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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Section 240.14a-11(c) or
Section 240.14a-12
T. ROWE PRICE INDEX TRUST, INC.
_________________________________________________________________
(Name of Registrant as Specified in its Charter)
T. ROWE PRICE INDEX TRUST, INC.
_________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
_________________________________________________________
2) Aggregate number of securities to which transaction
applies:
_________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: (1)
_________________________________________________________
4) Proposed maximum aggregate value of transaction:
_________________________________________________________
1 Set forth the amount on which the filing fee is calculated and
state how it was determined.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
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filing by registration statement number, or the form or schedule
and the date of its filing,
1) Amount previously paid:
_________________________________________________________
2) Form, schedule, or Registration Statement no.:
_________________________________________________________
3) Filing party:
_________________________________________________________
4) Date filed:
_________________________________________________________
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Proxy for the T. Rowe Price Equity Index Fund, should be inserted
here.
PAGE 1
T. ROWE PRICE
_________________________________________________________________
T. Rowe Price Associates, Inc., 100 East Pratt Street, Baltimore,
MD 21202
James S. Riepe
Managing Director
Dear Shareholder:
All of the T. Rowe Price mutual funds will hold shareholder
meetings in 1994 to elect directors, ratify the selection of
independent accountants, and approve amendments to a number of
investment policies.
The T. Rowe Price funds are not required to hold annual
meetings each year if the only items of business are to elect
directors or ratify accountants. In order to save fund expenses,
most of the funds have not held annual meetings for a number of
years. There are, however, conditions under which the funds must
solicit shareholder approval of directors, and one is to comply
with a requirement that a minimum number have been elected by
shareholders, not appointed by the funds' boards. Since the last
annual meetings of the T. Rowe Price funds, several directors
have retired and new directors have been added. In addition, a
number of directors will be retiring in the near future.
Given this situation, we believed it appropriate to hold
annual meetings for all the T. Rowe Price funds in 1994. At the
same time, we reviewed the investment policies of all of the
funds for consistency and to assure the portfolio managers have
the flexibility they need to manage your money in today's fast
changing financial markets. The changes being recommended, which
are explained in detail in the enclosed proxy material, do not
alter the funds' investment objectives or basic investment
programs.
In many cases the proposals are common to several funds, so
we have combined certain proxy statements to save on fund
expenses. For those of you who own more than one of these funds,
the combined proxy may also save you the time of reading more
than one document before you vote and mail your ballots. The
proposals which are specific to an individual fund are easily
identifiable on the Notice and in the proxy statement discussion.
If you own more than one fund, please note that each fund has a
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separate card. You should vote and sign each one, then return
all of them to us in the enclosed postage-paid envelope.
Your early response will be appreciated and could save your
fund the substantial costs associated with a follow-up mailing.
We know we are asking you to review a rather formidable proxy
statement, but this approach represents the most efficient one
for your fund as well as for the other funds. Thank you for your
cooperation. If you have any questions, please call us at 1-800-
225-5132.
Sincerely,
James S. Riepe
Director, Mutual Funds Division
CUSIP#77954G108/fund#068
CUSIP#779552108/fund#050
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T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE EQUITY INDEX FUND
Notice of Meeting of Shareholders
April 20, 1994
The Annual Meeting of Shareholders of the T. Rowe Price
Balanced Fund, Inc. ("Balanced Fund") and T. Rowe Price Equity
Index Fund ("Equity Index Fund") (each a "Fund" and collectively
the "Funds"), each a Maryland corporation, will be held on
Wednesday, April 20, 1994, at 9:30 o'clock a.m., Eastern time, at
the offices of the Funds, 100 East Pratt Street, Baltimore,
Maryland 21202. The Equity Index Fund is currently the sole
portfolio of the T. Rowe Price Index Trust, Inc. (the
"Corporation"). The following matters will be acted upon at that
time:
1. For the shareholders of both Funds: To elect directors
for the Fund in which you invest to serve until the
next annual meeting, if any, or until their successors
shall have been duly elected and qualified;
2. For the shareholders of both Funds:
A. To amend each Fund's fundamental policies to
increase its ability to engage in borrowing
transactions;
B. To amend each Fund's fundamental policies to
increase its ability to engage in lending
transactions;
C. To change from a fundamental to an operating policy
each Fund's policy on purchasing securities on
margin;
D. To amend each Fund's fundamental policies on the
issuance of senior securities;
E. To amend each Fund's fundamental policies on
investing in commodities and futures contracts to
permit greater flexibility in futures trading;
F. To change from a fundamental to an operating policy
each Fund's policy on short sales;
PAGE 4
3. For the shareholders of both Funds: To ratify or
reject the selection of the firm of Coopers & Lybrand
as the independent accountants for each Fund for the
fiscal year 1994; and
4. To transact such other business as may properly come
before the meeting and any adjournments thereof.
LENORA V. HORNUNG
Secretary
March 9, 1994
100 East Pratt Street
Baltimore, Maryland 21202
_________________________________________________________________
YOUR VOTE IS IMPORTANT
Shareholders are urged to designate their choices on each of the
matters to be acted upon and to date, sign, and return the
enclosed proxy in the envelope provided, which requires no
postage if mailed in the United States. Your prompt return of
the proxy will help assure a quorum at the meeting and avoid the
additional Fund expense of further solicitation.
_________________________________________________________________
CUSIP#77954G108/fund#068
CUSIP#779552108/fund#050
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T. ROWE PRICE BALANCED FUND, INC.
T. ROWE PRICE EQUITY INDEX FUND
Meeting of Shareholders--April 20, 1994
PROXY STATEMENT
This statement is furnished in connection with the
solicitation of proxies by the T. Rowe Price Balanced Fund, Inc.
(the "Balanced Fund") and the T. Rowe Price Equity Index Fund
(the "Equity Index Fund") (each a "Fund" and collectively the
"Funds"), each a Maryland corporation, for use at the Annual
Meeting of Shareholders of each Fund to be held on April 20,
1994, and at any adjournments thereof. The Equity Index Fund is
currently the sole portfolio of the T. Rowe Price Index Trust,
Inc. (the "Corporation").
Shareholders may only vote on matters which concern the
Fund or Funds in which they hold shares. Shareholders are
entitled to one vote for each full share, and a proportionate
vote for each fractional share, of the Fund held as of the record
date. Under Maryland law, shares owned by two or more persons
(whether as joint tenants, co-fiduciaries, or otherwise) will be
voted as follows, unless a written instrument or court order
providing to the contrary has been filed with the Fund: (1) if
only one votes, that vote will bind all; (2) if more than one
votes, the vote of the majority will bind all; and (3) if more
than one votes and the vote is evenly divided, the vote will be
cast proportionately.
In order to hold the meeting, a majority of each Fund's
shares entitled to be voted must have been received by proxy or
be present at the meeting. In the event that a quorum is present
but sufficient votes in favor of one or more of the Proposals are
not received by the time scheduled for the meeting, the persons
named as proxies may propose one or more adjournments of the
meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of
the shares present in person or by proxy at the session of the
meeting adjourned. The persons named as proxies will vote in
favor of such adjournment if they determine that such adjournment
and additional solicitation is reasonable and in the interests of
each Fund's shareholders. The shareholders of each Fund vote
separately with respect to each Proposal.
The individuals named as proxies (or their substitutes) in
the enclosed proxy card (or cards if you own shares of more than
PAGE 6
one Fund or have multiple accounts) will vote in accordance with
your directions as indicated thereon if your proxy is received
properly executed. You may direct the proxy holders to vote your
shares on a Proposal by checking the appropriate box "For" or
"Against," or instruct them not to vote those shares on the
Proposal by checking the "Abstain" box. Alternatively, you may
simply sign, date and return your proxy card(s) with no specific
instructions as to the Proposals. If you properly execute your
proxy card and give no voting instructions with respect to a
Proposal, your shares will be voted for the Proposal. Any proxy
may be revoked at any time prior to its exercise by filing with
the Fund a written notice of revocation, by delivering a duly
executed proxy bearing a later date, or by attending the meeting
and voting in person.
Abstentions and "broker non-votes" (as defined below) are
counted for purposes of determining whether a quorum is present,
but do not represent votes cast with respect to any Proposal.
"Broker non-votes" are shares held by a broker or nominee for
which an executed proxy is received by the Fund, but are not
voted as to one or more Proposals because instructions have not
been received from the beneficial owners or persons entitled to
vote and the broker or nominee does not have discretionary voting
power.
VOTE REQUIRED: A PLURALITY OF ALL VOTES CAST AT THE
MEETING IS SUFFICIENT TO APPROVE PROPOSAL 1 FOR EACH FUND. A
MAJORITY OF THE SHARES PRESENT IN PERSON OR BY PROXY AT THE
MEETING IS SUFFICIENT TO APPROVE PROPOSAL 3 FOR EACH FUND.
APPROVAL OF ALL REMAINING PROPOSALS OF EACH FUND REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF THE LESSER OF (A) 67% OF THE
SHARES PRESENT AT THE MEETING IN PERSON OR BY PROXY, OR (B) A
MAJORITY OF EACH FUND'S OUTSTANDING SHARES.
If the proposed amendments to each Fund's fundamental
investment policies are approved, they will become effective on
or about May 1, 1994. If any of the proposed amendments to each
Fund's fundamental investment policies are not approved, they
will remain unchanged.
Each Fund will pay a portion of the costs of the meeting,
including the solicitation of proxies, allocated on the basis of
the number of shareholder accounts of each Fund. Persons holding
shares as nominees will be reimbursed, upon request, for their
reasonable expenses in sending solicitation materials to the
principals of the accounts. In addition to the solicitation of
proxies by mail, directors, officers, and/or employees of each
PAGE 7
Fund or of its investment manager, T. Rowe Price Associates, Inc.
("T. Rowe Price"), may solicit proxies in person or by telephone.
The approximate date on which this Proxy Statement and form
of proxy is first being mailed to shareholders of each Fund is
March 9, 1994.
1. ELECTION OF DIRECTORS
The following table sets forth information concerning each
of the nominees for director indicating the particular Board(s)
on which the nominee has been asked to serve. Each nominee has
agreed to hold office until the next annual meeting (if any) or
his successor is duly elected and qualified. With the exception
of Ms. Merriman, each of the nominees is a member of the present
Board of Directors of the Fund and has served in that capacity
since originally elected. A shareholder using the enclosed proxy
form can vote for all or any of the nominees of the Board of
Directors or withhold his or her vote from all or any of such
nominees. If the proxy card is properly executed but unmarked,
it will be voted for all of the nominees. Should any nominee
become unable or unwilling to accept nomination or election, the
persons named in the proxy will exercise their voting power in
favor of such other person or persons as the Board of Directors
of the Fund may recommend. There are no family relationships
among these nominees.
The membership of two Boards will not be identical
following election at the meeting. Specifically, certain
individuals who are interested persons of T. Rowe Price are being
elected to only one of the Funds. Shareholders are being asked
to elect the Board of Directors of their respective Fund only.
