-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PV7ewSedlggm+0UCw0XKMGHkrIZ0ZLsb3ckRt/F9ws0SIeOF+6QwsL5Yb4vHM8bj x1f43Wux6bzO6UtCIQiyOQ== 0000902259-02-000011.txt : 20020729 0000902259-02-000011.hdr.sgml : 20020729 20020729160328 ACCESSION NUMBER: 0000902259-02-000011 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20020729 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE BLUE CHIP GROWTH FUND INC CENTRAL INDEX KEY: 0000902259 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-49581 FILM NUMBER: 02713269 BUSINESS ADDRESS: STREET 1: C/O T ROWE PRICE ASSOCIATES INC STREET 2: 100 EAST E PRATT ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4105472000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE BLUE CHIP GROWTH FUND INC CENTRAL INDEX KEY: 0000902259 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-07059 FILM NUMBER: 02713270 BUSINESS ADDRESS: STREET 1: C/O T ROWE PRICE ASSOCIATES INC STREET 2: 100 EAST E PRATT ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4105472000 485APOS 1 bcg13.txt PAGE 1 Registration Nos. 033-49581/811-7059 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/ Post-Effective Amendment No. 13 /X/ AND/OR REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940/X/ Amendment No. 14 /X/ T. ROWE PRICE BLUE CHIP GROWTH 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 September 27, 2002 ---------------------- It is proposed that this filing will become effective (check appropriate box): / / Immediately upon filing pursuant to paragraph (b) / / On (date), pursuant to paragraph (b) / / 60 days after filing pursuant to paragraph (a)(1) /X/ On September 27, 2002, 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 SUBJECT TO COMPLETION Information contained herein is subject to completion or amendment. A Registration Statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the Registration Statement becomes effective. This Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state. The Registration Statement of the T. Rowe Price Blue Chip Growth Fund, Inc. (the "REGISTRANT") on Form N-1A (File Nos. 033- 49581/811-7059) is hereby amended under the Securities Act of 1933 to register a new class of shares for the Registrant. PROSPECTUS September 30, 2002 T. ROWE PRICE Blue Chip Growth Fund--R Class A stock fund seeking long-term capital growth through high-quality U.S. growth companies. This class of shares is sold only through financial intermediaries. (R) 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 Blue Chip Growth Fund, Inc. T. ROWE PRICE BLUE CHIP GROWTH FUND--R CLASS Prospectus SEPTEMBER 30, 2002
ABOUT THE FUND 1 Objective, Strategy, Risks, and Expenses ----------------------------------------------- Other Information About the Fund ----------------------------------------------- T. ROWE PRICE ACCOUNT 2 INFORMATION Pricing Shares and Receiving Sale Proceeds ----------------------------------------------- Useful Information on Distributions and Taxes ----------------------------------------------- Transaction Procedures and Special Requirements ----------------------------------------------- MORE ABOUT THE FUND 3 Organization and Management ----------------------------------------------- Understanding Performance Information ----------------------------------------------- Investment Policies and Practices ----------------------------------------------- Financial Highlights ----------------------------------------------- INVESTING WITH T. ROWE PRICE 4 Account Requirements and Transaction Information ----------------------------------------------- Purchasing Additional Shares ----------------------------------------------- Exchanging and Redeeming Shares ----------------------------------------------- Rights Reserved by the Fund s ----------------------------------------------- T. Rowe Price Privacy Policy -----------------------------------------------
Founded in 1937 by the late Thomas Rowe Price, Jr., T. Rowe Price Associates, Inc., and its affiliates managed $156.3 billion for more than eight million individual and institutional investor accounts as of December 31, 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 ---------------------------------------------------------- A word about the fund's name and structure. Blue Chip Growth Fund - R Class is a share class of T. Rowe Price Blue Chip Growth Fund. The R Class is not a separate mutual fund. It is sold only through brokers, dealers, banks, insurance companies, and other financial intermediaries that provide various distribution and administrative services. What is the fund's objective? The fund seeks to provide long-term capital growth. Income is a secondary objective. What is the fund's principal investment strategy? The fund will invest at least 80% of net assets in the common stocks of large and medium-sized blue chip growth companies. These are firms that, in our view, are well established in their industries and have the potential for above-average earnings growth. We focus on companies with leading market position, seasoned management, and strong financial fundamentals. Our investment approach reflects our belief that solid company fundamentals (with emphasis on strong growth in earnings per share or operating cash flow) combined with a positive industry outlook will ultimately reward investors with strong investment performance. Some of the companies we target will have good prospects for dividend growth. In pursuing its investment objective, the fund's management has the discretion to purchase some securities that do not meet its normal investment criteria, as described above, when it perceives an unusual opportunity for gain. These special situations might arise when the fund's management believes a security could increase in value for a variety of reasons, including a change in management, an extraordinary corporate event, or a temporary imbalance in the supply of or demand for the securities. While most assets will be invested in U.S. common stocks, other securities may also be purchased, including foreign stocks, futures, and options, in keeping with fund objectives. The fund may sell securities for a variety of reasons, such as to secure gains, limit losses, or redeploy assets into more promising opportunities. 3 For details about the fund's investment program, please see the Investment Policies and Practices section. T. ROWE PRICE 2 What are the main risks of investing in the fund? Even well-established growth stocks can be volatile. Since growth companies usually invest a high portion of earnings in their own businesses, their stocks may lack the dividends that can cushion share prices in a down market. Since many investors buy these stocks because of anticipated superior earnings growth, earnings disappointments often result in sharp price declines. Also, medium-sized companies may have greater volatility than larger ones. As with all equity funds, this fund's share price can fall because of weakness in the broad market, a particular industry, or specific holdings. The market as a whole can decline for many reasons, including adverse political or economic developments here or abroad, changes in investor psychology, or heavy institutional selling. The prospects for an industry or company may deteriorate because of a variety of factors, including disappointing earnings or changes in the competitive environment. In addition, our assessment of companies held in the fund may prove incorrect, resulting in losses or poor performance even in a rising market. Finally, the fund's investment approach could fall out of favor with the investing public, resulting in lagging performance versus other types of stock funds. Foreign stock holdings are subject to the risk that some holdings may lose value because of declining foreign currencies or adverse political or economic events overseas. Investments in futures and options, if any, are subject to additional volatility and potential losses. As with any mutual fund, there can be no guarantee the fund will achieve its objective. 3 The fund's share price may decline, so when you sell your shares, you may lose money. How can I tell if the fund is appropriate for me? Consider your investment goals, your time horizon for achieving them, and your tolerance for risk. If you are are investing through an intermediary and willing to accept the risk of investing in established growth stocks in an effort to achieve long-term capital growth, the fund could be appropriate for you. This fund should not represent your complete investment program or be used for short-term trading purposes. The fund can be used in both regular and tax-deferred accounts, such as IRAs. 3 Equity investors should have a long-term investment horizon and be willing to wait out bear markets. ABOUT THE FUND 3 How has the fund performed in the past? Blue Chip Growth-R Class shares began operations on September 30, 2002, and do not have a full calendar year of performance history. As a point of comparison, however, the following bar chart and table show calendar year returns for the oldest existing class of the Blue Chip Growth Fund./a/ The bar chart showing calendar year returns and the average annual total return table indicate risk by illustrating how much returns can differ from one year to the next and over time. Fund past performance is no guarantee of future returns. The fund can also experience short-term performance swings, as shown by the best and worst calendar quarter returns during the year depicted. In addition, the average annual total return table shows hypothetical after-tax returns to suggest how taxes paid by the shareholder may influence returns. Actual after-tax returns depend on each investor's situation and may differ from those shown. After-tax returns are not relevant if the shares are held in a tax-deferred account, such as a 401(k) or IRA. During periods of fund losses, the post-liquidation after-tax return may exceed the fund's other returns because the loss generates a tax benefit that is factored into the result. LOGO T. ROWE PRICE 4 Table 1 Average Annual Total Returns
Periods ended December 31, 2001 Since inception 1 year 5 years (6/30/93) ------------------------------------------------------------------------------ Blue Chip Growth Fund Returns before taxes -14.42% 10.47% 15.24% Returns after taxes on distributions -14.42 10.07 14.67 Returns after taxes on distributions and sale of fund shares -8.78 8.65 12.95 S&P 500 Stock Index -11.89 10.70 13.75 Lipper Large-Cap Growth Funds -23.87 7.50 11.30 Index ------------------------------------------------------------------------------
Returns are based on changes in principal value, reinvested dividends, and capital gain distributions, if any. Returns before taxes do not reflect effects of any income or capital gains taxes. All after-tax returns are calculated using the historical highest individual federal marginal income tax and capital gains rates. They do not reflect the impact of state and local taxes. Returns after taxes on distributions reflect the taxed return on the payment of dividends and capital gains. Returns after taxes on distributions and sale of fund shares assume the shares were sold at period-end, and, therefore, are also adjusted for any capital gains or losses incurred by the shareholder. Market indexes do not include expenses, which are deducted from fund returns, or taxes. /a/ Because the Blue Chip Growth Fund-R Class is expected to have higher expenses than the existing class of the Blue Chip Growth Fund, its performance, had it existed over the periods shown, would have been lower. The existing class of the Blue Chip Growth Fund and the Blue Chip Growth Fund-R Class share the same portfolio. Shares of each class of the fund are offered in separate prospectuses. What fees or expenses will I pay? The numbers in the next table provide an estimate of how much it will cost to operate the R Class for a year. These are costs you pay indirectly because they are deducted from net assets before the daily share price is calculated. Table 2 Fees and Expenses of the RClass*
Annual fund operating expenses (expenses that are deducted from fund assets) --------------------------------------------------------------------------------------------- Management fee 0.62% ----------------------------------------------- Distribution and service (12b-1) fees 0.50% ----------------------------------------------- Other expenses 0.34% ----------------------------------------------- Total annual fund operating expenses 1.46% ----------------------------------------------- Fee waiver/reimbursement 0.11%/a/ ----------------------------------------------- Net expenses 1.35%/a/ ---------------------------------------------------------------------------------------------
* Redemption proceeds of less than $5,000 sent by wire are subject to a $5 fee paid to the fund. /a/To limit the class's expenses during its initial period of operations, T. Rowe Price is contractually obligated to bear any expenses (other than management fees) through April 30, 2003, that would cause the class's ratio of expenses to average net assets to exceed 1.35%. Expenses paid or assumed under this agreement are subject to reimbursement to T. Rowe Price by the fund whenever the class's expense ratio is below 1.35%; however, no reimbursement will be made after April 30, 2005, or if it would result in the expense ratio exceeding 1.35%. Any amounts reimbursed will have the effect of increasing fees otherwise paid by the class. ABOUT THE FUND 5 Example. The following table gives you an idea of how expense ratios may translate into dollars and helps you to compare the cost of investing in this class with that of other mutual funds. Although your actual costs may be higher or lower, the table shows how much you would pay if operating expenses remain the same, you invest $10,000, earn a 5% annual return, and hold the investment for the following periods and then redeem:
1 year 3 years 5 years 10 years ---------------------------------------------------- $TBD $TBD $TBD $TBD ----------------------------------------------------
OTHER INFORMATION ABOUT THE FUND ---------------------------------------------------------- What are some of the fund's potential rewards? The market frequently rewards growth stocks with price increases when earnings expectations are met or exceeded. A successful implementation of our strategy could lead to long-term growth of capital. By investing in companies with proven track records, the fund should be less risky than one focusing on newer or smaller companies while still offering significant appreciation potential. What is meant by a "blue chip" investment approach? This approach seeks to identify blue chip growth companies-those with strong market franchises in industries that appear to be strategically poised for long-term growth. Our strategy reflects T. Rowe Price's belief that the combination of solid company fundamentals (with emphasis on the potential for above-average growth in earnings) and a positive outlook for the overall industry will ultimately result in a higher stock price. While the primary emphasis is on a company's prospects for future growth, the fund will not purchase securities that, in T. Rowe Price's opinion, are overvalued considering the underlying business fundamentals. In the search for substantial capital appreciation, the fund looks for stocks attractively priced relative to their anticipated long-term value. How does the fund select stocks for the portfolio? The fund will generally take the following into consideration: . Market positions Blue chip companies often have leading market positions that are expected to be maintained or enhanced over time. Strong positions, particularly in growing industries, can give a company pricing flexibility as well as the potential for good unit sales. These factors, in turn, can lead to higher earnings growth and greater share price appreciation. . Management Seasoned management teams with a track record of providing superior financial results are important for a company's long-term growth T. ROWE PRICE 6 prospects. Our analysts will evaluate the depth and breadth of a company's management experience. . Financial fundamentals Companies should demonstrate faster earnings growth than their competitors and the market in general; high profit margins relative to competitors; strong cash flow; a healthy balance sheet with relatively low debt; and a high return on equity with a comparatively low dividend payout ratio. 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. T. ROWE PRICE ACCOUNT INFORMATION PRICING SHARES AND RECEIVING SALE PROCEEDS ---------------------------------------------------------- Here are some procedures you should know when investing in shares of the T. Rowe Price R Class. How and when shares are priced The share price (also called "net asset value" or NAV per share) for each class of shares is calculated at the close of the New York Stock Exchange, normally 4 p.m. ET, each day the New York Stock Exchange is open for business. To calculate the NAV, the fund's assets are valued and totaled, liabilities are subtracted, and each class's proportionate share of the balance, called net assets, is divided by the number of shares outstanding of that class. Market values are used to price stocks and bonds. 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. How your purchase, sale, or exchange price is determined R Class shares are intended for purchase and may be held only through various third-party intermediaries including brokers, dealers, banks, insurance companies, retirement plan recordkeepers, and others. Consult your intermediary to find out about how to purchase, sell, or exchange your shares, cut-off times, and other applicable procedures for these transactions. The intermediary may charge a fee for its services. The fund may have an agreement with your intermediary that permits the intermediary to accept orders on behalf of the fund until 4 p.m. ET. In such cases, if your order is received by the intermediary in good form by 4 p.m. ET and transmitted to the fund and paid for in accordance with the agreement, it will be priced at the next NAV computed after the intermediary received your order. T. ROWE PRICE 8 Note: The time at which transactions and shares are priced and the time until which orders are accepted by the fund or an intermediary may be changed in case of an emergency or if the New York Stock Exchange closes at a time other than 4 p.m. ET. How proceeds are received Normally, the fund transmits proceeds to intermediaries for redemption orders received in good form on either the next or third business day after receipt, depending on the arrangement with the intermediary. Under certain circumstances and when deemed to be in the fund's best interests, proceeds may not be sent for up to seven calendar days after receipt of the redemption order. You must contact your intermediary about procedures for receiving your redemption proceeds. 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. No interest will accrue on amounts represented by uncashed distribution or redemption checks. Income dividends . The funds declare and pay dividends (if any) quarterly for the Equity Income Fund-R Class; declare daily and pay monthly for the New Income Fund-R Class; and declare and pay annually for all other R Classes. . A portion of fund dividends (other than New Income Fund-R Class, International Stock Fund-R Class, and International Growth & Income Fund-R Class) may be eligible for the 70% deduction for dividends received by corporations to the extent the funds' income consists of dividends paid by U.S. corporations. . The dividends of New Income Fund-R Class, International Stock Fund-R Class, and International Growth & Income Fund-R Class will not be eligible for the 70% deduction for dividends received by corporations, if, as expected, none of the funds' income consists of dividends paid by U.S. corporations. ABOUT THE FUND 9 Capital gains payments . A capital gain or loss is the difference between the purchase and sale price of a security. . If a fund has net capital gains for the year (after subtracting any capital losses), they are usually declared and paid in December to shareholders of record on a specified date that month. If a second distribution is necessary, it is paid the following year. Tax Information You should contact your intermediary for the tax information that will be sent to you and reported to the IRS. You need to be aware of the possible tax consequences when: . You sell fund shares, including an exchange from one fund to another. . The fund makes a distribution to your account. Taxes on fund redemptions When you sell shares in any fund, you may realize a gain or loss. An exchange from one fund to another is still a sale for tax purposes. Taxes on fund distributions The tax treatment of a capital gain distribution is determined by how long the fund held the portfolio securities, not how long you held shares in the fund. Short-term (one year or less) capital gain distributions are taxable at the same rate as ordinary income and long-term gains on securities held more than 12 months are taxed at a maximum rate of 20%. If you realized a loss on the sale or exchange of fund shares that you held six months or less, your short-term loss must be reclassified to a long-term loss to the extent of any long-term capital gain distribution received during the period you held the shares. Gains and losses from the sale of foreign currencies and the foreign currency gain or loss resulting from the sale of a foreign debt security can increase or decrease an ordinary income dividend. Net foreign currency losses may cause monthly or quarterly dividends to be reclassified as a return of capital. 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 T. ROWE PRICE 10 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 a 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. A 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 or dividend distribution If you buy shares shortly before or on the "record date" - the date that establishes you as the person to receive the upcoming distribution - you will receive a portion of the money you just invested in the form of a taxable distribution. Therefore, you may wish to find out a fund's record date before investing. Of course, a fund's share price may, at any time, reflect undistributed capital gains or income and unrealized appreciation, which may result in future taxable distributions. Such distributions can occur even in a year when the fund has a negative return. 3 The preceding tax information summary does not apply to retirement accounts, such as IRAs, which are not subject to current tax. TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS ---------------------------------------------------------- Purchase Conditions for Intermediaries Nonpayment If the fund receives a check or ACH transfer that does not clear or the payment is not received in a timely manner, your purchase may be canceled. Any losses or expenses incurred by the fund or transfer agent will be the responsibility of the intermediary. The fund and its agents have the right to reject or cancel any purchase, exchange, or redemption due to nonpayment. U.S. dollars All purchases must be paid for in U.S. dollars; checks must be drawn on U.S. banks. ABOUT THE FUND 11 Sale (Redemption) Conditions Holds on immediate redemptions: 10-day hold If an intermediary sells shares that it just purchased and paid for by check or ACH transfer, the fund will process the redemption but will generally delay sending the proceeds for up to 10 calendar days to allow the check or transfer to clear. (The 10-day hold does not apply to purchases paid for by bank wire.) Redemptions over $250,000 Large redemptions can adversely affect a portfolio manager's ability to implement a fund's investment strategy by causing the premature sale of securities that would otherwise be held. If, in any 90-day period, you redeem (sell) more than $250,000, or your sale amounts to more than 1% of fund net assets, the fund has the right to pay the difference between the redemption amount and the lesser of the two previously mentioned figures with securities from the fund. Excessive Trading 3 T. Rowe Price may bar excessive traders from purchasing shares. Frequent trades or market timing in your account or accounts controlled by you can disrupt management of the fund and raise its expenses. To deter such activity, each fund has adopted the following excessive trading policy. 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 may be barred indefinitely and without further notice from further purchases of the T. Rowe Price funds. Systematic purchases and redemptions are exempt from this policy. Transactions accepted by intermediaries in violation of this excessive trading policy or from persons believed to be market timers are subject to rejection or cancellation by the funds. Signature Guarantees An intermediary may need to obtain a signature guarantee in certain situations and should consult its T. Rowe Price Financial Institution Services representative. 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 1993 and is a "diversified, open-end investment company," or mutual fund. Mutual funds pool money received from shareholders of each class into a single portfolio and try to achieve specified objectives. In 2000, the fund issued a separate class of shares known as the Advisor Class and in 2002 issued an additional class of shares known as the R Class. 3 Shareholders benefit from T. Rowe Price's 65 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 income and capital gain distributions of the class. The income dividends for Blue Chip Growth Fund-R Class shares will generally differ from those of the regular Blue Chip Growth Fund and Blue Chip Growth Fund-Advisor Class shares to the extent that the expense ratio of the classes differ. . 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. Each class of shareholders has exclusive voting rights on matters affecting only that class. 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 ABOUT THE FUND 13 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). 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: Larry J. Puglia, Chairman, Henry M. Ellenbogen, Robert N. Gensler, Kris H. Jenner, Christopher R. Leonard, Timothy E. Parker, Robert W. Sharps, and Robert W. Smith. The committee chairman has day-to-day responsibility for managing the portfolio and works with the committee in developing and executing the fund's investment program. Mr. Puglia has been chairman of the fund since 1996. He joined T. Rowe Price in 1990 and has been managing investments since 1993. 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%* First $50 billion 0.305% Next $30 billion 0.300% Next $40 billion 0.295% Thereafter -------------------------------------
* Represents a blended group fee rate containing various break points. T. ROWE PRICE 14 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 $92 billion at December 31, 2001, the group fee was 0.32%. . The individual fund fee is 0.30%. Distribution, Shareholder Servicing, and Recordkeeping Fees Blue Chip Growth Fund-R Class has adopted a 12b-1 plan under which it pays a fee at the rate of up to 0.50% of its daily net assets per year to various intermediaries for distribution and servicing of its shares. These payments may be more or less than the costs incurred by the intermediaries. Because the fees are paid from the R Class net assets on an ongoing basis, they will increase the cost of your investment and, over time, could result in your paying more than with other types of sales charges. The R Class may also separately compensate intermediaries at a rate of up to 0.10% of daily net assets per year for various recordkeeping and transfer agent services they perform. UNDERSTANDING PERFORMANCE INFORMATION ---------------------------------------------------------- This section should help you understand the terms used to describe fund performance. Total Return This tells you how much an investment has changed in value over a given time period. It reflects any net increase or decrease in the share price and assumes that all dividends and capital gains (if any) paid during the period were reinvested in additional shares. Therefore, total return numbers include the effect of compounding. Advertisements may include cumulative or average annual total return figures, which may be compared with various indices, other performance measures, or other mutual funds. Cumulative Total Return This is the actual return of an investment for a specified period. A cumulative return does not indicate how much the value of the investment may have fluctuated during the period. For example, an investment could have a 10-year positive cumulative return despite experiencing some negative years during that time. ABOUT THE FUND 15 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. 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 apply 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. T. ROWE PRICE 16 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 voting securities of the issuer would be held by the fund. Fund investments are primarily in common stocks (normally, at least 80% of net assets) and, to a lesser degree, other types of securities as described below. 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. 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. 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 ADRs and ADSs). Such ABOUT THE FUND 17 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, and there is no limit on the amount of fund foreign investments that may be made in such countries. Operating policy Fund investments in foreign securities are limited to 20% of total assets. Fixed-Income Securities From time to time, we may invest in debt securities of any type, including municipal securities, without regard to quality or rating. Such securities would be purchased in companies, municipalities, or entities which meet the investment criteria for the fund. The price of a bond fluctuates with changes in interest rates, generally rising when interest rates fall and falling when interest rates rise. High-Yield, High-Risk Bonds The total return and yield of lower-quality (high-yield, high-risk) bonds, commonly referred to as "junk" bonds, can be expected to fluctuate more than the total return and yield of higher-quality, shorter-term bonds, but not as much as those of common stocks. Junk bonds (those rated below BBB or in default) are regarded as predominantly speculative with respect to the issuer's continuing ability to meet principal and interest payments. Operating policy The fund may purchase any type of noninvestment-grade debt security (or junk bond) including those in default. The fund will not purchase this type of security if it would have more than 5% of its total assets invested in such securities. Fund investments in convertible securities are not subject to this limit. 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, redemption, or conversion terms of a security could be related to the market price of some commodity, currency, or securities index. Such securities may bear interest or pay dividends at below market or even relatively nominal rates. Under some conditions, the redemption value of such an investment could be zero. 3 Hybrids can have volatile prices and limited liquidity, and their use may not be successful. T. ROWE PRICE 18 Operating policy Fund investments in hybrid instruments are limited to 10% of total assets. Private Placements These securities are sold directly to a small number of investors, usually institutions. Unlike public offerings, such securities are not registered with the SEC. Although certain of these securities may be readily sold, for example, under Rule 144A, others may be illiquid, and their sale may involve substantial delays and additional costs. Operating policy Fund investments in illiquid securities are limited to 15% of net assets. 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 assets. Operating policy Fund transfers of portfolio securities as collateral will not be made except as necessary in connection with permissible borrowings or investments, and then such transfers may not exceed 33/1//\\/3/\\% of 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 ABOUT THE FUND 19 predetermined price in the future. Futures and options contracts may be bought or sold for any number of reasons, including: to manage fund exposure to changes in securities prices and foreign currencies; as an efficient means of adjusting fund overall exposure to certain markets; in an effort to enhance income; to protect the value of portfolio securities; and as a cash management tool. Call or put options may be purchased or sold on securities, financial indi ces, 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. Exchange Traded Funds (ETFs) These are a type of index fund bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities designed to track a particular market index. The fund could purchase an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities they are designed to track, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees which increase their costs. Managing Foreign Currency 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." If the fund were to engage in any of these foreign currency transactions, they would be primarily to protect a fund's foreign securities from adverse currency movements relative to the dollar. Such transactions involve the risk that anticipated currency movements will not occur, which could reduce fund total return. There are certain markets, including many emerging markets, where it is not possible to engage in effective foreign currency hedging. T. ROWE PRICE 20 Lending of Portfolio Securities Fund securities may be lent to broker-dealers, other institutions, or other persons to earn additional income. Risks include the potential insolvency of the broker-dealer or other borrower that could result in delays in recovering securities and capital losses. Additionally, losses could result from the reinvestment of collateral received on loaned securities. Fundamental policy The value of loaned securities may not exceed 33/1//\\/3/\\% of total assets. Portfolio Turnover Turnover is an indication of frequency of trading. 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 ---------------------------------------------------------- Blue Chip Growth-R Class first issued shares on September 30, 2002, and therefore has no financial history. As a point of comparison, however, Table 3 provides historical information about the Blue Chip Growth Fund because Blue Chip Growth-R Class has the same management program and investment portfolio. (Prior to the inception of Blue Chip Growth-R Class, Blue Chip Growth Fund had one other share class known as the Advisor Class.) This information is based on a single share of the Blue Chip Growth Fund outstanding throughout each of its fiscal years. This table is part of the Blue Chip Growth 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). The financial statements in the annual report were audited by the fund's independent accountants, PricewaterhouseCoopers LLP. Had the Blue Chip Growth-R Class existed during the period reflected in the table, some financial information would be different because of its higher anticipated expense ratio. ABOUT THE FUND 21 Table 3 Financial Highlights
Year ended December 31 1997 1998 1999 2000 2001 ------------------------------------------------------------------------------ Net asset value, beginning of period $19.06 $24.17 $30.60 $36.34 $ 33.85 Income From Investment Operations Net investment income 0.13 0.11 0.03 (0.03) (0.02) ------------------------------------------------ Net gains or losses on securities (both realized and 5.12 6.82 6.07 (0.84) (4.86) unrealized) ------------------------------------------------ Total from investment operations 5.25 6.93 6.10 (0.87) (4.88) Less Distributions Dividends (from net (0.12) (0.11) (0.03) -- -- investment income) ------------------------------------------------ Distributions (from (0.02) (0.39) (0.33) (1.62) -- capital gains) ------------------------------------------------ Returns of capital -- -- -- -- -- ------------------------------------------------ Total distributions (0.14) (0.50) (0.36) (1.62) -- ------------------------------------------------ Net asset value, $24.17 $30.60 $36.34 $33.85 $ 28.97 end of period ------------------------------------------------ Total return 27.56% 28.84% 20.00% (2.53)% (14.42)% Ratios/Supplemental Data Net assets, end of $2,345 $4,330 $6,709 $7,113 $ 6,242 period (in millions) ------------------------------------------------ Ratio of expenses to 0.95% 0.91% 0.91% 0.91% 0.96% average net assets ------------------------------------------------ Ratio of net income to 0.86% 0.43% 0.10% (0.09)% (0.06)% average net assets ------------------------------------------------ Portfolio turnover 23.7% 34.5% 41.3% 50.9% 48.3% rate ------------------------------------------------------------------------------
INVESTING WITH T. ROWE PRICE ACCOUNT REQUIREMENTS AND TRANSACTION INFORMATION ---------------------------------------------------------- Tax Identification Number The intermediary must provide us with its certified Social Security or tax identification number (TIN). Otherwise, federal law requires the funds to withhold a percentage (currently 30%) of dividends, capital gain distributions, and redemptions, and may subject the intermediary or account holder to an IRS fine. If this information is not received within 60 days after the account is established, the account may be redeemed at the fund's NAV on the redemption date. The information in this section is for use by intermediaries only. Shareholders of the R Class should contact their intermediary for information regarding the intermediary's policies on purchasing, exchanging, and redeeming fund shares as well as initial and subsequent investment minimums. All initial and subsequent investments by intermediaries must be made by bank wire. Opening a New Account $2,500 minimum initial investment; $1,000 for retirement plans or gifts or transfers to minors (UGMA/UTMA) accounts Intermediaries should call Financial Institution Services for an account number and assignment to a dedicated service representative and give the following wire information to their bank: Receiving Bank: PNC Bank, N.A. (Pittsburgh) Receiving Bank ABA#: 043000096 Beneficiary: T. Rowe Price [fund name] Beneficiary Account: 1004397951 Originator to Beneficiary Information (OBI): name of owner(s) and account number Complete a New Account Form and mail it to one of the appropriate addresses listed below. Intermediaries must also enter into a separate agreement with the fund or its agent. via U.S. Postal Service T. Rowe Price Financial Institution Services P.O. Box 17603 Baltimore, MD 21297-1603 ABOUT THE FUND 23 via private carriers/overnight services T. Rowe Price Financial Institution Services Mail Code: OM-17603 4515 Painters Mill Road Owings Mills, MD 21117-4842 PURCHASING ADDITIONAL SHARES ---------------------------------------------------------- $100 minimum additional purchase; $50 minimum for retirement plans, Automatic Asset Builder, and gifts or transfers to minors (UGMA/UTMA) accounts By Wire Intermediaries should call Financial Institution Services or use the wire instructions listed in Opening a New Account. 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. Intermediaries should call their Financial Institution Services representative. Redemptions Unless otherwise indicated, redemption proceeds will be wired to the intermediary's designated bank. Intermediaries should contact their Financial Institution Services representative. RIGHTS RESERVED BY THE FUNDS ---------------------------------------------------------- T. Rowe Price funds and their agents reserve the following rights: (1) to refuse any purchase or exchange order; (2) to cancel or rescind any purchase or exchange order (including, but not limited to, orders deemed to result in excessive trading, market timing, fraud, or 5% ownership) upon notice to the intermediary within five business days of the trade or if the written confirmation has not been received by the shareholder, whichever is sooner; (3) to freeze any account and suspend account services when notice has been received of a dispute T. ROWE PRICE 24 between the registered or beneficial account owners or there is reason to believe a fraudulent transaction may occur; (4) to otherwise modify the conditions of purchase and any services at any time; and (5) to act on instructions 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. ABOUT THE FUND 25 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. T. Rowe Price Associates, Inc. 100 East Pratt Street Baltimore, MD 21202 A fund Statement of Additional Information has been filed with the Securities and Exchange Commission and is incorporated by reference into this prospectus. Further information about fund investments, including a review of market conditions and the manager's recent strategies and their impact on performance, is available in the annual and semiannual shareholder reports. To obtain free copies of any of these documents, call your intermediary. Fund information and Statements of Additional Information are also available from the Public Reference Room of the Securities and Exchange Commission. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. Fund reports and other fund information are available on the EDGAR Database on the SEC's Internet site at http://www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at publicinfo@sec.gov, or by writing the Public Reference Room, Washington D.C. 20549-0102. 1940 Act File No. 811-7059 TBD 9/30/02 STATEMENT OF ADDITIONAL INFORMATION The date of this Statement of Additional Information is May 1, 2002, revised to July 10, 2002. T. ROWE PRICE BALANCED FUND, INC. T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. T. Rowe Price Blue Chip Growth Fund-Advisor Class T. Rowe Price Blue Chip Growth Fund-R Class T. ROWE PRICE 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 Income Fund-Advisor Class 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 Growth Stock Fund-Advisor Class T. ROWE PRICE HEALTH SCIENCES 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 T. ROWE PRICE INSTITUTIONAL EQUITY FUNDS, INC. T. Rowe Price Institutional Large-Cap Growth Fund T. Rowe Price Institutional Large-Cap Value Fund T. Rowe Price Institutional Mid-Cap Equity Growth Fund T. Rowe Price Institutional Small-Cap Stock Fund T. ROWE PRICE 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 REAL ESTATE FUND, INC. T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC. T. Rowe Price Science & Technology Fund-Advisor Class 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 and T. ROWE PRICE VALUE FUND, INC. T. Rowe Price Value Fund-Advisor Class ------------------------------------------------------------------------------- Mailing Address: T. Rowe Price Investment Services, Inc. 100 East Pratt Street C20-043 7/10/02 Baltimore, Maryland 21202 1-800-638-5660 Throughout this Statement of Additional Information, "the fund" is intended to refer to each fund listed on the cover page, unless otherwise indicated. For convenience, the term "director" is used to refer to both directors of funds that are corporations and to trustees of funds that are Massachusetts business trusts. This Statement of Additional Information is not a prospectus but should be read in conjunction with the appropriate fund prospectus dated May 1, 2002, which may be obtained from T. Rowe Price Investment Services, Inc. ("Investment Services"). Each fund's financial statements for the fiscal period ended December 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 and they will be sent to you at no charge. Please read them carefully.
