<PAGE>
Annual Report
Diversified
Small-Cap
Growth Fund
-------------------
December 31, 1998
-------------------
[ART WORK APPEARS HERE]
T. Rowe Price
<PAGE>
REPORT HIGHLIGHTS
- --------------------------------------------------------------------------------
Diversified Small-Cap Growth Fund
. The 1998 stock market was notable for its extreme volatility and the huge
divergence between large-cap stock returns and small-cap returns.
. Performance was negative for the past six months and modestly positive for
the year. Returns for both periods exceeded those of the Russell 2000
Growth Index and the Lipper average of similar funds.
. The fund's technology holdings managed a small gain in the second half, but
small stocks in all sectors lagged those of large companies.
. In the final six months, about half of earnings estimates revisions on
portfolio companies were positive, a rate exceeding that for S&P 500
companies.
. Valuations are more favorable for the portfolio than for the overall
market, and we are optimistic that performance leadership will change.
<PAGE>
Fellow Shareholders
The most notable feature of stock market returns over the past six months must
surely be the increased level of volatility. For the overall stock market, as
measured by the S&P 500, the volatility exhibited in 1998 was topped only twice
during the past 50 years. Investors in the fund were exposed to even greater
price volatility, with returns in excess of 3% (either up or down) on 17
separate days during the year.
The second most notable feature was the huge divergence between the performance
of the S&P 500 and any index of smaller companies. The S&P 500 had another
superb year, rising 28.57%, while the Russell 2000, for example, declined 2.55%.
The S&P 500's strong overall return masked significant size bias within the
index, as the smallest half of the index was flat for the year. The 50 largest
companies in the index posted returns, on average, well above 30%.
- -----------------------
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 12/31/98 6 Months 12 Months
- --------------------------------------------------------------------------------
Diversified Small-Cap
Growth Fund -2.60% 3.58%
................................................................................
Russell 2000 Growth Index -4.01 1.23
................................................................................
Lipper Small Cap Fund Index -6.86 -0.85
................................................................................
It is hard to look at the fund's 1998 performance without mixed emotions. The
fund fell early in the year but rebounded sharply in the fourth quarter to post
a small positive return for the year. This furious rally -- the fourth-best
quarter for small-cap growth stocks since 1979 -- reversed what was up to that
point a classic bear market. Compared to where we stood in October, the full
year result looks pretty good. In addition, the fund's performance was solid
relative to the appropriate benchmarks, outperforming both the Lipper Small Cap
Fund Index and the Russell 2000 Growth Index. Nevertheless, with the S&P 500 and
most large-cap indices having another banner year in 1998, it's hard not to be
disappointed with small-cap stocks yet again.
YEAR-END DISTRIBUTION
On December 15, your fund's Board of Directors declared a $0.03 per share
short-term capital gain payable to shareholders of record on that
1
<PAGE>
- -----------------------------
Preparing For The Year 2000
- --------------------------------------------------------------------------------
The Year 2000 draws closer every day, and it holds special meaning beyond the
arrival of a new millennium. The issue for investors is that many computer
programs throughout the world use two digits instead of four to identify the
year and may assume the next century starts with 1900. If these programs are not
modified, they will not be able to correctly handle the century change when the
year changes from O99O to O00O on January 1, 2000, and they will no longer be
able to perform necessary functions. The Year 2000 issue affects all companies
and organizations.
T. Rowe Price has been taking steps to assure that its computer systems and
processes are capable of functioning in the Year 2000. Detailed plans for
remediation efforts have been developed and are currently being executed.
OUR PLAN OF ACTION
We began to address these issues several years ago by requiring that all new
systems process and store four-digit years. All critical systems have been
reprogrammed (including business applications required to service our customers
and processing infrastructure necessary to ensure the integrity of customer data
and investments), and they are currently being tested. Because we exchange data
electronically with customers and vendors, we are working with them to assess
the adequacy of their own compliance efforts. Our goal is to ensure the
continuation of the same level of service to all our mutual fund shareholders
and clients after December 31, 1999.
We are asking all vendors and companies we do business with for a Year 2000
compliance status, with the expectation that some organizations will not be able
to modify their interface files prior to December 31, 1999. In addition, we are
scheduling tests for critical vendors and companies that claim Year 2000
compliance to ensure that time-related data and calculations function properly
as we move into the next century.
SMOOTH TRANSITION PLANNED
We believe our programs and initiatives will provide a smooth transition into
the next millennium. We are assessing all systems providing products or services
to our retail mutual fund shareholders, retirement plan sponsors, and
participants, and we have modified them where necessary for the Year 2000.
The Securities Industry Association (SIA) is coordinating Year 2000 testing to
assure that securities markets, clearing corporations, depositories, and third
party service providers can send, receive, and process files and transactions
accurately. In late July 1998, the SIA completed a beta test of Year 2000
readiness. The test was considered successful in terms of transactions completed
and will serve as the basis for the SIA's industry-wide approach. During October
1998, T. Rowe Price completed its beta test of Year 2000 readiness with the SIA
and is ready for the industry-wide test that is scheduled for March and April
1999.
For a more detailed discussion of our Year 2000 effort, as well as continuing
updates on our progress, please check our Web site (www.troweprice.com).
<PAGE>
date. You should already have received a check or statement reflecting this
distribution and also Form 1099-DIV reporting it for tax purposes.
MARKET ENVIRONMENT
While the second half of 1998 opened with a spurt in performance for
the S&P 500, smaller-cap issues continued a decline that began in late April.
