Item 1. Report to Shareholders
T. Rowe Price Spectrum Funds
- --------------------------------------------------------------------------------
June 30, 2004
Certified Semiannual Report
This report is certified under the Sarbanes-Oxley Act of 2002, which requires
that public companies, including mutual funds, affirm that the information
provided in their annual and semiannual shareholder reports fully and fairly
represents their financial position.
T. Rowe Price Spectrum Growth Fund
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Certified Semiannual Report (Unaudited)
Financial Highlights For a share outstanding throughout each period
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6 Months Year
Ended Ended
6/30/04 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
NET ASSET
VALUE
Beginning of
period $ 14.80 $ 11.13 $ 14.07 $ 15.72 $ 17.71 $ 16.45
Investment
activities
Net investment
income 0.02 0.09 0.09 0.16 0.13 0.15
Net realized
and unrealized
gain (loss) 0.60 3.70 (2.88) (1.37) (0.15) 3.19
Total from
investment
activities 0.62 3.79 (2.79) (1.21) (0.02) 3.34
Distributions
Net investment
income -- (0.10) (0.08) (0.16) (0.12) (0.17)
Net realized
gain -- (0.02) (0.07) (0.28) (1.85) (1.91)
Total
distributions -- (0.12) (0.15) (0.44) (1.97) (2.08)
NET ASSET
VALUE
End of period $ 15.42 $ 14.80 $ 11.13 $ 14.07 $ 15.72 $ 17.71
----------------------------------------------------------------
Ratios!!
Total return^ 4.19% 34.09% (19.83)% (7.63)% (0.11)% 21.20%
Ratio of total
expenses to
average net
assets 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Ratio of net
investment
income to
average
net assets 0.29%! 0.75% 0.68% 1.05% 0.70% 0.85%
Portfolio
turnover rate 2.2%! 2.3% 3.9% 6.1% 11.6% 20.3%
Supplemental
Data
Weighted
average
expense ratio
of underlying
Price funds * 0.86%! 0.88% 0.88% 0.87% 0.83% 0.83%
Effective
expense ratio 0.86%! 0.88% 0.88% 0.87% 0.83% 0.83%
Net assets,
end of period
(in millions) $ 2,362 $ 2,236 $ 1,739 $ 2,373 $ 2,889 $ 3,031
!! Reflects the activity of the fund, and does not include the activity of the
underlying Price funds. However, investment performance of the fund is
directly related to the investment performance of the underlying Price
funds in which it invests.
^ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
* Reflects the indirect expense impact to the fund from its investment in the
underlying Price funds, based on the actual expense ratio of each
underlying Price fund weighted for the fund's relative average investment
therein.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Spectrum Income Fund
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Certified Semiannual Report (Unaudited)
Financial Highlights For a share outstanding throughout each period
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6 Months Year
Ended Ended
6/30/04 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
NET ASSET
VALUE
Beginning
of period $ 11.77 $ 10.76 $ 10.60 $ 10.77 $ 10.71 $ 11.50
Investment
activities
Net investment
income 0.24 0.51 0.55 0.63 0.62 0.67
Net realized
and unrealized
gain (loss) (0.15) 1.06 0.16 (0.15) 0.14 (0.64)
Total from
investment
activities 0.09 1.57 0.71 0.48 0.76 0.03
Distributions
Net investment
income (0.24) (0.50) (0.55) (0.55) (0.70) (0.69)
Net realized
gain -- (0.06) -- (0.02) -- (0.13)
Tax return of
capital -- -- -- (0.08) -- --
Total
distributions (0.24) (0.56) (0.55) (0.65) (0.70) (0.82)
NET ASSET
VALUE
End of period $ 11.62 $ 11.77 $ 10.76 $ 10.60 $ 10.77 $ 10.71
----------------------------------------------------------------
Ratios!!