TABLE OF CONTENTS ----------------- Page Page ---- ---- Capital Stock 83 Legal Counsel 85 - ------------------------------------ -------------------------------------- Code of Ethics 69 Management of the Funds 30 - ------------------------------------ -------------------------------------- Custodian 68 Net Asset Value per Share 77 - ------------------------------------ -------------------------------------- Distributor for the Funds 67 Organization of the Funds 84 - ------------------------------------ -------------------------------------- Dividends and Distributions 77 Portfolio Management Practices 15 - ------------------------------------ -------------------------------------- Federal Registration of 84 Portfolio Transactions 69 Shares - ------------------------------------ -------------------------------------- Independent Accountants 85 Pricing of Securities 76 - ------------------------------------ -------------------------------------- Investment Management 58 Principal Holders of 57 Services Securities - ------------------------------------ -------------------------------------- Investment Objectives and 2 Ratings of Corporate Debt 90 Policies Securities - ------------------------------------ -------------------------------------- Investment Performance 79 Risk Factors 3 - ------------------------------------ -------------------------------------- Investment Program 6 Services by Outside Parties 66 - ------------------------------------ -------------------------------------- Investment Restrictions 28 Tax Status 77 - ------------------------------------ --------------------------------------
INVESTMENT OBJECTIVES AND POLICIES ------------------------------------------------------------------------------- The following information supplements the discussion of each fund's investment objectives and policies discussed in each fund's prospectus. Shareholder approval is required to substantively change fund objectives. Unless otherwise specified, the investment programs and restrictions of the funds are not fundamental policies. Each fund's operating policies are subject to change by each Board of Directors without shareholder approval. However, shareholders will be notified of a material change in an operating policy. Each fund's fundamental policies may not be changed without the approval of at least a majority of the outstanding shares of the fund or, if it is less, 67% of the 2 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") RISK FACTORS ------------------------------------------------------------------------------- Reference is also made to the sections entitled "Investment Program" and "Portfolio Management Practices" for discussions of the risks associated with the investments and practices described therein as they apply to the fund. 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 fund will normally have substantially all (for the Balanced Fund 50-70% and for the Capital Appreciation Fund at least 50%) of its assets in equity securities (e.g., common stocks). This portion of the fund's assets will be subject to all of the risks of investing in the stock market. There is risk in every investment. 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. Foreign securities (All funds other than Equity Index 500, Extended Equity Market, and Total Equity Market Index Funds) The fund may invest in U.S. dollar-denominated and non-U.S. dollar-denominated securities of foreign issuers. . 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. In 2001, Argentina defaulted on its foreign-owned debt and had the peso devalued, resulting in the resignation of its president and deadly riots in December in response to government-mandated austerity measures. 3 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 to varying degrees. These restrictions limit and at times 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 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 indirectly bear similar expenses of the underlying investment funds. In addition, the securities of these investment funds may trade at a premium over their net asset value. 4 . 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. In many of the countries of Eastern Europe and Russia, there is no stock exchange or formal market for securities. Such countries may also have government exchange controls, currencies with no recognizable market value relative to the established currencies of western market economies, little or no experience in trading in securities, no financial reporting standards, a lack of a banking and securities infrastructure to handle such trading, and a legal tradition which does not recognize rights in private property. In addition, these countries may have national policies which restrict investments in companies deemed sensitive to the country's national interest. Further, the governments in such countries may require governmental or quasi-governmental authorities to act as custodian of the fund's assets invested in such countries, and these authorities may not qualify as a foreign custodian under the 1940 Act and exemptive relief from such Act may be required. All of these considerations are among the factors which result in significant risks and uncertainties when investing 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 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. 5 . Japan Japan has experienced earthquakes and tidal waves of varying degrees of severity, and the risks of such phenomena, and damage resulting therefrom, continue to exist. Japan also has one of the world's highest population densities. A significant percentage of the total population of Japan is concentrated in the metropolitan areas of Tokyo, Osaka, and Nagoya. Economy The Japanese economy languished for much of the last decade. Lack of effective governmental action in the areas of tax reform to reduce high tax rates, banking regulation to address enormous amounts of bad debt, and economic reforms to attempt to stimulate spending are among the factors cited as possible causes of Japan's economic problems. The yen has had a history of unpredictable and volatile movements against the dollar; a weakening yen hurts U.S. investors holding yen-denominated securities. Finally, the Japanese stock market has experienced wild swings in value and has often been considered significantly overvalued. Energy Japan has historically depended on oil for most of its energy requirements. Almost all of its oil is imported, the majority from the Middle East. In the past, oil prices have had a major impact on the domestic economy, but more recently Japan has worked to reduce its dependence on oil by encouraging energy conservation and use of alternative fuels. In addition, a restructuring of industry, with emphasis shifting from basic industries to processing and assembly type industries, has contributed to the reduction of oil consumption. However, there is no guarantee this favorable trend will continue. Foreign Trade Overseas trade is important to Japan's economy. Japan has few natural resources and must export to pay for its imports of these basic requirements. Because of the concentration of Japanese exports in highly visible products such as automobiles, machine tools, and semiconductors and the large trade surpluses ensuing therefrom, Japan has had difficult relations with its trading partners, particularly the U.S. It is possible that trade sanctions or other protectionist measures could impact Japan adversely in both the short term and long term. INVESTMENT PROGRAM ------------------------------------------------------------------------------- Types of Securities Set forth below is additional information about certain of the investments described in each fund's prospectus. Hybrid Instruments Hybrid instruments (a type of potentially high-risk derivative) have been developed and combine the elements of futures contracts or options with those of debt, preferred equity, or a depository instrument (hereinafter "hybrid instruments"). Generally, a hybrid instrument will be a debt security, preferred stock, depository share, trust certificate, certificate of deposit, or other evidence of indebtedness on which a portion of or all interest payments, and/or the principal or stated amount payable at maturity, redemption, or retirement is determined by reference to prices, changes in prices, or differences between prices of securities, currencies, intangibles, goods, articles, or commodities (collectively "underlying assets") or by another objective index, economic factor, or other measure, such as interest rates, currency exchange rates, commodity indices, and securities indices (collectively "benchmarks"). Thus, hybrid instruments may take a variety of forms, including, but not limited to, debt instruments with interest or principal payments or redemption terms determined by reference to the value of a currency or commodity or securities index at a future point in time, preferred stock with dividend rates determined by reference to the value of a currency, or convertible securities with the conversion terms related to a particular commodity. Hybrid instruments can be an efficient means of creating exposure to a particular market, or segment of a market, with the objective of enhancing total return. For example, a fund may wish to take advantage of expected declines in interest rates in several European countries, but avoid the transaction costs associated with buying and currency-hedging the foreign bond positions. One solution would be to purchase a U.S. dollar-denominated hybrid instrument whose redemption price is linked to the average three-year interest rate 6 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 transaction 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 of and demand for the underlying assets, and interest rate movements. In recent years, various benchmarks and prices for underlying assets have been highly volatile, and such volatility may be expected in the future. Reference is also made to the discussion of futures, options, and forward contracts herein for a discussion of the risks associated with such investments. Hybrid instruments are potentially more volatile and carry greater market risks than traditional debt instruments. Depending on the structure of the particular hybrid instrument, changes in a benchmark may be magnified by the terms of the hybrid instrument and have an even more dramatic and substantial effect upon the value of the hybrid instrument. Also, the prices of the hybrid instrument and the benchmark or underlying asset may not move in the same direction or at the same time. Hybrid instruments may bear interest or pay preferred dividends at below market (or even relatively nominal) rates. Alternatively, hybrid instruments may bear interest at above market rates but bear an increased risk of principal loss (or gain). The latter scenario may result if "leverage" is used to structure the hybrid instrument. Leverage risk occurs when the hybrid instrument is structured so that a given change in a benchmark or underlying asset is multiplied to produce a greater value change in the hybrid instrument, thereby magnifying the risk of loss as well as the potential for gain. Hybrid instruments may also carry liquidity risk since the instruments are often "customized" to meet the portfolio needs of a particular investor, and therefore, the number of investors that are willing and able to buy such instruments in the secondary market may be smaller than that for more traditional debt securities. In addition, because the purchase and sale of hybrid instruments could take place in an over-the-counter market without the guarantee of a central clearing organization or in a transaction between the fund and the issuer of the hybrid instrument, the creditworthiness of the counterparty or issuer of the hybrid instrument would be an additional risk factor which the fund would have to consider and monitor. Hybrid instruments also may not be subject to regulation by 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). 7 Illiquid or Restricted Securities Restricted securities may be sold only in privately negotiated transactions or in a public offering with respect to which a registration statement is in effect under the Securities Act of 1933 (the "1933 Act"). Where registration is required, the fund may be obligated to pay all or part of the registration expenses, and a considerable period may elapse between the time of the decision to sell and the time the fund may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the fund might obtain a less favorable price than prevailed when it decided to sell. Restricted securities will be priced at fair value as determined in accordance with procedures prescribed by the fund's Board of Directors. If, through the appreciation of illiquid securities or the depreciation of liquid securities, the fund should be in a position where more than 15% of the value of its net assets is invested in illiquid assets, including restricted securities, the fund will take appropriate steps to protect liquidity. Notwithstanding the above, the fund may purchase securities which, while privately placed, are eligible for purchase and sale under Rule 144A under the 1933 Act. This rule permits certain qualified institutional buyers, such as the fund, to trade in privately placed securities even though such securities are not registered under the 1933 Act. T. Rowe Price, under the supervision of the fund's Board of Directors, will consider whether securities purchased under Rule 144A are illiquid and thus subject to the fund's restriction of investing no more than 15% of its net assets in illiquid securities. A determination of whether a Rule 144A security is liquid or not is a question of fact. In making this determination, T. Rowe Price 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% 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. 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. Debt Securities Balanced, Blue Chip Growth, Capital Appreciation, Capital Opportunity, Dividend Growth, Equity Income, Financial Services, Global Technology, Growth & Income, Health Sciences, Institutional Large-Cap Value, Institutional Small-Cap Stock, Media & Telecommunications, Mid-Cap Value, New Era, Real Estate, Small-Cap Stock, Small-Cap Value, and Value Funds Debt Obligations Although a majority of the fund's assets are invested in common stocks, the fund may invest in convertible securities, corporate and government debt securities, and preferred stocks which hold the prospect of contributing to the achievement of the fund's objectives. Yields on short-, intermediate-, and long-term securities are dependent on a variety of factors, including the general conditions of the money and bond markets, the size of a particular offering, the maturity of the obligation, and the credit quality and rating of the issuer. 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 investments, and a decline in interest rates will generally increase the 8 value of portfolio investments. The ability of the fund to achieve its investment objective is also dependent on the continuing ability of the issuers of the debt securities in which the fund invests to meet their obligations for the payment of interest and principal when due. The fund's investment program permits it to purchase below investment-grade securities. Since investors generally perceive that there are greater risks associated with investment in lower-quality securities, the yields from such securities normally exceed those obtainable from higher-quality securities. However, the principal value of lower-rated securities generally will fluctuate more widely than higher-quality securities. Lower-quality investments entail a higher risk of default-the nonpayment of interest or principal by the issuer-than higher-quality investments. Such securities are also subject to special risks, discussed below. 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. Special Risks of High-Yield Investing The fund may invest in low-quality bonds commonly referred to as "junk bonds." Junk bonds are regarded as predominantly speculative with respect to the issuer's continuing ability to meet principal and interest payments. Because investment in low- and lower-medium-quality bonds involves greater investment risk, to the extent the fund invests in such bonds, achievement of its investment objective will be more dependent on T. Rowe Price's credit analysis than would be the case if the fund was investing in higher-quality bonds. High-yield bonds may be more susceptible to real or perceived adverse economic conditions than investment-grade bonds. A projection of an economic downturn, or higher interest rates, for example, could cause a decline in high-yield bond prices because the advent of such events could lessen the ability of highly leveraged issuers to make principal and interest payments on their debt securities. In addition, the secondary trading market for high-yield bonds may be less liquid than the market for higher-grade bonds, which can adversely affect the ability of a fund to dispose of its portfolio securities. Bonds for which there is only a "thin" market can be more difficult to value inasmuch as objective pricing data may be less available and judgment may play a greater role in the valuation process. Fixed-income securities in which the fund may invest include, but are not limited to, those described below. . U.S. Government Obligations Bills, notes, bonds, and other debt securities issued by the U.S. Treasury. These are direct obligations of the U.S. government and differ mainly in the length of their maturities. . U.S. Government Agency Securities Issued or guaranteed by U.S. government-sponsored enterprises and federal agencies. These include securities issued by the Federal National Mortgage Association ("Fannie Mae" or "FNMA"), Government National Mortgage Association ("Ginnie Mae" or "GNMA"), Federal Home Loan Bank, Federal Land Banks, Farmers Home Administration, Banks for Cooperatives, Federal Intermediate Credit Banks, Federal Financing Bank, Farm Credit Banks, the Small Business Association, and the Tennessee Valley Authority. Some of these securities are supported by the full faith and credit of the U.S. Treasury; the remainder are supported only by the credit of the instrumentality, which may or may not include the right of the issuer to borrow from the Treasury. . Bank Obligations Certificates of deposit, banker's acceptances, and other short-term debt obligations. Certificates of deposit are short-term obligations of commercial banks. A banker's acceptance is a time draft drawn on a commercial bank by a borrower, usually in connection with international commercial transactions. Certificates of deposit may have fixed or variable rates. The 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. . Short-Term Corporate Debt Securities Outstanding nonconvertible corporate debt securities (e.g., bonds and debentures) which have one year or less remaining to maturity. Corporate notes may have fixed, variable, or floating rates. 9 . 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. 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. 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. Mortgage-Related Securities Balanced Fund Mortgage-related securities in which the fund may invest include, but are not limited to, those described below. . 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 GNMA, FNMA, the Federal Home Loan Mortgage Corporation ("Freddie Mac" or "FHLMC"), and the Federal Agricultural Mortgage Corporation ("Farmer Mac" or "FAMC"). FNMA, FHLMC, and FAMC obligations are not backed by the full faith and credit of the U.S. government as GNMA certificates are, but they are supported by the 10 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 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 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. 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 11 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. Fixed-rate mortgage-backed securities bear a stated "coupon rate" which represents the effective mortgage rate at the time of issuance, less certain fees to GNMA, FNMA, and FHLMC for providing the guarantee, and the issuer for assembling the pool and for passing through monthly payments of interest and principal. Payments to holders of mortgage-backed securities consist of the monthly distributions of interest and principal less the applicable fees. The actual yield to be earned by a holder of mortgage-backed securities is calculated by dividing interest payments by the purchase price paid for the mortgage-backed securities (which may be at a premium or a discount from the face value of the certificate). Monthly distributions of interest, as contrasted to semiannual distributions which are common for other fixed interest investments, have the effect of compounding and thereby raising the effective annual yield earned on mortgage-backed securities. Because of the variation in the life of the pools of mortgages which back various mortgage-backed securities, and because it is impossible to anticipate the rate of interest at which future principal payments may be reinvested, the actual yield earned from a portfolio of mortgage-backed securities will differ significantly from the yield estimated by using an assumption of a certain life for each mortgage-backed security included in such a portfolio as described above. . Collateralized Mortgage Obligations ("CMOs") CMOs are bonds that are collateralized by whole loan mortgages or mortgage pass-through securities. The bonds issued in a CMO deal are divided into groups, and each group of bonds is referred to as a "tranche." Under the traditional CMO structure, the cash flows generated by the mortgages or mortgage pass-through securities in the collateral pool are used to first pay interest and then pay principal to the CMO bondholders. The bonds issued under such a CMO structure are retired sequentially as opposed to the pro-rata return of principal found in traditional pass-through obligations. Subject to the various provisions of individual CMO issues, the cash flow generated by the underlying collateral (to the extent it exceeds the amount required to pay the stated interest) is used to retire the bonds. Under the CMO structure, the repayment of principal among the different tranches is prioritized in accordance with the terms of the particular CMO issuance. The "fastest-pay" tranche of bonds, as specified in the prospectus for the issuance, would initially receive all principal payments. When that tranche of bonds is retired, the next tranche, or tranches, in the sequence, as specified in the prospectus, receive all of the principal payments until they are retired. The sequential retirement of bond groups continues until the last tranche, or group of bonds, is retired. Accordingly, the CMO structure allows the issuer to use cash flows of long maturity, monthly-pay collateral to formulate securities with short, intermediate, and long final maturities and expected average lives. In recent years, new types of CMO tranches have evolved. These include floating-rate CMOs, planned amortization classes, accrual bonds, and CMO residuals. These newer structures affect the amount and timing of principal and interest received by each tranche from the underlying collateral. Under certain of these new structures, given classes of CMOs have priority over others with respect to the receipt of prepayments on the mortgages. Therefore, depending on the type of CMOs in which the 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 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. 12 . Multi-Class Residential Mortgage Securities Such securities represent interests in pools of mortgage loans to residential home buyers made by commercial banks, savings and loan associations, or other financial institutions. Unlike GNMA, FNMA, and FHLMC securities, the payment of principal and interest on Multi-Class Residential Mortgage Securities is not guaranteed by the U.S. government or any of its agencies. Accordingly, yields on Multi-Class Residential Mortgage Securities have been historically higher than the yields on U.S. government mortgage securities. However, the risk of loss due to default on such instruments is higher since they are not guaranteed by the U.S. government or its agencies. Additionally, pools of such securities may be divided into senior or subordinated segments. Although subordinated mortgage securities may have a higher yield than senior mortgage securities, the risk of loss of principal is greater because losses on the underlying mortgage loans must be borne by persons holding subordinated securities before those holding senior mortgage securities. . Privately Issued Mortgage-Backed Certificates These are pass-through certificates issued by nongovernmental issuers. Pools of conventional residential or commercial mortgage loans created by such issuers generally offer a higher rate of interest than government and government-related pools because there are no direct or indirect government guarantees of payment. Timely payment of interest and principal of these pools is, however, generally supported by various forms of insurance or guarantees, including individual loan, title, pool, and hazard insurance. The insurance and guarantees are issued by government entities, private insurance, or the mortgage poolers. Such insurance and guarantees and the creditworthiness of the issuers thereof will be considered in determining whether a mortgage-related security meets the 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. Interest only securities ("IOs") receive the interest portion of the cash flow while principal only securities ("POs") receive the principal portion. IOs and POs are usually structured as tranches of a CMO. Stripped Mortgage-Backed Securities may be issued by U.S. government agencies or by private issuers similar to those described above with respect to CMOs and privately issued mortgage-backed certificates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. The value of the 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 his/her 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 13 structure, including the number of tranches; and size of the issue and the number of dealers who make a market in the IO or PO. 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 directly bear the risk of any defaults by the obligors on the underlying assets not covered by any 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, the issuing entities are unlikely to have sufficient assets to satisfy their obligations on the related asset-backed securities. Real Estate and REIT Risk Primarily Real Estate Fund (but also any other fund investing in REITs) Investors in the fund may experience many of the same risks involved with investing in real estate directly. These risks include: declines in real estate values, risks related to local or general economic conditions, particularly lack of demand, overbuilding and increased competition, increases in property taxes and operating expenses, changes in zoning laws, heavy cash flow dependency, possible lack of availability of mortgage funds, obsolescence, losses due to natural disasters, condemnation of properties, regulatory limitations on rents and fluctuations in rental income, variations in market rental rates, and possible environmental liabilities. Real Estate Investment Trusts ("REITs") may own real estate properties (Equity REITs) and be subject to these risks directly, or may make or purchase mortgages (Mortgage REITs) and be subject to these risks indirectly through underlying construction, development, and long-term mortgage loans that may default or have payment problems. Equity REITs can be affected by rising interest rates that may cause investors to demand a high annual yield from future distributions which, in turn, could decrease the market prices for the REITs. In addition, rising interest rates also increase the costs of obtaining financing for real estate projects. Since many real estate projects are dependent upon receiving financing, this could cause the value of the Equity REITs in which the fund invests to decline. Mortgage REITs may hold mortgages that the mortgagors elect to prepay during periods of declining interest rates, which may diminish the yield on such REITs. In addition, borrowers may not be able to repay mortgages when due, which could have a negative effect on the fund. Some REITs have relatively small market capitalizations which could increase their volatility. REITs tend to be dependent upon specialized management skills and have limited diversification so they are subject to risks 14 inherent in operating and financing a limited number of properties. In addition, when the fund invests in REITs, a shareholder will bear his proportionate share of fund expenses and indirectly bear similar expenses of the REITs. REITs depend generally on their ability to generate cash flow to make distributions to shareholders. In addition, both Equity and Mortgage REITs are subject to the risks of failing to qualify for tax-free status of income under the Code or failing to maintain exemption from the 1940 Act. 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. The collateral, in turn, is invested in short-term securities. 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 a portion of the interest on the investment of the collateral. Normally, the fund employs an agent to implement its securities lending program and the agent receives a fee from the fund for its services. 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 a possible default by the borrower, delay in receiving additional collateral or in the recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. Loans will 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. Additionally, the fund bears the risk that the reinvestment of collateral will result in a principal loss. Finally, there is also the risk that the price of the securities will increase while they are on loan and the collateral will not adequately cover their value. Interfund Borrowing and Lending The fund is a party to an exemptive order received from the SEC on December 8, 1998, amended on November 23, 1999, that permits it to borrow money from and/or lend money to other funds in the T. Rowe Price complex ("Price Funds"). All loans are set at an interest rate between the rates charged on overnight repurchase agreements and short-term bank loans. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds. The program is subject to the oversight and periodic review of the Boards of Directors of the Price Funds. Repurchase Agreements The fund may enter into a repurchase agreement through which an investor (such as the fund) purchases a security (known as the "underlying security") from a well-established securities dealer or a bank that is a member of the Federal Reserve System. Any such dealer or bank will be on T. Rowe Price's approved list. At that time, the bank or securities dealer agrees to repurchase the underlying security at the same price, plus specified interest. Repurchase agreements are generally for a short period of time, often less than a week. Repurchase agreements which do not provide for payment within seven days will be treated as illiquid securities. The fund will only enter into repurchase agreements where (1) the underlying securities are of the type (excluding maturity limitations) which the fund's investment guidelines would allow it to purchase directly, (2) the market value of the underlying security, including interest accrued, will be at all times equal to or exceed the value of the repurchase agreement, and (3) payment for the underlying security is made only upon physical delivery or evidence of book-entry transfer to the account of the custodian or a bank acting as agent. In the event of a bankruptcy or other default of a seller of a repurchase agreement, the fund could experience both delays in liquidating the underlying security and losses, including: (a) possible decline in the value of the underlying security during the period while the fund seeks to enforce its rights thereto; (b) 15 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. . 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 nor GRF pays 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. 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. All funds except Equity Index 500, Extended Equity Market Index, and Total Equity Market Index 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 16 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. 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. This liability will be adjusted daily to the option's current market value, which will be the latest sale price on its primary exchange at the time at which the net asset value per share of the fund is computed (close of the New York Stock Exchange), or, in the absence of such sale, the mean of closing bid and ask prices. The option will be terminated upon expiration of the option, the purchase of an identical option in a closing transaction, or delivery of the underlying security or currency upon the exercise of the option. Closing transactions will be effected in order to realize a profit on an outstanding call option, to prevent an underlying security or currency from being called, or to permit the sale of the underlying security or currency. Furthermore, effecting a closing transaction will permit the 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 17 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 fund's total assets. In calculating the 25% limit, the fund will offset the value of securities underlying purchased calls and puts on identical securities or currencies with identical maturity dates. Writing Covered Put Options The fund may write American or European style covered put options and purchase options to close out options previously written by the fund. A put option gives the purchaser of the option the right to sell, and the writer (seller) has the obligation to buy, the underlying security or currency at the exercise price during the option period (American style) or at the expiration of the option (European style). So long as the obligation of the writer continues, he may be assigned an exercise notice by the broker-dealer through whom such option was sold, requiring him to make payment to the exercise price against delivery of the underlying security or currency. The operation of put options in other respects, including their related risks and rewards, is substantially identical to that of call options. The fund would write put options only on a covered basis. This 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. Alternatively, 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 18 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. The premium received by the fund for writing covered put options will be recorded as a liability of the fund. This liability will be adjusted daily to the option's current market value, which will be the latest sale price on its primary exchange at the time at which the net asset value per share of the fund is computed (close of the New York Stock Exchange), or, in the absence of such sale, the mean of the closing bid and ask prices. Purchasing Put Options The 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. 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 on its primary exchange 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 closing bid and ask prices. This asset will be terminated upon expiration of the option, the selling (writing) of an identical option in a closing transaction, or the delivery of the underlying security or currency upon the exercise of the option. Purchasing Call Options The 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 19 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 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. The fund will not commit more than 5% of its assets to premiums when purchasing call and put options. The premium paid by the fund when purchasing a call 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 on its primary exchange 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 closing bid and ask prices. 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 counter party, the fund may be unable to liquidate a dealer option. With respect to options written by the fund, the inability to enter into a closing transaction may result in material losses to the fund. For example, since the fund must maintain a secured position with respect to any call option on a security it writes, the fund may not sell the assets which it has segregated to secure the position while it is obligated under the option. This requirement may impair a fund's ability to sell portfolio securities or currencies at a time when such sale might be advantageous. The staff of the SEC has taken the position that purchased dealer options and the assets used to secure the written dealer options are illiquid securities. The fund may treat the cover used for written Over-the-Counter ("OTC") options as liquid if the dealer agrees that the fund may repurchase the OTC option it has written for a maximum price to be calculated by a predetermined formula. In such cases, the OTC option would be considered illiquid only to the extent the maximum repurchase price under the formula exceeds the intrinsic value of the option. Equity Index 500, Extended Equity Market Index, and Total Equity Market Index Funds Options Options are a type of potentially high-risk derivative. 20 The only option activity the funds currently may engage in is the purchase of S&P 500 call options for the Equity Index 500 Fund, or the purchases of call options on any indices that may be consistent with the investment programs for the Extended Equity Market Index and Total Equity Market Index Funds. Such activity is subject to the same risks described above under "Purchasing Call Options." However, the funds reserve the right to engage in other options activity. All 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"). The New Era Fund may also enter into futures contracts on commodities related to the types of companies in which it invests, such as oil and gold futures. The Equity Index 500, Extended Equity Market Index, and Total Equity Market Index Funds may only enter into stock index futures which are appropriate for their investment programs to provide an efficient means of maintaining liquidity while being invested in the market, to facilitate trading, or to reduce transaction costs. They will not use futures for hedging purposes. Otherwise the nature of such futures and the regulatory limitations and risks to which they are subject are the same as those described below. Stock index futures contracts may be used to provide a hedge for a portion of the 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 contracts with respect to indices or subindices whose movements will have a significant correlation with movements in the prices of the fund's portfolio securities. Interest rate or currency futures contracts may be used as a hedge against changes in prevailing levels of interest rates or currency exchange rates in order to establish more definitely the effective return on securities or currencies held or intended to be acquired by the fund. In this regard, the fund could sell interest rate or currency futures as an offset against the effect of expected increases in interest rates or currency exchange rates and purchase such futures as an offset against the effect of expected declines in interest rates or currency exchange rates. The fund will enter into futures contracts which are traded on national or foreign futures exchanges and are standardized as to maturity date and underlying financial instrument. Futures exchanges and trading in the United States are regulated under the Commodity Exchange Act by the CFTC. Although techniques other than the sale and purchase of futures contracts could be used for the above-referenced purposes, futures contracts offer an effective and relatively low cost means of implementing the fund's objectives in these areas. 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 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 21 value of the futures contracts and options thereon (less any related margin deposits), will be identified by the fund to cover the position, or alternative cover (such as owning an offsetting position) will be employed. Assets used as cover or held in an identified account cannot be sold while the position in the corresponding option or future is open, unless they are replaced with similar assets. As a result, the commitment of a large portion of a fund's assets to cover or identified accounts could impede portfolio management or the fund's ability to meet redemption requests or other current obligations. If the CFTC or other regulatory authorities adopt different (including less stringent) or additional restrictions, the fund would comply with such new restrictions. Trading in Futures Contracts A futures contract provides for the future sale by one party and purchase by another party of a specified amount of a specific financial instrument (e.g., units of a stock index) for a specified price, date, time, and place designated at the time the contract is made. Brokerage fees are incurred when a futures contract is bought or sold and margin deposits must be maintained. Entering into a contract to buy is commonly referred to as buying or purchasing a contract or holding a long position. Entering into a contract to sell is commonly referred to as selling a contract or holding a short position. Unlike when the fund purchases or sells a security, no price would be paid or received by the fund upon the purchase or sale of a futures contract. Upon entering into a futures contract, and to maintain the fund's open positions in futures contracts, the fund would be required to deposit with its custodian in a segregated account in the name of the futures broker an amount of cash or liquid assets known as "initial margin." The margin required for a particular futures contract is set by the exchange on which the contract is traded, and may be significantly modified from time to time by the exchange during the term of the contract. Futures contracts are customarily purchased and sold on margins that may range upward from less than 5% of the value of the contract being traded. Financial futures are valued daily at closing settlement prices. If the price of an open futures contract changes (by increase in the case of a sale or by decrease in the case of a purchase) so that the loss on the futures contract reaches a point at which the margin on deposit does not satisfy margin requirements, the broker will require a payment by the fund ("variation margin") to restore the margin account to the amount of the initial margin. Subsequent payments ("mark-to-market payments") to and from the futures broker, are made on a daily basis as the price of the underlying assets fluctuate, making the long and short positions in the futures contract more or less valuable. If the value of the open futures position increases in the case of a sale or decreases in the case of a purchase, the fund will pay the amount of the daily change in value to the broker. However, if the value of the open futures position decreases in the case of a sale or increases in the case of a purchase, the broker will pay the amount of the daily change in value to the fund. Although certain futures contracts, by their terms, require actual future delivery of and payment for the underlying instruments, in practice most futures contracts are usually closed out before the delivery date. Closing out an open futures contract purchase or sale is effected by entering into an offsetting futures contract sale or purchase, respectively, for the same aggregate amount of the identical securities and the same delivery date. If the offsetting purchase price is less than the original sale price, the fund realizes a gain; if it is more, the fund realizes a loss. Conversely, if the offsetting sale price is more than the original purchase price, the fund realizes a gain; if it is less, the fund realizes a loss. The transaction costs must also be included in these calculations. There can be no assurance, however, that the fund will be able to enter into an offsetting transaction with respect to a particular futures contract at a particular time. If the fund is not able to enter into an offsetting transaction, the fund will continue to be required to maintain the margin deposits on the futures contract. 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 22 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 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 mark-to-market payments 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 mark-to-market and variation margin payments. 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 or economic events. There are several risks in connection with the use by the fund of futures contracts as a hedging device. One 23 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 had 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 mark-to-market and variation margin requirements. Such sales of underlying instruments might be, but would not necessarily be, at increased prices (which would reflect the rising market). The 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. 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. Options on futures contracts are valued daily at the last sale price on its primary exchange at the time of 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 closing bid and ask prices. As an alternative to writing or purchasing call and put options on stock index futures, the fund may write or purchase call and put options on financial indices. Such options would be used in a manner similar to the use of options on futures contracts. From time to time, a single order to purchase or sell futures contracts (or 24 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 of Transactions in Futures Contracts" are substantially the same as the risks of using options on futures. If the fund were to write an option on a futures contract, it would be required to deposit and maintain initial and variation margin in the same manner as a regular futures contract. In addition, where the fund seeks to close out an option position by writing or buying an offsetting option covering the same index, underlying instrument, or contract and having the same exercise price and expiration date, its ability to establish and close out positions on such options will be subject to the maintenance of a liquid secondary market. Reasons for the absence of a liquid secondary market on an exchange include the following: (1) there may be insufficient trading interest in certain options; (2) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (3) trading halts, suspensions, or other restrictions may be imposed with respect to particular classes or series of options, or underlying instruments; (4) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (5) the facilities of an exchange or a clearing corporation may not at all times be adequate to handle current trading volume; or (6) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in the class or series of options) would cease to exist, although outstanding options on the exchange that had been issued by a clearing corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms. There is no assurance that higher than anticipated trading activity or other unforeseen events might not, at times, render certain of the facilities of any of the clearing corporations inadequate, and thereby result in the institution by an exchange of special procedures which may interfere with the timely execution of customers' orders. Additional Futures and Options Contracts Although the fund has no current intention of engaging in futures or options transactions other than those described above, it reserves the right to do so. Such futures and options trading might involve risks which differ from those involved in the futures and options described above. Foreign Futures and Options Participation in foreign futures and foreign options transactions involves the execution and clearing of trades on or subject to the rules of a foreign board of trade. Neither the National Futures Association nor any domestic exchange regulates activities of any foreign boards of trade, including the execution, delivery, and clearing of transactions, or has the power to compel enforcement of the rules of a foreign board of trade or any applicable foreign law. This is true even if the exchange is formally linked to a domestic market so that a position taken on the market may be liquidated by a transaction on another market. Moreover, such laws or regulations will vary depending on the foreign country in which the foreign futures or foreign options transaction occurs. For these reasons, when the fund trades foreign futures or foreign options contracts, it may not be afforded certain of the protective measures provided by the Commodity Exchange Act, the CFTC's regulations, and the rules of the National Futures Association and any domestic exchange, including the right to use reparations proceedings before the CFTC and arbitration proceedings provided by the National Futures Association or any domestic futures exchange. In particular, funds received from the fund for foreign futures or foreign options transactions may not be provided the same protections as funds received for 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. 25 All funds except Equity Index 500, Extended Equity Market Index, and Total Equity Market Index 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 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. 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 26 the price of the currency it has agreed to purchase. Should forward prices increase, the fund will suffer a loss to the extent 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. Federal Tax Treatment of Options, Futures Contracts, and Forward Foreign Exchange Contracts The fund may enter into certain options, futures, forward foreign exchange contracts, and swaps, including options and futures on currencies, which will be treated as Section 1256 contracts or straddles. Transactions 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, forward foreign exchange contracts, and swaps, 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. Entering into certain options, futures contracts, swaps, or foreign forward contracts may result in the "constructive sale" of offsetting stocks or debt securities of the fund. The Internal Revenue Service has issued a notice proposing alternative methods for the inclusion or deduction of certain payments made under swap contracts. Although not anticipated, it is possible that final rules could result in changes to the amounts recorded by the fund, potentially impacting the tax results of the fund. 27 INVESTMENT RESTRICTIONS ------------------------------------------------------------------------------- Fundamental policies may not be changed without the approval of the lesser of (1) 67% of the fund's shares present at a meeting of shareholders if the holders of more than 50% of the outstanding shares are present in person or by proxy or (2) more than 50% of a fund's outstanding shares. Other restrictions in the form of operating policies are subject to change by the fund's Board of Directors without shareholder approval. Any investment restriction which involves a maximum percentage of securities or assets shall not be considered to be violated unless an excess over the percentage occurs immediately after, and is caused by, an acquisition of securities or assets of, or borrowings by, the fund. Calculation of the fund's total assets for compliance with any of the following fundamental or operating policies or any other investment restrictions set forth in the fund's prospectus or Statement of Additional Information will not include cash collateral held in connection with securities lending activities. Fundamental Policies As a matter of fundamental policy, the fund may not: (1) Borrowing Borrow money except that the fund may (i) borrow for non-leveraging, temporary, or emergency purposes; and (ii) engage in reverse repurchase agreements and make other investments or engage in other transactions, which may involve a borrowing, in a manner consistent with the fund's investment objective and program, provided that the combination of (i) and (ii) shall not exceed 33/1//\\/3/\\% of the value of the fund's total assets (including the amount borrowed) less liabilities (other than borrowings) or such other percentage permitted by law. Any borrowings which come to exceed this amount will be reduced in accordance with applicable law. The fund may borrow from banks, other Price Funds, or other persons to the extent permitted by applicable law; (2) Commodities Purchase or sell physical commodities, except that it may enter into futures contracts and options thereon; (3) (a) Industry Concentration (All funds except Health Sciences, Financial Services, and Real Estate 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 (Health Sciences, Financial Services, and Real Estate 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 (i) the Health Sciences Fund will invest more than 25% of its total assets in the health sciences industry as defined in the fund's prospectus; (ii) the Financial Services Fund will invest more than 25% of its total assets in the financial services industry as defined in the fund's prospectus; (iii) the Real Estate Fund will invest more than 25% of its total assets in the real estate industry as defined in the fund's prospectus. (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; All funds except Institutional Large-Cap Growth Fund (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, 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 its total assets, more than 10% of the outstanding voting securities of any issuer 28 would be held by the fund (other than obligations issued or guaranteed by the U.S. government, its agencies, or instrumentalities); All funds (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 (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. Operating Policies As a matter of operating policy, the fund may not: (1) Borrowing Purchase additional securities when money borrowed exceeds 5% of its total assets; (2) Control of Portfolio Companies Invest in companies for the purpose of exercising management or control; (3) Futures Contracts Purchase a futures contract or an option thereon, if, with respect to positions in futures or options on futures which do not represent bona fide hedging, the aggregate initial margin and premiums on such options would exceed 5% of the fund's net asset value; (4) Illiquid Securities Purchase illiquid securities if, as a result, more than 15% of its net assets would be invested in such securities; (5) Investment Companies Purchase securities of open-end or closed-end investment companies except (i) in compliance with the 1940 Act; or (ii) securities of the T. Rowe Price Reserve Investment or Government Reserve Investment Funds; (6) Margin Purchase securities on margin, except (i) for use of short-term credit necessary for clearance of purchases of portfolio securities and (ii) it may make margin deposits in connection with futures contracts or other permissible investments; 29 (7) Mortgaging Mortgage, pledge, hypothecate, or, in any manner, transfer any security owned by the fund as security for indebtedness except as may be necessary in connection with permissible borrowings or investments and then such mortgaging, pledging, or hypothecating may not exceed 33/1//\\/3/\\% of the fund's total assets at the time of borrowing or investment; (8) Oil and Gas Programs Purchase participations or other direct interests in or enter into leases with respect to oil, gas, or other mineral exploration or development programs if, as a result thereof, more than 5% of the value of the total assets of the fund would be invested in such programs; (9) Options, etc. Invest in puts, calls, straddles, spreads, or any combination thereof, except to the extent permitted by the prospectus and Statement of Additional Information; (10) Short Sales Effect short sales of securities; or (11) Warrants Invest in warrants if, as a result thereof, more than 10% of the value of the net assets of the fund would be invested in warrants. For Blue Chip Growth, Capital Opportunity, Developing Technologies, Diversified Small-Cap Growth, Financial Services, Global Technology, Health Sciences, Media & Telecommunications, Mid-Cap Value, Real Estate, and Value 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 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. The fund is governed by a Board of Directors that meets regularly to review fund 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 and T. Rowe Price International. The directors who are also employees or officers of T. Rowe Price are referred to as inside or interested directors. Each Board currently has three committees, described in the following paragraphs. The Committee of Independent Directors, which consists of all of the independent directors of the funds, is responsible for selecting candidates for election as independent directors to fill vacancies on each fund's Board. F. Pierce Linaweaver is chairman of the committee. The committee will consider written recommendations from shareholders for possible nominees. Shareholders should submit their recommendations to the secretary of the funds. The committee held no formal meetings during the last fiscal year. The Joint Audit Committee is comprised of David K. Fagin, F. Pierce Linaweaver, John G. Schreiber, and Paul M. Wythes, all independent directors. The Audit Committee holds two regular meetings during each fiscal year, at which time it meets with the independent accountants of the T. Rowe Price funds to review: (1) the services provided; (2) the findings of the most recent audit; (3) management's response to the findings of the most recent audit; (4) the scope of the audit to be performed; (5) the accountants' fees; and (6) any accounting or other questions relating to particular areas of the T. Rowe Price funds' operations or the operations of parties dealing with the T. Rowe Price funds, as circumstances indicate. The Audit Committee for the funds met three times in 2001. All members of the committee participated in the meetings. 30 The fund's Executive Committee, consisting of the fund's interested directors, has been authorized by its respective Board of Directors to exercise all powers of the Board to manage the fund in the intervals between meetings of the Board, except the powers prohibited by statute from being delegated. All funds Independent Directors*
Number of Term of Office(a) Portfolios and Length of Time in Fund Position(s) Served Principal Occupation(s) Complex Other Directorships of Name, Address, and Held with During Past 5 Years(b) Overseen by Public Companies Date of Birth Fund Director - --------------------------------------------------------------------------------------------------------------------------- Calvin W. Burnett, Director Director since President, Coppin 97 Provident Bank of Ph.D. later of State College Maryland 100 East Pratt Street 2001 Baltimore, MD 21202 or 3/16/32 inception of fund(c) - --------------------------------------------------------------------------------------------------------------------------- Anthony W. Deering Director Director since Director, Chairman 97 The Rouse Company 100 East Pratt Street later of of the Board, Baltimore, MD 21202 2001 President, and Chief 1/28/45 or Executive Officer, inception of The Rouse fund(c) Company, real estate developers - --------------------------------------------------------------------------------------------------------------------------- Donald W. Dick, Jr. Director Director since Principal, 97 None 100 East Pratt Street later of EuroCapital Baltimore, MD 21202 1982 Advisors, LLC, an 1/27/43 or acquisition and inception of management fund(c) advisory firm - --------------------------------------------------------------------------------------------------------------------------- David K. Fagin Director Director since Director, Dayton 97 Dayton Mining 100 East Pratt Street later of Mining Corporation Corporation, Golden Baltimore, MD 21202 1988 (6/98 to present), Star Resources Ltd., 4/9/38 or Golden Star and Canyon inception of Resources Ltd., and Resources, Corp. fund(c) Canyon Resources, Corp. (5/00 to present); Chairman and President, Nye Corporation - --------------------------------------------------------------------------------------------------------------------------- F. Pierce Linaweaver Director Director since President, F. Pierce 97 None 100 East Pratt Street later of Linaweaver & Baltimore, MD 21202 2001 Associates, Inc., 8/22/34 or consulting inception of environmental & fund(c) civil engineers - --------------------------------------------------------------------------------------------------------------------------- Hanne M. Merriman Director Director since Retail Business 97 Ann Taylor Stores 100 East Pratt Street later of Consultant Corporation, Baltimore, MD 21202 1994 Ameren Corp., 11/16/41 or Finlay Enterprises, inception of Inc., The Rouse fund(c) Company, and US Airways Group, Inc. - --------------------------------------------------------------------------------------------------------------------------- John G. Schreiber Director Director since Owner/President, 97 AMLI Residential 100 East Pratt Street later of Centaur Capital Properties Trust, Baltimore, MD 21202 2001 Partners, Inc., a real Host Marriott 10/21/46 or estate investment Corporation, and inception of company; Senior The Rouse Company, fund(c) Advisor and Partner, real estate developers Blackstone Real Estate Advisors, L.P. - --------------------------------------------------------------------------------------------------------------------------- Hubert D. Vos Director Director since Owner/President, 97 None 100 East Pratt Street later of Stonington Capital Baltimore, MD 21202 1986 Corporation, a 8/2/33 or private investment inception of company fund(c) - --------------------------------------------------------------------------------------------------------------------------- Paul M. Wythes Director Director since Founding Partner of 97 Teltone Corporation 100 East Pratt Street later of Sutter Hill Ventures, Baltimore, MD 21202 1982 a venture capital 6/23/33 or limited partnership, inception of providing equity fund(c) capital to young high technology companies throughout the United States - ---------------------------------------------------------------------------------------------------------------------------
31 * All information about the directors was current as of December 31, 2001. (a) Each director serves until election of a successor. 32 (b) Unless otherwise indicated, the Independent Directors have been engaged in their respective principal occupations for at least five years. (c) See fund inception dates in the chart below.