Against this already weak backdrop, the sector was vulnerable to events
affecting the overall market, and international economic issues provided the
catalyst for a sharp decline. Russia's debt default in July followed by the
well-publicized difficulties faced by Long-Term Capital Management, a prominent
and highly leveraged hedge fund, dramatically altered investors' attitudes
toward risk.
- --------------------------------------------------------------------------------
. . . VALUATIONS OF SMALL-CAP GROWTH STOCKS RELATIVE TO
LARGE-CAPS . . . REACHED ROCK-BOTTOM LEVELS.
- --------------------------------------------------------------------------------
For the next three months, investors strongly preferred low-risk investments.
This pattern was seen across asset classes, as stocks dramatically
underperformed money market funds and similar conservative investments. Within
each major asset class the same behavior was found -- high-yield (junk) bonds
significantly lagged Treasuries, emerging market securities trailed those of
developed countries, and small-cap aggressive growth stocks underperformed even
large-cap stocks with low P/E ratios, such as telephone utilities. The bear
market in small-cap stocks led to declines of over 40% from the peak. Many
individual stocks, including some in our portfolio, fell 80% or more despite
reasonably good fundamentals.
The environment changed abruptly in early October. From October 8 through the
end of the year, small-cap growth stocks surged, with the fund rising almost
55%. It is hard to find an explanation for this reversal, except to note that
valuations of small-cap growth stocks relative to large-caps had reached
rock-bottom levels. As the quarter progressed, investors grew more comfortable
with economic conditions, especially in view of the Federal Reserve's three
interest rate cuts, and with the potential impact of foreign crises on U.S.
companies. Stock returns followed the rise in confidence.
For the entire second half, large-cap stocks were the best performers; even
within the universe of candidates we consider for the fund, larger companies
outperformed smaller ones. Another strong differentiator was earnings
variability; stocks with consistent earnings sharply outperformed those with
more cyclicality.
3
<PAGE>
PORTFOLIO REVIEW
The fund invests in small, rapidly growing companies and holds a
well-diversified portfolio with over 300 stocks. At year-end, its average market
capitalization stood at $1.1 billion, and we expect portfolio companies to
increase earnings per share at an average rate of 24% annually over the next
five years. The high-growth approach we follow means that we tend to invest in
companies with relatively high valuations, but we try to avoid the extremes and
look for consistent earnings. Some other important characteristics of our
portfolio management approach are lower-than-average turnover (39.8% for 1998)
and a philosophy of staying fully invested.
- --------------------------
Portfolio Characteristics
- --------------------------------------------------------------------------------
Diversified Small-Cap
As of 12/31/98 Growth Fund S&P 500
- --------------------------------------------------------------------------------
Market Cap (Investment-
Weighted Median) $1.1 billion $61.5 billion
................................................................................
Earnings Growth Rate
Estimated Next 5 Years * 23.5% 13.6%
................................................................................
P/E Ratio (Based on Next 12
Months' Estimated Earnings) 24.5X 25.4X
................................................................................
*Forecasts are based on T. Rowe Price research and are in no way an indication
of future investment returns.
The fund's second half return of -2.60% masked dramatic differences across
sectors. No sector performed especially well, but those we hold most heavily
were among the best. Technology stocks actually managed a small gain, led by
stocks such as Cybex Computer Products, a PC connectivity specialist, and Symbol
Technologies, which manufacturers bar code scanning equipment. Media and
telecommunications stocks, such as satellite manufacturer Comsat and the
diversified information services company Media General, were also good
performers. Another bright spot in the portfolio was retailing, where our
holdings in Office Depot and CDW Computer Centers advanced sharply. Double-digit
losses were suffered in financial stocks, consumer durables and cyclicals,
capital equipment, and especially in natural resource-related stocks. A common
thread across the worst-performing sectors was an increased sensitivity to
overall economic growth; conversely, the best sectors were those that did not
depend on the overall economy to generate good results.
Internet-related stocks produced astounding gains, often in spectacularly brief
periods. IPOs such as Theglobe.com and Earthweb rose by
4
<PAGE>
more than 300% on their first day of trading. More "established" Internet stocks
such as eBay or Amazon.com produced staggering returns in the fourth quarter,
and even a relatively disappointing stock such as Yahoo! was up 83%. While the
fund has some exposure to the Internet -- some pure plays such as E*TRADE, an
on-line brokerage firm, and many other companies with signficant Web strategies
- -- for the most part we have declined to invest in the more speculative or
outrageously valued companies.
- --------------------------------------------------------------------------------
CASH FLOW INTO AGGRESSIVE GROWTH FUNDS TURNED POSITIVE IN NOVEMBER, ALTHOUGH FOR
THE YEAR IT WAS DOWN SHARPLY FROM 1997.
- --------------------------------------------------------------------------------
There are many examples of stocks doubling (or more) in one day after announcing
Internet-related ventures, and this seems a clear case of speculative fever.
Without a doubt the Internet will affect commerce, but investors are acting as
if every company will be the next Microsoft.
We monitor how analysts revise their earnings estimates on portfolio companies
and use this as a quick way to judge the fundamental performance of our stocks.
In the second half, about 48% of the revisions were positive (meaning that
analysts raised their estimates), although the number declined as the year
progressed. This was about 10% higher than the rate of positive increases for
the S&P 500.
