-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, QYNPwQPgCNyGy4QRaZ4aNlE73bMD0S8HrA7F7TQK8/LwnzXIa1DAbwi82rGyiyb4 vcnUvzymg3Hq/k1Bqjo7+A== 0000950109-95-000242.txt : 19950515 0000950109-95-000242.hdr.sgml : 19950515 ACCESSION NUMBER: 0000950109-95-000242 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950202 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE SPECTRUM FUND INC CENTRAL INDEX KEY: 0000808303 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04998 FILM NUMBER: 95504886 BUSINESS ADDRESS: STREET 1: 100 E PRATT ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 3015472000 FORMER COMPANY: FORMER CONFORMED NAME: PRICE T ROWE OMNI TRUST DATE OF NAME CHANGE: 19870726 N-30D 1 T. ROWE PRICE/SPECTRUM FUND - ------------------------------------------------------------------------------- Fellow Shareholders - ------------------------------------------------------------------------------- There were few safe havens for investors in 1994. In the U.S. both stocks and bonds suffered from the effects of rising interest rates, shown below. Among fixed-income investments, money market securities were about the only source of positive returns. On the stock side, the notable exceptions to lackluster or negative results were technology stocks and some natural resource issues. The equity and bond pictures were more mixed outside the U.S., but were generally disappointing. - ------------------------------------------------------------------------------- Interest Rate Levels - ------------------------------------------------------------------------------- [CHART APPEARS HERE] T. Rowe Price Spectrum Income Fund - ---------------------------------- Interest Rate Levels: A three line chart showing yields on 90-day Treasury bills, 5-year Treasury Notes, and 30-year Treasury bonds from 12/31/93 to 12/31/94. A series of shocks in the final quarter reversed the previous quarter's encouraging progress in both the stock and bond markets. First, in early November, the Federal Reserve continued its efforts to preempt a rise in inflation by announcing its sixth and largest increase this year in the target for the key federal funds rate. Next, ripple effects from the bankruptcy of Orange County, California, disrupted the fixed-income markets far beyond the sphere of California municipal securities. Finally, Mexico's dramatic devaluation of the peso torpedoed Latin American investments, which had been enjoying tremendous worldwide popularity. - -------------------------------------------------------------------------------- Spectrum Growth Fund - -------------------------------------------------------------------------------- Repeating the overall market pattern, your Fund's excellent third quarter was basically wiped out by negative results in the final three months. For the year as a whole, the Fund provided a positive but modest return that was about even with the 1.3% gain of the overall U.S. market as represented by the unmanaged Standard & Poor's 500 Stock Index. While we were pleased that your Fund surpassed its competitive benchmark index for both the quarter and the year, as shown below, we were not happy with such dull performance. - ------------------------------------------------------------------------------- Performance Comparison - -------------------------------------------------------------------------------
Periods Ended 12/31/94 3 Months 12 Months ---------------------- Spectrum Growth Fund -1.5% 1.4% Lipper Growth & Income Fund Index* -1.9 -0.7
- -------------------------------------------------------------------------------- * Based on the 30 largest growth & income funds. During the year, we slightly reduced Spectrum Growth's weighting in underlying funds with a "value" orientation, namely the Equity Income and Growth & Income Funds. In light of the above-market return of the Equity Income Fund for 1994 (up 4.5%), this move may have cost us a bit in performance. Nevertheless, we continue to expect growth stocks to become the new market leaders as the economy gradually slows from its vigorous pace and the consistent earnings gains of growth companies attract investors. Accordingly, we increased our holdings of both large- and small-cap growth stocks as represented by the Growth Stock and New Horizons Funds, respectively. The Growth Stock Fund was our largest weighting (23%) at year-end. To take advantage of the improving earnings of natural resource stocks, which typically do well in the later stages of economic cycles, we raised our exposure to the New Era Fund during the year before paring it slightly in the last quarter. This Fund's 5.2% return for 1994 contributed positively to Spectrum Growth's performance. Reflecting the indifferent returns of most foreign stock markets, our significant exposure to foreign stocks was largely a neutral influence on Fund results until the fourth quarter's Mexican currency debacle initiated a downward spiral. Thus, our substantial weighting (25%) in foreign stocks, most of which reflects our International Stock Fund holding, was a negative contributor for the year. - ------------------------------------------------------------------------------- Security Diversification - ------------------------------------------------------------------------------- [PIE CHART APPEARS HERE] Spectrum Growwth Fund - Pie Chart
Money Domestic Internation Markets Stocks Stocks Bonds Total 12/31/94 8 65 25 2 100
