SEC Division of Investment Management staff letter: The T. Rowe Price Funds

JUL 3 I 1995
Bll
Our Ref. No. 95 - 023 -CC
RESPONSE OF THE OFFICE OF CHIEF COUNSEL The T.Rowe Price Funds DIVISION OF INVESTMNT MAAGEMENT File No. 801- 856 Your letter dated April 28, 1995 requests assurance that we

would not recommend enforcement action to the Commission under

Section 17(d) of the Investment Company Act of 1940 (the "Act")

and Rule 17d-1 thereunder if, as described in your letter,

investment companies advised by T. Rowe Price Associates, Inc.

("T. Rowe Price") or Rowe Price-Fleming International, Inc.

("RPFI") (the "Funds") enter into a committed line of credit with

one or more banks for which each Fund would pay a portion of the

commitment fee and other expenses under the arrangement. You

state that the line of credit would provide the Funds with a

source of cash for temporary and emergency purposes to meet

unanticipated or excessive redemption. requests by shareholders of

the Funds.

You state that the Funds intend to obtain the line of credit

pursuant to an "umrella" facility. There would be one loan

agreement ("Agreement") to which each participating Fund would be

a signatory. 1/ The Agreement would stipulate a maximum amount

of aggregate borrowings and would have a term of one year, during

which all banks would remain committed and no amendments could be

made without witual agreement of the banks and each Fund.

You state that each Fund in the arrangement could, at any

time, borrow up to the lesser of: (i) a contractual limit which

will be stated as a percentage of its net assets or (ii) the

amount unused under the aggregate maximum amount of the facility,

in either case limited to no more than 33 1/3% of total assets,

as permitted under each Fund's fundamental investment policies.

When a Fund borrows under the facility, the liability for

principal repayment and interest payment would be the obligation

of that Fund only. Under no circumstances would any Fund be

liable for the obligations of any other Fund. Borrowings under

the initial Agreement would be unsecured, but collateral could be

required by negotiations at a later date. ~/

You state that banks entering into the Agreement would be

compensated with a "commitment fee" that would be fixed for the

1/ Certain Funds, such as money market funds, would not

participate in the Agreement.

~/ If collateral is required for future borrowings, each Fund

would provide collateral only in connection with its own

borrowing, and would not provide collateral for borrowing by

any other Fund. A Fund would provide collateral for its

borrowing only if permitted under the Fund's investment

policies. Telephone conversation on July 14, 1995 between

Forrest Foss and John O'Hanlon.

~.t

• 2
  term of the Agreement and paid quarterly in arrears. The commitment fee would be calculated on the unused portion of the credit line, so the amount on which the fee would be calculated would be reduced by the amount of the actual borrowings (~, if the entire line were being used there would be no commitment fee during the remaining period of the loan). You represent that the basis for apportioning the fee generally would be pro rata based on the average net assets of the participating Funds. ~/ You further represent that procedures would be established, under the supervision of each Fund's board of directors, to allocate loans on a first come, first served basis. ~/ ;¡ The credit arrangement would involve several banks. The Funds will retain an "agent bank" to facilitate the preparation of the loan documentation and to arrange the syndication of the ~ deal to other banks. The agent bank would be paid a fee apportioned on a pro rata basis of the average net assets of the participating Funds. Moreover, additional costs, such as outside counsel fees for the Funds and banks also would be apportioned to the participating Funds on the same pro rata basis. Finally, the Agreement would be approved by the board of

directors of each Fund, including a majority of the non-

interested directors, prior to any Fund entering into the

Agreement and annually thereafter. Each Fund's board of

directors will determine annually that the participation of the

Fund in the Agreement would be fair and equitable and in the best

interest of the Fund. The factors the boards would consider in

making this determination w~uld include: (i) the expected

~/ You state that the apportionment of the commitment fee may

be adjusted to take into consideration other factors, such

as the level of borrowing by each fund. Any adjustment to

the apportionment methodology will be approved by the board

of directors of each Fund. Telephone conversation on July

28, 1995 between Forrest Foss and John O'Hanlon.