Supply and demand for aggressive investments is an important determinant of
performance. Investor sentiment toward the small-cap sector remains poor,
although good fourth quarter performance seems to have prodded some investors
into action. Cash flow into aggressive growth funds turned positive in November,
although for the year it was down sharply from 1997. This is important for the
fund's performance, because it is difficult for this sector to do well without
an accompanying inflow of cash from investors.
OUTLOOK
Each quarter in 1998 had a dramatically different personality, and stock
performance shifted direction abruptly several times during the year. Last year
was a "poster child" for the difficulties of market timing. For example, from
the trough on October 8 through the end of the year, the fund rose more than
55%. Given the poor performance earlier in the year and the dismal environment
in early October, it
5
<PAGE>
would have been understandable for a market timing investor to reduce exposure
to the sector. Of course, this would have been a serious mistake.
Although we cannot predict when the markets will turn around, we can observe
that valuations as well as fundamental trends seem to be more favorable for the
companies in the fund than the overall market. Small-cap stocks have typically
exhibited relative performance cycles of five to seven years, and we just
concluded the fifth year of the current cycle.
Respectfully submitted,
/s/ Richard T. Whitney
Richard T. Whitney
President and Chairman of the Investment Advisory Committee
January 21, 1999
6
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Portfolio Highlights
- --------------------------------------------------------------------------------
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
12/31/98
- --------------------------------------------------------------------------------
Citrix Systems 0.8%
................................................................................
Concord EFS 0.8
................................................................................
Serologicals 0.8
................................................................................
Symbol Technologies 0.8
................................................................................
HBO 0.7
- --------------------------------------------------------------------------------
Insight Enterprises 0.7
................................................................................
Watson Pharmaceuticals 0.7
................................................................................
Tetra Tech 0.7
................................................................................
Lincare 0.7
................................................................................
Orbital Sciences 0.7
- --------------------------------------------------------------------------------
O'Reilly Automotive 0.6
................................................................................
NCO Group 0.6
................................................................................
E*TRADE 0.6
................................................................................
Sofamor/Danek Group 0.6
................................................................................
USWeb 0.6
- --------------------------------------------------------------------------------
Sanmina 0.6
................................................................................
Swift Transportation 0.6
................................................................................
QLogic 0.6
................................................................................
Pediatrix Medical Group 0.6
................................................................................
National Data 0.6
- --------------------------------------------------------------------------------
Proxim 0.6
................................................................................
Synopsys 0.6
................................................................................
Imax 0.6
................................................................................
Level One 0.6
................................................................................
Dollar Tree Stores 0.6
- --------------------------------------------------------------------------------
Total 16.4%
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Portfolio Highlights
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
Twenty-Five Largest Industries
Percent of Percent of
Net Assets Net Assets
6/30/98 12/31/98
- --------------------------------------------------------------------------------
Computer Service and Software 16.1% 17.5%
................................................................................
Miscellaneous Business Services 8.5 9.9
................................................................................
Media and Communications 5.2 6.6
................................................................................
Specialty Merchandisers 6.4 6.2
................................................................................
Hospital Supplies/Hospital Management 7.4 6.0
- --------------------------------------------------------------------------------
Electronic Components 3.3 5.2
................................................................................
Pharmaceuticals 2.9 4.0
................................................................................
Distribution Services 2.7 2.7
................................................................................
Entertainment and Leisure 2.1 2.6
................................................................................
Electronic Systems 2.4 2.4
- --------------------------------------------------------------------------------
Telecommunications 3.5 2.2
................................................................................
Bank and Trust 3.4 2.2
................................................................................
Health Care Services 2.1 2.2
................................................................................
Insurance 2.4 2.1
................................................................................
Aerospace and Defense 2.4 2.1
- --------------------------------------------------------------------------------
Transportation Services 2.3 2.1
................................................................................
General Merchandisers 1.9 2.0
................................................................................
Biotechnology 1.7 1.9
................................................................................
Miscellaneous Consumer Products 2.8 1.7
................................................................................
Financial Services 2.1 1.7
- --------------------------------------------------------------------------------
Automobiles and Related 1.8 1.7
................................................................................
Building and Construction 1.7 1.5
................................................................................
Specialized Computer 1.2 1.5
................................................................................
Restaurants 1.5 1.3
................................................................................
Education 1.3 1.3
- --------------------------------------------------------------------------------
Total 89.1% 90.6%
8
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
DIVERSIFIED SMALL-CAP GROWTH FUND
-----------------------------------------------------------------------------
Diversified Small-Cap
Russell 2000 Growth Lipper Small Cap Fund Growth Fund-Line
------------------- --------------------- ----------------
6/30/97 $10,000 $10,000 $10,000
12/31/97 $10,734 $10,852 $10,710
12/31/98 $10,866 $10,760 $11,094
- --------------------------------------------------------------------------------
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
Since Inception
Periods Ended 12/31/98 1 Year Inception Date
- --------------------------------------------------------------------------------
Diversified Small-Cap Growth Fund 3.58% 7.14% 6/30/97
................................................................................
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
9
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
December 31, 1998
- --------------------
Financial Highlights For a share outstanding throughout each period
- --------------------------------------------------------------------------------
Year 6/30/97
Ended Through
12/31/98 12/31/97
NET ASSET VALUE
Beginning of period $ 10.70 $ 10.00
.......................
Investment activities
Net investment income (0.09)* (0.03)*
Net realized and unrealized gain (loss) 0.46 0.74++
.......................
Total from investment activities 0.37 0.71
.......................
Distributions
Net realized gain (0.03) (0.01)
.......................
Redemption fees added to paid-in-capital 0.01 -
.......................