We are stalwart in our belief that, over time, international stocks will provide attractive returns as well as an excellent source of diversification for our U.S.-dominated portfolio. Therefore, we are maintaining our significant exposure in this area. For reasons mentioned, we also feel confident that our tilt toward growth stocks will pay off in the coming months. - ------------------------------------------------------------------------------- Spectrum Income Fund - ------------------------------------------------------------------------------- For 1994, your Fund fared better than the overall U.S. bond market's return of -2.9% as measured by the broad-based Lehman Brothers Aggregate Bond Index. In addition, Spectrum Income Fund consistently outperformed the average fund in its Lipper category, as shown below. Nevertheless, the Fund was not immune to the terrible bond market environment; favorable returns on our investment in the Prime Reserve and Equity Income Funds (together totaling 20% of net assets) reduced, but were unable to fully offset, declines in other areas. We realize that your Fund's good comparative results are small comfort when absolute returns were, in fact, negative. - ------------------------------------------------------------------------------- Performance Comparison - -------------------------------------------------------------------------------
Periods Ended 12/31/94 3 Months 12 Months ---------------------- Spectrum Income Fund -0.43% -1.94% Lipper Flexible Income Funds Average* -0.95 -3.69
- -------------------------------------------------------------------------------- * Composed of income-oriented funds that invest in stocks and bonds. During the second half of 1994, we increased our weighting in mortgage- backed securities and other longer-term, high-grade bonds primarily by raising our commitments to the GNMA and New Income Funds. This strategy reflected our expectation that longer-term interest rates would not go much higher and would possibly decline somewhat in the coming months. In this event, the high coupon income generated by these portfolios, possibly enhanced by some appreciation, should provide solid returns. The results we hoped for were not realized in the fourth quarter, as the Fed's continued tightening depressed bond returns. Nevertheless, our forecast and our emphasis on these securities are unchanged. One move we made in the first half of the year--a small increase in our investment in the High Yield Bond Fund--hurt us as U.S. rates rose and emerging-country bonds collapsed. We have trimmed this allocation, but still maintain 17% of net assets in lower-rated bonds, which we believe will perform well as long as the U.S. economy remains healthy. We continued to reduce our exposure to high-quality foreign bonds, represented primarily by the International Bond Fund. As we discussed in our previous report, economies overseas are recovering from their recent 2 slumps, and we do not see much potential for further rate declines. In addition, higher U.S. interest rates may help strengthen the dollar versus other currencies, which would reduce returns on foreign bonds for U.S. investors. - ------------------------------------------------------------------------------- Security Diversification - ------------------------------------------------------------------------------- [PIE CHART APPEARS HERE] SPECTRUM INCOME FUND GRID - ANNUAL Ending December 31, 1994 ---------------------------------------------------------------- Security Diversification (Pie Chart) High-Grade Bonds 46% Money Markets 12% High-Yield Bonds 17% International Bonds 11% Stocks 14%
Spectrum Income Fund enjoys unusually wide diversification for an income fund, the benefits of which are evident in the Fund's performance versus its benchmarks. To be sure, there are times when holdings in a particular sector reduce overall returns. But it is important to remember that attempts to "time" investments to be exclusively in the right areas at the right time are generally futile; your Fund's broad reach virtually assures that it will benefit from market sectors, including equities, whenever they are performing well. OUTLOOK The U.S. economy should continue to perform reasonably well in 1995, with good corporate earnings and dividend growth, and we expect overseas economies to accelerate when it becomes clearer that U.S. interest rates have stopped rising. In the near term, we expect a mild acceleration in inflation to result in a small rise in rates, but much less than in 1994. Consequently, we look for positive but not spectacular progress in the equity markets and a return to positive fixed-income returns. Respectfully submitted, /s/ Peter Van Dyke Peter Van Dyke President and Chairman of the Investment Advisory Committee January 23, 1995 3 - -------------------------------------------------------------------------------- Spectrum Growth Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Key Statistics - --------------------------------------------------------------------------------
Change in Price Per Share Periods Ended 12/31/94 - ----------------------------------------------------------------- 3 Months (From $12.22 to $11.13) $-1.09 12 Months (From $11.87 to $11.13) -0.74 Dividend Per Share (12 months) 0.17 - ----------------------------------------------------------------- Capital Gains Per Share (12 months) 0.73 - -----------------------------------------------------------------
- ------------------------------------------------------------------------------- Ten Largest Holdings - ------------------------------------------------------------------------------- Of the combined underlying funds at December 31, 1994