Total return^ 0.76% 14.96% 6.86% 4.59% 7.40% 0.26%
Ratio of total
expenses to
average net
assets 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Ratio of net
investment
income to
average
net assets 4.12%! 4.47% 5.17% 5.91% 6.03% 5.95%
Portfolio
turnover rate 2.9%! 4.0% 14.1% 22.7% 19.3% 18.6%
Supplemental
Data
Weighted average
expense ratio of
underlying
Price funds * 0.75%! 0.78% 0.80% 0.80% 0.77% 0.77%
Effective
expense ratio 0.75%! 0.78% 0.80% 0.80% 0.77% 0.77%
Net assets,
end of period
(in millions) $ 3,948 $ 3,552 $ 2,713 $ 2,465 $ 2,471 $ 2,548
!! Reflects the activity of the fund, and does not include the activity of the
underlying Price funds. However, investment performance of the fund is
directly related to the investment performance of the underlying Price
funds in which it invests.
^ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
* Reflects the indirect expense impact to the fund from its investment in the
underlying Price funds, based on the actual expense ratio of each
underlying Price fund weighted for the fund's relative average investment
therein.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Spectrum International Fund
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Certified Semiannual Report (Unaudited)
Financial Highlights For a share outstanding throughout each period
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6 Months Year
Ended Ended
6/30/04 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
NET ASSET
VALUE
Beginning of
period $ 8.70 $ 6.40 $ 7.76 $ 10.08 $ 13.53 $ 10.56
Investment
activities
Net investment
income -- 0.09 0.07 0.18 0.12 0.12
Net realized
and unrealized
gain 0.24 2.32 (1.36) (2.17) (2.10) 3.95
Total from
investment
activities 0.24 2.41 (1.29) (1.99) (1.98) 4.07
Distributions
Net investment
income -- (0.10) (0.07) (0.18) (0.12) (0.13)
Net realized
gain -- (0.01) -- (0.15) (1.35) (0.97)
Total
distributions -- (0.11) (0.07) (0.33) (1.47) (1.10)
NET ASSET
VALUE
End of period $ 8.94 $ 8.70 $ 6.40 $ 7.76 $ 10.08 $ 13.53
---------------------------------------------------------------
Ratios!!
Total return^ 2.76% 37.73% (16.61)% (19.71)% (14.71)% 39.49%
Ratio of total
expenses to
average net
assets 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Ratio of net
investment
income to
average
net assets 0.07%! 1.36% 1.01% 2.06% 0.94% 1.14%
Portfolio
turnover rate 10.9%! 47.1% 94.4% 30.6% 42.5% 20.1%
Supplemental
Data
Weighted average
expense ratio
of underlying
Price funds * 1.05%! 1.10% 1.12% 1.09% 0.98% 0.89%
Effective
expense ratio 1.05%! 1.10% 1.12% 1.09% 0.98% 0.89%
Net assets,
end of period
(in thousands)$ 92,449 $ 79,477 $ 52,652 $ 64,153 $ 81,843 $ 82,846
!! Reflects the activity of the fund, and does not include the activity of the
underlying Price funds. However, investment performance of the fund is
directly related to the investment performance of the underlying Price
funds in which it invests.
^ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions and payment of no redemption or account fees.
