONE/ON-LINE SERVICES
----------------- --------
RPS will promptly respond to any telephone calls from Administrators
and/or Participants relating to the Retirement Accounts and/or questions
pertaining to the Funds. Procedures for processing telephone transactions
will be mutually agreed upon by both parties. RPS will also be responsible
for providing a telephone voice response unit and on-line access services.
9. CORRESPONDENCE
--------------
RPS will promptly and fully answer correspondence from Administrators and
Participants relating to Retirement Accounts and transfer agent procedures,
and such other correspondence as may from time to time be mutually agreed
upon with the Funds. Copies of all correspondence will be retained by RPS in
accordance with applicable law.
10. PROSPECTUSES/CONFIRMATION STATEMENTS
------------------------- ----------
RPS will be responsible for mailing all confirmations and statements
relating to transactions in the Funds, prospectuses, semi-annual and annual
reports of the Funds and other enclosures and mailings, as may be requested
by the Funds or required by applicable Federal law.
11. PROXIES
-------
As requested by the Funds, RPS shall assist in the mailing of proxy cards
and other material required to be mailed by the Fund in connection with
shareholder meetings of the Fund and shall assist in the receipt, examination
and tabulation of returned proxies and the certification of the vote to the
Fund.
12. FORM N-SAR
---- -----
RPS shall maintain such records, if any, as shall enable the Fund to
fulfill the requirements of Form N-SAR.
13. WITHHOLDING
-----------
The Fund and RPS shall agree to procedures to be followed with respect to
RPS's responsibilities in connection with compliance for federal withholding
on distributions to Participants from Retirement Accounts.
C. FEES AND OUT-OF-POCKET EXPENSES
-------------------------------
Each Fund shall pay to RPS for its services hereunder fees computed as set
forth in the Fee Schedule attached hereto. Except as provided below, RPS will
be responsible for all expenses relating to the providing of services. Each
Fund, however, will reimburse RPS for the following out-of-pocket expenses and
charges incurred in providing services:
1.
Postage. The cost of postage and freight for mailing materials, including
--------
confirmations and statements as well as Fund prospectuses and Fund
shareholder reports, to Participants with investments in the Fund, or
their agents, including overnight delivery, UPS and other express mail
services and special courier services required to transport mail between
RPS locations and mail processing vendors.
2.
Proxies. The cost to mail proxy cards and other material supplied to it
-------
by the Fund and costs related to the receipt, examination and tabulation
of returned proxies and the certification of the vote to the Fund.
3. Communications
--------------
a. Print. The printed forms used internally and externally for
-----
documentation and processing Participant, or their agent's, inquiries
and requests; paper and envelope supplies for letters, notices, and
other written communications sent to Administrators and Participants, or
their agents.
b.
Print & Mail House. The cost of internal and third party printing and
----- - ---- -----
mail house services, including printing of statements and reports.
c. Voice and Data. The cost of equipment (including associated
----- --- ----
maintenance), supplies and services used for communicating with the
Participants or their Administrator, the Fund's transfer agent, other
Fund offices, and other agents of either the Fund or RPS. These charges
shall include:
/2/ telephone toll charges (both incoming and outgoing, local, long
distance and mailgrams); and
/2/ data and telephone lines and associated equipment such as modems,
multiplexers, and facsimile equipment.
4.
Record Retention. The cost of maintenance and supplies used to maintain,
------ ---------
microfilm, copy, record, index, display, retrieve, and store, in optical
disc, cd rom or microfiche or microfilm form, documents and records.
5.
Disaster Recovery. The cost of services, equipment, facilities and other
-------- --------
charges necessary to provide disaster recovery for any and all services
listed in this Agreement.
D. REPRESENTATIONS AND WARRANTIES OF RPS
-------------------------------------
RPS represents and warrants to the Fund that:
1. It is a corporation duly organized and existing and in good standing under
the laws of Maryland.
2. It is duly qualified to carry on its business in Maryland, Florida and
Colorado.
3.
It is empowered under applicable laws and by its charter and by-laws to enter
into and perform this Agreement.
4.
All requisite corporate proceedings have been taken to authorize it to enter
into and perform this Agreement.
5. It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
6. It is registered with the Securities and Exchange Commission as a Transfer
Agent pursuant to Section 17A of the '34 Act.
E. REPRESENTATIONS AND WARRANTIES OF THE FUND
------------------------------------------
The Fund represents and warrants to RPS that:
1.
It is a corporation or business trust duly organized and existing and in good
standing under the laws of Maryland, or Massachusetts, as the case may be.
2.
It is empowered under applicable laws and by its Articles of Incorporation or
Declaration of Trust, as the case may be, and By-Laws to enter into and
perform this Agreement.
3.
All proceedings required by said Articles of Incorporation or Declaration of
Trust, as the case may be, and By-Laws have been taken to authorize it to
enter into and perform this Agreement.
4. It is an investment company registered under the Act.
5.
A registration statement under the Securities Act of 1933 ("the '33 Act") is
currently effective and will remain effective, and appropriate state
securities law filing have been made and will continue to be made, with
respect to all shares of the Fund being offered for sale.
F. STANDARD OF CARE/INDEMNIFICATION
--------------------------------
Notwithstanding anything to the contrary in this Agreement:
1. RPS shall not be liable to the Fund for any act or failure to act by it or
its agents or subcontractors on behalf of the Fund in carrying or attempting
to carry out the terms and provisions of this Agreement provided RPS has
acted in good faith and without negligence or willful misconduct and selected
and monitored the performance of its agents and subcontractors with
reasonable care.
2.
The Fund shall indemnify and hold RPS harmless from and against all losses,
costs, damages, claims, actions and expenses, including reasonable expenses
for legal counsel, incurred by RPS resulting from: (i) any action or omission
by RPS or its agents or subcontractors in the performance of their duties
hereunder; (ii) RPS acting upon instructions reasonably believed by it to
have been executed by a duly authorized officer of the Fund; or (iii) RPS
acting upon information provided by the Fund in form and under policies
agreed to by RPS and the Fund. RPS shall not be entitled to such
indemnification in respect of actions or
omissions constituting negligence or willful misconduct of RPS or where RPS
has not exercised reasonable care in selecting or monitoring the performance
of its agents or subcontractors.
3. Except as provided in Article K of this Agreement, RPS shall indemnify and
hold harmless the Fund from all losses, costs, damages, claims, actions and
expenses, including reasonable expenses for legal counsel, incurred by the
Fund resulting from negligence or willful misconduct of RPS or which result
from RPS' failure to exercise reasonable care in selecting or monitoring the
performance of its agents or subcontractors. The Fund shall not be entitled
to such indemnification in respect of actions or omissions constituting
negligence or willful misconduct of such Fund or its agents or
subcontractors; unless such negligence or misconduct is attributable to RPS.
4. In determining RPS' liability, an isolated error or omission will normally
not be deemed to constitute negligence when it is determined that:
/2/ RPS had in place "appropriate procedures;"
/2/ the employees responsible for the error or omission had been reasonably
trained and were being appropriately monitored; and
/2/ the error or omission did not result from wanton or reckless
conduct on the part of the employees.
It is understood that RPS is not obligated to have in place separate
procedures to prevent each and every conceivable type of error or omission.
The term "appropriate procedures" shall mean procedures reasonably
designed to prevent and detect errors and omissions. In determining the
reasonableness of such procedures, weight will be given to such factors as
are appropriate, including the prior occurrence of any similar errors or
omissions when such procedures were in place and transfer agent industry
standards in place at the time of the occurrence.
5.
In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes or other causes
reasonably beyond its control,
such party shall not be liable to the other party for any loss, cost,
damage, claims, actions or expense resulting from such failure to perform
or otherwise from such causes.
6.
In order that the indemnification provisions contained in this Article F
shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The
party who may be required to indemnify shall have the option to participate
with the party seeking indemnification in the defense of such claim, or to
defend against said claim in its own name or in the name of the other
party. The party seeking indemnification shall in no case confess any
claim or make any compromise in any case in which the other party may be
required to indemnify it except with the other party's prior written
consent.
7. Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement.
G. DUAL INTERESTS
--------------
It is understood that some person or persons may be directors, officers, or
shareholders of both RPS and the Fund and that the existence of any such dual
interest shall not affect the validity of this Agreement or of any transactions
hereunder except as otherwise provided by a specific provision of applicable
law.
H. DOCUMENTATION
-------------
1.
As requested by RPS, the Fund shall promptly furnish to RPS the following:
a.
copy of the resolution of the Directors/Trustees of the Fund
authorizing the appointment of RPS and the execution and delivery of
this Agreement;
b.
A copy of the Articles of Incorporation or Declaration of Trust, as
the case may be, and By-Laws of the Fund and all amendments thereto;
c.
An opinion of counsel for the Fund with respect to the validity of
the stock, the number of Shares authorized, the status of redeemed
Shares, and the number of
Shares with respect to which a Registration Statement has been filed
and is in effect; and
d.
A copy of the Fund's current and new prospectuses and shareholder
reports issued by the Fund.
The delivery of any such document to either party hereto for the purpose of
any other agreement to which the Fund and RPS are or were parties shall be
deemed to be delivery for the purposes of this Agreement.
2.
As requested by RPS, the Fund will also furnish to RPS from time to
time the following documents:
a.
Each resolution of the Board of Directors/Trustees of the Fund
authorizing the original issue of its shares;
b.
Each Registration Statement filed with the Securities and Exchange
Commission and amendments and orders thereto in effect with respect
to the sale of shares with respect to the Fund;
c.
A certified copy of each amendment to the Articles of Incorporation
or Declaration of Trust, and the By-Laws of the Fund;
d.