~/ You state that although the basis for allocation has not yet

been determined, the most likely basis would be pro rata

based on the average net assets of the participating Funds

and the amount requested. To establish the exact method of

allocation, the boards of directors would consider such

matters as: (i) the amount available under the Agreement;

(ii) the amount requested by each Fund and the Funds in the

aggregate; (iii) the availability of other sources of cash

to meet the needs of each Fund (such as uncommitted lines of

credit, short-term, liquid investments, and cash reserves);

(iv) the history of each requesting Fund's requests for

loans; (v) the expected duration of each requested loan; and

(vi) the expected need for loans in the immediate future.

'!-~

• 3
  benefits and costs to each Fund, (ii) the experience of each Fund

under the loan arrangement, (iii) the availability of other

sources of liquidity for each Fund, and (iv) the expected

continuing need by the Fund for the loan arrangement.

Section 17 (d) and Rule 1 7d- 1 prohibit an affiliated person

of an investment company from participating in a j oint enterprise

or other joint arrangement or profit-sharing plan with such

company without first obtaining an order from the Commission.

The purpose of Section 17 (d) and Rule 17d-1 is to protect

investment companies from participating in transactions with

affiliated persons on inequitable terms.

You believe that the arrangement described above does not

constitute a joint or a joint and several transaction within the

meaning of Section 17 (d) or Rule 17d-1. In addition, you believe

that the proposed arrangement will pose none of the dangers that ..~
Section 17 and Rule 1 7d- 1 are designed to prevent. You assert

that each Fund will participate in the arrangement on an equal

basis. You represent that each Fund will share the commitment

fee, agent bank fee and other expenses under the Agreement only

if its board of directors, including a majority of the non-

interested directors, determines that such participation would be

fair and equitable and in the best interests of each

participating Fund. You also state that all the Funds

participating in the arrangement have common and substantially

similar interests. You assert that the only potential for

conflict arises if the demand for borrowed funds under the line

of credit exceeds the amount available under the line. You

represent that, in such instance, the available loans would be

apportioned among the Funds on a fair and equitable basis in

accordance with procedures established by the Fund's board of

directors in advance of entering into the Agreement. You also

represent that the portion of the commitment fee paid by each

Fund will be so small that it will not, as a practical matter,

have any effect on the Fund's net asset value per share.

Without necessarily agreeing with your legal analysis, and

based on the facts and representations in your letter, we would

not recommend enforcement action to the Commission pursuant to

Section 17 (d) or Rule 1 7d- 1 thereunder if the Funds enter into a

committed line of credit arrangement and pay the commitment and

other fees as described above and in your letter. You should

note that different facts or representations might require a different conclusion. . ~~O¡~l￾John V. 0' Hanlon

Special Counsel

1

\ '. ':J .J I ~ r ~ ¿, owe Price Associates, Inc. Section 17(d)

Rule 17d.,1
P.O. Box 89000
Baltimore. Maryland 21289-8600 ,/ ACT :: ~f1
100 East Pratt Street
VI FEDERA EXPRESS ST,CTIOl' /1 (d) Baltimore. Maryland 21202 410-625-6601 RtF, __. Fax 410-547-0180 PUL;"::'J Forrest R. Foss April 28, 1995 AVAILABILITY 7/31/qS- Vice President and . I Associate Legal Counsel Chief Counsel Division of Investment Management Secrities and Exchange Commision 450 Fifh Street, N.W., MS 7-8 Washington, D.C. 20549

Re: Committed Line of Credit
Dear Mr. Murphy:
We are writing to request assurance that the Staff of the Securities and Exchange Commision ("Commission") would not recmmend enforcement action under the Invest~ent Company Act of 1940 ("1940 Act") if the T. Rowe Price Funds (the "Price Fuds" or "Fuds") were to enter into a committed lie of credit with one or more bank in order to secure a source of funds for temporary and emergency purposes to m~t unanticipated or excesive redemption requests by shareholders of the Funds. Becuse each Price Fund would pay a portion of the commitment fee required under the arrangement, it is arguable that the arrangement could raise isues under Section 17(d) of the 1940 Act and Rule 17d-1 thereunder.