PAGE 8
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Owned, Shares
Name, Address, Directly Beneficially
Date of Birth or Owned
of Nominee and Indirectly, Directly
Position with Principal as of as of
Fund Occupations(1) 1/31/94(2) 1/31/94
_________________________________________________________________
Leo C. Bailey Retired; Director of the Balanced
3396 S. Placita following T. Rowe Price Fund:
Fabula Funds: Growth Stock, Equity
Green Valley, AZ New Era, Science & Index
85614 Technology, Mid-Cap Fund:
3/3/24 Growth (since inception),
0Balanced Fund: OTC (since inception),
Director since Dividend Growth (since
1992 inception), Blue Chip Growth
0Equity Index (since inception), International,
Fund: Director and Institutional International
since 1990 (since inception)
Donald W. Dick, Partner, Overseas Partners Balanced
Jr. Inc., a financial Fund:
375 Park Avenue investment firm; formerly Equity
Suite 3505 (6/65-3/89) Director and Index
New York, NY Vice President-Consumer Fund:
10152 Products Division, McCormick
1/27/43 & Company, Inc., international
0Balanced Fund: food processors; Director/
Director since Trustee, Waverly Press,
1991 Inc. and the following T. Rowe
0Equity Index Price Funds: Growth Stock,
Fund: Initial Growth & Income, New America
election Growth, Capital Appreciation,
Mid-Cap Growth (since inception),
OTC (since inception), Dividend
Growth (since inception), Blue Chip
Growth (since inception), International,
and Institutional International
(since inception)
PAGE 9
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Owned, Shares
Name, Address, Directly Beneficially
Date of Birth or Owned
of Nominee and Indirectly, Directly
Position with Principal as of as of
Fund Occupations(1) 1/31/94(2) 1/31/94
_________________________________________________________________
David K. Fagin Chairman, Chief Executive Balanced
One Norwest Officer and Director, Fund:
Center Golden Star Resources, Equity
1700 Lincoln Ltd.; formerly (1986-7/91) Index
Street President, Chief Operating Fund:
Suite 1950 Officer and Director,
Denver, CO Homestake Mining Company;
80203 Director/Trustee of the
4/9/38 following T. Rowe Funds/
0Balanced Fund: Trusts: New Horizons, New
Director since Era, Equity Income,
1991 Capital Appreciation,
0Equity Index Mid-Cap Growth (since inception),
Fund: Initial OTC (since inception), Dividend
election Growth (since inception), and
Blue Chip Growth (since inception)
Addison Lanier Financial management; Balanced
441 Vine Street, President and Director, Fund:
#2310 Thomas Emery's Sons, Inc. Equity
Cincinnati, OH and Emery Group, Inc.; Index
45202-2913 Director/Trustee, Scinet Fund:
1/12/24 Development and Holdings,
0Balanced Fund: Inc. and the following T.
Director since Rowe Price Funds/Trusts: New
1991 America Growth, Equity Income,
0Equity Index Small-Cap Value, Mid-Cap Growth
Fund: Initial (since inception), OTC (since
election inception), Dividend Growth
(since inception), Blue Chip
Growth (since inception), International,
and Institutional International
(since inception)
PAGE 10
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Owned, Shares
Name, Address, Directly Beneficially
Date of Birth or Owned
of Nominee and Indirectly, Directly
Position with Principal as of as of
Fund Occupations(1) 1/31/94(2) 1/31/94
_________________________________________________________________
John K. Major Chairman of the Board and Balanced
126 E. 26 Place President, KCMA Fund:
Tulsa, OK Incorporated, Tulsa, Equity
74114-2422 Oklahoma; Director/Trustee Index
8/3/24 of the following T. Rowe Fund:
0Balanced Fund: Price Funds/Trusts: Growth
Director since Stock, New Horizons, New
1991 Era, Growth & Income, Capital
0Equity Index Appreciation, Science &
Fund: Initial Technology, Mid-Cap Growth
election (since inception), OTC (since
inception), Dividend Growth
(since inception), and Blue Chip
Growth (since inception)
Hanne M. Retail business consultant; Balanced
Merriman formerly, President and Fund:
655 15th Street Chief Operating Officer Equity
Suite 300 (1991-92), Nan Duskin, Index
Washington, Inc., a women's specialty Fund:
D.C. 20005 store, Director (1984-90)
11/16/41 and Chairman (1989-90) Federal
0Balanced Fund: Reserve Bank of Richmond, and
Initial election President and Chief Executive Officer
0Equity Index (1988-89), Honeybee, Inc.,
Fund: Initial a division of Spiegel, Inc.;
election Director, Central Illinois
Public Service Company, CIPSCO
Incorporated, The Rouse Company,
State Farm Mutual Automobile
Insurance Company and USAir
Group, Inc.
PAGE 11
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Owned, Shares
Name, Address, Directly Beneficially
Date of Birth or Owned
of Nominee and Indirectly, Directly
Position with Principal as of as of
Fund Occupations(1) 1/31/94(2) 1/31/94
_________________________________________________________________
*James S. Riepe Managing Director, T. Rowe Balanced
100 East Pratt Price Associates, Inc.; Fund:
Street President and Director, Equity
Baltimore, MD T. Rowe Price Index
21202 Investment Services, Inc.; Fund:
6/25/43 Chairman of the Board, T. Rowe
0Balanced Fund: Price Services, Inc., T. Rowe
Chairman of the Price Trust Company, T. Rowe
Board and member Price Retirement Plan Services,
of Executive Inc., and the following T. Rowe
Committee since Price Funds: Growth &
1991 Income, Spectrum (since
0Equity Index inception), and Mid-Cap Growth
Fund: Vice (since inception); Vice President
President and of the following T. Rowe Price
member of Funds/Trusts: New Era, New America
Executive Growth, Prime Reserve,
Committee International, and Institutional
since 1990 International (since inception);
Vice President and Director/
Trustee of the 23 other T. Rowe
Price Funds/Trusts; Director, T. Rowe
Price Tax-Free Insured Intermediate
Bond Fund, Inc. (since inception)
and Rhone-Poulenc Rorer, Inc.
PAGE 12
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Owned, Shares
Name, Address, Directly Beneficially
Date of Birth or Owned
of Nominee and Indirectly, Directly
Position with Principal as of as of
Fund Occupations(1) 1/31/94(2) 1/31/94
_________________________________________________________________
*M. David Testa Managing Director, T. Rowe Balanced
100 East Pratt Price Associates, Inc.; Fund:
Street Chairman of the Board, Equity
Baltimore, MD Rowe Price-Fleming Index
21202 International, Inc. and Fund:
4/22/44 the following T. Rowe Price
0Balanced Funds: Growth Stock,
Fund: Vice International, and Institutional
President and International (since inception);
member of Vice President and
Executive Director, T. Rowe Price
Committee since Trust Company; Director of
1991 the following T. Rowe Price
0Equity Index Funds: Dividend Growth (since
Fund: Initial inception) and Blue Chip
election Growth (since inception); Vice
President, T. Rowe Price Spectrum
Fund, Inc. (since inception)
Hubert D. Vos President, Stonington Balanced
1231 State Capital Corporation, a Fund:
Street private investment Equity
Suite 210 company; Director/Trustee Index
Santa Barbara, of the following T. Rowe Fund:
CA 93190-0409 Price Funds/Trusts: New
8/2/33 Horizons, New Era, Equity Income,
0Balanced Fund: Capital Appreciation, Science &
Director since Technology, Small-Cap Value,
1991 Mid-Cap Growth (since inception),
0Equity Index OTC (since inception), Dividend
Fund: Initial Growth (since inception), and
election Blue Chip Growth (since
inception)
PAGE 13
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Owned, Shares
Name, Address, Directly Beneficially
Date of Birth or Owned
of Nominee and Indirectly, Directly
Position with Principal as of as of
Fund Occupations(1) 1/31/94(2) 1/31/94
_________________________________________________________________
Paul M. Wythes Founding General Partner, Balanced
755 Page Mill Sutter Hill Ventures, a Fund:
Road venture capital limited Equity
Suite A200 partnership providing Index
Palo Alto, CA equity capital to young Fund:
94304 high technology companies
6/23/33 throughout the United States;
0Balanced Fund: Director/Trustee, Teltone
Director since Corporation, Interventional
1992 Technologies, Inc., Stuart
0Equity Index Medical, Inc., and the following
Fund: Director T. Rowe Price Funds: New Horizons,
since 1990 Growth & Income, New America
Growth, Science & Technology,
Small-Cap Value, Mid-Cap Growth
(since inception), OTC (since
inception), Dividend Growth (since
inception), and Blue Chip Growth
(since inception)
*Nominees considered "interested persons" of Price Associates.
(1) Except as otherwise noted, each individual has held the
office indicated, or other offices in the same company, for
the last five years.
(2) In addition to the shares owned beneficially and of record
by each of the nominees, the amounts shown reflect the
proportionate interests of Messrs. Riepe and Testa in
_________ shares of the Fund which are owned by a wholly-
owned subsidiary of the Fund's investment manager T. Rowe
Price, and their interests in _______ shares owned by the
T. Rowe Price Associates, Inc. Profit Sharing Trust.
The directors of the Fund who are officers or employees of
T. Rowe Price receive no remuneration from the Fund. For the
PAGE 14
year 1993, Messrs. Bailey, Dick, Fagin, Lanier, Major, Vos and
Wythes, received from the Balanced Fund directors' fee
aggregating $_________, including expenses. For the same period,
Messrs. Bailey and Wythes, received rom the Equity Index Fund
directors' fees aggregating $_________, including expenses. The
fee paid to each such director is calculated in accordance with
the following fee schedule: a fee of $25,000 per year as the
initial fee for the first Price Fund/Trust on which a director
serves; a fee of $5,000 for each of the second, third, and fourth
Price Funds/Trusts on which a director serves; a fee of $2,500
for each of the fifth and sixth Price Funds/Trusts on which a
director serves; and a fee of $1,000 for each of the seventh and
any additional Price Funds/Trusts on which a director serves.
For the year ended December 31, 1993, this group of directors
received from the Fund directors' fees aggregating $___________,
including expenses. Those nominees indicated by an asterisk (*)
are persons who, for purposes of Section 2(a)(19) of the
Investment Company Act of 1940 are considered "interested
persons" of T. Rowe Price. Each such nominee is deemed to be an
"interested person" by virtue of his officership, directorship,
and/or employment with T. Rowe Price. Messrs. Bailey, Dick,
Fagin, Lanier, Major, Vos and Wythes are the independent
directors of the Balanced Fund and Messrs. Bailey and Wythes are
the independent directors of the Equity Index Fund.
The Price Funds have established a Joint Audit Committee,
which is comprised of at least one independent director
representing each of the Funds. Messrs. Bailey, Dick and Vos,
directors of the Fund, are members of the Committee. The other
member is Anthony W. Deering. These directors also received a
fee of $500 for each Committee meeting attended. The Audit
Committee holds two regular meetings during each fiscal year, at
which time it meets with the independent accountants of the Price
Funds to review: (1) the services provided; (2) the findings of
the most recent audit; (3) management's response to the findings
of the most recent audit; (4) the scope of the audit to be
performed; (5) the accountants' fees; and (6) any accounting
questions relating to particular areas of the Price Funds'
operations or the operations of parties dealing with the Price
Funds, as circumstances indicate.
The Board of Directors of the Fund has an Executive
Committee which is authorized to assume all the powers of the
Board to manage the Fund, in the intervals between meetings of
the Board, except the powers prohibited by statute from being
delegated.
PAGE 15
The Board of Directors of the Fund has a Nominating
Committee, which is comprised of all the Price Fund's independent
directors. The Nominating Committee, which functions only in an
advisory capacity, is responsible for reviewing and recommending
to the full Board candidates for election as independent
directors to fill vacancies on the Board of Directors. The
Nominating Committee will consider written recommendations from
shareholders for possible nominees. Shareholders should submit
their recommendations to the Secretary of the Fund. Members of
the Nominating Committee met informally during the last full
fiscal year, but the Committee as such held no formal meetings.