Certified copies of each vote of the Board of Directors/Trustees
authorizing officers to give instructions to the Fund; and
e.
Such other documents or opinions which RPS, in its discretion, may
reasonably deem necessary or appropriate in the proper performance
of its duties under this Agreement.
3. RPS hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of check forms and
facsimile signature imprinting devices, if any, and for the preparation or
use, and for keeping account of, such forms and devices.
I. RECORDKEEPING/CONFIDENTIALITY
-----------------------------
1.
RPS shall keep records relating to the services to be performed hereunder,
in the form and manner as it may deem advisable, provided that RPS shall
keep all records in such form and in such manner as required by applicable
law, including the Act and the '34 Act.
2. RPS and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential, and shall not be voluntarily disclosed to any
other person, except: (a) after prior notification to and approval in
writing by the other party hereto, which approval shall not be unreasonably
withheld and may not be withheld where RPS or the Fund may be exposed to
civil or criminal contempt proceedings for failure to comply; (b) when
requested to divulge such information by duly constituted governmental
authorities; (c) after so requested by the other party hereto; or (d) by
the Administrator. The permission of the Administrator may be required
before disclosure is made to the Funds.
J. OWNERSHIP OF SOFTWARE AND RELATED MATERIAL
------------------------------------------
All computer programs, magnetic tapes, written procedures and similar items
purchased and/or developed and used by RPS in performance of the Agreement shall
be the property of RPS and will not become the property of the Fund.
K. AS OF TRANSACTIONS
------------------
For purposes of this Article K, the term "TRANSACTION" shall mean any
single or "related transaction" (as defined below) involving the purchase or
redemption of shares (including exchanges) processed at a time other than the
time of the computation of the Fund's net asset value per share next computed
after receipt of any such transaction order by RPS due to an act or omission of
RPS. "AS OF PROCESSING" refers to the processing of these Transactions. If
more than one Transaction ("RELATED TRANSACTION") in the Fund is caused by or
occurs as a result of the same act or omission, such transactions shall be
aggregated with other transactions in the Fund
and be considered as one Transaction.
1. REPORTING
RPS shall:
a.
Utilize a system to identify all Transactions, and shall compute the
net effect of such Transactions upon the Fund on a daily, monthly
and rolling 365 day basis. The monthly and rolling 365 day periods
are hereinafter referred to as "CUMULATIVE."
b.
Supply to the Fund, from time to time as mutually agreed upon, a
report summarizing the Transactions and the daily and Cumulative net
effects of such Transactions both in terms of aggregate dilution and
loss ("DILUTION") or gain and negative dilution ("GAIN")
experienced by the Fund, and the impact such Gain or Dilution has
had upon the Fund's net asset value per share.
c.
With respect to any Transaction which causes Dilution to the Fund of
$100,000 or more, immediately provide the Fund: (i) a report
identifying the Transaction and the Dilution resulting therefrom,
(ii) the reason such Transaction was processed as described above,
and (iii) the action that RPS has or intends to take to prevent the
reoccurrence of such as of processing ("REPORT").
2. LIABILITY
a.
It will be the normal practice of the Fund not to hold RPS liable
with respect to any Transaction which causes Dilution to any single
Fund of less than $25,000. RPS will, however, closely monitor for
each Fund the daily and Cumulative Gain/Dilution which is caused by
Transactions of less than $25,000. When the Cumulative Dilution to
any Fund exceeds 3/10 of 1% per share, RPS, in consultation with
counsel to the Fund, will make appropriate inquiry to determine
whether it should take any remedial action. RPS will report to the
Board of Directors/Trustees of the Fund ("BOARD"), as appropriate,
any action it has taken.
b.
Where a Transaction causes Dilution to a Fund greater than $25,000
("SIGNIFICANT TRANSACTION") but less than $100,000, RPS will review
with Counsel to the Fund the circumstances surrounding the
underlying Significant Transaction to determine whether the
Significant Transaction was caused by or occurred as a result of a
negligent act or omission by RPS. If it is determined that the
Dilution is the result of a negligent action or omission by RPS, RPS
and outside counsel for the Fund will negotiate settlement. All
such Significant Transactions will be reported to the Audit
Committee at its annual meeting (unless the settlement fully
compensates the Fund for any Dilution). Any Significant
Transaction, however, causing Dilution in excess of the lesser of
$100,000 or a penny per share will be promptly reported to the Board
--------
and resolved at the next scheduled Board Meeting. Settlement for
Significant Transactions causing Dilution of $100,000 or more will
not be entered into until approved by the Board. The factors to
consider in making any determination regarding the settlement of a
Significant Transaction would include but not be limited to:
i.
Procedures and controls adopted by RPS to prevent As Of
Processing;
ii.
Whether such procedures and controls were being followed at the
time of the Significant Transaction;
iii.
The absolute and relative volume of all transactions processed by
RPS on the day of the Significant Transaction;
iv.
The number of Transactions processed by RPS during prior relevant
periods, and the net Dilution/Gain as a result of all such
Significant Transactions to the Fund and to all other Funds; and
v.
The prior response of RPS to recommendations made by the Funds
regarding improvement to RPS's As Of Processing procedures.
c.
In determining RPS' liability with respect to a Significant Transaction, an
isolated error or omission will normally not be deemed to constitute negligence
when it is
determined that:
/2/ RPS had in place "appropriate procedures".
/2/ the employees responsible for the error or omission had been
reasonably trained and were being appropriately monitored; and
/2/ the error or omission did not result from wanton or reckless conduct on the
part of the employees.
It is understood that RPS is not obligated to have in place separate
procedures to prevent each and every conceivable type of error or
omission. The term "appropriate procedures" shall mean procedures
reasonably designed to prevent and detect errors and omissions. In
determining the reasonableness of such procedures, weight will be
given to such factors as are appropriate, including the prior
occurrence of any similar errors or omissions when such procedures
were in place and transfer agent industry standards in place at the
time of the occurrence.
L. TERM AND TERMINATION OF AGREEMENT
---------------------------------
1.
This Agreement shall run for a period of one (1) year from the date first
written above and will be renewed from year to year thereafter unless
terminated by either party as provided hereunder.
2.
This Agreement may be terminated by the Funds upon one hundred twenty (120)
days' prior written notice to RPS; and by RPS, upon three hundred
sixty-five (365) days' prior written notice to the Fund.
3.
Upon termination hereof, the Fund shall pay to RPS such compensation as may
be due as of the date of such termination, and shall likewise reimburse for
out-of-pocket expenses related to its services hereunder.
M. NOTICE
------
Any notice as required by this Agreement shall be sufficiently given (i)
when sent to an authorized person of the other party at the address of such
party set forth above or at such other address as such party may from time to
time specify in writing to the other party; or (ii) as other-
wise agreed upon by appropriate officers of the parties hereto.
N. ASSIGNMENT
----------
Neither this Agreement nor any rights or obligations hereunder may be
assigned either voluntarily or involuntarily, by operation of law or otherwise,
by either party without the prior written consent of the other party.
O. AMENDMENT/INTERPRETIVE PROVISIONS
---------------------------------
The parties by mutual written agreement may amend this Agreement at any
time. In addition, in connection with the operation of this Agreement, RPS and
the Fund may agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions are to be signed by all parties and annexed hereto, but no
such provision shall contravene any applicable federal or state law or
regulation and no such interpretive or additional provision shall be deemed to
be an amendment of this Agreement.
P. FURTHER ASSURANCES
------------------
Each party agrees to perform such further acts and execute such further
documents as are necessary to effectuate the purposes hereof.
Q. MARYLAND LAW TO APPLY
---------------------
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of Maryland.
R. MERGER OF AGREEMENT
-------------------
This Agreement, including the attached Schedule supersede any prior
agreement with respect to the subject hereof, whether oral or written.
S. COUNTERPARTS
------------
This Agreement may be executed by the parties hereto in any number of
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
T. THE PARTIES
-----------
All references herein to "the Fund" are to each of the Funds listed on
Appendix A individ-
ually, as if this Agreement were between such individual Fund and RPS. In the
case of a series Fund or trust, all references to "the Fund" are to the
individual series or portfolio of such Fund or trust, or to such Fund or trust
on behalf of the individual series or portfolio, as appropriate. Any reference
in this Agreement to "the parties" shall mean RPS and such other individual Fund
as to which the matter pertains. The "Fund" also includes any T. Rowe Price
Fund which may be established after the date of this Agreement.
Any reference in this Agreement to "the parties" shall mean the Funds and
RPS.
U. DIRECTORS, TRUSTEES AND SHAREHOLDERS AND MASSACHUSETTS BUSINESS TRUST
---------------------------------------------------------------------
It is understood and is expressly stipulated that neither the holders of
shares in the Fund nor any Directors or Trustees of the Fund shall be personally
liable hereunder. With respect to any Fund which is a party to this Agreement
and which is organized as a Massachusetts business trust, the term "Fund" means
and refers to the trustees from time to time serving under the applicable trust
agreement (Declaration of Trust) of such Trust as the same may be amended from
time to time. It is expressly agreed that the obligations of any such Trust
hereunder shall not be binding upon any of the trustees, shareholders, nominees,
officers, agents or employees of the Trust, personally, but bind only the trust
property of the Trust, as provided in the Declaration of Trust of the Trust.
The execution and delivery of this Agreement has been authorized by the
Trustees and signed by an authorized officer of the Trust, acting as such, and
neither such authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them, but shall bind
only the trust property of the Trust as provided in its Declaration of Trust.