Fund Inception Dates Fund Inception Date - ---- -------------- Balanced 12/31/39 Blue Chip Growth 06/30/93 Blue Chip Growth Fund-Advisor Class 03/31/00 Capital Appreciation 06/30/86 Capital Opportunity 11/30/94 Developing Technologies 08/31/00 Diversified Small-Cap Growth 06/30/97 Dividend Growth 12/30/92 Equity Income 10/31/85 Equity Income Fund-Advisor Class 03/31/00 Equity Index 500 03/30/90 Extended Equity Market Index 01/30/98 Financial Services 09/30/96 Global Technology 09/29/00 Growth & Income 12/21/82 Growth Stock 04/11/50 Growth Stock Fund-Advisor Class 12/31/01 Health Sciences 12/29/95 Institutional Large-Cap Growth 10/31/01 Institutional Large-Cap Value 03/31/00 Institutional Mid-Cap Equity Growth 07/31/96 Institutional Small-Cap Stock 03/31/00 Media & Telecommunications 10/13/93 Mid-Cap Growth 06/30/92 Mid-Cap Growth Fund-Advisor Class 03/31/00 Mid-Cap Value 06/28/96 New America Growth 09/30/85 New Era 01/20/69 New Horizons 06/03/60 Real Estate 10/31/97 Science & Technology 09/30/87 Science & Technology Fund-Advisor Class 03/31/00 Small-Cap Stock 06/01/56 Small-Cap Stock Fund-Advisor Class 03/31/00 Small-Cap Value 06/30/88 Small-Cap Value Fund-Advisor Class 03/31/00 Total Equity Market Index 01/30/98 Value 09/30/94 Value Fund-Advisor Class 03/31/00 - ---------------------------------------------------------
33 Inside Directors*
Term of Number of O Office( Portfolios ther a in Fund Director Position(s) ) Principal Occupation(s) Complex ships of Name, Address, and Held with and Length During Past 5 Years Overseen Public Date of Birth Fund of Time (b) by Director Companies Served - --------------------------------------------------------------------------------------------------
James A. C. Kennedy Director Director since Managing Director and 32 None 100 East Pratt Street later of 1992 Director, T. Rowe Baltimore, MD 21202 or inception of Price Associates, 8/15/53 fund(c) Inc. and T. Rowe Price Group, Inc. Vice President, Balanced Fund, Institutional Equity Funds, Mid-Cap Value Fund, New Era Fund, and Small-Cap Stock Fund - -----------------------------------------------------------------------------------------------
John H. Laporte Director Director since Managing Director, T. Rowe 15 None 100 East Pratt Street later of Price Associates, Inc.; Baltimore, MD 21202 1985 Managing Director and 7/26/45 Director, T. Rowe Price Group, or inception of fund( Inc. c President, New Horizons ) Fund; Vice President, Diversified Small-Cap Growth Fund, Health Sciences Fund, and New America Growth Fund - ---------------------------------------------------------------------------------------------------------
34
James S. Riepe Director Director since Vice Chairman of the Board, 97 None 100 East Pratt Street later of Director and Managing Baltimore, MD 21202 1982 Director, T. Rowe Price 6/25/43 Associates, Inc. or inception and T. Rowe of fund( Price Group, Inc.; Chairman c of the Board and Director, ) T. Rowe Price Investment Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and T. Rowe Price Services, Inc.; Chairman of the Board, Director, President, and Trust Officer, T. Rowe Price Trust Company; Director, T. Rowe Price International, Inc., T. Rowe Price Global Asset Management Limited, and T. Rowe Price Global Investment Services Limited Chairman of the Board, Institutional Equity Funds; Vice President, all funds - ----------------------------------------------------------------------------------------------------------
M. David Testa Director Director since Vice Chairman of the Board, 97 None 100 East Pratt Street later of Chief Investment Officer, Baltimore, MD 21202 1991 Director, and Managing 4/22/44 Director, T. Rowe Price Group, or inception Inc.; Chief Investment Officer, of fund( Director, and Managing c Director, T. Rowe Price ) Associates, Inc. ; Chairman, T. Rowe Price Global Asset Management Limited; Vice President and Director, T. Rowe Price Trust Company; Director, T. Rowe Price Global Investment Services Limited and T. Rowe Price International, Inc. President, Institutional Equity Funds; Vice President, Balanced Fund and Capital Appreciation Fund - ----------------------------------------------------------------------------------------------------------
* All information about the directors was current as of December 31, 2001. (a) Each director serves until election of a successor. (b) Unless otherwise indicated, the Independent Directors have been engaged in their respective principal occupations for at least five years. (c) See fund inception dates in the chart above. 35 Officers/(a)/
Name, Date of Birth, Address, and Principal Occupations Position(s) Held With Fund - ------------------------------------------------------------------------------- Marcy L. Arnold, 8/5/59 Vice President, Institutional Vice President, T. Rowe Price Associates, Equity Funds, Mid-Cap Value Fund, Inc. and T. Rowe Price Group, Inc. New Era Fund, and Small-Cap Stock Fund - ------------------------------------------------------------------------------- Preston G. Athey, 7/17/49 President, Small-Cap Value Fund; Managing Director, T. Rowe Price Vice President, Institutional Associates, Inc. and T. Rowe Price Group, Equity Funds, Mid-Cap Value Fund, Inc.; Vice President, T. Rowe Price Trust and Small-Cap Stock Fund Company - ------------------------------------------------------------------------------- Eugene F. Bair, 12/11/69 Vice President, Index Trust - ------------------------------------------------------------------------------- Carol G. Bartha, 1/4/42 Assistant Vice President, Growth Stock Fund - ------------------------------------------------------------------------------- Marc L. Baylin, 11/17/67 President, New America Growth Fund; Vice President, T. Rowe Price Associates, Vice President, Institutional Inc. and T. Rowe Price Group, Inc. Equity Funds, Mid-Cap Growth Fund, and New Horizons Fund - ------------------------------------------------------------------------------- Brian W.H. Berghuis, 10/12/58 President, Mid-Cap Growth Fund; Managing Director, T. Rowe Price Executive Vice President, Associates, Inc. and T. Rowe Price Group, Institutional Equity Funds; Vice Inc. President, Blue Chip Growth Fund, Growth Stock Fund, New America Growth Fund, and New Horizons Fund - ------------------------------------------------------------------------------- Stephen W. Boesel, 12/28/44 President, Capital Appreciation Managing Director, T. Rowe Price Fund; Vice President, Balanced Associates, Inc. and T. Rowe Price Group, Fund, Equity Income Fund, Financial Inc.; Vice President, T. Rowe Price Trust Services Fund, Growth & Income Company Fund, Institutional Equity Funds, Real Estate Fund, and Value Fund - ------------------------------------------------------------------------------- Andrew M. Brooks, 2/16/56 Vice President, Equity Income Fund Vice President, T. Rowe Price Associates, and Value Fund Inc. and T. Rowe Price Group, Inc. - ------------------------------------------------------------------------------- Brace C. Brooks, 1/10/67 Vice President, Mid-Cap Value Fund - ------------------------------------------------------------------------------- Joseph A. Carrier, 12/30/60 Treasurer, all funds Vice President, T. Rowe Price Associates, Inc., T. Rowe Price Group, Inc., and T. Rowe Price Investment Services, Inc. - ------------------------------------------------------------------------------- Arthur B. Cecil III, 9/15/42 Vice President, Capital Vice President, T. Rowe Price Associates, Appreciation Fund, Dividend Growth Inc. and T. Rowe Price Group, Inc. Fund, Equity Income Fund, and Growth & Income Fund - ------------------------------------------------------------------------------- Kara Cheseby, 10/9/63 Vice President, Institutional Vice President, T. Rowe Price Associates, Equity Funds, Mid-Cap Value Fund, Inc. and T. Rowe Price Group, Inc. and Value Fund - ------------------------------------------------------------------------------- Stephanie C. Clancy, 12/19/64 Vice President, Capital Vice President, T. Rowe Price Associates, Appreciation Fund, Dividend Growth Inc. and T. Rowe Price Group, Inc. Fund, Global Technology Fund, and Institutional Equity Funds - ------------------------------------------------------------------------------- Vice President, Developing Giri Devulapally, 11/18/67 Technologies Fund, Dividend Growth Vice President, T. Rowe Price Associates, Fund, Equity Income Fund, Global Inc. and T. Rowe Price Group, Inc. Technology Fund, Growth & Income Fund, Media & Telecommunications Fund, New America Growth Fund, and Science & Technology Fund - ------------------------------------------------------------------------------- Wendy R. Diffenbaugh, 10/2/53 Vice President, Balanced Fund and Assistant Vice President, T. Rowe Price Index Trust Associates, Inc. - ------------------------------------------------------------------------------- Anna M. Dopkin, 9/5/67 President, Financial Services Fund; Vice President, T. Rowe Price Associates, Vice President, Growth Stock Fund, Inc. and T. Rowe Price Group, Inc. Institutional Equity Funds, Mid-Cap Growth Fund, New Horizons Fund, and Real Estate Fund - ------------------------------------------------------------------------------- Donald J. Easley, 11/28/71 Vice President, Blue Chip Growth Fund, Dividend Growth Fund, and Science & Technology Fund - ------------------------------------------------------------------------------- Hugh M. Evans III, 5/17/66 Vice President, Institutional Vice President, T. Rowe Price Associates, Equity Funds, New Era Fund, Inc. and T. Rowe Price Group, Inc. Small-Cap Stock Fund, and Small-Cap Value Fund - ------------------------------------------------------------------------------- John R. Ford, 11/25/57 Vice President, Growth Stock Fund Managing Director, T. Rowe Price Associates, Inc. and T. Rowe Price Group, Inc.; Chief Investment Officer, Director, and Vice President, T. Rowe Price International, Inc. - ------------------------------------------------------------------------------- Abigail J. Fulton, 12/19/69 Vice President, Financial Services Vice President, T. Rowe Price Group, Inc. Fund - ------------------------------------------------------------------------------- President, Global Technology Fund Robert N. Gensler, 10/18/57 and Media & Telecommunications Vice President, T. Rowe Price Associates, Fund; Vice President, Blue Chip Inc. and T. Rowe Price Group, Inc. Growth Fund, Developing Technologies Fund, Growth Stock Fund, Institutional Equity Funds, Mid-Cap Growth Fund, New Horizons Fund, and Science & Technology Fund - ------------------------------------------------------------------------------- Vice President, Blue Chip Growth Eric M. Gerster, 3/23/71 Fund, Developing Technologies Fund, Vice President, T. Rowe Price Associates, Global Technology Fund, Growth Inc. and T. Rowe Price Group, Inc. Stock Fund, Media & Telecommunications Fund, Mid-Cap Growth Fund, New America Growth Fund, New Horizons Fund, and Science & Technology Fund - ------------------------------------------------------------------------------- David R. Giroux, 6/8/75 Vice President, Mid-Cap Value Fund Assistant Vice President, T. Rowe Price and Value Fund Associates, Inc. - ------------------------------------------------------------------------------- Jill L. Hauser, 6/23/58 Vice President, Blue Chip Growth Vice President, T. Rowe Price Associates, Fund, Developing Technologies Fund, Inc. and T. Rowe Price Group, Inc. Global Technology Fund, Growth Stock Fund, New Horizons Fund, and Science & Technology Fund - ------------------------------------------------------------------------------- Francies W. Hawks, 2/2/44 Assistant Vice President, New Assistant Vice President, T. Rowe Price Horizons Fund and Small-Cap Value Associates, Inc. Fund - ------------------------------------------------------------------------------- Ann M. Holcomb, 1/16/72 Vice President, Index Trust Assistant Vice President, T. Rowe Price Associates, Inc. - ------------------------------------------------------------------------------- Michael W. Holton, 9/25/68 Vice President, Capital Opportunity Vice President, T. Rowe Price Associates, Fund, Dividend Growth Fund, Inc. and T. Rowe Price Group, Inc. Financial Services Fund, Growth & Income Fund, Institutional Equity Funds, and Value Fund - ------------------------------------------------------------------------------- Henry H. Hopkins, 12/23/42 Vice President, all funds Managing Director, T. Rowe Price Associates, Inc.; 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 President, Dividend Growth Fund; Vice President, T. Rowe Price Associates, Vice President, Institutional Inc. and T. Rowe Price Group, Inc. Equity Funds - ------------------------------------------------------------------------------- Stephen C. Jansen, 12/12/68 Vice President, Blue Chip Growth Vice President, T. Rowe Price Associates, Fund, Dividend Growth Fund, Global Inc. and T. Rowe Price Group, Inc. Technology Fund, Growth & Income Fund, Growth Stock Fund, and Media & Telecommunications Fund - ------------------------------------------------------------------------------- President, Health Sciences Fund; Kris H. Jenner, 2/5/62 Vice President, Blue Chip Growth Vice President, T. Rowe Price Associates, Fund, Growth Stock Fund, Inc. and T. Rowe Price Group, Inc. Institutional Equity Funds, Mid-Cap Growth Fund, New Horizons Fund, and Small-Cap Stock Fund - ------------------------------------------------------------------------------- Lewis Johnson, 9/20/69 Vice President, New Era Fund - ------------------------------------------------------------------------------- Terral M. Jordan, 8/13/45 Vice President, Developing Vice President, T. Rowe Price Associates, Technologies Fund and Science & Inc. and T. Rowe Price Group, Inc. Technology Fund - ------------------------------------------------------------------------------- Susan J. Klein, 4/18/50 Vice President, Financial Services Assistant Vice President, T. Rowe Price Fund and Small-Cap Value Fund Associates, Inc. - ------------------------------------------------------------------------------- J. Jeffrey Lang, 1/10/62 Vice President, all funds Vice President, T. Rowe Price Associates, Inc. and T. Rowe Price Trust Company - ------------------------------------------------------------------------------- David M. Lee, 11/13/62 President, Real Estate Fund; Vice Vice President, T. Rowe Price Associates, President, Dividend Growth Fund and Inc. and T. Rowe Price Group, Inc. New Era Fund - ------------------------------------------------------------------------------- Christopher R. Leonard, 1/11/73 Vice President, Blue Chip Growth Fund and Health Sciences Fund - ------------------------------------------------------------------------------- Nathaniel S. Levy, 7/13/62 Vice President, Balanced Fund Vice President, T. Rowe Price Associates, Inc. and T. Rowe Price Group, Inc. - ------------------------------------------------------------------------------- John D. Linehan, 1/21/65 Vice President, Equity Income Fund, Vice President, T. Rowe Price Associates, Institutional Equity Funds, New Era Inc., T. Rowe Price Group, Inc., and T. Fund, and Value Fund Rowe Price International, Inc. - ------------------------------------------------------------------------------- Patricia B. Lippert, 1/12/53 Secretary, all funds Assistant Vice President, T. Rowe Price Associates, Inc. and T. Rowe Price Investment Services, Inc. - ------------------------------------------------------------------------------- Robert J. Marcotte, 3/6/62 Vice President, Institutional Vice President, T. Rowe Price Associates, Equity Funds, Mid-Cap Growth Fund, Inc. and T. Rowe Price Group, Inc. and New America Growth Fund - ------------------------------------------------------------------------------- Gregory A. McCrickard, 10/19/58 President, Mid-Cap Value Fund and Managing Director, T. Rowe Price Small-Cap Stock Fund; Executive Associates, Inc. and T. Rowe Price Group, Vice President, Institutional Inc.; Vice President, T. Rowe Price Trust Equity Funds; Vice President, Company Small-Cap Value Fund - ------------------------------------------------------------------------------- David S. Middleton, 1/18/56 Controller, all funds Vice President, T. Rowe Price Associates, Inc., T. Rowe Price Group, Inc., and T. Rowe Price Trust Company - ------------------------------------------------------------------------------- Vice President, Institutional Joseph M. Milano, 9/14/72 Equity Funds, Mid-Cap Growth Fund, Vice President, T. Rowe Price Associates, Mid-Cap Value Fund, New America Inc. and T. Rowe Price Group, Inc. Growth Fund, New Horizons Fund, Small-Cap Stock Fund, and Small-Cap Value Fund - ------------------------------------------------------------------------------- Raymond A. Mills, 12/3/60 Vice President, Balanced Fund and Vice President, T. Rowe Price Associates, Index Trust Inc. and T. Rowe Price Group, Inc. - ------------------------------------------------------------------------------- Mary C. Munoz, 12/2/62 Vice President, Index Trust Assistant Vice President, T. Rowe Price Associates, Inc. - ------------------------------------------------------------------------------- Edmund M. Notzon III, 10/1/45 Vice President, Balanced Fund Managing Director, T. Rowe Price Associates, Inc. and T. Rowe Price Group, Inc.; Vice President, T. Rowe Price Investment Services, Inc. and T. Rowe Price Trust Company - ------------------------------------------------------------------------------- Charles M. Ober, 4/20/50 President, New Era Fund; Vice Vice President, T. Rowe Price Associates, President, Capital Appreciation Inc. and T. Rowe Price Group, Inc. Fund and Real Estate Fund - ------------------------------------------------------------------------------- Curt J. Organt, 1/5/68 Vice President, Small-Cap Stock Fund - ------------------------------------------------------------------------------- Charles G. Pepin, 4/23/66 Vice President, Health Sciences Vice President, T. Rowe Price Fund, Institutional Equity Funds, Associates, Inc. and T. Rowe Price Group, Mid-Cap Value Fund, New Horizons Inc. Fund, Small-Cap Stock Fund, and Small-Cap Value Fund - ------------------------------------------------------------------------------- Donald J. Peters, 7/3/59 Vice President, Diversified Vice President, T. Rowe Price Associates, Small-Cap Growth Fund and Dividend Inc. and T. Rowe Price Group, Inc. Growth Fund - ------------------------------------------------------------------------------- D. James Prey III, 11/26/59 Vice President, Global Technology Vice President, T. Rowe Price Associates, Fund, Media & Telecommunications Inc. and T. Rowe Price Group, Inc. Fund, and Science & Technology Fund - ------------------------------------------------------------------------------- Larry J. Puglia, 8/25/60 President, Blue Chip Growth Fund; Managing Director, T. Rowe Price Vice President, Dividend Growth Associates, Inc. and T. Rowe Price Group, Fund, Financial Services Fund, and Inc. Growth Stock Fund - ------------------------------------------------------------------------------- Karen M. Regan, 4/16/67 Vice President, Growth & Income Fund and Real Estate Fund - ------------------------------------------------------------------------------- Brian C. Rogers, 6/27/55 President, Equity Income Fund and Managing Director, T. Rowe Price; Value Fund; Executive Vice Director and Managing Director, T. Rowe President, Institutional Equity Price Group, Inc.; Vice President, T. Funds; Vice President, Capital Rowe Price Trust Company Appreciation Fund and Real Estate Fund - ------------------------------------------------------------------------------- Philip W. Ruedi, 7/2/71 Vice President, New Horizons Fund Vice President, T. Rowe Price Associates, Inc. and T. Rowe Price Group, Inc. - ------------------------------------------------------------------------------- Robert W. Sharps, 6/10/71 President, Growth & Income Fund, Vice President, T. Rowe Price Associates, Growth & Income Fund; Vice Inc. and T. Rowe Price Group, Inc. President, Blue Chip Growth Fund, Financial Services Fund, and Institutional Equity Funds - ------------------------------------------------------------------------------- Robert W. Smith, 4/11/61 President, Growth Stock Fund; Managing Director, T. Rowe Price and T. Executive Vice President, Rowe Price Group, Inc.; Vice President, Institutional Equity Funds; Vice T. Rowe Price International, Inc. President, Blue Chip Growth Fund, Growth & Income Fund, Media & Telecommunications Fund, and New America Growth Fund - ------------------------------------------------------------------------------- Michael F. Sola, 7/21/69 President, Developing Technologies Vice President, T. Rowe Price and T. Rowe Fund and Science & Technology Fund; Price Group, Inc. Vice President, Institutional Equity Funds, Mid-Cap Growth Fund, New Horizons Fund, and Small-Cap Stock Fund - ------------------------------------------------------------------------------- William J. Stromberg, 3/10/60 President, Capital Opportunity Managing Director, T. Rowe Price and T. Fund; Vice President, Blue Chip Rowe Price Group, Inc. Growth Fund, Dividend Growth Fund, Equity Income Fund, Financial Services Fund, and Real Estate Fund - ------------------------------------------------------------------------------- Dean Tenerelli, 12/7/64 Vice President, Media & Vice President, T. Rowe Price Group, Inc. Telecommunications Fund and T. Rowe Price International, Inc. - ------------------------------------------------------------------------------- Justin Thomson, 1/14/68 Vice President, Developing Vice President, T. Rowe Price Group, Inc. Technologies Fund - ------------------------------------------------------------------------------- Mark J. Vaselkiv, 7/22/58 Vice President, Balanced Fund Managing Director, T. Rowe Price Associates, Inc. and T. Rowe Price Group, Inc. - ------------------------------------------------------------------------------- J. David Wagner, 2/25/74 Vice President, Financial Services Fund, Mid-Cap Value Fund, and New Horizons Fund - ------------------------------------------------------------------------------- John F. Wakeman, 11/25/62 Executive Vice President, Mid-Cap Vice President, T. Rowe Price and T. Rowe Growth Fund; Vice President, Price Group, Inc. Institutional Equity Funds and New Horizons Fund - ------------------------------------------------------------------------------- Executive Vice President, Mid-Cap Value Fund and New Era Fund; Vice David J. Wallack, 7/2/60 President, Capital Appreciation Vice President, T. Rowe Price Associates, Fund, Dividend Growth Fund, Inc. and T. Rowe Price Group, Inc. Institutional Equity Funds, Small-Cap Value Fund, and Value Fund - ------------------------------------------------------------------------------- Dale E. West, 1/21/69 Vice President, Media & Vice President, T. Rowe Price Group, Inc. Telecommunications Fund and T. Rowe Price International, Inc. - ------------------------------------------------------------------------------- Richard T. Whitney, 5/7/58 President, Balanced Fund, Managing Director, T. Rowe Price and T. Diversified Small-Cap Growth Fund, Rowe Price Group, Inc.; Vice President, and Index Trust; Vice President, T. Rowe Price Trust Company and Capital Opportunity Fund, T. Rowe Price International, Inc. Institutional Equity Funds, and Small-Cap Stock Fund - ------------------------------------------------------------------------------- Paul W. Wojcik, 11/28/70 Executive Vice President, Vice President, T. Rowe Price Associates, Diversified Small-Cap Growth Fund Inc. and T. Rowe Price Group, Inc. - ------------------------------------------------------------------------------- R. Candler Young, 9/28/71 Vice President, Growth & Income Assistant Vice President, T. Rowe Price Fund, Mid-Cap Growth Fund, and New Associates, Inc. America Growth Fund - -------------------------------------------------------------------------------
36 37 38 39 40 (a) Unless otherwise indicated, the officers have been employees of T. Rowe Price or T. Rowe Price International for at least five years. Director Compensation Table The fund does not pay pension or retirement benefits to its officers or directors. Also, any director 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. 41
Name of Person, Aggregate Compensation From Total Compensation From Fund and Position Fund(a) Fund Complex Paid to Directors(b) - -------------------------------- -------------------------------------------- --------------------------------- - ------------------------------------------------------------------------------------------------------------------- Balanced Fund $ Calvin W. Burnett, Ph.D./c/ 262 $110,000 Anthony W. Deering/c/ 262 110,000 Donald W. Dick, Jr. 1,803 110,000 David K. Fagin 2,553 112,000 F. Pierce Linaweaver/c/ 311 113,000 Hannes M. Merriman 2,521 110,000 John G. Schreiber/c/ 311 113,000 Hubert D. Vos 2,594 111,000 Paul M. Wythes 1,742 113,000 - ------------------------------------------------------------------------------------------------------------------- Blue Chip Growth Fund $ Calvin W. Burnett, Ph.D./c/ 715 $110,000 Anthony W. Deering/c/ 715 110,000 Donald W. Dick, Jr. 3,973 110,000 David K. Fagin 7,057 112,000 F. Pierce Linaweaver/c/ 911 113,000 Hannes M. Merriman 6,925 110,000 John G. Schreiber/c/ 911 113,000 Hubert D. Vos 7,186 111,000 Paul M. Wythes 4,324 113,000 - ------------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund $ Calvin W. Burnett, Ph.D./c/ 223 $110,000 Anthony W. Deering/c/ 223 110,000 Donald W. Dick, Jr. 1,499 110,000 David K. Fagin 1,974 112,000 F. Pierce Linaweaver/c/ 263 113,000 Hannes M. Merriman 1,947 110,000 John G. Schreiber/c/ 263 113,000 Hubert D. Vos 1,986 111,000 Paul M. Wythes 1,558 113,000 - ------------------------------------------------------------------------------------------------------------------- Capital Opportunity Fund $ Calvin W. Burnett, Ph.D./c/ 100 $110,000 Anthony W. Deering/c/ 100 110,000 Donald W. Dick, Jr. 863 110,000 David K. Fagin 998 112,000 F. Pierce Linaweaver/c/ 102 113,000 Hannes M. Merriman 997 110,000 John G. Schreiber/c/ 102 113,000 Hubert D. Vos 1,000 111,000 Paul M. Wythes 867 113,000 - ------------------------------------------------------------------------------------------------------------------- Developing Technologies Fund $ Calvin W. Burnett, Ph.D./c/ 95 $110,000 Anthony W. Deering/c/ 95 110,000 Donald W. Dick, Jr. 932 110,000 David K. Fagin 940 112,000 F. Pierce Linaweaver/c/ 96 113,000 Hannes M. Merriman 940 110,000 John G. Schreiber/c/ 96 113,000 Hubert D. Vos 940 111,000 Paul M. Wythes 933 113,000 - ------------------------------------------------------------------------------------------------------------------- Diversified Small-Cap Growth Fund $ Calvin W. Burnett, Ph.D./c/ 99 $110,000 Anthony W. Deering/c/ 99 110,000 Donald W. Dick, Jr. 958 110,000 David K. Fagin 987 112,000 F. Pierce Linaweaver/c/ 101 113,000 Hannes M. Merriman 986 110,000 John G. Schreiber/c/ 101 113,000 Hubert D. Vos 987 111,000 Paul M. Wythes 961 113,000 - ------------------------------------------------------------------------------------------------------------------- Dividend Growth Fund $ Calvin W. Burnett, Ph.D./c/ 158 $110,000 Anthony W. Deering/c/ 158 110,000 Donald W. Dick, Jr. 1,263 110,000 David K. Fagin 1,553 112,000 F. Pierce Linaweaver/c/ 178 113,000 Hannes M. Merriman 1,541 110,000 John G. Schreiber/c/ 178 113,000 Hubert D. Vos 1,566 111,000 Paul M. Wythes 1,299 113,000 - ------------------------------------------------------------------------------------------------------------------- Equity Income Fund Calvin W. Burnett, Ph.D./c/ 833 $110,000 Anthony W. Deering/c/ 833 110,000 Donald W. Dick, Jr. 5,351 110,000 David K. Fagin 8,666 112,000 F. Pierce Linaweaver/c/ 931 113,000 Hannes M. Merriman 8,601 110,000 John G. Schreiber/c/ 931 113,000 Hubert D. Vos 8,921 111,000 Paul M. Wythes 5,682 113,000 - ------------------------------------------------------------------------------------------------------------------- Equity Index 500 Fund $ Calvin W. Burnett, Ph.D./c/ 416 $110,000 Anthony W. Deering/c/ 416 110,000 Donald W. Dick, Jr. 2,656 110,000 David K. Fagin 4,128 112,000 F. Pierce Linaweaver/c/ 485 113,000 Hannes M. Merriman 4,082 110,000 John G. Schreiber/c/ 485 113,000 Hubert D. Vos 4,215 111,000 Paul M. Wythes 2,813 113,000 - ------------------------------------------------------------------------------------------------------------------- Extended Equity Market Index Fund $ Calvin W. Burnett, Ph.D./c/ 99 $110,000 Anthony W. Deering/c/ 99 110,000 Donald W. Dick, Jr. 959 110,000 David K. Fagin 991 112,000 F. Pierce Linaweaver/c/ 101 113,000 Hannes M. Merriman 989 110,000 John G. Schreiber/c/ 101 113,000 Hubert D. Vos 992 111,000 Paul M. Wythes 963 113,000 - ------------------------------------------------------------------------------------------------------------------- Financial Services Fund $ Calvin W. Burnett, Ph.D./c/ 121 $110,000 Anthony W. Deering/c/ 121 110,000 Donald W. Dick, Jr. 1,074 110,000 David K. Fagin 1,202 112,000 F. Pierce Linaweaver/c/ 127 113,000 Hannes M. Merriman 1,198 110,000 John G. Schreiber/c/ 127 113,000 Hubert D. Vos 1,210 111,000 Paul M. Wythes 1,087 113,000 - ------------------------------------------------------------------------------------------------------------------- Global Technology Fund $ Calvin W. Burnett, Ph.D./c/ 100 $110,000 Anthony W. Deering/c/ 100 110,000 Donald W. Dick, Jr. 1,530 110,000 David K. Fagin 1,043 112,000 F. Pierce Linaweaver/c/ 148 113,000 Hannes M. Merriman 1,011 110,000 John G. Schreiber/c/ 148 113,000 Hubert D. Vos 1,030 111,000 Paul M. Wythes 1,581 113,000 - ------------------------------------------------------------------------------------------------------------------- Growth & Income Fund $ Calvin W. Burnett, Ph.D./c/ 317 $110,000 Anthony W. Deering/c/ 317 110,000 Donald W. Dick, Jr. 2,179 110,000 David K. Fagin 3,259 112,000 F. Pierce Linaweaver/c/ 367 113,000 Hannes M. Merriman 3,225 110,000 John G. Schreiber/c/ 367 113,000 Hubert D. Vos 3,329 111,000 Paul M. Wythes 2,299 113,000 - ------------------------------------------------------------------------------------------------------------------- Growth Stock Fund $ Calvin W. Burnett, Ph.D./c/ 528 $110,000 Anthony W. Deering/c/ 528 110,000 Donald W. Dick, Jr. 3,245 110,000 David K. Fagin 5,230 112,000 F. Pierce Linaweaver/c/ 643 113,000 Hannes M. Merriman 5,153 110,000 John G. Schreiber/c/ 643 113,000 Hubert D. Vos 5,336 111,000 Paul M. Wythes 3,476 113,000 - ------------------------------------------------------------------------------------------------------------------- Health Sciences Fund $ Calvin W. Burnett, Ph.D./c/ 180 $110,000 Anthony W. Deering/c/ 180 110,000 Donald W. Dick, Jr. 1,333 110,000 David K. Fagin 1,671 112,000 F. Pierce Linaweaver/c/ 199 113,000 Hannes M. Merriman 1,659 110,000 John G. Schreiber/c/ 199 113,000 Hubert D. Vos 1,689 111,000 Paul M. Wythes 1,371 113,000 - ------------------------------------------------------------------------------------------------------------------- Institutional Large-Cap Growth Fund(d) $ Calvin W. Burnett, Ph.D./c/ 93 $110,000 Anthony W. Deering/c/ 93 110,000 Donald W. Dick, Jr. 93 110,000 David K. Fagin 96 112,000 F. Pierce Linaweaver/c/ 98 113,000 Hannes M. Merriman 92 110,000 John G. Schreiber/c/ 98 113,000 Hubert D. Vos 95 111,000 Paul M. Wythes 98 113,000 - ------------------------------------------------------------------------------------------------------------------- Institutional Large-Cap Value Fund $ Calvin W. Burnett, Ph.D./c/ 93 $110,000 Anthony W. Deering/c/ 93 110,000 Donald W. Dick, Jr. 923 110,000 David K. Fagin 925 112,000 F. Pierce Linaweaver/c/ 93 113,000 Hannes M. Merriman 925 110,000 John G. Schreiber/c/ 93 113,000 Hubert D. Vos 925 111,000 Paul M. Wythes 924 113,000 - ------------------------------------------------------------------------------------------------------------------- Institutional Mid-Cap Equity Growth Fund $ Calvin W. Burnett, Ph.D./c/ 120 $110,000 Anthony W. Deering/c/ 120 110,000 Donald W. Dick, Jr. 1,059 110,000 David K. Fagin 1,174 112,000 F. Pierce Linaweaver/c/ 126 113,000 Hannes M. Merriman 1,170 110,000 John G. Schreiber/c/ 126 113,000 Hubert D. Vos 1,180 111,000 Paul M. Wythes 1,072 113,000 - ------------------------------------------------------------------------------------------------------------------- Institutional Small-Cap Stock Fund $ Calvin W. Burnett, Ph.D./c/ 117 $110,000 Anthony W. Deering/c/ 117 110,000 Donald W. Dick, Jr. 1,038 110,000 David K. Fagin 1,132 112,000 F. Pierce Linaweaver/c/ 122 113,000 Hannes M. Merriman 1,129 110,000 John G. Schreiber/c/ 122 113,000 Hubert D. Vos 1,137 111,000 Paul M. Wythes 1,047 113,000 - ------------------------------------------------------------------------------------------------------------------- Media & Telecommunications Fund $ Calvin W. Burnett, Ph.D./c/ 154 $110,000 Anthony W. Deering/c/ 154 110,000 Donald W. Dick, Jr. 1,271 110,000 David K. Fagin 1,571 112,000 F. Pierce Linaweaver/c/ 170 113,000 Hannes M. Merriman 1,560 110,000 John G. Schreiber/c/ 170 113,000 Hubert D. Vos 1,588 111,000 Paul M. Wythes 1,304 113,000 - ------------------------------------------------------------------------------------------------------------------- Mid-Cap Growth Fund $ Calvin W. Burnett, Ph.D./c/ 698 $110,000 Anthony W. Deering/c/ 698 110,000 Donald W. Dick, Jr. 3,808 110,000 David K. Fagin 6,670 112,000 F. Pierce Linaweaver/c/ 824 113,000 Hannes M. Merriman 6,586 110,000 John G. Schreiber/c/ 824 113,000 Hubert D. Vos 6,790 111,000 Paul M. Wythes 4,067 113,000 - ------------------------------------------------------------------------------------------------------------------- Mid-Cap Value Fund $ Calvin W. Burnett, Ph.D./c/ 135 $110,000 Anthony W. Deering/c/ 135 110,000 Donald W. Dick, Jr. 1,096 110,000 David K. Fagin 1,277 112,000 F. Pierce Linaweaver/c/ 206 113,000 Hannes M. Merriman 1,228 110,000 John G. Schreiber/c/ 206 113,000 Hubert D. Vos 1,259 111,000 Paul M. Wythes 1,173 113,000 - ------------------------------------------------------------------------------------------------------------------- New America Growth Fund $ Calvin W. Burnett, Ph.D./c/ 201 $110,000 Anthony W. Deering/c/ 201 110,000 Donald W. Dick, Jr. 1,544 110,000 David K. Fagin 2,082 112,000 F. Pierce Linaweaver/c/ 230 113,000 Hannes M. Merriman 2,063 110,000 John G. Schreiber/c/ 230 113,000 Hubert D. Vos 2,113 111,000 Paul M. Wythes 1,606 113,000 - ------------------------------------------------------------------------------------------------------------------- New Era Fund $ Calvin W. Burnett, Ph.D./c/ 194 $110,000 Anthony W. Deering/c/ 194 110,000 Donald W. Dick, Jr. 1,465 110,000 David K. Fagin 1,924 112,000 F. Pierce Linaweaver/c/ 215 113,000 Hannes M. Merriman 1,910 110,000 John G. Schreiber/c/ 215 113,000 Hubert D. Vos 1,948 111,000 Paul M. Wythes 1,511 113,000 - ------------------------------------------------------------------------------------------------------------------- New Horizons Fund $ Calvin W. Burnett, Ph.D./c/ 585 $110,000 Anthony W. Deering/c/ 585 110,000 Donald W. Dick, Jr. 3,530 110,000 David K. Fagin 5,742 112,000 F. Pierce Linaweaver/c/ 696 113,000 Hannes M. Merriman 5,668 110,000 John G. Schreiber/c/ 696 113,000 Hubert D. Vos 5,868 111,000 Paul M. Wythes 3,771 113,000 - ------------------------------------------------------------------------------------------------------------------- Real Estate Fund $ Calvin W. Burnett, Ph.D./c/ 99 $110,000 Anthony W. Deering/c/ 99 110,000 Donald W. Dick, Jr. 949 110,000 David K. Fagin 972 112,000 F. Pierce Linaweaver/c/ 101 113,000 Hannes M. Merriman 970 110,000 John G. Schreiber/c/ 101 113,000 Hubert D. Vos 972 111,000 Paul M. Wythes 953 113,000 - ------------------------------------------------------------------------------------------------------------------- Science & Technology Fund $ Calvin W. Burnett, Ph.D./c/ 623 $110,000 Anthony W. Deering/c/ 623 110,000 Donald W. Dick, Jr. 4,163 110,000 David K. Fagin 7,457 112,000 F. Pierce Linaweaver/c/ 793 113,000 Hannes M. Merriman 7,343 110,000 John G. Schreiber/c/ 793 113,000 Hubert D. Vos 7,650 111,000 Paul M. Wythes 4,532 113,000 - ------------------------------------------------------------------------------------------------------------------- Small-Cap Stock Fund $ Calvin W. Burnett, Ph.D./c/ 368 $110,000 Anthony W. Deering/c/ 368 110,000 Donald W. Dick, Jr. 2,177 110,000 David K. Fagin 3,203 112,000 F. Pierce Linaweaver/c/ 427 113,000 Hannes M. Merriman 3,164 110,000 John G. Schreiber/c/ 427 113,000 Hubert D. Vos 3,243 111,000 Paul M. Wythes 2,283 113,000 - ------------------------------------------------------------------------------------------------------------------- Small-Cap Value Fund $ Calvin W. Burnett, Ph.D./c/ 274 $110,000 Anthony W. Deering/c/ 274 110,000 Donald W. Dick, Jr. 1,726 110,000 David K. Fagin 2,397 112,000 F. Pierce Linaweaver/c/ 339 113,000 Hannes M. Merriman 2,353 110,000 John G. Schreiber/c/ 339 113,000 Hubert D. Vos 2,411 111,000 Paul M. Wythes 1,820 113,000 - ------------------------------------------------------------------------------------------------------------------- Total Equity Market Index Fund $ Calvin W. Burnett, Ph.D./c/ 111 $110,000 Anthony W. Deering/c/ 111 110,000 Donald W. Dick, Jr. 1,015 110,000 David K. Fagin 1,094 112,000 F. Pierce Linaweaver/c/ 116 113,000 Hannes M. Merriman 1,090 110,000 John G. Schreiber/c/ 116 113,000 Hubert D. Vos 1,097 111,000 Paul M. Wythes 1,025 113,000 - ------------------------------------------------------------------------------------------------------------------- Value Fund $ Calvin W. Burnett, Ph.D./c/ 213 $110,000 Anthony W. Deering/c/ 213 110,000 Donald W. Dick, Jr. 1,502 110,000 David K. Fagin 1,991 112,000 F. Pierce Linaweaver/c/ 251 113,000 Hannes M. Merriman 1,965 110,000 John G. Schreiber/c/ 251 113,000 Hubert D. Vos 2,004 111,000 Paul M. Wythes 1,560 113,000 - -------------------------------------------------------------------------------------------------------------------
42 43 44 45 46 47 48 (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 fiscal year 2001. The T. Rowe Price complex included 97 funds as of December 31, 2001. (c) Newly elected to fund Board as of October 24, 2001. (d) Expenses estimated for the period October 31, 2001 through December 31, 2001. Directors' Holdings in the T. Rowe Price Funds The following table sets forth the T. Rowe Price fund holdings of the independent and inside directors, as of December 31, 2001.