Percent of Company Net Assets - ------------------------------------------- ---------- Atlantic Richfield 1.0 % Royal Dutch Petroleum 0.8 Viacom 0.8 GE 0.8 Schlumberger 0.7 Mobil 0.7 CUC International 0.7 Paychex 0.6 Wal-Mart 0.6 Texaco 0.5 - ---------------------------------------------------------- Total 7.2 %
- ------------------------------------------------------------------------------- Allocations - -------------------------------------------------------------------------------
Minimum- Underlying Fund Maximum 12/31/94 - ----------------------------------------------------------- Prime Reserve 0-25% 0.0% Equity Income 5-20 11.0 Growth & Income 5-20 13.0 Growth Stock 15-30 23.0 New Era 10-25 14.0 International Stock 5-20 20.0 New Horizons 10-25 19.0
- ------------------------------------------------------------------------------- Spectrum Income Fund - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Key Statistics - -------------------------------------------------------------------------------
Dividend Yield* Periods Ended 12/31/94 - ------------------------------------------------------------- 3 Months 6.77% 12 Months 6.65 Dividend Per Share - ------------------------------------------------------------- 3 Months $ 0.17 12 Months 0.69 Capital Gains Per Share (12 months) 0.10 - ------------------------------------------------------------- Change in Price Per Share - ------------------------------------------------------------- 3 Months (From $10.43 to $10.11) $-0.32 12 Months (From $11.11 to $10.11) -1.00 Weighted Average Quality** 2.5*** - ------------------------------------------------------------- Weighted Average Maturity 7.9 yrs.***
- -------------------------------------------------------------------------------- * Dividends earned and reinvested for the periods indicated are annualized and divided by the average daily net asset values per share for the same period. ** On a scale of 1 to 10, with Grade 1 representing highest quality. *** Excludes the Equity Income Fund. - -------------------------------------------------------------------------------- Allocations - --------------------------------------------------------------------------------
Minimum- Underlying Fund Maximum 12/31/94 - ---------------------------------------------------------- Prime Reserve 5-30% 5.0% Short-Term Bond 0-15 3.0 GNMA 5-20 17.0 New Income 15-30 26.0 High Yield 10-25 20.0 International Bond 5-20 14.0 Equity Income 10-25 15.0
- -------------------------------------------------------------------------------- Income return and principal value represent past performance and will vary. Shares may be worth more or less at redemption than at original purchase. 4 - ------------------------------------------------------------------------------- Spectrum Growth Fund - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Fiscal-Year Performance Comparison - ------------------------------------------------------------------------------- [GRAPH APPEARS HERE] Fund Name: Spectrum Growth Fiscal-Year Performance Comparison: A two-line chart comparing the growth in an initial $10,000 investment in the Fund with the same investment in the S&P 500 Index starting on 6/30/90 and ending on 12/31/94. - ------------------------------------------------------------------------------- Fiscal-Year Performance - -------------------------------------------------------------------------------
Periods Ended December 31, 1994 - ------------------------------------------------------- 1 Year 1.40% Since Inception (6/29/90)* 10.00%
- -------------------------------------------------------------------------------- * Average Annual Compound Total Return - ------------------------------------------------------------------------------- Spectrum Income Fund - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Fiscal-Year Performance Comparison - ------------------------------------------------------------------------------- [GRAPH APPEARS HERE] Fund Name: Spectrum Income Fiscal-Year Performance Comparison: A two-line chart comparing the growth in an initial $10,000 investment in the Fund with the same investment in the Salomon Brothers Broad Investment-Grade Index starting on 6/30/90 and ending on 12/31/94. - ------------------------------------------------------------------------------- Fiscal-Year Performance - -------------------------------------------------------------------------------
Periods Ended December 31, 1994 - ------------------------------------------------------- 1 Year -1.94% Since Inception (6/29/90)* 8.75%
- -------------------------------------------------------------------------------- * Average Annual Compound Total Return Income return and principal value represent past performance and will vary. Shares may be worth more or less at redemption than at original purchase. 5 - ------------------------------------------------------------------------------- Investment Record T. Rowe Price Spectrum Funds - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Spectrum Growth Fund -- Per-Share Data - ------------------------------------------------------------------------------- The table below shows the investment record of one share of the T. Rowe Price Spectrum Growth Fund, purchased at the initial offering price of $10.00, for the period 6/29/90 through 12/31/94. Over this time stock prices in general have risen. The results shown should not be considered a representation of the dividend income or capital gain or loss which may be realized from an investment made in the Fund today.