V. CAPTIONS
--------
The captions in the Agreement are included for convenience of reference
only and in no way
define or limit any of the provisions hereof or otherwise affect their
construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers.
T. ROWE PRICE RETIREMENT PLAN T. ROWE PRICE FUNDS
SERVICES, INC.
BY:
-----------------------------------------------------------
BY:
----------------------------------------------------------
DATED:
---------------------------------------------------
DATED:
---------------------------------------------------
LHC\Agrmnt\2000RetirementPlanServices.ServiceAgreement.doc
APPENDIX A
-------- -
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. Rowe Price Blue Chip Growth Fund-Advisor Class
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. Rowe Price Equity Income Fund-Advisor Class
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. Rowe Price High Yield Fund-Advisor Class
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Institutional Mid-Cap Equity Growth Fund
Institutional Large-Cap Value Fund
Institutional Small-Cap Stock Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Growth & Income Fund
T. Rowe Price International Stock Fund-Advisor Class
T. Rowe Price Emerging Europe & Mediterranean Fund
T. Rowe Price International Bond Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price International Bond Fund-Advisor Class
T. ROWE PRICE INTERNATIONAL INDEX FUND, INC.
T. Rowe Price International Equity Index Fund
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. Rowe Price Prime Reserve Fund-PLUS Class
T. ROWE PRICE REAL ESTATE FUND, INC.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. Rowe Price Science & Technology Fund-Advisor Class
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. Rowe Price Small-Cap Stock Fund-Advisor Class
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. Rowe Price Small-Cap Value Fund-Advisor Class
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Income Fund
Spectrum Growth Fund
Spectrum International Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE U.S. BOND INDEX FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE VALUE FUND, INC.
AMENDMENT NO. 1
AGREEMENT
BETWEEN
T. ROWE PRICE RETIREMENT PLAN SERVICES, INC.
AND
EACH OF THE PARTIES INDICATED ON APPENDIX A
The Retirement Plan Services Contract of January 1, 2001, between T. Rowe Price
Retirement Plan Services, Inc. and each of the Parties listed on Appendix A
thereto is hereby amended, as of July 24, 2001, by adding thereto Institutional
Equity Funds, Inc., on behalf of Institutional Large-Cap Growth Fund.
T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
T. Rowe Price Blue Chip Growth Fund-Advisor Class
T. ROWE PRICE CAPITAL APPRECIATION FUND
T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC.
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC.
T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC.
T. ROWE PRICE DIVIDEND GROWTH FUND, INC.
T. ROWE PRICE EQUITY INCOME FUND
T. Rowe Price Equity Income Fund-Advisor Class
T. ROWE PRICE FINANCIAL SERVICES FUND, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC.
T. ROWE PRICE GROWTH & INCOME FUND, INC.
T. ROWE PRICE GROWTH STOCK FUND, INC.
T. ROWE PRICE HEALTH SCIENCES FUND, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. Rowe Price High Yield Fund-Advisor Class
T. ROWE PRICE INDEX TRUST, INC.
T. Rowe Price Equity Index 500 Fund
T. Rowe Price Extended Equity Market Index Fund
T. Rowe Price Total Equity Market Index Fund
INSTITUTIONAL EQUITY FUNDS, INC.
Institutional Mid-Cap Equity Growth Fund
Institutional Large-Cap Value Fund
Institutional Small-Cap Stock Fund
Institutional Large-Cap Growth Fund
INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Foreign Equity Fund
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
T. Rowe Price International Stock Fund
T. Rowe Price International Discovery Fund
T. Rowe Price European Stock Fund
T. Rowe Price New Asia Fund
T. Rowe Price Japan Fund
T. Rowe Price Latin America Fund
T. Rowe Price Emerging Markets Stock Fund
T. Rowe Price Global Stock Fund
T. Rowe Price International Growth & Income Fund
T. Rowe Price International Stock Fund-Advisor Class
T. Rowe Price Emerging Europe & Mediterranean Fund
T. Rowe Price International Bond Fund
T. Rowe Price Emerging Markets Bond Fund
T. Rowe Price International Bond Fund-Advisor Class
T. ROWE PRICE INTERNATIONAL INDEX FUND, INC.
T. Rowe Price International Equity Index Fund
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
T. ROWE PRICE MID-CAP GROWTH FUND, INC.
T. ROWE PRICE MID-CAP VALUE FUND, INC.
T. ROWE PRICE NEW AMERICA GROWTH FUND
T. ROWE PRICE NEW ERA FUND, INC.
T. ROWE PRICE NEW HORIZONS FUNDS, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC.
T. Rowe Price Personal Strategy Balanced Fund
T. Rowe Price Personal Strategy Growth Fund
T. Rowe Price Personal Strategy Income Fund
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. Rowe Price Prime Reserve Fund-PLUS Class
T. ROWE PRICE REAL ESTATE FUND, INC.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. Rowe Price Science & Technology Fund-Advisor Class
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SMALL-CAP STOCK FUND, INC.
T. Rowe Price Small-Cap Stock Fund-Advisor Class
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
T. Rowe Price Small-Cap Value Fund-Advisor Class
T. ROWE PRICE SPECTRUM FUND, INC.
Spectrum Income Fund
Spectrum Growth Fund
Spectrum International Fund
T. ROWE PRICE SUMMIT FUNDS, INC.
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit GNMA Fund
T. ROWE PRICE U.S. BOND INDEX FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
T. ROWE PRICE VALUE FUND, INC.
Attest:
/s/Patricia B. Lippert /s/Joseph A. Carrier
Patricia B. Lippert, By: Joseph A. Carrier
Secretary Treasurer
Attest: T. ROWE PRICE RETIREMENT PLAN
SERVICES, INC.
/s/Barbara A. Van Horn /s/Henry H. Hopkins
Barbara A. Van Horn, By: Henry H. Hopkins,
Secretary Vice President
L:\TRPPROD\EDG\AGMTS.EDG\2001Agmts\2001RPS.fm
EX-99.J OTHER OPININ
10
nifconsent01.txt
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 52 to the registration statement on Form N-1A ("Registration
Statement") of our report dated June 19, 2001, relating to the financial
statements and financial highlights which appear in the May 31, 2001 Annual
Report to Shareholders of T. Rowe Price New Income Fund, Inc., which are also
incorporated by reference into the Registration Statement. We also consent
to the references to us under the headings "Financial Highlights" and
"Independent Accountants" in such Registration Statement.
/s/PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Baltimore, Maryland
September 21, 2001
EX-99.J OTHER OPININ
11
nifopinion01.txt
September 19, 2001
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: T. Rowe Price New Income Fund, Inc.
File Nos.: 002-48848/811-2396
Post-Effective Amendment No. 52
Commissioners:
We are counsel to the above-referenced registrant which proposes to file,
pursuant to paragraph (b) of Rule 485 (the "Rule"), the above-referenced
Post-Effective Amendment (the "Amendment") to its registration statement under
the Securities Act of 1933, as amended.
Pursuant to paragraph (b)(4) of the Rule, we represent that the Amendment does
not contain disclosures which would render it ineligible to become effective
pursuant to paragraph (b) of the Rule.
Sincerely,
/s/Shearman & Sterling
Shearman & Sterling
EX-99.J OTHER OPININ
12
incomepoa.txt
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE RESERVE INVESTMENT FUNDS, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
T. ROWE PRICE SUMMIT FUNDS, INC.
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. BOND INDEX FUND, INC.
and
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
POWER OF ATTORNEY
RESOLVED, that the Corporations/Trusts (collectively the
"Corporations/Trusts" and individually the "Corporation/Trust") and each of its
directors/trustees do hereby constitute and authorize, William T. Reynolds, Joel
H. Goldberg, and Henry H. Hopkins, and each of them individually, their true and
lawful attorneys and agents to take any and all action and execute any and all
instruments which said attorneys and agents may deem necessary or advisable to
enable the Corporation/Trust to comply with the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, and any rules,
regulations, orders or other requirements of the United States Securities and
Exchange Commission thereunder, in connection with the registration under the
Securities Act of 1933, as amended, of shares of the Corporation/Trust, to be
offered by the Corporation/Trust, and the registration of the Corporation/Trust
under the Investment Company Act of 1940, as amended, including specifically,
but without limitation of the foregoing, power and authority to sign the name of
the Corporation/Trust on its behalf, and to sign the names of each of such
directors/trustees and officers on his behalf as such director/ trustee or
officer to any (i) Registration Statement on Form N-1A of the Corporation/Trust
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended; (ii) Registration Statement on Form N-1A of the
Corporation/Trust under the Investment Company Act of 1940, as amended; (iii)
amendment or supplement (including, but not limited to, Post-Effective
Amendments adding additional series or classes of the Corporation/ Trust) to
said Registration Statement; and (iv) instruments or documents filed or to be
filed as a part of or in connection with such Registration Statement, including
Articles Supplementary, Articles of Amendment, and other instruments with
respect to the Articles of Incorporation or Master Trust Agreement of the
Corporation/Trust.
IN WITNESS WHEREOF, the above named Corporations/Trusts have caused these
presents to be signed and the same attested by its Secretary, each thereunto
duly authorized by its Board of Directors/Trustees, and each of the undersigned
has hereunto set his hand and seal as of the day set opposite his name.
ALL CORPORATIONS/TRUSTS
____________________________ Treasurer (Principal Financial Officer)
April 25, 2001
Joseph A. Carrier
____________________________ Director/Trustee April 25, 2001
Calvin W. Burnett
____________________________ Director/Trustee April 25, 2001
Anthony W. Deering
____________________________ Director/Trustee April 25, 2001
F. Pierce Linaweaver
____________________________ Director/Trustee April 25, 2001
John G. Schreiber
(Signatures Continued)
edg\agmts\IncomeFd.POA
JAMES S. RIEPE, Director/Trustee
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
JAMES S. RIEPE, Vice President and Director/Trustee
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE RESERVE INVESTMENT FUNDS, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE SUMMIT FUNDS, INC.