The Board of Directors held seven meetings during the last
full fiscal year. With the exception of Messrs. Major and Testa
of Balanced Fund, each director standing for election or
reelection attended 75% or more of the aggregate of (i) the total
number of meetings of the Board of Directors (held during the
period for which he was a director) and (ii) the total number of
meetings held by all committees of the Board on which he served.
2. APPROVAL OR DISAPPROVAL OF CHANGES TO THE FUNDS'
FUNDAMENTAL INVESTMENT POLICIES
The Investment Company Act of 1940 (the "1940 Act")
requires investment companies such as the Funds to adopt certain
specific investment policies that can be changed only by
shareholder vote. An investment company may also elect to
designate other policies that may be changed only by shareholder
vote. Both types of policies are often referred to as
"fundamental policies." Certain of the Funds' fundamental
policies have been adopted in the past to reflect regulatory,
business or industry conditions that are no longer in effect.
Accordingly, each Fund's Board of Directors has approved, and has
authorized the submission to each Fund's shareholders for their
approval, the amendment and/or reclassification of certain of the
fundamental policies applicable to each Fund.
The proposed amendments would (i) simplify and modernize
the limitations that are required to be fundamental by the 1940
Act and (ii) eliminate as fundamental any limitations that are
not required to be fundamental by that Act. By reducing to a
minimum those limitations that can be changed only by shareholder
vote, the Funds would be able to minimize the costs and delay
associated with holding frequent annual shareholders' meetings.
The Directors also believe that T. Rowe Price's ability to manage
the Funds' assets in a changing investment environment will be
PAGE 16
enhanced and that investment management opportunities will be
increased by these changes.
In the following discussion "the Fund" is intended to refer
to each Fund.
BOTH FUNDS
A. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
TO INCREASE ITS ABILITY TO ENGAGE IN BORROWING TRANSACTIONS
The Board of Directors has proposed an amendment to the
Fund's fundamental policy which would permit the Fund greater
flexibility to engage in borrowing transactions. The current
restriction is not required by applicable law. The new
restriction would (1) allow the Fund to borrow slightly larger
amounts of money; (2) borrow from persons other than banks or
other Price Funds to the extent permitted by applicable law; and
(3) clarify that the Fund's restriction on borrowing does not
prohibit the Fund from entering into reverse repurchase
agreements and other proper investments and transactions. The
new restriction would also conform the Fund's policy on borrowing
to one which is expected to become standard for all T. Rowe Price
mutual funds. The Board believes that standardized policies will
assist the Fund and T. Rowe Price in monitoring compliance with
the various investment restrictions to which the T. Rowe Price
mutual funds are subject. The Board has directed that such
amendment be submitted to shareholders for approval or
disapproval.
The Fund's current fundamental policy in the area of
borrowing is as follows:
Balanced Fund
"[As a matter of fundamental policy, the Fund may not:]
Borrow money, except the Fund may borrow from banks or
other Price Funds as a temporary measure for extraordinary
or emergency purposes, and then only in amounts not
exceeding 30% of its total assets valued at market. The
Fund will not borrow in order to increase income
(leveraging), but only to facilitate redemption requests
which might otherwise require untimely disposition of
portfolio securities (see page ___ of prospectus).
Interest paid on any such borrowings will reduce net
investment income. The Fund may enter into futures
PAGE 17
contracts as set forth in [its fundamental policy on
futures];"
Equity Index Fund
"[As a matter of fundamental policy, the Fund may not:]
Borrow money, except the Fund may borrow from banks and
other Price Funds as a temporary measure for extraordinary
or emergency purposes, and then only in amounts not
exceeding 30% of its total assets valued at market. The
Fund will not borrow in order to increase income
(leveraging), but only to facilitate redemption requests
which might otherwise require untimely disposition of
portfolio securities (see page ___ of prospectus).
Interest paid on any such borrowings will reduce net
investment income. The Fund may enter into futures
contracts as set forth in [its fundamental policy on
futures];"
As amended, the Fund's fundamental policy on borrowing
would be as follows:
"[As a matter of fundamental policy, the Fund may not:]
Borrow money except that the Fund may (i) borrow for non-
leveraging, temporary or emergency purposes and (ii) engage
in reverse repurchase agreements and make other investments
or engage in other transactions, which may involve a
borrowing, in a manner consistent with the Fund's
investment objective and program, provided that the
combination of (i) and (ii) shall not exceed 33 1/3% of the
value of the Fund's total assets (including the amount
borrowed) less liabilities (other than borrowings) or such
other percentage permitted by law. Any borrowings which
come to exceed this amount will be reduced in accordance
with applicable law. The Fund may borrow from banks, other
Price Funds or other persons to the extent permitted by
applicable law."
If approved, the primary effect of the proposals would be
to allow the Fund to: (1) borrow up to 33 1/3% (or such higher
amount permitted by law) of its total assets (including the
amount borrowed) less liabilities (other than borrowings) as
opposed to the current limitation of 30%; (2) borrow from persons
other than banks and other mutual funds advised by T. Rowe Price
or Rowe Price-Fleming International, Inc. ("Price Funds"); and
(3) enter into reverse repurchase agreements and other
PAGE 18
investments consistent with the Fund's investment objective and
program.
33 1/3% Limitation
The increase in the amount of money which the Fund could
borrow is designed to allow the Fund greater flexibility to meet
shareholder redemption requests should the need arise. As is the
case under its current policy, the Fund would not borrow to
increase income through leveraging. It is possible the Fund's
ability to borrow a larger percentage of its assets could
adversely affect the Fund if the Fund were unable to liquidate
sufficient securities, or the Fund were forced to liquidate
securities at unfavorable prices, to pay back the borrowed sums.
However, the Directors believe the risks of such possibilities
are outweighed by the greater flexibility the Fund would have in
borrowing. The increased ability to borrow should permit the
Fund, if it were faced with substantial shareholder redemptions,
to avoid liquidating securities at unfavorable prices or times to
a greater degree than would be the case under the current policy.
Reverse Repurchase Agreements
To facilitate portfolio liquidity, it is possible the Fund
could enter into reverse repurchase agreements. Reverse
repurchase agreements are ordinary repurchase agreements in which
a fund is a seller of, rather than the investor in, securities,
and agrees to repurchase them at an agreed upon time and price.
Reverse repurchase agreements can avoid certain market risks and
transaction costs associated with an outright sale and
repurchase. Reverse repurchase agreements, however, may be
viewed as borrowings. To the extent they are, the proposed
amendment would clarify that the Fund's restrictions on borrowing
would not prohibit the Fund from entering into a reverse
repurchase agreement.
Other Changes
The other proposed changes in the Fund's fundamental policy
- - - - to allow the Fund to borrow from persons other than banks and
other Price Funds to the extent consistent with applicable law -
and to engage in transactions other than reverse repurchase
agreements which may, or may be deemed to, involve a borrowing -
are simply designed to permit the Fund the greatest degree of
flexibility permitted by law in pursuing its investment program.
All activities of the Fund are, of course, subject to the 1940
PAGE 19
Act and the rules and regulations thereunder as well as various
state securities laws.
The Board of Directors recommends that shareholders vote
FOR the proposal.
B. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING THE MAKING OF LOANS
The Board of Directors has proposed an amendment to the
Fundamental Investment Policies of the Fund in order to: (i)
increase the amount of its assets which may be subject to its
lending policy; and (ii) allow the Fund to purchase the entire or
any portion of the debt of a company. The new restriction would
also conform the Fund's policy on lending to one which is
expected to become standard for all T. Rowe Price mutual funds.
The Board believes that standardized policies will assist the
Fund and T. Rowe Price in monitoring compliance with the various
investment restrictions to which the T. Rowe Price mutual funds
are subject. The Board has directed that such amendment be
submitted to shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of making
loans is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Make loans, although the Fund may (i) purchase money market
securities and enter into repurchase agreements; (ii)
acquire publicly-distributed bonds, debentures, notes and
other debt securities and purchase debt securities at
private placement; (iii) lend portfolio securities; and
(iv) participate in an interfund lending program with other
Price Funds provided that no such loan may be made if, as a
result, the aggregate of such loans would exceed 30% of the
value of the Fund's total assets;"
As amended, the Fund's fundamental policy on loans would be
as follows:
"[As a matter of fundamental policy, the Fund may not:]
Make loans, although the Fund may (i) lend portfolio
securities and participate in an interfund lending program
with other Price Funds provided that no such loan may be
made if, as a result, the aggregate of such loans would
exceed 33 1/3% of the value of the Fund's total assets;
(ii) purchase money market securities and enter into
repurchase agreements; and (iii) acquire publicly-
PAGE 20
distributed or privately-placed debt securities and
purchase debt;"
33 1/3% Restriction
The Fund's current fundamental policy on lending restricts
the Fund to lending no more than 30% of the value of the Fund's
total assets. The new policy would raise this amount to 33 1/3%
of the value of the Fund's total assets. The purpose of this
change is to conform the Fund's policy to one that is expected to
become standard for all Price Funds and to permit the Fund to
lend its assets to the maximum extent permitted under applicable
law. The Board of Directors does not view this change as
significantly raising the level of risk to which the Fund would
be subject.
Purchase of Debt
The Fund's fundamental policy on lending allows the Fund to
purchase debt securities as an exception to the general
limitations on making loans. However, there is no similar
exception for the purchase of straight debt, e.g., debt held by a
bank for example which might not be considered a debt security.
Such an investment might be subject to greater risks of liquidity
and unavailability of public information than would be the case
for an investment in a publicly held security. The primary
purpose of this proposal is to conform the Fund's fundamental
policy in this area to one that is expected to become standard
for all Price Funds. The Fund will continue to invest primarily
in equity securities. However, the Board of Directors believes
that increased standardization will help promote operational
efficiencies and facilitate monitoring of compliance with the
Fund's investment restrictions.
Other Matters
For purposes of the restriction on lending, the Fund will
consider the acquisition of a debt security to include the
execution of a note or other evidence of an extension of credit
with a term of more than nine months.
The Board of Directors recommends that shareholders vote
FOR the proposal.
PAGE 21
C. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT
POLICY ON PURCHASING SECURITIES ON MARGIN
The Board of Directors has proposed that the Fund's
Fundamental Investment Policy on purchasing securities on margin
be changed from a fundamental policy to an operating policy.
Fundamental policies may be changed only by shareholder vote,
while operating policies may be changed by the Board of Directors
without shareholder approval. The purpose of the proposal is to
allow the Fund greater flexibility in responding to market and
regulatory developments by providing the Board of Directors with
the authority to make changes in the Fund's policy on margin
without further shareholder approval. The new restriction would
also conform the Fund's policy on margin to one which is expected
to become standard for all T. Rowe Price mutual funds. The Board
believes that standardized policies will assist the Fund and T.
Rowe Price in monitoring compliance with the various investment
restrictions to which the T. Rowe Price mutual funds are subject.