Backgund
Historicay, uncommitted lies of credit have been suffcient to meet the redemption needs of the Price Funds and, so far as we are aware, the industry. Uncommitted credit facilties are arrangements with banks whereby the bank has pedormed it's credit review of a mutual fund and has agree to entertin loan requests from the fund. The clear understanding, which is reflected in the documentation for such lies, is that the bank is under no obligation to make loans and wil make them at it's sole disetion. Despite the tenuous nature of such arrangements they have served the needs of the industry to date. Their advantage is that there is no cost to the mutual fund but the disdvantage is that the bank is not under any obligation to advance funds when requested. T.RoIlæ Ii

\

"" T. Rowe Price Associates, Inc.
If al conditions remained constant, and if the hitory of the industry were a good predictor of the future, uncommitted credit facilties would liely be adequate to meet the emergency liquidity need of Price Funds. However, there are several importnt developments which make T. Rowe Price Asiates, Inc. ("T. Rowe Price") and Rowe Price-Fleming International Inc. ("RPFI"), investment managers of the Price Funds, believe that the Price Funds should have the option to seek committed lies of credit in the future. . There are relatively few banks which are active in lending to mutual funds, even with

uncommitted facilties. Moreover, there is growing resistance among them to invest the effort for the formal credit review proc for each individual fund (a necry precndition to lending) without compensation. If present trends continue, uncommitted facilties wil be available only from a shrinkig number of banks. . Uncommitted loan facilties are generaly available only from banks which have, or anticipate having, some other relationship with the mutual fund such as securities lending or custodial service. We believe the Price Funds should be in a position to secure a

source of borrowing without regard to these other factors.
. Banks in recnt years have seen their tota committed loan facilties to entities in and

around the securities busines (e.g., DTC and NYSE) esate as they prepare themselves for managig cash during periods of high demand. Th could increase the chance of loan requests not being funded under uncommitted facilties. . With the increaed specialtion ànd internationaltion of mutual fund portfolios, the

industry is appropriately giving greater attention to alternative methods for funding redemptions during periods of market volatilty. . The mutual fund industry has many new funds. The ripple effect of how these funds and

their shareholders handle negative market events could have signifcant impact on the redemption activity of the mutual fund industry at large. . Across al the Price Funds, 80% of redemption proced are disburse the day after the

redemption (i.e., wire transfers and checkwting redemptions). If the portfolio manager needs to sell secrities, the sae may not' settle until 4 days after the money was disbursed. Even under T + 3, there would be a two day disepancy. Most mutual funds have establihed procdures to fund redemptions during unusual market

activity. Thes include: holding the mailg of redemption procds and delaying the transmision of exchange proceds for up to five busines days; increasing reseives in anticipation of market volatilty; and the establihment of uncommitted lies of credit. In light of the above lited factors, however, we believe it is appropriate to consider the establihment of committed lies of credit as a further saeguard.

~ T. Rowe Price Associates, Inc.

Although market conditions make it impossible to determine when the Price Funds would fid it necry to enter into a committed lie of credit, we believe it is prudent for the Funds to seek this relief so that, when the time comes, they wil be able to act quickly. The tye of committed lie of credit which T. Rowe Price has disussed with various banks would have the following

characteristics:
. An "umbrella" facilty. There would be one loan agreement ("Agrment") of which each

participating Price Fund would be a signatory. Cert Funds would not participate, such as money market funds, but it is currently expeced that about 50 Price Funds would be in the facilty. Attachment A includes a current lit of such.funds. Other funds advised by T. Rowe Price or Price-Fleming would be added in the future. . The Agreement would stipulate a maxum amount of aggegate borrowings at one time,