NET ASSET VALUE
End of period $ 11.05 $ 10.70
-----------------------
Ratios/Supplemental Data
Total return# 3.58%* 7.10%*
................................................................................
Ratio of expenses to average net assets 1.25%* 1.25%+*
................................................................................
Ratio of net investment income to average net assets (0.83)%* (0.67)%+*
................................................................................
Portfolio turnover rate 39.8% 13.4%
................................................................................
Net assets, end of period (in thousands) $ 70,444 $72,071
................................................................................
# Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions and payment of no redemption or account fees.
* Excludes expenses in excess of a 1.25% voluntary expense limitation in
effect through 12/31/98.
+ Annualized
++ The amount presented is calculated pursuant to a methodology prescribed by
the Securities and Exchange Commission for a share outstanding throughout
the period. This amount is inconsistent with the fund's aggregate gains and
losses because of the timing of sales and redemptions of the fund's shares
in relation to fluctuating market values for the investment portfolio.
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
December 31, 1998
<TABLE>
<CAPTION>
- -----------------------
Statement of Net Assets Shares Value
- -----------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Common Stocks 98.6%
FINANCIAL 6.0%
Bank and Trust 2.2%
City National 9,100 $ 379
................................................................................
Commerce Bancorp 5,906 310
................................................................................
Community First Bankshares 11,800 248
................................................................................
North Fork Bancorporation 9,500 227
................................................................................
Silicon Valley Bancshares * 14,400 245
................................................................................
Webster Financial 5,600 154
................................................................................
1,563
.............
Insurance 2.1%
Amerin * 9,000 220
................................................................................
CMAC Investment 4,800 221
................................................................................
E.W. Blanch 5,200 247
................................................................................
Executive Risk 4,200 231
................................................................................
Protective Life 8,800 350
................................................................................
Triad Guaranty * 8,500 188
................................................................................
1,457
.............
Financial Services 1.7%
AmeriCredit * 22,000 304
................................................................................
HealthCare Financial Partners * 5,800 231
................................................................................
Imperial Credit Industries * 8,500 71
................................................................................
Legg Mason 9,332 295
................................................................................
Waddell & Reed Financial (Class A) 13,100 310
................................................................................
1,211
.............
Total Financial 4,231
.............
UTILITIES 0.8%
Telephone 0.8%
Comverse Technology * 5,500 390
................................................................................
Intervoice * 5,800 200
................................................................................
Total Utilities 590
.............
</TABLE>
11
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
CONSUMER NONDURABLES 16.4%
Food Processing 0.9%
Earthgrains 5,400 $ 167
................................................................................
Smithfield Foods * 9,900 335
................................................................................
Twinlab * 8,600 113
................................................................................
615
............
Hospital Supplies/Hospital Management 5.8%
ADAC Laboratories * 10,900 218
................................................................................
American Oncology Resources * 9,100 133
................................................................................
Dentsply International 6,600 169
................................................................................
First Health Group * 10,200 169
................................................................................
Lincare * 11,400 462
................................................................................
Mentor 13,800 323
................................................................................
Omnicare 7,900 274
................................................................................
Patterson Dental * 4,950 215
................................................................................
Pediatrix Medical Group * 6,900 414
................................................................................
PSS World Medical * 10,275 236
................................................................................
Quorum Health Group * 5,300 68
................................................................................
Renal Care Group * 8,100 235
................................................................................
Respironics * 13,893 280
................................................................................
Steris * 9,700 276
................................................................................
Universal Health Services * 5,100 264
................................................................................
Veterinary Centers of America * 4,100 82
................................................................................
VI Technologies * 5,000 51
................................................................................
VISX * 2,500 219
................................................................................
4,088
............
Pharmaceuticals 3.9%
Barr Laboratories * 4,700 226
................................................................................
Biogen * 2,400 199
................................................................................
Duane Reade * 7,500 289
................................................................................
Express Scripts (Class A) * 4,000 267
................................................................................
IDEXX Laboratories * 3,000 81
................................................................................
Jones Pharma 7,100 259
................................................................................
K-V Pharmaceutical (Class A) * 300 6
................................................................................
Parexel International * 9,000 224
................................................................................
Sofamor/Danek Group * 3,600 438
................................................................................
12
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
Theragenics * 16,600 $ 279
................................................................................
Watson Pharmaceuticals * 7,800 490
................................................................................
2,758
............
Biotechnology 1.9%
Covance * 7,000 204
................................................................................
Cytyc * 10,000 258
................................................................................
Medco Research * 6,400 167
................................................................................
NBTY * 24,300 172
................................................................................
Serologicals * 18,000 537
................................................................................
1,338
............
Health Care Services 2.2%
Concentra Managed Care * 11,472 121
................................................................................
Henry Schein * 5,300 237
................................................................................
Inhale Therapeutic Systems * 8,500 280
................................................................................
Novoste * 8,200 229
................................................................................
Orthodontic Centers of America * 12,900 251
................................................................................
PacifiCare Health Systems (Class B) * 1,700 135
................................................................................
Total Renal Care Holdings * 9,780 289
................................................................................
1,542
............
Miscellaneous Consumer Products 1.7%
Blyth Industries * 9,000 281
................................................................................
Fossil * 4,000 115
................................................................................
Jones Apparel Group * 8,300 183
................................................................................
Nautica Enterprises * 11,600 173
................................................................................
North Face * 4,300 55
................................................................................
Pillowtex 3,800 102
................................................................................
Quicksilver * 5,300 159
................................................................................