* Reflects the indirect expense impact to the fund from its investment in the
underlying Price funds, based on the actual expense ratio of each
underlying Price fund weighted for the fund's relative average investment
therein.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Spectrum Growth Fund
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Certified Semiannual Report (Unaudited) June 30, 2004
Percent of
Portfolio of Investments(1) Net Assets Shares Value
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(Cost and value in $ 000s)
T. Rowe Price
New Horizons Fund* 16.6% 14,713,318 391,668
T. Rowe Price
Equity Income Fund 16.3 15,473,916 384,991
T. Rowe Price
International Stock Fund 14.1 28,583,908 333,860
T. Rowe Price
Blue Chip Growth Fund 13.6 10,952,260 320,682
T. Rowe Price
Growth Stock Fund 13.5 12,781,871 318,908
T. Rowe Price
Mid-Cap Value Fund 8.2 8,883,402 194,813
T. Rowe Price
Growth & Income Fund 6.9 7,358,191 162,690
T. Rowe Price
Emerging Markets
Stock Fund 3.9 5,986,214 92,427
T. Rowe Price
International
Growth & Income Fund 3.5 7,624,846 82,043
T. Rowe Price
New Era Fund 2.2 1,729,985 51,000
T. Rowe Price
Value Fund 1.2 1,398,458 29,368
Total Investments in Securities
100.0% of Net Assets
(Cost $1,851,263) $ 2,362,450
--------------------
(1) Denominated in U.S. dollars unless otherwise noted
* Non-income producing
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Spectrum Growth Fund
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Certified Semiannual Report (Unaudited) June 30, 2004
Statement of Assets and Liabilities
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(In thousands except shares and per share amounts)
Assets
Investments in securities,
at value (cost $1,851,263) $ 2,362,450
Other assets 22,564
Total assets 2,385,014
Liabilities
Total liabilities 22,600
NET ASSETS $ 2,362,414
--------------------
Net Assets Consist of:
Undistributed net investment
income (loss) $ 3,710
Undistributed net realized
gain (loss) (134,330)
Net unrealized gain (loss) 511,187
Paid-in-capital applicable to
153,247,258 shares of $0.01
par value capital stock
outstanding; 1,000,000,000 shares
of the Corporation authorized 1,981,847
NET ASSETS $ 2,362,414
--------------------
NET ASSET VALUE PER SHARE $ 15.42
--------------------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Spectrum Income Fund
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Certified Semiannual Report (Unaudited) June 30, 2004
Percent of
Portfolio of Investments(1) Net Assets Shares Value
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(Cost and value in $ 000s)
T. Rowe Price
New Income Fund 23.6% 104,886,739 932,443
T. Rowe Price
High Yield Fund 21.2 121,758,314 837,697
T. Rowe Price
Equity Income Fund 15.2 24,064,181 598,717
T. Rowe Price
International Bond Fund 14.8 58,947,315 582,400
T. Rowe Price
GNMA Fund 12.3 50,862,623 486,755
T. Rowe Price
Short-Term Bond Fund 8.0 66,686,803 317,429
T. Rowe Price
U.S. Treasury Long-Term Fund 2.6 8,977,992 102,708
T. Rowe Price
Emerging Markets Bond Fund 2.0 6,738,742 79,652
T. Rowe Price
Corporate Income Fund 0.3 1,160,195 11,022
Total Investments in Securities
100.0% of Net Assets
(Cost $3,810,365) $ 3,948,823
--------------------
(1) Denominated in U.S. dollars unless otherwise noted
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Spectrum Income Fund
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Certified Semiannual Report (Unaudited) June 30, 2004
Statement of Assets and Liabilities
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(In thousands except shares and per share amounts)
Assets
Investments in securities,
at value (cost $3,810,365) $ 3,948,823
Other assets 11,530
Total assets 3,960,353
Liabilities
Total liabilities 12,371
NET ASSETS $ 3,947,982
--------------------
Net Assets Consist of:
Undistributed net realized
gain (loss) $ 10,265
Net unrealized gain (loss) 138,458
Paid-in-capital applicable to
339,853,727 shares of $0.01
par value capital stock outstanding;
1,000,000,000 shares of the
Corporation authorized 3,799,259
NET ASSETS $ 3,947,982
--------------------
NET ASSET VALUE PER SHARE $ 11.62
--------------------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Spectrum International Fund
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Certified Semiannual Report (Unaudited) June 30, 2004
Percent of
Portfolio of Investments (1) Net Assets Shares Value
- --------------------------------------------------------------------------------