With Capital Gains and Income Dividends ----------------------------------------- Taken in Cash Reinvested in Additional Shares Annual Total Return ----------------------------------- -------------------------------------- On Investment Periods Net Capital Capital % Change Ended Asset Gain Income Gain Income Value of --------------------- 12/31 Value Distributions/1/ Dividend Distributions Dividend Investment Fund S&P 500 ------- ------ ---------------- -------- ------------- -------- ---------- ------ --------- 1990/2/ $ 8.52 $0.28 $0.19 $0.28 $0.19 $ 8.99 -10.1% 3.4% 1991 10.53 0.32 0.21 0.33 0.22 11.68 29.9 30.3 1992 10.54 0.55 0.20 0.59 0.22 12.52 7.2 7.6 1993 11.87 0.72 0.16 0.86 0.19 15.15 21.0 10.1 1994 11.13 0.73 0.17 0.93 0.22 15.36 1.4 1.3 ------------------------------------------------------------------------------------------------------------------- Total $2.60 $0.93 $2.99 $1.04 -------------------------------------------------------------------------------------------------------------------
/1/ Includes short-term capital gains of $0.06 in 1991; $0.02 in 1992; $0.08 in 1993; and $0.09 in 1994 which are taxable to shareholders at ordinary income rates. /2/ From inception 6/29/90 to 12/31/90. - ------------------------------------------------------------------------------- Spectrum Income Fund -- Per-Share Data - ------------------------------------------------------------------------------- The table below shows the investment record of one share of the T. Rowe Price Spectrum Income Fund, purchased at the initial offering price of $10.00, for the period 6/29/90 through 12/31/94. The results shown should not be considered a representation of the dividend income or capital gain or loss which may be realized from an investment made in the Fund today.
Adjusted to Reflect Reinvestment -------------------------------- Income Cumulative Dollars Annual Percentage Return Periods Net Dividend ---------------------------- --------------------------------------- Ended Asset Taken in Income Value of Income Change in Total 12/31 Value Cash Dividend Investment/2/ Return Net Asset Value/2/ Return/2/ ------- ------ -------- -------- -------------- ------ ------------------ --------- 1990/1/ $ 9.77 $0.44 $0.45 $10.27 4.5% -1.8% 2.7% 1991 10.73 0.83 1.44 12.28 9.2 10.4 19.6 1992 10.70 0.76 2.35 13.24 7.3 0.5 7.8 1993 11.11 0.69 3.39 14.88 6.8 5.6 12.4 1994 10.11 0.69 4.00 14.59 6.2 -8.1 -1.9 ---------------------------------------------------------------------------------------------------------------- Total $3.41 ----------------------------------------------------------------------------------------------------------------
/1/ From inception 6/29/90 to 12/31/90. /2/ Also reflects reinvestment of $0.02 long-term capital gain and $0.03 short-term capital gain distributions in 1990; $0.03 long-term capital gain and $0.03 short-term capital gain distributions in 1991; $0.05 long-term capital gain and $0.03 short-term capital gain distributions in 1992; $0.11 long-term capital gain and $0.08 short-term capital gain distributions in 1993; and $0.05 long-term capital gain and $0.05 short-term capital gain distributions in 1994. 6 - ------------------------------------------------------------------------------- Statement of Net Assets (Value in thousands) T. Rowe Price Spectrum Funds / December 31, 1994 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Growth Fund Investments - -------------------------------------------------------------------------------
Value -------- 10,686,793 shs. T. Rowe Price Growth Stock Fund............................... $200,377 15,395,063 T. Rowe Price International Stock Fund......................... 174,272 11,472,535 T. Rowe Price New Horizons Fund............................... 169,335 6,065,349 T. Rowe Price New Era Fund............ 122,217 7,238,105 T. Rowe Price Growth & Income Fund............................... 113,132 5,986,248 T. Rowe Price Equity Income Fund............................... 95,660 339,018 T. Rowe Price Prime Reserve Fund............................... 339 - ------------------------------------------------------------------------ TOTAL INVESTMENTS -- 99.5% OF NET ASSETS (COST $873,794) 875,332 - ------------------------------------------------------------------------ Other Assets Less Liabilities 4,034 NET ASSETS CONSISTING OF: Accumulated realized gains/ losses -- net of distributions...... $ 4,074 Net unrealized gain..................... 1,538 Paid-in-capital applicable to 78,990,570 shares of $0.01 par value capital stock outstanding; 1,000,000,000 shares of Spectrum authorized.......................... 873,754 -------- NET ASSETS $879,366 ======== NET ASSET VALUE PER SHARE $11.13 ======
- ------------------------------------------------------------------------------- Income Fund Investments - -------------------------------------------------------------------------------