Wesley Jessen VisionCare * 5,500 152
................................................................................
1,220
............
Total Consumer Nondurables 11,561
............
CONSUMER SERVICES 18.5%
Restaurants 1.3%
Applebee's 7,500 156
................................................................................
CKE Restaurants 6,655 196
................................................................................
Dave & BusterOs * 10,200 234
................................................................................
13
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
Logan's Roadhouse * 3,700 $ 87
................................................................................
Outback Steakhouse * 6,900 275
................................................................................
948
............
General Merchandisers 2.0%
Bed Bath & Beyond * 8,600 293
................................................................................
Dollar Tree Stores * 9,225 403
................................................................................
Family Dollar Stores 4,200 92
................................................................................
Fred Meyer * 5,700 344
................................................................................
Kenneth Cole Productions (Class A) * 2,900 54
................................................................................
Neiman-Marcus * 8,100 202
................................................................................
1,388
............
Specialty Merchandisers 6.0%
Barnes & Noble * 4,500 191
................................................................................
Borders Group * 9,500 237
................................................................................
CDW Computer Centers * 4,100 397
................................................................................
Day Runner * 6,900 99
................................................................................
General Nutrition * 8,000 130
................................................................................
Guitar Center * 5,400 133
................................................................................
Insight Enterprises * 9,700 494
................................................................................
Lands' End * 7,000 189
................................................................................
Linens 'n Things * 5,400 214
................................................................................
Men's Wearhouse * 8,700 274
................................................................................
Office Depot * 8,200 303
................................................................................
Pacific Sunwear * 6,100 100
................................................................................
Renters Choice * 11,000 347
................................................................................
Ross Stores 6,500 256
................................................................................
SLI * 7,900 219
................................................................................
Stein Mart * 17,200 120
................................................................................
Whole Foods Market * 3,700 179
................................................................................
Williams-Sonoma * 9,000 363
................................................................................
4,245
............
Entertainment and Leisure 2.6%
Brinker * 7,600 219
................................................................................
Imax * 12,800 406
................................................................................
J & J Snack Foods * 9,500 215
................................................................................
Promus Hotel * 5,147 167
................................................................................
SFX Entertainment (Class A) * 5,200 286
................................................................................
Sonic * 3,800 91
................................................................................
14
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
Steinway Musical Instruments * 6,900 $ 179
................................................................................
Sunterra * 17,200 258
................................................................................
1,821
..........
Media and Communications 6.6%
A.C. Nielson * 7,200 203
................................................................................
American Tower Systems (Class A) * 5,200 154
................................................................................
Catalina Marketing * 2,800 191
................................................................................
Century Communications (Class A) * 9,900 315
................................................................................
Chancellor Media * 7,200 345
................................................................................
Cox Radio (Class A) * 5,000 211
................................................................................
Emmis Broadcasting (Class A) * 7,500 325
................................................................................
Harte-Hanks 7,000 200
................................................................................
Heftel Broadcasting (Class A) * 3,900 193
................................................................................
Infousa (Class A) * 17,400 87
................................................................................
Infousa (Class B) * 15,700 81
................................................................................
Jacor Communications * 5,100 330
................................................................................
Level One * 11,400 405
................................................................................
Media General (Class A) 2,600 138
................................................................................
Outdoor Systems * 11,775 353
................................................................................
Saga Communications (Class A) * 2,500 51
................................................................................
TCA Cable TV 7,800 278
................................................................................
United Video Satellite (Class A) * 8,200 193
................................................................................
Univision Communications (Class A) * 4,500 163
................................................................................
Valassis Communications * 3,600 186
................................................................................
World Color Press * 4,200 128
................................................................................
Young Broadcasting (Class A) * 2,900 121
................................................................................
4,651
..........
Total Consumer Services 13,053
..........
CONSUMER CYCLICALS 3.2%
Automobiles and Related 1.7%
Central Parking 3,050 99
................................................................................
Gentex * 17,900 359
................................................................................
O'Reilly Automotive * 9,600 452
................................................................................
Tower Automotive * 12,400 309
................................................................................
1,219
..........
15
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Building and Real Estate 0.8%
Apartment Investment & Management, (Class A) REIT 8,012 $ 298
......................................................................................
Premier Parks * 9,200 278
......................................................................................
576
............
Miscellaneous Consumer Durables 0.7%
HA-LO Industries * 8,700 327
......................................................................................
Polo Ralph Lauren (Class A) * 7,600 146
......................................................................................
473
............
Total Consumer Cyclicals 2,268
............
TECHNOLOGY 14.3%
Electronic Components 5.2%
Burr Brown * 9,550 223
......................................................................................
Cybex Computer Products * 10,050 293
......................................................................................
Dallas Semiconductor 6,600 269
......................................................................................
Etec Systems * 5,700 228
......................................................................................
Lattice Semiconductor * 6,900 317
......................................................................................
Maxim Integrated Products * 5,000 218
......................................................................................
Micrel * 5,500 304
......................................................................................
Microchip Technology * 5,800 214
......................................................................................
MicroTouch Systems * 11,700 155
......................................................................................
Plexus * 6,200 209
......................................................................................
PMC-Sierra * 1,900 120
......................................................................................
QLogic * 3,200 418
......................................................................................
Sanmina * 6,800 424
......................................................................................
Vitesse Semiconductor * 5,200 237
......................................................................................
3,629
............
Electronic Systems 2.4%
Black Box * 5,800 219
......................................................................................
Dionex * 8,800 325
......................................................................................