The Board has directed that such amendment be submitted to
shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of
purchasing securities on margin is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase securities on margin, except for use of short-term
credit necessary for clearance of purchases of portfolio
securities; except that it may make margin deposits in
connection with futures contracts, subject to [its
fundamental policy on futures];"
As amended, the Fund's operating policy on purchasing
securities on margin would be as follows:
"[As a matter of operating policy, the Fund may not:]
Purchase securities on margin, except (i) for use of short-
term credit necessary for clearance of purchases of
portfolio securities and (ii) it may make margin deposits
in connection with futures contracts or other permissible
investments;"
Both the Fund's current policy and the proposed operating
policy prohibit the purchase of securities on margin but allow
the Fund to make margin deposits in connection with futures
contracts and use such short-term credit as is necessary for
clearance of purchases of portfolio securities. The proposed
operating policy also would acknowledge that the Fund is
PAGE 22
permitted to make margin deposits in connection with other
investments in addition to futures. Such investments might
include, but are not limited to, written options where the Fund
could be required to put up margin with a broker as security for
the Fund's obligation to deliver the security on which the option
is written.
The Board of Directors recommends that shareholders vote
FOR the proposal.
D. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
ON THE ISSUANCE OF SENIOR SECURITIES
The Fund's Board of Directors has proposed an amendment to
the Fund's fundamental policy on investing in senior securities
which would allow the Fund to invest in senior securities to the
extent permitted under the Investment Company Act of 1940. The
new policy, if adopted, would provide the Fund with greater
flexibility in pursuing its investment objective and program.
The Board has directed that such amendment be submitted to
shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of
issuing senior securities is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Issue senior securities;"
As amended, the Fund's fundamental policy on issuing senior
securities would be as follows:
"[As a matter of fundamental policy, the Fund may not:]
Issue senior securities except in compliance with the
Investment Company Act of 1940;"
The 1940 Act limits a Fund's ability to issue senior
securities or engage in investment techniques which could be
deemed to create a senior security. Although the definition of a
"senior security" involves complex statutory and regulatory
concepts, a senior security is generally thought of as a class of
security preferred over shares of the Fund with respect to the
Fund's assets or earnings. It generally does not include
temporary or emergency borrowings by the Fund (which might occur
to meet shareholder redemption requests) in accordance with
federal law and the Fund's investment limitations. Various
investment techniques that obligate the Fund to pay money at a
PAGE 23
future date (e.g., the purchase of securities for settlement on a
date that is longer than required under normal settlement
practices) occasionally raise questions as to whether a "senior
security" is created. The Fund utilizes such techniques only in
accordance with applicable regulatory requirements under the 1940
Act. Although the Fund has no current intention of issuing
senior securities, the proposed change will clarify the Fund's
authority to issue senior securities in accordance with the 1940
Act without the need to seek shareholder approval.
The Board of Directors recommends that shareholders vote
FOR the proposal.
E. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL POLICIES ON
INVESTING IN COMMODITIES AND FUTURES CONTRACTS TO PROVIDE
GREATER FLEXIBILITY IN FUTURES TRADING
Balanced Fund
The Board of Directors has proposed amendments to the
Fund's Fundamental Investment Policies on commodities and
futures. The principal purpose of the proposals is to conform
the Fund's policies on commodities and futures with policies
which are expected to become standard for all T. Rowe Price
mutual funds. The Board has directed that such amendments be
submitted to shareholders for approval or disapproval.
The Fund's current fundamental policies in the area of
investing in commodities and futures are as follows:
Commodities
"[As a matter of fundamental policy, the Fund may not:]
Purchase or sell commodities or commodity contracts; except
that it may (i) enter into futures contracts and options on
futures contracts, subject to [its fundamental policy of
futures]; (ii) enter into forward foreign currency exchange
contracts (although the Fund does not consider such
contracts to be commodities); and (iii) invest in
instruments which have the characteristics of both futures
contracts and securities;"
Futures Contracts
"[As a matter of fundamental policy, the Fund may not:]
Enter into a futures contract or an option thereon,
although the Fund may enter into financial and currency
PAGE 24
futures contracts or options on financial and currency
futures contracts;"
As amended, the Fund's fundamental policies on investing in
futures and commodities would be combined and would be as
follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase or sell physical commodities; except that it may
enter into futures contracts and options thereon;"
In addition, the Board of Directors intends to adopt the
following operating policy, which may be changed by the Board of
Directors without further shareholder approval.
"[As a matter of operating policy, the Fund will not:]
Purchase a futures contract or an option thereon if, with
respect to positions in futures or options on futures which
do not represent bona fide hedging, the aggregate initial
margin and premiums on such positions would exceed 5% of
the Fund's net asset value (the "New Operating Policy")."
If adopted, the primary effect of the amendment would be to
remove the restriction in the current policies the Fund may only
enter into financial and currency futures. Although not
specifically described in the amended fundamental restriction,
the Fund would continue to have the ability to enter into forward
foreign currency contracts and to invest in instruments which
have the characteristics of futures and securities or whose value
is determined, in whole or in part, by reference to commodity
prices.
The Fund has no current intention of investing in other
types of futures. However, the new policy, if adopted, would
allow it to do so. The risks of any such futures activity could
differ from the risks of the Fund's currently permitted futures
activity. As noted, the principal purpose of seeking the
proposed change in the Fund's fundamental policies is to conform
such policies to ones which are expected to become standard for
all T. Rowe Price Funds. The Board of Directors believes that
standardized policies will assist the Fund and T. Rowe Price in
monitoring compliance with the various investment restrictions to
which the T. Rowe Price Funds are subject.
The Board of Directors recommends that shareholders vote
FOR the proposal.
PAGE 25
E. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL POLICIES ON
INVESTING IN COMMODITIES AND FUTURES CONTRACTS TO PROVIDE
GREATER FLEXIBILITY IN FUTURES TRADING
Equity Index Fund
The Board of Directors has proposed amendments to the
Fund's Fundamental Investment Policies on commodities and
futures. The principal purpose of the proposals is to conform
the Fund's policies on commodities and futures with policies
which are expected to become standard for all T. Rowe Price
mutual funds. The Board has directed that such amendments be
submitted to shareholders for approval or disapproval.
The Fund's current fundamental policies in the area of
investing in commodities and futures are as follows:
Commodities
"[As a matter of fundamental policy, the Fund may not:]
Purchase or sell commodities or commodity contracts; except
that it may enter into futures contracts and options on
futures contracts, subject to [its fundamental policy on
futures];"
Futures Contracts
"[As a matter of fundamental policy, the Fund may not:]
Enter into a futures contract or an option thereon,
although the Fund may enter into financial futures
contracts or options on financial futures contracts;"
As amended, the Fund's fundamental policies on investing in
commodities and futures would be combined and would be as
follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase or sell physical commodities; except that it may
enter into futures contracts and options thereon;"
In addition, the Board of Directors intends to adopt the
following operating policy, which may be changed by the Board of
Directors without further shareholder approval.
"[As a matter of operating policy, the Fund will not:]
Purchase a futures contract or an option thereon if, with
PAGE 26
respect to positions in futures or options on futures which
do not represent bona fide hedging, the aggregate initial
margin and premiums on such positions would exceed 5% of
the Fund's net asset value (the "New Operating Policy")."
If adopted, the primary effect of the amendment would be to
remove the restriction in the current policies the Fund may only
enter into financial futures.
The Fund has no current intention of investing in other
types of futures. However, the new policy, if adopted, would
allow it to do so. As noted, the principal purpose of seeking
the proposed change in the Fund's fundamental policies is to
conform such policies to ones which are expected to become
standard for all T. Rowe Price Funds. The Board of Directors
believes that standardized policies will assist the Fund and T.
Rowe Price in monitoring compliance with the various investment
restrictions to which the T. Rowe Price Funds are subject.
The Board of Directors recommends that shareholders vote
FOR the proposal.
F. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT
POLICY ON SHORT SALES
The Fund's Board of Directors has proposed that the Fund's
Fundamental Policy on effecting short sales be eliminated and
replaced with a substantially similar operating policy.
Fundamental policies may be changed only by shareholder vote,
while operating policies may be changed by the Board of Directors
without shareholder approval. The current policy of the Fund is
not required by applicable law to be fundamental. The purpose of
the proposal is to provide the Fund with greater flexibility in
pursuing its investment objective and program. The Board has
directed that the proposal be submitted to shareholders for
approval or disapproval.
The Fund's current fundamental policy in the area of
effecting short sales of securities is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Effect short sales of securities;"
The operating policy on short sales, to be adopted by the
Fund, would be as follows:
PAGE 27
"[As a matter of operating policy, the Fund may not:]
Effect short sales of securities;"
The current fundamental policy was formerly required by
certain states to be fundamental. This is no longer the case and
the replacement of the policy with an operating policy will
adequately protect the Fund while providing greater flexibility
to the Fund to respond to market or regulatory developments by
allowing the Board of Directors the authority to make changes in
this policy without seeking further shareholder approval.
In a short sale, an investor, such as the Fund, sells a
borrowed security and must return the same security to the
lender. Although the Board has no current intention of allowing
the Fund to engage in short sales, if the proposed amendment is
adopted, the Board would be able to authorize the Fund to engage
in short sales at any time without further shareholder action.
In such a case, the Fund's prospectus would be amended and a
description of short sales and their risks would be set forth
therein.
The Board of Directors recommends that shareholders vote
FOR the proposal.
3. RATIFICATION OR REJECTION OF SELECTION OF INDEPENDENT
ACCOUNTANTS
The selection by each Fund's Board of Directors of the firm
of Coopers & Lybrand as the independent accountants for each Fund
for the fiscal year 1994 is to be submitted for ratification or
rejection by the shareholders at the Shareholder Meeting. The
firm of Coopers & Lybrand has served each Fund as independent
accountants since its inception. The independent accountants
have advised each Fund that they have no direct or material
indirect financial interest in the Fund. Representatives of the
firm of Coopers & Lybrand are expected to be present at the
Shareholder Meeting and will be available to make a statement, if
they desire to do so, and to respond to appropriate questions
which the shareholders may wish to address to them.
INVESTMENT MANAGER
The Fund's investment manager is T. Rowe Price, a Maryland
corporation, 100 East Pratt Street, Baltimore, Maryland 21202.
The principal executive officer of T. Rowe Price is George J.
PAGE 28
Collins, who together with Thomas H. Broadus, Jr., James E.
Halbkat, Jr., Carter O. Hoffman, Henry H. Hopkins, James S.
Riepe, George A. Roche, John W. Rosenblum, Charles H. Salisbury,
Jr., Robert L. Strickland, M. David Testa, and Philip C. Walsh,
constitute its Board of Directors. The address of each of these
persons, with the exception of Messrs. Halbkat, Rosenblum,
Stickland and Walsh, is 100 East Pratt Street, Baltimore,
Maryland 21202, and, with the exception of Messrs. Halbkat,
Rosenblum, Strickland, and Walsh, all are employed by T. Rowe
Price. Mr. Halbkat is President of U.S. Monitor Corporation, a
provider of public response systems, P.O. Box 23109, Hilton Head
Island, South Carolina 29925. Mr. Rosenblum, whose address is
P.O. Box 6550, Charlottesville, Virginia 22906, is the Tayloe
Murphy Professor at the University of Virginia, and a director
of: Chesapeake Corporation, a manufacturer of paper products;
Cadmus Communications Corp., a provider of printing and
communication services; Comdial Corporation, a manufacturer of
telephone systems for businesses; and Cone Mills Corporation, a
textiles producer. Mr. Strickland is Chairman of Lowe's
Companies, Inc., a retailer of specialty home supplies, 604 Two
Piedmont Plaza Building, Winston-Salem, North Carolina 27104.