(Cost and value in $ 000s)
T. Rowe Price
International Stock Fund 45.9% 3,634,415 42,450
T. Rowe Price
European Stock Fund 28.2 1,481,361 26,087
T. Rowe Price
Japan Fund * 10.0 1,093,713 9,264
T. Rowe Price
Emerging Markets Stock Fund 6.7 402,923 6,221
T. Rowe Price
International Discovery Fund 4.7 150,640 4,344
T. Rowe Price
New Asia Fund 2.5 279,956 2,276
T. Rowe Price
Emerging Europe &
Mediterranean Fund 2.0 137,672 1,805
Total Investments in Securities
100.0% of Net Assets
(Cost $99,891) $ 92,447
--------------------
(1) Denominated in U.S. dollars unless otherwise noted
* Non-income producing
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Spectrum International Fund
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Certified Semiannual Report (Unaudited) June 30, 2004
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
(In thousands except shares and per share amounts)
Assets
Investments in securities,
at value (cost $99,891) $ 92,447
Other assets 75
Total assets 92,522
Liabilities
Total liabilities 73
NET ASSETS $ 92,449
--------------------
Net Assets Consist of:
Undistributed net investment
income (loss) $ 32
Undistributed net realized gain (loss) (7,095)
Net unrealized gain (loss) (7,444)
Paid-in-capital applicable to
10,340,604 shares of $0.01
par value capital stock outstanding;
1,000,000,000 shares of the
Corporation authorized 106,956
NET ASSETS $ 92,449
--------------------
NET ASSET VALUE PER SHARE $ 8.94
--------------------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Spectrum Funds
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Certified Semiannual Report (Unaudited)
Statement of Operations
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($ 000s) Growth Income International
Fund Fund Fund
6 Months 6 Months 6 Months
Ended Ended Ended
6/30/04 6/30/04 6/30/04
Investment Income
Income
Dividend $ 3,336 $ 4,048 $ --
Interest -- 74,678 32
Total income 3,336 78,726 32
Expenses
Shareholder servicing 2,127 3,861 110
Registration 56 117 14
Prospectus and
shareholder reports 40 34 4
Custody and accounting 18 18 18
Legal and audit 5 6 5
Directors 4 5 2
Expenses reimbursed by
underlying Price funds (2,250) (4,041) (153)
Total expenses -- -- --
Net investment income 3,336 78,726 32
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Sale of underlying
Price funds 8,055 (2,104) (2,262)
Capital gain distributions
from underlying Price funds 2,946 8,133 --
Net realized gain (loss) 11,001 6,029 (2,262)
Change in net unrealized
gain (loss) from
underlying Price funds 78,538 (59,750) 4,347
Net realized and unrealized
gain (loss) 89,539 (53,721) 2,085
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 92,875 $ 25,005 $ 2,117
-------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Spectrum Growth Fund
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Certified Semiannual Report (Unaudited)
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
($ 000s)
6 Months Year
Ended Ended
6/30/04 12/31/03
Increase (Decrease) in Net Assets
Operations
Net investment income $ 3,336 $ 14,294
Net realized gain (loss) 11,001 (87,644)
Change in net unrealized
gain (loss) 78,538 652,263
Increase (decrease) in
net assets from operations 92,875 578,913
Distributions to shareholders
Net investment income -- (15,230)
Net realized gain -- (3,047)
Decrease in net assets
from distributions -- (18,277)
Capital share transactions *
Shares sold 188,284 233,024
Distributions reinvested -- 17,823
Shares redeemed (154,255) (314,892)
Increase (decrease) in net
assets from capital
share transactions 34,029 (64,045)
Net Assets
Increase (decrease)
during period 126,904 496,591
Beginning of period 2,235,510 1,738,919
End of period $ 2,362,414 $ 2,235,510
------------------------------------
(Including undistributed net
investment income of $3,710
at 6/30/04 and $374 at 12/31/03)
*Share information
Shares sold 12,348 18,699
Distributions reinvested -- 1,252
Shares redeemed (10,132) (25,226)
Increase (decrease)
in shares outstanding 2,216 (5,275)
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Spectrum Growth Fund
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Certified Semiannual Report (Unaudited)
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
($ 000s)
6 Months Year
Ended Ended
6/30/04 12/31/03
Increase (Decrease) in Net Assets
Operations
Net investment income $ 78,726 $ 139,767
Net realized gain (loss) 6,029 35,229
Change in net unrealized
gain (loss) (59,750) 262,849
Increase (decrease) in net