the current thikig is in the range of $400 mion to $500 milon. e The Agreement would have a term of one year during which al banks would remain committed and no amendments could be made without mutual agreement of the banks and each Price Fund. . The Agreement would have normal provisions for represntations and warranties,

busines covenants and events of default. Other than when in default, the banks would be contractualy obligated to honor all requests for loans. . Each Price Fund in the arrangemènt could, at any time, borrow up to the leser of: (1)

a contractual liit which wil be stated as a percent of it's net assets or (2) the amount

unuse under the aggegate maxum amount of the facilty, in either case liited to no more than the 33 1/3% of total assets alowed under each fund's fundamental investment policies. . When a Price Fund borrows under the facilty, the liabilty for pricipal repayment and

interest payment would be the obligation of that fund only. Under no circumstance

would any Price Fund be liable for the obligations of any other Price Fund. . Borrowings under the intial Agreement 'would be unsecred (but collateral could be

required by negotiations at a later date).
. No bank participating in any loan arrangement would be an affate of T. Rowe Price,

RPFI or any Price Fund.
. The banks entering into the agreement would be compensated with a "commitment fee"

which is a rate denominated in basis points. The rate would be fied for the term of the

Agreement, and would be paid quarterly in arrears. The commitment fee would be caculated on the unused portion of the lie, so the amount on which the fee would be

T. Rowe Price Associates, Inc.

caculated would be reduced by the amount of actual borrowings (e.g., if the entire lie were being used there would be no commtment fee during the remaining period of the loan.) . Each Price Fund participating in the Ageement would pay its portion of the

commitment fee. The basis for apportionig the fee would be pro rata based on the average net asets of the participating Price Funds. . Procures would be establihed, under the supervision of the Boards of Directors, to alocte loans on a first come, fist served basis. If at a particuar time, the demand for loans exceeds the available supply under the Agreement, the available loans would be apportioned among the Funds on a fai and equitable basis. Although the basis for apportionment has not yet ben determed, the most liely choice would be pro rata based on average net assets of the partcipating Price Funds and the amount requested. To determine the exact method of apportionment, the boards of directors would consider such matters as: the amount avaiable under the Agreement; the amount requested by each Price Fund and by the Price Funds in the aggegate; the availabilty of other source of monies to meet the needs of each Price Fund such as uncommitted lies of

credit, cash reserves and other short-term, liquid investments; the history of each requesting fund's requests for loans; the expected duration of each requested loan; and the expected nee for loans in the imediate future. . As the credit arrangement would involve a number of banks, an "agent bank" would

liely be retained to faciltate the preparation of the loan documentation and to arange the sydication of the dea to other ban. That bank would be paid a fee for acting as

agent. The fee would be paid when the sydication is completed or in arrears on some basis. Such fee would be apportioned among each participating Price Fund on a pro rata basis based on average net asets. . There would be other costs assiated with the Agreement, such as outside counsel for

the Funds and the bank, which would al be apportioned across the participating funds on a pro rata basis. It is the custom in the industry for counsel fees to be paid by the

borrower. However, such fees are exped to be insigncant.

. The Agreement would be approved by the board of direcors, including a majority of the independent directors, of each participatig Price Fund prior to any Fund entering into the Agreement and annualy thereater. No Price Fund would be alowed to initialy participate or renew its participation in the Agreement unless the Board of such fund determines that paricipation would be fai and equitable and in the bet interest of each participating fund. The factors the boards would consider in makig this determation would include the execed benefits and costs to each fund, the exerience of each fund under the loan arrangement, the availabilty of other source of liquidity for each fund and the expeced continuing need for the loan arrangement.

