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 - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) Financial Highlights For a share outstanding throughout each period - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) Financial Highlights For a share outstanding throughout each period - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) Financial Highlights For a share outstanding throughout each period - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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 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 - -------------------------------------------------------------------------------- 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 $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 - -------------------------------------------------------------------------------- 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 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 - -------------------------------------------------------------------------------- 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 $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 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) Statement of Operations - -------------------------------------------------------------------------------- ($ 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 - -------------------------------------------------------------------------------- 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 $374 at 12/31/03) *Share information Shares sold 12,348 18,699 Distributions reinvested -- 1,252 Shares redeemed (10,132) (25,226) Increase (decrease) in shares outstanding 2,216 (5,275) The accompanying notes are an integral part of these financial statements. T. Rowe Price Spectrum Growth Fund - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) Statement of Changes in Net Assets - -------------------------------------------------------------------------------- ($ 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 $0 at 12/31/03) *Share information Shares sold 62,540 95,505 Distributions reinvested 6,313 13,042 Shares redeemed (30,879) (58,719) Increase (decrease) in shares outstanding 37,974 49,828 The accompanying notes are an integral part of these financial statements. T. Rowe Price Spectrum International Fund - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) Statement of Changes in Net Assets - -------------------------------------------------------------------------------- ($ 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 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Certified Semiannual Report Information on Proxy Voting - -------------------------------------------------------------------------------- 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