T. ROWE PRICE U.S. BOND INDEX FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
____________________________ April 25, 2001
James S. Riepe
(Signatures Continued)
edg\agmts\IncomeFd.POA
M. DAVID TESTA, Director/Trustee
T. ROWE PRICE CALFORNIA TAX-FREE INCOME TRUST
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. ROWE PRICE GNMA FUND
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE RESERVE INVESTMENT FUNDS, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
T. ROWE PRICE SUMMIT FUNDS, INC.
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. BOND INDEX FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
____________________________ April 25, 2001
M. David Testa
(Signatures Continued)
edg\agmts\IncomeFd.POA
WILLIAM T. REYNOLDS, Chairman of the Board (Principal Executive Officer)
T. ROWE PRICE CALIFORNIA TAX-FREE INCOME TRUST
T. ROWE PRICE CORPORATE INCOME FUND, INC.
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. ROWE PRICE HIGH YIELD FUND, INC.
T. ROWE PRICE PRIME RESERVE FUND, INC.
T. ROWE PRICE RESERVE INVESTMENT FUNDS, INC.
T. ROWE PRICE SHORT-TERM BOND FUND, INC.
T. ROWE PRICE STATE TAX-FREE INCOME TRUST
T. ROWE PRICE SUMMIT FUNDS, INC.
T. ROWE PRICE SUMMIT MUNICIPAL FUNDS, INC.
T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
T. ROWE PRICE TAX-FREE HIGH YIELD FUND, INC.
T. ROWE PRICE TAX-FREE INCOME FUND, INC.
T. ROWE PRICE TAX-FREE SHORT-INTERMEDIATE FUND, INC.
T. ROWE PRICE U.S. BOND INDEX FUND, INC.
WILLIAM T. REYNOLDS, Director/Trustee
T. ROWE PRICE GNMA FUND
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
WILLIAM T. REYNOLDS, President and Director
T. ROWE PRICE NEW INCOME FUND, INC.
T. ROWE PRICE U.S. TREASURY FUNDS, INC.
____________________________ April 25, 2001
William T. Reynolds
(Signatures Continued)
edg\agmts\IncomeFd.POA
T. ROWE PRICE GNMA FUND
____________________________ President April 25, 2001
Connice A. Bavely
T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC.
____________________________ President April 25, 2001
Charles B. Hill
ATTEST:
____________________________
Patricia B. Lippert, Secretary
edg\agmts\IncomeFd.POA
EX-99.P CODE ETH
13
codeofethics01.txt
T. ROWE PRICE GROUP, INC.
STATEMENT OF POLICY
ON
SECURITIES TRANSACTIONS
BACKGROUND INFORMATION.
Legal Requirement. In accordance with the requirements of the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisers Act of 1940 and the Insider Trading and Securities Fraud
Enforcement Act of 1988, Price Group and the mutual funds ("Price
Funds") which its affiliates manage have adopted this Statement of
Policy on Securities Transactions ("Statement"). TRPI has also adopted a
Statement of Policy on Securities Transactions.
Price Advisers' Fiduciary Position. As investment advisers, the Price
Advisers are in a fiduciary position which requires them to act with an
eye only to the benefit of their clients, avoiding those situations
which might place, or appear to place, the interests of the Price
Advisers or their officers, directors and employees in conflict with the
interests of clients.
Purpose of Statement. The Statement was developed to help guide Price
Group's employees and independent directors and the independent
directors of the Price Funds in the conduct of their personal
investments and to:
o eliminate the possibility of a transaction occurring that the
Securities and Exchange Commission or other regulatory bodies
would view as illegal, such as Front Running (see definition
below);
o avoid situations where it might appear that Price Group or the
Price Funds or any of their officers, directors or employees had
personally benefited at the expense of a client or fund
shareholder or taken inappropriate advantage of their fiduciary
positions; and
o prevent, as well as detect, the misuse of material, non-public information.
Employees and the independent directors of Price Group and the Price
Funds are urged to consider the reasons for the adoption of this
Statement. Price Group's and the Price Funds' reputations could be
adversely affected as the result of even a single transaction considered
questionable in light of the fiduciary duties of the Price Advisers and
the independent directors of the Price Funds.
Front Running. Front Running is illegal. It is generally defined as the
purchase or sale of a security by an officer, director or employee of an
investment adviser or mutual fund in anticipation of and prior to the
adviser effecting similar transactions for its clients in order to take
advantage of or avoid changes in market prices effected by client
transactions.
PERSONS SUBJECT TO STATEMENT. The provisions of this Statement apply as
described below to the following persons and entities. Each person and entity is
classified as either an Access Person or a Non-Access Person as described below.
The provisions of this Statement may also apply to an Access Person's or
Non-Access Person's spouse, minor children, and certain other relatives, as
further described on page 4-4 of this Statement. Access Persons are subject to
all provisions of this Statement. Non-Access Persons are subject to the general
principles of the Statement and its reporting requirements, but are exempt from
prior clearance requirements except for transactions in Price Group stock. The
persons and entities covered by this Statement are:
Price Group. Price Group, each of its subsidiaries and affiliates except TRPI,
TRPGA and TRPGIS, and their retirement plans.
Employee Partnerships. Partnerships such as Pratt Street Ventures.
Personnel. Each officer, inside director and employee of Price Group
and its subsidiaries and affiliates, including T. Rowe Price
Investment Services, Inc., the principal underwriter of the Price
Funds, except that personnel working abroad are subject to the TRPI
Statement.
Certain Temporary Workers. These workers include:
o All temporary workers hired on the Price Group payroll ("TRP Temporaries");
o All agency temporaries whose assignments at Price Group exceed four
weeks or whose cumulative assignments exceed eight weeks over a
twelve-month period;
o All independent or agency-provided consultants whose assignments
exceed four weeks or whose cumulative assignments exceed eight weeks
over a twelve-month period and whose work is closely related to the
ongoing work of Price Group's employees (versus project work that
stands apart from ongoing work); and
o Any contingent worker whose assignment is more than casual in nature
or who will be exposed to the kinds of information and situations
that would create conflicts on matters covered in the Code.
TRPI, TRPGA and TRPGIS Personnel. As stated in the first paragraph, a
Statement of Policy on Securities Transactions has been adopted by TRPI.
Under that Statement, all TRPI, TRPGA and TRPGIS personnel (officers,
directors and employees) stationed in Baltimore will be subject to this
Statement.
Retired Employees. Retired employees of Price Group who continue to
receive investment research information from one or more of the Price
Advisers will be subject to this Statement.
Independent Directors of Price Group, the Savings Bank and the Price
Funds. The independent directors of Price Group include those directors
of Price Group who are neither officers nor employees of Price Group.
The independent directors of the T. Rowe Price Savings Bank ("Savings
Bank") include those directors of the Savings Bank who are neither
officers nor employees of Price Group or any of its subsidiaries or
affiliates. The independent directors of the Price Funds include those
directors of the Price Funds who are not deemed to be "interested
persons" of Price Group.
Although subject to the general principles of this Statement, including the
definition of "beneficial ownership," independent directors are subject only to
modified reporting requirements. See p. 4-14. The independent directors of the
Savings Bank and the Price Funds are exempt from prior clearance requirements.
The independent directors of Price Group are exempt from the prior clearance
requirements except for Price Group stock.
ACCESS PERSONS. Certain persons and entities are classified as "Access Persons"
under the Code. The term "Access Person" means:
o the Price Advisers;
o any officer (vice president or above) or director (excluding
independent directors) of any of the Price Advisers or the
Price Funds;
o any employee of Price Group or the Price Funds who, in connection
with his or her regular functions or duties, makes, participates in,
or obtains or has access to information regarding the purchase or
sale of securities by a Price Fund or other advisory client, or whose
functions relate to the making of any recommendations with respect to
the purchases or sales; or
o any person in a control relationship to any of the Price Advisers or
a Price Fund who obtains or has access to information concerning
recommendations made to a Price Fund or other advisory client with
regard to the purchase or sale of securities by the Price Fund or
advisory client.
All Access Persons are notified of their status under the Code.
Investment Personnel. An Access Person is further identified as
"Investment Personnel" if, in connection with his or her regular
functions or duties, he or she "makes or participates in making
recommendations regarding the purchase or sale of securities" by a Price
Fund or other advisory client.
The term "Investment Personnel" includes, but is not limited to:
o those employees who are authorized to make investment decisions
or to recommend securities transactions on behalf of the firm's
clients (investment counselors and members of the mutual fund
advisory committees);
o research and credit analysts; and
o traders who assist in the investment process.
All Investment Personnel are deemed Access Persons under the Code. All
Investment Personnel are notified of their status under the Code.
Investment Personnel are prohibited from investing in initial public
offerings.
NON-ACCESS PERSONS. Persons who do not fall within the definition of Access
Persons are deemed "Non-Access Persons". If an employee who is a Non-Access
Person is married to an Access Person, then the non-Access Person is deemed to
be an Access Person under the beneficial ownership provisions described below.
QUESTIONS ABOUT THE STATEMENT. You are urged to seek the advice of the
Chairperson of the Ethics Committee when you have questions as to the
application of this Statement to individual circumstances.