Burnett Deering Dick Fagin Linaweaver Merriman Schreiber Vos Wythes - ----------------------------------------------------------- ---------- Aggregate Holdings, ------------------- $1- over over over over over over over over All Funds $10,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 --------- - -------------------------------------------------------------------------------------------------------------------------- Balanced Fund None None None None $50,001-$100,000 None None None None - -------------------------------------------------------------------------------------------------------------------------- Blue Chip Growth Fund None None $1-$10,0$10,001-$50,000 None over None None None $100,000 - ------------------------------------------------------------------------------------------------------------------------------ Blue Chip Growth None None None None None None None None None Fund-Advisor Class - ----------------------------------------------------------------------------------------------------------------------------------- Blue Chip Growth Portfolio None None None None None None None None None - ----------------------------------------------------------------------------------------------------------------------------------- California Tax-Free Bond None None None None None None None None None Fund - ----------------------------------------------------------------------------------------------------------------------------------- California Tax-Free Money None None None None None None None None None Fund - ----------------------------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund None None over None None $10,001-$50,000 None None None $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ Capital Opportunity Fund None None None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ Corporate Income Fund None None None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ Developing Technologies None None None None None None None None None Fund - ------------------------------------------------------------------------------------------------------------------------------------ Diversified Small-Cap None None None None None None None None None Growth Fund - ------------------------------------------------------------------------------------------------------------------------------------ Dividend Growth Fund None None None $10,001-$50,000 None $10,001-$50,000 None None None - ------------------------------------------------------------------------------------------------------------------------------------ Emerging Europe & None None None None None None None None None Mediterranean Fund - ------------------------------------------------------------------------------------------------------------------------------------ Emerging Markets Bond Fund None None None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ Emerging Markets Stock Fund None None None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ Equity Income Fund None None$50,001-$100,$50,001-$100,000 None $50,001-$100,000 None $10,001-$50,00None - ------------------------------------------------------------------------------------------------------------------------------------ Equity Income Fund-Advisor None None None None None None None None Class - ------------------------------------------------------------------------------------------------------------------------------------ Equity Income Portfolio None None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ Equity Index 500 Fund None None None None None over $100,000 None None - ------------------------------------------------------------------------------------------------------------------------------------ Equity Index 500 Portfolio None None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ European Stock Fund None over $10,001-$50,000 $10,001-$50,000 None None None None $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ Extended Equity Market None None None None None None None None Index Fund - ------------------------------------------------------------------------------------------------------------------------------------ Financial Services Fund None None $10,001-$50,000 None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ Florida Intermediate None None None None None None None None Tax-Free Fund - ------------------------------------------------------------------------------------------------------------------------------------ Georgia Tax-Free Bond Fund None None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ Global Stock Fund None None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ Global Technology Fund None None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ GNMA Fund None None None None None None over None $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ Government Reserve None None None None None None None None Investment Fund - ------------------------------------------------------------------------------------------------------------------------------------ Growth & Income Fund None None $1-$10,000 None None None over No$10, $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ Growth Stock Fund None None $10,001-$50,000 None $10,001-$50,000 None None None - ------------------------------------------------------------------------------------------------------------------------------------ Growth Stock Fund-Advisor None None None None None None None None Class - ------------------------------------------------------------------------------------------------------------------------------------ Health Sciences Fund None None $10,001-$50,000 None None None None $50,001-$100 - ------------------------------------------------------------------------------------------------------------------------------------ Health Sciences Portfolio None None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ High Yield Fund $1-$10,000 None $10,001-$50,000 None None None over None $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ High Yield Fund-Advisor None None None None None None None None Class - ------------------------------------------------------------------------------------------------------------------------------------ Institutional Foreign None None None None None None None None Equity Fund - ------------------------------------------------------------------------------------------------------------------------------------ Institutional Large-Cap None None None None None None None None Growth Fund - ------------------------------------------------------------------------------------------------------------------------------------ Institutional Large-Cap None None None None None None None None Value Fund - ------------------------------------------------------------------------------------------------------------------------------------ Institutional Mid-Cap None None None None None None None None Equity Growth Fund - ------------------------------------------------------------------------------------------------------------------------------------ Institutional Small-Cap None None None None None None None None Stock Fund - ------------------------------------------------------------------------------------------------------------------------------------ International Bond Fund None None $50,001-$100,000 None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ International Bond None None None None None None None None Fund-Advisor Class - ------------------------------------------------------------------------------------------------------------------------------------ International Discovery None$50,001-$100,0$10,001-$50,000 None over $100,000 None None None Fund - ------------------------------------------------------------------------------------------------------------------------------------ International Equity Index None None None None None None None No Fund - ------------------------------------------------------------------------------------------------------------------------------------ International Growth & None None None None None None None No Income Fund - ------------------------------------------------------------------------------------------------------------------------------------ International Stock Fund $1-$10,000 over $100,000 None over $100,000 None None None No - ------------------------------------------------------------------------------------------------------------------------------------ International Stock None None None None None None None No Fund-Advisor Class - ------------------------------------------------------------------------------------------------------------------------------------ International Stock None None None None None None None No Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Japan Fund None None None None None None None No - ------------------------------------------------------------------------------------------------------------------------------------ Latin America Fund None None None None None None None No - ------------------------------------------------------------------------------------------------------------------------------------ Limited-Term Bond Portfolio None None None None None None None No - ------------------------------------------------------------------------------------------------------------------------------------ Maryland Short-Term None None None None None None None No Tax-Free Bond Fund - ------------------------------------------------------------------------------------------------------------------------------------ Maryland Tax-Free Bond Fund None None None None None None None No - ------------------------------------------------------------------------------------------------------------------------------------ Maryland Tax-Free Money None None None None None None None No Fund - ------------------------------------------------------------------------------------------------------------------------------------ Media & Telecommunications None $10,001-$50,000 None None None None None No Fund - ------------------------------------------------------------------------------------------------------------------------------------ Mid-Cap Growth Fund None None $1-$10,000 $10,001-$50,000 None None No$10,001- - ------------------------------------------------------------------------------------------------------------------------------------ Mid-Cap Growth Fund-Advisor None None None None None None None No Class - ------------------------------------------------------------------------------------------------------------------------------------ Mid-Cap Growth Portfolio None None None None None None None No - ------------------------------------------------------------------------------------------------------------------------------------ Mid-Cap Value Fund None None None None None None None No - ------------------------------------------------------------------------------------------------------------------------------------ New America Growth Fund None None None None over $100,000 $10,001-$50,000 None No - ------------------------------------------------------------------------------------------------------------------------------------ New America Growth None None None None None None None No Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ New Asia Fund None None None $10,001-$50,000 None None None No - ------------------------------------------------------------------------------------------------------------------------------------ New Era Fund None None None None None None No$10,001- - ------------------------------------------------------------------------------------------------------------------------------------ New Horizons Fund $1-$10,000 None $10,001-$50,000 $1-$10,000 over $100,000 $10,001-$50,000 No$10,001- - ------------------------------------------------------------------------------------------------------------------------------------ New Income Fund None None $50,001-$100,000 None None None over No $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ New Jersey Tax-Free Bond None None None None None None None No Fund - ------------------------------------------------------------------------------------------------------------------------------------ New York Tax-Free Bond Fund None None None None None None None No - ------------------------------------------------------------------------------------------------------------------------------------ New York Tax-Free Money None None None None None None None No Fund - ------------------------------------------------------------------------------------------------------------------------------------ Personal Strategy Balanced None None None None None None None No Fund - ------------------------------------------------------------------------------------------------------------------------------------ Personal Strategy Balanced None None None None None None None No Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Personal Strategy Growth None None None None None None None No Fund - ------------------------------------------------------------------------------------------------------------------------------------ Personal Strategy Income None None None None None None None No Fund - ------------------------------------------------------------------------------------------------------------------------------------ Prime Reserve Fund $1-$10,000 None over $100,000 None $1-$10,000 $50,001-$100,0$10,001-$50,0No - ------------------------------------------------------------------------------------------------------------------------------------ Prime Reserve Fund-PLUS None None None None None None None Class - ------------------------------------------------------------------------------------------------------------------------------------ Prime Reserve Portfolio None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ Real Estate Fund None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ Reserve Investment Fund None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ Science & Technology Fund None over $100,000 None None None $10,001-$50,000 No$10,00 - ------------------------------------------------------------------------------------------------------------------------------------ Science & Technology None None None None None None None Fund-Advisor Class - ------------------------------------------------------------------------------------------------------------------------------------ Short-Term Bond Fund None None None $50,001-$100,000 None None over $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ Small-Cap Stock Fund None None $1-$10,000 $10,001-$50,000 None None No$10,00 - ------------------------------------------------------------------------------------------------------------------------------------ Small-Cap Stock None None None None None None None Fund-Advisor Class - ------------------------------------------------------------------------------------------------------------------------------------ Small-Cap Value Fund None None None None None None No$10,00 - ------------------------------------------------------------------------------------------------------------------------------------ Small-Cap Value None None None None None None None Fund-Advisor Class - ------------------------------------------------------------------------------------------------------------------------------------ Spectrum Growth Fund None None None None None over $100,000 None - ------------------------------------------------------------------------------------------------------------------------------------ Spectrum Income Fund None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ Spectrum International Fund None None None None None $10,001-$50,000 None - ------------------------------------------------------------------------------------------------------------------------------------ Summit Cash Reserves Fund None None None over $100,000 None None over $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ Summit GNMA Fund None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ Summit Municipal Income None None None None None None over Fund $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ Summit Municipal None None None None None None over Intermediate Fund $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ Summit Municipal Money None None None None None $50,001-$100,000 None Market Fund - ------------------------------------------------------------------------------------------------------------------------------------ Tax-Efficient Balanced Fund None None None $50,001-$100,000 None None None - ------------------------------------------------------------------------------------------------------------------------------------ Tax-Efficient Growth Fund None None None $10,001-$50,000 None None None - ------------------------------------------------------------------------------------------------------------------------------------ Tax-Efficient Multi-Cap None None None None None None None Growth Fund - ------------------------------------------------------------------------------------------------------------------------------------ Tax-Exempt Money Fund None None None None None None over $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ Tax-Exempt Money Fund-PLUS None None None None None None None Class - ------------------------------------------------------------------------------------------------------------------------------------ Tax-Free High Yield Fund None None None None None None over $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ Tax-Free Income Fund None None None None None None over $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ Tax-Free Intermediate Bond None None None None None None None Fund - ------------------------------------------------------------------------------------------------------------------------------------ Tax-Free Short-Intermediate None None None None None None None Fund - ------------------------------------------------------------------------------------------------------------------------------------ Total Equity Market Index None None None None None None None Fund - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Bond Index Fund None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Treasury Intermediate None None over $100,000 None None None over Fund $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Treasury Long-Term None None None None None None over Fund $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Treasury Money Fund None None None None None None over $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ Value Fund None None $10,001-$50,000 None None $50,001-$100,000 over $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ Value Fund-Advisor Class None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------ Virginia Tax-Free Bond Fund None None None None None None None - ------------------------------------------------------------------------------------------------------------------------------------
49 50 51 52 53
Kennedy Laporte Riepe Testa - -------------------------------------------------------------------------------------------- Aggregate Holdings, ------------------- All Funds over $100,000 over $100,000 over $100,000 over $100,000 --------- - -------------------------------------------------------------------------------------------- Balanced Fund None None over $100,000 None - -------------------------------------------------------------------------------------------- Blue Chip Growth Fund None None None None - -------------------------------------------------------------------------------------------- Blue Chip Growth None None None None Fund-Advisor Class - -------------------------------------------------------------------------------------------- Blue Chip Growth None None None None Portfolio - -------------------------------------------------------------------------------------------- California Tax-Free None None None None Bond Fund - -------------------------------------------------------------------------------------------- California Tax-Free None None None None Money Fund - -------------------------------------------------------------------------------------------- Capital Appreciation over $100,000 over $100,000 over $100,000 None Fund - -------------------------------------------------------------------------------------------- Capital Opportunity $10,001-$50,000 $50,001-$100,000 None None Fund - -------------------------------------------------------------------------------------------- Corporate Income Fund None None None None - -------------------------------------------------------------------------------------------- Developing None over $100,000 None None Technologies Fund - -------------------------------------------------------------------------------------------- Diversified Small-Cap None None None None Growth Fund - -------------------------------------------------------------------------------------------- Dividend Growth Fund over $100,000 None None None - -------------------------------------------------------------------------------------------- Emerging Europe & None None None None Mediterranean Fund - -------------------------------------------------------------------------------------------- Emerging Markets Bond None None None None Fund - -------------------------------------------------------------------------------------------- Emerging Markets None None None over $100,000 Stock Fund - -------------------------------------------------------------------------------------------- Equity Income Fund $10,001-$50,000 None over $100,000 None - -------------------------------------------------------------------------------------------- Equity Income None None None None Fund-Advisor Class - -------------------------------------------------------------------------------------------- Equity Income None None None None Portfolio - -------------------------------------------------------------------------------------------- Equity Index 500 Fund None None None None - -------------------------------------------------------------------------------------------- Equity Index 500 None None None None Portfolio - -------------------------------------------------------------------------------------------- European Stock Fund None $10,001-$50,000 None None - -------------------------------------------------------------------------------------------- Extended Equity None None None None Market Index Fund - -------------------------------------------------------------------------------------------- Financial Services over $100,000 None None None Fund - -------------------------------------------------------------------------------------------- Florida Intermediate None None None None Tax-Free Fund - -------------------------------------------------------------------------------------------- Georgia Tax-Free Bond None None None None Fund - -------------------------------------------------------------------------------------------- Global Stock Fund None None None None - -------------------------------------------------------------------------------------------- Global Technology None None None None Fund - -------------------------------------------------------------------------------------------- GNMA Fund None None None None - -------------------------------------------------------------------------------------------- Government Reserve None None None None Investment Fund - -------------------------------------------------------------------------------------------- Growth & Income Fund None None over $100,000 None - -------------------------------------------------------------------------------------------- Growth Stock Fund None None None None - -------------------------------------------------------------------------------------------- Growth Stock None None None None Fund-Advisor Class - -------------------------------------------------------------------------------------------- Health Sciences Fund over $100,000 None None over $100,000 - -------------------------------------------------------------------------------------------- Health Sciences None None None None Portfolio - -------------------------------------------------------------------------------------------- High Yield Fund None None over $100,000 None - -------------------------------------------------------------------------------------------- High Yield None None None None Fund-Advisor Class - -------------------------------------------------------------------------------------------- Institutional Foreign None None None None Equity Fund - -------------------------------------------------------------------------------------------- Institutional None None None None Large-Cap Growth Fund - -------------------------------------------------------------------------------------------- Institutional None None None None Large-Cap Value Fund - -------------------------------------------------------------------------------------------- Institutional Mid-Cap None None None None Equity Growth Fund - -------------------------------------------------------------------------------------------- Institutional None None None None Small-Cap Stock Fund - -------------------------------------------------------------------------------------------- International Bond None None None None Fund - -------------------------------------------------------------------------------------------- International Bond None None None None Fund-Advisor Class - -------------------------------------------------------------------------------------------- International $50,001-$100,000 over $100,000 $1-$10,000 over $100,000 Discovery Fund - -------------------------------------------------------------------------------------------- International Equity None None None None Index Fund - -------------------------------------------------------------------------------------------- International Growth None None None None & Income Fund - -------------------------------------------------------------------------------------------- International Stock over $100,000 over $100,000 over $100,000 over $100,000 Fund - -------------------------------------------------------------------------------------------- International Stock None None None None Fund-Advisor Class - -------------------------------------------------------------------------------------------- International Stock None None None None Portfolio - -------------------------------------------------------------------------------------------- Japan Fund None None over $100,000 None - -------------------------------------------------------------------------------------------- Latin America Fund over $100,000 None None None - -------------------------------------------------------------------------------------------- Limited-Term Bond None None None None Portfolio - -------------------------------------------------------------------------------------------- Maryland Short-Term None None None None Tax-Free Bond Fund - -------------------------------------------------------------------------------------------- Maryland Tax-Free None over $100,000 None None Bond Fund - -------------------------------------------------------------------------------------------- Maryland Tax-Free None None None None Money Fund - -------------------------------------------------------------------------------------------- Media & Telecommunications over $100,000 None None None Fund - -------------------------------------------------------------------------------------------- Mid-Cap Growth Fund over $100,000 over $100,000 None over $100,000 - -------------------------------------------------------------------------------------------- Mid-Cap Growth None None None None Fund-Advisor Class - -------------------------------------------------------------------------------------------- Mid-Cap Growth None None None None Portfolio - -------------------------------------------------------------------------------------------- Mid-Cap Value Fund over $100,000 None None None - -------------------------------------------------------------------------------------------- New America Growth None over $100,000 None None Fund - -------------------------------------------------------------------------------------------- New America Growth None None None None Portfolio - -------------------------------------------------------------------------------------------- New Asia Fund over $100,000 over $100,000 $1-$10,000 None - -------------------------------------------------------------------------------------------- New Era Fund over $100,000 None None None - -------------------------------------------------------------------------------------------- New Horizons Fund None over $100,000 None over $100,000 - -------------------------------------------------------------------------------------------- New Income Fund None $10,001-$50,000 None None - -------------------------------------------------------------------------------------------- New Jersey Tax-Free None None None None Bond Fund - -------------------------------------------------------------------------------------------- New York Tax-Free None None None None Bond Fund - -------------------------------------------------------------------------------------------- New York Tax-Free None None None None Money Fund - -------------------------------------------------------------------------------------------- Personal Strategy None None None None Balanced Fund - -------------------------------------------------------------------------------------------- Personal Strategy None None None None Balanced Portfolio - -------------------------------------------------------------------------------------------- Personal Strategy None None None None Growth Fund - -------------------------------------------------------------------------------------------- Personal Strategy None None None None Income Fund - -------------------------------------------------------------------------------------------- Prime Reserve Fund over $100,000 $10,001-$50,000 over $100,000 $10,001-$50,000 - -------------------------------------------------------------------------------------------- Prime Reserve None None None None Fund-PLUS Class - -------------------------------------------------------------------------------------------- Prime Reserve None None None None Portfolio - -------------------------------------------------------------------------------------------- Real Estate Fund None None None None - -------------------------------------------------------------------------------------------- Reserve Investment None None None None Fund - -------------------------------------------------------------------------------------------- Science & Technology None over $100,000 over $100,000 None Fund - -------------------------------------------------------------------------------------------- Science & Technology None None None None Fund-Advisor Class - -------------------------------------------------------------------------------------------- Short-Term Bond Fund None None over $100,000 None - -------------------------------------------------------------------------------------------- Small-Cap Stock Fund over $100,000 None None None - -------------------------------------------------------------------------------------------- Small-Cap Stock None None None None Fund-Advisor Class - -------------------------------------------------------------------------------------------- Small-Cap Value Fund None None over $100,000 over $100,000 - -------------------------------------------------------------------------------------------- Small-Cap Value None None None None Fund-Advisor Class - -------------------------------------------------------------------------------------------- Spectrum Growth Fund None None None None - -------------------------------------------------------------------------------------------- Spectrum Income Fund None None None None - -------------------------------------------------------------------------------------------- Spectrum None None None None International Fund - -------------------------------------------------------------------------------------------- Summit Cash Reserves over $100,000 over $100,000 over $100,000 over $100,000 Fund - -------------------------------------------------------------------------------------------- Summit GNMA Fund None None None None - -------------------------------------------------------------------------------------------- Summit Municipal None None None None Income Fund - -------------------------------------------------------------------------------------------- Summit Municipal None None None over $100,000 Intermediate Fund - -------------------------------------------------------------------------------------------- Summit Municipal over $100,000 None over $100,000 None Money Market Fund - -------------------------------------------------------------------------------------------- Tax-Efficient None None None None Balanced Fund - -------------------------------------------------------------------------------------------- Tax-Efficient Growth None None None None Fund - -------------------------------------------------------------------------------------------- Tax-Efficient None None None None Multi-Cap Growth Fund - -------------------------------------------------------------------------------------------- Tax-Exempt Money Fund over $100,000 None None None - -------------------------------------------------------------------------------------------- Tax-Exempt Money None None None None Fund-PLUS Class - -------------------------------------------------------------------------------------------- Tax-Free High Yield None None None None Fund - -------------------------------------------------------------------------------------------- Tax-Free Income Fund None None None $10,001-$50,000 - -------------------------------------------------------------------------------------------- Tax-Free Intermediate None None None None Bond Fund - -------------------------------------------------------------------------------------------- Tax-Free Short-Intermediate None None over $100,000 None Fund - -------------------------------------------------------------------------------------------- Total Equity Market None None over $100,000 None Index Fund - -------------------------------------------------------------------------------------------- U.S. Bond Index Fund None None None None - -------------------------------------------------------------------------------------------- U.S. Treasury None None None None Intermediate Fund - -------------------------------------------------------------------------------------------- U.S. Treasury None None None None Long-Term Fund - -------------------------------------------------------------------------------------------- U.S. Treasury Money None None None None Fund - -------------------------------------------------------------------------------------------- Value Fund over $100,000 over $100,000 over $100,000 over $100,000 - -------------------------------------------------------------------------------------------- Value Fund-Advisor None None None None Class - -------------------------------------------------------------------------------------------- Virginia Tax-Free None None None None Bond Fund - --------------------------------------------------------------------------------------------
54 55 56 PRINCIPAL HOLDERS OF SECURITIES ------------------------------------------------------------------------------- As of March 28, 2002, the officers and directors of the fund, as a group, owned less than 1% of the outstanding shares of the fund. As of March 28, 2002, the following shareholders of record owned more than 5% of the outstanding shares of any share class of the fund: Balanced (54.16%), Capital Appreciation (20.27%), Equity Income (25.08%), Extended Equity Market Index (17.50%), Growth & Income (26.22%), Growth Stock (23.60%), New America Growth (32.62%), New Era (5.54%), New Horizons (30.76%), Science & Technology (20.86%), and Small-Cap Value Funds (20.59%): T. Rowe Price Trust Company, Inc./a/, Attn.: TRPS Institutional Control Department, P.O. Box 17215, Baltimore, Maryland 21297-1215; /a/ T. Rowe Price Trust Company is a wholly owned subsidiary of T. Rowe Price Associates, Inc., which is a wholly owned subsidiary of T. Rowe Price Group, Inc., each a Maryland corporation. T. Rowe Price Trust Company is not the beneficial owner of these shares. Such shares are held of record by T. Rowe Price Trust Company and are voted by various retirement plans and retirement participants. Blue Chip Growth Fund (40.59%): T. Rowe Price Retirement Plan Services/b/ TR Blue Chip Growth Fund, Attn.: Asset Reconciliations, P.O. Box 17215, Baltimore, Maryland 21297-1215; /b/ T. Rowe Price Retirement Plan Services is a wholly owned subsidiary of T. Rowe Price Associates, Inc., which is a wholly owned subsidiary of T. Rowe Price Group, Inc., each a Maryland corporation. T. Rowe Price Retirement Plan Services is not the beneficial owner of these shares. Such shares are held of record by T. Rowe Price Retirement Plan Services and are voted by various retirement plans and retirement participants. Capital Appreciation (6.98%), Financial Services (6.81%), Mid-Cap Growth (8.22%), New Era (6.86%), and Small-Cap Value Funds (5.52%): Charles Schwab & Co. Inc., Reinvest Account, Attn.: Mutual Fund Department, 101 Montgomery Street, San Francisco, California 94104-4122; Capital Opportunity (5.75%) and Value Funds (22.41%): T. Rowe Price Trust Company, Inc., Attn.: Installation Team for TRPS Institutional Control Department, P.O. Box 17125, Baltimore, Maryland 21297-1125; Developing Technologies Fund (10.55%): Trustees of T. Rowe Price, 401k Plus Plan, Attn.: Financial Reporting Department, P.O. Box 89000, Baltimore, Maryland 21289-0001; Dividend Growth Fund (17.47%): T. Rowe Price Trust Company, Inc., Dividend Growth Fund (DGF), Attn.: Asset Reconciliation, P.O. Box 17215, Baltimore, Maryland 21297-1215; Equity Index 500 Fund (40.63%): T. Rowe Price Trust Company, Inc., Attn.: RPS Control Department, 10090 Red Run Boulevard, Owings Mills, Maryland 21117-4842; Growth & Income (13.37%), New Era (5.10%), New Horizons (10.25%), and Mid-Cap Value Funds (24.33%): Pirateline & Company, T. Rowe Price Associates, Attn.: Fund Accounting Department, 100 East Pratt Street, Baltimore, Maryland 21202-1009; Institutional Large-Cap Growth Fund (100.00%): T. Rowe Price Associates/c/, Attn.: Financial Reporting Department, 100 East Pratt Street, Baltimore, Maryland 21202-1009; /c/ T. Rowe Price Associates is a wholly owned subsidiary of T. Rowe Price Group, Inc., each a Maryland corporation. Securities owned by T. Rowe Price Associates are the result of its contribution to the fund at the fund's inception in order to provide the fund with sufficient capital to invest in accordance with its investment program. At the level of ownership indicated, T. Rowe Price Associates would be able to determine the outcome of most issues that were submitted to shareholders for vote. Institutional Large-Cap Value Fund (100.00%): T. Rowe Price Finance Inc./d/, 802 West Street, Suite 301, Wilmington, Delaware 19801-1526; 57 /d/ T. Rowe Price Finance is a wholly owned subsidiary of T. Rowe Price Associates, Inc., which is a wholly owned subsidiary of T. Rowe Price Group, Inc., each a Maryland corporation. Securities owned by T. Rowe Price Finance are the result of its contribution to the fund at the fund's inception in order to provide the fund with sufficient capital to invest in accordance with its investment program. At the level of ownership indicated, T. Rowe Price Finance would be able to determine the outcome of most issues that were submitted to shareholders for vote. Institutional Mid-Cap Equity Growth Fund: Atlantic Trust Company NA (8.74%), Attn.: Kathy Trull, 100 Federal Street, 37th Floor, Boston, Massachusetts 02110-1802; Atlantic Trust Company NA (11.49%), Attn.: Kathy Trull, 100 Federal Street, 37th Floor, Boston, Massachusetts 02110-1802; Stichting Pensioenfonds (8.05%), Van de Koninklijke Nedlloyd, P.O. Box 1982, 3000 B Z Rotterdam, The Netherlands; CIBC World Markets Agt. for CIBC (5.17%), Mellon Trust Co. TR Nexfor Master Investment Trust Funds, 161 Bay Street, P.O. Box 500, Toronto, Ontario Canada M5J2S8; Band & Company (5.19%), c/o Firstar Bank, P.O. Box 1787, Milwaukee, Wisconsin 53201-1787; Institutional Small-Cap Stock Fund: Burlington Resources Inc. (5.19%), 5051 Westheimer Road, Suite 1400, Houston, Texas 77056-5686; Brookline Contributory Retirement Systems (5.88%), 333 Washington Street, Brookline, Massachusetts 02445-6853; Northern Trust Co. TR Illinois Tool Works Pension Trust U/A DTD 1/ 8/90 (14.52%), Attn.: Robert T. Callahan, 3600 West Lake Avenue, Glenview, Illinois 60025-1215; Deutsche Trust Bank Limited FBO Tokkin Fund No. 5064 (12.94%), Sanno Park Tower 2-11-1, Nagatacho Chiyoda KU, Tokyo, Japan 100-6172; Sigler & Co. Cust, Smithsonian Institution (20.60%), Chase Manhattan Bank, Mark R. Pensec, AVP, 4 New York Plaza 2nd Floor, New York, New York 10004-2413; Media & Telecommunications Fund (6.57%): T. Rowe Price Trust Company, Inc., Media & Telecommunications Fund, DST #121, P.O. Box 17215, Baltimore, Maryland 21297-1215; Mid-Cap Growth Fund (18.02%): T. Rowe Price Trust Company, Inc., Attn.: Asset Reconciliations, P.O. Box 17215, Baltimore, Maryland 21297-1215; Mid-Cap Value Fund: National Financial Services for the Exclusive Benefit of Our Customers (6.58%), 200 Liberty, One Financial Center 5th Floor, New York, New York 10281-1003; New America Growth Fund (8.80%): Wilmington Trust Co. TR, FBO Continental Airlines Inc., DCP Plan A/C #49277-0, c/o Mutual Funds, P.O. Box 8971, Wilmington, Delaware 19899-8971; Real Estate Fund (11.05%): T. Rowe Price Retirement Plan Services, Inc., Kimley-Horn Retirement Savings PL, Plan #105315, NB-Custom Blended Fund #122 REF, P.O. Box 17215, Baltimore, Maryland 21297-1215; Small-Cap Stock Fund: T. Rowe Price Trust Company, Inc. (18.16%), T. Rowe Price OTC Fund, Attn.: RPS Control Department, P.O. Box 17215, Baltimore, Maryland 21297-1215; Norwest Bank Company NA TR FBO State of Minnesota Deferred Compensation Plan, Minnesota State Deferred Compensation Plan Trust (7.57%), c/o Great West Life Recordkeeper, 8515 East Orchard Road, Attn.: 2T2, Englewood, Colorado 80111-5037. 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 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 58 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, and committee members of the fund without cost to the fund. The Management Agreement also provides that T. Rowe Price, its directors, officers, employees, and certain other persons performing specific functions for the fund will only be liable to the fund for losses resulting from willful misfeasance, bad faith, gross negligence, or reckless disregard of duty. Approval of Management Agreements The Management Agreements of the funds are reviewed each year by the funds' Boards of Directors to determine whether the agreements should be renewed for a one-year period or not. Renewal of the agreements requires the majority vote of the Board of Directors, including a majority of the independent directors. Each fund board consists of a majority of independent directors. In approving the continuation of the investment management agreements for each fund for the current year, the Board reviewed reports prepared by T. Rowe Price, materials provided by fund counsel and counsel to the independent directors, as well as other information. The Board considered the nature and quality of the investment management services provided to the fund by T. Rowe Price under the investment management agreements and the personnel who provide these services, including the historical performance of the fund compared to its benchmark index and its peer group of similar investment companies. In addition, the Board considered other services provided to the fund by T. Rowe Price and its affiliates, such as administrative services, shareholder services, fund accounting, assistance in meeting legal and regulatory requirements, and other services necessary for the fund's operation. The Board considered the fees paid to T. Rowe Price for investment management services, as well as compensation paid to T. Rowe Price or its affiliates for other non-advisory services provided to the fund. In connection with its review of the fees paid to T. Rowe Price and its affiliates, the Board reviewed information provided by Lipper Inc. comparing the fund's advisory fee rate and overall expense ratio with those of comparable funds. Where applicable, the Board considered that the fund's advisory fee structure reflects breakpoints, which permit fee reductions resulting from economies of scale. Additionally and where applicable, the Board considered the contractual fee waivers and expense reimbursements agreed to by T. Rowe Price. The Board also considered the costs incurred and the benefits received by T. Rowe Price and its affiliates, including the profitability of T. Rowe Price from providing advisory services to the fund. In reviewing data concerning the profitability of T. Rowe Price, the Board examined, among other components, the cost allocation methodology utilized in the presentation. In addition, the Board considered other potential benefits to T. Rowe Price, such as the research services T. Rowe Price receives from brokers in return for allocating fund brokerage in a "soft dollar" arrangement. Based on the information reviewed and the discussions, the Board concluded that it was satisfied with the nature and quality of the services provided by T. Rowe Price to the fund and that the management fee rate was reasonable in relation to such services. The independent directors of the fund were assisted by independent legal counsel in their deliberations. All funds except Equity Index 500, Extended Equity Market Index, Total Equity Market Index, Institutional Large-Cap Growth, Institutional Large-Cap Value, Institutional Mid-Cap Equity Growth, and Institutional Small-Cap Stock Funds Management Fee The fund pays 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 59 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 0.295% Thereafter ------------------------------------------------------------------------------ 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:
Balanced Fund 0.15% Blue Chip Growth Fund 0.30% Capital Appreciation Fund 0.30% Capital Opportunity Fund 0.35% Developing Technologies Fund 0.60% Diversified Small-Cap Growth Fund 0.35% Dividend Growth Fund 0.20% Equity Income Fund 0.25% Financial Services Fund 0.35% Global Technology Fund 0.45% Growth & Income Fund 0.25% Growth Stock Fund 0.25% Health Sciences Fund 0.35% Media & Telecommunications Fund 0.35% Mid-Cap Growth Fund 0.35% Mid-Cap Value Fund 0.35% New America Growth Fund 0.35% New Era Fund 0.25% New Horizons Fund 0.35% Real Estate Fund 0.30% Science & Technology Fund 0.35% Small-Cap Stock Fund 0.45% Small-Cap Value Fund 0.35% Value Fund 0.35%
60 Equity Index 500 Fund The fund pays T. Rowe Price an annual investment management fee in monthly installments of 0.15% of the average daily net asset value of the fund. Extended Equity Market Index and Total Equity Market Index Funds The Management Agreement between each fund and T. Rowe Price provides that each fund pays T. Rowe Price an annual fee of 0.40%. The agreement also provides that T. Rowe Price will pay all expenses of each fund's operations, except interest, taxes, brokerage commissions, and other charges incident to the purchase, sale, or lending of the fund's portfolio securities, directors' fees, and expenses (including counsel fees and expenses) and such non-recurring or extraordinary expenses that may arise, including the costs of actions, suits, or proceedings to which the fund is a party and the expenses the fund may incur as a result of its obligation to provide indemnification to its officers, directors, and agents. However, the Board of Directors for the funds reserves the right to impose additional fees against shareholder accounts to defray expenses which would otherwise be paid by T. Rowe Price under the management agreement. The Board does not anticipate levying such charges; such a fee, if charged, may be retained by the fund or paid to T. Rowe Price. Institutional Large-Cap Growth Fund The fund pays T. Rowe Price an annual investment management fee in monthly installments of 0.55% of the average daily net asset value of the fund. Institutional Large-Cap Value Fund The fund pays T. Rowe Price an annual investment management fee in monthly installments of 0.55% of the average daily net asset value of the fund. Institutional Mid-Cap Equity Growth Fund The fund pays T. Rowe Price an annual investment management fee in monthly installments of 0.60% of the average daily net asset value of the fund. Institutional Small-Cap Stock Fund The fund pays T. Rowe Price an annual investment management fee in monthly installments of 0.65% of the average daily net asset value of the fund. Expense Limitations and Reimbursements 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 limitation. . (The expense limitation for the Advisor Class relates to operating expenses other than management fees and certain other portfolio level expenses such as fees for custody, outside directors, and auditors.) The expenses borne by T. Rowe Price are subject to reimbursement by the fund through the indicated reimbursement date, provided no reimbursement will be made if it would result in the fund's expense ratio exceeding its applicable limitation. .
