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August 26, 2013

T. Rowe Price bans about 1,300 American employees from trading in 401(k) plans

Investment firm T. Rowe Price has banned about 1,300 American Airlines employees from trading in their 401(k) retirement plans that are managed by the firm.

According to an article by Reuters, the move was made to curb trading practices of a group of employees that had subscribed to a newsletter that gave investment advice.

"The ban, confirmed by the airline and the fund company in response to a Reuters inquiry, follows a period of several years in which T. Rowe Price imposed a series of temporary trading restrictions on some subscribers to the EZTracker LLC newsletter for American Airlines employees.

"The newsletter suggests monthly mutual fund trades to more than 2,000 subscribers who invest in the company's defined contribution plan known as $uper $aver 401(k). The plan has more than 80,000 participants," the article says.

One employee sent Sky Talk a copy of the letter he received from T. Rowe Price which advises the employee of permanent restrictions being placed on his account.

"The trading activity in your account relates specifically to the recent purchase and redemption of the T. Rowe Price High Yield Fund. The collective impact of similar trading activity by Plan participants is disruptive to the management of the Fund and could negatively impact other Fund shareholders," the letter said.

Keep reading for more of the letter from T. Rowe Price.

-Andrea Ahles

Dear Participant:

You are receiving this letter because T. Rowe Price has identified certain trading activity in your American Airlines $uper $aver - 401(k) Plan (the "Plan") account as being disruptive to some of the T. Rowe Price Funds in your Plan (namely T. Rowe Price Mid-Cap Growth Fund, T. Rowe Price New Horizons Fund, T. Rowe Price Science & Technology Fund, and/or T. Row Price High Yield Fund (collectively, the "Price Funds" or "Funds")). The trading activity in your account relates specifically to the recent purchase and redemption of the T. Rowe Price High Yield Fund. The collective impact of similar trading activity by Plan participants is disruptive to the management of the Fund and could negatively impact other Fund shareholders. As steward of the Price Funds, T. Rowe Price has a fiduciary obligation to protect the interests of all shareholders in the Funds.

We have previously advised you that permanent restrictions would be placed on your account if future trades in the Price Funds are deemed disruptive to the management of the Fund. The recent purchase and redemption in the T. Rowe Price High Yield Fund have been identified as such. Therefore, as explained in previous communications, you have been restricted permanently from exchanging or transferring shares into any of the Price Funds in your Plan. These restrictions will not prevent you from making Plan contributions into the Price Funds or from exchanging out of the Price Funds to non-T. Rowe Price Funds.

As you may know, the Price Funds' prospectuses allow the Funds, in their sole discretion, to refuse to accept any purchase or exchange order. In addition, the Price Fund's prospectus provides that:

"A fund may, in its discretion, reject any purchase or exchange from a shareholder whose trading activity could dilute the value of the fund's shares, including trading by shareholders acting collectively (e.g. following the advice of a newsletter). Such persons may be barred from further purchases of the T. Rowe Price funds either permanently or for a minimum of 90 days."

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