TRANSACTIONS SUBJECT TO STATEMENT. Except as provided below, the provisions of
this Statement apply to transactions that fall under either one of the following
two conditions:
First, you are a "beneficial owner" of the security under the Rule 16a-1 of the
Securities Exchange Act of 1934 ("Exchange Act"), as defined below.
Second, if you control or direct securities trading for another person or
entity, those trades are subject to this Statement even if you are not a
beneficial owner of the securities. For example, if you have an exercisable
trading authorization of an unrelated person's or entity's brokerage account, or
are directing another person's or entity's trades, those transactions will be
subject to this Statement to the same extent your personal trades would be,
unless exempted as described below.
Definition of Beneficial Owner. A "beneficial owner" is any person who, directly
or indirectly, through any contract, arrangement, understanding, relationship,
or otherwise, has or shares in the opportunity, directly or indirectly, to
profit or share in any profit derived from a transaction in the security.
A person has beneficial ownership in:
o securities held by members of the person's immediate family
sharing the same household, although the presumption of
beneficial ownership may be rebutted;
o a person's interest in securities held by a trust, which may
include both trust beneficiaries or trustees with investment
control;
o a person's right to acquire securities through the exercise
or conversion of any derivative security, whether or not
presently exercisable;
o a general partner's proportionate interest in the portfolio securities
held by a general or limited partnership;
o certain performance-related fees other than an asset-based fee,
received by any broker, dealer, bank, insurance company, investment
company, investment adviser, investment manager, trustee or person
or entity performing a similar function; and
o a person's right to dividends that is separated or separable from
the underlying securities. Otherwise, right to dividends alone shall
not represent beneficial ownership in the securities.
A shareholder shall not be deemed to have beneficial ownership in the portfolio
securities held by a corporation or similar entity in which the person owns
securities if the shareholder is not a controlling shareholder of the entity and
does not have or share investment control over the entity's portfolio.
Requests for Exemptions. If you have beneficial ownership of a security, any
transaction involving that security is presumed to be subject to the relevant
requirements of this Statement, unless you have no control over the transaction.
Such a situation may arise, for example, if you have delegated investment
authority to an independent investment adviser, or your spouse has an
independent trading program in which you have no input. Similarly, if your
spouse has investment control over, but no beneficial ownership in, an unrelated
account, an exemption may be appropriate.
If you are involved in an investment account for a family situation, trust,
partnership, corporation, etc., which you feel should not be subject to the
Statement's relevant prior approval and/or reporting requirements, you should
submit a written request for clarification or exemption to Baltimore
Legal/Compliance (Attn. D. Jones). Any such request for clarification or
exemption should name the account, your interest in the account, the persons or
firms responsible for its management, and the basis upon which the exemption is
being claimed. Exemptions are not self-executing; any exemption must be granted
through Baltimore Legal/Compliance.
PRIOR CLEARANCE REQUIREMENTS GENERALLY. As described, certain transactions
require prior clearance before execution. Receiving prior clearance does not
relieve employees from conducting their personal securities transactions in full
compliance with the Code, including its prohibition on trading while in
possession of material, inside information, and with applicable law, including
the prohibition on Front Running (see page 4-1 for definition of Front Running).
TRANSACTIONS IN STOCK OF PRICE GROUP. Because Price Group is a public company,
ownership of its stock subjects its officers, inside and independent directors,
and employees to special legal requirements under the federal securities laws.
Each officer, director and employee is responsible for his or her own compliance
with these requirements. In connection with these legal requirements, Price
Group has adopted the following rules and procedures:
Independent Directors of Price Funds. The independent directors of
the Price Funds are prohibited from owning the stock of Price Group.
Quarterly Earnings Report. Generally, all employees and independent
directors of Price Group must refrain from initiating transactions in
Price Group stock in which they have a beneficial interest from the
sixth trading day following the end of the quarter (or such other date
as management shall from time to time determine) until the third trading
day following the public release of earnings. Employees and independent
directors will be notified in writing through the Office of the
Secretary of Price Group ("Secretary") from time to time as to the
controlling dates.
Prior Clearance of Price Group Stock Transactions Generally. Employees
and independent directors of Price Group are required to obtain
clearance prior to effecting any proposed transaction (including gifts
and transfers) involving shares of Price Group stock owned beneficially
or through the Employee Stock Purchase Plan. A transfer includes a
change in ownership name of shares of Price Group stock, including a
transfer of the shares into street name to be held in a securities
account and any transfers of shares of Price Group stock between
securities firms or accounts, including accounts held at the same firm.
Prior Clearance Procedures for Price Group Stock. Requests for prior
clearance must be in writing on the form entitled "Notification of
Proposed Transaction" (available from the Corporate Records Department
and on the firm's Intranet under Corporate/Corporate Records) and be
submitted to the Secretary, who is responsible for processing and
maintaining the records of all such requests. This includes not only
market transactions, but also sales of stock purchased either through
the Price Group Employee Stock Purchase Plan ("ESPP") or through a
brokerage account if shares of Price Group stock are transferred there
from the ESPP. Purchases effected through the ESPP are automatically
reported to the Secretary.
Prohibition Regarding Transactions in Publicly-Traded Price Group
Options. Transactions in publicly-traded options on Price
Group stock are not permitted.
Applicability of 60-Day Rule to Price Group Stock Transactions.
Transactions in Price Group stock are subject to the 60-Day Rule except
for transactions effected through the ESPP, the exercise of employee
stock options granted by Price Group, and shares obtained through an
established dividend reinvestment program.
Gifts of Price Group stock, although subject to prior clearance, are
also not subject to this Rule.
Purchases through payroll deduction of Price Group stock in the ESPP are
not considered in determining the applicability of the 60-Day Rule to
market transactions in Price Group stock. See p. 4-18.
================================================================================
All employees (both Access Persons and Non-Access Persons) and
independent directors of Price Group must obtain prior clearance
of any transaction involving Price Group stock from the Office of
the Secretary of Price Group.
================================================================================
Initial Disclosure of Holdings of Price Group Stock. Each new employee
must report to the Secretary any shares of Price Group stock of which he
or she has beneficial ownership no later than 10 days after his or her
starting date of employment.
Dividend Reinvestment Plans for Price Group Stock. Purchases of Price
Group stock owned outside of the ESPP and effected through a dividend
reinvestment plan need not receive prior clearance if the Secretary's
office has been previously notified by the employee that he or she will
be participating in that plan. Reporting of transactions effected
through that plan need only be made quarterly, except in the case of
employees who are subject to Section 16 of the Securities Exchange Act
of 1934, who must report such transactions at least monthly.
Effectiveness of Prior Clearance. Prior clearance of transactions in
Price Group stock is effective for five (5) business days from and
including the date the clearance is granted, unless (i) advised to the
contrary by the Secretary prior to the proposed transaction, or (ii) the
person receiving the approval comes into possession of material,
non-public information concerning the firm. If the proposed transaction
in Price Group stock is not executed within this time period, a new
clearance must be obtained before the individual can execute the
proposed transaction.
Reporting of Disposition of Proposed Transaction. Covered persons must
use the form returned to them by the Secretary to notify the Secretary
of the disposition (whether the proposed transaction was effected or
not) of each transaction involving shares of Price Group stock owned
directly. The notice must be returned within two business days of the
trade's execution, or within seven business days of the date of prior
clearance if the trade is not executed.
Insider Reporting and Liability. Under current rules, certain officers,
directors and 10% stockholders of a publicly traded company ("Insiders")
are subject to the requirements of Section 16. Insiders include the
directors and certain managing directors of Price Group.
SEC Reporting. There are three reporting forms which insiders are
required to file with the SEC to report their purchase, sale and
transfer transactions in, and holdings of, Price Group stock. Although
the Secretary will provide assistance in complying with these
requirements as an accommodation to insiders, it remains the legal
responsibility of each insider to assure that the applicable reports are
filed in a timely manner.
o Form 3. The initial ownership report by an insider is required
to be filed on Form 3. This report must be filed within ten
days after a person becomes an insider (i.e., is elected as a
director or appointed as an executive officer) to report all
current holdings of Price Group stock. Following the election
or appointment of an insider, the Secretary will deliver to
the insider a Form 3 for appropriate signatures and will file
such Form with the SEC.
o Form 4. Any change in the insider's ownership of Price Group
stock must be reported on a Form 4 unless eligible for
deferred reporting on year-end Form 5. The Form 4 is due by
the 10th day following the end of the month in which the
ownership change occurred. Following receipt of the Notice of
Disposition of the proposed transaction, the Secretary will
deliver to the insider a Form 4, as applicable, for
appropriate signatures and will file such Form with the SEC.
o Form 5. Any transaction or holding which is exempt from
reporting on Form 4, such as option exercises, small purchases
of stock, gifts, etc. may be reported on a deferred basis on
Form 5 within 45 days after the end of the calendar year in
which the transaction occurred. No Form 5 is necessary if all
transactions and holdings were previously reported on Form 4.
Liability for Short-Swing Profits. Under federal securities laws,
profit realized by certain officers, as well as directors and 10%
stockholders of a company (including Price Group) as a result of
a purchase and sale (or sale and purchase) of stock of the
company within a period of less than six months must be returned
to the firm or its designated payee upon request.
Office of Thrift Supervision ("OTS") Reporting. TRPA and Price Group are
holding companies of T. Rowe Price Savings Bank, which is regulated by
the OTS. OTS regulations require the Directors and senior officers of
TRPA and Price Group to file reports regarding their personal holdings
of the stock of Price Group and of the stock of any non-affiliated bank,
savings bank, bank holding company, or savings and loan holding company.
Although the Bank's Compliance Officer will provide assistance in
complying with these requirements as an accommodation, it remains the
responsibility of each person to ensure that the required reports are
filed in a timely manner.