Expense Reimbursement Fund Limitation Period ------- ------------- ---- ----------------- Ratio Date - ------------------------------------------------------------------------------------------- ----- ---- Limitation ---------- ------------------------------- January 1, 2002 - Blue Chip Growth Fund-Advisor Class December 31, 2003 December 31, 2005 September 30, 2002 - Blue Chip Growth Fund-R Class April 30, 2003 April 30, 2005 August 31, 2000 - Developing Technologies December 31, 2002 1.50% December 31, 2004 May 1, 2002 - April Diversified Small-Cap Growth(a) 30, 2004 April 30, 2006 January 1, 2002 - Equity Income Fund-Advisor Class(b) December 31, 2003 December 31, 2005 January 1, 2001 - Equity Index 500(c) December 31, 2003 December 31, 2005 September 29, 2000 - Global Technology December 31, 2002 1.50% December 31, 2004 Growth Stock Fund-Advisor Class January 1, 2002 - December 31, 2005 December 31, 2003 - -------------------------------------------------------------------------------------------------------------------------- October 31, 2001 - Institutional Large-Cap Growth December 31, 2002 December 31, 2004 January 1, 2002 - Institutional Large-Cap Value(d) December 31, 2003 December 31, 2005 January 1, 2002 - Institutional Small-Cap Stock(e) December 31, 2003 December 31, 2005 January 1, 2002 - Mid-Cap Growth Fund-Advisor Class(f) December 31, 2003 December 31, 2005 January 1, 2002 - Real Estate(g) December 31, 2003 December 31, 2005 January 1, 2002 - Science & Technology Fund-Advisor Class(h) December 31, 2003 December 31, 2005 January 1, 2002 - Small-Cap Stock Fund-Advisor Class(i) December 31, 2003 December 31, 2005 January 1, 2002 - Small-Cap Value Fund-Advisor Class(j) December 31, 2003 December 31, 2005 Value Fund-Advisor Class(k) January 1, 2002 - December 31, 2005 December 31, 2003 - --------------------------------------------------------------------------------------------------------------------------
61 (a) The Diversified Small-Cap Growth Fund previously operated under a 1.25% limitation that expired December 31, 2000. The reimbursement period for this limitation extends through December 31, 2002. (b) The Equity Income Fund-Advisor Class previously operated under a 1.00% limitation that expired December 31, 2001. The reimbursement period for this limitation extends through December 31, 2003. (c) The Equity Index 500 Fund previously operated under a 0.35% limitation that expired December 31, 2000. The reimbursement period for this limitation extends through December 31, 2002. (d) The Institutional Large-Cap Value Fund previously operated under a 0.65% limitation that expired December 31, 2001. The reimbursement period for this limitation extends through December 31, 2003. (e) The Institutional Small-Cap Stock Fund previously operated under a 0.75% limitation that expired December 31, 2001. The reimbursement period for this limitation extends through December 31, 2003. (f) The Mid-Cap Growth Fund-Advisor Class previously operated under a 1.10% limitation that expired December 31, 2001. The reimbursement period for this limitation extends through December 31, 2003. (g) The Real Estate Fund previously operated under a 1.00% limitation that expired December 31, 2001. The reimbursement period for this limitation extends through December 31, 2003. (h) The Science & Technology Fund-Advisor Class previously operated under a 1.15% limitation that expired December 31, 2001. The reimbursement period for this limitation extends through December 31, 2003. (i) The Small-Cap Stock Fund-Advisor Class previously operated under a 1.20% limitation that expired December 31, 2001. The reimbursement period for this limitation extends through December 31, 2003. (j) The Small-Cap Value Fund-Advisor Class previously operated under a 1.15% limitation that expired December 31, 2001. The reimbursement period for this limitation extends through December 31, 2003. (k) The Value Fund-Advisor Class previously operated under a 1.10% limitation that expired December 31, 2001. The reimbursement period for this limitation extends through December 31, 2003. Each of the above-referenced fund's Management Agreement also provides that one or more additional expense limitation periods (of the same or different time periods) may be implemented after the expiration of the current expense limitation, and that with respect to any such additional limitation period, the fund may reimburse T. Rowe Price, provided the reimbursement does not result in the fund's aggregate expenses exceeding the additional expense limitation. Pursuant to the Developing Technologies Fund's current expense limitation, $122,000 of management fees were not accrued by the fund for the period ended December 31, 2001. At December 31, 2001, unaccrued fees and other expenses in the amount of $199,000 remain subject to reimbursement by the fund through December 31, 2004. Pursuant to the Diversified Small-Cap Growth Fund's previous expense limitation, $114,000 of unaccrued fees remain subject to reimbursement by the fund through December 31, 2002. 62 Pursuant to the Equity Index 500 Fund's previous expense limitation, $1,822,000 of management fees were not accrued by the fund for the year ended December 31, 2001. At December 31, 2001, unaccrued fees in the amount of $1,822,000 remain subject to reimbursement by the fund through December 31, 2003. Pursuant to the Global Technology Fund's current expense limitation, $185,000 of management fees were not accrued by the fund for the year ended December 31, 2001. Pursuant to the Institutional Large-Cap Growth Fund's current expense limitation, $2,000 of management fees were not accrued by the fund for the period ended December 31, 2001, and $15,000 of other fund expenses were borne by the manager. At December 31, 2001, unaccrued fees and other expenses in the amount of $17,000 remain subject to reimbursement by the fund through December 31, 2004. Pursuant to the Institutional Large-Cap Value Fund's current expense limitation, $13,000 of management fees were not accrued by the fund for the period ended December 31, 2001, and $89,000 of other fund expenses were borne by the manager. At December 31, 2001, unaccrued fees and other expenses in the amount of $179,000 remain subject to reimbursement by the fund through December 31, 2003. Pursuant to the Institutional Small-Cap Stock Fund's current expense limitation, $76,000 of previously unaccrued management fees were accrued as expenses of the fund for the period ended December 31, 2001. Pursuant to the Real Estate Fund's current expense limitation, $140,000 of management fees were not accrued by the fund for the year ended December 31, 2001. At December 31, 2001, unaccrued fees and other expenses in the amount of $284,000 remain subject to reimbursement by the fund through December 31, 2003. Management Fee Compensation The following chart sets forth the total management fees, if any, paid to T. Rowe Price by each fund, during the last three fiscal years:
Fund 2001 2000 1999 ---- ---- ---- ---- Balanced $ 8,542,000 $ 9,675,000 $ 9,154,000 Blue Chip Growth* 41,035,000 45,037,000 34,536,000 Capital Appreciation 7,570,000 4,963,000 5,793,000 Capital Opportunity 559,000 686,000 763,000 Developing Technologies 62,000 (b) (a) Diversified Small-Cap Growth 480,000 679,000 292,000 Dividend Growth 3,676,000 4,010,000 6,522,000 Equity Income* 57,395,000 58,470,000 75,676,000 Equity Index 500 3,554,000 6,234,000 8,301,000 Extended Equity Market Index** 300,000 354,000 131,000 Financial Services 2,122,000 1,388,000 1,266,000 Global Technology 569,000 274,000 (a) Growth & Income 14,691,000 18,013,000 20,605,000 Growth Stock* 27,400,000 33,072,000 29,222,000 Health Sciences 5,675,000 4,403,000 2,038,000 Institutional Large-Cap Growth (b) (a) (a) Institutional Large-Cap Value (b) (b) (a) Institutional Mid-Cap Equity Growth 1,704,000 1,896,000 1,238,000 Institutional Small-Cap Stock 1,624,000 432,000 (a) Media & Telecommunications 4,885,000 7,174,000 3,144,000 Mid-Cap Growth* 42,179,000 39,493,000 27,412,000 Mid-Cap Value 2,445,000 1,495,000 1,427,000 - ------------------------------------------------------------------------------------------------------------ New America Growth 8,612,000 11,988,000 13,511,000 New Era 6,414,000 6,223,000 6,131,000 New Horizons 36,074,000 45,642,000 33,020,000 Real Estate 207,000 589,000 (b) Science & Technology* 46,472,000 89,979,000 47,361,000 Small-Cap Stock* 20,306,000 15,623,000 10,276,000 Small-Cap Value* 11,370,000 8,294,000 9,213,000 Total Equity Market Index** 766,000 863,000 512,000 Value* 8,231,000 5,644,000 5,699,000 - ------------------------------------------------------------------------------------------------------------
63 (a) Prior to commencement of operations. (b) Due to the fund's expense limitation in effect at that time, no management fees were paid by the fund to T. Rowe Price. * The fund has two classes of shares. The management fee is allocated to each class based on relative net assets. ** All-inclusive fee including Investment Management Fees and Administrative Expenses. Blue Chip Growth, Equity Income, Growth & Income, Growth Stock, Mid-Cap Value, New Era, and New Horizons 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"). Each Agreement provides that, if the Board of Directors of any underlying Price fund determines that such underlying fund's share of the aggregate expenses of Spectrum Fund is less than the estimated savings to the underlying Price fund from the operation of Spectrum Fund, the underlying Price fund will bear those expenses in proportion to the average daily value of its shares owned by Spectrum Fund, provided further that 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. All funds except Extended Equity Market Index and Total Equity Market Index Funds Management Related Services As noted above, the Management Agreement spells out the expenses to be paid by the fund. In addition to the Management Fee, the fund pays for the following: shareholder service expenses; custodial, accounting, legal, and audit fees; costs of preparing and printing prospectuses and reports sent to shareholders; registration fees and expenses; proxy and annual meeting expenses (if any); and director fees and expenses. T. Rowe Price Services, Inc., a wholly owned subsidiary of T. Rowe Price, acts as the fund's transfer and dividend disbursing agent and provides shareholder and administrative services. Services for certain types of retirement plans are provided by T. Rowe Price Retirement Plan Services, Inc., also a wholly owned subsidiary. The address for each is 100 East Pratt Street, Baltimore, MD 21202. Additionally, T. Rowe Price, under a separate agreement with the fund, provides accounting services to the fund. The funds paid the expenses shown in the following table for the fiscal year ended December 31, 2001, to T. Rowe Price and its affiliates. 64
Transfer Agent and Retirement Accounting Fund Shareholder Services Subaccounting Services ---- -------------------- Services -------- -------- Balanced $ 812,000 $ 4,385,000 $ 86,000 Blue Chip Growth 6,167,000 10,809,000 76,000 Blue Chip Growth Fund-Advisor Class 1,000 0 3,000 Capital Appreciation 900,000 1,310,000 64,000 Capital Opportunity 218,000 32,000 64,000 Developing Technologies 70,000 (*) 64,000 Diversified Small-Cap Growth 250,000 1,000 64,000 Dividend Growth 988,000 532,000 64,000 Equity Income 7,516,000 11,264,000 99,000 Equity Income Fund-Advisor Class 3,000 0 (*) Equity Index 500 3,570,000 3,500,000 65,000 Extended Equity Market Index 174,000 58,000 65,000 Financial Services 528,000 59,000 64,000 Global Technology 497,000 (*) 84,000 Growth & Income 2,360,000 2,648,000 84,000 Growth Stock 3,087,000 4,560,000 104,000 Health Sciences 1,817,000 220,000 64,000 Institutional Large-Cap Growth (*) 0 11,000 Institutional Large-Cap Value 1,000 0 64,000 Institutional Mid-Cap Equity Growth 1,000 0 64,000 Institutional Small-Cap Stock 2,000 0 64,000 Media & Telecommunications 1,795,000 196,000 64,000 Mid-Cap Growth 3,627,000 5,621,000 80,000 Mid-Cap Growth Fund-Advisor Class 3,000 0 (*) Mid-Cap Value 740,000 58,000 64,000 New America Growth 1,185,000 1,950,000 64,000 New Era 930,000 254,000 64,000 New Horizons 3,634,000 6,604,000 84,000 Real Estate 139,000 9,000 64,000 Science & Technology 9,908,000 5,137,000 72,000 Science & Technology Fund-Advisor Class 1,000 0 7,000 Small-Cap Stock 1,379,000 2,239,000 98,000 Small-Cap Stock Fund-Advisor Class 4,000 0 1,000 Small-Cap Value 1,071,000 1,741,000 79,000 Small-Cap Value Fund-Advisor Class 1,000 0 (*) Total Equity Market Index 399,000 12,000 64,000 Value 1,066,000 1,365,000 79,000 Value Fund-Advisor Class 1,000 0 (*) - -------------------------------------------------------------------------------
(*) Less than $1,000. 65 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 2001.
Balanced Fund $ 146,413 Blue Chip Growth Fund 750,963 Capital Appreciation Fund 52,598 Capital Opportunity Fund 1,207 Dividend Growth Fund 4,474 Equity Income Fund 711,597 Equity Index 500 Fund 108,344 Financial Services Fund 9,513 Growth & Income Fund 71,544 Growth Stock Fund 97,325 Health Sciences Fund 30,863 Media & Telecommunications Fund 504 Mid-Cap Growth Fund 1,602,030 Mid-Cap Value Fund 8,268 New America Growth Fund 115,482 New Era Fund 38,459 New Horizons Fund 914,498 Science & Technology Fund 525,912 Small-Cap Stock Fund 668,769 Small-Cap Value Fund 197,468 Value Fund 50,018
Each 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 2001.
Blue Chip Growth Fund-Advisor Class $1,026,704 Equity Income Fund-Advisor Class 112,600 Mid-Cap Growth Fund-Advisor Class 15,391 Science & Technology Fund-Advisor Class 2,153,287 Small-Cap Stock Fund-Advisor Class 60,806 Small-Cap Value Fund-Advisor Class 31,931 Value Fund-Advisor Class 17,257
66 Each R Class has adopted an R Class administrative fee payment program ("R Class AFP") under which various intermediaries, including intermediaries receiving 12b-1 payments, may receive payments from the R Class in addition to 12b-1 fees for providing various recordkeeping and transfer agent type services to the R 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.
Blue Chip Growth Fund-R Class $
Control of Investment Advisor 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. DISTRIBUTOR FOR THE FUNDS ------------------------------------------------------------------------------- Investment Services, a Maryland corporation formed in 1980 as a wholly owned subsidiary of T. Rowe Price, serves as the fund's distributor for all T. Rowe Price mutual funds on a continuous basis. Investment Services is registered as a broker-dealer under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc. 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 Price funds, pursuant to an Underwriting Agreement ("Underwriting Agreement"), which provides that the funds (other than Extended Equity Market Index Fund and Total Equity Market Index Fund) will pay all fees and expenses in connection with: necessary state filings; preparing, setting in type, printing, and mailing of prospectuses and reports to shareholders; and issuing shares, including expenses of confirming purchase orders. For Extended Equity Market Index Fund and Total Equity Market Index Fund, these expenses are the responsibility of Investment Services. The Underwriting Agreement also provides that Investment Services will pay all fees and expenses in connection with: printing and distributing prospectuses and reports for use in offering and selling fund shares; preparing, setting in type, printing, and mailing all sales literature and advertising; Investment Services' federal and state registrations as a broker-dealer; and offering and selling shares for each fund, except for those fees and expenses specifically assumed by the fund. Investment Services' expenses are paid by T. Rowe Price. Investment Services acts as the agent of the fund, in connection with the sale of fund shares in the various states in which Investment Services is qualified as a broker-dealer. Under the Underwriting Agreement, Investment Services accepts orders for fund shares at net asset value. No sales charges are paid by investors or the fund. No compensation is paid to Investment Services. Blue Chip Growth, Equity Income, Growth Stock, Mid-Cap Growth, Science & Technology, Small-Cap Stock, Small-Cap Value, Value Advisor and R Classes Distribution and Shareholder Services Plan The fund Directors have adopted a Plan pursuant to Rule 12b-1 with respect to each Advisor Class and each R Class. Each Plan provides that the 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 the Class shares. It is expected that most, if not all, payments under the Plans will be made (either directly, or indirectly through Investment Services) to brokers, dealers, banks, insurance companies, and intermediaries other than Investment Services. Under the Plans, each Advisor Class pays a fee at the annual rate of up to 0.25% of that 67 class's average daily net assets and each R Class pays a fee at the annual rate of up to 0.50% of that class's average daily net assets. Normally, the full amount of the fee is paid to the intermediary on shares sold through that intermediary. However, a lesser amount may be paid 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 Class, as well as for a wide variety of other purposes associated with supporting, distributing, and servicing the Class shares. The amount of fees paid by a Class during any year may be more or less than the cost of distribution and other services provided to the Class and its investors. 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 Plans comply with these rules. The Plans require that Investment Services provide, or cause to be provided, a quarterly written report identifying the amounts expended by each Class and the purposes for which such expenditures were made, to the fund Directors for their review. Prior to approving the Plans, the funds considered various factors relating to the implementation of the Plans and determined that there is a reasonable likelihood that the Plans will benefit each fund, its Class, and the Class's shareholders. The fund Directors noted that to the extent the Plans allow a fund to sell Class shares in markets to which it would not otherwise have access, the Plans 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 Plans are renewable from year to year with respect to each fund, so long as the continuance is approved at least annually (1) by the vote of a majority of the fund Directors and (2) by a vote of the majority of the Rule 12b-1 Directors, cast in person at a meeting called for the purpose of voting on such approval. The Plans may not be amended to increase materially the amount of fees paid by any Class thereunder unless such amendment is approved by a majority vote of the outstanding shares of such Class and by the fund Directors in the manner prescribed by Rule 12b-1 under the 1940 Act. The Plans are terminable with respect to a Class at any time by a vote of a majority of the Rule 12b-1 Directors or by a majority vote of the outstanding shares in the Class. Advisor Class The following payments for the period ended December 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 Advisor Class 12b-1 Plans.
Blue Chip Growth Fund-Advisor Class $ 729,000 Equity Income Fund-Advisor Class 81,000 Mid-Cap Growth Fund-Advisor Class 14,000 Science & Technology Fund-Advisor Class 1,319,000 Small-Cap Stock Fund-Advisor Class 51,000 Small-Cap Value Fund-Advisor Class 25,000 Value Fund-Advisor Class 12,000
All funds 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. 68 The fund (other than Equity Index 500, Extended Equity Market Index, and Total Equity Market Index 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; ; a change has occurred in T. Rowe Price's rating of the security within seven calendar days prior to the date of the proposed transaction; ; or the security is subject to internal trading restrictions. In addition, Access Persons are prohibited from profiting from short-term trading (e.g., purchases and sales involving the same security within 60 days). Any person becoming an Access Person must file a statement of personal securities holdings within 10 days of this date. All Access Persons are required to file an annual statement with respect to their personal securities holdings. Any material violation of the Code of Ethics is reported to the 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. 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 in the case of agency transactions, at competitive commission rates where such rates are negotiable. However, under certain conditions, the fund may pay higher brokerage commissions in return for brokerage and research services. As a general practice, over-the-counter orders are executed with market-makers. In selecting among market-makers, T. Rowe Price 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 69 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. Equity and Fixed-Income Securities 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. In addition, such services may include computers and related hardware. 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 value are provided by brokers or dealers, T. Rowe Price may be relieved of expenses which it might otherwise bear. Subject to its policy on directed brokerage (see below), 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. 70 Directed Brokerage In 2002, the T. Rowe Price Funds that invest in domestic equity securities adopted a commission recapture program. Under the program, a percentage of commissions generated by the portfolio transactions of those funds is rebated to the funds by the brokers and used to pay for certain fund operating expenses. 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. Therefore, research may not necessarily benefit all accounts paying commissions to such brokers. Accordingly, while T. Rowe Price cannot readily determine the extent to which commission rates charged by broker-dealers reflect the value of their research services, T. Rowe Price would expect to assess the reasonableness of commissions in light of the total brokerage and research services provided by each particular broker. 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 fund participates. Research is used overall to benefit such accounts which purchase in the offering. 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 business received by any firm may be less than the suggested allocations but can, and often does, exceed the suggestions, because the total business is allocated on the basis of all the considerations described above. In no case is a broker or dealer excluded from receiving business from T. Rowe Price because it has not been identified as providing research services. Miscellaneous T. Rowe Price's brokerage allocation policy is consistently applied to all its fully discretionary accounts, which represent a substantial majority of all assets under management. Research services furnished by brokers 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. 71 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 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. Trade Allocation Policies T. Rowe Price has developed written trade allocation guidelines for its Equity, Municipal, and Taxable Fixed Income Trading Desks. Generally, when the amount of securities available in a public offering or the secondary market is insufficient to satisfy the volume or price requirements for the participating client portfolios, the guidelines require a pro-rata allocation based upon the relative sizes of the participating client portfolios or the relative sizes of the participating client orders depending upon the market involved. In allocating trades made on combined basis, the Trading Desks seek to achieve the same net unit price of the securities for each participating client. Because a pro-rata allocation may not always adequately accommodate all facts and circumstances, the guidelines provide for exceptions to allocate trades on an adjusted, pro-rata basis. Examples of where adjustments may be made include: (i) reallocations to recognize the efforts of a portfolio manager in negotiating a transaction or a private placement; (ii) reallocations to eliminate deminimis positions; (iii) priority for accounts with specialized investment policies and objectives; and (iv) reallocations in light of a participating portfolio's characteristics (e.g., available cash, industry or issuer concentration, duration, and credit exposure). Other For the last three fiscal years, the total brokerage commissions paid by each fund, including the discounts received by securities dealers in connection with underwritings, and the percentage of these commissions paid to firms which provided research, statistical, or other services to T. Rowe Price in connection with the management of each fund, or, in some cases, to each fund, was as shown below.