Value -------- 19,011,783 shs. T. Rowe Price New Income Fund............................... $159,509 16,182,707 T. Rowe Price High Yield Fund............................... 125,416 11,914,883 T. Rowe Price GNMA Fund............... 105,804 5,832,385 T. Rowe Price Equity Income Fund............................... 93,201 9,278,662 T. Rowe Price International Bond Fund.......................... 86,663 31,272,955 T. Rowe Price Prime Reserve Fund............................... 31,273 4,177,477 T. Rowe Price Short-Term Bond Fund............................... 19,342 - ------------------------------------------------------------------------ TOTAL INVESTMENTS -- 99.4% OF NET ASSETS (COST $659,542) 621,208 - ------------------------------------------------------------------------ Other Assets Less Liabilities 3,732 NET ASSETS CONSISTING OF: Accumulated realized gains/ losses -- net of distributions $ 1,316 Net unrealized loss..................... (38,334) Paid-in-capital applicable to 61,807,446 shares of $0.01 par value capital stock outstanding; 1,000,000,000 shares of Spectrum authorized.......................... 661,958 -------- NET ASSETS $624,940 ======== NET ASSET VALUE PER SHARE $10.11 ====== - ------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 7 - ------------------------------------------------------------------------------- Statement of Operations - ------------------------------------------------------------------------------- T. Rowe Price Spectrum Funds / Year Ended December 31, 1994
Growth Income Fund Fund --------- -------- (Amounts in thousands) INVESTMENT INCOME Income distributions from Underlying Funds..................................... $ 12,230 $ 39,951 -------- -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Sale of Underlying Funds................................................... 5,394 (230) Capital gain distributions from Underlying Funds........................... 52,394 7,518 -------- -------- Net realized gain.......................................................... 57,788 7,288 Change in net unrealized gain or loss.......................................... (59,702) (59,602) -------- -------- Net realized and unrealized loss............................................... (1,914) (52,314) -------- -------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 10,316 $(12,363) ======== ========
- -------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements. 8 - ------------------------------------------------------------------------------- Statement of Changes in Net Assets - ------------------------------------------------------------------------------- T. Rowe Price Spectrum Funds
Growth Fund Income Fund ------------------------- ------------------------ Year Ended December 31, Year Ended December 31, 1994 1993 1994 1993 ----------- --------- --------- -------- (Amounts in thousands) INCREASE (DECREASE) IN NET ASSETS FROM Operations Income distributions................................. $ 12,230 $ 7,197 $ 39,951 $ 30,918 Net realized gain.................................... 57,788 33,587 7,288 10,294 Change in net unrealized gain or loss................ (59,702) 50,137 (59,602) 15,013 --------- -------- -------- -------- Increase (decrease) in net assets from operations.... 10,316 90,921 (12,363) 56,225 --------- -------- -------- -------- Distributions to shareholders Net investment income................................ (12,230) (7,015) (39,951) (31,008) Net realized gain.................................... (53,228) (33,219) (6,247) (9,974) --------- -------- -------- -------- Decrease in net assets from distributions............ (65,458) (40,234) (46,198) (40,982) --------- -------- -------- -------- Capital share transactions/1/ Shares sold.......................................... 412,180 227,185 268,102 291,924 Distributions reinvested............................. 62,074 39,608 40,313 36,129 Shares redeemed...................................... (124,622) (87,738) (212,845) (131,800) --------- -------- -------- -------- Increase in net assets from capital share transactions 349,632 179,055 95,570 196,253 --------- -------- -------- -------- Increase in net assets................................... 294,490 229,742 37,009 211,496 NET ASSETS Beginning of year.................................... 584,876 355,134 587,931 376,435 --------- -------- -------- -------- End of year.......................................... $ 879,366 $584,876 $624,940 $587,931 ========= ======== ======== ======== - ----------------------------------------------------------------------------------------------------------------------- /1/Capital share transactions (number of shares) Shares sold.......................................... 34,623 19,948 25,117 26,244 Distributions reinvested............................. 