assets from operations 25,005 437,845
Distributions to shareholders
Net investment income (78,726) (139,767)
Net realized gain -- (17,825)
Decrease in net assets from
distributions (78,726) (157,592)
Capital share transactions *
Shares sold 738,339 1,071,950
Distributions reinvested 74,019 147,592
Shares redeemed (362,662) (660,550)
Increase (decrease) in net assets
from capital share transactions 449,696 558,992
Net Assets
Increase (decrease) during period 395,975 839,245
Beginning of period 3,552,007 2,712,762
End of period $ 3,947,982 $ 3,552,007
------------------------------------
(Including undistributed net investment
income of $0 at 6/30/04 and $0 at 12/31/03)
*Share information
Shares sold 62,540 95,505
Distributions reinvested 6,313 13,042
Shares redeemed (30,879) (58,719)
Increase (decrease) in shares outstanding 37,974 49,828
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Spectrum International Fund
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Certified Semiannual Report (Unaudited)
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
($ 000s)
6 Months Year
Ended Ended
6/30/04 12/31/03
Increase (Decrease) in Net Assets
Operations
Net investment income $ 32 $ 820
Net realized gain (loss) (2,262) (1,293)
Change in net unrealized gain (loss) 4,347 21,510
Increase (decrease) in net
assets from operations 2,117 21,037
Distributions to shareholders
Net investment income -- (893)
Net realized gain -- (89)
Decrease in net assets from distributions -- (982)
Capital share transactions *
Shares sold 23,317 58,336
Distributions reinvested -- 939
Shares redeemed (12,462) (52,505)
Increase (decrease) in net
assets from capital
share transactions 10,855 6,770
Net Assets
Increase (decrease) during period 12,972 26,825
Beginning of period 79,477 52,652
End of period $ 92,449 $ 79,477
------------------------------------
(Including undistributed net investment income
of $32 at 6/30/04 and $0 at 12/31/03)
*Share information
Shares sold 2,596 8,494
Distributions reinvested -- 113
Shares redeemed (1,392) (7,692)
Increase (decrease) in shares outstanding 1,204 915
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Spectrum Funds
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Certified Semiannual Report (Unaudited) June 30, 2004
Notes to Financial Statements
- --------------------------------------------------------------------------------
T. Rowe Price Spectrum Fund, Inc. (the corporation), is registered under the
Investment Company Act of 1940 (the 1940 Act) as a nondiversified, open-end
management investment company. Spectrum Growth Fund, Spectrum Income Fund, and
Spectrum International Fund (collectively, the Spectrum Funds) are three
portfolios established by the corporation. Spectrum Growth and Spectrum Income
commenced operations on June 29, 1990, and Spectrum International commenced
operations on December 31, 1996.
Each Spectrum Fund diversifies its assets within set limits among specific
underlying T. Rowe Price funds (underlying Price funds). Spectrum Growth seeks
long-term capital appreciation and growth of income, with current income a
secondary objective. Spectrum Income seeks a high level of current income with
moderate share price fluctuation. Spectrum International seeks long-term capital
appreciation.
Note 1 - Significant Accounting Policies
Basis of Preparation
The accompanying financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America, which
require the use of estimates made by fund management.
Valuation
Each fund values its investments and computes its net asset value per share at
the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day
that the NYSE is open for business. Investments in the underlying Price funds
are valued at their closing net asset value per share on the day of valuation.
One of the underlying Price funds held by Spectrum International, the T. Rowe
Price Japan Fund, is not open on certain days when Spectrum International is
open. On such days, a net asset value per share is computed for the Japan Fund
solely for purposes of valuing Spectrum International. The net asset value is
computed in the normal manner using the most recent yen-denominated closing
prices and exchange rates on the day of valuation. Investments for which these
valuation procedures are inappropriate or are deemed not to reflect fair value
are stated at fair value as determined in good faith by the T. Rowe Price
Valuation Committee, established by the funds' Board of Directors.