Mr. Walsh, whose address is Blue Mill Road, Morristown, New
Jersey 07960, is a consultant to Cyprus Amax Minerals Company,
Englewood, Colorado, and a director of Piedmont Mining Company,
Charlotte, North Carolina.
The officers of the Funds (other than the nominees for
election or reelection as directors) and their positions with T.
Rowe Price are as follows:
Balanced Fund
Position Position with
Officer with Fund Manager
*Richard T. Whitney President Vice President
Stephen W. Boesel Vice President Managing Director
Andrew M. Brooks Vice President Vice President
Jonathan M. Greene Vice President Vice President
Henry H. Hopkins Vice President Managing Director
James A.C. Kennedy, III Vice President Managing Director
Edmund M. Notzon Vice President Vice President
M. David Testa Vice President Managing Director
Peter Van Dyke Vice President Managing Director
Lenora V. Hornung Secretary Vice President
Carmen F. Deyesu Treasurer Vice President
David S. Middleton Controller Vice President
PAGE 29
Roger L. Fiery Assistant Vice PresidentEmployee
Edward T. Schneider Assistant Vice PresidentEmployee
Ingrid I. Vordemberge Assistant Vice PresidentEmployee
Equity Index Fund
*Richard T. Whitney President Vice President
Kristen D. Farrow Vice President Assistant Vice
President
Jonathan M. Greene Vice President Vice President
Henry H. Hopkins Vice President Managing Director
Alan R. Stuart Vice President Vice President
Lenora V. Hornung Secretary Vice President
Carmen F. Deyesu Treasurer Vice President
David S. Middleton Controller Vice President
Roger L. Fiery Assistant Vice President Employee
Edward T. Schneider Assistant Vice President Employee
Ingrid I. Vordemberge Assistant Vice President Employee
* Mr. Whitney's date of birth is ________. He has been
President of the Balanced and Equity Index Fund since ______
and _____, respectively, and has been employed by T. Rowe
Price since ____.
The Funds have an Underwriting Agreement with T. Rowe Price
Investment Services, Inc. ("Investment Services"), a Transfer
Agency Agreement with T. Rowe Price Services, Inc. ("Price
Services"), and an Agreement with T. Rowe Price Retirement Plan
Services, Inc. ("Retirement Services"), which are wholly-owned
subsidiaries of T. Rowe Price. In addition, the Funds have an
Agreement with T. Rowe Price to perform fund accounting services.
James S. Riepe, the Chairman of the Board of the Balanced Fund
and a Vice President and Director of the Equity Index Fund, is
Chairman of the Board of Price Services and Retirement Services
and President and Director of Investment Services. Henry H.
Hopkins, a Vice President of the Funds, is a Vice President and
Director of both Investment Services and Price Services and a
Vice President of Retirement Services. Edward T. Schneider, an
Assistant Vice President of the Funds, is a Vice President of
Price Services. Certain officers of the Funds own shares of the
common stock of T. Rowe Price, its only class of securities.
The following information pertains to transactions involving
common stock of T. Rowe Price, par value $.20 per share
("Stock"), during the period January 1, 1993 through December 31,
1993. There were no transactions during the period by any
PAGE 30
director or officer of the Fund, or any director or officer of T.
Rowe Price which involved more than 1% of the outstanding Stock
of T. Rowe Price. These transactions did not involve, and should
not be mistaken for, transactions in the stock of the Fund.
During the period, the holders of certain options purchased
a total of 343,525 shares of common stock at varying prices from
$0.67 to $18.75 per share. Pursuant to the terms of T. Rowe
Price's Employee Stock Purchase Plan, eligible employees of T.
Rowe Price and its subsidiaries purchased an aggregate of 96,931
shares at fair market value. Such shares were purchased in the
open market during this period for employees' accounts.
The Company's Board of Directors has approved the repurchase
of shares of its common stock in the open market. During 1993,
the Company purchased 80,000 common shares under this plan,
leaving 1,432,000 shares authorized for future repurchase at
December 31, 1993.
During the period, T. Rowe Price issued 1,154,000 common
stock options with an exercise price of $28.13 per share to
certain employees under terms of the 1990 and 1993 Stock
Incentive Plans.
An audited consolidated balance sheet of T. Rowe Price as of
December 31, 1993, is included in this Proxy Statement.
INVESTMENT MANAGEMENT AGREEMENT
T. Rowe Price serves as investment manager to the Funds
pursuant to their Investment Management Agreements (each the
"Management Agreement" and collectively the "Management
Agreements"). The Balanced and Equity Index Funds' Management
Agreements, dated May 1, 1992 and May 1, 1991, respectively, were
approved by the shareholders of each Fund on April 23, 1992 and
April 18, 1991, respectively. By their terms, the Management
Agreements will continue in effect from year to year as long as
they are approved annually by each Fund's Board of Directors (at
a meeting called for that purpose) or by vote of a majority of
each Fund's outstanding shares. In either case, renewal of the
Management Agreement must be approved by a majority of each
Fund's independent directors. On March __, 1994, the directors
of each Fund, including all of the independent directors, voted
to extend the Management Agreement for an additional period of
one year, commencing May 1, 1994, and terminating April 30, 1995.
Each Management Agreement is subject to termination by either
PAGE 31
party without penalty on 60 days' written notice to the other and
will terminate automatically in the event of assignment.
Under each Management Agreement, T. Rowe Price provides the
Fund with discretionary investment services. Specifically, T.
Rowe Price is responsible for supervising and directing the
investments of each Fund in accordance with the Funds' investment
objectives, programs, and restrictions as provided in their
prospectuses and Statements of Additional Information. T. Rowe
Price is also responsible for effecting all security transactions
on behalf of the Funds, including the negotiation of commissions
and the allocation of principal business and portfolio brokerage.
In addition to these services, T. Rowe Price provides the Funds
with certain corporate administrative services, including:
maintaining each Fund's corporate existence, corporate records,
and registering and qualifying Fund shares under federal and
state laws; monitoring the financial, accounting, and
administrative functions of the Funds; maintaining liaison with
the agents employed by the Funds such as each Fund's custodian
and transfer agent; assisting the Funds in the coordination of
such agents' activities; and permitting T. Rowe Price's employees
to serve as officers, directors, and committee members of the
Funds without cost to the Funds.
Each Fund's Management Agreement also provides that T. Rowe
Price, its directors, officers, employees, and certain other
persons performing specific functions for the Fund will only be
liable to the Fund for losses resulting from willful misfeasance,
bad faith, gross negligence, or reckless disregard of duty.
The Management Agreement provides that each Fund will bear
all expenses of its operations not specifically assumed by T.
Rowe Price. However, in compliance with certain state
regulations, T. Rowe Price will reimburse the Funds for any
expenses (excluding interest, taxes, brokerage, other
expenditures which are capitalized in accordance with generally
accepted accounting principles, and extraordinary expenses) which
in any year exceed the limits prescribed by any state in which
the Funds' shares are qualified for sale. Presently, the most
restrictive expense ratio limitation imposed by any state is 2.5%
of the first $30 million of the Fund's average daily net assets,
2% of the next $70 million of such assets, and 1.5% of net assets
in excess of $100 million. For the purpose of determining
whether a Fund is entitled to reimbursement, the expenses of the
Fund are calculated on a monthly basis. If the Fund is entitled
to reimbursement, that month's management fee will be reduced or
postponed, with any adjustment made after the end of the year.
PAGE 32
Balanced Fund Only
In the interest of limiting the expenses of the Fund during
its initial period of operations, T. Rowe Price agreed to bear
any expenses through December 31, 1992, which would cause the
Fund's ratio of expenses to average net assets to exceed 1.00%.
Effective January 1, 1993, T. Rowe Price agreed to extend the
Fund's 1.00% expense limitation for a period of two years through
December 31, 1993. Expenses paid or assumed under each agreement
are subject to reimbursement to T. Rowe Price by the Fund
whenever the Fund's expense ratio is below 1.00%; however, no
reimbursement will be made after December 31, 1994, (for the
initial agreement) or December 31, 1996 (for the second
agreement) or if it would result in the expense ratio exceeding
1.00%. The Management Agreement also provides that one or more
additional expense limitation periods (of the same or different
time periods) may be implemented after the expiration of the
current one on December 31, 1994, and that with respect to any
such additional limitation period, the Fund may reimburse T. Rowe
Price, provided the reimbursement does not result in the Fund's
aggregate expenses exceeding the additional expense limitation or
any applicable state expense limitation. As a result of these
agreements, as of December 31, 1992, $266,000 of management fees
were not accrued by the Fund for the period subsequent to the
reorganization date and $305,000 of unaccrued fees and expenses
related to the Fund's operations in 1991 and 1992 (including the
period prior to the reorganization date) are subject to
reimbursement through December 31, 1994.
For the years ended December 31, 1993, 1992 and 1991, the
ratios of operating expenses to average net assets of the
Balanced Fund were 1.00%, 1.00%, and 1.03%.
Equity Index Fund Only
Effective January 1, 1992, T. Rowe Price agreed to bear any
expenses through December 31, 1993, which would cause the Fund's
ratio of expenses to average net assets to exceed 0.45%.
Effective January 1, 1994, T. Rowe Price agreed to extend the
Fund's 0.45% expense limitation for a period of two years through
December 31, 1995. Expenses paid or assumed under each agreement
are subject to reimbursement to T. Rowe Price by the Fund
whenever the Fund's expense ratio is below 0.45%; however, no
reimbursement will be made after December 31, 1995 (for the first
agreement) or December 31, 1997 (for the second agreement), or if
it would result in the expense ratio exceeding 0.45%. The
PAGE 33
Management Agreement also provides that one or more additional
expense limitation periods (of the same or different time
periods) may be implemented after the expiration of the one on
December 31, 1995, and that with respect to any such additional
limitation period, the Fund may reimburse T. Rowe Price, provided
that the reimbursement does not result in the Fund's aggregate
expenses exceeding the additional expense limitation or any
applicable state expense limitation.
Pursuant to this agreement, $293,000 of management fees were
not accrued by the Fund for the year ended December 31, 1993, and
$20,000 of other expenses were borne by the Manager.
Additionally, $338,000 of unaccrued fees and expenses remain
subject to future reimbursement. Pursuant to a previous
agreement, $421,000 of unaccrued fees and expenses from 1990-1991
have been permanently waived.
Equity Index Fund did not pay T. Rowe Price an investment
management fee for the years ended December 1993, 1992, and 1991.
For its services to the Balanced Fund under the Management
Agreement, T. Rowe Price is paid a management fee ("Management
Fee") consisting of two elements: a "group" fee ("Group Fee") and
an "individual" fund fee ("Individual Fund Fee"). The Group Fee
varies and is based on the combined net assets of all of the
Price Funds distributed by T. Rowe Price Investment Services,
Inc., other than institutional or "private label" products. For
this purpose, the Price Funds include all funds managed and
sponsored by T. Rowe Price as well as those Funds managed and
sponsored by Rowe Price-Fleming International, Inc. The Balanced
Fund pays, as its portion of the Group Fee, an amount equal to
the ratio of its daily net assets to the daily net assets of all
the Price Funds. In addition, the Balanced Fund pays a flat
Individual Fund Fee of 0.15%, based on the net assets of the
Fund. Based on combined Price Funds' assets of approximately
$34.7 billion at December 31, 1993, the Group Fee was 0.35% and
the total management fee for the year would have been an annual
rate of 0.50% of the Balanced Fund. The Equity Index Fund pays
T. Rowe Price an annual investment management fee in monthly
installments of 0.20% of the average daily net asset value of the
Fund. The following chart shows the net assets and the
management fees, paid by each Fund to T. Rowe Price, at December
31, 1993.