5,613 3,343 3,858 3,245 Shares redeemed...................................... (10,518) (7,711) (20,072) (11,772) --------- -------- -------- -------- Increase in capital shares outstanding............... 29,718 15,580 8,903 17,717 ========= ======== ======== ======== - -----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 9 - ------------------------------------------------------------------------------- Notes to Financial Statements - ------------------------------------------------------------------------------- T. Rowe Price Spectrum Funds / December 31, 1994 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES T. Rowe Price Spectrum Fund, Inc. (Spectrum) is registered under the Investment Company Act of 1940. Spectrum Growth Fund (the Growth Fund) and Spectrum Income Fund (the Income Fund), non-diversified, open-end management investment companies, are the two portfolios established by Spectrum. The Growth Fund and Income Fund invest in other mutual funds (the Underlying Funds) sponsored and managed by T. Rowe Price Associates, Inc. A) Security valuation - Investments in the Underlying Funds are valued at the closing net asset value per share of each Underlying Fund on the day of valuation. B) Other - Income is recorded on the accrual basis. Distributions from the Underlying Funds and distributions to Spectrum's shareholders are recorded on the ex-dividend date. Purchases and sales of the Underlying Funds are accounted for on the trade date. Realized gains and losses are reported on an identified cost basis. Capital gain distributions are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. NOTE 2 - UNDERLYING FUND TRANSACTIONS Purchases and sales of the Underlying Funds for the year ended December 31, 1994, were as follows:
Growth Income Fund Fund -------- -------- (Amounts in thousands) Purchases $503,361 $235,898 Sales 158,060 143,497
NOTE 3 - FEDERAL INCOME TAXES No provision for federal income taxes is required since each Fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. At December 31, 1994, the aggregate cost of the Underlying Funds held by the Growth Fund and Income Fund for federal income tax and financial reporting purposes was $873,794,000 and $659,542,000, respectively. Net unrealized gain or loss of the Underlying Funds was as follows:
Growth Income Fund Fund -------- -------- (Amounts in thousands) Appreciated Funds $ 14,238 $ 2,332 Depreciated Funds (12,700) (40,666) -------- -------- Net Unrealized Gain (Loss) $ 1,538 $(38,334) ======== ========
NOTE 4 - INVESTMENT MANAGER The Growth Fund and Income Fund are managed by T. Rowe Price Associates, Inc. (the Manager). Each Fund operates at a zero expense ratio by virtue of a Special Servicing Agreement (the Agreement) between and among Spectrum, the Underlying Funds, the Manager and T. Rowe Price Services, Inc. The Agreement provides that each Underlying Fund will bear expenses associated with the operation of Spectrum in proportion to the average daily value of its shares owned by Spectrum. 10 - ------------------------------------------------------------------------------- Financial Highlights - ------------------------------------------------------------------------------- T. Rowe Price Spectrum Funds
For a share outstanding throughout each period -------------------------------------------------- June 29, 1990 Year Ended December 31, (Commencement of ------------------------------------------ Operations) to 1994 1993 1992 1991 December 31, 1990 - ------------------------------------------------------------------------------------------------------------------------- Spectrum Growth Fund NET ASSET VALUE, BEGINNING OF PERIOD........................... $ 11.87 $ 10.54 $ 10.53 $ 8.52 $ 10.00 ------- ------- ------- ------- ------ Investment Activities Income distributions from Underlying Funds............................ 0.17 0.16 0.20 0.21 0.20 Net realized and unrealized gain (loss)................................. (0.01) 2.05 0.56 2.33 (1.21) ------- ------- ------- ------- ------ Total from Investment Activities.............. 0.16 2.21 0.76 2.54 (1.01) ------- ------- ------- ------- ------ Distributions Income........................................ (0.17) (0.16) (0.20) (0.21) (0.19) Net realized gain............................. (0.73) (0.72) (0.55) (0.32) (0.28) ------- ------- ------- ------- ------ Total Distributions........................... (0.90) (0.88) (0.75) (0.53) (0.47) ------- ------- ------- ------- ------ NET ASSET VALUE, END OF PERIOD.................... $ 11.13 $ 11.87 $ 10.54 $ 10.53 $ 8.52 ======= ======= ======= ======= ====== - ----------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Total Return...................................... 1.40% 21.0% 7.2% 29.9% (10.1)% Ratio of Expenses to Average Net Assets........... 0.00% 0.00% 0.00% 0.00% 0.00%+ Ratio of Net Investment Income to Average Net Assets............................ 1.60% 1.57% 2.15% 2.77% 4.50%+ Portfolio Turnover Rate........................... 20.7% 7.0% 7.9% 14.6% 33.4%+ Net Assets, End of Period (in thousands)................................ $879,366 $584,876 $355,134 $148,661 $35,387 - -----------------------------------------------------------------------------------------------------------------------