Redemption Fees
For Spectrum International, a 2% fee is assessed on redemptions of fund shares
held less than 90 days. Redemption fees are withheld from proceeds that
shareholders receive from the sale or exchange of fund shares and are paid to
the fund. Redemption fees received by the fund are allocated to each underlying
Price fund in proportion to the average daily value of its shares owned by the
fund. Accordingly, redemption fees have no effect on the net assets of the fund.
Investment Transactions, Investment Income, and Distributions
Income is recorded on the accrual basis. Income and capital gain distributions
from the underlying Price funds are recorded on the ex-dividend date. Purchases
and sales of the underlying Price funds are accounted for on the trade date.
Realized gains and losses are reported on the identified cost basis.
Distributions to the Spectrum Funds' shareholders are recorded on the
ex-dividend date. Income distributions are declared by Spectrum Income on a
daily basis and paid monthly. Income distributions are declared and paid by
Spectrum Growth and Spectrum International on an annual basis. Capital gain
distributions, if any, are declared and paid by each fund, typically on an
annual basis.
Other
In the normal course of business, each fund enters into contracts that provide
general indemnifications. Each fund's maximum exposure under these arrangements
is dependent on claims that may be made against the fund in the future and,
therefore, cannot be estimated; however, based on experience, the risk of
material loss from such claims is considered remote.
Note 2 - Investments In Underlying Price Funds
Purchases and sales of the underlying Price funds for the six months ended June
30, 2004 were as follows:
- --------------------------------------------------------------------------------
Spectrum Spectrum Spectrum
Growth Income International
Purchases $ 59,052,000 $ 425,999,000 $ 15,650,000
Sales 24,944,000 54,935,000 4,794,000
Note 3 - Federal Income Taxes
No provision for federal income taxes is required since each fund intends to
continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code and distribute to shareholders all of its taxable income
and gains. Federal income tax regulations differ from generally accepted
accounting principles; therefore, distributions determined in accordance with
tax regulations may differ in amount or character from net investment income
and realized gains for financial reporting purposes. Financial reporting records
are adjusted for permanent book/tax differences to reflect tax character.
Financial records are not adjusted for temporary differences. The amount and
character of tax-basis distributions and composition of net assets are finalized
at fiscal year-end; accordingly, tax-basis balances have not been determined as
of June 30, 2004.
For tax purposes, Spectrum Growth has elected to treat net capital losses
realized between November 1 and December 31 of each year as occurring on the
first day of the following tax year. Consequently, realized losses in the amount
of $6,322,000 for Spectrum Growth that were recognized for financial reporting
purposes in the year ended December 31, 2003, were recognized for tax purposes
on January 1, 2004. Further, each fund intends to retain realized gains to the
extent of available capital loss carryforwards. As of December 31, 2003,
Spectrum Growth had $139,154,000 of unused capital loss carryforwards, of which
$48,512,000 expire in 2010, and $90,642,000 expire in 2011. Spectrum
International had $4,843,000 of unused capital loss carryforwards at December
31, 2003, of which $1,122,000 expire in 2009, $1,841,000 expire in 2010, and
$1,880,000 expire in 2011.
At June 30, 2004, the cost of investments for federal income tax purposes and
net unrealized gain (loss) on investments was as follows:
- --------------------------------------------------------------------------------
Spectrum Spectrum Spectrum
Growth Income International
Cost $ 1,851,263,000 $ 3,810,365,000 $ 99,891,000
Unrealized
appreciation $ 511,187,000 $ 212,932,000 $ 2,967,000
Unrealized
depreciation -- (74,474,000) (10,411,000)
Net unrealized
appreciation
(depreciation) $ 511,187,000 $ 138,458,000 $ (7,444,000)
---------------------------------------------------------------
Note 4 - Related Parties
T. Rowe Price Associates, Inc. (Price Associates), a wholly owned subsidiary of
T. Rowe Price Group, Inc., is the investment manager for Spectrum Growth and
Spectrum Income, and also serves as manager for the domestic underlying Price
funds. T. Rowe Price International, Inc. (Price International), a wholly owned
subsidiary of Price Associates, is the investment manager for Spectrum
International and also serves as manager for the international underlying Price
funds. Pursuant to various service agreements, Price Associates and its wholly
owned subsidiaries provide shareholder servicing and administrative, transfer
and dividend disbursing, accounting, marketing, and certain other services to
the Spectrum Funds. Certain officers and directors of the Spectrum Funds are
also officers and directors of Price Associates and its subsidiaries, and of the
underlying Price funds.