2001 2000 1999 Fund Commissions % Commissions % Commissions % ---- ----------- - ----------- - ----------- - Balanced $ 1,203,000 10.9% $ 399,000 11.5% $ 720,000 10.6% Blue Chip Growth 7,972,000 39.8 7,485,000 58.5 7,088,000 45.8 Capital Appreciation 2,345,000 14.1 1,305,000 32.5 1,142,000 38.4 Capital Opportunity 101,000 31.5 121,000 24.5 298,000 28.9 Developing Technologies 72,000 10.9 42,000 3.1 * * Diversified Small-Cap 55,000 2.4 105,000 1.3 75,000 1.5 Growth - ------------------------------------------------------------------------------------ Dividend Growth 640,000 66.5 1,070,000 72.0 1,420,000 57.5 Equity Income 7,344,000 26.2 8,687,000 47.3 9,653,000 45.3 Equity Index 500 193,000 0.8 331,000 0.8 378,000 0.0 Extended Equity Market Index 42,000 0.1 51,000 0.0 27,000 0.4 Financial Services 539,000 51.4 348,000 56.3 507,000 20.1 Global Technology 510,000 45.4 362,000 15.9 * * Growth & Income 4,538,000 49.5 6,522,000 57.4 2,428,000 35.8 Growth Stock 8,332,000 52.7 10,878,000 41.3 8,923,000 42.5 Health Sciences 2,732,000 60.4 2,560,000 30.3 593,000 33.1 Institutional Large-Cap Growth 2,000 6.7 * * * * Institutional Large-Cap Value 5,000 18.1 3,000 58.9 * * Institutional Mid-Cap Equity Growth 565,000 547,000 25.1 654,000 34.7 Institutional Small-Cap Stock 265,000 33.9 128,000 41.4 * * Media & Telecommunications 3,993,000 3,517,000 36.5 2,041,000 12.9 Mid-Cap Growth 11,886,000 18.3 8,893,000 22.9 12,136,000 35.1 Mid-Cap Value 1,050,000 75.5 272,000 61.8 303,000 37.1 New America Growth 1,823,000 36.4 3,730,000 29.1 4,556,000 17.1 New Era 1,411,000 40.4 2,352,000 32.5 2,122,000 52.3 New Horizons 7,929,000 7.1 13,876,000 3.8 12,816,000 4.2 Real Estate 114,000 36.8 51,000 27.8 59,000 37.4 Science & Technology 15,035,000 13,388,000 39.5 9,172,000 33.9 Small-Cap Stock 2,865,000 38.0 2,214,000 38.4 2,851,000 26.6 Small-Cap Value 1,656,000 50.0 891,000 49.5 998,000 46.1 Total Equity Market Index 40,000 0.0 30,000 0.0 45,000 0.0 Value 2,221,000 55.1 1,330,000 74.6 1,847,000 52.0 - ------------------------------------------------------------------------------------
72 (*) Prior to commencement of operations. On December 31, 2001, the Balanced Fund held stock of American Express, Bank of America, Goldman Sachs Group, Morgan Stanley Dean Witter, J.P. Morgan Chase, Credit Suisse Group, and Deutsche Bank AG, with values of $5,632,000, $12,064,000, $2,319,000, $7,809,000, $7,456,000, $1,152,000, and $1,531,000, respectively. The fund also held bonds of American Express, Goldman Sachs Group, Morgan Stanley Dean Witter, and J.P. Morgan Chase, with values of $1,227,000, $4,133,000, $4,238,000, and $5,473,000, respectively. On December 31, 2000, the fund held stock of Goldman Sachs Group, UBS, Chase Manhattan, and Morgan Stanley Dean Witter, with values of $2,674,000, $5,251,000, $9,320,000, and $11,063,000, respectively. The fund also held bonds of Goldman Sachs Group, Lehman Brothers, Morgan Stanley, and UBS, with values of $4,181,000, $1,535,000, $3,986,000, and $1,021,000, respectively. On December 31, 1999, the fund held stock of Goldman Sachs and Morgan Stanley, with values of $2,355,000 and $9,964,000, respectively. The fund also held bonds of Morgan Stanley, Lehman Brothers, and Paine Webber, with values of $3,853,000, $5,278,000, and $3,650,000, respectively. On December 31, 2001, the Blue Chip Growth Fund held stock of Goldman Sachs Group, Merrill Lynch, and Morgan Stanley Dean Witter, with values of $30,144,000, $22,412,000, and $61,534,000, respectively. On December 31, 2000, the fund held stock of Charles Schwab, Goldman Sachs Group, and Morgan Stanley Dean Witter, with values of $14,188,000, $22,457,000, and $64,985,000, respectively. On December 31, 1999, the fund held stock of Goldman Sachs, Bank America, and Morgan Stanley, with values of $11,425,000, $23,588,000, and $57,957,000, respectively. 73 On December 31, 2001, the Blue Chip Growth Portfolio held stock of Goldman Sachs Group, Merrill Lynch, and Morgan Stanley Dean Witter, with values of $28,000, $21,000, and $52,000, respectively. On December 31, 2001, the Capital Opportunity Fund held stock of J.P. Morgan Chase and Merrill Lynch, with values of $334,000 and $438,000, respectively. On December 31, 2000, the fund held stock of FleetBoston Financial, Goldman Sachs Group, and Morgan Stanley Dean Witter, with values of $447,000, $332,000, and $699,000, respectively. On December 31, 1999, the fund held stock of Bank of America and Morgan Stanley, with values of $703,000 and $879,000, respectively. On December 31, 2001, the Diversified Small-Cap Growth Fund held stock of Investment Technology Group with a value of $369,000. On December 31, 1999, the fund held stock of Investment Technology Group with a value of $144,000. On December 31, 2001, the Dividend Growth Fund held stock of Morgan Stanley Dean Witter with a value of $4,755,000. On December 31, 2000, the fund held stock of Chase Manhattan and Morgan Stanley Dean Witter, with values of $3,181,000 and $3,566,000, respectively. On December 31, 2001, the Equity Income Fund held stock of J.P. Morgan Chase with a value of $106,578,000. On December 31, 2000, the fund held stock of J.P. Morgan with a value of $142,330,000. On December 31, 1999, the fund held stock of J.P. Morgan with a value of $126,625,000. On December 31, 2001, the Equity Income Portfolio held stock of J.P. Morgan Chase with a value of $8,018,000. On December 31, 1999, the portfolio held stock of Goldman Sachs and Morgan Stanley, with values of $565,000 and $47,000, respectively. On December 31, 2001, the Equity Index 500 Fund held stock of J.P. Morgan Chase, Lehman Brothers, Merrill Lynch, and Morgan Stanley Dean Witter, with values of $23,468,000, $5,386,000, $14,208,000 and $20,230,000, respectively. On December 31, 2000, the fund held stock of Bank America, Chase Manhattan, Morgan Stanley Dean Witter, and J.P. Morgan, with values of $25,682,000, $20,472,000, $30,539,000, and $9,253,000, respectively. On December 31, 1999, the fund held stock of Lehman Brothers with a value of $4,130,000. On December 31, 2001, the Equity Index 500 Portfolio held stock of Bear Stearns, J.P. Morgan Chase, Lehman Brothers, Merrill Lynch, and Morgan Stanley Dean Witter, with values of $3,000, $33,000, $7,000, $20,000, and $29,000, respectively. On December 31, 2001, the Extended Equity Market Index Fund held stock of Goldman Sachs Group, Investment Technology Group, Jeffries Group, and Knight Trading Group, with values of $487,000, $53,000, $34,000, and $35,000, respectively. On December 31, 2000, the fund held stock of Goldman Sachs Group, Investment Technology Group, and Knight Trading Group, with values of $364,000, $38,000, and $46,000, respectively. On December 31, 1999, the fund held stock of Donaldson, Lufkin & Jenrette with a value of $68,000. On December 31, 2001, the Financial Services Fund held stock of Goldman Sachs Group, Legg Mason, Merrill Lynch, and Morgan Stanley Dean Witter, with values of $10,175,000, $2,849,000, $4,691,000, and $1,399,000, respectively. On December 31, 2000, the fund held stock of Goldman Sachs Group, Merrill Lynch, and Morgan Stanley Dean Witter, with values of $12,373,000, $1,023,000, and $10,699,000, respectively. On December 31, 1999, the fund held stock of Goldman Sachs with a value of $2,261,000. On December 31, 2001, the Growth & Income Fund held stock of FleetBoston Financial, Goldman Sachs Group, J.P. Morgan Chase, and Morgan Stanley Dean Witter, with values of $30,543,000, $13,449,000, $29,989,000, and $31,886,000, respectively. On December 31, 2000, the fund held stock of Bear Stearns, Bank of America, and Morgan Stanley Dean Witter, with values of $7,096,000, $12,845,000, and $33,285,000, respectively. On December 31, 1999, the fund held stock of Bear Stearns and Morgan Stanley Dean Witter, with values of $22,156,000 and $28,550,000, respectively. On December 31, 2001, the Growth Stock Fund held stock of Morgan Stanley Dean Witter and Merrill Lynch, with values of $31,606,000 and $38,048,000, respectively. On December 31, 2000, the fund held stock of 74 Morgan Stanley Dean Witter with a value of $42,002,000. On December 31, 1999, the fund held stock of Mellon Bank with a value of $19,703,000. On December 31, 2001, the Total Equity Market Index Fund held stock of Goldman Sachs Group, Investment Technology Group, Jeffries Group, J.P. Morgan Chase, Knight Trading Group, Lehman Brothers, Merrill Lynch, and Morgan Stanley Dean Witter, with values of $269,000, $23,000, $13,000, $1,087,000, $23,000, $261,000, $667,000, and $923,000, respectively. On December 31, 2000, the fund held stock of Morgan Stanley Dean Witter, Goldman Sachs Group, Bank of America, J.P. Morgan, Chase Manhattan, Knight Trading Group, and Investment Technology Group, with values of $1,252,000, $214,000, $1,043,000, $381,000, $822,000, $22,000, and $17,000, respectively. On December 31, 1999, the fund held stock of Goldman Sachs, Lehman Brothers, and Donaldson, Lufkin & Jenrette, with values of $151,000, $119,000, and $73,000, respectively. On December 31, 2001, the Institutional Large-Cap Value Fund held stock of Bank of America and Merrill Lynch, with values of $63,000 and $52,000, respectively. On December 31, 2001, the New America Growth Fund held stock of Goldman Sachs Group and Morgan Stanley Dean Witter, with values of $12,521,000 and $12,027,000, respectively. On December 31, 2000, the fund held stock of Goldman Sachs Group and Morgan Stanley Dean Witter, with values of $10,694,000 and $33,681,000, respectively. On December 31, 2001, the New America Growth Portfolio held stock of Goldman Sachs Group and Morgan Stanley Dean Witter, with values of $951,000 and $923,000, respectively. On December 31, 2000, the portfolio held stock of Goldman Sachs Group and Morgan Stanley Dean Witter, with values of $770,000 and $2,417,000, respectively. On December 31, 2001, the Personal Strategy Balanced Portfolio held stock of Credit Suisse Group, Goldman Sachs Group, Morgan Stanley Dean Witter, Deutsche Bank AG, and Merrill Lynch, with values of $123,000, $272,000, $363,000, $116,000, and $47,000, respectively. On December 31, 2000, the Personal Strategy Balanced Portfolio held stock of Goldman Sachs Group and Morgan Stanley Dean Witter, with values of $64,000 and $174,000, respectively. The fund held bonds in Goldman Sachs Group, Lehman Brothers, and Morgan Stanley Dean Witter, with values of $418,000, $258,000, and $211,000, respectively. On December 31, 1999, the fund held stock of Goldman Sachs and Morgan Stanley Dean Witter with values of $19,000 and $114,000, respectively. The fund also held bonds of Paine Webber, with a value of $730,000. On December 31, 2001, the Value Fund held stock of Merrill Lynch with a value of $13,030,000. On December 31, 2000, the fund held stock of Bank of America with a value of $8,028,000. On December 31, 1999, the fund held stock of Bank of America with a value of $7,528,000. The portfolio turnover rate for each fund for the last three fiscal years was as follows:
Fund 2001 2000 1999 ---- ---- ---- ---- Balanced 36.0% 16.5% 20.7% Blue Chip Growth 48.3 50.9 41.3 Capital Appreciation 25.1 32.4 28.3 Capital Opportunity 53.6 64.7 133.1 Developing Technologies(b) 107.5 232.6* (a) Diversified Small-Cap Growth 30.3 66.0 49.4 Dividend Growth 34.9 35.7 37.8 Equity Income 17.3 21.9 21.8 Equity Index 500 4.0 9.1 5.2 Extended Equity Market Index 31.3 30.5 23.4 Financial Services 54.8 32.5 37.1 Global Technology 189.2 123.6* (a) - ------------------------------------------------------------------------------- Growth & Income(c) 65.9 80.3 20.3 Growth Stock 64.1 74.3 55.8 Health Sciences 74.6 110.6 81.9 Institutional Large-Cap Growth 98.2* (a) (a) Institutional Large-Cap Value 106.3 58.4* (a) Institutional Mid-Cap Equity Growth 48.6 67.5 55.4 Institutional Small-Cap Stock 26.9 15.8* (a) Media & Telecommunications(b) 241.1 197.5 57.6 Mid-Cap Growth 43.0 53.6 53.3 Mid-Cap Value 57.5 31.9 26.8 New America Growth(d) 52.1 81.4 39.7 New Era 17.9 28.5 32.5 New Horizons 27.4 47.2 44.7 Real Estate 37.2 19.0 26.9 Science & Technology 143.6 134.1 128.0 Small-Cap Stock 16.5 32.8 42.3 Small-Cap Value 16.8 14.4 7.3 Total Equity Market Index 8.6 7.6 3.2 Value 42.2 55.9 67.8 - -------------------------------------------------------------------------------
75 * Annualized. (a) Prior to commencement of operations. (b) The funds' high portfolio turnover was due to extreme volatility in the companies in which the funds invest. (c) The increase in the fund's portfolio turnover rate from 1999 to 2000 was the result of the fund's new portfolio manager emphasizing a greater balance between growth and value stocks and significant market volatility. (d) The increase in the fund's portfolio turnover rate from 1999 to 2000 was primarily the result of the fund's decision effective May 1, 2000, to adopt a broader investment focus and invest in companies believed to be in the fastest growing sectors of the economy. This involved selling some existing holdings and replacing them with other ones. All funds PRICING OF SECURITIES ------------------------------------------------------------------------------- Equity securities listed or regularly traded on a securities exchange are valued at the last quoted sale price, or official closing price for certain markets, 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 are valued at the mean of the latest bid and ask prices. Other equity securities are valued at a price within the limits of the latest bid and ask prices deemed by the Board of Directors, or by persons delegated by the Board, best to reflect fair value. Debt securities are generally traded in the over-the-counter market. Securities with original maturities of one year or more are valued using prices furnished by dealers who make markets in such securities or by an independent pricing service, which considers yield or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Securities with original maturities less than one year are valued at amortized cost in local currency, which approximates fair value when combined with accrued interest. 76 Investments in mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. Assets and liabilities denominated in foreign currencies are translated into U.S. dollar values each day at the prevailing exchange rate, using the mean of the bid and ask prices of such currencies against U.S. dollars quoted by a major bank. Assets and liabilities for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by or under the supervision of the officers of the fund, as authorized by the Board of Directors. 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 capital gain distributions, final quarterly dividend (Balanced, Dividend Growth, Equity Income, Equity Index 500, Growth & Income, and Real Estate Funds), and annual dividend (other funds), if any, will be reinvested on the reinvestment date using the NAV per share of that date. The reinvestment date normally precedes the payment date by one day, although the exact timing is subject to change and can be as great as 10 days. TAX STATUS ------------------------------------------------------------------------------- The fund intends to qualify as a "regulated investment company" under Subchapter M of the Code. 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 are 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 its tax year-end) to avoid a federal income tax. 77 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 a 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 the shareholder is a nonresident alien individual who was physically present in the U.S. during the tax year for more than 182 days. All funds except Equity Index 500, Extended Equity Market Index, and Total Equity Market Index Funds 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 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. 78 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 period of time will vary from the average.
Cumulative Performance Percentage Change Periods ended 12/31/01 Fund 1 Yr. 5 Yrs. 10 Yrs. % Since Inception ---- ----- ------ ------- ------- --------- Inception Date --------- ---- Balanced -3.98% 49.12% 155.13% 42,677.36% 12/31/39 Blue Chip Growth -14.42 64.52 -- 234.00 06/30/93 Blue Chip Growth Fund-Advisor Class -14.42 -- -- -21.39 03/31/00 Capital Appreciation 10.26 77.27 233.25 575.59 06/30/86 Capital Opportunity -10.10 24.79 -- 122.64 11/30/94 Developing Technologies -30.58 -- -- -49.94 08/31/00 Diversified Small-Cap Growth -9.81 -- -- 17.18 06/30/97 Dividend Growth -3.64 55.04 -- 212.36 12/30/92 Equity Income 1.64 67.96 269.46 804.16 10/31/85 Equity Income Fund-Advisor Class 1.51 -- -- 18.38 03/31/00 Equity Index 500 -12.17 63.84 226.56 323.27 03/30/90 Extended Equity Market Index -9.55 -- -- 14.67 01/30/98 Financial Services -3.13 112.57 -- 141.05 09/30/96 Global Technology -36.07 -- -- -52.50 09/29/00 Growth & Income -2.17 50.28 221.57 868.53 12/21/82 Growth Stock -9.79 78.17 250.92 30,189.56 04/11/50 Health Sciences -5.97 125.80 -- 186.21 12/29/95 Institutional Large-Cap Growth -- -- -- 14.00 10/31/01 Institutional Large-Cap Value 4.44 -- -- 20.71 03/31/00 Institutional Mid-Cap Equity Growth -1.18 91.71 -- 122.58 07/31/96 Institutional Small-Cap Stock 7.26 -- -- 14.80 03/31/00 Media & Telecommunications(a) -6.93 132.90 -- 227.89 10/13/93 Mid-Cap Growth -0.98 90.08 -- 427.37 06/30/92 Mid-Cap Growth Fund-Advisor Class -1.10 -- -- -3.30 03/31/00 Mid-Cap Value 14.36 87.28 -- 117.81 06/28/96 New America Growth -11.89 26.90 162.56 651.36 09/30/85 New Era -4.35 39.56 159.28 2,411.80 01/20/69 New Horizons -2.84 47.38 9,816.24 06/03/60 Real Estate 8.87 -- -- 30.22 10/31/97 Science & Technology -41.19 12.64 241.88 593.91 09/30/87 Science & Technology Fund-Advisor Class -41.19 -- -- -65.34 03/31/00 Small-Cap Stock 6.81 77.43 288.04 06/01/56 Small-Cap Stock Fund-Advisor Class 6.60 -- -- 13.84 03/31/00 Small-Cap Value 21.94 65.47 291.78 429.74 06/30/88 Small-Cap Value Fund-Advisor Class 21.84 -- -- 41.04 03/31/00 Total Equity Market Index -11.20 -- -- 20.90 01/30/98 Value 1.60 77.29 -- 228.50 09/30/94 Value Fund-Advisor Class 1.45 -- -- 16.78 03/31/00 - -------------------------------------------------------------------------------
79 (a) The five-year and inception figures are based partly on the fund's performance as a closed-end investment company traded on the New York Stock Exchange until July 28, 1997, when it was converted to an open-end mutual fund.
Average Annual Compound Rates of Return Periods ended 12/31/01 Fund 1 Yr. 5 Yrs. 10 Yrs. % Since Inception ---- ----- ------ ------- ------- --------- Inception Date --------- ---- Balanced -3.98% 8.32% 9.82% 10.27% 12/31/39 Blue Chip Growth -14.42 10.47 -- 15.24 06/30/93 Blue Chip Growth Fund-Advisor Class -14.42 -- -- -12.82 03/31/00 Capital Appreciation 10.26 12.13 12.79 13.11 06/30/86 Capital Opportunity -10.10 4.53 -- 11.96 11/30/94 Developing Technologies -30.58 -- -- -40.49 08/31/00 Diversified Small-Cap Growth -9.81 -- -- 3.58 06/30/97 Dividend Growth -3.64 9.17 -- 13.49 12/30/92 Equity Income 1.64 10.93 13.96 14.59 10/31/85 Equity Income Fund-Advisor Class 1.51 -- -- 10.10 03/31/00 Equity Index 500 -12.17 10.38 12.56 13.06 03/30/90 Extended Equity Market Index -9.55 -- -- 3.55 01/30/98 Financial Services -3.13 16.28 -- 18.24 09/30/96 Global Technology -36.07 -- -- -44.77 09/29/00 Growth & Income -2.17 8.49 12.39 12.67 12/21/82 Growth Stock -9.79 12.25 13.38 11.68 04/11/50 Health Sciences -5.97 17.69 -- 19.14 12/29/95 Institutional Large-Cap Growth -- -- -- (a) 10/31/01 Institutional Large-Cap Value 4.44 -- -- 11.33 03/31/00 Institutional Mid-Cap Equity Growth -1.18 13.90 -- 15.91 07/31/96 Institutional Small-Cap Stock 7.26 -- -- 8.19 03/31/00 Media & Telecommunications(b) -6.93 18.42 -- 15.55 10/13/93 Mid-Cap Growth -0.98 13.71 -- 19.12 06/30/92 Mid-Cap Growth Fund-Advisor Class -1.10 -- -- -1.89 03/31/00 Mid-Cap Value 14.36 13.37 -- 15.18 06/28/96 New America Growth -11.89 4.88 10.13 13.21 09/30/85 New Era -4.35 6.89 10.00 10.28 01/20/69 New Horizons -2.84 8.07 13.75 11.69 06/03/60 Real Estate 8.87 -- -- 6.54 10/31/97 Science & Technology -41.19 2.41 13.08 14.56 09/30/87 Science & Technology Fund-Advisor Class -41.19 -- -- -45.34 03/31/00 Small-Cap Stock 6.81 12.15 14.52 14.14 06/01/56 Small-Cap Stock Fund-Advisor Class 6.60 -- -- 7.67 03/31/00 Small-Cap Value 21.94 10.60 14.63 13.14 06/30/88 Small-Cap Value Fund-Advisor Class 21.84 -- -- 21.66 03/31/00 Total Equity Market Index -11.20 -- -- 4.96 01/30/98 Value 1.60 12.13 -- 17.82 09/30/94 Value Fund-Advisor Class 1.45 -- -- 9.25 03/31/00 - -------------------------------------------------------------------------------
80 (a) No figure is provided because the fund's performance is for a period of less than one year. (b) The five-year and inception figures are based partly on the fund's performance as a closed-end investment company traded on the New York Stock Exchange until July 28, 1997, when it was converted to an open-end mutual fund. 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 firms, 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), or 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 advantaged product, may be illustrated by graphs, charts, etc.; (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; (6) the fund may disclose the performance of other funds or accounts managed by T. Rowe Price in a manner similar to the fund; and (7) the blended total returns or performance rankings of the funds may be disclosed. 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. 81 Other Features and Benefits The fund is a member of the T. Rowe Price family of funds and may help investors achieve various long-term investment goals, which include, but are not limited to, investing money for retirement, saving for a down payment on a home, or paying college costs. To explain how the fund could be used to assist investors in planning for these goals and to illustrate basic principles of investing, various worksheets and guides prepared by T. Rowe Price and/or Investment Services may be made available. No-Load Versus Load and 12b-1 Funds Many mutual funds charge sales fees to investors or use fund assets to finance distribution activities. These fees are in addition to the normal advisory fees and expenses charged by all mutual funds. There are several types of fees charged which vary in magnitude and which may often be used in combination. A sales charge (or "load") can be charged at the time the fund is purchased (front-end load) or at the time of redemption (back-end load). Front-end loads are charged on the total amount invested. Back-end loads are charged either on the amount originally invested or on the amount redeemed. 12b-1 plans allow for the payment of marketing and sales expenses from fund assets. These expenses are usually computed daily as a fixed percentage of assets. The T. Rowe Price funds, including the Advisor Classes, are considered to be "no-load" funds. They impose no front-end or back-end sales loads. However, the Advisor Classes do charge 12b-1 fees. Under applicable National Association of Securities Dealers Regulation, Inc. ("NASDR") regulations, mutual funds that have no front-end or deferred sales charges and whose total asset-based charges for sales-related expenses and/or service fees (as defined by NASDR) do not exceed 0.25% of average net assets per year may be referred to as no-load funds. Redemptions in Kind The fund has filed a notice of election under Rule 18f-1 of the 1940 Act. This permits the fund to effect redemptions in kind and in cash as set forth in its prospectus. In the unlikely event a shareholder were to receive an in-kind redemption of portfolio securities of the fund, it would be the responsibility of the shareholder to dispose of the securities. The shareholder would be at risk that the value of the securities would decline prior to their sale, that it would be difficult to sell the securities, and that brokerage fees could be incurred. Issuance of Fund Shares for Securities Transactions involving issuance of fund shares for securities or assets other than cash will be limited to (1) bona fide reorganizations; (2) statutory mergers; or (3) other acquisitions of portfolio securities that: (a) meet the investment objective and policies of the fund; (b) are acquired for investment and not for resale except in accordance with applicable law; (c) have a value that is readily ascertainable via listing on or trading in a recognized United States or international exchange or market; and (d) are not illiquid. Balanced Fund On August 31, 1992, the T. Rowe Price Balanced Fund acquired substantially all of the assets of the Axe-Houghton Fund B, a series of Axe-Houghton Funds, Inc. As a result of this acquisition, the SEC requires that the historical performance information of the Balanced Fund be based on the performance of Fund B. Therefore, all performance information of the Balanced Fund prior to September 1, 1992, reflects the performance of Fund B and investment managers other than T. Rowe Price. Performance information after August 31, 1992, reflects the combined assets of the Balanced Fund and Fund B. Media & Telecommunications Fund On July 28, 1997, the fund converted its status from a closed-end fund to an open-end mutual fund. Prior to the conversion the fund was known as New Age Media Fund, Inc. Small-Cap Stock Fund Effective May 1, 1997, the fund's name was changed from the T. Rowe Price OTC Fund to the T. Rowe Price Small-Cap Stock Fund. 82 Equity Index 500 Fund Effective January 30, 1998, the fund's name was changed from T. Rowe Price Equity Index Fund to the T. Rowe Price Equity Index 500 Fund. All funds except Capital Appreciation, Equity Income, and New America Growth Funds CAPITAL STOCK ------------------------------------------------------------------------------- The fund's Charter authorizes the Board of Directors/Trustees 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/Trustees 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/Trustees 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 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/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 directors/trustees unless and until such time as less than a majority of the directors/ trustees holding office have been elected by shareholders, at which time the directors/trustees then in office will call a shareholders' meeting for the election of directors/trustees. Except as set forth above, the directors/ trustees shall continue to hold office and may appoint successor directors/trustees. Voting rights are not cumulative, so that the holders of more than 50% of the shares voting in the election of directors/trustees can, if they choose to do so, elect all the directors/trustees of the fund, in which event the holders of the remaining shares will be unable to elect any person as a director/trustee. 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. 83 Capital Appreciation, Equity Income, and New America Growth Funds ORGANIZATION OF THE FUNDS ------------------------------------------------------------------------------- For tax and business reasons, the funds were organized as Massachusetts Business Trusts, and are 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 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. All funds FEDERAL REGISTRATION OF SHARES ------------------------------------------------------------------------------- The fund's shares are registered for sale under the 1933 Act. Registration of the fund's shares is not required under any state law, but the fund is required to make certain filings with and pay fees to the states in order to sell its shares in the states. 84 LEGAL COUNSEL ------------------------------------------------------------------------------- Shearman & Sterling, whose address is 599 Lexington Avenue, New York, New York 10022, 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 funds. The financial statements of the funds listed below for the periods ended December 31, 2001, and the report of independent accountants are included in each fund's Annual Report for the periods ended December 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 periods ended December 31, 2001, are incorporated into this Statement of Additional Information by reference (references are to page numbers in the Reports):
ANNUAL REPORT REFERENCES: EQUITY FINANCIAL NEW AMERICA NEW ERA INCOME SERVICES GROWTH ------- ------ -------- ------ Financial Highlights, December 1 1 31, 2001 8 0 0 10 Statement of Net Assets, December 31, 2001 10-17 11-13 11-16 11-15 Statement of Operations, year ended December 31, 2001 18 14 17 16 Statement of Changes in Net Assets, years ended December 31, 2001, and December 31, 2000 19-20 15 18 17 Notes to Financial Statements, December 31, 2001 21-25 16-19 19-22 18-22 Report of Independent Accountants 26 20 23 23
DIVIDEND GROWTH BLUE CHIP CAPITAL GROWTH STOCK GROWTH OPPORTUNITY ------ ----- ------ ----------- Financial Highlights, December 31, 2001 9 9 11 8 Statement of Net Assets, December 31, 2001 10-16 10-16 13-19 9-20 Statement of Operations, year ended December 31, 2001 17 17 20 21 Statement of Changes in Net Assets, years ended December 31, 2001, and December 31, 2000 18 18 21-22 22 Notes to Financial Statements, December 31, 2001 19-22 19-24 23-27 23-26 Report of Independent Accountants 23 25 28 27
85
MID-CAP REAL INSTITUTIONAL VALUE VALUE ESTATE MID-CAP EQUITY ----- ----- ------ GROWTH ------ Financial Highlights, December 31, 2001 8 9 9 7 Statement of Net Assets, December 31, 2001 10-16 10-16 10-12 8-10 Statement of Operations, year ended December 31, 2001 17 17 13 11 Statement of Changes in Net Assets, years ended December 31, 2001, and December 31, 2000 18-19 18 14 12 Notes to Financial Statements, December 31, 2001 20-24 19-22 15-18 13-14 Report of Independent Accountants 25 23 19 15
EXTENDED TOTAL EQUITY EQUITY MARKET INDEX MARKET INDEX ------------ ------------ Financial Highlights, December 31, 2001 2 2 Portfolio of Investments, December 31, 2001 3-86 3-68 Statement of Assets and Liabilities, December 31, 2001 87 69 Statement of Operations, year ended December 31, 2001 88 70 Statement of Changes in Net Assets, years ended December 31, 2001, and December 31, 2000 89 71 Notes to Financial Statements, December 31, 2001 90-93 72-75 Report of Independent Accountants 94 76
DIVERSIFIED GROWTH HEALTH SMALL-CAP & INCOME SCIENCES GROWTH -------- -------- ------ Financial Highlights, December 31, 2001 9 9 9 Statement of Net Assets, December 31, 2001 10-23 10-15 10-15 Statement of Operations, year ended December 31, 2001 24 16 16 Statement of Changes in Net Assets, years ended December 31, 2001, and December 31, 2000 25 17 17 Notes to Financial Statements, December 31, 2001 26-29 18-22 18-22 Report of Independent Accountants 30 23 23
86
GLOBAL DEVELOPING TECHNOLOGY TECHNOLOGIES ---------- ------------ Financial Highlights, December 31, 2001 8 8 Statement of Net Assets, December 31, 2001 9-13 9-13 Statement of Operations, December 31, 2001 14 14 Statement of Changes in Net Assets, periods ended December 31, 2001, and December 31, 2000 15 15 Notes to Financial Statements, December 31, 2001 16-20 16-19 2 Report of Independent Accountants 1 20
SCIENCE & EQUITY TECHNOLOGY INDEX 500 ---------- --------- Financial Highlights, December 31, 2001 8 1 Statement of Net Assets, December 31, 2001 10-14 2-20 2 Statement of Operations, December 31, 2001 15 1 Statement of Changes in Net Assets, years ended 2 December 31, 2001, and December 31, 2000 16-17 2 2 Notes to Financial Statements, December 31, 2001 18-22 3-28 Report of Independent Accountants 23 29
NEW CAPITAL MID-CAP BALANCED HORIZONS APPRECIATIONGROWTH -------- -------- ---------- Financial Highlights, December 31, 1 2001 10 11 8 2 Portfolio of Investments, December 31, 2001 11-39 12-22 9-15 14-19 Statement of Assets and Liabilities, December 31, 2001 40 23 16 20 Statement of Operations, year ended December 31, 2001 41 24 17 21 Statement of Changes in Net Assets, years ended December 31, 2001, and December 31, 2000 42 25 18 22-23 Notes to Financial Statements, December 31, 2001 43-47 26-29 19-22 24-28 Report of Independent Accountants 48 30 23 29
87
SMALL-CAP MEDIA & STOCK TELECOMMU- ----- NICATIONS --------- Financial Highlights, December 31, 2001 10 7 Portfolio of Investments, December 31, 2001 12-22 8-10 Statement of Assets and Liabilities, December 31, 2001 23 11 Statement of Operations, year ended December 31, 2001 24 12 Statement of Changes in Net Assets, years ended December 31, 2001, and December 31, 2000 25-26 13 Notes to Financial Statements, December 31, 2001 27-31 14-17 Report of Independent Accountants 32 18
INSTITUTIONAL SMALL-CAP LARGE-CAP VALUE VALUE ----- ----- Financial Highlights, December 31, 2001 5 8 Portfolio of Investments, December 31, 2001 6-8 10-21 Statement of Assets and Liabilities, December 31, 2001 9 22 Statement of Operations, year ended December 31, 2001 10 23 Statement of Changes in Net Assets, years ended December 31, 2001, and December 31, 2000 11 24-25 Notes to Financial Statements, December 31, 2001 12-13 26-30 Report of Independent Accountants 14 31
INSTITUTIONAL SMALL-CAP STOCK --------------- Financial Highlights, December 31, 2001 6 Statement of Net Assets, December 31, 2001 7-11 Statement of Operations, December 31, 2001 12 Statement of Changes in Net Assets, December 31, 2001 13 Notes to Financial Statements, December 31, 2001 14-15 1 Report of Independent Accountants 6
88
INSTITUTIONAL LARGE-CAP GROWTH ------ Financial Highlights, December 31, 2001 4 Statement of Net Assets, December 31, 2001 5-6 Statement of Operations, for the period ended December 31, 2001 7 Statement of Changes in Net Assets, for the period ended December 31, 2001 8 Notes to Financial Statements, December 31, 2001 9-10 1 Report of Independent Accountants 1
BLUE CHIP EQUITY INCOME GROWTH FUND-ADVISOR VALUE FUND- FUND-ADVISOR CLASS ADVISOR CLASS CLASS ----- ------------- ----- Financial Highlights, December 31, 2001 12 9 9 10 Statement of Net Assets, -1 December 31, 2001 13-19 7 10-16 Statement of Operations, year 1 ended December 31, 2001 20 8 17 Statement of Changes in Net Assets, for the periods ended December 31, 2001, and December 1 31, 2000 21-22 9-20 18-19 2 Notes to Financial Statements, 1 December - 31, 2001 23-27 25 20-24 Report of Independent 2 2 Accountants 8 26 5
MID-CAP SMALL-CAP STOCK GROWTH FUND- FUND- ADVISOR CLASS ADVISOR CLASS ------------- ------------- 1 Financial Highlights, December 31, 2001 3 11 1 4 -1 Portfolio of Investments, December 31, 2001 9 12-22 Statement of Assets and Liabilities, December 31, 2001 20 23 Statement of Operations, year ended December 2 31, 2001 1 24 Statement of Changes in Net Assets, for the periods ended December 31, 2001, and December 22 31, 2000 -23 25-26 2 4 Notes to Financial Statements, December 31, -2 2001 8 27-31 2 Report of Independent Accountants 9 32
89
SMALL-CAP VALUE FUND-ADVISOR CLASS ----- Financial Highlights, December 31, 2001 9 Portfolio of Investments, December 31, 2001 10-21 Statement of Assets and Liabilities, December 31, 2001 22 Statement of Operations, year ended December 31, 2001 23 Statement of Changes in Net Assets, for the periods ended December 31, 2001, and December 31, 2000 24-25 Notes to Financial Statements, December 31, 2001 26-30 Report of Independent Accountants 31
SCIENCE & TECHNOLOGY FUND-ADVISOR CLASS ----- Financial Highlights, December 31, 2001 9 Statement of Net Assets, December 31, 2001 10-14 Statement of Operations, year ended December 31, 2001 15 Statement of Changes in Net Assets, for the periods ended December 31, 2001, and December 31, 2000 16-17 Notes to Financial Statements, December 31, 2001 18-22 Report of Independent Accountants 23
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 known as high-grade bonds. A-Bonds rated A possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Baa-Bonds rated Baa are considered as medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba-Bonds rated Ba are judged to have speculative elements: their futures cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B-Bonds rated B generally lack the characteristics of a desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. 90 Caa-Bonds rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to repayment of principal or payment of interest. Ca-Bonds rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C-Bonds rated C represent the lowest rated and have extremely poor prospects of attaining investment standing. Standard & Poor's Corporation AAA-This is the highest rating assigned by Standard & Poor's to a debt obligation and indicates an extremely strong capacity to pay principal and interest. AA-Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay principal and interest is very strong. A-Bonds rated A have a strong capacity to pay principal and interest, although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions. BBB-Bonds rated BBB are regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in the A category. BB, B, CCC, CC, C-Bonds rated BB, B, CCC, CC, and C are regarded on balance as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. BB indicates the lowest degree of speculation and C the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. D-In default. Fitch IBCA, Inc. AAA-High grade, broadly marketable, suitable for investment by trustees and fiduciary institutions, and liable to slight market fluctuation other than through changes in the money rate. The prime feature of a "AAA" bond is the showing of earnings several times or many times interest requirements for such stability of applicable interest that safety is beyond reasonable question whenever changes occur in conditions. Other features may enter, such as wide margin of protection through collateral, security, or direct lien on specific property. Sinking funds or voluntary reduction of debt by call or purchase are often factors, while guarantee or assumption by parties other than the original debtor may influence their rating. AA-Of safety virtually beyond question and readily salable. Their merits are not greatly unlike those of "AAA" class but a bond so rated may be junior though of strong lien, or the margin of safety is less strikingly broad. The issue may be the obligation of a small company, strongly secured, but influenced as to rating by the lesser financial power of the enterprise and more local type of market. A-Bonds rated A are considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. BBB-Bonds rated BBB are considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore 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 91 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. 92 PAGE 3 PART C OTHER INFORMATION ITEM 23. EXHIBITS (a)(1) Articles of Incorporation of Registrant, dated April 21, 1993 (electronically filed with initial Registration Statement dated May 7, 1993) (a)(2) Articles Supplementary, dated March 14, 2000 (electronically filed with Amendment No. 10 dated March 24, 2000) (a)(3) Form of Articles Supplementary, dated July 24, 2002 (b) By-Laws of Registrant, as amended July 21, 1999 (electronically filed with Amendment No. 11 dated April 24, 2000) (c) Inapplicable (d) Investment Management Agreement between Registrant and T. Rowe Price Associates, Inc., dated April 22, 1993 (electronically filed with initial Registration Statement dated May 7, 1993) (e) Underwriting Agreement between Registrant and T. Rowe Price Investment Services, Inc., dated July 24, 2002 (f) Inapplicable (g) Custody Agreements (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, July 24, 2001, April 24, 2002, and July 24, 2002 (to be filed by amendment) (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, July 24, 2001, and April 24, 2002 (to be filed by amendment) (h) Other Agreements PAGE 4 (h)(1) Transfer Agency and Service Agreement between T. Rowe Price Services, Inc. and T. Rowe Price Funds, dated January 1, 2002, as amended April 24, 2002 and July 24, 2002 (to be filed by Amendment) (h)(2) Agreement between T. Rowe Price Associates, Inc. and T. Rowe Price Funds for Fund Accounting Services, dated January 1, 2002, as amended April 24, 2002 and July 24, 2002 (to be filed by Amendment) (h)(3) Agreement between T. Rowe Price Retirement Plan Services, Inc. and the Taxable Funds, dated January 1, 2002, as amended April 24, 2002 and July 24, 2002 (to be filed by Amendment) (i) Legal Opinion (j) Other Opinions (j)(1) Consent of Independent Accountants (to be filed by amendment) (j)(2) Power of Attorney (j)(3) Certificate of Vice President pursuant to Rule 306 of Regulation S-T for the T. Rowe Price Blue Chip Growth Fund (electronically filed with Amendment No. 12 dated April 18, 2002) (k) Inapplicable (l) Inapplicable (m)(1) Rule 12b-1 Plan for the T. Rowe Price Blue Chip Growth Fund-Advisor Class dated February 9, 2000 (electronically filed with Amendment No. 9 dated March 24, 2000) (m)(2) Rule 12b-1 Plan for the T. Rowe Price Blue Chip Growth Fund-R Class dated July 24, 2002 (m)(3) Form of Selling Agreement to be used by T. Rowe Price Investment Services, Inc. (electronically filed with Amendment No. 9 dated March 24, 2000) (n)(1) Rule 18f-3 Plan for the T. Rowe Price Blue Chip Growth Fund-Advisor Class dated February 9, 2000 (electronically filed with Amendment No. 9 dated March 24, 2000) (n)(2) Rule 18f-3 Plan for the T. Rowe Price Blue Chip Growth Fund-R Class dated July 24, 2002 PAGE 5 (p) Code of Ethics, dated April 1, 2002 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 PAGE 6 any Proceeding, to the fullest extent that such indemnification may be lawful under Maryland law. The Corporation shall pay any reasonable expenses so incurred by such Indemnitee in defending a Proceeding in advance of the final disposition thereof to the fullest extent that such advance payment may be lawful under Maryland law. Subject to any applicable limitations and requirements set forth in the Corporation's Articles of Incorporation and in these By-Laws, any payment of indemnification or advance of expenses shall be made in accordance with the procedures set forth in Maryland law. Notwithstanding the foregoing, nothing herein shall protect or purport to protect any Indemnitee against any liability to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office ("Disabling Conduct"). Anything in this Article X to the contrary notwithstanding, no indemnification shall be made by the Corporation to any Indemnitee unless: (a) there is a final decision on the merits by a court or other body before whom the Proceeding was brought that the Indemnitee was not liable by reason of Disabling Conduct; or (b) in the absence of such a decision, there is a reasonable determination, based upon a review of the facts, that the Indemnitee was not liable by reason of Disabling Conduct, which determination shall be made by: (i) the vote of a majority of a quorum of directors who are neither "interested persons" of the Corporation as defined in Section 2(a)(19) of the Investment Company Act, nor parties to the Proceeding; or (ii) an independent legal counsel in a written opinion. Anything in this Article X to the contrary notwithstanding, any advance of expenses by the Corporation to any Indemnitee shall be made only upon the undertaking by such Indemnitee to repay the advance unless it is ultimately determined that such Indemnitee is entitled to indemnification as above provided, and only if one of the following conditions is met: (a) the Indemnitee provides a security for his undertaking; or (b) the Corporation shall be insured against losses arising by reason of any lawful advances; or PAGE 7 (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 8 T. Rowe Price Associates, Inc. ("PRICE ASSOCIATES"), a Maryland corporation, serves as investment adviser to individual and institutional investors, including investment companies. Price Associates is registered as an investment adviser under the Investment Advisers Act of 1940. 