PRIOR CLEARANCE REQUIREMENTS (OTHER THAN PRICE GROUP STOCK) FOR ACCESS PERSONS.
All Access Persons must obtain prior clearance before directly or indirectly
initiating, recommending, or in any way participating in, the purchase or sale
of a security in which the Access Person has, or by reason of such transaction
may acquire, any beneficial interest or which he or she controls, unless
exempted below. Non-Access Persons are not required to obtain prior clearance
before engaging in any securities transactions, except for transactions in Price
Group stock.
================================================================================
All employees (both Access Persons and Non-Access Persons) and
independent directors of Price Group must obtain prior clearance
of any transaction involving Price Group stock from the Office of
the Secretary of Price Group.
================================================================================
Where required, prior clearance must be obtained regardless of whether the
transaction is effected through TRP Brokerage or through an unaffiliated
broker/dealer or other entity. Please note that the prior clearance procedures
do not check compliance with the 60-Day Rule (p. 4-18); you are responsible for
ensuring your compliance with this rule.
TRANSACTIONS (OTHER THAN IN PRICE GROUP STOCK) THAT ARE EXEMPT FROM PRIOR
CLEARANCE AND REPORTING. The following transactions are exempt from both the
prior clearance and reporting requirements:
Mutual Funds and Variable Insurance Products. The purchase or
redemption of shares of any open-end investment companies,
including the Price Funds, and variable insurance products,
except that any employee who serves as the president or executive
vice president of a Price Fund must report his or her beneficial
ownership or control of shares in that Fund to Baltimore
Legal/Compliance through electronic mail to Dottie Jones.
U.S. Government Obligations. Purchases or sales of direct
obligations of the U.S. Government.
Certain Commodity Futures Contracts. Purchases or sales of
commodity futures contracts for tangible goods (e.g., corn,
soybeans, wheat) if the transaction is regulated solely by the
Commodity Futures Trading Commission ("CFTC"). Futures contracts
for financial instruments, however, must receive prior clearance.
TRANSACTIONS (OTHER THAN PRICE GROUP STOCK) THAT ARE EXEMPT FROM PRIOR
CLEARANCE, BUT MUST BE REPORTED BY BOTH ACCESS PERSONS AND NON-ACCESS PERSONS.
Unit Investment Trusts. Purchases or sales of shares in unit
investment trusts, including such unit investment trusts as
DIAMONDS, SPYDER and Nasdaq-100 Index Tracking Stock ("QQQ").
Pro Rata Distributions. Purchases effected by the exercise
of rights issued pro rata to all holders of a class of
securities or the sale of rights so received.
Stock Splits and Similar Acquisitions. The acquisition of
additional shares of existing corporate holdings through stock
splits, stock dividends, exercise of rights, exchange or
conversion. Reporting of such transactions need only be made
quarterly.
Mandatory Tenders. Purchases and sales of securities pursuant
to a mandatory tender offer.
Spousal Employee-Sponsored Payroll Deduction Plans. Purchases by
an Access Person's spouse pursuant to an employee-sponsored
payroll deduction plan (e.g., a 401(k) plan or employee stock
purchase plan), provided Baltimore Legal/Compliance has been
previously notified by the Access Person that the spouse will be
participating in the payroll deduction plan. Reporting of such
transactions need only be made quarterly.
Exercise of Stock Option of Corporate Employer by Spouse.
Transactions involving the exercise by an Access Person's spouse
of a stock option issued by the corporation employing the spouse.
However, a subsequent sale of the stock obtained by means of the
exercise must receive prior clearance.
Dividend Reinvestment Plans. Purchases effected through an
established Dividend Reinvestment Plan ("DRP"). An Access
Person's purchase of share(s) of the issuer to initiate
participation in the DRP or an Access Person's purchase of shares
in addition to those purchased with dividends (a "Connected
Purchase") and any sale of shares from the DRP must receive prior
clearance.
Systematic Investment Plans. Purchases effected through a
systematic investment plan involving the automatic investment of
a set dollar amount on predetermined dates, provided Baltimore
Legal/Compliance has been previously notified by the Access
Person that he or she will be participating in the plan.
Reporting of Systematic Investment Plan transactions need only be
made quarterly. An Access Person's purchase of securities of the
issuer to initiate participation in the plan and any sale of
shares from such a plan must receive prior clearance.
Inheritances. The acquisition of securities through inheritance.
Gifts. The giving of or receipt of a security as a gift.
OTHER TRANSACTION REPORTING REQUIREMENTS. Any transaction that is subject to the
prior clearance requirements prior to execution on behalf of an Access Person,
including purchases in initial public offerings and private placement
transactions, must be reported. Although Non-Access Persons are not required to
receive prior clearance for securities transactions (other than Price Group
stock), they must report any transaction that would have been required to be
prior cleared by an Access Person.
PROCEDURES FOR OBTAINING PRIOR CLEARANCE (OTHER THAN PRICE GROUP STOCK) FOR
ACCESS PERSONS. Unless described as exempt from prior clearance above or subject
to an exemption granted by the Chairperson of the Ethics Committee, Access
Persons must receive prior clearance for all securities transactions. This
includes transactions in closed-end funds, including Exchange Traded Funds
("ETFs") and sector index funds that are closed-end funds. All Access Persons
should follow the procedures set forth below before engaging in the transactions
described.
Procedures For Obtaining Prior Clearance For Initial Public Offerings
("IPOs"):
Non-Investment Personnel. Access Persons who are not Investment
Personnel ("Non-Investment Personnel") may purchase securities
that are the subject of an IPO only if prior written approval has
been obtained from the Chairperson of the Ethics Committee or his
or her designee ("Designee"), which may include J. Gilner, N.
Morris, or A. Brooks. An IPO is an offering of securities
registered under the Securities Act of 1933 when the issuer of
the securities, immediately before the registration, was not
subject to certain reporting requirements of the Securities
Exchange Act of 1934.
In considering such a request for approval, the Chairperson or
his or her Designee will determine whether the proposed
transaction presents a conflict of interest with any of the
firm's clients or otherwise violates the Code. The Chairperson or
his or her Designee will also determine whether the following
conditions have been met:
1. The purchase is made through the Non-Investment
Personnel's regular broker;
2. The number of shares to be purchased is commensurate
with the normal size and activity of the Non-Investment
Personnel's account; and
3. The transaction otherwise meets the requirements of the
NASD's rules on free riding and withholding.
Non-Investment Personnel will not be permitted to purchase shares in an
IPO if any of the firm's clients are prohibited from doing so.
Therefore, Non-Investment Personnel must check with the Equity Trading
Desk the day the offering is priced before purchasing in the IPO. This
prohibition will remain in effect until the firm's clients have had the
opportunity to purchase in the secondary market once the underwriting is
completed -- commonly referred to as the aftermarket.
Investment Personnel. Investment Personnel may not purchase
securities in an IPO.
Non-Access Persons. Although Non-Access Persons are not required
to receive prior clearance before purchasing shares in an IPO,
any Non-Access Person who is a registered representative of
Investment Services is reminded that NASD rules may restrict his
or her ability to buy shares in a "hot issue," which is a new
issue that trades at a premium in the secondary market whenever
that trading commences.
Procedures For Obtaining Prior Clearance For Private Placements. Access
Persons may not invest in a private placement of securities, including
the purchase of limited partnership interests, unless prior written
approval has been obtained from the Chairperson of the Ethics Committee
or a Designee. In considering such a request for approval, the
Chairperson will determine whether the investment opportunity (private
placement) should be reserved for the firm's clients, and whether the
opportunity is being offered to the Access Person by virtue of his or
her position with the firm. The Chairperson will also secure, if
appropriate, the approval of the proposed transaction from the
chairperson of the applicable investment steering committee.
Continuing Obligation. An Access Person who has received
approval to invest in a private placement of securities and who,
at a later date, anticipates participating in the firm's
investment decision process regarding the purchase or sale of
securities of the issuer of that private placement on behalf of
any client, must immediately disclose his or her prior
investment in the private placement to the Chairperson of the
Ethics Committee and to the chairperson of the appropriate
investment steering committee.
Employees who are registered representatives of Investment Services are
reminded that NASD rules may restrict investment in a private placement
in certain circumstances.
Procedures For Obtaining Prior Clearance For All Other Securities
Transactions. Requests for prior clearance by Access Persons for all
other securities transactions requiring prior clearance may be made
orally, in writing, or by electronic mail (e-mail address "Personal
Trades," in the electronic mail address book) to the Equity Trading
Department, which will be responsible for processing and maintaining the
records of all such requests. Obtaining clearance by electronic mail is
strongly encouraged. All requests must include the name of the security,
the number of shares or amount of bond involved, whether a foreign
security is involved, and the nature of the transaction, i.e., whether
the transaction is a purchase, sale or short sale. Responses to all
requests will be made by the Trading Department documenting the request
and its approval/disapproval.
Requests will normally be processed on the same day; however, additional
time may be required for prior clearance of transactions in foreign
securities.
Effectiveness of Prior Clearance. Prior clearance of a securities
transaction is effective for three (3) business days from and including
the date the clearance is granted, regardless of the time of day when
clearance is granted. If the proposed securities transaction is not
executed within this time, a new clearance must be obtained
Reminder. If you are an Access Person and become the beneficial owner
of another's securities (e.g., by marriage to the owner
of the securities) or begin to direct trading of another's securities,
then transactions in those securities become subject to
the prior clearance requirements.