T. Rowe Price Associates, Inc.

Legal Analysis and Applicable Preedent
Section 17(d) of the 1940 Act provides, in pertinent part, as follows:
It shal be unlawful for any affilated person of . . . a regitered investment company . . . or any affilated person of such person . . . acting as principal to effect any transaction in which such regitered company . . . is a joint or a joint and several participant with such person . . . or affilated person, in contravention of such rues and reguations as the commion may presbe for the purpose of liiting or preventing participation by such regitered or controlled company on a basis different from or les advantageous than that of such other participant . . . . Rule 17d-1 under the 1940 Act provides, in relevant part, as follows:
No affated person of ... any registered investment company . . . and no affilated person of

such a persn . . . acting as principal shall participate in, or effec any transaction in connecion with, any joint enterprise or other joint arrangement or profit-sharing plan in which any such regitered company . . . is a participant, and which is entered into, adopted or modifed subseuent to the effecive date of this rue, unles an application regarding such joint enterprise, arrangement or profit-sharing plan has been fied with the Commision and has been granted by an order entered prior to the submision of such plan or modifcation to security holders for approval. . . . Rule 17d-1(a). A "joint enterprise or other joint arrangenient" as used in this rue shal mean any written or oral plan, contract, authoriztion or arrangement, or any practice or understanding concerning an enterprise or undertg whereby a registered investment company . . . and any afated

person of . . . such regitered investment company, or any affilated person of such a person, . . . have a joint or a joint and several participation, or share in the profits of such enterpris or undertakig, . . . . Rule 17d-1(c). We do not believe the arrangement desibed above constitutes a joint or a joint and several transaction within the meanig of Section 17(d) or Rule 17d-L. Th is beuse the Board of Directors of each participating Price Fund, in approving participation in the Agreement for that Fund, wil consider only that Fund's interest. In no case wil a decision that a particuar Price Fund should partcipate be based, to any degree, upon a determination that such participation might further the interests of other Price Funds. We have found no applicable no action letters relating to the use of a committed lie of credit and payment of a commitment fee by a group of affilated mutual funds. In the area of exemptive relief, the only relevant precent we have found is Rule 17g-1 under the 1940 Act which provides exemptive relief for the purchase of a joint fidelity bond covering affilated mutual funds and their affilated investment advisers and distributors. The exitence of Rule 17g-1 does not imply, however, that any sharing of a common resource or asset by affilted mutual funds requires exemptive relief under Section 17 of the 1940 Act. The key fact

T. Rowe Price Associates, Inc.

distinguishing the instant arrangement and the arrangement to which Rule 17g-1 is addresed is, that under Rule 17g-1, the affilated investment advisrs and distributors of the mutual funds are permtted to be parties to the fidelity bond. Obviously, situations involving a sharing of

resurce by a mutual fund and its investment adviser or pricipal undeiwiter are vastly

diferent and rais signifcant confct of interest isues which are not present in the committed

lie of credit disussed herein.

Furthermore, there are sound policy reans for the Staff to grant the no-action relief which we request. While supplying increased liquidity to the participating Price Funds, the propose arrangement wil for the reaons set forth below, pose none of the dangers that Secion 17 and Rule 17d-1 are designed to prevent:

• Each Price Fund wil participate in the arrangement on an equal basis. In this regard,
  each such Fund wil have equal acc to the lie of credit and the costs of the arrangement, ie., commitment fees, documentation and legal fees, wil be apportioned on a pro rata basis among the participating Price Funds. Thus, there wil be no paricipation by any Price Fund "on a basis diferent from or les advantageous than that

of (any) other participant."
. Al of the Price Funds are on the same side of the transaction,ie., they are al potential

borrowers. Thus, the~ interests are common and substantialy the same. The only potentia for conflct is if the demand for borrowed funds under the lie of credit by al of the Funds exceeds the amount Rvailable under the lie. However, this situation would exit even in the absence of a committed lie beuse any given bank or group of banks wil only lend a fmite amount of funds to any given mutual fund or group of funds. As desib earlier, the Board of Direcors of the Price Funds wil be responsible for developing criteria to determe a fair and equitable apportionment of funds available for borrowing should the funds available be les than the demand. The isue of alocting a liited resource al exits with respec to everyday purchases of secrities

for the Funds where there can often be cases where several funds wil purchase the same seurity but no fund wil be alotted the ful amount it desires of the secrity. To

our knowledge, the Commion has not taken the position that the normal purchas by one or more affated mutual funds of the same serity and the aloction among those

funds of difering amounts of that secrity under circumstance where not each fund recives al of the security it may have wanted raises an isue under Section 17(d).