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 and elsewhere. In addition to managing private counsel client accounts, T. Rowe Price International also sponsors and serves as adviser and subadviser to U.S. and foreign 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 ("GLOBAL INVESTMENT SERVICES") is an English Corporation, organized in 2000, and a wholly owned subsidiary of T. Rowe Price Group, Inc. Global Investment Services is also regulated by the English Financial Services Authority and 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 provides 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 PAGE 9 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. 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. PAGE 10 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. 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 PAGE 11 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. 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 PAGE 12 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. Listed below are the directors and executive officers 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 Vice President of T. Rowe Price Group, Inc., and T. Rowe Price Associates, Inc.; Director and President of T. Rowe Price Insurance Agency, Inc., T. Rowe Price Investment Services, Inc., and T. Rowe Price Advisory Services, PAGE 13 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. HENRY H. HOPKINS, Director and Vice President of T. Rowe Price Group, Inc.; Director of T. Rowe Price Insurance Agency, Inc.; Director and Vice President of T. Rowe Price (Canada), Inc., T. Rowe Price Investment Services, Inc., T. Rowe Price Recovery Fund Associates, 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 Associates, Inc., T. Rowe Price International, T. Rowe Price Retirement Plan Services, Inc., T. Rowe Price Stable Asset Management, Inc., and T. Rowe Price Strategic Partners Associates, Inc.; Vice President of T. Rowe Price Recovery Fund II Associates, L.L.C. JAMES A.C. KENNEDY, Director and Vice President 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 Vice President of T. Rowe Price Group, Inc.; Vice President of T. Rowe Price Associates, Inc. WILLIAM T. REYNOLDS, Director and Vice President 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.and T. Rowe Price Global Asset Management Limited; Director and President of T. Rowe Price Recovery Fund Associates, Inc.; President of T. Rowe Price Recovery Fund II Associates, L.L.C. JAMES S. RIEPE, Vice-Chairman of the Board, Director, and Vice President of T. Rowe Price Group, Inc.; Director and Vice President of T. Rowe Price Associates, Inc. and T. Rowe Price Stable Asset Management, 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 Global Asset Management Limited, 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, Inc., T. Rowe Price Global Investment Services Limited, T. Rowe Price Insurance Agency, Inc., TRPH Corporation, and T. Rowe Price Advisory Services, Inc.; and Director and President of TRP Distribution, Inc., TRP Suburban, Inc., TRP Suburban Second, Inc., and TRP Suburban Third, Inc. PAGE 14 GEORGE A. ROCHE, Chairman of the Board, Director, and President of T. Rowe Price Group, Inc.; Director and President of T. Rowe Price Associates, Inc.; Chairman of the Board and Director of TRP Finance, Inc.; Director of T. Rowe Price International, Inc., T. Rowe Price Retirement Plan Services, Inc., and T. Rowe Price Strategic Partners, Inc.; Director and Vice President of T. Rowe Price Threshold Fund Associates, Inc., TRP Suburban, Inc., TRP Suburban Second, Inc., and TRP Suburban Third, Inc. BRIAN C. ROGERS, Director and Vice President of T. Rowe Price Group, Inc.; Vice President 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 Vice President of T. Rowe Price Group, Inc.; Chief Investment Officer, Director, and Vice President of T. Rowe Price Associates, Inc.; Director, T. Rowe Price International, Inc., T. Rowe Price Global Investment Services Limited, and TRPH Corporation; Chairman of the Board and Director of T. Rowe Price Global Asset Management Limited; Director and President of T. Rowe Price (Canada), Inc.; Director and Vice President of T. Rowe Price Trust Company. MARTIN G. WADE, Director and Vice President of T. Rowe Price Group, Inc.; Vice President of T. Rowe Price Associates, Inc.; Chairman of the Board and Director of T. Rowe Price International, Inc. and T. Rowe Price Global Investment Services Limited; Director, T. Rowe Price Global Asset Management Limited. ADDITIONAL EXECUTIVE OFFICERS CRISTINA WASIAK, Chief Financial Officer and Vice President of T. Rowe Price Group, Inc. and T. Rowe Price Associates, Inc.; Director, TRP Finance, Inc. 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 PAGE 15 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., T. Rowe Price Institutional International Funds, Inc., T. Rowe Price U.S. Treasury Funds, Inc., T. Rowe Price Index Trust, Inc., T. Rowe Price Spectrum Fund, Inc., T. Rowe Price Balanced Fund, Inc., T. Rowe Price Mid-Cap Growth Fund, Inc., T. Rowe Price Small-Cap Stock Fund, Inc., T. Rowe Price Tax-Free Intermediate Bond Fund, Inc., T. Rowe Price Dividend Growth Fund, Inc., T. Rowe Price Blue Chip Growth Fund, Inc., T. Rowe Price Summit Funds, Inc., T. Rowe Price Summit Municipal Funds, Inc., T. Rowe Price Equity Series, Inc., T. Rowe Price International Series, Inc., T. Rowe Price Fixed Income Series, Inc., T. Rowe Price Personal Strategy Funds, Inc., T. Rowe Price Value Fund, Inc., T. Rowe Price Capital Opportunity Fund, Inc., T. Rowe Price Corporate Income Fund, Inc., T. Rowe Price Health Sciences Fund, Inc., T. Rowe Price Mid-Cap Value Fund, Inc., T. Rowe Price 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., T. Rowe Price International Index Fund, Inc., and T. Rowe Price Institutional Income Funds, 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. Investment Services will not receive any commissions or other compensation for acting as principal underwriter. PAGE 16 (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 and Director Vice 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 Patricia M. Archer Vice President None Steven J. Banks Vice President None John T. Bielski 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 Joseph A. Crumbling Vice President None Christine S. Fahlund Vice President None Laurie L. Fierro Vice President None Forrest R. Foss Vice President None Thomas A. Gannon Vice President None John R. Gilner Vice President None John Halaby Vice President None Douglas E. Harrison Vice President None David J. Healy Vice President None Joseph P. Healy Vice President None Walter J. Helmlinger Vice President None Salvador G. LaBella Vice President None Steven A. Larson Vice President None Cynthia W. LaRue Vice President None Gayle A. Lomax Vice President None Gayatri Malik Vice President None Sarah McCafferty Vice President None Donald W. McCall 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 Oestreicher Vice President None Regina M. Pizzonia Vice President None Kathleen G. Polk Vice President None Pamela D. Preston Vice President None Kylelane Purcell 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 Scott Such Vice President None Jerome Tuccille Vice President None Walter Wdowiak Vice President None Jane F. White Vice President None Barbara A. O'Connor Treasurer None Theodore J. Zamerski III Controller and Assistant Vice None President Barbara A. Van Horn Secretary None Kimberly B. Andersen Assistant Vice President None Shane Baldino Assistant Vice President None Richard J. Barna Assistant Vice President None Catherine L. Berkenkemper Assistant Vice President None Elizabeth A. Cairns Assistant Vice President None Patricia Cannon Assistant Vice President None Jodi Ann Casson Assistant Vice President None Linsley G. Craig Assistant Vice President None Jon Derek Dry Assistant Vice President None Dominick J. Dunnigan Assistant Vice President None Cheryl L. Emory Assistant Vice President None Bruce S. Fulton Assistant Vice President None John A. Galateria Assistant Vice President None Karen Glooch Assistant Vice President None 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 Shawn M. Isaacson Assistant Vice President None Patricia B. Lippert Assistant Vice President Secretary Lois Lynch Assistant Vice President None Karen M. Magness Assistant Vice President None Amy L. Marker 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 Andrew Miller Assistant Vice President None Laurie K. Mitchell Assistant Vice President None Clark P. Neel Assistant Vice President None Danielle Nicholson Smith Assistant Vice President None JeanneMarie B. Patella Assistant Vice President None Jean E. Ramos-Izquierdo Assistant Vice President None Seamus A. Ray Assistant Vice President None Shawn D. Reagan 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 Thomas L. Siedell Assistant Vice President None John A. Stranovsky Assistant Vice President None Nancy R. Tabor Assistant Vice President None Robyn S. Thompson Assistant Vice President None Judith B. Ward Assistant Vice President None William R. Weker, Jr. Assistant Vice President None Natalie F. Widdowson Assistant Vice President None Mary G. Williams Assistant Vice President None Linda C. Wright Assistant Vice President None Timothy R. Yee Assistant Vice President None
PAGE 17 PAGE 18 (c) Not applicable. Investment Services will not receive any compensation with respect to its activities as underwriter for the Price Funds. 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 JPMorgan Chase Bank, London, in its foreign branches, with other banks or foreign depositories. JPMorgan Chase 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. PAGE 19 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 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 July 29, 2002. T. Rowe Price Blue Chip Growth Fund, Inc. /s/Larry J. Puglia By: Larry J. Puglia 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/Larry J. Puglia President July 29, 2002 Larry J. Puglia (Chief Executive Officer) /s/Joseph A. Carrier Treasurer (Chief July 29, 2002 Joseph A. Carrier Financial Officer) * Director July 29, 2002 Calvin W. Burnett * Director July 29, 2002 Anthony W. Deering * Director July 29, 2002 Donald W. Dick, Jr. * Director July 29, 2002 David K. Fagin /s/James A.C. Kennedy Director July 29, 2002 James A.C. Kennedy * Director July 29, 2002 F. Pierce Linaweaver * Director July 29, 2002 Hanne M. Merriman /s/James S. Riepe Director and July 29, 2002 James S. Riepe Vice President * Director July 29, 2002 PAGE 21 John G. Schreiber /s/M. David Testa Director July 29, 2002 M. David Testa * Director July 29, 2002 Hubert D. Vos * Director July 29, 2002 Paul M. Wythes */s/Henry H. Hopkins Vice President and July 29, 2002 Henry H. Hopkins Attorney-In-Fact EX-99.A CHARTER 3 artsuppbcg2.txt T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. ARTICLES SUPPLEMENTARY CLASSIFYING AUTHORIZED STOCK T. Rowe Price Blue Chip Growth Fund, Inc., a Maryland corporation, having its principal office in Baltimore City, Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Article Sixth of the Charter of the Corporation, the Board of Directors has duly classified a number of shares of its unissued common stock (determined in connection with the SECOND paragraph below) into one (1) new class of common stock to be designated the T. Rowe Price Blue Chip Growth Fund-R Class. SECOND: After giving effect to the foregoing classification, the Board of Directors has heretofore duly divided and classified an aggregate of 1,000,000,000 shares of the unissued Common Stock of the Corporation into the following classes on the dates indicated in the parentheses following the names of the respective class: T. Rowe Price Blue Chip Growth Fund (April 21, 1993), T. Rowe Price Blue Chip Growth Fund-Advisor Class (March 30, 2000), and T. Rowe Price Blue Chip Growth Fund-R Class (July 24, 2002). Each such class shall consist, until further changed, of the lesser of (x) 1,000,000,000 shares or (y) the number of shares that could be issued by issuing all of the shares of the Corporation currently or hereafter authorized less the total number of shares of the Corporation then issued and outstanding of all other classes. The Blue Chip Growth Common Stock R Class shall represent the same interest in the Corporation and have identical voting, dividend, liquidation, and other rights with the Common Stock of the Corporation; provided, however, that notwithstanding anything in the charter of the Corporation to the contrary: (1)Expenses uniquely related to the Blue Chip Growth R Class of Common Stock (including, without limitation, distribution expenses under a Rule 12b-1 plan and administrative expenses under an administration or service agreement, plan or other arrangement, however designated) shall be borne by that Class, and shall be appropriately reflected (in the manner determined by the Board of Directors) in the net asset value, dividends, distribution and liquidation rights of the shares of that Class, all as the Board of Directors may determine by resolution from time to time, and shall be described in the prospectus or statement of additional information for such Class as and to the extent required by the Investment Company Act of 1940, as amended, and the rules and regulations thereunder. (2) As to any matter with respect to which a separate vote of any Class is required by the Investment Company Act (including, without limitation, approval of any plan, agreement or other arrangement referred to in subsection (1) above), such requirement as to a separate vote by that Class shall apply in lieu of any voting requirements established by the Maryland General Corporation Law. As to any matter which does not affect the interest of the Blue Chip Growth class of Common Stock, only the holders of shares of the affected Class or Classes shall be entitled to vote. THIRD: The shares aforesaid have been duly classified by the Board of Directors pursuant to authority and power contained in the Charter of the Corporation. These Articles Supplementary do not increase the aggregate authorized capital stock of the Corporation. IN WITNESS WHEREOF, T. Rowe Price Blue Chip Growth Fund, Inc. has caused these presents to be signed in its name and on its behalf by its President and witnessed by its Secretary on July 24, 2002. WITNESS: T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. /s/Patricia B. Lippert By: /s/ Larry J. Puglia Patricia B. Lippert, Secretary Larry J. Puglia, President THE UNDERSIGNED, President of T. Rowe Price Blue Chip Growth Fund, Inc., who executed on behalf of the Corporation Articles Supplementary of which this certificate is made a part, hereby acknowledges in the name and on behalf of said Corporation the foregoing Articles Supplementary to be the corporate act of said Corporation and hereby certifies that the matters and facts set forth herein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/Larry J. Puglia Larry J. Puglia, President L:\TRPPROD\EDG\Agreements\Articles Supplementary\artsuppBCG2.fm EX-99.E UNDR CONTR 4 underbcr.txt UNDERWRITING AGREEMENT BETWEEN T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. AND T. ROWE PRICE INVESTMENT SERVICES, INC. THIS UNDERWRITING AGREEMENT, made as of the 24th day of July 2002, by and between T. ROWE PRICE BLUE CHIP GROWTH FUND, INC., a corporation organized and existing under the laws of the State of Maryland (hereinafter called the "Fund"), and T. ROWE PRICE INVESTMENT SERVICES, INC., a corporation organized and existing under the laws of the State of Maryland (hereinafter called the "Distributor"). WITNESSETH: WHEREAS, the Fund proposes to engage in business as an open-end management investment company and to register as such under the federal Investment Company Act of 1940, as amended ("ICA-40"); and WHEREAS, the shares of the Fund's capital stock may be divided into classes (all such shares being referred to herein as "Shares") and the Fund currently is authorized to offer more than one class of Shares; and WHEREAS, the Distributor is engaged principally in the business of distributing shares of the investment companies sponsored and managed by either T. Rowe Price Associates, Inc. ("Price Associates") or T. Rowe Price International, Inc. ("Price International") and is registered as a broker-dealer under the Securities Exchange Act of 1934, as amended, ("SEA-34") and is a member of the National Association of Securities Dealers, Inc. ("NASD"); and WHEREAS, the Fund desires the Distributor to act as the distributor in the public offering of its shares; and WHEREAS, the Fund has adopted a plan pursuant to Rule 12b-1 under the ICA-40 (the "Plan") with respect to one or more classes of Shares (the "12b-1 Shares") authorizing payments by the Fund to the Distributor with respect to the distribution and/or provision of shareholder and administrative services with respect to such 12b-1 Shares; NOW, THEREFORE, in consideration of the premises and the mutual promises hereinafter set forth, the parties hereto agree as follows: 1. DELIVERY OF FUND DOCUMENTS. The Fund has furnished Distributor with copies, properly certified or authenticated, of each of the following: 1 (a) Articles of Incorporation, dated April 21, 1993, as amended. (b) By-Laws of the Fund as in effect on the date hereof. (c) Resolutions of the Board of Directors of the Fund selecting Distributor as principal underwriter and approving this form of agreement. The Fund shall furnish the Distributor from time to time with copies, properly certified or authenticated, of all the amendments of, or supplements to, the foregoing, if any. The Fund shall furnish Distributor promptly with properly certified or authenticated copies of any registration statements filed by it with the Securities and Exchange Commission under the Securities Act of 1933, as amended ("SA-33") or ICA-40, together with any financial statements and exhibits included therein, and all amendments or supplements thereto hereafter filed. 2. SALE OF SHARES. Subject to the provisions of Paragraphs 3, 4, and 6 hereof, and to such minimum purchase requirements as may from time to time be currently indicated in the Fund's prospectus, the Distributor is authorized to sell, as agent on behalf of the Fund, Shares authorized for issuance and registered under SA-33. Distributor may also sell Shares under offers of exchange between and among the investment companies for which Price Associates and/or Price International act as investment advisers ("Price Funds"). Distributor may also purchase as principal such Shares for resale to the public. Such sale will be made by Distributor on behalf of the Funds by accepting unconditional orders to purchase the Shares placed with Distributor by investors or by selected dealers and such purchases will be made by Distributor only after acceptance by Distributor of such orders. The sales price to the public of such Shares shall be the public offering price as defined in Paragraph 5 hereof. The Distributor shall have the right to enter into selected dealer agreements with registered and qualified securities dealers and other financial institutions of its choice for the sale of Shares, provided that the Fund shall approve the forms of such agreements. Within the United States, the Distributor shall offer and sell Shares only to such selected dealers as are members in good standing of the NASD or are institutions exempt from registration under applicable federal securities laws. Shares sold to selected dealers shall be for resale by such dealers only at the public offering price as defined in Paragraph 5 hereof. 3. SALE OF SHARES BY THE FUND. The rights granted to the Distributor shall be nonexclusive in that the Fund reserves the right to sell its Shares to investors pursuant to applications received and accepted by the Fund or its transfer agent. Further, the Fund reserves the right to issue Shares in connection with the merger or consolidation of any other investment company, trust or personal holding company with the Fund or the Fund's acquisition by the purchase or otherwise, of all or substantially all of the assets of an investment company, trust or personal holding company. Any right granted to Distributor to accept orders for Shares, or to make sales on behalf of the Fund or to purchase Shares for resale, will not apply to Shares issued in connection with the merger or consolidation of any other investment company with the Fund or its acquisition by purchase or otherwise, of all or substantially all of the assets of any investment company, trust or personal 2 holding company, or substantially all of the outstanding shares or interests of any such entity, and such right shall not apply to Shares that may be offered by the Fund to shareholders by virtue of their being shareholders of the Fund. 4. SHARES COVERED BY THIS AGREEMENT. This Agreement relates to the issuance and sale of Shares that are duly authorized, registered, and available for sale by the Fund, including redeemed or repurchased Shares if and to the extent that they may be legally sold and if, but only if, the Fund authorizes the Distributor to sell them. 5. PUBLIC OFFERING PRICE. All Shares sold by the Distributor pursuant to this Agreement shall be sold at the public offering price. The public offering price for all accepted subscriptions will be the net asset value per share, as determined in the manner provided in the Fund's Articles of Incorporation, as now in effect, or as they may be amended (and as reflected in the Fund's then current prospectus), next determined after the order is accepted by the Distributor. The Distributor will process orders submitted by brokers for the sale of Shares at the public offering price exclusive of any commission charged by such broker to his customer. 6. SUSPENSION OF SALES. If and whenever the determination of net asset value is suspended and until such suspension is terminated, no further orders for Shares shall be accepted by the Distributor except such unconditional orders placed with the Distributor before it had knowledge of the suspension. In addition, the Fund reserves the right to suspend sales and Distributor's authority to accept orders for Shares on behalf of the Fund if, in the judgment of the Board of Directors of the Fund, it is in the best interests of the Fund to do so, such suspension to continue for such period as may be determined by the Board of Directors of the Fund; and in that event, no orders to purchase Shares shall be processed or accepted by the Distributor on behalf of the Fund while such suspension remains in effect except for Shares necessary to cover unconditional orders accepted by Distributor before it had knowledge of the suspension, unless otherwise directed by the Board of Directors of the Fund. 7.SOLICITATION OF ORDERS. In consideration of the rights granted to the Distributor under this Agreement, Distributor will use its best efforts (but only in states in which Distributor may lawfully do so) to obtain from investors unconditional orders for Shares authorized for issuance by the Fund and registered under SA-33, provided that Distributor may in its discretion reject any order to purchase Shares. This does not obligate the Distributor to register or maintain its registration as a broker or dealer under the state securities laws of any jurisdiction if, in the discretion of the Distributor, such registration is not practical or feasible. The Fund shall make available to the Distributor at the expense of the Distributor such number of copies of the Fund's currently effective prospectus as the Distributor may reasonably request. The Fund shall furnish to the Distributor copies of all information, financial statements and other papers which the Distributor may reasonably request for use in connection with the distribution of Shares. 8. AUTHORIZED REPRESENTATIONS. The Fund is not authorized by the Distributor to give, on behalf of the Distributor, any information or to make any representations other than the information and representations contained in a registration statement or prospectus filed with the SEC under SA-33 and/or ICA-40, covering Shares, as such registration statement and prospectus may be amended or supplemented from time to time. 3 Neither Distributor nor any selected dealer nor any other person is authorized by the Fund to give on behalf of the Fund any information or to make any representations in connection with the sale of Shares other than the information and representations contained in a registration statement or prospectus filed with the Securities and Exchange Commission ("SEC") under SA-33 and/or ICA-40, covering Shares, as such registration statement and prospectus may be amended or supplemented from time to time, or contained in shareholder reports or other material that may be prepared by or on behalf of the Fund. This shall not be construed to prevent the Distributor from preparing and distributing tombstone ads and sales literature or other material as it may deem appropriate. No person other than Distributor is authorized to act as principal underwriter (as such term is defined in ICA-40, as amended) for the Fund. 9. REGISTRATION AND SALE OF ADDITIONAL SHARES. The Fund will, from time to time, use its best efforts to register under SA-33, such Shares of the Fund as Distributor may reasonably be expected to sell on behalf of the Fund. In connection therewith, the Fund hereby agrees to register an indefinite number of Shares pursuant to Rule 24f-2 under ICA-40, as amended. The Fund will, in cooperation with the Distributor, take such action as may be necessary from time to time to qualify such Shares (so registered or otherwise qualified for sale under SA-33), in any state mutually agreeable to the Distributor and the Fund, and to maintain such qualification. 10. EXPENSES. The Fund shall pay all fees and expenses: a. in connection with the preparation, setting in type and filing of any registration statement and prospectus under SA-33 and/or ICA-40, and any amendments or supplements that may be made from time to time; b. in connection with the registration and qualification of Shares for sale in the various states in which the Fund shall determine it advisable to qualify such Shares for sale. (Including registering the Fund as a broker or dealer or any officer of the Fund or other person as agent or salesman of the Fund in any state.); c. of preparing, setting in type, printing and mailing any report or other communication to shareholders of the Fund in their capacity as such; d. of preparing, setting in type, printing and mailing prospectuses annually to existing shareholders; e. in connection with the issue and transfer of Shares resulting from the acceptance by Distributor of orders to purchase Shares placed with the Distributor by investors, including the expenses of confirming such purchase orders; and f. of any issue taxes or (in the case of Shares redeemed) any initial transfer taxes. The Distributor shall pay (or will enter into arrangements providing that persons other than Distributor shall pay) all fees and expenses: 4 a. of printing and distributing any prospectuses or reports prepared for its use in connection with the distribution of Shares to the public; b. of preparing, setting in type, printing and mailing any other literature used by the Distributor in connection with the distribution of the Shares to the public; c. of advertising in connection with the distribution of such Shares to the public; d. incurred in connection with its registration as a broker or dealer or the registration or qualification of its officers, directors or representatives under federal and state laws; and e. incurred in connection with the sale and offering for sale of Shares which have not been herein specifically allocated to the Fund. 11. PAYMENT OF THE DISTRIBUTOR UNDER THE PLAN. a. The Fund shall pay a fee to the Distributor, or to such person as the Fund or Distributor may direct, for distribution, shareholder and/or administrative servicing expenses with respect to the Fund's 12b-1 Shares. Such fee shall be paid under the Plan adopted by the Fund and this Agreement. b. So long as the Plan or any amendment thereto is in effect, the Distributor shall inform the Board of the distribution expenses and shareholder and administrative servicing expenses incurred with respect to the 12b-1 Shares by the Distributor. So long as the Plan (or any amendment thereto) is in effect, at the request of the Board or any agent or representative of the Fund, the Distributor shall provide such additional information as may reasonably be requested concerning the activities of the Distributor hereunder and the costs incurred in performing such activities with respect to the 12b-1 Shares. 12. CONFORMITY WITH LAW. Distributor agrees that in selling Shares it shall duly conform in all respects with the laws of the United States and any state in which such Shares may be offered for sale by Distributor pursuant to this Agreement and to the rules and regulations of the NASD. 13. INDEPENDENT CONTRACTOR. Distributor shall be an independent contractor and neither Distributor, nor any of its officers, directors, employees, or representatives is or shall be an employee of the Fund in the performance of Distributor's duties hereunder. Distributor shall be responsible for its own conduct and the employment, control, and conduct of its agents and employees and for injury to such agents or employees or to others through its agents or employees. Distributor assumes full responsibility for its agents and employees under applicable statutes and agrees to pay all employee taxes thereunder. 14. INDEMNIFICATION. Distributor agrees to indemnify and hold harmless the Fund and each of its directors, officers, employees, representatives and each person, if any, who controls the 5 Fund within the meaning of Section 15 of SA-33 against any and all losses, liabilities, damages, claims or expenses (including the reasonable costs of investigating or defending any alleged loss, liability, damage, claim or expense and reasonable legal counsel fees incurred in connection therewith) to which the Fund or such of its directors, officers, employees, representatives or controlling person may become subject under SA-33, under any other statute, at common law, or otherwise, arising out of the acquisition of any Shares by any person which (i) may be based upon any wrongful act by Distributor or any of Distributor's directors, officers, employees or representatives, or (ii) may be based upon any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, shareholder report or other information covering Shares filed or made public by the Fund or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon information furnished to the Fund by Distributor. In no case (i) is Distributor's indemnity in favor of the Fund, or any person indemnified to be deemed to protect the Fund or such indemnified person against any liability to which the Fund or such person would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of his duties or by reason of his reckless disregard of his obligations and duties under this Agreement or (ii) is Distributor to be liable under its indemnity agreement contained in this Paragraph with respect to any claim made against the Fund or any person indemnified unless the Fund or such person, as the case may be, shall have notified Distributor in writing of the claim within a reasonable time after the summons or other first written notification giving information of the nature of the claim shall have been served upon the Fund or upon such person (or after the Fund or such person shall have received notice of such service on any designated agent). However, failure to notify Distributor of any such claim shall not relieve Distributor from any liability which Distributor may have to the Fund or any person against whom such action is brought otherwise than on account of Distributor's indemnity agreement contained in this Paragraph. Distributor shall be entitled to participate, at its own expense, in the defense, or, if Distributor so elects, to assume the defense of any suit brought to enforce any such claim, but, if Distributor elects to assume the defense, such defense shall be conducted by legal counsel chosen by Distributor and satisfactory to the Fund, to its directors, officers, employees or representatives, or to any controlling person or persons, defendant or defendants, in the suit. In the event that Distributor elects to assume the defense of any such suit and retain such legal counsel, the Fund, its directors, officers, employees, representatives or controlling person or persons, defendant or defendants in the suit, shall bear the fees and expenses of any additional legal counsel retained by them. If Distributor does not elect to assume the defense of any such suit, Distributor will reimburse the Fund, such directors, officers, employees, representatives or controlling person or persons, defendant or defendants in such suit for the reasonable fees and expenses of any legal counsel retained by them. Distributor agrees to promptly notify the Fund of the commencement of any litigation or proceedings against it or any of its directors, officers, employees or representatives in connection with the issue or sale of any Shares. The Fund agrees to indemnify and hold harmless Distributor and each of its directors, officers, employees, representatives and each person, if any, who controls Distributor within the meaning of Section 15 of SA-33 against any and all losses, liabilities, damages, claims or expenses (including the reasonable costs of investigating or defending any alleged loss, liability, damage, 6 claim or expense and reasonable legal counsel fees incurred in connection therewith) to which Distributor or such of its directors, officers, employees, representatives or controlling person may become subject under SA-33, under any other statute, at common law, or otherwise, arising out of the acquisition of any Shares by any person which (i) may be based upon any wrongful act by the Fund or any of the Fund's directors, officers, employees or representatives, or (ii) may be based upon any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, shareholder report or other information covering Shares filed or made public by the Fund or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon information furnished to Distributor by the Fund. In no case (i) is the Fund's indemnity in favor of the Distributor, or any person indemnified to be deemed to protect the Distributor or such indemnified person against any liability to which the Distributor or such person would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of his duties or by reason of his reckless disregard of his obligations and duties under this Agreement, or (ii) is the Fund to be liable under its indemnity agreement contained in this Paragraph with respect to any claim made against Distributor, or person indemnified unless Distributor, or such person, as the case may be, shall have notified the Fund in writing of the claim within a reasonable time after the summons or other first written notification giving information of the nature of the claim shall have been served upon Distributor or upon such person (or after Distributor or such person shall have received notice of such service on any designated agent). However, failure to notify the Fund of any such claim shall not relieve the Fund from any liability which the Fund may have to Distributor or any person against whom such action is brought otherwise than on account of the Fund's indemnity agreement contained in this Paragraph. The Fund shall be entitled to participate, at its own expense, in the defense, or, if the Fund so elects, to assume the defense of any suit brought to enforce any such claim, but, if the Fund elects to assume the defense, such defense shall be conducted by legal counsel chosen by the Fund and satisfactory to Distributor, to its directors, officers, employees or representatives, or to any controlling person or persons, defendant or defendants, in the suit. In the event that the Fund elects to assume the defense of any such suit and retain such legal counsel, Distributor, its directors, officers, employees, representatives or controlling person or persons, defendant or defendants in the suit, shall bear the fees and expenses of any additional legal counsel retained by them. If the Fund does not elect to assume the defense of any such suit, the Fund will reimburse Distributor, such directors, officers, employees, representatives or controlling person or persons, defendant or defendants in such suit for the reasonable fees and expenses of any legal counsel retained by them. The Fund agrees to promptly notify Distributor of the commencement of any litigation or proceedings against it or any of its directors, officers, employees, or representatives in connection with the issue or sale of any Shares. 15.DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall become effective upon its execution ("effective date") and, unless terminated as provided, shall remain in effect through April 30, 2002 and from year to year thereafter, but only so long as such continuance is specifically approved at least annually by the vote of a majority of the directors of the Fund who are not interested persons of Distributor or of the Fund, cast in person at a meeting called for the purpose of voting on such approval, and by vote of the directors of the Fund or of a majority of the 7 outstanding voting securities of the Fund. This Agreement may, on 60 days' written notice, be terminated at any time, without the payment of any penalty, by the vote of a majority of the directors of the Fund who are not interested persons of Distributor or the Fund, by a vote of a majority of the outstanding voting securities of the Fund, or by Distributor. This Agreement will automatically terminate in the event of its assignment. In interpreting the provisions of this Paragraph 16, the definitions contained in Section 2(a) of ICA-40 (particularly the definitions of "interested person," "assignment," and "majority of the outstanding securities") shall be applied. 16. AMENDMENT OF THIS AGREEMENT. No provisions of this Agreement may be changed, waived, discharged, or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge, or termination is sought. If the Fund should at any time deem it necessary or advisable in the best interests of the Fund that any amendment of this Agreement be made in order to comply with the recommendations or requirements of the SEC or other governmental authority or to obtain any advantage under state or federal tax laws and notifies Distributor of the form of such amendment, and the reasons therefor, and if Distributor should decline to assent to such amendment, the Fund may terminate this Agreement forthwith. If Distributor should at any time request that a change be made in the Fund's Articles of Incorporation or By-Laws or in its methods of doing business, in order to comply with any requirements of federal law or regulations of the SEC, or of a national securities association of which Distributor is or may be a member relating to the sale of Shares, and the Fund should not make such necessary change within a reasonable time, Distributor may terminate this Agreement forthwith. 17. SEPARATE AGREEMENT AS TO CLASSES. The amendment or termination of this Agreement with respect to any class of Shares shall not result in the amendment or termination of this Agreement with respect to any other class of Shares unless explicitly so provided. 18. MISCELLANEOUS. It is understood and expressly stipulated that neither the shareholders of the Fund, nor the directors of the Fund shall be personally liable hereunder. The captions in this Agreement are included for convenience of reference only, and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 19. NOTICE. Any notice required or permitted to be given by either party to the other shall be deemed sufficient if sent by registered or certified mail, postage prepaid, addressed by the party giving notice to the other party at the last address furnished by the other party to the party giving notice: if to the Fund, 100 East Pratt Street, Baltimore, Maryland 21202, and if to the Distributor, at 100 East Pratt Street, Baltimore, Maryland 21202. 