REASONS FOR DISALLOWING ANY PROPOSED TRANSACTION. A proposed securities
transaction will be disapproved by the Trading Department and/or the Chairperson
of the Ethics Committee, unless it is determined that an exception is
appropriate, if:
Pending Client Orders. Orders have been placed by any of the
Price Advisers to purchase or sell the security.
Purchases and Sales Within Seven (7) Calendar Days. The security
has been purchased or sold by any client of a Price Adviser within
seven calendar days immediately prior to the date of the proposed
transaction. For example, if a client transaction occurs on
Monday, an Access Person may not purchase or sell that security
until Tuesday of the following week. If all clients have
eliminated their holdings in a particular security, the seven-day
restriction is not applicable to an Access Person's transactions
in that security.
Approved Company Rating Changes. A change in the rating of an
approved company as reported in the firm's Daily Research News has
occurred within seven (7) calendar days immediately prior to the
date of the proposed transaction. Accordingly, trading would not
be permitted until the eighth (8) calendar day.
Securities Subject to Internal Trading Restrictions. The
security is limited or restricted by any of the Price Advisers
as to purchase or sale by Access Persons.
Requests for Waivers of Prior Clearance Denials. If an Access Person's request
for prior clearance has been denied, he or she may apply to the Chairperson of
the Ethics Committee for a waiver. All such requests must be in writing and must
fully describe the basis upon which the waiver is being requested. Waivers are
not routinely granted.
TRANSACTION CONFIRMATIONS AND PERIODIC ACCOUNT STATEMENTS. All Access Persons
and Non-Access Persons must request broker-dealers, investment advisers, banks,
or other financial institutions executing their transactions to send to the
attention of Compliance, Legal Department, T. Rowe Price, P.O. Box 17218,
Baltimore, Maryland 21297-1218 a duplicate confirmation with respect to each and
every reportable transaction, including Price Group stock, and a copy of all
periodic statements for all securities accounts in which the Access Person or
Non-Access Person is considered to have beneficial ownership and/or control (see
page 4-4 for a discussion of beneficial ownership and control concepts).
NOTIFICATION OF SECURITIES ACCOUNTS. All Access Persons and Non-Access Persons
must give notice by e-mail addressed to the Legal/Compliance mailbox before
opening or trading in a securities account with any broker, dealer, investment
adviser, bank, or other financial institution including TRP Brokerage.
New Employees. A new employee must give written notice to Baltimore
Legal/Compliance of any existing securities accounts maintained with any
broker, dealer, investment adviser, bank or other financial institution
within 10 days of the employee's joining the firm.
Employees do not have to report accounts at transfer agents or similar
entities if the only securities in those accounts are variable contracts
or mutual funds if these are the only types of securities that can be
held or traded in the accounts. If other securities can be held or
traded, the accounts must be reported. For example, if an employee has
an account at T. Rowe Price Services, Inc., a transfer agent, that holds
shares of a Price Fund, that account is not reportable. If, however, the
employee has a broker account it must be reported even if the only
securities currently held or traded in it are mutual funds.
Officers, Directors and Registered Representatives of Investment
Services. The NASD requires each associated person of T.
Rowe Price Investment Services, Inc. to:
o Obtain approval from Investment Services (request should be in
writing and be directed to Baltimore Legal/Compliance) before
opening or placing the initial trade in a securities account; and
o If the securities account is with a broker/dealer, provide the
broker/dealer with written notice of his or her association with
Investment Services.
Annual Statement by Access Persons. Each Access Person must also file
with the firm a statement of his or her accounts as of year-end in
January of the following year.
Reminder. If you become the beneficial owner of another's securities
(e.g., by marriage to the owner of the securities) or begin to direct
trading of another's securities, then the associated securities
accounts become subject to the account reporting requirements.
PROCEDURES FOR REPORTING TRANSACTIONS. The following requirements apply both
to Access Persons and Non-Access Persons:
Report Form. If the executing firm provides a confirmation or similar
statement directly to Baltimore Legal/Compliance, you do not need to
make a further report. All other transactions must be reported on the
form designated "T. Rowe Price Employee's Report of Securities
Transactions," a supply of which is available from Baltimore
Legal/Compliance or on the firm's Intranet under Corporate/Legal.
When Reports are Due. You must report a securities transaction within
ten (10) days after the trade date or within (10) days after the date on
which you first gain knowledge of the transaction (for example, a
bequest) if this is later. Reporting of transactions involving either
systematic investment plans or the purchase of securities by a spouse
pursuant to an employee-sponsored payroll deduction plan, however, may
be reported quarterly.
Reminder. If you become the beneficial owner of another's securities
(e.g., by marriage to the owner of the securities) or begin to direct
trading of another's securities, the transactions in these
securities become subject to the transaction reporting requirements.
TRANSACTION REPORTING REQUIREMENTS FOR THE INDEPENDENT DIRECTORS OF THE PRICE
FUNDS, THE INDEPENDENT DIRECTORS OF PRICE GROUP, AND THE INDEPENDENT DIRECTORS
OF THE SAVINGS BANK. The independent directors of the Price Funds are subject to
the same reporting requirements as Access Persons and Non-Access Persons except
that reports need only be filed quarterly. Specifically: (1) a report for each
securities transaction must be filed with Baltimore/Legal Compliance no later
than ten (10) days after the end of the calendar quarter in which the
transaction was effected; and (2) a report must be filed for each quarter,
regardless of whether there have been any reportable transactions.
Baltimore/Legal Compliance will send the independent directors of the Price
Funds a reminder letter and reporting form approximately ten days prior to the
end of each calendar quarter.
The independent directors of Price Group are not required to report their
personal securities transactions (other than transactions in Price Group stock)
as long as they do not obtain information about the Price Advisers' investment
research, recommendations, or transactions. However, the independent directors
of Price Group are reminded that changes to certain information reported by the
respective independent director in the Annual Questionnaire for Independent
Directors are required to be reported to Baltimore/Corporate Records (e.g.,
changes in holdings of stock of financial institutions or financial institution
holding companies).
The independent directors of the Savings Bank are not required to report their
personal securities transactions except as they may be requested from time to
time to do so by the Savings Bank in accordance with regulatory or examination
requirements.
MISCELLANEOUS RULES REGARDING PERSONAL SECURITIES TRANSACTIONS. These
rules vary in their applicability depending upon whether you
are an Access Person.
The following rules apply to all Access Persons and Non-Access Persons and,
where indicated, to the independent directors of Price Group and the Price
Funds.
Dealing with Clients. Access Persons, Non-Access Persons and the
independent directors of Price Group and the Price Funds may not,
directly or indirectly, sell to or purchase from a client any security.
Market transactions are not subject to this restriction. This
prohibition does not preclude the purchase or redemption of shares of
any mutual fund that is a client of any of the Price Advisers and does
not apply to transactions in a spousal employee-sponsored payroll
deduction plan or spousal employee-sponsored stock option plan.
Client Investment Partnerships.
Co-Investing. The independent directors of the Price Funds are
not permitted to co-invest in client investment partnerships of
Price Group or its affiliates, such as Strategic Partners,
Threshold, and Recovery.
Direct Investment. The independent directors of the Price
Funds are not permitted to invest as limited partners in
client investment partnerships of Price Group or its affiliates.
Investment Clubs. These restrictions vary depending upon the person's
status, as follows:
Non-Access Persons. A Non-Access Person may form or participate
in a stock or investment club without approval of the Chairperson
of the Ethics Committee. Only transactions in Price Group stock
are subject to prior clearance requirements. Club transactions
must be reported just as the Non-Access Person's individual
trades are reported.
Access Persons. An Access Person may not form or participate in a
stock or investment club unless prior written approval has been
obtained from the Chairperson of the Ethics Committee. All
transactions by such a stock or investment club in which an
Access Person has beneficial ownership or control are subject to
the same prior clearance and reporting requirements applicable to
an individual Access Person's trades. However, if the Access
Person has beneficial ownership solely by virtue of his or her
spouse's participation in the club and has no investment control
or input into decisions regarding the club's securities
transactions, he or she may request the waiver of prior clearance
requirements of the club's transactions (except for transactions
in Price Group stock) from the Chairperson of the Ethics
Committee as part of the approval process.
Margin Accounts. While margin accounts are discouraged, you may open and
maintain margin accounts for the purchase of securities provided such
accounts are with firms with which you maintain a regular securities
account relationship.
Trading Activity. You are discouraged from engaging in a pattern of
securities transactions which either:
o Is so excessively frequent as to potentially impact your ability to
carry out your assigned responsibilities, or
o Involves securities positions that are disproportionate to your net assets.
At the discretion of the Chairperson of the Ethics Committee,
written notification of excessive trading may be sent to you
and/or your supervisor if ten or more reportable trades occur in
your account(s) in a month, or if circumstances otherwise warrant
this action.
The following rules apply only to Access Persons:
Large Company Exemption. Although subject to prior clearance,
transactions involving securities in certain large companies, within the
parameters set by the Ethics Committee (the "Exempt List"), will be
approved under normal circumstances, as follows:
Transactions Involving Exempt List Securities. This exemption
applies to transactions involving no more than $20,000 or the
nearest round lot (even if the amount of the transaction
marginally exceeds $20,000) per security per seven (7) calendar
day period in securities of companies with market capitalizations
of $5 billion or more, unless the rating on the security as
reported in the firm's Daily Research News has been changed to a
1 or a 5 within the seven (7) calendar days immediately prior to
the date of the proposed transaction. If such a rating change has
occurred, the exemption is not available. The Exempt List may
also include issuers determined to have a sufficiently large
trading volume, as determined by the Ethics Committee.