+ Annualized. 11 - ------------------------------------------------------------------------------- Financial Highlights (cont.) - ------------------------------------------------------------------------------- T. Rowe Price Spectrum Funds
For a share outstanding throughout each period --------------------------------------------------- June 29, 1990 Year Ended December 31, (Commencement of ---------------------------------------------------------- Operations) to 1994 1993 1992 1991 December 31, 1990 ------------------------------------------------------------------------------- Spectrum Income Fund NET ASSET VALUE, BEGINNING OF PERIOD...................... $ 11.11 $ 10.70 $ 10.73 $ 9.77 $ 10.00 ------- ------- ------- ------- ------ Investment Activities Income distributions from Underlying Funds ...................... 0.69 0.69 0.76 0.82 0.44 Net realized and unrealized gain (loss)............................ (0.90) 0.60 0.05 1.03 (0.18) ------- ------- ------- ------- ------ Total from Investment Activities............. (0.21) 1.29 0.81 1.85 (0.26) ------- ------- ------- ------- ------ Distributions Income................................... (0.69) (0.69) (0.76) (0.83) (0.44) Net realized gain........................ (0.10) (0.19) (0.08) (0.06) (0.05) ------- ------- ------- ------- ------ Total Distributions.......................... (0.79) (0.88) (0.84) (0.89) (0.49) ------- ------- ------- ------- ------ NET ASSET VALUE, END OF PERIOD............... $ 10.11 $ 11.11 $ 10.70 $ 10.73 $ 9.77 ======= ======= ======= ======= ====== - ------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Total Return................................. (1.9)% 12.4% 7.8% 19.6% 2.7% Ratio of Expenses to Average Net Assets...... 0.00% 0.00% 0.00% 0.00% 0.00%+ Ratio of Net Investment Income to Average Net Assets....................... 6.48% 6.19% 7.10% 8.03% 9.58%+ Portfolio Turnover Rate...................... 23.1% 14.4% 14.2% 18.8% 36.9%+ Net Assets, End of Period (in thousands)........................... $624,940 $587,931 $376,435 $147,859 $40,082 - -------------------------------------------------------------------------------------------------------------------------------
+ Annualized. 12 - ------------------------------------------------------------------------------- Report of Independent Accountants - ------------------------------------------------------------------------------- To the Board of Directors and Shareholders of T. Rowe Price Spectrum Fund, Inc. In our opinion, the accompanying statements of net assets and the related statements of operations and of changes in net assets and the selected per share data and information (which appears under the heading "Financial Highlights") present fairly, in all material respects, the financial position of Spectrum Growth Fund and Spectrum Income Fund (the two portfolios constituting T. Rowe Price Spectrum Fund, Inc.) at December 31, 1994, and the results of each of their operations, the changes in each of their net assets and the selected per share data and information for each of the fiscal periods presented, in conformity with generally accepted accounting principles. These financial statements and selected per share data and information (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Baltimore, Maryland January 19, 1995 13 - ------------------------------------------------------------------------------- Shareholder Services - ------------------------------------------------------------------------------- To help shareholders monitor their current investments and make decisions that accurately reflect their financial goals, T. Rowe Price offers a wide variety of information and services--at no extra cost. KNOWLEDGEABLE SERVICE REPRESENTATIVES BY PHONE--Shareholder service representatives are available from 8:00 a.m. to 10:00 p.m., Monday - Friday, and weekends from 9:00 a.m. to 5:00 p.m., ET. Call 1-800-225-5132 to speak directly with a representative who will be able to assist you with your accounts. IN PERSON--Visit one of our investor center locations to meet with a representative who will be able to assist you with your accounts. While there, you can drop off applications or obtain prospectuses and other literature. AUTOMATED 24-HOUR SERVICES Tele*Access/(R)/ (1-800-638-2587) provides information such