The Spectrum Funds pay no management fees; however, Price Associates and Price
International receive management fees from the underlying Price funds. The
Spectrum Funds operate in accordance with the investment management and special
servicing agreements between and among the corporation, the underlying Price
funds, Price Associates, and, in the case of Spectrum International, Price
International. Pursuant to these agreements, expenses associated with the
operation of the Spectrum Funds are reimbursed by each underlying Price fund to
the extent of estimated savings to it and in proportion to the average daily
value of its shares owned by the Spectrum Funds. Therefore, each Spectrum Fund
operates at a zero expense ratio. However, each Spectrum Fund indirectly bears
its proportionate share of the management fees and operating costs of the
underlying Price funds in which it invests.
The Spectrum Funds do not invest in the underlying Price funds for the purpose
of exercising management or control; however, investments by the Spectrum Funds
may represent a significant portion of an underlying Price fund's net assets. At
June 30, 2004, Spectrum International Fund held less than 25% of the outstanding
shares of any underlying Price fund; Spectrum Growth Fund held approximately
28.6% of the outstanding shares of the International Growth & Income Fund, and
Spectrum Income Fund held approximately 43.1% of the outstanding shares of the
International Bond Fund, 26.3% of the High Yield Fund, 37.4% of the GNMA Fund,
43.3% of the U.S. Treasury Long-Term Fund, 36.6% of the New Income Fund, and
35.2% of the Emerging Markets Bond Fund.
Additionally, Spectrum Income is one of several mutual funds in which certain
college savings plans managed by Price Associates may invest. Shareholder
servicing costs associated with each college savings plan are allocated to
Spectrum Income in proportion to the average daily value of its shares owned by
the college savings plan and, in turn, are borne by the underlying Price funds
in accordance with the terms of the investment management and special servicing
agreements. At June 30, 2004, approximately 7.9% of the outstanding shares of
Spectrum Income were held by the college savings plans.
T. Rowe Price Spectrum Funds
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Certified Semiannual Report
Information on Proxy Voting
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A description of the policies and procedures that the T. Rowe Price Spectrum
Funds use to determine how to vote proxies relating to portfolio securities is
available, without charge, upon request by calling 1-800-225-5132. It also
appears in the fund's Statement of Additional Information (Form 485B), which can
be found on the SEC's Web site, www.sec.gov.
Item 2. Code of Ethics.
A code of ethics, as defined in Item 2 of Form N-CSR, applicable to its
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions is filed as an
exhibit to the registrant's annual Form N-CSR. No substantive amendments were
approved or waivers were granted to this code of ethics during the registrant's
most recent fiscal half-year.
Item 3. Audit Committee Financial Expert.
Disclosure required in registrant's annual Form N-CSR.
Item 4. Principal Accountant Fees and Services.
Disclosure required in registrant's annual Form N-CSR.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Not applicable. The complete schedule of investments is included in Item 1 of
this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 10. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures within 90
days of this filing and have concluded that the registrant's disclosure controls
and procedures were effective, as of that date, in ensuring that information
required to be disclosed by the registrant in this Form N-CSR was recorded,
processed, summarized, and reported timely.
(b) The registrant's principal executive officer and principal financial officer
are aware of no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 11. Exhibits.
(a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is filed
with the registrant's annual Form N-CSR.
(2) Separate certifications by the registrant's principal executive officer
and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(3) Written solicitation to repurchase securities issued by closed-end
companies: not applicable.
(b) A certification by the registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940,
is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
T. Rowe Price Spectrum Fund, Inc.
By: /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date: August 16, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date: August 16, 2004
By: /s/ Joseph A. Carrier
Joseph A. Carrier
Principal Financial Officer
Date: August 16, 2004