• We would alo point out that the amount of the commitment fee paid by each Price Fund wil be so smal that there wil not be, as a practica matter, any effect on any
  of the Funds' NA Vs per share. In our view, each Fund's payment of its pro-rata share of the commitment fee is no diferent from the payment of other fees by affilated funds in a mutual fund complex. For exaple, each Price Fund pays a management fee

composed of two part --- an individual fee and a group fee. Each Fund's portion of the group fee is determed by the ratio of the fund's daily net assets to the daily net assets

, T. Rowe Price Associates, Inc. of al the mutual funds in the T. Rowe Price complex with certain minor exceptions. The individual fee is intended to reflect the investment management services needed for the particular investment program of the given mutual fund. The group fee is intended to reflect the fact that affilated mutual funds in a complex share resource such as research, trading facilties, overhead and technology. Quite obviously, this resource sharing wil never be exactly equal and each fund wil acc and use the common resource to difering extents. The group fee arrangement has been in place for the Price Funds since 1987 and in other mutual fund complexes for quite some time. Again, to our knowledge the Commission has never taken the position that such arrangements violate Secion 17(d). The exitence of these group fee arrangements and others where mutual funds pay fees on a pro-rata basis for shared resurce, such as transfer agent or custodial fees, support our view that the payment of the commtment fee by the Price Funds based on pro-rata aloction of assets or some similar measure should not raie concerns under Section 17(d). Conclusion For the reans stated above, we request that the Staff of the Commision isue a letter stating that the Staff wil not recmmend enforcement action to the Commision if the Price Funds enter into the committed lie of credit arrangement and pay the commitment fees desibed above. Should you have any questions regarding thi matter, please ca the undersigned at 410 625 6601. Sincerely, Forrest R. Foss Attachment FRwpta\UneCre.SEC 1062 Orig & 7 Coies

\

Attachment A
T. ROWE PRICE FUNDS
EQUI

T. Rowe Price Balance Fund, Inc. ..................................... BAL

T. Rowe Price Blue Chip Growth Fund, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BCG T. Rowe Price Capital Appreciation Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. CAF T. Rowe Price Capital Opportunity Fund, Inc. ............................ COF

T. Rowe Price Dividend Growth Fund, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DGF T. Rowe Price Equity Income Fund ............................. ~ . . . . . . . ElF

T. Rowe Price Equity Series, Inc. ...................................... EQS

T. Rowe Price Equity Income Portfolio ............................. EIP

T. Rowe Price New America Growt Portfolio ...................... NAP

T. Rowe Price Persnal Strategy Balnce Portfolio ................. PSBP

T. Rowe Price Growth & Income Fund, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GIF T. Rowe Price Growth Stock Fund, Inc. ................................. GSF

T. Rowe Price Index Trust, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. IN T. Rowe Price Equity Index Fund ................................ EXF

T. Rowe Price Mid-Cap Growth Fund, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. MCG T. Rowe Price New America Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NAG T. Rowe Price New Era Fund, Inc. ..................................... NEF

T. Rowe Price New Horizns Fund, Inc. ................................. NH

T. Rowe Price OTC Fund, Inc. ........................................ OTC

T. Rowe Price OTC Fund ...................................... OTC

T. Rowe Price Personal Strategy Funds, Inc. . . . . . . . . . . . . '. . . . . . . . . . . . . . . . .. PER T. Rowe Price Personal Strategy Balce Fund ...................... PSB

T. Rowe Price Personal Strategy Growth Fund ....................... PSG

T. Rowe Price Personal Strategy Income Fund ....................... PSI

T. Rowe Price Science & Technology Fund, Inc. ...... . . . . . . . . . . . . . . . . . . . . . . STF T. Rowe Price Smal-Cap Value Fund, Inc. ......... . . . . . . . . . . . . . . . . . . . . .. SCV