PAGE 34
Net Assets Management Fee
__________ ______________
Balanced Fund $340,799,576 $1,169,038
Equity Index Fund $166,993,589 $ 0
PORTFOLIO TRANSACTIONS
In the following discussion "the Fund" is intended to refer
to each Fund.
Investment or Brokerage Discretion
Decisions with respect to the purchase and sale of portfolio
securities on behalf of the Fund are made by T. Rowe Price. T.
Rowe Price is also responsible for implementing these decisions,
including the negotiation of commissions and the allocation of
portfolio brokerage and principal business.
How Brokers and Dealers are Selected
Equity Securities
In purchasing and selling the Fund's portfolio securities,
it is T. Rowe Price's policy to obtain quality execution at the
most favorable prices through responsible brokers and dealers
and, in the case of agency transactions, at competitive
commission rates. However, under certain conditions, the Fund may
pay higher brokerage commissions in return for brokerage and
research services. As a general practice, over-the-counter
orders are executed with market-makers. In selecting among
market-makers, T. Rowe Price generally seeks to select those it
believes to be actively and effectively trading the security
being purchased or sold. In selecting broker-dealers to execute
the Fund's portfolio transactions, consideration is given to such
factors as the price of the security, the rate of the commission,
the size and difficulty of the order, the reliability, integrity,
financial condition, general execution and operational
capabilities of competing brokers and dealers, and brokerage and
research services provided by them. It is not the policy of T.
Rowe Price to seek the lowest available commission rate where it
is believed that a broker or dealer charging a higher commission
rate would offer greater reliability or provide better price or
execution.
PAGE 35
Fixed Income Securities
Fixed income securities are generally purchased from the
issuer or a primary market-maker acting as principal for the
securities on a net basis, with no brokerage commission being
paid by the client. Transactions placed through dealers serving
as primary market-makers reflect the spread between the bid and
asked prices. Securities may also be purchased from underwriters
at prices which include underwriting fees.
With respect to equity and fixed income securities, T. Rowe
Price may effect principal transactions on behalf of the Fund
with a broker or dealer who furnishes brokerage and/or research
services, designate any such broker or dealer to receive selling
concessions, discounts or other allowances, or otherwise deal
with any such broker or dealer in connection with the acquisition
of securities in underwritings.
How Evaluations are Made of the Overall Reasonableness of
Brokerage Commissions Paid
On a continuing basis, T. Rowe Price seeks to determine what
levels of commission rates are reasonable in the marketplace for
transactions executed on behalf of the Fund. In evaluating the
reasonableness of commission rates, T. Rowe Price considers: (a)
historical commission rates, both before and since rates have
been fully negotiable; (b) rates which other institutional
investors are paying, based on available public information; (c)
rates quoted by brokers and dealers; (d) the size of a particular
transaction, in terms of the number of shares, dollar amount, and
number of clients involved; (e) the complexity of a particular
transaction in terms of both execution and settlement; (f) the
level and type of business done with a particular firm over a
period of time; and (g) the extent to which the broker or dealer
has capital at risk in the transaction.
Description of Research Services Received from Brokers and
Dealers
T. Rowe Price receives a wide range of research services
from brokers and dealers. These services include information on
the economy, industries, groups of securities, individual
companies, statistical information, accounting and tax law
interpretations, political developments, legal developments
affecting portfolio securities, technical market action, pricing
and appraisal services, credit analysis, risk measurement
analysis, performance analysis and analysis of corporate
PAGE 36
responsibility issues. These services provide both domestic and
international perspective. Research services are received
primarily in the form of written reports, computer generated
services, telephone contacts and personal meetings with security
analysts. In addition, such services may be provided in the form
of meetings arranged with corporate and industry spokespersons,
economists, academicians and government representatives. In some
cases, research services are generated by third parties but are
provided to T. Rowe Price by or through broker-dealers.
Research services received from brokers and dealers are
supplemental to T. Rowe Price's own research effort and, when
utilized, are subject to internal analysis before being
incorporated by T. Rowe Price into its investment process. As a
practical matter, it would not be possible for T. Rowe Price's
Equity Research Division to generate all of the information
presently provided by brokers and dealers. T. Rowe Price pays
cash for certain research services received from external
sources. T. Rowe Price also allocates brokerage for research
services which are available for cash. While receipt of research
services from brokerage firms has not reduced T. Rowe Price's
normal research activities, the expenses of T. Rowe Price could
be materially increased if it attempted to generate such
additional information through its own staff. To the extent that
research services of value are provided by brokers or dealers, T.
Rowe Price may be relieved of expenses which it might otherwise
bear.
T. Rowe Price has a policy of not allocating brokerage
business in return for products or services other than brokerage
or research services. In accordance with the provisions of
Section 28(e) of the Securities Exchange Act of 1934, T. Rowe
Price may from time to time receive services and products which
serve both research and non-research functions. In such event,
T. Rowe Price makes a good faith determination of the anticipated
research and non-research use of the product or service and
allocates brokerage only with respect to the research component.
Commissions to Brokers who Furnish Research Services
Certain brokers who provide quality execution services also
furnish research services to T. Rowe Price. In order to be
assured of continuing to receive research services considered of
value to its clients, T. Rowe Price has adopted a brokerage
allocation policy embodying the concepts of Section 28(e) of the
Securities Exchange Act of 1934, which permits an investment
adviser to cause an account to pay commission rates in excess of
PAGE 37
those another broker or dealer would have charged for effecting
the same transaction, if the adviser determines in good faith
that the commission paid is reasonable in relation to the value
of the brokerage and research services provided. The
determination may be viewed in terms of either the particular
transaction involved or the overall responsibilities of the
adviser with respect to the accounts over which it exercises
investment discretion. Accordingly, while T. Rowe Price cannot
readily determine the extent to which commission rates or net
prices charged by broker-dealers reflect the value of their
research services, T. Rowe Price would expect to assess the
reasonableness of commissions in light of the total brokerage and
research services provided by each particular broker.
Internal Allocation Procedures
T. Rowe Price has a policy of not precommitting a specific
amount of business to any broker or dealer over any specific time
period. Historically, the majority of brokerage placement has
been determined by the needs of a specific transaction such as
market-making, availability of a buyer or seller of a particular
security, or specialized execution skills. However, T. Rowe
Price does have an internal brokerage allocation procedure for
that portion of its discretionary client brokerage business where
special needs do not exist, or where the business may be
allocated among several brokers which are able to meet the needs
of the transaction.
Each year, T. Rowe Price assesses the contribution of the
brokerage and research services provided by brokers, and attempts
to allocate a portion of its brokerage business in response to
these assessments. Research analysts, counselors, various
investment committees, and the Trading Department each seek to
evaluate the brokerage and research services they receive from
brokers and make judgments as to the level of business which
would recognize such services. In addition, brokers sometimes
suggest a level of business they would like to receive in return
for the various brokerage and research services they provide.
Actual brokerage received by any firm may be less than the
suggested allocations but can, and often does, exceed the
suggestions, because the total brokerage business is allocated on
the basis of all the considerations described above. In no case
is a broker excluded from receiving business from T. Rowe Price
because it has not been identified as providing research
services.
PAGE 38
Miscellaneous
T. Rowe Price's brokerage allocation policy is consistently
applied to all its fully discretionary accounts, which represent
a substantial majority of all assets under management. Research
services furnished by brokers through which T. Rowe Price effects
securities transactions may be used in servicing all accounts
(including non-Fund accounts) managed by T. Rowe Price.
Conversely, research services received from brokers which execute
transactions for the Fund are not necessarily used by T. Rowe
Price exclusively in connection with the management of the Fund.
From time to time, orders for clients may be placed through
a computerized transaction network.
The Fund does not allocate business to any broker-dealer on
the basis of its sales of the Fund's shares. However, this does
not mean that broker-dealers who purchase Fund shares for their
clients will not receive business from the Fund.
Some of T. Rowe Price's other clients have investment
objectives and programs similar to those of the Fund. T. Rowe
Price may occasionally make recommendations to other clients
which result in their purchasing or selling securities
simultaneously with the Fund. As a result, the demand for
securities being purchased or the supply of securities being sold
may increase, and this could have an adverse effect on the price
of those securities. It is T. Rowe Price's policy not to favor
one client over another in making recommendations or in placing
orders. T. Rowe Price frequently follows the practice of
grouping orders of various clients for execution which generally
results in lower commission rates being attained. In certain
cases, where the aggregate order is executed in a series of
transactions at various prices on a given day, each participating
client's proportionate share of such order reflects the average
price paid or received with respect to the total order. T. Rowe
Price has established a general investment policy that it will
ordinarily not make additional purchases of a common stock of a
company for its clients (including the Price Funds) if, as a
result of such purchases, 10% or more of the outstanding common
stock of such company would be held by its clients in the
aggregate.
To the extent possible, T. Rowe Price intends to recapture
solicitation fees paid in connection with tender offers through
T. Rowe Price Investment Services, Inc., the Fund's distributor.
PAGE 39
At the present time, T. Rowe Price does not recapture commissions
or underwriting discounts or selling group concessions in
connection with taxable securities acquired in underwritten
offerings. T. Rowe Price does, however, attempt to negotiate
elimination of all or a portion of the selling-group concession
or underwriting discount when purchasing tax-exempt municipal
securities on behalf of its clients in underwritten offerings.
Balanced Fund Only
Transactions with Related Brokers and Dealers
As provided in the Investment Management Agreement between
the Fund and T. Rowe Price, T. Rowe Price is responsible not only
for making decisions with respect to the purchase and sale of the
Fund's portfolio securities, but also for implementing these
decisions, including the negotiation of commissions and the
allocation of portfolio brokerage and principal business. It is
expected that T. Rowe Price may place orders for the Fund's
portfolio transactions with broker-dealers through the same
trading desk T. Rowe Price uses for portfolio transactions in
domestic securities. The trading desk accesses brokers and
dealers in various markets in which the Fund's foreign securities
are located. These brokers and dealers may include certain
affiliates of Robert Fleming Holdings Limited ("Robert Fleming
Holdings") and Jardine Fleming Group Limited ("JFG"), persons
indirectly related to T. Rowe Price. Robert Fleming Holdings,
through Copthall Overseas Limited, a wholly-owned subsidiary,
owns 25% of the common stock of Rowe Price-Fleming International,
Inc. ("RPFI"), an investment adviser registered under the
Investment Advisers Act of 1940. Fifty percent of the common
stock of RPFI is owned by TRP Finance, Inc., a wholly-owned
subsidiary of T. Rowe Price, and the remaining 25% is owned by
Jardine Fleming Holdings Limited, a subsidiary of JFG. JFG is
50% owned by Robert Fleming Holdings and 50% owned by Jardine
Matheson Holdings Limited. Orders for the Fund's portfolio
transactions placed with affiliates of Robert Fleming Holdings
and JFG will result in commissions being received by such
affiliates.
The Board of Directors of the Fund has authorized T. Rowe
Price to utilize certain affiliates of Robert Fleming and JFG in
the capacity of broker in connection with the execution of the
Fund's portfolio transactions. These affiliates include, but are
not limited to, Jardine Fleming Securities Limited ("JFS"), a
wholly-owned subsidiary of JFG, Robert Fleming & Co. Limited
("RF&Co."), Jardine Fleming Australia Securities Limited, and
PAGE 40
Robert Fleming, Inc. (a New York brokerage firm). Other
affiliates of Robert Fleming Holding and JFG also may be used.