Novellus Systems * 3,200 158
......................................................................................
Sawtek * 13,000 228
......................................................................................
Teradyne * 5,200 220
......................................................................................
Tollgrade Communications * 10,000 196
......................................................................................
Uniphase * 5,200 361
......................................................................................
1,707
............
</TABLE>
16
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
Information Processing 0.9%
Data Processing Resources * 7,000 $ 205
................................................................................
First USA Paymentech * 7,700 142
................................................................................
SCI Systems * 4,800 277
...........
624
...........
Specialized Computer 1.5%
Pinnacle * 5,100 181
................................................................................
Security Dynamics Technologies * 12,400 286
................................................................................
Symbol Technologies 8,350 534
................................................................................
Technology Solutions * 6,950 74
................................................................................
1,075
...........
Telecommunications 2.2%
Dialogic * 7,600 149
................................................................................
Inter-Tel 5,400 127
................................................................................
Omnipoint * 4,500 42
................................................................................
Pacific Gateway Exchange * 4,300 207
................................................................................
Premisys Communications * 6,100 56
................................................................................
Proxim * 15,300 409
................................................................................
Tekelec * 8,800 146
................................................................................
Transaction Network Services (Class A) * 7,800 156
................................................................................
USA Networks * 7,700 255
................................................................................
1,547
...........
Aerospace and Defense 2.1%
AAR 14,400 344
................................................................................
Avondale Industries * 10,000 290
................................................................................
Orbital Sciences (Class A) * 10,400 460
................................................................................
Precision Castparts 4,100 182
................................................................................
Triumph Group * 6,700 214
................................................................................
1,490
...........
Total Technology 10,072
...........
EDUCATION 1.3%
Apollo Group (Class A) * 8,550 289
................................................................................
ITT Educational Service * 5,200 177
................................................................................
Learning Tree International * 12,400 113
................................................................................
Sylvan Learning Systems * 9,750 297
................................................................................
Total Education 876
...........
17
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
CAPITAL EQUIPMENT 0.4%
Machinery 0.4%
JLG Industries 15,500 $ 242
................................................................................
Total Capital Equipment 242
...........
BUSINESS SERVICES AND
TRANSPORTATION 32.9%
Computer Service and Software 17.1%
Affiliated Computer Services (Class A) * 6,700 302
................................................................................
Analysts International 7,500 145
................................................................................
AXENT Technologies * 12,300 381
................................................................................
BISYS Group * 5,800 299
................................................................................
Cadence Design Systems * 8,200 244
................................................................................
Cambridge Technology Partners * 2,900 64
................................................................................
CIBER * 10,000 279
................................................................................
Citrix Systems * 5,850 568
................................................................................
Cognos * 6,600 163
................................................................................
Computer Management Sciences * 14,400 248
................................................................................
Cotelligent Group * 8,900 190
................................................................................
Datastream * 13,200 150
................................................................................
Documentum * 5,200 279
................................................................................
DST Systems * 5,300 302
................................................................................
E*TRADE Group * 9,400 440
................................................................................
Electronic Arts * 6,300 353
................................................................................
Engineering Animation * 4,300 232
................................................................................
HBO 17,210 494
................................................................................
Hyperion Solutions * 11,400 206
................................................................................
IDX Systems * 6,600 291
................................................................................
International Network Services * 4,900 326
................................................................................
Intuit * 3,500 254
................................................................................
Keane * 6,400 256
................................................................................
Legato Systems * 4,500 297
................................................................................
Lexmark International Group (Class A) * 1,300 131
................................................................................
Mastech * 7,400 210
................................................................................
National Data 8,400 409
................................................................................
National Instruments * 7,700 263
................................................................................
18
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
Network Associates * 5,400 $ 358
................................................................................
PLATINUM technology * 6,100 117
................................................................................
QRS * 8,000 380
................................................................................
Saville Systems ADR * 11,500 218
................................................................................
Sterling Commerce * 5,106 230
................................................................................
Summit Design * 26,200 242
................................................................................
SunGard Data Systems * 8,100 321
................................................................................
Sykes Enterprises * 9,300 283
................................................................................
Symantec * 5,800 126
................................................................................
Synopsys * 7,500 406
................................................................................
Transaction Systems Architects * 7,400 372
................................................................................
Usweb * 16,650 438
................................................................................
VERITAS Software * 6,450 386
................................................................................
Visio * 5,000 181
................................................................................
Zebra Technologies (Class B) * 7,200 207
................................................................................
12,041
...........
Distribution Services 2.7%
AmeriSource Health (Class A) * 5,100 331
................................................................................
Aviation Sales * 3,000 122
................................................................................
Barnett * 14,100 191
................................................................................
Central Garden & Pet * 7,100 103
................................................................................
MSC (Class A) * 8,300 188
................................................................................
Richfood Holdings 9,800 203
................................................................................
Tech Data * 5,900 237
................................................................................
U.S. Foodservice * 5,400 265
................................................................................
Watsco (Class A) 14,250 239
................................................................................
1,879
...........
Environmental 0.4%
Allied Waste Industries * 13,400 317
................................................................................
317
...........
Transportation Services 2.1%
BE Aerospace * 11,600 243
................................................................................
Coach USA * 8,500 295
................................................................................
Expeditors International of Washington 6,600 278
................................................................................
Swift Transportation * 15,150 421
................................................................................
USFreightways 7,900 230
................................................................................
1,467
...........
19
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
Miscellaneous Business Services 9.7%
ABR Information Service * 6,500 $ 126
................................................................................