T. Rowe Price Value Fund, Inc. ...................................... . VAL

INCOME
T. Rowe Price Short-Term u.S. Governent Fund, Inc. ..................... ARG

T. Rowe Price Caorna Tax-Free Income Trust .......................... CAT

Caornia Tax-Free Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. CAB T. Rowe Price Fixed Income Series, Inc. . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . .. FIS T. Rowe Price Limted-Term Bond Portolio. . . . . . . . . . . . . . . . . . . . . . .. LTP T. Rowe Price GNM Fund ......................................... GMA

T. Rowe Price High Yield Fund, Inc. .....".............................. HY

T. Rowe Price New Income Fund, Inc. ................................... NI

T. Rowe Price Short-Term Bond Fund, Inc. .............................. STB

.,?~
T. ROWE PRICE FUNDS
INCOME
T. Rowe Price State Tax-Free Income Trust .............................. SIT

Florida Insured Intermediate Tax-Free Fund . . . . . . . . . . . . . . . . . . . . . . . . . FLI Georgia Tax-Free Bond Fund ................................... GAB

Maryland Short-Term Tax-Free Bond Fund. . . . . . . . . . . . . . . . . . . . . . . . . MDS Maryland Tax-Free Bond Fund ................................. MDB

New Jersey Tax-Free Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. Nff New York Tax-Free Bond Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NY Virgiia Tax-Free Bond Fund ................................... V AB

Virgiia Short-Term Tax-Free Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . .. V AF T. Rowe Price Summit Funds, Inc. ...................................... SIF

T. Rowe Price Summit GNM Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SGM T. Rowe Price Summit Limited-Term Bond Fund. . . . .. .. . . . . . . . . . . .. SLT T. Rowe Price Summit Municipal Funds, Inc. ............................. SMF

T. Rowe Price Summit Municipal Income Fund . . . . . . . . . . . . . . . . . . . . .. SMI T. Rowe Price Summit Municipal Intermediate Fund ................. SMT

T. Rowe Price Tax-Free High Yield Fund, Inc. ............................ TF

T. Rowe Price Tax-Free Income Fund, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TF T. Rowe Price Tax-Free Insured Intermediate Bond Fund, Inc. ................ TI

T. Rowe Price Tax-Free Short-Intermediate Fund, Inc. . . . . . . . . . . . . . . . . . . . . . . . TF T. Rowe Price U.S. Treasury Funds, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. UST U.S. Treaury Intermediate Fund ................................. USI

U.S. Treasury Long-Term Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. USL IN'L Institutional International Funds, Inc. .................................... llF

Foreign Equity Fund .......................................... FEF

T. Rowe Price International Funds, Inc. .................................. PIF

T. Rowe Price Emergig Markets Bond Fund ................ . . . . . . . EMB

T. Rowe Price Emergig Markets Stock Fund . . . . . . . . . . . . . . . . . . . . . . . EMS T. Rowe Price European Stock Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ESF T. Rowe Price Global Government Bond Fund ...................... GGB

T. Rowe Price International Bond Fund ............................ mF

T. Rowe Price International Disvery Fund . . . . . . . . . . . . . . . . . . . . . . . . . mF T. Rowe Price International Stock Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . .. ISF T. Rowe Price Japan Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . JAF T. Rowe Price Latin America Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . lAM T. Rowe Price New Asia Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. NAS T. Rowe Price Short-Term Global Income Fund. . .. . . .... . . . . . . . . . .. STG T. Rowe Price International Series, Inc. .................................. INS

T. Rowe Price International Stock Portfolio ......................... ISP

1 T. ROWE PRICE FUNDS
HA & SPEC

New Age Media Fund, Inc. .......................................... NAM

T. Rowe Price Spectrum Fund, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. SPC Specrum Growth Fund ......................... . . . . . . . . . . . . . .. SPG Specrum Income Fund ......................................... SPI

FRwpta\lineCl.SEC