as account balance, date and amount of your last transaction, latest dividend payment, and fund prices and yields. Additionally, you have the ability to request prospectuses, statements, account and tax forms; reorder checks; and initiate purchase, redemption, and exchange orders for identically registered accounts. PC*Access/(R)/ provides the same information as Tele*Access, but on a personal computer via dial-up modem. ACCOUNT SERVICES Checking--Write checks for $500 or more on any money market and most bond fund accounts. Automatic Investing--Build your account over time by investing directly from your bank account or paycheck with Automatic Asset Builder. Additionally, Automatic Exchange enables you to set up systematic investments from one fund account into another, such as from a money fund into a stock fund. A low, $50 minimum makes it easy to get started. Automatic Withdrawal--If you need money from your fund account on a regular basis, you can establish scheduled, automatic redemptions. Dividend and Capital Gains Payment Options--Reinvest all or some of your distributions, or take them in cash. We give you maximum flexibility and convenience. INVESTMENT INFORMATION Combined Statement--A comprehensive overview of your T. Rowe Price accounts. The summary page gives your earnings by tax category, provides total portfolio value, and lists your investments by type--stock, bond, and money market. Detail pages itemize account transactions by fund. Quarterly Shareholder Reports--Portfolio managers review the performance of the funds in plain language and discuss T. Rowe Price's economic outlook. The T. Rowe Price Report--A quarterly newsletter with relevant articles on market trends, personal financial planning, and T. Rowe Price's economic perspective. Insights--A library of information that includes reports on mutual fund tax issues, investment strategies, and financial markets. Detailed Investment Guides--Our widely acclaimed Asset Mix Worksheet, College Planning Kit, Retirees Financial Guide, Retirement Planning Kit (also available on disk for PC use), and Guide to Risk-Adjusted Performance can help you determine and reach your investment goals. DISCOUNT BROKERAGE You can trade stocks, bonds, options, precious metals, and other securities at a substantial savings over regular commission rates. Call a shareholder service representative for more information. 14 - -------------------------------------------------------------------------------- T. Rowe Price No-Load Mutual Funds - -------------------------------------------------------------------------------- STABILITY Prime Reserve Summit Cash Reserves U.S. Treasury Money California Tax-Free Money New York Tax-Free Money Summit Municipal Money Market Tax-Exempt Money CONSERVATIVE INCOME Adjustable Rate U.S. Government Short-Term Bond Short-Term Global Income Summit Limited-Term Bond U.S. Treasury Intermediate Florida InsuredIntermediate Tax-Free Maryland Short-Term Tax-Free Bond Summit Municipal Intermediate Tax-Free Insured Intermediate Bond Tax-Free Short-Intermediate Virginia Short-Term Tax-Free Bond INCOME Global Government Bond GNMA New Income Spectrum Income Summit GNMA U.S. Treasury Long-Term California Tax-Free Bond Georgia Tax-Free Bond Maryland Tax-Free Bond New Jersey Tax-Free Bond New York Tax-Free Bond Summit Municipal Income Tax-Free Income Virginia Tax-Free Bond AGGRESSIVE INCOME Emerging Markets Bond High Yield International Bond Tax-Free High Yield CONSERVATIVE GROWTH Balanced Capital Appreciation Dividend Growth Equity Income Equity Index Growth & Income Spectrum Growth Value GROWTH Blue Chip Growth European Stock Growth Stock International Stock Japan Mid-Cap Growth New Era Small-Cap Value AGGRESSIVE GROWTH Capital Opportunity International Discovery Latin America New America Growth New Asia New Horizons OTC Science & Technology PERSONAL STRATEGY FUNDS Personal Strategy Income Personal Strategy Balanced Personal Strategy Growth Call if you want to know about any T. Rowe Price Fund. We'll send you a prospectus with more complete information, including management fees and other expenses. Read it carefully before you invest or send money. 15 ANNUAL REPORT T. Rowe Price - ------------- SPECTRUM FUNDS DECEMBER 31, 1994 FOR YIELD, PRICE, LAST TRANSACTION, AND CURRENT BALANCE, 24 HOURS, 7 DAYS A WEEK, CALL: 1-800-638-2587 toll free 625-7676 Baltimore area FOR ASSISTANCE WITH YOUR EXISTING FUND ACCOUNT, CALL: Shareholder Service Center 1-800-225-5132 toll free 625-6500 Baltimore area T. ROWE PRICE 100 East Pratt Street Baltimore, Maryland 21202 This report is authorized for distribution only to shareholders and to others who have received a copy of the prospectus of the T. Rowe Price Spectrum Funds. T. Rowe Price Invest With Confidence/(R)/ SPC -----END PRIVACY-ENHANCED MESSAGE-----