Transactions Involving Options on Exempt List Securities. Access
Persons may not purchase uncovered put options or sell uncovered
call options unless otherwise permitted under the "Options and
Futures" discussion on p. 4-17. Otherwise, in the case of options
on an individual security on the Exempt List (if it has not had a
prohibited rating change), an Access Person may trade the greater
of 5 contracts or sufficient option contracts to control $20,000
in the underlying security; thus an Access Person may trade 5
contracts even if this permits the Access Person to control more
than $20,000 in the underlying security. Similarly, the Access
Person may trade more than 5 contracts as long as the number of
contracts does not permit him or her to control more than $20,000
in the underlying security. Options transactions on the stock of
Price Group are prohibited. See p. 4-6.
These parameters are subject to change by the Ethics Committee. An Access Person
should be aware that if prior clearance is granted for a specific number of
shares lower than the number requested, he or she may not be able to receive
permission to buy or sell additional shares of the issuer for the next seven (7)
calendar day under this exemption.
Exchange-Traded Index Options. Although subject to prior clearance, an
Access Person's transactions involving exchange-traded index options,
within the parameters set by the Ethics Committee, will be approved
under normal circumstances. Generally, an Access Person may trade the
greater of 5 contracts or sufficient contracts to control $20,000 in the
underlying securities; thus an Access Person may trade 5 contracts even
if this permits the Access Person to control more than $20,000 in the
underlying securities. Similarly, the Access Person may trade more than
5 contracts as long as the number of contracts does not permit him or
her to control more than $20,000 in the underlying security.
These parameters are subject to change by the Ethics Committee.
Client Limit Orders. The Equity Trading Desk may approve an Access
Person's proposed trade even if a limit order has been entered for a
client for the same security, if:
o The Access Person's trade will be entered as a market order; and
o The client's limit order is 10% or more away from the market at the
time of approval of the Access Person's trade.
Options and Futures. Please consult the specific section on
Exchange-Traded Index Options (p. 4-17) for transactions in those
options.
================================================================================
Before engaging in options and futures transactions, Access Persons
should understand the impact that the 60-Day Rule and intervening client
transactions may have upon their ability to close out a position with a
profit (see page 4-18).
================================================================================
Options and Futures on Securities and Indices Not Held by Clients
of the Price Advisers. There are no specific restrictions with
respect to the purchase, sale or writing of put or call options
or any other option or futures activity, such as multiple
writings, spreads and straddles, on securities of companies (and
options or futures on such securities) which are not held by any
of the Price Adviser clients. Options transactions in the stock
of Price Group, however, are not permitted. See p. 4-6.
Options on Securities of Companies Held by Price Advisers
Clients. With respect to options on securities of companies which
are held by any of Price Adviser's clients, it is the firm's
policy that an Access Person should not profit from a price
decline of a security owned by a client (other than an Index
account). Therefore, an Access Person may: (i) purchase call
options and sell covered call options and (ii) purchase covered
put options and sell put options. An Access Person may not
purchase uncovered put options or sell uncovered call options,
even if the issuer of the underlying securities is included on
the Exempt List, unless purchased in connection with other
options on the same security as part of a straddle, combination
or spread strategy which is designed to result in a profit to the
Access Person if the underlying security rises in or does not
change in value. The purchase, sale and exercise of options are
subject to the same restrictions as those set forth with respect
to securities, i.e., the option should be treated as if it were
the common stock itself.
Other Options and Futures Held by Price Advisers Clients. Any
other option or futures transaction with respect to domestic or
foreign securities held by any of the Price Advisers' clients
will be approved or disapproved on a case-by-case basis after due
consideration is given as to whether the proposed transaction or
series of transactions might appear to or actually create a
conflict with the interests of any of the Price Advisers'
clients. Such transactions include transactions in futures and
options on futures involving financial instruments regulated
solely by the CFTC.
Closing Positions. A transaction to close an options transaction
must also receive prior clearance. If an intervening client
transaction in the underlying security has occurred since the
position was opened, the Access Person may not receive prior
clearance to initiate a transaction to close out the position.
Short Sales. Short sales by Access Persons are subject to prior
clearance. In addition, Access Persons may not sell any security short
which is owned by any client of one of the Price Advisers. All short
sales are subject to the 60-Day Rule described below.
The 60-Day Rule. Access Persons are prohibited from profiting from the
purchase and sale or sale and purchase of the same (or equivalent)
securities within 60 calendar days. An "equivalent" security means any
option, warrant, convertible security, stock appreciation right, or
similar right with an exercise or conversion privilege at a price related
to the subject security, or similar securities with a value derived from
the value of the subject security. Thus, for example, the rule prohibits
options transactions on or short sales of a security within 60 days of
its purchase. In addition, the rule applies regardless of the Access
Person's other holdings of the same security or whether the Access Person
has split his or her holdings into tax lots. For example, if an Access
Person buys 100 shares of XYZ stock on March 1, 1998 and another 100
shares of XYZ stock on May 1, 2001, he or she may not sell any shares of
XYZ stock at a profit for 60 days following May 1, 2001. The 60-Day Rule
"clock" restarts each time the Access Person trades in that security.
Exemptions from the 60-Day Rule. The 60-Day Rule does not apply
to:
o any transaction by a Non-Access Person except for transactions in Price
Group stock not exempted below;
o any transaction exempt from prior clearance (e.g., exercise of
corporate stock option by Access Person spouse, systematic
investment plan; see p. 4-8);
o the purchase and sale or sale and purchase of exchange traded index
options;
o any transaction in Price Group stock effected through
the ESPP (the 60-Day Rule does apply to shares
transferred from the ESPP to a brokerage account;
generally, however, an employee remaining in the ESPP
may not transfer shares held less than 60 days out of
the ESPP); and
o the exercise of "company granted" Price Group stock options and the
subsequent sale of the derivative shares.
Prior clearance procedures do not check compliance with the
60-Day Rule when considering a trading request. Access Persons
are responsible for checking their compliance with this rule
before entering a trade.
Access Persons may request a waiver from the 60-Day Rule. Such
requests should be directed in writing to the Chairperson of the
Ethics Committee. These waivers are not routinely granted.
Investments in Non-Listed Securities Firms. Access Persons may not
purchase or sell the shares of a broker/dealer, underwriter or federally
registered investment adviser unless that entity is traded on an
exchange or listed as a Nasdaq stock or permission is given under the
Private Placement Procedures (see p. 4-11).
OWNERSHIP REPORTING REQUIREMENTS - ONE-HALF OF ONE PERCENT OWNERSHIP. If an
employee or an independent director of Price Group or an independent director of
the Price Funds owns more than 1/2 of 1% of the total outstanding shares of a
public or private company, he or she must immediately report in writing such
fact to Baltimore Legal/Compliance, providing the name of the company and the
total number of such company's shares beneficially owned.
DISCLOSURE OF PERSONAL SECURITIES HOLDINGS BY ACCESS PERSONS. Upon commencement
of employment, appointment or promotion (no later than 10 days after the
starting date), each Access Person must disclose in writing all current
securities holdings in which he or she is considered to have beneficial
ownership and control ("Securities Holdings Report") (see page 4-4 for
definition of the term Beneficial Owner) and reconfirm the information regarding
all of his or her securities accounts. The form to provide the Securities
Holding Report will be provided upon commencement of employment, appointment or
promotion and should be submitted to Baltimore Legal/Compliance. The form on
which to report securities accounts can be found on the firm's Intranet under
Corporate/Legal.
All Access Persons are also required to file a Personal Securities Report,
consisting of a Statement of Personal Securities Holdings and a Securities
Account Verification Form Report on an annual basis. The reports must be as of
year end and be filed with the firm in January of the following year.
CONFIDENTIALITY OF RECORDS. Price Group makes every effort to protect the
privacy of all persons and entities in connection with their Securities Holdings
Reports, Reports of Securities Transactions, and Reports of Securities Accounts.
SANCTIONS. Strict compliance with the provisions of this Statement is considered
a basic provision of employment or other association with Price Group and the
Price Funds. The Ethics Committee and Baltimore Legal/Compliance are primarily
responsible for administering this Statement. In fulfilling this function, the
Ethics Committee will institute such procedures as it deems reasonably necessary
to monitor each person's and entity's compliance with this Statement and to
otherwise prevent and detect violations.
Violations by Access Persons, Non-Access Persons and Directors of Price
Group. Upon discovering a material violation of this Statement by any
person or entity other than an independent director of a Price Fund, the
Ethics Committee will impose such sanctions as it deems appropriate and
as are approved by the Management Committee or the Board of Directors
including, inter alia, a letter of censure or suspension, a fine, a
suspension of trading privileges or termination of employment and/or
officership of the violator. In addition, the violator may be required
to surrender to Price Group, or to the party or parties it may
designate, any profit realized from any transaction that is in violation
of this Statement. All material violations of this Statement shall be
reported to the Board of Directors of Price Group and to the Board of
Directors of any Price Fund with respect to whose securities such
violations may have been involved.
Violations by Independent Directors of Price Funds. Upon discovering a
material violation of this Statement by an independent director of a
Price Fund, the Ethics Committee shall report such violation to the
Board on which the director serves. The Price Fund Boards will impose
such sanctions as they deem appropriate.
Violations by Baltimore Employees of TRPI, TRFAM or TRPGIS. Upon
discovering a material violation of this Statement by a Baltimore-based
employee of TRPI, TRFAM or TRPGIS, the Ethics Committee shall report
such violation to the Board of Directors of TRPI, TRFAM or TRPGIS, as
appropriate. A material violation by a Baltimore-based employee of TRPI
shall also be reported to the Board of Directors of any TRPI Fund with
respect to whose securities such violations may have been involved.
May, 2001