Although it does not believe that the Fund's use of these brokers
would be subject to Section 17(e) of the Investment Company Act
of 1940, the Board of Directors of the Fund has agreed that the
procedures set forth in Rule 17e-1 under that Act will be
followed when using such brokers.
During the year ended December 31, 1993, the Fund paid
Robert Fleming, Inc., (a New York brokerage firm) $10,000, in
total brokerage commissions (including discounts received in
connection with underwritings) in connection with the Fund's
portfolio transactions. The brokerage commissions paid to Robert
Fleming, Inc. represented 11%, of the Fund's aggregate brokerage
commissions paid during 1993. The aggregate dollar amount of
transactions effected through Robert Fleming, Inc. involving the
payment of commissions (including discounts received in
connection with underwritings) represented 2%, of the aggregate
dollar amount of all transactions involving the payment of
commissions during 1993. In accordance with the written
procedures adopted pursuant to Rule 17e-1, the independent
directors of the Fund reviewed the Fund's 1993 transactions with
affiliated brokers and determined that such transactions resulted
in an economic advantage to the Fund either in the form of lower
execution costs or otherwise.
Other
Shown below are the approximate total brokerage commissions,
including the discounts received by securities dealers in
connection with underwritings, paid by the Balanced and Equity
Index Funds for the last three years:
1993 1992 1991
____ ____ ____
Balanced Fund $92,000 $162,000 $122,000
Equity Index Fund $21,000 $39,000 $10,000
The approximate percentage of these commissions paid to
firms which provided research, statistical, or other services to
T. Rowe Price in connection with the management of each Fund, or
in some cases, to each Fund, for the last three years, are shown
in the following chart.
PAGE 41
1993 1992 1991
____ ____ ____
Balanced Fund 46% 65% 20%
Equity Index Fund 9% 3% *
The portfolio turnover rate for each Fund for each of the
last three years has been as follows:
1993 1992 1991
____ ____ ____
Balanced Fund 8.7% 63.1% 10.3%
Equity Index Fund 0.8% 0.1% 5.8%
OTHER BUSINESS
The management of each Fund knows of no other business which
may come before the meeting. However, if any additional matters
are properly presented at the meeting, it is intended that the
persons named in the enclosed proxy, or their substitutes, will
vote such proxy in accordance with their judgment on such
matters.
GENERAL INFORMATION
As of December 31, 1993, there were 28,362,315 and 12,
387,013 shares of the capital stock of the Balanced and Equity
Index Funds, respectively, outstanding, each with a par value of
$.01. Of those shares, approximately _____________ and
_____________, representing ______% and ________%, respectively,
of the outstanding stock, were registered to the T. Rowe Price
Trust Company as Trustee for participants in the T. Rowe Price
Funds Retirement Plan for Self-Employed (Keogh), as Trustee for
participants in T. Rowe Price Funds 401(k) plans, as Custodian
for participants in the T. Rowe Price Funds Individual Retirement
Account (IRA), as Custodian for participants in various 403(b)(7)
plans, and as Custodian for various Profit Sharing and Money
Purchase plans. The T. Rowe Price Trust Company has no
beneficial interest in such accounts, nor in any other account
for which it may serve as trustee or custodian.
As of December 31, 1993, approximately __________ and
___________ shares of the Balanced and Equity Index Funds,
representing approximately ___% and ___%, respectively, of the
PAGE 42
outstanding stock, were owned by various private counsel clients
of T. Rowe Price, as to which T. Rowe Price has discretionary
authority. Accordingly, such shares are deemed to be owned
beneficially by T. Rowe Price only for the limited purpose as
that term is defined in Rule 13d-3 under the Securities Exchange
Act of 1934. T. Rowe Price disclaims actual beneficial ownership
of such shares. In addition, as of December 31, 1993, a wholly-
owned subsidiary of T. Rowe Price owned directly 169,698 and
241,736 shares of the Balanced and Equity Index Funds,
respectively, representing approximately ___% and ____%,
respectively, of the outstanding stock.
As of December 31, 1993, the officers and directors of the
Balanced Fund, as a group, beneficially owned, directly or
indirectly, _______ shares, representing approximately ____% of
the Fund's outstanding stock. The ownership of the officers and
directors reflects their proportionate interests, if any, in
___________ shares of the Fund which are owned by a wholly-owned
subsidiary of the Fund's investment manager, T. Rowe Price, and
their interests in __________ shares owned by the T. Rowe Price
Associates, Inc. Profit Sharing Trust.
As of December 31, 1993, the officers and directors of the
Equity Index Fund, as a group, beneficially owned, directly or
indirectly, _______ shares, representing approximately ____% of
the Fund's outstanding stock. The ownership of the officers and
directors reflects their proportionate interests, if any, in
___________ shares of the Fund which are owned by a wholly-owned
subsidiary of the Fund's investment manager, T. Rowe Price, and
their interests in __________ shares owned by the T. Rowe Price
Associates, Inc. Profit Sharing Trust.
A copy of the Annual Report of each Fund for the year ended
December 31, 1993, including financial statements, has been
mailed to shareholders of record at the close of business on that
date and to persons who became shareholders of record between
that time and the close of business on February 18, 1994, the
record date for the determination of the shareholders who are
entitled to be notified of and to vote at the meeting.
ANNUAL MEETINGS
Under Maryland General Corporation Law, any corporation
registered under the Investment Company Act of 1940 ("the Act")
is not required to hold an annual meeting in any year in which
the Act does not require action by shareholders on the election
PAGE 43
of directors. The Board of Directors of the Fund has determined
that in order to avoid the significant expense associated with
holding annual meetings, including legal, accounting, printing
and mailing fees incurred in preparing proxy materials, each Fund
will take advantage of these Maryland law provisions.
Accordingly, no annual meetings shall be held in any year in
which a meeting is not otherwise required to be held by the Act
for the election of Directors unless the Board of Directors
otherwise determines that there should be an annual meeting.
However, special meetings will be held in accordance with
applicable law or when otherwise determined by the Board of
Directors. Each Fund's By-Laws reflect this policy.
SHAREHOLDER PROPOSALS
If a shareholder wishes to present a proposal to be included
in the Proxy Statement for the next Annual Meeting, and if such
Annual Meeting is held in April, 1995, such proposal must be
submitted in writing and received by the Corporation's Secretary
at its Baltimore office prior to November 10, 1994.
FINANCIAL STATEMENT OF INVESTMENT MANAGER
The audited consolidated balance sheet of T. Rowe Price
which follows is required by the Investment Company Act of 1940,
and should not be confused with, or mistaken for, the financial
statements of T. Rowe Price Balanced Fund, Inc., which are set
forth in the Annual Report for each Fund.
PAGE 44
REPORT OF INDEPENDENT ACCOUNTANTS
_________________________________
To the Stockholders and Board of Directors
of T. Rowe Price Associates, Inc.
In our opinion, the accompanying consolidated balance sheet
presents fairly, in all material respects, the financial position
of T. Rowe Price Associates, Inc. and its subsidiaries at
December 31, 1993 in conformity with generally accepted
accounting principles. This financial statement is the
responsibility of the Company's management; our responsibility is
to express an opinion on this financial statement based on our
audit. We conducted our audit in accordance with generally
accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Baltimore, Maryland
January 25, 1994
PAGE 45
T. ROWE PRICE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
(in thousands)
ASSETS
Cash and cash equivalents $ 46,218
Accounts receivable 43,102
Investments in sponsored mutual funds
Short-term bond and money market mutual funds
held as trading securities 27,647
Other funds held as available-for-sale securities 69,423
Partnership and other investments 19,606
Property and equipment 39,828
Goodwill and deferred expenses 9,773
Other assets 7,803
________
$263,400
________
________
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 15,111
Accrued retirement and other compensation costs 19,844
Income taxes payable 5,097
Dividends payable 3,784
Debt 12,915
Deferred revenues 1,548
Minority interests in consolidated subsidiaries 9,148
________
Total liabilities 67,447
________
Commitments and contingent liabilities
Stockholders' equity
Common stock, $.20 par value - authorized 48,000,000
shares; issued and outstanding 29,095,039 shares 5,819
Capital in excess of par value 1,197
Unrealized security holding gains 5,345
Retained earnings 183,592
________
Total stockholders' equity 195,953
________
$263,400
________
________
PAGE 46
The accompanying notes are an integral part of the consolidated
balance sheet.
T. ROWE PRICE ASSOCIATES, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Associates, Inc. and its consolidated subsidiaries
(the "Company") provide investment advisory and administrative
services to sponsored mutual funds and investment products, and
to private accounts of other institutional and individual
investors.
Basis of preparation
The Company's financial statements are prepared in accordance
with generally accepted accounting principles.
Principles of consolidation
The consolidated financial statements include the accounts of all
majority owned subsidiaries and, by virtue of the Company's
controlling interest, its 50%-owned subsidiary, Rowe Price-
Fleming International, Inc. ("RPFI"). All material intercompany
accounts are eliminated in consolidation.
Cash equivalents
For purposes of financial statement disclosure, cash equivalents
consist of all short-term, highly liquid investments including
certain money market mutual funds and all overnight commercial
paper investments. The cost of these investments is equivalent
to fair value.
Investments in sponsored mutual funds
The Company has historically accounted for its investments in
stock and bond mutual funds at the lower of aggregate cost or
market. On December 31, 1993, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," which
requires the Company to state its mutual fund investments at fair
value and to classify these holdings as either trading (held for
only a short period of time) or available-for-sale securities.
PAGE 47
Unrealized holding gains on available-for-sale securities at
December 31, 1993 are reported net of income tax effects in a
separate component of stockholders' equity.
Concentration of credit risk
Financial instruments which potentially expose the Company to
concentrations of credit risk as defined by SFAS No. 105 consist
primarily of investments in sponsored money market and bond
mutual funds and accounts receivable. Credit risk is believed to
be minimal in that counterparties to these financial instruments
have substantial assets including the diversified portfolios
under management by the Company which aggregate $54.4 billion at
December 31, 1993.
PAGE 48
T. ROWE PRICE ASSOCIATES, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Partnership and other investments
The Company invests in various partnerships and ventures
including those sponsored by the Company. These investments
which hold equity securities, venture capital investments, debt
securities and real estate are stated at cost adjusted for the
Company's share of the earnings or losses of the investees
subsequent to the date of investment. Because the majority of
these entities carry their investments at fair value and include
unrealized gains and losses in their reported earnings, the
Company's carrying value for these investments approximates fair
value.
Property and equipment
Property and equipment is stated at cost net of accumulated
depreciation and amortization computed using the straight-line
method. Provisions for depreciation and amortization are based
on the following estimated useful lives: computer and
communications equipment and furniture and other equipment, 3 to
7 years; building, 40 years; leased land, the 50-year lease term;
and leasehold improvements, the shorter of their useful lives or
the remainder of the lease term.
PAGE 49
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET
NOTE 1 - INVESTMENTS IN SPONSORED MUTUAL FUNDS
Investments in sponsored money market mutual funds, which are
classified as cash equivalents in the accompanying consolidated
financial statements, aggregate $45,272,000 at December 31, 1993.