Billing Information Concepts * 500 5
................................................................................
Carriage Services (Class A) * 6,700 190
................................................................................
Concord EFS * 13,350 563
................................................................................
Consolidated Graphics * 4,100 277
................................................................................
CORT Business Services * 8,100 196
................................................................................
Fair, Issac and Company 4,800 222
................................................................................
Fastenal 3,100 136
................................................................................
First Consulting Group 12,551 260
................................................................................
G & K Services (Class A) 5,600 297
................................................................................
Insituform Technologies (Class A) * 8,000 116
................................................................................
Knoll * 5,400 160
................................................................................
Merrill 9,400 182
................................................................................
META Group * 12,800 386
................................................................................
Metamor Worldwide * 11,400 283
................................................................................
Modis Professional Services * 21,600 313
................................................................................
National Computer Systems 6,400 236
................................................................................
NCO Group * 9,800 441
................................................................................
NOVA * 10,796 374
................................................................................
Paging Network * 17,300 81
................................................................................
Prepaid Legal Services * 4,600 152
................................................................................
Professional Staff ADR * 16,000 121
................................................................................
Rent Way * 9,900 241
................................................................................
Romac International * 13,300 295
................................................................................
Service Experts * 8,000 234
................................................................................
StaffMark * 5,900 133
................................................................................
Strayer Education 3,800 134
................................................................................
Superior Services * 8,300 166
................................................................................
Tetra Tech * 18,125 489
................................................................................
6,809
...........
Airlines 0.9%
Alaska Air Group * 4,300 190
................................................................................
Comair Holdings 8,950 301
................................................................................
Mesaba Holdings * 7,800 161
................................................................................
652
...........
Total Business Services and Transportation 23,165
...........
20
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
ENERGY 1.0%
Energy Services 0.8%
BJ Services * 8,600 $ 134
................................................................................
Oceaneering International * 11,700 176
................................................................................
R & B Falcon * 6,200 47
................................................................................
Smith International * 4,500 113
................................................................................
Weatherford International * 4,100 80
................................................................................
550
...........
Exploration and Production 0.2%
Noble Affiliates 6,100 150
................................................................................
150
...........
Total Energy 700
...........
PROCESS INDUSTRIES 1.9%
Specialty Chemicals 0.4%
Sybron International * 12,100 329
................................................................................
329
...........
Building and Construction 1.5%
American Homestar * 14,300 215
................................................................................
Dycom Industries * 4,100 234
................................................................................
Fairfield Communities * 9,600 106
................................................................................
Global Industries * 8,800 55
................................................................................
NCI Building Systems * 9,800 276
................................................................................
Simpson Manufacturing * 4,000 150
................................................................................
1,036
...........
Total Process Industries 1,365
...........
BASIC MATERIALS 0.6%
Metals 0.1%
RTI International Metals * 5,800 81
................................................................................
81
...........
21
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------------------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Miscellaneous Materials 0.5%
Gilat Satellite Networks * 6,700 $ 371
.......................................................................................................
371
.............
Total Basic Materials 452
.............
Total Miscellaneous Common Stocks 1.3% 911
.............
Total Common Stocks (Cost $59,555) 69,486
.............
Short-Term Investments 2.1%
Money Market Funds 2.1%
Reserve Investment Fund, 5.42% # 1,460,536 1,461
.......................................................................................................
Total Short-Term Investments (Cost $1,461) 1,461
.............
Total Investments in Securities
100.7% of Net Assets (Cost $61,016) $ 70,947
Other Assets Less Liabilities (503)
.............
NET ASSETS $ 70,444
-------------
Net Assets Consist of:
Accumulated net realized gain/loss - net of distributions $ (7,190)
Net unrealized gain (loss) 9,931
Paid-in-capital applicable to 6,376,853 shares of $0.0001 par
value capital stock outstanding; 1,000,000,000 shares authorized 67,703
.............
NET ASSETS $ 70,444
-------------
NET ASSET VALUE PER SHARE $ 11.05
-------------
</TABLE>
# Seven-day yield
* Non-income producing
ADR American Depository Receipt
REIT Real Estate Investment Trust
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
- -----------------------
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
Year
Ended
12/31/98
Investment Income Income
Dividend $ 176
Interest 115
Total income 291
...........
Expenses
Investment management 325
Shareholder servicing 307
Custody and accounting 89
Prospectus and shareholder reports 63
Registration 28
Legal and audit 12
Directors 6
Miscellaneous 46
...........
Total expenses 876
...........
Net investment income (585)
...........
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities (7,194)
Change in net unrealized gain or loss on securities 9,852
...........
Net realized and unrealized gain (loss) 2,658
...........
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 2,073
-----------
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
- ----------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
Year 6/30/97
Ended Through
12/31/98 12/31/97
Increase (Decrease) in Net Assets
Operations
Net investment income $ (585) $ (174)
Net realized gain (loss) (7,194) 431
Change in net unrealized gain or loss 9,852 79
......................
Increase (decrease) in net assets from operations 2,073 336
......................
Distributions to shareholders
Net realized gain (191) (67)
......................
Capital share transactions *
Shares sold 35,966 81,333
Distributions reinvested 190 65
Shares redeemed (39,729) (9,747)
Redemption fees received 64 51
......................
Increase (decrease) in net assets from capital
share transactions (3,509) 71,702
......................
Net Assets
Increase (decrease) during period (1,627) 71,971
Beginning of period 72,071 100
......................