8 ATTEST: T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. /s/Patricia B. Lippert By: /s/Larry J. Puglia Patricia B. Lippert, Secretary Larry J. Puglia, President ATTEST: T. ROWE PRICE INVESTMENT SERVICES, INC. /s/Barbara A. Van Horn By: /s/Henry H. Hopkins Barbara A. Van Horn, Secretary Henry H. Hopkins, Vice President L:\TRPPROD\EDG\Agreements\Underwriting Agreements\UnderBCR.fm 9 EX-99.I LEGAL OPININ 5 bcrh3opin485a.txt July 29, 2002 T. Rowe Price Blue Chip Growth Fund, Inc. 100 East Pratt Street Baltimore, Maryland 21202 Dear Sirs: In connection with the proposed registration of shares of Capital Stock of your Company designated as the T. Rowe Price Blue Chip Growth Fund--R Class, I have examined certified copies of your company's current Articles of Incorporation and By-Laws of your Company as presently in effect. I am of the opinion that: (i) your Company is a corporation duly organized and existing under the laws of Maryland; and (ii) each of such authorized shares of Capital Stock of your Company, upon payment in full of the price fixed by the Board of Directors of your Company, will be legally and validly issued and will be fully paid and non-assessable. I hereby consent to the use of this opinion as an exhibit to the Company's Registration Statement on form N-1A to be filed with the Securities and Exchange Commission for the registration under the Securities Act of 1933 of shares of Capital Stock of your Company designated as the T. Rowe Price Blue Chip Growth Fund--R Class. Sincerely, /s/Henry H. Hopkins Henry H. Hopkins EX-99.J OTHER OPININ 6 poa.txt POWER OF ATTORNEY RESOLVED, that the Corporations/Trusts listed on Exhibit I (collectively the "Corporations/Trusts" and individually the "Corporation/Trust") and each of its directors/trustees do hereby constitute and authorize, the individuals listed on Exhibit II with respect to the Corporations/Trusts indicated thereon, 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. Power of Attorney December 3, 2001 Page 2 EXHIBIT I 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 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. T. ROWE PRICE INDEX TRUST, INC. T. ROWE PRICE INSTITUTIONAL EQUITY FUNDS, INC. 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 PERSONAL STRATEGY FUNDS, 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 SPECTRUM FUND, INC. T. ROWE PRICE TAX-EFFICIENT FUNDS, INC. T. ROWE PRICE VALUE FUND, INC. 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. (Exhibit Continued) TRPPROD\EDG\Agreements\Power of Attorney\POA.fm Power of Attorney December 3, 2001 Page 3 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. T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. ROWE PRICE INSTITUTIONAL INTERNATIONAL FUNDS, INC. T. ROWE PRICE INTERNATIONAL SERIES, INC. T. ROWE PRICE INTERNATIONAL INDEX FUND, INC. TRPPROD\EDG\Agreements\Power of Attorney\POA.fm Power of Attorney December 3, 2001 Page 4 EXHIBIT II 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 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. T. ROWE PRICE INDEX TRUST, INC. T. ROWE PRICE INSTITUTIONAL EQUITY FUNDS, INC. 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 PERSONAL STRATEGY FUNDS, 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 SPECTRUM FUND, INC. T. ROWE PRICE TAX-EFFICIENT FUNDS, INC. T. ROWE PRICE VALUE FUND, INC. James S. Riepe Joel H. Goldberg Henry H. Hopkins 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. (Exhibit Continued) TRPPROD\EDG\Agreements\Power of Attorney\POA.fm Power of Attorney December 3, 2001 Page 5 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. William T. Reynolds Joel H. Goldberg Henry H. Hopkins T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. ROWE PRICE INSTITUTIONAL INTERNATIONAL FUNDS, INC. T. ROWE PRICE INTERNATIONAL SERIES, INC. T. ROWE PRICE INTERNATIONAL INDEX FUND, INC. M. David Testa Joel H. Goldberg Henry H. Hopkins TRPPROD\EDG\Agreements\Power of Attorney\POA.fm Power of Attorney December 3, 2001 Page 6 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 /s/Calvin W. Burnett Director/Trustee December 3, 2001 Calvin W. Burnett /s/Joseph A. Carrier Treasurer (Principal Financial Officer) December 3, 2001 Joseph A. Carrier /s/Anthony W. Deering Director/Trustee December 3, 2001 Anthony W. Deering /s/Donald W. Dick, Jr. Director/Trustee December 3, 2001 Donald W. Dick, Jr. /s/David K. Fagin Director/Trustee December 3, 2001 David K. Fagin /s/F. Pierce Linaweaver Director/Trustee December 3, 2001 F. Pierce Linaweaver /s/Hanne M. Merriman Director/Trustee December 3, 2001 Hanne M. Merriman /s/John G. Schreiber Director/Trustee December 3, 2001 John G. Schreiber /s/Hubert D. Vos Director/Trustee December 3, 2001 Hubert D. Vos /s/Paul M. Wythes Director/Trustee December 3, 2001 Paul M. Wythes (Signatures Continued) TRPPROD\EDG\Agreements\Power of Attorney\POA.fm Power of Attorney December 3, 2001 Page 7 JAMES S. RIEPE, Chairman of the Board (Principal Executive Officer) T. ROWE PRICE SPECTRUM FUND, INC. T. ROWE PRICE INSTITUTIONAL EQUITY FUNDS, INC. JAMES S. RIEPE, Vice President and Director/Trustee 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 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. T. ROWE PRICE INDEX TRUST, INC. 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 PERSONAL STRATEGY FUNDS, 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 TAX-EFFICIENT FUNDS, INC. T. ROWE PRICE VALUE FUND, INC. (Signatures Continued) TRPPROD\EDG\Agreements\Power of Attorney\POA.fm Power of Attorney December 3, 2001 Page 8 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. /s/James S. Riepe December 3, 2001 James S. Riepe (Signatures Continued) TRPPROD\EDG\Agreements\Power of Attorney\POA.fm Power of Attorney December 3, 2001 Page 9 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. /s/William T. Reynolds December 3, 2001 William T. Reynolds (Signatures Continued) TRPPROD\EDG\Agreements\Power of Attorney\POA.fm Power of Attorney December 3, 2001 Page 10 M. DAVID TESTA, Chairman of the Board T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC. M. DAVID TESTA, Director/Trustee T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. 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 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. T. ROWE PRICE INDEX TRUST, INC. 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 TAX-EFFICIENT FUNDS, INC. T. ROWE PRICE VALUE FUND, INC. M. DAVID TESTA, President and Director T. ROWE PRICE EQUITY SERIES, INC. T. ROWE PRICE INSTITUTIONAL EQUITY FUNDS, INC. M. DAVID TESTA, Vice President and Director/Trustee T. ROWE PRICE BALANCED FUND, INC. T. ROWE PRICE CAPITAL APPRECIATION FUND T. ROWE PRICE SPECTRUM FUND, INC. (Signatures Continued) TRPPROD\EDG\Agreements\Power of Attorney\POA.fm Power of Attorney December 3, 2001 Page 11 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. M. DAVID TESTA, Director T. ROWE PRICE INTERNATIONAL INDEX FUND, INC. M. DAVID TESTA, Vice President and Director T. ROWE PRICE INSTITUTIONAL INTERNATIONAL FUNDS, INC. T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. ROWE PRICE INTERNATIONAL SERIES, INC. /s/M. David Testa December 3, 2001 M. David Testa (Signatures Continued) TRPPROD\EDG\Agreements\Power of Attorney\POA.fm Power of Attorney December 3, 2001 Page 12 MARTIN G. WADE, Director T. ROWE PRICE INTERNATIONAL INDEX FUND, INC. MARTIN G. WADE, Chairman of the Board (Principal Executive Officer) T. ROWE PRICE INTERNATIONAL FUNDS, INC. T. ROWE PRICE INSTITUTIONAL INTERNATIONAL FUNDS, INC. T. ROWE PRICE INTERNATIONAL SERIES, INC. /s/Martin G. Wade December 3, 2001 Martin G. Wade (Signatures Continued) TRPPROD\EDG\Agreements\Power of Attorney\POA.fm Power of Attorney December 3, 2001 Page 13 JAMES A.C. KENNEDY, Director/Trustee T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. T. ROWE PRICE CAPITAL APPRECIATION FUND T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC. T. ROWE PRICE DIVIDEND GROWTH FUND, INC. T. ROWE PRICE EQUITY INCOME FUND 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 INDEX TRUST, INC. T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC. T. ROWE PRICE MID-CAP GROWTH FUND, INC. T. ROWE PRICE PERSONAL STRATEGY FUNDS, INC. T. ROWE PRICE REAL ESTATE FUND, INC. T. ROWE PRICE SPECTRUM FUND, INC. T. ROWE PRICE TAX-EFFICIENT FUNDS, INC. T. ROWE PRICE VALUE FUND, INC. JAMES A.C. KENNEDY, Vice President and Director T. ROWE PRICE BALANCED FUND, INC. T. ROWE PRICE MID-CAP VALUE FUND, INC. T. ROWE PRICE NEW ERA FUND, INC. T. ROWE PRICE INSTITUTIONAL EQUITY FUNDS, INC. /s/James A.C. Kennedy December 3, 2001 James A.C. Kennedy (Signatures Continued) TRPPROD\EDG\Agreements\Power of Attorney\POA.fm Power of Attorney December 3, 2001 Page 14 JOHN H. LAPORTE, Director T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC. T. ROWE PRICE EQUITY SERIES, INC. T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC. T. ROWE PRICE SMALL-CAP STOCK FUND, INC. T. ROWE PRICE SMALL-CAP VALUE FUND, INC. JOHN H. LAPORTE, President and Director/Trustee T. ROWE PRICE NEW HORIZONS FUND, INC. JOHN H. LAPORTE, Vice President and Director/Trustee T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC. T. ROWE PRICE HEALTH SCIENCES FUND, INC. T. ROWE PRICE NEW AMERICA GROWTH FUND /s/John H. Laporte December 3, 2001 John H. Laporte (Signatures Continued) TRPPROD\EDG\Agreements\Power of Attorney\POA.fm Power of Attorney December 3, 2001 Page 15 T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. /s/Larry J. Puglia President December 3, 2001 Larry J. Puglia T. ROWE PRICE BALANCED FUND, INC. T. ROWE PRICE DIVERSIFIED SMALL-CAP GROWTH FUND, INC. T. ROWE PRICE INDEX TRUST, INC. /s/Richard T. Whitney President December 3, 2001 Richard T. Whitney T. ROWE PRICE CAPITAL OPPORTUNITY FUND, INC. /s/William J. Stromberg President December 3, 2001 William J. Stromberg T. ROWE PRICE EQUITY INCOME FUND T. ROWE PRICE VALUE FUND, INC. /s/Brian C. Rogers President December 3, 2001 Brian C. Rogers T. ROWE PRICE MID-CAP VALUE FUND, INC. T. ROWE PRICE SMALL-CAP STOCK FUND, INC. /s/Gregory A. McCrickard President December 3, 2001 Gregory A. McCrickard T. ROWE PRICE NEW ERA FUND, INC. /s/Charles M. Ober President December 3, 2001 Charles M. Ober (Signatures Continued) TRPPROD\EDG\Agreements\Power of Attorney\POA.fm Power of Attorney December 3, 2001 Page 16 T. ROWE PRICE REAL ESTATE FUND, INC. /s/David M. Lee President December 3, 2001 David M. Lee T. ROWE PRICE CAPITAL APPRECIATION FUND /s/Stephen W. Boesel President December 3, 2001 Stephen W. Boesel T. ROWE PRICE DEVELOPING TECHNOLOGIES FUND, INC. T. ROWE PRICE GLOBAL TECHNOLOGY FUND, INC. T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC. /s/Charles A. Morris President December 3, 2001 Charles A. Morris T. ROWE PRICE GROWTH & INCOME FUND, INC. /s/Robert W. Sharps President December 3, 2001 Robert W. Sharps T. ROWE PRICE GROWTH STOCK FUND, INC. /s/Robert W. Smith President December 3, 2001 Robert W. Smith T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC. /s/Robert N. Gensler President December 3, 2001 Robert N. Gensler (Signatures Continued) TRPPROD\EDG\Agreements\Power of Attorney\POA.fm Power of Attorney December 3, 2001 Page 17 T. ROWE PRICE MID-CAP GROWTH FUND, INC. /s/Brian W.H. Berghuis President December 3, 2001 Brian W.H. Berghuis T. ROWE PRICE SMALL-CAP VALUE FUND, INC. /s/Preston G. Athey President December 3, 2001 Preston G. Athey T. ROWE PRICE DIVIDEND GROWTH FUND, INC. /s/Thomas J. Huber President December 3, 2001 Thomas J. Huber T. ROWE PRICE FINANCIAL SERVICES FUND, INC. /s/Anna M. Dopkin President December 3, 2001 Anna M. Dopkin T. ROWE PRICE HEALTH SCIENCES FUND, INC. /s/Kris H. Jenner President December 3, 2001 Kris H. Jenner T. ROWE PRICE NEW AMERICA GROWTH FUND /s/Marc L. Baylin President December 3, 2001 Marc L. Baylin T. ROWE PRICE TAX-EFFICIENT FUNDS, INC. /s/Donald J. Peters President December 3, 2001 Donald J. Peters (Signatures Continued) TRPPROD\EDG\Agreements\Power of Attorney\POA.fm Power of Attorney December 3, 2001 Page 18 T. ROWE PRICE GNMA FUND /s/Connice A. Bavely President December 3, 2001 Connice A. Bavely T. ROWE PRICE TAX-FREE INTERMEDIATE BOND FUND, INC. /s/Charles B. Hill President December 3, 2001 Charles B. Hill T. ROWE PRICE INTERNATIONAL INDEX FUND, INC. /s/Richard T. Whitney President December 3, 2001 Richard T. Whitney ATTEST: /s/Patricia B. Lippert Patricia B. Lippert, Secretary TRPPROD\EDG\Agreements\Power of Attorney\POA.fm EX-99.M 12B-1 PLAN 7 bcr12b1.txt PLAN PURSUANT TO RULE 12b-1 WHEREAS, the T. Rowe Price Blue Chip Growth Fund, Inc. ("FUND") is an open-end management investment company registered under the Investment Company Act of 1940, as amended ("1940 ACT"), and offers for public sale shares of beneficial interest in the Fund; WHEREAS, the Board of Directors is authorized to establish separate classes of shares of the Fund, and has authorized more than one such class, including the T. Rowe Price Blue Chip Growth Fund-R Class (THE "R CLASS"); WHEREAS, the Fund desires to adopt a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the R Class of shares (THE "R CLASS SHARES") and the Board of Directors has determined that there is a reasonable likelihood that adoption of said plan will benefit the Fund and the R Class shareholders; and WHEREAS, the Fund has employed T. Rowe Price Investment Services, Inc. ("INVESTMENT SERVICES") as principal underwriter of both classes of shares of the Fund, pursuant to an Underwriting Agreement between Investment Services and the Fund; NOW, THEREFORE, the Fund hereby adopts this Plan pursuant to Rule 12b-1 ("PLAN") with respect to the R Class Shares in accordance with Rule 12b-1 under the 1940 Act on the following terms and conditions: 1. The Fund is authorized to pay to Investment Services, or such other person(s) as it 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 R Class Shares, a fee at an annual rate of no more than 0.50% of the net assets of the R Class Shares, such fee to be calculated and accrued daily and paid monthly or at such other intervals as the Board shall determine. 2. The fees payable hereunder are payable without regard to the aggregate amount that may be paid over the years, provided that the amounts paid hereunder ------------- shall not exceed any limitations, including permissible interest, imposed by applicable National Association of Security Dealers, Inc. or Securities and Exchange Commission rules. 3. This Plan shall take effect on July 24, 2002, or such other date as the Directors of the Fund shall determine, and shall continue in effect for successive periods of one year thereafter for so long as it is initially approved, and such continuance is specifically approved at least annually, by votes of a majority of both (a) the Board of Directors, and (b) those Directors who are not "interested persons" of the Fund, as defined in the 1940 Act and who have no direct or indirect financial interest in the operation of the Plan or in any agreements related to the Plan (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings called for the purpose of voting on the Plan. 4. Investment Services shall provide, or arrange to be provided, to the Fund's Board of Directors and the Board shall review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made as required by Rule 12b-1 under the 1940 Act. 5. This Plan may be terminated at any time without penalty by vote of a majority of the Rule 12b-1 Directors or by vote of a majority of the outstanding R Class Shares. 6. This Plan may not be amended to increase materially the amount of fees to be paid by R Class Shares hereunder unless such amendment is approved by a vote of at least a majority of the outstanding R Class Shares (as required by the 1940 Act), and no material amendment to the Plan shall be made unless such amendment is approved in the manner provided in paragraph 3 hereof for annual approval. 7. While the Plan is in effect, the selection and nomination of Directors who are not interested persons of the Fund, as defined in the 1940 Act, shall be committed to the discretion of Directors who are themselves not interested persons. 8. The Fund shall preserve copies of the Plan and any related agreements for a period of not less than six years from the date of expiration of the Plan or agreement, as the case may be, the first two years in an easily accessible place; and shall preserve copies of each report made pursuant to Paragraph 4 hereof for a period of not less than six years from the date of such report, the first two years in an easily accessible place. Effective as of July 24, 2002. L:\TRPPROD\EDG\Agreements\12b-1 & 18f3 Agreements\BCR RULE 12b-1.fm EX-99.N 18F-3 PLAN 8 bcr18f3.txt T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. (the Fund) PLAN PURSUANT TO RULE 18f-3 The Fund hereby adopts this plan pursuant to Rule 18f-3 under the Investment Company Act of 1940 (the 1940 Act), setting forth the separate arrangement and allocation of income, realized gains and losses, unrealized appreciation and depreciation, and expenses of each class of shares. Any material amendment to this plan is subject to prior approval of the Board of Directors, including a majority of the independent Directors. EXPENSES BLUE CHIP GROWTH SHARES Blue Chip Growth shares shall bear all expenses incurred directly on behalf of the Blue Chip Growth shares ("Class Level Expenses"). Blue Chip Growth shares shall also bear that portion of the Fund's expenses not incurred directly by a particular class ("Fundwide Expenses") as the net assets of the Blue Chip Growth shares bear to the net assets of the Fund. BLUE CHIP GROWTH ADVISOR SHARES Blue Chip Growth Advisor shares shall bear all expenses incurred directly on behalf of the Blue Chip Growth Advisor shares, including 12b-1 fees ("Class Level Expenses"). Blue Chip Growth Advisor shares also bear that portion of Fundwide Expenses as the net assets of the Blue Chip Growth Advisor shares bear to the net assets of the Fund. BLUE CHIP GROWTH R SHARES Blue Chip Growth R shares shall bear all expenses incurred directly on behalf of the Blue Chip Growth R shares, including 12b-1 fees ("Class Level Expenses"). Blue Chip Growth R shares also bear that portion of Fundwide Expenses as the net assets of the Blue Chip Growth R shares bear to the net assets of the Fund. INCOME AND GAIN/LOSS ALLOCATIONS Income, realized gains and losses and unrealized appreciation and depreciation will be allocated to each class on the basis of the net assets of that class in relation to the net assets of the Fund. DIVIDENDS AND DISTRIBUTIONS Dividends and other distributions paid by the Fund to each class of shares will be paid on the same day and at the same time, and will be determined in the same manner and will be in the same amount, except that the amount of the dividends and other distributions declared and paid by a particular class may be different from that paid by another class generally only because of differing Class Level Expenses borne by each class. EXCHANGE PRIVILEGE Each class of shares is exchangeable for the other class of shares or for the same or other classes of shares of any T. Rowe Price mutual fund subject to the conditions of any such fund's then-current prospectus. GENERAL Each class of shares shall have exclusive voting rights on any matter submitted to shareholders that relates solely to its arrangements and shall have separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other class. On an ongoing basis, the Directors, pursuant to their fiduciary responsibilities under the 1940 Act and otherwise, will monitor the Fund for the existence of any material conflicts among the interests of its several classes. The Directors, including a majority of the independent Directors, shall take such action as is reasonably necessary to eliminate any such conflicts that may develop. T. Rowe Price Associates will be responsible for reporting any potential or existing conflicts to the Directors. L:\TRPPROD\EDG\Agreements\12b-1 Agreements\BCR Rule18F3.fm EX-99.P CODE ETH 9 codeofethics02.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, the Insider Trading and Securities Fraud Enforcement Act of 1988, and the various United Kingdom laws and regulations, Price Group and the mutual funds ("Price Funds") which its affiliates manage have adopted this Statement of Policy on Securities Transactions ("Statement"). 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: 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); avoid situations where it might appear that Price Group or the Price Funds or any of their officers, directors, employees, or other personnel had personally benefited at the expense of a client or fund shareholder or taken inappropriate advantage of their fiduciary positions; and prevent, as well as detect, the misuse of material, non-public information. Those subject to the Code, including 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 except certain restrictions on purchases in initial public offerings that apply only to Investment Personnel. 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, 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. Certain Temporary Workers. These workers include: All temporary workers hired on the Price Group payroll ("TRP Temporaries"); All agency temporaries whose assignments at Price Group exceed four weeks or whose cumulative assignments exceed eight weeks over a twelve-month period; 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 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. 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 or any of its subsidiaries or affiliates. 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. 4-17. 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: the Price Advisers; any officer (vice president or above) or director (excluding independent directors) of any of the Price Advisers or the Price Funds; any person associated with 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 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: 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); research and credit analysts; and 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 generally prohibited from investing in initial public offerings. See pp. 4-11; 4-13. NON-ACCESS PERSONS. Persons who do not fall within the definition of Access Persons are deemed "Non-Access Persons." If 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 (U.S.-based personnel) or the TRP International Compliance Team (International personnel) 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 (e.g., a power of attorney to direct transactions in another person's account) 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: securities held by members of the person's immediate family sharing the same household, although the presumption of beneficial ownership may be rebutted; a person's interest in securities held by a trust, which may include both trust beneficiaries or trustees with investment control; a person's right to acquire securities through the exercise or conversion of any derivative security, whether or not presently exercisable; a general partner's proportionate interest in the portfolio securities held by a general or limited partnership; 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 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 either Baltimore Legal/Compliance or the TRP International Compliance Team, as appropriate. 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 or the TRP International Compliance Team. PRIOR CLEARANCE REQUIREMENTS GENERALLY. As described, certain transactions require prior clearance before execution. Receiving prior clearance does not relieve you from conducting your 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, employees and all others subject to the Code to special legal requirements under the federal securities laws. You are responsible for your 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 Access Persons and Non-Access Persons and the 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. You 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. Access Persons and Non-Access Persons and the 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. The 60-Day Rule does apply to shares transferred out of the ESPP to a securities account; generally, however, an employee remaining in the ESPP may not transfer shares held less than 60 days out of the ESPP. 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. 4-22. Access Persons and Non-Access Persons and the 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. 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 firm 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. You must use the form returned to you 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. 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 the form with the SEC. 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 the form with the SEC. Form 5. Any transaction or holding that is exempt from reporting on Form 4, such as 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 the United States 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. Access Persons and Non-Access Persons and the 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 (generally available only to U.S. residents) 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. 4-21); 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 United States 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"). National Government Obligations (other than U.S.). Purchases or sales of direct obligations of national (non- U.S.) governments. 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 (U.S.-based personnel) or the TRP International Compliance Team (International personnel) 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"). Reporting of these transactions may be made quarterly. 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/Savings Schemes. Purchases effected through a systematic investment plan (i.e., a regular savings scheme or savings plan) involving the automatic investment of a set dollar or other currency amount on predetermined dates, provided Baltimore Legal/Compliance (U.S.-based personnel) or the TRP International Compliance Team (International personnel) has been previously notified by the Access Person that he or she will be participating in the plan or scheme. Reporting of Systematic Investment Plan/Savings Scheme 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") (e.g., iShares; Cubes), and sector index funds that are closed-end funds. All Access Persons should follow the procedures set forth below, depending upon their location, before engaging in the transactions described. For U.S. - Based Access Persons: 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"). 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, even after approval has been obtained from the Chairperson of the Ethics Committee or his or her Designee, 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. The 60-Day Rule applies to transactions in securities purchased in an IPO. 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. 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 should generally be made via iTrade on the firm's intranet to the Equity Trading Department, which will be responsible for processing and maintaining the records of all such requests. If iTrade is not available, requests may be made orally, in writing, or by electronic mail (e-mail address "Personal Trades" in the electronic mail address book). Obtaining clearance by electronic mail if iTrade is not available is strongly encouraged. All requests must include the name of the security, the number of shares or amount of bond involved, and the nature of the transaction, i.e., whether the transaction is a purchase, sale, short sale, or buy to cover. Responses to all requests will be made by iTrade or the Equity 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 non-U.S. 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. In situations where it appears that the trade will not be executed within three business days even though the order was entered in that time period (e.g., certain transactions through Transfer Agents or spousal employee-sponsored payroll deduction plans), please contact Baltimore Legal/Compliance. 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. For International Access Persons: General Procedures For Obtaining Prior Clearance (Other Than Price Group Stock) For Access Persons. Requests for prior clearance may be made by electronic mail or by submitting a written form to the TRP International Compliance Team. The TRP International Compliance Team is responsible for processing and maintaining the records of all such requests. All requests must include the name of the security, the number of shares or amount of bond involved, and the estimated value of the requested transaction. The TRP International Compliance Team will record whether the request was approved or disapproved and the date and time of the approval or disapproval; the reason for any disapproval; the nature of the transaction (i.e., whether the transaction is a purchase, sale, short sale, or buy to cover), and whether the securities are part of a new issue or private placement. Responses to all requests will be confirmed by the TRP International Compliance Team by electronic mail or on a standard written form documenting the request and its approval/disapproval. Requests will normally be processed on the same day they are received; however, additional time may be required to allow checks to be made with overseas offices. Effectiveness of Prior Clearance. Prior clearance of a securities transaction is effective for three (3) business days from and including the date the clearance is granted. If the proposed securities transaction is not executed within this time, a new clearance must be obtained. For example, if approval is granted at 2:00 pm Monday, the trade must be executed by Wednesday. In situations where it appears that the trade will not be executed within three business days even though the order was entered in that time period (e.g., an Individual Savings Account), please contact the TRP International Compliance Team. Procedures for Obtaining Prior Clearance for Initial Public Offerings ("IPOs"): Investment Personnel. Generally Investment Personnel may not purchase shares in an IPO. However, an exemption from the TRP International Compliance Team to permit investment in certain IPOs open to the general public in which allocations are made by the issuer/syndicate on a purely random basis (lottery) or on a pro-rata basis per application ("Pro-Rata Offering") may be available. Non-Investment Personnel. Access Persons other than Investment Personnel ("Non- Investment Personnel") may purchase securities in a Pro-rata Offering if the following four conditions are met: The issue is a Pro-Rata Offering; Residence; No order for the purchase of any such securities has been entered by a Price Adviser on behalf of any client; and The number of shares to be purchased is commensurate with the normal size and activity of the Access Person's account. Non-Investment Personnel may also be granted approval to purchase securities that are the subject of a non-Pro-Rata Offering. In considering such a request for approval, the TRP International Compliance Team will determine whether the proposed transaction presents a conflict of interest with any of the firm's clients or otherwise violates the Code. Approvals will carry the following conditions: 1. The purchase is made through the Non-Investment Personnel's regular broker, bank, or from a syndicate member through a general solicitation or subscription form, if relevant; and 2. The number of shares to be purchased is commensurate with the normal size and activity of the Non-Investment Personnel's account. All Access Persons. Neither Investment Personnel nor Non- Investment Personnel will be permitted to purchase in an IPO if any of the Price Advisers' clients are prohibited from doing so. This prohibition will remain in effect until these clients have had the opportunity to purchase in the secondary market once the underwriting is completed -- commonly referred to as the aftermarket. In addition, the 60-Day Rule applies to transactions in securities purchased in an IPO. Procedures for Obtaining Prior Clearance for Private Placements. Approval for an Access Person to invest in or sell securities through a private placement of securities, including the purchase of limited partnership interests, must be sought from the TRP International Compliance Team in the usual manner. The approval process will include a review by a member of the Investment Team to determine whether the investment opportunity (private placement) should be reserved for the firm's clients and whether the opportunity is being offered to the Access Person by virtue of his or her position with the firm, as well as approval by a member of the Ethics Committee. Continuing Obligation. Any Access Person who has received approval to invest in a private placement of securities and who, at a later date, anticipates participating in the firm's investment decision process regarding the purchase or sale of securities of the issuer of that private placement on behalf of any client, must immediately disclose his or her prior investment in the private placement to the TRP International Compliance Team. REASONS FOR DISALLOWING ANY PROPOSED TRANSACTION. A proposed securities transaction will be disapproved by the Trading Department, either directly or by iTrade, and/or by the Chairperson of the Ethics Committee or by the TRP International Compliance Team (unless it is determined that an exemption 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. If for any reason an Access Person has a proposed securities transaction disapproved, he or she must not communicate any information about the disapproval to another person and must not cause any other person to enter into such a transaction. 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 a duplicate confirmation or contract note 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) as follows: U.S.-based personnel should have this information sent to the attention of Compliance, Legal Department, T. Rowe Price, P.O. Box 17218, Baltimore, Maryland 21297-1218. International personnel should have this information sent to the attention of the TRP International Compliance Team, T. Rowe Price International, Inc., 60 Queen Victoria Street, London EC4N 4TZ United Kingdom. NOTIFICATION OF SECURITIES ACCOUNTS. All Access Persons and Non- Access Persons must give notice before opening or trading in a securities account with any broker, dealer, investment adviser, bank, or other financial institution, including TRP Brokerage, as follows: U.S.-based personnel must give notice by e-mail to Legal/Compliance; International personnel must give notice in writing (which may include e-mail) to the TRP International Compliance Team. New Personnel Subject to the Code. A person subject to the Code must give written notice as directed above of any existing securities accounts maintained with any broker, dealer, investment adviser, bank or other financial institution within 10 days of association with the firm. You do not have to report accounts at transfer agents or similar entities if the only securities in those accounts are variable insurance products 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 you have 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, you have a brokerage 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: Obtain approval from Investment Services (whether the registered person is based in the United States or internationally) -- the request should be in writing, directed to Baltimore Legal/Compliance, and submitted before opening or placing the initial trade in a securities account; and 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, contract note or similar statement directly to the firm, 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," which is available 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 a systematic investment plan/savings scheme, in an established dividend reinvestment plan, or the purchase of securities by a spouse pursuant to an employee-sponsored payroll deduction plan, however, may be reported quarterly. The TRP International Compliance Team will send all reports it receives to Baltimore Legal/Compliance on a quarterly basis. 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 specifically 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 employer-sponsored payroll deduction plan or spousal employer-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 (U.S.-based personnel) or the TRP International Compliance Team (international personnel). 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 (U.S.-based personnel) or the TRP International Compliance Team (international personnel). 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. If, however, 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 or the TRP International Compliance Team, as appropriate, 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: Is so excessively frequent as to potentially impact your ability to carry out your assigned responsibilities, or 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 the appropriate 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: Exempt List Transactions. Although subject to prior clearance, transactions involving securities in certain large issuers or in issuers with high trading volumes, 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 U.S. $20,000 (all amounts are in U.S. dollars) 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: issuers with market capitalizations of $5 billion or more, or U.S. issuers with an average daily trading volume in excess of 500,000 shares over the preceding 90 calendar days. Note that if 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, this exemption is not available. 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. 4-20. 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. Transactions Involving Exchange-Traded Index Options. 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 securities. These parameters are subject to change by the Ethics Committee. Please note that an option on a Unit Investment Trust (e.g., QQQ) is not an exchange-traded index option and does not fall under this provision. See the discussion under General Information on Options and Futures below. Client Limit Orders. The Equity Trading Desk or the TRP International Compliance Team, as appropriate, may approve an Access Person's proposed trade even if a limit order has been entered for a client for the same security, if: The Access Person's trade will be entered as a market order; and The client's limit order is 10% or more away from the market at the time of approval of the Access Person's trade. Japanese New Issues. All Access Persons are prohibited from purchasing a security which is the subject of an IPO in Japan. Options and Futures. Please consult the specific section on Exchange-Traded Index Options above 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 4-21). General Information on Options and Futures. If a transaction in the underlying instrument does not require prior clearance (e.g., National Government Obligations, Unit Investment Trusts), then an options or futures transaction on the underlying instrument does not require prior clearance. However, all options and futures transactions, except the commodity futures transactions described on page 4-9, must be reported even if a transaction in the underlying instrument would not have to be reported (e.g., U.S. Government Obligations). Transactions in publicly traded options on Price Group stock are not permitted. See p. 4-6. 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 a security (and options or futures on such security) or index that is not held by any of the Price Advisers' clients. Options on Securities Held by Clients of the Price Advisers. With respect to options on securities of companies which are held by any of Price Advisers' 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 Clients of the Price Advisers. 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 or Exercising Option Positions. A transaction initiated by an Access Person to exercise an option or to close an option 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 exercise the option or to close out the position, as applicable. Short Sales. Short sales by Access Persons are subject to prior clearance unless the security itself does not otherwise require prior clearance. In addition, Access Persons may not sell any security short which is owned by any client of one of the Price Advisers unless a transaction in that security would not require prior clearance. 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 February 28, 2002, he or she may not sell any shares of XYZ stock at a profit for 60 days following February 28, 2002. 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: any transaction by a Non-Access Person except for transactions in Price Group stock not exempted below; any transaction exempt from prior clearance (e.g., exercise of corporate stock option by Access Person spouse, systematic investment plan; see p. 4-9); any transaction in a security in which either the acquisition or the sale of that security did not require prior clearance (e.g., if an Access Person inherits a security, a transaction that did not require prior clearance, then he or she may sell the security inherited at a profit within 60 calendar days of its acquisition); the purchase and sale or sale and purchase of exchange- traded index options; any transaction in Price Group stock effected through the ESPP (note that the 60-Day Rule does apply to shares transferred out of the ESPP to a securities account; generally, however, an employee remaining in the ESPP may not transfer shares held less than 60 days out of the ESPP); and 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 pp. 4-11; 4-14). 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. The independent directors of the Savings Bank are not required to make such reports, except as they may be specifically requested from time to time to do so by the Savings Bank in accordance with regulatory or examination requirements. GAMBLING RELATED TO THE SECURITIES MARKETS. All persons subject to the Code are prohibited from wagering, betting or gambling related to individual securities, securities indices or other similar financial indices or instruments. This prohibition applies to wagers placed through casinos, betting parlors or internet gambling sites and is applicable regardless of where the activity is initiated (e.g., home or firm computer or telephone). This specific prohibition does not restrict the purchase or sale of securities through a securities account reporting to Baltimore Legal/Compliance or the TRP International Compliance Team, even if these transactions are effected with a speculative investment objective. 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 is required by United States securities laws to 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 provide or 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 (U.S.-based personnel) or the TRP International Compliance Team (International personnel). 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, Baltimore Legal/Compliance, and the TRP International Compliance Team are primarily responsible for administering this Statement. In fulfilling this function, the Ethics Committee will institute such procedures as it deems reasonably necessary to monitor 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. -----END PRIVACY-ENHANCED MESSAGE-----