The Company's investments in sponsored mutual funds held as
available-for-sale at December 31, 1993 (in thousands) include:
Gross
unrealized Aggregate
Aggregate holding fair
cost gains value
________ _________ _________
Stock funds $ 34,990 $ 7,025 $ 42,015
Bond funds 26,190 1,218 27,408
________ _______ _________
Total $ 61,180 $ 8,243 $ 69,423
________ _______ _________
________ _______ _________
The Company provides investment advisory and administrative
services to the T. Rowe Price family of mutual funds which had
aggregate assets under management at December 31, 1993 of $34.7
billion. All services rendered by the Company are provided under
contracts that set forth the services to be provided and the fees
to be charged. These contracts are subject to periodic review
and approval by each of the funds' boards of directors and, with
respect to investment advisory contracts, also by the funds'
shareholders. Services rendered to the funds accounted for 71%
of 1993 revenues.
Accounts receivable from the sponsored mutual funds aggregated
$21,741,000 at December 31, 1993.
PAGE 50
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1993 (in thousands)
consists of:
Computer and communications equipment $ 31,431
Building and leased land 19,756
Furniture and other equipment 13,889
Leasehold improvements 4,691
_________
69,767
Accumulated depreciation and amortization (29,939)
_________
$ 39,828
_________
_________
PAGE 51
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (Continued)
NOTE 3 - GOODWILL AND DEFERRED EXPENSES
On September 2, 1992, the Company acquired an investment
management subsidiary of USF&G Corporation and combined six USF&G
mutual funds with aggregate net assets of $.5 billion into the T.
Rowe Price family of funds. The total transaction cost which has
been recognized using the purchase method of accounting was
approximately $11,024,000, including goodwill of $8,139,000 which
is being amortized over 11 years using the straight-line method.
Prepaid non-compete and transition services agreements totaling
$2,500,000 are being amortized over their three-year life.
Accumulated amortization at December 31, 1993 aggregates
$2,216,000.
Goodwill of $1,980,000 from an earlier corporate acquisition is
being amortized over 40 years using the straight-line method.
Accumulated amortization was $1,039,000 at December 31, 1993.
NOTE 4 - DEBT
In June 1991, the Company completed the long-term financing
arrangements for its administrative services facility. Terms of
the $13,500,000 secured promissory note with Confederation Life
Insurance Company include an interest rate of 9.77%, monthly
principal and interest payments totaling $128,000 for 10 years,
and a final principal payment of $9,845,000 in 2001. A
prepayment option is available under the terms of the note;
however, the payment of a substantial premium would have been
required to retire the debt at December 31, 1993. Related debt
issuance costs of $436,000 are included in deferred expenses and
are being amortized over the life of the loan to produce an
effective annual interest rate of 10.14%.
The outstanding principal balance for this note was $12,904,000
at December 31, 1993. A fair value of $16,030,000 was estimated
based on the cost of risk-free assets that could be acquired to
extinguish the obligation at December 31, 1993.
A maximum of $20,000,000 is available to the Company under unused
bank lines of credit at December 31, 1993.
PAGE 52
NOTE 5 - INCOME TAXES
Deferred income taxes arise from differences between taxable
income for financial statement and income tax return purposes and
are calculated using the liability method prescribed by SFAS No.
109, "Accounting for Income Taxes."
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (Continued)
The net deferred tax liability of $2,596,000 included in income
taxes payable at December 31, 1993 consists of total deferred tax
liabilities of $5,609,000 and total deferred tax assets of
$3,013,000. Deferred tax liabilities include $2,898,000 arising
from unrealized holding gains on available-for-sale securities,
$1,353,000 arising from unrealized capital gains allocated from
the Company's partnership investments, and $677,000 from
differences in the recognition of depreciation expense. Deferred
tax assets include $1,100,000 from differences in the recognition
of the costs of the defined benefit retirement plan and
postretirement benefits.
NOTE 6 - COMMON STOCK AND EMPLOYEE STOCK INCENTIVE PLANS
Shares Authorized
At December 31, 1993, the Company had reserved 8,151,315 shares
of its unissued common stock for issuance upon the exercise of
stock options and 420,000 shares for issuance under an employee
stock purchase plan.
Share Repurchases
The Company's board of directors has authorized the future
repurchase of up to 1,432,000 common shares at December 31, 1993.
Executive Stock
At December 31, 1993, there were outstanding 1,226,540 shares of
common stock ("Executive Stock") which were sold to certain
officers of the Company in 1982 at a discount. These shares are
subject to restrictions which require payment of the discount of
PAGE 53
$.32 per share to the Company at the earlier of the sale of such
stock or termination of employment.
PAGE 54
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (Continued)
Stock Incentive Plans
The following table summarizes the status of noncompensatory
stock options granted at market value to certain officers and
directors of the Company.
Options
Unexer- Options Unexer- Exer-
cised Options Granted cised cisable
Options Exer- (Canceled) Options at
Year at Decem- cised During Decem- Decem- Exer-
of ber 31, During ber 31, ber 31, ber 31, cise
Grant 1992 1993 1993 1993 1993 Price
____ ________ ________ ________ ________ ________ ______
1983-4 53,000 (30,600) -- 22,400 22,400 $.67 &
$.75
1987 309,410 (68,064) -- 241,346 241,346 $5.38 &
$9.38
1988 359,000 (66,586) -- 292,414 292,414 $7.94
1989 632,280 (46,288) (5,600) 580,392 312,404 $11.38
1990 681,500 (83,387) (11,800) 586,313 141,313 $7.19 &
$8.50
1991 811,450 (37,000) (14,000) 760,450 283,450 $17.00
1992 926,000 (11,600) (27,400) 887,000 168,600 $18.75
1993 -- -- 1,154,000 1,154,000 -- $28.13
_________ ________ _________ _________ _________
3,772,640 (343,525) 1,095,200 4,524,315 1,461,927
_________ ________ _________ _________ _________
_________ ________ _________ _________ _________
The right to exercise stock options generally vests over the
five-year period following the grant. After the tenth year
following the grant, the right to exercise the related stock
options lapses and the options are canceled.
NOTE 7 - EMPLOYEE RETIREMENT PLANS
The Company sponsors two defined contribution retirement plans:
a profit-sharing plan based on participant compensation and a
401(k) plan.
The Company also has a defined benefit plan covering those
employees whose annual base salaries do not exceed a specified
PAGE 55
salary limit. Participant benefits are based on the final
month's base pay and years of service subsequent to January 1,
1987. The Company's funding policy is to contribute annually the
maximum amount that can be deducted for federal income tax
purposes. The following table sets forth the plan's funded
status and the amounts recognized in the Company's consolidated
balance sheet (in thousands) at December 31, 1993.
PAGE 56
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (Continued)
Actuarial present value of
Accumulated benefit obligation for service rendered
Vested $ 780
Non-vested 1,362
______
Total 2,142
Obligation attributable to estimated future compensation
increases 2,594
______
Projected benefit obligation 4,736
Plan assets held in sponsored mutual funds, at fair value 2,594
______
Projected benefit obligation in excess of plan assets 2,142
Unrecognized loss from decreases in discount rate 407
______
Accrued retirement costs $1,735
______
______
Discount rate used in determining actuarial present
values 6.40%
______
______
NOTE 8 - COMMITMENTS AND CONTINGENT LIABILITIES
The Company is a minority partner in the joint venture which owns
the land and building in which the Company leases its corporate
offices. Future minimum rental payments under the Company's
lease agreement are $3,110,000 in 1994 and 1995, $3,220,000 in
1996, $3,769,000 in 1997 and 1998, and $33,755,000 in 1999
through 2006. Other assets at December 31, 1992 includes a
receivable from the venture of $3,485,000 for leasehold
improvements made by the Company and reimbursed by the venture in
1993.
The Company leases office facilities and equipment under other
noncancelable operating leases. Future minimum rental payments
under these leases aggregate $4,621,000 in 1994, $4,123,000 in
1995, $1,776,000 in 1996, $1,259,000 in 1997, $696,000 in 1998,
and $4,806,000 in later years.
At December 31, 1993, the Company had outstanding commitments to
invest an additional $6,757,000 in various investment
partnerships and ventures.
PAGE 57
The Company has contingent obligations at December 31, 1993 under
a $500,000 direct pay letter of credit expiring not later than
1999 and a $780,000 standby letter of credit which is renewable
annually.
PAGE 58
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (Continued)
Consolidated stockholders' equity at December 31, 1993 includes
$32,635,000 which is restricted as to use under various
regulations and agreements to which the Company and its
subsidiaries are subject in the ordinary course of business.
From time to time, the Company is a party to various employment-
related claims, including claims of discrimination, before
federal, state and local administrative agencies and courts. The
Company vigorously defends itself against these claims. In the
opinion of management, after consultation with counsel, it is
unlikely that any adverse determination in one or more pending
employment-related claims would have a material adverse effect on
the Company's financial position.
[/TEXT]
[/DOCUMENT]
</DOCUMENT
PAGE 4
T. ROWE PRICE (LOGO) PROXY
_______________________________________________________________
INSTRUCTIONS:
1. Cast your vote by checking the appropriate boxes on the
reverse side. If you do not check a box, your vote will be
cast FOR that proposal.
2. Sign and date the card below.
3. Please return the signed card promptly using the enclosed
postage paid envelope, even if you will be attending the
meeting.
4. Please do not enclose checks or any other correspondence.
Please fold and detach card at perforation before mailing.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
T. ROWE PRICE INDEX TRUST, INC.
MEETING: 9:30 A.M. EASTERN TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James S. Riepe and M. David
Testa, as proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote, as
designated below, all shares of stock of the Fund, which the
undersigned is entitled to vote at the Annual Meeting of
Shareholders to be held on Wednesday, April 20, 1994, at the time
indicated above, at the offices of the Fund, 100 East Pratt
Street, Baltimore, Maryland 21202, and at any and all
adjournments thereof, with respect to the matters set forth below
and described in the Notice of Annual Meeting and Proxy Statement
dated March ___, 1994, receipt of which is hereby acknowledged.
Please sign exactly as name
appears. Only authorized officers
should sign for corporations. For
information as to the voting of
stock registered in more than one
name, see page ___ of the Notice of
Annual Meeting and Proxy Statement.
Dated: __________________, 1994
___________________________________
___________________________________
Signature(s)
CUSIP#779552108/fund#050
(Front)
PAGE 5
T. ROWE PRICE (LOGO) WE NEED YOUR PROXY VOTE BEFORE APRIL 20,
1994
_________________________________________________________________
Please refer to the Proxy Statement discussion of each of these
matters.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE SHAREHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR ALL PROPOSALS.
Please fold and detach card at perforation before mailing.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
1. Election of FOR all nominees / /WITHHOLD AUTHORITY / /1.
directors. listed below (except to vote for all
as marked to the nominees listed below
contrary)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL
NOMINEE STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW.)
Leo C. Bailey Donald W. Dick, Jr. David K. Fagin
Addison Lanier John K. Major Hanne M. Merriman James S. Riepe
M. David Testa Hubert D. Vos Paul M. Wythes
2. Approve changes to the Fund's fundamental policies.
FOR each policy / / ABSTAIN / / 2.
listed below (except as
marked to the contrary)
PLEASE CHECK THE BOX FOR any policy change you do NOT
(underscored) wish to approve:
/ / / / / / / / / / / /
A B C D E F
3. Ratify the selection of Coopers & Lybrand as independent
accountants. FOR / / AGAINST / / ABSTAIN / / 3.
4. I authorize the Proxies, in their discretion, to vote upon
such other business as may properly come before the meeting.
CUSIP#779552108/fund#050
(BACK)