End of period $ 70,444 $ 72,071
---------------------
*Share information
Shares sold 3,404 7,622
Distributions reinvested 19 6
Shares redeemed (3,779) (905)
......................
Increase (decrease) in shares outstanding (356) 6,723
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
December 31, 1998
- -----------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Diversified Small-Cap Growth Fund, Inc. (the fund) is
registered under the Investment Company Act of 1940 as a diversified, open-
end management investment company and commenced operations on June 30, 1997.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company
industry; these principles may require the use of estimates by fund
management.
Valuation Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price on the day the valuations
are made. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market
for such security. Listed securities not traded on a particular day and
securities regularly traded in the over-the-counter market are valued at the
mean of the latest bid and asked prices. Other equity securities are valued
at a price within the limits of the latest bid and asked prices deemed by
the Board of Directors, or by persons delegated by the Board, best to
reflect fair value.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair
value as determined in good faith by or under the supervision of the
officers of the fund, as authorized by the Board of Directors.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on the identified cost basis. Dividend income and distributions
to shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income
tax regulations and may differ from those determined in accordance with
generally accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $27,310,000 and $31,198,000, respectively, for the
year ended December 31, 1998.
25
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its income. As of December 31, 1998, the fund has capital loss carryforwards
for federal income tax purposes of $5,643,000, all of which expires in 2006.
In order for the fund's capital accounts and distributions to shareholders to
reflect the tax character of certain transactions, the following
reclassifications were made during the year ended December 31, 1998. The
results of operations and net assets were not affected by the
increases/(decreases) to these accounts.
- --------------------------------------------------------------------------------
Undistributed net investment income $ 585,000
Paid-in-capital (585,000)
At December 31, 1998, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$61,016,000. Net unrealized gain aggregated $9,931,000 at period-end, of
which $16,406,000 related to appreciated investments and $6,475,000 to
depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management
fee, of which $29,000 was payable at December 31, 1998. The fee is computed
daily and paid monthly, and consists, of an individual fund fee equal to
0.35% of average daily net assets and a group fee. The group fee is based on
the combined assets of certain mutual funds sponsored by the manager or Rowe
Price-Fleming International, Inc. (the group). The group fee rate ranges from
0.48% for the first $1 billion of assets to 0.30% for assets in excess of $80
billion. At December 31, 1998, and for the year then ended, the effective
annual group fee rate was 0.32%. The fund pays a pro-rata share of the group
fee based on the ratio of its net assets to those of the group.
26
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
Under the terms of the investment management agreement, the manager is
required to bear any expenses through December 31, 1998, which would cause
the fund's ratio of expenses to average net assets to exceed 1.25%.
Thereafter, through December 31, 2000, the fund is required to reimburse the
manager for these expenses, provided that average net assets have grown or
expenses have declined sufficiently to allow reimbursement without causing
the fund's ratio of expenses to average net assets to exceed 1.25%. Pursuant
to this agreement, $146,000 of management fees were not accrued by the fund
for the year ended December 31, 1998. Additionally, $94,000 of unaccrued
1997 fees remain subject to reimbursement through December 31, 2000.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries of the manager, pursuant to which the fund
receives certain other services. The manager computes the daily share price
and maintains the financial records of the fund. T. Rowe Price Services,
Inc. is the fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the fund. T. Rowe Price
Retirement Plan Services, Inc. provides subaccounting and recordkeeping
services for certain retirement accounts invested in the fund. The fund
incurred expenses pursuant to these related party agreements totaling
approximately $308,000 for the year ended December 31, 1998, of which
$32,000 was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve
Funds are offered as cash management options only to mutual funds and other
accounts managed by T. Rowe Price and its affiliates and are not available
to the public. The Reserve Funds pay no investment management fees.
Distributions from the Reserve Funds to the fund for the year ended December
31, 1998, totaled $115,000 and are reflected as interest income in the
accompanying Statement of Operations.
27
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
- ---------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
T. Rowe Price Diversified Small-Cap Growth Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position
of T. Rowe Price Diversified Small-Cap Growth Fund, Inc. (the "Fund") at
December 31, 1998, the results of its operations, the changes in its net
assets and the financial highlights for the fiscal periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements 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 audits, which included
confirmation of securities at December 31, 1998, by correspondence with
custodians, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
January 21, 1999
28
<PAGE>
T. Rowe Price Diversified Small-Cap Growth Fund
- --------------------------------------------------------------------------------
- -----------------------------------------------------------
Tax Information (Unaudited) for the Tax Year Ended 12/31/98
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included $191,000 from short-term
capital gains.
29
<PAGE>
For yield, price, last transaction, Investor Centers:
current balance, or to conduct 101 East Lombard St.
transactions, 24 hours, 7 days Baltimore, MD 21202
a week, call Tele*Access(r):
1-800-638-2587 toll free T. Rowe Price
Financial Center
For assistance 10090 Red Run Blvd.
with your existing Owings Mills, MD 21117
fund account, call:
Shareholder Service Center Farragut Square
1-800-225-5132 toll free 900 17th Street, N.W.
410-625-6500 Baltimore area Washington, D.C. 20006
To open a Brokerage account ARCO Tower
or obtain information, call: 31st Floor
1-800-638-5660 toll free 515 South Flower St.
Los Angeles, CA 90071
Internet address:
www.troweprice.com 4200 West Cypress St.
10th Floor
T. Rowe Price Associates Tampa, FL 33607
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price Diversified Small-Cap
Growth Fund.
[LOGO OF T.ROWEPRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor. F20-050 12/31/98
